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Financial Crime and AML Compliance

Integrated Case Management – A Game Changer for Smaller Banks Fighting Financial Crime

Blog by: Garima Chaudhary, Oracle Financial Crime and Compliance Management Specialist Smaller banks are equally vulnerable to financial crime just like large multi-jurisdiction banks – thus exposing them to greater regulatory scrutiny. This has led to increased investment in financial crime & compliance programs such as Know Your Customer, transaction monitoring & case investigation. Increased regulatory expectation has amplified the costs and burden of compliance management – and the challenge is surely greater for smaller banks.  “Basic” Anti-Money Laundering Software Is Not Working Banks currently perform periodic reviews on high-risk accounts and conduct investigations based transaction histories via several risk indicators. To facilitate this anti-money laundering process, there are many tools which fit the “basic” and “economical” compliance needs of smaller banks. However, these anti-money laundering tools only provide basic functionality and lack key aspects such as flexibility, automation and future readiness. These are some limitations in current anti-money laundering software: Lack of Holistic View: If a bank’s system is unable to provide complete cause of red flags, customer activity, historical cases, then the analysts are not able to get a clearer view of the AML investigations. This means that either the analyst has to gather such details from third-party systems, manually adding to the investigation times or make inaccurate conclusions using incomplete data. Manual Case Assignment: Based on team structure & case types,  banks should be able to automatically assign cases to users or user groups. If not, supervisors need to step in and assign the cases themselves. With process automation that is available in the market, banks can  invest in their time more on high-value activities such as reviewing & assessing overall program instead of assessing cases. Inflexible Workflow: Current anti-money laundering software options pre-packed with basic workflows which is great from a “time-to-production” perspective. However, if these tools are inflexible and cannot be tailored to meet bank-specific anti-money laundering policies or any future organizational changes then it needs to be adapted. These tools may not be the best option to match available resources with the bank’s risk profile. Case Correlation: If the case management tool does not allow for case grouping as per common/shared information between cases then, it is most likely that analysts are investigating siloed cases, hence not making informed decisions. This leads to inaccurate case outcome and an  inefficient AML investigation process. Case Categorization: Ability to group cases based on priority, customer segment & investigation scenario allows more effective case assignment policy, enhanced risk assessment reporting & removes false positives. By maintaining cases without any relevant categories or sub-categories, it can restrict a more granular assessment. Productivity Reporting: Productivity reports provide a complete view of bank’s financial crime program & user management. Information around volume of pending cases, for instance, allows the senior management to better manage resources towards anti-money laundering, plan out training courses as well as other policies. Integration with Third Party Systems: A thorough financial crime case investigation often requires information-gathering from several sources such as  transaction reports, sanctions screening and media scan to truly “know your customer”. Inability to integrate with third party systems increases investigation time, and also makes it impossible to maintain complete audit trails of investigation steps. Scalability/Future Proofing: It is critical to align AML compliance investments with firm’s enterprise growth goals. The cost of upgrading would be more expensive compared to configuring existing tool to support newly added jurisdictions, products/services or acquisitions.  Don’t Settle for the Rest, Go for the Best To maximise their return on investment, smaller banks should aim to adopt anti-money laundering technology that is tailored for the size of their operations and that is powered by deep industry understanding and research. Highly visual tools are available in modern anti-money laundering software that puts  the power of analytics in every user’s hands instead of being beholden to vendor limitations. Here is a useful checklist when assessing your investment in anti-money laundering technology: A Modern Intuitive User Experience:  Proving an exceptional user experience is critical part of the investigation hence. The solution needs to include the functionality -  A logical presentation of key information Automatic access to historical activity and cases Summary of key information for Level 2 investigation Ability to take unlimited steps for actions & evidence-gathering to fit banks policies View of pending/overdue cases for supervisors A map of network of all the related parties Complete audit trail Perform end to end process with fewer clicks Configurable Workflow Process & Correlation: Every bank can come with different anti-money laundering policies & processes. A pre-packaged workflow will make it easier and quicker to implement any changes. Drag-and-drop flexible frameworks will allow banks to achieve the most optimized anti-money laundering process, matched to available resources. By grouping & correlating together new cases based on shared information between customers, accounts, external parties, addresses, tax ID and household, it will give a more holistic view of case entity. Case correlation can better make sense of all information as well to weed out false positives.   Robotics Process Automation: Robotic process automation (RPA) is gaining popularity in anti-money laundering technology, for good reason. AML investigation teams have an important but time-consuming job. Looming deadlines and volumes of information make it harder to address all factors for each investigation. On the other hand, failure to consider key factors could also result in incomplete analysis. Robotic process automation can help to improve investigation efficiency and quality. There is a high rate of robotic process automation adaption within smaller banks due to lower technology cost Smaller banks need a solution that is not a black box and is fully compliant with the latest anti-money laundering regulations for data and model controls like DFS504 and AML5D. As the volume of transactions get larger and schemes become more complex, the need to fighting financial crime with advanced technology is even more pressing. The opportunity to apply the latest anti-money laundering technology to help defeat financial criminals is here. Modern visualization-driven platforms and robotic process automation can take financial crime programs to the next level increasing your organization’s efficiency and effectiveness. Find out more about our anti-money laundering solutions here: https://www.oracle.com/industries/financial-services/analytics/solutions/financial-crime-compliance.html  

Blog by: Garima Chaudhary, Oracle Financial Crime and Compliance Management Specialist Smaller banks are equally vulnerable to financial crime just like large multi-jurisdiction banks – thus exposing...

Financial Crime and AML Compliance

Can Blockchain Block Money Laundering?

Blog By: Julien Mansourian, Strategy and Transformation Executive. Blockchain has been touted as the solution to replace the many ageing processes powering financial services and it may just be the answer to stop money launderers and financial criminals in their tracks. What is blockchain? Blockchain is a sequential distributed and encrypted database found in cryptocurrencies derived from Bitcoin. It has become a tool for maintaining transparent and distributed ledgers that can verify transactions, including financial ones, with minimal third party involvement. Blockchain is distributed because the ledger is not held in a central location but rather spread across a network of computers or nodes. And it is transparent since every transaction is made public for all to see. As part of its set up, historical transactions can’t be changed, which reduces the possibility of data altering and maintains a high level of data integrity. With these characteristics, blockchain has tremendous potential to become one of the most wanted technologies across all industry sectors over the next coming years and will have an industry impact similar to the Internet. Central banks and financial institutions are actively investing in this space. A recent article  lists 26 separate banks globally who are considering blockchain technology. Similarly, there are 42 banks that are considering a common set of standards and best practices with a view to explore a hybrid blockchain concept. What is money laundering? Every year, financial institutions spend about US$10 billion to develop anti-money laundering processes , yet still this and other financial crimes continue to take place on a large scale. The largest financial crimes are not carried out with firearms but with a single click of a button. These criminals disguise themselves with different aliases from different locations so that the origins of the money laundered becomes untraceable. How money laundering works is commonly described in three stages: Placement, the stage at which criminally derived funds are introduced into the financial system. Layering is the substantive stage of the process in which the property is 'washed' and its ownership and source is disguised Integration, the final stage at which the 'laundered' property is re-introduced into the legitimate economy. These three stages simplifies how money laundering works but provides a general overview. Often, these stages may overlap and there may be no requirements for criminal proceeds to be placed. Find out how free trade zones can be a financial fraud freeway: https://blogs.oracle.com/financialservices/free-trade-zone-a-freeway-without-policing Blockchain improves data integrity As financial criminals are after the big economic data that banks and similar financial organizations are dealing with, keeping this data safe is an important anti-money laundering process. With blockchain technology, banks can increase the level of data traceability and integrity, which will consequently improve the quality of their transaction monitoring activities. In parallel, Blockchain can significantly reinforce the effectiveness of the internal controls (COBIT 5 – Data Governance Requirements) to secure data and meet the underlying principles outlined by ISACA: Reduce complexity and increase cost-effectiveness Increase user satisfaction with information security arrangements and outcomes Improve integration of information security Inform risk decisions and risk awareness Reduce information security incidents Enhance support for innovation and competitiveness Blockchain as part of your anti-money laundering process While blockchain technology will not become the future anti-money laundering platform, financial institutions can directly leverage blockchain to source data for Know Your Customer (KYC) and fight financial crime The data irreversibility of Blockchain provides a single source of truth and reduces the risk of duplications or errors as it is immutable. Blockchain can be used to streamline client on-boarding and KYC processes in a considerable way. To ensure data privacy and cyber security, cryptography can be another critical point to ensure partitioning of data. The number of cases of fraud, hacking and unauthorized personnel accessing data that should be secure poses a significant risk for all businesses. Utilizing blockchain can overhaul and improve security and highlight where upgrades need to be made after a leak or hack has occurred. Blockchain technology holds promise in boosting anti-money laundering processes but there will be some challenges to address. Shifting to a decentralized network will require educating end users and operators and integrating with current working process to have the biggest and best impact. Read up on the latest anti-money laundering trends and solutions here: https://www.oracle.com/industries/financial-services/analytics/solutions/financial-crime-compliance.html

Blog By: Julien Mansourian, Strategy and Transformation Executive. Blockchain has been touted as the solution to replace the many ageing processes powering financial services and it may just be the...

Banking

Fintech Hydrogen Accelerates Financial Innovation on Oracle Open Banking

Blog by: Mike Kane, Co-Founder of Hydrogen Open banking started as an European Union directive in 2015, known as PSD2. It was administered to get financial institutions to open their APIs to allow third-parties to build applications and services on top of data. This initiative has now spread globally, but there has yet to be meaningful product layers built on top of the financial data. The end goal of open banking was to increase competition and provide a level playing field by regulating consumer protection. However, only about 49% of consumers feel comfortable sharing their data with companies through open banking. Gaining the consumer’s trust is critical when it comes to adopting open banking, and we realize the importance of this, here at Hydrogen. Trust must be established for any relationship to be successful, which is why Hydrogen recently announced that our platform is now available on the Oracle Cloud Marketplace and can be seamlessly added to the Oracle Open Banking Platform. With 430,000 customers in 175 countries, Oracle is one of the most trusted technology firms in the world and Oracle customers can now leverage the power of Hydrogen’s award-winning secure and scalable enterprise grade cloud  platform on Oracle Cloud Infrastructure (OCI). Oracle Open Banking Platform The Oracle Open Banking Platform is an open banking API enabled solution that is built on top of the Oracle Cloud which serves as the foundation for building, integrating, monitoring, and securing applications, as well as for driving new insights. Through its extensive catalog of services, such as lending, payments and predictive analytics, the Open Banking Platform enables financial institutions and fintechs to expedite innovation and monetization with a single enterprise cloud platform. Oracle Open Banking Platform equips customers with a best-in-class open banking solution that, among many other benefits, delivers high-value and cost effective financial products and services, improved operational efficiency, and creates new revenue channels by exposing APIs and monetizing current banking assets. Accelerating Financial Innovation with Hydrogen With the Hydrogen platform integrated with Oracle’s open API banking cloud offering, Oracle customers can accelerate their digital financial innovation by quickly building hundreds of solutions using a single platform. Hydrogen’s powerful toolkit consists of one connected set of configurable APIs, one integration library, and one standardized data model, with added business logic and modular UI components to build end-to-end investing, savings, insurance, wellness, and many other applications. The Hydrogen platform is able to accomplish this because it can integrate with any third party system, provide core data storage and financial engineering, and create end-to-end client-facing web or mobile applications. Financial Wellness Use Case As we’ve previously mentioned, the Hydrogen platform can be leveraged to create numerous financial applications. One example is a data rich financial wellness application that can be built with the joint tools available from Oracle and Hydrogen. In this use case, the wellness application will highlight personal finance management (PFM), budgeting, financial health, and planning. The application starts by pulling in the users financial data through their various accounts with multiple financial institutions. Hydrogen extends this functionality through an integration library and chooses from various aggregation vendors and then pull the data automatically back into the Hydrogen platform. Once the user has selected the financial accounts they want to review, they are taken to their financial wellness dashboard. This data is stored in the Hydrogen platform and synced via vendor integration. The application can now perform analytics on the financial wellness of the user such as net worth tracking and cash flow analysis. Users can also create and update budgets.  After banking and credit card accounts have been synced, the application can check the budget against categorized transactions and users can automatically view their progress toward a configurable budget. The user can also receive a health score across their finances using the aggregated data. This score can be computed using the financial data stored, either by comparing to other users in the application, or based on a rule of thumb. Lastly, interactive calculators can be shown next to each score to give the user additional advice. For example, Emergency Fund Calculator returns a total recommendation along with a plan to save for the total recommended amount in a variety of horizon intervals. With Hydrogen as an added layer on top of the Oracle Open Banking Platform, financial institutions can quickly and cost-effectively create new revenue models and mitigate risks with an enterprise-grade platform. The average Oracle Cloud customer can save over 80% in product development cost and time by leveraging the joint Hydrogen/Oracle model.  

Blog by: Mike Kane, Co-Founder of Hydrogen Open banking started as an European Union directive in 2015, known as PSD2. It was administered to get financial institutions to open their APIs to allow...

Financial Crime and AML Compliance

Transnational Financial Crimes Cost Banks up to $2.2 Trillion

Blog By: Matthew Long, ​Director Financial Crime and Compliance Solutions Financial crime has existed for as long as money has. Although we’ve come a long way from hiding grain underground, but financial criminals still follow the same principle of anonymity and hiding.   Transnational financial crime is  good business. A recent article by Global Financial Integrity, reported that it is valued to be between US$1.6 trillion to US$2.2 trillion in 2017 11 different markets.   The report took a closer look into several groups,  including the FARC (Revolutionary Armed Forces of Columbia), the Islamic State and the Lord’s Resistance Army. These groups reportedly used criminal markets for personal wealth gain and power play. They allegedly “front” anonymous (shell) companies  (i.e. companies that have obscured their ownership in order to allow beneficiaries to operate more “freely”), to help hide their identities, criminal activities  frustrate active law enforcement investigations and run money laundering. The International Consortium of Investigative Journalists (ICIJ) and OrganizedCrime and Corruption Reporting Project (OCCRP) have also found this to be true in their ongoing investigations into global corruption and financial crime.​ Criminals have worked around hard-to-detect areas for money laundering in trade finance and correspondent banking. Financial fraud is also made easier considering the many banks have limited ‘know your customer’ systems and processes, leaving them vulnerable for exploitation. So how can financial institutions stop financial criminals in their tracks? Connect the dots faster and deeper with artificial intelligence and machine learning    It may seem obvious, but criminals increasingly lean on technology. As technology trends accelerate, even an anti-money laundering army of analysts and investigators are no longer able to keep pace. These transactions now happen in an instant, making it hard to detect that quickly. The trouble with digital disruption is that there is too much data. Luckily, artificial intelligence (AI) and machine learning solutions are getting to a point where they can run complete analyses and automated decision-making across vast volumes of transaction data.  Spotting anomalies is crucial. However, it is not useful until they are string together to make sense. This is where graph technology comes in. The use of network analysis and data visualization  allows for the exploration of relationships between entities of interest such as organizations, people and transactions, easier entity resolution, single customer views and the  visualization of patterns and relationships. This is important during transaction monitoring and investigations in helping the anti-money laundering team understand what the data truly means. Use regulation as a jumping-off point While regulation is everywhere in financial services, these regulations rarely align globally or reflect the sophisticated financial crime threat that today’s institutions have to deal with. Financial institutions will need to use regulations as a starting point, rather than as the end point, to ensure that their processes and rules are as up-to-date with criminal activity as possible. Financial compliance need not be a frustrating customer experience. Find out more: https://blogs.oracle.com/financialservices/financial-compliance%3A-the-foundation-of-banks’-customer-experience Collaborate to fight financial crime The financial services community needs to come together to build strength and resilience in numbers. Financial criminals do not work under a single structure. They scatter across clans, cells and networks. But, the crimes they commit are the same. Regulators and financial service providers need to band together to combat any criminals or patterns of corruption. In the likely event that it is taken up to criminal trials, it will easier to judge them under an effective legal system across different borders.   Ultimately, the interconnectedness of the global financial system means that financial crime  and money laundering is only going to get more complicated, far-reaching and sophisticated. However, with the right tools, the right processes and the right collaborative approach, financial services firms can take on these criminals from a position of strength. Find out more about our anti-money laundering solutions here: https://www.oracle.com/industries/financial-services/analytics/solutions/financial-crime-compliance.html

Blog By: Matthew Long, ​Director Financial Crime and Compliance Solutions Financial crime has existed for as long as money has. Although we’ve come a long way from hiding grain underground, but...

Banking

Fintech Strands Launches SaaS Personalised AI Banking Platform Running on Oracle Autonomous Cloud

Blog by Javier Castillo of Strands, Inc. In recent years, financial institutions have taken big steps in the adoption of cloud-based solutions with the aim of leveraging the benefits shared IT resources and ecosystems deliver across the enterprise. Oracle Open World 2019 set the scene for the launch of Strands Software-as-a-Service platform as we look to deliver the first global enterprise grade digital money management solution on the cloud. Strands is a pioneer when it comes to creating highly-customizable digital money management software for top-tier financial institutions worldwide. Cesar Richardson, Head of Alliances and speaker at OOW19, indicated “Strands' and Oracle’s partnership could not come at a more timely moment in the evolution of cloud banking in the Financial Services industry. Banks are very interested in leveraging our technology however demonstrable security, performance, handling PII data and compliance remain key in all our conversations. Oracle's Gen 2 Cloud provides the foundation for enterprise cloud-based banking platform needs demanded by our large banking clients who require to monitor, control, and encrypt sensitive data leveraging, bank private data isolation for mission-critical banking applications such as Strands Finance Suite. We chose Oracle’s Gen 2 cloud as it is designed to meet cloud security principles such as protecting data in transit, asset protection and resilience, separation of client data, operational, personnel security, identity, and authentication requirements, which are table-stakes for taking banking computing to the cloud. We can now confidently meet bank infosec and regulatory scrutiny allowing us to grow our business at scale and provide immediate value to financial institutions and their customers at the best price point in the industry. There is no doubt that banks will be very impressed when they explore how our joint product offering not only reduces the total cost of ownership, but also delivers a range of innovative deployment options (private cloud, public and hybrid) that adapt to implementations with different regulators worldwide. Understanding the current needs of banks and financial institutions when it comes to their digital transformation, Strands has found a partner in Oracle and their Gen 2 Cloud solution to power and deliver their enterprise-grade Finance Suite as-a-Service. This new partnership supports all of Strands’ money management and insights solutions offering a blend of private, public and hybrid cloud configurations based on the requirements of every financial institution and local regulator. Some of the key benefits of our product partnership include: Exceptional Performance - Processing over 150K real-time transactions per minute and instances with over 10 Million users requires a cloud that is optimally tuned to run large and complex production systems. Enterprise Grade Security - Monitored and controlled access to Autonomous DB protecting from cyber attacks and unauthorized internal control. Remove human error and prevent hacks- Autonomous DB reduces the considerable risk human errors can generate including errors in configurations, patching database and carrying out administrative tasks that don't add value but expose the enterprise to potential threats. Smooth Transition - Migration of our Enterprise grade solution to the Oracle Cloud was seamless thanks to the flexibility in supporting all applications - old and new alike. Superior Price to Performance Ratios - Price relative to Performance is unrivaled with Oracle Cloud when running data-intensive applications. Strands’ goal is to help banks and financial institutions build new business models which will allow them to compete in an evolving industry and find opportunities to monetize their rich source of transactional data. This will be achieved by delivering personalized AI banking services using the Oracle Autonomous Cloud. Strands is leveraging multiple components of Oracle’s Gen 2 Cloud including Oracle Kubernetes Engine, OCI Streaming, Oracle API Platform and Autonomous DB. Looking to the future, the value of data will continue to increase. As such, Strands’ mission is to use Machine Learning and Artificial Intelligence to help banks and financial institutions extract and categorize transactional data to produce rich insights about their customers. By doing so, banks can then take steps to speed up internal processes and help reap the benefits of a more engaged relationship with their customers.

Blog by Javier Castillo of Strands, Inc. In recent years, financial institutions have taken big steps in the adoption of cloud-based solutions with the aim of leveraging the benefits shared IT...

Financial Crime and AML Compliance

Free Trade Zones: A Financial Fraud Freeway?

Blog by: Garima Chaudhary, Oracle Financial Crime and Compliance Management Specialist We’re not saying free-trade zones (FTZ) are a hotbed of financial crime. But given its duty- and tax-free status, these jurisdictions tend to attract money laundering, terrorism financing and other criminal activities, in addition to legitimate businesses. Blind Men and the Financial Crime Elephant  The scope and degree of Customs control over the goods introduced, and the economic operations carried out in FTZs, vary from one jurisdiction to another. Goods introduced in a FTZ can undergo various economic operations, such as transshipment, warehousing, re-packaging and re-labelling as well as storage. But the same shipment may also use FTZs as a base around the globe for no other purpose than money laundering. All of this creates a complex financial crime network with multi-layer supply chain systems that can be tough to monitor. The special status, tax and arrangements, in these areas, can often allow financial criminals to exploit the system with little regulatory oversight. Even involved institution, with a robust transaction monitoring program may have limited visibility or just a fraction of the complete view. It is a Family Business  FTZs are more than commercial distribution centers and represents global, family-based, ethnic/religious networks. The operators may be linked by ethnic/religious networks across FTZs across the world that even company registry information may not be track the relationship across businesses. Tackling the Money Laundering Threat with a 720-Degree Customer View  Transaction monitoring of FTZs is currently ineffective because there is no holistic view of customer financial activity. The current programs only factor internal information (such as Customer, Bill of Lading, Documents) for monitoring & investigation. However, detecting financial criminal behavior requires factoring a good amount of external information, such as comparison of customer activity with overall FTZ customers of similar business nature, company information, actual vessel route and many more. The more effective anti-money laundering approach is to have a 720-degee customer view that includes information beyond the institution’s purview. They need to cross-reference customer activities with other FTZ customers of a similar business nature, gathering company and shipping information, for example.   Holistic Risk Indicators: Typical transaction monitoring parameters such as high-risk geographies and inconsistent shipping do not give an overall picture of a customer behavior. These internal red flags should be correlated with external information to understand the holistic view and any discrepancies in customer behavior. Below are examples of some holistic risk indicators: Individual or company linked with several other companies Individual owning & operating more than one company at same time & same location Companies shipping to just one country Direct operations in FTZ Companies & individuals with same family ties  Companies registered with incorrect addresses Companies doing business in high risk geographies Inconsistent shipping route / change in shipping route from Bill of Lading External Network Data is Vital  There is no single source of database on these free ports or the merchants who sell these the goods. However, there are several types of external data that can be collected, organized and available to financial institutions, intelligence and law enforcement agencies as well as businesses. Below are a few examples of the vast variety of external information (along with internal data) needed: Business operating in FTZ - names, addresses, phone numbers and websites Trends report of amount of goods/services received and shipped in FTZ Financial institutions (and their principal officers) serving the businesses in the FTZ Shipping lines that transport goods/services from the port or ports serving the FTZ Products/goods brands sold in each business Data on the global supply chain. Insights on companies at every stage of the supply chain. From manufacturers and buyers to shipping and logistics Connect Hidden Dots: Advanced Graph Analytics What do you do with all that data? Institutions need to connect the dots in their data, uncover hidden relationships and patterns and ensure coverage of known risks by validating existing controls and scenarios. From a technology standpoint, an anti-money laundering solution which allows for graph visualizations for both internal & external financial crime data, that rapidly builds powerful detection patterns and generates insightful investigation dashboards for financial crime investigators and risk analysts, is crucial. In addition, financial criminals register themselves under multiple names and addresses. By the time a link is detected, these individuals nowhere to be found. Robotic process automation,can help automate basic processes for your anti-money laundering team, enhance Know Your Customer (KYC), Know Your Customer’s Customer (KYCC) and augment Counter Terrorist Financing (CTF) investigations with a holistic customer view. A centralized investigation hub to speed up investigations and boost investigator productivity is another critical aspect of anti-money laundering technology. The platform should enable financial institutions to search across customers, bill of lading, watchlists and external data such as FTZ trends, vessel movement, company information and many more. Due to the global nature of business, automating the manual data collection, linking, foreign language processing through graph analytics will ease entity resolution and understand how involved parties are interconnected. There has been increased scrutiny on trade-based money laundering recently by regulators around the globe. Tackling trade-based money laundering effectively requires factoring in the FTZ connection. An agile platform is important to keep up with the dynamic nature of criminals in fight against money laundering & financial crime. Find out more here: https://www.oracle.com/industries/financial-services/analytics/solutions/financial-crime-compliance.html  

Blog by: Garima Chaudhary, Oracle Financial Crime and Compliance Management Specialist We’re not saying free-trade zones (FTZ) are a hotbed of financial crime. But given its duty- and tax-free...

Banking

Oracle’s participation in the winning hackathon team at SIBOS 2019 in London

I had the pleasure to meet Nitish Priyaranjan and Vijay Dev, both from the Oracle Financial Services Global Business Unit.  Nitish is a member of the winning team of the SIBOS 2019 hackathon with the theme “Open Banking needs open minds”, and Vijay pulled together the Oracle Banking Sandbox that were used by the hackathon participants. Rik De Deyn: Let’s start with Nitish.  Congratulations on being part of the winning hackathon team, Nitish.  What was the hackathon about? Nitish Priyaranjan: Thanks Rik.  This first SIBOS hackathon was organized by Innotribe at the 2019 SIBOS in London.  The aim of the hackathon was to collaboratively craft solutions to future industry challenges relating to security, identity and payments.  Mixed teams, with participants from banks, technology vendors and fintech firms, spent three days together to come up with an idea and a prototype for a new application.  Rik: Interesting.  So, what was the winning concept that your team came up with? Nitish: Our team consisted of participants from eBury.com, Form3, Trustology and Oracle.  We called our team “Optipay” and decided to design an application to let end users customize the way they do payments.  Our tag line was “Optimal Payments Guaranteed”.  The whole idea was to combine artificial intelligence and API’s, to realistically predict the cost and throughput of the payment that the user wants to do, before the payment is performed.  This gives users the chance to choose the payment method that most matches their personal preferences and initiate the payment with a reduced fee and more transparency. Rik: That sounds useful.  What was Oracle’s participation in the hackathon? Nitish: Oracle participated in the hackathon in two different ways.  We participated with two developers in two different teams, but Oracle also contributed by providing access to the Oracle Banking Sandbox and Oracle Banking APIs to each of the hackathon teams.  For the teams, it was great to be able to use and combine banking API’s, not only from Oracle, but also from SWIFT and Tink. Rik: That brings us to Vijay.  How did you support the hackathon teams with API’s? Vijay Dev: The use of API’s was very much an integral aspect of the hackathon. The theme was about Open Banking, but there was also a focus on open collaboration.  Collaboration between developers from different companies, as well as collaboration between systems.  And API’s are an excellent way to do that.  The experience we have with setting up and supporting hackathons, made us realize that it is important to offer API’s that have access to a fully functioning demo bank system. It makes the hackathon experience so much more realistic.  And that’s what we set up for this hackathon: a Banking Sandbox running Oracle Banking APIs, in our demonstration labs, for all teams to use freely.  Rik: Can you elaborate on that a bit?  What’s the background of this? Vijay: We brought together decades of experience working with over 600 banking customers worldwide, implementing our suite of banking software. We have customers right from core banking capabilities to linking IoT devices. Based on that we have built a sandbox that contains all our products, integrated and available. This is very close to a real bank integration and is open for access and collaboration with fintechs, partners and innovators.  At the front of this sandbox are our Oracle Banking APIs. We expose over 1600 APIs across banking domains and user segments. So, we don’t just deliver the APIs as stubs with dummy data. Our API’s apply the same level of access and authorization controls that are needed to integrate with a bank.        Rik: What a great story.  What has been your biggest take away from the hackathon experience? Nitish: Well, it’s been good to see how focused the whole financial services industry is on collaboration and API’s.  It’s been a real opportunity to be part of this, and I’d like to thank the organizers for including Oracle.  Being a development manager for payments in FLEXCUBE, the hackathon inspired me to continue this path of collaboration. Vijay: Same here.  It’s always interesting to see developer teams working with our API’s for innovative solutions.  A hackathon environment really brings out what’s working best and where we can improve.  This will most certainly influence our Banking API strategy. Rik: Thanks a lot for these insight guys, and very much looking forward to work with you again. Sources: https://twitter.com/Sibos/status/1177186595260096512 https://www.sibos.com/media/news/sibos-hackathon-open-banking-needs-open-minds

I had the pleasure to meet Nitish Priyaranjan and Vijay Dev, both from the Oracle Financial Services Global Business Unit.  Nitish is a member of the winning team of the SIBOS 2019 hackathon with the...

Banking

Self-Driving Finance-as-a-Service is Keeping Banks Relevant on Oracle Autonomous Cloud

Blog by: Dorel Blitz - VP Strategy & Business Dev, Personetics  Leading banks around the world are urgently looking to stay relevant by providing retail, small business and wealth management customers guidance in managing their finances – with varying levels of personalization and automation. We call this Self-Driving Finance. Self-Driving Finance enables banks to deliver proactive help to their customers empowering them to take control over their financial well being. This strategy boosting customers’ engagement & products’ adoption. Self-Driving Finance-as-a-Service is the next iteration as it becomes available on the Oracle Cloud. Now banks can enjoy the benefits of all that comes with an agile and scalable Cloud infrastructure including built-in encrypted security, quicker time-to-market, and on-demand scalability. Banks that adopt a Cloud infrastructure have the agility to innovate as desired with new functionalities, products, and services and streamlined paths for upgrades and customizations. With the help of Open Banking APIs and Kubernetes technology, banks can now move faster than ever to deploy Self-Driving Finance’s personalized insights, automated wellness programs and other innovative products with minimal effort, accelerating their digital transformation towards a new standard of banking experience which is highly personalized, proactively engaging the customer, and focused on the customer’s financial well being. And as Self-Driving Finance-as-a-Service ensures that the security and deployment aspects are taken care of, the fun can begin. Personetics is currently working on a set of out-of-the-box connectors to Oracle’s leading Financial Service solutions and applications. The first step is a connector for Oracle’s Open Banking APIs which will allow any bank using the Open Banking APIs to enjoy Personetics personalized insights, automated wellness programs and other products, with minimal effort. In addition, Personetics’ plan is to build connectors to Oracle CRM and Marketing Cloud to bring the power of Personetics AI to banking departments that work directly with people, namely, sales, support and marketing. Personetics is a proud partner of Oracle’s fintech innovation initiative to accelerate banks’ growth. Combined with the intuitive user interface of the Oracle Cloud Marketplace and its automated application installation features, banks are able to quickly search for relevant applications and services and deploy the business solutions that work best for their organization and their customers. Self-Driving-Finance as a service and its money management and other features accelerates the time-to-market, quality, scale & agility. To date, more than 60 million bank customers across the globe are already experiencing the benefits of Self-Driving Finance. Now, with the accelerated transformation empowered by the secure and agile framework of the Cloud, banks can quickly bring this technology to millions while realizing the tangible ROIs that serve core goals coveted by the industry – increased engagement, improved customer satisfaction, deposit growth, and increased share of wallet. We believe that banks that choose to go with a Cloud set-up, including Oracle Cloud, will see great value in their choice. Personetics plans to continue to innovate and streamline its Oracle Cloud offerings to provide great value and a short time to market. Stay tuned!    

Blog by: Dorel Blitz - VP Strategy & Business Dev, Personetics  Leading banks around the world are urgently looking to stay relevant by providing retail, small business and wealth management customers...

Banking

The critical role of DATA in improving ‘turn-around times’ in SMB Origination

Blog by: Susan Harden, Senior Director, Banking Solutions, Oracle Financial Services The average ‘Time to Decision’ for small to medium business (SMB) origination within traditional banks ranges anywhere between 5 days to 1 month depending on the loan size and complexity of the deal and ‘Time to Cash’ anywhere between 25-55 days. In a world where SMB’s are demanding funds fast, these time-frames are unacceptable. Banks must focus on how to reduce ‘turn-around times’ and deliver a better end to end experience to both customers and staff. What role does data play in enabling banks to reduce turn-around times for SMB origination?  In the competitive SMB lending arena, banks that effectively leverage their data will be best positioned to ‘win’ the small to medium business customers banking relationship. Let’s take a more in-depth look at how leveraging data can drastically reduce origination ‘turn-around times,’ lower the cost to originate and improve credit quality. To do this, let's break down the end to end origination process into three sub-processes – Application Capture, Application Assessment, and Application Fulfillment. Application Capture - The data captured to support the application must be complete and correct. For both customers and relationship managers, this step needs to focus on minimal data entry while ensuring data quality is not compromised.  The measure at this stage is ‘first time right.’ The higher percentage of right applications for approval, the higher the chance for a quick credit decision.  Banks also need to reduce the effort required by their customers and relationship managers as part of this stage. Doing this, for relationship managers increases their customer-facing time and enables them to focus their efforts on securing the customers business, not data entry. Banks must ensure that any data already on file related to the applicant and relevant to the new application is pre-populated. Pre-populated data must then be enriched either from documents provided by the customer or by taping data sources external to the bank.  As part of the origination process, customers are asked to provide documentary evidence to support their application. Banks typically use these documents for verification purposes. Data provided include personal (driver’s license, passports) and business identification (certificates of registration, etc.) documents, personal and business tax returns, business balance sheets and P&L reports, personal and business bank statements. These documents not only verify but are rich sources of data. The challenge is how to get to the data within these documents. Advancements in Optical Character Recognition (OCR) and Machine Learning are making this possible. OCR is a technology that converts different types of documents, such as scanned paper documents, PDF files, or images captured by a digital camera into editable and searchable data. Leveraging data from documents during the application capture step not only drastically improves both customer and relationship managers experience, it significantly reduces verification processing times. The ability to integrate and augment data already within the bank with data from sources external to the bank provides another opportunity for banks to improve this step in the origination process. Services such as address verification services, personal and business identification services (Equifax, Experian e.g.), data sourced companies and personal credit bureaus, the extraction of financial data directly from the customer bank account or accounting package (Sage, NetSuite, Xero, QuickBooks etc), valuation services to assess collateral value upfront in the origination process. The more data that banks can source the simpler and more accurate the application will be. Further, this data can then determine, in real-time and based on configured credit policy, the amount a customer is eligible to borrow and a risk-based, personalized price.  Oracle customers are achieving 90% ‘First Time Right’ 35% increase in banker customer-facing time Application Assessment – This step aims to maximize the number of applications auto-decisioned and automatically verified. If auto-approved the application needs to move seamlessly to the next stage, if referred the application is sent, and all the associated data relating to the application needs to pass to an underwriter for further scrutiny. Should a manual credit decision be needed, underwriters require access to all the data in a single place to make a timely decision. Underwriter review is where the accuracy of the data captured during the earlier step is so important. For banks to improve ‘time to decision’ errors, manual steps, lengthy verification processes must be avoided. Banks need to be able to configure credit policy to leverage ‘trusted data’ and ensure that quality ensues. Further, banks need to use this data downstream of the origination process to monitor their portfolios and use insights to adjust and adapt credit policy based on portfolio performance.  Oracle customers are achieving ‘Time to Decision’ in minutes 70% improvement in auto-decision Application Fulfilment – At this stage, we measure ‘Time to Cash.’ SMB’s want access to capital quickly, so being able to complete the final legs in the process efficiently is as important as the earlier two stages. Term Sheets need to be generated automatically and pre-populated with the data and all conditions and covenants relevant. Errors at this late stage in the process cause delays which can ultimately impact whether the loan will proceed or not. Post acceptance, funds are disbursed automatically. If the loan is secured, then the bank will need to register their security interest. Oracle customers are achieving ‘Time to Cash’ less than 24-hours Finally, data that is captured and enriched across the origination process must be stored in consolidated repositories so that it can be re-used across the bank and for future applications. As examples, financial profile data captured for both the business and relevant parties associated with the business needs to be stored and updated regularly through integration with external sources, of the provision of updated financial documents such as tax returns, balance sheets, P&L statements. Collateral data is centralized with valuation data kept up to date throughout the life-cycle. The ongoing maintenance of this data is critical for the bank to better manage and monitor the portfolio across time. As competition intensifies, effective banks use data across the origination process and throughout their relationship life-cycle. These banks see significant improvements in turnaround times, as well as in the profitability of SMB origination. Oracle’s Banking Origination Platform enables banks to harness valuable data insights. These insights improves, simplifies small to medium business origination experience for customers and bank staff. Oracle customers are achieving 40% improvement in ‘Turnaround Times' 25% reduction in ‘Cost to Originate’ To learn more about Oracle Banking Origination Platform, feel free to message me to explore more or have a conversation. For more information on Oracle’s SMB Originations solution please visit our websites at: Oracle Digital Mortgage Originations: Webpage Oracle Banking Solutions: Homepage Oracle Financial Services: Homepage Contact us: Email: financialservices_ww@oracle.com            Follow us: Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog by: Susan Harden, Senior Director, Banking Solutions, Oracle Financial Services The average ‘Time to Decision’ for small to medium business (SMB) originationwithin traditional banks ranges...

Analytics

Oracle Powers Digital Fintech Ecosystem at Sibos 2019

At Sibos in London Sept 23-26, Oracle will feature 10 enterprise-ready FinTechs, 3Forge, Amenity Analytics, BankiFi, Gapsquare, IPsoft, Personetics, Perx, Previse, Quant Network, The Logic Value who are leveraging Oracle Cloud technology and Oracle Banking APIs to improve security, reliability, data privacy and regulatory compliance for banking. View detailed profiles of the 10 FinTechs here: Meet the FinTechs Each fintech is part of Oracle for Startups, a unique acceleration program that enables mutually beneficial business-building partnerships for startups and customers. The Corporate banking and payments value chain is an ecosystem that is driven by third-party innovators. The FinTechs selected by Oracle address core challenges in the financial services sector and deliver solutions in areas such as cognitive banking, real-time trade reporting, autonomous finance, investment banking, hyper-personalized customer loyalty platforms, open SME banking, wealth management solutions and more. With its FinTech partners, Oracle’s solutions are designed to help corporate banks rethink processes, co-create innovative products, and provide an experience that is simple and seamless for their customers. Oracle has made significant investments in four major areas: Cash and Liquidity Management, Credit and Lending, Trade Finance and Payments to help banks achieve smarter operations, greater connectivity, and faster delivery of innovative products. Meet us at H101 during Sibos to discover the innovations from Oracle for corporate banks. Please visit oracle.com/goto/sibos for more information 

At Sibos in London Sept 23-26, Oracle will feature 10 enterprise-ready FinTechs, 3Forge, Amenity Analytics, BankiFi, Gapsquare, IPsoft, Personetics, Perx, Previse, Quant Network, The Logic Value who ar...

Financial Crime and AML Compliance

3 Ways to Turn Anti-Financial Crime Compliance into a Competitive Advantage

Blog By Garima Chaudhary, Financial Crime and Compliance Management Specialist, Oracle Financial Services As regulatory scrutiny increased, and monitoring systems started to generate an enormous number of cases, the option institutions had was to increase manpower to handle the workload. Increasing the manpower have drastically increased the cost of compliance. Such increasing costs have caused enterprises to start looking at advance analytics and data scientists as smarter investments in the long run. Analytics technologies like machine learning models enabled anti-financial crime teams to predict upcoming cases. The technology helped reduce the false positive ratio by a large degree. These systems have remained mostly disparate in siloes, thereby decreasing the Return of Investments (ROI) for most enterprises. Newer FinTech multi country-based products & services have further complicated financial crime risk making detection of organized, sophisticated crimes even tougher. Traditional Approach – Ineffectiveness in Analytics Added model management regulations, need for machine learning, and rapid evolution of unknown risks, have been critical drivers for institutions to create sizeable highly skilled analytics team. Large data sets from production & non-production systems are needed for analytics to perform data discovery & regular model optimization. Generally, data provisioning can take very long, and by the time the data is made available, it might already be outdated. Moreover, drastic changes in the risk profile of customers or entities require access to non-production data along with production data. Again, a longer time for data provisioning does not provide must-have coverage to financial crime risk. Lastly, tools with restricted data science languages limit the ability to provide coverage for complex behaviors, such as a network of external & internal parties.  This approach makes the data discovery & optimization process expensive & highly inefficient. RPA Can Win Games but Not a Championship – Investigation Challenges It is well established that, for cases, investigation analysts spend almost 80% of the time gathering the information and just 20% of the time analyzing the collected data. Time spent gathering data makes the investigation process the most expensive element in financial crime & compliance program. In recent years, Robotics Process Automation (RPA) has been leveraged to solve data gathering challenge. RPA has reduced overall data gathering time significantly, though it does not provide insight & connection between hidden parties. The lack of insight & connections makes the investigation process highly inefficient and exposes institutions to organized financial crime risks. 3 Ways to Turn Anti-Financial Crime Compliance into a Competitive Advantage   1. Unified Platform for Monitoring, Investigation & Analytics is Vital: Quite a few leading institutions leverage a unified platform for detection & investigation. However, analytics for data exploration, above the line tuning / below the line tuning and new risk coverage are in disparate systems. A unified strategic platform for analytics fully integrated with detection & investigation will ensure timely & quality availability of production data. Additionally, machine learning models require huge volume & a wide variety of data attributes. Data attributes such as case outcome & supported evidence can be efficiently fed into machine learning models, when programmed into unified fully integrated platforms. Additionally, a unified platform can drastically reduce the operational time of newly authored models to production, which is essential for the efficient model optimization process. 2. Polyglot Model Authoring with On-demand Data Access: When a system is jammed with fewer analytics languages, it limits the institution’s ability to leverage numerous open-source languages as per specific requirements.  For example, individual languages prove better while integrating with Hadoop, or can better handle large volumes from Hadoop (Example: SPARK) as compared to other words. Which implies, the ability to leverage multiple analytics languages is essential to the growing need for improved analytics. Strategic solutions should leverage popular data languages such as R, Python, and SQL, for productivity. Institutions realize that active discovery requires the institution’s transactions, accounts, case, and other financial crimes related data hosted in a data lake. Ability to load data from the data lake on-demand, significantly reduces the time and effort data scientists spend in preparing data for analysis. Data Scientists should be able to ‘mashup' production data with third-party data in the data lake for discovery and modeling. 3. Graph Analytics to Fight Organized Criminal Network: Efficient Investigation of highly organized financial crime requires technologies such as Graph Analytics to succinctly express intricate money movement patterns, detect multi-hop relationships, and identify hubs and spokes of activity. Graph Analytics leveraging a single source of data powers investigators with an ability to search customer information from various source systems and allows the linkage of customers, accounts, external entities, transactions and external data stored in disparate operational silos. A single source also provides a 360-degree view of a customer, foreign bodies, or account for a holistic view of the case, transactions, and external data of interest. Graph algorithms such as Connected Components, Shortest Path can generate automatic linkages. For example, such linkages could be (i.e., linking based on customer identification numbers, name-matching, shared phone numbers, tax ID, etc.). Further, investigators can drill down (expand/collapse) on customer information & visualize related parties using graph analytics. Lastly, Natural Language Processing (NLP) to auto-generates case narrative/summary for investigations, including case highlights, associated parties, number of events, and red flags, etc. can be a game-changer in documenting case findings. Graph Analytics opens new avenues of deep learning using graph algorithms such as Graph Similarity. Graph Similarity involves determining the degree of similarity between Graphs. Intuitively, the nodes in both graphs would be similar if, its neighbors are identical (and its connectivity, in terms of edge, to its neighbors). Again, its neighbors are identical if their neighborhoods are similar, and so on. This intuition guides the possibility of using Belief Propagation (BP) as a method for measuring Graph Similarity, precisely because of the nature of the algorithm and its dependence on neighborhood structure. With seamless access to production data in a secure and designated discovery sandbox, ability to leverage popular data science languages and graph analytics, both data scientists & investigators can gain an accelerated path to explore financial crimes data & hidden unknown networks interactively.   In the upcoming ACAMS 18th Annual AML & Financial Crime Conference, Oracle is hosting a panel of key industry experts. The Panel, “Innovation Applied: Solving Financial Crime with Advanced Analytics & Intelligence”, features Stuart Davis - Global Head- Financial Crimes Risk Management, and Group Chief Anti-Money Laundering (AML) Officer, Scotiabank is one of the panelists. Stuart Davis continues to speak about his vision of a unified compliance data store for all financial crime needs. This data store is for monitoring, investigation & advanced analytics. Another panelist is Brad Ahrens - Vice President, Compliance Surveillance Technology & Analytics Group, Charles Schwab. Brad Ahrens is a massive advocate of using innovative technologies to improve advance analytics & intelligence productivity. John Sabatini from our partner organization PwC will also be part of the panel. Jason Somrak Chief Financial Crime Consultant will moderate the panel, Oracle and (Jason)-[Loves]->(Graph). Come join us on September 24th between 3:45 PM to 5 PM to listen to insights on how using innovation, compliance investments can be turned into competitive advantages. Oracle experts will also be showcasing some of our innovative solutions addressing critical issues faced in fighting financial crime at Booth #200. We look forward to meeting you at the ACAMS 18th Annual AML & Financial Crime Conference between September 23rd and 25th in Vegas. Find out more. For more information on Oracle’s Financial Crime solution please visit our websites at: Oracle Financial Crime and AML Compliance Management: Webpage Oracle Financial Services: Homepage Contact us: Email: financialservices_ww@oracle.com            Follow us: Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog By Garima Chaudhary, Financial Crime and Compliance Management Specialist, Oracle Financial Services As regulatory scrutiny increased, and monitoring systems started to generate an enormous number...

