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Battling Regulations – How Banks can Navigate PSD2 and GDPR

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Battling Regulations – How Banks can Navigate PSD2 and GDPR

Satya SwarupDas, Senior Solution Architect, Virtusa

Benjamin Franklin once said, ‘when you’re finished changing, you’re finished’ and nowhere is it truer than in the commercial banking sector. The industry has been beset by numerous new opportunities and challenges in recent years that it’s sometimes tough to keep track.

Many banks still recovering from the impact of digital disruption, yet now are having to contend with two new game-changing regulations in the shape of Open Banking/Payment Services Directive-Revised(PSD2)in January 2018 and General Data Protection Regulation(GDPR) in May 2018.

The challenge to adapt to both and still maintain a profitable business can be overwhelming at the onset, especially when the two seem to contradict one another.The good part is that the power balance will shift towards customers as both legislations are likely to give them greater control over their personal data and, if handled appropriately, also help banks build stronger relationships with customers.

Navigating the battle of regulations

At first blush, the goals of Open Banking –gives better service options to customers through sharing of data by banks to Third Party Providers (TPP) – is the exact opposite of GDPR that aims to help consumers limit how and where their personal data is used as they will have the chance to know, understand, and consent to the data collected about them. While the former is trying to provide customers with greater choice, better products and better service when it comes to banking, the latter represents a substantial check on how that data can be used by companies. This has left many businesses confused about how to ensure they are compliant with both simultaneously.

To make matters worse, the issue is further muddied by numerous grey areas in both legislations. Now, there are several key questions we don’t have a definite answer to. For example, since Open Banking will allow TPPs to access data and use it for customer servicing, if there is a breach of GDPR rules by a third-party provider, where does the culpability lie – with the bank or the TPP? And who does the customer take its grievances to? Can the same definition of ‘consent’ be used for both regulations? These issues, along with many others, need to be clarified by the regulators. In the meantime, it can be challenging to know the best way to stay compliant to both. Given that GDPR allows regulators to levy fines up to 4% of the annual global turnover, it may well be the case that banks are more focused on GDPR compliance than Open Banking. If so, regulators will need to pitch in so that the concerns of both banks and consumers can be reconciled.

All in the data

However, despite the prima facie contradictions between GDPR and Open Banking, the end goal for both is to give consumers greater control over their data, and at the same time, banks to gain visibility and control of the customer data they have. As of May 25th, 2018, customers can demand that banks share their data with a TPP or delete it under GDPR – either way, unless the bank knows where all the relevant customer data is held, it will not be able to meet these requests and will end up falling foul of the regulations.

The first step in gaining this level of control is to break down all the internal data silos so that a comprehensive profile can be built for every customer. This will guarantee that no data is missed or overlooked. Once these silos are broken down, banks will review all internal data-handling processes to see if they are still fit for purpose. Chances are that in many cases they won’t be and banks will have to strategically consider how to best redesign them to ensure that the requirements of both regulations are met.

The Customer Perspective

As per Veritas GDPR Consumer Research, 2018 some interesting facts come into notice. As per this survey, 71% customers state that they will exercise their right to be forgotten under the new GDPR regulations which means they will ask their banks to delete their personal data. 56% of customers surveyed want to clearly understand how the data companies utilize their data. 79% believe that organizations will not be able to find and/or delete all of the personal data that they hold on them. These figures apply to all other industry sectors. But given the finding that 56% (Highest among all industry segments) feel the hardest sector to be hit by the regulation is Financial Services, the concern applies most to banks and financial institutions.

The above findings indicate that there is a lot of ground to cover to strike the right balance. There are some intrinsic cushions for banks within both the regulations.  e.g. PSD2 has Strong Customer Authentication (SCA), Secure Communication (SC) and Regulatory Technical Standard (RTS) aspects to take care of checks and also does not allow to share “sensitive payment data”. Similarly, GDPR defines “personal data” by taking appropriate stand on security majors and keeping banks’ interest intact.

