Banking And Walter Bagehot — Smart Lessons From A Leading Victorian

Bagehot — The Life and Times of the Greatest Victorian. By James Grant. 334 pages. $29.95

What a match-up: James Grant, financial journalist and in modern terminology a public intellectual, writing on Walter Bagehot, who might qualify for that nomenclature today but was “just” a banker, editor of The Economist, and advisor to some of the leading statesmen of 19th century England.

Grant is suitably impressed by Bagehot’s stunning productivity — 5,000 words a week for The Economist, plus essays on luminaries ranging from Gibbon to Shelby. However, Bagehot might not get awards for work/life balance. In Bagehot’s writing after the Panic of 1857, Grant cites a longish passage and notes that ”Few better observations of the cycle of bankerly feast and famine have ever been written.” But, he adds, this was in a love letter.

The 19th century was a period of great change and a shift of power from the landed aristocracy to the merchant and industrial classes. Bagehot wrote about the reform of 1832 where some in Parliament actually voted to eliminate the infamous pocket boroughs, even at the price of putting themselves out of office. The reforms were overdue — cities like Manchester and Birmingham with growing populations didn’t have any representation. But the reforms had another consequence…those boroughs were sometimes home to a class of elevated statesman who were spared the ordeal of having to face the voters and at least a few contributed wisdom to the debates of the day, Bagehot wrote. The reform destroyed some intellectual constituencies.
The radical Irish journalist E.D.J. Wilson wrote in his obit of Bagehot: “His friends used to say of him, and there was a little exaggeration in the saying, that for a dozen years at least he was an unofficial member of every Cabinet, Conservative as well as Liberal, which has governed these kingdoms. Successive Chancellors of the Exchequer and Secretaries of the Treasury called him into their counsels as a matter of course. And the most illustrious of the statesman who thus consulted a journalist without a place in Parliament or any strength of party connection, would be the first to acknowledge how much they owed to the ‘white light’ of his pure and clear intelligence.”

Ironic then the Bagehot’s Stuckey’s bank sold to what eventually became part of National Westminster Bank, which was acquired by The Royal Bank of Scotland (RBS) which failed — at a cost to taxpayers of approximately £45.5 billion.

Grant notes the Bagehot’s world was one of institutionalized discipline while today’s world — one of paper currencies, floating exchange rates, enormous budget deficits and government policies to protect both investors and depositors against the consequences of banks’ mismanagement — is largely one of institutionalized indiscipline.

In financial journalism, “Bagehot was a superior commentator, thought a middling seer — for every financial writer must squint into the future… HIs attitude was perhaps too cautionary in the short term, and much too complacent for the long term. He worried too much about the single gold reserve and not enough about the distant adverse consequences of government control in banking and credit.”

Grant draws some broad historical comparisons:

“The interplay between money and credit was the source of the recurrent cycles of boom and bust that bedeviled the nineteenth century and continues to plague and mystify the 21st.”

And in some cases Grant makes his commentary just by direct quotation:

“In all customary societies, bigotry is the ruling principle. In rude places to this day, anyone who says anything new is looked on with suspicion…one of the the greatest pains to human nature is the pain of a new idea.”

Sound familiar?

Posted in banking, Central Banking, Financial commentary, Monetary policy, UK

Low-Code Can Compensate For Shortage Of Programmers In Financial Services

The financial services industry needs to use low code development because it doesn’t have the time or the people to create services the old fashioned way, says Omar Arab, vice president of business development at Veritran. The company provides a low-code solutions to write front-end customer-facing apps. Its code runs at 50 banks with 40 million users and processes 10 billion transactions a year, he said.

“Our customers don’t need to write code, which is a good thing because the industry needs speed to market and secure applications. With Veritran, it takes five minutes to build a wallet, for example.”

The company has development centers in Colombia and Argentina. Arab said it is easy for non-technical business users to build customer centric apps very, very fast.

They will need to as banks pursue digitalization — the clumsy term for moving from legacy platforms designed for paper processes to using digital front office apps such as digital wallets that can interact with business and retail customers.

“Digital transformation is the key, and the digital transformation journey is culture, not technology, Arab. “People need to put focus on one wallet or one digital banking solution. It is impossible to take six months to build one app for a channel — you need to take no more than weeks.”

Veritran has APIs to connect to legacy systems on-prem or to new applications that reside in the cloud, he added, whether they are run by Tier One banks, smaller banks, credit unions or fintechs.

Users including BANORTE, the second largest bank in Mexico, and BBVA in Colombia.

“BANNORTE has 5 million users in our wallet in digital banking, BancoEstado in Chile has been interested in this solution because its focus is financial inclusion. They have three million users in our wallet.”

The bank won the Celent’s 2018 award Model Bank: Financial Inclusion for its app, PagoRUT, “an extremely popular mobile app that allows customers to send and receive payments for free, both in person and remotely,” according to Celent.

“The problem in financial industry is core banking runs on old legacy system and they need to change,” said Arab. “To change the front end is easy — it takes weeks; for the core banking they need more time and more development.”

