the full picture, this week – 05 April 2019

by | Apr 5, 2019 | All Blog Posts, the full picture this week, Featured

Let us put you in the picture this week, as we round-up and react to the latest news from the financial crime compliance and technology sectors.

This time, we give our reaction to a Citibank report that warns that banking incumbents must be prepared to go digital in order to gain a foothold amid the increasing dominance of challengers.

Elsewhere, there is a conflict in Latvia as the country’s chief financial regulator and government are at loggerheads over new efforts to tackle money laundering.

These issues, and more from around the globe, give us plenty to dive into for your Full Picture, This Week…

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technology

Banking incumbents must go digital in order to rival the increasing dominance of challengers, according to a report by Citibank.

The report concludes that incumbents that are slow to upgrade their infrastructure could see a 30 per cent decrease in revenue as challengers get a foothold on the market focusing on innovative digital banking services.

The findings from the US-based bank point to a need for established banking organisations to develop their own digital-first offerings in order to fend off the growing number of fintech challengers.

It is estimated that digitalisation could bring down costs by 30-50 per cent, as robotic processes and technology such as Artificial Intelligence (AI) take on more menial tasks from employees. However, rising competition from digital challengers could knock revenues at traditional banks by as much as 30 per cent.

Providing context, Ronit Ghose, global head of bank research at Citibank, said:

Creating an ‘incumbent challenger’ sounds like an oxymoron, but as legacy banks recognise the threat that new entrants into banking are posing to revenue and customers, they need to reinvent themselves and reimagine banking. By creating their own Bank X, we believe legacy banks can transform themselves from slow moving caterpillars to agile butterflies.

Read more on the report here.

the encompass view

In today’s technology-driven landscape, what we are seeing more often than not is that customers are demanding innovation; what they expect from their banking provider is ease, transparency, speed, and lower transaction costs.

What this report shows is that incumbents will lose out significantly if they are not prepared to dedicate the resources required to digitise their offerings and keep up with challengers, who are making a real mark on the industry with innovative platforms and solutions. Traditional banks must move with the developments of the age they are operating in if they are to stem this increasing challenge and offer what customers really want.

Banks and non-banks alike should pursue seamless connectivity and thought partnering with customers for improved experience and full transparency into transactions, as well as simplified onboarding of accounts, suppliers, and platforms, as they look to meet the need for digitisation.

In doing this, they will ensure that the resulting customer experience drives the volumes necessary to counter pressure and the heightened competition that they are facing from more agile new entrants into the space, while also decreasing costs.

the encompass view

In today’s technology-driven landscape, what we are seeing more often than not is that customers are demanding innovation; what they expect from their banking provider is ease, transparency, speed, and lower transaction costs.

What this report shows is that incumbents will lose out significantly if they are not prepared to dedicate the resources required to digitise their offerings and keep up with challengers, who are making a real mark on the industry with innovative platforms and solutions. Traditional banks must move with the developments of the age they are operating in if they are to stem this increasing challenge and offer what customers really want.

Banks and non-banks alike should pursue seamless connectivity and thought partnering with customers for improved experience and full transparency into transactions, as well as simplified onboarding of accounts, suppliers, and platforms, as they look to meet the need for digitisation.

In doing this, they will ensure that the resulting customer experience drives the volumes necessary to counter pressure and the heightened competition that they are facing from more agile new entrants into the space, while also decreasing costs.

Alex Oxford | Head of Sales Asia, encompass

Hong Kong

The Hong Kong Monetary Authority (HKMA) has revealed a first batch of virtual banking licenses, as it aims to strengthen Hong Kong’s position as an international financial hub.

The first three licences have been given to Livi VB Limited, SC Digital Solutions Limited and ZhongAn Virtual Finance Limited, with all three expected to go live within the next six to nine months.

Norman Chan, chief executive of the HKMA, commented on the move, saying:

The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era. It is a major milestone in reinforcing Hong Kong’s position as a premier international financial centre. I believe that virtual banks will not only help drive fintech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong.

Finextra has more here.

compliance

Latvia’s chief financial regulator and the government are at loggerheads over moves to tackle money laundering.

It comes after the country’s new government presented a comprehensive reform of Anti-Money Laundering (AML) measures that included a new way of selecting board members of the bank regulator, the Financial and Capital Market Commission (FCMC).

The plans would force Peter Putnins, the head of the regulator with a contract until 2022, to reapply for his job as the government insists the FCMC is receiving new powers.

However, in a frank interview with the Financial Times, Mr Putnins accused the government of changing the law purely to get rid of him, saying:

In a civilised country this is not acceptable… You can disguise everything but at the end, much of the power will be concentrated in the government’s hands. This embarrasses us.

Read the latest from the Financial Times [subscription required].

news in brief

The European Commission (EC) has launched a new cross-border initiative encouraging collaboration between national regulators and governments, with the aim of growing the fintech economy. The European Forum for Innovation Facilitators (EFIF) has been established to support regulators to share information and work together on plans for innovation hubs and regulatory sandboxes. Find out more.

The Financial Intelligence Centre (FIC) have announced that a panel of experts is set to test the effectiveness of South Africa’s legislative and institutional capability to detect and combat money laundering and terrorist financing. The experts are from the International Monetary Fund (IMF), the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and the Financial Action Task Force (FATF). Read more here.

Financial services compliance departments should accelerate their uptake of new technologies and regtech solutions to cut costs, according to Accenture. A survey of 151 compliance executives at financial services institutions found that more than two thirds of their compliance departments are facing a cost reduction target, while 69 percent are looking to make savings of between 10 and 20 per cent during the next three years. FStech has the latest.

Fourteen global financial institutions – including HSBC, Lloyds, Deutsche Bank and Standard Chartered – have joined together to launch an initiative which aims to use technology to open up trade finance as an asset class for institutional investors. The Trade Finance Distribution Initiative (TFD) will initially focus on creating common data standards and definitions to enhance operational efficiencies and improve risk management associated with establishing trade finance as an asset class. Get the latest from FSTech.

Canadian Prime Minister Justin Trudeau’s government has pledged to take steps to fix the country’s shortcomings in relation to money laundering. “This issue was identified as a real priority – it has become a priority for my government,” Bill Blair, federal minister for organised crime reduction, commented. Read more on the issue here.

The European Parliament has adopted a detailed roadmap towards fairer and more effective taxation, as well as tackling financial crime. The recommendations range from overhauling the system to deal with financial crimes, tax evasion and tax avoidance – most notably by improving cooperation in all areas between the authorities involved – to setting up new bodies at EU and global level. Find out more.

Brett King, futurist and CEO at Moven, spoke about the future of banks at SunTech’s 2019 Confluence in Dubai, focusing on the importance of being digital at their core and how far organisations have come. Take a look at what he had to say here.

the latest from encompass

Law firms and other professional services are finding themselves under pressure to offer better services at a lower price. This week on the blog, we looked at the benefits Anti-Money Laundering (AML) technology can bring.

The accountancy and legal industries have been making headlines, after a report from OPBAS highlighted criticisms in how professional bodies representing the sectors tackle money laundering. While the conclusions do not make for positive reading for the sectors – and particularly their regulators – overall, encompass’ industry advisor Amy Bell believes they do not tell the full story. She shared her thoughts here.

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