Dangerous Intersection Ahead: Privacy and Banking Fintech

WILLIAM T. REPASKY | March 9, 2020

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Bankers in the fintech space are familiar with the FFIEC’s Guidance recommending multi-factor authentication for certain financial transactions.  Multi-factor authentication, at least for “high risk” transactions, requires a combination of something you know, something you have and something you are.  This last factor is often referred to as biometric information.  While biometric authentication is making great strides around the globe, its adoption in American banking is not yet common and poses its own set of legal issues.

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Technological Innovation and Everyday Lifestyle

Article | July 7, 2021

Technological innovation over the recent decades has attracted increased interest of researchers and industry experts thereby becoming an integral part of everyday lifestyle. The challenge lies in resolving the dispute between a forward-looking innovative structure promoting innovation, and a proportionately meticulous schema that is capable of winning faith of consumer. Information technology is fast turning to be a key instrument in the lives of consumer across generations. In current global economy, customers across industries have been pampered and the credit goes to “Bigtechs ” like Ali Baba, Apple, Amazon, E-bay, the list being exhaustive along with “Fintech ” and “Incumbent banks ” as a result, consumers expect swift product delivery with flawless service. A review of available literature is suggestive that further expositions tend to focus on fintech and its integration in banking arena investigating the factors that underpin the choice of external partners to collaborate, design, develop and implement fintech capability while addressing the gap between research and industry evolution. Recent developments in technology have refurbished global economies at an immensely fast pace, making the business environment extremely challenging with continued margin pressure. Digital technologies are intrusive to not only the competition but also to the role of payments in businesses impacting the ultimate consumers. Investigating digital transformation has been of continuing interest across industries. Digitization might abolish some vital job roles, threatening the human workforce reluctant to digital changes. However, observations are indicative of focus towards higher-value tasks and creating unprecedented opportunities. For instance, adoption of digitization in financial industry, provides considerable opportunity to relationship managers to spend minimal time in operational activities and maximum towards advising customers. Amongst many ideas laying the foundation of fintech adoption, a growing body of literature recognizes two vital causes for the evolution of fintech companies that can be routed back to a decade. Firstly, the global economic financial crisis also called economic recession that has distinctly exhibited to consumers the flaws of the traditional system. Second, the evolution of new technologies that boosted mobility, easy flow of information, speeding up the service delivery and lowering the costs. The way banks engage the customer today has gained fresh prominence, with a movement from branch banking to digital systems, benefitting from customer insights. Aiming to enhance consumer engagement and gain competitive advantage, debates continue about the best strategies banks adopt to engage with customers that has resulted in adding capabilities and complex technology on top of systems and processes to meet dynamic customers’ expectations to gain real time personalization. Much debated question is whether organizations with traditional framework are able to come up to such expectations becoming capable of disrupting industry by prompt digital delivery using advanced algorithms and digital platforms to successfully provide unrestricted access to information bits. Promising superior experience to users, however, if industry experts hit the bulls-eye and tend to offer more competitive prices, enhanced operational controls may entitle lesser risk and probability of higher revenues. Such developments bring along advantages and disadvantages at the same time. Whereas advantage lies in reduced transaction processing times, service excellence and global integration the disadvantages lie in the fact that not many users are keen to shift to the fintech modes as far as their financial transactions are concerned since they are apprehensive of the risks associated with such adoption, witnessing this paradigm shift in the pace at which industry is developing focussing on much saturated red ocean of retail banking and gradually making a shift towards payment systems, which seems to be an untapped blue ocean of opportunities. The underpinning factors that govern the financial industry are KYC / AML and CFT together forming the basis for regulatory controls. Ethical transparent business knit together with service excellence, minimal risk, a strong regulatory framework in the competitive industry has given the incumbent banks an opportunity to partner, collaborate and codevelop with technology and consulting firms for collaborative innovation. Technologies like artificial intelligence, blockchain are capable of providing effective product suite to clients resulting in scalability of business.. On the other hand, robots replacing front end customer interface causes threat of redundancy to human capital and increase the training costs. As a result, many times an informal approach to collaboration tends to delay the outcome since the senior management looks at digitization in transaction banking as a profitable step and the middle management is hesitant of human redundancy, training etc which might cause delay. Taken together, a probable explanation advocates that common goals of digitization in financial institutions are regulatory control, risk mitigation, increase in revenue and to meet dynamic customer expectations by co-developing with external partners to gain competitive advantage. This adoption may further lead to higher cohesiveness in departments, improved value chain and reduced turnaround time with higher resolution quality. The digital transformation is capable of reducing the operational costs and overheads leading to increased profits, improved efficiency, better regulatory controls with less risks and collaborative opportunities for partners taking benefit of its tech talent to reach desired results. References: Anikina, I.D., Gukova, V.A., Golodova, A.A. and Chekalkina, A.A. 2016. Methodological Aspects of Prioritization of Financial Tools for Stimulation of Innovative Activities. European Research Studies Journal, 19(2), 100-112. Boston Consulting Group 2018, Three Keys to successful digitization in Transaction Banking, Boston Consulting Group, pp1-2 Botta, et.al.,2016. Technology innovations driving change in transaction banking. [Online] Accessed on March 11, 2018 Available at:https://www.mckinsey.com/industries/financial-services/our-insights/technology-innovations-driving-change-in-transaction-banking Capegemini & LinkedIn, 2018, World Fintech Report, p. 9-10 Hammond, Alex, August 2017, How banks are getting the digitization of core banking wrong, pp 1-8, [Online] [Accessed on April 02, 2018] Available at:https://www.bobsguide.com/guide/news/2017/Aug/23/how-banks-are-getting-the-digitisation-of-core-banking-wrong/ Johnson. et. al., 2017, Exploring Strategy chapter 3 Industry and sector analysis, pp. 62-91 Markovitch, Shahar & Wilcott, Paul, May 2014, Accelerating the digitization of business processes, Digital McKinsey, McKinsey & Company, pp 1-5 Mehrotra, Mohit, 2014, Digital Transaction Banking: Opportunities & Challenges, Deloitte Consulting Pte Ltd., pp 1-22 Olanrewaju, Tunde, July 2014, The rise of the digital bank, Digital McKinsey, McKinsey & Company, pp 1-5 Puschmann, Thomas, 2 February 2017, Fintech, Bus Inf Syst Eng 59(1): 69-76, Springer Fachmedien Wiesbaden 2017 Saksonova, Svetlana, Kuzmina-Merlino, Irina, 2017, Fintech as Financial Innovation – The Possibilities and Problems of Implementation, European Research Studies Journal, Volume XX, Issue 3A, pp 1-14