Into the future

Alone, either GDPR or Open Banking will present a huge challenge for the banking industry. Taken together, the effect is seismic, pulling major global institutions in a dozen different ways at once, especially given that input and clarification is urgently needed from regulators on a host of issues. However, it’s important for the industry not to be reactive and wait for these clarifications.

Open Banking and GDPR represent a fantastic opportunity for banks to reshape the way they interact with customers, provided they can get full control and visibility of the data they hold. Many banks – particularly the more established ones – have huge amounts of legacy infrastructure problems that have resulted in data being stored in different places. If GDPR and Open Banking provide the final push to address that problem then everyone, from banks to consumers, will benefit.

Banking

The future of offshore banking

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The future of offshore banking 1

By Granville Turner, Director at Turner Little.

Despite its misconceptions, the popularity of offshore banking is growing. Not only is it a perfectly legal way of holding your money, but with the right professional advice, it is also reassuringly simple to open an account.

This ease-of-use is prompting many offshore banks to change their offering to compete and make overseas banking even more accessible. No longer is it limited to just the super-rich.

So, what does the future look like for offshore banks? We’ve compiled a list of the top fundamental changes happening in the realm of offshore banking.

Catering to niche markets is the future

Rather than managing account holder’s money in general, offshore banks are tapping into how they can best serve different demographics. Essentially, it is about taking a more bespoke approach to managing money at various stages of life.

But catering to a variety of markets doesn’t just stop there. Many overseas banks are now accepting crypto as a form of currency to appeal to digital, tech-savvy generations.

Cryptocurrency is also attractive for those who see the security benefits it can offer.

Paper chains are fast becoming a thing of the past

As banks move away from paper in favour of digital, security is on everyone’s minds. This is because information is an important asset to many businesses, so protecting it is vital. As such, banks are securing data with the most vigorous encryption security standards.

For account holders, this means digital bank transfers and communication become less of a risk and the smarter thing to do. Paper chains are fast becoming a thing of the past.

Instant access, day or night

In today’s digital world, you don’t need to travel overseas to open an offshore bank account; everything can be done online or over the phone. And like most UK standard current accounts, many offshore accounts now offer online and mobile banking features. So account holders can manage their offshore finances and investments while transferring funds with ease.

Branchless banking

Offshore banks are following the same route of challenging onshore banks by going branchless. This offers substantial benefits for account holders, as branchless offshore banks don’t pass on as much overhead costs to the customer. Ultimately, this means customers can earn better interest rates and other returns on their investments.

Happy to help

At Turner Little, we work closely with offshore banks to provide you with quality service tailored to your needs. With over 20 years of international banking experience and specialist expert knowledge, we will assist you with your enquiries, no matter how complex. And every account we arrange comes with internet banking, card facilities and the ability to transact internationally.

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Banking

Hong Kong’s First Multi-Cloud Challenger Bank Goes Live with Temenos

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Hong Kong’s First Multi-Cloud Challenger Bank Goes Live with Temenos 2
  • WeLab Bank designed, built and launched using cloud-native Temenos Transact in less than 10 months
  • WeLab offers next generational digital services for the 7.5m people in Hong Kong to access from their mobile phones
  • Customers can open accounts remotely in just 5 minutes with bank reporting 10,000 account openings within 10 days of launch

Temenos (SIX: TEMN), the banking software company, today announced that WeLab Bank, Hong Kong’s first homegrown virtual bank, has publicly launched using cloud-native Temenos Transact to provide a range of next generation digital services for customers to enjoy 24/7 from their mobile phones. Designed, built and launched in less than 10 months, the fully digital bank has seen rapid take up with a reported 10,000 account openings within the first 10 days of launch.

