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By the Center for Financial Professionals

Ahead of the upcoming Liquidity Risk Management Congress, the research team at the Center for Financial Professionals conducted a range of one on one interviews with leading industry professionals to gain an insight as to the critical challenge areas. The results of this research will be summarized and presented to an audience of over 150 at the 2nd Annual Liquidity Risk Management Congress, taking place in NYC on October 17-18. Some summary points are outlined, but for full results visit and join us and industry professionals to review, debate and discuss the liquidity risk landscape and evolution of the risk function.

The results of the research study highlighted a diverse range of key points across the industry, with many concerned with regulatory updates and the influx of regulatory changes and how all of these requirements interlink and work under one unified platform. Below are just a snapshot of some of the topics identified and areas of focus over the coming 12 months for liquidity risk professionals across the industry.

The continued debate around NSFR remains at the forefront of professional’s minds across the industry and different institutions. With the focus having been on NSFR for quite some time now, many were concerned that the topic has been over debated and yet confusion and uncertainty remains. The questions still remain as to what the final rule will look like, and the impact this will have on companies’ individual progression towards compliance with timelines seemingly set.

“We want to know if that will continue because right now its targeted for 2018, we want to know if that will continue to stay on the same timeline… NSFR is going to impact companies that have a stronger or bigger investment portfolio, also FBO’s. Without seeing all their direct books, we just want to see how its changed the way they are funding themselves, is it going to impact current liquidity buffer at all?”

“Depending on the final rule, the impact on the industry may be different and maybe material, so if we have to comply to a rule that has been issued 6 or 3 months before the implementation date, it will be very hard to adapt the business”

Many respondents also expressed concern or interest in the potential impact of the financial choice act, and how that would impact regulation such as NSFR:

“At this point, although nothing has been finalized and the full implementation of NSFR is up in the air at a ground level, the regulators are pushing us to implement it. We have to think about what we are going to do, and how we are going to implement it. Some of the disclosures that have come up from the big banks, they are all acknowledging NSFR, they are all saying they are working towards compliance towards the proposed Jan 2018 deadline. There is a lot of acceptance within the industry, no matter what the administration are saying lot of people are working towards it and the proposed rule”

“It could give banks a way out, and would potentially eliminate the Volcker Rule here in the US. If you’re out from under Dodd Frank in the US that means you don’t have to do LCR, you don’t have to do NSFR and you don’t have to do a lot of these liquidity reports. So there is a whole bunch of business decisions someone would have to make… All of those impacts liquidity because it opens up new products… it changes the value of different kinds of securities that people hold for HQLA, because people can hold what they want, they don’t have to hold government and agency bonds- that would have a huge impact on liquidity and offloading to smaller banks and changing the market dynamics”

A key focus when considering regulation in general was around the interaction of different regulatory programs, particularly LCR and NSFR:

“We have started analysing NSFR at a very high level, but the point is the NSFR requires long term funding and LCR is a short-term ratio, the basic challenge is how do you go through the peaks and values of the 30 day LCR whilst not disrupting long term NSFR calculations? There will be times when you have a big maturity coming up which will impact your 30 day LCR, while you try and fix that you may deviate from the maximum requirement on the NSFR side, so how do you keep a good balance between the two?”

“So, it’s really the connections between the NSFR, LCR and capital, with the capital, how its released to capital and how the regulators use that. Last time it sounded like they did it in isolation, so lets say capital metrics and liquidity metrics. But then there were some kind of future trends to start looking at it together’

Another key area of focus across respondents within certain institutions is the requirements and changes under funds transfer pricing and how this impacts institutions and restructuring.

