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How to get your data in shape to migrate and why it’s crucial to comply

Experian-SEPA-Infographic

By Jonathan Williams

Although there is little under a year to go until the legally-binding Single Euro Payments Area (SEPA) compliance deadline is upon us, many businesses are still unprepared for its impact. The SEPA initiative removes existing differences between national and international, domestic and cross-border payments, and becomes mandatory in February 2014 for businesses in Eurozone countries, (2016 for those in non-Eurozone territories) wishing to make and receive payments in Euros.

Despite the fact that we are over 83% through the time-window of SEPA-migration, the volume of credit transfers in the Eurozone migrated to SEPA is only 30.3% . The direct debit migration situation is even more chronic, as only 2.1% currently comply.

Whilst the, albeit minor, increase in compliance is encouraging for credit transfers, the position for direct debit originators is concerning. The vast majority of transactions are still to be migrated and, in some cases, new mandates must be sought from both businesses and consumers. It is vital that organisations collecting via direct debit immediately examine their processes and plan to comply by next year’s deadline.

Businesses must ensure that all their banking data adheres to the following international standards: International Bank Account Number (IBAN) – ISO13616 – Bank Identifier Code (BIC) – ISO 9362 – and payment file format ISO20022 XML. Essentially, in order to be SEPA-compliant, organisations will need to convert the bank account data they currently hold in domestic format, or BBAN (Basic Bank Account Number), to IBAN in keeping with the aim to drive down cross-border payments barriers by establishing common standards and processes.

Payment Service Providers should accept IBAN-only information from their users for domestic transactions from February 2014. They are allowed to provide BBAN to IBAN conversion services, but after this point Payment Service Providers can only accept instructions that include an IBAN. The rest of the world will need to be fully compliant by 2016. In the interbank space, the requirement is for IBAN and BIC from February 2014. So, when a Payment Service Provider has accepted an IBAN, they will need to append the necessary BIC in order for the transaction to be completed. As a result, banks throughout the SEPA zone must invest in back-office technology that supports their customers’ migration to SEPA.

The time for full data conversion depends on the size of the business; the number of suppliers it has; the staff size; and how much time it has to dedicate to contacting people for data clarification. To give an example, global retailer Levi Strauss & Co. recognised the need to convert to SEPA early and worked with Experian to validate and convert their data. Experian revealed that 91% of the data held was accurate and complete, leaving only 9% of records to be verified. Levi were then able to focus their efforts on correcting this data, saving the company the potentially huge cost of checking all 100% of the records themselves to unearth the 9% with errors, thus saving a significant amount of time, money and resource. The project had been expected to take six months, but within two months the file was 100% complete. Additionally, 95% of data was complete, correct and converted in only ten days, enabling Levi’s Shared Service Centre to start processing all payments into Europe through their bank.

Businesses should understand the timeline involved, and start preparing for migration as soon as possible. Transitioning data and amending incorrect details will take time, and the work involved should not be underestimated. Prior to data conversion, companies need to think about their business software and make sure that it is capable of handling IBANs, as well as BICs, and that they can process the correct payment files for their banks. They should be in communication with their bank and their software providers to certify they have the necessary resources and then check that all their data is correct before migrating.

Although IBANs have been in existence for many years, they are still not widely recognised. So, businesses will need to consider how they update their legacy data without confusing their customers, suppliers and staff. Businesses which currently use IBAN-format account numbers have reduced error rates in comparison with those using domestic account numbers – only 4.6% as opposed to 12.7%. However, this would still represent a significant increase in failed payments over the 1-2% currently experienced by European organisations, because of the error that a bad migration will expose.

Businesses are not currently seeing this rate of failure because there is enough information in account data to enable banks to unobtrusively correct payments with inaccurate account data. Banks frequently fix any incorrect data silently and transparently where they can without informing the originator of the payment; this is more efficient than declaring the payment failed, and also provides good customer service. For example, if a bank receives a payment including a branch code whose branch closed 3 years ago, it is known to the bank that any accounts from the old branch will have been transferred to another, and so the bank may process the payment as if to the correct branch in order to complete the payment, although the data directs otherwise. Under SEPA, the clearing system would not be able to identify the BIC, therefore couldn’t route the payment to the receiving bank that is currently able to address such errors, and so there would be a significant risk that such a payment would fail.

