editions

Partnering with fast-moving fintechs can help incumbent banks roll out sleek digital tools to impress existing customers and win-over new ones.

If you can’t beat them, join them: HSBC just made a $35 million strategic investment in UK challenger bank Monese through its corporate venture arm.  

HSBC’s investment is just the latest example of a neobank-incumbent tie-up: In the past several years, BBVA invested $300 million in Brazil’s Neon, Goldman Sachs invested $50 million in digital bank Starling, and Santander led a $40 million investment in credit-focused Upgrade. 

“They essentially get outsourced product development,” Jonah Crane, partner at financial services advisory firm Klaros Group, told Insights Distilled of this investment strategy. “They’re bringing that more modern technology development by the fintechs in-house, as it were.”  

This model allows incumbents to better serve their entrenched customer base under their own brand, while helping challengers develop their platform-as-a-service model.  

Alternatively, Crane has observed that the relationship between fintechs and banks in the US is often reversed: Incumbents will power challengers behind the scenes, so the users know the fintech’s brand, but the big bank is also gaining new customers. 

Financial institutions are nearly unanimous on the appeal of a passwordless future, but there are many different approaches. Bank of America’s latest launch showcases a simple, creative way to bring smartphone-based biometrics to the web.

Bank of America wants to banish manually-entered credentials from its website for business customers, and it’s combining two popular technologies to make it happen.

Customers will now be able to use their smartphones to scan a QR code on the CashPro website, which will prompt a biometric scan of either their face or fingerprint on their phone (BofA has long enabled biometric access for its mobile apps). Once authenticated, they’ll be automatically signed in online.  

Following the pandemic-spurred onslaught of QR code usage, this launch represents a simple, creative way to bring a mobile app-centric capability to the web without requiring a complicated new process. 

Dealing with issues in trade settlement has historically been a fragmented process, where participants must manually resolve errors over email chains. The biggest players are investing in AccessFintech’s centralized (and secure) data management network because its collaborative workflows reduce the time and costs for all involved. 

By promising to streamline transaction processing, AccessFintech is winning converts: More than 100 organizations use its platform to share data and a slew of top financial firms just contributed to its $60 million in Series C funding.  

By making data exchange and communication easier between all the participants in a given trade, AccessFintech reduces manual work and human error, thus speeding up transactions and lowering overall costs. For example, after a year of using AccessFintech’s network, Citi and JPMorgan reported a 30% reduction in trade fails and a 76% drop in operations-related email traffic. 

AccessFintech recently expanded its network to include derivatives and syndicated loans, and the new funding will fuel further growth and expansion. The more players and asset types involved, the more useful the platform is for all. As BNY Mellon’s head of custody put it, “Democratizing data across market participants” reduces costs and improves settlement, which is critical to “the smooth functioning of the capital markets.”

Trade finance – which often still involves paper documents moving between banks, shippers, and exporters – is ripe for technological change. JPMorgan’s new partnership with Cleareye.ai digitizes the process and enables sophisticated automation. 

JPMorgan has partnered with Cleareye.ai to make trade operations and compliance more efficient and less risky. Through a combination of computer vision and natural-language processing, Cleareye.ai’s ClearTrade solution ingests documents and then analyzes and validates them based on algorithmic rules created to catch compliance and sanction violations or money laundering red flags.  

The product automatically creates reports that make it easier for trade operations analysts to do their jobs, drastically reducing processing times and human error. The platform will be integrated into JPMorgan’s system to “massively improve efficiency” for the bank and ultimately become part of its commercial trade processing tool.  

JPMorgan chose to work with Cleareye.ai after testing multiple technology providers, and head of trade Stuart Roberts told Finextra that Cleareye.ai stood out because its system was able to hit high efficiency ratios and learn and improve after mistakes. 

As US regulators hammer a dozen banks including JPMorgan, Goldman Sachs, and Bank of America with a combined $2 billion in fines for failing to properly monitor all employee messaging, comprehensive communications-surveillance tools are in high demand.

The SEC slapped banks with steep fines after it discovered that their workers were using unmonitored chat apps, including WhatsApp, for work. This communication crisis is spurring banks to adopt tools that will let employees continue using their preferred channels, but compliantly. (In the case of Deutsche Bank, WhatsApp was an approved and monitored messaging platform, but employees also used personal accounts.) 

“Employees want to communicate in ways they are most comfortable—voice, text, WhatsApp, and Microsoft Teams. It’s about choices,” CEO of compliance tech firm Movius Ananth Siva previously told Insights Distilled. Through its monitoring products, “employees no longer need to carry two phones.” 

SteelEye, Symphony, Nice Actimize, and LeapXpert all offer monitoring for modern communication apps (and the latter claims to be the only communications surveillance firm that can seamlessly and scalably integrate with and monitor Apple’s iMessage).  

“We’ve seen an incredible rise in interest from financial institutions of all kinds due to the ongoing regulatory crackdown,” LeapXpert cofounder and chief revenue officer Avi Pardo told Insights Distilled, highlighting faster sales cycles and implementation times. There’s also been a particularly major uptick in Europe as financial institutions large and small race to protect themselves from audits, fines, and reputational damage, he said: “They believe the regulatory crackdown is in the process of crossing the pond.” 

