“The original aim of the Competition and Markets Authority’s order was to provide consumers with more choice, create better customer engagement with banking services and stimulate innovation across the financial sector,” Jim Wadsworth, Senior Vice President of Open Banking at Mastercard, said in an email interview with International Finance. These are all important efforts, which have made worldwide open banking adoption a required norm.

Today open banking in the UK is the most advanced in the world. All of the CMA9 banks have rolled out open banking APIs, with some of the non-CMA9 banks voluntarily adopting it. Brian Hanrahan, Chief Commercial Officer of Nuapay, a pioneer in open banking, said in an interview with International Finance, “I think it is fair to say that for the last 18 months the UK has been going through the learning curve, and developing its basic open banking infrastructure and connections.”

Currently, there are 110 third party providers approved in the country and there was a 25.3 percent increase in the number of API calls made between August and September, according to UK regtech Konsentus data, as of November 2019.

Prescriptive approach to open banking creates positive outcomes

These developments stem from a robust API standardisation as banks and financial services companies are testing prototypes and beta versions of their new operating models. “Research in fact shows that the country’s API framework is entirely capable of supporting the banking sector’s ambition in opening itself up to open banking opportunities,” Adrian Cannon, Managing Director at Omnio, a financial technology company, tells International Finance. Another reason for this is that the approach taken by the UK regulator has always been fairly prescriptive compared to other markets. The regulator provides levels of standardisation across banks which make it easier for third party providers to build services across APIs of various banks.

“The prescriptive API framework or approach taken by the regulator in the UK has also led to some really positive outcomes from a customer perspective as well,” Hanrahan says. “For example, the UK banks were required to implement an app-to-app journey, where consumers authenticate themselves in their mobile banking app. This implementation has been critical in improving customer experience.”

But it has taken a long time for the APIs to be up and running successfully in the country — particularly in the payments landscape where the API framework is facing teething troubles, however. Its functional design and the banks’ reliability are sufficient to carry on with customer propositions. Earlier this year, the Open Banking Organisation said that there are more than 135 entities approved by the Financial Conduct Authority to provide open banking-led services for consumers and SMEs.

In the coming months, the UK SMEs will find themselves in the midst of numerous financing opportunities — as open banking is disrupting the whole financial services landscape. It allows SMEs to provide their account history of cash flow and creditworthiness to external lenders to obtain a quick loan application. The crucial point, however, is that it helps those SMEs to generate a richer set of data on a particular customer to facilitate better lending decisions — and develop closer levels of integration into their existing CRM, ERP, or accounting packages. As it appears, “SMEs is one particular area where there are a lot of declines, simply because of insufficient data to make a decision, and we are expecting open banking will help change this,” Hanrahan explains.

New use cases of bank-fintech collaboration to benefit SMEs

The UK lenders like GrowthStreet and iwoca are beginning to use open banking to accelerate decision making and reduce fraud in the underwriting process. In fact, there are a number of emerging use cases of banks and fintechs collaborating to develop new innovative products and services targeting SMEs in the UK. “We’ve seen a particular focus on new products and services to benefit SMEs following the Capital Market Authority’s open banking order which came out of review in the retail banking sector,” Wadsworth says. These innovative tools and apps can analyse open banking data drawn from small business bank accounts and find valuable insights that can help them with better credit access, improve financial management and fulfill other legal obligations. “This is hugely important as it encourages SMEs to focus on being productive while an app or tool will support their budgeting, cash flow and borrowing capacity,” Wadsworth adds.

Although it is nearly impossible to measure the current impact of open banking in the UK and other European markets — this new directive is creating greater competition among business lenders, especially as the lending market suffers from a lack of competition.
For now, “open banking has increased competition and has encouraged innovators to enter the market — and these pioneers are willing to break the mould and do things differently,” Canon says. “With regard to SMEs, there is no doubt that open banking has produced efficiency gains for them, not least spurred on by the integration between non-banking and banking API-based platforms.”

But in order for third party providers to be able to operative effectively — the banks’ underlying APIs will have to be powerful. To that end, the current APIs need building out for more sophistication on both availability and stability fronts.

