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Banking on the unbanked – how technology can revive correspondent finance



Banking on the unbanked – how technology can revive correspondent finance

Abhijit Deb, Head of Banking & Financial Services, UK & Ireland, Cognizant 

Despite the size of the market increasing, correspondent banking remains under pressure due to the cost of compliance, reputational risk and shrinking margins.

Can technology strike the balance between de-risking and financial inclusion?

A broader distribution of global wealth created new opportunities as well as obstacles for the financial sector. Over time, this has led to increased access to banking facilities in regions where consumers earlier may not have had access to a variety of financial services in the past. In the business world, the introduction of more local banks has allowed for an expansion of the correspondent banking industry, with large international banks competing to provide the infrastructure for smaller or regional outfits to carry out transaction services such as cross-border payments.

It is an industry built on the premise of trust and a network that supports this. For example, local banks must trust that international banking facilitators have a resilient transaction network that is secure and can take the strain of high demand. On the other hand, larger international banks need to trust that the local banks they partner with, which may be under less scrutiny from local regulators, remain compliant. This equilibrium is essential for banks to effectively provide services to those in emerging economies.

However, recent changes to the regulatory landscape such as the Bank Secrecy Act along with material breaches or incidents where banks have been caught off guard and found themselves unknowingly abetting fraud or drug cartels have caused a deterioration of this trust. In fact, between 2014 and 2015, 75 percent of international banks admitted that they were scaling back their correspondent banking operations, according to The World Bank. The reputational risks associated with being linked to money laundering, fraud, sanctions or securities violations – not to mention the high regulatory fines – and subsequent compliance costs, are causing banks to be overly circumspect in where and how they offer their services, in the process sometimes depriving whole communities and business segments – previously served by local banks – from accessing a broader range of services. For example, a typical large global FI[1] could incur costs of up to $25,000 per year just in compliance to keep a bank account open in another country, so if the business or political climate is not there for that country, correspondent relations are often terminated.

Ironically, this trend is counterintuitive given the increase in volume of transactions. For instance, take the case of international payments – over 80 percent of cross-border payments on SWIFT[2] are carried out by banks, including 49 of the top 50 globally. Yet parts of the payments value-chain are still slow, often taking an average of five days. In addition, a lack of information around the payment results in 25% of all international payments requiring manual repairs.

With continued globalisation causing an increase in international trade and investments and fuelling demand for these connected services globally, can technology help revive sector that is struggling to reinvent the fabric of trust and ease that underpins most of it?

Trusting in tech 

Technology can play an important role in making the sector more efficient and profitable. For instance, as many of the processes carried out by large international banks are still manual, the introduction of technology has huge potential to boost efficiencies and streamline processes. Some are introducing Artificial Intelligence (AI) in the form of smart contracts to overcome the pitfalls of subjectivity and flag fraudulent transactions without the need for human insight. Elsewhere, others are using AI and hyper-contextualised analytics to reduce the risk of financial crime, replacing manual transaction monitoring techniques.  Ovum reports that 41% of corporate customers are expecting greater use of AI, while only 9% of banks plan to do so in the next 18 months.

The ‘rails’ of the ecosystem are also evolving: SWIFT’s global payments innovation (GPI) has been rolled out aimed at bringing real time international payments to the global banking population, with GPI set to be the standard for all cross-border payments on SWIFT by 2020. GPI, launched just over 15 months ago, and now represents 25% of all SWIFT cross border payment traffic[3].

Blockchain could also significantly ease the correspondent banking process, allowing instant and more secure cross-border payments. One global bank recently announced the world’s first commercially viable trade finance transaction using blockchain, potentially paving the way for much wider adoption.

Innovations such as the above will see much-needed improvements in speed, integrity and transparency and thereby improve the overall customer experience.

A key factor here is accessibility; while local banks may not necessarily have the appetite or resources to invest in cutting edge technologies, they do not have to if international banks do so instead. These smaller organisations would have access to the platforms of the larger business that they subscribe to as part of a correspondent banking relationship. International banks have the resources to push features such as smart contracts out to local partners and given the right assistance, provide them as a value-added service. Charging more for this type of service could also help solve the problem of profitability for international banks.

Catering to a new generation

In order to incentivise local counterparts to use their services again large, international banks could also focus on implementing different processes and pricing models. As B2B customer demands evolve, the interactions offered by larger banks to local partners have increasingly fallen short. Although there is a need to re-look at legacy business processes tied to existing products such as cheques, which are due an update for a present-day customer base, customer service failings often occur because some of the modules they offer are scrapped due to large compliance costs. Could international banks consider a different pricing structure for their services, adopting a model more akin to retail banks?

For example, some larger banks are now offering specific services around transaction screening, document and contract management, or financial analytics. This ultimately benefits the experience provided to local banks, by offering them more affordable bite-size products that meet their needs more accurately. It also has the potential to reduce service and compliance costs, while enabling participants in the ecosystem to vary how they charge for their services. In other words, it gives local partners an almost iPhone-like experience, in that they are not so much paying for a product, which is largely similar but for the way it is presented to them. In the banking world, this could mean that any fee is based on the value that the larger global banks are providing, as opposed to a flat cut of each transaction.

It is a team effort 

On the surface, the market opportunity seems huge, but underneath there are concerns within each stakeholder preventing correspondent banking from reaching its potential. For example, international banks might be conscious of risks such as money laundering, but regulators equally need auditability. The additional challenge of broaching technological innovation with banks’ legal, HR and risk teams means that reviving the industry will be no easy task. Although these obstacles are having an impact on potential revenues for international banks, there are starker implications for financial provision, meaning the masses in unbanked regions could lose the opportunity to access banking services if their local banks do not have the infrastructure to support them.

Key to solving the insecurities plaguing the industry is bringing banks, fintech companies, consultants and regulators together to establish a balanced approach that addresses the needs of all stakeholders. After all, correspondent banking is fundamentally a people-led business, built on assurance, predictability and quality of service. By improving efficiency through use of technologies such as AI and analytics, banks and regulators can be more flexible and ultimately collaborate to realise the potential of the correspondent banking market to enable local banks to provide financial services to their customers.

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U.S. inauguration turns poet Amanda Gorman into best seller



U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit

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Why brands harnessing the power of digital are winning in this evolving business landscape



Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

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Brexit responsible for food supply problems in Northern Ireland, Ireland says



Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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