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What systematic risk are regulators now observing?

What systematic risk are regulators now observing?

Regulators have faced heightened risk to the stability of the financial market and a loss of confidence in the banking system in the first half of 2023 after the collapse of multiple Financial institutions. While regulators globally are increasing efforts to assess financial stability via the liquidity and capital adequacy levels of Financial institutions, which was on expected lines, we have also observed a robust regulatory focus on the non-financial risk profile of individual institutions.

Growing complexity, scale, and plausible system-wide impact of non-financial risks gain regulatory attention on Financial institutions and the supply chain.

The increased reliance on technology and interconnectedness with third parties and technology partners in the new financial ecosystem has meant that the non-financial risk profile of individual institutions has changed multifold in terms of its scale and complexity.

Non-financial risk is increasingly being viewed as a potential threat to pose a systematic risk to the operational resilience of the financial system itself. Solid and coordinated supervision efforts are observed right from consultation, rulemaking, standard setting, and enforcement across legislations especially in Europe.

We observe new regulations covering information and communications technology (ICT) risk management, third-party risk management strategy, scenario planning, operational resilience, and technology governance. New regulations and wider remit of regulators cover information and communications technology (ICT) risk management, third-party risk management strategy, scenario planning, operational resilience, and technology governance. Crucially, these regulations will have an enterprise-wide impact and reach out to third-party suppliers.

Non-financial-risks-gain-regulatory-attention-on-banks-and-the-supply-chain

Supervisory reports, industry consultations and surveys in both the US and Europe continue to highlight the potential impact of non-financial risks. Policy responses are also in line, providing standards, rules, and guidance.

Potential impact of non-financial risks in US and Europe

Consistent risk management standards designed to avoid system-level disruptions

Newer emerging technologies, newer participants, and interconnectedness of various market participants mean that any operational resilience failure of individual organizations can quickly spread across the eco-system, thereby causing systematic risk. Therefore, it is not sufficient to assess and monitor the operational resilience of individual organizations; instead, regulators are now adopting a holistic system view of non-financial risks in the eco-system.

A detailed study of the new and proposed regulations highlights supervisors promoting consistency in risk management practices among Financial institutions via regulatory frameworks on technology governance, regulatory standards, toolkits, and guidelines.
regulatory frameworks on technology governance, regulatory standards, toolkits, and guidelines

The maturity profile of NFR Risk management usually differs significantly between Financial institutions. These common standards are expected to align NFR Risk management and reporting practices similar to financial risk management and reporting pathways.

This consistency is critical for efficient supervision while enhancing the industry’s ability to mitigate and recover from any system-level ICT-related disruption.

 

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Unlocking ROI: Mastering Hyper-Personalization in Wealth Management

Unlocking ROI: Mastering Hyper-Personalization in Wealth Management

With the rise of advanced analytics and digital capabilities, firms can now deliver real-time, personalized insights and meet clients’ increasing demand for tailored experiences. Hyper-personalization is thus a critical imperative in today’s competitive market, but its implementation is fraught with challenges – from understanding client personas to tech requirements and data privacy. Our unique, industry 1st, framework helps address these challenges and provides a roadmap for delivering impactful client experiences, whether through real-time personalization or product-persona-journey interventions.

Our Industry-First Framework Our framework is rooted in proprietary principles and a unique methodology, and is committed to revolutionize client experiences.Our Industry-First Framework
ROI Impact Our framework isn’t just about enhancing experiences; it’s about driving tangible business outcomes. For e.g.: A minor shift in metrics (1% point in open rate, 0.4% point in click rate) can lead to a significant increase in AUM (USD $1.14mn) within 6-8 months, showcasing the power of our approach.
ROI Impact

In Conclusion In an industry marked by evolving client expectations, our framework emerges as a game-changer. It’s not just a tool; it’s a strategic intervention set to reshape the wealth management landscape.

Dive deeper into our framework and its transformative potential by listening to our Podcast on the same topic here.

Maveric’s thought leadership series – E.D.G.E (Experiences Delivered by Global Experts) – handpicks the game-changing technology ideas and pressing functional questions Banks and financial institutions must solve today.  

These features – reports, whitepapers, podcasts, flyers, blogs, and infographics – are for Banking leaders and Technology evangelists to apply profound trends, the latest opinions, and transformational analyses to boost the performance of their organizations.

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Scoring with Core Banking

Scoring with Core Banking

With millions of dollars spent on them, core banking systems CBS are the heart and sinew of today’s banking. These back‐office systems process and post daily transactions to accounts and constitute the deposit, loan, and credit processing capabilities with interfaces to general ledger systems and reporting tools.

