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October 20 / Blog

4 Problems Banks Can Solve with Fintech RIGHT NOW!

Let’s get real.  All this talk of Fintech like blockchain and bitcoin are all great but we’re probably 2-3 years away before these technologies can make any meaningful impact. But banks are dealing with real problems that can be solved with technology today. Sometimes we get so caught up with the next best thing, we missed out on opportunities to do something now.

So here are some frustratingly annoying problems banks can solve with tech, RIGHT NOW!

PRODUCT DISTRIBUTION

If you’ve ever worked on the front line, you’ll know what I’m talking about.  Product information scattered all over the place.  They could in different folders of a shared drive, or on an excel that only someone from some department have access to.  Looking for basic product information is like a treasure hunt and the data might be outdated or incomplete.  It’s madness!

In early 2000, someone came up with a very simple idea.  “What if we can centrally manage our product online?”  This simple idea became the seed that spawned a $2 trillion dollar behemoth we now called eCommerce.

It makes perfect sense for banks have a centralized product system and make everyone’s lives easier. There are “out of the box” solution that comes with as a centralized product repository with a beautiful front end and some cool searching features.  Some are available on the cloud so it’s easy to adopt the technology.

COMPLIANCE MONITORING

All banks have compliance reporting tools, but given the complexity of today’s regulatory requirements, they are simply not enough.  We live in a completely different world and there are too much at stake when the regulators come knocking.

The fact is compliance violations are becoming harder to find.  You need to look deep at the data interrelationship across different processes, trends in clients and staffs behavior, and pan-regional activities.  And most legacy systems just aren’t cut out for this type of work.

That is why RegTech is such a hot thing right now.  According to Deloitte, there are over 150 RegTech startups globally in 2017.  And if there is one thing these startups understands, it’s data.   They are able to leverage innovations in data architecture and analytics to generate meaningful reports and real-time alert in real-time so you won’t be caught off guard.

FUND ORDER ADMINISTRATION

For some reason, fund administration is still stuck in the stone age.  It’s mind-boggling that we can order lunches over an app, but are still processing funds order using paper application and faxes!

End to end order and execution solutions have been around since the 80s but fund operations have been kept in the dark.  The excuse is that the fund houses and the distributors negotiate very specific terms and that makes automation difficult.

Well, guess what?   A number Fintechs have figured it out.  Some offer digital execution and settlement through direct connectivity to the fund houses.  Other offer services that automate the rebate processing.  Some of that these solutions are funded by the asset management companies so it’s cost-effective.

CALL REPORT

A lot of banks that I’ve worked with uses very basic tools like Word and Excel for their call report.  And really, as long as they have an organized process where these reports are properly maintained, it really isn’t that big of a problem.  What’s more interesting is the content of these reports.

A client can tell you a lot about themselves in any client engagement and the data collected from each these engagements is the most valuable intelligence you can have.  The trick is, how do you mine that intelligence in scale. Word and Excel can’t do that.

Bottom line, call report needs to be more than just a note.  There are technology solutions that use metadata to capture keywords and classify them into themes.  As the library builds up, they reveal some very interesting things about your client’s investment behavior, preferences, and risk tolerances, to which you can personalize your offering to each of your clients.

A LITTLE IMPROVEMENT GOES A LONG WAY

Look, as a Fintech enthusiast, I’m super excited about how the industry is transforming. But we can’t move ahead unless we remove the hurdles today.  As you start planning for 2018, work with your IT and think about what little improvements you can do with tech.  It’s the small victories that matter.

 

Written by

simon

Simon Wong
Managing Director, Head of Greater China

 

June 6 / Blog

Three Lessons from the BSI Fallout

MAS’s decision to withdrawal BSI Bank license sent shock wave across the industry.  The last time a bank was shut down was back in 1984 when MAS accused Jardine Fleming for serious lapses in its advisory work.

Though BSI has been in the spot light ever since one of their former bankers was charged over his involvement in the 1MDB scandal, according to MAS’s press release the decision to shut down the bank “takes into account the repetitive lapses” of their compliance failings since 2011, so no-one should accuse MAS of over reacting.

After the shock and with some analysis, I believe there are three lessons to be learned here from the fallout of BSI in Singapore:

 

1. EVENT-DRIVEN STRATEGY FOR COMPLIANCE SIMPLY DOESN’T WORK. 

Like most banks, BSI uses an event-driven strategy to manage their compliance.  I know this because MAS first found the bank to be in breach in 2011 over “lapses at the front office and weak enforcement by control functions”.  Although those lapses were rectified, MAS found another set of lapses in 2014 over “serious shortcomings in its due diligence checks” that they had to fix.  The lapses found during the 1MDB investigation in 2015, was the straw the breaks the camel’s back.

Simply reacting to regulatory events is simply not a sustainable compliance strategy.  Instead of waiting for the next regulatory note or audit, banks should proactively develop a comprehensive compliance strategy first by asking “What type of business do you want to have, and how much risk you’re willing to take?”  At a recent compliance event, a senior executive of a private bank shared that they develop their compliance policies and process based on the business strategy of only onboarding clients that can provide sustainable revenue.  That means, the policies and actions, if properly followed, will filter out clients that do not meet that that criteria.  This provides the bank with a sense of direction in the development, maintenance and execution of their compliance policies, and do not simply reacting to events.

2. GOES ALL THE WAY UP TO THE TOP.

Beside the one BSI banker that was charged, MAS has also named 5 others individuals, including two former CEOs of the bank, and referred them to Public Prosecutor to investigate for possible criminal negligence. MAS found “considerable evidence of gross dereliction of duty and failure to discharge oversight responsibilities” of the senior management.

Personal liability is now a reality in Asia and for the MDs of private banks, this should serve as a major wake up call.  Ask any C-Level of a bank and they will say compliance is on the top of their priority list.  But most of them only participate at the strategic level – rarely are they involved in overseeing the execution as they will naturally delegate that to other functional units like legal, projects and IT.  This may be acceptable to any other business, but compliance is different.  If a responsible officer fails to meet his business numbers, worst thing to happen is he gets replaced.  But should he fail to ensure the bank enforce proper compliance controls and oversights that can lead to criminal offense and jail time.  That is why on the matter of compliance, the C-Levels need to be hands on and get involved throughout the process.  From defining the policies, to selecting the right technology, to post implementation monitoring, the C-level should be vigilant in overseeing the execution of the strategy.

3. LOCAL BREACH, GLOBAL RAMIFICATION.

Unlike the Panama Papers, the 1MDB scandal is very much a Malaysian event.  But immediately after MAS announced the shutting down BSI, the Swiss financial regulator also opened criminal proceedings against the bank with the Group’s CEO resigning.  Although the Swiss authorities have said that they’ve been looking at BSI for some time, you can’t help but think that their action is somewhat related to MAS’s decision.

This shows that the fallout of a compliance lapse knows no geographical boundaries.  COOs and CEOs at both the group and regional level should understand that risk associated to compliance breach in any one region are shared across the world so a group CEO is just as much at risk as the regional CEO should regulator from any region decided to take action.    Compliance management can no longer sit in geographical silos with different regions doing different things.  There needs to be a common vision, strategy, and sense of urgency on compliance across the group’s global operation so that management oversight on compliance adherence is consistence throughout.

 

Written by

simon 

Simon Wong
Managing Director, Head of Greater China