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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
What a week it was in San Francisco, as FinovateSpring landed back in the tech capital of America!
And as much as this show felt familiar, being back in the same city again didn’t mean that we’re returned to 2019.
We come back to find a very different fintech ecosystem. There are surface-level similarities between where financial services is now and where it was in 2019, but the last few years have brought about dramatic changes all over the world. And more changes and challenges are coming. There are so many factors affecting everyday consumers and their finances that it’s hard to keep up with them all, but the short version is that consumers need help, and it’s up to us as an industry to provide the tools and technologies that people need to secure their financial futures.
The good news is that creativity in fintech abounds, and so do new ideas. Our attendees saw both on display over the three days, as innovative demoers and industry experts took to the stage to share their insights and vision for the future of fintech. And now it’s your chance to get a piece of the action, wherever you are in the world.
This is a sponsored post by PwC, Gold sponsors of FinovateSpring 2022. Written by Vicki Huff, Global New Ventures & Innovation, TMT Vice Chair, PwC United States; Matthew Blumenfeld, Digital Assets Strategy Leader, PwC United States; and John Garvey, Global Financial Services Leader Principal, PwC United States.
If the boom and accompanying volatility in cryptocurrencies and NFTs leaves you uncertain, and if you’re not sure yet what to make of the metaverse, there’s a good way to separate hype from reality: follow the money.
Like the internet in the early 1990s, the crypto boom encompasses both transformative technologies and wild speculation. But some of the smartest money in the world — high tech venture capital — is flowing to some specific areas. These capital flows may hint at how the new, emerging digital economy will function.
Where the crypto unicorns are today
No boom is complete without turbulence along the way. Total cryptocurrency market capitalization reached almost $3 trillion by late 2021 — but market volatility at the start of 2022 wiped out nearly a third of this value. This drop, largely driven by macroeconomic and geopolitical concerns (rather than any problem with crypto technology or blockchain applications), may have given crypto speculators a rough ride. But it in no way interrupted the underlying innovation — and a crypto market gap of “just” $2 trillion is still about ten times larger than it was at the start of 2020.
The boom includes companies creating the foundation for Web 3.0 and the crypto economy. These investments began to scale in April 2021, when cryptocurrency exchange Coinbase held an initial public offering (IPO). It resulted in a valuation of over $80 billion on the first day of trading. Following this success, capital began to pour into startups which, like Coinbase, are building the foundations of a new digital economy that runs on cryptocurrencies. Crypto M&A rose to $55 billion in 2021 compared to $1.1 billion in 2020 — an increase of nearly 5000% — according to PwC’s Global Cryptocurrency M&A and Fundraising Report. Fundraising rose 645% to $34.3 billion from $5.6 billion according to the report.
The result is a new crop of unicorns (VC-backed startups valued at $1 billion or more.) Our analysis, based on PitchBook Data, identified 48 unicorns focused on cryptocurrencies, NFTs, and other foundations of a new, metaverse-based digital economy. Two of these unicorns (Coinbase in the U.S. and OneConnect in China) have since held IPOs, leaving 46.
The U.S. today is home to 24 of these 46 firms, but since cryptocurrency (and the capital that backs it) has no boundaries, companies can easily change locations. China’s crypto crackdown last year led many crypto startups to move or found themselves elsewhere. There have been concerns that potentially onerous regulations in the U.S. might also lead crypto companies here to consider relocating. But the recent Executive Order from the Biden Administration may have dispelled those fears for now.
What the crypto unicorns are building
Today, crypto and NFT unicorns are largely focused on the nuts and bolts of a new digital economy: buying and selling, digital infrastructure and analytics, and supporting the creator economy and other new digital services.
Many, for example, are offering financial services. Crypto exchanges help people and organizations buy and sell cryptocurrencies and tokens, store them (sometimes in interest paying accounts), and trade crypto options, futures and other derivatives. Crypto payments networks support more frictionless and trusted money transfers, while crypto financing startups help people and organizations use crypto as collateral for loans and other financial market operations.
Other unicorns are enabling other aspects of the new economy. They may offer hardware for cryptocurrency mining and operations, security and custody for digital assets, cross-blockchain transactions, support in building blockchain applications, blockchain-based data analytics, or blockchain-based smart contracts to help enforce contracts, automatically conduct transactions and more. Others help companies and consumers create, sell and invest in NFTs, purchase and develop digital real estate (such as digital storefronts), or invest in assets within one of the best places to reach Gen Z: gaming environments.
It’s not just crypto unicorns active here. Established financial services companies and fintech startups are also active in this rapidly accelerating effort: to build a trusted digital monetary system that is a critical building block of the metaverse.
What to do right now
Even if you have no plans to make big crypto investments, you owe it to your company’s future to keep track of this new world for financial services, data analytics, and virtual investments. Here are three steps every business leader can take today.
Start learning. You don’t have to be a crypto expert, but someone in your company should be — and you and other key decision makers should understand the basics and keep an eye on the underlying technologies and economic forces.
