By Mark Bolton, Head of Sales, International at Gresham Technologies

Automation was once embraced wholeheartedly by reconciliation departments as companies leapt at the opportunity to integrate the latest efficiency driving technology to bring about change and improvement. However, in more recent times this has been replaced by a mood of complacency and stagnation, characterised by a preference to stick to what’s known. To get out of this rut we need to get out of our comfort zones and embrace change – because even during times of uncertainty, a better understanding of your data will always enable a better understanding of your business.

When high-value, high-volume reconciliation processes were first automated it was an exciting and brave new world. Manual tasks that previously required dozens of people were replaced with a new solution that could get through thousands of transactions in a fraction of the time taken for an army of clerks to tick back the same trades.

However, over the years, a culture of resistance to this change has taken hold in many recs departments and the appetite to ‘do more with less’ is diminished by a fear of disrupting day-to-day operations and breaking old systems that work for now. At the same time, the C-Suite has sometimes overlooked the vital role of reconciliations in keeping the firm running smoothly, only mandating change when poor performance or high costs are simply too big to ignore.

Where did it all go wrong?

Skipping forward to today, many organisations have addressed the shortcomings of their incumbent solutions with bespoke in-house procedures, or worse, manual processes, as their incumbent solutions lack the flexibility to cope with either the volume or complexity – or both – of current demands. Business as usual undoubtedly looks very different.

Whilst those within the industry are resistant to change, this does not mean that the industry stays still. Over time, complexity has increased, with transaction volumes skyrocketing, causing new technology to be introduced in response to these developments. This meant that systems had to be updated to keep up with the rapid changes in market conditions. However, this wasn’t as easy as the original ‘big bang’ approach taken to create automated processes, where everything was built from the ground up. Changes to a production environment often didn’t happen, as the time and cost of performing these updates was often prohibitive and heavily reliant on solution providers. Over time, the quality of results started to deteriorate.

Challenging complacency to adapt to the new normal

For many, an argument against change is that the labour-intensive implementation of their legacy solution took many months (or years) to get close to their expected results, and the appetite to repeat such a painful exercise is lacking.

Also, it’s comfortable to keep what you know, right? Wrong! Nothing is more uncomfortable than when your patchwork of fixes unravels, forcing errors to become more commonplace. Unless you can be absolutely data confident across the whole enterprise, then this is the reality you face.

We now have a sector that is rapidly changing, but there’s a lack of willingness to embrace this change. The consequence is piecemeal measures being put in place, rather than taking a leap and fully embracing new technology and the benefits it can bring. For example, we know of multiple companies whose foundations are built upon legacy systems, which they must rely on to process millions of transactions. Many within these companies made requests for systems to be updated but changes were never made, whether due to concerns over cost or the complexity of changes required.

It is in the interest of both the C-Level and practitioners to challenge this risk-averse attitude and fix this situation. Regulations such as MiFID, Basel III and CAT have already placed a huge burden on these old, creaking solutions, and as regulatory oversight continues to increase, so will complex reconciliation volumes. This means wasting time and money by using valuable resources to work through issues that could be handled efficiently by technology.

Firms must act now. With the right partner and attitude, firms will not only be able to develop the right solution for themselves now but one which will provide a robust long-term framework that is flexible and adaptable enough to react to whatever the market has in store.

Mark Bolton
Head of Sales, International
Gresham Technologies

By Niall Twomey, CTO at Fenergo

How do financial institutions stay competitive in the COVID-impacted marketplace? In today’s climate, financial institutions must switch to digital or risk becoming obsolete. As a result of the pandemic, recent research revealed that consumers use of mobile and online banking has dramatically increased with 30 per cent more people using their mobile apps and 35 per cent using online banking. It’s imperative during these trying times that financial institutions digitise in order to accommodate the needs of the marketplace, otherwise they risk losing customers – or worse, going out of business.

Before COVID-19, many financial institutions were putting aside digital transformation projects for a variety of reasons. For example, financial services have been slow to adopt cloud technology owing to a perceived lack of data security and control. Historically, building and maintaining in-house systems was considered the safest way of protecting business-critical sensitive data and applications. However, many of the key concerns associated with cloud adoption such as security and privacy have been addressed, and banks are now beginning to enjoy the advantages of cloud-based services. In the regulatory space, more and more banks are now forced to rapidly embrace the deployment of their regulatory applications on the cloud – in order to drive scalability, lower capital costs, ease of operations and resilience. It’s all about driving efficiencies by adopting technologies, to help give financial institutions a competitive advantage.

