Christian Ball, Head of Retail – Atlantic Region
It is commonly recognised that the digital revolution sweeping the financial sector is a serious threat to traditional banks. The pace of change that has occurred over the last decade has left many institutions feeling uncertain on how best to embrace the digital future. Faced with new competitors and advances in technology, it would be easy to assume that traditional banks will inevitably be left behind as customers turn to challenger banks and third party providers for financial services and products. What is often overlooked is that as incumbents, large banks have certain advantages that their smaller rivals do not possess. Arguably the biggest advantage is that of data.
Banks have always held vast amounts of data inside their organisations but their ability to interpret and extract value from this commodity is something they have historically struggled to achieve. With new regulations to be introduced and more competitors in the marketplace, this situation is set to change. The Competition and Markets Authority (CMA) and the European Union directive PSD2 are at the forefront of this change that is driving banks towards implementing an Open Banking strategy.
Open Banking will make it easier for customer data to be shared between banks, customers and other third party providers – transforming the relationship between banks and customers. This access to data gives challenger banks and fintechs the opportunity to develop new innovative financial products and services but traditional banks have an ideal chance to improve their customer experience through the vast amounts of data they hold.
How to create value for customers through data becomes an important factor in the digital economy. It means establishing a more accurate understanding of customers and the context in which they consume services. Communicating with customers about products and services in an appropriate and timely manner and ultimately creating a more enhanced customer experience through the value of data.
The emergence of Cognitive Banking
A more personalised form of banking is beginning to emerge through enhanced data analysis. This ability to extract more value from data through learning, understanding and analysis is leading towards cognitive banking; where artificial intelligence and machine learning are changing the customer experience.
Cognitive banking is about having fast data and good User Experience and Interfaces (UX & UI) for customers. It also includes automatic or robotic artificial intelligence deployed in executing data quickly, accurately, cost effectively and predictably, thus significantly improving the digital banking process. In the world of digitalisation and the digital economy, cognitive banking expresses all the digital requirements and more.
As well as providing services in this way, banks must reach conclusions on the engagement strategy with their customer base, either directly or indirectly on real time data from multiple sources. This forms part of the cognitive banking process which encompasses the analysis, processing and production of insights resulting in new products and deeper more targeted customer value.
Banks and financial institutions are working towards establishing new business opportunities by identifying how customers consume and are made aware of products. Decisions can be made on which additional services can be offered to secure customer loyalty, along with understanding how banks should communicate specifically with individuals through applying more behavioural analytics to segmentation.
If banks apply greater machine learning and artificial intelligence techniques and technology, a far more personalised and focused message is created, one that is targeted more effectively and with the added benefit of improving each customer’s appreciation of what their bank can do for them.
Moving from Big Data to Fast Data
Deriving greater value and insight requires ‘Fast Data’. The defining feature of Fast Data is the rapid gathering and analysis of data in real time. It is about the ability to consume, analyse and execute on the insight generated from multiple data sources. Unlike big data, which focuses on storage. Fast data is a consumption orientated view and provides a richer context in terms of analysis and decision making. This allows banks to provide a more enhanced and personalised customer experience.
The value of data
Faced with increased competition, traditional banks must utilise data effectively and transform themselves into data-driven organisations that will deliver knowledge banking. This will lead to better financial products and services for customers that suit their needs and expectations.
Banks can however go one step further by extrapolating valuable data from their large established customer bases and segments – something challengers do not have. This data can be monetised by allowing third parties to access segmentation information about their own customer base, detailing consumer behaviour. This permissive data which customers have agreed to share is an important development. This opportunity to sell insights based on segmentation knowledge offers the possibility of a profitable new revenue stream for banks.
Bank of Ireland limits 2020 loss with strong second half, shares rise
By Padraic Halpin
DUBLIN (Reuters) – Bank of Ireland limited its underlying 2020 loss to 374 million euros ($452 million) after a return to profitability in the second half, the bank said on Monday, sending its shares more than 5% higher.