Get engaged. Cryptocurrency may feel chaotic at times, with volatility high and regulations still a work in progress. But given the speed at which investment is flowing and technology is maturing, if you wait until the dust settles, you may be left behind. Consider low-risk, low-cost investments (such as NFTs) to help build institutional familiarity.
Stay nimble. The speed of development means that you probably shouldn’t go all in on any one strategy — such as linking yourself too tightly with a single vendor, partner, or strategy. Continue to monitor developments in technology, user preferences, and the growth of related digital ecosystems.
With a cautious yet forward-looking approach, your company can avoid speculative bubbles and focus on the value that cryptocurrencies and related startups can provide.
3. “Coinbase IPO Exceeds All Expectations, Showing More Promise For Bitcoin,” Nasdaq.com, https://www.nasdaq.com/articles/coinbase-ipo-exceeds-all-expectations-showing-more-promise-for-bitcoin-2021-04-19, accessed 25 March 2022
4. PitchBook Data Inc. is the underlying data source for unicorn funding throughout this report. The analysis conducted by PwC has not been reviewed by PitchBook, and industry terminology used in this article may differ from PitchBook’s.
Accessing and leveraging enterprise data in a timely fashion has become one of the most definitive ways to outpace the competition in the business world. In the financial services industry, financial firms must be able to use data to generate a complete view of the business and the customer at many levels of the organization.
Until recently, data-driven insights were the sole purview of leaders, stakeholders, and team members with the right technical expertise. Now, financial organizations are searching for ways to deliver insights across their organizations, from the board room to one-on-one interactions between customers and customer service representatives.
This is what’s known as data democratization, and it will be key to driving innovation in the financial services industry moving forward.
According to a recent study sponsored by InterSystems entitled “Empowering Line of Business Users Through Data Democratization,” one of the most important steps in democratizing the enterprise’s data is breaking down data siloes. The study, produced by WBR Insights and published by the Financial Information Management (FIMA) conference series, engaged 250 leaders from the financial industry to learn just how they intend to improve access to data over the next 12 months.
Data Access, Compliance, and Analytics Are Key Projects for the Future
Researchers concluded that any company that isn’t satisfied with its current ability to democratize data may need new data technologies. They may also need to consult with third-party experts to deploy enterprise-wide data governance processes and manage changes among staff members.
Indeed, 62% of the respondents said that providing improved access to siloed distributed data is among their top data priorities for the next 12 months.
Data Siloes Are the Biggest Barrier to Innovation
Innovation in the financial services industry has taken on a variety of forms. Self-service solutions for customers have become particularly attractive to organizations recently, as customers are demanding more ways to connect with their financial companies from home. Artificial intelligence and machine learning are also making inroads among financial firms due to their ability to make predictions and offer strategic insights.
But the most important asset for all these innovations is data. Without accessible and usable data, the organization can’t make use of advanced technologies or develop innovative applications for them. Too often, enterprise data is locked in silos due to systems that don’t communicate with each other.
According to the respondents to the FIMA and WBR Insights study, data siloes were among their top three biggest barriers to innovation.
Specifically, 54% of the respondents listed “data silos” as a top barrier to innovation. These organizations know that they have valuable data locked away in their systems, but because those systems can’t communicate with each other, there is effectively a barrier between the organization, its data, and the insights that data contains.
In the context of the financial services industry, it should be no surprise that unlocking the potential of that data is a top concern. Data is quickly becoming a new currency, and the ability to use customer data for insights is driving competition across the sector.
These are just a few of the insights offered by the new report by WBR Insights and FIMA. If you’d like to gain actionable insights into how you can democratize data at your organization, download the report today.
The financial industry has made significant investments in document lifecycle management solutions to enhance productivity, accuracy, and flexibility. There is broad recognition that paper-based processes are a huge source of waste and inefficiency, but simply transitioning away from paper often isn’t enough on its own to achieve true digital transformation. That’s because performing a digital-based process manually still presents many of the same problems. In order to leverage the true benefits of digital document management, fintechs need to implement data capture and document generation capabilities as part of a broader process automation solution.
A Quick History of Data Capture & Document Generation
To understand how fintechs can use data capture and document generation technology to enable their digital transformation, it’s helpful to take a moment to understand the history of these tools and how they’ve developed since their origins.
Data Capture
The financial industry was an early innovator in data capture technology with the development of the specialized OCR-A font in the 1960s. This simple monospace font is still used today for the account and routing numbers on an ordinary bank check. Early data capture technology relied on pattern recognition, so an exact pixel match was needed to read the characters electronically and match them to a corresponding character in a font library. While this worked well enough for scanning printed bank checks into a computer system to track transactions, reading anything else on the check with an automated system required further developments in data capture tools.
Modern character recognition technology utilizes a more sophisticated feature detection approach that uses the component elements of each character to distinguish them from one another. An “A,” for example, usually consists of the same basic elements (two angular lines that come to a point with a horizontal line crossing them) regardless of the font used. Breaking characters down into their component elements has even made it possible for software to read handwritten characters as well as machine-printed text.
