Way forward for today’s Global Transaction Banking

As global transaction banking move to 2020, it is evident that many banks are still not clear on the path to take. Global transaction banks are matted in their present IT challenges and operational issues followed by demanding central banks regulatory requirements. Many global transactions banks are looking at their current complex IT landscape and operational models and thinking of next steps, which were deferred for different reasons over the past decade. Therefore the coming years offer global transaction banking the potential to maximize top line with minimal spend on supporting software and hardware.

Global transaction banks need to identify a core GTB platform that delivers comprehensive functionality for all business and manages complex workflow's involving core processing and corporate channel layer on a common platform. With the right GTB platform, as highlighted global transactions banks will have the opportunity to maximize revenue streams and leverage the value of the GTB platform. This can be done by expanding the global transaction banking offering and by addressing both domestic and international requirements. There have been few developments in the past 2-3 years that have impact on global transaction banking and any modern GTB platform should address them.

These include: Regulations Market dynamics (BPO/SWIFT TSU, PSD2), End of bespoke systems, Fin Tech and Digitization, Global Reference Models ( i.e. Search for a consistent Global / Regional operational and IT model) and Cloud.

The changing regulatory environment is also a key theme, with European Market Infrastructure Regulation (Emir), SEPA, Basel III, Foreign Account Tax Compliance Act (FATCA) etc. likely to attract particular attention. The modern Next generation GTB platform needs to be robust enough to maintain current demands and requirements yet be flexible enough to meet future changes in policy and regulation at a local, regional and global level.

Global Transaction banks have to provide their services in a cost effective way to benefit from a higher margin and at the same time be more competitive and innovative. GTB platform should help global transaction banks to adopt market dynamics and there by provide new sources of transaction banking revenue.

Many global transaction banks are victim of being early adopter of technology. They adopted software before a software industry existed. And, in doing so, they built systems that were necessarily bespoke and not upgrade able. Problems have been compounded over times. Since only few global transaction banks have corrected their original mistake and moved to packaged software, banks continue to layer legacy software on top of legacy software written in a piecemeal fashion over decades in languages now not easily supported. Global transaction banks have significant technology debt which will need to be paid off today, as banks spend more than 75% of their IT budget maintaining legacy systems. Global transaction banks can achieve this by selecting next generation GTB platform.

There has been a detailed discussion for the past few years on the impact of Fin Tech and Digitization on Financial Services. Global transaction banking other than Payments area has not seen the full impact of Fin Tech up till now. Over the years, many global transaction banks have tried to put a digital layer on the legacy problem by investing in middle ware, stand-alone pricing platforms and siloed channel solutions. But, this created additional complexity while failing to deliver the rich, integrated customer experience that customer expect. Next generation GTB platform should be truly digital from front to back and help banks to achieve the digitization they desire without compromising on integrated customer experience. Fin Tech along with multiple banks are experimenting on Blockchain – the shared ledger technology which allows any participant in a business network to see the system of record – will have a transformative impact on global transaction banking in the future. Mainly three areas of transaction banking – Trade Finance, Payments and Capital Markets – will have Blockchain technology impact. Aside from the immaturity of the technology, there are many hurdles which might prevent Blockchain from going mainstream in transaction banking. One could be the degree to which the banks have an appetite right now to make the necessary levels of investment, beyond the experimentation they are already doing in order not to be left behind. Another hurdle could be regulatory and legal issues. Having said that, Blockchain could be the technology that enables banks to introduce new products and services, and this is all the more worth considering given the fact that new entrants, unencumbered by legacy constraints, could utilize Blockchain to create a radically cheaper platform. Next generation GTB platform should not ignore Blockchain technology and experiment how they can adopt the same.

Next generation GTB platform should be truly Multi Region, Multi Currency, Multi Time zone and Multi Lingual application with configuration and extensible features. It should be deployable as a single instance on a global basis. GTB Platform should be extendable or adoptable with the use of code hooks via extensibility tool kits. This gives global transaction banks the ability to quickly adapt to any client demand or local regulatory needs not depending on vendors. This also helps global transactions banks to reduce their products time to market and thereby be a market lead rather than being a follower. Any extensibility changes done by banks using these tool kits will be owned by the respective bank and is therefore controlled and implemented in house ensuring proper processes. Further once these changes are promoted to the banks installation it should be able to be applied to future versions of the GTB platforms without much efforts. Extensibility and Multi region/entity configuration capability in GTB platforms help global transaction banks to establish their global reference model (GRM) by identify standard product processors, which can be fine-tuned on a regional and / or local country level. Global transaction banks with GRM can reduce the implementation time line and the cost by avoiding duplication's.

Next generation GTB platform should be deployable on cloud. This helps global transaction banks to leverage cloud solutions and thereby reduce the CapEx requirement of running the global transaction banking business.

Disclaimer: The views in this article are in my individual capacity and do not anyway represent/relate to my current or past employers.