In order to be able to better serve their clients in the current climate, financial firms need to improve efficiency, drive better digital client experiences and focus on better value-added tasks by embracing innovative and highly automated technologies that can help ensure the optimal client experiences. In our connected age, clients expect and demand a faster, more efficient account opening process that lets them re-use the information they’ve already submitted and avoid repeated requests to the customer. Often, poor data management is where financial institutions become stuck. The inability to automate the consumption of customer information really hampers financial institutions’ abilities to expedite compliance and onboarding. Financial institutions of any size, and within any sector, need to recognise that introducing technology-enabled client onboarding solutions will give them the best possible chance of meeting the continuing regulatory challenges head-on.

Firms must prepare for the future and consider what the next 6-12 months will look like. They must contemplate how to best respond when relationship managers can’t physically reach out to potential customers. When face-to-face meetings are no longer possible, a digital-first strategy and the ability for clients to provide documents remotely via online portals is crucial. With increased automation, the middle and back-office no longer need to deal with repetitive, manual processes such as scanning documentation. Advanced technologies and capabilities such as natural language processing (NLP), machine learning (ML) and optical character recognition (OCR) allow firms to extract the required information and text from scanned documents which can then be cross-referenced against other data sources internally and externally.

The pandemic has accelerated consumers’ move toward online financial services. Today, customers are looking for remote services including online banking and mobile apps, however, it’s just a matter of time before the demand for more advanced services becomes the standard. For this reason, banks need to fast-track their digital transformation or risk being outpaced by digital-first competitors.

Niall Twomey
CTO
Fenergo

Mohit Joshi, President, Infosys, in conversation with Siew Choo Soh, Managing Director, Group Head of Consumer Banking and Big Data/AI Technology, DBS

DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank’s “AA-” and “Aa1” credit ratings are among the highest in the world.

Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney. In addition, DBS has been accorded the “Safest Bank in Asia” award by Global Finance for 11 consecutive years from 2009 to 2019.

In her conversation with Mohit Joshi from Infosys, Siew Choo Soh from DBS talks about how the bank has achieved a feat unmatched by other banks globally, to become the first bank to concurrently hold three global best bank awards. Siew Choo Soh is the Managing Director, Group Head of Consumer Banking and Big Data/AI Technology at DBS. In her role, she drives digital transformation leveraging Agile, Cloud Computing, Big Data, AI, Machine Learning and is also increasing the representation of Women in Tech. Mohit Joshi is a President of Infosys. He is Head of Banking, Financial Services & Insurance ( BFSI), Healthcare and Life Sciences at Infosys and is also responsible for firm-wide sales operations and reporting processes, including large deal pursuits and top account growth.

Mohit Joshi: You have had a very interesting, fascinating and a well-documented career. Could you just give us a sense of your journey and the key lessons through-out your years in technology at DBS?

Siew Choo: It was a point in my career when I was ready to move towards new challenges and that was when DBS came calling. They asked me to look at a transformation they were about to start and pick up an opportunity there. When I first started in DBS, I was working on all the back-end technology, core banking is one of them from Finacle. As well as all the supporting units for the business such as legal, compliance, finance and so on. Those were the areas that I had never done in my entire career, I deliberately asked to be assigned to such a kind of technology to make sure I can get a 360-degree view of technology in a bank. I did that for about 2 years and after that I was given another new opportunity to head the consumer bank technology and the big data platform for the bank. That is what I am currently doing and still in the journey to further transform these 2 areas in the bank.

I was very fortunate to work with companies that truly supported mobility of people. We actually select people for roles and not because you have done it before but because of your calibre and as well as your passion to make an impact.

Mohit Joshi: You are also one of the few female leaders in technology across the world. For us at Infosys, 40% of our employees are women. What advice would you have for them as they move up in their career and take senior positions.

Siew Choo: Wow, 40% is a great achievement. Well done. I would say that women are typically the shy lot and we always have very high standards. To me, I think every woman should be bold and be fearless. One of my favorite icon is the fearless girl that has been moved in front of the New York Stock Exchange. I think that should be the model for every single girl. Be fearless and go after your dreams and do what you are passionate about.

Mohit Joshi: Now, moving to DBS. DBS has been a remarkable bank for many decades, but specially over the past 10 years. In 2019, the bank won every single ‘Best Bank in the World’ award, every single magazine and every single survey. What would you say is the vision of DBS, what is DBS truly looking to accomplish?

