Barriers to Data Mindset

 It is very hard for a bank to develop a data mindset.  Traditionally, regulated banks have been trained to deliver accuracy as they are managing money. The focus is on getting it right without errors and making sure all compliance requirements are met. This culture does not reward any creative inputs. Legacy systems on which banks have spent decades managing are also inflexible. In addition the process of completing a transaction has to...

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What is likely to happen? The journey of Prescriptive Analytics

 This is the final frontier in data analytics-- the ability to respond in real time to event data in a way that allows you to back the instincts of the decision maker with data. If your data is telling you what your instincts are saying, the chances of making an informed decision to influence outcomes increases.However, the right questions have to asked of the data otherwise the outcome will not be what was desired.Some examples in banks where...

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What can happen? The story of Predictive Analytics

Predictive Analytics is the process of using a combination of data analysis, statistics and machine learning to make predictions on possible outcomes.Examples of these can be:-predicting when a turbine in a power plant fail operating --this can help schedule maintenance activities  -predicting customer behaviour based on time of our marketing promotions-predicting capital required to meet regulatory requirements based on the volume of loans...

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Why did it happen? The Story of Diagnostic Analytics

 Diagnostic Analytics tries to answer the why something happened in the past  from our data sets- for example why did sales rise this month though we didn't have any marketing campaigns, why did patients in a sample have the same symptoms,why did our bank's customers choose the 5 year fixed mortgage product.Frequently this side of data analytics looks at both internal and external data sets to draw inferences . The process of drawing out...

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What happened? The story of Descriptive Analytics

 The oldest know data analysis consists of two things-aggregating or summarizing data and  data mining.The majority of a company's investment in data analytics is focused on aggregating data-- what was the sales, by month, by region for example.Comparing to previous time periods gives an understanding of where the company is going for instance the sales have increase 20% compared to previous quarter. It is an important tool for analysis...

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Why are banks interested in your data?

 Why are banks interested in customer data? The answer is one word--Steve Jobs.On 29 June 2007 the iPhone was launched. Fast forward 15 years  and the reverberations of iPhone are still being felt. The pandemic has only accelerated these changes.Steve said: "A lot of times people don't know what they want until you show it to them"What did Steve do that was so revolutionary?He showed that a customer centric unified value proposition...

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The business of banking and payments

 What does a bank do? From the perspective of a consumer of business here are the core functions:-Offers consumers banking services around their day to day needs of payroll, paying bills, cash requirements, mortgages, deposits and managing wealth.-Offers businesses a way to receive money from customers and pay their suppliers, loans to fund their business, handle domestic and international  payments Between themselves, they offer loan syndication, securitization, investments , stocks and bonds.A common theme is the use of information...

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Barriers to Open Banking

 As the banking industry is wrestles with  the twin challenges of  new customer acquisition and operational costs they are aligning some of their spend on digital transformation to Open Banking driven by the requirement of giving TPP or third party providers access to customer payments data.This has created some additional barriers around competition and innovation. Lets consider these in more detail:Competition:-All jurisdictions with PSD2 have rules around which accounts should be accessible by TPPs. Many banks have even published...

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What is a Data Fabric?

 We are all aware that banks today are dealing with multiple data sources. Each of these data sources or end points  have to be brought into a central warehouse to run analytics on.  All this data movement requires integration capabilities and further the need to manage for security , the information about the data or metadata.Data fabric is a middle layer that sits on top these end points and the connections architecture . You can think of this as a logical or virtual layer. You then build services to connect to the data fabric. ...

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How will payments be regulated?

 With the success of Chinese and UK based fintech and the changes in the USA allowing the likes of Amazon to offer lending to small business, fintechs are a well established member of the market infrastructure. As the volumes they handle rises the questions is what will regulators do?On the one hand they want to encourage competition, enable the underserved and have worked to ensure data collections and sharing is regulated. Now that these goals have been met, the challenge is what to do with the new monopolies being created in fintech.Witness...

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What is a Data Repository

 In order to provide true value to the customer, banks need to understand them first. To understand customer behaviour with the goal of offering products/services relevant to them, the bank collects all details of the customer transactions. Then they study the data to see if any deeper understanding can be gleaned.To facilitate the process of getting insights banks use a collection of data bases called Data Repository   (aka data lake, data mart, data library, data archive). This repository stores the data sets on which analytics...

