Capco Blog

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Via discussions hosted on the Capco Institute Blog. Members debate high profile issues, with frequent and provocative contributions from Capco thought leaders. For institutions around the world, how will the changing financial services landscape form the future of finance?

The content and opinions posted on this blog and any corresponding comments are the personal opinions of the original authors, not those of Capco.

Author: Tobias Temmen
Published: November 28, 2014

Risk management has been transformed beyond recognition in the past few years. The regulatory wave unleashed by the 2008 financial crisis has created a need for a new layer of operations for implementations of these legal requirements. Most banks are already improving their operations by throwing teams at the ‘deep end’ of run-the-bank and change-the-bank functions. I believe they should be diving deeper.

The increased consumption of budgets for regulatory projects demonstrates that operations cost-management is directly related to a bank’s ability to react to new compliance requirements. Although each new regulation is issued separately, implementation usually impacts the same systems and processes within a bank. Understanding the overall impact of regulations on the value chain of a bank’s operating model is crucial to business excellence.

Author: Thomas Wagenknecht
Published: November 27, 2014

A once slow-moving market is changing at an ever-increasing speed. Snapchat, the popular photo sharing app, has announced a partnership with Square to offer instant P2P mobile payments.

The move comes only a few weeks after Apple rolled out its mobile payment service on iPhones. What does the rapid shift mean for banks and the payments industry?

With Snapcash, users transfer money sending a text message beginning with a “$” sign and the corresponding amount. All they have to do is to register their debit card details in their Snapcash account. That’s it. Square, a US-startup that already offers a similar service, provides the infrastructure.

Author: Adam Davis
Published: November 26, 2014

The financial crisis. Memories of the worst of it may, just, be starting to fade. But its legacy is likely to be felt for decades, through the reshaping of the banking landscape. We all know the key features of change; Regulation has hardened and proliferated. Banking customers have high demands, conditioned by experiences in other sectors. And in perhaps the most profound change of all, new and nimble players – including so-called ‘non-traditionals’ - have successfully entered a previously closed market. Yet attractive as this may seem, any investor wanting to start a new bank should be concerned about three main barriers to entry:

  • The capital required to start a bank
  • The banking license required from the British regulators
  • The brand strength needed to inspire customer trust

A strong brand wrapper around a well-capitalised bank with a license to trade: these are the critical foundations of challenger bank viability. Yet, our experience shows that any start-up bank determined to thrive requires additional attributes. It should offer clear differentiation through a killer proposition. It should be supported by relevant operations, solid risk policies and procedures. And it should meet the standards of modern technology. That’s no small checklist. So, where to start? We believe (and our proven experience con¬firms) there is a sequence of steps to follow to establish a successful new banking entrant in record time. We have done it before. In order to help other challengers succeed, we have packaged our experience in a reusable methodology and a set of supporting tools. Here, we walk through our approach.

Author: Ian Rawlinson
Published: November 23, 2014

To add a level of complexity, regulators have increased the volume of rules and guidance in recent years and many of these now overlap and can, on occasion, conflict with one another.

Moreover, banks are no longer con ned to liaising with a single regulator - compliance now involves dealing with domestic and foreign authorities. Regulators from all over the world continue to issue fines and censure individuals and companies in relation to compliance failings.

Irrespective of the size, keeping a bank compliant in the current climate is a challenge. Banks need to be proactive in their management of compliance risk to give regulators confidence that adequate control and oversight is in place. Banks can however help themselves by ensuring that their strategic objectives are in line with current regulatory concerns, such as the fair treatment of customers.

Tobias Schmidtke
Karsten Schneider
Published: November 20, 2014

Until recently, insurance companies have escaped the scrutiny of global regulators, while banks carried the burden for the 2008 financial crisis, adapting to a torrent of reforms.

Now compliance is catching up with the insurance industry. The EU Solvency II directive is an early milestone and probably the first of many.

In step with global regulatory efforts, German authorities are anxious to implement German market-specific regulations. The latest example here is LVRG (Lebensversicherungsreformgesetz) - the German life insurance reform act, which is set to have a major impact on the country’s life insurance market.

Author: Kyle Marynowski
Published: November 03, 2014

Traditionally, Mass Affluent households have proven to be an enigma to Wealth Managers. This segment requires a new approach and fresh thinking to unlock investment opportunities. Capco believes that it is the first company to offer a comprehensive, yet flexible solution, to develop and retain that business segment well into the future.

The post 2008 economic landscape is chock-full of constraints, strict capital requirements, narrow margins, depressed lending, and fee limitations. Wealth Managers have been reluctant to break the mold, reexamine the segments they serve, and offer investment solutions that prove lucrative to both parties. Instead, the vast majority of Wealth Managers continue to push products that cater to the High Net Worth segment, historically the “Golden Goose.”