Siew Choo: In the last 10 years, we have been guided by our current CEO, Piyush Gupta. He has a very clear vision about where the bank should be, how we the bank should add value and how we should be transforming ourselves. I think the key part of it actually that we want to make sure that we are truly customer obsessed. We are striving every single day to make our customer experience seamless and we are always pioneering new areas to exceed the expectation of the customer. We have been doing this for many years and we continue to think of new ways to exceed the expectations of the customer, to make banking seamless and invisible to them. That has been the key part of our agenda.

Mohit Joshi: DBS is in a unique position where people contrast DBS with a Netflix or an Amazon just because your technology DNA is so strong. How do technology and business co-exist and succeed at DBS?

Siew Choo: We have a new saying at DBS that ‘business is tech and tech is business’. We are using technology as an enabler for business. Quite a few business models came about because of technology. That’s how we see technology as a revenue contributor rather than a support unit. That is a big contrast to many years ago to where we are now. In this whole agenda, we are quite relentless in pursuing cloud native, in making sure that our people are working in a truly agile manner as well as in the leverage of data and AI. We want to make sure that we do each of this in the true and correct way. There is a lot of effort put into educating our people, giving opportunity to attend various conferences and to be trained by the experts in the industry to understand the true essence. This is so that when we are implementing all of this, the architecture pattern for example, we are doing it the right way that we are able to reap the true benefits from those implementations.

We also benchmark ourselves with the big tech firms. For example, in the last one-two years we are trying to create a new enterprise data platform – ADA, to drive our AI agenda. Before we started, we went to all the various companies, especially the tech companies to look at what they use, what are the tools that they use and what is their operating model and so on. We created our platform based on those learnings.

Mohit Joshi: That’s very inspiring. From a Finacle perspective, we have had a relationship with DBS for many years now and you personally have been a very strong sponsor but also a very constructive critic of everything that Finacle needs to do. What is your advice to us as we invest and grow our platform?

Siew Choo: DBS has been in partnership with Infosys and Finacle for more than ten years. Finacle is definitely a core part of our architecture. As the bank grows up to become more and more digital to tackle new business models, it is important for us that Finacle evolves at the same pace as well as in the same direction as where we are going. So, in a sense the architecture pattern, the product capabilities, the agility of the teams as well as the user friendliness of the UI, those are all key part of what Finacle does to DBS. It is in our interest that we kept the agenda and the priorities of the bank in sync with Finacle.

DBS was recognised as the winner of the Celent Model Bank award in 2018. To download a copy of the Case Study click here.

James Butland, VP Global Banking at Airwallex

Businesses will always need banks, but this necessity does not equate to trusting or even liking their chosen provider. The last decade has seen the digitisation of financial services change entirely how people manage their finances and what they want from banking suppliers – from instant contact, API integrations and more importantly, choice in the market.

COVID-19 has presented an optimum time for banking providers old and new to engage with their customers on a human level, rather than simply transactional. Since their rise from the early 2010s challenger banks have gained huge support due to customers no longer needing to physically visit a branch and the high tech digitisation of managing finances. However, traditional providers continue to overwhelmingly dominate market share and retain long-standing customers, whether they trust them or not.

A shift in attitudes since 2008

The years following the financial crash have witnessed an explosion of choice in banking, in turn altering what businesses are looking for when choosing a provider. The effects of 2008 have had a major impact on the structure of the industry. Advancements in technology and increasing competition from newer financial institutions entering the market means that what was once a monopoly for traditional high street banks is no longer the case. With an abundance of new options, it is only to be expected that customer needs have changed.

The arrival of digital-only banks was a blessing for customers hoping to have their own needs put first. Trust is core to UK banking and when customers hear a provider has a UK banking license, or is regulated by the FCA, it’s an immediate proofpoint ticked off the list. New FinTech companies that have come in and disrupted the market over the past decade were born in part from a loss of confidence in the traditional banking sector as customers sought options elsewhere. The crash opened up opportunities to disrupt the status quo of banking, and businesses re-evaluated what was important to them. Something FinTechs have over traditional banks is agility to expand their services to suit customer demand. For example, aside from often being cheaper, faster, more convenient, new financial providers can listen to customer wants and adapt their platform accordingly, more quickly and easily to meet demand, as the technology is not shackled to older legacy hardware and business processes.

