IBSi Flagship Offerings Archives

October 21, 2023December 18, 2023 byJeet Vasa

Banks have the Generative AI advantage, but must overcome challenges to fully utilise its benefits

Despite the many challenges the industry has faced, the banking sector has continued to prioritise digital transformation and it is only accelerating quicker. Generative artificial intelligence (AI) is the latest in a wave of disruptive technologies that will drastically transform the financial services and banking industry.

By Jay Limburn, VP of AI Product Management, IBM

Many banks and financial institutions are as good as, if not better than most industries when it comes to technological maturity. We have been working on generative AI with banks for several years, and they have been experimenting with the operational advantages of AI across their business. The IBM 2023 CEO Decision-Making in the Age of AI report showed that 75% of CEOs surveyed believe the organisation with the most advanced generative AI will have a competitive advantage. However, executives are also concerned about the potential risks around security, ethics and bias.

Leaders are looking to fuel their digital advantage to drive efficiencies, competitiveness and customer satisfaction, but they have not been able to fully operationalise AI as they face key challenges around implementation.

The biggest challenge and opportunity…data

Banks are continuing to digitally innovate, and data has emerged as one of the biggest challenges to fully utilising generative AI across the industry. Platforms like ChatGPT caught people’s imaginations and created excitement in the sector. But while they rely on Large Language Models (LLM) to analyse vast amounts of data, the banks need to be able to choose from multiple models and embed their own data sets for analysis.

Instead of having one model to rule them all, banks will need to evaluate which models can be applied to their individual use cases. Banks are aware of the benefits generative AI can bring, so in place of summary capabilities of what the technology can do, they need to look at how to modernise different elements of their business. This requires models to be trained on the bank’s own data sets to get high-level accuracy and to fully operationalise the technology.

The amount of data is overwhelming many organisations, and banks are not excluded. To succeed, financial institutions will need to embed their own data into generative AI models to fully operationalise the technology.

Banks can help shape regulation and governance

One of the other key challenges facing banks with regards to generative AI is regulation and governance. As a new and emerging technology, regulators will not necessarily understand AI, so the natural inclination is to say we cannot use it. Equally, some models cannot explain why it has made a decision. For trust and compliance, financial institutions need to explain their decision-making process.

The more AI is embedded into organisations, the more important it is that leaders have a proactive approach to governance, which means having a legal framework to ensure AI is used responsibly and ethically, helping to drive confidence in its implementation and use.

But in order to help shape the AI regulatory environment and meet these requirements, banks need to take an active part in shaping the regulatory framework and move to models which can explain the decision-making process.

Generative AI will help not lead

The response we have seen from banks to generative AI has been phenomenal. As an industry, financial services and banking can lead the charge around AI regulation and explore new models to leverage their own data for better outcomes.

However, this isn’t without its challenges. Operationalising generative AI has proved difficult due to potential risks, compliance and evolving regulatory requirements, and concerns would be heightened as banks introduce their own data to AI models – which is why most generative AI use cases have so far focused on the customer care space.

Despite these challenges, banks have a huge opportunity to leverage generative AI, which will fundamentally change how we bank and how banks serve customers, and governance will play an active role in ensuring trust as we continue to explore the benefits of generative AI. Importantly, AI is here to help banks, not be the lead in most use cases.

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October 21, 2023December 19, 2023 byJeet Vasa

The rise of eCash: Why more consumers are using cash online

Megan Megan Oxman, Interim President Digital Wallets at Paysafe — Megan Oxman, Interim President Digital Wallets at Paysafe

Here’s how using cash online helps customers take control as they manage online security concerns and economic uncertainty. According to our Lost in Transaction 2023 payment trends research report, the number of consumers using cash online is growing, and quickly.

By Megan Oxman, Interim President Digital Wallets at Paysafe

In fact, eCash, which enables consumers to generate a barcode and pay offline at a conveniently-located store, is more popular than at any other point since our Lost In Transaction research series began in 2017.

Now, 31% of people who used cash online in the previous year are paying with it more often than they did 12 months ago. So what’s driving this growth, and how can businesses help customers embrace this increasingly popular payment method?

How popular is eCash?

Overall, 30% of respondents who used eCash in the past year say it’s their preferred way to pay online. This makes it the fifth most popular online payment method after debit cards, credit cards, digital wallets such as Skrill or NETELLER, and credit cards stored in Apple Pay, Google Pay or a similar mobile wallet.

