As we approach the tail end of Q3 it is abundantly clear that Real-Time Payments (RTP) remains a hot topic for our clients and the industry as a whole, and we have had many interesting conversations around the challenges and opportunities presented by RTP. To help satisfy this appetite we continue to witness for all things RTP related, we hosted a webinar in June on US real-time payments exploring the challenges that U.S. banks and financial institutions will face when looking to implement real-time or instant payments. We also published a collaborative white paper with Finextra which looks at how open banking and real-time payments tie up. Many hundreds of copies were downloaded shortly after publication and I invite you to do the same as I am certain you will find it an interesting read. There have also been interesting developments in PSD2 and cryptocurrencies, which is explored in more detail in Neil Clarke’s market update, as well as VolReg which Fiona Hamilton explores in her article.
Looking at product development, our aim has always been to develop new products before they are needed, staying ahead of the curve so we can preempt your needs and help accelerate your projects when the time comes. As a result, our research and development teams in India continue to expand, with the goal of enhancing business agility for our clients. The Volante product roadmap is constantly reviewed against progress and market nuances, taking into account feedback from our diverse client base. Ravi Ramachandran, SVP - Product Development, explores this further in his article, “Volante R&D, one focus: enhancing business agility.” Continuing on the theme of product development, interest in solving challenges caused by the growing demands for regulatory compliance reporting, in this edition of Volante Insights, we also report on progress towards the creation of a RegTech business application to help streamline and overcome such challenges.
It has been a very busy year so far for Volante in terms of event participation and media activities, and of course as we move through the year there will be more to come. I very much hope you enjoy this update from my team and I and, as always, if you have any questions please feel free to contact any member of our regional teams.
Industry News
Financial Markets News - Q3 2017
Where to start? Despite the summer vacation period having just finished, developments continue to abound in the industry. Open Banking continues to draw the industry headlines with plenty of noise on the part of PSD2 (the second payment services directive). Concerns continue from the Fintech industry too, and in particular with those that seek to be Third Party Providers (TPPs) in the new open banking ecosystem. Namely, that there may not be a consistent approach by banks in defining the APIs to access customer accounts for either payment or account information usage services. Industry bodies such as the European Consumer Association BEUC, are actively lobbying the European Commission to ensure that some consistency is applied to avoid widespread non-interoperability issues. With many issues to be resolved until the Regulatory Technical Standards (RTS) are finalized later this year, there continues to be a high degree of uncertainty as to how PSD2 will pan out across the EU, and that’s without a discussion of the so called “fuzzy period” between the publication of the RTS and the fully regulated deadline 18 months afterwards.
Neil Clarke, Market Engagement Director, Volante Technologies
Compare the situation in Europe with the analogous plan in the UK. Following extensive consultation with the impacted banks, the Open Banking Implementation entity formally published the API definitions for the Open Banking payment initiation, account information services and bank data such as Branch/ATM locations for use by authorized third-party providers. With such a prescribed and collaborative implementation plan, it bodes well for a successful launch in January 2018.
On a related note, Europe continues its push to adopt Instant (or Real-time) Payments under the SCT Inst program. As well as the Pan European EBA Clearing RT1 platform seeing strong take-up multiple domestic variations are arising. This of course leads to headaches for banks domiciled in multiple European countries as they will likely need to adopt multiple payment interfaces. This observed, it is worth noting that Volante's VolPay Hub: RTP Suite has been designed specifically to help solve such challenges.
At the time of writing and hot off the press is the Payments Strategy Forum publication of a blueprint and consultation for a New Payments Architecture in the UK. It is a wide-reaching project aimed at creating a consolidated and futureproofed payments infrastructure. Key elements include enablement of overlay services such as, Request to Pay and, provisions for the inclusion of richer data, as well as improved ways of tackling financial crime. Design and procurement for this ambitious program is due to start soon. You can read the blueprint of this initiative here.
Continuing on the theme of new in payments but taking a sideways step to alternative mechanisms, Ripple continues to make waves. Its digital token, XRP, is now the 3rd highest valued cryptocurrency (in its traditional sense) and the Ripple solution for banks has seen high profile adoption in Japan with 30 institutions signing up to use the network. Ripple also launched new solutions on the market under the banner RippleNet.