Analytics

Oracle wins Asia Risk Awards – ALM Product of the Year 2019

Blog By: Daniel Lee, Digital Marketing Manager, Oracle Financial Services Oracle is proud to win the Asia Risk Awards – Asset Liability Management (ALM) Product of the Year 2019 for its Asset Liability Management solution.     Asia Risk Awards - Key Judging Criteria Amongst Asia Risk Awards 2019, the ALM product of the year is given to the technology solution that offers the most significant value add to end users from an innovation and risk perspective. The judging panel looks out for several critical criteria in determining the best of breed within each category, as follows:  Innovation: looking beyond the ordinary in approaching existing or new business opportunities. Risk management: a clear demonstration of sound risk management practices that lie beyond innovation. Client references and feedback: how well innovations meet client needs, including satisfaction of customer service. Cross-asset structuring: mobilisation of the global markets business to move beyond a single asset class.  The editors, journalists of Risk.net and Asia Risk Magazine, together with a selected group of industry leaders, decides on the winner. For the 2019 assessment, the judging panel includes Peter Burgess, Independent advisor, formerly head of XVA central desk, CBA, Sid Dash, Research Director, CHARTIS RESEARCH, Colm Kennelly, CIO, BNP PARIBAS, Frederick Shen, Head Global Treasury Business Management, OCBC BANK. After several rounds of rigorous evaluations, Oracle has emerged top in the Technology category, for ALM product of the year, selected by the group of industry thought leaders.   A forward-looking approach Traditional ALM approaches tend towards reactive measures which are static in nature. This approach often leads to poorly originated exposures, resulting in tactical or strategic imbalances for the banks. Consequently, banks need to manage the incremental costs from the resultant risk.  Oracle’s modern, proactive ALM approach works in a multidimensional manner across the treasury, finance, risk, and business lines. It determines the best possible trade-off between profitability and riskiness by integrating the trading and banking book through several Fund Transfer Pricing (FTP) techniques designed to arrive at the target balance sheet profile. The solution uses FTP as a dynamic tool to incentivize growth or divest certain products, actively contributing to setting the target profile of the banking book. The solution also assists the ALM function in managing compliance with Liquidity Coverage Ratio (LCR), short-term liquidity metrics, funding concentration, and other regulatory requirements. This approach both reduces cost and improves risk management insights to add value beyond compliance. Case in Point – Bank of China (BOC) One client that has implemented Oracle’s ALM solution is the Bank of China (BOC). BOC faced the difficulty of capturing instrument-level characteristics of every customer relationship it has. The complexity increased because of its inability to measure interest rate risk accurately. The Bank also had an increasing volume of regulatory guidance coming from the People’s Bank of China (PBOC). Within this business backdrop, BOC needed sophisticated solutions to measure its exposure to liquidity & market risk accurately. Oracle’s ALM used standard customer level and ledger information for all performance and risk applications, and tuned customer behaviours for prepayments, price sensitivity and product selection to economic circumstances. It generated customer relationship level cash flows considering caps, floors, discounts, and other unique payment characteristics. It has pre-built reports and dashboards available that could be customized to the requirements of the PBOC and delivers Interest Rate Risk in the Banking Book seamlessly. The solution helped to simplify maintenance, operations, and enabled BOC to capture the characteristics of every customer relationship effectively. By understanding its customers, the Bank could assess their behaviours in different environments and its impacts on their bottom line. These benefits enabled the Bank to measure its sensitivity to market and economic circumstances better, managing their exposures, reducing excessive risks. The Bank was also able to speed up its reporting process, responding in time to the new requirements coming out from PBOC. Download the PDF View the article to discover more. For more information on Oracle’s Asset Liability Management solution please visit our websites at: Oracle Asset Liability Management: Webpage Oracle Financial Analytics Solutions: Homepage Oracle Financial Services: Homepage Contact us: Email: financialservices_ww@oracle.com            Follow us: Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog By: Daniel Lee, Digital Marketing Manager, Oracle Financial Services Oracle is proud to win the Asia Risk Awards – Asset Liability Management (ALM) Product of the Year 2019 for its Asset Liability...

Financial Crime and AML Compliance

Why are small, medium financial firms more exposed to financial crime?

Blog By: Amit Malik, Director, Financial Crime and Compliance Management Solutions, Oracle There is a trend of increasing scrutiny on financial crime by regulators across the globe. As a result, most sizeable FI’s have initiated investments to progress to the next level of maturity for their anti-financial crime (AFC) programs. However, small to mid-sized financial institutions or other businesses such as real estate, legal, casinos, money remitter’s, struggle to gain sufficient investments in compliance, and it often takes a lower priority compared to other business investments. So, what makes them more vulnerable? Executive Mindset Many small to medium-size institution executives perceive compliance as a drag on the business. Few firms believe that they are too small for the regulator to care about, or do not have the clear understanding on the applicability of the AML/CTF laws with respect to their business. Often businesses forget that compliance is a continuous process. Firms that fail to recognize that compliance needs to keep pace with changes in market dynamics are often caught red-handed by the regulators. The fines paid are multifold compared to the investments that firms could have made retrospectively. More recently, AUSTRAC’s audit notice to Afterpay offers a glimpse of the business ramifications – a dent on the stock price, and more broadly, the risk to business reputation. Business Relevant AML/CTF Program Absence of continuously updated, risk-based, business-aligned AML/CTF policy is a key risk. Anti-Money laundering measures should not be limited to an annual corporate audit/exercise. It needs to be something frequently visited by businesses as public scrutiny increases globally. Failure to stop the bad guys at the door There is a lack of proper due diligence at customer acquisition stage (identifying the suspects at the onboarding stage). Fragmented customer onboarding processes (with manual ID checks, screening, and risk assessments) often allows the suspects onboard successfully. Client onboarding is the best avenue to avoid the unnecessary costs of monitoring, reporting, and eventually off-boarding the potential suspects. Effective anti-money laundering practices can save businesses a significant amount of money, and the company risk reduces in the process. Lack of intelligent monitoring Once on board, the next opportunity to identify the bad guys is to monitor and flag their activities/transactions that trigger the red flags. Often small institutions don’t have a dedicated analytics team to assist with continual tuning, upkeep of internal rules for additional products, channels, and changes in behavioural (transactional) patterns. The lack of a dedicated analytics team adds to the burden of operational teams with more irrelevant alerts (high false positives) and a higher probability of missing out on true-positives. Fighting financial crime with poorly designed weapons To understand the challenges in monitoring, it becomes crucial to understand the legacy in this space. Small to medium-size players have long relied on either: A home-grown monitoring solution with its challenges such as accountability, cost of change, model risk management. OR A shared AML/CTF solution (not 100% relevant to the business) with third-party aggregators conducting the monitoring on their behalf. OR A rigid vendor solution that is very expensive to change or upgrade or even keep operational. Why are these poorly designed/deployed solutions more susceptible to money laundering activities? To keep up with the changes in payment industry, the AML solutions need to be more dynamic. The challenge, however, is that majority of the tools to identify/stop them (currently) are not as dynamic. These tools are either limited by their aggregators’ services/solution or the time/cost to make the solution relevant to new behaviours. In addition to it, the micro transaction-level alert based focus hinders the investigators from gaining a more holistic view/context surrounding the triggered red-flags, therefore leading to more time being spent on investigation/gathering relevant details or incorrect disposition of red-flags driven by operational KPI’s. Sustainable compliance can be a reality for smaller businesses with the help of the right mindset, processes, and tools. Five considerations for cost-effective anti-money laundering programs Businesses should ask these questions while selecting a solution to their problems once they have the right mindset: How can the solution stay relevant without continuous vendor engagement or a large internal team to support it? Does the solution allow for holistic investigation (reducing time for dispositioning?) Does the solution assist them to keep the ever-increasing operational budget in check (leveraging Machine Learning etc.)? Does the solution remove the need for future upgrades (staying relevant always)? Most importantly, does the solution allow you to improve your risk coverage and at the same time, reduce your total cost of ownership? Oracle Financial Services Anti-Money Laundering Express Edition is a robust AML detection and investigation platform, designed specifically for the needs of small and mid-sized financial institutions. The product enables small and mid-sized financial institutions to stay compliant with regulations and become responsive to threats. Anti-Money Laundering Express Edition enables organizations to effectively monitor customer behaviour, detect suspicious activities, and make business decisions to counter them in real-time. All this while taking care of their business goals and appetite for technology investments.    For more information on Oracle’s Anti-Money Laundering Express Edition please visit our websites at: Oracle Anti-Money Laundering: Homepage Oracle Anti-Money Laundering Express Edition: Webpage Contact us: Email: financialservices_ww@oracle.com            Follow us: Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog By: Amit Malik, Director, Financial Crime and Compliance Management Solutions, Oracle There is a trend of increasing scrutiny on financial crime by regulators across the globe. As a result, most...

Thwarting financial crime in a hyper-connected world!

Blog by: Smruthi Bangera, Principal Product Manager - Marketing, Oracle Financial Services The age of hyper-connected world is here! Not too long back, the financial services industry witnessed a huge transformation with Digitalization and Open Banking as a result of which financial institutions and service providers from across industries came together to create newer business models and ecosystems that worked towards innovation and providing the best customer experience.  While on one side hyper-connectivity worked beautifully to improve the end user experience, on the other hand the bad guys have equally benefited from it. They have leveraged the loop holes within the digital payment transformation system and the payment networks to successfully mask their money laundering and terrorist financing activities. Effectiveness and Efficiency – 2 sides of the same coin Digitalization has caused an exponential increase in the number of financial transactions, as a result of which archaic rule-based systems no longer serve the purpose of catching the bad guys in real-time and ensuring compliance to the AML/CFT regulations. These systems need to be extremely precise in the flags they raise, so that they are “effective” and therefore can reduce the probability of false positives- the biggest pain point hampering the “efficiency” of anti-financial crime departments in banks. Efficiency can improve only when the investigators are able to focus on the real suspicious cases rather than false positives, which in turn can help improve the effectiveness of the anti-financial crime objectives of the institution. Investing in intelligent systems that deploy advanced technologies like AI, RPA, NLP, Machine Learning and Graph Analytics enables institutions to be able to run through huge volumes of incoming transaction data in real-time and fish out “truly” suspicious transactions and augment financial crime investigators with the intelligence to analyze them. In the world of big data, these technologies can empower FIs to achieve much more from their networks. The FIs can leverage their network of internal and third-party systems in a hyper-connected world, to retrieve information about the customer, transaction, related accounts, and beneficiaries, feed the information into innovative analytical models, process and analyze them, and thereby ensure effectiveness and efficiency in their anti-financial crime compliance and investigation efforts. This opens up the possibility for these institutions to be innovative in the multitude of investigative scenarios and checks they might want to apply on data to nip the bud before it is too late, yet ensure superior customer service and keep lights on. Joining the collaboration + innovation bandwagon Regulators across the globe are also increasingly accepting the power of networks and advanced analytics to combat financial crime in the hyper connected world. The USA PATRIOT Act Section 314(b) by FinCEN permits financial institutions to share information with one another in order to identify and report to the federal government activities that may involve money laundering or terrorist activity. Not very long back the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the Agencies) issued a joint statement to encourage banks under the Bank Secrecy Act, to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations, in order to further strengthen the financial system against illicit financial activity. Similarly the Financial Conduct Authority along with global regulators has formed the Global Financial Innovation Network (GFIN) to leverage the power of collaboration to innovate and share best practices both in terms of newer products for customers as well as combat financial crime. Few banks are already leading the path and testing waters to adopt these advanced analytical technologies as well as collaborate with their peers to combat money laundering and terrorist financing. Though quite a lot of them are yet to embark on these projects. Reasons could be one or many – lack of resources and expertise on advanced analytical technologies, internal conflicts or resistance to change, build vs buy decisions, etc. Oracle’s Financial Crime and Compliance Management (FCCM) suite of products have been specifically designed for organizations looking to thwart illicit financial behavior with advanced capabilities to monitor, detect, investigate and report suspected financial crime, as well as fully manage regulatory compliance requirements. Using Oracle’s expertise, financial institutions can centrally assess, streamline and manage associated operational and customer risks with respect to the organization’s end-to-end AML, Fraud, Know Your Customer, Case Management and Trading and Broker compliance programs. These broad functional capabilities are delivered along with state-of-the-art data management and advanced analytics capabilities. Visit Oracle at Booth H101 @SIBOS 2019 to meet our experts and discuss on how we can partner with you in your transformation journey to leverage the power of collaboration and advanced analytical technologies towards combating financial crime in a hyper-connected world! For more information: Website: www.oracle.com/goto/sibos  Email: financialservices_ww@oracle.com           Follow us:        Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog by: Smruthi Bangera, Principal Product Manager - Marketing, Oracle Financial Services The age of hyper-connected world is here! Not too long back, the financial services industry witnessed a huge...

Analytics

Oracle retains 2nd position in Chartis RiskTech100 2019 for the 3rd year running!

Oracle retains its 2nd best risk tech provider position in Chartis RiskTech100® 2019   Oracle won 5 category awards while being ranked 2nd in the Chartis RiskTech100® 2019 for the 3rd consecutive year. Chartis is a leading research and analysis firm that specializes in analyzing the systems, products, vendors, applications and trends in the global risk technology market. RiskTech100® – the most comprehensive independent study of the world’s major players in risk and compliance technology – analyzes and ranks top 100 firms in the risk technology space.  Oracle was ranked leader in following solution categories:   2019 Winner 2019 Runner-up Chartis categories Core Technology Functionality Solution Categories Data integrity & control Balance sheet risk management Risk & finance integration Financial crime – applications Risk data aggregation & reporting Liquidity risk & ALM   RegTech Industry Categories Banking   Oracle has consistently emerged as a category leader across multiple specific solution categories by Chartis across the year. The categories are listed below: IFRS 17 Technology Solutions: Market and Vendor Landscape 2019 Financial Crime Risk Management Systems: AML and Watchlist Monitoring 2019 Artificial Intelligence in Financial Services, 2019: Market and Vendor Landscape Financial Crime Risk Management Systems: Enterprise Fraud 2018 CECL Technology Solutions 2018 Technology Solutions for Credit Risk 2.0 2018 Balance Sheet Management Technology 2018 Data Integrity and Control in Financial Services - Market Update 2018 Not far behind Oracle has also been featured as a best of breed solution in the following categories. Risk as a Service for the Buy-Side 2018 Financial Crime Risk Management Systems: Know Your Customer 2018 The wins revealed the strength of Oracle’s technology with the OFSAA portfolio of applications and continued commitment towards providing world class solutions in the risk technology space. To read more about our solutions for banking industry please visit oracle.com/financialservices Blog by: Smruthi Bangera, Principal Product Manager - Marketing, Oracle Financial Services

Oracle retains its 2nd best risk tech provider position in Chartis RiskTech100® 2019   Oracle won 5 category awards while being ranked 2nd in the Chartis RiskTech100® 2019 for the 3rd consecutive year....

Banking

Could Latency Determine your Bank’s Rating

Blog Authored by Shriyanka Hore, Director Product Strategy, Oracle As the global financial industry moves towards real-time payments, banks will lose their relevance unless they can meet customers’ need for speed. Almost all major financial markets have taken steps to make real-time payments the default for both consumer and corporate customers, driven by new legislations like SEPA Instant in the Eurozone and the New Payments Platform (NPP) in Australia. According to Forrester’s latest findings, 90% of banks worldwide are building payments APIs with the explicit goal of improving visibility and agility – responding to demand for ever faster, more convenient payments. Some reports suggest that more than 1 in 2 corporate banking clients will choose their principal bank based on which institution provides real-time payments that match the speed of business. As real-time becomes the default for payments processing, banks will find it increasingly difficult to justify fees or premiums for offering such capabilities. Soon, banks could even be ranked or rated according to their speed of payments handling – something made increasingly possible and transparent with new industrial standards like SWIFT GPI. Corporate banking clients today expect the same speed of transaction that they experience as consumers, if not faster. They demand immediate, real-time access to funds and instantaneous responsiveness as part of how they gain and maintain a competitive edge. Banks need to go beyond traditional batch processing and embrace automated, even AI-enabled models if they want to survive these pressures from customers. Staying secure, at speed The challenge, for many banks, will be this: how can they maintain the fidelity of their business offerings at increasingly taxing speeds? Maintaining compliance and good governance of corporate transactions already poses a sizable challenge; how much more so when dealing with a much higher volume of payments at steadily rising velocity? Forrester’s research suggests that 75% of banks worldwide see lengthy compliance and risk evaluations as the primary barrier to payments transformation, even more than those struggling with legacy infrastructure and processes (70%). To break the speed barrier, and maintain or even augment their reputation amongst customers, banks will need to accelerate not only payments but the way in which they secure and govern them. Automation may be the key to doing so. Banks which automate their payments processes stand to reduce handling time by up to 40%, even as they radically improve the accuracy of those payments. By automating similarly repetitive processes such as Know Your Customer (KYC) or anti-money laundering checks, banks could significantly speed up their compliance routines – to the point of delivering real-time compliance that matches the ever-increasing speed of payments themselves. Applying analytics to their growing wealth of compliance and regulatory data could also help banks profile customer risk and flag suspicious transactions with much greater precision – simplifying the payments value chain and driving up operational efficiencies in a way that supports, if not enables, far broader digital transformation. At the same time, banks would do well to centralize their payments handling. At present, many banks still operate multiple concurrent payments systems in siloed models where cross-system integration is rare. Bridging those silos, and drawing all payments handling under a single hub, should eliminate those duplicate processes while also consolidating all payments data in a single place – making it much easier to develop new APIs, gateways, or other services based on analysis of that data and customers’ underlying needs. Some real-time payments standards, like Australia’s NPP, already demand higher levels of real-time service integration beyond just payments themselves. Banks would do well to shift gears ahead of regulation and centralize their systems to lay those solid foundations for further innovation and platform-building. Ultimately, banks will only thrive if they can continue increasing the speed of payments as part of broader improvements to customer service. Adopting real-time payments is just the start: banks must fundamentally streamline their compliance, security, and even data sharing processes if they are to match the speed at which their customers seek to operate. What opportunities do you see for banks to turn customers’ need for speed into a competitive advantage? Join us at SIBOS 2019 to learn more about what it means to deliver lightning-fast payments and how to meet customers’ need for speed. www.oracle.com/goto/sibos For more information: Website: www.oracle.com/corporate-banking Email: financialservices_ww@oracle.com           Follow us:        Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog Authored by Shriyanka Hore, Director Product Strategy, Oracle As the global financial industry moves towards real-time payments, banks will lose their relevance unless they can meet customers’ need...

Banking

Pricing and Billing in the Cloud: Putting it into practice

Blog Authored by Akshaya Kapoor, Senior Director, Product Strategy, Oracle Cloud pricing and billing has come a long way in the last few years and has gradually over time evolved from a disruptive innovation to a pervasive reality. We are beginning to see many financial institutions thinking about it, experimenting with it, and are gaining a deeper understanding of how it is shaping up to be a major paradigm shift in revenue management. Why this is happening now: The shift to recurring subscription revenue models and increased customer demand for customized pricing and billing options are all converging to set the stage for this opportunity. To focus on recurring customer relationships, the very foundation from which an enterprise operates, not only needs to be re-established but also needs to be “modernized”. Pricing and billing in the cloud-catchphrase or practical approach? Historically pricing and billing application implementations have been lengthy, costly, and to some extent unpredictable, with extensive customizations and expensive consulting engagements. The cloud changes everything. Pricing and billing in the cloud, gives you all benefits that a cloud solution promises - faster deployment, high availability, quick scalability and business agility. We are beginning to see many financial institutions thinking about it, experimenting with it, and are gaining a deeper understanding of how it is shaping up to be a major paradigm shift in revenue management. The advantages are clear: Is transitioning pricing and billing to the cloud only about cost optimization?  For many business leaders, the phrase “cloud transformation” is synonymous with “cost savings”, and that’s understandable. A recent analysis, found cloud application projects deliver 3.2 times the ROI of on-premise ones. Suffice to say, that’s a staggering number. Beyond cost savings, the benefits that come with pricing and billing cloud adoption are profound. Enterprises can: Make more-precise and more-profitable pricing decisions with built-in analytics: Today’s cloud pricing and billing applications have built-in analytics that help financial institutions monitor and act on key events during the customer life cycle Improve customer relationships by providing customers with timely, accurate, and transparent pricing and invoicing. Cloud pricing and billing eliminates manual processing and nonvalue work, thereby reducing the likelihood of errors and saving time  Gain real-time insight into revenue and profit margin estimates. By using cloud-based pricing and billing, CFOs and line-level managers can analyze up-to-the-minute financial situation and performance obligations, allowing for better-informed, strategic decision making Cloud based pricing and billing can be easily tailored to fit the exact needs, compared to the ‘one size fits all’ design of on-premise systems. In the cloud, financial institutions can change processes, rules and other conditions easily and rapidly Offer personalization with innovative, flexible pricing and billing: Intelligent billing and charging models that are reflective of consumption behavior Strategic values to exploit: Take the case of a top consumer and wholesale bank. Once it’s pricing and billing is on the Cloud the bank discovers these value additions: Using a pre-configured application, the bank gets off the ground quickly. It takes just six months to go into operation and helps the bank take services to existing and new markets that much faster There are fewer disruptions as upgrades are delivered regularly and automatically, which means near zero downtime It has the freedom to scale up and down as needed - and fast, making it easier to  quickly pilot new services on a limited scale - and progressively scale to millions of transactions as necessary, thereby accelerating innovation With many compliance and security measures baked-into the cloud, the bank no longer needs to maintain internal extensive security systems nor does the bank have to spend time and effort on compliance procedures The bank has expanded its operations internationally and quickly conquered new markets with built-in localizations that address local business requirements With seamless sharing of enterprise information and direct integration between other cloud-based and on-premise source systems, the bank has been able to reduce inefficiency caused by siloed systems. The bank has also gained a single source of truth that cascades all operational functions and is able to make business decisions more accurately and quickly Financial institutions that embrace cloud pricing and billing today are more likely to see a greater payoff tomorrow. By moving pricing and billing to the cloud, financial institutions can achieve a sustainable competitive advantage by transforming how they operate internally and how they deliver value to customers. See how Oracle can help you create Tomorrow’s Pricing and Billing, Today at www.oracle.com/goto/sibos For more information: Website: www.oracle.com/corporate-banking Email: financialservices_ww@oracle.com           Follow us:        Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

Blog Authored by Akshaya Kapoor, Senior Director, Product Strategy, Oracle Cloud pricing and billing has come a long way in the last few years and has gradually over time evolved from a disruptive...

Big doesn’t have to mean slow, for Open Banking

Blog Authored by Shriyanka Hore, Director Product Strategy, Oracle Do smaller, nimbler fintechs have an inherent advantage over traditional financial institutions when it comes to open banking? It may certainly seem so, but that may not be the case. In fact, expertise that larger banks bring to bear – particularly in the areas of B2B transactions and corporate banking – may give them the critical mass to develop much broader, deeper offerings, and even establish themselves as platforms of choice in the open banking ecosystem. But they will need to accelerate their adoption of more open data standards if they want to build the necessary momentum and avoid ending up at the back of the race for customers’ loyalty and attention. Bigger isn’t better…or is it? The scale of traditional banks has often been held up as a roadblock to their adoption of open banking – and it’s true that smaller financial institutions and fintechs can typically adjust their infrastructure and processes much faster than their larger competitors. But traditional banks have something which these smaller players often struggle to achieve: breadth and depth of service offerings, especially in B2B and corporate disciplines which require more specialized knowledge or technical mastery. Couple this with the faster, more streamlined data sharing of open banking standards, and traditional banks find themselves with an opportunity to own a much more comprehensive swathe of the banking services pool than fintechs or smaller institutions – who typically focus on just one core offering – may ever be able to. As banks expand their services and grow transaction volumes, they also gain more and more data to then offer to other service providers in the open banking environment. That has the potential to create a virtuous cycle which eventually establishes the bank as a platform-of-choice – both for businesses looking for a seamless, fully-integrated corporate banking experience, and other providers looking to gain new customers or enter new markets. In an open banking environment, platform providers hold a significant and defensible advantage, and the critical mass of traditional banks – both in providing core services like payments and cross-border transactions, as well as strategic value-adds like Know Your Customer (KYC) and anti-fraud protection – puts them in good stead to take up that position. Riding the regulatory wave To take advantage of these opportunities, however, traditional banks will need to adopt as proactive a stance as possible towards open banking – particularly when faced with its rising tide of regulation. New standards and directives like PSD2, for example, can be treated as impetus for innovation in how banks connect, cross-sell, and integrate products varying from faster payments to cross-bank handling of cash management. Banks which can develop the solutions and platforms for these new open services – like multi-bank cash management solutions for SMEs – stand to generate tens of millions of dollars in additional revenue. For large banks to claim their advantage over smaller competitors, they will need to view these new directives – and open banking more generally – as a matter of customer experience rather than forced adaptation. The movement away from closed-off, proprietary services into open APIs, the forging of new partnerships in the cloud: all these should ultimately be guided by what the bank’s customers want and need, and how the data from those customers might be used to further improve that experience across the entire financial services ecosystem. Banks who move first will gain a valuable head-start on the race to become platforms-of-choice: Citi’s proactive move to enroll with the UK’s Open Banking Directory sends a clear message that it, and its data are literally open for business – and committed to delivering as streamlined and cohesive a banking experience for their customers as possible. Banks must stay at the front edge of the regulation wave, whether by adopting new core systems or preparing their data for third-party use, if they want their size to be a source of momentum instead of slowing them down. Join us at SIBOS 2019 to learn more about what open banking means for today’s financial institutions and how to turn impending regulation into a catalyst for change.www.oracle.com/goto/sibos 

Blog Authored by Shriyanka Hore, Director Product Strategy, Oracle Do smaller, nimbler fintechs have an inherent advantage over traditional financial institutions when it comes to open banking? It may...

Banking

Oracle a Leader in 2019 Gartner Magic Quadrant for Global Retail Banking

Oracle is excited to be named a “Leader” in the Gartner Magic Quadrant for Global Retail Core Banking Report, for the second year in a row. Gartner notes that “Core banking market demand keeps surging, underpinned by digital banking transformation, with an increased focus on commercial off-the-shelf packages, public cloud and open banking initiatives.”   Quadrant Descriptions: Leader  “Leaders in the global retail core banking market tend to possess a high-order market understanding that helps in lead generation and ultimately in achieving more sales. In addition, they make it their business to monitor market trends and funnel progressive innovation into their product roadmaps. Most of them possess software development quality certifications (such as Capability Maturity Model Integration [CMMI]) or are pursuing them. The Leaders are also, without exception, “thinking small” or targeting component-based architecture as a gateway to providing increased accessibility to the granular functionality that banks need to drive the basis for differentiation. Leaders have high viability and great customer feedback, even though lately the increase in the number of sales has brought challenges in supporting customers at high standards. Leaders also focus on innovation — and the innovation trends that affect this particular market. They especially focus on trends with visionary capability in managing the ecosystem for open banking platforms by fostering open banking with their products and services in a collaborative environment with their ecosystem partners. They also leverage the cloud opportunity by gradually making their product more cloud-friendly with “APIfication” of the components and by introducing cloud-native components.” Oracle’s FLEXCUBE is a complete retail banking product suite for consumer, corporate, investment, private wealth management, mobile and internet banking, consumer lending, asset management, and investor servicing, including local and cross-border payments across channels and networks.  To view the full report, click here For more information on Oracle’s FLEXCUBE please visit our website at: https://www.oracle.com/industries/financial-services/       financialservices_ww@oracle.com          Follow us: Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs Attribution: Gartner, Magic Quadrant for Global Retail Core Banking, Don Free, Vittorio D’Orazio, 22 July 2019 Disclaimer: Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a purpose.

Oracle is excited to be named a “Leader” in the Gartner Magic Quadrant for Global Retail Core Banking Report, for the second year in a row. Gartner notes that “Core banking market demand keeps...

Banking

KeyBank wins Celent Model Bank 2019 Award for its Digital Platform Transformation with Oracle

We are exhilarated that one of our Customers – KeyBank, wins Celent Model Bank 2019 Award for Digital Platform Transformation. Redefining Customer Experience, from the Client Perspective KeyBank is a leading super-regional retail bank in the United States, with US$138 billion in total assets as of December 31, 2018. It is the first super-regional bank to complete an IT transformation project of such scale. KeyBank completed the transformation while integrating its acquisition of First Niagara Financial Group (FNFG) into its operations and systems. The project, Digital 17, had the goal of accelerating KeyBank’s journey to become a fully digital bank across four significant transformational aspects.(Figure 1) Figure 1: 4 Major Transformational Aspects of KeyBank’s Digital 17 project. KeyBank adopted an agile delivery approach fueled by DevOps automation tools. The tools enabled them to deliver the system change rapidly during the project as well as when the project went live. With this technology adoption, KeyBank redesigned its Retail Banking user interface to be digital-centric, bringing an overall improvement in their customer experience. Impact of the Digital Transformation The transformation saw a 17% increase in the number of digitally active Customers for KeyBank. Their Net Promoter score also improved 15% year over year. Notably, KeyBank’s app store rating jumping from 2.5 to 4.5, an all-time high for the bank. KeyBank also saw its new banking product rollout time reduced from 9 months average to a monthly basis. Their Internet and native mobile apps also share 80% of their code base, reducing maintenance costs and code deployment time. Further details of the transformation impact in Figure 2.  Figure 2: Summary of Key Impact, KeyBank’s Digital Transformation. The Celent Model Bank awards are given for Best Practices of technology usage in different areas critical to the success of a bank. Banks judged on the three main evaluation criteria of Demonstrable Business Benefits, Degree of Innovation, and Technology / Implementation excellence. KeyBank won the award for Digital Platform Transformation due to the significant improvement in its retail banking client experience, its IT cost savings and the technological flexibility achieved. Technology-enabled KeyBank’s growth, facilitating its integration with First Niagara Financial Group. Celent assessed this as a critical core competency for US super-regional banks. Find out more about KeyBank’s Digital Journey   Keybank Case Study Redefining the digital client experience, Winner of Celent Model Bank 2019 Award for Digital Platform Transformation: Download Now             Video KeyBank’s transformation journey | Amy Brady, Chief Information Officer, Executive Vice President, KeyBank: Watch Now   For more information: Website: www.oracle.com/banking                                             Email: financialservices_ww@oracle.com           Follow us:        Linkedin: https://www.linkedin.com/showcase/oraclefs/ Twitter: https://www.twitter.com/oraclefs

We are exhilarated that one of our Customers – KeyBank, wins Celent Model Bank 2019 Award for Digital Platform Transformation. Redefining Customer Experience, from the Client Perspective KeyBank is a...

Banking

Banking as a Service: Financial Innovation Is Finally Coming to Corporate Treasury

Blog By: Sanjay Mathew, Sr. Director, Financial Services Industry Solutions Consumers have come to expect a high level of technological prowess from their banks: innovative products, tight integration with popular web services, powerful mobile apps, and real-time transaction processing. But until recently, the enterprise corporate treasurer and payments groups have been left to deal with outdated portals, file transfers, batch payment processing, and a lack of transparency into transaction status. Now, however, corporate customers are demanding the same kind of customer experience they’ve come to expect as consumers. The banks that succeed in delivering this improved experience will be rewarded with greater market share and increased revenue. Those that fail to deliver innovation quickly will find themselves falling behind. The rise of banking as a service (BaaS), supported by open banking API standards, has given commercial banking the boost needed to improve the customer experience, develop new business models, and compete/collaborate with their fintech challengers/enablers. Banks that deliver these services also benefit from lowering onboarding costs and delivering a much simpler and rapid onboarding process for their clients. Corporate Customers Have Become More Demanding The key driver when it comes to the evolution of commercial banking is that corporate customers’ expectations are based not on their experiences with commercial banks at all, but on their experiences as consumers. For years, online retailers have set the standard for an easy, intuitive experience at every step of the shopping experience, and commercial banks must provide the same level of user experience to their corporate banking products. Corporate clients are used to the end-to-end visibility that ERP software provides them across functional silos such as finance, procurement and supply chain management, and they want their banks to integrate seamlessly within that ecosystem, sharing data to prevent inaccuracy and improve process efficiency. They don’t want to duplicate efforts by logging in multiple times to a bank’s portal to complete a payment or check the status of transactions. More importantly they expect their user experience to be as seamless and consistent as their existing ERP systems.  Information that is available from banks, whether it is payment status, cash information, future cash flow projections, etc. should be made available seamlessly and right within their existing systems of record. Innovate or Go Home The changing technology landscape, including the rise of artificial intelligence (AI), machine learning (ML), and blockchain, is driving new business models that can help banks innovate to meet and even exceed their corporate customers’ expectations. BaaS unbundles individual banking services including payment processing, treasury management, and working capital financing, and embeds them where the customer is, such as a corporate ERP system. BaaS is driven by open banking, which enables third parties or the banks customers or partners to safely and securely access accounts (with customer consent) to gather transaction data or initiate transactions on the customer’s behalf. In this ecosystem, the bank connects to third parties via an open application programming interface (API) for each service it offers using the banking as service layer At a high level, BaaS for Corporate Banking consists of 3 layers that must function together: The bank’s APIs exposed as a service on the Banking As Service Layer/Portal. This layer should be connected to the underlying core systems of the bank and expose key bank services such as payments, payments tracking, liquidity services etc for the corporate bank to easily consume and embed into their applications. This allows the banks, fintech partners and others to seamlessly extend the banks services and create rich new user experiences. The ERP /Treasury applications that can be extended to provide a seamless banking experience fully integrated and authenticated within the bank The secure API connect cloud layer that connects the bank’s system to the ERP ensuring data exchange is completely secure, obfuscated and meets bank security and compliance standards Oracle’s recently announced partnership with Citi is an early example of how BaaS can work. Citi will use Oracle ERP Banking-as-a-Service Connector, which integrates into the Citi Treasury & Trade Solutions (TTS) via Citi’s own Banking APIs. That connectivity allows corporate finance organizations to initiate payments and gain better visibility into transaction and real time balance statuses from within the Oracle ERP platform, which supports the sending of payment information directly to Citi. Oracle’s payment solution enables banks to unify payment processing, engage in real-time global transactions, prevent fraud, and ensure faster time-to-market for payment services. Increased transaction velocity also means greater return on the bank’s per-transaction revenue.  The Connector provides joint customers with a fast, efficient financial supply chain, from the transaction through to payment, eliminating friction and enabling enterprises to seamlessly complete transactions. Citi and Oracle’s collaboration uses the CitiConnect API Suite and the Oracle Open Banking Platform together to make it a better and faster experience for our clients to connect to Citi via the Oracle ERP cloud. This partnership has achieved in 12 weeks what would typically take a client to develop in 12 months.  Take a look at the video below for details about this solution: The potential of BaaS goes way beyond payment processing, however. In the BaaS model, banks leverage APIs to create an integrated financial ecosystem of corporations, fintechs services, and other banks. This enables all parties to undertake faster transactions while the bank retains control of key financial aspects of its corporate customer’s business. Thanks to this connectivity, banks can get real-time insights into company global liquidity and underlying global account structures previously unavailable. They can offer customized liquidity solutions and intelligent client recommendations that, for example, automatically transfer excess working capital into and out of high-yield instruments or lines of credit as necessary. In addition, banks can leverage emerging technologies such as AI, ML, IOT and blockchain to offer continuous innovation and new revenue streams. For instance, a bank could use AI for forecasts to recommend financing or investment products based on the corporate customer’s financial position. This approach enables banking solutions to be delivered as a service, allowing clients to access banking and treasury services from the same systems they use for daily business transactions instead of disparate banking platforms. Oracle’s Digital Innovation Platform for Open Banking offers financial institutions a secure, scalable, enterprise-grade platform with a holistic set of banking APIs. This approach allows banks to reduce the cost of integrating new fintech innovations or delivering their own, while improving the customer experience and enabling new business models. To learn more about Oracle Innovation Platform for Open Banking, visit: www.oracle.com/industries/financial-services/digital-innovation-platform.html      

Blog By: Sanjay Mathew, Sr. Director, Financial Services Industry Solutions Consumers have come to expect a high level of technological prowess from their banks: innovative products, tight...

Financial Crime and AML Compliance

Oracle joins FCA's Global AML & Financial Crime TechSprint to develop solutions for Fighting Financial Crime.

Oracle part of "Team Citadel" which won first place in the TechSprint  "It takes a network to defeat a network."   One of the key themes that emerged from the United Kingdom Financial Conduct Authority's 2019 AML & Financial Crime TechSprint was the importance of data and knowledge sharing amongst relevant bodies in identifying and impeding complex criminal networks.  Ten cross-industry teams, with more than 100 participants, competed in this year's event, as well as c-suite executives, professional bodies (such as FATF) global regulators, law enforcement representative and academics who attended the final presentations and competition judgment.   Members of Team Oracle (Oracle Research Labs – represented by Iraklis Psaroudakis, Sabrina Senna, and remotely assisted by Miroslav Cepek and Riva Nathans, and Financial Crime and Compliance Management, represented by Matthew Long) collaborated with Westpac, Citi, Privitar, DataRobot, Bureau van Dijk, the Financial Conduct Authority (FCA) and Companies House as "Team Citadel" and emerge as winners in this year's highly competitive event. The Team Citadel prototype solution was developed to help address the pending statutory 5th Anti Money Laundering Directive ("5AMLD") requirements associated with UBO reporting and data discrepancies between Financial Institutions and Companies House and to help reconcile those discrepancies without breaching privacy legislation and data protection. Besides, this solution was also submitted for consideration as part of the consultation to enhance the role of Companies House and increase the transparency of UK corporate entities and help combat economic crime. The Citadel team was able to provide valuable insights into the synthetic data supplied during the TechSprint, such as identifying and highlighting missing or inconsistent Company and UBO data held by Companies House and the Banks used in this exercise. Oracle's main Team Citadel focus was on using #graphtechnology #PGX to create the golden networked source of UBO data, post encryption and to carry out some examples of graph query pattern matching (such as finding and visualising the "neighbourhood" of the UBO(s) with connections to the most companies), graph analytics algorithms (such as Pagerank) and network visualization. Oracle was also one of only five technology solution providers invited by the Regulators to participate in the supporting AML Techfair event, which was an opportunity to discuss and present our innovative Anti-Financial Crime Solutions to attendees. The session focus was on the usage of AI/Machine powered solutions to uplift investigations and the potential to facilitate information sharing. Matthew Long, Director, Financial Crime & Compliance Solution Consulting, who was part of Team Citadel and represented Oracle at the AML TechFair noted,  "An underlying theme of the TechSprint was, "it takes a network to catch a network," and the FCA certainly helped create that environment with this event. The complex cross-jurisdictional problems facing the financial industry today can only continue to benefit from cross-organization support, collaboration, and sharing. This was a genuinely well organized, inspiring event and at times an emotional reinforcement, if we needed it, that partnership and collaboration is the only way forward in the ongoing fight against financial crime. Iraklis Psaroudakis, Principal Member of Technical Staff, Oracle Labs, who was part of Team Citadel noted,  "The TechSprint is an incredible event that brings together great minds across multiple organizations and fields to help tackle some of the financial world's most complex data and financial crime problems. It was a great honor and experience to be a part of the Citadel team." More About FCA's TechSprint  To help address this global challenge, this year's Global AML and Financial Crime TechSprint (run between 29 July - 2 Aug), explored the potential for Privacy Enhancing Technologies (PETs) such as homomorphic encryption, zero-knowledge proof, secure multi-party computation, etc. to improve the ability of financial institutions, regulators and law enforcement to share information that will assist in the detection and prevention of money laundering and financial crime while remaining compliant with data protection and privacy legislation.

Oracle part of "Team Citadel" which won first place in the TechSprint  "It takes a network to defeat a network."   One of the key themes that emerged from the United Kingdom Financial Conduct...

Banking

4 Critical Factors Shaping the Banking Future in Asia Pacific

Blog By: Venky Srinivasan, Group Vice President-Sales, Asia Pacific, Japan, Middle East & Africa Oracle Financial Services Asia has become the global banking industry’s epicenter for growth and change. Already some 43% of global banking profits now originate from the Asia Pacific region. By 2021, Asia will generate the largest share of retail banking revenue in the world – driven by a combination of critical mass in China and India, sector maturity in Japan and Australia, and acceleration of growth in emerging markets like Indonesia, Thailand, and the Philippines. Asia’s diversity of services and issues around the region range from the disruptive impact of firms like Ant Financial – originating loans in seconds – to how digital services are filling huge gaps in financial inclusion in emerging markets like Indonesia. The pressure to embrace mobile and digital services, for example, is incredibly high: today, up to 75% of customers demand digital banking in some markets. Virtual banks appear all but guaranteed to shake up markets in Singapore, Hong Kong, Taiwan and Malaysia; Traditional players are also beginning to establish digital banks in developing markets like Cambodia and Thailand.  These firms assert their competitive edge through lower operating costs (running with little to no legacy infrastructure), higher agility, and ostensibly more efficient customer service. However, Asia’s heterogeneity of operating conditions – from high regulation in Australia to the Big Tech-driven free-for-all in China – means that these states of banking are not necessarily the only ways to achieve a decisive and lasting advantage. Different markets, and indeed different banks with varying levels of history and loyalty, will require varying approaches to succeed. Here are four critical factors shaping the banking future that I have identified over the course of our work in the region: “Customer-led” Retail Banking: These banks have inverted their traditional “Product-Out” approach, using their vast stores of data to develop and hyper-personalize products for the consumer. Moreover, the bank no longer limits itself to meeting purely financial needs, but act as a platform to help consumers achieve their dreams and life goals. HDFC Bank in India, for example, now uses our digital core banking platform to offer services such as digital consumer-durable loans and digital loans against non-conventional collaterals like securities and mutual funds. Smaller banks in Asia who can establish themselves as platforms for themselves and partners to provide these “dream creation” services are likely to see rapid growth and customer acquisition. Digital Corporate Banking: These banks extend digital transformation out of back-room operations and into the front-end of B2B banking, using data to maximize clients’ profitability and reduce their risks. We see, for example, that credit lines often take more than 3 months for origination, with 70% of customers in Asia being over- or under-funded due to incomplete credit analyses. Digitizing the corporate credit and lending process allows for the introduction of AI, machine learning, and analytics technologies that can radically improve the speed and accuracy of lending – enhancing customers’ experience of the bank while mitigating bottom-line capital risks for both parties. The same approach can apply across a range of customer-facing corporate banking functions from supply chain financing through to trade services. Protected and Compliant Banking: With financial crime impacting 1 in 2 Asian banks in some way, and some of the world’s most sophisticated criminal networks calling Asia home, the region stands to benefit significantly from a more aggressive, data-led approach to illicit financial activity. These banks seize the opportunity to go beyond just ensuring their own compliance, and apply AML technologies to curtail criminal flows of capital that threaten customers and their communities. Technologies like graph analytics and machine learning, applied to histories of transactional data, can help these banks discover patterns of transaction and behavior that even regulators or litigators may not. That empowers them to play an active role in investigating and prosecuting financial crimes that put not only them but their customers at risk.  High-Performance & Resilient Banking: To maximize their market share and reduce churn, high-performance banks will deploy analytics, AI, and other data-driven tools to optimize on capital allocation, mitigate risks, and maximize long-term profitability. From our latest APAC-wide research on using data to drive business insights, some 66% of global banking executives consider aligning data charting financial performance data and risk very important or critical to success. The research shows clearly that banks need to adapt in a much more agile and reliable manner to changing market, regulatory, and competitive conditions. In the long term, that means both greater returns and loyalty from customers who see their wealth not only protected but consistently grown in even high-volatility environments. There is no definitive “end-state” for Asia’s banks More likely than not, Asia’s banks will progress through several, if not all, of these critical states at different points in their journey to greater customer traction and market share. Each of these states focuses less on technology than it does a specific outcome that the bank might hope to achieve – for itself, and its customers. None of these states constitutes an “end” in itself, but rather a potential vision of the bank at different stages in its journey of ongoing adaptation. Download and read the Oracle Whitepaper on Digital Banking: Evaluating Paths for Progressive Transformation One thing remains constant, however: the time to act is indeed now. From our work with more than 200 leading banks in Asia, we find that irrespective of market the most successful banking transitions take place via a series of measured step-changes, rather than a “big bang” approach to digital transformation. A winning strategy takes constant recalibration and adaptation. The more clearly banks can define how they hope to look in the future, the easier they will move between different states of banking to get there. Connect me at https://www.linkedin.com/in/venkys1/ For more information: www.oracle.com/financialservices financialservices_ww@oracle.com  

Blog By: Venky Srinivasan, Group Vice President-Sales, Asia Pacific, Japan, Middle East & Africa Oracle Financial Services Asia has become the global banking industry’s epicenter for growth and change. A...

