Listen: Weekly Wrap looks at core, cloud, regulatory predictions

Loraine Lawson
Hi everyone, I’m Deputy Editor Loraine Lawson, and welcome to The Buzz from Bank Automation News, where we explore how automation and emerging technology is transforming the banking industry. This is our Weekly Wrap of what’s happening in the industry. This week, I’m pleased to be joined by associate editors Aaron Marsh and Elijah Poindexter. It is Jan. 7, 2022. And this week, we looked at predictions for 2022, including the fact that banks are using outdated processes that could draw bigger fines in 2022.Aaron, you covered that story and you specifically mentioned how spreadsheet use to manually handle banking tests may lead to big trouble for banks. And that struck me because even though it’s spreadsheet data, folks often joke that Excel is the world’s most popular database. So how can spreadsheets and other manual processes lead to trouble with regulators?Aaron Marsh
Well, Lorraine, it basically comes down to those manual inputs and manual processes. And this is largely from a conversation I had with with Bikram Singh, and he is CEO of EZOPS. They work mainly with like large banks, larger banks, and they automate processes. So this is what they see. And to quote him, we’re talking about spreadsheet use, and I want to read this: because “these are the repetitive tasks, the low-value tasks that have been done historically in Excel and Microsoft Access databases, things that are very error-prone, not scalable and are often bringing down the entire client service experience,” delaying things like opening new accounts and onboarding new members and things like that. So these are still very widely used processes, but they’ve been being phased out over a number of years now. But they still remain pretty popular. And there’s an awful lot of manual data entry, and it’s very time consuming. It also opens you up for a lot of errors.So what we’re seeing is that last year, there were some signals from regulators, from FDIC as well as the OCC, that they are concerned about these legacy systems and processes at banks. Mainly they’re looking at it more from like an IT vulnerability, a security vulnerability standpoint. But they’re honing in on these old, kind of outdated manual-heavy and intensive processes that that can lead to trouble. And so if you’re using these for business and accounting purposes, and then all of a sudden, you have a data error of some kind or reporting error, and now a regulatory authority is going to see that. Mr. Singh at EZOPS is seeing from the banks that are working to change these processes, if there are problems of this nature, they tend to kind of keep coming back, they keep rearing their ugly head.They’re saying we may see like five times, 500%, larger potential fines for these kinds of errors at banks, particularly for repeat circumstances, repeat offenses. So you know, this isn’t in the story — I think sometimes we like to talk about what didn’t make it into the story. This is a “wait and see” kind of thing to see what happens in 2022 with U.S. regulators’ views and their standpoint on this issue. But we did just see in December, from the Bank of England, is their Prudential Regulatory Authority came down with a pretty heavy fine of around $60 million — that’s the dollar equivalent — for Standard Chartered Bank. And it really stemmed from a spreadsheet error and some their subsequent cooperation with authorities was cited as well. But it was basically a spreadsheet error, and it comes down to a fine of $60 million.

So it sort of becomes this issue of, look, we’d better see if we’ve got some of these old processes in place and look to invest and upgrade them, or pay that out in fines. Your choice.

Loraine Lawson
Well, and it’s interesting because there are business cases for moving off spreadsheets as well. For instance, if someone leaves you may not have access to their spreadsheet or may not even know they were using a spreadsheet for that process. Or the other problem that it represents for it is that they become little data silos where People are keeping valuable business information locked away on their desktop in a spreadsheet. So there are valid reasons. But hopefully maybe that’ll put some pressure on people to go ahead and move on for automation. automate some of these tasks instead of spreadsheets to right.

So another trend that we reported on this this week is core cloud. Alijah, you looked at that, what did you find?

Alijah Poindexter
Yeah, so there are several trends going on right now and in the core and cloud banking space, as you probably would assume. And one of the biggest ones we noticed, during the article this week was self service. Digital banking is something that I think a lot of people may think, I mean, we might be at the final frontier, because it seems like every other week, something new is coming out. And it’s like, okay, it’s almost like they can’t innovate any further. But that’s certainly not the case. I spoke with plenty of people on the topic over the past couple of weeks. And yeah, we’re moving in a lot of different directions with digital banking, self service, online account origination, that’s a big one. So you know, in some instances, it can take up to two hours just to set up a checking account and this is not pre COVID.

Right now you go into your go into your local brick and mortar bank. Say I want to set up a checking and savings account, you could be out two hours. Well speaking with a couple people, one of them being a Gio Mastronardi, who’s at CSI, its consultancy, he says that online accountant loan origination is certainly in the cards, it’s certainly a big play for 2021, you will not have to go to a bank for anything in that area, which is certainly exciting.