Europe continues its push to adopt Instant (or Real-time) Payments under the SCT Inst program
In general however, digital assets took a bit of hit recently with a couple of high profile news items. We continue to see criminal activities in this space, e.g. high profile arrests and fines relating to the BTC-e bitcoin exchange (see $110 Million: BTC-e Fined as US Vows Crackdown on Bitcoin), while regulators across the globe make their positions more clear on the use of crypto-based assets or securities. In the US, the SEC made a significant statement on the Ethereum platform DAO 'hack' (see SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities), in particular noting that issuing of such crypto-based assets should be viewed (and regulated) similarly to traditional exchange traded securities.
The SEC statement is perhaps somewhat of a wakeup call for many in the crypto world particularly as there appears to be a boom in Initial Coin Offerings (ICO) at the moment which some might describe as modern day Ponzi schemes - as is the case for any investment - but perhaps significantly more so in this world, it’s a case of 'buyer be(very)aware.'
As admirable as the model of a user/community led infrastructure is, the friction that appears as new initiatives are proposed to move the infrastructure forward (such as SegWit and the lightening network) meaning the arrival of chain forking (as occurred with the Ethereum DAO debacle) and the investment uncertainties that come with such change, suggests that widespread adoption of this technology for consumer payments still remains unlikely.
Volante product development operations
Volante R&D, one focus: enhancing business agility
Volante Technologies’ research & product development team consists of a mix of highly experienced and brilliant members, as well as hires from some of the top universities in India, such as IIT / Anna University / VIT. Any individual who joins the company, irrespective of whether they are experienced or fresh graduates, undergoes a long and rigorous training process to enhance their understanding of our products, domains, and processes before they are selected into different teams. This ensures that all members understand and absorb the culture, vision and philosophy of the company – the creation of development platforms and business applications that significantly enhance business agility.
Ravi Ramachandran, SVP - Product Development, Volante Technologies
Tools are used for project management, product development, and issues tracking for software delivery, as well as for automation processes. The team members are empowered to process their actions and deliveries with less dependence on external input, but at the same time they can also tap into the collective power of the group for solving issues. All development efforts have associated documentation, individual testing and automation in place so that deliveries to clients have the highest degree of quality. Each project then undergoes rigorous testing before being released to our customers; indeed, around 50% of our staff are dedicated to testing and quality assurance. These individuals follow robust processes and have automation in place in all practical phases to enable speedy and thorough certification. This level of rigorous testing is our internal mandate, as our clients in financial services expect this with our solutions as they are deployed in mission critical areas.
As part of the innovation process, ViLab (Volante Innovation Labs) is Volante’s research wing, focused on exploring, understanding and exploiting new technologies and industry disruptors
As part of the innovations process, ViLab (Volante Innovation Labs) is the research wing of Volante focused on understanding and exploiting new technologies and industry disruptors and work on prototypes that encompass these innovations. In terms of R&D processes and best practices, our team documents the design approach taken and all configurations, methodologies and steps followed for any research engagement, so that the final delivery is easily reproducible - this approach ensures our customers are less reliant on Volante and empowered to create, deploy and maintain payment and financial message integration solutions in-house with significantly less involvement from external specialists and consultants. Some of the research lines currently being explored are cloud and container technologies (like Amazon Services, Docker, Bluemix, Cloud Foundry), big data (using Hadoop / Spark), and distributed ledger technologies using blockchain, machine learning and auto enrichment features. Some technologies such as OpenAPI / MicroServices have found immediate usage into the core product, while other research output is archived for later inclusion.
In conclusion, our central belief is to create world class products that will help our customers achieve cost savings, speedy time to market, improve efficiency, and ease of maintenance. All of the above nurtured and delivered from our Research & Product Development centers. This capability is entirely attributed to our world class team and rigorous processes we have in place.
An agile solution to the pressures of transaction regulatory reporting
Volante has been helping clients with reporting requirements since the financial crisis of 2008, helping firms, ARMs and CCPs provide Competent Authorities with fully valid and enriched data. Over the past many months we have spent much time talking to our customers and the market in general including competent authorities and industry working groups to deeply understand the specific pressures that financial organizations, particularly those in capital markets and derivatives, face in the future. The reality being that the first wave of regulation was just the rising of the winds and not the full force of the storm which is coming over the next few years. Regulations such as MiFID II, CSDR, SFTR and GDPR, as well as existing regulations, are constantly being updated, including BCBS and potentially others such as Dodd-Frank depending on the geo-political climate.
During our discussions we uncovered a recurring theme of key challenges that cost firms an inordinate amount of time and work in an effort to remain compliant in an ever-changing environment of regulatory reporting demands - the challenge being:
To reliably, accurately and efficiently compile the necessary data required by the plethora of regulatory bodies in the required format, in the correct timeframe.