Banking

The New World of Virtual Banks: Profitable Growth will Define Success

Blog by: Sharon Tan, Head of Marketing – Financial Services - Asia Pacific & Japan Progressive regulation is creating open and collaborative ecosystems with both banks and customers moving up the technology maturity scale. With customer sentiment ripe for a new way of banking, virtual banks need to grow at scale, leveraging open, cloud-based platforms. While a perfect storm supporting the growth of virtual banks is brewing, success is not guaranteed unless new banks are able to transform into a data-driven, high-performance and profitable organization. Exceeding Your Customer’s Expectations Consistently and Across the Financial Lifecycle Virtual banks globally have done well in the on-boarding process but must prove themselves across the financial lifecycle as they expand into more complex product areas such as SME Banking, Mortgages, and Business Banking. A global survey conducted by Oracle showed that existing customers of traditional incumbent banks are ready for churn not at the beginning of the lifecycle but when more complexity appears in the relationship.  This is where the rubber meets the road. Virtual banks need to have a nimble, friction-free approach across processes, and an ability to act on customer data insights to elevate the overall service experience.   3 Critical Aspects of Running a Virtual Bank Using Data as a Core Asset Across the Business Virtual banks can leverage data insights via agile technology stacks to offer the customer unique personalization. To grow market share and reduce churn, it is critical to implement an analytical architecture and automate using artificial intelligence and machine learning. To ensure long-term profitability, data-driven tools should be used to optimize on capital allocation, customer data management and to mitigate risks. Enable the Strategic Role of CFOs & Customer-facing Teams CFOs have increased responsibility for providing data-driven business enablement: 40% of banking CFOs say they need to provide proactive analysis of future business scenarios. Also, 66% of global banking executives consider aligning financial performance and risk data very important or critical to success.  A common analytics platform helps give a real-time picture of a bank’s business and aligns finance, risk and performance management strategies under the same data-decisioning engine and platform.  Enable Regulatory & Finance Crime Compliance Anti-Money Laundering (AML) technologies like graph analytics and machine learning, applied to histories of transactional data, can help virtual banks curtail criminal flows of capital that put their customers at risk. With the ever increasingly complex business and regulatory landscape, virtual banks need to make use of Know Your Customer (KYC), risk or compliance data associated with running a new bank to gain business insight.  Drive Ecosystems Partnerships The ability to tie up options for eCommerce, transport, lifestyle and payment all in one seamless digital banking experience is critical. Oracle is enabling virtual banks to jumpstart such initiatives with more than 1600 ready to deploy Oracle Banking APIs. Virtual banks can scale and react with speed and agility to incorporate new products and processes onto their platform and easily connect with third-party products — offering more choices to the end user.  The new wave of virtual banks will need to journey through different stages of ongoing adaptation in the bid for growth and profitability, greater customer traction and market share.  Oracle is assisting banks in redesigning the customer journey - right from the API strategy, front-end customer-facing applications to the back-end rails of modern and digital core platforms. The result is better digital services that boost customer value and understanding their needs more deeply across the financial lifecycle.  For more information, pls contact us at: financialservices_ww@oracle.com  

Blog by: Sharon Tan, Head of Marketing – Financial Services - Asia Pacific & Japan Progressive regulation is creating open and collaborative ecosystems with both banks and customers moving up the...

Financial Crime and AML Compliance

Water flows where it’s easiest - Small to medium sized institutions and tackling the AML challenge

Blog By: Matthew Long, Director, Financial Crime & Compliance Management Solution Consulting, Oracle Financial Services For the majority of small to medium sized institutions, money laundering and financial criminality may seem like an issue confined to the news – something that only happens to global players operating high risk products, in higher risk countries. However, the reality is that smaller institutions may now be more at risk of being caught up in money laundering schemes and financial crime activity than their larger counterparts. The risk to smaller institutions was raised recently by the head of the Danish Financial Supervisory Authority, Jesper Berg, who claimed that smaller institutions should be preparing for assault by money launderers as the larger banks are reacting to intense regulatory scrutiny and improving their defences following a series of (ongoing) high profile AML scandals.  A theme echoed in many global jurisdictions. Berg also noted that, “historically they (small lenders) had to worry when somebody came to them with a suitcase and wanted money….. Now they have to worry when somebody comes with a suitcase of money….. What’s changed now is that clearly the bigger banks have upped the(ir) game, and water flows where it’s easiest.” Lack of local resources and centralisation to blame? From a regulatory perspective, whilst the global AML and KYC requirements are similar, many smaller domestic banks or subsidiaries of larger foreign organisations don’t always have the technical infrastructure, sufficient pool of specialist resources or efficient compliance processes, policies and systems in place to be fully compliant and operationally efficient in the jurisdictions in which they operate. For example, the vulnerability to money laundering in smaller institutions was noted by Alison Barker, Director of Specialist Supervision for the UK Financial Conduct Authority (FCA), who stated that, improvements in money laundering systems and controls and an ability to monitor customers, complete  enhanced due diligence and transaction monitoring had been noted for the “largest, most risky institutions.” However, the FCA added that the smaller foreign subsidiaries in the UK in particular had shown fewer improvements, despite enforcements. Similar findings are also evident in other jurisdictions, including in the US, where the federal depository institutions regulators and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN)  issued a statement highlighting instances in which certain banks and credit unions may decide to enter into collaborative arrangements to share resources such as staff, technology, or other resources. This initiative, according to the statement, is designed to increase operational efficiencies, reduce costs, and leverage specialized expertise in order to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively. Overcoming common AML/CTF challenges for smaller institutions Whilst collaboration and sharing will be key in the long fight against financial crime, more short term steps can be taken by institutions that will provide a more immediate impact. Our experience in evaluating and supporting financial crime and compliance management technology frameworks, of all sizes, has highlighted a number of common (if somewhat obvious) shared challenges that should be addressed to help mitigate the AML risks for small to medium sized institutions. Below are just couple: Policy and procedure assessment – foreign subsidiaries For foreign subsidiaries, very often the AML/CTF policies and procedures tend to be enterprise level and largely a derivative on the requirements of the home country. Whilst in principle there are many benefits from centralised governance/monitoring perspective, the localised version needs to be assessed carefully and reviewed regularly to ensure they fully align with the nuances and specificities of the host country requirements. In particular, the host country policy should ensure that there is sufficient independence for the locally responsible teams to be adequately resourced and equipped in order to meet their obligations. (Cost)Effective and efficient behaviour detection and investigation systems AML systems for foreign subsidiaries, particularly transaction monitoring applications, have a tendency to be dependent on enterprise level investments, which also offers many benefits from a cost, governance and monitoring consistency perspective. However, these systems should be carefully assessed to ensure that they are fully adapted to meet the current and pending local AML requirements, such as the pending European 5th and 6th AML Directives, in addition to producing manageable volumes of work for the operational teams supporting it on the ground or in an outsourced environment. Generic monitoring or unchanged processes that are tailored for another jurisdiction may rapidly lead to enforcements in the current climate should breaches occur. For domestic institutions, the systems challenge is somewhat different, as many firms are battling operational challenges coming from legacy, rules-based transaction monitoring and KYC systems that are difficult to adapt or amend to meet new legal requirements due to previous heavy customisation or just a sheer lack of transparency as any system change is heavily dependent on the vendor, consultants or an overly burdened IT team. As such, both smaller domestic institutions and foreign subsidiaries, organisations should be actively assessing the capabilities of their transaction monitoring and investigative capabilities, asking the following questions: How easily can I segment my customer base and apply appropriate thresholds in line with my policy and risk appetite? How can I create new or apply out of the box AML/CTF behavioural scenarios without vendor/consultant involvement? How do I ensure they map against the current and future local AML requirements? How can I easily add new behaviours myself and explain the detection decisions and approach to auditors, senior management and external examiners? Can the solution be on premise and cloud enabled depending on our IT and Compliance strategy? How can I rapidly deploy a new solution if the older one is no longer fit for purpose?   Without doubt, small to medium sized financial institutions will continue to face many compliance and financial crime challenges in the months and tears to come. Challenges made harder in the current climate of increasing regulatory scrutiny, combined with the criminals’ ability to adapt their methods and respond to the increasing controls being implemented within larger firms.  However, at Oracle we believe firms can and should have access to the same high quality and robust technology irrespective of size and we’d love to hear the experiences and insights from those involved in the fight against financial crime within small to medium size companies to see how they are tackling the challenge. For more information on how Oracle can help contact matthew.long@oracle.com  _________ Oracle Financial Services Anti Money Laundering Express Edition leverages more than 25 years of Oracle Anti-Money Laundering expertise to provide a product, optimized for smaller financial institutions, which provides simple and effective operational control and configuration to detect and investigate behaviours of interest. https://www.oracle.com/industries/financial-services/analytics/anti-money-laundering-express-edition.html  

Blog By: Matthew Long, Director, Financial Crime & Compliance Management Solution Consulting, Oracle Financial Services For the majority of small to medium sized institutions, money laundering and...

Banking

The Right Core platform can Drive Success for a New Bank

Blog By: Tushar Chitra, Vice President, Product Strategy & Marketing, Oracle The banking industry today is one of the most complex ones to operate in. There are several challenges that need to be addressed, for anyone planning an entry into the industry. However, the right technology platform and capabilities coupled with an accelerated launch can help a new entrant not just overcome challenges, but drive growth and success. In several markets around the world, new banking licenses or charters which were scarce until a few years, are now easier to obtain. Consequently, there is an ever increasing number of new banks that have been launched or in various stages of planning/roll-out. These banks are often classified by several names such as challenger banks, neo banks, and digital/mobile-only banks. Firms with a hard-won license to launch a new bank, however, face several industry challenges, which if addressed rightly, can ensure success: Saturated Market: Most markets where new banking licenses have been issued are highly saturated. Retail banking customer segments are also deeply entrenched with incumbent banks for their primary financial service requirements. To drive business and growth in such a market, it is essential for a new bank to offer innovation and new value to demanding customers as well as target untapped markets. Intense Competition: Most markets are also highly competitive with a multitude of players which include traditional incumbent banks with a deep market presence and reach, pure digital subsidiaries of incumbent banks, and nimble FinTechs and startups. Therefore it is essential for a new bank to target a rapid go-to-market with a minimum viable portfolio of products, services, and channels. The agility and flexibility to tweak business models and scale operations are also essential for success. Limited Licenses: New licenses in certain markets are issued with limits or restrictions. For example, they mandate a focus on certain lines of business such as payments or prioritize certain areas like lending to small/medium enterprises. Hence, the ability to quickly establish partnerships can help overcome any limits and provides the necessary agility for a new bank to offer customers additional services, if required. With technology so intrinsic to banking, the right platform and solution landscape is one of the most important factors that will enable a new bank to not just address them, but take advantage of these challenges and drive growth and success. It is therefore essential for a new bank to invest in a core banking platform with the requisite capabilities that drive: Rapid Roll Out: The right core banking platform can help a new bank rapidly launch operations with minimal delays while minimizing risks and costs. A complete, packaged, pre-configured core banking platform enables a rapid roll out. Dedicated clusters enable out-of-the-box market and regulatory compliance. Accelerator packs with preset configurations and industrialized processes help quicken deployment. Ready-to-use products like deposits, lending, payments, etc. can help speed up go-to-market with a minimum viable portfolio. Efficient Collaboration: Partnerships and connected ecosystems, where multiple firms such as banks, FinTechs and, other digital firms share data and build innovative services, are fast becoming a reality. Partnering with third-party firms and participating in ecosystems can also help a new bank explore untapped customer touch points and value chains and allows it to offer a more comprehensive portfolio of services. Hence, the ability to build, manage, offer and consume data and APIs securely, transparently and efficiently is essential for any bank today. Scaling business lines and tapping new business and revenue models also become more efficient. Consequently, a core banking platform that supports global standards and protocols which enable quick, seamless and secure integration with systems and platforms of partner firms and networks is essential to a new bank. Phygital Distribution: While the choice of distribution channels at several new banks today is skewed towards digital or even just mobile in some cases, it is important for a new bank to have the flexibility to leverage physical channels when needed. Physical channels can help drive business growth from un-tapped markets such as under-banked and un-banked customer segments as well as augment engagements for already-banked customer segments. A core banking platform that enables an omnichannel approach which mixes digital and physical channels seamlessly into a ‘phygital’ distribution network is necessary for a new bank to be able to provide comprehensive engagement to its customer segments. Embedded Intelligence: The ability to generate better insights and predictions can help a new bank establish immediate competitive advantages. A core banking platform with embedded Artificial Intelligence and Machine Learning capabilities co-located with data, can industrialize the generation of insights at scale with out-of-the-box business use cases and drive next-generation decisioning. Such capabilities can help a new bank efficiently offer new levels of innovative customer engagement and value. Specialized Micro-verticals: The capability to explore new business lines is also a key requirement. A core banking platform with out-of-the-box functionality for micro-finance, Islamic banking or capabilities that allow the roll out low-cost banking services, can help a new bank target up-tapped markets quickly and profitably. Scalability and Flexibility: The ability to scale operations quickly and cost-effectively is essential for any bank today. A new bank must invest in a core banking platform that provides the flexibility of multi-tenant and multiple operational models to help it cater to regional regulations, market and business requirements as well as customer needs. Additionally, a core banking platform that ensures superior, reliable and continuous performance is also an essential requirement. Selecting the right core banking platform is key to ensuring a new bank’s success. A modern core banking platform with the requisite capabilities is essential for a new bank to address and leverage key challenges and succeed in a complex and rapidly evolving industry.   My colleague Avinash Swamy and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and avinash dot swamy at Oracle dot com.

Blog By: Tushar Chitra, Vice President, Product Strategy & Marketing, Oracle The banking industry today is one of the most complex ones to operate in. There are several challenges that need to be...

Banking

Fast Track Real-Time Payments Innovation with Oracle and The Clearing House

With over 40+ economies in the world shifting to real-time payments schemes over the last decade, the market demand for immediate access to funds is undoubtedly at its peak. The TCH RTP® not only provisions for real-time transfers and requests for funds but also fills the gaping hole of real-time information through an extensive set of messages. By limiting transactions to credit push alone, it mitigates the risk of unauthorized debits and the cost of follow-up investigations. Most importantly, it creates the foundation of trust for consumers to adopt seamless digital transactions and for fintechs to create evolved use cases around this window of opportunity. Fostering Market Led Innovation for B2B Payments The Clearing House’ RTP® bases itself on an evolved framework of use cases that cater not just to the consumer needs of P2P or B2C payments but focuses equally on challenging use cases around the 23.1 trillion $ B2B payments space. Increasingly, domestic businesses are evaluating the RTP® scheme for most of their settlement needs because of significantly lowered costs of 'invoice to payment reconciliations' and 'receipt re-associations' that promise better cash flow visibility. However, is putting in place a real-time payments infrastructure enough to solve the need for businesses today? Real-time Ready but not Real-time Digital Yet With over 57% of U.S businesses at some point in their individual digital-transformation journeys, the demand for real-time and digital payments is only partially met by the RTP® which provides the foundational network infrastructure native APIs to the ecosystem. Not without thought and as a deliberated upon decision, this whitespace is left to be addressed for technology providers to co-create. Oracle Banking APIs combined with Oracle Banking Payments, unlocks the brute power of this 24x7x365 RTP® infrastructure to create evolved customer journeys across retail and corporate banking.  Leveraging the TCH RTP® ready APIs, banks and fintechs can design simplified user journeys that power not just digital payments but can combine and leverage the 1500 APIs from its stable, to create visibility into cash flows, simplify trade payments, expedite settlements and fortify credit and lending disbursements. These APIs are powered by the Oracle Banking Payments RTP processor, the Universal Payments Hub that processes RTP, ACH, Wires and cross border payments via SWIFT and SWIFT gpi on a single platform. Designed to integrate with complex payment ecosystems, aggregate payments data from across systems and deliver accelerated straight through processing with seamless connectivity to the payments networks, Oracle Banking Payments is now TCH RTP® ready. Collaborate, Innovate and Evolve We invite you to come and experience these products that are designed for collaborative innovation between banks and fintechs. While Oracle’s rich digital APIs helps transform the customer’s payment experience across retail and commercial banking by providing channel agnostic services, data-rich insights and real-time tracking of payables, the underlying payments hub helps businesses scale as they grow, making it a true community platform for innovation. * Carolina Fintech Hub in collaboration with The Clearing House and Oracle is presenting a ‘Real Time Payments Buildathon'. Register for the event to experience the innovation potential of Oracle’s solutions!

With over 40+ economies in the world shifting to real-time payments schemes over the last decade, the market demand for immediate access to funds is undoubtedly at its peak. The TCH RTP® not only...

Financial Crime and AML Compliance

Hiding in Plain Sight: Using Technology To Defend Against The Financial Criminals Costing Banks Billions

Blog by: Matthew Long - Director, Financial Crime & Compliance Solution Consulting We live in a time where news of the next banking or supervisory authority being drawn into a money laundering scandal is a matter of when, not if. The now infamous ‘Troika Laundromat’ serves as the latest stark reminder, with the OCCRP (Organised Crime and Corruption Reporting Project) reporting a complex network of 75 offshore shell companies have been used to channel billions of US dollars belonging to wealthy Russians across to the west. Understandably, this has resulted in widespread criticism of the unwitting companies involved for failing to prevent potentially criminal funds moving through across their global branches. Furthermore, the once well-respected Danske Bank is facing €1 billion of damages filed by up to 70 investors, following allegations that €200 billion of suspicious transactions had filtered through its Estonia branch between 2007 and 2015. The Danish bank revealed 1% (around 28,000) of its retail customers had left the bank, while its chief executive and chairman were both ousted last year. These examples expose serious shortcomings in risk and compliance processes among some of the most established financial institutions in the world.  Clearly, the stakes have never been higher, yet many banks persist in using outdated, time-consuming rules-based processes for their anti-money laundering, KYC and due diligence that history has shown can be circumvented by determined money launderers and other nefarious opportunists. As more high-profile cases of financial crime come to light, the question is: why aren’t financial institutions able to catch them earlier, and how can they and their supervisors better police their own practices? Hiding in plain sight – how are criminals getting away with it? As the ongoing ‘laundromat’ exposure suggests, criminals rely on a sophisticated variety of techniques and mechanisms to obscure their ownership and control of illicitly obtained assets. The most pervasive vehicles for financial crime are shell companies. These organisations will essentially ‘hide in plain sight’ by using global trade and commerce infrastructures to appear legitimate. Due to the anonymity of their ownership, shell companies represent the perfect conduit for money launderers, fraudsters, and other financial criminals seeking to hide their assets and evade taxes and launder criminal funds. It’s becoming far too difficult for law enforcement to pin down the true beneficial owners of these shell entities. Technology is essential to outsmart criminals Clearly, the financial services sector can no longer rely on outdated compliance systems, processes and armies of analysts and investigators to take on this challenge. Given the high volume and complex nature of today’s transactions – combined with opaque and disparate relationships and connections between customers and entities – financial services companies are turning to technology that can better identify and process all the hidden and known connections between the following: Legitimate customers Businesses Criminals PEPs (politically exposed persons) Sanctioned entities Shell companies.   For example, AI and machine learning can create more holistic and contextualised risk profiles or risk scores to determine whether or not banks should enter into a potential client or customer relationship – with anomalies or suspicious activity flagged for further investigation by analysts. Combine this with system-generated recommendations on ‘next step’ considerations and much of the traditional manual exercises (e.g. watch list checking, documentation retrieval, existing relationship checks etc.) are already completed by the system. It means the analyst can now be left to ‘analyse’, instead of ‘clerk’. But for this to work, all that data needs be organised in a much more effective manner and institutions need to have clearly defined what they want and don’t want to see from the system – with all definitions and system-based decisions clearly tested, justified, documented and governed). Currently, when screening individuals against internal and commercially available watch lists, firms typically look to at the following: Customer name Address Date of birth Registration details (corporate accounts or transactions) Information regarding key executives, stakeholders, and beneficial owners (corporate accounts or transactions). Invariably though, anomalies and inconsistencies will inevitably crop up, influencing the accuracy of the screening process and its subsequent results. Data holds the key – preparation is the best form of defence It’s clear that simple data cleansing isn’t a strong enough defence in our increasingly-sophisticated threat landscape. More extensive profiling and auditing of data ahead of screenings need to be enforced, with financial institutions required to collect data concerning: Nationality Country of residence Membership in certain regimes or political parties Close associates (otherwise known as secondary identifiers) Writing system used. Recording this level of detail means pesky anomalies or inconsistencies can be more easily removed, such as white spaces, questionable characters, or fields requiring only one entry that suspiciously contain multiple values, such as a company name or job title. Data can then be optimised to match the original set of rules. Effective screening will differentiate between individuals and entities with common names, but will possess more discrete match rules. With the correct definition and application of rules to customer and list data sources, plus the use of secondary identifiers as part of the screening process, false positives can be reduced to a minimum without increasing risk. This approach empowers organisations to more accurately deploy the risk-based approach demanded by regulators and allows compliance teams to focus their time and investment on higher-risk, higher-probability and higher-complexity issues. This is where the human touch truly adds value. There will always be nefarious activities, but increasingly, forward-thinking organisations are bolstering their defences with machine learning, AI and more meticulous data preparation. If your company is one of those exposing itself to these risks without the correct safeguards in place, then you’re part of the problem, not the solution. If you wish to get in touch please email matthew.long@oracle.com

Blog by: Matthew Long - Director, Financial Crime & Compliance Solution Consulting We live in a time where news of the next banking or supervisory authority being drawn into a money laundering scandal...

Analytics

Transforming Five Key Areas Of Finance Management

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting   If you read our posts about the quandaries of chief controllers and compliance officers and financial analysts and line-of-business managers, you may wonder what finance teams should do. How can they gain the visibility and decision-making ability they need without causing greater fragmentation and complexity in their technology environments? Collaborations with a great variety of banking and insurance businesses leave me convinced that the modern cloud is today’s best foundation for building and evolving infrastructures that can simplify financial processes and provide access to data and analytical tools. In the cloud, software deployments and updates can be fast and non disruptive, and it can become easier to access and integrate business intelligence resources that extend your financial systems. Computing resources and storage are practically unlimited. As the result of research and development backed by billions of dollars in investments by technology leaders, data security in the cloud is more stringent than most banking and insurance organizations could develop on their own. Banking and insurance finance teams need such a cloud-based infrastructure to provide advanced capabilities in five important aspects of their work: Modern financials with efficient, fast workflows for all finance activities, including prompt month-end closings and a scalable, global chart of accounts. They should include accurate, timely reporting on all financial dimensions of interest. Performance management has to provide accurate, anytime assessment of the profitability of company offerings, customer segments, and the business overall. It needs to integrate with financial actuals and meet the insight requirements of finance-team roles. Regulatory and audit reporting must clearly demonstrate the effectiveness of the company’s compliance efforts. Automated reporting mechanisms have to sync with evolving regulatory frameworks and align with up-to-the-minute financial performance results. Portfolio and customer analytics helps banks and insurance companies understand their customers and offer them the right products they want. Analytics can highlight what is happening today and what the future might look like if certain actions are taken or customer behaviors and market trends persist. Integrated risk and finance management should provide compliance and risk officers with reconciled, comprehensive information that helps them understand and mitigate existing and emerging risks. A cloud infrastructure developed by Oracle, the ERP Financial Cloud, can serve as the consolidated resource finance teams can use to perform all their business management and analytical tasks. This cloud foundation, often deployed in integration with Oracle Integrated Finance and Risk Platforms, makes it possible for banking and insurance CFOs and finance teams to deliver their services effectively in our five key areas of finance management. Its basic elements are simple: The platform connects data sources companywide with role- and process-specific functionality that includes the critical areas of accounting, planning, compliance, and customer insight. Such roles as chief controllers, compliance officers, financial analysts, and line-of-business managers find tools designed for their unique requirements. A business insight layer delivers analytical and reporting capabilities across the key finance roles and processes, based on consolidated data from all pertinent sources. Finance managers can use collaboration tools to share insight and enable sound decisions within their own team or with executives and business groups across the company. Feel free to get in touch with me at yogendra.p.singh@oracle.com.

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting   If you read our posts about the quandaries of chief controllers and compliance officers and...

Industrialization of Risk and Regulatory Processes in Banking – The Way Forward

Blog By: Saloni Ramakrishna - Author, Senior Director, Oracle Financial Services I had, in my earlier blog in finextra, said “The objective of Industrialization is to drive innovation and efficiency by reengineering the value chain to add measurable value”. In this blog, I take a deeper dive into process of Industrialization with Stress Testing platform as the use case to illustrate the point. The regulators are demanding consistency across reports as well as transparency and line-of-sight into all data, risk & regulatory processes. Banks are challenged both on consistency across reports given the siloed approach, as well on transparency and line of sight as there are multiple manual interventions trying to stitch together processes that are piece meal automated. Echoing this, a study states that “86% of institutions face challenges with risk data aggregation capabilities, overarching governance framework and connected infrastructure”. This chasm between expectation and reality of “connectedness” sets a strong business case for Industrializing the critical processes of Risk and Regulation with an active Process Orchestration capability. It is pertinent to point that implementation of an industrialized approach is most effective when done on a use case basis.  I have chosen Stress Testing platform as the use case for three reasons - a) It is both a regulatory and an internal requirement with regular occurrence at periodical interval, b) Is a huge cost, and c) It is a great example to illustrate the benefits of industrialization because it answers all the below qualifying questions with a resounding “Yes”. Does it have a critical mass in terms of Volumes? Is the current process resource intensive? Are there manual interventions at multiple points? Is there a sizeable opportunity to reduce cost and increase revenue if the process is streamlined and automated? Is it a critical process for the organization? Can it be automated? First step, post use case finalization, is to identify the building blocks that are required. Given our use case, the building blocks needed are Data Preparation that includes Data Sourcing and movement Data Quality and reliability enhancement Data Governance layer that looks at Controls, Key indicators, Assessments, issues and action management. Creation of a clean, consistent and comprehensive “Regulatory Hub” Modeling tools and techniques Stress approach methodology and Stress scenarios. Computational steps for arriving at Stressed Capital under different stress scenarios Having identified the building blocks the next step is to define a lean operating model or Process Model. The challenge and the opportunity here are to identify and eliminate redundancies / duplications; spotting the synergies/ commonalities; reducing manual interventions to the minimum and reuse of data and process artefacts where appropriate. The question I have encountered most often, is should the process models for similar use case be the same for all banks – the answer is “NO”, just like the operating model of two car manufacturer are not identical at all steps. The building blocks will be largely common though, given the common objective – the difference would be in how the problem is approached and solved. Let me illustrate this using two samples of process models of banks designed for calculating Stress capital – the first wants its platform to be designed on the regulatory requirement representing the regulatory flow covering Actual, BAU (Business as Usual) and Stress scenarios. It stresses its models say PD, LGD and EAD with the stress values (GDP Fall, adverse Interest rates or Forex rates etc.) and uses the model outputs to arrive at stressed capital. The second takes a more fundamental approach of stressing the balance sheet and P& L components based on the stressed market and economic scenarios, then calculate PD, LGD and EAD values and arrives at Stressed Capital. Which is the more appropriate approach – well both have their rationale. Can the same bank have both approaches in an industrialized model – the answer is yes – have a common flow for the data preparation block and then branch off into two models – One regulatory the other as internal. This capability not only saves cost but builds in great operational efficiency while providing the flexibility required.  Once the lean process model is defined and approved it can then be automated with appropriate technology that provides unified analytical platform. The objective is to stitch together the different building blocks allowing seamless flow of the data, process in a transparent and auditable manner (remember, this is the risk and regulatory platform that must be audit and regulatory scrutiny enabled.) The above is the preparatory phase. The dynamic part is when the process is executed and is to be monitored - through “active Process Orchestration”. One of my banker friends, calls this as “The central master piece” for an industrialized approach as it enables banks to actively monitor, control and manage the process such that it delivers not just cost savings but measurable value through standardization, automation and traceability.  The below video captures the highlights of that conversation. As we summed up in the conversation, Industrialization of Risk and Regulatory processes in banks is not just a process for process sake but one that will make strategic contribution to the organization by delivering sustained measurable value.

Blog By: Saloni Ramakrishna - Author, Senior Director, Oracle Financial Services I had, in my earlier blog in finextra, said “The objective of Industrialization is to drive innovation and efficiency by...

Analytics

When Finance Managers Can’t Meet Expectations

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting CFOs and finance managers in banking and insurance companies often mention that employee turnover is high even while job security is strong and salaries are competitive. According to some industry observers, CFOs themselves stay roughly five years in their role—not at all long for a high-visibility executive. It’s practically impossible to find out trustworthy reports about finance-team turnover. Statistics usually refer to business roles across entire companies, which mean they include call centers and other more volatile operations. Finance-team members I know tend to be loyal to their organizations even when they are not happy with their tools and working conditions. Even so, the hurdles they need to negotiate every day may well cause them to wonder about the working life in other companies. Companies look to finance teams for risk mitigation Analysts have observed that 57 percent of company boards want their finance execs to provide effective risk management. This is one of the top-three expectations for CFOs. For financial analysts working with CFOs to assess and minimize risks as companies strive to win and retain more customers, reviewing and analyzing business data become essential functions. Banks and insurance companies make huge investments when they launch and market new products and services. However, when financial analysts need to determine the impact of these offerings and mitigate the risk associated with innovation, they often encounter difficulties. They typically need to glean customer, market, and financial data from multiple sources. Analysts often have to rely on analytical tools that may not be designed for their industry or that may not reside on the same platform as the data sources. These complexities make it hard for analysts to gain a full view of customer and market trends to make the right decisions in managing performance and reducing risk. Banks and insurance companies often use multiple accounting systems that may be many years old and which aren’t very helpful at delivering business insight. Line-of-business managers and analysts then can be hard-pressed to make strategic planning recommendations based on reliable, comprehensive information. Conventional infrastructures and processes may be dysfunctional today Traditionally, finance teams have often been isolated from the business groups that were responsible for driving growth, generating revenue, devising competitive strategies, or pursuing new customers. Relying on information passed on to them, they were responsible for prudent and efficient financial management. Their scope expanded when regulatory requirements became more complex and when it became necessary for them to contribute to business performance management. But the software tools available to finance teams have not kept up with these tasks. For example, widely adopted, all-in-one ERP systems have often been found to be too inflexible to help finance teams be effective. In fact, legacy ERP software and stand-alone business reporting solutions provoke the most frequent complaints I hear. While finance managers struggle with disparate systems to deliver accurate reporting and gain business insight, the world moves on. Customer preferences can change quickly, and competitors with new business models or from outside of the industry may rapidly cause disruption in once-stable markets. When you can’t fully trust your current reporting tools and data sources, and when it takes too long to transform information into insight, it may be time to change your practices. Imagine what work could be like, for instance, if your company’s data streams and analytical models were completely transparent. Or if you could easily analyze financial performance reporting in context with recent insight on market and consumer trends. It’s Oracle’s goal to empower the finance teams in banking and insurance to minimize risk and drive the best possible business performance. To accomplish this, we have incorporated vast industry and process expertise into software platforms that connect financial management and analytics, like the Oracle ERP Financial Cloud and Oracle Integrated Finance and Risk Platforms. If you want to explore how Oracle aims to make the lives of CFOs and finance teams easier.  Feel free to get in touch with me at yogendra.p.singh@oracle.com.

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting CFOs and finance managers in banking and insurance companies often mention that employee turnover is...

Analytics

What Gets in The Way of Chief Controllers and Compliance Officers?

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting In conversation with compliance officers in banking and insurance businesses, I’m often struck by the disparity between what they aim to accomplish and the expectations they face—and the tools available to them. The position of the compliance officer, much like the chief controller, has in recent years evolved in parallel with the role of the chief financial officer (CFO), but most software tools have not kept pace. In the past, finance teams were mostly responsible for efficient financial management and reporting. Today, companies look to CFOs and their associates for a more strategic contribution as organizations grow and transform. Business groups and clients alike perceive CFOs and finance team members as highly credible and well-informed business partners. They expect compliance officers and chief controllers, in particular, to act from a position of high integrity and with a clear view of the entire business. Fragmented compliance efforts and limited transparency For many compliance officers and chief controllers those perceptions and expectations may be aspirational, but they do not reflect their working conditions. For instance, an important part of the role of compliance officers is timely regulatory reporting on their company’s compliance programs. Many compliance officers find it challenging to meet reporting requirements because they lack access to reliable, consolidated business information. They must often navigate multiple, disparate data sources and request assistance from IT to do so. When compliance officers cannot easily delve into information and processes, reporting may not be accurate and prompt. Compliance officers face more hurdles when they need to make sure that their organizations adjust to changing regulatory requirements. Such updates generally need to be auditable. Without the visibility and control this effort demands, the interactions of compliance officers with other stakeholders can be protracted and inefficient, which can delay or compromise compliance. The most successful compliance officers are masters at building relationships and working with their peers in the business groups—including IT—to achieve the visibility they need. Compliance officers who know their organization extremely well may be able to succeed this way, but somebody who is new to a company will find it more difficult. Hampered chief controllers and desperate workarounds Compliance officers are always highly conscious of compliance-related risks faced by banking and insurance organizations. Chief controllers, in their turn, are becoming more risk-aware as their companies face intense competition. All too often, growth—especially when it happens through acquisitions—means that chief controllers must deal with a jungle of software tools. It is not uncommon for chief controllers to access as many as 15 different financial reporting systems every day. Under these circumstances, how do you ensure accurate finance management and reconcile financial and regulatory reporting within deadlines? You can invest the effort to become a proficient user of each tool. Or, you can collaborate with IT to get help. However, not all chief controllers succeed at either approach, which may result in longer close cycles and delayed or flawed reporting. Those outcomes, in turn, can lead to decisions that are late or mistakenly based on the wrong assumptions. They also could harm the reputation and standing of the compliance officer and other finance team members involved. The risks of not fully empowering finance teams to succeed are substantial. At Oracle, we enable CFOs, compliance officers, and chief controllers to make the strategic contributions companies expect. We offer a wealth of industry and technical expertise and software tools that make it possible to integrate data sources and analytical applications, including the Oracle ERP Financial Cloud and Oracle Integrated Finance and Risk Platforms. If you want to explore how Oracle aims to make the lives of CFOs and finance teams easier, download our eBook, Empowering Banking and Insurance CFOs in the Digital Era Feel free to get in touch with me at yogendra.p.singh@oracle.com

Blog By: Yogendra Singh, Global Lead, Oracle Financial Services Analytical Applications Consulting In conversation with compliance officers in banking and insurance businesses, I’m often struck by the...

Financial Crime and AML Compliance

Are FIs Ready for New Wave of Innovation: AML Trends for 2019

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. Anti-money laundering (AML) and know-your-customer (KYC) compliance have become leading concerns at financial institutions globally today. In 2018, money laundering scandals made headlines, especially in Europe. The Danske Bank scandal, for example, exposed the worrying levels of suspect wealth that flowed, unchecked through European banks. In the aftermath of this, 2019 looks like to be a year when regulatory authorities reassess their regulatory regimes, becoming more tough with enforcement, and less lenient, when dealing with financial indiscretions. Financial institutions under risk of heftier fines, uncontrollable external factors and massive reputational damage will be expected to do much more. Recent joint statement (Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing) by major regulatory bodies in United States, emphasizes the use of innovative technologies to combat financial crime is an indication of upcoming innovation & trends in financial crime & compliance. In this article we discuss some of the key industry trends which would inspire financial crime & compliance program.   Rapid Efficiency Gain - Robotics Process Automation / AI: Most of the global financial institutions invested in robotics process automation (RPA) in many business areas within their organization. In last 12 to 18 months, RPA investments extended to financial crime & compliance. The most common use cases where RPA has been applied are data provisioning (ETL), information gathering during case review process and suspicious activity reporting narrative. Just by applying RPA for case review processes financial institutions were able to cut investigation time by around 40%. Firms who has no footprint of RPA in their financial crime program yet, will learn from early adopters and continue to enhance their program for such quick wins. Additionally, the RPA use cases will nurture beyond automation and extend to artificial intelligence (AI). Key areas where AI can be useful are for more interactive data mining, Natural Language Processing (NLP) to interpret documents and Natural Language Generation (NLG) to generate suspicious activity reporting case narrative, Optical character recognition (OCR) for Bill of Lading, Ultimate Beneficiary Ownership (UBO) information gathering and many more. Machine Learning/Deep Learning to Increase Effectiveness: Again, like RPA machine learning is not entirely a new trend for 2019. Global financial institutions are leveraging machine learning, mostly during transaction monitoring detection to reduce false positives rate and have gained substantial benefits. However, the application of machine learning is limited to event-based detection only by now, where individual events (red-flags) and its historical disposition learning is leveraged by machine learning model to predict future outcome. A specific event (or behavior) can just be an indicator of suspicious activity and therefore should be assessed in conjunction with other indicators, not in a silo. When events are created for the entity, as soon as there is a suspicious rule hit, the surveillance process and machine learning model is not factoring the behaviors occurred before and after that specific activity. This means the surveillance process is lacking a holistic view, which makes the detection process unproductive. As part of the next wave of machine learning, financial institutions will adopt advance machine learning approaches. Once such as approach is Graph Similarity. In this method, individual events can be correlated based on a network which can be treated as a Graph. And advance machine learning algorithms such as Graph Similarity can be applied to predict future cases.      Power of Data - Financial Crime Data Lake: Financial institutions realize the power of enterprise data strategy in terms of risk, compliance and customer profitability. And that is why enterprise data strategy have been trending for many years now. However, due to the complex nature of money laundering patterns, multi jurisdiction customer network and international regulatory compliance, the holistic view of customer profile from financial crime perspective is limited. Which can be achieved by brining transaction monitoring, customer profile, sanctions, fraud and other relevant financial crime data organized. Finally, financial crime data lake/data mart, can be leveraged for more effective machine learning, model tuning and advance analytics.      Enterprise Investigation Hub: AML and sanctions compliance remains a significant challenge for financial institutions globally, with notable differences between regions. As financial institutions become more complex and more interconnected across jurisdictions, and as rules, regulations and various sanctions regimes continue to evolve, firms devote considerable resources to AML and sanctions-compliance investigations. Such complex investigation requires bringing data from various systems and analyzing the complex customer network. Which is not just extremely expensive but also highlight inefficient, due to the lack of unified investigation platform and technology required to understand complex network. In coming years, financial institutions will be driven to invest in single, unified platform leveraging graph analytics, data visualization, for financial crime data. Which should succinctly express complex money movement patterns, detects multi-hop relationships, and identifies hubs and spokes of activity using advance graph algorithms. Investigation hub which would essentially leverage financial crime data lake as basis can be extended to leverage robotics process automation for more interactive data mining and AI.      The industry has been roiled by a perfect storm of disruptive forces. Complex regulatory-compliance requirements, aging legacy assets and operating models, digital innovation and fintech have rapidly changed the operating environment. The evolving regulatory landscape that accompanies those changes, worldwide political changes and record monetary fines have made AML and KYC compliance a major challenge for financial institutions globally. The stakes are high; regulatory action has produced a wave of investigations and sanctions, jeopardized licenses and found individuals personally accountable and liable for noncompliance. Criminals will always find newer ways to use financial system for illegal activities. The timely detection of criminal activities is the most challenging aspect in the implementation of an efficient program. Several innovative technology-based tools and products are currently available. Though these technology tools will not eliminate financial crime, they will bring it under control to a significant extent, and financial institutions should proactively look at adopting these sooner than later. Hence, the dialog for many organizations specially those who are under higher regulatory scrutiny is about robust program to prepare for unknowns, and not about just cost anymore. 

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. Anti-money laundering (AML) and know-your-customer (KYC) compliance have become leading...

Banking

Can your core banking system support your bank’s growth?