Migrating existing customer records to the IBAN standard will be a huge challenge given the sheer scale of records and, as a result, large creditors face notable challenges to migrate and maintain SEPA-compliant mandate information. Even then, errors will not be fully eradicated. The most common error is related to out-of-date or invalid bank or branch codes. Millions of BICs are critically impaired or out-of-date following numerous bank mergers, reorganisations, defunct branches or structural changes. Over 55% of BICs recorded for a bank or branch are a correct match, but 1.0% do not have data in this field, and a concerning 43.7% of records have invalid or out-of-date BIC information.

There is much to do and not much time to make these changes, especially for larger organisations with thousands of accounts to validate and migrate. Failure to successfully migrate before the deadline could significantly affect a business’ ability to continue making and receiving payments. Organisations need the confidence that they can continue doing business at minimal cost and risk, using the correct bank account formats. Separating the good transactions from the bad as early as possible is critical in order to quickly resolve costly problems, and performing a full validation is vital. Migrating with a service partner who can manage the process will save time and money, make the transition smoother, and ensure that all data is valid as well as correct.

The SEPA finish line is now in sight following formal ratification of the end date and, with so much still to do, there should be a sense of urgency amongst businesses. SEPA clearly has enormous benefits, and this poses a timely opportunity to permanently eliminate the long-standing costs linked to running legacy systems.

Experian-SEPA-Infographic

 

Banking

How new trends are creating the perfect recipe for rapid digital transformation throughout the world’s oldest institutions

How new trends are creating the perfect recipe for rapid digital transformation throughout the world's oldest institutions 1

By Wayne Johnson, CEO, Encompass

Digital banking has drastically changed the landscape of financial transactions over the last few years. Technologies used to be limited when it came to banking, however, now they cover every step of banking or investment services, from behind the scenes due diligence checks to customer facing channels. Embracing this change through emerging technologies is the future for the financial industry.

In recent years, financial technology (FinTech) has developed to facilitate online payments, instant banking, trading, lending, and more.

This new era of digital transformation has been driven by technologies such as artificial intelligence (AI), APIs, blockchain, process automation, and internet of things (IoT) technologies, which have provided vital upgrades to the outdated legacy IT systems institutions historically relied on. The aforementioned technologies streamline and enhance processes, consequently generating a much more reliable and pleasant customer experience. These technological advancements have transformed modern banking operations, changing how the banking industry operates today.

Every new advancement in technology in the finance sector, like expanding a financial service offering to business customers, brings with it new risks and compliance obligations, but the latest trends are creating the perfect recipe for rapid digital transformation throughout the world’s oldest institutions.

The acceptance of new-age technologies

Technology is already driving massive changes in the banking landscape as we know it, and it will be an influential contributor to shaping the industry of the future.

Focus on improving customer experience

One of the areas that banks are increasingly trying to improve through digital banking is customer

experience. Customer expectations for online services are constantly being influenced by the experience provided by big tech companies like Google, Amazon, Apple, and Facebook. With their influence, everyone is looking for a similar experience from their own providers. While digitally savvy Millennials are mainly responsible for the rise in expectations across the board, the wide-spread use of digital technologies in most industries has meant that it is more important than ever for banks to be on top of their delivery at all times.

Wayne Johnson

Wayne Johnson

Interactive banking channels

There has been a huge decline in branch visits in recent years, with some re-evaluating their very role, and an increasing shift from just providing transactional services to allowing for a practical banking experience. This was initially done by moving banks to key locations in town centres, investing in video chat services and offering self-service points – all of which has only been possible through the use of digital technologies. Financial institutions have realised that customers, with their busy and demanding lifestyles, like to have a choice and rely on a full range of channels, online access and 24/7 availability.

The rise of open banking

The increased popularity of open banking and rise in API usage is set to drastically change the industry with the flexibility offered by APIs allowing financial institutions and FinTech’s to put innovation at the heart of their service, resulting in improved customer service and enhanced convenience.