Document Generation
Document generation technology emerged in the 1970s in the form of document assembly, which was originally used by lawyers to streamline contract creation. Contracts are highly structured and rules-oriented, which made it easy to build a decision-tree logic that could be understood by the software tools of that era. Early document assembly programs used a collection of document templates that incorporated conditional fields the software could replace automatically each time it generated a contract.
Modern document assembly is typically used as part of a more robust document automation solution. Software extracts information from a database and inserts it into a template to generate unique documents quickly, easily, and accurately. These programs are much more sophisticated and flexible than early document assembly tools, allowing organizations to programmatically generate a wide range of documents without ever having to look at the contents prior to the final review process.
Data Capture & Document Assembly in Fintech Today
Despite being an early innovator in OCR technology, the financial industry has been slow to implement more robust data capture capabilities throughout their operations. According to a recent study, 63% of banks are still collecting information from documents manually, a process that’s not only time consuming, but also incredibly prone to error. They’ve been slightly faster to adopt document generation, with 49% of banks still relying on manual processes to create documents.
Ironically, fintech organizations are even more dependent upon manual practices than traditional banks. When it comes to data capture, 75% of fintechs are reviewing documents and entering their data manually rather than using an automated solution. The story is largely the same for document generation, as 79% of them are still creating documents manually.
Understandably, most of these organizations are planning to implement some form of automated data capture and document generation solution within the next two to three years. That’s because they recognize that it will be difficult to achieve true digital transformation without them.
Why Data Capture and Document Generation Are So Important for Fintech
Fintech companies have developed a wide range of innovative financial tools that allow consumers to take better control of their finances and help organizations manage their resources more efficiently. In order to deliver those streamlined solutions, however, fintechs need to have the capabilities in place to make their own processes more efficient.
Data capture and document generation work together to help these organizations maximize the value and potential of their document management systems. Financial information can be submitted in many different formats, ranging from digital forms and fillable PDFs to images, flattened PDFs, and scanned documents. Extracting information from each of these formats requires a sophisticated understanding of data capture that few software developers possess.
Once that data is extracted, it can be routed anywhere it’s needed by workflow automation tools. That could be a new document that’s being generated, but more often it will be sent to a database. When the time comes to generate a new document, previously captured information can be inserted wherever it’s needed programmatically. Multiple documents (or just sections of them) can also be merged or split apart to create entirely new ones filled with information drawn from several sources.
All of this can be done in a matter of seconds with the right software integrations, which saves a tremendous amount of time for fintech teams who have many other priorities to focus on. By incorporating robust data capture and document generation capabilities into their platforms, they can provide faster, better functionality to their customers. Rather than uploading a document and waiting for it to be processed, information can be extracted and routed wherever it’s needed instantly to facilitate faster reviews and resolutions.
Another key benefit of data capture and document generation is accuracy. Between manually reviewing information, entering it by hand into a system, and then retrieving it to create new documents, there are plenty of opportunities for mistakes to be made. In a financial context, those errors often have the potential to be systemic, creating additional errors that are time consuming and expensive to remediate. Automated extraction and assembly remove the risk of human error, which enables fintechs to accelerate and scale their processes more effectively.
Integrating Data Capture and Document Generation with Accusoft
For over 30 years, Accusoft has been a pioneer in building software integrations that expand application functionality. We provide a variety of data capture and document generation solutions that meet the needs of today’s fintech platforms. Whether you’re incorporating functionality directly into your application with an SDK or deploying a cloud-based solution that connects to one of our APIs, we have the flexibility to help you integrate the features you need to complete your digital transformation. To learn more about how Accusoft can enhance your fintech application with data capture and document generation, talk to one of our solutions experts today.
Many systems for managing the document life-cycle process could be more efficient.
Banks and financial technology (fintech) companies commonly use document life-cycle management solutions to make their back-office functions run more smoothly. To take full advantage of these systems, organizations must be able to transform documents into a format they can work with.
However, this crucial first step in the process remains cumbersome for many organizations. Even after documents are in the system, organizations need to be able to do more than view them. “The key to managing back-office tasks more efficiently is capturing and extracting data from documents without bogging employees down with manual processes,” said Tracy Schlabach, Director of Marketing at Accusoft. The ability to work with documents and their data can help organizations realize the full efficiency of a comprehensive document management solution.
Over the past two years, enterprise leaders around the world have had to respond to disruption, unpredictability, and unprecedented challenges. The way the world interacts and transacts has changed, and across millions of businesses using Stripe, we’ve noticed that the capacity for businesses to adapt has been a major determinant of resilience and growth.
An adaptive business initiates change; an agile business reacts to it. The next generation of industry leaders will be companies that anticipate and take action to capture emergent opportunities, using their flexibility as a competitive advantage. They execute on strategies to find new revenue streams, pursue global expansion, and partner to scale faster. According to a recent study from Forrester, adaptive businesses grow at more than three times the industry average.
Stripe worked with The Economist Impact (formerly known as The Economist Intelligence Unit) on a research study that takes a deeper look into the core characteristics that make enterprises adaptive, the strategies leaders are pursuing as online commerce expands, and how the ability to navigate change is an enduring competitive advantage.