The financial services industry is being disrupted by unprecedented levels of convergence and connectivity between people, technology, and businesses. The banking value chain is witnessing a paradigm shift towards unparalleled choice, convenience, innovation and collaboration. This shift is driven primarily by three major factors: Demographics: Digital savvy customers increasingly expect innovative services and engaging experiences, anywhere, anytime and instantaneous service. They also expect services to be more accessible and ubiquitous, available at relevant touch points along different value chains, often beyond the traditional financial realm. Additionally, economic development and financial inclusion directives offer significant opportunities for banks to target the under-banked and even un-banked segments, profitably. Technology: Next generation technologies like Artificial Intelligence and Machine Learning are enabling banks to significantly improve decision making with better prediction of future outcomes, automation of processes and delivery of human-like customer engagement at an unprecedented scale. Advances in Open APIs and Open Banking directives are opening up new opportunities for banks to monetize data and services. They also enable quick and efficient collaboration with multiple third-party firms and ecosystems. Blockchain technologies and systems are also revolutionizing the way data is shared and trusted transactions are conducted. Business Models: Several innovative operating and business models are emerging in the areas of service and data monetization, financial and related marketplaces and Banking as a service (BaaS) where, banking is offered as a utility service to third party firms, almost invisible and seamlessly embedded in any transaction or interaction. BaaS can extend banking services outside traditional banks and beyond banking value chains allowing banks to scale their offerings along and across adjacent value chains and new touch points. All of these factors are coalescing to fundamentally change the industry in the coming years by completely redefining both the way customers experience financial services and the way banks offer them. To address these fundamental shifts, protect customer relationships and business lines and to stay competitive, incumbent banks must double down on transforming their strategies to drive better services, experiences and value for their customers. With technology intrinsic to banking, the right core banking systems and solution landscape is one of, if not the most important factor, that will enable your bank to successfully adapt to these shifts, compete and thrive. It is therefore imperative to take stock of your existing core banking systems and solution landscape to check for requisite capabilities that are now essential for your bank’s success amidst these rapidly evolving dynamics. Here is a quick checklist of essential core banking capabilities: Listed below are key high-level checks that you need to ask of your bank’s core banking system’s capabilities. Accelerated innovation and time-to-market: A modern core banking service must enable rapid innovation and time to market of products and services with centralized product management capabilities, high levels of parameterization, end-to-end servicing capabilities, advanced pricing and billing features and easy localization to meet regional requirements. Augmented customer views, predictions, intelligent decisoning: The ability to build detailed pictures of customers through multi-dimensional views coupled with multi-product originations enables the rollout of customized and contextual products and offers. Additionally, a modern core banking system must enable better predictions of future outcomes to help a bank derive new insights and improve decision making through intelligence and automation. Frictionless and convenient experiences: The capability to roll out simplified, frictionless, safe and engaging digital experiences, seamlessly across any channel is essential for a bank today. A bank’s systems must also enable it to easily attract, onboard and service customers contextually on any channel. New use cases, opportunities: A modern core banking system must support complex workflows that enables a bank to easily orchestrate new services through a highly extensible UI and business logic. It should also allow a bank to quickly adopt new use cases like the ability to leverage any data set for machine learning or the ability to interface with any blockchain system. Additionally, it must have out of the box capabilities to enable a bank to quickly tap new and unexplored opportunities like financial inclusion, microfinance etc. Customized strategies and transformation paths: A modern core banking system must be flexible enough to allow a bank to prioritize their business focus, address immediate strategic needs and undertake customized transformation paths to suit unique requirements. It must offer multiple options for transformation while balancing risk through different deployment models like bank-in-a-box or co-deployed/standalone components or on a private/public cloud. Data and services monetization: The ability to efficiently build and manage data and services as APIs will be a key differentiator for a bank. A modern core banking system must have an open architecture and advanced API management capabilities to enable a bank to build, process and manage fine grained APIs, monetize data/services to drive new revenue streams and profit from Open Banking. New business models and ecosystems: A modern core banking system must enable a bank to externalize any business service or business process with the required operational and financial controls as well as develop and participate in broad ecosystems. This will help the bank leverage a BaaS model to seamlessly and efficiently extend and scale its products and services to new touch points and adjacent value chains. Operational efficiency: A modern core banking system must support multi-tenancy and multiple operational models to cater to regional regulations, market requirements and customer needs. It must support multiple operational models – centralized, decentralized, semi-centralized – to suit diverse business requirements. It must also include superior control management, centralization of key operations and intelligent process automation to enhance operational efficiency. Scalability and performance: The ability to scale operations quickly and cost effectively is an essential capability in a modern core banking system. Additionally, the system must ensure superior, reliable and continuous performance. Regulations and compliance: Out of the box support for regulations like Faster Payments, SWIFT GPI, SEPA Instant etc. are essential. A modern core banking system must offer capabilities that help a bank meet evolving regulatory requirements of PSD2, PAD and data privacy and protection directives and leverage them to create business opportunities. Additionally, it must be equipped with enhanced regulatory and compliance controls and help address multi-regulatory reporting requirements. If the answer to most of these checks is in the negative, it is time to upgrade your core banking systems to ensure your bank’s competitiveness and success. Your bank will need to leverage a modern core banking system that includes the latest digital technologies, Artificial Intelligence (AI) and Machine Learning (ML) to elevate customer engagement and value as well as operational efficiency. A core banking system that supports Open Banking, APIs and the Cloud can help you accelerate collaboration with third-party firms and participate in ecosystems that span value chains and do so efficiently and at scale. My colleague Avinash Swamy and I co-authored this blog. We would love to hear your views. We are reachable at tushar dot chitra at Oracle dot com and avinash dot swamy at Oracle dot com.

The financial services industry is being disrupted by unprecedented levels of convergence and connectivity between people, technology, and businesses. The banking value chain is witnessing a paradigm...

Financial Services

Instant PSD2 Compliance, Monetization-Ready

The European Oracle Fintech Innovation Program publishes articles offering insights from curated Fintech partners. This article is based on an interview with Rik De Deyn, Senior Innovation Director at the Oracle European Fintech Innovation Program, and Stefan Hamm, CEO of adorsys. Rik DE DEYN, Sr. Innovation Director, Oracle: Welcome Stefan.  Over the last couple of months, it’s been a real pleasure to get to know you and the group of PSD2 specialists in your organization.   The PSD2 initiative has always struck me as a potential catalyst for Open Banking in Europe.  Is that how European banks and corporates see PSD2, and where are they with their timelines? Stefan HAMM, CEO, Adorsys: With PSD2 (Payment Services Directive 2), entrepreneurs have a real alternative to credit card schemes, as real-time transaction processing opens new possibilities. Since PSD2 is a regulatory EU directive, financial institutions are required to provide the appropriate service in time.  In contrast to SEPA (the Single Euro Payments Area), there is no central authority like the European Payments Council (EPC), that creates and maintains the commercial, banking and technical PSD2 framework. The banks that are looking at becoming ASPSP’s (Account Servicing Payment Service Providers), and the TPP’s (Third Party Provider) that want to be AISP’s (Account Information Service Providers) or PISPs (Payment Initiation Service Providers), will have access to customer accounts (XS2A) of financial institutions.  These parties have been invited to get ready for March 14th, 2019 when the testing phase of the new application programming interfaces (API’s) will start. API’s are the technical mechanism that will allow banks to share customer data with TPP’s securely. The official live start date for PSD2 is Saturday September 14th, 2019. To prevent a Friday-the-13th-disaster, all services must be up and running by then, and all PSD2 participants must have their processes certified by the regulator. We are now three months before the commitment to be ready for testing, and because the directive has different national regulatory frameworks, it is becoming apparent that the EU has 6 or 7 different API standards, like the ones from STET and Open Banking UK. We think that about 80% of the banks will use the NextGenPSD2 format from The Berlin Group, with individual adaptations. We also notice that even just under 10 months before the live launch, not all banks have a truly resilient solution. This is understandable, as the regulation requires deep entry in the core systems. Opening these up is not a trivial adjustment. In defense of the banks, the directive does not provide clear specifications for all details of the technical implementation. This is the reason that much of the lost time went into finding agreements on specifications. Parties that want to go live September 14th will have to largely complete the implementation in June, due to the internal lead times and processes for new products. To reach the March 14th milestone, considerable additional effort will be required.  This will force many of the institutions to find temporary alternative solutions that meet the regulatory requirements. Still, compliance is the highest priority, as non-compliance entails a considerable risk, including liability on the part of the members of the Management Board. The complexity of the implementation, the far-reaching changes and the tight timeframe make the topic so explosive for the banks. Rik, Oracle: It seems like banks are running out of time quickly.  How can Adorsys help banks achieve instant compliance by March 14th? Stefan, Adorsys: We have been working hard on a solution that makes banks PSD2-ready almost immediately. Our customers can obtain a PSD2-compliant sandbox environment for the testing-requirement in March.  The core of the work is the so-called XS2A API, which we have implemented in collaboration with our reference customers. There is no need to integrate existing systems, the PSD2 sandbox contains everything you need to operate as a self-supporting service. To take even more pressure off banks, the sandbox is of course cloud-ready and can therefore be used outside the bank's own infrastructure. Of course, the sandbox environment can be linked to the bank’s back-end systems for the September go-live.  This allows for a smooth transition to go-live, which will be important for our customer’s customers, and the regulator. Rik, Oracle: This is great.  But there are many PSD2 solutions out there.  How do you differentiate from your competitors? Stefan, Adorsys: It always starts with quality people. Our PSD2 team has more than 30 focused employees, including former employees of UBS, Credit Suisse and Consors Bank, part of BNP Paribas. In addition to the pure development performance of the PSD2 team, we also ensure professional market engagement. We have been working on this topic in client projects for a long time and we have achieved a lot.  For example, the sandbox already contains a consent management system.  We now concentrate on additional added value, such as a backend that behaves like a core banking system and enables end-to-end processes, even in the sandbox. But also, for live production, which allows you to not to have to make your inventory system real-time. We are not talking about the future here; the modules are there today. Rik, Oracle: What are some of the things you hear from your bank customers?  How do they benefit most? Stefan, Adorsys:  At the moment, the most banks focus almost exclusively on compliance. Understandable, but what will happen after March 14th? We want to make it as easy as possible for the users of the Sandbox to make the transition to the monetization of their PSD2 investments: value-added services for their customers for example, and API-management.  That’s why we have included everything that can already supports the PSD2 live operation. Even when the banks will be forced to open their live systems, they won’t have to repeat their investment after March 14th, when the race for the customer interfaces will really start.  Those who cannot make monetize their investment will lose importance to their customers. Who wants a new PayPal that uses technology that the bank has built up, with pain and high costs?  With our solutions, we are already ready for the time in which not only the legal framework, but also the commercial exploitation of the technology is becoming the next driver. And so, we see ourselves not only as a technology supplier. We also help banks find viable models to turn technical investments into business value. Rik, Oracle: That’s interesting.  Now, how does your collaboration with Oracle improve benefits for your customers? Stefan, Adorsys: our implementation teams have been around for many years and have built real projects in top-tier banks.  We know Oracle’s strengths and experience in these environments, and Oracle provides technology that allows us to focus on our own solution, instead of having to worry whether the underlying infrastructure will be strong, scalable and secure.  This allows us to convince our customers that we deliver enterprise-ready solutions end-to-end, and they get to a more strategic advantage faster. However, Oracle’s focus on cloud creates another really opportunity for us.  We want to use Oracle Cloud to deliver our solution almost immediately to interested banks, without long infrastructure procurement cycles.  Time is of the essence, especially for the compliance-sandbox.  For live PSD2 implementations beyond March, we know we can count on Oracle to also help us integrate into the bank’s backend systems.   But also here, it’s about people.  The Oracle Fintech innovation program team has created an open and collaborative environment that allows us to find a business model that works for us. Concretely, clients can start with a self-contained sandbox delivered through a trusted cloud and then expand into monetization of PSD2. Rik, Oracle: OK, that’s a great usage of cloud.  When will all this be available? Stefan, Adorsys: The compliance-stage modules are ready today. We have delivered them to several banks as a consulting engagement, and we will soon have productized them on Oracle Cloud. We will continuously extend them to simulate core-banking, create and manage more sophisticated environments for TPPs, and of course keep them compliant to the ongoing demands of upcoming PSD requirements. Rik, Oracle: This was a fascinating story Stefan.  Thanks again and looking forward to helping your customers find that value in PSD2. For more information, reach out to Jay Van Berkel, Senior Business Development Manager, jay.vanberkel@adorsys.de  

The European Oracle Fintech Innovation Program publishes articles offering insights from curated Fintech partners. This article is based on an interview with Rik De Deyn, Senior Innovation Director at...

Financial Services

Fintech Ecosystems: The Key to Achieving Enterprise Sales and Customer Scale

There’s been a flurry of speculation around the impact of fintechs on the future of the financial services industry. The promise of transformative technologies, the demand for smart, digital services, and the ability to deliver a ubiquitous user experience have all fueled the anticipation that these agile, innovative entities will displace traditional business models. However as many big tech companies and leading financial services firms are learning, there’s no “one-size fits all” solution to the challenges facing the financial services industry.  Steady enterprise sales growth and loyal customer engagement can no longer be sustained through traditional means. Fintechs are learning first hand that in this new digital era, to move from innovation to monetization, to achieve enterprise sales growth and customer scale requires a business model change that has the power of a collaborative ecosystem at its core. Over the last few years, Oracle’s Financial Services Industry Solutions Group has been curating an ecosystem of fintech firms, banks and venture capitalists to address the disruptive business and technology challenges experienced across the industry on a worldwide basis.  Through our Fintech Innovation Program we’ve been lucky enough to witness some of the most brilliant young minds in the industry collaborate and make advances in ways we never thought possible before the cloud enabled the democratization of cheap, easy to use innovative technologies. For me, one of the more fascinating aspects of the program has been discovering how a big tech company such as Oracle has been able to add value to this industry.  As the program’s ecosystem grew, we started to see trends in three areas as to why fintechs and institutional innovators were turning to Oracle for collaborative innovation in the fintech space: Community, Change, and Monetization.  Community There’s no innovation without community.  Fintechs come with their agility, innovative use of technology, out-of-this-world ideas and great ambitions. Accelerators create communities between fintechs and financial services organizations, through programs and events. Innovation teams in banks and insurance firms come with the reality of their daily customers, stable innovation and trust.  The collaboration between Oracle and B-Hive.eu, the prime accelerator for Europe is a great example. Oracle, as a big tech company, fits well within the fintech community.  Oracle has a passion for delivering cutting-edge technology, including cloud, artificial intelligence, API and blockchain cloud services.  But Oracle is also a mature fintech, with decades of experience being part of bank data centers. As a result, Oracle is often looked at as a bridge between fintechs and the enterprise in terms of meeting the requirements of financial institutions.  For fintechs, collaborating with Oracle is becoming an excellent way to complement their strength in innovation with the breadth and trusted stability of Oracle’s customer base.  Lastly, many fintechs are benefitting from the flexibility Oracle provides to run cloud services within bank data centers, a differentiator that appeals to a financial sector that’s increasingly concerned about data privacy. Invest and Change the Market Oracle’s fintech ecosystem collaborates in a variety of ways. Some members focus on changing the market, others on pure technology investments or marketing initiatives.  Selected ecosystem partners participate in industry councils, innovation summits, hackathons and open banking workshops.  These gatherings all tackle specific themes like platform banking, security, enterprise monetization, at different levels: market, regions and opportunities.   From an enterprise platform innovation perspective, fintechs have been able to obtain tangible benefits from their collaborations with the Oracle startup and scaleup programs, as well as structured go to market programs as Oracle partner for the more mature fintechs. Finally, Oracle has been co-investing with fintech firms in joint marketing programs, publication in the fintech catalog and social campaigns. Monetization Monetization for all participants is an important ambition of the Fintech Innovation Program.  That’s why the focus on business models is always part of a fintech relationship. Monetization of capabilities can take several forms for fintechs that have found a business model with Oracle. Oracle offers several types of self-service sales programs, and all are publicly available to our customer base.  Fintechs that have found a business model integrating to one of our SaaS applications can provide a pre-integrated software module in the SaaS app marketplace.  There is even a NetSuite-marketplace for SME customers, that has now announced that banks will be allowed to appear on the marketplace. Other fintechs find a business model in running on the Oracle cloud and inheriting all its autonomous and enterprise capabilities.  These fintechs can monetize through the IaaS marketplace and are invited to provide self-service learning, demonstration and -soon- deployment capabilities through Oracle’s JumpStart program. A classic but still powerful approach is to set up sales enablement for Oracle sales teams.  This ranges from use-case driven promotion of fintech capabilities to go-to-market programs for fintechs that have reached enterprise readiness on Oracle Cloud.  Oracle is also regularly consulted to curate a list of fintechs that answer to a customer’s functional, innovation, and enterprise needs. The ultimate form of monetization is of course when fintechs succeed in collaborating with Oracle sales teams in real opportunities.  Oracle supports these sales cycles with incentives and joint selling approaches. Next Steps Oracle regularly runs onboarding programs for fintechs.  Read up on the programs and reach out through http://bit.ly/gfsi-assets.

There’s been a flurry of speculation around the impact of fintechs on the future of the financial services industry. The promise of transformative technologies, the demand for smart, digital services,...

Financial Services

The Future of Financial Services Is Already Here: Singapore Fintech Festival

By Mark Smedley, Vice President, FS Industry Solutions Going to the Singapore Fintech Festival? Good. Staying up to date on the latest services and transformative technologies is more important now than ever, because the future of the financial services industry has never before been so uncertain. Distribution has changed from a vertically integrated model to a digital presence model. Fintech organizations are creating entirely new types of services and changing customer expectations. Big tech companies like Amazon are now essentially becoming banks themselves, partnering with the likes of JP Morgan or others, and odds are that together these collaborations will yield far more customers than your firm. And it doesn’t stop there, the phenomenon is only growing: WeChat is becoming a bank, and it has more than 1 billion active monthly users and 14 billion corporate accounts.  Ant Financial grew out of AliPay and is now the 10th largest bank in the world by market cap… bigger than Goldman and Barclays combined. Faced with unprecedented innovation and scale, financial services companies must ask themselves what unique value they will be able to offer moving forward. Oracle will be exploring these all important questions at the Singapore Fintech Festival 2018. Our focus is on the future of the industry, and we’re putting on two can’t-miss events that you’ll want to attend. First, though, here’s what makes Oracle so different from other companies that will have a presence at the festival: We’re here to collaborate with you, not compete with you. These days, with so many companies going into the banking business, you can’t be sure who’s going to be your competitor tomorrow. Not us. We’re here to help you transform. And transformation is necessary, because delivering financial products the way it’s always been done soon will not be viable. FSI organizations will have to automate the back office, create and sustain a digital presence to be accessible at the customer’s convenience, shift to digital platforms, dial up security, and expose core services to digital distribution and products. Here’s how Oracle can help: Lift and shift current processes onto more efficient and ubiquitous cloud platforms Fire up innovation by connecting financial services firms with certified FinTech partners who can radically and reliably transform processes for regulation, compliance, onboarding, and other key activities Prepare financial services businesses to adapt to and anticipate the huge changes coming in the next five years. Here’s a great example of how we can help companies succeed: We recently announced availability of the Citi and Oracle ERP Banking as a Service (BaaS) Connector. Now, using the CitiConnect® application programming interfaces (APIs), Oracle ERP Cloud customers can connect to the suite of Citi Treasury and Trade Solutions. This enables easy integration with Citi’s core treasury management functionality, which currently allows payment initiation and is soon expected to extend to transaction status inquiry and balance inquiry. Citi wins. Oracle customers win. And that’s our model for the future of financial services. Come learn more about what the future looks like at these sessions: Oracle and B-Hive Partnership: Meet the Experts: Nov 12 – 14, 12:00 – 12:30 The Future of RegTech Nov 15- 16, 15:00 – 18:00 Looking for a quick and reliable way to innovate? Come to the B-Hive. Oracle and B-Hive are paving the way for digital transformation in financial services through a growing innovation partnership designed to accelerate startups and scaleups that solve real digital challenges for incumbent banks. Oracle works with fintech organizations to improve their reliability and integration with Oracle infrastructure, and then curates the best of those organizations, connecting them with financial services businesses that need their innovative new technologies. The focus is on monetization for all participants in this ecosystem and faster, better ways for financial services firms to implement innovation. The Accelerated Evolution of the Bank: Nov 14, 16:00-16:45 What does the future of regulation look like? These experts will tell you (and maybe scare you). Is it game over for traditional banks? What makes your services unique? What about social distribution and scale? We’ve lined up three experts who will be sharing their provocative points of view in what promises to be a fascinating panel discussion. Come hear from compelling industry leaders including Devadas Krishnadas, Founder and CEO of Future Moves, Ketan Samani, Vice President of Consumer Digital at Singtel and Fabian Vandenreydt, Executive Chairman at B-Hive in this engaging session. We’ll follow up this session with RegTech Symposium, co-sponsored by Singapore Fintech Association, featuring a variety of cutting-edge fintech partners and solutions at 80 Robinson Road Fintech Hub, Nov 15th and 16th, 3–6pm. Come learn how accelerator B-Hive and our full panel of RegTech companies (featuring Datarama, Indigita, Novastone, Know Your Customer, Difitek, Merkle, Daon, Pole Star, Blockcerts, and Netguardians) are offering innovative solutions for all aspects of regulatory compliance, including identity management, on-boarding, monitoring, detection, reporting, and process controls. Register to attend We look forward to seeing you at the Singapore Fintech Festival! This event could radically change your business—and help ensure its survival.

By Mark Smedley, Vice President, FS Industry Solutions Going to the Singapore Fintech Festival? Good. Staying up to date on the latest services and transformative technologies is more important now...

Fintechs and Financial Services Firms Collaborate for Greater Success with Oracle’s New Business Model

By: Rochelle Brocks-Smith, Director, FS Industry Solutions Open banking and digital transformation are especially hot topics for financial services firms and fintechs today—and moving faster than the pace of change is essential to competitive success. Financial services firms once looking to navigate digital disruption on their own, are now looking to collaborate with fintechs known for their speed of innovation social expertise and ability to optimize the user experience. However successfully monetizing and scaling a business in the new financial services digital economy can be challenging. Oracle, with its secure, compliant cloud offerings, has in-depth experience of the enterprise requirements of financial services firms as well as the technical capabilities of fintechs. Building on that experience, Oracle is delivering a new Fintech Innovation Scale Up program that helps curated fintechs and financial services firms alike  to connect so they can develop, integrate, and launch new services much faster than before. It’s essentially an ecosystem of curated resources: Oracle identifies fintechs with proven innovation with customers , technological capabilities, user experience, and financial strength, and helps to match them with financial services firms looking to roll out new digital services requiring those specific technologies, so that they can get new services delivered to customers faster. Here are three can’t-miss sessions at Oracle OpenWorld that explore this new model for open banking and digital transformation, and explain how financial services firms can seize a competitive advantage by leveraging Oracle’s global fintech ecosystem. Come check out  these presentations, learn new insights from your peers and start accelerating your own organization’s path to success. Citibank Partners with Oracle to Transform the Corporate Payment Experience [BUS6551] Monday Oct 22 3:45-4:30pm, Park Central (Floor 2) Metropolitan III This presentation provides a great example of what success looks like when a large financial services firm works with fintech partners through the Oracle Open Banking platform to get real business results. You’ll hear how, as its commercial banking client’s take their business to the cloud, Citi is actively pursuing partnerships to simplify the payments process for clients connecting to Citi. The primary objective of the partnership with Oracle is to enhance client experience by removing friction in the onboarding process and enabling Oracle ERP Cloud customers to seamlessly transact payments using Citi-Oracle ERP Banking as a Service (BaaS) Connector. The joint solution on Oracle Cloud Marketplace and Oracle’s Open Banking is the result of a partnership between Citi and Oracle, with a goal of simplifying treasury operations. This session will show case the need for collaboration between large institutions and the Oracle ecosystem to be successfully meet the evolving customer experience expectations in commercial banking. How Fintechs Are Accelerating the Path to Digitization [BUS6873] Tuesday Oct 23 12:30 – 1:15pm – Park Central (Floor 2) Metropolitan III If you’re part of a fintech, you know a shakedown is coming. More than 7,500 fintech firms around the world have raised nearly USD $110 billion in capital—and most of them are not going to make it. Success depends on achieving the right product-market fit, overcoming the high cost of attaining scale, and finding and aligning with the right partners—quickly. Oracle can help you go to market faster with its Fintech ScaleUp program. In this session, five enterprise-class Oracle Enterprise Fintech firms describe how Oracle is helping them accelerate their path to digitization and monetization with transformational technologies delivered on Oracle cloud. These cutting-edge organizations are driving innovative solutions in areas including biometrics (Daon), institutional payments (Baton Systems), discovering and building new unbounded blockchain networks (HACERA), blockchain and Oracle ERP integrated trade/working capital management (TradeIX), and cognitive bank (Unscrambl). Driving Banking Digital Innovation with the Oracle Fintech Innovation Program [CAS6368] Tuesday Oct 23 5:45 – 6:30pm, Park Central (Floor 2) Metropolitan III Financial services institutions and fintech firms understand in general terms the value each can provide. However, growth will depend on the ability of financial services firms to identify specific and relevant partnerships based on success criteria, including founding team engagement, financial stability, business use case relevance, and enterprise-readiness of fintech technologies. This is where Oracle comes in, using its deep technology and business expertise to match them with fintechs that have complementary products and experience. Oracle helps make these connections through the Oracle Fintech Innovation ScaleUP Program accelerators, such as B-Hive Europe, which will be represented in this session. Whether your part of a fintech or a financial services firm, come learn more about this model and how it can benefit your business. This session will include a  panel discussion between Oracle, Accelerators (B-Hive) , Fintech (Difitek) and the Citibank to expore how some of the challenges that fintechs and banks face in co-innovating  and shed light on strategies to adopt Fintech at scale Don’t miss these insightful sessions. Join us at Oracle OpenWorld 2018 and register today.

By: Rochelle Brocks-Smith, Director, FS Industry Solutions Open banking and digital transformation are especially hot topics for financial services firms and fintechs today—and moving faster than the...

Bank Revenue Management: driven by data, or going on guesstimates?

Blog Authored by Akshaya Kapoor, Senior Director, Product Strategy, Oracle Are billing and pricing mechanisms falling behind the rest of banks’ digital stack? To fully realize the benefits of their investments in the digital customer experience, financial institutions must also merge customer data with a more fluid, forward-looking approach to how they manage revenue and price their products. By doing so, they can not only ensure more stable and resilient revenues in the long term, but also personalize what is arguably the most critical element of the customer experience: how much they pay, and when. Dynamic pricing for dynamic businesses Despite broad moves towards customization across the financial services industry, few institutions so far have adopted an equally flexible approach to billing and pricing. In most cases, fixed fees and commissions are still set based upon the bank’s general assessment of what customers may be willing to pay, or the market rate set by its competitors. These traditional pricing models don’t usually account for the huge amounts of customer data that are already beginning to personalize almost every other area of the corporate banking experience – potentially causing banks to miss out on opportunities to better service those customers and seize greater revenue and market share in the process. Banks should consider applying the same data and analytics technologies that they already use elsewhere to how they bill and price products. This would not only allow them to more accurately define and optimize pricing to achieve the highest possible level of profit with each customer. As businesses grow, their financial service requirements also evolve – sometimes extremely rapidly, as in the case of everything from fast-growing start-ups to larger enterprises undergoing sudden mergers or acquisitions. A more dynamic, data-driven approach to pricing can identify not only the right products for those changing needs, but the right price based on the customer’s financial history and current situation. That should ultimately translate into more products and services sold, in better alignment with customers’ unique and ever-changing requirements – a win-win for both banks and the businesses they serve. Centralize to customize For this to happen, financial institutions will need to begin centralizing their billing, pricing, and general revenue management systems – moving away from traditional departmental siloes as quickly as possible. Only by converging their pricing and billing functions, and removing the redundancy that exists across different departments, can banks hope to both gain a full picture of their customers and co-ordinate pricing efforts for the best possible experience. When they do so, banks will also find it increasingly straightforward to calculate and forecast revenues from each customer; a centralized revenue management platform also paves the way for further innovations, such as real-time billing and automated, rule-based pricing, that can simultaneously enhance banking revenues and customer satisfaction. Traditional “guesstimates” of the optimal pricing point can no longer function effectively – not least because market and individual customer demands shift so quickly as to render any such guesses almost immediately redundant. By extending their data and analytics capabilities from the front-end customer experience into the realm of billing and pricing, banks can take the guesswork out of their revenues and better align their profit models to real, often surprising trends in demand. Ultimately, such dynamic pricing systems should seek to strengthen the relationships between banks and their customers on which long-term profits and growth – for both sides – are founded. Discover how banks are extracting greater value from pricing to billing through collections by implementing a complete platform for end-end revenue management. Find out how at www.oracle.com/goto/sibos 

Blog Authored by Akshaya Kapoor, Senior Director, Product Strategy, Oracle Are billing and pricing mechanisms falling behind the rest of banks’ digital stack? To fully realize the benefits of...

Financial Crime and AML Compliance

Financial Compliance: the foundation of banks’ customer experience?

Blog Authored By Sunil Mathew, Vice President, FCCM and Big Data, Oracle The strength of banks’ compliance offerings will increasingly correlate with the quality of their customer experience. By investing in faster, more accurate compliance systems, banks can not only reduce their liability in the case of financial crimes or money laundering – which has, in cases, stretched into billions of dollars of punitive measures – but also improve the fundamentals of customer service and engagement. From bottleneck to accelerator Compliance often comes as a speedbump to real-time payments, data sharing across services, and other core elements of the open banking environment that banks must now operate in. Banks face rapidly rising levels of regulatory complexity both locally and globally, with traditional methodologies of risk assessment under increasing pressure to provide intelligence of greater accuracy and timeliness than ever before. That typically translates into more and more time spent analyzing larger and larger sets of data – which in turn threatens to throttle the agility of the bank’s services and overall customer experience. How can banks achieve even more rigorous standards of governance without compromising their fidelity and the reputation they hold amongst their customers? They may consider adopting new anti-fraud or AML platforms which combine real-time monitoring with increasingly sophisticated analytics, data visualization, and AI or machine learning capabilities. Doing so will help them to automate the detection and streamline the response to potential criminal or noncompliant events with heightened speed and accuracy that constantly improves over time. For this to happen, banks should focus on centralizing or otherwise consolidating data from their core banking systems: the deeper the data sets available for these systems to analyze, the more precisely they can identify potential risk factors and refine the criteria they search for. Banks cannot achieve an optimal experience for their customers without first tackling the speed and accuracy of their compliance solutions. Businesses will inevitably question their trust in any financial institution without robust compliance and governance controls – something traditional banks still hold as an advantage over their less-established fintech rivals. In fact, banks would do well to treat compliance and governance as the foundation of their customer experience – one which, when improved, results in significant flow-on benefits across the organization. Compliance as the cornerstone The effects of digitizing compliance will be felt almost immediately by all a bank’s customers. Apart from faster transactions – essential for services like cash flow management, or credit approval – customers should also find that their regulatory and reporting burdens steadily decline. Smarter, AI-enabled platforms can significantly lower the incidence of false positives when comparing names or other identifiers, minimizing the disruptions caused to businesses by unnecessary audits or money laundering investigations. When data from those platforms is securely shared across the bank, customers should also encounter far less governance checks and balances, the sort normally demand by KYC standards or other mandates on customer identification. The greatest impact of digitized, AI-enabled compliance on customer experience is also the least visible. But while most businesses may never see the cases of fraud averted or financial crimes stopped, they will almost certainly notice the benefits of faster transactions and service levels with less onerous manual reporting and governance requirements. For now, relatively few financial institutions – including fintechs – have managed to strike the right balance between robust governance and speed of processing. Those who can accelerate their compliance solutions with data, analytics, and new technologies like machine learning will find themselves increasingly sought after by businesses looking to benefit from that enhanced customer experience – and even apply such capabilities to their own offerings. Join us at SIBOS 2018 for in-depth discussion into the role of data and AI in the fight against money laundering and financial crime – and the opportunities for banks as providers of this valuable compliance expertise. Take part in our upcoming executive luncheon roundtable session “Crack the Code” to understand ways to streamline and protect your organisation, by using machine learning and advanced analytics to discover patterns and turn raw data into a critical source of business intelligence. View more at www.oracle.com/goto/sibos

Blog Authored By Sunil Mathew, Vice President, FCCM and Big Data, Oracle The strength of banks’ compliance offerings will increasingly correlate with the quality of their customer experience....

Analytics

Six ways to shift gears and ramp up your innovation quotient at SIBOS 2018

Blog Authored by Parvez Ahmad, Director Marketing, Oracle Oracle’s innovation in financial services will be showcased at SIBOS 2018, where you can discover how technology is shaping the future of banking into a faster, more efficient and secure digital economy. From one-on-one meet-ups with our solution experts to discovery sessions to experience our demos, we’re looking forward to share best practices, connect, and collaborate on modern solutions for the banking world. At Oracle, we’re gearing up for the transition into a platform-centric, open banking environment – one which has major implications for the speed and customer engagement of corporate banks worldwide. Here’s what you can experience with us at SIBOS: Arrive in style at the ICC with a free Tesla ride This year, Oracle is offering SIBOS delegates free rides to the conference – and what better way than to arrive in an electric vehicle that doesn’t leave any carbon footprints behind? Simply tweet us on @OracleFreeRides to schedule a ride in a Tesla Model X – a more frictionless, efficient way of going places. Start your day at the 5km fun run Start your Wednesday morning fresh with a 6am fun run along Pyrmont Waterfront. Sponsored by Oracle, the sunrise route will start and end at the picturesque Metcalfe Park, giving you an opportunity to see the city from a different perspective before a busy conference day begins. The five-kilometer course is a great chance to get outdoors and network with other active delegates, so bring your running shoes and strap in for an early start. Sign up here. Reach for new horizons at the exclusive Dinner in the Sky Dine with us atop the iconic Sydney Tower, 300 meters above the heart of the central business district with 360-degree views of the city skyline. At this exclusive invitation-only event, you’ll meet and hear from Scott Farrell, senior partner at King & Wood Mallesons who has over 20 years’ experience in financial law and government regulatory across Australia and Asia. You’ll also get the opportunity to listen to Australian track cycling Olympian, Anna Meares, about the secrets to reaching peak performance and how to inspire great leadership under even the toughest conditions. Register your interest here. Meet with Oracle experts one-to-one at Booth I11 Engage in one-on-one meetings with Oracle experts at our exhibition booth for a discovery session and brainstorm on solutions and the technology enablers for corporate and business banking. Experience demos of our cloud-based platforms built on modern, open, and data-rich technology. Demos will cover a range of major flashpoints for today’s banks including virtual account management, real-time liquidity management, real-time payments, revenue and billing management, and risk and compliance in today’s heightened-security environment (including KYC and AML solutions). Keep up-to-date with industry trends Learn how to navigate the digital platform economy and the latest financial sector changes with our Power Up and Open Theatre sessions. The Power Up Sessions are quick 20-minute TEDx style presentations, while the Open Theatre will feature guest speaker Laura Misenheirmer from Wells Fargo who will be speaking on Payments Modernization: Responding to Market Events and Regulation Faster. These sessions will inform, educate, and prepare the financial industry in moving to analytics-driven platforms run on cloud technology and artificial intelligence. Shape the future of banking together with us Join us for executive luncheons and roundtable discussions on how adopting best-of-breed technology can help the financial industry overcome previously-intractable problems. Ask questions, network with industry leaders and discuss the role of data science and graph analytics in tackling financial crime. Our session “Crack the Code” will help you understand ways to streamline and protect your organisation, by using machine learning and advanced analytics to discover patterns and turn raw data into a critical source of business intelligence. Another session will be covering how banks can drive pricing & revenue assurance now and the case for change in a digital and real-time world as well as understand how moving to Cloud can accelerate ROI and lead to competitive advantage. These sessions will help industry players innovate and respond to market dynamics using fast, agile and secure digital platforms. Register your interest here. Say hello to us at Booth I11 on Level 1 @ SIBOS 2018, and discover our comprehensive and modern solutions for your business in the digital economy. www.oracle.com/goto/sibos

Blog Authored by Parvez Ahmad, Director Marketing, Oracle Oracle’s innovation in financial services will be showcased at SIBOS 2018, where you can discover how technology is shaping the future of...

Financial Services

Oracle and B-Hive Europe Join Forces to Accelerate and Monetize Fintech Innovation

Banks, insurers, and other companies in the financial services sector have invested heavily in innovation through various fintech initiatives for the past few years. Firms have become good at two-day hackathons, four-day proofs of concept, and press releases touting their cutting-edge services. But putting new capabilities in place and generating revenue from them has proven more challenging. Since innovation without monetization was not the point of the exercise, many are now questioning whether they’re getting enough return on that investment. Oracle believes European financial services companies can realize new revenue streams and higher returns from their fintech investments. All they need is a better ecosystem—one that helps match fintech companies with the firms that could benefit from their technologies. It would include an innovation accelerator and world-class infrastructure, and it would curate fintechs around innovation themes such as trust, open banking, talent, and so on. Plus, it would be based in a central location with a long banking history, a central location like Brussels. To help create that ideal ecosystem, Oracle recently rolled out its Fintech Innovation Program to Europe in conjunction with Brussels-based B-Hive Europe. This collaborative fintech platform brings together major banks, insurers, and market infrastructure players to work on common innovation challenges. The goal is to build bridges to the startup and scale-up community and also create a market where banks can offer capabilities in a modular way without having to own every individual component that makes up a service offering.   As B-Hive Europe’s first strategic cloud infrastructure collaborator, Oracle brings expertise to help fintech companies achieve higher levels of enterprise readiness. Oracle will be collaborating with B-Hive Europe to both measure the performance of fintechs and to help them improve their performance scores. Through collaboration, testing, mentoring, and a formal certification program, Oracle will be helping fintechs become more secure, scalable, and resilient—and help them prove it to tier-one financial services companies. Fintechs that meet Oracle’s standards will gain mentoring and insider access to the Oracle customer base of financial services industry customers, with Oracle providing referrals and invitations to show-and-tell days and webinars. Oracle believes monetization will flow when financial services companies become customers of fintechs and fintechs become channels for those financial services firms’ capabilities. As an example, when Barclays used Oracle’s Fintech Innovation Program to publish an open-API catalog for their PrecisionPay services to open its virtual credit card services on the fintech ecosystem, it dramatically expanded its channel. It became an easy default choice for companies building a new service offering with Oracle enterprise software and looking to include virtual credit card services as part of their new service. In another example, Oracle added open APIs for TAS Group services—including card issuing, network gateway, and card management—to the Oracle cloud-based Digital Innovation Platform. Oracle customers can now easily select the specific TAS Group services they need—accelerating TAS Group’s innovation and expanding the company’s customer base. Collaboration is key to B-Hive Europe’s success. At a recent panel discussion between representatives from Oracle, B-Hive Europe, and several fintechs, two fintech representatives, Mantica and TAS Group, met and have begun collaborating to build joint solutions on the Oracle Cloud. When big tech meets fintech in an international banking center like Europe, things start happening. Fintechs and financial services companies alike can build on Oracle’s Infrastructure-as-a-Service and Platform-as-a-Service cloud offerings to speed delivery of new services while mitigating innovation risk—and monetize joint innovations in a matter of weeks instead of years. In the near future, expect to hear more about new Oracle fintech initiatives in Europe in collaboration with B-Hive Europe.

Banks, insurers, and other companies in the financial services sector have invested heavily in innovation through various fintech initiatives for the past few years. Firms have become good at two-day...

Financial Services

Leaders and Laggards: Get Ahead or Get Left Behind

By Mark Smedley, Vice President of Financial Services Pressure on wealth and asset management firms to innovate is coming from all directions. With the choice to innovate or lose out to fintechs and other faster-moving competitors, firms need to identify key areas where emerging technologies can be best adopted to help them create a truly client-centric experience. In a recent report, Wealth and Asset Management 2022: The Path to Digital Leadership [i], EConsult Solutions explores some of the most promising areas to focus on as well as the costs of not moving fast enough. The firms that are leading in these areas are experiencing impressive results: an average 8.6% increase in revenue, an 11.3% increase in productivity, and a 6.3% increase in market share. For the laggards, the cost is high—nearly $80 million per $1 billion of revenue. For the industry leaders, cloud, artificial intelligence (AI), and blockchain are three technologies that are showing the most impressive results. Innovation Must Be Built on Solid Ground—in the Cloud The EConsult Solutionsreport identifies the foundational elements of a strong technology strategy. Of these, cloud is critical because a cloud-based platform facilitates the use of APIs, AI, blockchain, and robotics. When coupled with a data warehouse or data lake environment, these technologies make possible the delivery of innovative products and services, speed time to market for new offerings, reduce operating costs, scale easily, and deliver an extremely personalized client experience. But cloud is just the beginning. The Smart Money Is on AI AI may possibly be the biggest game-changer in this ongoing digital transformation. Digital leaders are using it to increase advisor productivity, improve portfolio management, detect and anticipate cybersecurity risks, and more. Charles Schwab is using natural language processing to create personalized experiences for clients, and to arm its advisors with information to help investors. AI can also drive internal change. The EConsult Solutions report predicts that, by 2022, robotics and AI will increasingly replace routine activities, including many areas of trading and back office operations. By taking away these more mundane employee tasks, firms will be able to direct their efforts to more creative applications that add client value. AI has already made inroads in replacing humans in high-frequency trading and some areas of portfolio management. AI is certainly a key factor in humanizing the client experience, but so it another technology that is still misunderstood by many: blockchain.        Blockchain Helps Create the Frictionless Client Experience       Blockchain has tremendous potential to streamline and simplify client interactions with their advisors. Because it’s a distributed public ledger that provides every stakeholder in a transaction a “single view of the truth,” blockchain can enable “smart contracts,” more transparency, faster transaction processing, and better data security. Since the blockchain ledger is encrypted, it can potentially replace many third-party intermediaries such as banks, brokers, or custodians for many different kinds of transactions or identity management—revolutionizing the whole financial services industry. Blockchain can also streamline the client onboarding process. If your identity is embedded in a block, then firms have immediate access to information that can verify your identity and credentials for fast processing. Other applications where blockchain has huge potential include reduction of counterparty, market exposure, and operational risk; and replacing the internal book of record for transactions and portfolio positions. It’s Not Either/Or—It’s Both/And Thankfully, technology can’t completely replace advisors. In fact, these new technologies offer them the opportunity to better serve their clients. Automated processes, customer insights, and market intelligence can enhance the human touch. Technology will also automate mundane tasks for advisors and other employees, which is definitely humanizing and liberating. But the digital transformation will also require a major culture change at organizations. Unless firms are willing to become extremely agile and foster innovation, they won’t be able to succeed. Digital Is Not an Option We can’t underestimate the risk of not adopting these promising technologies, or even waiting too long to make the move. Econsult Solutions’s report estimates a “laggard penalty” of up to $1.5 billion for large firms. Key to becoming a leader is staying ahead of the technology curve, and every wealth and asset management firm is taking steps to incorporate digital technology. The question is which ones will be able to take the lead, and which ones will lag behind. [i] Econsult Solutions, Wealth and Asset Management 2022: The Path to Digital Leadership. 2017.

By Mark Smedley, Vice President of Financial Services Pressure on wealth and asset management firms to innovate is coming from all directions. With the choice to innovate or lose out to fintechs and...

Financial Services

Welcome the Blockchain Generation

By: Sanjay Mathew, Sr. Director, FS Industry Solutions   While the Carolina Fintech Hub Generation Blockchain Challenge has come to a close, the opportunity to impact the future of multiple industries is far from over. Students participating in this hackathon were tested with real-world challenges: learning a complex technology on the fly, collaborating and making difficult choices within a group, and planning for contingencies when things didn’t go as expected. And yet these students rose to the challenge. For the 30 students on the 10 teams that submitted projects, the Blockchain Challenge was a chance to connect with industry executives and stakeholders in the North and South Carolina area. Participants took on a multitude of challenges, exhibiting qualities that are found in every successful entrepreneur, including the patience and perseverance to keep moving ahead and the discipline to keep collaborating and problem solving with their banking mentors and their Oracle support team. With access to the enterprise-grade Oracle Blockchain Cloud Service, student teams were able to take their ideas from business case to commercially relevant proof of concept with only two days of training. In addition to the experience, the connections, and the chance for a monetary reward, this generation’s entrepreneurs also learned valuable lessons from being hands-on with the process of applying blockchain technology. But the students weren’t the only ones learning. For those on the other side of this challenge—the sponsors who participated in mentoring student teams and judging the final results—this event provided an opportunity to give back to the community and foster emerging talent. But it was also a chance for the mentors to see what “thinking outside the box” looks like for the next generation and to reassess their organization’s own plans for transformation. For these companies, the Blockchain Challenge modeled a smarter way to innovate—a practical approach of engaging the academic community and partnering with technology leaders that together can jumpstart the next generation of opportunities.  Blockchain mentors from Oracle also enjoyed the fresh ideas and persistence exhibited by the students who were continually questioning the status quo—something that “mature” businesses sometimes forget to do. The young entrepreneurs didn’t take “No” for an answer and refused to be denied. Rather than being defined by project constraints, these future leaders broke through those constraints—often with the shear brute force of hard work, long hours, and a refusal to accept anything but success. Financial services, and so much more. The concept of blockchain as a distributed ledger for making and recording transactions is straight forward. It’s the unlimited scope for applications that’s causing heart palpitations in boardrooms around the world. It’s a technology that could affect—literally—everyone, but, acceptance in the financial services industry has been understandably measured. In fact, it may be that the acceptance of blockchain in other, less heavily regulated industries is key to accelerating its acceptance in the financial services arena.  “It will take a change in thought leadership within the industry to allow some of this technology to take hold,” observed one mentor from a leading national bank.   It’s that kind of change that’s been seen in the Blockchain Challenge. While sponsors of the first CFH hackathon were mainly from the financial services arena, the challenge itself was open to cross-industry submissions and produced a significant number of forward-thinking, viable business opportunities in areas such as energy, real estate, and healthcare, as well as financial services. Sudhakar Pyndi, Director, Enterprise Architecture at Ally Bank, a mentor and judge in the CFH Generation Blockchain Challenge was impressed by the level of hard work and dedication shown by the student competitors and sees a connection between the variety of applications and his own financial services industry. “It was good to learn about those kinds of applications as well. We’re learning a lot that could easily apply to our industry.” One mentor, impressed with both the variety in the applications and the level of excitement and commitment from the student entrepreneurs noted “There’s not just a showcase of talent there, but there’s a showcase of opportunity as well.” Most executives believe that blockchain will revolutionize the financial industry over the long run, but many believe it will take time for the technology to gain market acceptance. That’s consistent with an Oracle survey that shows investment providers plan to more than double their use of blockchain (from 15% to 31%) over the next five years. But the Blockchain challenge made one thing clear to competitors and sponsors alike: There’s no going back; there’s only moving ahead—either as a leader in the process of accepting and implementing this cutting edge technology or as a beneficiary of the results. The next generation is already there. The Generation Blockchain Challenge Hackathon shows that a future with blockchain is here. Now. And based on the results of this challenge and the capabilities of these young entrepreneurs, it’s time to for the rest of us to lead, follow, or get out of the way. ----------------- Learn more about the Carolina Fintech Hub Blockchain Challenge contestants, here.

