Volume 5 (2020-21)

Each volume of Journal of Digital Banking consists of four 100-page issues. Articles scheduled to be published in Volume 5 are available to view on the 'Forthcoming content' page. The articles published in Volume 5 include:

Volume 5 Number 1

  • Editorial
    Simon Beckett, Publisher, Journal of Digital Banking
  • Readying the open banking system for success
    Jim Wadsworth, Senior Vice President, Mastercard Open Banking Solutions

    Open banking is now the accepted norm across Europe and beyond thanks to mandated legislation. For financial institutions, however, it is no longer deemed the compliance exercise it once was. Many have realised that it offers an opportunity to innovate and, importantly, compete; open banking is the architecture that allows them to rethink audiences and transform product portfolios accordingly. The potential for open banking to revolutionise the financial well-being of millions of individuals and small businesses across Europe is beginning to unfurl. But to reach its true potential, there are still challenges to be overcome within the open banking ecosystem and its architecture. This paper addresses some of those issues, such as Application Programming Interface (API) multiple standards, which are causing unwanted layers of complexity, confusion and expense for both third-party providers (TPPs) and banks; trust and security problems posed by the validation of TPPs — particularly in cross-border transactions; and also the complexity of dispute resolution where no central records or consistent formats exist. Additionally, readers will learn whether the topic ‘open banking’ itself really matters to the success of open banking-enabled products and whether FinTechs, banks and financial institutions are wasting their energies marketing the underlying technology. Readers can expect to get a clear picture of how all of these challenges — interoperability and standards, secure transactions, clear means of resolving disputes and marketing — can be overcome to create an efficiently functioning architecture that allows powerful open banking-enabled practical tools and solutions to be transformational for both people and businesses.
    Keywords: open banking, API, PSD2, TPPs (third party providers), FinTech, banks

  • Consumer-centric commerce: Why banks and merchants need to step up their game on customer experience
    Chris Kronenthal, President and Chief Technology Officer, FreedomPay

    E-commerce is growing year on year, with expectations that US$4.6tn will be spent in this area by 2022, but with this growth come a variety of problems and opportunities that need to be addressed. Consumer interaction with today’s brands is changing as technology advances, and mobile technology dictates how customers want to pay, buy, browse, receive offers and earn loyalty rewards. Any merchant or service provider wanting to retain a foothold in ever more competitive markets needs to embrace this technology and use it to both their and their customers’ advantage. Merchants have real power when they get this loyalty piece right, increasing customer sales but also creating the opportunity to generate additional revenue from banks and credit providers, who increasingly want access to a merchant’s loyal customers. Trust is an issue for financial institutions, so piggybacking on the existing trust between merchants and their customers makes perfect sense. Payment services technology allows the seamless integration of the range of services necessary to facilitate these transactions, enabling the management of all interactions with clients. Robust and secure systems that comply with the latest regulatory requirements, including payment card industry (PCI) compliance and strong customer authentication, offer a secure and technologically advanced environment that will keep up with whatever payments methods or regulations are devised next. This paper discusses the result: potentially limitless benefits to all parties that can be adapted to suit future needs at will, thanks to the seamless integration of a single-platform service that provides benefits to all simultaneously.
    Keywords: customer experience, commerce, technology, payments, consumer-centric commerce, digital

  • Personalising digital banking with human middleware — why humans still have a place in customer service for banking
    Nicola Lambie, Marketing and Brand Strategy Manager, Energy Super

    As the world marches irrevocably towards fully digital experiences, consumers increasingly expect to be able to fulfil their banking needs online, whenever and wherever they want to. Two of the main challenges facing banks in the race for digitisation, however, are how to deepen customer relationships within a remote channel and how to meet the continued customer desire for advice from a real person in complex transactions, such as buying a home or financial advice. This paper discusses the current trends in banking channel preferences for consumers and examines how front-line teams are meeting those needs. It explores the concept of human middleware, defined here as the intersection of humans and technology in delivering banking services. And with the need to balance customer service expectations alongside productivity, efficiency and cost management, it provides a case study of some of the steps smaller financial institutions are taking to remain relevant in the banking market by leveraging ‘human digital’ services for customers.
    Keywords: digital transformation, channel transformation, digital banking, online customer experience, human digital, banking innovation

  • Evolution of the invisible bank: How partnerships with FinTechs are driving digital innovation
    Mayank Mishra, Global Head of Digital Channels, Treasury and Trade Solutions and Global Head of Online Banking Services, Citi

