Founder of cryptocurrency lending platform Celsius Network arrested; AI gains momentum in core financial services functions; Beyond banking: Big moves for some big names — but not all;
In this edition:
1️⃣ Apple’s Tap to Pay arrives in the UK with Revolut and Natwest first out of the gate
2️⃣ In closely watched case against Ripple, judge says tokens sold on public exchanges were not securities
3️⃣ Founder of cryptocurrency lending platform Celsius Network arrested
4️⃣ AI gains momentum in core financial services functions
5️⃣ A neobank today should adopt an AI-first mindset and build a holistic set of capabilities
6️⃣ Why Citibank Branches Are Closing Around The World
7️⃣ Beyond banking: Big moves for some big names — but not all
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News
Apple’s Tap to Pay arrives in the UK with Revolut and Natwest first out of the gate
Tap to Pay on iPhone enables users to accept in-person contactless payments with a just a tap of their payment cards or mobile wallet, with no need for additional terminals or hardware.
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In closely watched case against Ripple, judge says tokens sold on public exchanges were not securities
US regulators were dealt a setback in their effort to restrict the sale of cryptocurrencies on Thursday when a judge found that Ripple Labs did not violate securities law by selling digital tokens to members of the public.
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Founder of cryptocurrency lending platform Celsius Network arrested
The Securities and Exchange Commission and the Federal Trade Commission filed companion lawsuits Thursday that said Mashinsky and Celsius “falsely promised investors a safe investment with high returns” but misled investors about the financial success of Celsius’ business and the price of Celsius’ own crypto asset security was fraudulently manipulated.
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City minister tells Revolut he cannot influence its banking licence bid
Sources said that when the issue of Revolut’s licence application was raised, Mr Griffith said it was a matter for regulators and he could not speak about it or influence the decision.
Insights
AI gains momentum in core financial services functions
As AI continues to grow in financial services, AI-powered functionality will increasingly flow into the hands of employees and business operations. Working cooperatively with AI creates the most value, as it takes on manual, repetitive tasks that frustrate employees.
With education and increased exposure to AI, employees can find more job satisfaction, create better opportunities for customers, and build expertise, raising their value. Most companies don’t offer enough education about the best uses of AI.
Increasingly sophisticated AI platforms and better data will streamline the handling of regulatory requirements and ESG compliance. Ensuring data quality and model consistency will be important, as will removing biases from data.
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A neobank today should adopt an AI-first mindset and build a holistic set of capabilities
Engagement layer
To succeed in the current competitive environment, neobanks need to create experiences and build accompanying capabilities that fulfill a range of customer expectations. First, the engagement layer needs to deliver experiences that are not only easy, intuitive, fast, and responsive but also delightful. To do this, they could create low-friction, low-latency, and highly customizable mobile-first journeys.
AI-and-analytics-led decisioning layer
Hyper-personalization requires granular AI-driven decisions across the entire customer life cycle, spanning acquisition, onboarding, servicing, retention, and cross-sell. This requires many machine-learning (ML) models across domains including credit analytics, product and channel propensity, fatigue (how often neobanks are reaching out to customers), and risk (including attrition, collections) to identify the next-best action for customers.
Core technology and data layer
Developing experiences in the engagement layer and personalizing the decisioning layer require a modern technology and data core. When incumbent banks invest in digital capabilities, their money is mostly spent in the maintenance of their existing core technology. Far less investment goes to building new cloud, data, or API capabilities.
Neobanks unencumbered by legacy decisions can leapfrog incumbents by building their core tech. Their goal should be to develop a cloud-based, flexible, and highly configurable banking core that will help engineering teams launch new product variants rapidly through easy configurations. To do this, neobanks would need to make judicious decisions on which components to build on their own and which to outsource. For example, most neobanks use externally available cloud-based infrastructure and storage services.
Operating-model layer
The final layer — and a crucial determinant of a neobank’s speed and agility — pertains to how it attracts and organizes talent across its teams in a way that breaks traditional organizational silos. Three capabilities are key here. First, a successful neobank should be able to set and embody an aspirational vision and culture for the organization. This will help it attract leading talent in banking and critical nonbanking domains, including designers, architects, engineers, and data scientists. Second, these neobanks should have full-stack platform-based teams with all the skill sets required for their end objective. These teams should also have autonomy to define and execute actions aligned to their goals while being loosely coupled with the rest of the organization.
Finally, the neobanks should calibrate the organizational rhythms and processes that promote innovation and rapid experimentation while adhering to regulation and compliance norms.
Source Mckinsey and Co
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Why Citibank Branches Are Closing Around The World
After the company’s collapse during the 2008 recession, Citi’s stock has continuously struggled. Shares of the company saw more than a 30% drop over the last 5 years. In 2021, CEO Jane Fraser announced a bold shift in the company strategy, exiting 14 consumer markets outside of the U.S. and instead doubling down on wealth management. It’s a tactical move that several other major banks like Bank of America and Wells Fargo have adopted in recent years. So will Citi’s bet pay off and can the company return to its former glory?
Source CNBC
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Beyond banking: Big moves for some big names — but not all
Compared to other regions, European banks are behind the curve. A look at the global market shows a number of strong beyond banking case studies featuring well-known incumbents making bold moves. In particular, JPMorgan Chase & Co.’s plan to set up its own full-service travel service has caused quite a stir in the market. The company’s Connected Commerce unit is driving the plan, the overarching goal of which is to “serve customers with digital experiences beyond the core financial product.” During the first phase, JPMorgan bought a booking system, a luxury travel agency, and a restaurant review company.
In Asia, DBS Bank is a leading example of leveraging its wide reach of small- and medium-sized enterprises (SMEs) and retail customers and building a marketplace for them. Originally starting around cars (buying, selling, financing, insuring, and value-added services such as roadside assistance), the marketplace now also includes education, home and living, health, property, and travel and leisure. DBS acts as orchestrator, offering a one-stop solution for its customers’ needs.
Only a few financial institutions, however, have managed to create genuine super apps that include beyond banking offerings. New super apps have emerged from four potential specialties: ride hailing, delivery, telcos, and marketplaces. In our view, Tinkoff and Alipay are prime examples. It has transitioned from being a lender to offering a wide range of lifestyle and financial services for business and individuals through its Web interface and mobile app. Note that this was a multiyear evolution for Tinkoff.
There are a number of reasons Europe is lagging behind its peers:
- Reliance on old practices. Incumbent banks are characterized by a focus on in-house development and a high level of confidentiality; the ecosystem paradigm requires collaboration and data sharing across players and a move away from the practice of doing everything in-house.
- Inadequate tech capabilities. Legacy IT infrastructure does not always support the construction and co-orchestration of an ecosystem; modernizing the tech stack and specifically upgrading the connectivity capabilities is often necessary and requires high financial investments.
- Focus on near banking. Many banking ecosystems products are currently in the “near banking” stage (i.e., banks offer additional products that are near to their core offering, such as insurances).
- Lack of long-term focus. Building and independently managing an ecosystem without a partner requires substantial up-front investments, which can take several years to recoup and thus calls for unwavering attention and a sufficiently long planning horizon. The possibility of failure is always present and creates uncertainty.
Source Arthur D. Little