Although low-code has seen a surge in popularity, both in API stores like Temenos’s and in companies such as Kony, which was bought by Temenos and in Outsystems.
Kony and Outsystems are in Gartner’s Magic Qudrant.

Arab said that Veritran has been low-code since its inception.

“The company to started 15 years and has been low code always,” he said.,”Veritran is the only company with low code that is 100% focused on the financial industry.”

Posted in digital banking, payments, security, Uncategorized | Tagged , , ,

Volante Offers SWIFT Message Validation on AWS

Volante Technologies, a global provider of messaging and payments technology both in-prem and in teh cloud, today announced it has launched financial message validation on the cloud, available as an Amazon Machine Image (AMI) on the AWS Marketplace.

Like other cloud-based services it offers, Volante’s new validation offering is available as a microservice to any users looking to test their SWIFT Standards Release (SR) 2019 messages ahead of go-live on November 17, 2019.

The validation service provides APIs for validating messages, ready for applications to use. In addition to the validation process, Volante’s service returns a list of errors encountered for any invalid message. This information helps reduce the frequency and severity of formatting errors, and minimizes the risk of rejected messages. 

The cost for the service is based on hourly use rather than by message count or data usage.

 

 

 

Posted in digital banking, fintech, payments | Tagged , ,

Helping Employees Avoid Late Fees, Bounced Checks And Pay Day Lending With Their Own Money

PayActiv gives workers access to the money they have earned without requiring them to wait two weeks for their paycheck, said Safwan Shah, the company’s CEO. It advances the money and then is reimbursed by the employer when checks or direct deposits are issued.

“It delivers access to affordable financial services at scale to a financially stressed community. We have two guard rails that are always available,” Shah explained. “One is a cap on the amount you can access, which can be 40 to 60 percent of what you have already earned. Second, you don’t pay per transaction, you only pay $5 a pay period when you use PayActiv. And we don’t provide just access to your money, you can pay bills, load cards, you can call Uber, pay for Amazon through us. or get cash with no fees from a Walmart ATM.”

PayActiv became a Public Benefit Corporation, a certified B corporation, four years ago, Shah said. Its articles of incorporation describe its missions is to deliver affordable financial services. He’s in good company — Patagonia is another B corporation.

“I am the bank of the unbanked and underserved.”

PayActiv also helps them save money, with an interesting twist — they save in time.

“We allow users, who are hourly workers, to save in units of time. A backpack may be three hours of work. Or they can allocate 5 minutes a day toward savings, and in 10 days they can save $15. It all happens behind the scenes.”

Unlike some other wage access companies, PayActiv does not require users to transfer their accounts and direct deposit to the company or use a proprietary stored value card — they can move advanced wages to any card or account they choose.

PayActiv, which launched in 2014, now has more than 100 participating employers, including Walmart where it works with Even’s Pay Access, and empowers more than one million employees, Shah said.

Employers value it because companies have come to realize that financial stress has a real cost to them in employee distraction and occasional absenteeism.

PayActiv is a benefit that costs employers nothing, although some, around 20%, will pay part or all of the $5 fee when an employee takes early payout of his or her earnings.

That’s because it is good business — PayActiv employers saw a 19% reduction in turnover, Shah said, and the cost of replacing an employee can easily run $2,000 to $3,000. It also improves recruitment.

“We’ve become almost a financial services center for the unbanked,” Shah said. Between Uber, bill pay, and records of hours saved, employees may turn to it several times a day. A third say they use it to pay bills, another third to avoid late fees and a third to avoid payday loans.

Posted in digital banking, fintech, payments, Uncategorized | Tagged , ,

DHS Updates U.S. Critical Infrastructures Including Payments And Securities Settlement

The U.S. Department of Homeland Security last week released an update to its list of 16 critical infrastructures, which included financial services such as payments and clearing and settlement of securities.

“The Financial Services Sector-Specific Plan details how the National Infrastructure Protection Plan risk management framework is implemented within the context of the unique characteristics and risk landscape of the sector,” the department said in its announcement. “Each Sector-Specific Agency develops a sector-specific plan through a coordinated effort involving its public and private sector partners.”

The Department of Treasury is designated as the agency for the financial services sector. Other sectors considered critical include energy, transportation and communications.

Valerie Abend, managing director, Accenture Security, said the department took a comprehensive view of security.

“It took a look at what functions have to be done all the time, and let’s figure out how to protect them,” she said. “You pick one function and it will cross more than one entity; I think it is a really good way to manage risk.”

The DHS Cybersecurity and Infrastructure Security Agency (CISA) April 30 released what it termed the “inaugural set of national critical functions” but, in fact, the list goes back to 2010, 2013 and 2015.

“Led by CISA’s National Risk Management Center (NRMC), this effort represents an evolution in thinking with respect to risk management that focuses security and resilience efforts on cross-cutting functionality, instead of more static asset, organization, or sector-specific view.,” the departments said in its announcement.

“Identifying these National Critical Functions has been a collaborative process between public and private sector partners and marks a significant step forward in the way we think about and manage risk,” said CISA Director Christopher Krebs. “By moving from an individual, sector-specific lens to a more comprehensive, cross-cutting risk management framework, we can identify and manage risk in a more strategic and prioritized manner.”