Report overview
The analysis in the report is based on a survey of 600 C-level executives, and around a third of the respondents (34%) are based in Europe, with another third (33%) in North America, and the balance in Asia-Pacific. Their companies are distributed across a wide range of industries, with the largest representation from the financial services (15%), technology (15%) and retail (11%) sectors. Just over half (53%) of the respondents work in companies earning annual revenue of over US$500m, with the rest earning between US$100m and US$500m. Most of the companies represented (83%) are no older than 20 years, and 44% have existed for fewer than ten years.
Executive summary
The Covid-19 pandemic brought about profound change, affecting long- standing consumer behaviours and preferences, and in some cases permanently changing competitive landscapes. Businesses had to make consequential decisions in short order—rapidly modifying business models, accelerating digital transformation, seeking out new revenue streams, moving or re-thinking supply chains, entering new product or geographic markets, and improving online customer experiences.
The past two years have created an inflection point for enterprises—one that is likely to define business success for the next decade. Risks to business are considerable, yet organizations that are able to successfully navigate disruption while positioning themselves for growth can be a competitive advantage in today’s global economy. The findings in this report detail characteristics of an adaptive enterprise.
Key findings from the study
Adaptability is decisive. Businesses able to maintain or grow revenue under the difficult conditions of the pandemic appear to have made proactive choices in adapting to widespread change. When asked about chief factors enabling success, CxOs point to their firms’ ability to change or adopt new business models, serve customers online, and scale in short order to shifts in customer behavior and demand. Companies suffering revenue declines, by contrast, highlighted struggles with some of these same areas.
Going for growth. The pandemic has not slowed, but instead seemingly accelerated businesses’ pursuit of growth or new revenue streams. Survey respondents indicate a strong intention to boost investment in technology and show little support for cost-cutting. Rather than contract their businesses, a majority of CxO respondents—80%—believe global expansion is central to their business viability. Over half—52%—plan to increase the number of countries they trade in over the next year. Only 13% said they would decrease.
Digital is integral. The flight of consumers to digital channels was dramatic in 2020, and CxOs in the survey expect the consumer trends that accelerated during the crisis to gain additional momentum. Among the surveyed companies, 28% say half or more of their company sales came via online channels before the pandemic, 46% indicate the same was true during the pandemic (as at October 2020), while 54% anticipated half of their revenue to come from online channels by the end of 2021. A majority—82%—believe that their customer’s shift to online purchasing during the crisis will continue, even after the pandemic is over.
Anticipation is key. Far from all companies were ready for a digital acceleration: 69% of CxOs say their firms under-invested in online strategies before the pandemic. A majority—53%—say they now plan to boost investment in digital transformation over the next 12 months, aiming to improve processes or operations, innovation and customer experiences. The maintained or increasing digital budgets imply a CxO outlook that it’s never too late to adapt.
Stripe is a financial infrastructure platform for businesses. Millions of companies—including financial organisations like Hargreaves Lansdown, Klarna, and AJ Bell—use Stripe to accept payments, grow their revenue, and accelerate new business opportunities. Headquartered in San Francisco and Dublin, the company aims to increase the GDP of the internet. Check out Stripe’s website to learn more, and contact sales when you’re ready to have a conversation.
This is a sponsored post by Ripple, Gold Sponsors of FinovateEurope in London, March 22 -23.
The blockchain industry saw some big changes last year, brought on by a maturing crypto landscape and the development of innovative new technologies.
Ripple set out to better understand and further analyze this rapid evolution through both primary and secondary research. Our work included surveying more than 2,000 global financial institutions, business, individuals and developers to uncover the key perceptions and trends related to the tokenization, management, and movement of digital assets, as well as the adoption of the core technologies that encompass and underpin these trends.
We are excited to bring you our hot-off-the-press 2022 report “New Value: Crypto Trends in Business and Beyond” which spotlights key findings on the current state of blockchain and digital asset applications, including their benefits, blockers, and future use cases. This report includes a large section on payments, but also expands beyond payments to help the industry better understand how crypto solutions more generally are being used in both financial and business applications worldwide, and, beyond business, by governments and individuals as well.
The report is divided into four sections:
Tokenize: establishes the digital representation of value on the blockchain
Manage: wields tokenized value through holding, hedging, staking, lending, borrowing, etc.
Move: sends value from one place, person or organization to another, i.e. payments
Compliance
And within these four sections, it covers a variety of critical topics across the crypto landscape today. These topics include the emergence of Non-Fungible Tokens (NFTs) and Central Bank Digital Currencies (CBDCs) — notoriety of the former grew rapidly while the latter remained largely in the research and development stage, though a number of countries are actively exploring the technology. While familiar to seasoned players in the space, the use of crypto for Decentralized Finance (DeFi), portfolio and capital management is advancing. And of course, payments leveraging crypto have continued to grow dramatically.
Industry Perception
As we’ve noted, the crypto and blockchain industry is maturing and with that, institutions and enterprises are realizing the potential benefits of applying this technology to their own organizations for a variety of use cases. Interestingly, enterprises tend to be more optimistic than financial institutions on the benefits of blockchain, the potential impacts and the enthusiasm to adopt this technology.