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Machine Learning in Finance – Present and Future Applications

Article | March 4, 2020

Machine learning has had fruitful applications in finance well before the advent of mobile banking apps, proficient chatbots, or search engines. Given the high volume, accurate historical records, and quantitative nature of the finance world, few industries are better suited for artificial intelligence. There are more uses cases of machine learning in finance than ever before, a trend perpetuated by more accessible computing power and more accessible machine learning tools (such as Google’s Tensorflow).

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Fintech Customer Acquisition - Beyond Early Adopters

Article | February 24, 2020

This blog attempts to answer the following key questions at a high level: What could financial technology companies (fintechs) do to enable greater consumer or SME (customer) adoption of their products and services beyond early adopters? What could fintechs do to pull under-served and well-served customers away from incumbent banks and established providers?

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FinTech in Post-Covid 19 World

Article | April 7, 2020

FinTech industry has 2008 crisis to thank for its tectonic rise. A number of ingredients (e.g. cheap funding, mistrust for banks, availability of ex banking talent, etc) came together that turned last recession into a platform for the launch of a wave of FinTech innovations. Since FinTech was almost born out of the last crisis, it is only natural to wonder how Corona Virus-induced crisis will reshape FinTech.

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Brean Capital, LLC

Brean Capital is an independent investment bank and asset management firm. We focus on delivering high-quality investment ideas and investment banking services to institutional investors and corporate clients. Our services include equity research, corporate finance and advisory investment banking, equity institutional sales and trading, and asset management. Our fixed income business provides sales, trading, research and banking services on a wide range of mortgage and asset-backed, US Treasury and government agency securities, structured products, corporate bonds, and municipal debt.

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