WeLab Bank is powered by cloud agnostic Temenos Transact for core banking along with Temenos Analytics and Financial Crime Mitigation. Implemented on Amazon Web Services and Google Cloud, WeLab is the first multi cloud digital bank in Hong Kong. Operating on multiple clouds at the same time gives WeLab increased operational resilience and disaster recovery capability and is a regulatory requirement of the Hong Kong Monetary Authority for new digital banks. According to the Economist Intelligence Unit 2020 report for Temenos, 81% of global banking executives surveyed believe a multi-cloud strategy will become a regulatory prerequisite.

Developing a cost-effective and scalable core banking solution was paramount for WeLab. Temenos cloud native software is built for the digital age using API-first and DevOps principles and engineered to deploy in containers and microservices. This makes it easy for WeLab to scale for future business growth efficiently and eliminates the need to provision for peak processing volumes so that the bank only pays for its actual usage, yielding significant cost savings.

Critically, with NuoDB the solution delivers a cloud-agnostic, distributed relational database that enables WeLab to deploy an active-active on-demand database across multiple cloud providers with near zero downtime failover.

Temenos Transact is a preconfigured system and so requires very little coding and with Temenos model bank to address local practices and regulations, WeLab was able to bring its service to market faster and extend its innovation with more than 400 out-of-the-box APIs.

With Temenos, WeLab bank is set to transform banking in Hong Kong. In as fast as 5 minutes, customers can remotely open a WeLab Bank account with $0 monthly fees and start enjoying differentiated services such as time deposits with competitive rates, an interest-bearing deposit account with an instant virtual Debit Card, and real-time payments powered by Faster Payment System (FPS). Everything can be done on a mobile phone, simply and effortlessly.

Adrian Tse, CEO at WeLab Bank, commented: “WeLab Bank was born from an initiative to reimagine the banking experience for the 7.5 million people of Hong Kong. From the start, we knew this vision needed the most advanced cloud native technology and a partner that shared our vision for digital transformation. With Temenos we have efficiently built WeLab Bank from scratch, free from any legacies, with innovative features that proactively help customers to take control of their money and their financial journey.”

Max Chuard, Chief Executive Officer, Temenos, said: “Congratulations to WeLab Bank on the launch of their trailblazing new digital bank. Building and launching a licensed bank in such a rapid timeframe is a fantastic achievement and we are proud to have supported them in becoming the first multi-cloud digital bank in Hong Kong. Temenos cloud-native, cloud-agnostic strategy means we can satisfy the needs of the most innovative and ambitious neobanks like WeLab Bank to run on multiple cloud providers. We know this is just the beginning for WeLab and we are excited to be part of their story as they revolutionize banking for people in Hong Kong.”

Bob Walmsley, CEO of NuoDB said: “We are excited to be partnering with Temenos to help WeLab Bank achieve their aggressive launch timelines and deliver innovative banking services to its customers. We were inspired by the technical vision of WeLab and knew that executing an on-demand, multi-cloud strategy was a perfect fit for NuoDB. Our enterprise-class, distributed SQL database combined with Temenos’ cloud-native technology helps banks of all sizes around the globe migrate to the cloud to improve agility and reduce costs.”

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Banking

The Bank is Where the Heart Is

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The Bank is Where the Heart Is 3

By Nick Barnes, Practice Director, Financial Services & Customer Success at JRNI

When unexpected events occur, people turn to their banks to provide a sense of trust, security, and stability. They need to be available anywhere, anytime, and from any device. As it’s a business based on trust, one-on-one communication is key.

With the world still emerging from the COVID-19 crisis and endeavouring to avert a possible second wave, every country, state, and region has their own unique requirements. Plus, every customer or member has their own demands. Experts and pundits have discussed a new normal, but what’s normal for now involves keeping customers and employees safe while also providing the same sense of stability as before.

For banks, building societies and credit unions, the main concerns include how to maintain personal relationships amidst social distancing; how to be available at any time on any device; and how to provide a sense of calm and security amidst the chaos.

