Connect with us

Banking

MOBILE BANKING WATERSHED SIGNALS THE ARRIVAL OF THE VIRTUAL BANK

Published

on

mobile-banking

Richard Hamerton-Stove, Infosys Senior Principal in Financial Services

At the end of March the British Bankers Association (BBA) announced that the number of transactions made through banks’ smartphone apps has doubled over the past year. This announcement marks what I believe to be a watershed moment for mobile banking services and the tipping point towards their mass consumer adoption. It proves that the previously fragmented mobile banking market has become simplified, with a second generation of improved services that consumers are taking to with relish. At this key moment in the mobile banking revolution, it is worth taking stock of some of the far reaching implications that it will have on banks and their customers.

Customer-centric banking

Richard Hamerton Stove

Richard Hamerton Stove

Perhaps the biggest impact of today’s ubiquitous and powerful mobile connectivity is that customer expectations have completely changed. Mobile banking services (along with our wider online culture) are encouraging customers to expect to be able to engage with banks at a time and place of their choosing. To meet this expectation banks need to start thinking about their entire customer base in aggregate and to shape their workforce of financial advisors accordingly, freeing from the traditional restrictions of branch, region or geography.

If customer expectations have radically changed then the only sensible reaction from the banking sector is to position the customer at the centre of the relationship, connecting with customers at the time, place and channel of their choosing. If a customer wants to talk about their finances on a Sunday morning then the advisors need to be available at that time. If a customer wants to talk to two different advisors back to back then the bank needs to make this happen. If the customer would prefer to conduct his business from his own home office, kitchen or living room then bank needs to adjust to this.

Virtualising the retail bank

Such an approach relies heavily on technology as an enabler. Banks will in particular need to embrace video-conferencing and ensure that they have in place solutions to challenges around security, network bandwidth and sales compliance. None of these challenges are insurmountable and all of the technology already exists, it is simply up to banks to seize the initiative. Indeed most UK banks are already trialling such systems today.

A clear advantage of this approach is that it will make compliance significantly easier. For each transaction banks need a full and complete audit trail of authenticity and authorisation.  This becomes increasingly complex as customers interact in multiple ways through multiple systems yet crucial for compliance with banking regulations. By recording the online interactions of our virtualised bank, (and thus obtaining evidence of customer intent) creating a clear audit trail becomes a simple exercise, reducing banks’ exposure to risk.

The end of the branch?

Of course, progress in one area usually means that there will be loss in another. In the case of mobile banking, many are concerned that it will come at the cost of the traditional bricks-and-mortar branch office. Many customers are attached to their local branch, but the undeniable fact of the matter is that branches do not make much sense from an operational perspective. For example, opening hours are mostly mapped to when working people are otherwise occupied and few branches offer services that can’t be delivered digitally. Branches are also highly expensive to maintain.

Branches, however, provide many customers with kind of security blanket that makes them feel safe. It is this largely the feeling of security that branches give customers that they remain so popular.  In fact, recent Infosys research[1] found that customers feel much more comfortable sharing personal information in a branch than online and while mobile. This is perhaps one of the most important factors in fully realising the promise of mobile banking.

Banks need to invest in the right network security products and anti-fraud data mining technology so that customers can rest assured that everything that can be done to secure data has been done.

The importance of trust cannot be overstated, with 77 per cent of respondents to our survey stating that they would consider changing banks if a competitor offered assurances that their data and money would be safer. Worryingly, nearly a third of consumers (31 percent) still feel that their current bank or financial institution does not have a clear process for addressing fraudulent issues.

This is not something banks can afford to be laissez-faire about. Digital banking is the only kind of banking the next generation understands and increasingly success in the retail banking sector will be defined by the strength of mobile banking services.  The BBA’s watershed announcement should be celebrated, but while mobile banking is no doubt the future, there are many lessons of the past banks need to take with them on this journey.

Banking

AML and the FINCEN files: Do banks have the tools to do enough?

Published

on

AML and the FINCEN files: Do banks have the tools to do enough? 1

By Gudmundur Kristjansson, CEO of Lucinity and former compliance technology officer

Says AML systems are outdated and compliance teams need better controls and oversight

The FinCEN files have shown that it’s time for a change in AML. We must take a completely new approach in order to catch up with the speed of innovation in financial crime.

Despite what you’ll read in news headlines, we can’t lay all of the blame for anti-money laundering failures at the doors of the banks. The majority of compliance teams are doing what they can, and what they are being asked to do.

