Volante Insights

Immediate payments is a topic of significant interest as many countries look to adopt schemes similar to those already in place in the UK, Singapore, Sweden, and Poland among many others. In Europe, the SCTInst program is well underway with an infrastructure provider already selected to build a pan-European immediate payments system. The US is also rapidly moving towards immediate payments as part of the FED Payment Improvement program. At the same time, the privately operated US ACH, The Clearing House (TCH), is partnering with VocaLink to generate an immediate payments system for the US using ISO 20022 based standards. Indeed, ISO 20022 has now published formal schema for ISO 20022 Real-time payment messages with additional related messages due for publication later this year.

Closely linked to the increase in consumer demand for immediate or real time payments, is the rise of Open Banking and in particular the PSD2 initiative in Europe (SEPA) and UK’s Open Banking initiative. Both projects will see a significant change in the way banks interact with their customers, with third party providers (TPPs) being allowed secure access to consumer accounts via APIs. minimum. The big challenge, as discussed at the recent EBADay meeting, is that the Regulatory Technical Standards (RTS) are not expected to be standards as such, but more a framework set of rules. Some concerns have been raised that FIs will generate different APIs and thus interoperability issues will arise. The UK Open Banking initiative will be live next year and this could be somewhat of a guinea pig for how such APIs are implemented across Europe.

Another significant regulatory change impacting the transaction banking business will be the implementation of the Financial Action Task Force (FATF) changes; in particular, recommendation 16 on Wire Transfers which sees FIs having to clearly identify originator and ultimate beneficiary for cross border wire payments. Plans for adoption are scheduled in the EU’s forthcoming wire transfer regulations in June 2017 and we may see changes to the SWIFT MT103.

In the Capital Markets, significant news sees the delay to the MIFID II regulation in the EU, in response to concerns that the technical challenges were underestimated. The implementation deadline for the EU is now pushed back to 3rd January 2018.

And what of the new kid on the block, Blockchain? This technology is drawing huge attention as a wide range of technology vendors receive large amounts of venture capital investment to build blockchain or distributed ledger technology (DLT) solutions in the FS space. In April, the R3 consortium of banks announced its Corda platform which is due to be available in open source very soon. Furthermore, Digital Asset Holdings announced significant deals with the ASX and the DTCC to develop solutions in the equities market and post-trade repo clearing and settlement respectively. Of great significance, was the announcement that Santander was utilizing the Ripple DLT for use by its staff to make international payments with the express intention of extending the use of the Ripple solution in due course. And finally a quick note on Bitcoin, the Granddaddy of the blockchain family; June saw it reach $700 a coin. There were many factors cited for its surge in value, one of which being the imminent halving of the bitcoin reward for mining, a significant event in the life of the preeminent cryptocurrency.

And finally, with the dust still settling on the decision by UK voters for Brexit, it remains to be seen how much long term impact there will be on financial markets regulation and market initiatives arising from the EU, but as it stands, major projects such as PSD2 and MIFID II noted above, continue as planned with the FCA stating it's business as usual for now.

Latin America: building a successful path in a challenging market

Recognizing that there were excellent business prospects in Latin America, Volante Technologies made the strategic decision in May 2013 to acquire a regional Mexico City based software company after it had successfully executed projects using Volante software; building a complete integration layer between front and back office in only 3 months - a fact that raised eyebrows at the time, as that kind of speed was very unusual and still is to this day. While we have experienced great success since the merger, it has not come without some industry and regional challenges.

In Latin America, business is done in a different way; firms prefer local expertise over remote services or support. A local presence with local face to face relationships are also important in order to understand the different rules and nuances of each culture or country in the region. To address this, and deal with the growing number of projects, we have chosen to work with key partners with regional expertise to use Volante’s technology and implement into our client systems’ environments. This approach has worked very well for us and as a result, we have experienced impressive growth in Latin America. Two years ago, we had three clients and three projects; now we have more than fourteen clients with around nine live projects at any one time. At the same time, we have hired the best people in the market to ensure a solid pace of the growth – as a result, our team has doubled in size during the past year. We have also extended our reach further into Latin America securing clients in Chile.

Key to meeting the needs of our Latin American client base is our investment in forming strategic local partnerships with other financial service providers in the region. This enables us to provide the knowledge base excellence required by our clients. One of the ways we are looking to support our partners and clients yet further, is the development of a training and certification program, available in both Spanish and English, which will ensure clients have full confidence when hiring recommended third party companies to implement Volante products. This entire process of course, is very closely monitored and managed by Volante Technologies.

Latin America is an up and coming, developing and exciting market. When compared to other financial centers around the globe, Latin American banks aren’t necessarily restricted by legacy systems, and have the appetite for deploying nimble, scalable software based on the latest technology. Their priority is to gain the business agility to deal quickly with the complexity of change and take advantage of business opportunities as they arise in the region and internationally – and this is certainly the case in Latin America! This requirement fits 100% with the Volante ethos, as we strongly believe in creating powerful and yet easy to use software, that is business-led through configuration rather than code-led software solution creation. This is evident within the full range of Volante software products with features such as automatically generated code and documentation and guided streamlined configuration rather than coding.

While it is clear that Latin America operates differently compared to other financial markets, there is much that can be gleaned from this relatively new, vibrant and exciting market. For Volante, having this diversity of clients across geographies in payments - be it financial message integration, payments on-boarding, processing or orchestration, we are able to absorb best practices from this diversity and build it into our core products for the benefit of our entire global community of clients.

Research, collaboration and development - a Volante approach to product roadmap creation

As a technology firm, we understand the world moves quickly and our clients need to be as agile and flexible as possible in order to meet their own client and market demands, while remaining competitive in the work they do. When developing our product roadmap and strategy, we look primarily at three main areas: client needs, changes in the industry such as regulation and standards, and of course, new trends in technology.

As financial technology evolves, so too must firms be able to quickly adapt and interface with it in order to take advantage of the new features to enhance their business offerings and gain the additional business agility needed to continue to thrive and stay ahead. A good example of this is distributed ledger technology (DLT) which is currently being considered for use in the payments space, which is why we engaged with Ripple last year to give clients easy and rapid cloud-based access to the new technology. In October 2015 we announced that the VolPay suite of products are Ripple ready and in June 2016 we went further by announcing the availability of a Ripple interface that is payment system agnostic. Meanwhile in the securities market, blockchain is still in the exploratory stage – so our product teams continue to monitor new developments in order to be ready either for when it is more widely rolled out, or used in smaller, well-defined business applications.

It is no surprise that regulatory demands continue as always to be a pain point for so many firms, particularly around reporting transactions. Firms must send the required data after specific business processing in some form, to the regulators in very specific formats containing key information. This undoubtedly requires money, resources and man-hours to understand the requirements and implement in a timely manner. One of our longstanding and on-going focuses is to provide technology that allows compliance with changing standards without making significant changes to clients’ own internal systems – in effect ‘insulating’ core systems from the complexity of change in standards and regulation thereby enhancing business agility while keeping the clients’ focus on the business rather than changes in technology.

Since our last newsletter, Volante has introduced support for REST, to provide a more flexible and open application architecture and support apps for mobile phones and tablets to access online services. Volante has also added support for MongoDB to allow clients to store and query large repositories of unstructured data.

When planning our product roadmap, we are constantly looking to new trends, regulation and client needs to bring solutions to market that make life easier for financial institutions. Collaboration is also key to gaining a holistic view of the industry, which is why we believe in matter what the requirement, we’re always ahead of the market and ready!