And many of those who use cash online, rely upon it: 23% of respondents who say eCash is their preferred payment method would abandon their cart if they can’t pay with it. Put simply: businesses may lose customers if they don’t provide this payment method.

Why are consumers using cash online?

The greatest drivers in the growth of using cash online are the rising cost-of-living and concerns about online security. In times of economic uncertainty, consumers often turn to cash to help them exercise more control on their spending and stick to a budget.

With eCash becoming more widely available as purse-strings tighten, it’s no surprise that consumers would take the opportunity to take this money-saving technique digital. Now, more consumers are using cash online to control online spending just as they use physical cash to manage their outlay in stores.

It’s telling that, while eCash usage has increased across the board, the spike has been greatest among respondents who changed payment habits due to the cost-of-living crisis, with 60% using eCash more often. The budgetary benefits of using cash online are not to be underestimated.

eCash offers a secure online payment alternative

Our research also found consumers view eCash as a more secure online payment option, particularly when it comes to online video gaming and iGaming. Almost half (49%) of respondents who pay for online gaming told us cash-based methods are the safest way to make online purchases.

As to why this is the case, eCash payments don’t require consumers to share any financial details online — a key concern about ecommerce, with 52% of respondents explaining that they don’t feel comfortable sharing financial details online.

eCash and the bottom line

Businesses should be looking to incorporate a number of different payment methods to cater for consumers’ needs, and eCash can be fundamental to satisfying both budgetary concerns and settling nerves around security.

The right payment platform can enable businesses to do this – helping to meet customers’ needs by allowing them to take control of their spending and their personal data.

To learn more about why a growing number of consumers are using cash online, check out our Lost in Transaction 2023 report.

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October 21, 2023December 18, 2023 byJeet Vasa

Bridging the Gap: the crucial role of last mile data integration in financial services

Financial firms worldwide are striving to achieve last mile data integration, a process that seamlessly integrates data into business workflows and puts it at the disposal of business users. The goal is to eliminate the need to search through databases or data warehouses for required data, allowing easy access for reporting and financial models, and enabling better decision-making.

By Martijn Groot, VP Marketing and Strategy, Alveo

Financial services firms spend material amounts on acquiring and warehousing data sets from enterprise data providers, ESG data companies, rating agencies and index data businesses.

However, when this data is not readily available to business users or applications where it impacts decisions those investments will not deliver the return they should be. For many financial services businesses, last mile data integration represents a missing link in ensuring they are optimising the value they obtain from data. The volume of data they need is continuously growing and the bills they face for acquiring it are therefore going up in tandem.

Activating data assets

Ultimately, firms will not get the best out of their investment in data, if they don’t have a way, first, to verify it, and second, to land it into the hands of their users or enable users to self-serve. If the data is conversely, still sitting in a database that is hard to get to, or needs skills to access, then the business will not achieve maximum value from it.

That in a nutshell is why last mile data integration is so important to them. Achieving it does however come with challenges. Organisations must establish efficient data onboarding processes and transform data sets to meet diverse technical requirements common in their applications landscape. Additionally, maintaining high service levels and responsiveness to requests for new data to be onboarded is vital to build trust and keep business users engaged.

So how can all this best be achieved? The key is efficient data management. To use an analogy, financial data management can be seen in the context of the human body, with the need to manage data flows analogous with the circulation of blood through the arteries. Data gushes in from internal and external sources.

It needs to be cleaned and a process of data derivation and quality measurement applied and then we see the end result in the form of validated and approved data sets. The overall flow often stops at that point for financial services organisations. But such an approach is incomplete in that it actually ignores last mile data integration. Data may be flowing through the arteries of the organisation but it is not reaching the veins, and capillaries.

That’s where the key step of distribution comes in. This not only enables easier access to the data in whatever format required by lines of business within the organisation but also to set up exports or extracts of relevant data in predefined views or formats that then flow easily into business applications.

Maximizing data ROI

Financial sector organisations understand the need to do this but often they end up doing it in a way that involves a lot of ad hoc manual maintenance at the individual desktop level, which means that process get out of sync; data becomes stale and there is the danger of duplication. All this inevitably ends up impacting the quality of decision-making also.

