Bankloch

Financial institutions face increasing challenges in combating financial crime. While technology has significantly advanced (e.g. thanks to AI), the methods employed by criminals have also evolved, becoming more sophisticated and harder to detect. One of the crucial challenges in this battle is the siloed approach to detecting and combating financial crime. Financial crime information is rarely shared between banks and even within various departments of a single bank, such as cybersecurity, risk, compliance, fraud, operations, and customer support. Despite these departments common goal of reducing financial crime, each department focuses on different aspects. For example, cybersecurity teams focus on protecting the bank’s digital infrastructure, compliance ensures regulatory adherence, and fraud teams detect and prevent fraudulent activities. Consequently, these departments often do not share information, leading to missed opportunities to identify and mitigate risks. A centralized dat...

As a regular consumer, you might not realize that a simple wire transfer to a company or a friend launches a complex and lengthy payment flow. This process involves multiple financial institutions and diverse IT systems. In this blog, we explore a typical payment flow at a financial institution. The complexity of the payment flow stems from increasingly strict regulatory requirements designed to mitigate risks to the financial system and reduce financial crime. Additionally, the high non-functional requirements for payments — such as reliability and security — are critical for maintaining customer trust in the financial system. This necessitates intricate architectures with numerous optimizations and redundancies to meet these stringent requirements. Large Tier 1 banks process millions of payments daily, where even a failure rate of 0.001% results in hundreds of failed payments per day. With the rise of digital payments, instant payments and regulatory complexities, the payment flow ha...

With an audience of fintech enthusiasts, I am probably preaching to the choir, but investing your excess savings remains critical to preserving and hopefully increasing the buying power of your hard-earned money. Unfortunately in practice, this is easier said than done. After years of great enthusiasm, investments in robo-advisors seem to be returning, despite the hype of AI and its clear link with this technology. At the same time specialized digital trading platforms like Robinhood, Webull, E-Trade or eToro offer an excellent user experience, but often remain a bridge too far for the average investor, who occasionally invests relatively small amounts via their regular bank. And good advisory services still target mainly the happy few, as the costs are too high to offer to the masses. As a result, the occasional, amateur investor, who doesn’t want to spend too much time on his investments, often ends up buying the "Fund of the Month" offered by their bank or invests a large ...

  In recent years, the world of payments has been undergoing a   significant transformation . Historically, international payments were dominated by major players like SWIFT, VISA, MasterCard, and a handful of large international banks. However, this landscape is rapidly evolving due to the rise of new payment rails, Open and Embedded Banking, and the growing influence of global Big Tech companies entering the payment space. This evolution has resulted in   an even more complex web   of different payment methods, rails, and market infrastructure players. Coupled with the increasing speed of payments (with instant payments becoming the standard), heightened customer expectations (demanding faster payments, higher quality, more transparency and lower costs), and rising transaction volumes (driven by the digitalization of cash), this creates the perfect storm for a major transformation in the banking sector. Interoperability   among these diverse payment rails pose...

Digital threats top the agenda for every Chief Information Officer (CIO), especially in the Financial Services industry, where the consequences of breaches can be catastrophic. As financial services   increasingly rely on IT tools and systems , any digital disruption can have profound impacts not only on the institution itself but on the broader economy. Ensuring the operational resilience of these systems is critical and should be monitored by regulators similarly to traditional financial risks, such as capital adequacy. The   European Union’s Digital Operational Resilience Act (DORA - EU Regulation 2022/2554)   aims to significantly enhance the security and resilience of the financial sector, especially in the event of severe disruptions such as cyberattacks, natural disasters, or technological failures. As the first legislation of its kind at the European level, DORA establishes a harmonized and comprehensive framework for ensuring the digital operational resilience of...

Around the world, there are significant moves to transition from traditional electronic money transfers, which rely on batch settlement systems that can take several days for transactions to clear, to   instant, or at least near real-time, payment systems . These new innovative payment systems ensure that beneficiaries receive their funds within seconds, regardless of the day or time. Notably, developing countries are at the forefront of these efforts, while many developed nations are falling behind. Key success stories come from the BRICS nations, such as Brazil with its PIX system (launched in 2020), and India with the UPI initiative (launched in 2016), which now handles 46% of global instant payment volumes. For more information, see my blog post " The UPI Phenomenon: From Zero to 10 Billion " ( https://bankloch.blogspot.com/2023/09/the-upi-phenomenon-from-zero-to-10.html ). Other significant initiatives include WeChat Pay and AliPay in China, SPEI in Mexico, PSE (Pagos S...