To derive eligibility of a transaction for a particular regime and then appropriately enrich the data with, for example GDPR compliant data being key.
To have visibility of what has been reported, when, to whom and what has failed.
Fiona Hamilton, Vice President, Europe and Asia, Volante Technologies
Firstly there is the problem of integrating flows of data from the various sources of transaction data being produced by the various transaction systems within the organization. These data flows vary greatly depending on the systems used to generate them. While some of these systems are flexible enough to configure data flows in a useable format, others are old and inflexible, or at least, slow and expensive to adapt. With this also comes the risk of accessing the wrong data or indeed incomplete transactional data. Then even if the data is correct, there is the challenge of reconfiguring the integration of data based on new changes in transaction reporting requirements. Secondly, there is the challenge of bringing all the data into one place where the institution can further work on the data and ready it for reporting to regulators. This includes activities such as; validating, transforming or enriching based on sets of business rules that are shaped by the reporting requirements. And then thirdly, the actual passing on of the data to the various regulators using the format and messaging standards they stipulate.
Volante’s flagship product Volante Designer for financial message and data integration - and proven over many years with some of the largest financial institutions in the world - is an ideal solution for solving such challenges. Indeed we have used our own product as the basis for creating targeted solutions in the payments area that leverage its power and agility. We intend to implement the same approach to the challenges in the regulatory reporting space – in short, a RegTech solution brought to the market by a proven vendor and a proven technology. The Volante Innovation Lab (ViLab) has used Volante Designer to create a business application to solve these three key challenges in transaction regulatory reporting. The solution is in its final stages of prototype testing and we are already demonstrating the power and convenience of this to clients. We value input at all stages of development so we would love to hear from you if you would to share your challenges and understand how Volante can help alleviate them.
The Volante Transaction Reporting Hub – agility and timeliness in regulatory compliance reporting
Latest News
In June, Volante hosted a very well-attended webinar on “Staying Ahead of Real-time Payments in the US.” The webinar focused on the challenges that U.S. banks and financial institutions will face when looking to implement real-time payments, what this means in terms of technology needed for implementation, and how banks can benefit from this shift while creating value for their clients. During the webinar, experts also discussed use cases, best practices, and key lessons learned.
In August, Volante and Finextra teamed up to publish a white paper titled 'Open Banking in a real-time world: preparing your payments systems for a continuum of change in collaboration.' The paper explores two major developments influencing the way banks must respond to regulation, fast-evolving technology, increasingly demanding customers and a vibrant competitive landscape: the unstoppable rise of real-time payments; and the transition to openness, underpinned by API integration.
Viewpoints
In April, Volante exhibited and spoke alongside Bank of New York Mellon on Real time Payments in the US, at NACHA Payments 2017 in Austin, Texas, and we shared our thoughts and experiences in a series of blogs about the event. In the first blog, we looked at what people could expect from the event, and predictions about key themes. In our day one blog, we looked back at highlights from the day, including corporate demands for faster payments and the reality of Blockchain & Same Day ACH. In our final event wrap-up blog, we highlighted hot topics from the event including The Implications of Faster Payments in the digital age, and Updates on the Faster Payments Task Force. From thoughtful debates to productive conversations, we are delighted that this edition of the conference was our most successful yet. We look forward to seeing you at NACHA Payments 2018 next year!
In May, Volante was interviewed by Euromoney for an article on Ripple, looking at how Ripple is reaping the benefits of a payments focus.
At EBAday in June, Fiona Hamilton spoke to Finextra about her impressions of the conference over the two days and how the theme of conversations has been markedly different this year being more focused on the changes and opportunities with PSD2, open banking and the adoption of real time payments.
In June, Nadish Lad, Head of Payments Products, Volante Technologies, explored the theme of interconnectedness of instant payments and PSD2 in a blog for Finextra. Within the blog, Nadish suggests that banks approach their RTP/instant and PSD2 strategies in parallel.
In July, Neil Clarke spoke to Finextra about how PSD2 and open banking challenge banks’ business models, and the role of agile, context aware technologies in helping banks to comply with the technical requirements of the new regulation.
Finextra interviewed Volante again in July this time, with Fiona Hamilton exploring how real-time challenges go beyond real-time schemes, the fact that ISO 20022 won’t be a panacea; how to cope with the impact of various new real-time developments on back end systems and, how to avoid regression testing your entire infrastructure every time there’s a change.