Recently, Nuapay published data from its study which compares banks in the UK over two categories. The first is the total time to initiate payment through open banking and the other is the number of customer interactions required to achieve that. Its data found a slight variation in how banks adopt an API-based approach. For example, one of the banks that Nuapay interviewed said that they had taken a step back after a slow start to completely re-architecture their system and the API connections to deliver better customer experience. In another example, the bank had taken an API-based approach, where all external APIs made available to third party providers were the same used for internal communications.

“So I think the open banking has not just been about automating their existing experiences, but it has forced them to rethink some of their existing approaches and think from an API first approach to their technology stack,” Hanrahan exclaims.

UK remains the most innovative open banking market

While the UK remains the most innovative open banking market — it is worth remembering that when the regulations came into effect last year — it subsequently suffered unintended consequences in terms of security and trust. In fact, McKinsey published a report titled A Brave New World for Global Banking, which estimates that banks in Europe and the UK currently have $35 billion, or 31 percent of profits at risk due to digitisation — emphasising that further digital disruption could cut profits by half  to $50 billion in 2020.

The country’s regulatory landscape is transforming systematically, with more focus on full implementation and compliance with the existing regulations over the next two years. Also, there could be a wide scope for extending new regulations in the future.

“One area which we can assume that will be flooded with regulation is the use of data to which regulators have already expressed concerns. Sensitive information must and will become carefully controlled. While the exact timing is hard to predict, what is certain is that when problems arise, the regulator will catch-up with innovators,” Canon emphasised, stating that “in the UK, we enjoy a robust regulatory framework which encourages innovation. Despite Brexit, we are seeing an impressive volume of inward investment in the open banking sector.”

That said, it does not reduce the impact of regulatory and technical challenges that banks have been persistently facing in recent months. The regulatory challenge mainly stems from the deadlines set by the regulator. For example, the deadline for introducing customer authentication was delayed by 18 months as banks in the UK were unable to meet the requirements within the stipulated duration. This in turn could lead to technical challenges for banks as they are expected to meet requirements and justify huge technology transformation costs under excessive strain. In addition, the availability of the right skill sets for the job is extremely hard to find, especially because of highly complex regulatory compliance and risk management frameworks involved.

Another challenging scenario is that an emerging generation of banks are struggling to extract value from their assets and infrastructure. In today’s circumstances, commercialising APIs is a huge necessity — and many banks are moving toward the concept of premium third party providers, or APIs which these providers are willing to pay for. Against this background, “We expect the Open Banking Implementation Entity will make an active push, using its mandate to ensure the banks are complying with their obligations to provide a service that is as good as their own internet or mobile banking channels,” Hanrahan says.

Then there is the ultimate concern of data security for banks across the world as they adopt open banking technologies. Wadsworth explains, “With a range of different technical standards across Europe, it’s crucial that financial institutions are clear on how they will safeguard their data against fraudulent activity.”

UK open banking uplifts next-gen banking capabilities in Europe

But certainly the Open Banking Implementation Entity has secured the leading role in uplifting the next-generation of European banking capabilities. This is because  “the UK was arguably the first country to develop open banking standards and continues to be a leader in the field. Many other countries are looking carefully at the UK’s experience as they develop their own models,” Wadsworth explains. The UK has made it easier for customers by providing them with modest complex banking arrangements and other European banks are following suit.

In future, it might be easier to persuade financial customers to adopt open banking, according to the PwC report, which found that 39 percent of them would share their financial data with banks and third party providers. However, this will depend on whether they receive benefits such as a comprehensive banking app, or are able to compare bespoke offers from third party providers. An app-to-app journey will be the next big focus to enhance customer experience — with a major shift anticipated toward open finance rather than just open banking in the UK and the rest of Europe — as in the case of Australia.

The post Open banking unleashes business lending race appeared first on International Finance.

“The original aim of the Competition and Markets Authority’s order was to provide consumers with more choice, create better customer engagement with banking services and stimulate innovation across the financial sector,” Jim Wadsworth, Senior Vice President of Open Banking at Mastercard, said in an email interview with International Finance. These are all important efforts, which have made worldwide open banking adoption a required norm.