The consequences of the pandemic for the industry

COVID-19 has offered banks an apt opportunity to show their customers how best they can serve them during hard times. In theory, this should provide financial providers with an optimum time to gain customer trust, but research suggests there is a notable gap between what SMEs feel about banks carrying out transactional tasks against the level of trust that banks will look after their long-term financial well-being.

Before the pandemic hit the number of physical banks branches were already in decline, especially in Spain, Luxembourg and Iceland. The lessering need for bricks and mortar means a wider array of choice and as we come out the other side of COVID-19, digital only banking will likely continue as the norm, particularly with advice from The World Health Organisation to use contactless payments and avoid handling cash to reduce the spread of germs. Where there are health connotations attached, the lessening of visits to high street bank branches may mean a continual decline in branch use. Lloyds Bank saw a 50 per cent increase in those registering for online banking compared to last year, while TSB has seen a rise of 137 per cent since the start of lockdown.

Business banking needs in 2020

A huge number of businesses have struggled immensely during COVID-19, with more than half of UK SMEs seeing a significant decline in sales, or worse, out of business entirely. Now more than ever business owners need the support of their bank, so the mission-driven ethos newer providers tend to offer will hold an immense amount of significance. FinTechs cater towards changing customer demand quicker than traditional providers because their platforms are built to adapt. If a new feature is being requested they can most likely build it and be much more transparent on progress. For example a public roadmap or regular company updates clearly demonstrates to users what they can expect and when.

Trust is immensely important for international businesses needing to manage money in multiple currencies. The cost of sending money abroad can be extortionate and traditional providers are guilty of inflating the exchange rate, while also adding on high foreign transaction and receiving fees. It is often when businesses realise they have lost out on a significant chunk of money that they are incentivised to search for alternatives. Many FinTech companies are reliable options to ensure businesses do not get ‘stung’ each time they send, spend, or receive money in another currency. Airwallex, for example, provides clients with easy and immediate access to international markets by allowing them to set up local business accounts and displaying a transparent rate at the time of the transaction.

The shock of COVID-19 to the world economy has been huge and affected businesses and consumers alike on a global scale across all industries. Trust was a huge problem in the previous financial crash because it was born out of decades of bad practice and excessive risk-taking, whereas this isn’t the case in 2020. Nonetheless, COVID-19 provided banks with the ideal time to show businesses how their needs were being put first, something that appears better communicated from the newer FinTech providers on the market. And while the shift to fully digital banking/payments is underway, traditional providers are still a long way off being competitive with the technology (and underlying customer demand) of the FinTechs of the past decade.

Whether or not this year has resulted in a growing amount of trust towards banking providers, or positively shifted attitudes is still yet to be discovered. One thing is for sure though, the effect this will have on customers’ futures will be remembered for years to come.

James Butland
VP Global Banking
Airwallex

By Stephen Ferry, Managing Director at Pay360 by Capita

For businesses, the impact of Covid-19 has changed the way they interact with their customers. In order to survive, many who viewed an ecommerce offering as a “nice to have” have been forced to act quickly and decisively, moving into unchartered territory: by becoming a fully-fledged online retailer. Of course, amidst such dramatic change and uncertainty, this is when fraudsters can thrive.

Many businesses might dismiss payment fraud as only applying to large corporates, but that is simply not the case, as every business will encounter fraud, whether they know about it or not.

According to a recent report in Retail Times, fraudsters are using the surge in online activity to target unsuspecting consumers and merchants. The average ticket price of attempted fraud increased by £14 in May ‘20, driven by electronics and retail goods. During the period from January to May 2020, the fraud attempt rate by value increased to 4.3%. Significant, by any standards.

In light of the dramatic increase in online fraud, businesses need to be conscious of customer contested card payments (“chargebacks”). The intention should be to minimise chargebacks as much possible and the threshold for this is around 1%, though the target should be 0.5%. However, when a merchant’s chargebacks go over 1% this becomes a red flag for many card acquirers. This can result in higher security or rolling reserves, higher charges and, worse case, the card acquirer serving a merchant notice.

To put this into context, according to Chargebacks911, only 18% of chargebacks are even contested by merchants, because they don’t have the internal resource or the technology to contest them. Repeat fraud is also assured, since 2 of out every 5 consumers who commit this type of ‘’friendly fraud” will do it again within two months.