Historically, AML has, in large part been a box-checking exercise. Banks have weaved through mountains of false alerts, investigated cases, sent SARs, and then got on with business as usual. In some jurisdictions, banks can‘t even interfere with customers under investigation, in fear of jeopardizing cases.

But the sentiment towards banks’ responsibility in AML is changing. They are increasingly looking at AML as a corporate social responsibility issue and even a competitive advantage. Banks are looking to protect their brands from the horrors of an AML scandal, and as such are taking a more proactive approach.

They are also throwing a lot of money at the problem. Deutsche Bank claims to have invested close to $1 billion in improved AML procedures and increased its anti-financial crime teams to over 1,500 people. Most big-brand banks have a similar story to tell.

With reputation on the line, better AML controls can become good business.

So where does the problem lie?

From the thousands of SARs discovered in the FinCEN files, lack of customer oversight is evident. Banks need to establish a method of knowing their customers through their actions across the organization and beyond the organizational walls. By doing so, banks can better understand AML and compliance risk, which gives them the necessary tools to bar customers from doing business or limiting their activity.

While banks are striving to better enforce regulations by pouring money and resources into CDD and transaction monitoring, forming this type of intelligent customer overview might be the real solution. Proper Customer Due Diligence and customer risk monitoring can only be achieved by continuously tracking customer behaviour and transactional networks. With the latest developments in Artificial Intelligence – that is now possible.

But, the reality for compliance teams is they are hindered by outdated technology in their risk assessment and transaction monitoring systems and because of this, banks are fighting a steep, uphill battle against serious organised crime.

In 2019, the Bank of England issued a statement that claimed: “existing (money laundering) risks may be amplified if governance controls do not keep pace with current advancements in technological innovation.”

I know from my time working as a senior compliance technology officer that many traditional AML systems are inefficient, slow and labour intensive, and often lead to inaccurate outcomes. In fact, most of the systems pre-date the iPhone, so they are using last-generation technology and techniques to detect criminal activity.

In short, legacy AML systems are not fit-for-purpose. Legacy vendors built them for the box-checking world of the past, and they are focused on one suspicious transaction at a time – rather than looking at ‘bad actors’ in the financial system, and patterns in their behaviour.

As launderers constantly evolve their techniques to circumvent rule-based or simple statistical detection, the AML systems market has not kept up. There is a dire need for innovation.

Unless systems are updated, banks can continue to file suspicious activity reports (SAR), but if bad actors can conduct their business ‘as usual’ and shuffle money around the globe to hide its malicious origin, the effectiveness of a SAR is significantly diminished.

What’s the solution?

I believe we need to rethink our entire approach to AML. We need to empower compliance departments with better controls and oversight, and move away from outdated, traditionally rule-based systems and towards a modern, AI-enabled, behavioural approach.

While the bad guys have learnt how to evade rule-based systems, they find it extremely difficult to get around AI algorithms that search for anomalies in behaviour. The advancement of AI algorithms, especially in the field of deep learning, provide an opportunity for banks to detect more complex and evasive money laundering networks.

So the answer is to establish continuous automated risk monitoring and implement a workflow system that provides money laundering risk scores for customers.

The latest AI software could kickstart a new age of customer AML risk-based overview. Instead of relying on static and self-reported KYC data, AI systems can analyse behaviour over a period of time and compare it with peer-groups and past actions. It provides compliance teams with a continuous risk-rating of their customers, actor insights and summaries to facilitate efficient and thorough investigations, and an organizational-wide overview.

Recent advancements in AI have not only made the above possible, but also practical. Our latest Human AI models contextualize and explain the appropriate data, making it easier for banks to spot sophisticated crime.

By looking at AML not simply as a box-ticking exercise, but as a competitive advantage that can increase customers’ trust in their financial institutions, banks have a lot to gain. Moving towards behaviour-based AML systems is a move towards making money good.

Continue Reading

Banking

Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild

Published

on

Local authorities and business networks play a key role in small business success, and must be protected during COVID rebuild 2
  • 23% of UK’s top performing businesses have been supported by local enterprise partnerships and growth hubs
  • Similarly, 30% of Britain’s strongest businesses have obtained external finance in the last 3 years
  • New findings come as part of an independent, holistic study into small business success, commissioned by Allica Bank to support British businesses

A new study, commissioned by business bank, Allica Bank, shows that a high level of engagement and interaction with external institutions and resources, is central to SMEs’ prospects of success.

