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A new landscape: How technological innovation is transforming transaction banking



Deep Technology venture firm launches CosimoXTokenized VCFund

By Daniel Verbruggen, Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services, BNY Mellon.

Bana Akkad Azhari, Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services, BNY Mellon.

Transaction banking is undergoing significant change. While a combination of factors is responsible– including new regulatory requirements, globalisation and evolving client demands – it is technology that is really driving the transformation. For example, the growth of digital solutions across finance is contributing to evolving consumer expectations, while PSD2 regulations have been introduced in response to the growth of fintech.

This new landscape is challenging banks, which must adapt to manage an increasingly technology-focused environment. Yet,importantly, technology is introducing a multitude of opportunities, enabling banks to leverage this shifting industry and its capabilities to optimise their transaction services.

Transaction banking needed change

Bana Akkad Azhari

Bana Akkad Azhari

Transaction banking stands to benefit considerably from innovative, digital enhancements.Trade processes, for instance, are often plagued by time and cost inefficiencies, with manual, paper-based tasks increasing labour costs and decelerating cash flow.Meanwhile, administrative, documentation tasks – required for trade services – can prevent staff from concentrating on more strategic priorities, thus further driving down efficiency.

Payment processes – particularly those involving international payments – are also subject to inefficiencies. The outdated back-end systems and procedures involved can result in slow and expensive transactions, with the tracking and transparency procedures required for cross-border operations further increasing banking costs and processing times.

Innovation is enhancing processes

Certainly, transaction banking is an environment ripe for reform, with technology providing the catalyst. A number of initiatives – including SWIFT’s global payment innovation (gpi) initiative, artificial intelligence (AI), application programming interfaces (APIs) and blockchain technology– are being explored by banks to help transform payments and trade.

SWIFT gpi, for example,aims to enhance transaction banking by delivering improved speed, efficiency and transparency to international payments.The first phase of gpi is already live and delivering tangible benefits: over 180 banks are now members[i] and the majority of the approximately US$100 billion worth of SWIFT gpi messages sent in the daily flow of transactions are being credited within 24 hours[ii]. Gpi is also improving payment visibility through its Tracker. Unique tracking codes enable visibility of the lifecycle of a payment, allowing them to be traced with ease. Such visibility can reduce tracking operational costs for banks by up to 50%[iii].

AI is also being leveraged by banks. BNY Mellon, for example, is utilising AI robots to automate certain straightforward, manual procedures, and is experiencing significant improvement in processing times as a result. One branch of AI – known as “machine learning” – has the potential for higher value applications. Machine learning is the ability for applications to use datasets to learn how to identify patterns and trends – and then apply this knowledge to “think” in a logical way.Applying the full capabilities of machine learning is still some way away, but its practical applications could include supporting fraud detection, and enabling algorithmic trading – AI systems that make extremely fast trading decisions.

Elsewhere, APIs can be harnessed to enrich the payment and trade space. APIs permit streamlined communication between various software components and can be particularly valuable in creating digital ecosystems that are accessible by clients.

Blockchain technology could also deliver value-added payment solutions. Blockchainis a digitalised, decentralised ledger that is inviolable and transparent, and it could potentially be used to streamline payments between people operating under different levels of regulation and security; which has the overall effect of speeding-up the entire transaction. Similarly, trade services often involve ecosystems of external partners, with each independent participant further decelerating the process. As blockchains facilitate transactions under one system, ongoing developments aim to also support faster trade operations.

Leveraging the digital space

Daniel Verbruggen

Daniel Verbruggen

The innovations touched upon are just some of those that could enhance payments and trade. But how can banks ensure they leverage these new capabilities in order to optimise their transaction services?

At the heart of any banking strategy should be client value. The first step should therefore be to determine which initiatives will enhance the experience of the client. Every region is different, so banks must consult their client base to develop deep insights that determine which clients will benefit from each initiative.

If banks believe the developments will enhance their clients’ experience, it is then a case of prioritisation. With new fintechs continually entering the market – and one in four failing[iv]– banks should be prudent when investing in technology, looking at what will add value to client relationships in both the short and the long term.

A collaborative approach

Of course,leveraging the digital space is rarely simple. For smaller – perhaps local banks – investing in cutting-edge technology can pose a significant challenge. Technologies can change rapidly, picking winners in this environment can becomplex.

It is here that a collaborative approach can provide a solution. Non-compete alliances between local and global banks combine the capabilities and skillsets of both parties – local banks gain access to the technology solutions needed to enhance their services while global banks gain access to unrivalled, country specific insights and expertise from local banks. Corporate clients can therefore benefit from an experience fuelled by the strengths of both parties.

Yet, collaboration does not need to stop there. The new landscape is also generating opportunities for partnership that extend to fintechs. A bank-fintech alliance is equally valuable. Participation not only gives banks access to technology services, but also allows fintechs to benefit from the extended reach of banks.

Technological innovation is transforming transaction banking. Technology solutions can deliver enhanced capabilities, transforming payments and trade. And by collaborating, banks of all sizes and reach can access these enhanced services, delivering a new, value-added experience to clients.

 The views expressed herein are those of the authors only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.


SoftBank reaches settlement with former WeWork CEO Neumann



SoftBank reaches settlement with former WeWork CEO Neumann 1

(Reuters) – SoftBank Group Corp said on Friday it has reached a settlement with WeWork’s special committee and the company’s co-founder and former chief executive, Adam Neumann, putting to rest a legal battle dating back to 2019.

SoftBank, the new owner of the office-sharing firm, did not disclose terms of the settlement. Media reports earlier this week indicated the deal includes a nearly $500 million cut in Neumann’s payout from SoftBank.

The legal tussle between SoftBank and Neumann started in 2019, when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann as well as current and former WeWork employees. SoftBank later contested its obligation to purchase the shares.