“The more sophisticated and robust FTP one has, would mean the better job they would do to control liquidity risk and to manage or control the amount of inventory or assets they have under the balance sheet that are not liquidity friendly. Depending on how sophisticated your methodology is, you could have an FTP model that is quite granular and goes down to the asset or product level, or you could have one that is not so robust and doesn’t allocate the cost of funding or the cost of liquidity to the produce level, you may not be able to incentivize behaviour in a dynamic way and you may not be able to influence traders or business in a real-time fashion if you’re not allocating your FTP charges or your liquidity charges appropriately””

“There is a regulatory requirement to do it, or at least regulatory pressure. It becomes critical in that a lot of business lines, profitability, a lot of traders businesses depend on what kind of liquidity charge you are putting on their positions. It goes into a profitability discussion for allocation profit between different segments or desks”

“You look at the liquidity positions and as you can imagine that become very political. There are lots of pressures to support whatever liquidity risk you are transferring through, but at the same time you want to make sure that you are capturing all of the liquidity risk you need, if a position on a desk requires you to hold more of a liquidity buffer on the LCR, or more of a liquid buffer in your intraday monitoring then there is a cost associated with holding that extra buffer for that particular desk. The whole perspective is that you want to understand if the ideas of these rules is to influence behaviours and understand the liquidity risk they are taking relative to the business decisions they are making, you want people making those decisions to understand that and FTP is the best way to present that to them”

Along the same lines of regulatory challenges and implementing the influx of changes and requirements, comes the ongoing discussions around intraday liquidity and understand the regulatory regime and what it means for specific institutions. Institutions need to better understand where they can benefit from these changes and responses. Some comments pertaining to the challenges of intraday liquidity include:

“The intraday liquidity is becoming a larger issue for a lot of banks, it goes into resolution planning and finding out minimum operating liquidity. That is based off the intraday flows and intraday flows between legal entities in jurisdictions, so that’s a key calculation”

“The whole idea Is that you need to understand what your intraday risks are and there are a sub set of people who have large intraday exposure than they have overnight exposure. A lot of the foreign banks that do operations and have somewhat limited operations in New York, and most of it is for the parent, they could have a much larger intraday liquidity requirement than they could have an LCR requirement. So, it becomes pretty important how you calculate that and how you support that.

As a whole, liquidity as an industry are facing continual change and regulatory pressure to not only implement all of these requirements, but to also align them all to ensure they run smoothly and interact efficiently. With areas such as NSFR still unclear as to what the future holds and what the final rule will be, institutions are forced to push ahead with implementation based on current guidance, with timelines remaining the same for now. In amongst such change comes the uncertainty of the future of regulation as many turn their focus to what the potential regulatory changes could be under the Trump administration and the impacts of the financial choice act. Many are in two minds as to their opinion on the proposed changes, and whether this is beneficial or detrimental to their work, if this were to take effect, institutions would have to turn their focus to work that has already been done and what should be considered best practice as they begin unravelling progress.

The Center for Financial Professionals have brought together a senior line up presenters and panellists to review and discuss the above challenges, plus many more areas that arose from the research efforts including; recovery and resolution planning, money market reform, LCR, pricing liquidity, EPS, stress testing, lines of defense and much more.

Join us on October 17-18 to network with peers, interact, debate and share best practices over two days of interactive discussions. All information can be found at


Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna



Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna 1

Payment processor Mollie reveals the most popular payment methods for Black Friday

Mollie, one of the fastest-growing payment service providers, has revealed insights into the most popular payment methods used this Black Friday. The data, which provides a year-on-year comparison of 2019, shows that payment methods allowing customers to pay flexibly – like ‘pay later’ service Klarna – has more than doubled in 2020. The study spans 101,000 merchants across Europe, primarily from Germany, U.K., France, the Netherlands and Belgium.

Black Friday trends: 

  • In 2019, Mollie saw a 36% increase in the overall number of transactions on Black Friday versus the previous year. In 2020, this shot up to a growth of 56% on the 2019 numbers, representing a difference of 20%.
  • And this year, even in the four days leading up to Black Friday, there was a 58% YoY growth in transactions.
  • Use of ‘buy now, pay later’ services on Black Friday (such as Klarna or ClearPay) has more than doubled from 1% of all payments in 2019 to almost 2.5% in 2020.
  • Use of mobile payment methods on Black Friday is consistent on the previous year – 0.20% in 2019 to 0.25% in 2020.

