Bank of England selected to host BIS Innovation Hub
An event which will see the UK centre providing support to the banking and wider financial services community through the development of ‘digital public goods’ (open source software).
It is hoped that the decision will help solidify the country’s standing in the international business community as a financial, innovation and technology leader.
“The UK is home to a world-leading fintech sector and is at the forefront of innovation – so it’s fantastic the Bank of International Settlements has chosen to establish a Hub Centre in London,” commented Rishi Sunak, Chancellor of the Exchequer.
“It presents an invaluable opportunity to connect the expertise of the world’s central banks, working collaboratively on innovative new ways to enhance financial services.”
In the pursuit of financial stability
Founded in 1930, BIS is owned by 62 central banks in countries all around the world (accounting for 95% of global GDP). Headquartered in Switzerland, the organisation is dedicated to bringing about monetary and financial stability through international cooperation.
BIS’ medium-term strategy ‘’ is a plan centred on fostering continuous technological development in terms of analytical and business capabilities. It is hoped that initiatives within the plan will promote a dynamic work environment and create added value for stakeholders.
Topics currently under consideration include digital currencies, payment innovations, regtech and the digitalisation of trade finance.
The possibilities of technology
Andrew Bailey, Governor of the Bank of England, stated that he was proud and excited to host the Innovation Hub in the UK, citing the present need for open collaboration and exploration into the possibilities of technology:
“Now more than ever it is important the central banking community does all it can to build a more effective, resilient and inclusive financial system and technology is an important part of that effort.
“By involving central banks and prudential regulators in this important work, we can help to ensure that innovation is consistent with our objectives of safety and soundness and financial stability. This centre provides an important venue to ensure the UK’s deep expertise in innovation can contribute to solving global financial issues,” he said.
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.