So, where do businesses start? Many businesses are not even aware that they are being targeted or think that the costs of preventing card fraud will be greater than the fraud itself, which is usually not the case at all.

There are many fraud prevention solutions on the market sold as standalone products or integrated within payment platforms. It makes good sense to have a fraud prevention solution baked into your software, to enable the seamless process that merchants and their customers crave. Make sure you shop around to find one that fits into your business, integrates with your existing system and can scale with you as your business grows. Select one that has a straightforward and easy to understand interface and an interactive dashboard that can be connected to multiple data points. Also make sure rules are available to be set up in real time and offer complete flexibility.

Integrated fraud solutions can save merchants thousands of pounds in lost revenue, chargeback costs and administration time, and enhance the right customer payment experience. The key message I leave for businesses is – the threat of online fraud is current and growing. It’s a risk you ignore or underestimate at your peril.

Stephen Ferry
Managing Director
Pay360 by Capita

David Orme, SVP, Sales & Marketing, IDEX Biometrics ASA

The coronavirus pandemic has changed consumer behaviours and attitudes towards digital payments. While previously, consumers were happy to punch in a PIN, or even provide a signature for a purchase, they are now familiar with more convenient and safer touch-free methods, and this is unlikely to change following the pandemic.

Since the beginning of lockdown, when the World Health Organization encouraged people to not use cash, touch-free authentication has played a pivotal role in helping to reduce the spread of the virus. However, as shops and restaurants across the world begin to reopen, we are seeing an increasing number of people making payments via touch-pads. As we return to the ‘new normal’, the global payments industry must now consider how we can protect consumers from the pandemic and reduce the risk of another outbreak.

During the pandemic, touch-free payments began to gain international traction across the world, changing behaviour during the payment process. Contactless payments has also continued to grow since the reopening of the economy. In Europe, high street stores have rapidly shifted to contactless payments, often refusing to accept cash. Meanwhile in the USA, levels of contactless payments have rocketed since the pandemic, after a slow initial adoption of the service – US banks only adopted contactless cards in 2019 compared to 2007 in the UK. According to Visa, overall contactless usage in the USA has grown 150% year-on-year as of May 2020.

Even mega-retailer, Walmart, has recently introduced contactless options for in-store shopping and delivery to protect its customers during the pandemic – showing there is growing demand for a touch-free and convenient way to pay across the world. This has raised awareness of touch-free payments among consumers looking to reduce contact-based interactions and time spent at the checkout during the pandemic.

Tapping into the future of mobile payments

Mobile payments are continuing to grow in popularity, again, showing the desire for touch-free authentication among consumers. According to Forbes, the US mobile payment market – currently only sixth in the world – has increased 41% and is worth more than $98 billion.

To respond to the growth of touch-free payments among small vendors, PayPal has launched a new QR code-based payment app that allows market stall holders or businesses without a PoS machine to accept payment through a code. This means even the smallest of merchants, from small stores and farmer’s markets to craft sales, can now go cash-free and use touch-free payments for everything.

Meanwhile, China has long been using QR code-based apps, such as WeChat Pay from tech giant TenCent and AliPay from Alibaba. The apps are so widely used that street vendors display QR codes for payments and together the two fintech giants control about 90% of China’s digital payments market.

Payment cards remain king

At the same time, payment cards are still consumers preferred way to pay. Of course, we only need to look to Apple and Google, who recently have launched physical payment cards despite running mobile payment apps for further proof that payment cards are far from dead.

So why aren’t cards on their way out, given the growth of mobile payments?

We know that consumers still look to payment cards for security and a sense of familiarity while shopping. According to IDEX Biometrics’ research carried out in the UK, only 3% of consumers choose to use mobile payments, while nearly two-thirds (65%) state that carrying their debit card provides a sense of security. And when it comes to touch-free payments, only biometric payment cards can provide the most secure level of validation with an easy digital experience for shoppers.

Despite the popularity of WeChat as a payment app, China’s biggest card provider China UnionPay has recognised that its customers aren’t ready to give up on physical payment cards either. China UnionPay has recently certified the first biometric fingerprint card technology in the country as they look to the use of biometric technology in cards to provide an extra layer of security, with added convenience and hygiene during a payment transaction.