Effective last mile data integration is an automated process that involves identifying relevant data sources, mapping and cleaning the data and then transforming and loading it into the target system and using data quality and consumption information in a feedback loop. The key to this process is making it easy for the specific business user. It is about understanding the kinds of taxonomies and nomenclature the user is expecting and then being able to mould, build and shape the data being presented in a way that best suits that user.

Financial services firms that get all this right will be well placed to unlock the full potential of their investment in data and maximise the ROI on the data they purchase. Ultimately, by delivering on this process and verifying and making data readily available to users, organisations will put themselves in the best possible position to make informed decisions, streamline operations, and position themselves for ongoing success.

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October 21, 2023December 18, 2023 byJeet Vasa

Is regulation enough to propel Open Banking adoption?

Recently, the European Commission set out its intentions to advance open banking with the introduction of PSD3. The update to its Payment Services Directive (PSD2) shows a commitment from the EU to realise the potential of Open Banking, and it’s one welcomed by the industry.

Hans Tesselaar, executive director at BIAN

While PSD3 sets out several key changes to realise its goal of driving Open Banking adoption forward, the aim to standardise payments across the EU with its move from a directive to a regulation poses the question: is widespread adoption possible with regulation alone?

The benefits of regulation

A new Payment Services Regulation will update and replace elements of PSD2 to ensure its rules are applied more consistently across Europe. This new regulation will bolster Open Banking by enforcing better API functionality, allowing smoother payment data sharing and eliminating unnecessary steps hindering data flow.

Apart from refining PSD2, these proposals enhance user control via a centralised dashboard, ensuring easier management of data sharing. In addition, new measures like increased bank cooperation will support the industry’s attempt to combat fraud and elevate consumer confidence.

This regulation puts FinTechs and banks on a level playing field, giving technology providers more control over the service they provide to customers through easier and more secure data sharing, while reducing infrastructure costs.

Europe is not the only country taking a regulatory approach. The UK for example, a pioneer in Open Banking innovation on a global scale, has been prioritising regulation since the launch of Open Banking in 2017 by the Competition and Markets Authority (CMA) following the introduction of PSD2. Now, its recent announcement from the Joint Regulatory Oversight Committee, regarding its commitment to a long-term regulatory framework, reaffirms its commitment in the area.

While these regulatory measures allow fintechs and banks to implement Open Banking more effectively and aim to give customers a seamless experience, independent regulation does limit innovation without the correct considerations.

The realities of regulation

The state of open banking is still very immature, but there is no denying its growth. The number of users worldwide is forecast to reach 132.2 million by 2024, a significant increase from the 24.4 million users in 2020.

Countries like the UK risk reducing their role as a driver of progress without the access to the wider European population that it had before Brexit, as an example. And as the European market is predicted to be the largest open banking market by 2024, the continent as a whole would do well to collaborate to better understand customer needs, react to market demand and expand further.

Being open to learning from global examples and listening to industry leaders, including larger banking institutions with global influence and international exposure, will be important to ensure successful practices are promoted, which will encourage open banking more widely within these countries and different regulatory frameworks.

Meeting the demand

Focusing on regulation must not overshadow market demand, and looking at countries with a market-driven approach, such as Singapore, will reveal what governments and organisations should be prioritising when it comes to open banking.

Singapore’s market-driven stance has led to high open banking adoption. 90% of professionals consider open banking either a ‘must have’ or ‘important’ and a further 90% agree that it has also had a positive impact on the industry and made it more collaborative. This is despite no mandatory requirements.

Adoption has accelerated in APAC over the past few years due to the opportunity it has to make the industry more collaborative and the potential to bring about fairer and more equal financial services. However, the space remains in the early stages of development. Many banks are just starting their digital transformation journeys, and struggling with core legacy systems and closed or outdated architectures. This is why overcoming these barriers and industry collaboration will be at the heart of open banking adoption.

Coreless banking

Regardless of a regulatory or market-driven approach to open banking, banks must create an ecosystem with fintechs, providers and aggregators. This is to boost the speed at which best-of-breed products can be implemented to meet customer demand and make the most of the opportunity that lies within the open banking space.

A coreless banking solution will be key to empowering banks to overcome issues around interoperability and selecting the software vendors needed to obtain these best-in-class solutions for each application. In turn, this will promote industry collaboration and ensure customers are provided with the optimum service to further encourage open banking adoption.

