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EUROPEAN BANKS MUST ADAPT NOW OR RISK BECOMING INFRASTRUCTURE

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  • Auka launches suite of mobile payment technology to financial sector across Europe
  • Auka is the company behind first fully regulated financial system to be run entirely on Google Cloud Platform
  • Application allows banks to launch their own solution in three months
  • Deadline for institutions to release API to third parties fast approaching

A Nordic pioneer1 in mobile payments is launching today in the UK and across Europe.

The first fully licensed and regulated financial company to be run 100 per cent on the Google Cloud Platform, Auka builds and operates fully regulated and licensed end-to-end payments infrastructure that connect financial institutions, merchants and consumers. Banks can then license the infrastructure and applications and launch mobile payments products under its own brand, all within a few months.

The launch comes as the clock ticks on implementation of PSD2 (payment services directive) / XS2A (access to accounts). Approved by the European Parliament at the end of last year, the most significant change of this EU regulation is opening the payments system (currently run directly by the banks) to the open market, thereby increasing competition and, as a result, a wider (and more economic) choice for customers.

This isn’t just another piece of EU regulation requiring changes to operations and compliance. Banks and financial institutions are going to have to  offer up their API (application program interface) to third parties.

It is a digital revolution that will completely alter the current banking model and require financial institutions to adapt their business and operating mode. Failure to keep up will result in revenue, currently generated by the big financial institutions, being taken by innovative new players.

1So banks are faced with one of three choices: do nothing and accept that challenger firms will leverage customers away from them, develop their own system in house, or buy a fully-functional off-the-shelf package that they can customise to their own needs.

But developing a secure mobile payments platform takes time: it has to be secure, stable, intuitive and something customers want to use. In less than two years, the doors will be thrown open and they will have to compete on the open market if they are to retain control of the transaction chain.

This is where Auka comes into its own. The company, which developed and perfected Norway’s mCASH system, now has 17 banks and several thousand merchants running live on it platform, deployed on a PaaS/SaaS (Platform as a Service / Software as a Service) model.

Its suite of applications can be customised to a bank’s needs, from branding and corporate identity through to real time P2P, Point of Sale (POS) and merchant services. What’s more, this can be turned around in three months; far less time than it would take a bank to create its own platform from scratch.

Auka relies on Google App Engine, a service of Google Cloud Platform, in the backend. Google has been working closely together with Auka from the beginning and together they now work to bring new, innovative payment solutions to the financial industry.

2“I’m excited and privileged to work together with the Auka team. They introduce fresh ideas and services to what is considered a very traditional industry in terms of IT. I believe what Auka is doing is very disruptive and a great step forward for the financial industry,” said Otso Juntunen, Head of Google Cloud Platform in the Nordics.

Daniel Döderlein, CEO of Auka, says, “traditional banks are facing a massive change to the way they do business – and how they interact with their own customers – in the shape of the second iteration of the Payment Services Directive” (PSD2).

“Banks need to be prepared to use the Access to Accounts (XS2A) provision within the new regulations to its full extent. It’s not just about complying with requests to provide their API, but building the kind of sticky, high-frequency use services that they can then plug their rivals’ APIs into, ensuring that they are the brand that customers have facetime with,” Döderlein said.

PSD2/XS2A is going to disrupt the market. But with some forward planning, it can be an opportunity to stay relevant.

In Norway, the mCASH system has been deployed by 17 banks that will use the solution to future proof its position for when the changes come into effect. It’s harder to break into an established space than when you all start off at the same time. Banks across Europe need to do the same if they are to retain ‘ownership’ of their customers. The alternative will be costly to them in many ways.

Banking

SoftBank reaches settlement with former WeWork CEO Neumann

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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?

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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.”

UNINTENDED CONSEQUENCES

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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Banking

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

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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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