As cloud, digital banking, APIs, and Big Data and AI-led solutions gain wider acceptance, Banks rely on their CBS’…

That is a CV for a modern-day Superman.
“Core is Forever”

Today, BankTech experts consider core modernization as a continual WIP investment. With the current paradigm shifts in banking, this is justifiably so. From the resurgence in retail branch banking to experimental success in Metaverses, leveraging data for the hyper-personal experiences, collaborating with the disruptors-Fintechs, and transitioning to green money, Banks are doing more than doling loans and collecting cheques – they are solving customers’ financial problems.
What’s the way for banks to accelerate to their next?
Ultimately, for Banks to modernize their CBS and launch innovative digital services, the solution comes from domain contextualization built on emerging deep tech glued with a foundational QE rigor.

Learnings from the field.


 Constructing the Core so Banks Can Care More

 

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Cloud and DevOps in Banking

Cloud and DevOps in Banking

Digital entrants eroding market shares across BANKING SEGMENTS, ECOSYSTEM COLLABORATIONS REWRITING PLAYBOOKS, AND HIGHER ESG COMMITMENTS are central themes for leading FIs.

Fifteen years of original McKinsey surveys report that less than one in three companies pursuing transformations in the past five years have been successful. For the few that achieve their targets, there is a disparity between performance and outcomes.

While growth spirals are unique for each of the BFSI players, there is consensus around what constitutes ‘bold banking innovation’: reinvent core businesses through digital and analytics, acquire or create new revenue streams and rehaul operating models that capture speed to the market.

AGAINST THIS BACKDROP, ENTERPRISE ADOPTING MULTI-CLOUD STRATEGIES – A MIX OF CLOUD ENVIRONMENTS AND PROVIDERS –  CONTINUES TO PROLIFERATE.

As enterprises move their application and data workloads, hybrid and distributed cloud environments quickly become the norm. An hbr analytic survey talks about 85% percent of respondents using at least two clouds and a quarter using five or more. 

The Problem Statement

Embracing greater agility via such expanding ecosystems necessitates accepting more complex architectures. This has evolved in the form of microservices, event-driven and serverless. Furthermore, other jigsaw pieces – application and data architectures, infrastructure, and development methodologies – have significantly modernized.

However, ‘traditional operations’ remain silos of applications, data, and infrastructure. Consequently, enterprises are challenged to maintain and operate cloud workloads cost-efficiently without sacrificing reliability and availability.

What’s the way for banks to accelerate to their next?  

Engineering-led operations that refine Cloud-work management strategies are the next step to reduce the Cloud’s complexity and accelerate innovation that keeps pace with customer expectations.

Banks must invest in consistent means to determine the place, timing, and mechanics to run their cloud workloads to capture the Cloud benefits. This comes from the ability to contextualize consciously.  

Whether supporting data storage and analytics solutions, unleashing employee productivity, or automating AI/ML and CRM  systems, decision-making that contextualizes tech with business strategy is non-negotiable. The downsides of poor (or absent) decision-making show up in two ways – paying for redundant services and plugging security holes.

So, how does contextualization reflect in Cloud for Banking?

Said simply, prioritizing the FIs goals of operational efficiency, cutting expenses, increasing productivity, and boosting security by streamlining spending and usage.

The DevOps Advantage for Banks

Not the strongest or the most intelligent, but the most sensitive (and adaptive) to change will come through as the winners.

Just as every activity in modern banking is fuelled by digital applications, guided by advanced analytics, or augmented by automation, calling DevOps the new management science for technology delivery is not out of line.

While the GOAL of DevOps (improve the flow of an idea to customer value via multidisciplinary teams), BENEFITS (increased quality and frequency of deployments and improved innovation & risk-taking), and PRACTICES (continuous-integration, testing, delivery, and operations) are well-known, this article highlights the three-dimensions (people, process, and technology) necessary for successful DevOps.

 

Learnings from the field.

For FIs to create substantial competitive advantage and outthink the competition, they must operate and deliver at a speed more significant than the pace of incoming disruption. While CloudOps and DevOps will drive value with accelerated GTM, superior quality, and reduced costs and waste—the enterprise-wide adoption of these methodologies can get complicated:

BFSI organizations must invest in scalable digital operations that integrate multi-channel customer interactions through front, mid, and back-office solutions to meet customer expectations.

After all, Banking in the new normal is about operating through a data-driven digital mindset bolstered by a foundational-quality rigor.