    Business banking as we know it is changing in ways that could hardly have been imagined less than a decade ago. The introduction of next-generation technologies, such as application programming interfaces (APIs), artificial intelligence (AI), machine learning and robotics, is poised to deliver the ‘invisible bank’, where treasury and banking functions merge together seamlessly, bringing customer experience to a new level of convenience. This paper discusses the need to extend the reach of banking solutions beyond the bank’s own channels and technologies, incorporating them into day-to-day treasury management functions. In this way, the friction between corporates and banks is reduced — making it impossible to tell where the bank ends and treasury operations begin. By leveraging treasury data in a more contextual way, banks will be able to integrate banking functions and services into the daily duties of treasury professionals, delivering tremendous convenience and a greatly improved client experience. Digital technologies, such as APIs, are allowing banks and corporates to be more agile in connecting and collaborating with each other to bring innovations to market faster, meeting the needs of their customer base. In fact, Forbes reports that 80 per cent of large enterprises are already generating more than US$5m a year from APIs.
    Keywords: Business banking, next-generation technologies, application programming interfaces (APIs), AI, machine learning, robotics, invisible bank

  • A ‘Digital Euro’ as an approach for frictionless payment processes
    Udo Milkau, Chief Digital Officer, Transaction Banking, DZ Bank

    Digitalisation is changing the way we think of money and payment architectures in the 21st century. Within global competition, economic benefits for the consumers and corporates in terms of convenience and efficiency will be the benchmark for success. App-based solutions with strong brands and centralised payment platforms proliferate, while Europe has a fragmented landscape of various elements for fully digitalised payment processes. Frictionless payment processes could be facilitated by a ‘Digital Euro’ as an interface between digital (and more and more automated) payment initiation at the front-end level and real-time processing and settlement at the back end. Such an approach could provide an end-to-end cross-industry synchronisation of processes with payment automation as an integral solution. This paper discusses a special case machine-to machine payment in the Internet-of-Thing payments at the ‘edge of networks’, as they could generate a tremendous volume of ‘localised’ transactions that require dedicated solutions compared with networks with their principal overhead.
    Keywords: digitalisation of payments, payment architectures, customers’ perspective, CBDC, blockchain, M2M payments

  • Technology-driven next-gen corporate banking: Trends and implications in APAC and Japan
    Eiichiro Yanagawa, Senior Analyst, Celent

    Corporate banking is at a critical juncture of accelerated change. External factors are driving disruptions and opportunities in corporate banking. Banks are at risk of falling behind in their response. Players in the corporate banking arena need to ensure that they keep pace and take significant strides to compete effectively with financial institutions at the vanguard of technology as well as digital giants and FinTech firms. Companies need to cease product-centric approaches and embrace a customer-centric approach, one that reimagines and improves the customer journey. Banks need to digitise paper-based processes and assign top priority to shifting from intuition-driven decision making to data and analysis-driven decision-making. Asia-Pacific (APAC) dominates the global bank profit landscape, generating 43 per cent of total global bank revenue, with the Chinese market forming the centrepiece of growth strategies for the region. Having said that, moving ahead, China will not be the sole growth engine. The global situation is characterised by uncertainty stemming from factors ranging from negative interest rates and the emergence of trade protectionism to US-China trade friction and Brexit and now coronavirus (COVID-19). Against this backdrop, the future of corporate banking growth can be expected to be heavily dependent on performance in digital economies, where technology plays a prominent role. This paper discusses how, now more than ever, as technology iteration continues to speed up, banks should seek to pursue evolution and innovation in the corporate banking arena.
    Keywords: legacy and ecosystem migration, Innovation and emerging technology, digital transformation, transaction banking, SME banking, next-generation corporate banking

  • The inverted bank: How platforming helps exploit ecosystems
    Sankha Som, Chief Innovation Evangelist and V. Ram, Chief Technology Officer, Tata Consultancy Services

    Ecosystems are emerging as major drivers of economic activity all across the world. The emergence of ecosystems is seeing a fundamental transformation of traditional business models across all sectors of the economy. The FinTech movement has been one of the earliest ecosystem-based disruptions that have profoundly affected the banking sector. The banking sector globally has been trying to build strategies to engage and exploit ecosystems with varying degrees of success. Community banks have been early adopters of ecosystems, leveraging the traditional banking infrastructure to take deposits, underwrite loans and provide the regulatory governance infrastructure to FinTechs, whereas FinTechs provide the necessary customer experience layer and create innovative new products and services. While large banks are pursuing major digital transformation programmes to make banking services more accessible to customers and partners, smaller community banks are devising new ways of remaining low-cost players with personalised services. Digital ecosystems are now opening scope for API-fication and AI-based decision-making. Smaller niche firms are now able to build and integrate faster and demonstrate business agility. In this paper we present a summary of the macro environment that is driving changes to business structure in enterprises. The present FinTech engagement strategies of banks are presented through the lens of motivation to go-to market with new products and features that appeal to the end-customer. We have also attempted to analyse the relative merits and demerits of each strategy. If banks must emerge as ecosystem orchestrators, they will need to re-architect themselves into digital platforms. This is even more relevant for community banks. We present a logical architecture of such banking platforms and important features that need to be built into these platforms. Finally, we have presented a model of an ‘inverted bank of the future’, where many existing production activities of the bank, large and small alike, will be performed outside the bank’s boundaries by the banks’ ecosystem.
    Keywords: ecosystem, platform, FinTech, digital, open banking