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PSD2 AND BEYOND: WHY THE CLOUD IS KEY TO KEEPING BANKS AGILE

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PSD2 AND BEYOND: WHY THE CLOUD IS KEY TO KEEPING BANKS AGILE

Jay Hibbin, regional sales director – financial services EMEA, CenturyLink

Jay Hibbin

Jay Hibbin

The second Payment Services Directive, more commonly known as PSD2, has graced media headlines for many months now. With the 2018 implementation date fast approaching, we’re seeing more and more conversations centred around whether or not this will be an opportunity for tech companies, fintechstartups, merchants and challenger banks alike to eat the lunch of the traditional banks.

Essentially, under the directive, banks will be required to provide third parties, such as those mentioned above, with access to their customers’ accounts via application programme interfaces (APIs). If, for example, you were to purchase books on Amazon for example, under PSD2, you wouldn’t necessarily need to be redirected to PayPal or Visa to make the payment, but instead, Amazon could,if it chooses to take advantage of new categories of provider created by PSD2, make the payment for you. This also gives the likes of Amazon theopportunity to build financial services on top of the banks’ data and infrastructure, thus expanding their services to the end user, and ultimately enhancing customer experience.

This is also an opportunity for account information services (AIS) providers. They could act as consolidators under PSD2 where they would be able to utilise the fact that most people have more than one bank account, bank loan, or card account. An AIS would gather data on the multiple accounts and their terms and send a text to the customer suggesting that if they moved their money to another account, they could save money – by offering these value-added features, they will become more proactive and able to provide useful information from monitoring a customers’ spending.

The element of security obviously comes in here as new data protection will be required – although it may be true that third parties will have access to a bank’s customer data, they will require the specific permission of these customers. The General Data Protection Act (GDPR) also comes into force in 2018, and whilst this focuses on the protection of data, a quality GDPR and PSD2 share is that both put the customer first. What will be at the crux of their success, as well as compliance, will be explaining to a customer explicitly what you’re offering.

Reality or a fad?

PSD2 and open banking is a completely new directive in the sense that it is driven by competition, not compliance. As a result, it will create a real shift in the nature of banking as we know. At its heart, it will aim to increase choice for the customer when it comes to financial services. However, this has understandably spread fear amongst banks that loyalty to one financial provider, which was once guaranteed, will be less prevalent amongst consumers.

We’ve heard a lot of noise around how fintechs and tech companies are looking to take this opportunity to break down the once reliant nature that consumers had to traditional finance providers, but will this really be the case? Yes, the landscape will open and new players with genuine solutions that can provide a better service to customer will present themselves,but it’s not all doom and gloom – PSD2 is an opportunity for banks too.

Embracing change

Now is the time for banks to continue to enhance their innovative thinking. The buzz around fintechs‘eating the lunch of banks’ isn’t going to end, so in order to compete, banks need to turn this into motivation to learn from their younger counterparts. Moving to the cloud will be critical for banks looking to develop new services and speed up their time to market. Take for example startup banks like Metro Bank and Atom – they have successfully utilised the benefits of the cloud to speed up time to market for new products. This is now the route that traditional players should be considering for key projects where implementing a minimum viable product quickly are key to success.

 Enablement via the cloud

The cloud is a key way for banks to remain agile. By usingadvanced orchestration and management systems, they can deliver innovative software to clients quickly and securely. Any project in an R&D or developmental phase, or those that are quick to develop,are ripe for a cloud setting. Really, any standalone product that sits outside core banking legacy systems, even if they interface with them, could also be potentially migrated to the cloud. For example, payment service provider solutions or mobile payments. This way, banks will be able to operate their newest service offerings in a similar way to their fintech counterparts.

The right cloud

There isn’t a “one size fits all” approach to which environment is most suitable for a move to the cloud. Multiple public and private clouds all have their place, but the key here is to choose the best execution venue for each application and operate these under a single hybrid IT model.