Coreless banking implies that each of the needed (IT)-services works seamlessly together. If this is established, financial institutions can migrate to a “best of breed” environment so they will have the ability to utilize and combine third-party solutions to deliver the best open banking services for their customers.

This means banks can focus on incorporating the technology they need to enable open banking services and respond to customer demand – regardless of whether this is from a regulatory or market-driven starting point – at a faster and more efficient pace.

The answer lies in collaboration.

Is regulation enough for open banking adoption? The short answer is no.

Whether countries decide to push open banking from a regulatory standpoint, or adoption is driven from the market demand, industry collaboration will be the answer. This will enable greater innovation, so from PSD3 in Europe, to Singapore’s market demand, the industry can unlock the ultimate outcome for open banking with an open attitude.

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October 21, 2023December 18, 2023 byJeet Vasa

Embracing technology to navigate economic turbulence in the financial services sector

Guy Mettrick, VP, Financial Services at Appian

Today’s dynamic financial landscape has exposed the vulnerabilities of the financial services sector and shattered preconceived notions about banks’ regulatory resilience. The rapid collapse of once-revered institutions highlights the fragility of the banking sector in the face of economic turbulence and unforeseen market shifts.

With analysts scrambling to dissect the factors behind these failures, it is crucial to consider the broader implications for the financial services industry and the potential ripple effects on the overall economy.

Guy Mettrick, VP, Financial Services at Appian

Adaptive strategies for growth and innovation are becoming increasingly important amidst a background of stricter risk management, reduced lending, and increased regulation. To navigate the unpredictable path ahead that is defined by tightening regulatory frameworks and resource limitations, agility is key.

Balancing regulatory challenges

Mounting regulations driven by factors such as climate change and the push for enhanced compliance are forcing businesses leaders to reconsider their organisation’s strategic approach. The prominence of environmental, social, and governance (ESG) objectives in the financial services sector requires increased attention and significant investments in human resources and technology.

While these circumstances may lead to scaled-back growth aspirations, cost-cutting initiatives and deferred investment decisions, they also present transformative opportunities.

Leveraging technological advancements

During economic uncertainty, technology emerges as a powerful force within the financial services landscape. When it comes to expediting client onboarding, enhancing customer service, and facilitating seamless communication between financial institutions and their clients, automation proves indispensable. Automation enhances process efficiency and efficacy by eliminating manual tasks and minimising errors. Advanced technologies like artificial intelligence, robotic process automation, and process mining empower financial organisations to drive innovation within complex frameworks.

With automation, firms can facilitate real-time reporting and audits that provide tangible evidence of control effectiveness by embedding risk controls directly into their processes. In an era of increasingly stringent regulatory frameworks, this proactive approach to compliance proves invaluable.

The rise of data fabric

One emerging trend is the adoption of enterprise-wide data fabric, project by Market Watch to grow from $1.71 billion in 2022 to $6.97 billion by 2029. Data fabric streamlines the consolidation of data from various systems, a process that has traditionally been challenging and costly. This integration eliminates the need for data migration – a critical prerequisite for successful process automation.

Data fabric seamlessly connects and harmonises existing databases. This breaks down data silos and enables a cohesive and compliant framework that consolidates all relevant data sources. Within the financial services sector, this technology facilitates easy access to vital components such as risk governance policies and customer data.

Financial service providers must adopt adaptive strategies and embrace technology to effectively manage risks, regulations, and growth during an economic downturn. Regulation should not be perceived as a burden. Financial institutions should view technology, particularly process automation, as a catalyst for growth. Automation and data fabric enable these organisations to navigate complexities, streamline operations, and enhance customer experiences. Rather than succumbing to challenges, financial service providers can leverage technology to foster innovation, ensuring resilience in the face of economic uncertainty.

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October 21, 2023December 18, 2023 byJeet Vasa

Cyberattacks: 2023’s Greatest Risk to Financial Services

New year, same big problem. Without doubt, cyberattacks have posed and continue to pose the single biggest threat to the UK’s financial services industry

by Miguel Traquina, Chief Information Officer at iProov

Three in four industry execs in the UK deem a cyberattack to be their highest risk factor and, as the economy enters choppier waters, this threat is rising, with those expecting a high-impact cyberattack in the next three years rising by 26% in the second half of 2022 versus the first.