“There is a lot of pressure on consumers’ wallets at the moment, which is making people look to payment methods that offer them financial security,” said Ken Serdons, Chief Commercial Officer at Mollie. “It makes sense that fintechs like Klarna, who have performed phenomenally well this year, have been so popular this Black Friday. The increase is in-line with this growing trend towards more flexibility in how consumers pay for goods.”

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Beyond Transactions: The Payment Revolution



Beyond Transactions: The Payment Revolution 2

By Marwan Forzley, CEO of Veem 

The uninterrupted disruption brought on by the pandemic accelerated the need for robust, digital-first tools created to support remote teams and accelerate online commerce.

As offices across the US moved to work from home for indefinite periods, specialized back office departments handling sensitive information have had to go a layer deeper to find tailored solutions that support the transition of their in-person workflow. For finance teams, payment approvals, issuance, and general management became a challenge overnight. Particularly for those who — even in 2020 — continued to send and receive paper checks through the mail.

For years and even to this day, millions of small business owners around the world have relied on slow and confusing bank processes to manage their business finances. Every day, they spend valuable time using old, complex and expensive platforms to transact with domestic and international vendors — never knowing where their payment is or even when it arrives at its destination.

With ongoing economic and logistical uncertainty looming as we move into 2021, this old norm should not be expected for much longer. This year has seen small business owners wear more hats than ever before, and has influenced a mass adoption of online financial applications that offer heightened security, save more time, and provide more value as budgets tightened.

A study conducted by Mastercard earlier this year saw online business-to-business payments skyrocket in popularity with more than half (57%) of small business owners across North America turning to digital services since the start of the pandemic to improve cash flow and modernize their payment processes.

If this study is of any indication, the days of making an appointment with a banker or sending a wire transfer through an outdated web portal have passed. And the time for the payment revolution is here.

Putting the user in the driver’s seat

Major world events have always acted as a catalyst for innovation and change. As of a result of the growing pains we experienced this year, in 2021 businesses can finally say goodbye to huge transaction fees and bank-imposed gatekeeping when it comes to managing their financial processes.

The financial technology firms, in partnership card and local bank networks and sometimes even each other, have been building and iterating on products over the past decade that were created to work flawlessly from a desktop or smartphone.

For the first time, small businesses have access to needed, user-friendly financial tools packaged to make their lives easier. No longer reserved for major enterprises, those previously underserved by traditional banks can sign up for applications that consolidate billing, payments, working capital and more to one central dashboard.

With the owner in the driver’s seat, they can better communicate with vendors and customers and reallocate their time previously spent manually sending, receiving and reconciling payments toward growing their business — without ever stepping foot out of their home.

Marwan Forzley

Marwan Forzley

Genuinely seamless and automatic integrations with complimentary functions aligned to core financial activities mark a fundamental change in how businesses will choose to operate moving forward. Not only should experiences be integrated, but the entire lifecycle of the transaction should be digital.

Consider a freelance contractor that uses a time tracking and invoicing software to invoice a client. Through an integration between the time tracking tool and Veem (a complete online business payment tool) the client receives and captures the invoice within their Veem payment dashboard. Because Veem and Quickbooks are integrated partners, as soon as the invoice is received, a bill is automatically created, marked as paid, and reconciled on the client’s accounting software as soon as the funds are issued.

In this flow, the contractor only needs to send an invoice, and the client only has to approve the payment for everything else to move. Thoughtful integrations like these empower businesses to log-in to one application, but benefit from several, ultimately eliminating inefficiencies.