Under the new settlement, SoftBank will purchase around half the shares it had originally agreed to buy, a source familiar with the talks had told Reuters on Monday.

The settlement is also expected to clear the decks for WeWork as it reportedly pursues a public listing by merging with a special purpose acquisition company (SPAC).

“This agreement is the result of all parties coming to the table for the sake of doing what is best for the future of WeWork,” said Marcelo Claure, executive chairman of WeWork and CEO of SoftBank Group International.

SoftBank, which poured more than $13.5 billion into WeWork, was pulled into the legal dispute with directors at WeWork after backing out of the $3 billion tender offer agreed when it bailed out the office-sharing firm following a flopped IPO attempt.

(Reporting by Shariq Khan in Bengaluru; Editing by Richard Pullin)

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Banks weigh up home working – the new normal or an aberration?



Banks weigh up home working - the new normal or an aberration? 2

By Lawrence White, Iain Withers and Muvija M

LONDON (Reuters) – As the finance industry prepares for life post-pandemic, commercial banks are moving quickly to harness working from home to cut costs, while investment banks are keen to get traders and advisers back to the office.

HSBC and Lloyds are getting rid of as much as 40% of their office space as an easy way to make savings when bank profits have been crunched by the pandemic.

But there are concerns that remote working does not benefit everyone. Junior staff miss out on socialising and learning opportunities and there are also risks home working can entrench gender inequality.

At investment banks, where long hours in the office were the norm pre-pandemic, bosses say they want most people back where they can see them.

HSBC plans to almost halve office space globally, as it aims to squeeze more use out of the remaining space and increase the number of staff per desk from just over one to closer to two.

Britain’s biggest domestic lender Lloyds plans to shrink its office space by a fifth within three years. Standard Chartered will cut a third of its space within four years, while Metro Bank said it would cut some 40% and make more use of branches.

“We’ve had a period where flexible working has been tested in full, with about three quarters of people not based in offices as we used to call them, and the business has performed remarkably well,” Andy Halford, Standard Chartered CFO, said.

But major investment banks take a different view, with Goldman Sachs Chief Executive David Solomon pouring cold water on the potential of remote working.

“It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible,” he told a Credit Suisse conference on Wednesday.

Barclays CEO Jes Staley, who last year said he thought the days of 7,000 employees trudging into its Canary Wharf headquarters were numbered, is also unwilling to commit for now to large office closures.

The Barclays boss has said the bank had “no plan” to make a major real estate move as Britain’s prolonged third lockdown had shown the strains of working from home.

Nick Fahy, CEO of online lender Cynergy Bank, said working over screens often could not compete. “You might have a disagreement on this, that or the other but actually over the coffee machine or over a glass of wine or a bit of lunch, issues can be resolved.”


Some banks have acted quickly because they are used to flexing workforces in line with economic cycles, particularly in investment banks, Oliver Wyman principal Jessica Marlborough said.

But some are waiting on analysis of staff productivity changes before making final decisions, while others were mindful junior staff may still prefer going into offices, she said.

Banks are also concerned women may lose out from the shift to remote working.

“We thought the pandemic would be a big leveller for women. But actually what we’re starting to see is it’s extremely challenging to get women to move jobs in a pandemic,” Marlborough said.

“Banks were making progress in hiring a more balanced workforce in terms of gender and other metrics, but they’re actually struggling now (as banks are finding) they (women) are less likely to seek out a new job.”

Union leaders said part of the reason was that some women are juggling more childcare responsibilities during the pandemic.

Dominic Hook, national officer for UK union Unite, said banks must ensure working from home is voluntary, use of surveillance tools is limited, and employers respect staff hours so work does not spill into evenings and weekends.

“Our concern is that it won’t actually be a choice and that banks will pressure staff to work from home,” Hook said.

There are also concerns hybrid working will favour employees who visit the office more regularly, as they can spend more time in person with colleagues and managers, said Richard Benson, managing director at Accenture Interactive.

The staff most likely to go back to the office are traders, bank executives said, while back-office functions such as finance, risk management and IT will spend more time working remotely.

In Germany, Deutsche Bank said it had been challenging to adapt home office spaces for traders and expected many will want to return, but not all.

“We will pay more attention to the personal circumstances at home. Dealers also have children or parents in need of care. We have become more sensitive,” said Kristian Snellman, Deutsche Bank’s head of investment banking transformation for Germany and EMEA.

The trend to shed offices predated the pandemic as many banks made cuts after the 2007-09 financial crisis. Some have already made moves as a result of the pandemic, such as NatWest, which shut its tech hub in north London last summer.

Retained offices are being remodelled, with desks removed to make way for collaboration and break space such as coffee areas, gardens and libraries, property consultancy Arcadis said.

“It’s not just about adding a ping pong table and table football and hoping it will work, it’s about making sure people get downtime,” said Sarah-Jane Osborne, head of workscape at Arcadis.

David Duffy, CEO of Virgin Money, said the bank is among those planning to strip out office cubicles.

“The world of large-scale populations returning to a tall skyscraper building to come in and do their e-mail in the office doesn’t make any sense,” he said.

(Reporting By Lawrence White and Iain Withers in London and Muvija M in Bengaluru, Additional reporting by Patricia Uhlig in Frankfurt. Editing by Rachel Armstrong and Jane Merriman)

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Bank of England’s Haldane warns inflation “tiger” is prowling



Bank of England's Haldane warns inflation "tiger" is prowling 3

By Andy Bruce

LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, adding that central banks may need to respond.

In a clear break from other members of the Monetary Policy Committee who are more relaxed about the outlook for inflation, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online.

“But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

Haldane’s comments prompted British government bond prices to fall and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation.

“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.

(Editing by David Milliken)

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