2022 has been another year of seismic change in the cybercrime space. Types of attacks are evolving rapidly, and consumer awareness is growing. Now, more than ever, we’re starting to see huge end-user demand for greater online protection from identity theft and other online threats.

Public and private sector organisations around the world are responding by exto increase digital trust and enables with the goal of increasing digital trust and enabling their customers to prove they are who they claim to be securely and easily.

The pace of advancements in digital identity verification will only accelerate more in the coming year, especially in a high-value and highly sensitive industry like financial services, with more innovation and regulation on the horizon. As we welcome 2023, here are my top four predictions for the year ahead.

Biometrics + device will overtake password + device for 2FA

Calling out the ineffectiveness of passwords as an authentication method isn’t new, but what will be new next year is that finally this stubborn, outdated mode of authentication will be overtaken by the use of biometrics in twThroughout-factor (2FA and MFA) use cases.

Over the course of 2023, password + device will be replaced by biometric + device.

The uptake of MFA has been steadily rising in recent years, especially since the enactment of PSD2 for electronic payment services in Europe. While passwords are technically compliant as a strong authentication factor, they and other knowledge-based techniques leave a lot to be desired when it comes to security and user-friendliness. Biometrics and other inherence-based security hit the perfect balance between providing the necessary protection to make 2FA and MFA truly secure while also delivering an effortless user experience.

Liveness checks become mandatory for online identity verification in financial services

Speaking of regulation, 2023 will also see the European Banking Authority mandate all regulated financial service providers in the EU complete biometric liveness checks when remotely enrolling customers. These new guidelines will help ease new account of theft, and money laundering. What we’ll also see is consumers feeling more comfortable with, and demanding more, biometric verification at other points of their user journey.

As this becomes mandatory for financial services in Europe, attackers will turn their attention elsewhere – which will require the UK and other regions to follow suit.

Synthetic identity fraud will break records

Synthetic identity fraud exploded in many regions in 2022, even becoming its own industry. That is set to continue in 2023, with Aite Group estimating $2.43bn of losses from synthetic identity fraud this year. Nearly every organisation is at risk of onboarding a fake person and the implications that come with that: financial loss, data theft, regulatory penalties, and more. Organisations throughout the financial services world will need to ramp up their online security to identify synthetic identity crime attacks.

Deepfakes become ubiquitous as the next generation of digital attacks

The technology to create convincing deepfakes is now so readily available that even the novice cyberattacker can do serious damage.

Any financial services organisation that isn’t protecting its systems against deepfakes will need to do so as a matter of urgency. More sophisticated bad actors have already moved on to advanced methods, and in 2023 we’ll see a proliferation of face swaps and 3-D deepfakes being used to find security vulnerabilities and bypass the protocols of organisations around the world.

Privacy-enhancing government-backed digital identity programs will pick up pace – and they’ll be interoperable

Consumers globally are realising they don’t want to give their addresses and other personal data to every website or car rental firm or door-person outside a bar. As demand for secure identity services grows, more state and federal governments will begin to roll out interoperable digital ID programs that use verifiable credentials to enable citizens to cryptographically confirm details about themselves.

Device spoofing will grow exponentially

The increase in reliance on devices as a security factor has attracted the attention of cybercriminals, who are exploiting vulnerabilities for theft and other harm. In 2023, we will see an increase in the sophistication of criminals spoofing metadata to conceal their attract top made to appear like a mobile device) to circumvent enterprise security protocols. In 2023, organizations – especially those that rely on mobile web – will recognize the limitations of once-trusted device data and move verification services to the cloud.

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October 21, 2023December 18, 2023 byJeet Vasa

Small Finance Banks – The quest for technology-led differentiation

Since their inception, Small Finance Banks (SFBs) have been primed as a vital cog for the last mile credit and service delivery for the MSMEs, farmers, and unorganized sector units, helping to bridge the $240 billion credit gap for the underserved segment.

By Naveen Gupta, Senior Product Owner, Tagit

These Small Finance Banks have a robust base of borrowers with small credit needs. The banks so far have been reasonably successful in serving their priority segment and are now looking to establish their presence in the commercial banking space by evolving beyond a credit-only institution to a diversified financial institution.