Because contactless both for navigating the pandemic and also for the fact that people want convenience. And this is a surefire way to deal with that. So people could live in an area for 5, 10 years, they you know, start an account, go through the whole rigmarole and then exit the account once they leave the area and not one step into the physical, you know, brick and mortar location. So that’s super interesting. And that also applies to loan origination as well.

And then another thing is detailed card controls. So you know, I remember a time and I’m sure a lot of a lot of our listeners do as well, when if something was going on with your card, you know, fraud, or if there’s an overdraft you didn’t know about, you wouldn’t be days before you could resolve it, especially if it was over a long weekend or a holiday, no longer 2022 is going to be a year where really detailed, you know, self-service car controls come into play. So you may have the full toolkit that you know, somebody working in the anti-fraud or the anti-money laundering, or the security and risk department at your local bank, you might have that full toolkit moving forward at your fingertips, so that if something happens in you know, you’re notified of it, or you find out about it, you immediately have the opportunity to kind of go in and deal with that. So that’s super exciting.

And then another thing, of course, is micro services. So, you know, AWS says that FIS are deploying micro services on the cloud and Oracle. And this offers a number of financial service solutions include including a core platform, and these solutions are built on micro services, which are, you know, for those who don’t know, discrete bits of code, and they sort of encapsulate a single function. So there’s a lot there, a lot of really interesting things going on with core and cloud banking, and you know, how everything we have in the digital banking space moving forward, is going to be built. So you might as well be there to kind of catch the innovations as they come and play it as it lays, so to speak. So, super exciting.

Loraine Lawson
Yeah, and of course, we also reported on the business value of microservices this week. But that would be something we’ll be looking at long-term. I mean, one of the values is that it does enable embedded finance, so when they create these discrete bits of code, that means they can run without necessary necessarily having to source other code or services like traditionally used to be when you built a service. It was built to interact with the bigger application, these are more discreet, they don’t need that bigger application, so you can pop that out and use it somewhere else. So it should be an interesting development as more companies build out on microservices.

Well, that about covers it for this week. Thank you so much for joining us for the weekly wrap on The Buzz. Don’t forget to attend our Bank Automation Summit, which is March 1-2 in Charlotte, North Carolina. You can learn more about the Bank Automation Summit at bankautomationsummit.com. For more podcast content, check out bankautomationnews.com and search “The Buzz” from Bank Automation News on iTunes and Spotify.

Loraine Lawson
Hi everyone, I’m Deputy Editor Loraine Lawson, and welcome to The Buzz from Bank Automation News, where we explore how automation and emerging technology is transforming the banking industry. This is our Weekly Wrap of what’s happening in the industry. This week, I’m pleased to be joined by associate editors Aaron Marsh and Elijah Poindexter. It is Jan. 7, 2022. And this week, we looked at predictions for 2022, including the fact that banks are using outdated processes that could draw bigger fines in 2022.Aaron, you covered that story and you specifically mentioned how spreadsheet use to manually handle banking tests may lead to big trouble for banks. And that struck me because even though it’s spreadsheet data, folks often joke that Excel is the world’s most popular database. So how can spreadsheets and other manual processes lead to trouble with regulators?Aaron Marsh
Well, Lorraine, it basically comes down to those manual inputs and manual processes. And this is largely from a conversation I had with with Bikram Singh, and he is CEO of EZOPS. They work mainly with like large banks, larger banks, and they automate processes. So this is what they see. And to quote him, we’re talking about spreadsheet use, and I want to read this: because “these are the repetitive tasks, the low-value tasks that have been done historically in Excel and Microsoft Access databases, things that are very error-prone, not scalable and are often bringing down the entire client service experience,” delaying things like opening new accounts and onboarding new members and things like that. So these are still very widely used processes, but they’ve been being phased out over a number of years now. But they still remain pretty popular. And there’s an awful lot of manual data entry, and it’s very time consuming. It also opens you up for a lot of errors.So what we’re seeing is that last year, there were some signals from regulators, from FDIC as well as the OCC, that they are concerned about these legacy systems and processes at banks. Mainly they’re looking at it more from like an IT vulnerability, a security vulnerability standpoint. But they’re honing in on these old, kind of outdated manual-heavy and intensive processes that that can lead to trouble. And so if you’re using these for business and accounting purposes, and then all of a sudden, you have a data error of some kind or reporting error, and now a regulatory authority is going to see that. Mr. Singh at EZOPS is seeing from the banks that are working to change these processes, if there are problems of this nature, they tend to kind of keep coming back, they keep rearing their ugly head.They’re saying we may see like five times, 500%, larger potential fines for these kinds of errors at banks, particularly for repeat circumstances, repeat offenses. So you know, this isn’t in the story — I think sometimes we like to talk about what didn’t make it into the story. This is a “wait and see” kind of thing to see what happens in 2022 with U.S. regulators’ views and their standpoint on this issue. But we did just see in December, from the Bank of England, is their Prudential Regulatory Authority came down with a pretty heavy fine of around $60 million — that’s the dollar equivalent — for Standard Chartered Bank. And it really stemmed from a spreadsheet error and some their subsequent cooperation with authorities was cited as well. But it was basically a spreadsheet error, and it comes down to a fine of $60 million.

