Connect with us

Wealth Management

FROM EFFICIENCY TO NEW INVESTMENTS – WHY BLOCKCHAIN IS MORE THAN MEETS THE EYE

Published

on

Thomas Borrel, chief product officer at Polymath

 

Blockchain has been an extremely hot topic in 2021. With companies and financial institutions internationally having to adapt to an increasingly digital world, the true potential of blockchain is becoming increasingly clear. We have seen hospitals using the technology to track vaccine distributions, major blue-chip companies floating digital assets or ‘stablecoins’, even progress made by central banks in piloting and adopting digital currencies

When it comes to the world of finance, much of the attention has focussed on the booming price of Bitcoin, and there has been much excitement around using cryptocurrencies as an alternative investment. However, the real potential of blockchain technology stretches far into traditional finance and beyond.

 

Improving access to investment options

Security tokens created and issued on the blockchain are already being used to improve efficiency in a variety of more traditional asset classes, ranging from real estate to green bonds. The Sustainable Digital Finance Alliance (SDFA) and HSBC Center of Sustainable Finance recently joined forces to highlight how security tokens for green bonds can reduce management costs and increase operational efficiency by up to ten times. And in early 2020, RedSwan CRE Marketplace tokenised $2.2B in commercial real estate, making it one of the biggest tokenisations we’ve seen so far.

Thomas Borrel

However, the potential of tokenisation does not only stand to improve the process of trading traditional assets; blockchain can also open up the pool of investors able to participate. To date, the focus has been on how fractionalisation brings benefits to retail investors by lowering the bar to entry. However, the retail regulations are still very stringent, which is important to protect non-professionals from disproportionate losses.

Tokenisation can be used to enable large institutional investors to buy into smaller projects. Referred to as aggregation, this process can be used to bind assets together so that they meet an institution’s minimum investment threshold. Because of the transparency of blockchain, the investor is still able to inspect each individual offering and ensure each element meets their quality and risk requirements, but by packaging it into one larger token, an institution can diversify with assets that would have otherwise flown under its radar.

 

Optimising efficiency and minimising risk

Risk management and operational efficiency are usually at the core of any financial institution’s wider strategy. However, no matter how much firms optimise their own processes, there are a range of financial instruments that are still very prone to issues in these areas, especially those that are traded ‘over the counter’ (OTC). The best example of this is likely the bonds market – a multi trillion-dollar market, where OTC trades are still common practice.

When an OTC trade is conducted, it is often so over the telephone – one person calling another to make a deal. This introduces significant information risk with securities operations teams reporting error rates as high as 40%. When instructions for the trade are passed on to the custodians, they will spot the discrepancy. They then have to investigate and find out what has gone wrong, often resulting in very long delays to settlement times.

Blockchains go a long way to solving this problem, providing transparent access to trade and clearing information so that operational issues can be caught earlier and help mitigate settlement risk (i.e. settlement failure). For example, on Polymesh settlement instructions must be affirmed prior to settlement, in a case where an OTC trade has been improperly captured by one counterparty, the counterparty which has affirmed the instruction can see that the other counterparty has not affirmed the instruction within a defined period. In this way, the affirming counterparty can reach out proactively prior to the settlement date to rectify the situation and avoid settlement failure.

Trading on blockchain also generates an easily accessible, secure ledger of trading information. When it comes to reporting in traditional asset classes, the process is highly manual and often expensive. But, with a blockchain solution, reporting is built into the ecosystem from the ground up. There are no significant additional costs or resources required to extract this data and share it where necessary, and the number and complexity of the steps required to complete reconciliations between different entities are reduced and simplified.

 

Is tokenisation a ‘cover all’ solution?

Fundamentally, certain traditional asset classes are not right for the blockchain yet. Instruments with well-established frameworks, like publicly traded stocks, already have very well-formed, rigorous rails in place, and so transferring to a blockchain could cause disruption and incur unnecessary costs.

It is very common to hear blockchain advocates claiming that blockchain technology should be introduced into every corner of the finance space, which is misguided. Blockchain should be introduced where it brings value to investors or institutions. It should be about augmenting and supplementing the marketplace – not overhauling it, or at least not until the incumbent systems no longer keep up with demand.