By: Sanjay Mathew, Sr. Director, FS Industry Solutions   While the Carolina Fintech Hub Generation Blockchain Challenge has come to a close, the opportunity to impact the future of multiple industries...

Banking

How will Transfer Agency continue to be relevant in the current Age of Disruption?

With the profound changes happening across Financial Services due to rapid technological shifts, and regulatory reactions to various scandals, will Transfer Agency still be a function that is relevant to the industry? Transfer Agency has long been thought of as a cost of providing Fund Administration either in-house or through Third Party Administration, and the advances that are prevalent today can lead us to question if the process can be done more efficiently and cheaply than it is at present.  Banks and Asset Managers feel that the process is cumbersome and a ‘must do’ activity rather than a ‘want to do’ activity.  This view is further entrenched within Third Party Administrators who see Fund Accounting and Custody as profit centres, and who are ‘forced’ to do Transfer Agency to win mandates from various Asset Managers. Some are questioning if it is a function that will cease to exist[1] whilst others may look to see if it can be reduced or merged into another line of business.  What will the future Transfer Agent look like as technology continues to advance and people look to disintermediate traditional ways of doing business? Since the start of the new century the world has gone through an unprecedented amount of technological change which has impacted us in ways that we did not foresee. What were once seen as stalwarts of various industries are now no longer in existence. New companies have taken technology and applied it in new and imaginative ways to disrupt and even derail physical industries. At the end of 2000 we approached the end of the dot-com bubble as people rushed to all things Internet related.  Any company with an Internet address was hot property, irrespective of its business model and prospects. As history taught us many of these companies failed as the new technology was nascent and still to find its true calling, with entrepreneurs. Fast forward 18 years and now we see the benefits of the Internet; but most of us would not have anticipated that we would be consuming this through a ‘telephone.’ The advent of the smart device has enabled a wholesale and rapid change in the way we engage with each other (social media); acquire goods and services (Amazon; Alibaba etc.) and how we get information and entertain ourselves. The result of this has been profound with the world entering the Digital Revolution, akin to the Industrial Revolution, with its multi-faceted impact. The Age of Disruption is part of the Digital Revolution as entrepreneurs and others look to apply digital technology to all areas of our lives. But what does the technological shift mean for Transfer Agency, will it remain a function that is required?  Or will the advance in change bring about the end of the function as we move on to more efficient processes? It is important to remember that in of itself Transfer Agency can still be remembered as a book keeping process, wherein the Investors’ contact details, trades and holdings are captured and maintained.  Over time, as Investor and Asset Managers needs changed and the regulatory requirement increased the process became more complex and nuanced. Given its increasing maturity and presence, Transfer Agency has become another layer of intermediation between the Investor and Fund Manager. Whilst, within the Industry we see each Function (Custody, Fund Accounting etc) as a value add service it must be remembered that to the Investor these functions extract costs from the overall Investment. To maintain relevance and cost effectiveness, Transfer Agency must address many significant factors that impact its reputation as an unloved cost centre. This includes the speed and willingness to change; the product lines and investor types which are serviced; the underlying technology and ecosystem and the opportunity to provide an enhanced customer experience. By addressing these and showing the value, the function can bring value to the various stakeholders so that Transfer Agency can thrive and mature further. It is important to remember that it is the one place an Investor gets to engage with the Asset Manager and so offers an unparalleled opportunity to set the tone of engagement and develop the Investor relationship. The Transfer Agent that can show itself as a true partner to the Asset Manager by providing a leading customer experience with an ability to deliver on all the reporting and KYC/AML requirements will soon be seen as essential to the Asset Manager. Effective and efficient processing with the ability to be agile and responsive to Investor, Asset Manager and Regulatory demands will ensure that Transfer Agency can maintain relevance. However, standing still and maintaining relevance is something that Transfer Agency has being trying to do for the last number of years. Now is the time to realise that new, bold actions should be taken so that Transfer Agency is not consigned to the dustbin of history. As the millennial and digital natives become more engaged with the Asset Management industry and recognise the need to ‘save for a rainy’ day, so the Transfer Agency / Asset Management partnership that offers the best customer experience will continue to be relevant. The upcoming generation of Investors, be they Retail or Corporate, will expect to have a dynamic, flexible and ‘enjoyable’ investing experience! This presents a challenge to a function that moves at a glacial pace and frequently pays lip-service to transformation. Now is the time for Transfer Agency to grab the opportunity and show its willingness for quick and effective change. Many in the industry are consciously making efforts to investigate new ways of doing business in how they can advance themselves in the current market and showcase their innovation. However, the whole Transfer Agency needs to rethink how they operate to take advantage of the technology offerings so they can adapt, and survive. Only the bravest and boldest will then thrive. Nevertheless, this cannot be done on legacy systems that over time have spawned whole sub-ecosystems as tactical solutions were applied to maintain the BAU state. Putting a shiny Digital Front End, for example, onto this type of environment will not provide a strategic solution since multiple touch points will be required behind the scenes slowing the experience, potentially disengaging the very audience targeted for the Front End.  An area though which Transfer Agency can and should lead the way is in the servicing of Products and Investors.  The forward looking, dynamic Transfer Agent will realise that they can provide their services to a diverse range of Asset Managers and Investors for a broad range of Products.  Retail investors should be embraced (as it should be remembered that they are in effect the investors underneath the Institutional Investor) with a multi-channel offering on an agile platform. As millennials come to the fore for their future savings a staid Transfer Agent will find it hard to engage and justify their fees if they cannot service this new investor type. The Transfer Agent that can take its experience in fund servicing and apply to new product ranges (e.g. Pensions, ETFs) and additional services (such as acting as Distribution channel/Sub TA) will find opportunities in the market.  With the capability to service Mutual Funds, Alternative Investments and Pension & Insurance offerings through a single gateway, the next generation Transfer Agent continues to be relevant if the engagement process is effective.  To do this, Transfer Agents can evolve by moving away from legacy systems and infrastructure to a micro service architecture in a more streamlined environment. They can truly transform themselves and become a Digital Transfer Agent with the capability to service a wider range of products and investors at lower cost. As a function Transfer Agency will still be completed as it is necessary to keep a record of all Investors in a Fund.  The modern, forward looking Transfer Agent will not necessarily be what we see and are comfortable with today. To maintain relevance now and into the future, Transfer Agency has to embrace change and the transformative technology that is still in its infancy. In addition, the ‘sticky plaster’ approach to systems needs to be rethought and appropriate investment in modern IT system offerings must become the new normal. A cost-efficient function that can provide a streamlined, efficient service which fully engages the end Investor will always be seen as relevant. However, if we continue to wait for others to lead we will soon find ourselves looking back at history trying to understand why Transfer Agency is no longer required. This is an abridged version of an article that was first published in the Journal of Securities Operations &Custody, Volume 10 Number 2 by the same author (see https://www.henrystewartpublications.com/jsoc/v10) [1] “Why transfer agents should embrace an infrastructural future”; Dominic Hobson; http://cooconnect.com/dominic-hobson/why-transfer-agents-should-embrace-an-infrastructural-future

With the profound changes happening across Financial Services due to rapid technological shifts, and regulatory reactions to various scandals, will Transfer Agency still be a function that is relevant...

The Blockchain Generation: Creating the Future of Banking

By: Rochelle Brocks-Smith, Director, FS Industry Solutions Sanjay Mathew, Sr. Director, FS Industry Solutions   It’s one thing to be the master of your own destiny in your 20s. It’s quite another to tackle the challenge of redefining the future of financial services by mastering a cutting-edge technology like blockchain.  Yet that is exactly what students and recent graduates from the Carolinas in partnership with leading banks (Bank of America, Wells Fargo, BB&T & Ally Bank), Oracle SIA partners and Aurablocks are doing as part of the Carolina Fintech Hub Generation Blockchain Challenge.   Why the Generation Blockchain Challenge? The Carolina Fintech Hub, the sponsor of this blockchain event and an organization focused on accelerating the merging worlds of financial services and digital technology, hopes to inspire the next generation of leaders participating in this challenge with an opportunity to develop commercially viable and industry relevant blockchain projects. The challenge for students is to “imagine a disruptive use for blockchain technology” and present a fully working blockchain solution. Entries could win participants one of three monetary prizes and a chance to see their ideas brought to fruition and possibly to impact the course of the industry. The Challenge was officially launched on January 22, and 30 teams submitted their business cases before the February 25 deadline. On February 28, 10 teams—a total of 22 students—were selected to move forward into phase two, developing a proof of concept (POC). Students can explore any blockchain topic they wish as long as they are solving real industry problems that have commercial relevance to the sponsor companies.  Some of the final top 10 projects that were chosen for the challenge include projects like clinical trials record keeping, title and deed transfers, public health reporting, prescription fulfillment optimization, Know-Your-Customer/Anti-Money Laundering, trading of energy and oil, managing gift points and contract arbitration. The range of projects cover a great mix of blockchain project types from provenance tracking, marketplace disintermediation of middlemen, complex process optimization, records keeping and identity management.  You might ask why bank mentors are interested in such a vast array of cross-industry projects. The answer lies in the realization that to learn and innovate one must explore and learn from other industries beyond their own. That is when real innovation ignites. The top three winners will be announced on April 20th by a jury of industry experts. While close to 12 universities submitted applications for the challenge, the top 10 student teams that were selected to compete are representing the University of North Carolina/Charlotte and the North Carolina State University. Teams take advantage of training on cutting-edge technology and real world experience To help the 10 final teams speed development time and focus on their applications, they have been given access to the Oracle Digital Innovation Platform for Open Banking, along with extensive training from Oracle and  Oracle implementation partner Aurablocks, who conducted blockchain training at Raleigh and Charlotte for over 150 students. The Oracle open banking platform is a cloud-based open API based solution that can help accelerate the implementation of open banking ecosystems, connecting legacy core banking platforms with a variety of Fintechs and industry partners enabling rapid digitization of legacy customer facing processes. Teams will be able to use a full API stack, pre-integrated  with fintech solutions on Oracle’s open banking platform (e.g., example payments, machine learning, cognitive tools, biometrics,  bank account connectivity).The platform also a mobile development platform, UI tools, chat bots, development tools, and open source tools support with built-in Oracle’s enterprise-grade blockchain platform Oracle Blockchain Cloud Services. Access to this innovative platform will help the students marry their ideas with the latest Oracle and innovative fintech technology—technology that they would never have access to without the Generation Blockchain Challenge. They will also have the help of industry leaders from CFH supporting organizations including Ally, BB&T, Bank of America, Wells Fargo, Oracle & SIA partners who have volunteered to serve as team mentors and panel judges. Blockchain: The art of the possible Blockchain is a game changing technology that promises to revolutionize financial services. In a recent Roubini ThoughtLab report, “Wealth and Asset Management 2022: The Path to Digital Leadership,” 15 percent of industry leaders surveyed said they are currently using blockchain technology, and another 31 percent expect to be adopting it in the next five years—a 110 percent growth rate.    For the students involved in the challenge, this is a fantastic opportunity to learn more about blockchain technology and to help them develop their business and technical skills with the help of their mentors and access to Oracle’s advanced enterprise-grade blockchain cloud technology. At Oracle we hope to support these students in their endeavors to become the successful entrepreneurs and develop commercial banking and non-banking applications which may be applicable to millions of customers across industries globally. For more information read: Join the Blockchain Revolution Why the Future of Banking is Open    

By: Rochelle Brocks-Smith, Director, FS Industry Solutions Sanjay Mathew, Sr. Director, FS Industry Solutions   It’s one thing to be the master of your own destiny in your 20s. It’s quite another to...

Banking

Fintech & Digital Disruption on Transfer Agency

In today’s Technology and Business Landscape Digital Disruption is and has been a buzz phrase for many years.  In particular, we have seen the impact on Financial Services, as well as many other industries.  Nevertheless, in some of the more established markets and segments of Financial Services there has been a mixed outcome to the new digital age. Along with Digital Disruption there has also been much discussion for the past few years on the impact of FinTech within Financial Services. It seems Core banking is at the fore of this focus for both FinTech and Digital Disruption, such that the Transfer Agency space has not seen the full impact of the revolution.  Within Transfer Agency we have seen many companies choose to extend the lifespan of current, legacy systems.  However, as Fund investors have become more 'tech savvy‘, and the demand from Regulation continues to grow, many organizations now find that they cannot move forward as the market and their clients demand (see Fund Servicing in the Millennial Age).  FinTech companies can offer alternatives and we have seen impacts on established market participants.  Nevertheless, many FinTechs are not focused on the fundamental aspects of Transfer Agency and therefore they do not always cater to the needs of the key players.  The same is true for those offering a transition to the digital market.  However, it has been found that with the rush to be digitally ready many companies have not received the expected Return On Investment.  To be digitally ready you first need to be on a stable core platform that offers a global foundation for current and future needs.  This requirement is one of the strategic elements that any next generation system for a Transfer Agent should provide. We only have to look at the various banking groups across the globe who have struggled to add digital to their legacy core banking systems (see Outage for Bank following refresh) to see the impact of adding digital to legacy.  Those groups with a more robust and scalable platform have been more successful in their digital role out. So, will Digital Disruption impact upon us here in the Transfer Agency segment and if so how?  Will legacy systems be robust enough to handle the new digital requirement?  The TA industry is at a crossroads. When we look at the role TA plays in the funds industry, it is often seen as an activity that must be performed, but one that is rarely done with eagerness due to the perceived costs involved.  We know that regulators are placing significant challenges on all participants, but is this preventing a move to digital?  Within Financial Services and Transfer Agency (TA) many commentators have expressed themselves to be doomsayers, prophets or participators in the current vogue of technology speak.  Is Fintech the way forward or can incumbents use their current providers to move into the digital age? For many the burden is adding additional risk but moving forward with digital will, is there a regulatory hindrance that is inhibiting the move to digital in established markets?  Is regulatory compliance a smokescreen and do today’s Transfer Agents have more fundamental issues preventing a move to digital? To date we have not seen the expected Digital Disruption in the industry as incumbents and Fintechs have focused their attentions elsewhere.  However, I now expect this to change and the TA with the best technology provider will evolve to meet the market need for digital.  With a robust and scalable platform behind a modern TA, opportunities exist to improve revenue streams and take the market lead with a best-of-breed offering. However, as noted above, legacy systems are not necessarily capable of supporting an additional channel without a risk of further stability issues. These platforms have grown their own eco-systems to such an extent that they require ongoing maintenance to ensure a BAU state for the business.  The addition of the digital channel may, or may not, be the ‘straw that breaks the camel’s back’. So, is FinTech going to be the silver bullet for us in TA for digitisation?  When researching what is ‘Fintech’ for TA I was amazed to find that the search engines were returning results from 2008.  Is that true, if we type “Transfer Agency Fintech” the industry has not progressed in over 8 years, or has there been a period of stagnation? Whilst this is the case in Europe and the US in particular there is evidence that Fintechs and incumbents are successfully moving into digital in other regions (see Thai Bank plans for 2016).   I, for one, feel that here in Europe we have been slow to grasp the opportunity that digital presents. Consequently, as incumbent Fintech and other providers have been slow to move to digital, who will act as our disruptor?  Will there be ‘true’ disruption from a new source (be it a Fintech or a new entrant (eg Apple) or will it be the use of existing technologies in a new way? The area can provide our first glimpse of this disruption is technology that is already established and more than 20 years old, namely distributed ledgers.  The advent of Bitcoin (and associated Blockchain technology) has given this old concept a new lease of life. The idea we can take from Blockchain is that it offers the end investor a simplified experience when engaging with their service provider.  In turn the service provider will need to support this evolving technology.  To move forward then we need to look beyond our existing legacy platform, identify where simplification for eco-system and/or platform can take place.  We have seen that many applications have spawned their own eco-systems and customisations to meet the demands of a dynamic market and energetic regulators.  As such, these legacy systems are not in a place where they have the agility and ability to update quickly.  There is the need to have support (often critical life support) and costly deliverables to allow for the upgraded version to be delivered to the market place.  Is this suitable for those who want to move into the digital space? With a simplified enterprise wide system, it is much easier for the platform provider to react where needed, to service their partners by being engaging with their consumer and drive efficiencies within their business to keep costs down. We have, in Oracle, seen examples of success our customers enjoy now after simplification to a single global application.

In today’s Technology and Business Landscape Digital Disruption is and has been a buzz phrase for many years.  In particular, we have seen the impact on Financial Services, as well as many other...

Banking

Fund Servicing in the Millennial Age

Millennials comprise about a third of the global population and are massively impacting the way investments function. Since they’ve grown up as digital natives, they are certainly more inclined towards digital products, services, and lifestyle. They believe more in indulgence and direct control over things: no wonder then that trends like peer to peer lending and crowdfunding find greater resonance with this generation. The new modes of social interaction, comfort level with the latest technologies and confident vision towards investments that millennials present have been key drivers of recent innovations in the fund industry. Millennials are also more responsible and visionary investors when compared with their parents. They are 2x more active at sustainable investment than average and they not only invest based on their financial goals and requirements but also try to fit it into the larger scheme of things in terms of social, political and environmental implications. Impact investing is one of their favorite ways to plan money matters. The Shift in the Industry While millennials slide into the driving seat of the financial world, baby boomers are accessing their savings and investments to support their retirement plans. Regulations, on the other hand, are affecting all aspects of the industry right from fee structures to product designs to business models themselves. These developments have certainly been driving a massive digital shift in the fund management industry. This also means the way fund managers deal with customer interactions, loyalty and long term relationships will all change to a completely digitized, less time consuming and hyper-connected modus operandi. Several new age investment firms have started replicating millennial requirements into their products and solutions. Online fund selection, portfolio creation as per specific buckets and maintenance is now nothing new. But in the future, fund managers will need a truly digital approach to anything that is distantly related to fund management. According to a research by PWC, technology will be one of the key influencers in the fund servicing market and global investable assets for the asset management industry will increase to more than $100 trillion by 2020. This means that a large volume of fund transactions will rely on new age technology, innovative and connected systems and smart front to back integrations. A Digital Heavy Future Awaits Us According to a research by PWC, most of the fund management companies would have hired a chief digital officer by 2020. While currently, most asset managers are not much digitally involved apart from maintaining a website, by 2020, most of them will be involved digitally through social media, mobile phones and other digital media. Big data, in future will play an important role in helping asset manager understand the requirements of their customers and offer products and services on the right channels at the right time. It will also help them price products in a more relevant manner and offer a more coherent servicing. In an industry that has been oversupplied, differentiation leveraging technological advancements can make a huge difference. It is not a coincident then that the world’s largest asset management firms have been shopping robo advisor firms. One of the latest trends in this market is the entrance of new players from other industries who are heavy on customer data. Since there is a huge gap between the consumer requirements and the way the incumbents service them, there is a huge opportunity for new players in this market. Use of self-service portals with great customer experience, and use of chatbots and automated advisors are some of the leading examples of how a digital shift is a prerequisite in the industry. This will not only increase the speed of servicing but will also free up the precious advisor time for more high priority customer interactions that need personal attention. Asset Management Systems of Tomorrow In order to gain cost efficiency and better revenues in this context, fund servicing firms need to choose their technology provider after doing a thorough requirement to capability mapping. The requirements of asset management firms might vary according to their size, market, and business model. The asset managers of the next generation will certainly need technology platforms that can facilitate their short term and long term business objectives. They will need: Segmentation of their customers based on behavior on social platforms, previous records and future career and personal goals. Digitally enabled prioritization of clientele as per their net worth and lifetime value and optimization of resources accordingly Channel agnostic marketing and communication to percolate across segments of focus in the most timely and relevant manner An automated fund servicing system that gives the fund managers the scope to learn from the past and grow fast. A truly digital customer experience layer and a digitalized backend in order to ensure a seamless servicing and a great customer relationship lifecycle. Fulfilling these requirements will not only need a scalable solution but will require the use of the latest technologies such as artificial intelligence and machine learning. A global vendor with localized focus and an eye to the future might prove a good partner in this journey to digitization. Is your technology vendor supporting your journey to true digitization? My colleague Shalu Upadhyay and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and shalu dot upadhyay at Oracle dot com            

Millennials comprise about a third of the global population and are massively impacting the way investments function. Since they’ve grown up as digital natives, they are certainly more inclined...

Analytics

The Time to Explore Machine Learning is Now

Over the years, we have become increasingly dependent on technological advancements. Almost all aspects of our lives - the way we communicate, the way we shop, and the way we bank are all impacted by technological advances. Innovations are underway to improve standards and build consumer friendly products. Take for example the mobile phone industry which has evolved significantly over last 10 years and has come up with innovative ways to make communication simpler, by creating products like WhatsApp, real time video calls, games etc. Similarly, Artificial Intelligence (AI) is a technological advancement that is making an impact on the banking industry. Many organizations are already exploring ways to remain ahead of the competition and increase their standing as innovative enterprises. If banks are to remain competitive they need to take into account consumer lifestyle and behavioral changes that are defining today’s value propositions and design around artificial intelligence to deliver relevant services. According to Efma, “AI presents a huge number of opportunities for the banking industry, who, when able to exploit their growing data repositories, can better meet regulations, increase their bottom line, improve customer experience and more.” In broader terms, artificial intelligence is the ability of a machine to act like a human being by gathering facts about a situation through sensors and comparing them with stored data and making decisions based on what it signifies. Voice and visual recognition followed by machine learning are the most commonly used AI solutions across industries. Movie recommendations by Netflix, product recommendations by e-commerce retailers like Amazon, Alibaba and Facebook's ability to spot our friends faces - are all early examples of machine learning. And Google's self-driving car is becoming a classic case study. A self-driven car is not programmed to drive, it learns by driving millions of miles on its own and observing how people drive. Machine learning can be useful especially in cases involving large dynamic data sets, such as those which track consumer behavior. When behaviors change, it can detect delicate shifts in the underlying data, and then revise algorithms accordingly. Machine learning can even identify data variances and treat them as directed, considerably improving predictability. These exclusive capabilities make it significant for a broad range of banking applications. Banks can use machine learning across the front, middle and back office, in functions ranging from customer service to sales and marketing to fraud detection to securities settlement. They can identify or even prevent fraud by deploying machine learning to look into patterns in payment transaction data like for credit cards to spot anomalies or inconsistencies, in middle office functions. There are many other areas in the banking ecosystem where machine learning can add substantial value: Creating New Sales Opportunities – It opens doors for cross selling and up selling to by developing deeper insights from evaluation of customers’ needs and usage patterns. Organizations using machine learning can increase existing customer revenue by 10-15%. Not Letting Customer Go - As machine learning monitors customer behavior deeply, it can forecast if there are any risks of losing a customer and can enable banks to quickly act on retaining them. Media sentiments, demographics and site behaviors play a very important in predicting such activities. Organizations that use machine learning can reduce customer attrition by around 25%. Automating Customer Services – Cognitive machine learning helps organizations automate their customer service centre and lower servicing cost, enhance system performance, improve customer experience, enable faster responses and reduce risks. Today there are multiple virtual assistants available that use deep learning and natural language processing to understand and interact the way humans do. Reducing Bad Debt – Machine learning can build dynamic models which can segment delinquent borrowers and identify self-cure customers enabling organizations have better collection practices. Organizations using machine learning have reduced their bad debts by 35 – 40 % already. Reducing Price Leakage – Machine learning can certainly help in eliminating price leakage and billing errors by applying advanced analytics. Improved customer segmentation and appropriate pricing models can help organizations achieve 10 – 15% more revenue. Technology is transforming the way consumers behave and as seen above it is most evident in the banking industry. Machine Learning can revolutionize payment operations by creating insights from large datasets and forming various patterns, correlations and provide informed decisions in real - time.  Reduced operational cost, improved compliance and better productivity which in turn leads to higher revenue are few benefits that banks can derive out of machine learning.   Despite these benefits, organizations do not exhibit complete trust in machine learning. It must be noted that 60 years ago when calculators where introduced they too were not trusted. And in some cases when organizations do take up machine learning, they expect instant ROI. This however, is not realistic, you need the right talent, right tools to develop the right approach and harness the potential of machine learning. It is evident that machine learning is here to stay, and is impacting a large number of industries, and the banking industry an early adopter. This trend is expected to propagate exponentially in the future. However, it is important for organizations to establish a clear vision and strategy, and embrace this trend to be winners over the next ten years. My colleague Parul Jain and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and parul dot jain at Oracle dot com

Over the years, we have become increasingly dependent on technological advancements. Almost all aspects of our lives - the way we communicate, the way we shop, and the way we bank are all impacted by...

Banking

Exerting a Gravitational Pull - Singapore Fintech Festival 2017

Mark Smedley, VP FS Industry Solutions, Oracle Sharon Tan, Strategic Marketing Lead, Oracle Financial Services By: Mark Smedley and Sharon Tan The recent Singapore Fintech Festival 2017 revealed the power of gravitational pull - where the strength of the force increased exponentially as objects moved closer together. The festival successfully pulled together market resources into close proximity. We see the community mobilized - financial instuitions and start-ups alike with a mission mandate to solve a series of 100 banking problem statements. Here’s our take on what’s generating the gravitational pull: 4 value propositions and takeaways dominating the FinTech and Innovation landscape.   Consumers in Orbit: Omnipresent Service Triggered by Open APIs Gravity is a force of attraction that pulls objects into its orbit. We’ve observed that the model is shifting from push to pull as banks are looking to a strong API strategy to avoid being ousted out of the consumer ecosystem or orbit. The ‘digital switch’ to omnipresent service experiences has been triggered by the leap forward with Application Programming Interfaces (APIs), Open banking and the rise of FinTechs. As part of the broader Smart Nation agenda, Singapore is taking the lead in the Fintech 2.0 Journey and moving at full speed to an open API economy. Banks are looking to build strong API strategies to integrate and deliver services and data to the digital economy with the right devices and user interfaces, which enables them to retain or regain relevance to their customers Local banks are taking open architecture seriously with the likes of DBS Bank launching their API developer platform with more than 170 APIs and over 50 successful collaborations. At Oracle, we’ve built our Open Banking Platform with 600+ Open APIs from Oracle, in addition to a growing list of FinTech and FSI APIs, which the Oracle ecosystem participants can use to collaborate and deliver innovation at scale. Force Generators & Multipliers: FinTechs & TechFins Non-banks are leading as a force generator and multiplier. Besides FinTech start-ups, TechFin giants like Tencent, Ant Financial and GAFA (Google, Apple, Facebook, Amazon) are all vying to provide payments, lending or other financial services. FinTechs at the festival like Creditease,  Flywire, Blocko and Trunomi are actively filling in the gaps of underserved market segments. They are jumping in to adopt the latest in Blockchain, Data Analytics and Artificial Intelligence and cognitive learning to solve front-end customer problems. We also see new business models emerging around the needs of millennials, overseas workers and small businesses etc.   Our Oracle team had the privilege to mentor 2 of the Top 20 Finalists of the Global Haccelerator -- ERNIT, the world's first smart piggy bank, and SnapCheck's blockchain-enabled Digital Checking Platform.  Both leveraged our Open Banking and API Platform to build and present market-ready solutions for the Financial Industry.   In the new age of collaboration, banks are increasingly realizing that to succeed, they must adopt the habits and culture of digitally native companies: opening up the banks’ APIs to the FinTech community, pursuing agile development, or hosting hackathons to foster intensive digital collaboration. The Force Awakens: Artificial Intelligence, Machine Learning & Data Analytics On the back of MAS launching a S$27 million Artificial Intelligence & Data Analytics Grant (a part of the S$225 million Financial Sector Technology & Innovation Scheme) the industry is turning their focus to follow ‘smart’ money. Real-world use cases to solve demonstrable problems using artificial intelligence and machine learning were fleshed out amongst the banks, FinTechs and technology leaders present. This represents an inevitable progression as FinTech capabilities mature and traditional banks and financial services companies seek to commercialize the best innovations available. In our view, the use of AI to properly harvest data to directly support business strategies, creates a data-driven culture that can readily operationalize customer data. The key is to bring digital and data together to build customer experiences and sustained digital interactions, resulting in customer insights that foster superior acquisition and loyalty. Exerting Influence: Collaboration is the key Gravity exerts influence even at distance. Collaboration will be the gravitational force driving partnership, solving key problems such as Financial Inclusion, Regtech, Cyberfraud etc We see headway in the industry led by initiatives around cross-border payments such as Project Ubin, a move to share blockchain source codes to spur innovation and the linking of PayNow in Singapore and PromptPay in Thailand. Another great initiative that will deepen financial inclusion and digital financial services is the launch of an industry sandbox: ASEAN Financial Innovation Network (AFIN) - a platform for ASEAN banks, microfinance institutions, non-banks and FinTechs to partner. Reaping benefits of collaborative influence will come when banks start to create the right affiliations, cross-sell opportunities, sub-brands or alliances to knit together an ecosystem to capture revenue and valuable data. We are in a perfect storm of innovation and digital-driven transformation in Financial Services. It was a tremendous opportunity for all participants to share leading ideas and for many players to unveil some of their latest, most exciting projects to capture the imagination of the industry. As we wrapped up a very busy week at the Singapore Fintech Festival, we have never been more excited about Oracle’s direction and potential to support the commercialization of technologies to help financial institutions achieve their digital strategies, and to help leading FinTechs gain relevance. Follow us on Twitter @OracleFS and LinkedIn to find out more. For more information: please visit https://cloud.oracle.com/financial-services https://www.oracle.com/pressrelease/oracle-open-api-banking-solution-101617.html https://www.oracle.com/sg/startup/index.html

Mark Smedley, VP FS Industry Solutions, Oracle Sharon Tan, Strategic Marketing Lead, Oracle Financial Services By: Mark Smedley and Sharon Tan The recent Singapore Fintech Festival 2017 revealed the...

Banking

Is Blockchain a disruptor or enabler for Transfer Agency?

We have been awash in the Financial Services over the past several years of hearing of the next big technology that will change the face of the industry, and Transfer Agency has been no different.  In the year 2017 it is the turn of Distributed Consensus Ledger Technology (also known as ‘Blockchain’) to set pulses racing and generate many reams of papers from various parties.  Whatever happened to Big Data from 2016? The principles behind Blockchain are over 40 years old, however with the increase in computing power and its use behind Bitcoin, the industry is now awash with articles and Proof of Concepts purporting to show the benefits of this technology.  There is no doubt that the Financial Services industry suffers from many inefficiencies and some of these can be addressed by the Blockchain. Transfer Agency can be seen as a line of business that would greatly benefit from the disruptive capabilities of Blockchain.  This is particularly salient as Transfer Agents and Asset Managers are still paying lip service to the idea of moving forward with best of breed technology when they are inhibited by legacy systems.   The impact and cost of legacy should not be underestimated as the advent of FinTech’s and their nimbleness means existing players must decide whether they are to adapt and compete with respect to their core service offering or wither and die.  Transfer Agents need to determine if their existing environment can support growth and provide the flexibility for the changes that are coming? The opportunity to seize the moment and have a truly value add service for Asset Managers and Investors is now.  This can only happen, though, for those Transfer Agents are not weighed down by Legacy; who have a holistic view of their approach and whose technology is modern, flexible and reliable.  With a modern platform at a Transfer Agency’s core innovation is possible ensuring that the modern Transfer Agent is relevant to the market. The acceptance of legacy is not an option as the next generation will wonder why the industry exists since the stock answer is “we always did it that way!”.  Does this latest and possibly greatest fad in Blockchain now provide the impetus to change our approach to TA and the platform that underpins it?  Or will Transfer Agents continue down the well worn tactical path and bolt on another ‘patch’ to an already complex and overstretched ecosystem? So, what are the pain points that Blockchain can truly eliminate?  Will it be challenges in a process such as Reconciliations (for example) or can it be truly disruptive enough to negate a Function such as Transfer Agency?  Further we need to question whether the disruptive use of this technology will come from within the industry or from a new source, namely FinTech?  Can we, that is Transfer Agency, as an industry, really disrupt ourselves or do our own vested, legacy interests win out? There is no doubt that a ‘Blockchain’ can and will have an impact on the industry and the potential number of players within it.  Discussions continue to take place around some of the main challenges with Blockchain as there will be a need for everyone to agree on a standard or agreed protocol.  Consensus is fundamental to the technology underpinning Blockchain.  Given the industry’s traditional inability to agree locally, regionally and globally to the same protocols I would expect that there will be several variants of a Blockchain that will come into existence over the next few years.  It is not likely that there will be a single global standard Blockchain which will negate the need for Transfer Agency, as some as suggesting. So how does Transfer Agency look forward and get ready for Blockchain disruption? This where the likes of the Hyperledger consortium can help due to the consortium's approach to Blockchain using open source collaboration, modular architecture, horizontal/cross-industry technology support, and support for enterprise needs (see Oracle joins Hyperledger). Many firms are engaged in Proof of Concept tests to understand and determine what processes can be improved by Blockchain.  The Proof of Concepts have shown benefits in small scale lab conditions where environments are controlled.  An example of a successful Blockchain use case in a lab environment utilising Hyperledger is the ability to send/receive instructions on the Oracle TA platform via Hyperledger and thereby managing the single source record. Questions are arising though as to whether these tests can scale to real life scenarios.  The amount of data and processing power to provide a reliable and robust solution is not currently within reach, but it may not be that far off into the future for the industry to ignore.  (It is also worth noting that there are stability issues within Bitcoin where outages of up to hours have occurred, how will this impact Asset Servicing in a real world scenario?) As noted at the start of this blog, we have been, within the Asset Servicing arena, inundated with articles, papers and announcements of Blockchain breakthroughs, but like the overall Financial Services industry we have yet to see Consensus on the way forward.  Indeed, we have even seen the banks join and leave various Blockchain consortia over the past couple of years as they individually seek to identify what is the best way forward. Not only does the industry have the consensus issue to resolve there is also the challenge to decide which process to apply Blockchain too.  There have been numerous commenters highlighting the benefits that Blockchain will bring.  Two processes that are often seen as ripe for disruption are Settlements and KYC / Client On-Boarding. The ability for an Investor to open an account in a fraction of the time that it currently takes has to be a welcome development as it improves the experience of engaging with a Financial Services Provider let alone the costs involved for the Transfer Agent, which for account opening can be significant. This brings us about to Transfer Agency as the process of being a Transfer Agent is seen as a necessary but unloved part of the Mutual Fund cost chain.  Asset Servicers and Asset Managers get little value out of the function and at best see it as a Cost Centre that must be endured.  TA’s do provide a number of key procedures however their true value is not seen in the overall package that is offered. The cost of legacy systems within Transfer Agency means that the ability to respond to the latest developments in Financial Services is exceptionally slow and reinforces the view of an industry that does not add value.  This can have its benefits (as fads can pass by without any effort or effect) however when a true disruptor arrives Transfer Agency will not recognise it and so TA itself will be passed by. To remain relevant Transfer Agents should look at themselves and determine if they have a best of breed system that is based on an Open Architecture.  With this bedrock they are in a position to assess and react to the current dynamic in technology.  Does the latest discovery mean the Transfer Agent is potentially loses its relevance (Blockchain) or can it ride the storm as legacy gives it a buffer (Big Data)? At this point in time we know Transfer Agency is inefficient with previous technological changes not fully embraced to make a difference.  As Blockchain looms large is now the time for Transfer Agency to recognise the Disruptor and look within itself to see if TA can survive on its legacy environment?  Either way Blockchain will impact us all, the how and when will only be confirmed in history.

We have been awash in the Financial Services over the past several years of hearing of the next big technology that will change the face of the industry, and Transfer Agency has been no different.  In...

Banking

Harnessing Oracle Digital Experience Solution for Customer Delight in Lending and Leasing

Digital originations are evolving According to a research*, the average number of connected devices owned by a typical digital consumer is 3.64. Digital ways of consumption of products and services is clearly here to stay and it is only going to get more sophisticated in future. As automation becomes imminent across lending products, a digital lending system becomes an obvious choice for the aspiring leaders in the industry. Since the origination process is the first touch point to the customer, lending institutions need to evolve out of their silos into an integrated system that offers a personalized origination experience taking into account customer relationship as a whole rather than one product or service at a time. This means an intuitive process with data based underwriting and centralized documentation of customer details. Not only this, all these features need to reflect in a truly user friendly user interface. Here are the key areas which, if digitized, can change the lending and leasing businesses for good: Social integration: 64% of consumers aged between 18 and 34 claim to use social login because they dislike spending time to fill out registration forms. Consumers of this age clearly prefer integration to their social sites which helps them save time and complete mundane tasks conveniently. A truly digital origination system needs to identify this very need and integrate the popular social media options into their interaction layer. Customer data centralization: Digitally savvy lending consumers expect their financial institutions to know them well. This means re-entering the information already shared is a big reason for repulsion. Lenders need to let data flow freely between departments and across stakeholders such as dealers and brokers so that consumers are not hassled. Workflow automation: In order to achieve maximum productivity, the lending systems need to offer the flexibility of customization of workflows. They should be able to use a default origination workflow or customize the workflow in line with the lending institution’s existing processes. Localization: Political, social and economic changes in each geography have a ripple effect on the way people consume financial products. From regulatory requirements to consumer rights protection acts, the adherence to local standards makes up for a substantial part of business operations. Digital channels and delivery modes require to be designed in accordance with local requirements. Integration across entities: Lending institutions work in tandem with consumers, dealers, brokers and other third party agencies. In order to offer great customer experience, flow of information needs to be seamless across all these entities. The Oracle Advantage  Oracle Financial Services Lending and Leasing integration with Oracle Banking Digital Experience makes it easy for lending and leasing institutions to connect customers to their lending applications in a truly digital manner. The option to login via social media accounts such as Facebook and LinkedIn provides speed and flexibility to end consumers and simplifies the login process. The digital experience layer also offers ways to fetch basic customer information from previous records of existing users to prepopulate to the loan application. The Payday Loans application tracker makes it easy to keep a track of the uploaded documents and proofs and also the application status. Applicants can fill and submit their application at their convenience with the ‘Save Application’ feature. All necessary information in addition to the prepopulated fields is collected at the applicants’ convenience. Once origination workflows have been finalized they can be applied to products depending on the best workflow that suits the product. Through this integration, the financial institution administrators get the choice to customize the origination workflow to suit their unique requirements. This can further be customized based upon the country, nature of product and other specific information needed.   The pre-integration of Oracle Banking Digital Experience with Oracle Financial Services Lending and Leasing provides a futuristic approach to lending and leasing. It not only bestows a digital skin to the origination process but also makes the entire process less cumbersome and more consumer-friendly.  My colleagues Shalu Upadhyay, Unmesh Pai and I  co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at oracle dot com, shalu dot upadhyay at oracle dot com and Unmesh dot pai at oracle.com Sources: *Globalwebindex

Digital originations are evolving According to a research*, the average number of connected devices owned by a typical digital consumer is 3.64. Digital ways of consumption of products and services is...

Analytics

Relationship Pricing - The Key to Valuing Your Customers?

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services This is the third and final blog in a series relating to a joint study between Oracle and Efma, which led to the production of a White Paper: ‘Making Innovation Pay’. An important conclusion of the study was that a move towards revenue management is essential - and that as part of this, relationship pricing is one of the key elements in achieving sustainable, long-term profitability and revenue assurance from innovation projects. The report comments: “For many banks, profit margins are still below pre-crisis levels. The solution lies in the development of innovative, personalised offers combined with other revenue-enhancing initiatives such as relationship pricing.” Pricing is one of the ‘Four Ps’ that Oracle believes are essential for building a digital enterprise (and which equally apply to successful innovation) - Product, Price, People and Place. As we talked in the last blog, it’s all about offering the right product, right place, right price and at right time. McKinsey says “Successful banks can adopt a sophisticated pricing strategy that can add 6 to 15 percent to the bank’s revenue, deepen relationships with valuable corporate clients, and encourage performance improvements throughout the organization” Adopting an effective pricing strategy Traditionally, banks have opted for a product-based pricing approach. Strategy should cater from one time buyers with a “Click-buy-bye” offer to regular buyers with dynamic pricing that help & incentivize customers with a “click-buy-buy” offer.  However, in recent years they have been gradually moving towards a more relationship-based pricing approach, along with subscription models, discounts and product bundles - but progress in this area is still slow. Another recent White Paper by Oracle and Efma, ‘Responding to change – how are banks using information and pricing strategies to boost profitability?’, suggests that only 36% of the banks surveyed have adopted true relationship pricing. The paper goes on to say that a poor pricing strategy will ultimately lead to lower profits and that ideally, relationship-based pricing should go hand-in-hand with innovation. This was confirmed by the current study, which observes that a relationship-based pricing strategy can make a real difference to a bank’s ability to respond to change. Relationship pricing involves offering customers more favourable prices on a particular service because of the customer’s purchase of other solutions from the bank. For example, a customer with a bank account might be given a more favourable mortgage rate. The ease with which a bank can set these more personalised prices can be helped by a further strategy – the aggregation of accounts. This enables the bank to see the total customer relationship, which in turn enables it to offer the customer discounted prices as a reward for their loyalty in different areas. Applying a relationship-based pricing strategy One of the difficulties of adopting a relationship-based approach to pricing is that it can be difficult to assess the true value of the relationship with the customer. The key to effective relationship pricing is that it should be applied holistically – and this in turn means that banks need a better understanding of their customers. To understand a customer fully, a bank needs to able to look at different aspects of customer behaviour so that it can recognise, anticipate and influence it through personalised pricing. Banks have a huge amount of customer information – but they need to choose and use the right data so that they can run analytical models that will enable them to develop the right pricing strategies. Finally, they also need to use dynamic pricing and agile strategies that are aligned to critical customer events and milestones (such as buying a house or car or getting married). Unfortunately, most banks that are moving towards a relationship-based pricing approach only apply this strategy to specific products or occasions. This type of piece-meal approach is unlikely to have a lasting effect. One example quoted in the report is that of a person who is both a retail customer and also a small business owner. If the bank is able to view the total relationship, it can start to set prices that reflect the true value of the customer. The report sums this up by saying: “One reason why some of the innovative programmes don’t pay off is because they are designed without paying attention to relationship pricing. The programme is designed for the experience but not for the pricing. So it might involve a good idea but it doesn’t make money because the bank hasn’t identified how to price it effectively.” The White Paper concludes that pricing represents a missed opportunity for banks – but there is still time to grasp this opportunity and develop a relationship-based pricing strategy that is also aligned with their innovation strategy. In this way, they will be able to start to make good progress on the arduous but worthwhile road to sustainable profitability. To see the full report on Making Innovation Pay, please visit  

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services This is the third and final blog in a series relating to a joint study between Oracle and Efma, which led to the...