In today’s environment, SFBs are facing twin challenges. Where, from one end, the FinTechs are grabbing their market share using innovation and new technologies and at the other end incumbents’ banks are blocking their market access with their size.

To compete with them, SFBs must step up their game. They need to look beyond rate strategy (providing higher interest rates on CASA and deposits as compared to the incumbent banks) and build a robust, sustainable differentiation built around their primarily intended high-technology, low-cost model.

Born on the cusp of the digital era, Small Finance Banks do not come with the baggage of legacy technology. Though they don’t have the capital to match the technology spends of their incumbent peers, the unbundling of the banking technology stack and ecosystem driven collaborative innovation – courtesy API economy and open systems – presents a great opportunity for them to undertake a phased, yet fast leap towards digital transformation, all the while keeping IT spends under control.

SFBs must focus on:

Implementing digital channels for banking services: Banks can use digital platforms such as mobile apps, online banking portals, and social media to provide customers with convenient and secure access to their accounts, transactions, and other banking services.
Enhancing security: Banks can use advanced security measures such as biometrics, encryption, and multi-factor authentication to protect customer data and prevent fraud.
Partnering with fintech: Banks can collaborate with fintech companies to access new technologies and innovative products and services to enhance their digital capabilities.
Investing in digital infrastructure: Banks can invest in modernizing their IT infrastructure to enable better data management, improved scalability, and enhanced security.
Providing digital financial education: Banks can use digital platforms to educate customers about financial literacy and digital banking services.
Improving data management: Banks can use big data and analytics to gain insights from customer data and use it to improve product offerings, target marketing, and personalize the customer experience.

With the right technology transformation strategy powered by smart investments and careful roadmap considerations, Small Finance Banks can grow their business and achieve sustainable differentiation while keeping costs under check.

Banks need to ensure that they have the right partners for their digital transformation. Partners having plenty of digital transformation experience in the Indian market can help transform SFBs with the right speed and scale without impacting existing business and thereby enabling the SFBs in their journey of expanding market share and revenue.

Banks should collaborate with Digital transformation partners like Tagit who have platform-led solutions, provide more value in the long term, ensure that solutions are future-ready, and services delivered are secured and scalable.

With the right mix of products, SFB can successfully transform to a universal bank, increasing their market presence fending competition from new age fintechs and other banks and bringing more value to their stockholders. Tagit can help Small Finance Banks in increasing their customer base and revenue and enhancing customer loyalty with new and innovative features.

Tagit has been helping banks in India in their digital initiatives by providing best-in-class digital solutions alongside a holistic digital roadmap.

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October 21, 2023December 18, 2023 byJeet Vasa

Unlocking AML efficiency: streamlining compliance with automation

In today’s digital era, businesses are confronted with ever-increasing challenges in achieving anti-money laundering (AML) compliance. However, a new wave of AML experts is transforming the landscape by leveraging advanced automation and configurability capabilities.

By Fraser Mitchell, technical director at SmartSearch

Fraser Mitchell, technical director, SmartSearch

By leveraging fully automated workflows and extensive search configurability, businesses can tailor their AML processes, resulting in significant time and resource savings.

These automated workflows streamline crucial tasks such as data collection, analysis, and reporting, thereby reducing the risk of human error. Additionally, the configurability aspect enables businesses to adapt their AML practices to meet evolving regulatory requirements, industry standards, and emerging financial crime trends.

The adoption of automation and configurability fosters scalability in AML compliance. As businesses grow and transaction volumes surge, manual processes become increasingly overwhelming and prone to errors. By harnessing technology, regulated firms can handle larger volumes of data, analyse them in real-time, and identify potential risks more effectively.

Next-generation platforms are transforming compliance processes. By leveraging fully automated workflow capabilities, businesses can align their AML workflows with their internal processes, enabling seamless integration across different business functions.

This automation significantly reduces manual efforts and minimises the risk of human error, ultimately enhancing operational efficiency. Businesses can customise their AML workflows by utilising custom risk profiles and watchlist screening configurability. This level of customisation allows users to screen custom lists and adapt their processes according to the specific risk profiles of their clients. By tailoring the configurability to individual needs, businesses can optimise their compliance efforts and ensure regulatory adherence.