With last year’s explosion of popularity in NFTs, there is a growing number of interested individuals outside of what we’ve traditionally seen in this space. And there is a growing number of use cases that encompass functional NFTs (e.g. for ticketing, or voting) and business-oriented NFTs (e.g. representing real-world assets of various types). Given the agility and power of assets represented on the blockchain, the surge in creative use cases and interest among both individuals and businesses isn’t surprising.
Whether you are considering using CBDCs, NFTs, or cryptocurrencies, or anything else on a blockchain, sustainability should be taken into account. And, we confirmed, there is still a lot of progress to be made in educating consumers, institutions and businesses alike on the differences in carbon emissions between blockchains and the performance advantages of a sustainable blockchain.
Regional Perspectives
The report offers insight into interesting regional differences. Asia Pacific (APAC) is particularly optimistic about the value that blockchain technology can bring to individuals, businesses and institutions in the region. We highlight key findings around why APAC consumers are purchasing NFTs, the potential that APAC enterprises and financial institutions see in CBDCs, and more.
Research results draw parallels between our data on crypto’s positioning in Latin America (LATAM) and recent news of related current events in the region. New Value highlights the distinct stance LATAM financial institutions and businesses have taken on crypto related to payments, inflation and the impact this technology will have in the coming years. While respondents in Europe and North America see the value of these new technologies, they tend to be somewhat less optimistic about their impact than those in APAC or LATAM or MEA.
Looking Ahead
Findings from the New Value Report have far-reaching implications for more than just the financial services industry. Digital assets and the new technologies that drive them will have a profound impact on both the economy and the individual, the government and the artist, the enterprise and the unbanked, and everyone in between.
Download the report here for a comprehensive first look at the exponential climb toward the Internet of Value, and how crypto is paving the way.
This is a sponsored blog post by Nick Kerigan, Head of Innovation, Swift.
Working with Clearstream, Northern Trust, SETL and others, SWIFT plans experiments in 2022 to explore how it can support interoperability in the development of the tokenized asset market.
Relative to cryptocurrencies and stablecoins, the current market capitalization of tokenized assets is small, but momentum for these digital assets is expected to accelerate rapidly in the coming years. By some estimates, volumes could reach some 24 trillion USD by 2027.
Tokenization can be applied to stocks and bonds, but also to illiquid assets, including commodities, property or even art. For example, a share or bond with a high value per unit (say over $500) can be divided into digital pieces that each have ownership and value. This increases the liquidity of the overall asset, and accessibility, by enabling a wider demographic of people to invest in assets that may historically have been unavailable to them.
Banks and securities firms are responding to tokenization by developing services − including fractionalization, a process whereby assets are broken into smaller value digital tokens − amongst other digital asset servicing capabilities, such as private key safekeeping. Financial market infrastructures also are embracing tokenization by supporting the full lifecycle of digital securities.
As interest increases, SWIFT is exploring how it can enable and improve interoperability between participants and systems during the transactional lifecycle of tokenized assets. To this end, SWIFT plans a series of experiments throughout 2022 leveraging its trusted role as a central platform to explore the issuance, delivery versus payment (DVP), and redemption processes, to support a frictionless and seamless tokenized asset market. These experiments will use both established forms of payment and central bank digital currencies (CBDCs).
Asset tokenization − a trend and challenge for securities markets
Over the coming decade, tokenized and traditional assets will likely co-exist, and this poses potential challenges. One major risk is that a variety of technologies, platforms and regulatory environments will create a thicket of connections for securities market participants. This could result in inefficiencies and fragmentation, as well as rising costs and risks across the industry.
SWIFT is uniquely placed to help solve this challenge. As a neutral, global cooperative with a strong focus on ensuring interoperability and setting standards for the industry, we are able to interconnect market participants and simplify operations by completing activities centrally that otherwise would be performed bilaterally between institutions. This role relies on SWIFT’s strong identity and security frameworks, alongside our unparalleled reach and record of reliability.
With this in mind, we are looking at how we can support both traditional and tokenized assets flows, with a focus on regulated assets only. We would not become a crypto-custodian nor perform direct settlement of tokenized assets as a financial market infrastructure would. Rather, we see our role as helping to connect all entities as efficiently as possible and enabling our customers to provide better services to their end-users.
Collaborative innovation in action
SWIFT, Clearstream, Northern Trust, SETL and other industry participants are exploring the feasibility and benefits of SWIFT as an interconnector, linking up multiple tokenization platforms and various cash-leg payment types. This will build on SWIFT’s successes in achieving interoperability for CBDCs outlined in our whitepaper published last year.
In the experiments, Clearstream and Northern Trust, alongside other industry players, will represent key parts of the tokenized − and traditional − asset ecosystem, including securities market infrastructures, as well a local and global custodians. SETL and Northern Trust will support SWIFT and the participants in the integration between the various DLT environments and with transaction orchestrations using their respective capabilities. Results of the experiments will be shared with the financial community afterwards.
