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WHAT CAN BANKS DO TO TACKLE THE CHALLENGE OF REGULATORY COMPLIANCE?

WHAT CAN BANKS DO TO TACKLE THE CHALLENGE OF REGULATORY COMPLIANCE?

Reetu Khosla, Senior Director of Risk, Compliance and On boarding for Financial Services, at Pegasystems discusses the challenge global financial institutions face in keeping pace with regulatory changes

Regulatory compliance is a huge undertaking for the world’s financial institutions and it’s only becoming more costly and more time consuming each year. Over the past five years, regulation has been driven by fall outs from the financial crisis, and we can only expect this to increase. What’s most surprising is the effect these new regulations can have on customer experience. Customers want to be safe in the knowledge that the bank they are using is fully compliant, however, they may not realise that this can come with unwelcome time delays as processes become more complex. As a result, banks are starting to see a slight disparity between being compliant, maintaining full customer satisfaction while delivering faster transaction times. Almost every global and Corporate and Investment Bank is using this as an opportunity to streamline the full end to end Client Life cycle Management, orchestrating global front and back office processes including regulatory due diligence and customer on boarding. The only way to do that is through technology.

According to a recent Forrester Research report, complying with Know Your Customer (KYC) regulations ranks as the biggest pain point for global corporate banking executives. This is predominantly down to very manual due diligence processes and increasing regulatory change, which makes it even more difficult for banks to onboard new customers. Implementing new regulations has the potential to negatively impact an organisation’s customer experience and consequently affect its lifetime customer value.It can take between 60 and 90 days to onboard a new client, meaning it is the largest global banks which are particularly pained by the changing KYC regulations. The increasing use of KYC utilities, married with end to end Client Lifecycle Management technology, allows banks to reduce the documentation collection and validation component of these complex rules. Innovation in technology also allows banks can update new rules without impacting onboarding times and reducing operational and legal costs.

Reetu Khosla

Reetu Khosla

The cost of onboarding a new business client currently stands upward of $30,000 per corporate,which is continuing to rise.This is a necessary expense as banks need to remain competitive while ensuring compliance to complex regulatory requirements that are country, booking entity and product specific.These escalating costs are expected to lead to an increase in compliance budget for 68 percent of financial services firms this year.

Regulation changes are also seeing the banks move increasingly towards global KYC centralisation technology through utilities like Markit, Clarient and SWIFT to ensure streamline document collection and validation. As anti-money laundering and due diligence rules such FATCA, EMIR, MiFID II, and Dodd-Frank continue to drive large global Corporate and Investment banks to overhaul their end to end onboarding of clients, it’s becoming clear that the industry needs a more automated way to manage regulatory rule maintenance.Hard coded approaches do not allow banks to mitigate and manage new regulatory requirements in a streamlined way.

The ideal solution would be to introduce tools that can automatically integrate the latest regulatory updates directly into KYC applications through simple updates in a fully unified approach. Such tools have the ability to restore some of the love lost between compliance, onboarding times and customer experience. The automated process would means banks are able to apply specific regulations at the right time in the customer lifecycle, ensuring fast and efficient time to revenue.

But technology alone can’t help. There is a real need for collaboration between technology solution providers and regulatory experts to ensure solutions keep pace with change. For example, my organisation works with the global law firm and regulatory advisor, DLA Piper, for exactly this reason. Partnering with a global firm that is made up of ex-regulators and a legal team that has driven rules such as Dodd-Frank offers a unique insight into the world of regulatory enforcement, and allows us to offer banks information on regulatory rule updates that is based on true expertise and operationally sound. They can then implement the correct solutions to rapidly update their rules and efficiently mitigate risk. Each bank has its own unique risks, and this type of collaboration allows global banks to tap into leading expertise to further enhance their rules and unique risks ensuring holistic risk-proof approach. Banks cannot rely on technology vendors alone.

If accessing the latest intelligence on how regulatory practices are changing is key it is equally vital that the technology platforms used by banks to improve KYC are built on the principle of change, and can be rapidly adapted to absorb a new set of rules. Bank executives need to ensure their KYC solution can scale globally and across multiple lines of business and product sets and be a part of the larger Client Lifecycle Management technology.

Monitoring rule changes and updating compliance programs in this ever-changing regulatory environment is expensive, time-consuming and risky for financial institutions. Relying on world leading regulatory expertise combined with scalable technology allows banks to mitigate their unique risks, while efficiently managing onboarding times, complexity and customer experience, front to back office. The technology and solution approach banks choose should assure regulatory compliance and rapid implementation of emerging regulatory changes in an operationally effective fashion, while still providing competitive advantage and scalability globally. As global banks look towards simplification and increasing market share we will see more and more banks investing in this kind of fully unified technology.