A bespoke workflow capability empowers businesses to create rules-based applications and assign tasks based on specific triggers. This automation provides timely outcomes and actions, simplifying the decision-making process for users. Additionally, configurable watchlist screening enables a seamless customer journey for legitimate clients. By automating these processes, businesses can improve customer onboarding and enhance the overall compliance experience.

With a fully-configurable solution, firms can customise their AML operations to align with their unique needs. The platform facilitates the seamless onboarding of clients by offering extensive search configuration, allowing businesses to identify high-risk clients more efficiently while streamlining the onboarding process for genuine customers. By utilising custom watchlists tailored to their specific business requirements, firms can proactively mitigate compliance risks.

In the rapidly evolving landscape of AML compliance, businesses need innovative solutions to streamline their processes and maintain regulatory compliance. Advanced automation and configurability capabilities offer a game-changing approach to AML workflows.

By leveraging fully automated workflow capabilities and extensive search configurability, businesses can customise their AML processes and focus on their core operations. The result is enhanced efficiency, improved customer onboarding, and reduced compliance risks. Embracing these technologies will empower businesses to thrive in the evolving compliance landscape while maintaining their commitment to regulatory standards.

SmartSearch’s commitment to supporting regulated firms with AML compliance spans over a decade. Their digital compliance solution has earned the trust of more than 6,000 clients and 55,000 users, including prominent financial services and property firms, and leading accountancy and legal firms.

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October 21, 2023December 18, 2023 byJeet Vasa

Why FinTech M&A in the UK is on the up and up

The UK FinTech sector will experience an upswing in M&A towards the end of 2023, as companies look to consolidate their positions in the market and take advantage of the potential for growth and innovation.

By Konstantin Dzhengozov, Co-Founder and Chief Financial Officer at Payhawk

While headwinds such as the turbulent geopolitical landscape, volatile stock markets, and rising interest rates and inflation have meant both companies and investors have remained cautious throughout Q1 and into Q2, pressure is mounting for them to complete transactions.

According to data from Prequin Pro, this is particularly pertinent to private equity firms that are sitting on a record level of $1.96 trillion (about £1.5 trillion) of dry powder. Thus, we will soon see a switch out of defensive cash strategies and into M&A. Figures from Ernst & Young’s latest CEO Outlook, for example, show that 50% of UK CEOs are planning to make acquisitions in the next 12 months and 67% are considering joint ventures.

VC funds, on the other hand, will not have the same capital reserves and might struggle to fundraise since they are unable to showcase success stories to potential investors in the current macroeconomic environment. This means they will start to pressurise their companies to consolidate, merge and create bigger organisations that will appear more capital efficient and thus have the potential for a more meaningful exit down the line.

Time to focus

Although most of the movement in this space will be motivated by necessity, there are countless advantages to M&A in the current environment. Firstly, it pushes companies to conduct vital internal evaluations to determine which assets are core to their business, allowing them to divest those they consider non-essential. This will ultimately result in a more mature company with a bolstered focus and cash to spend.

Secondly, it allows cash-rich companies to purchase spin-offs at a reduced price and go on to achieve better returns. According to PwC analysis, deals done during a downturn are often the most successful. Data from the 2001 recession, for instance, indicates those that made acquisitions had a 7% higher median shareholder return than their industry counterparts one year later.

M&A for geographical expansion

This concept will also prove useful when it comes to using M&A for geographical expansion. FinTechs that are already successful in the UK will likely look to acquire or merge with strong yet struggling competitors in other countries instead of enduring the rigmarole of setting up there from scratch. We have already seen the number of cross-border M&A announcements increase, with data from Investment Monitor’s Global FDI Annual Report 2022 showing a 45.2% jump in 2021 compared to the previous year – a trend we can expect to continue in 2023.

FinTech trends

Some of the key growth areas for M&A in the FinTech space will be Banking as a Service (BaaS) and Gen AI. As customers become increasingly dissatisfied with existing offerings, BaaS providers are rapidly gaining popularity and new players are entering the market. This is set to change, however, as regulators are beginning to force these organisations to strengthen control and their compliance functions to obtain a license-holding. Naturally, this would limit the number of new entrants in this space, making licence-holding companies extremely attractive and driving appetite for M&A or consolidation.

Gen AI can exponentially boost a company’s productivity and allow greener enterprises to disrupt big industries. Businesses already innovating in this space will become more valuable and there will no doubt be fierce competition to acquire them.