Relentless transparency

Understanding that old habits die hard, it’s expected that businesses of any size have questions when it comes to moving payments from a bank to an online provider.

Answering these questions with unprecedented product value and relentless transparency is the best way forward to bring more businesses onboard in 2021.

This means providing up front pricing, tracking, choice and flexibility to users. Before, during and after the pandemic, cash flow management remains the most critical part of running a small business. Digital payment providers enable the entrepreneur to have unparalleled insight, visibility, and control over their cash flow.

Through non-bank payment options, businesses can secure their information over a secure data network, watch their money move from origin to destination, and choose the speed at which they would like funds to move. By these tools working in harmony, the user can remove friction and spend more time focused on their business.

Separating the signal from the noise

2020 is a year that changed everything for the global small business community. In a report by Veem issued at the start of the pandemic, an overwhelming 80% of businesses shared that they anticipated COVID-19 to impact their business over the next 12-16 months. Problems surfaced that many didn’t even realize they had. And in finding those problems, businesses turned to technology to support them.

As enabling technology, it’s our job to listen and bring clarity and solutions to those contributing to and growing our local and global economies despite the hurdles and challenges they’ve faced.

Right now, small businesses deserve more. More access, more choice and more credit. In the road ahead we expect online payments and bundled user friendly financial services to play a pivotal role in the recovery of small businesses. The payment revolution will see the continuation of important and meaningful products that value the users time and enable businesses to launch, grow, and scale regardless of what’s to come in 2021.

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The UK’s hidden payments crisis: why businesses should rethink their payments strategy



The UK’s hidden payments crisis: why businesses should rethink their payments strategy 3

By Edwin Abl, Chief Marketing Officer at Modulr.

As the economic conditions imposed by the Coronavirus endure, businesses are facing a dilemma about how to reduce operational costs while meeting customer needs in as economical a way as possible. And all without compromising on their quality of service.

A recent survey of 200 payments decision makers across the UK, revealed there are hidden costs of payment processing which will have an exponentially greater impact on wider businesses if left untreated. It found, UK businesses are spending an average of £1.5m a year in costs attached to payments – money they simply cannot afford to lose to inefficient processes in these uncertain times.

Businesses need to plug any holes in their boat to avoid sinking. And for many this includes the examination and recalibration of their payments strategy.

The research reveals that the payments process now represents a huge 12% of a business’s total operational expenditure. With two-thirds (64%) of all businesses expecting the cost of payment processing to increase over the next two years.

Two thirds (67%) of payments decision makers surveyed believe the way they process, and service payments has had a direct impact on their customer experience. In fact, 62% of respondents believe the hidden costs of poor payments outweigh the hard costs. This indicates that a poor payments strategy is no longer something business leaders can ignore, as it now has a far greater and unseen impact on wider business mechanics.

The top three hidden costs attached to inefficient payment processes were ‘impact on customer experience/satisfaction’ (38%), ‘influence on relationships with other teams and departments (35%) and ‘impact on competitor differentiation’ (31%).

These findings suggest there is widespread consensus that getting payment operations right, directly creates performance boosts elsewhere in the business. When asked to estimate, as a percentage, the business performance boost received if hidden payment inefficiencies were resolved, the average margin for improvement was +14%, with traditional banking the sector most likely (31%) to predict a performance gain greater than +15%.

The 5 key steps UK businesses can take to drive payment efficiencies

There are five key areas payments decision makers and tech leaders should be looking to change, so that they can drive end-to-end payment process efficiencies:

1 – Locate hidden payment process inefficiencies

Visibility is a key issue. Respondents across large (46%) and small businesses (47%) say they have very clear metrics directly related to payment process costs. Only 8% say that they don’t understand the costs involved. Yet, businesses know they could do better with improved visibility of costs. Both large and smaller companies cite ‘lack of visibility for operational costs’ as the top challenge when it comes to achieving strategic goals around payment process and money services provision.