The cloud boasts transparency of cost, flexibility and agility, but there is a high-level view in the boardroom that the public cloud is cheaper than traditional managed hosted systems. When it comes to cost, banks need to be careful to ensure they consider the workload and usage patterns of the operation, as this will all play a part in containing the overall cost. To exemplify this, should a system be running 24 hours a day, 365 days a year, versus actually only needing to scale up on a particular time of the day, month or year, the usage pricing model can mean this will ultimately cost more than expected.

When customer data is brought into the mix, security is of course a major concern. Public cloud is suitable for workloads that require huge computing power, need to scale at continued pace and have the ability to switch on and off easily. But, it can be harder and costlier to securethe required standard depending on the workloads deployed than private solutions. The latter is consequently more readily used when holding highly sensitive customer data and needing to comply with internal governance and external regulation.

By combining the public cloud’s utility benefits of flexibility and elasticity, while maintaining the privacy of a dedicated private environment, a hybrid cloud offers the best of both worlds. This means that it’ll become increasingly commonplace for banks to require multiple cloud providers, with a strategy encompassing both public and private options. This will ultimately offer greater flexibility and efficiency, but it will be a large task for the CIO. In order to reduce this operational headache, they should look to add a managed service layer to keep complexity to a minimum.

Preparing for the inevitable

There’s no denying PSD2 will increase the level of competition that banks will have to fend off. No longer will they be able to rely on their vast customer data as a point of difference so they will need to find ways of using the data to their own advantage. If not, they will miss out on a massive opportunity. By giving thought now to the types of services and data they want to move to the cloud, the type of cloud they want to move it to, and the steps they need to take to make this happen, banks can begin preparing for the inevitable and ensure they retain the agility to remain competitive and keep their current, and potential, clients happy.

Banking

The Next Evolution in Banking

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The Next Evolution in Banking 1

By Young Pham, Chief Strategy Officer at CI&T

Everything we know about banking is about to change. A new industry around the sharing of financial data is primed to give birth to a host of new consumer services, all thanks to Application Programming Interface (API) technology. Already known for being the safest place for money, there are opportunities for banks to expand that relationship to other aspects of the customer relationship. Banks will no longer simply be just a place to deposit and withdraw your cash, but a one-stop-shop for a range of data-sensitive services.

The passing of GDPR and the Payment Services Directive (PSD2) were the first steps in this process of banks modernising how they handled their customer data. However, incumbent institutions have so far not engaged enthusiastically. Rather, it was only after growing pressure from fintech challengers and government regulation that they were forced to open up and share their data. This should not be treated as a regulatory challenge, but rather a way to grasp the unique opportunities that banks have to reposition themselves as the most trusted resource for their customers.

Expanding offerings

It is hard to overestimate the breadth of possibilities arising from open banking, should banks choose to take advantage of this evolution. While the public rarely holds bankers in high regard, it still puts a high level of trust in banking institutions. People are more willing to hand over their sensitive data than they would be to almost any other private entity. Furthermore, banks have a unique perspective into their customers’ behaviours, needs and desires. Spending habits, income streams and risk appetites are just a few examples of the data that no other institution can tap in to.

There is certainly appetite to expand offerings. In our recent study of business banking customers, over 68% of respondents indicated that they were open to their financial institution providing digital non-banking services.  This includes services such as tax support, managing payroll, or invoicing to help them with their day-to-day businesses.

More banks should consider how open banking can maximise their digital capabilities and create a greater range of services for customers to enjoy. Such offerings could be tailored according to each bank and their particular customer audience. For instance, banks could offer everyday services for most users, such as insurance for individuals or business management tools for business accounts. Alternatively, banks could offer more exclusive and specialised services for high net worth individuals to meet their specific needs, such as art appraisal and investment management.

The idea that a firm can expand its offering into new verticals is hardly new. Many of the world’s largest tech companies, such as Apple and Amazon, already offer diverse products including hardware, software, entertainment and cloud services. They are able to do this thanks to the vast quantities of data they have gathered, which provide invaluable insights into consumer behaviour and demand. Banks are in prime position to follow the example of these top tier tech companies thanks to their monopoly on key financial data.

Disruptors vs incumbents

The business model described above is already being adopted by numerous challenger banks. These firms have led the innovative charge thus far, thanks largely to their agility afforded by their smaller size. Indeed, some fintech banks already provide a range of non-banking services to their customers. Revolut, for instance, offers users several types of travel insurance as well as access to airport lounges as part of its premium service for a monthly subscription.