Ireland’s largest bank by assets also announced the closure of one-third of its branches in Ireland, 10 days after NatWest said it would wind down its Irish arm Ulster Bank.
The bank set aside 1.1 billion euros to cover possible loan defaults due to COVID-19 disruption, the bottom of its forecast range and which it expects to capture the majority of credit impairment risk associated with the pandemic.
An underlying 295 million euros second half profit limited the damage as lending and business income improved, trends Chief Financial Officer Myles O’Grady said continued into 2021, even though Ireland was in a long lockdown again.
“It’s clear that there is some impact from this lockdown but the signals overall are encouraging. We do think (the second half) will be a return to a more normalised level of activity,” O’Grady told Reuters.
Shares in the bank were 5.1% higher at 3.6 euros by 0910 GMT.
The bank cut it costs by 4% year on year in 2020, meaning it achieved its 1.7 billion euro annual cost target one year early. It set a new goal of cutting costs further to 1.5 billion euros by 2023.
That will partly be achieved by branch closures, with its Irish network cut to 169 from 257 from September and Northern Irish presence more than halved to 13. It struck a deal with the Irish post office to offer customers access to banking services at An Post locations.
The head of Ireland’s Finance Services Union described the announcement of closures in the middle of a pandemic as a “shameful act” that needed to be reversed.
Bank of Ireland’s core Tier 1 capital ratio, a key measure of financial strength, stood at 13.4% versus 13.5% at the end of September. The bank said it expected capital to remain broadly in line with those levels in 2021.
The bank’s guidance for this year should support the restart of distributions to shareholders in relation to full-year 2021 results, Chief Executive Francesca McDonagh said, adding that future distributions will likely include share buybacks.
($1 = 0.8272 euros)
(Reporting by Padraic Halpin; Editing by Edmund Blair)
Functions and Features of Offshore Banks to Know About
By Luigi Wewege, Senior Vice President, and Head of Private Banking of Belize based Caye International Bank
Have you been mulling over the idea of establishing an offshore checking or savings account? Maybe the idea of having an investment account with an offshore bank has been on your mind. If so, now is the time to explore these options more fully.
You’ll find that the features and functions of offshore banks have quite a bit to offer. Here are just a few examples to keep in mind.
Account Types That Are Familiar Plus More
One of the first things you’ll notice is that all of the domestic account types you’re familiar with are also available internationally. Along with those, you’ll find accounts that have some features that aren’t found at home. Some of them will help you grow your accounts or save money faster.
From time deposit accounts to special retirement funds, there’s something for just about everyone. Bank officials are happy to explain how each account type works and what it can do for you.
Competitive Interest Rates
Depending on how much you can deposit into an account, the interest rate that applies can be higher than what you receive at home. This is especially true if you opt for accounts that come with tiered interest rates. As you exceed and maintain certain balance levels, it’s possible to lock in higher interest rates.
Think of what this could mean if the plan is to save money for your retirement years. As you add to the balances and let them remain in the account, more interest is earned. Start that when you still have at least a couple of decades left to work full time, and the result could be a significant nest egg to use during those retirement years.
Easy Online Management
The days when managing offshore accounts required the post or some other slower method are gone. The best offshore banks provide online management to their clients. That means you can transfer funds between accounts with ease.
Think of how nice it would be to initiate a funds transfer that moves money from a domestic account to an international one. This can be done any time of the day or night. You will know when it posts to the account, often on the next business day. How much simpler could it be to get money in those accounts?
With the Best in Security Measures
Security is a priority with offshore banks. Data is encrypted correctly, account access is monitored, and there are plenty of safeguards in place. Other than authorized bank personnel and yourself, no one is getting into your accounts.
Top offshore banks evaluate and update security measures regularly. This makes it possible to remain ahead of the most recently launched threats and prevent hackers from accessing your funds.