Analytics

Revenue Management – The Secret Behind Successful Innovation

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services In a previous blog, (‘Using innovation to achieve sustainable profitability’), we looked at a recent joint study between Oracle and Efma, resulting in a White Paper entitled ‘Making Innovation Pay’. One of the key recommendations that emerged from the study was the need for banks to take the topic of revenue management far more seriously. This is an area that is often overlooked, but can be a critical element in achieving sustainable revenue assurance and profitability from innovation programmes. As mentioned in the previous blog, banks recognise the importance of innovation and yet fail to take real advantage of new ideas and technologies and therefore don’t achieve sustainable profitability from their innovation programmes. As McKinsey says “Relationship managers could take up to two days to perform pricing calculations that could be completed in just 20 minutes with technological support”. An effective revenue management strategy can make a significant difference in this area. Revenue management is a topic that is taken very seriously in most other industries – indeed, many have whole departments and senior executives that focus specifically on this subject. This doesn’t appear to be the case in the financial services sector – and could be one reason why banks are lagging behind other industries in terms of making innovation pay. How Revenue Management Works So, what are the key principles behind revenue management? It’s a discipline that enables a company to see its revenue flow as an end-to-end process, with the aim of achieving the optimum customer lifetime value. It involves the application of analytics and operational and systematic controls. It aims to understand the behaviour of customers and their perception of value – leading to product prices that are more closely aligned with individual customer segments. Ultimately, effective revenue management will ensure that the right product is sold to the right customer at the right time, via the right channel, and for the right price. In terms of innovation projects, it also means that banks need to have a clear idea of the expected impact of a new project before they embark upon it. Oracle believes that “organisations that have a centralised discipline of revenue management with their innovation programmes typically enjoy a much higher and more sustainable pay-off.” In other words, revenue management is an essential element of being able to make innovation pay. One of the key aspects of revenue management is relationship pricing, a topic that will be covered by the next blog in this series. Developing a revenue management strategy So, how can banks start to develop more effective revenue management strategies? The White Paper identifies seven vital factors: The need for banks to stop talking about customer centricity and to start putting it into practice. The need to improve the customer experience by starting to look at things from the customer’s viewpoint and by understanding their needs. The use of new techniques, such as behavioural economics and gamification, to delve deeper into how and why people interact and engage with the bank. The use of customer-based relationship pricing capabilities that are both adaptable and scalable. The use of relationship-based, personalised offers for driving cross-selling. The active involvement of managers and employees in optimising both top- and bottom-line metrics. Embedding, testing, learning and developing the system. This last point is particularly important – banks need to experiment and learn from those experiments if they’re going to grow. There is plenty of opportunity for innovation – in developing the right products for the right customers. As mentioned earlier, one of the key areas of innovation that can make a real difference is pricing – and this aspect will be covered by the final blog in this series. Meanwhile, Oracle has been busy developing a range of solutions that it hopes will play an important role in the future of more effective revenue management. To see the full report on Making Innovation Pay, please visit 

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services In a previous blog, (‘Using innovation to achieve sustainable profitability’), we looked at a recent joint study...

Banking

Using Innovation To Achieve Sustainable Profitability

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services It’s no secret that profit margins for most banks are still at or below the levels that they had reached before the financial crisis hit some ten years ago. At the same time, the banks recognise the importance that innovation will play in a rapidly changing world. This will need banks to think differently. It will help bank introduce cultural change that will help them be an effective player in the new Banking ecosystem. They can use these challenges as additional streams of revenue. However, they are failing to use innovation effectively in a way that will achieve lasting revenue assurance & profitability. When it comes to innovations, banks need to build an appetite for “Return-on-Failure” (ROF), rather than unilaterally measure each innovation idea against “Return-on-Investment” (ROI). As a result, Oracle has conducted a study in conjunction with Efma, the independent non-profit making association that provides information and networking resources for financial institutions. The study involved online discussions between members of a Steering Committee of senior financial executives, chaired by Oracle; a few in-depth interviews with some of these members; and a detailed questionnaire sent out to select Efma members. The results of the study are available in a new joint report: ‘Making Innovation Pay’. As one of our esteemed EFMA Steering Committee members said “Banks know what to do, but don’t know how to do”. Are banks taking innovation seriously? This was one of the key questions that the study sought to answer. Firstly, why are banks failing to use innovation to boost their profit margins in a sustainable way? The results of the survey underlined the fact that they feel that innovation is important: 90% of those taking part said that they were likely to increase their investment in this area in the future. However, other results suggest that this might sometimes be a half-hearted approach, as only half of the banks surveyed currently have dedicated Innovation teams. The financial services sector often lags behind other industries in terms of a real commitment to innovation. Reasons for this include the historical emphasis on product silos; complex legacy systems; a lack of integration between channels; and dispersed and encoded business rules. One particularly important aspect is the high level of risk aversion in many banks. The study found that over 80% of banks are either moderately or very risk-averse. Despite this, all of the banks that took part in the survey said that they would probably consider unconventional ideas and over half would follow these through in some way. Current innovation programmes are focused mainly on issues such as increasing customer engagement; building brand value; and developing incremental improvements. Customer engagement was the area where there was the greatest gap between the focus of the programme and its resulting effectiveness. The types of innovation covered include payment enablement, chat-bots, artificial intelligence, biometrics and blockchain. The study looked at innovation measurement – an area where banks again lag far behind other industries. It can be difficult to measure the success of an innovation programme, but this is vital if a bank is to know how a new project has affected aspects such as the customer experience and the brand value. These measurements need to be built into new innovation programmes before they start. Again, in terms of measuring the revenues and profits derived from innovation, banks find this hard and often avoid it. However, 63% of banks said that innovation programmes had led to increased revenues - but only 42% said that this was reflected in higher profit margins. Perhaps one of the most important elements that should be measured is the customer lifetime value, although some banks have difficulty in understanding this concept. Fintechs – friends or foes? At least some of the innovation taking place in banks is a direct result of the perceived threats from fintechs or other new entrants. But should fintechs be seen as ‘the enemy’ or could they in fact become a useful partner in future innovation strategies? Although very few of the survey participants had an established programme involving fintechs, over 85% saw the value of developing partnerships with them and were at least exploring the possibilities. A few have already been working on some joint innovation projects and, although many banks are still wary of such partnerships, it seems that this could herald a new focus for banks in the future. Oracle has been working with both sides to try and help them to align their objectives. Banks can benefit because fintechs have a lot to contribute, as they are both more creative and more agile than banks. They have more new ideas, cutting-edge analytics and are good at online acquisition. Meanwhile, the fintechs can benefit from the far larger customer base and depth of experience of the banks. The study shows that banks need to take innovation seriously. It must become an integral aspect of normal banking life. It needs to draw in people with different types of expertise and different ideas. However, support from senior executives – including the CEO – is crucial to its eventual success. Two other critical factors that emerged from the study (and which will be explored in future blogs) are revenue management and relationship pricing. To see the full report on Making Innovation Pay, please visit 

Blog By: Akshaya Kapoor, Senior Director, Product Strategy, Oracle Financial Services It’s no secret that profit margins for most banks are still at or below the levels that they had reached before...

Banking

Are you Ready for Digital Lending and Leasing ?

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services They share their cars with unknown people, communicate every emotion through selfies, and their followers on social media define their stardom. They are radically different from previous generations. According to a research, nearly 40% American millennials interact more with their smartphones than they do with any human being. This generational shift is driving a monumental change in the way products and services are consumed across industries. Cab service providers are now digital wallet providers and telecom companies are functioning as banks that don’t expect their consumers to visit their branches, in fact most of them don’t even have any physical branches. What do these socio-technological patterns mean for businesses? For one, they need to move away from the approach of perceiving gadgets as mere ‘channels’ to looking at them as quintessential elements of their consumers’ lifestyles. Addressing the elephant in the room Since millennials are the largest of all generations in terms of size and they embrace digital technologies as their second skin, digital platforms cannot just be one of the many outlets of lending solutions. Digitalization needs to become an intrinsic value to the way lenders interact with their audience. So how do they do it? What do their consumers want and how can lenders offer exactly that? I want everything here and now! In 2015, the New York Times reported a surge in same day delivery orders. The digital native population is more comfortable paying extra for same day delivery than waiting longer for their orders to arrive. Speed is naturally one of the biggest drivers of their buying decisions. Let’s say a millennial wants to apply for a loan. He can always use a P2P lending app or a marketplace site to find out what the best deal is. A regular lender with a traditional setup is not even there in the picture since it involves visiting a branch or calling a representative in order to negotiate: there are chatbots to do that work. Instant gratification is one of their most important factors while buying a credit product. Loan origination systems need to talk to the consumers in their own language. This means that from credit decision making to the application processing, the entire procedure needs to be lightening quick- at least quicker than the closest competition. This is only possible if the underlying technology facilitates fast processing with smart business insights and real time reciprocation of consumer choices. The later stages in the lending lifecycle such as updates and payback also follow the same rules of the game: wait is not appreciated and instant servicing is the biggest differentiator. If it was not shared, it never happened Sharing platforms such as Snapchat, Facebook and Instagram are the primary touch points millennials use to connect with the rest of the world. In fact, the application of social platforms goes beyond just connecting: they now make their buying decisions based on reviews by others on these platforms. 68% of them say they won’t make a major decision until they have discussed it with trustworthy people on their social platforms. Lending Club, the peer-to-peer lending platform, connects prospective buyers and sellers of credit products. All the borrowers need to do is post their requirements on the app and the befitting investors lend them money. This platform based social approach to lending is a more comfortable situation for the digitally savvy consumers. Investors on such platforms have a similar digital outlook as that of borrowers and hence are less intimidating than conventional lenders. It also makes more social sense because they are able to share their experiences and resources with the others. Josh Dykstra in his blog on Fastcompany mentions owning something does not mean much now unless it is used for defining what people can do with it, what they can tell others about it, and what having it says about them. Millennials have grown up to a sharing economy where everything is less private than it was in the previous generation. Their lending solutions also need to reflect this very concept through their digital systems. Ownership does not mean much, experiences do. They have seen their parents over the period of the global financial meltdown and hence believe things are momentary and experiences are forever. Three in four millennials prefer paying for an experience over a product. They opine social and experiential value for money are more important than belonging to things or things belonging to them. This essentially means that a product sold is not a guarantee of a happy customer. Their satisfaction index transcends into the overall journey as a lifecycle rather than a transaction. For lenders, this is an opportunity if they are able to convert every interaction with the consumers into a memorable experience. Providing variety of options is always one of the best ways to service. Whether it’s the frequency of installments paid or the channel of communication or the mode of repayment, the larger the number of choices, the happier the millennial consumers. According to a research, roughly three quarters of Americans now own smartphones and about the same proportion of them have broadband connections at home. Only the lenders who have capabilities to service loan consumers on digital platforms can monetize this situation. They not only need to offer the right mix of products and services at the right time, but also keep the customers informed about the entire process on their channels of choice while making the procedure interactive. This should be topped with the best prices based on the customer relationship and previous records. Servicing customers via digital channels will not only help lenders bring down the costs drastically but will also position them as the forerunners of the new digital brigade of lenders. You ought to know about me, everything, already. Traditional lenders rule out millennials as consumers because they lack proper credit history. Fintechs however are poaching these consumers early on in their lives by looking at other credentials such as an education from a reputed institute and a promising career ahead. Zestfinance, for instance, uses non-conventional ways of underwriting. They employ machine learning to analyze thousands of variables and gain insights into the vast amounts of data they already have in-house, such as customer support data, payment histories, and purchase transactions. The platform can also add nontraditional credit variables, such as how customers fill out forms, how they navigate a lender’s site, and more. The effect is such that a lot of big banks and lenders are losing their prospective customers to such fintechs simply because their understanding of their customers is context based. Fintechs are making use of the fact that they know their customers well enough! Digital technologies can also facilitate the minimization of delinquencies through better business intelligence and insights from consumer data gathered over the course of the relationship with the lender. Psychographic Conversion by AES Technologies, for example, is a solution that leverages user experience and behavioral psychology elements for making loan collections more intuitive. The solution takes into account the fact that loan collections is a crucial part of the lending and leasing business where knowledge of the customer base is extremely important: a badly managed call can ruin the relationship with the customers forever and a simplified transaction can build it for life. The right use of customer information should occur at the right time and this is only possible with digitalization of processes. Any kind of negotiation, resolution or pay back can happen with the proper bucketing of customer data. This can potentially change a process that is perceived as painful and uncomfortable by many to a memorable brand experience that can increase the net promoter score for lenders. If the complexity of the solution shows up on the surface, it’s not good enough Interactivity, intuitiveness and customization are the topmost criteria for most customers today. You cannot expect a millennial to walk to a branch when he has an option of clicking a button on the smartphone and downloading the statement. In fact, they now have access to apps that even tell them where their money could have been spent better than buying a credit product. The obvious derivation of these recent developments is the need for a robust servicing engine backed by futuristic technology. There is no room for lengthy processes and cumbersome offline protocols. There is a need to accept, process and decision credit applications in a paperless mode, with a single data entry process. Lending and leasing institutions should be able to provide seamless channel integration to ensure an application can be started and closed on different channels of customer choice.  Although a great lending platform is the one that makes use of relevant data to cater to the evolving requirements of the consumers, this should all be done in a manner that the consumer still sees things as if they were just one touch away. Take the lead, the race is on  We are inevitably entering an age when there are apps to tell us not to use apps while driving. Millennials are so addicted to digital technologies that there is a new social recommendation surfacing the marketplace: ‘digital diet’ which essentially means a monitored abstinence from all things digital in order to bring people back to at least a minimum level of human interaction. When such a generation is a major part of your target audience, it becomes imperative to conform your products and services to their sense of consumption. A sturdy lending and leasing engine with a modern architecture can go a long way in this context. My colleague Shalu Upadhyay and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and shalu dot upadhyay at Oracle dot com  

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services They share their cars with unknown people, communicate every emotion through selfies, and their followers on social...

Analytics

The Reality of Upgrading: Spinning Learnings into Opportunities

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. In my previous post, I discussed the key drivers behind an upgrade and how to determine if upgrading with the existing system provider can be considered a fresh install or a true upgrade. Despite the budget increases, which includes additional personnel, anti-money laundering (AML) efforts remain suboptimal in many organizations. Often, AML initiatives and systems are deficient from the onset. Among the many issues, institutions fail to incorporate lessons learned from past errors into their new Transaction Monitoring (TM) programs in an appropriate or timely manner. Hence, an upgrade project can be a good opportunity to learn from previous challenges, factoring in those learnings as part of the new system selection process.  This a not meant to be a comprehensive list of all factors that should be considered while choosing a system provider; however, these are specific points that were encountered in previous TM systems. Data: Developing a comprehensive set of data requirements to support an effective TM system will help identify data quality and architecture issues. Addressing these issues at the source system by changing operational procedures, implementing application controls (e.g., edit checks, validations) and dealing with system gaps can enhance operational efficiencies, allowing for better management reporting and improving the overall AML program.  This leads to some key questions specific to data: Does the new system provide better data provisioning ability, such as standard tools, to gather data from various sources to AML system? Is there data quality checks available as part of the standard offering that would help reduce data related risk? How robust is the data model if there is one available out of the box? Does the data model provide enterprise coverage for various products and business units? What is the vendor’s strategy to provide backward compatibility, which would be critical in the next upgrade? Does the architecture help you provide the must have data lineage? In the case of Big Data, is the vendor able to integrate with your data lake to gather data that would help reduce ETL effort tremendously? Enhanced Functions: In addition to key features, the upgrade project provides an opportunity to consider all prior wish list items. It is important to have a clear understanding of whether or not those wish list features are available as part of a standard feature or customization. Customizing those features will lead to additional project and IT risks and may not be available as part of the next upgrade. The goal should be to have these enhanced features as part of the standard offering as much as possible. Process Automation: Having an optimized investigation process can help reduce compliance cost tremendously; therefore, this upgrade project could be a great opportunity to optimize investigation processes aligned with your latest AML program as much as possible. They key automation areas that should be consider here are: The first step of the investigation process is assignment of cases to investigators after the cases have been generated. At this point, suitable scoring methodology can be incorporated to score the cases based on the financial institution’s risk portfolio and policies. Factors such as number and score of previous cases, associated products, suspicious activity type, etc. can be part of the scoring methodology. Cases can then be auto assigned to individual investigators or teams. Scores can also be used to derive case due dates. To get the complete view of an investigation, it would be useful to group cases with other cases.  Criteria such as customer IDs, other customer profile attributes (phone number, address, etc.), related accounts, etc. are some examples of cases that can be grouped automatically to avoid manual linking, enhancing the investigation process. Most of the investigator types go into collecting data from various 3rd party systems, depending on the financial institution’s number of 3rd party systems required to collect data, which can vary approximately from 2 to 10. Such information gathering stages can be automated as well, using relevant information that is automatically linked with the investigated case. This automation can also make information gathering more accurate as compared to manual search and linking. The last stage of the process is regulatory reporting, which mandates financial institutions to E-file detected suspicious activity. This can be another key area to allow for automated E-filing of suspicious activity much quicker (and perhaps more accurately). Platform Unification: Depending on your current state, different AML functions are supported through various silo systems, which increase data, regulatory, and IT risks. This new upgrade project allows for a more unified compliance platform, bringing various functions of the AML program (such as transaction monitoring, case management, regulatory reporting, MIS reporting, model validation, etc.) as part of one platform. Unification of financial crime and compliance platform can occur in a number of phases, and this can be a good opportunity to move towards this. Upcoming Regulatory Trend: All known and expected regulatory trends should be considered as part of all upgrade projects as well. Service providers committed to broader AML compliance areas and  keeping up with regulatory changes will provide the upper edge when there is a time to cater to that requirement. Some recent examples could be Beneficiary Ownership guidelines or Currency Transaction Reporting changes.  Reduced Maintenance Costs: As compared to the current system, the new system should provide more flexibility in terms of onboarding new suspicious detection rules, workflow configuration, MIS reporting, etc. From a technology perspective, the considered system should have better batch maintenance procedures with needed batch tracking capability, onboarding of new data and easy to maintain 3rd party system integration. Ease of onboarding of new business units in the future should also be considered. To summarize, there are plenty of areas that can allow for an improved AML platform and should be considered as part of the upgrade project instead of choosing the existing system provider to be the most effective system for you. In addition, all areas should be closely evaluated to understand the real benefit to you. It would be great to hear your experiences and perspectives on all the key areas that should be leveraged as learning from previous systems while working on an upgrade project.  To learn more, visit us at ACAMS.

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. In my previous post, I discussed the key drivers behind an upgrade and how to determine if...

Banking

The Reality of Upgrading: Fresh Installs vs. True Upgrades

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. A well-made transaction monitoring system is a critical component of an effective anti-money laundering (AML) compliance program. It supports efforts to combat money laundering and terrorist financing by helping financial institutions identify unusual or suspicious activity that must be reported to regulatory authorities, and aids law enforcement in tracking and prosecuting criminals involved in money laundering and terrorist financing. Due to intensifying regulatory scrutiny, the increasing sophistication of criminals and the rapid pace of technological advances, financial institutions are bound to update their AML efforts constantly; therefore, it’s not surprising that these organizations are increasing their investment in transaction monitoring (TM) systems. Maintenance, risk management and other costs related to AML compliance have climbed more than 50 percent in the last few years. With continued regulatory change and rapid implementation requirements, costs are predicted to remain high. In addition, institutions are upgrading their existing AML system every few years, which requires a massive number of manpower, money and time.   What is driving the upgrade? Outdated system: when the current system is not suitable to keep up with compliance needs, changing the outdated system is a gigantic investment. Clearly, if companies fail to embrace the new technology opportunities, they’ll face increasing costs for compliance while simultaneously decreasing their productivity, capacity and efficiencies. Regulatory pressure: when it has been mandated by regulators that there is additional work required and the best way to handle that work is to upgrade to the latest technology. It’s sink or swim for regulated institutions; either they adapt and introduce new technologies that allow them to be more nimble, flexible and productive, or they continue to use labor-intensive processes that will become increasingly cumbersome and untenable. De-supported by the system provider: when the current system provider is planning to de-support the version in use and the only way to get support is to upgrade to the latest version.   Most commonly, financial institutions are upgrading due to a combination, or all, of the drivers described above. Fresh Install vs “True” Upgrade Whatever the driver for upgrade might be, there are two options to take: 1) go with existing system provider to upgrade to the latest version or 2) explore other industry system providers. In most cases, the obvious choice is to upgrade with the existing system provider due to current familiarity with the system and vendor.  There is also a myth that contributes hugely to this obvious choice, which is the idea of upgrading with existing vendor seems somewhat easier as compared to installing a completely new system. It can be complicated to understand if an existing upgrade is equivalent to a fresh install. Below are some high-level points, which can be analyzed to get better clarity around such projects. Data Provisioning: Data provisioning should be available in the existing system and leveraged as part of upgrade. This means the ETL rules and the data available should be reusable for upgrades. This is a very important question to ask because data is the base for the entire system and if the entire data structure (data model) is going to be changed, then most everything beyond - data quality, detection rules etc. - will require significant work. Therefore, the first question is if the data model for the upgraded system is like what is existing or not?  In addition, all the data provisioning customizations such as ETL, data quality, and most importantly data model, should also be investigated in the version you are planning to upgrade. If these changes were included without the participation of the solution provider or if there were no standard guidelines for you to follow, then it is probable that such changes are not included in the discussed version. Behavior Detection Rules, User Interface and Workflow: Once the data model has been identified, the next stage would be to understand the rest of the components of a system, such as user interface, AML detection rules and workflows. The question that should be asked is if the AML detection rules and workflows from the current program are available as part of the upgraded system or do you require additional custom work? The most important component will be AML detection rules because if those are expected to go through rewriting, then that will require a whole lot of additional effort from model risk management, which is model validation and audit review followed by further review by regulators. Earlier Customizations: This will require two main stages of analysis: 1) Understand overall percentage of customization vs. standard features where the entire AML system can be segregated into two categories - custom build vs. standard product feature. Out of which all of the organization explicit customizations (specifically the ones driven by product gaps expected as standard compliance requirements) are done as part of the previous AML system should be analyzed to understand if those are available as standard features in the upgraded system or if it requires additional work to achieve those customizations. It is also a good time to go through those customizations and see if they are still applicable in the present setting.  2) All of the currently used standard features should be re-reviewed to make sure they are still supported by the solution provider because there is a possibility that those crucial features are unavailable in the up-to-date version. 3rd Party System Integrations: Another important aspect of upgrading that should be examined carefully is integration with various 3rd party systems (both internal and external) leveraged by the AML program for data acquisition and consolidations, such as customer screening, negative news lists, adverse media scan, credit reports, etc. The analysis should be to understand how much of the existing integration capability will be available as part of the upgrade. Are those available via solution provider or will be a custom work? After considering the above points, you should know if the next AML system is available as part of a standard product by the present solution provider or not. If the examination is pointing towards significant onsite work as compared to a prepackage solution, then it is safe to assume that upgrading to a new version with the existing solution provider is more of a fresh installation as compared to a true upgrade. The plan and risk associated with the project for new install vs. upgrade are completely different; therefore, it is critical to have a clear understanding of the project. On occasion, organizations ignore the above points and don’t have a clear understanding of the fresh install vs. true upgrade and continue using the existing system. However, it will be worthwhile to venture outside your comfort zone and explore the best options available to suit your organization’s compliance needs. Many firms have undertaken large-scale remediation programs while trying to upgrade existing systems and look-back efforts to achieve AML compliance.  A carefully designed, ongoing program can help assess capabilities against industry practices, identify strengths and weaknesses, and pinpoint needed improvements. To learn more, visit us at ACAMS.        

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. A well-made transaction monitoring system is a critical component of an effective anti-money...

CECL Challenges: The Changing Face of Qualitative and Environment Factors

Blog by Geetika Chopra, Senior Product Manager, Oracle Financial Services Analytical Applications. In my last post around the introduction of the CECL standard, I gave some recommendations on how to turn the challenges into business benefits.  Now with the CECL standards coming into effect soon, I’d like to address a specific key challenge that practitioners are gearing up to face: The inclusion of predictive forward-looking adjustments for reserve calculations. Though the standard does not prescribe any specific set of factors, if we look into the details given in the standard, some important points to note include: Historical loss experience is generally the basis for assessment of expected credit losses. This historical loss experience can be internal, external or both. Such historical loss experience should be adjusted for differences in current asset specific risk characteristics within a pool at a reporting date; such as: Underwriting standards, Portfolio mix, and Asset term. Adjustments should be made to reflect the current contractual term of the assets, or group of assets, when it differs from the historical experience. Adjustments should be done when current conditions and reasonable and supportable forecasts differ from the conditions prevalent during the period over which historical information was evaluated; such as: Unemployment rates, Property values, Commodity values, and Delinquencies. Such reasonable and supportable forecasts need not be for the entire contractual period of the asset or group of assets and the use of historical information beyond such a period is permitted. One important note: the stress on containing the forecast within a reasonable period, though prudent,  still leaves a lot of room to conclude and decide what a reasonable period is. Different factors can come with their own underlying assumptions of a reasonable period and it would be necessary for consistency to follow a standard reasonable period across the various factors. Though the Financial Accounting Standards Board (FASB) allows the use of external historical loss experience, we expect the use would be limited to Probability of Default (PD) models from external rating agencies and used mostly for corporate portfolios. The use of external data for the retail portfolio would be limited as these models are black boxes and are not open enough for auditor scrutiny.  The 2006 Interagency policy on Allowance for Loan and Lease Losses expects the institution to adjust its historical loss experience of its loan portfolio (assessed collectively under FAS 5) for changes in trends, conditions and other relevant factors that affect the repayment of the loan as of the evaluation date. The qualitative and environment factors that may cause the estimated ALL to differ from historical loss experience are: Changes in lending policies and procedures, including underwriting standards and collection, charge off and recovery practices. Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments. Changes in the nature and volume of the portfolio and in the terms of loans. Changes in the experience, ability, and depth of lending management and other relevant staff. Changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans. Changes in the quality of the institution’s loan review system. Changes in the value of underlying collateral for collateral-dependent loans. The existence and effect of any concentrations of credit, and changes in the level of such concentrations. The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio. The interagency statement issued in June 2016 states, “Estimating allowance levels, including assessments of qualitative adjustments to historical lifetime loss experience, involves a high degree of management judgment, is inevitably imprecise, and results in a range of estimated expected credit losses. For these reasons, institutions are encouraged to build strong processes and controls over their allowance methodology.” Hence, our understanding is that even though the parameters for qualitative adjustments remain the same, the process will undergo changes to include reasonable, supportable forecast and come under higher scrutiny with statutory auditors. Factors that are easier to predict include scale and volume of business, credit concentrations, change in terms of agreements, valuations of underlying collateral, changes in regulatory system and macro-economic factors. Analytical models and trend analysis can be reasonable evidence in support of such adjustments; but, factors like changes in lending policies and practices, changes in the quality of an organizations loan review system, changes in experience ability and depth of lending management and external factors such as competition are far more difficult to ascertain with reasonable forecasts and involve a higher degree of subjectivity. Unless the system of making these adjustments is itself highly transparent and subject to internal controls and managed with adequate internal reporting, auditors and other stakeholders would question the process. The Board has a much higher role to play here to ensure earnings management is ruled out for such adjustments. With higher shareholder activism, tougher whistle blower laws, and an environment for evidence and fact-finding, this needs to be addressed by creating adequate internal controls and processes, reporting and transparency around various assumptions and the need to maintain consistency within assumptions across running periods. As with any other accounting estimate this would need to be reasonably supported through audit evidence and needs to stand the test of time against any challenges in the future by a stakeholder. Most likely, best business practices and auditing standards would emerge over time, considering the same auditors audit various institutions. Industry forums will develop where finance professionals and auditors will exchange notes, leading to higher audit tests for these accounting estimates. What are you finding to be the most challenging element of CECL? I’d love to hear from you on this subject. I’ll be attending The Center for Financial Professional’s CECL 2017 Conference and would love to meet you to discuss further.        

Blog by Geetika Chopra, Senior Product Manager, Oracle Financial Services Analytical Applications. In my last post around the introduction of the CECL standard, I gave some recommendations on how to...

Banking

Measuring Up: Five key metrics to help banks measure their “Digital Maturity”

Blog by: Mark D. Atherton, Group Vice President, Oracle Corporation Digital disruption, fintech and emerging technologies have upset the status quo in banking. The conservative approach that served banks so well for so long could prove their Achilles heel in the new environment. Bank boardrooms are abuzz as they try to chart a way forward. And change will only accelerate as more institutions adopt emerging technologies such as artificial intelligence (AI) and blockchain distributed ledgers. The founder of the World Economic Forum, Klaus Schwab, coined the idea of the “fourth industrial revolution,” which is defined in part by its speed and its reach. The short version? It’ll happen faster and change more than the first three. And banks are among the most vulnerable institutions. If they don’t have a plan to measure, improvise and improve on their digital progress, they could lose revenue faster than they realize. A Common Measure of Digital Progress Here’s the rub: banks need new metrics because innovation is happening at such a tremendous pace. True digital maturity isn’t just about technology, it’s about transforming businesses so they can consistently keep pace with the changing market. Part of this process is coming up with meaningful criteria for measuring progress. After all, it’s difficult to improve if you don’t know where you stand to begin with. Of all institutions, banks should understand this. Yearly profit and revenue figures aren’t enough. Banks and other financial institutions need ways of measuring how well they’re adapting to digital disruption. The best banks are already benchmarking their progress. JP Morgan Chase is measuring the impact of digitizing each aspect of their business in its shareholder reports. The progress of digital engagement is now front and center of their agenda. One of our customers in Australia, Suncorp, measures digital engagement by a fine-grained analysis of logins across digital platforms. They measure the digital impact on the bank’s brand and progress across the digital ecosystem. They report to their investors on both profits and digital metrics. And the numbers are good. There were 63 million logins to its digital platforms, 5 million registered accounts and 55 million visits to its sites across brands. The Starting Line for Measurement – Key Metrics for Digital Progress Digital Engagement & Reach – Banks need to measure the extent and reach of digital engagement across their products and services. It is critical to measure progress based on customer’s ability and willingness to use self-service channels. Digitally engaged banks offer mortgage services, insurance, as well as investment accounts completely on digital channels and with complete digital process, cutting processing times from weeks to hours. To drive customer loyalty, banks need to constantly innovate. Savvy banks gamify their services, so that people will treat them like a financial Fitbit that lets users track their wealth. Pace of Adoption - Another measure is an institution’s ability to add a new customer entirely online and originate products digitally across the customer’s lifecycle. JP Morgan Chase, for example, now acquires 77% of its credit card customers digitally. The pace and readiness to adopt digital models shows a bank’s ability to cope with changing business models and disruptive market entrants. Depth of Data Analytics and Customer Insight – Banks need to measure and benchmark themselves very differently in the age of AI and Machine Learning. Customer data management and analytics need to be at the core of a bank’s processes and they should measure how real-time their decision making is, how data is shared internally – and that these systems are managed for optimum efficiency. Digital Enablement of the Workforce – A digital enterprise needs to be matched with a digital workforce. Technical skills are increasingly a core competency for workers in the finance sector.  A digitally mature organisation understands that progress is a continual process of improving the organisation’s capacity. Financial institutions need a clear gauge of their technical capacity, which means they need to remove inflexible processes and build a collaborative culture. Cross industry comparisons – Banks can also deploy traditional measures such as Net Promoter Scores to create cross-industry comparisons to see where they stand against leaders across Telco, Consumer Tech and other sectors. A Measured Digital Response Can Have Valuable Pay-offs While banks may seem to lag behind fintech start-ups on innovation and digital models, they also have some advantages that they can build on. They can partner with fintechs or buy them, and can capitalise on their already large customer base. The peer-to-peer payments market in the US is a perfect example. Zelle, which is backed by dozens of US banks, recently launched. It’s a strong product, and building on the major banks’ customer base, it’s expected to quickly overtake the market leader, PayPal’s Venmo. The rewards of measuring digital responses can be extraordinary. Research by Capgemini and MIT Sloan found that companies who understand the value of digital transformation are on average 26% more profitable than their competitors and have valuations that are 12% higher. Digital leadership can be measured, tracked and ultimately a bank’s level of ‘digital maturity’ is a critical gauge to sustainable growth.  

Blog by: Mark D. Atherton, Group Vice President, Oracle Corporation Digital disruption, fintech and emerging technologies have upset the status quo in banking. The conservative approach that...

Analytics

AnaCredit - Is it One regulation or Many? A look at the impact of National variations.

Blog By: Saloni Ramakrishna, author and senior director, Oracle Financial Services Analytical Applications. It depends on who is answering that question. Really!! It is a single uniform regulation at the ECB (European Central Bank) level with clearly spelt our coverage. To ECB’s credit they have given comprehensive implementation information through the detailed AnaCredit Reporting manual, part 1, 2 and 3. The information that they expect from all the participating NCBs (National Central Banks) is uniform and that is what is detailed in the manual. They however add that there is room for some national discretion (National Arrangements as ECB refers) with the National Central Banks (NCBs) on how they collect that information from their constituents. National Central Banks, that need to adhere to the AnaCredit regulation, have or will have a single uniform regulation for their constituents. Interestingly however, if you ask the banks and credit institutions that need to provide the required information in the required format and frequency, there would be two different answers.r Many? A look at the impact of National variations. The Domestic banks and credit institutions (those incorporated and operating in a single country and regulated/ supervised by one NCB) will say it is one regulation since they need to comply with only one set of guidelines as mandated by their NCBs. Regional and global banks will have a different answer. For them it is multiple variants of AnaCredit implementation as they will need to follow the mandates of the different NCBs that they report into. The critical point to be kept in context while discussing AnaCredit is that it is a two-step process as I spoke of in my previous blog. Step one is where Banks and Credit Institutions submit the Credit data sets across the 10 subject areas to their National Central Banks. Step 2 is NCBs submitting the data to ECB as required by the AnaCredit regulation (ECB refers to this as the “Baseline Scenario”). Note that I have not said the data NCBs receive from their constituents. And therein lies the plurality that regional and global banks will need to address. Scope of National Arrangement areas per part 1 of the AnaCredit Manual issued by ECB (AnaCredit Reporting Manual Part 1 dated 9th November 2016) are NCBs may collect the information to be transmitted to the AnaCredit database as part of a broader national reporting framework. NCBs may extend the reporting of granular credit and credit risk data beyond the scope outlined in the AnaCredit Regulation, for their own statutory purposes, in line with relevant national law What some of my Banking friends refer as AnaCredit ++. NCBs decide on the reporting format and timeliness in which they receive the data from reporting agents. May exempt reporting agents from reporting counterparty reference data information to the relevant NCB, when such information can be obtained using reliable alternative sources. May grant derogations to small reporting agents, if the total outstanding amount of loans granted to derogated entities does not exceed 2% of the total national outstanding amount of loans; Whether NCBs decide to deviate from the “baseline requirements”, and to what extent, will be communicated by them. The moot question is what does all of this mean to Banks and Credit Institutions that have global or even regional operations? Short answer, it impacts all three aspects - content, timelines and the format of reporting and that is saying a lot. Some of the countries that have come out with their implementation guidelines like Germany, Netherlands, Belgium, France and Ireland point to the reality of national variations of the execution of AnaCredit regulation in different geographies. Content Can become part of a larger data set as in case of Belgium (AnaCredit ++?) Reduced set of attributes may be asked if the National Central bank (Counter party reference data) can source some of the data from other sources e.g. DNB, Netherlands Exempt or Not exempt resident foreign branch from reporting – e.g. Germany Submission Different timelines Actual submission dates - Could be earlier than the ECB timelines Frequency of submission – eg Daily for changes, monthly, quarterly… Different submission formats – xbrl, xml, csv etc. All the above truly make the implementation of AnaCredit much more nuanced, requiring a well thought out inclusive functional and information policy and architecture. In my next blog, I will explore the “Regulatory hub” approach that the banks with multi country presence might want to consider so they can have a “Unity in Diversity” construct that can be leveraged not just for AnaCredit implementation but that which enables them to truly “use” and “reuse” their biggest asset – DATA to create business value.

Blog By: Saloni Ramakrishna, author and senior director, Oracle Financial Services Analytical Applications. It depends on who is answering that question. Really!! It is a single uniform regulation at...

Analytics

AnaCredit - the Nuanced regulation

Blog By: Saloni Ramakrishna, author and senior director, Oracle Financial Services Analytical Applications. I am quite fascinated with the European Central Bank’s (ECB’s) AnaCredit Regulation that came into effect on 18th May 2016 – A regulation that requires granular credit data sets from the national central banks (NCBs) of the member countries based on the data they collect from their constituents- Banks and Credit Institutions. The project was initiated in 2011 and made a regulation in May 2016. Data collection from the NCBs is scheduled to start in September 2018. The objective of ECB in asking for the granular credit data is to integrate and harmonize the national credit registers that will enable ECB to understand the credit Risks being taken by banks both at the Individual borrowers and corporate level. As the details of the regulations are getting released, it is becoming clear that AnaCredit is a nuanced regulation and requires a closer look as well as a well thought out plan for execution. A simple comparison with the other major regulatory reporting requirement the FinRep / CoRep brings out three critical differences in the construct and design of the regulations (Not speaking of the content here). AnaCredit  is a two step process of submission where the banks and credit institutions submit the relevant loan by loan data to their national central banks who in turn, after processing and enriching where relevant, submit it to ECB unlike the FinRep/ CoRep reporting which is a direct submission by the banks to the regional authority. It is granular data at a loan by loan level and not aggregated reporting as in the latter’s case. It is an evolving regulation – most regulations are one might say – but the difference perhaps, is that as banks and credit institutions prepare for implementation, given the timelines, the guidelines on implementations are being rolled out. Important to remember is that the September 2018 timeline is for the NCBs to submit to the ECB, the submission timelines for the reporting agents (Banks & Credit Institutions) will be much earlier, around December 2017 or early 2018, so as to give the NCBs sufficient time to collate, process, enrich and submit to the ECB. AnaCredit submission by the NCBs to the ECB is harmonized but some flexibility has been given to the NCBs of how they   implement the regulation in terms of what and how the information is collected from their constituents within their jurisdictions. ECB, post the promulgation of the regulation has released or is in the process of releasing a three part manual* from an implementation stand point.  Part 1 (Released - Nov 2016) – explains the general AnaCredit methodology and provides information about the reporting population and setting up the reporting, including a general description of the underlying data model. This part spells out the scope of national arrangements and national discretions, amongst other things. Part 2  (Released – February 2017)-  describes all datasets and data attributes of AnaCredit data collection in detail and provides specific reporting instructions. Part 3 (yet to be released) – Will present various case studies and in particular covers special scenarios that require more in-depth explanations. Expected to be issued around May 2017. As the NCBs are detailing the Anacredit implementation approach for their constituents, it is becoming clear that implementation will not be uniform across - there would be geographical variations and local flavors.  The manual of ECB, while is the umbrella guidance and baseline requirement, it is imperative for banks and credit institutions to read them in consonance with the national directive of their NCBs. For example DNB (DeNederlandschebank), the Dutch NCB, clearly spells this out when it says “The Manual does not take into account the specific implementation choices made by the individual Member States. So the Manual should be read taking into account the Dutch implementation and the choices made by DNB.” Therein is one of the most important nuances in the implementation of the AnaCredit regulation – that of national variations. Relevant information on whether or not the NCBs decide to deviate or not deviate as well as national extensions and the timeliness or format of the reporting will be provided by the relevant NCBs. The implementation at the reporting agent’s (Banks & credit Institutions) level will need to be in accordance with their NCB’s directives/ guidance. In the next blog, I will discuss the areas of national discretions in some detail and the challenges it poses to regional and global banks.

Blog By: Saloni Ramakrishna, author and senior director, Oracle Financial Services Analytical Applications. I am quite fascinated with the European Central Bank’s (ECB’s) AnaCredit Regulation that came...