Today open banking in the UK is the most advanced in the world. All of the CMA9 banks have rolled out open banking APIs, with some of the non-CMA9 banks voluntarily adopting it. Brian Hanrahan, Chief Commercial Officer of Nuapay, a pioneer in open banking, said in an interview with International Finance, “I think it is fair to say that for the last 18 months the UK has been going through the learning curve, and developing its basic open banking infrastructure and connections.”

Currently, there are 110 third party providers approved in the country and there was a 25.3 percent increase in the number of API calls made between August and September, according to UK regtech Konsentus data, as of November 2019.

Prescriptive approach to open banking creates positive outcomes

These developments stem from a robust API standardisation as banks and financial services companies are testing prototypes and beta versions of their new operating models. “Research in fact shows that the country’s API framework is entirely capable of supporting the banking sector’s ambition in opening itself up to open banking opportunities,” Adrian Cannon, Managing Director at Omnio, a financial technology company, tells International Finance.

Another reason for this is that the approach taken by the UK regulator has always been fairly prescriptive compared to other markets. The regulator provides levels of standardisation across banks which make it easier for third party providers to build services across APIs of various banks.

“The prescriptive API framework or approach taken by the regulator in the UK has also led to some really positive outcomes from a customer perspective as well,” Hanrahan says. “For example, the UK banks were required to implement an app-to-app journey, where consumers authenticate themselves in their mobile banking app. This implementation has been critical in improving customer experience.”

But it has taken a long time for the APIs to be up and running successfully in the country — particularly in the payments landscape where the API framework is facing teething troubles, however. Its functional design and the banks’ reliability are sufficient to carry on with customer propositions. Earlier this year, the Open Banking Organisation said that there are more than 135 entities approved by the Financial Conduct Authority to provide open banking-led services for consumers and SMEs.

In the coming months, the UK SMEs will find themselves in the midst of numerous financing opportunities — as open banking is disrupting the whole financial services landscape. It allows SMEs to provide their account history of cash flow and creditworthiness to external lenders to obtain a quick loan application.

The crucial point, however, is that it helps those SMEs to generate a richer set of data on a particular customer to facilitate better lending decisions — and develop closer levels of integration into their existing CRM, ERP, or accounting packages. As it appears, “SMEs is one particular area where there are a lot of declines, simply because of insufficient data to make a decision, and we are expecting open banking will help change this,” Hanrahan explains.

New use cases of bank-fintech collaboration to benefit SMEs

The UK lenders like GrowthStreet and iwoca are beginning to use open banking to accelerate decision making and reduce fraud in the underwriting process. In fact, there are a number of emerging use cases of banks and fintechs collaborating to develop new innovative products and services targeting SMEs in the UK. “We’ve seen a particular focus on new products and services to benefit SMEs following the Capital Market Authority’s open banking order which came out of review in the retail banking sector,” Wadsworth says.

These innovative tools and apps can analyse open banking data drawn from small business bank accounts and find valuable insights that can help them with better credit access, improve financial management and fulfill other legal obligations. “This is hugely important as it encourages SMEs to focus on being productive while an app or tool will support their budgeting, cash flow and borrowing capacity,” Wadsworth adds.

Although it is nearly impossible to measure the current impact of open banking in the UK and other European markets — this new directive is creating greater competition among business lenders, especially as the lending market suffers from a lack of competition.

For now, “open banking has increased competition and has encouraged innovators to enter the market — and these pioneers are willing to break the mould and do things differently,” Canon says. “With regard to SMEs, there is no doubt that open banking has produced efficiency gains for them, not least spurred on by the integration between non-banking and banking API-based platforms.”

But in order for third party providers to be able to operative effectively — the banks’ underlying APIs will have to be powerful. To that end, the current APIs need building out for more sophistication on both availability and stability fronts.

Recently, Nuapay published data from its study which compares banks in the UK over two categories. The first is the total time to initiate payment through open banking and the other is the number of customer interactions required to achieve that. Its data found a slight variation in how banks adopt an API-based approach.