Posted in fintech, payments, security, Uncategorized | Tagged , , , , , , ,

Technisys – Ready With A Digital Banking Core For North & South America

North America has a newcomer in core banking — Technisys, originally from Argentina. It is implementing a digital first system at Alberta’s ATB in a new subsidiary bank called Brightside, and it recently raised a $50 million Series C investment round from Riverwood, a Silicon Valley fund.

Co-founders Miguel Santos, CEO and co-founder Adrián Iglesias, COO both came out of IBM Argentina while a third co-founder German Pugliese Bassi, CMO & Alliances is a well-known entrepreneur in Latin America. The company now makes its headquarters in Miami.

Santos said the company will use the new round of funding to pursue business worldwide disrupting the market in financial services.

“We are helping banks transform to digital and powering new challenger banks.”

He thinks the funding shows two major trends — continued growth in technology and continued expansion into North America.

North American banks are so dissatisfied with the big three core providers — FIS, Fiserv, and Jack Henry — that the American Banking Association (ABA) and the Independent Community Bankers of America (ICBA) are each backing new vendors.

The ICBA  is investing in, and supporting through an incubator, Agora which provides real-time banking that sits in front of legacy core banking platforms and provides such features as mobile accounts, shared accounts, children/parent accounts, advanced real time card controls, budgeting and saving tools and money pooling.

Meanwhile the ABA is in a consortium behind Finxact, developed by fintech industry veteran Frank Sanchez. It has announced $30 million in equity financing from the ABA, Accenture Ventures, SunTrust Bank, and Finxact’s existing investors, including Live Oak Ventures, First Data, Woodforest National Bank, and T.N. Incorporation Ltd (TNI) of Thailand.

Rob Nichols who has been CEO of the American Bankers Association for three years, said in his travels around talking to banks, the core banking systems were a common source of dissatisfaction.

“Early on I learned that outside public priorities, their chief desire is to have a nimble and agile core offering. We saw this (Finxact) as an opportunity to invest in an innovation which could push the whole core processing dialogue in an interesting direction.”

So Technisys is well-positioned for a market that is unhappy with incumbents.

In addition to ATB in Canada, Technisys has non-disclosed clients in the U.S. and is dealing with mid-size American banks, Santos said.

“We are seeing many small and medium banks tied to FIS, Fiserv and Jack Henry, which are old technologies. We have a lot to offer Tier 2 and Tier 3 banks that want to differentiate.”

Technisys has projects in more than 15 countries including U.S, Canada, Brazil, Colombia, Argentina, Chile, Mexico, Perú and Ecuador.

One challenge for non-American banking vendors is the complexity of the U.S. regulation, including state regulations. Some firms have been reluctant to invest without a bank committed to buying their technology, and banks don’t want to contract for a system that hasn’t been developed yet.

Santos said the Technisys platform has been readied to meet U.S. financial regulatory requirements.

Technisys offers a modern fully digital core and a digital front end for a 100% customizable customer interface and a layer for Open APIs to plug into, giving flexibility to the banks to offer their clients a superior experience while being able to innovate. The core and digital platform can be installed separately or implemented together. The digital platform provides the opportunity for banks to differentiate and emphasize their brand or create special services or new financial products.

“We can actually install the digital platform into a customer’s operations and interact with their existing core banking system, and make them free to create new experiences and differentiate from the competition, which is going to be harder and harder,” Santos said.

“The value proposition on the digital banking platform, we are convinced, is differentiation for not only banks, but technology firms going into finance. Having a platform that lets you create, that allows you to differentiate is key. More than key, it will be mandatory.”

Posted in Uncategorized | Tagged , , , , , , , ,

Z/Yen Group Designs New Index Linking Finance and Tech

London’s Z/Yen group has developed a Smart Centres Index, designed to track the development of commercial and financial centres across the world in their support for and readiness for new technology applications.  Smart centres are cities across the world which encourage a high degree of innovation in business using new technologies.

The index is intended to help investors, governments, and regulators track the attractiveness of centres for new technologies and products by measuring how attuned centres and their regulatory systems are to attracting innovation and growth in Science, Technology, Energy Systems, Machine Learning, Distributed Ledgers, and Fintech.

To support the index, it has launched a survey aimed at professionals working in the development, application and regulation of new technology.  The survey seeks the views of interested professionals on the regulation, depth and quality of new technology in centres across the world.

Professor Michael Mainelli, Executive Chairman of the Z/Yen Group, said:

“The opportunities presented by new technology and science across all areas of commerce and trade are incredibly rich.  We at Z/Yen are deeply engaged with the development, application, and regulation of new technology in the world’s commercial and financial centres. This survey will help form the next edition of the Smart Centres Index.”

Z/Yen says it helps organisations make better choices.

“Our clients consider us a commercial think-tank that spots, solves and acts. Our name combines Zen and Yen – ‘a philosophical desire to succeed’ – in a ratio, recognising that all decisions are trade-offs. One of Z/Yen’s specialisms is the development and publication of factor assessment indices combining factor analysis and perception surveys.”

Posted in fintech, Uncategorized | Tagged , , ,