The costs and infrastructure associated with capital markets have made some assets – like green bonds or real estate – too expensive to bring to market and service, or too difficult to invest in. These use-cases are examples of where tokenisation can really shine.

Blockchain is an extremely powerful tool, with a range of exciting applications and potential benefits for businesses and financial institutions, ranging from risk management and efficiency through to enabling new investments. However, as with any product, it isn’t the answer to all problems, and must be treated as a powerful enabler – not as an agitator.

 

Top 10

IF IT’S A LOSS, YOU’RE TOO LATE – WHY THE INSURANCE INDUSTRY NEEDS TO FOCUS ON FIRST NOTIFICATION OF RISK

Published

on

By

Simon Dicks, Insurance Channel Manager EMEA, Lytx

 

Insuring commercial fleets can be an expensive business. Average repair costs have increased by up to 40% in the past 8 years and disputes about who was responsible can drive up expenditure for both fleets and insurers.

Part of the problem is that the insurance industry hasn’t had the tools to forecast costs and premiums accurately enough in this sector. Underwriting decisions are still made in the same way they always have been, by looking back at historical data from previous years. This approach simply isn’t giving insurance companies an accurate indication of potential risk – or a proper indication of the impact of driver behaviour.

Technology is helping insurers to an extent by providing information about First Notification of Loss (FNOL) – automatically sending notifications when unusual G-force readings are captured within a black box tracking device as a result of sudden braking or impact. This is good, but far better is the ability to use proactive technology to detect when an incident is at risk of occurring and when a driver is distracted.

The only way to address this is to put a highly accurate level of camera technology both inside and outside cabs, supported by sophisticated technologies such as Machine Vision (ML) and Artificial Intelligence (AI). This way, we can see not just that an incident has happened, but why it happened. What’s more, we can assess risk before an accident happens at all and prevent it happening in the first place. We call this First Notification of Risk (FNOR) – and it’s a whole step up from FNOL.

Machine Vision scans the internal and external environment of the vehicle to identify distracted driving behaviours such as mobile phone use, eating, drinking, smoking, inattentive behaviour or failure to wear a seatbelt. AI, comparing the behaviour against a vast bank of accumulated data, is then able to determine the riskiness of that situation and whether it needs to be flagged to the fleet manager, driver, or insurer via a short video clip. The big difference in this approach is that it’s proactive, not reactive. For the first time, fleets and insurers can identify adverse driving and distracted driving in real-time for the first time.

This includes the ability to alert drivers of any momentary slip-ups or distracted behaviours. Using the same technology, drivers will receive an audio or visual alert to help keep them on track and to lessen the likelihood of a moment’s distraction becoming anything more.

When insurers have access to these insights, they can also start to see patterns from the data over time. For example, a fleet manager might start to see that there’s a peak in risky driving behaviours on a Friday afternoon when lots of drivers are rushing to finish for the weekend. As a result, they may decide to spread the shifts differently so as to avoid that pattern of behaviour.

When insurers are only looking at FNOL, it’s already too late. A driver could be unthinkingly driving whilst smoking, on their phone, and nobody would never know. Whereas with FNOR, both managers and insurers are provided with insights that remove the guesswork, and underwriters have the information they need to assess risk with far greater precision.

There’s still a long way to go in making the move towards FNOR. With so many different companies selling cameras and telematics systems and producing information in hundreds of different formats, claims data will have to be standardised before the sector can really transform. However, by starting to embrace ideas like FNOR, the industry can move towards a solution that saves them time, money and lives.

To find out more, visit  www.lytx.com/FNOR

Continue Reading

Top 10

THE DIGITAL WEALTH, ASSET MANAGER AND FINANCIAL BROKER OF THE FUTURE: TRANSFORMING CLIENT COMMUNICATIONS

Published

on

By

By Christina Di Nolfo, Head of Solutions at Delta Capita

 

More than in any other profession in financial services, wealth managers and financial brokers are heavily dependent on personal interaction with their clients. While digital transformation has been on the agenda of many individual advisors for years, the pandemic revealed the painful inefficiencies of legacy communication models.