Different countries have very different credit reporting systems, which means that lenders may struggle with the underwriting necessary to approve immigrants for credit cards, loans, or other bank services. Nova Credit’s software integrates and standardizes international credit data, which ultimately reduces the effort and cost for lenders to serve these customers.

HSBC is working with Nova Credit to better provide services to immigrant customers.  

The fintech makes credit history from one country usable in another, and HSBC is currently deploying the service in its Singapore unit to help it serve people who have a credit history from India. HSBC has historically assessed immigrants’ creditworthiness by requesting documents, but Nova Credit’s system makes it easier, faster, and ultimately cheaper to serve this population.  

Helping the under-banked get access to loans is a boon to both society and banks’ bottom lines: Immigrants are HSBC’s “fastest growing” and “most commercially attractive” customer segment, it told American Banker. It plans to expand its use of Nova Credit’s service to include new geographies and invested $10 million in the firm through its venture arm. “The potential for the reach of this partnership is monumental,” a Nova Credit spokesperson told Insights Distilled.  

The relationship between HSBC and Nova Credit has been in the works since before the pandemic, the spokesperson said, and other partnerships could emerge in the future: “Global demographics continue to show that immigration is the main driver of population growth in developed economies. As other global banks take a stance behind this shift and realize the importance of the immigrant population, we are open to explore those relationships.”   

Complex IT systems require increased visibility: Observability platforms can help teams understand their tech stacks, troubleshoot and optimize data workloads, and keep costs under control. 

Mastercard’s back-end infrastructure is incredibly complicated and inter-connected. “Big data means that even a small problem can cause a large impact,” Mastercard principal engineer Chinmay Sagade said in a presentation last year, with issues ranging from system slowdowns or crashes to resource bottlenecks.  

Unravel’s tools have made its platforms more resilient, reliable, and efficient: By integrating Unravel into its software development lifecycle, Mastercard was able to identify issues in minutes that would previously have taken days (or more) to find, including by flagging “toxic workloads” likely to create cascading problems.  

Operational effectiveness improved without additional infrastructure costs, and workers could reallocate time to value-add work versus battling fire-drills. “We saw an immediate impact on the platform,” Sagade said. 

Unravel just raised a $50 million Series D and also counts DBS and Deutsche Bank among its clients.  

While quantum computing holds promise for financial institutions, its eventual risk is also enormous: Experts estimate that quantum computers may one day be able to break current encryption systems in seconds.

France’s central bank worked with CryptoNext Security on an experiment to use so-called “post-quantum” algorithms to operate a data exchange system that’s resistant to the power of future quantum computers. 

This report closely follows a new whitepaper from post-trade market infrastructure firm DTCC that explores how “the quantum technology threat is coming” within the next decade and why financial institutions need to start developing their playbooks for new encryption now.  

“The banking industry handles long-term sensitive data, so banks need to protect themselves and their communications now against ‘harvest now, decrypt later’ activities,” CrytoNext CEO Florent Grosmaitre told Insights Distilled. Banks should “take inventory of their cryptography” and begin building a playbook for the years-long process of upgrading, he said, adding that CryptoNext is working with another large European bank on quantum-resistant digital signatures. IBM and Thales are also offering post-quantum cryptography services. 

Meanwhile, the likes of HSBC, JPMorgan, Ally, and Credit Agricole are experimenting with ways to use quantum computing technology for their benefit, like improving speed and precision of risk analysis, fraud detection, and the pricing of complex derivatives.

Low-code platforms like Genesis Global (an Insight Partners’ portfolio company) provide ready-made, reusable code components that can simplify and speed up the development process.

The securities arm of a Latin American banking group, Itaú Securities, is using technology from Genesis to design a new cloud-based system that will automate pre-trade workflows – saving time and effort for traders – and create a more comprehensive client experience overall.  

Genesis’ platform has reusable “building blocks” that financial institutions can use to either launch services or integrate new apps into their existing legacy systems. For example, a consortium of global banks recently worked with Genesis to build an electronic trading platform about five times faster and at a fraction of the cost than they could have otherwise, a Citi exec previously told Insights Distilled. 

Itaú is the “perfect environment” for Genesis because of its ability to integrate with multiple systems both internal and external to Itaú and because of its domain expertise in trading. 

Citi, Bank of America, and BNY Mellon recently invested $20 million into Genesis. 

A whopping 89% of small-to-medium businesses feel underserved by their primary banks, according to a recent Capgemini study, but personalized, value-add tools can help buck the trend. 

US Bank just added a new tool to its arsenal as it aims to become a one-stop-shop for business owners. 

The tool draws on customers’ bank data as well as any external sources they connect, like accounting software, to forecast cash flow, and will eventually include the ability to calculate predictions for different “what if?” scenarios.  

Providing business customers “with a more comprehensive view of the health of their business” is a “differentiator” for US Bank, chief digital officer for small business, Irv Henderson, told Insights Distilled, and fits into its mission to help SMBs “run their business operations more efficiently.”  

US Bank created the tool through a “close partnership” between its in-house development team and a fintech partner, Henderson said, a model which enables its strategy of “bringing innovative new solutions and tools to our customers.”  

Ultimately, US Bank’s Business Essentials suite allows it to add value and build stronger relationships with small businesses customers at a time when competition (between rival banks and between banks and fintechs) is hotter than ever.