For example, one of the banks that Nuapay interviewed said that they had taken a step back after a slow start to completely re-architecture their system and the API connections to deliver better customer experience. In another example, the bank had taken an API-based approach, where all external APIs made available to third party providers were the same used for internal communications.

“So I think the open banking has not just been about automating their existing experiences, but it has forced them to rethink some of their existing approaches and think from an API first approach to their technology stack,” Hanrahan exclaims.

UK remains the most innovative open banking market

While the UK remains the most innovative open banking market — it is worth remembering that when the regulations came into effect last year — it subsequently suffered unintended consequences in terms of security and trust. In fact, McKinsey published a report titled A Brave New World for Global Banking, which estimates that banks in Europe and the UK currently have $35 billion, or 31 percent of profits at risk due to digitisation — emphasising that further digital disruption could cut profits by half  to $50 billion in 2020.

The country’s regulatory landscape is transforming systematically, with more focus on full implementation and compliance with the existing regulations over the next two years. Also, there could be a wide scope for extending new regulations in the future.

“One area which we can assume that will be flooded with regulation is the use of data to which regulators have already expressed concerns. Sensitive information must and will become carefully controlled. While the exact timing is hard to predict, what is certain is that when problems arise, the regulator will catch-up with innovators,” Canon emphasised, stating that “in the UK, we enjoy a robust regulatory framework which encourages innovation. Despite Brexit, we are seeing an impressive volume of inward investment in the open banking sector.”

That said, it does not reduce the impact of regulatory and technical challenges that banks have been persistently facing in recent months. The regulatory challenge mainly stems from the deadlines set by the regulator. For example, the deadline for introducing customer authentication was delayed by 18 months as banks in the UK were unable to meet the requirements within the stipulated duration.

This in turn could lead to technical challenges for banks as they are expected to meet requirements and justify huge technology transformation costs under excessive strain. In addition, the availability of the right skill sets for the job is extremely hard to find, especially because of highly complex regulatory compliance and risk management frameworks involved.

Another challenging scenario is that an emerging generation of banks are struggling to extract value from their assets and infrastructure. In today’s circumstances, commercialising APIs is a huge necessity — and many banks are moving toward the concept of premium third party providers, or APIs which these providers are willing to pay for.

Against this background, “We expect the Open Banking Implementation Entity will make an active push, using its mandate to ensure the banks are complying with their obligations to provide a service that is as good as their own internet or mobile banking channels,” Hanrahan says.

Then there is the ultimate concern of data security for banks across the world as they adopt open banking technologies. Wadsworth explains, “With a range of different technical standards across Europe, it’s crucial that financial institutions are clear on how they will safeguard their data against fraudulent activity.”

UK open banking uplifts next-gen banking capabilities in Europe

But certainly the Open Banking Implementation Entity has secured the leading role in uplifting the next-generation of European banking capabilities. This is because  “the UK was arguably the first country to develop open banking standards and continues to be a leader in the field. Many other countries are looking carefully at the UK’s experience as they develop their own models,” Wadsworth explains. The UK has made it easier for customers by providing them with modest complex banking arrangements and other European banks are following suit.

In future, it might be easier to persuade financial customers to adopt open banking, according to the PwC report, which found that 39 percent of them would share their financial data with banks and third party providers. However, this will depend on whether they receive benefits such as a comprehensive banking app, or are able to compare bespoke offers from third party providers.

An app-to-app journey will be the next big focus to enhance customer experience — with a major shift anticipated toward open finance rather than just open banking in the UK and the rest of Europe — as in the case of Australia.

The post UK: Open banking unleashes business lending race appeared first on International Finance.

Nearly 190 countries met in Madrid to assess the activities on the back of Paris Climate Agreement which demands closure of coal power by 2050. 

Katrin Ganswindt of German environmental pressure group Urgewald told Reuters, “Some banks have pledged to not directly finance new coal plants but they are providing general finance to companies which are building new plants.”

Urgewald and BankTrack, an NGO targeting banks and their financing activities said that 10 European banks are still planning to finance coal-fired power plants.

The 10 banks were Barclays, BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, ING, Nordea, Standard Chartered and UniCredit. However, Barclays said that it no longer finances any new or existing coal-fired power plants. 

