Archive for March, 2018

Speaker Interview: Olly Betts

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Olly Betts, Co-Founder and CEO, OpenWrks

How will the increased use of open APIs shape the financial services market, and how will it impact different market players in both the short- and long-term?

Open APIs are the biggest innovation in the financial services market since the formation of the credit bureaus. The impact will be felt in every corner of the market with the potential to transform the whole financial services ecosystem, but only where participants focus on leveraging open APIs to improve people’s everyday lives. In the short term, the focus has to be on delivering benefit to customers by improving existing experiences, rather than creating new ones. At OpenWrks we make Open Banking work by helping people share their financial information securely with the businesses they trust. So that those businesses can deliver better products and services to their customers, for example, faster mortgage applications, better access to credit for people with thin credit files and more compliant income and expenditure assessments . In the long term, open APIs have the potential to change our relationship with money and how we spend it. The winners will embrace Open Banking to better understand their customers and deliver more personalised solutions. Shaping their products and services around their customers’ needs rather than around business models.

Which activities should banks be prioritising in the wake of open banking?

Firstly and most importantly, banks need to be compliant with PSD2 regulations, ensuring that they have a dedicated interface for third parties that enables people to connect their bank account and authorise consent to share information or make payments with trusted and regulated third parties. Despite great efforts from many of the banks to meet the Open Banking deadline, we are very much at version 1.0 and continued investment from banks and collaboration with TPPs is required to deliver a standard that will drive the user benefits that we all want to see. Secondly, banks need to be figuring out how they’re going to start using the data and payments capability they’ve had for hundreds of years to actually deliver better end to end customer experiences that are digital, convenient and deliver incremental value to their customers.

What opportunities does Open Banking present, and which commercial strategies will thrive in the new environment?

The potential opportunities created by Open Banking are endless and I believe winners will put their commercial strategy secondary to delivering value to their customers. Many banks and businesses are focussing on Open Banking driven marketplaces – owning the open banking app store – and generating revenue from connecting customers to third party products but without providing the brilliant product through which people access the marketplace – think iPhone – I cannot see this business model being sustainable. Open Banking finally gives control to the customer, so the commercial strategies that will stand the test of time will give a clear value exchange for the data shared by customers, delivering genuine value to customers that meet the ever-changing customer demands of convenience, personalisation and frictionless end to end experiences – think Uber leveraging Google Maps API.

How can firms overcome the security and privacy concerns associated with data sharing?

By putting data privacy first and being prepared for failure. To build trust, there needs to be clear and radical transparency regarding what information will be shared, with who and the benefits people will receive in return. Everyone is responsible for increasing the general awareness of how to protect personal data and the very real threat that cybercrime represents. We need to be transparent with customers about the risks of data sharing, how these are mitigated and what they can do to protect their information. We must all be prepared and plan for failure. There will be a leak in the system and how companies respond and communicate with any customers impacted is essential to the success of the open banking ecosystem.

What are the best strategies to encourage customer engagement?

I’ve said it before and I’ll say it again. Radical transparency and clarity on the value exchange. People won’t opt into Open Banking. They’ll opt into a faster mortgage application, a better loan rate, an easier way to save money and a way to make more from their savings.

Why will you be speaking at Finance Edge’s Open Banking Summit, and what do you hope to get out of the event?

OpenWrks is at the cutting edge of Open Banking. We’re helping our clients use Open Banking in their businesses today to deliver real value to their customers and we want to share what we’ve learned with others. I’m also looking to hear the very latest insights from the people alongside OpenWrks at the cutting edge of the market. Their views of early customer adoption and an understanding whether incumbents are seeing Open Banking as an opportunity or a threat. Most importantly I am looking forward to being amongst like-minded people, thought leaders and influencers to continue making Open Banking a success through collaboration and ultimately ensuring it improves people’s everyday lives.

Open Banking Summit 25 April 2018 London

Olly Betts will be joining us for the Open Banking Summit. This high-level, interactive forum will bring together senior-level professionals from all corners of the open banking space.

CONTACT US to secure your place

Speaker Interview: Patrick Hunger

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How far along are wealth and asset managers in the digitization process? What else still needs to happen to get us to the next stage?