“As a neutral cooperative with a reach across 11,500 institutions in more than 200 countries, and oversight by central banks globally, SWIFT is uniquely placed to engage closely in the future of securities,” says Thomas Zschach, Chief Innovation Officer, SWIFT. “We look forward to this set of new experiments and innovating collaboratively with market participants on the emerging trend of tokenized assets.”
“Our vision for instant and frictionless transactions not only applies to traditional securities instruments but also to new asset classes as well,” adds Vikesh Patel, Head of Securities Strategy, SWIFT. “The insights from this exercise with leading capital markets participants will help us define and prioritize the concrete steps required to enable seamless processes for tokenized assets.”
Anthony Culligan, Chief Engineer at SETL, stated: “We are very pleased to be contributing to this important initiative. We see significant innovation in securities tokenization at the moment and these experiments have the potential to create broader accessibility and interoperability between the emerging networks.”
Keep an eye out for the results of our experiments – we’ll be publishing them later in 2022. In the meantime, to find out how your firm could collaborate with us, get in touch at innovate@swift.com. We can’t wait to hear from you.
This is a sponsored post by Paul Higgins, EMEA Banking Lead, Mendix, Silver Sponsors of FinovateEurope, March 22 – 23 in London.
Innovation in the banking sector has proven its value to society during the COVID-19 crisis. For example, during times of physical distancing, enabling contactless banking and offering bank employees the possibility to work remotely were particularly relevant. Looking to the future at a post-COVID, post-Brexit world, it’s time to reflect on how the sector has adjusted, the sweeping changes ahead and the challenges those changes present.
The burden of legacy tech
The number of regulators and ever-changing regulations can make the financial services industry a daunting place. Changes must be implemented quickly to ensure compliance and avoid significant fines. This means that IT delivery in a financial institution is often more complex and nuanced than in less regulated industries. Many organizations, particularly the more traditional banks, run on legacy monoliths that aren’t easy to make changes to. Such changes carry the risk of causing outages that can damage the reputation of the bank and can also incur fines. Just last month, Nationwide received negative press because of a payments outage around the time that many get paid and pay their bills.
Can a financial institution risk being left behind by not migrating off legacy systems?
Many banks try to reduce the risk of such outages at critical times of year, usually end of month, quarter, and year, by establishing “frozen-zones” that limit changes to IT systems to only those deemed as essential to the stability of the systems. Additionally, the appetite to replace legacy systems is very low due to the huge complexity and inherent risk involved – often the famous adage applies “if it isn’t broken, don’t fix it”. But you have to ask, can a financial institution risk being left behind by not migrating off legacy systems?
Seeing off nimble fintechs
The pandemic showed how vital digital transformation is for every industry – people needed remote access to services, products, and their jobs. In the financial industry, the consumer-facing part is generally quite far in the digitalization journey, with most customers able to access online and mobile banking. Not so with corporate banking and internal employee access to systems. But according to McKinsey, in the case of remote working, companies moved 40 times more quickly than they thought possible before the pandemic. And the expectation is that the digital transformation journey will continue this acceleration.
In the past, accelerating digital transformation has required large teams of developers working non-stop on a single project for months. The pandemic highlighted that this was simply not sustainable. Tech teams need to be able to juggle between projects, adjusting their priorities as and when required. To do so, they require a different approach to their delivery.
Nine out of 10 IT leaders in financial services believe their firm will need to invest in digital projects over the next two years just to survive in a rapidly changing market.
Low-code provides a compelling answer to this new problem. Low-code platforms enable even the most traditional banks and financial services companies to compete with nimbleness of their fintech rivals. The time to act is now: recent Mendix research found that nine out of 10 IT leaders in financial services believe their firm will need to invest in digital projects over the next two years, just to survive in a rapidly changing market.
The value of low-code
Many banks in Europe have turned to cross-functional, agile teams to provide the collaboration needed to develop the solutions that answer customer needs and drive revenue growth. This requires providing both developers and non-developers with tools that enable them to operate together. And financial institutions that haven’t implemented such agile methods still recognize the value of close collaboration between business and IT.
The Mendix low-code platform is a recognized market leader because it fosters this collaboration by providing two integrated development environments: one for non-technical people, often from the business side, and another for pro developers. This enables non-technical staff to work hand in hand with the development team in creating applications.
Both the technical and non-technical teams use the same visual development language to develop apps, bringing together those that understand the business problems with those that understand the IT landscape, core systems, and services to contribute to the vision of a product. And IT stays in control through built-in governance and guardrails that ensure compliance with the established standards of the organization.
It seems set that low-code will play a vital role in the financial services industry in accelerating digital transformation and increasing the speed of innovation.
This is a sponsored post by Carol Hamilton, Senior Vice President, Global Solutions at Provenir.
New survey data reveals uncertainty in the accuracy in credit risk modeling, underscoring the need for AI, machine learning, and alternative data.
Consumer credit markets have changed dramatically over the past two years during the Covid-19 pandemic, translating into economic uncertainty for millions across the globe, and it seems for the fintechs and financial services organizations that serve them.