Overall, one can anticipate a flurry of M&A activity in Q3 and Q4. While not all driven by preference, companies positioned with both the financial resources and a thorough strategy will be able to capitalise on the current dubious market to make transformational deals that may contribute to their long-term success.

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October 21, 2023December 18, 2023 byJeet Vasa

Awareness and trust holding consumers back from pursuing Open Banking products

Although the IMF recently reported that the UK economy has once again avoided a recession, the rate of inflation isn’t expected to return to the Bank of England’s target rate of 2% until mid-2025 – later than expected.

By Stefano Vaccino, founder & CEO, Yapily

This means mortgage repayments, bills, credit rates, costs of household items and more will continue to pinch consumers’ finances. Indeed, research from the Nationwide Building Society found that 74% of people were worried about their finances and ability to cover essential costs in April – with the value of spending on essentials rising 9% since earlier this year.

Within this tough environment, however, consumers believe their financial providers are falling short, with our data revealing that 53% don’t feel that their financial needs are being met. The natural conclusion you’d think is to look for a new and, hopefully, better alternative. And yet, only a tiny 2% of consumers say they have started using new products and services – meaning that many of the population could very well be stuck in a financial rut. Not great given the current state of the economy when most people need to manage their finances effectively.

Consumers trust what they know

One of the main reasons consumers don’t feel their financial needs are being met that we identified in our State of Payments report was trust. Many consumers say they only trust products and services they have heard of or that are recommendations for family, friends, and colleagues. There’s a name for this: the familiarity principle (or the exposure effect) and while it generally happens subliminally, it also influences a lot of the decisions we make… from the restaurants we frequent to the financial products and services we use.

Interestingly, though, consumers said they would be open to securely sharing more of their data with financial services organisations, like their bank or with a personal finance app if it improved their financial well-being. This includes saving money more consistently, building their credit score, and reaching financial goals quicker like saving for a mortgage.

Such services are now being provided by many major financial services providers and FinTechs in the UK – and many are powered by Open Banking. But despite these encouraging findings, 76% of consumers said they either don’t care about whether a product uses open banking or would be less likely to use a product if it is enabled by Open Banking. Again, the trust issue creeps in as a quarter say this is down to them not knowing enough about it and being wary of the technology.

An awareness issue

The plot thickens further in the issue of trust. Though consumers say they are willing to share their data, many decision-makers in financial services organisations paint a very different picture. Almost one-third (30%) indicated that trust in data sharing is the biggest barrier they face as a company in driving the adoption of their Open Banking services and products.

So, there is a disconnect here in that fed-up consumers aren’t switching to new products and services to improve their financial well-being, even though the solutions do, exist thanks to Open Banking. This may be a result of a lack of understanding around Open Banking services or the true value they can deliver to their finances, but it undoubtedly presents a missed opportunity.

Conquering the disconnect

Financial organisations must conquer a broader awareness issue so consumers know that they could have access to better and fairer financial products that support their financial well-being. There’s an opportunity to bridge the trust gap and build confidence in Open Banking solutions to get consumers turning to new products that will power better financial experiences. These positive experiences will be key to raising broader awareness of the benefits of and, in turn, increasing demand for Open Banking.

This starts by highlighting the benefits of Open Banking vs traditional banking processes and how they impact financial well-being. For example, by highlighting that it’s easier to track spending and budgets more effectively when bringing all bank account and credit card information into one personal finance app.

Another area that needs more clarity is dispelling some of the myths that have crept in surrounding data privacy and security. Sharing financial information that was once only available to notoriously highly regulated banks, naturally raises questions about privacy. But Pay by Bank is one of the most secure payment methods and there’s a reason why: it was a top priority when PSD2 was drafted, so banks and providers are required to use highly secure and encrypted APIs. To access data in the first place, a service provider needs consumer consent and cannot access without it. Raising awareness of these issues will help ease worries and build trust around Open Banking.

Final thoughts

Now more than ever, people need tailored financial products and services that are right for them, particularly as the UK continues on unsteady economic footing. Building trust and awareness amongst consumers will be vital to drive demand for Open Banking services and importantly, let them know there are products and solutions available that will make managing their finances easier. We hope to also see the right steps taken by industry and government to ensure Open Banking can build on its seven million active users and be a success story in the UK in years to come.

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