Even Standard Chartered said that the bank carries out its due diligence before approving funds to ensure it is compatible with their policies. 

Many European banks have adopted environmental and climate policies since the Paris agreement. These banks have discontinued financing to firms which rely on coal in any capacity to boost their revenue. 

Last year, a United Nations report said that nearly all coal-fired power plants are expected to close by the middle of this century to control the rising global temperatures to 1.5 degrees Celsius. This is in line with scientists’ belief that it is required to further prevent climate change effects. 

The post Europe’s biggest banks told to end financing for coal power plants appeared first on International Finance.

The bank’s assets sale to Goldman is the latest in a series of unit disposals this year. It had pushed aside billions in assets into a capital release unit, also known as bad bank, the media reports said. 

The unit contained €177 billion in leverage exposure at the end of the third quarter. Deutsche Bank plans to reduce the unit’s assets to €119 billion by the end of this year. 

The bank has sold equity derivatives in three auctions. Now, it is planning to sell more complex equity derivatives, which is expected to take longer years.   This month, Deutsche Bank signed a deal to transfer its prime brokerage business to BNP Paribas, as part of restructuring, 

More recently, Deutsche Bank Wealth Management appointed five relationship and investment managers in Dubai, Manama, Geneva and London. Loïc Voide, Head of Wealth Management for MEA, told the media that, “The MEA team has been contributing strongly to the growth of the global Wealth Management business at Deutsche Bank with a low double-digit percentage revenue increase year-on-year. I am delighted about these appointments that will enable us to further promote our proven capabilities to serve wealthy clients in the region.”

The bank’s wealth management unit has identified the Asia Pacific, the Middle East and Africa as its emerging markets regions demonstrating strong growth potential. 

The post Deutsche Bank scales restructuring with $50 bn asset sale appeared first on International Finance.

According to Denmark’s third largest bank, Danish customers under the mortgage with negative interest rates will make a monthly repayment as usual but the amount outstanding will gradually reduce each month by more than what the borrower has paid.

Similarly, another Danish bank Nordea has also announced that it will begin offering 20-year fixed-rate deals at 0 percent and a 30-year mortgage at 0.5 percent.

While the bank’s announcement on the Danish bank’s negative interest rate mortgages has puzzled many, some question the bank’s strategy. Jyske’s housing economist Mikkel Hoegh explained that Jyske Bank has access to money markets where it can borrow from institutional investors at a negative rate. According to him, the bank will pass the same money to its customers.

However, those who are willing to save in the banks will not receive anything as interest. To make matter worse, the interest rate may as well go negative. Last week, Zurich-based UBS announced that it would introduce a charge of 0.6 percent a year if the customers’ deposits exceed €500,000.

The Danish bank’s negative interest rate on a mortgage might sound attractive but in reality, it’s more complicated. With additional fees involved, experts believe the customers might end up owing money on the loan, rather than earning it.

Lise Nytoft Bergmann, chief analyst at Nordea’s home finance unit in Denmark told the media that,” It’s an uncomfortable thought that there are investors who are willing to lend money for 30 years and get just 0.5 percent in return. It shows how scared investors are of the current situation in the financial markets, and that they expect it to take a very long time before things improve.”

The post Danish Bank introduces first-ever negative interest mortgage appeared first on International Finance.

France’s largest bank also said it is planning to save an extra €500 million in costs this year by paring staff and bank branches.

Stronger client activity in its corporate and institutional banking practices boosted the first quarter profit, BNP Paribas said. BNP Paribas profit was also boosted by the sale of its 14.3 percent stake in SBI Life Insurance – the French bank’s joint venture with the State Bank of India (SBI).

The French bank’s CFO Lars Machenil told CNBC that the bank’s focus was on digitisation and not acquisitions. He also added that the drop in the bank’s Common Equity Tier (CET) 1 ration was due to new accounting rules. The CET 1 ratio dropped 10 basis points to 11.7 percent. Machenil also expects capital growth to gain traction throughout 2019.