These offerings are not a sign that the challenger banks are about to topple the large incumbents. Rather, these disruptors have always flagged the gaps in the market that larger institutions have been too slow to fill. It is now up to the established banks to learn from their example.

While challenger banks may have a first-mover advantage for these services, the incumbents have two key advantages: capital and credibility. Firstly, the top banks have enough cash to fund this overhaul of their business models. While the challengers have been able to afford to do so in recent years, they lack the reserves to tide them over during economic downturns such as the current pandemic.

Secondly, even though challenger banks are perceived as more convenient and are less vilified than traditional banks, the public still trusts the latter. Many of these large banks can point to their extended histories and long-term investment success – accolades young challengers simply cannot match. In short, people don’t have to like their bank to trust them with their cash and their data. These two advantages strongly suggest that large banks are better positioned to take advantage of the open banking business model in the long term, despite being slower to adopt and adapt.

What’s next?

All this opportunity is within reach. We already have the technical capabilities for data sharing, and the regulatory framework is not insurmountable. Rather, the key for this evolution of the sector lies in banks’ appetite for risk and willingness to reinvent their business model.

Banks need to take a leap of faith and leave behind the business paradigm to which they’ve become accustomed. They should embrace transparency, run towards regulation and take advantage of opportunities to invest in these areas or collaborate with outside technology firms. Only then will banks be able to make the most of their data assets, creating value for the customer and further strengthening the relationship.

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Banking

Banks talk a good game, but are bankrupt when it comes to change and innovation

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Banks talk a good game, but are bankrupt when it comes to change and innovation 2

By Erich Gerber, SVP EMEA & APJ, TIBCO Software

You hear all the time about the incredible pace of change in technology and the way that it affects business, but sometimes we kid ourselves about the real speed of that change and the depth of its effects. Retail banking is a perfect example to illustrate the yawning chasm between the illusion and the less attractive reality. In this article, I want to provide a critique of the banking sector and its failure to change fundamentally and to modernise.

Banking is an old sector: the Banca Monte dei Paschi di Siena has its roots in the 15th century and the oldest UK banks go back to the 17th century. We often talk about legacy holding companies back, restricting their speed of operations and hampering their ability to adapt. Well, established banks have legacy in spades.

They also have cultural challenges. The old saying has it that something is “safe as the Bank of England” and that is a standard for security. But today we need banks to be more dynamic and represent something more than being a deposit box for our wealth. Consumers are accustomed to the superb customer experiences in entertainment (Spotify), devices (Apple), retail (Amazon), travel (Uber) and much else. Surveys show that they want their banks to be responsive, easy to use and available across multiple channels. They’d like banks to be secure but also to be advisors, enable flexible movement of assets between accounts, provide useful data analytics, be cloud- and mobile-friendly and offer deals that are specifically targeted at their interests.

S-l-o-w progress

At their core, banks now must become digital enterprises but, frankly, it has been slow going. As Deloitte observed: “While many banks are experimenting with digital, most have yet to make consistent, sustained and bold moves toward thorough, technology-enabled transformation.”

Erich Gerber

Erich Gerber

We all know that retail banking has changed significantly: you can see that in the proliferation of apps and the fact that, in pre-pandemic times, the morning and evening commute are peak times for transactions as people arrange their finances while sitting in trains, buses and subways. Banking has become a virtual, often mobile business, thanks to new tech-literate consumers pushing banks in that direction. But my fear is that the banks aren’t moving even nearly fast enough and that’s bad for us as consumers and bad for the banks themselves.

Banks are under pressure to change because challengers don’t have the legacy constraints of incumbents and because PSD2 and open banking regulations are having the intended effect of promoting banking as a service, delivering transparency and greater competition.

Attend any business technology conference and banks will talk about their digital transformations and customer experience breakthroughs, but it’s my contention that a lot of this work is more window-dressing than platform building. Or, to put it another way, banks are injecting Botox, rather than undergoing the open-heart surgery that they really need. It’s a case of ‘look: fluffy kittens and shiny baubles’ in the form of apps and websites, but the underlying platforms remain old and creaking and that means that the banking incumbents are hampered.