After all the disruption we’ve seen over the past 24 months, how sound are credit risk models? This was the question we sought out to find the answer for with a global research study that surveyed 400 decision makers in the industry. The results were more than a little unsettling — only 18 percent of fintechs and financial services organizations believe their credit risk models are accurate at least 75 percent of the time.
That’s pretty astonishing — especially given the fact that the rest of the respondents indicated they believed their credit risk models were accurate less than 75 percent of the time.
Credit risk modelling is at the heart of every fintech and financial services company and this financial fault line in credit risk decisioning should send chills down the spine of the entire sector.
This “risky business” uncertainty in credit risk modelling accuracy may be why real-time credit risk decisioning was respondents’ No. 1 planned investment area in 2022, as organization’s work to resolve this financial fault line in credit risk decisioning. The survey underscored the growing appetite for AI predictive analytics and machine learning, data integration, and use of alternative data as the means to improve credit risk decisioning.
Aside from improving credit risk modelling accuracy, organizations are also employing credit risk decisioning platforms to help address the key priorities of fraud detection/prevention and financial inclusion. And increasingly these credit risk analysis strategies employ the use of alternative data.
Fraud continues to grow for financial services and lending firms, both before and during the pandemic, with identity fraud being a key factor.
Sixty-five percent of decision makers in our survey indicated they recognize the importance of alternative data in credit risk analysis for improved fraud detection. Additionally, 51 percent recognize its importance in supporting financial inclusion. Alternative data is a more varied way for lenders to evaluate those individuals with a thin (or no) credit file put together a more holistic, comprehensive view of an individual’s risk. This vastly benefits those who can’t be easily scored via traditional methods, while also benefitting financial institutions, by expanding their total addressable market.
To level-up credit risk decisioning, organizations need more data, more automation, more sophisticated processes, and more forward-looking predictions. And to do that, businesses need AI that can provide immediate impact to the decisioning process. AI-enabled risk decisioning is seen as key to usher in improvements in many areas, including fraud prevention (78%), automating decisions across the credit lifecycle (58%), improving cost savings and efficiency (57%), more competitive pricing (51%), and improving accuracy of credit risk profiles (47%).
For unbanked and underbanked consumers, AI gives organizations the opportunity to support those consumers’ financial journeys. Financial services organizations typically struggle to support these consumers because they don’t come with a history of data that is understandable by traditional decisioning methods. However, because AI can identify patterns in a wide variety of alternative, traditional, linear, and non-linear data, it can power highly accurate decisioning, even for no-file or thin-file consumers.
While AI and machine learning, and alternative data may have been on the credit risk decisioning “nice to have” list a few years ago, fintechs and financial services organizations are quickly realizing legacy technology and methods simply are not up to today’s task of credit-risk decisioning. By deploying new technology such as AI and machine learning, and embracing alternative data, organizations are on their way to improved confidence in the accuracy of their credit risk models – moving to remediate their credit risk “risky business.” In doing so, they will be more prepared to react to changes moving forward, while supporting inclusive finance.
Carol Hamilton is Senior Vice President, Global Solutions at Provenir, which helps fintechs and financial services providers make smarter decisions faster with its AI-Powered Risk Decisioning Platform. Provenir works with disruptive financial services organizations in more than 50 countries and processes more than 3 billion transactions annually.
This is a sponsored post, written by Tracy Schlabach, Director of Marketing at Accusoft.
Fintechs, ISVs, big banking corporations, and SaaS solutions all have immediate needs in common, they all need to bring forth financial technologies that improve both the customer and employee experience. The challenge is building and launching these technologies quickly, efficiently, and within a scalable, sustainable model. Product managers and development teams are all evaluating options to assist with meeting stakeholder demands for quality, while also meeting the need for speed to market. Enter the hidden value of third-party software integrations.
The secret life of APIs
Digital transformation is an ever-increasing priority for all businesses as well as an initiative that is seeing a surge in funding. In a recent State of the API Economy 2021 report by Google, 56% of enterprise leaders say APIs help them to build better digital experiences and products. Leaders are also finding value in focusing on an API-driven strategy and 52% say APIs accelerate innovation by enabling partners to leverage digital assets at scale.
How API integration works
At a very simple level, an API consists of code that allows two separate technology systems to communicate and interact with one another. It functions as a translator and messenger; delivering user requests and data from one system to a completely separate system. This effectively allows an application to utilize the features and data of other applications without having to build out that functionality from scratch.
For example, the Uber ride-sharing app connects customers to available drivers within a specific area. It does this with a combination of smartphone geolocation and accurate maps, but the Uber app doesn’t have mapping capabilities. To get those features, it connects to Google Maps by way of an API that allows it to access the relevant navigational data and use it to connect customers to drivers.
Purchasing new software doesn’t mean throwing out existing tools, which substantially reduces the risks associated with technology investments and upgrades.