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The need for data integration

 In modern banking technology environment , the quest to get hold of data is a very complex exercise. First the data about the transaction has to be collected and there are rules on what to collect , how to collect and from where you are receiving this data. Then the need to transform the data into a form that can be ingested ,indexed and visualized by the product developers. After this, the data has to be moved to analytical platforms to slice and dice the data in a way that will make sense to the business teams. Finally the data has to be...

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The Data Management Challenge

 Data data everywhere , not a bit to use  can become a familiar story in banks as our sources of data such as ISO20022 information , internet of things (IoT) with every edge device capable of a payment transaction and scads of video, biometric  and other unstructured data. Banks have done a good job of gathering all this data but very few know where it is or how to use it.Here are the issues:-Keeping up with storage and use for consumption by analysts and data scientists.-Why is the data being collected ? Few know why and how it...

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Data Security in ISO 20222 with Tokenization

 With increasing use of account level credentials being used for facilitating payments it comes with risk of ensuring safety of the remittance information. Compounded by various real time rails and the rise of immediate payments the new payment methods such as wallets, ecommerce, QR code and  other payment methods have increased the chance of fraud . Given lack of delay in the real time rails and that payments are irrevocable, fraud mitigation is taken on a higher priority.Tokens , which can be thought of as surrogates for the PAN or...

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Customer minutes and friction as a metric for Banks

 Everywhere we see especially in ecommerce what used to be complicated method of paying for goods and if required getting refunds used to be fraught process. Nowadays Amazon has shown the way with One click ordering and refunds.This consumer focus to help make their lives easier while interacting with a machine has been rewarded both by customers and the stock markets . What are some examples where banks have made the difference?- Transaction alerts on the mobile app -Customer authentication on the phone if calling from a registered number-Servicing...

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Business in the instant payment world

 Many jurisdictions are working on implementing a low value system on real time rails. Built on ISO20022 payment messaging standards, these promise the availability of instant and irrevocable settlement as well as rich data about the transaction such as invoice details.Some well established business use cases that will benefit from these new capabilities  where payments are available 24x7  as opposed to time delay for ACH and checks are:-Ecommerce vendors buying and selling online-Gig economy payroll for workers for payment of hourly...

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CSM Opportunity for Banks

 Given the huge innovation in payment initiation  for consumers its only a matter of time that businesses would ask banks what options are available for them to participate in the instant payment world.Its not going to be easy for banks. They will have to take calls that may or may not pan out. One area they can start thinking about is the Clearing and Settlement function. There is a history of lag and costs in this area. However there is sporadic innovation as well. Ripple's cross border RippleNet system has shown the potential for reducing...

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Banks cede innovation in Retail Payments

 We have seen the great uptick in new methods of payment initiation by the customer. Examples of these are:-QR Codes-Request to Pay-Pay by mobile phone and other devices using Google or Apple Pay-Buy now Pay Later or Installment Pay.-EMT or email money transferAll these new services are can be grouped as Alternative Payment Methods (APMs). These services are possible by layering an Alias Directory on top of the payer, payer's bank, the network, the payee's bank and the payee. Overlay services delivered via the alias directory improve customer...

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What is LEI?

 LEI stands for Legal Entity Identifier . This is a 20 character alpha numeric code based on ISO 17442 standard. This code helps in identifying the legal entities in a payment transaction. For example in Canada all counterparties to the derivatives transactions need to have an LEI. As faster payments and pay mod initiatives kick  in, more market participants including legal companies, their subsidiaries, government departments, charities...

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The Age of Open Banking

 Let us pivot for a moment from the back office of ISO20022 payment messages to the front office where the customer meets the bank.  Imagine your legacy bank has worked hard to modernize its payment systems and now carries rich data about a transaction end to end.What challenges do banks face? Several in fact. Sharing Customer Data: Who do I share this data with?  What is the risk to the bank, the customer? How is my API strategy shaping up?  Regulations are spotty at best and cant be depended to course correct us.Partner:...

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