Adapt or fall behind

Customers are quickly learning which of their service providers are adapting best to this new world. Are financial services providers like banks and credit unions adapting, or falling behind?

Finances are a highly personal topic, and often, illogical or emotional. Will I have enough? Will it be available when I need it? It is always a hot topic of conversation, but especially during a pandemic when unemployment rates are rising, and the economic landscape is unsettled. In the past, a customer could walk into the bank, have a reassuring conversation with a representative and move on.

So, how can banks help their customers through tough financial times during the current crisis, when in-person communication is nearly impossible? One solution is to provide helpful, personalized customer service through digital channels.

While in-person assistance will remain important after COVID-19, customers are looking for assistance now.   Banks are turning to remote video and voice appointments to boost customer satisfaction and meet customer expectations.

3 reasons to use remote appointments

1. To comply with social distancing

Our Modern Consumer Banking Report​​​​​​​ last year showed that when consumers visit branches, it’s primarily to talk face-to-face and ask questions/get help.  Research from Bain reinforces this, and emphasizes that “many retail banking customers think it’s easier to purchase through a human channel, or prefer to speak with an employee before buying a product.”

Due to social distancing measures, branches cannot be customers’ primary way of managing their finances during this pandemic. However, this doesn’t mean that customers aren’t interested in personalized attention that can be made available via video and voice.

2. To meet new demand 

Although spending habits may have changed, consumers are still making critical financial decisions during the COVID-19 pandemic.

Individuals: The financial effects of coronavirus are drastically different from one customer to the next. While some are counting down the days to receipt of their unemployment check, others may be taking advantage of low-interest rates to buy a house. Ultimately, banks and credit unions need to address each customer segment with a unique message and way of providing assistance.

Small business banking: Countless small businesses around the world have been forced to close their doors. Whether they’re needing loans, payment deferrals, or advice, small businesses are looking to their bank as a guide, and a comfort.

Investment management: A recession is upon us, and with that comes a new approach to investing. Financial advisors are fielding questions, providing recommendations, and staying up to date on the market. Beyond this, many are building entirely new strategies for their clients.

Regardless of customer type, it’s clear that each subset of customer needs help from their financial institution at this time.

3. To boost customer retention

​​​​​​​​​​​​​​Financial institutions cannot afford to lose customers during the pandemic, so customer retention is crucial.  Great customer service boosts customer loyalty, and research from Bain shows that loyalty is key to retention:

  • Customer loyalty increases revenue, and loyal customers are less likely to switch to a competing bank.
  • Customers who are a bank’s “promoters” recommend the bank to others as much as six times more than “detractors.”
  • A bank’s “promoters” spend one-quarter more than detractors on their primary credit card.

Ultimately, being able to connect with a customer in need using video or voice can give customers peace of mind and boost loyalty. Delivering personalized financial services without interruption is crucial.

Initial results from video banking show that consumers consider the service valuable. Phoenix Synergistics’ survey from December 2019 found that 17% of customers polled had used video chat through a website or app with their financial institution. Of those that had used video chat, 89% found video chat valuable.

Some suggestions for banks using remote video or voice appointments would be to: firstly ensure your solution is secure and doesn’t expose personal information outside of the conversation; secondly create a culture of consultation to alleviate outstanding fears; thirdly leverage appointment setting to allow customers to pre-schedule consultations and enquiries; finally include remote appointments as part of a wider suite of ‘touchless’ offerings.

The dos and don’ts for bank branches

Forty-three percent of banking customers have expressed their desire to change the way they bank due to the pandemic. As with retail and hospitality, several key customer segments have doubts about visiting physical locations and are transacting more remotely.

The challenge for banks is to make services available wherever customers want to bank – be it by phone, online, or in branch – and when it comes to any transaction, the key is to make customers feel cared for, heard, and secure.

With social distancing parameters in place along with other health and safety measures, there’s significant focus on the need to retool the branch experience. Here are a few suggestions as we move into that next stage of business and interaction:

DO: Have a plan.