The importance of organisational structure transformation

In order to achieve true digital transformation, financial services institutions need to change their organisation functions from the inside out. To reap the greatest rewards, they must promote a “digital first” strategy internally. Only then will they see a positive change and truly release the benefits of digital transformation and the solutions available today.

The  market is constantly evolving , and adapting, and whilst the survival of traditional institutions is not under immediate threat, key players are going to have to modernise their processes and ways of working to keep up with developing requirements and customer needs.

Financial institutions are now starting to recognise the importance of digitalisation, which many other businesses realised was a priority years ago. This is demonstrated by the emerging trends mentioned, which indicate a rapid altering of the operating environment, from increased customer expectations and improved processes, back-end technology and newer operating models to organisational priorities shifting with the times. Digital transformation can no longer be ignored, and financial services organisations will have to embrace it if they want to remain competitive

 

This is a Sponsored Feature.

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Banking

Standard Chartered Bank partners with Microsoft to become a cloud-first bank

Standard Chartered Bank partners with Microsoft to become a cloud-first bank 2

Standard Chartered Bank and Microsoft Corp. on Tuesday announced a three-year strategic partnership to accelerate the bank’s digital transformation through a cloud-first strategy. This partnership marks a significant milestone for Standard Chartered in making its vision for virtual banking, next-generation payments, open banking and banking-as-a-service a reality. Leveraging Azure as a preferred cloud platform, the companies will also co-innovate in open banking and real-time payments to help the bank unlock new banking experiences for clients.

Standard Chartered Bank partners with Microsoft to become a cloud-first bank 3

Embarking on a cloud-first strategy

As part of its digital transformation, Standard Chartered will adopt a multicloud approach, where significant applications, including its core banking and trading systems and new digital ventures such as virtual banking and banking as-a-service, will be cloud-based by 2025, subject to regulatory approvals. The bank will also adopt a cloud-first principle for all new software developments and major enhancements.

As technology reshapes the banking industry, Standard Chartered recognizes that a cloud-first strategy is critical to the bank’s ambition to make banking simpler, faster and more convenient. By being digital-first, the bank will be able to meet the demand for seamless banking virtually anytime, anywhere, and make banking more accessible to people across its network.

Michael Gorriz, Group Chief Information Officer of Standard Chartered, said, “Cloud is a cornerstone of Standard Chartered’s strategy to meet the present and future banking needs of our clients. Cloud providers have invested massively in the reliability and automation of infrastructure and platforms. Using cloud services improves our ability to be agile and innovative, while increasing our operational efficiency and resilience. As disruption in the financial industry continues, we can focus on client benefits by deploying our solutions quicker and allowing for faster integration of new business models and partners. To realize our digital ambitions, Standard Chartered has chosen Microsoft as a strategic partner and this partnership marks a major milestone for the bank in adopting a cloud-first approach.”

Bhupendra Warathe, Chief Technology Officer, Cloud Transformation at Standard Chartered, added that “The pandemic has shone a spotlight on the need for businesses and banks to be resilient from a risk mitigation, cost and security perspective. With the increasing trend of an always-on digital economy, commercial and consumer clients are looking for applications and services that empower them to do online banking from anywhere, flexibly and efficiently. The speed and scale of continuous innovation offered by Azure allows us to innovate with the latest AI services to meet evolving client needs. We can pilot new apps in one market and scale them rapidly across others. This is especially important for a bank with a footprint as broad and diverse as ours.”

Standard Chartered will adopt Microsoft Azure as a preferred cloud platform to meet the bank’s need for resilient data centers and cloud services and addressing customers’ security, privacy and compliance requirements across the bank’s global footprint.

The first set of capabilities to move to Microsoft Azure will be Standard Chartered’s trade finance systems, allowing for seamless cross-border trade for the bank’s corporate and institutional clients.

The partnership will also advance the bank’s digital workplace transformation with Microsoft 365 and Microsoft Teams providing modern productivity and collaboration tools to Standard Chartered’s 84,000 employees across its 60 markets.