 

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CX in Banking

CX in Banking

Accelerating Next through Conscious Contextualization. 

For companies – Uber, Venmo, Google, Apple Pay – to become ‘daily-use-verbs’ is like a rite of passage. It is a milestone, the ‘blue tick mark’ of customer trust and loyalty.  

In today’s experience economy, this milestone is made meaningful when one considers the ominous dark clouds over banking a.k.a.  economic downturn, geopolitical instability, and soaring inflation.  

CX for banks is a big deal. A Forrester study posits a 1% improvement in CX for a multichannel bank yields additional $123 Mn in revenue (for a direct bank that works out to $92 Mn) 

What’s the way for banks to accelerate to their next?

In a climate where B2B C-suite are taking their CX cues from Netflix, Spotify, and Amazon (fast, personalized, and seamlessly digital), neobanks like – Northmill, Starling, Nubank – are approaching CX in a mission mode. These include – 365/24/7 access,   360-degree customer dashboards for agents to offer streamlined support, and embedded support across channels and devices for consistent and connected experiences.   

However, CX is largely influenced by feelings, a domain where emotions drive loyalty. This comes from the ability to consciously contextualize – something that AI systems are yet to deliver wholeheartedly.  

Sentiment Analyses show that humans, while satisfied with the ease or effectiveness of the solution they receive, rely on their feelings as a truer barometer for future actions.  

So, how does contextualization reflect in CX? Said simply, wallet share can only succeed mindshare. Not through the up-sell campaign slipped into an orientation call, or the number of times your name shows up in an ‘education’ emailer, or on top right hand corner of your online account page.  

Conscious contextualization happens when financial, personal, and behavioural data can accurately predict lifestyle needs.  

Something that this conversation is clearly missing… 

We asked Chat GPT, “Compared to existing AI, how can ChatGPT offer superior CX for Banks?”

Source –https://chat.openai.com/ 07.07.2023 10:10 IST

So even with the deluge of GPT AI news and the cautionary tales flooding our inboxes, lets remind ourselves with a line from Steve Jobs, let’s go invent tomorrow instead of worrying about what happened yesterday.  That holds true for all of banking tech, as well.

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AI in Wealth Management

AI in Wealth Management

Insights on Banking Technology Inspired by the Latest News, Studies & Events Stay updated with the best and brightest from the world of Banking!


Chat GPT in AWM – Accelerating Next

Recapping the narrative from our previous feature – BEST PRACTICES IN AWM – the strategy paying off for the Tech companies in the AWM space has the following FOUR IMPERATIVES:

While composable cloud-native platforms must be constructed on a 360-degree ‘customer- ecosystem – technology’ construct [refer to below graphic], this companion piece focuses on the fourth point – recent advances in AI-intelligent systems (or specifically Chat GPT in AWM)

New AWM consumer models (On Demand Streaming, One Click Purchase & more)

In January 2023, within 60 days of its launch, ChatGPT (a popular chatbot from Open AI) topped out with 100 Mn monthly active users. TikTok, the previous record holder, had taken 27 months. Pair this stat with another.

In a McKinsey study, by “2030, 80% of new wealth management clients will prefer advice in a Netflix-style model” – data-driven, hyper-personal, continuously, and potentially by subscription.

Connecting the two begins to portend what the AWM future may look like.

But how is ChatGPT different from its predecessors?

We asked ChatGPT how I can use it to create wealth. It responded along common sensical lines – financial education, market research, etc. 

ChatGPT 08.06.2023 16:14 IST

We asked ChatGPT if it would make investment advisors redundant.

Its cautious response was factually relevant (human empathy, complex markets…)

ChatGPT 08.06.2023 16:18 IST

While GPTs will accelerate money analysis and decision-making, early adopters discuss several limitations.

 

In sum,

In these early days, critics warn us – that trained on internet data, ChatGPT is open to human biases, lacks human morals, is prey to misinformation, and can easily exploit competitors’ confidentiality.

For now, though, AWM firms can begin examining their Tech strategy by – Developing an internal GPT AI Strategy.

OpenAI has made the “brain” of ChatGPT available to the citizenry through APIs. With open minds, leading FIs must study how tech companies and programmers can access the power to build their domain-and-product-specific customer applications.

We asked ChatGPT if it would revolutionize wealth management.

It said, “I can provide some insights, but I can’t predict the future with certainty.”

ChatGPT 08.06.2023 16:14 IST

We agree.

For the moment, our world views match! 

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