November 1

Double materiality allows investors to not only understand the environmental, social, and governance risks facing their portfolios, but also the ESG impacts that those assets could have on the wider world. The more forward-looking, comprehensive principle is already baked into EU regulation, and is starting to gain traction in the US (while also facing blowback from conservatives).

JPMorgan is doubling down on double materiality through its partnership with software firm Datamaran, which powers its new ESG Discovery tool.  

“This holistic view enables investors to make a more informed decision about how and where their investment is deployed in a way that goes much further than the traditional financial tools they might have relied upon until now,” Donato Calace, SVP of innovation at Datamaran, told Insights Distilled, adding that the analysis gives users a “longer-term perspective” on the “value drivers of the future.” 

Datamaran’s software uses natural language processing to automatically identify and monitor these risks. 

Beyond providing double materiality – which is more forward-looking than standard ESG – the software notably doesn’t try to provide a rating or score for any given company. This was a key reason JPMorgan chose to work with Datamaran, as other AI-powered platforms simplify the complexity of ESG too much, an exec said of the partnership. 

Instead, Datamaran compiles and centralizes information about hundreds of ESG risks and opportunities, paired with analysis that includes input from JPMorgan researchers, so that clients can see the underlying data when making decisions. 

Dedicated innovation centers have become a go-to way for incumbents to galvanize creativity, agility, and ambitious projects in emerging areas like Web3 or the metaverse.  

$548 billion-asset Truist just announced a new stand-alone innovation group called Foundry, which will work across the bank to build new products and features. The unit aims to operate like a startup within the bank. 

“The decisions that banks make over the next two to three years from a technology perspective are going to define who wins over the next decade,” Truist’s head of strategic initiatives, Christina Russ, said. 

Such dedicated initiatives are meant to create room for experimentation at-speed – though the model doesn’t always work. For example, ING overhauled its dedicated innovation program earlier this year, citing the need for sharpened focus. 

Foundry pulled about a fourth of its 45 workers from The Long Game, a financial games app the bank acquired in May. Buying fast-moving startups and then integrating their employees into new product lines can give big banks a culture jolt that breeds innovation. 

Variable recurring payments (VRPs) provide a more secure, transparent, and lower-cost alternative to direct debits or card payments. Though they’re regarded as the future of bill, subscription, and invoicing payments, as well as one-click ecommerce, banks have been slow to enable them, in part because of the technical and regulatory challenges.  

NatWest just launched partnerships with three fintechs – Token, Yapily, and Tink (a former Insight Partners’ portfolio company that sold to Visa) – to provide more opportunities for variable recurring payments for its customers (the bank previously announced relationships with TrueLayer, GoCardless, and Crezco). The fintechs each have their own specialty, including bill pay and one-click checkout.  

VRPs save time, reduce fees, provide transparency, and lower the risk of failed payments for merchants, while providing more security and flexibility for consumers. The UK requires banks to provide VRP for sweeping (where money is automatically transferred between accounts belonging to the same person), but NatWest is the first UK bank to provide VRP for use cases beyond that as it aims to be on the forefront of the technology for its customers. 

“We’re committed to offering innovative and convenient payment methods to businesses and consumers,” NatWest’s head of APIs, Daniel Globerson, said of the partnerships. “VRP brings greater simplicity, control, and flexibility to payments. It’s fast, cost-efficient, and uses the very latest in bank API technology.” 

Implementing a digital overhaul involves more than just technical challenges: It requires a cultural shift that relies on buy-in from an entire organization.  

There’s in-fighting at UBS between CEO Ralph Hamers, who aims to use technology to expand the bank’s breadth, and the head of UBS’ wealth business, Iqbal Khan, who favors a more high-touch and traditional approach, according to a sweeping Bloomberg report.  

The report paints UBS, which has maintained steady returns, as caught in a power struggle between those who embrace Hamers’ vision for algorithm-driven expansion to a broader subset of potential clients, versus those who want to abide by Khan’s remit to build relationships “not with machines, but with people.” 

Hamers’ digital vision faced a significant setback when UBS’ $1.4 billion acquisition of robo-advisor Wealthfront was abruptly cancelled last month. It remains to be seen whether Hamers’ digital push and customer expansion ambitions will win out over Khan’s influence.   

Read the rest of the Bloomberg piece here. 

America’s oldest bank made waves when it launched its crypto custody service earlier this month, but a top exec says that knowing when to partner with specialists is one of its greatest strengths.

BNY Mellon earned well-deserved credit for being the first traditional bank to launch digital asset custody services in early October, but an executive is quick to point out that it needed to rely on fintech partners to maintain its high standards for client protection.  

Despite the bank’s “very thorough and robust cybersecurity departments,” it’s entrusting wallet management to Fireblocks, an infrastructure platform it invested in last year. Digital assets are a new beast for the bank, so it “looked across the industry at specialized firms,” BNY Mellon’s CEO of custody services, Caroline Butler, told Protocol. Fireblocks also counts BNP Paribas and ANZ Bank among its clients. 

Knowing when it makes sense to partner with subject matter experts is one of BNY Mellon’s key strengths, Butler said. “[Clients] are appreciating that we have the ability to innovate in a very measured and prudent fashion.” 

BNY Mellon also partners with Chainalysis for compliance.