Nick Barnes

Nick Barnes

Think about how customers will enter and exit each location. Plan for increased space between people in line, how to attend to at-risk customers, properly spaced lobbies, and waiting areas. Consider your employees and what they need in order to stay safe including break rooms with increased space between lounging areas, removal of shared snacks, availability of hand sanitizer and masks.

DO: Make sure you can effectively manage footfall.

Overcrowding will create fear and loss of trust. Make sure you have plenty of directional signage, crowd control measures, and staffing. Solutions including people counters, occupancy managers, and pre-booked appointments​​​​​​​ both allow for the throttling of traffic, and the ability to build in cleaning time.

DO: Hire the right team and staff adequately.

Being courteous and in control will be the most important ingredient to success. Have enough staff, you will need the extra hands to ensure that all staff is properly trained and ready to enforce new protocols.

Some customers will be understandably anxious going into branches, and some will want to feel that everything has returned to normal, so staff may need to be very firm and well-versed in a new operating style.

DO: Offer customers the ability to bank when and how they prefer.

We’re not suggesting that you remain open for 24 hours, but the goal is to make it easy for the customer. Adding the ability to set an appointment with a wealth manager or an advisor online will enable customers to bank from home, and will enable banks to provide the personalized service customers have come to expect.

Leverage online appointment confirmations to remind customers to have key documents available if they need them. Virtual solutions position the bank to serve as an advisor rather than just a financial institution.

DO: Demonstrate your commitment to a safe environment.

Use clear signage to convey the measures in place to ensure customer and employee safety. Make hand sanitizer or wipes available throughout the branch, and in all high-touch areas. Ensure cleaning supplies are visible, around doorways and ​​​​​​​near greeters to provide customers with an added sense of security. And make sure that employees are following every measure required of customers.

DON’T: Lose customer confidence.

If you are not prepared, it will show, and it will be very hard to gain back customer confidence once compromised. Social media will not be your friend. Forrester Research reports that 52% of US online adults prefer to buy from companies that demonstrate how they are protecting customers against the threats of COVID-19.

DON’T: Overcrowd or fill your branch to capacity.

Consumers are being trained to avoid crowds, so failure at the branch to comply could result in losing their business. Most physical locations are operating with fewer staff and accommodating 10 – 25% of the traffic once allowed. Keep in mind that you only have one opportunity to make a first impression on customers, and they’re looking to trust you have their best interests in mind.

DON’T: Understaff.

You will need to expect the unexpected and having more hands-on deck will prove to be beneficial in the long run.  Having the wrong staff, or those that don’t take the time to learn new operating procedures or feel comfortable telling that customer who won’t keep a mask on, may not be the best fit.

DON’T: Make it difficult for customers to do business with you.

Social distancing introduces a number of disruptions to the way you’ve traditionally done business. So limiting options to customers – providing no ability to bank online or via phone, not having a live customer service voice or chat option – is not going to help. In addition to making sure the services are available, it is imperative to communicate all options to customers.

DON’T: Assume someone else will do it.

Bank staff need to show that the branch is being tended to, cleaned between visitors, and before opening each day. It is important that staff jump in to help move customers safely through the branch, ensure their questions are answered and overall, take a proactive approach to service without assuming that a sign or another staff member will take care of it.  Customers will come to the branch, but gaining their confidence is everything. Don’t lose it by not being prepared. It will be very hard to win it back.

With the constant threat new restrictions in response to COVID-19 outbreaks, banks will need to take a long view on how they enable the operational flexibility that will be needed to adapt to fast-changing conditions.  As people prepare to live more risk-averse lives, banks will need to go the extra mile to ensure customers feel less wary about visiting in person whilst also offering a seamless experience for those customers who prefer to remain in the safety of their homes.  Those that manage to do so will emerge from the crisis with a sustainable advantage over their competitors.

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