Disruption, Digital Transformation and Regulation

Financial Services

FinTech Disruption and Open Banking

The explosion of pioneering FinTech innovations from around the world is disrupting and transforming the global financial landscape. From payment, investment and lending innovations, to mobile money, digital wallets and Blockchain technology, FinTechs make financial services more relevant, accessible, affordable and easy to use by society.

Open banking forces banks to make customers’ financial data available to be shared with trusted third parties via secure application programming interfaces (APIs). This will shift their role from being one-stop-shops for financial services to more open platforms where consumers can start to embrace a modular approach to banking, opening the door to innovative fintech startups to offer consumers better ways to manage their finances online.

Robo Advisors

Also known as “digital advice platforms”, Robo-advisors are automated digital platforms that provide financial and investment management advice using algorithms. After collecting information from an individual(s), robo-advisors give advice on how to best proceed or some may automatically make the appropriate financial transactions for you.

Robo-advisors have actually been around for a few years now. However, they began using their algorithms and providing advice behind the scenes to the wealth managers themselves, who used that as supplemental information before giving their final recommendation to clients. However, as robo-advisors become more efficient, wealth managers are able to focus less time on investment management/data entry, and more time on building client relationships. This is key because of wealth management is very reliant on the relationships they create (the industry is very similar to consulting in that way). Tech savvy advisors, on average, have 40% more AUM (assets under management) and serve 55% more clients. Digital advances have raised the standard of customer service in the field, because clients can now talk to an advisor (albeit a digital one) 24 hours a day.

FRTB Regulation

The Fundamental review of the trading book (FRTB) requires dramatic change to the banking industry’s existing market risk management practices. One of the underlying challenges is the collection and management of market data and other information, especially for banks that want to use internal models.

It overhauls the standardised approach to market risk, forcing big banks to calculate and report it for the first time, radically alters the way that modelling approval is granted and policed, replaces value-at-risk (VAR) with expected shortfall (ES) as the standard risk measure, redefines the boundary between banking and trading books, and affects many other areas that require data management solutions.