Co-innovating the future of banking

Standard Chartered will also use Microsoft Azure artificial intelligence (AI) and data analytics capabilities to enhance and automate banking processes as well as deliver hyper personalization of its client products and experiences. Co-innovation in open banking application programming interface (API) and Internet-of-Things-based, real-time payments will also help the bank unlock new banking experiences for clients.

Bill Borden, Corporate Vice President of Worldwide Financial Services at Microsoft said, “Cloud computing is an enabler for financial institutions to modernize their infrastructure and systems, to gain the agility they need to respond to competitive pressures, regulatory environments and customer demand. We are committed to helping Standard Chartered Bank in its ongoing digital transformation journey as it strives to address evolving customer needs and build the next generation of banking experiences.”

Addressing the social needs of communities in the emerging markets

Standard Chartered strives to understand the evolving needs of its communities and be an enabler for change. As a part of the strategic partnership, the bank and Microsoft will explore sustainable finance and business initiatives to expand sustainability across the industry.

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Banking

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 4

By James Herbert, CEO & founder, Hastee

Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when we expend effort, we expect an immediate reward.

It’s therefore no surprise that over time, different areas in society have adapted to our nature as humans. Almost everything we want, we can get on-demand. Whether it’s instantly streaming movies on Netflix, online shopping from Amazon, or fast-food delivery from the likes of Just Eat. And, because of such technological innovations our expectations have accelerated when it comes to the pace of delivery. This isn’t individual to us as consumers in our day-to-day lives, it’s also reflected in the workplace. We ultimately want work to work for us.

Part of this of course comes down to accessing wages. Workers should be able to access a portion of their earned wages whenever they need it, in advance of the monthly pay cycle – whether to help during challenging times or in day-to-day life. We solved this solutionBut, to take this up a level, ready for the future, we introduced the world’s first Earnings on Demand contactless debit card, powered by Visa – giving users access to their accrued earnings in real-time, with the card’s balance dynamically increasing every day they work.

So what is the card, and how will it change how we access earnings in the future?

The basis is very much the concept of Earnings on Demand. At university I set up a company called Brightsparks to connect students with work opportunities so they could earn money. Yet I noticed a common trend. With students often having to wait for the monthly pay cycle to get their earnings, many were having to turn down work simply because they couldn’t afford the travel day-by-day. It became very apparent that not having £20 today could stop them earning £200 tomorrow.

It struck me that payday itself doesn’t have to be a rigid construct that people have to wait for. But this isn’t specific to students. Liquidity is a widespread issue faced by people in all industries and of all ages, and according to our most recent Workplace Wellbeing Study, 82 per cent of people turn to high-cost methods of financing to tide them over when needed.

The Hastee Card effectively makes wages directly accessible: it simply lets people spend a portion of  what they’ve already earned.

Some people might wonder why they’d want to step away from the standard monthly pay cycle. But consider this: the monthly payroll (via a cheque) only came about in the 1960s as an Act of Parliament. Before this, most people were paid weekly in cash. The first major firm that shifted to monthly payments did it for cost-cutting. It worked for the employer more than the employee. In fact, that firm’s employees had rejected their employer’s change of payment type when it was first trialled a decade before (look up ‘Pye Radio’). So the way that workers and organisations interact around pay is not set in stone – it changes as technology and society shifts.

The way we perceive and use money keeps evolving. Apple Pay, Monzo, and PayPal have completely changed the way payments can happen, yet payroll still remains largely unchanged. It’s only a matter of time before disruption becomes more widespread.

Looking at it from the employer side, it has its benefits too. Before the climate changed, businesses were accommodating enhanced workplace benefits such as no-desk policies, flexible or remote working. In all cases by businesses offering more, they tend to see a more engaged, happier and less financially stressed workforce – leading to increased productivity.

Earnings on Demand is ultimately a perk that presents an ethical alternative to high-cost credit options such as payday loans, credit cards and overdrafts. And existing solutions offer zero impact on payroll processes, zero impact on the cashflow of the business and are designed for quick, simple integration.

The Hastee Card is an evolution of this all – preparing for the future. It builds upon and enhances the user experience by reducing friction and offering immediate spending power as well as a path to greater benefits such as cashback and rewards in the not-to-distant future.

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