Introducing Banking to Children and Young Adults in a Cashless World

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services The 'future’, everyone has an opinion on where technology is heading! What will mobility, communication, financial services be like in the future? While every business focuses its energies on being future proof, they need to pay attention to one key demographic who will ultimately consume all of these services in the future. This demographic is very unique, unpredictable and has a strong tendency to demand the unimagined. We are talking about children. Children and teenagers constitute roughly 32% of the total world population1. The future belongs to them and soon they are the ones who will call the shots on which car they want to drive, products and services to use and houses to live in. It is evident that the next generation has inherited a greater affinity for technology. The the likelihood of children adopting a new device and adapting to it almost instinctively cannot be underestimated. How do you introduce children to the world of banking and finance as cash is taking a digital form at lightning speed and the world is losing its physical connect with money. How do children spend most of their time these days and how do we gain their attention? Tiny tots love watching videos. It is safe to say video streaming websites are the new Kids TV channels. Children specific video apps with content specifically for toddlers are on the rise. If you are wondering why are we discussing what videos children watch, I would like to stress the point that this is where it all begins, as toddlers grow and near their teens they have already built an opinion about a certain brand based on what they have been seeing around their ecosystem and this has a huge influence on the kind of buying behavior they develop, believe me, if toddlers make up their mind on what they want to buy they do not stop until they get what they want. Also, not to forget the impact of a peer group – it is rightly said ‘children learn most from peers than parents.’ Hence these channels could have a multiplying effect on strengthening a brand’s identity. Are banks really building their brand to attract the attention of these tiny tots? There is no money to be made by doing so but it definitely is a long term investment. Banks can start early by partnering with various content developers (videos, games, music and literature). They can also create child friendly play areas in branches. Creating a mascot and displaying mascot derived imagery on ATMs, sponsored playgrounds and merchandise make the bank omnipresent. All of this can go a long way in developing an image of the bank in the eyes of a child. There is a need which parents often find difficult to fulfill, which is explaining the meaning or value of money to a child. A helping hand from the custodian of all things money will not go unnoticed and will surely be rewarded by grateful parents. By the time children are old enough to attend playschool they begin to develop a vague understanding of the value of money, this is where the piggy bank enters the spectrum. What is the use of piggy banks when the use of physical cash is steadily declining? Banks have a unique opportunity of handing their customers a digital piggy bank. Yes a digital piggy bank, one that is internet enabled, biometrically authenticated, accepts NFC payments, has its own QR code display for people to scan and transfer cash. Now doesn’t that sound like a big win for IoT devices! The digital piggy bank can have multiple themes for deposits like candy money, gaming money, toy money and also a college or school fund letting the adult transferring the money make the right choice for the child. This does not sound like fun for the child. To keep all parties happy the display on the piggy bank can show the child articles that can be bought with the funds collected and allow them to place an order directly. Doing this indirectly teaches the child of how money works. Banks have an opportunity to create a platform by partnering with vendors of products and services, such as educational institutions, amusement parks, toy manufacturers and display several products. The inclusion of children into the financial ecosystem begins with their parents. Banks are sitting on a treasure trove of data.  A simple run through of an account statement will identify customers who have children. Once banks get the parents’ consent to participate in a program that introduces money and finance to young children, a piggy bank in the full livery of the bank’s mascot can be placed in the hands of the child. Children will outgrow their piggy bank sooner than you realize and will be ready to actively participate in an adult environment. The average age when a child gets its first smartphone is 10.3 years 2; this is also the best time to introduce children to the world of money and finance. Fintech’s have already identified this gap and have introduced solutions like mobile apps linked to children’s debit cards. These apps are tools for parents to transfer pocket money to their children, monitor spend and also set spending limits. Ignoring a 10 year olds need for digital payments is definitely an opportunity lost; their needs range from downloading/ streaming music and video, mobile apps, in- app purchases, gaming console related purchases; the possibilities are limitless. Empowering children to make their own digital payments not only frees parent’s time, it also gives the child a sense of responsibility and self-belief. This also helps parents avoid a situation where their child may buy dinosaur on a Jurassic park game for $59003. Many parents employ a points system to get their children to complete daily chores, homework, being obedient etc. this system has scope to be digitized and presented to kids in a gamified avatar linking tasks completed with rewards as prescribed by the parents. Around the age of 10 is also when children are mesmerized by the world of gaming. The worldwide gaming industry hit 91 Billion USD in revenues for 20164. Games like the World of Minecraft have young children building worlds of their own, this game is very popular and termed the “Lego” of the digital world and it already has banks where children deposit Minecraft Money. Similarly educational games like TiViTz College Savings Game, which help children earn money for their college education are becoming increasingly popular. These games require setting up of a savings account. Barclays has already built an interactive game that teaches basic money management and financial life skills to young consumers. This is just the tip of the iceberg when it comes to the world of gaming for young children. Given the massive scope of introducing banking to the younger generation through gaming and gamification, banks need to develop a strategy to embrace this channel. Banks maybe funding game developers to build games for the younger generation, but banks also need to help game developers reach their existing bank customer base. Exposing banking APIs to game developers creating a seamless experience for children within the bank’s customer base is a good start. This will also lead to customer stickiness from the network effect the customer gains. Every game has its own form of digital currency which needs to be earned or purchased with real world currency, imagine a scenario where banks offer children a repository for their game money which can be used across different games. A move like this will attract gamers to banks the same way toddlers are drawn to video streaming websites, creating a new revenue stream. All game and no play makes Jack an ‘unhealthy’ boy. Banks today have begun incentivizing healthy lifestyles by providing customers with better rates, offers and added benefits if they lead a healthy lifestyle. Fitness tracking wearable devices paired with a bank’s app track customer’s footsteps, miles they run, cycle,and swim in addition to monitoring their heart rate, calorie counts and overall stress level. The same offerings can be extended to children who are the bank’s customers and linked to the children’s banking app we spoke of before. The success of Pokeman GO demonstrates how gamification can bring children, and some adults, back out into the open spaces. Devices are not only used to play and pay, they are at the forefront of education as well, Edtech is seen as the next fintech. Close to 7.3 Billion USD was invested in edtech just in 2016 5 and edtech is still considered to be in its infancy. Edtech startups have popped all across the world to cater to the growing demand of education on a digital platform. On the ground level, there is a growing demand to make financial education mandatory. Banks have the opportunity to play a key role as an enabler given their subject matter expertise, they also need to extend their infrastructure to act as sandboxes to help edtech startups in the financial domain to provide their users a near-real experience. This in turn will introduce banks to this untapped demography of youngsters taking their first steps towards financial literacy. Banks have already started collaborating with fintech’s through their innovation accelerator programs, gamification is one of the larger themes of research in many accelerators. Gamification also happens to be at the forefront of edtech helping children have fun as they learn. A partnership between financial institutions and edtech firms has high potential to blossom into a very fruitful collaboration with dividends to be earned for many years into the future. When banks become part of the digital learning ecosystem, students need not look very far when they require any sort of financial assistance for their studies, travels and entrepreneurial ventures. In conclusion, what we have been emphasizing is that the entire digital banking ecosystem needs to focus specifically on the younger demographic and provide them a banking experience from a very young age so that they board your platform for banking throughout their lifetime. The current set of banking offerings for youngsters are designed to attract their parents more than the children themselves, it’s time for banks to join children on the play-ground and make them their BFF (Best Friend Forever). My colleague Roger Lobo and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and roger dot lobo at Oracle dot com. 1  http://www.worldometers.info/world-population/world-population-gender-age.php 2  https://techcrunch.com/2016/05/19/the-average-age-for-a-child-getting-their-first-smartphone-is-now-10-3-years/ 3  http://in.pcmag.com/apps/98800/news/kid-racks-up-5900-bill-on-dads-ipad-playing-jurassic-world 4  http://venturebeat.com/2016/12/21/worldwide-game-industry-hits-91-billion-in-revenues-in-2016-with-mobile-the-clear-leader/ 5.  http://www.metaari.com/assets/Metaari_s-Analysis-of-the-2016-Global-Learning-Technology-Investment-Pat25875.pdf  

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services The 'future’, everyone has an opinion on where technology is heading! What will mobility, communication, financial...

Analytics

Japan's FSA launches Money Laundering Inspections across local Financial Institutions

Blog post written by Ido Nir, Oracle Financial Services Analytical Applications, Financial Crime and Compliance Management - Asia Pacific.  Enhanced enforcement to be carried out in light of upcoming Mutual Evaluation by the Financial Action Task Force (FATF) planned for October/November 2019.  Tokyo-based financial institutions have established a longstanding ecosystem to address anti-money laundering.  This ecosystem has served for many years as the standard dictating operational best practices across Japan, as well as the standard for customer due diligence procedures and the detection of suspicious activity.  In recent years, we have witnessed constant change in the direction of global regulation, focusing mostly on proper KYC processes, identification of the ultimate beneficiary, Trade Based Money Laundering (TBML), and other areas.  As a result, we see a distinct shift in the focus of global banks and a re-evaluation of best practices for transaction monitoring, customer due diligence, and screening. The Japanese government has acknowledged this shift and has recently introduced changes to the Act on Prevention of Transfer of Criminal Proceeds (effective October 2016), which set new standards for both banks and other financial institutions operating in Japan for customer on-boarding and monitoring (KYC, CDD, and ECDD), the verification of foreign correspondent bank relationships, monitoring and detection of suspicious transactions, as well as implementation of additional in-house AML measures. In previous years, the FATF has criticized the Japanese government for inadequately addressing AML issues.  The last official statement was given in 2014 where the FATF contemplated adding Japan to its "grey list" of high-risk jurisdictions.  The 2016 amendments take Japanese AML legislation one step closer to fully addressing the FATF's criticisms and establishing a more robust AML regime as seen in other developed nations. As a direct result of the new legislation, and in light of the upcoming FATF mutual evaluation planned for October or November 2019, the Financial Services Agency (FSA) began a nationwide evaluation of multiple banks, securities firms, and other financial institutions, surveying the measures they are taking to prevent money laundering.  The aim of this survey is to better tackle the growing problem of money laundering and financial crime among both global and regional financial institutions. At each of the financial institutions surveyed, the FSA is examining the precise steps being taken to prevent money laundering across a multitude of risk areas, and whether these policies have been properly adopted by individual branches and subsidiaries.  Furthermore, bank-wide knowledge and understanding of AML as well as management's understanding of related risks and exposure is also being evaluated. It is clear that the FSA will continue its effort to bring proper AML controls to the forefront and will vigorously require both global and regional financial institutions to adopt proper measures. Financial institutions are expected to update their current AML measures and policies to ensure compliance with the recently updated regulatory framework.  This change in policies, operations, and procedures should be applied with minimal impact to the existing business process - ideally it should enhance the existing process.  Financial institutions should set a goal to establish a holistic compliance program that handles the identification of customers, screening of customers and transactions, as well as monitoring of suspicious activity in a cohesive, effective and most importantly in a unified way, with minimal impact to business processes. By arming themselves with the right tools and technology, Japanese financial institutions can ensure they implement the level of scrutiny that regulators are demanding today, as well as ensuring their ability to meet both the business and regulatory challenges of tomorrow. Financial institutions must comply with and observe the changes in a set of standards imposed by regulators and, as indicated above, they are regularly audited to verify their compliance.  Financial institutions who are found in breach of their duties face legal consequences as severe as being stripped of their banking license and the threat of hefty fines rising potentially into the hundreds of millions of dollars.  Good examples of this include the case of 1Malaysia Development Berhad and the case of Deutsche Bank's USD 41M fine for AML lapse imposed as part of their May 2017 settlement with the U.S Federal Reserve.  There are numerous other examples where fines reach more than USD 1B, which clearly reflects the regulators' intentions. To avoid hefty fines, financial institutions must look at the banking products they offer, the markets in which they operate, and the regulations that apply in those markets to further understand their risks.  Then they must implement controls and solutions, such as detection scenarios.  Many financial institutions have followed a "rule-based technology approach."  This approach has worked well for many years, but while it will trigger alerts that catch bad guys, it may also result in false positive detection of legitimate activities.  False positive detection is a known problem across the industry that routinely requires analysts to spend time reviewing more alerts, incurs a larger workload and commensurate costs on AML operations. Machine learning algorithms are promising tools for reducing such false positives.  Algorithms can be developed using training data, and then customer-specific data to be fine-tuned, resulting in higher detection accuracy and increased performance.  However, when it comes to compliance, showing results is not enough for regulators.  Banks are required and must be able to explain how they arrived at their detection results. This is one of the key challenges with models trained using Machine Learning techniques, the advanced and more sophisticated algorithms are essentially a black-box, and the inability to explain the algorithm in a black-box has been a major roadblock for industry adoption of this technology.  However, the stakes are too high to give up on Machine Learning.  To learn more about this topic and what Oracle is doing to achieve delivery and regulator acceptance of Machine Learning techniques in AML applications, come see us at ACAMS and SIBOS.

Blog post written by Ido Nir, Oracle Financial Services Analytical Applications, Financial Crime and Compliance Management - Asia Pacific.  Enhanced enforcement to be carried out in light of...

注意差距:从流动性管理迈向资金合作伙伴

Blog By: Anand Ramachandran, Senior Director, Global Banking Solutions Practice, Oracle 如今,多股宏观经济和监管力量正对公司流动性管理产生影响。跨国公司涉及多货币和多地区业务,因此全球和区域银行都在与其打交道。 银行在公司客户业务中不断成长。但是,有关流动性管理实践的监管规定一直在收紧(例如,存放非经营性存款的限制)。这更突出强调了因多个DDA(活期结算账户)系统所导致的“流动性管理缺乏单一真实数据源”问题。随着数字化和电子商务的飞速发展以及妨碍公司企业在地区和全球市场扩张的门槛逐渐降低,这些公司企业从成立伊始就开始构建其作为地区和全球玩家的业务模式,并在多个司法管辖区开展业务运营。 这种趋势促进了跨市场和时区的多币种现金和流动性池的发展,也使得高效的流动性管理愈发成为必要。同时,国家层面的监管限制以及公司所处的具体税务和法律环境也导致公司在多个司法管辖区内经营时发生流动性受困的情况。 与此同时,实施《巴塞尔协议III》所带来的影响也正在逐步凸显,一方面是银行信贷的不断紧缩,另一方面银行也不再愿意接受非经营性存款。这些因素使得企业财务主管再也不能像全球金融危机发生之前那样随意把现金存放在银行里。 此外,货币市场基金改革的举措也无助于此种状况的改善。例如,美国货币市场基金不再保证收益率,因此,公司财务主管必须更有效地平衡“收益率-效率”之间的矛盾。 2016年出现的负利率现象,进一步加剧了实现有效流动性管理所面临的挑战。负利率曾一度被认为只是假设情景,如今却真实发生在日本和几个欧洲国家。 此外,公司财务主管们进一步认识到需要对财务和流动性功能进行集中管理,以帮助其应对日新月异的技术变化,如数字化、快速支付和开放API(应用程序接口)等等。 为什么流动性管理对公司很重要? 流动性管理是企业日常工作的重要组成部分。无论现金充裕还是紧张,在获得来自市场或银行的外部资金之前,公司企业都需要调动、优化其现金流并确保其自有现金储备获得最大回报。 事实上,全世界的企业财务主管都认识到,他们的大部分工作与现金或流动性管理有关。荷兰合作银行(Rabobank)2016年的一项调查显示,现金池(69%)、流动资金优化(52%)和资金归集(47%)属于财务主管关注的前三大领域。 北欧银行2017年的调查——“公司财务的未来”表明,从现在起到2017年底,集中管理集团的现金和流动性是企业财务人员关注的头等大事。 越来越多的企业开始认识到必须要改善其内部流动资金管理,并有效管控区域和全球现金或流动性头寸。因此,对于公司财务主管的要求就集中在能否实现更优化的区域和跨区域流动性解决方案。流动性解决方案现已成为整个业务流程中的核心价值。 全球和跨国公司正在努力实现流动性管理的三项关键成果——可见可控、易于补充、收益优化。为实现这些关键成果,公司财务部门正基于其强大的区域流动性管理能力基础上构建全球流动性管理架构。这样做的好处在于,财务部门可以同时应对集中以及分散的财务处理要求,并加强从分支机构的运营部门到财务总部的信息流。 技术进步正在促进集中化以及财务职能的广泛演进。 在欧洲、中东和非洲(EMEA)地区,公司财务主管需考虑英国脱欧对流动性管理实践的影响和潜在风险。在此情况下,该地区过去几十年来一直发挥作用的有效财务结构是否会进一步复杂化? 英国一直是世界资金的主要枢纽,拥有众多现金池(实体的和名义的)的顶层归集账户、财务中心和银行及企业的共享服务中心。如今面临的问题是,欧盟是否会为公司企业创造一个有利的生态系统,以帮助其适应新现状。 鉴于这些动态,公司财务主管和核心流动性服务提供者(如银行)被迫重新审视位置、决策标准以及了解新涌现出来的挑战。 总而言之,有效的流动性管理有助于公司在面对不断进化的市场和监管挑战时保持稳定,提高业务灵活性并达到所期望的流动性结果。   银行如何回应? 公司客户正面临动荡、不确定、复杂和模糊(VUCA)的环境,有鉴于此,银行可将自身定位为提供流动性服务的主要银行,帮助客户驾驭市场。 最近针对公司财务主管的调查表明,小型企业目前正与越来越多的银行合作,在一个或多个地区扩大其业务和利益;而大型公司则在继续梳理其银行业务关系并使其更加合理化。 流动性服务曾被认为是大型全球化银行的独家领域,如今早已不止于此,其需求范围越发广泛。许多中小企业(SME)自成立起便将自身定位为地区性和全球性公司。这为与SME客户打交道的地区和国家银行创造了机会,让其可将自身定位为流动性解决方案提供者。 随着闸门开启,各种类型的银行都开始提供流动性服务,这个市场将从那些全球性、区域性和国家银行之间的良性竞争中获益匪浅。这反过来又有助于促使全球流动性市场从目前的线性增长状态走向更大规模的指数式增长。 然而,那些希望对市场产生重大影响的银行则需要考虑为企业客户提供咨询服务,并力图成为他们首选的财务合作伙伴。   Oracle 的流动性管理解决方案如何为银行提供助益? Oracle 提供有简单灵活的解决方案,可由银行根据其时间安排及优先级进行实施,而无需采用那些复杂而昂贵的系统进行一次性全面替换。 Oracle 的全球流动性解决方案建立在最新技术架构之上。可以为那些向其公司客户提供流动性管理服务的银行提供一流的国内、区域和国际流动性管理功能支持。 Oracle 的解决方案为银行带来灵活性,可将此先进解决方案与银行一个或多个现有核心系统和基础设施进行集成,从而降低互操作性所面临挑战,并消除落后技术带来的影响。 银行将因此具备: 处理复杂帐户结构的能力。大多数成熟的公司客户往往拥有多个账户,跨越市场、币种和时区。Oracle 的解决方案可为传统和现代流动性管理需求提供全面支持。 灵活支持创新结构。要支持多个司法管辖区的监管要求,解决受困流动性并提高收益,一个灵活的解决方案必不可少。该解决方案以客为本,方便易用——其所使用的可视化工具有助于管理和维护复杂的流动性结构,并提高银行人员处理全球和地区业务需求时的运营效率。 无缝集成多银行交易。公司客户往往会先测试不同银行的服务,再决定选择哪一家银行作为主要的流动性服务提供商。Oracle 的解决方案可协助银行提供灵活的多银行现金归集服务,并有助于银行与公司客户逐步建立战略合作关系。 提供个性化公司解决方案。银行可通过系统深入了解公司客户,提供更好的客户服务,使潜在公司客户能更好地了解其资金流动性状况,并提高运营效率。 提供咨询服务。该系统拥有的全面解决方案功能,提供包括方便易用的工具,如仪表板、流动性热图(heat map)和模拟技术,使银行能够专注咨询服务,增加费用收入。 Oracle 的流动性管理解决方案内置有先进的模拟引擎,这将使银行能帮助其客户对可能的市场变化了然于胸,令各方均能做出明智决定。进而改变游戏规则。 Oracle 致力于金融领域,其巨大的研发入和轻量级解决方案使银行能够成为其客户的财务合作伙伴,并推动流动性管理最佳实践的发展。

Blog By: Anand Ramachandran, Senior Director, Global Banking Solutions Practice, Oracle 如今,多股宏观经济和监管力量正对公司流动性管理产生影响。跨国公司涉及多货币和多地区业务,因此全球和区域银行都在与其打交道。 银行在公司客户业务中不断成长。但是,有关流动性管理实践的监管规定一直在收紧(例如,存放非经营性存款的限制...

Financial Crime and AML Compliance

Top 3 Trends Transforming AML Programs

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. On the timeline of financial services development, the anti-money laundering discipline does not have a long history. It started around 1985 and evolved in more recent years beyond an anti-crime, anti-drug orientation to include an anti-terrorist financing element post 9/11. To have an effective anti-money laundering program, global banks and international bodies must deal with the confluence of data that emanates from the financial, social, and economic aspects of life. With recent technological advancements, tax evaders, terrorists, and cyber criminals hide behind and leave their trail in encrypted messages, social media, the cloud, big data, and the "Internet of Things." The focus for the past few years has been around unification of a financial crime and compliance platform, which brings various components of an anti-money laundering program as part of a single, unified compliance platform. Components include transaction monitoring, case management, suspicious transaction reporting, analytics, etc. as part of single platform. Several financial institutions have already jumped in and are now moving towards the next step of this journey. In addition to unification of a compliance platform, another major focus is on data and making sure there is quality data for detection and investigation for an effective program. While the industry continues to work towards these aspects, there will be a next level of items that financial institutions will focus on over next few years: Machine Learning in Suspicious Pattern Detection: Traditional ways of query-based detection have been successful for suspicious transaction monitoring. This query-based detection allows financial institutions to adjust various monitoring parameters for much better accuracy. Query-based detection monitoring requires regular testing and updating, which in addition requires a massive quantity of human resources, technology, and money. Furthermore, query-based detection lacks the ability to apply better detection logic based on prior behaviors by itself. There is always a possibility to miss some suspicious behaviors due to delay in updates in the traditional detection. And that is why this traditional query-based detection will evolve towards smarter systems, which will have any ability to learn by itself and keep up without human intervention. At a high level, learning will include historical customer behaviors and analyst conclusion to apply the updated detection logic. If it is possible to identify such repeated analyst conclusions and factor those in suspicious transaction monitoring, then the amount of false positives can also be dramatically reduced. This does not eliminate the need for regular verification of detection configuration; however, will certainly provide a smarter suspicious transaction detection capability.   Robotics for Investigation: Cost of compliance in anti-money laundering due to huge investigation teams is increasing. There have been some recent fines not due to the inability to detect suspicious transactions, but due to the lack of investigation. Banamex USA acknowledged that they conducted fewer than 10 investigations and filed only 9 so-called suspicious activity reports — even though its monitoring system identified more than 18,000 transactions as “potentially suspicious” during that period (detailed article here). Robotics is a general term that can refer to a few different uses of digital robots to automate work. In most cases, Robotics is referred to Robotic Process Automation (RPA), which is using Robotics to automate an entire process from start to finish. The other type of Robotics, which is discussed less often, is Robotic Desktop Automation (RDA), which combines human and robot. This technology allows an organization to automate many stages of an investigation process, allowing for more efficiency, consistency, and effectiveness.  Financial institutions will move towards making those well-known repeated tasks much more automated, such as searches on external websites or data providers. This way you aren’t adding “headcount”, you are enhancing your analysts and allowing them to focus on gathering more information and making better decisions – overall making them more efficient.   Service-Based Solutions (Cloud): Cost and risk are perennial concerns for executives and managers, especially when manpower and money are committed to on-premise deployments of enterprise software with no guarantee of success. In addition, it is a time-consuming process to on-board a new system or upgrade an existing system to keep up with the latest regulatory changes.  Therefore, the future technology will be service-based cloud solutions, which are mainly Software as a Service — a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted by vendor.  Service-based solutions will also allow faster on-boarding of a system for a financial institution and will reduce overall cost, allowing compliance teams to focus more on the things they care about most, which is compliance. (The worldwide public cloud services market is projected to grow 18% in 2017 to total $246.8 billion, up from $209.2 billion in 2016, per Gartner, Inc.) This change in trend will surely put additional burden on both financial intuitions and technology vendors. On one side, technology vendors will need to evolve to accommodate these upcoming demands, and on the other side, financial institution will have the biggest challenge to convince regulators in addition to train their staff and update policies. Like any other change, this phase will also take its own leap time and will require a few years to get to its mature stage. It will be interesting to hear your standpoint on what other trends you are seeing in this space and the challenges and effects we should anticipate while the industry will move forward to acclimatize these new trends.

Blog by Garima Chaudhary, Oracle Financial Services Financial Crime and Compliance Management Specialist. On the timeline of financial services development, the anti-money laundering discipline does...

Banking

Mind The Gap: Stepping Up From Liquidity Management To Being A Treasury Partner

Blog By: Anand Ramachandran, Senior Director, Global Banking Solutions Practice, Oracle There are multiple macro-economic and regulatory forces influencing corporate liquidity management today. Both Global and Regional Banks are dealing with multinational corporations that have businesses dealing with multi-currency and multi-location requirements.  Banks have been growing in the corporate customer businesses. However, regulations governing liquidity management practices have been tightening, such as the limits in placing non-operational deposits. This places greater emphasis on the problem of having ‘no single source of truth of liquidity’ brought about by multiple DDA (Demand Deposit Account) systems. With the digital and e-commerce explosion and as the entry barriers for corporations to expand regionally and globally have become progressively lower, corporations are structuring their business model as regional or global players’ right from the start and are dealing with business operations across multiple jurisdictions.  This trend has led to multi-currency cash and liquidity pools across markets and time zones, necessitating the need for effective liquidity management. Country-level regulatory restrictions along with a company’s specific tax and legal situations also lead to trapped liquidity in companies operating across multiple jurisdictions.  Meanwhile, the effects of Basel III are kicking in with credit tightening at one end and pushback from banks on non-operational deposits, this has deterred treasurers of companies from placing cash at will with their bankers as they had previously in the pre-GFC (Global Financial Crisis) world.  In addition, money market fund reforms initiatives have not helped the cause. For instance, U.S. Money market funds no longer guarantee yields and thereby corporate treasurers must effectively manage the yield-efficiency trade-off.  Challenges in achieving effective Liquidity Management is further amplified with the kicking in of negative interest rates in 2016. Once thought of as only a hypothetical scenario, negative interest rates have become a reality across Japan and several European countries There is also a greater realization among the corporate treasurer community of the need to centralize treasury and liquidity functions to help them deal with fast-evolving technology such as digitalization, faster payments and API (application program interface) initiatives.  Why is Liquidity Management Important for Corporates? As a core function of corporations, liquidity must be managed on a day-to-day-basis. Whether cash-rich or cash-strapped, corporations still need to mobilize, optimize and ensure maximum return out of their cash reserves before getting external funding from the market or the banks. In fact, treasurers spend most of their time on cash or liquidity management. This is acknowledged by the corporate treasury community worldwide. In a 2016 survey by Rabobank, cash pooling (69%), working capital optimization (52%) and cash concentration (47%) are the top three areas that treasurers focus on.  Nordea Bank’s 2017 survey – ‘The future of the corporate treasury’ found that centralizing the group’s cash and liquidity is the top priority for treasuries between now and end of 2017.  Increasingly, there is a growing impetus and drive for corporations in improving their internal working capital management, managing regional and global cash or liquidity positions. Thus, corporate treasurers are focused on achieving optimized regional and cross-regional liquidity solutions. Liquidity solutions have now become fundamental value enablers in the entire business process. Global and multinational corporations are striving to achieve THREE key outcomes – Visibility & Control, Access to Liquidity and Yield Optimization. To achieve these key outcomes, corporate treasuries are overlaying strong regional capabilities with a global liquidity structure. This approach enables them to support both centralized and decentralized treasury operations and enhance the information flow from subsidiary operations to treasury headquarters.  Technological advancements are facilitating centralisation as well as a wider evolution the treasury function. In the Europe, Middle East and Africa (EMEA) region, corporate treasurers need to factor in the impact of Brexit on liquidity management practices and potential risks. Will this fallout add further complexity to the efficient treasury structures that are in play for the last couple of decades in the region?  The UK has been a major hub for treasury, housing many cash pool headers (physical and notional), treasury centres and shared service centres for both banks and corporates. A question now is whether the EU will create a conducive ecosystem for corporations to live with the new reality.  Given these dynamics, corporate treasurers and core liquidity service providers such as banks are forced to revisit the location, decision criteria and understand the emerging challenges. In summary, effective liquidity management has helped corporations remain stable in the face of evolving market and regulatory challenges, increase business agility and achieve the desired liquidity outcomes  How Can Banks Respond?   With corporations facing a volatile, uncertain, complex and ambiguous (VUCA) environment, banks can position themselves as a prime bank providing liquidity services to help their clients navigate the marketplace. Recent surveys of Corporate Treasurers confirm that while smaller companies are working with a growing number of banks as they expand their footprint and interests in one or more locations, the largest corporations are still rationalising their banking relationships. Once thought of as the exclusive domain of large global banks, the demand for liquidity services has gone much further than that. Small and medium enterprises (SMEs) are positioning themselves as regional and global players from inception. This opens an opportunity for regional and country banks that deal with SME customers to position themselves as liquidity solution providers. With the floodgates open for banks of all types to offer liquidity services, the marketplace will enjoy healthy competition between global, regional and country banks. This in turn helps promotes global liquidity market growth from its current linear state to more exponential growth.  However, banks looking to make a significant impact on the market need to look at advisory services and become a treasury partner of choice.  How does Oracle’s Liquidity Management Solution Help Banks?  Oracle offers simple and flexible solutions that can be implemented by banks at their own time and based on their priorities – instead of having to adopt complex and expensive transformation programs all at one go.  Oracle’s global liquidity solution is built on a modern architecture with best-in-class functional capabilities delivered in-country, with regional and global liquidity techniques for banks to offer liquidity services to various corporations. Oracle’s solution offers flexibility to banks to bolt this best-in class solution to one or more existing core banking systems and infrastructure, thus easing interoperability challenges and eliminating technology obsolesce.  Banks will be equipped to:  Deal with complex account structures. Most established corporations tend to have multiple accounts that span across markets, currencies and time zones. Oracle’s solutions provide comprehensive support for both traditional and advanced liquidity management techniques.  Have the agility to support innovative structures. An agile approach is necessary to support regulations across multiple jurisdictions, address trapped liquidity and increase yield. The solution is very user friendly – The visual tools help manage and maintain complex liquidity structures and enhance operational efficiency of bankers while they deal with requirements of global and regional businesses.  Incorporate multi-bank transactions seamlessly. Corporates tend to test out different banks’ services before deciding on a primary liquidity service provider. Oracle’s solutions help banks provide flexible multi-bank cash concentration services, which will facilitate the transition between banks and their corporate customers to a strategic relationship over time. Propose personalized corporate solutions. With a system that offers banks an in-depth overview of their corporate customers, banks are able to provide better customer service, which allows potential corporate customers to get a better visibility of their liquidity and drive operational efficiencies.  Provide advisory services. The comprehensive solution capabilities including customer friendly tools such as dashboards, liquidity heat maps and simulation techniques allow banks to focus on advisory services and enhance fee-based income.  The advanced simulation engine in Oracle’s liquidity management solutions is a game-changer as it allows banks to give better visibility of likely market scenarios to their clients so that all parties can make an informed decision moving forward.  Oracle’s commitment to the financial sector, its R&D investment and lightweight solution allows banks to step up as a treasury partner and drive best practice liquidity management.

Blog By: Anand Ramachandran, Senior Director, Global Banking Solutions Practice, Oracle There are multiple macro-economic and regulatory forces influencing corporate liquidity management today. Both...

Banking

Faster Payments: How Banks are Reclaiming Lost Ground

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services The last couple of years have witnessed, innovations in payments dominated largely by Fintechs. According to McKinsey, payments represent 43% of FinTech startups, with payment companies securing 40% of the total funds out of the $36 Billion of global FinTech funding in 2016. The appeal of payments Fintechs lies in its personalized experience, differentiated business models and the power of digital end-to-end business value. Customers are seeking cheaper, faster, and more transparent payment options, and lean Fintech companies threaten to disrupt the marketplace. After the initial slumber, following the onslaught of the Payments Fintechs, incumbent banks are gradually stirring into action - slowly but surely. The progress is less dramatic, but full of promise. The SWIFT global payments Innovation (gpi) and SEPA instant payments are a welcome change, in an otherwise staid payments eco-system of the banking industry. The recent addition of US payment market infrastructures to support SWIFT gpi, adds to an already growing list of 56 SWIFT-connected market infrastructures, including EURO1 and TARGET2. SWIFT gpi is now live with 12 major global transaction banks exchanging tens of thousands of gpi payments. Nearly 100 banks have signed up to SWIFT gpi and numerous additional banks are set to go live in the coming months. The advantage of SWIFT's global payments innovation (gpi) over a fintech start-up doing a proof of concept is that the former is being piloted by banks using their production systems. That’s a huge leap. The recent shifts in service expectations around accelerated payment processing triggered the idea of instant payments, within the European banking Industry. To paraphrase the Euro Retail Payments Board’s definition of SEPA Inst Payments – an electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate crediting of the payee’s account with confirmation to the payer (All within 10 seconds of payment initiation). This is irrespective of the underlying payment instrument used or of the underlying clearing and settlement ecosystem. And it is planned to go live on November 2017 at 08:00 CET. As a huge boost to community banks and credit unions, the Same Day ACH (SDA), for credit entries, was made available on September 2016, marking the beginning of faster payments in US markets. Starting September 15, 2017, Same Day ACH will be available for debit entries, enabling the same-day processing of virtually any ACH payment. By March 2018, Receiving Depository Financial Institutions (RDFIs) will be mandated to make funds available from same day ACH credits. With nearly $5 billion in 3.8 million Same Day ACH transactions, in October alone, it does make for a profound statement.  These innocuous and subtle technological innovations could prompt a perceptible shift in scales in favor of the incumbent banks. How Banks Have the Advantage Banks have a captive customer base and offer multiple products - payments is just one among the many business offerings, while payments Fintechs are more transactional in nature, where the core revenue model thrives on float and transaction fee. The challenges of the long winding path to profitability will endure the initial euphoria of technological prowess of the Fintechs. And these innovations are not making it any easier. As banks realize the effects of faster, cheaper, and more transparent payments, they can expect to grow their international business, enhance supplier relationships and increase treasury efficiencies, while taking on payment Fintechs on their own turf. New solutions could be built across different customer segments that lower the total cost of ownership, maintain regulatory compliance, and provide a faster, more efficient, and more transparent end-to-end customer experience. Banks can now gain the ability to evolve and meet contemporary challenges of an evolving payments landscape. And the threat to Fintechs is beginning to show. In India, as per RBI data, bank wallets showed a growth of 57% (173 million in December 2016) and 20% (208.5 million in January 2017), while e-wallets showed a declining trend of their market share from 34% of total PPI transactions in December, to 33% in January to 29% in February . These are interesting times in an already vibrant payments industry, and the consumers are not complaining! My colleague Mridul Nath and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and mridul dot nath at Oracle dot com.  

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services The last couple of years have witnessed, innovations in payments dominated largely by Fintechs. According to...

Financial Crime and AML Compliance

Fighting Financial Crime with Cutting-Edge Techniques

As you know, the pressure placed on financial organizations to combat crime and money laundering is always on the rise—and there’s good reason, too. It’s estimated that US$1.6 trillion in criminal proceeds pass through the financial system every year, or roughly 2 to 5 percent of the world’s GDP.1 If that sounds like a lot, it’s worth bearing in mind that this isn’t just a number. This is money that funds organized crime—that’s terrorist groups, large-scale corruption, the drugs trade, human trafficking, and counterfeiting—and those of us in the finance industry are in a unique position to fight it all. This is why anti-money laundering (AML), risk, compliance, and Bank Secrecy Act officials are constantly tasked with improving practices. But with more data flowing through the system than ever before, and with increasingly sophisticated threats, maintaining compliance and keeping crime at bay are tasks that grow in complexity. Right now, a lot of banks are still using traditional methods to uncover suspicious behavior. But these methods are costly—and rife with opportunities for failure. The time has come for a new approach.  Fighting Fires Before They're Fires There’s currently a real desire on the part of regulators to change the industry’s culture and approach to compliance, making it central for all operations. For example, a much bigger emphasis is currently being placed on due diligence and knowing your customers, with regulators really starting to scrutinize how banks have chosen their clients in the past. There’s good reason for this, too. This initial stage of interaction between an institution and potential customer is the easiest time to prevent fraudulent activity. Quite often, by the time customers have been on-boarded, the damage has been done. But vetting customers before this point—before they even engage with the institution—is by far the most successful method of prevention. It’s all about knowing who your customer is. How do you do this? Well, it’s clear that siloed, piecemeal solutions are no longer suitable. What the modern bank needs is a way of automating the on-boarding and risk-scoring processes to ensure compliance, while engaging in ongoing due diligence (ODD) and enhanced due diligence (EDD). Placing Big Data Analytics at the Heart of Your Defense Many organizations are already updating AML systems and Financial Crime and Compliance Management (FCCM) solutions to automate and standardize these on-boarding processes, gain a single version of the truth, increase transparency, and improve overall performance. Several are also starting to acknowledge the importance of data-driven analytics, business intelligence tools, and the techniques commonly seen in other areas of big data analysis to prevent financial crime. The fact is that although a lot of institutions feel limited to the data available in siloed databases, or to that which customers provide, many have the potential to access a much bigger pool of data in various formats residing in data lakes. With the right investments, this data can provide much better insight into who clients are and, ultimately, a better assessment of their risk to the institution. Guesswork or manual review are not appropriate strategies for protecting your bank, so using big data in the investigative and due-diligence process to find early correlations between clients and crime is the best way to stay ahead of potential threats. The main benefit is that where traditional SQL warehousing is slow and can only enable you to address structured data, big data analytics provide the ability to work with multiple data types like voice, chat, email, and machine logs, as well as transaction data. This means you can develop a more complete picture of compliance, track insider misconduct risks, and reduce instances of false positives. All-importantly, you can do all of this in real time, turning a responsive approach to protection into a proactive one and effortlessly putting compliance at the heart of your day-to-day operations. Right now, the use of big data analytics in financial compliance programs is becoming more mainstream. But in order to take full advantage, you need the right solutions in place to ensure your approach is effective, cost-efficient, and future-proofed—so no matter what changes are made to legislation, you’re able to keep up. A Solution Fit for the Modern Age So the measures you take to protect your bank need to do a couple of things: take the cost out of the onboarding process, and minimize risk. But what technology can help you do this? As we mentioned earlier, it all comes down to knowing your customer. There are plenty of tools available that can help you to get a more complete picture of your prospective clients from day one—making it far easier to monitor, detect, and investigate suspicious activity, and notify regulators of potential problem areas. These same know-your-customer tools can also automate and reduce the cost of on-boarding—which makes finding new customers that much safer, and maintaining compliance that much cheaper. Sound Good? To learn more about the current state of financial crime and compliance, and the solutions available to help you face your challenges, visit our resource center. Alternatively, if you want to experience the benefits of a modern approach right away, trial Oracle Financial Crime and Compliance Management today. 1 UNODC, "Illicit Money: How Much Is Out There?"

As you know, the pressure placed on financial organizations to combat crime and money laundering is always on the rise—and there’s good reason, too. It’s estimated that US$1.6 trillion in criminal...

Analytics

Fundamental Review of the Trading Book(FRTB): How do you start on this journey?

Blog By: Rohit Verma The Fundamental Review of the Trading Book is painful, onerous & expensive to implement, and unfortunately it’s not going away. It’s an additional limb on an overflowing tree of regulatory requirements. With a 50% estimated increase in capital requirements assuming full IMA approval and a $200M estimated cost of implementing FRTB for each of the Tier 1 banks this is certainly no laughing matter, some may laugh until you cry however! The 2019 deadline seems a bit away at this time, but the steps required to ensure compliance aren’t easy and now is the time to start. I presented at the Marcus Evans Conference on FRTB back in February, and the consensus was fairly consistent with the attendees: where do we start? There is a lot to do with multiple challenges at multiple levels and the next 18 months may not be enough time. This is a capital adequacy regulation that also impacts the way the trading desks are organized and the way lines of business operate within the bank. So how do you start on this journey? I see there being 4 key challenges in addressing this regulation: Methodology  Data Management Technology And the intersection point of all 3 But just with any regulatory guideline, there is a great opportunity to turn the regulatory burden into a strategic business initiative that streamlines data and processes for the trading book. Let me take you through each of them. Methodology FRTB introduces multiple computational challenges for banks. While calculation of Expected Shortfall is likely to be a minor extension of the current VaR model in most banks, the bigger challenges are in the areas of model validation and risk factor identification & modeling.FRTB introduces the need for continuous monitoring of model validation results for each trading desk. In addition, there is the need to classify risk factors as model-able or non model-able and identify historical stress periods based on restricted set of risk factors . There is also a need to compute capital using standardized approach for trading desks that fail model validation tests. Banks have to build new models and methodologies, and in some cases tweak existing ones, to comply with FRTB. Data Management Data is the crux of any regulatory requirement these days, no matter which department it affects within the bank. Without the right data, you cannot accurately report on any regulatory requirement, but beyond that you cannot take the organization forward. According to a survey from Oracle and Deloitte, 67 percent of financial services institutions have a comprehensive data strategy, but two-thirds say it is better suited for complying with regulatory requirements than driving the business forward. The FRTB requirements are requiring firms to take a careful and thorough look at their data architectures. A single source of data is no longer optional; it’s a mandatory requirement for the development and execution of strategy wide variety of models across trading desks. Absence of a strong data management strategy will introduce inconsistencies across different metrics that will eventually result in higher capital requirements. Technology FRTB brings up new technology requirements; the reality is that most existing systems will not suffice for what’s required here. The calculations are complex, but more importantly they have to be done on a regular basis, some even daily. The whole process of FRTB requires frequent validation of models and making decisions based on the model validation results – the entire task of managing the process is very complex and a flexible technology solution is needed to help accommodate changes early in the process. FRTB is unlike any other regulation in the sense that most others can be set up to run on its own. For example, you can set up your data and analytical engines to run the regulatory requirements needed for Basel III. The process is a smooth one that goes from sourcing data to regulatory reporting in a series of steps without much human interaction required. However, FRTB is complex and requires multiple sets of eyes reviewing the process along the away and deciding on next steps. With the right technology solution in place supporting this, it will alleviate some of the burden. Intersection point So how do you bring it all together? First, you have to recognize that all three are imperative. You cannot have 2 out of the 3 and still be successful. For example, you can have the best models and the best technology in place but if your data is insufficient you won’t be compliant; this is a challenge that is often overlooked. When decisions are made in silos it creates the following: Missed regulatory deadlines Delays & higher expenses Opportunity costs Re-work and reduced employee morale It’s best to avoid additional challenges when attacking something as complex as FRTB; and that is easily avoided when you have the proper set up for your Methodology, Data Management, Technology Solutions and  where they all intersect with one another.I’d love to hear from you on how your organization is addressing FRTB.   Rohit Verma is Senior Director for Risk Analytics Strategy with Oracle Financial Services Analytical Applications and can be reached at Rohit.r.verma AT oracle.com

Blog By: Rohit Verma The Fundamental Review of the Trading Book is painful, onerous & expensive to implement, and unfortunately it’s not going away. It’s an additional limb on an overflowing tree of...

Analytics

Live from OIC17 - Continuing the Journey of Capitalizing on Artificial Intelligence

Blog By: Arjun Ray Chaudhuri I am live at Oracle Industry Connect and I just had the pleasure of sharing a demo with the attendees during Sonny Singh’s Keynote address around Machine Learning and applying it to the context of Next Best Offer.  For those of you that were at Oracle OpenWorld back in September, you may recall we introduced Jenni to you.  Jenny was applying for a car loan with her bank; she was able to apply and receive an offer to buy the car right on her mobile device. Well now at Oracle Industry Connect, Jenny is back, her life fast forwarded 3 years and she is ready to pay off her car.  Jenny is now posed with a situation – does she take the monthly amount she was paying into her car and buy a new car, or does she take that money and put it into something else.  At the same time, her bank is evaluating the relationship with Jenny and realizes she’s about to pay off her loan. Mobile banking remains Jenny’s preferred banking channel and the bank has been tracking Jenny’s activities over the mobile website and app and comparing them with her dynamic peer segments for many months. For the bank, it’s the right moment to pitch a marketing offer and deepen the relationship with Jenny given that one of the products is about to get closed. After Jenny has made the last car payment on her bank’s app on her phone, a marketing communication is displayed asking Jenny if she’d like to open 529 plans for her children.  But how did the bank know that 529 accounts were the right offer for Jenny? Why didn’t they make the offer earlier? Thanks to Machine Learning, financial institutions are better armed to analyze vast amounts of data, be it every transaction level data or online activity data of the customer in the form of weblogs and applogs. With this capability, banks are able to service their customers through data driven marketing offers, before they’ve even had a chance to think about taking that car payment to another institution or to make some other purchase.  The future is now, and organizations that sit back and wait to decide how to integrate these technologies into their operations will fall behind and start losing customers like Jenny.  Just as the McKinsey article stated: “Now is the time to grapple with these issues, because the competitive significance of business models turbocharged by machine learning is poised to surge.” We all know banks need to have strong and quality intelligence and this is needed for a variety of reasons: customer retention, cross sell/upsell, regulatory requirements, risk management and the list goes on and on.  But how can machine learning take financial institutions to the next level? Here is a list of benefits of applying machine learning on big data when compared to traditional statistical models: According to the “Innovation in Retail Banking” report from Efma and Infosys Finacle, financial institutions understand the potential impact and benefits of AI, but that they are still hesitant to act. The hesitation comes from a number of reasons, with legacy technology environments coming in as the biggest hurdle to jump, and a lack of unified vision for digital across the enterprise coming in a close second.  The priorities are there – they know how to best leverage the technology if they had it. 78% of organizations say the Creating a customer-centric organization is a priority, while 74% say enhancing channels to give an omnichannel digital experience is key; and even 68% say maximizing usage of digital technologies such as mobile and social are important. And our example with Jenny leverages each of these. So how can banks bridge the gap between priorities and barriers?? The trick is to recognizing the strategic business opportunities that exist here.  The use of Machine Learning helps optimize customer experience for marketing personalization and engaging them with relevant offer recommendations by processing vast amounts of information more accurately. As with any organizational change or regulatory requirement, there are cost implications and change management to monitor, but the extended benefits outweigh the concerns.  You don’t want to be an organization that is behind in leveraging advanced technologies and lose customers along the way.  I hope you join me next time as I continue with you on this journey of capitalizing on artificial intelligence. Arjun Ray Chaudhuri is a Product Manager with Oracle Financial Services Analytical Applications and can be reached at arjun.ray.chaudhuri AT oracle.com  

Blog By: Arjun Ray Chaudhuri I am live at Oracle Industry Connect and I just had the pleasure of sharing a demo with the attendees during Sonny Singh’s Keynote address around Machine Learning and...