The transformation is still in its infancy. Most of the traditional wealth and asset managers continue to preserve and protect existing revenue streams based on non-digital ‘business blueprints.’ In particular, the role of the human interface is stereotyped relative to robo-advisers or algorithms with the argument that humans in essence only relate to humans. This is fundamentally wrong, as humans relate in the wealth and asset management space to value and value only. Hence, what will get us to the next stage is an understanding of value creation by human advisers, and ‘human interaction as a service’ (HIaaS) around trade-offs.

What are the best ways firms can design a customer experience that will appeal to an existing customer base as well as the next generation?

Historically, wealth and asset managers have been rather one-dimensional in their channel approach to clients. Technology has fundamentally changed the way we access information and this seems to be true irrespective of demographics. As such, I do not strongly advocate ‘generational’ or ‘gender’ segmentation. I would rather recommend designing means of collaboration with your customers based on social needs, i.e. create inclusion, team dynamics or peer-to-peer-connectivity. You do not want to create a ‘customer-base legacy’ but rather create an eco-system of interrelated ambassadors.

How is automation changing the role of wealth and asset managers?

As indicated before, automation puts more emphasis on value creation. Technology is after all a commodity and does not idiosyncratically drive success. Wealth and asset managers need to create their ‘value space’ by skillfully combining technology and HIaaS or alternatively by designing services without any kind of personal intermediation. Whatever the approach is, strategy follows customers and unless you create value for your customer, you should not be in the game in the first place.

In an evolving digital landscape, how can firms most effectively utilise client and company data?

The wealth and asset management space is obsessed with data. In a digital world, your starting point is though whether your data is big and holds value. This may sound counterintuitive, but your challenge is not just to target broadly, but also to personalise your services deeply. Moreover, for that to successfully and continuously happen, you need to think outside of dashboards, connect siloed data, and merge data from the past with data from the moment. Your goal is to answer important customer questions on the fly. I doubt that the majority of wealth and asset managers hold these capabilities today, which makes them vulnerable to fintechs and tech companies in general.

How do you choose the technology that will be the best fit for your firm?

That is a very difficult question to answer. However, whatever your path is, do not try to outsmart your competition with technology, as this will not work – it is a commodity. You can only outsmart your competitors with your value proposition. ‘Customer service magic’ is created by connecting the dots

Why will you be speaking at Finance Edge’s Digitizing Wealth & Asset Management Summit, and what do you hope to get out of the event?

It is a great privilege to be speaking at the summit and to connect with all the subject matter experts. I concluded a long time ago that mastering the digital future is only possible through collaboration. As we do not know what we do not know, it is in a digitised world that displays unprecedented developmental velocity, even more relevant to listen actively to what other people have to say.

Speaker Interview: Mike Schwartz

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What is Free Open Source Software or “FOSS”, and why is it the best development methodology for Open Banking?

The “open source” marketing label is a bit like “organic” — you need to dig deeper to understand what it really means. Some “organic” products may contain up to 30% non-organic ingredients! Thriving FOSS ecosystems share some common characteristics though: at a minimum, an open source license is fundamental — everyone in the ecosystem must have the right to modify and redistribute the code. Versioned packages are important as well–operations teams can’t compile source code and need easy-to-use binaries. And finally, freely available documentation and an active community are essential for productivity.

When all cylinders are firing (code, packages, docs, and an active community), the FOSS development process results in a product which has the most features, the fewest bugs, the simplest user experience and the quickest updates. More eyes on the code, more contributors building features, and more trained engineers makes community the super-power for open source products.

Is open source safe for banks?

There is no intrinsic security advantage for proprietary commercial software — hackers don’t need to see source code to find flaws. There is, however, a clear security benefit derived when many organisations pool their penetration testing results and share findings. An open source community leads to more discussion on the impact of announced security vulnerabilities and faster bug fixes. Community collaboration is the secret power of open source software, and is a “super-safe” choice!

What types of use cases is open source software best suited to address?

Open source software works best for standards, security and infrastructure–areas where cooperation is more important than competition. Banks compete, but nobody wins if hackers get richer. Sharing know-how on software that implements security standards is a win-win for all legitimate players in an ecosystem.

What are the up-and-coming identity security standards that will impact Open Banking?

The Internet is a layered fabric of standards. Routing data packets, browsing web pages, sending email, using mobile applications — none of this can happen without Internet standards working together. Important new standards for authentication, single sign-on (SSO) and consent management are proliferating even as older identity security standards are just gaining adoption. Even experts in the industry find it difficult to keep track of it all!