The study analysed data from over 1,000 companies and ranked their success on a scale that evaluated factors including productivity, growth, consistency and outlook. To measure SMEs’ external engagement, survey respondents were asked whether or not they had engaged with local enterprise partnerships, growth hubs, or external financial advisers, as well as whether they had obtained credit or sought re-financing advice, in the last three years.

The benefit to small businesses in making the most of external resources are clear to see, with a quarter (23%) of the UK’s top performing SMEs – those in the top tenth percentile – actively engaging their local enterprise partnership or growth hub in the last three years. This compares to just 16% of all other small businesses. With such a clear benefit to businesses, these external networks must not only be protected but prioritised by any Government plans to rebuild the economy post-COVID.

Similarly, of the top performing SMEs in the country, 30% have obtained external credit in the past three years, compared to less than a quarter (24%) of all other businesses. This figure drops even further for the weakest performing businesses – those in the ninetieth percentile – where just 12% of businesses have obtained external financial support in recent years.

Chris Weller, Chief Commercial Officer, Allica Bank, said:

“At Allica Bank we understand that no two businesses are the same. We also know that no-one knows a business as well as its owners and managers. But they can’t be expected to be experts on everything.

“In the UK there is a wealth of external advice and support for small businesses and we urge each and every business out there to tap in to the external resources around them. Third-parties, such as business clubs, chambers of commerce, local enterprise partnerships and trade bodies, can be invaluable sources of advice and further resources. And although they have excelled in their given field, business owners may still lack knowledge in many other areas of running and growing a business. Therefore, engaging with third parties can give business owners the kinds of insight – and fresh perspectives – they need to succeed.

“As the economy and the country comes to terms with the impact of the COVID-19 pandemic, it is important these vital SME resources are protected and given the funding they need to continue providing invaluable insight and support to small businesses up and down the country.”

Allica Bank’s SME Guide to Success identified six ‘rules to success’ that were more likely to be displayed by top-performing SMEs compared to their counterparts. The full report contains a wealth of additional data and insight into each of these topics.

As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.

Continue Reading

Banking

Do we really need banks? Yes, but digital transformation industry-wide is vital

Published

on

Do we really need banks? Yes, but digital transformation industry-wide is vital 3

By Charley Cooper is Managing Director at enterprise blockchain firm, R3

The Coronavirus crisis has taught us that we are capable of going digital quickly when we need to. As the banking sector faces a second wave, the ability for individual firms to grow and succeed will be reliant on better connectivity and efficiency at the industry-level, writes R3’s Charley Cooper.

The sudden and dramatic pace of change has been seen globally over the last six months. Decades of paper-based practices are being updated, digitised and overhauled as the whole word adapts to working online. As of today, countries are accepting “alternative arrangements” for original paper export certificates, New York is allowing notary services by video, and global banks are accepting “original” documents and acceptances by email.

Over the coming months, we will see this digital transformation extend from individual use cases and firm-level deployment to entire industries. And perhaps in no other industry is this more critical than in financial services, where the role of banks continues to be challenged because of the inefficiencies they face as a result of decades of siloed technology deployment.

While unquestionably an improvement over reliance on manual processes, regular “digital transformation” as implemented by a single bank has limited benefits. These typically include greater automation of business processes, acceleration in adoption of electronic channels, elimination of manual processes, standardisation of non-value-adding business practices and a focus on driving up data quality and speed of information flows.

Now consider achieving digital transformation at the level of the entire market, rather than on a bank-by-bank basis. Whilst a digital transformation project for a single bank might automate a business process between a front and back office, a digital industry transformation project might optimise the trading and settlement of the asset between buyer and seller and their custodians too.

Of course, such things have been attempted before. But there have been many failures and the successes are notable by how they have resulted in new dominant centralised providers – for example for market data, messaging or settlement. The advent of blockchain architectures showed us there was a new way to tackle the problem, one that worked with the grain of existing markets.

Done right, the prize is a huge “productivity dividend” as entire markets are unshackled from their analogue histories.

Tackling interbank reconciliation at the industry level

The Italian financial services industry provides a pertinent use case of digital industry transformation. 32 banks in Italy went live in March with one of the first real-world deployments of enterprise blockchain technology in interbank financial markets. 23 more banks went live in May, with further institutions scheduled to go live this autumn. Built by the Italian Banking Association, ABI, the Spunta Banca DLT app on R3’s Corda Enterprise platform tackles the market-wide issue of interbank reconciliation.