Studies from YChart mirrored the communication gap just a year prior to the lockdown. 75% of clients want proactive communication from their wealth manager or advisor. But nearly half of clients with over $500,000 or more in AUM said they received infrequent communications, with those with less than $500,000 invested, receiving even less of their advisor’s time.

Consequently, finance professionals have been quick to try out any communication software from Zoom to Slack to WhatsApp. However, these programs were not made for financial advisors, making adhering to compliance standards more complicated than ever and raising security concerns.

Christina Di Nolfo

Let’s take Zoom as a quick example. Whilst Zoom is a great communication tool and one which many of us are all too familiar with, it is only meant for video calls and is not a comprehensive communication platform. The Federal Trade Commission discovered that Zoom’s end-to-end encrypted (E2EE) wasn’t what it appeared to be. Instead of calls being E2EE between participants, the data was only encrypted between each meeting participant and Zoom’s servers – meaning it was not truly end-to-end encrypted.

But it’s not just Zoom. Any application not built with compliance in mind is a risk for your business and your customer.

A customisable, compliant, and fully interactive client portal for the digital wealth advisor or financial broker is essential to streamline communications and maintain compliance. But what does that look like?

 

The Wealth Manager of the Future

Customer experience is everything, and the wealth manager of the future can already benefit from an end to end digital customer journey platform. Imagine if you could:

  1. Onboard new clients in minutes
  2. Push secure content to your client on their chosen device
  3. Record every minute of your meeting, even as you switch between video, chat, screen shares, and more
  4. Collect signatures and obtain consent instantaneously
  5. Accept PCI compliant payments directly from your portal
  6. Provide disclosures and other vital documentation for clients
  7. Collect customer documentation in real time such as ID and proof of address

All of this is possible through Klarion, our end-to-end engagement portal. Completely customisable, Klarion offers an entirely digital process designed for the optimal user experience. Clients are not required to download complex software. Instead, they only need to click on a secure link that you send to them via email or SMS.

Klarion enables you to verify identities in real-time, manage essential sensitive data, accept payments, engage in a video call and more. And you don’t need to worry about compliance. Not only does our solution log every interaction and timestamp it within an end-to-end encrypted environment, but you can also benefit from PCI-DSS Level 1 and KYC/AML compliance features.

You no longer need to go back and forth with your clients over email or other communication channels, as you attempt to resolve issues or complete tasks. And you also do not need to invest time and resources in tracking down every slip of paper. Instead, you can focus on what matters: Keeping your client informed about their assets and providing value.

Financial managers using Klarion have shifted their self-service offering from 13% to 30%, and reduced call volumes by 2.2x without sacrificing customer experience or compliance regulations.

 

The Future Won’t Wait

Through the proliferation of technology, more and more customers will demand a comprehensive and cohesive user experience. To create a sustainable, client-focused financial management practice today, integrating technology with human sensibilities is critical.

But waiting to reinvent your customer interaction process means that instead of focusing on growth, you may well end up running after the competition.

Klarion makes it easy to get up and running. There is no need to worry about costly, complicated, or time-consuming system consolidations, as Klarion integrates seamlessly with current infrastructure as a white label front-end solution, while ensuring your brand is front and centre. Klarion sends information directly to your CRM (or other systems), saving you from data entry duplication and is customisable to whatever workflow is required.

 

Continue Reading

Magazine

Trending

Business2 hours ago

THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

Jennifer Sims, Senior Consultant at Xledger   The world of finance software is evolving quickly, but with many new software...

Business2 hours ago

HOW RETURNS ABUSE AFFECTS RETAILERS

By Aaron Begner, EMEA GM at Forter   Accompanying the significant growth in ecommerce over the past 12 months, is the...

News2 hours ago

TINTRA PLC FINALISES JOINT VENTURE WITH ARTIFICIAL INTELLIGENCE PARTNER TO BUILD INDUSTRY CHANGING REGULATORY TECHNOLOGY

Innovative fintech company, Tintra PLC(https://tintra.com/), has formed a joint venture with award-winning Artificial Intelligence and Machine Learning business, TMC2, via...

News2 hours ago

CELLPOINT DIGITAL PARTNERS WITH VYNE TO ENABLE INSTANT OPEN BANKING PAYMENTS FOR MERCHANTS

The partnership will allow CellPoint Digital customers to incorporate Vyne into its payment ecosystem and access instant payments without a...