Recent media reports have suggested that the BNP Paribas is interested in merging with Germany’s Commerzbank. Such a merger is also supposed to have the support of the German government, the German media had reported. The German government holds a 15 percent stake in Commerzbank, which it acquired as part of a bailout package in 2009.

The post BNP Paribas profit up 22%, to save extra €500 mn in costs this year appeared first on International Finance.

The post Leading Raiffeisen Bank’s digital transformation in Italy appeared first on International Finance.

 June 11, 2013 : International Finance Magazine, reports on the rise of the bank, its rapid growth and its role in money laundering activities.

U.K. Banking giant HSBC has gone past its rival The Deutsche Bank to top a list of Europe’s biggest banking institutions. The Canary Wharf based bank rose from third to first by going past Deutsche Bank and pushing French bank BNP Paribas from second position to fourth spot in this year’s SLN poll. HSBC has total assets worth 2.04 trillion Euros putting it head of Deutsche bank with 2.02 trillion as per information obtained from SLN financial. Out of Europe’s 10 largest Banks, 4 are British, Barclays, Royal Bank of Scotland and Lloyds Banking Group. These banks have total assets of 6.64 trillion Euros, which means their combined balance sheet is three times the UK economy. HSBC, also holds the first place amongst the largest banks in Europe by market capitalization, with a stock market value of 147 billion Euros, which is more than double the region’s second largest lender, Spain’s Banco Santander, which is worth 62.7 billion Euros. The second largest British bank in terms of market capitalization is Standard Chartered, which was worth 46.8 billion at the end of last year. Half of Europe’s wealthiest banks are British, while one is French. HSBC’s assets have risen, despite the disposal of several assets including its holding in Asian insurer Ping An and other insurance interests in emerging markets. Several other banks have shrunk in size with ING contracting by 13 percent, Credit Suisse, posting a reduction in its assets by 11.3 percent and UBS shelving its assets by 10.6 percent. The fastest growing bank was Russia’s Sberbank, which has climbed by 9 places in the list with a yearly asset growth of 44 percent. In the U.S., J.P Morgan topped the list closely followed by Bank of America. HSBC had avoided from a possible legal wrangle by paying $ 1.98 billion dollars to settle a U.S. money laundering probe recently. It is also under fire from international agencies for openly supporting money laundering.

The Hongkong  and Shanghai Banking Corporation (HSBC), which had a total annual net  income of $ 16.8 billion and operates in 81 countries worldwide, has grown quickly by acquiring banks around the world that became its affiliates. Headquartered in London, its international network comprises of 6,600 offices and in over 81 countries and territories in Europe, the Asia Pacific region, America and Middle East Africa. The bank was established to finance the growing trade between China and Europe and the brainchild of the Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company, Thomas Sutherland. The bank first opened up its shores in Hong Kong followed by a second office in Shanghai. HSBC is a pioneer of modern banking practices and is the “numero uno” in the dynamic markets of Asia Pacific. The bank has opened a presence in Europe since the opening of its office in London in July 1865. The acquisition of Midland Bank in 1992 transformed its reputation in Europe and placed them among the leading financial institutions in the world. The bank has also capitalized the North American market by opening an agency in 1865. It also has its subsidiaries in Brazil, Mexico and Panama.

Heroin Smuggling Bank

The U.K., based bank was under the receiving end of U.S. prosecutors when it openly admitted to laundering billions of dollars for Colombian and Mexican drug cartels violating the Banking Secrecy Act and Trading with the Enemy Act. However, strangely U.S. prosecutors did not pursue criminal charges against the bank for violating several laws and supporting criminal activities. Instead the bank was penalized $ 1.9 billion, which was termed “record financial settlement”. Financial analysts and legal experts opine the penalty was a mere five week revenue of the bank. The banks laundering transactions were so ‘brazen’ that it could have been easily detected by space. The New York Times reported that the Federal and State authorities chose not to indict HSBC, the London based bank, on charges of vast and prolonged money laundering, for fear of criminal prosecution would topple the bank and induce another financial crisis to slowdown hit U.K. and other countries where the bank has its presence.

The post HSBC is “Numero Uno” among European Banks appeared first on International Finance.