Protection From Political and Market Upheavals
It’s no secret that political shifts and marketing changes impact the financial world. One way you can minimize the effect on your wealth is to house part of it in offshore accounts. Whatever is happening at home will not impact the funds you have placed in offshore accounts.
No matter what happens to your domestic assets, your offshore funds and holdings remain intact. Regardless of the losses you might incur at home, you’ll still have your offshore balances to help you get back on your feet.
Safeguard Against Legal Troubles at Home
No one is immune from being the defendant in a lawsuit. It could be a personal injury suit or a civil action against you. It could even be problems with a tax agency that leads to seizing your bank accounts or garnishing your wages. While it would be impossible to protect your domestic assets from these types of issues, your offshore assets are different.
In most instances, a judgment in a civil suit or a tax garnishment will not result in the seizure of any of your offshore accounts. They remain outside the jurisdiction of a domestic court.
A Wider Range of Investment Opportunities
Setting up accounts in the right offshore location allows you to take advantage of many investment opportunities that aren’t available at home. It’s not just the possibility of greater returns that captures your interest. The options themselves are broader than what you can access using any domestic banking or investment firm.
From real estate to currency trading, some options are likely to be of interest. Many of them can be managed through one or more arms of your international bank. Since many offshore banks have personnel who can provide information about investment opportunities, it’s easy to access factual data to help you decide if a particular investment fits in with your overall financial goals.
Possibly Superior Rates of Exchange When You Travel
Here’s something to consider if you tend to travel abroad regularly. When it comes to the exchange rate between different currencies, using your offshore checking account balance rather than a domestic one may be a better choice. That’s because there may be a more favorable exchange rate between your offshore account and the nation where you’re visiting.
A better exchange rate increases your buying power and lessens the overall cost of your trip. You’ll spend less on big-ticket items like hotels, air or rail travel, and meals.
Benefit from Opening an Offshore Bank Account
You don’t have to be rich to establish and grow offshore bank accounts. You’ll find banks that allow you to open an account with relatively modest balances and add to them with ease.
Over time, these balances help you achieve greater financial stability and ensure a more secure future.
This is a Sponsored Feature
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition.
You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
Banks in EU to publish world’s first ‘green’ yardstick from next year
By Huw Jones
LONDON (Reuters) – Banks in the European Union would have to publish a groundbreaking “green asset ratio” (GAR) as a core measure of their climate-friendly business activities from next year, the EU’s banking watchdog proposed on Monday.
As the trend in sustainable investing gathers pace, regulators want investors to get more reliable information on a bank’s exposures to climate change as storms and other weather events affect the value of their assets and liabilities.
The European Banking Authority (EBA) said the ratio, put out to formal public consultation on Monday, will measure the amount of climate-friendly loans, advances and debt securities compared to total assets on a lender’s balance sheet to reach a percent figure.
“I believe it’s the first time regulators are asking for a green asset ratio,” said Piers Haben, EBA’s director of banking, markets, innovation and consumers.
“The numbers may well be single digit for banks at first and that’s why context will be important. When a bank talks about where it wants to be in 2030, that is going to be really interesting on the green asset ratio.”
The new EU “taxonomy” would be used to define which assetsare environmentally sustainable.
EBA said that many stakeholders have a legitimate interest in the physical and transition risks that banks are exposed to from climate change.
Banks are likely to face pressure from investors to show what steps they are taking to increase their GAR over time, though few lenders are expected to reach 100%.
The watchdog was responding to a request from the EU’sexecutive European Commission on how to implement upcomingrequirements on climate-related disclosures by banks.
The GAR would published in a bank’s annual report, starting from 2022 based on data up to Dec. 31, 2021.
Banks will also have to publish three other indicators showing the extent to which fees from advisory services, major trading operations and off-balance sheet exposures are derived from climate-friendly activities.
(Reporting by Huw Jones; Editing by Ana Nicolaci da Costa)
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