Business

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy  

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy   36

Leading payments provider, Contis, has applied for two grants from the RBS & BCR Alternative Remedies Package, totalling £35 million.  

Unlike most applicants who will deploy funds through a single brand, Contis is taking a completely different approach. The funding will be used to drive fintech innovation in the UK by developing an off the shelf, B2B electronic and card payment technology platform for SMEs. With Contis’ powerful tech stack and regulated status, this will empower hundreds of fintechs to support the SME market with groundbreaking technologies, payments and lending capabilities. Contis today services over 800,000 consumer accounts, 14,500 business accounts and processes £4bn in transactions per year, demonstrating a proven track record.   

UK businesses are facing a challenging economic environment with the impacts of Covid-19 and Brexit. As large corporations and entire sectors are affected, SMEs will play a vital role in the recovery. Contis’ approach is completely disruptive, offering three channels to maximise support for SMEs and sole traders, through three unique brands, all powered by APIs from Contis’ modular and configurable engine. 

1.       Canvas for Business 

Contis is a super-vendor in the world of fintech, offering payments through proven banking rails and card scheme capabilities including issuing pre-paid, debit and virtual cards. They’re linked to digital delivery like Apple Pay and Google Pay, and a trusted tech stack that boasts 99.99% uptime.  

With funding from the Capability and Innovation Fund (CIF), Contis’ technology and regulated services will be made available to the whole fintech community, enabling them to provide dedicated SME accounts with the latest leading-edge capabilities delivered via Contis’ wholly owned, secure, cloud-based technology and apps. Contis’ solution has a firm eye on the need for SMEs to compete internationally, particularly after Brexit, and offers FX integration as standard.  

Canvas for Business will increase competition by providing fintechs serving the SME market with technology that outstrips the big banks. Contis will also provide credit referencing capabilities and empower fintechs to lend to their SME client base through Contis’ own credit licence. Without the constraints of legacy systems, it will enable simple connectivity to accounting and payments solutions, as well as to unlimited future innovations.  

2.       Engage for Business 

Over 150 Credit Unions currently use Contis’ Engage service and technology, and hold an estimated £400 million in undeployed cash reserves. Developed with CIF funding, Engage for Business will enable Credit Unions to launch business accounts and payments products for the first time, and allow excess funds to be redeployed in the SME sector through business support loans. This will revolutionise access to funding for sole traders and small businesses. 

3.       Freedom for Business 

With CIF funding, Contis will also offer large scale SMEs a direct-to-market solution where Contis holds the relationship and provides a bespoke offer to meet the business’ exact needs. 

Contis’ application to the Capability and Innovation Fund is focused on creating the widest possible impact for UK SMEs by fulfilling their accounts & payments needs and driving innovation in SME financial services. 

Through the grant, Contis will empower over 200 fintechs and Credit Unions to provide credit, simplify payments integration into everyday business needs, offer digital credit referencing, provide budgeting tools to SMEs, enable automated payments, give predictive insight on cash flow, provide rewards to SMEs on spending, and much more. 

Peter Cox, Founder and Executive Chairman of Contis said: “Our mission is to democratise payments and financial services for all SMEs, so they’re spoilt for choice with innovative and affordable solutions that meet their exact needs. Our approach, based upon proven technologies, will broaden and disrupt the services available to SMEs far beyond the capabilities of existing providers such as the big banks.  

“By driving competition and innovation, while improving the availability of funding, our approach will increase the services on offer to SMEs and make them more affordable, therefore becoming easier for every entrepreneurial person with vision to run their own businesses.” 

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Business

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver 37

Nearly a third (32%) of consumers would switch providers if a brand’s website is unavailable for more than 24 hours

A study released today reveals the scale of omni-channel pressure brands now faced as a result of the Covid-19 pandemic, as consumers flock to apps and websites to as the priority destination to transact with brands.