Banking

The World Beyond Passwords - Biometrics & Banking

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Managing passwords is a big issue for today’s connected customers in a digital world. Customer expectations are changing at a fast pace and is putting tremendous pressures on banks. Security and convenience have a major impact on customer choice. Due to outdated processes and increase in cyber crime, banks have experienced incredible amounts of friction and increased costs.  Banks have realized that one of the best features of biometrics is to present an exact, unique form of identity. Banks need to explore suitable biometric alternatives for authenticating tech savvy users that can balance both these factors. Customer trust in biometrics has also risen considerably in last two years because of the convenience and huge security benefits it has to offer. According to a study by Visa in the U.K., “9 out of 10 respondents (85 %) showed interest in using biometric authentication to confirm their identity by banks and 81 % would trust payment networks”. Biometrics is a priority for banks right now and several facial, eye, voice, vein, and fingerprint recognition solutions are being implemented. Over the coming years, the global biometric authentication and identification market is projected to undergo significant growth. According to Grand View Research, the market size for biometrics is expected to reach $24.59 billion in the next six years. The other inflection point in this field has been the rapid development of biometric sensors and the rapid reduction in their costs. Many mobile manufacturers are introducing various biometric sensors in their new launches which help collect data that can be used by service providers. Everyday hundreds of biometric apps are popping up in the App Store. According to a research by Globe and Mail "by 2019, around 770 million biometric authentication apps would have been downloaded worldwide”. Even on the software front, the ability to convert a standard camera into a biometric device has seen an upswing. Due to rising usage of smart phones and biometrics authentication, banks will be forced not only to work closely with biometrics technology providers but also with the biometrics developers to create seamless and easy to use solutions which can help their customers. Customers are looking for really simple and convenient ways of logging in. Social login is being used extensively for this purpose from existing social accounts like Facebook, Twitter, Google+ or LinkedIn. When the customer visits a site that offers social logins, they have the option to register, log in with their regular ID and password or through a widget or plug-in that connects the site to their choice of social platform. Although it is easy and convenient and helps in blocking spam mails and fake users, it is not very secure for identification and authentication purposes.  Here are some of the areas where biometrics is being explored: Banks can use biometrics beyond authentication, like emotion and mood detection and accordingly cross sell and modify their products.  A bank in New Zealand is using its facial recognition software to measure their customers' behavior in different financial scenarios, for example if the customer has to book a flight at last minute, the software records their muscle movement through webcam and decodes their micro-expressions. As the system captures such emotions better than what humans do, it offers enhanced guidance on their financial decisions using emotions. Recently, an Israel-based bank has become the first in the world to embrace behavioral biometrics as a password replacement on mobile devices. Shopping has been revolutionized due to advances in technology like wearables, mobile payments, wallets, and contactless cards. Retailers are taking full advantage of this and creating lucrative offers and deals for young shoppers to give them best experiences. Alibaba, a major player in mobile payments market recently launched ‘Smile to Pay’ or ‘Pay with Selfie’. Just click on the 'buy' button on the app and click a selfie with a smile to place your order. Mastercard recently rolled out its 'Selfie Pay' in Europe and will open this up for rest of the world by the end of this year. Surely, other major technology vendors like Apple and Google will come up with something in a couple of years. The market will soon start to see solutions which leverage biometrics for improved security and user experience as technology becomes more advanced and sensors (fingerprint, camera, and microphone ) on devices improve. Bank customers are showing an increased interest in IRIS scanning authentication, facial recognition is being used for mobile authentication by companies like MasterCard  and banks have embraced voice recognition for their call-in centers already. Apple is also coming up with a new biometric sensor, which will use a customer’s heart rate from a wearable device for identification. Until now banks have implemented Biometrics for replacement of mobile banking passwords. But now new areas are being explored like multi-factor authentication for high risk activities like payments and money transfers, cardless cash withdrawal and so on. At the basic level, security is about something you know and something you have which can be used for identification, hence making it impossible for someone to forge or tamper financial transactions. Bank of America, HSBC, Charles Schwab, Citi are already using multi factor authentication for their retail customers.  While banks are deploying Biometrics in a big way and customers are also embracing the shift, there is a high potential risk of cyber attacks, online fraud and identity theft. Banks and service providers are therefore investing heavily in cyber security measures. Banks are working closely with Fintechs to help curb cyber fraud. Fraudulent transactions can occur through multiple channels as customers have the flexibility to access their account from any channel as per their wish.  However, banks with advanced systems that give them a view of all of the customer's  transactions  will be able to able to prevent fraud based on their knowledge of  the customer's previous transaction behavior. Alternative modes like fingerprint scanning, facial recognition, and voice recognition which are nearly impossible to forge, due to the uniqueness associated with them, also offer a convenient way to prevent fraudulent activities. Though banks are pushing hard for a cashless, branchless future, eventually it will be customers who have to accept or reject the new tech heavy banking system. My colleague Parul Jain and I co-authored this blog. We would love to hear your views.  We are reachable at tushar dot chitra at Oracle dot com and parul dot j dot jain at Oracle dot com.    

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Managing passwords is a big issue for today’s connected customers in a digital world. Customer expectations are...

Analytics

CECL Compliance – Evolving for the future

The Financial Accounting Standards Board (FASB) published an accounting standard update in June 2016 for estimation of credit losses for the purposes of financial reporting. The key highlights of the update include:  The earlier approach of an incurred loss model to provide for credit losses was considered to be restrictive. It delayed the recognition of a loss provision unless it is probable that a loss has been incurred The new standard requires all organizations to provide for expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts  There is no single method prescribed by the standard and the FASB expects the complexity of the model to be aligned with the complexity of the organization’s business model and processes The estimates have to be based on the expected life of the asset and should be assessed collectively based on similar risk parameters Additional disclosures are required for credit quality indicators by Vintage (year of origination) A new impairment model for AFS debt securities Valuation of PCD assets at initial recognition Challenges Lie Ahead Not only are these changes expected to alter the month end and quarter end book closure processes, these will also impact the profitability numbers published by organizations (mostly financial institutions) and will undergo higher scrutiny with respect to what assumptions have been taken into account for the estimation of Allowance for Loan and Lease Losses (ALLL). Combine this with intersecting regulatory requirements from CCAR, DFAST and BIS and the understanding of credit risk a financial institution faces complicates even further. There would be multiple interpretations of how credit risk is viewed by the bank for different regulations and even worse, how it is understood and computed can differ by the various divisions in the same bank. When Life Hands you Lemons… Make lemonade...or so the saying goes! But in looking at this from a different perspective, I see the changes as an opportunity to help banks and the entire financial services industry to change and evolve for the better. Some of the benefits I see include:  Forcing the Risk and Finance teams within the organization to start aligning with each other and communicate in a language understood by both – leading to: Data convergence – how it is captured, processed and reported Model convergence – how risk parameters are derived and consumed   Changes in organization structures to support  This standard will necessitate an auditor to investigate more into the assumptions made for current conditions and reasonable supportable forecasts and would compare with similar assumptions made at peer organizations – leading to more transparency in peer groups and unearthing of black box models Most internal ratings-based (IRB) banks would prefer to extend and adjust their existing credit risk models to cover CECL expectations leading them to expose their models to the auditor, considering that the assumptions would need to pass the test of reasonableness. To stay relevant in these conditions, these models and associated technology applications would also need to be transparent and auditable. Considering there is no single prescriptive model for CECL, it is more likely that Tier 2 institutions would look towards enhancing the incurred loss models presently used and adjust them to reasonable supportable forecasts. This is a solution that can work in the interim, but it ultimately leads the organization to look at tactical solutions that may not pass an auditor’s test or scale up to future needs. Eventually most institutions will need to work towards a more strategic solution that solves the Risk and Finance intersections more holistically. Institutions that are already on the path of an integrated risk and finance model will stand to benefit the most. With the issuance of a discussion paper by BIS on regulatory treatment of accounting provisions, other regulators can also look at options to converge these models and assess credit risk with similar objectives to arrive at a standard way of computing these provisions either for financial reporting or regulatory reporting. The cost of compliance with tighter regulations is weighing down the financial services industry and continued divergence and regulatory changes will add to the burden; but it can ultimately lead to standardization of data, models, processes and systems that benefit the entire financial institution.  All parties involved, from the regulators to the banks and even including the vendors that support financial institutions, need to evolve and think out of the box to what the future will likely be and work towards holistic solutions for the same.  Apart from what I’ve outlined above there can be more reasons for evolution, such as convergence with treasury operations for valuations and hedge accounting given that standards on the same are still evolving.       Geetika Chopra is a product manager with Oracle Financial Services Analytical Applications leading the solution for IFRS Compliance.  She can be reached at geetika.x.chopra AT oracle.com.

The Financial Accounting Standards Board (FASB) published an accounting standard update in June 2016 for estimation of credit losses for the purposes of financial reporting. The key highlights of...

Banking

PSD2: Threat or Opportunity for Incumbent Banks

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Payment Services Directive (PSD) adopted in 2007 aimed to create a single market for payments within the European Union. However limitations like each country having different regulations around third party access to customer accounts led to services being localized by country. Also banks were not obligated to grant third party providers access to their customers’ accounts In the light of these limitations, the revised Payment Services Directive (PSD2 – EU Directive 2015/2366) was proposed by the European Commission in 2013. The objective behind PSD2 is to create greater convenience and choice for customers in the European Union, integrate and improve payment process, create level playing field for payment service providers, foster innovation and competition What does PSD2 propose? Unconditional right of refund for direct debits under the SEPA CORE scheme Much stronger customer authentication system Ban on surcharges for card payments Enhanced customer protection for payments made outside of the EU or in non-EU currencies Introduction of third party payment service providers (TPPs) to the EU financial landscape: Payment Initiation Services Providers – PISP with access to the account information of bank customer Account Information Service Providers – AISP who can initiate a payment on behalf of the customer There will also be Account Servicing Payment Service Providers – ASPSPs which are nothing but banks who have to provide access to customer information to TPPs using APIs How does PSD2 change the financial landscape for the European Union? According to a PwC Strategy & study on PSD2 in 2016, 88% of consumers use third-party providers for online payments, indicating a large, ready base of customers for other digital banking services like payments, financial planning etc. 2018 is when the PSD2 is supposed to go live and according to industry experts will end banks' monopoly on their customer’s information. Under PSD2 banks will be obligated to share their customer information with third parties through open APIs.  These third party providers can then build their services using  the bank’s data. Banks will also have to bear increased costs of providing the security infrastructure around APIs that they will be exposing. This will result in a dramatic increase in competition in the financial sector with banks no longer competing with other banks but also with non-banks or Fintechs which will have easier access to the market. According to some projections as much as 9% of retail payments revenues are predicted to be lost to PISP services by 2020 just within two years of PSD2 going live.   How can banks respond? The banking sector is one of the biggest spenders on technology. However, the majority of this spend is on maintenance activities. What has prevented traditional banks from being innovative is not the cost of acquiring new technology but the hesitance to cede control and organization inertia. This can be a very risky approach in both light of the regulator’s push to level the playing field by allowing new players to enter the banking sector and changing customer expectations.  According to Fujitsu European Financial Services Survey of 2016, 37% of European consumers say they would change their bank if it did not offer them up-to-date technology1. Banks can use either look at PSD2 as just another compliance requirement or turn it into an opportunity to develop new business models while delivering services that the new age customers want. Bank as a Platform: Banks can open their APIs which can be used by external developers to extend the platform functionality at a technology level, while third party vendors can use the platform to create value for the consumers at a business level. Incumbent banks should take the lead by industrializing their APIs and build their own digital ecosystems and/or be a part of an external ecosystem. This approach will help banks to be more agile and create new opportunities in product creation and distribution while opening new revenue streams. There are two approaches of adopting “Bank as a Platform” strategy: Build a digital banking platform based on apps from third party applications like current accounts, credit and debit cards, and instant and contextual personal loans. Effectively the bank will be building an application marketplace like an e-commerce platform where third party players, FinTechs and even other smaller banks can list their financial services or products. Consumers will then use the banking market place to consume product and services as they do for example from an Amazon. The revenue for such a digital bank will not be form fees that end consumers pay, but from the app providers that list their apps on the platform. Banks can also expand their services by enabling some of these third party modules to their own core offerings and find new cross sell opportunities. Secondly they can become part of a third party API marketplace like the Berlin-based Open Bank Project (OBP), where they have access to community of developers who can quickly create new products and services for them. These third party API marketplaces also offer white labeled apps and sandboxes for banks and other third part providers to build solutions that offer better experience to their customers. This will reduce the development cost and time for banks as they do not have to invest in building products and APIs from scratch but would use the services of the developers as and when required. Offer PISP services: Banks can use this approach to spread out their transaction banking offerings and offer low cost and much faster API based P2P payment solutions. One prime example is Danish Saxo Bank, which opened up its APIs in September 20152.  Saxo Payments uses Oracle solutions to build Saxo Payments Banking Marketplace to empower Fintech businesses to deliver instant and low-cost cross border payments capabilities to their merchant clients. Another example is Capital One, a UK-based bank, which now enables affiliates to benefit through their APIs3. Monetize customer data and insights:  Banks have traditionally collected and aggregated customer information which is of tremendous value for new entrants. Banks can use advanced analytics to draw insights from transactional data which will help new entrants to better target their customers.  Using open APIs banks can work as providers of this rich data to third parties and thus create new revenue opportunities. Banks can also act as Account Information Service Providers to their customers, Barclays for example has a subscription service SmartBusiness application for SMEs to monitor their finances in comparison to their 500,000+ peers.  New AIS entrants who aim to provide similar services would be restricted by the number of customers that sign up for their services, while Banks already have a huge data base of existing customers which offers a tremendous first mover advantage. Tushar Chitra is the Senior Director for Product Marketing at Oracle Financial Services. He can be reached at Tushar dot Chitra at oracle dot com Co Author: Abhishek Shukla is a Principal Product Manager at Oracle Financial Services. He can be reached at abhishek dot as dot shukla@oracle dot com   Sources: 1.Fujitsu (2016) :The Fujitsu European Financial Services Survey 2016 2.Saxo Bank (September, 2015): Saxo opens access to its trading infrastructure with the launch of OpenAPI 3.Capital One (March, 2016): Let’s Start Something Together.    

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Payment Services Directive (PSD) adopted in 2007 aimed to create a single market for payments within the European...

Banking

Banks Must Dive In and Ride the Digital Wave

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Evidence on banking transformation is mounting every day. One need look no further than FinTechs and their pace of growth. The global financing of FinTechs is estimated to have increased seven fold 1 in the three years between 2012 and 2015. This momentum did not abate in 2016. And FinTechs are likely to continue their bullish run through 2017 maintaining their uber momentum. Without doubt, high growth patterns will be the new normal for FinTechs. In tandem, digital will continue to spread its tentacles across every aspect of consumer life. FinTechs are further set to benefit from this rising digital adoption. Consider the success of mobile apps such as taxi apps. Pioneering mobile app innovation, mobile taxi apps have successfully redefined the cab landscape. They even created a new group of customers for banks. By virtue of moving their newly registered cab drivers into the banking ecosystem, they shared a part of their success with banks. Banks happily welcomed them, adding a big number of new bank accounts quickly in a matter of days. Left to banks, they would have taken a few years to add the same number of new customers. Such is the impact created by disruptors, whose effects transcend sectors and industries. Also, 2016 recorded a historic feat, largely unnoticed. For the first time the number of card payments surpassed that of cash payments 2. We see that consumer behavior and technology innovation outside of banking is now cascading into banking.   Evaluating the changing landscape and its outcomes are absolutely necessary to a bank’s survival. Let us continue with example of the taxi app, where roping in and retaining drivers is fundamental to their success. Many cab drivers had to open bank accounts only because of them and became part of the financial ecosystem. Now the taxi apps can provide incentives to their drivers through a variety of value added banking services to increase driver loyalty. The driver network can benefit from the new banking services offered by the app. These cab drivers otherwise may not have access to such services. For example, if the cab driver was looking to upgrade his vehicle then he would need a new car loan. With full knowledge of that driver’s history, the taxi app would be better placed to originate this loan instead of the partner bank. However, it would still be the bank which offers this loan. The banks benefit immensely by selling more products and services to new customers acquired through this partnership. By simply participating in such an ecosystem, banks can chart a new path to success. Disruptors such as mobile apps or other FinTechs cannot really act as a bank, and therefore they look to partner with the best of banks that are both agile and innovative. In a fast changing world, banks must recognize that success can come in different ways, forms and places. Going forward, it will be a world of collaboration and partnerships, where a bank will likely play a new but a crucial role.   Globally, regulators and governments are supporting innovation in the financial sector. Europe’s PSD2 and UK’s Open Banking Standard are important initiatives in this context. For example, PSD2 will enable third party providers such as retailers to now compete with traditional payment providers.  With the consent of consumers, retailers can directly seek information from their bank accounts to complete payment transactions without a need for intermediaries. Also, a new group of information aggregators who keep track of a consumer’s multiple bank accounts and their financial history are emerging. Such aggregators will help the users of their platform to engage in ways that will benefit consumers. Consumers can reap the benefits from this arrangement but only if they are willing to share their financial history with a trusted partner. By amending policies in  the financial sector, regulators are hopeful that it will create an environment which will foster innovation, increase efficiency, boost competition and provide a level playing field. However, consumers assent will be mandated in order to use their data. Compliance for data security and consumer privacy is set to become more stringent as banks begin to open up as mandated by regulators.    Beyond the drive from regulatory authorities, we also see fundamental shifts in technology affecting the banking landscape. State-of-the-art applications of internet of things, blockchain and artificial intelligence such as machine learning have the potential to change how banks operate and deliver products and services. Unleashing these technologies early in the adoption cycle inside a banking setup can yield good results, provided banking executives are receptive to innovation. Robot advisory, for example, is catching on.    As we move into an ‘Internet of Things’ world, we can further expand our earlier taxi example. Consider a scenario where the cabs are part of an IoT ecosystem. The vehicle generates a continuous flow of information about its usage, condition, driving style, and also maintenance records. Considering this level of detail for a car loan would certainly help determine a fair value for the old car and also help reward the good drivers – at least until the point where cabs become driverless.  One can safely assume that most banks today are not in a position to use this level of information (from IoT) to make decisions. The inertia of banks in responding to technology advancements and their unpreparedness will significantly hamper their growth.   The amount of regulatory and compliance requirements will increase with new technologies. As regulations compound and volumes of data explode, the challenge for banks will be to deal with this complexity. If not addressed appropriately, banks can become vulnerable to data thefts and hacking. At the same time, it also presents an opportunity for an emerging group of technology companies who specialize in securing banks with solutions that deal with complexities resulting from a combined explosion of digital, data and regulation. We can expect a steady growth for these companies called ‘RegTechs’, a shortened version of ‘regulatory technology’.   As banks get ready to face the incoming tide, here is a list of key criteria fundamental to any strategy: Know Your Customer: Banks have been gathering customer data and their financial history for over many years. This data resides in the many systems which banks have been running during this time. Despite the wealth of customer information residing within, many banks are unsure of how much they really know about their customers. The number of customers who transact using or with FinTechs / third party players will continue to rise. These newer players, who are at the front of customers, will start enriching their own database with valuable customer transaction information. These players are usually smaller and nimbler without any legacy baggage and operate with modern systems designed for scalability. Accumulating their customer transaction data over time, the newer players will also be able to generate invaluable customer insights in the future, very similar to what banks are aiming to do today. Without doubt, banks at the moment have an enormous advantage over the newer players. However, in order to stay relevant and essential, banks must ensure they consolidate all customer data already residing within their many systems and synchronize all customer data flowing through their different channels today.   Build Partnerships – but start early to influence and innovate: Partnering for growth will be a key element in a bank’s strategy. Banks can establish an ecosystem by collaborating with third party players, retailers, FinTechs, RegTechs, etc and allow for innovative methods in product manufacturing, delivery and customer onboarding. The real test is in their ability to influence and build their partner network. It is important that banks start early and exhibit leadership in developing their ecosystem rather than becoming a late participant. Otherwise they would risk losing their ability to offer their own infrastructure as per their own terms and certifications for utilization. They should constantly engage with IT users, partners and developers to nurture innovation and stay relevant in the evolving landscape. The significance of APIs and an open API ecosystem is growing largely due to their ability to establish such partnerships. If banks have to effectively participate in this API ecosystem, then banks should first simplify how information is exchanged between systems internally and reduce the difficulties arising from legacy systems. While building partnerships, they need to enforce policies which ensure security and protect privacy.    Make Digitization Top Priority: Digitization is crucial to banking processes with customers initiating transactions anytime and from anywhere, through FinTechs or other players. Customers expect instant gratification without any hassles 24X7. Banking partnerships can only be built based on their ability to fulfill customer needs. A growing partner network will further increase the need for concurrent usage and reconciliation. Beyond responding in real time, banks should be able to use the data generated by customers to contextually engage them either directly or through their partners. Therefore, it is imperative for banks to increase automation and improve systems integration. Digitization is vital to improve productivity, operational efficiency, security and lower risks.     Get Serious About Cloud: The ability to handle massive volumes of data without hampering the performance of systems crucial to banking can be gained only through cloud. Cloud will improve a bank’s agility and scalability. Non critical functions and non sensitive information are the easy start points that can be moved to cloud. Private and hybrid clouds are other options available for more sensitive and core business functions. Using cloud, banks can offer more services at lower costs. The economics of costs clearly favor cloud as compared to on-premise options. With increasing partnerships, globalization and newer technologies like IoT set to take off, the volumes of data to be handled will further multiply exponentially. Cloud will move from being an option available to banks to something fundamental to their existence.   In the evolving banking landscape, the above four criteria can be considered essential for banks to break the mould, but by no means is a complete list.    Tushar Chitra is the Senior Director for Product Marketing at Oracle Financial Services. He can be reached at Tushar dot Chitra at oracle dot com   Sources: [1] http://investingnews.com/daily/tech-investing/fintech-investing/fintech-market-size-a-breakdown-of-the-basicssub/ [2] http://blog.euromonitor.com/2016/09/consumer-card-transactions-overtake-cash-payments-first-time-2016.html  

Blog By: Tushar Chitra, Senior Director, Product Marketing, Oracle Financial Services Evidence on banking transformation is mounting every day. One need look no further than FinTechs and their pace of...

Analytics

Technology: The Core of a Successful Compliance Program

In this video blog, Saloni Ramakrishna, author and senior director at OFSAA, discusses the unified platform approach for compliance and managing regulatory demands.  In the financial services space, there is no way to manually manage the “Multi” dimension of regulations – Multiple regulations, Multiple regulators, and Multiple geographies.  Technology is THE business enabler that harmoniously weaves in these “multiple aspects” of regulatory demands.  Watch this video blog to learn why building for compliance alone is sub-optimal and how building for business excellence naturally subsumes compliance needs while addressing the larger business goals. Ms. Saloni Ramakrishna, author of Enterprise Compliance Management - An Essential Toolkit for Banks & Financial Institutions, is a  financial services industry practitioner with nearly three decades of experience. She brings to table rich hands on knowledge with real world perspectives in Risk, Compliance and Performance areas. In her role she interacts with senior management of banks, consulting professionals and regulators across multiple countries. Ms. Saloni Ramakrishna is invited to share her views on industry trends by national and international finance forums like GARP, Ops Risk Asia, RiskMinds and Asian Banker amongst others. Her ideas have appeared as articles and quotes in printed & online media and television interviews.

In this video blog, Saloni Ramakrishna, author and senior director at OFSAA, discusses the unified platform approach for compliance and managing regulatory demands.  In the financial services space,...

Analytics

What price a better pricing strategy for banks?

Blog By: Arjun Ray Chaudhuri The world of financial services is changing and banks must be ready to respond to these changes. This is the thinking behind a new Oracle report, “Responding to change – how are banks using information and pricing strategies to boost profitability?” The report explores and explains the results of a recent Oracle and Efma survey and also includes some observations from two Think Tank sessions hosted by Efma and led by Oracle. Two previous blogs in this series have looked at a couple of inter-related key elements of a response to changes that affect the financial services sector – the effective use of customer information by banks and the increasing potential for using big data to enhance customer engagement and profitability. This blog will focus on another key issue - the importance of powerful pricing strategies. Trends in pricing strategies A bank’s approach to pricing can have a significant impact upon its profitability. If a pricing strategy is right, it will enhance the customer experience and will help to boost profits. If it’s wrong, the results for a bank can be disastrous. Pricing has now become even more important, as customer loyalty can no longer be taken for granted. In the past, customers were sensitive to fees but were also very loyal to their banks and would still tend to buy products from them even if the price was slightly higher than from other banks. Product-based pricing was prevalent throughout the industry. Although this is still the primary strategy adopted by many financial institutions, others have since moved on to risk-based pricing. The results from our survey show this trend. Relationship-based pricing A few of the more progressive banks have gone even further and now rely on relationship-based pricing. This still takes risk into account but also includes different approaches to rewarding customers for their loyalty to the bank. Banks are also starting to differentiate in terms of the customer experience provided. This approach is still under debate within the industry. Legacy systems and bank silos are also delaying the adoption of this approach in many areas. Our survey suggests that Western European banks in particular are still reluctant to move over to a relationship-based pricing strategy. To explore this issue a little further, five in-depth interviews were conducted with five banks from different geographical regions. For example, a respondent from Russia said that his bank was using all three of the key approaches to pricing (product-based, risk-based and relationship-based). However, it’s focusing mostly on relationship-based pricing and intends to try and develop a seamless approach that will enables all of its business lines to access the same information. Meanwhile, a bank in East Asia, although currently using product-based pricing, is also trying to develop an approached based on the customer relationship. The bank is planning to roll out a special customer value tool to help with this. In contrast, a financial institution in Central and Eastern Europe is still focusing mainly on a risk-based approach, although an increasing number of banks in the region are now starting to develop a more customer-centric strategy. Finally, two other banks (based in the Czech Republic and the Middle East) aren’t really using relationship-based pricing at all. One of them has developed some very simple pricing strategies but wants to start moving towards a basic type of relationship pricing. The other bank is still focusing on product-based pricing. However, it again is moving towards a relationship-based approach, as it’s now starting to work on the concept of a model centered around the Customer Lifetime Value. Moving forward There is little doubt that price is once more becoming a major factor when customers are deciding upon a bank to use. Relationship-based pricing is the way forward for banks, even though that might mean a major cultural change – including the elimination of silos. As banks move over towards this approach and start rewarding their customers for their loyalty, this is likely to be reflected in greater success in both acquiring and retaining customers. Banks that fail to grasp the nettle of a progressive pricing strategy might find themselves ‘stung’ in other ways – by a loss of customers and a loss of business. So, banks can’t afford to be complacent and ‘keep doing things the way we’ve always done them’. Times are changing and banks need to change with them – or risk being overtaken by events. To read the full report on Responding to change, please visit Arjun Ray Chaudhuri is a Senior Principal Product Manager for Oracle Financial Services. He can be reached at arjun.ray.chaudhuri AT oracle.com.   

Blog By: Arjun Ray Chaudhuri The world of financial services is changing and banks must be ready to respond to these changes. This is the thinking behind a new Oracle report, “Responding to change –...

Analytics

A Video Blog Series #3: Building an ecosystem to future proof banks in a fast changing regulatory reporting landscape

In the second video blog of the 3-part series, Saloni Ramakrishna, author and senior director OFSAA, discussed AnaCredit, a new regulation from EBA as part of the evolving European Regulatory reporting framework. She detailed the nuances of AnaCredit emphasizing that the regulation has more than meets the eye. In the last video blog of this series, Ms. Ramakrishna shares her thoughts on how we can build a future proofing idea or construct into an overall ecosystem that we create for regulatory reporting. <span id="XinhaEditingPostion"></span> Ms. Saloni Ramakrishna, author of Enterprise Compliance Management - An Essential Toolkit for Banks & Financial Institutions, is a  financial services industry practitioner with nearly three decades of experience. She brings to table rich hands on knowledge with real world perspectives in Risk, Compliance and Performance areas. In her role she interacts with senior management of banks, consulting professionals and regulators across multiple countries. Ms. Saloni Ramakrishna is invited to share her views on industry trends by national and international finance forums like GARP, Ops Risk Asia, RiskMinds and Asian Banker amongst others. Her ideas have appeared as articles and quotes in printed & online media and television interviews.

In the second video blog of the 3-part series, Saloni Ramakrishna, author and senior director OFSAA, discussed AnaCredit, a new regulation from EBA as part of the evolving European...

Analytics

Big data – a vast pool of potentially invaluable information

Blog By: Arjun Ray Chaudhuri Businesses - including banks - are constantly bombarded with a colossal amount of information, thanks to the ever-growing influence of the Internet. But how can financial institutions harness this information and start using it for their own purposes? Even finding and identifying the right information can seem like a headache – a bit like finding a stone in a raging torrent.  You need to know how to look and where to look. And then, when you have the information, you need to know how to use it to boost your profitability. This is an important area that Oracle’s been exploring in a recent report, “Responding to change – how are banks using information and pricing strategies to boost profitability?” The details of this joint Oracle and Efma publication can be found in my previous blog, “Are you making the best use of information?”, which looked at how banks are using their existing customer information. The potential of big data However, there is a much wider pool of information that is now available and can provide some fascinating insights into customer behavior. So-called ‘big data’ includes both structured and unstructured data from many different sources – including the many social networks that have sprung up across the Internet in recent years. Our study showed that much of this information remains untouched and unused by banks – and that relatively few senior executives have really grasped its potential for transforming the profitability of their organizations. The amount of data being produced continues to increase exponentially – and the gap between this amount and its usage by banks is also continuing to grow. This is partly because the data needs to be properly identified and prepared first, so that it can then be analyzed effectively - and also because the skills and resources required are still scarce. Banks find it hard to keep pace with the volume of data being produced and are unsure how to use it effectively. Using big data effectively Our survey therefore looked at how banks are progressing in terms of meeting the challenge of using big data. On the positive side, it showed that most banks are now beginning to understand the importance of big data and the need to put it as a priority in their future planning strategies. Banks have very different approaches in terms of their big data journey. However, the vast majority are still in the planning stages or are only just beginning to find ways of using big data. This finding was confirmed by in-depth interviews with banks from different geographical regions. For instance, a financial institution in Russia said that the big data journey was still in the very early stages. However, it hopes to develop its capabilities in the future – indeed, big data is high on the agenda for most of the banks in the region. Two banks (one in the Czech Republic and one in the Middle East) said that they were also starting off on their big data journey - one with the idea of using data from non-banking partners and the other by developing analytical models. In contrast, a bank in East Asia said that it doesn’t really have time to focus on this topic at the moment – and another bank in Central and Eastern Europe commented that it didn’t have a sufficiently critical mass of information. We also looked at the types of big data that banks are using and how they are using it. Most seem to be augmenting their existing data with structured data, although there is a greater emphasis on unstructured data in the US. At the moment, big data is mainly being used for ‘quick wins’, such as improving decision-making and enhancing the customer experience. Other areas – such as using the data to reduce fraud or to improve risk assessments – have been largely overlooked, even though these could lead to impressive returns for the banks. No gain without pain Unfortunately, the whole process of collecting, analyzing and using big data is an expensive business. However, it’s one that banks can’t afford to avoid. As a starting point, targeting can be a relatively easy and effective way of leveraging big data. This might mean exploring customer interactions on channels such as social media in more depth, and using geolocation and other data to make the right offer to the right customer in the right location. For instance, offers can be sent to the customer based upon the retail outlets within their vicinity. This will also help the customer to engage more with the bank, and enhances their perception of the value of the bank’s services. Ultimately, big data could open up a host of new opportunities for banks. The main question is whether they are both willing and able to take up the challenge. The key to success will lie in each bank’s readiness to invest more time and money in the big data journey. If the willingness is there, this could lead to great rewards in the future. To read the full report on Responding to change, please visit Arjun Ray Chaudhuri is a Senior Principal Product Manager for Oracle Financial Services. He can be reached at arjun.ray.chaudhuri AT oracle.com.        

Blog By: Arjun Ray Chaudhuri Businesses - including banks - are constantly bombarded with a colossal amount of information, thanks to the ever-growing influence of the Internet. But how can financial...

Analytics

Are you making the best use of information?

Blog By: Arjun Ray Chaudhuri Information is the lifeblood of any business, and the financial services sector is awash with useful information – both valuable customer details and also a wealth of ‘big data’, some of which will be useful and some of which won’t.  So, are banks making the optimum use of the information that’s available to them? That was one of the key questions that Oracle has been addressing in a new report, published jointly with Paris-based Efma. Efma, for those of you who don’t know this not-for profit association, brings together senior executives from financial institutions across Europe and beyond. The report, entitled “Responding to change – how are banks using information and pricing strategies to boost profitability?” is based on the results of a survey conducted by Efma, along with two Think Tank sessions organized by the association and led by Oracle. Senior executives from financial institutions worldwide were questioned during the study. Collecting the information The use of big data and pricing strategies will be covered by future blogs. But what can our survey and the Think Tanks tell us about the use of basic customer information? The report starts by looking at how banks gather and use information so that they can have a 360-degree view of their customers. This is vital for increasing customer engagement and retention and for optimizing profitability.  It was immediately clear that although the vast majority of banks use details of their customers’ information from their financial transactions, relatively few make use of the wide array of information available on social media, either directly or indirectly. However, this can give valuable insights into customer attitudes and behavior. This was confirmed by in-depth interviews with five leading banks in different geographical regions. Some of the banks are using financial and other details obtained from their customers’ accounts. Although banks generally seem to agree that a 360-degree customer view is desirable, many are hampered by legacy systems, where information is stored in many different places and in different formats. This reflects the pressing need for a central source of information in many banks throughout the world. Analyzing and using the information In terms of analyzing the customer information that already exists within their banks, financial institutions are again missing some golden opportunities. Over half of the organizations questioned in our survey don’t use real-time analytics and only a small number use these on a daily basis. The in-depth interviews showed a varying picture across the different regions. For instance, a Russian bank has a team of analysts and employs various analytical approaches, although it’s not yet really employing real-time analytics. Two banks from East Asia and the Middle East said that they currently lack the capabilities needed for real-time analytics. Meanwhile, a financial institution in the Czech Republic is using machine-learning algorithms – and a Central and Eastern European bank is exploring the use of different types of data in real-time analytics. This bank is also using customer segmentation to help it to generate different campaigns for different types of customers. Once banks have collected and analyzed customer data, the results are invariably used for refining customer-focused marketing campaigns. However, few are taking this to the next level by using the results from the data to increase customer engagement throughout the campaign. An emphasis on customer engagement In a changing world, where banks face increasing competition from fintechs and new entrants from outside the financial services sector, they need to start making much better use of the wealth of customer information that they’ve accrued. This will involve gaining a greater insight into individual customers; identifying those that are most valuable; and finding ways of enhancing their service levels and increasing customer engagement.  Some progress is already being made in this area. However, for a few banks, the customer experience is still a relatively new concept. A bank in East Asia is now starting to grapple with this and wants to develop more seamless processes. In Central and Eastern Europe, a bank is exploring the use of customer behavior patterns for targeting its campaigns more accurately. And in the Middle East, a financial institution has recently completed a comprehensive customer-centricity training program. As a result of these changing demands, financial institutions need to explore the customer relationship and look at their needs, their pressure points and their relative profitability. This new emphasis on customer engagement will be a challenge for most banks, but it’s one that they must face and must overcome if they want to survive in the difficult times that lie ahead. To read the full report on Responding to change, please visit Arjun Ray Chaudhuri is a Senior Principal Product Manager for Oracle Financial Services. He can be reached at arjun.ray.chaudhuri AT oracle.com.

Blog By: Arjun Ray Chaudhuri Information is the lifeblood of any business, and the financial services sector is awash with useful information – both valuable customer details and also a wealth of ‘big...

Analytics

A Video Blog Series #2: Paradigm Shifts in the European Regulatory Reporting Framework with focus on AnaCredit, the new requirement from EBA

In the first video blog of the 3-part series, Saloni Ramakrishna, author and senior director OFSAA, discussed the overall context and background of European Regulatory Reporting.  The second video focuses on AnaCredit, a new regulation from EBA as part of the evolving European Regulatory reporting framework. She details the nuances of AnaCredit emphasizing that the regulation is more than meets the eye. The last video blog of this series will detail Building an Ecosystem to Future Proof Banks in a Fast Changing Regulatory Reporting Landscape. Ms. Saloni Ramakrishna, author of Enterprise Compliance Management - An Essential Toolkit for Banks & Financial Institutions, is a  financial services industry practitioner with nearly three decades of experience. She brings to table rich hands on knowledge with real world perspectives in Risk, Compliance and Performance areas. In her role she interacts with senior management of banks, consulting professionals and regulators across multiple countries. Ms. Saloni Ramakrishna is invited to share her views on industry trends by national and international finance forums like GARP, Ops Risk Asia, RiskMinds and Asian Banker amongst others. Her ideas have appeared as articles and quotes in printed & online media and television interviews.

In the first video blog of the 3-part series, Saloni Ramakrishna, author and senior director OFSAA, discussed the overall context and background of European Regulatory Reporting.  The second...

Analytics

A Video Blog Series: Paradigm Shifts in the European Regulatory Reporting Framework with focus on AnaCredit, the new requirement from EBA

In the first video blog of the 3-part series, Saloni Ramakrishna, Author and Senior Director for Oracle Financial Services Analytical Applications, discusses the overall context and background of European Regulatory Reporting.  She reviews the 4 pillars based on which regulators make decisions and interventions to ensure that the market is stable: Harmonization, Integration, Coherence, and Consistency. The following 2 video blogs of this series will detail AnaCredit, challenges the evolving Regulatory landscape presents, how to address them and how banks can future-proof themselves. Ms. Saloni Ramakrishna, author of Enterprise Compliance Management - An Essential Toolkit for Banks & Financial Institutions, is a  financial services industry practitioner with nearly three decades of experience. She brings to table rich hands on knowledge with real world perspectives in Risk, Compliance and Performance areas. In her role she interacts with senior management of banks, consulting professionals and regulators across multiple countries. Ms. Saloni Ramakrishna is invited to share her views on industry trends by national and international finance forums like GARP, Ops Risk Asia, RiskMinds and Asian Banker amongst others. Her ideas have appeared as articles and quotes in printed & online media and television interviews.

In the first video blog of the 3-part series, Saloni Ramakrishna, Author and Senior Director for Oracle Financial Services Analytical Applications, discusses the overall context and background of...

Analytics

Aligning Risk and Data Governance Across your Financial Institution

There is a data deluge in the Financial Services sector. New regulations, requirements, and sophisticated analytical tools have conspired to drive huge demand for richer, more abundant, and more readily available data. For you, the Chief Risk Officer, this is proving to be both a blessing and a curse. In risk, data is knowledge, and knowledge is insight. These growing volumes of rich data can help you learn more than ever before about business practices and make identifying potential areas of risk extremely simple. On the flipside however, more data is a greater risk in and of itself. All of that extra data is valuable, and if it’s not being managed properly between different silos and lines of business, it’s not just being underutilized—it’s vulnerable. It can make your life much easier or significantly harder depending on how its managed, and if you want to consistently turn rich data to your advantage, you must align accounting, risk, and financial processes to ensure all data is collected and managed in the best way possible. The key to great risk dataThe difference between “acceptable” and truly great Risk Data Aggregation and Reporting (RDAR) is in how the data is collected and managed. If data is siloed or unavailable to key stakeholders and risk-assessment staff, it loses most of its analytical value. But if you can break down the silos and collect and collate data under a single management pane of glass, you can simplify reporting, and put yourself in a better position to spot areas of risk and profit-opportunities. Overcoming the barriers to risk reporting excellence With that single view and unified platform for enterprise data in place, the next step is rolling out new governance policies to ensure that everybody across all departments handles, captures, and stores data correctly using the new system. To do this, you’ll have to work closely with the Chief Data Officer. They have the final say on data policy and governance, and only by discussing what you want to get from enterprise data with them will you be able to ensure that the right practices are enforced enterprise-wide. The CDO will also be able to help you integrate your risk data aggregation and reporting systems into your core data platform, so that it can effectively utilize fresh, timely data from all departments and lines of business. Surprisingly, despite it’s clear benefits, few FIs have managed this yet. A recent study from Chartis on Risk Data Aggregation & Reporting Solutions found that only 7% of surveyed organizations had integrated Risk Data Aggregation and Reporting systems into other business areas. Building lasting partnerships with top data stewards As Chartis summarizes in its report: “The trinity of the CRO, CDO and Big Data should be at the heart of how FIs approach business, and they should all be closely aligned.” Building a strong relationship with the CDO and working with them to improve governance and data management standards across all departments—especially accounting and finance—is your key to better data-driven risk management. During this process, it may also be beneficial to meet with different lines of business, especially accounting and finance, to discuss why you’ve put a new data management platform in place and created new governance policies to support it. By helping them understand your motivations, and how better risk management will benefit their department in the long term, you can get the kind of enterprise-wide support and alignment that you need for new initiatives like these to succeed. Good governance demands good technology Aligning essential data stakeholders and processes across your organization is just one piece of the puzzle. Another is making sure your data and analytics technologies can handle the breadth of data generated by today’s FIs, and that you have the capabilities in place to effectively unify the data everyone is generating. Take a look at how Oracle Financial Services Analytical Applications can help ensure your FI is ready to deliver consolidated, consistent and authoritative data across the enterprise, and take the first step towards eliminating risk with better visibility and reporting today.

There is a data deluge in the Financial Services sector. New regulations, requirements, and sophisticated analytical tools have conspired to drive huge demand for richer, more abundant, and more...

Analytics

How the CFO can Prepare for the Future of Financial Regulations

The rules and regulations placed on financial institutions are constantly changing, and trying to adapt and ensure you’re compliant with them all is far from a simple task. Preparing for changes in advance is difficult, as nobody can truly predict what’s coming. But if we look at what’s happening to the world’s largest banks, we can gain some valuable insight into what the future might hold for all financial institutions. BCBS 239 and beyond For the GSIBs at the very top of the financial services industry, a new set of regulations and requirements has brought major changes to the way they manage data governance, and look at their enterprise data infrastructure. Within BCBS 239, GSIBs have been asked to comply with a number of strict new regulatory requirements that go beyond the data itself and instead look at the company’s data management infrastructure, data lineage, and governance practices. The motivation for this is clear. To fully ensure data consistency, you have to look beyond how specific data is being handled—you have to address issues with the big picture, the entire data infrastructure, and the impact it is having on the quality and security of that institution’s data. What does it mean for the rest of the world’s banks? Leading with these new principles makes sense, as it is enabling regulators to eliminate data issues at their source instead of just fighting fires as and when problems occur. It’s a bit like the “teach a man to fish” proverb. Regulate a company’s data and they’ll become compliant today, regulate their data infrastructure and they’ll become compliant for a lifetime. With that in mind, it would also make sense if we saw those principles applied to all banks, in one form or another. If the world’s biggest banks successfully adapt to those new regulations, the regulatory environment could very quickly shift everybody’s focus towards data infrastructure and governance. It’s not just a matter of compliance While only a handful of banks are currently required to comply with the infrastructure and governance requirements outlined in BCBS 239, many others may want to consider meeting those standards anyway. Those that have been pushed to comply are now beginning to see the real business benefits of a strong, integrated enterprise data environment, and the benefits go far beyond compliance. It’s making reporting, analytics, and risk far simpler to manage, and becoming a real source of competitive advantage. For some other large banks that fall just outside of the GSIB catchment, adopting the same principles is becoming a necessary requirement if they want to keep pace with their competition. So what can the CFO do about it all? The CFO is highly experienced in dealing with regulatory requirements and ensuring that their company is compliant, and if they want to prepare for potential future changes, they need to start thinking proactively about what they can do to improve their data infrastructure today. There are many ways to improve data management across the entire enterprise, but for many FIs, the first step is standardization. To maximize data quality and ensure compliance with new regulations, it needs to be stored in a unified, integrated way that allows it to be accessed, analyzed, and shared with key stakeholders across the entire enterprise—and often outside of it. This means: Standardizing the way you collect, handle and store data Standardizing the platforms used to manage and store data Standardizing across different LOBs and data silos Standardizing the way data lineage is tracked and maintained By doing this, you can create a single source of truth where you and your team can find clean, consistent and verified data that you can rely on. As the CFO, it’s up to you to work closely with the CDO and the CRO to think “architecture first” and consider what changes you need to make to your data architecture in order to achieve governance and data quality excellence.

The rules and regulations placed on financial institutions are constantly changing, and trying to adapt and ensure you’re compliant with them all is far from a simple task. Preparing for changes in...