The traditional reconciliation process for interbank transactions in Italy—formerly governed by the “spunta” process— is notoriously complex. Resolving mismatches in transactions is a labour-intensive process, hampered by a lack of standardisation, fragmented communication and no “single version of the truth.” The Spunta Banca DLT app automates the reconciliation process and enables banks to pinpoint mismatches in interbank transactions quickly by sharing common data in a secure way.

Connecting such a large and diverse group of banks in a live environment to tackle a shared problem is a major milestone for digital transformation in the Italian banking sector, providing a glimpse into a brighter, more efficient and interconnected future for all financial markets.

Changing mindset

The current crisis has accelerated the launch of digital technology for many use cases across a diverse range of sectors, but those that stand the test of time will be developed with an industry-level mindset, not firm-level.

It is now clear that the age of inter-bank optimisation is over – the path forward from this crisis will be paved by software that focuses on adding real value for entire markets, connecting banks to overcome the biggest challenges they share as an industry.

Banks must adapt and start thinking about technology in new and innovative ways if they are to retain their critical role in the global economy.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

7 Ways to Grow a Profitable Hospitality Business 4 7 Ways to Grow a Profitable Hospitality Business 5
Business15 mins ago

7 Ways to Grow a Profitable Hospitality Business

Hospitality requires charisma and innovation The hospitality industry is a multibillion-dollar industry with lots of career opportunities in hotels, theme...

AML and the FINCEN files: Do banks have the tools to do enough? 11 AML and the FINCEN files: Do banks have the tools to do enough? 12
Banking50 mins ago

AML and the FINCEN files: Do banks have the tools to do enough?

By Gudmundur Kristjansson, CEO of Lucinity and former compliance technology officer Says AML systems are outdated and compliance teams need better...

Finding and following your website’s ‘North Star Metric’ 13 Finding and following your website’s ‘North Star Metric’ 14
Business1 hour ago

Finding and following your website’s ‘North Star Metric’

By Andy Woods, Design Director of Rouge Media The ‘North Star Metric’ (NSM) is one of many seemingly confusing terms...

Taking control of compliance: how FS institutions can keep up with the ever-changing regulatory landscape 15 Taking control of compliance: how FS institutions can keep up with the ever-changing regulatory landscape 16
Top Stories1 hour ago

Taking control of compliance: how FS institutions can keep up with the ever-changing regulatory landscape

By Charles Southwood, Regional VP – Northern Europe and MEA at Denodo The wide-spread digital transformation that has swept the financial...

Risk assessment: How to plan and execute a security audit as a small business 17 Risk assessment: How to plan and execute a security audit as a small business 18
Business2 hours ago

Risk assessment: How to plan and execute a security audit as a small business

By Izzy Schulman, Director at Keys 4 U Despite the current global coronavirus pandemic and the uncertainty it has placed...

Buying enterprise professional services: Five considerations for business leaders in turbulent times 19 Buying enterprise professional services: Five considerations for business leaders in turbulent times 20
Business3 hours ago

Buying enterprise professional services: Five considerations for business leaders in turbulent times

By James Sandoval, Founder and CEO,  MeasureMatch  The platformization of professional services provides businesses with direct, seamless access to the skills...

Wireless Connectivity Lights the Path to Bank Branch Innovation 21 Wireless Connectivity Lights the Path to Bank Branch Innovation 22
Technology3 hours ago

Wireless Connectivity Lights the Path to Bank Branch Innovation

By Graham Brooks, Strategic Account Director, Cradlepoint EMEA As consumers cautiously return to the UK high street in the past...

Financial Regulations: How do they impact your cloud strategy? 23 Financial Regulations: How do they impact your cloud strategy? 24
Technology3 hours ago

Financial Regulations: How do they impact your cloud strategy?

By Michael Chalmers, MD EMEA at Contino How exactly do financial regulations affect your cloud strategy? It’s a question many of...

Is It The Right Time To Invest In Gold? 25 Is It The Right Time To Invest In Gold? 26
Investing3 hours ago

Is It The Right Time To Invest In Gold?

By Zoe Lyons, Hatton Garden Metals The current climate is one of uncertainty, so it can be difficult to know...

Private public investment is more inter-dependant than ever 27 Private public investment is more inter-dependant than ever 28
Investing4 hours ago

Private public investment is more inter-dependant than ever

By Konstantin Sidorov, CEO and Founder of London Technology Club Today, one thing unites the majority of governments around the...

Newsletters with Secrets & Analysis. Subscribe Now