The UK has experienced a huge leap in use of online services thanks to lockdown, with the public appearing to have less concern for the availability of a brand’s physical location. Research by Sungard Availability Services (Sungard AS) uncovers a “window of availability” that UK businesses now have before consumer loyalty changes:

  • If a brand’s website is down for 24 hours – 32 percent of consumers would switch provider
  • If a brand’s app is down for 24 hours – 28 percent of consumers would switch provider
  • If a physical store is closed for 24 hours – 20 percent of consumers would switch provider

The results by industry paint an interesting picture of the availability timeframes brands are expected to adhere to:

  • For online retailers, excluding grocery retailers – 23 percent of consumers would switch provider if they could not access online services for 12 hours, rising to over a third (34 percent) after 24 hours
  • For financial services and entertainment streaming platforms – 21 percent of consumers would switch provider after 12 hours, rising to 33 percent after 24 hours
  • In the case of online grocery shopping – 20 percent would switch provider after 12 hours, rising to one third 33 percent after 24 hours

The findings also highlight that as digital reliance increases, so will consumer expectations towards availability in the future. Over the coming two years, a third (33 percent) of consumers expect online financial services to always be available, rising to 35 percent for streaming services.

“UK consumers have become reliant on the constant availability of online services, and lockdown has only served to heighten this,” comments Chris Huggett, SVP, EMEA at Sungard AS. “What used to be a choice between physical and digital has now firmly accelerated into digital environments across various industries. As online worlds continue to outpace bricks and mortar as the face of businesses, ensuring constant availability and clear communications on downtime will be key for brands to build trust and loyalty.

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Business

Demonstrating the value of collaborative leadership during crises

Demonstrating the value of collaborative leadership during crises 38

By Jean Stephens, CEO, RSM International

In 2000, a leading expert in behavioural science, Daniel Goleman, outlined the six key styles of leadership: autocratic, paternalistic, democratic, laissez-faire, transactional and transformational, with each having their own merits and drawbacks. However, the recent global pandemic has irrevocably altered the business landscape, as traditional work practices and routines have been forced to adapt to the needs of an increasingly remote workforce. These changes have been easier for some and presented new challenges for others. At C-suite level, it has been integral that leaders continue to harness the potential within their workforces to ensure that growth and innovation do not fall by the wayside.  As such, it has become increasingly clear that our new normal calls for a seventh, more collaborative style of leadership to come to the fore. Through this, middle-market business leaders can continue to drive growth by empowering others to collectively nurture and experiment with new ideas across their business.

In a survey conducted by RSM International earlier this year, it was revealed that nearly half (48%) of new ideas within European businesses were never explored by senior management, with 37% stating that resistance from senior leadership is the greatest barrier to change. But change should not be feared; it is an opportunity to unlock new opportunities and to challenge the norm. As a middle-market business leader, letting go of control can sometimes seem the hardest task of all, particularly in times like these where the wrong move can spell disaster. But micro-management can stifle creativity and diminish potential, especially in moments of rapid evolution. It can prevent brilliant thinkers from experimenting, provide a false sense of security and render organisations inflexible.

New challenges will continue to arise as lockdown measures ease and tighten as the virus recedes and spreads. It is the responsibility of collaborative leaders to empower those within their businesses to find comprehensive and innovative solutions to these new problems. By working together and supplying teams with the necessary support and toolkits, leaders can face challenging situations head on, rather than simply directing from above.

Demonstrating collaboration is also a powerful way to motivate employees through difficult times. Businesses across the globe have been hit hard by the COVID-19 crisis, with some having to introduce unpaid leave, cut pay or make redundancies. Asking employees to make these sacrifices while continuing to deliver in their roles requires trust in the leadership, transparency in the decision-making process and support where it is needed. In practice this can take many different forms; from weekly virtual meetings, where teams are encouraged to be open about the challenges they are facing, to offering additional technology and office equipment to those who do not have dedicated working areas at home. Internal surveys can act as a barometer for the mood of an organisation and show senior management how to help their employees’ transition to the new normal that bit easier. Weekly internal newsletters can also provide another layer of connection between staff in each corner of a sprawling business, from back office to support to front line workers, demonstrating that they are all part of a single team driving towards the same objectives.

As a leader, displaying understanding and empathy has also never been more crucial. Video conferencing has given us a window into the homes and lives of colleagues who we would not, ordinarily, have seen outside the office. Workers at all levels have taken responsibility for the emotional well-being of isolated colleagues. As a leader, all it takes is a little compassion and empathy to listen to those problems, provide support and help find a solution. Diffusing this ethos across a business will foster a community in which no one feels alone or abandoned in the face of pressure or stress, be it personal or professional.

2020 will be marked as a turning point for not only business but society as a whole. Many middle-market businesses have already proven themselves able to adapt rapidly to face new challenges and situations, but the change does not have to stop there. New circumstances provide new opportunities to listen, learn and innovate, to ensure your business and workforce can continue to thrive. We cannot predict how long this current situation will continue for but, as we continue to adapt, an empowered workforce under strong, collaborative leadership has the most potential to emerge more resilient and innovative than before – to thrive and not just survive.

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