Another key function of APIs is their ability to automate key processes and connect legacy infrastructure to newer technology systems. Data can be collected in one system, for instance, and “pushed” into another system automatically. This not only eliminates the complicated (and error-prone) task of manually transferring data between different systems, but also allows users to build a workflow in an application they’re already accustomed to, without having to learn an entirely new system.
More importantly, since APIs allow newer technologies, devices, and legacy applications to talk to each other, they provide firms with substantial flexibility when it comes to adding new platforms. Purchasing new software doesn’t mean throwing out existing tools, which substantially reduces the risks associated with technology investments and upgrades.
The cost savings with API integrations
When you purchase a third-party API integration you’re gaining more than additional functionality for your application. You also gain access to a team of developers and support specialists who are here to assist you from POC to deployment and beyond. Leaning on the specialization of a third-party vendor allows your developers to focus on application enhancements and release your product to market faster. This ultimately saves your company valuable development time and realizes product revenue faster.
Interested in learning more?
Could your business benefit from an API-led digital transformation strategy? Schedule a consultation today to learn more about the document management API integration options available from Accusoft.
This is a sponsored post, by Michael Hom, Head of Financial Services Solutions, InterSystems. InterSystems areGold Sponsors of the upcoming FinovateEurope in London, March 22-23.
Last year was a record breaking for the global fintech sector, with investment reaching $102 billion – an annual increase of 183%. This growth was in large part spurred on by the pandemic which brought about major changes in consumer banking and spending habits, with eight in 10 people in the U.K. alone now using fintech products for banking and payments. At the same time, demand for fintech is also growing due to increased digitization among incumbent banks as these institutions try to keep pace with evolving customer demand for digital services and applications.
However, despite this growth, fintechs, much like more traditional financial services institutions, face a range of technical challenges which if not addressed could stall their progress. This was evidenced in recent research from InterSystems, which found that a staggering 81% of fintechs globally see data issues as their biggest technical challenge. Therefore, with data vital to everything from making informed decisions to delivering personalized services, addressing these challenges needs to be a priority for fintechs if they are to sustain the momentum of 2021.
The implications of fintechs’ data struggles
The data challenges being faced by fintechs fall under two distinct issues. Firstly, 41% of fintechs globally say they are unable to leverage data for analytics, machine learning (ML), and artificial intelligence (AI), while 40% of fintechs experience difficulties in connecting to customers’ applications and data systems. This indicates that not only are fintechs often unable to use their data effectively, but also they are struggling with data silos and integration.
These issues can have implications for fintechs such as hindering their ability to make informed decisions about the types of products and services they should be offering customers, and how they can continue to innovate to meet evolving customer needs. Additionally, for B2B fintechs in particular, integration challenges will make it more difficult to sell their applications to enterprise customers who need solutions that fit seamlessly within their existing infrastructure and that allow them to obtain the much-needed flow of bidirectional data.
On top of this, the data challenges cited by fintechs could hinder their ability to comply with financial regulations. Not only is this a concern from a regulatory standpoint, but it also may put the 93% of fintechs that hope to unlock the opportunities of partnering with incumbent banks at a disadvantage. After all, security and regulatory compliance are essential for banks and are key considerations when making decisions about which fintechs and firms to work with.
Time for a change of data architecture
Consequently, to build on the growth they have experienced over the last year and to be in the best position to capitalize on lucrative relationships with incumbent banks, fintechs globally must begin to address the problems with their data management. The starting point must be to find a way to bridge data silos and make integration easier.
Within the wider financial services sector, traditional firms, such as JPMorgan, Citi, and Goldman Sachs, are turning to data fabrics to solve these data challenges and provide a consistent, accurate, real-time view of data assets. A new architectural approach, data fabrics access, transform, and harmonize data from multiple sources on demand. By weaving together different data sets, from both within and outside the organization, and providing easy and uniform access to data, a smart data fabric can help fintechs to generate insights that can be used to get to know their customers better and gain complete visibility to accelerate business innovation.
This type of data architecture will also allow fintechs to create a bidirectional gateway between their applications and their enterprise customers’ production applications, legacy systems, and data silos. This approach will help those fintechs to ensure that their solutions can be quickly and easily integrated within their customers’ existing environments, which is particularly beneficial for fintechs looking to collaborate with banks.
‘Smart’ or enterprise data fabrics elevate this approach further by embedding a wide range of analytics capabilities, including data exploration, business intelligence, natural language processing, and ML directly within the fabric. This makes it faster and easier for organizations to gain new insights and power intelligent predictive and prescriptive services and applications.
As such, smart data fabrics address both the data integration challenges facing fintechs and their currently inability to use data with more advanced technologies such as AI and ML to extract valuable insights. As smart data fabrics allow existing legacy applications and data to remain in place, thereby removing the need to “rip-and-replace” any of their existing technology, this approach also enables fintechs to maximize their previous technology investments.
With so much potential within the global fintech sector, implementing a smart data fabric will allow fintechs to address their most pressing data challenges. They will have the ability to make more informed decisions based on accurate information and insights, deliver the products and services their customers need, and collaborate with other institutions. Ultimately, this will ensure fintechs are in the best possible position to make 2022 an even more successful year than the last.