Touch-free card payments – the key to securing data

Biometric fingerprint payment cards allow the user to authenticate their ID by touching their finger to the card’s sensor while holding it over the contactless Point of Sale. Therefore, the shopper only has to hold their own card over the PoS system, making the entire transaction process free of public PIN pads or checkout counters. Not only does touch-free payment technology provide consumers with the convenience of contactless or a mobile payment but the process offers far greater security, as the card is personally tied to the owner.

With biometric technologies like fingerprints, facial and voice recognition, and even iris recognition becoming popular in smartphones, consumers are becoming familiar with the technology. It is only a matter of time until biometric identification in payment cards will become essential to help consumers navigate the shopping and transaction process safely, speedily and securely.

As our economy gradually reopens, the financial services industry has a responsibility to protect consumers during the transaction process, whether it’s in stores, on transport systems and even in stadiums. The payment industry must adapt and adopt fingerprint biometric payment cards to ensure touch-free authentication for all, and to keep payments seamless, secure and sanitary.

David Orme
SVP, Sales & Marketing
IDEX Biometrics ASA

By Kevin Walkup, President and COO of Harmonate, a data operations firm serving private funds.

Can the confluence of three fast-moving market forces make for a perfect storm in a specific industry? Fund administers are about to find out.

First, the pandemic has driven down valuations in expectation of a recession. Asset managers are under pressure to come up with investment strategies that perform while controlling costs. They can’t waste time on anything that doesn’t clearly help.

Second, before the coronavirus arrived, margins were already dropping and fees had already fallen in large part from competition in finance. The truth is that neither will be rebounding anytime soon. The result is that asset managers can’t waste money. On the contrary, they need to make up for lost revenue.

Third, for all of the above reasons, funds were also already shifting away from internal administration before the coronavirus. Now that pace is accelerating due to the stresses arising from the pandemic.

For fund administrators, a typhoon of outsourcing is coming our way. Asset managers are still hiring data scientists to perform in-house work and develop domain expertise. But they increasingly are going to reach out for third-party partners, too. Funds will have little choice if they want to compete.

I’m going to predict that the administrators who live long and prosper in the new climate will be the ones who adopt a high-touch approach that utilizes solid data operations for funds. They’ll be the ones capitalizing on new fund administration that resembles the close collaboration that asset managers expect from their in-house teams except with more innovation.

High-touch is the ability to answer questions and react to fund managers’ needs quickly and accurately. In a high-touch relationship, speed and accuracy are key. Managers need to have information at their fingertips to respond promptly to events, to plan and to answer investor queries with confidence. Working closely at speed, however, can only come with automation that leverages the power of talented teams.

Technology is already at the center of fund administration. When asset managers talk about fund services, they mention statement processing, capital statements and other reporting. But in reality the asset managers are talking about data operations. They might not view those processes as high-tech because they don’t ask about which tools helped human administrators produce those documents. Humans can do it. But humans need data operations, mostly because speed and accuracy are the result of data operations.

The most advanced data operations for funds can take reporting from 2 weeks to 24 hours. Accounting processes can decrease from more than 100 minutes per investor to 1 minute per investor. Those numbers gain the attention of hard-pressed managers. Even if those numbers weren’t so staggering, can you imagine a leader not performing thoughtful due diligence?

New fund administrators should first start by asking managers about their needs, their challenges and the solutions that they think would improve their productivity. There’s a joke going around that a fund in a major metropolitan area was using interns and Excel spreadsheets for fund services. It probably echoes the truth, though, suggesting plenty of asset managers have not yet even considered data operations that are revolutionizing funds.

That said, as they increasingly shop around and the trends mentioned earlier, more asset managers will understand that data operations will dramatically improve their productivity. What’s more, many will eschew the mega consultancies in hopes of finding more boutique service providers who will treat their fund with extra love and care.

That gets us back to high-touch. If an asset manager is seeking new fund administration, then they are likely trying to chart a course through the storm that has been brewing in recent years but has since exploded with the appearance of the coronavirus. Fund administrators who work with those kinds of managers will need to capitalize on the most advanced machine learning and domain expertise if they want to keep up. Batten the hatches.

Kevin Walkup
President and COO
Harmonate

By Freddy Kelly, CEO and Co-Founder, Credit Kudos

The Covid-19 pandemic has profoundly impacted the nation’s finances, with millions having to borrow to mitigate the effects of lockdown. But these unprecedented economic circumstances have dramatically altered the lending landscape, making it impossible for lenders to continue business as usual while still relying on traditional credit assessments.