To be fair, I have lots of sympathy here. They simply can’t move as fast as the challenger banks that have had the luxury of starting their infrastructure from scratch and sooner or later that will come back and bite them. Look, for example, at cloud platforms where only 10 or 20 percent of infrastructure has been migrated despite promises of cloud-first strategies and the banking data centres where monolithic on-prem hardware still reigns.

You feel that slowness of action in your interactions with banks that communicate only via issued statements, letters notifying you of changes to Ts and Cs, and threats when you go into the red. Inertia is nothing new in banking either: we like to think that technology change happens in the blink of an eye but in banking contactless NFC took the best part of 20 years to go mainstream.

This is the dirty secret of banks. They see the need to change but remain shackled. Why are the banks so slow? Historically, because it was hard for competitors to gain banking licences and the capital to really challenge so there was no catalyst or mandate for change. Also, because change is tough and fear of downtime or a security compromise to critical systems is very real. More recently, because internal wars in organisations set roundheads against cavaliers, the risk-averse against the bold, resulting in impasse and frustration.

I said change is tough and that’s why banks need to power through on the basis of Winston Churchill’s wisdom that ‘if you’re going through hell, keep going.” How? By a combination of maniacal focus on expunging legacy systems, placing maximum emphasis on superb customer interaction experiences and digitally enabling anything that moves.

Right now, the banks are surviving, not thriving; they’re rabbits blinking into the headlights of approaching traffic, frozen in the moment. But they need to disrupt themselves before others do it to them: change is painful but not as painful as the alternative. They have to do much more or they will see a decline in their fortunes due to their bankrupt capacity for innovation and their inflexible infrastructures.

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Banking

Vietnamese National Citizen Bank Rises to Excellence with Three Global Financial Awards

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Hanoi, Vietnam – Global Banking & Finance Review is proud to announce the sweeping victory of National Citizen Bank in the 2020 Global Banking & Finance Awards®. The bank was recently presented with three prestigious global financial awards: Best Place to Work Vietnam 2020, Fastest Growing Retail Bank Vietnam 2020, and Best Investor Relations Bank Vietnam 2020. The Global Banking & Finance Awards® recognize the innovation, enterprise, method, progressive and influential transformations that transpire every year within the global finance community. National Citizen Bank would like to extend their thanks and appreciation to the community and their customers for their continuous loyalty and support throughout the last 25 years.

Vietnamese National Citizen Bank Rises to Excellence with Three Global Financial Awards 3

 

The National Citizen Bank was recognized for its all-inclusive professional working environment and ongoing staff development that enhances its internal communications and employee relations. Throughout the last 25 years, National Citizen Bank has focused on the core fundamentals of regulatory modifications with the underlying goal of dividing the volume of both business and administrative tasks. As a result of this, the bank has successfully strengthened its staff’s capacity to obtain, manage outstanding liabilities, and acquire assets to negotiate and retrieve capital efficiently and reliably.

When asked what allowed the bank to triumph against the fierce competition, Wanda Rich, Editor for Global Banking & Finance vocalized, “one of the key factors that stood out to the committee is that National Citizen Bank strives to maintain and maximize profit to shareholders through the implementation of stable, sustainable business operations and advanced production methods. The bank has also remained stable, positive, and had a high growth rate in all of its activities, which is not often seen; however, it clearly indicates how prestigious and overall accomplished they are. They should be exceptionally proud of all three awards.”

About National Citizen Bank

The National Citizen Bank was initially established as a rural bank in 1995 under the name Bank of Kien River. The bank optimized its competitive standing within the global financial industry, later transforming into an urban banking institution where they reinstated their name as the National Citizens Bank. With a team of highly professional financial experts and customer service representatives, the bank embraces each customer’s diverse needs to ensure customary, efficient, and trustworthy experiences from start to finish. Over the years, the bank has prided itself on its continued emphasis on risk management and global business relations with investors, customers, and partners. For more information, please visit the National Citizen Bank.

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