Business3 days ago

WHY A MULTI-ACQUIRER STRATEGY IS KEY TO GLOBAL GROWTH

As online business grows exponentially, finally fulfilling the internet’s promise of a ‘global village’ in which anyone can buy and...

Business3 days ago

TAKE THE NO-CODE LEAP TO DIGITAL INNOVATION WITH A FUSION TEAM

Chris Obdam, CEO, Betty Blocks   In the last couple of years, a new sector has emerged alongside enterprise financial...

Finance3 days ago

HOW FINANCIAL ORGANIZATIONS CAN PROTECT THEIR DATA

Yuval Wollman, President, CyberProof and Chief Cyber Officer, UST   Top executives from Wall Street’s largest banks pinpointed cybersecurity as the...

Top 103 days ago

IF IT’S A LOSS, YOU’RE TOO LATE – WHY THE INSURANCE INDUSTRY NEEDS TO FOCUS ON FIRST NOTIFICATION OF RISK

Simon Dicks, Insurance Channel Manager EMEA, Lytx   Insuring commercial fleets can be an expensive business. Average repair costs have...

Business3 days ago

IDENTITY SECURITY IN THE ERA OF SOX

By Steve Bradford, Senior Vice President, EMEA, SailPoint   The Sarbanes-Oxley Act (SOX) is a federal law that mandates practices...

News3 days ago

EXPERIAN LAUNCHES VERIFICATION SERVICE TO SUPPORT FASTER, MORE ACCURATE LENDING DECISIONS

Work Report™ is the UK’s first service that automates the digital sharing of payroll information on behalf of the consumer...

News4 days ago

TENUREX AND ELUCIDATE PARTNER TO INCREASE FINANCIAL INCLUSION WORLDWIDE

TenureX and Elucidate have announced a strategic partnership with a mission to increase financial inclusion worldwide and tackle the laborious...

Banking4 days ago

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

by Lili Metodieva, MD of Monneo   As our world becomes more interconnected, so too does the need for banking...

News4 days ago

PAYCAST PARTNERS WITH MARQETA AND MASTERCARD FOR NEW MARKETPLACE PAYMENT SOLUTION

Paycast will leverage Marqeta’s modern card issuing platform and the Mastercard network to empower marketplaces with payment solutions that help...

Finance5 days ago

HOW FS ORGANISATIONS CAN USE API-DRIVEN DATA AUTOMATION TO JOIN THE OPEN BANKING REVOLUTION

By Steve Barrett, Senior Vice President, International Operations at Delphix    Technology is rapidly transforming all industries across the world. However, for the...

Banking5 days ago

IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

Eugene Danilkis, CEO at Mambu   We are living in an experience economy, and banking is no different. Customers need...

Banking5 days ago

WILL CHALLENGER OR TRADITIONAL BANKS WIN THE SECURE CARD PAYMENTS BATTLE?

By Vince Graziani, CEO, IDEX Biometrics ASA   Challenger banks have shaken up the payment ecosystem in the last decade....

Banking5 days ago

TOP ITALIAN BANK ROLLS OUT FIRST OF ITS FULLY DIGITAL BRANCHES WITH AURIGA

Banca Carige Smart, the new intelligent branch model enabled by Auriga #NextGenBranch solutions , combines digitalisation with a human touch...

Banking5 days ago

HOW BANKS CAN PROTECT THEMSELVES AGAINST RANSOMWARE

Jay Ralph, Managed Cloud Global Sales Lead at SoftwareONE   We’ve seen a slew of high-profile ransomware attacks in 2021. From hackers...

News5 days ago

BLOCKERS TO BLOCKCHAIN ADOPTION LIFT FOR 65% OF FINANCIAL ORGANISATIONS

Four years of data from Visma | Onguard’s Fintech Barometer finds growing confidence in blockchain technology   65% of organisations...

News6 days ago

SAME DAY REMITTANCE IS A WELCOME BOOST FOR SMALL MERCHANTS THIS BLACK FRIDAY

UTP Merchant Services, Jaime Lowe, Sales Director On November 26th, much of the globe will witness the start of the...

Trending