Three standards organisations are developing identity standards that will have an important impact on Open Banking: the OpenID Foundation (OIDF), Kantara and the FIDO Alliance:

  • Authentication: The FIDO Alliance is defining standards for hardware, mobile, and biometric authentication credentials
  • Single Sign-On: OIDF is leading the Financial API (FAPI) working group, which is defining a profile of OpenID Connect that enables websites and mobile applications to securely use a bank’s authentication service.
  • Authorisation: Kantara’s UMA standard will enable consumers to delegate access and permissions to people and electronic agents, and will help banks define inter-operable security policies with account information service providers and payment initiation service providers.

Why will you be speaking at Finance Edge’s Open Banking Summit, and what do you hope to get out of the event?

We are looking to build the community of collaborators for the Gluu Server, an open source OAuth 2.0 and FIDO access management platform.

Speaker Interview: Clare Rowley

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Clare Rowley, Head of Business Operations, GLEIF

The way we work has been revolutionised by technology. As part of this, the automation of many manual processes has led to considerable time and cost saving. However, despite these changes, many continue to use manual methods when it comes to legal entity identification.

The use of Legal Entity Identifiers (LEIs) as a common identifier to combat this issue has a wide range of business use cases that span multiple industries, business activities and functions. Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation (GLEIF), talks to us about why current entity verification methods are not enough, and how the solution to the problem – LEIs – can not only help firms meet regulatory requirements, but create business value in multiple sectors.

How do LEIs work?

The LEI is a 20-digit alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It enables clear and unique identification of legal entities participating in financial transactions by connecting to key reference information. GLEIF makes available the Global LEI Index, which is the only global online source that provides open, standardized and high quality legal entity reference data. Each LEI contains information about an entity’s ownership structure and thus answers the questions of ‘who is who’ and ‘who owns whom’. As of February 2018, more than 1.1 million LEIs have been issued to legal entities globally.

The LEI data pool – which is publicly available – is essentially a global directory that enhances transparency in the marketplace.

Why are current entity verification processes not fit for purpose?

Current processes have significant manual components and often require the use of multiple databases in which a counterparty may be identified by a different name. Many banks and corporations still use names rather than identifiers, resulting in confusion. As an example, a large bank’s client services division recently found that it had an average of five names—with minor variations in its database—for the same organization. Additionally, commonly used databases, different divisions and IT systems within organizations can all have varying versions of the same entity’s name, making it harder to trace and to link information from multiple sources.

Another example of current inefficiencies is in know-your-customer (KYC) processes, where firms work to verify their clients’ identity by conducting robust due diligence. The lack of consistency and clarity within these processes means that banks spend considerable time and resources on what should be a simple task.

Beyond compliance and regulatory requirements, how can LEIs provide business value for companies?

Our recent white paper released with McKinsey & Company and titled ‘The Legal Entity Identifier: The Value of the Unique Counterparty ID’ identifies two broad areas in which the LEI has business value. Firstly, it reduces transactional and operational friction, both within and among organizations. Secondly, you can easily access important information about the background of a legal entity in a specific transaction. Together these benefits help organisations reduce the amount of time spent on identifying counterparties as well as improving information reliability.

How can LEIs create business value for the banking sector?

To give just one example: In capital markets, the LEI’s primary value is derived from reducing the cost of onboarding clients and middle- and back-office activities related to the processing of stocks, bonds and other securities trades. All such activities could be simplified and streamlined if LEI use was more broadly adopted throughout the lifecycle of the client relationship. The use of LEIs in the onboarding and trading phases of the client relationship would also reduce the time spent on data correction and reconciliation necessitated by inconsistent identification of legal entities.

McKinsey estimates that the use of LEIs in capital markets could reduce annual trade processing and onboarding costs by 10 percent. This would lead to a 3.5 percent reduction in overall trade processing and capital markets onboarding costs, amounting to over US$150 million in annual savings for the global investment banking industry alone.

What message do you have for businesses thinking about getting an LEI in the future?

Introducing the LEI into almost any process with a manual component that requires counterparty identification and verification can result in more reliable information, efficient operations, significant cost savings and a reduction in the time it takes to onboard clients. I would actively encourage organisations to consider the adoption of LEIs in their day to day processes.

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