Digital banking companies, including lenders and FinTechs, identified ‘lack of visibility for operational cost’ as a challenge when it comes to increasing payment services revenue (37%). This is in comparison with all respondents mentioning other issues such as lack of skills (25%) and constrained resources (25%) as secondary and tertiary challenges respectively.

For many businesses, developing a cost model for current and projected payment process costs, both hard and hidden, is a top priority.

2 – Make payments key to stakeholder experience management

Customer, departmental and even supply chain partner experiences are increasingly intertwined. There is no doubt that customer experience is a top priority for payment services strategy. But enhancing the broader stakeholder experience is a close second, and certainly complements the former.

Employee experience affects customer experience. So, payment services innovation must extend beyond customer touchpoints. Happy employees who feel they are working with effective and efficient payments systems will be best placed to enhance the customer experience. And, employees in commercial roles who have bought into the benefits of efficient payments will naturally want to extoll those benefits to customers.

Edwin Abl

Edwin Abl

Companies with a sophisticated and integrated supply chain are likely to be the frontrunners in implementing the integrated payment services that benefit all stakeholders, due to their historic experience. As customer experience management evolves into a broader discipline of stakeholder experience management, including employees and supply chain partners, it will become more crucial than ever to include payment services experience

3 – Integrate and automate to support payment innovation

Payment innovation is driving a culture change, connecting previously siloed functions such as IT and finance. There is increasing integration of systems from customer relationship management (CRM) and enterprise resource planning (ERP), into accounts and payments. The research tells us that payment processes are impacting nearly every department, affecting areas including customer experience, brand, leadership, business agility and ultimately, revenue. Integration enables new business models for paying suppliers and customers.

Automation is key to driving efficiency, replacing manual error-prone and time-consuming processes with real-time and responsive, digital ones. This is particularly the case when it comes to operational and payment processes.

Indeed, 52% of large companies say that team hours spent on payment processes was their biggest hard cost attached to payments, compared with 26% of smaller companies who share that view. This suggests that automation could contribute more to cutting the cost of payment processes in large companies.

A host of payments-as-a-service providers (including Modulr) are supporting customers to do just this by enabling them to stream a whole unified product ecosystem of payments functionality directly into their own software.

4 – Bring business leaders together

Payments innovation is driving systems integration and creating a more collaborative stakeholder ecosystem. As all the C-level roles become increasingly focused on the customer experience, the finance remit now includes overall business operations and its associated risks and opportunities. The role is evolving beyond just accounting, tax liability and funding. Therefore, closer collaboration between senior leaders is key to driving efficiencies and enhancing customer experience.

5 – Innovate by adding finance and payments to vertical services

Companies with a vertical focus are well placed to innovate by offering new payment services. In many vertical sectors, especially employment services, software vendors are increasingly embedding financial services facilities, such as payments, into their technology platforms. Employment services SaaS providers, across payroll, accounting, bookkeeping and more are offering financial services to existing and new customers within their specific ecosystem.

This means they can develop hyper relevant, convenient and delightful financial products and services for their end users through highly flexible, ‘plumbed in’ payments. This creates an ecosystem of stickier products while boosting the lifetime value of each end user.

Moving forward – engaging technology to drive efficiencies

If the onset of the Coronavirus crisis has taught us anything, it is that there are many advantages to investing in technology and having a digital infrastructure as responsive as your customer-facing experience.

However, whilst digital technologies enable companies to provide customer service in new ways during lockdown. These same businesses are failing to transform their digital strategies, with the biggest priority still being cost reduction (41%).

By not shedding legacy technology and shoring up operational efficiency, UK businesses are following an increasingly risky strategy. And one which will have an exponentially greater impact on the wider business if left untreated. Particularly when this widespread failure to act concerns the customer experiences that sit at the very heart of a proposition – the payments.

To find out how you can drive payment efficiencies into 2021 and beyond, download the full report here for all the insight you need.

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