British businesses have borrowed almost £35 billion under the government’s three emergency coronavirus credit programmes, but the approval rate for coronavirus business interruption loans (CBILS) remains just 50 per cent. Critics say that these emergency lending schemes rely too heavily on old, cumbersome legacy technology and if FinTechs using Open Banking were to be involved, more loans could be paid out faster.

There is a similar issue in the consumer lending market. The Credit Kudos Borrowing Index found that 32 per cent have previously been turned down for some form of lending and I’m sure this number will rise in the coming months. In the credit card sector, which had been in growth for many years pre-coronavirus, several providers stopped offering new cards and the number of 0 per cent balance transfer deals swiftly plummeted. Many people’s financial situation will have changed due to Covid-19 and so pre-pandemic data isn’t enough for lenders; they need access to up-to-date data on an individual’s current financial situation to properly assess affordability.

We have already seen adoption of Open Banking in lending increase as a result of this need, and I’d expect to see much more innovation in credit reporting on the back of the crisis, with Covid-19 acting as a catalyst for further digitisation. From car finance, to credit unions, and unsecured personal loans, lenders are hampered by inadequate, insufficient data, reducing their ability to lend responsibly. The traditional methods used to identify creditworthy borrowers are not reliable enough, often use out-of-date information, meaning lenders are unable to understand the borrower’s current and future financial health.

Opening up new opportunities

It’s time for lenders to embrace new data sources and technologies to better understand borrowers in our rapidly changing world. Open Banking provides a reliable, timely, and compliant way of accessing a wider range of real-time transaction data for credit risk and affordability assessments. It gives lenders across all sectors the opportunity to return to growth after the pandemic.

Open Banking streamlines processes and speeds up the results offered to lenders. Adding Open Banking into current customer flows need not be a large technology transformation that takes months, as technology-forward solutions can get new businesses up and running in a matter of days.

As one of the first FCA-authorised AISPs in the UK, we have seen first-hand how the lending sector has progressed on this journey. Using the transaction data available through Open Banking, we’ve been powering brokers and lenders to keep issuing loans in these uncertain times, and as we’re starting to come out the other side we’re seeing a wider range of use cases within the organisations we work with.

Servicing the full spectrum

Open Banking is relevant to each and every lending vertical. Even credit unions, the most traditional of lenders with a model rooted in face-to-face contact, have had to digitise rapidly. We’re working with forward-looking organisations such as Serve & Protect Credit Union, which caters for service personnel and other frontline workers, to draw on Open Banking to help them extend their services.

Similarly, unsecured personal loans, Open Banking helps to uncover new opportunities, converting marginal declines to acceptances thanks to the additional data and insights available. Lenders who already had Open Banking in place have been able to mitigate the cost of Covid-19 by identifying new borrowing behaviour before its reported by the traditional credit reference agencies.

Car finance is another good example. It was a steady market before the pandemic but much of the business is done through car dealerships, which have only recently reopened. Despite the dealerships being closed, some lenders were able to carry on lending through online brokers which have an enhanced credit risk model using Open Banking data. Open Banking can highlight recent loans and missed payments, and our Income Shock Detector also helps lenders to accurately detect and account for recent loss of income.

Demand remains high

Brokers felt the impact of Covid-19. Online brokers are still getting a lot of traffic, but they’ve struggled to continue to serve the market due to reduced lending appetite. They now have an essential role in supporting lenders as they seek to safely return to the market or, for those already lending again, safely return to growth.

We’ve developed a secure onward consent mechanism which is allowing companies like Loans Warehouse to safely share credit risk and affordability insights with lenders to help better inform their decisions. As part of the Loans Warehouse customer journey, individuals will be asked to connect through Open Banking. We will then analyse a borrower’s financial transaction data and securely provide Loans Warehouse’s lending panel with an up-to-date report of an individual’s current financial situation, with the borrower’s consent. By sharing richer, real-time data, prospective borrowers will be more likely to be matched with a lender that meets their needs, increasing their chances of being accepted.

Amidst the mayhem created by Covid-19, Open Banking is a cause for genuine optimism. Lenders across the spectrum are already accepting the digitisation of credit reporting, and I expect this to continue – even in more traditional sectors like banking as they endeavour to quickly embed Open Banking into their strategy further. There is no way back – Open Banking is already well on the way to creating a new lending landscape that will be characterised by innovation and collaboration; a fertile environment for increasing responsible lending and driving growth.

Freddy Kelly
CEO and Co-Founder
Credit Kudos