So it sort of becomes this issue of, look, we’d better see if we’ve got some of these old processes in place and look to invest and upgrade them, or pay that out in fines. Your choice.

Loraine Lawson
Well, and it’s interesting because there are business cases for moving off spreadsheets as well. For instance, if someone leaves you may not have access to their spreadsheet or may not even know they were using a spreadsheet for that process. Or the other problem that it represents for it is that they become little data silos where People are keeping valuable business information locked away on their desktop in a spreadsheet. So there are valid reasons. But hopefully maybe that’ll put some pressure on people to go ahead and move on for automation. automate some of these tasks instead of spreadsheets to right.

So another trend that we reported on this this week is core cloud. Alijah, you looked at that, what did you find?

Alijah Poindexter
Yeah, so there are several trends going on right now and in the core and cloud banking space, as you probably would assume. And one of the biggest ones we noticed, during the article this week was self service. Digital banking is something that I think a lot of people may think, I mean, we might be at the final frontier, because it seems like every other week, something new is coming out. And it’s like, okay, it’s almost like they can’t innovate any further. But that’s certainly not the case. I spoke with plenty of people on the topic over the past couple of weeks. And yeah, we’re moving in a lot of different directions with digital banking, self service, online account origination, that’s a big one. So you know, in some instances, it can take up to two hours just to set up a checking account and this is not pre COVID.

Right now you go into your go into your local brick and mortar bank. Say I want to set up a checking and savings account, you could be out two hours. Well speaking with a couple people, one of them being a Gio Mastronardi, who’s at CSI, its consultancy, he says that online accountant loan origination is certainly in the cards, it’s certainly a big play for 2021, you will not have to go to a bank for anything in that area, which is certainly exciting.

Because contactless both for navigating the pandemic and also for the fact that people want convenience. And this is a surefire way to deal with that. So people could live in an area for 5, 10 years, they you know, start an account, go through the whole rigmarole and then exit the account once they leave the area and not one step into the physical, you know, brick and mortar location. So that’s super interesting. And that also applies to loan origination as well.

And then another thing is detailed card controls. So you know, I remember a time and I’m sure a lot of a lot of our listeners do as well, when if something was going on with your card, you know, fraud, or if there’s an overdraft you didn’t know about, you wouldn’t be days before you could resolve it, especially if it was over a long weekend or a holiday, no longer 2022 is going to be a year where really detailed, you know, self-service car controls come into play. So you may have the full toolkit that you know, somebody working in the anti-fraud or the anti-money laundering, or the security and risk department at your local bank, you might have that full toolkit moving forward at your fingertips, so that if something happens in you know, you’re notified of it, or you find out about it, you immediately have the opportunity to kind of go in and deal with that. So that’s super exciting.

And then another thing, of course, is micro services. So, you know, AWS says that FIS are deploying micro services on the cloud and Oracle. And this offers a number of financial service solutions include including a core platform, and these solutions are built on micro services, which are, you know, for those who don’t know, discrete bits of code, and they sort of encapsulate a single function. So there’s a lot there, a lot of really interesting things going on with core and cloud banking, and you know, how everything we have in the digital banking space moving forward, is going to be built. So you might as well be there to kind of catch the innovations as they come and play it as it lays, so to speak. So, super exciting.

Loraine Lawson
Yeah, and of course, we also reported on the business value of microservices this week. But that would be something we’ll be looking at long-term. I mean, one of the values is that it does enable embedded finance, so when they create these discrete bits of code, that means they can run without necessary necessarily having to source other code or services like traditionally used to be when you built a service. It was built to interact with the bigger application, these are more discreet, they don’t need that bigger application, so you can pop that out and use it somewhere else. So it should be an interesting development as more companies build out on microservices.

Well, that about covers it for this week. Thank you so much for joining us for the weekly wrap on The Buzz. Don’t forget to attend our Bank Automation Summit, which is March 1-2 in Charlotte, North Carolina. You can learn more about the Bank Automation Summit at bankautomationsummit.com. For more podcast content, check out bankautomationnews.com and search “The Buzz” from Bank Automation News on iTunes and Spotify.