Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -

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Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
in Finance
Issue #61

Reshaping financial services

On the cover
Harinder Takhar, Paytm Labs, page 6

Featured interviews
Voices on 2030, page 13
Ranjana Clark, MUFG, page 22
Harit Talwar, Goldman Sachs, page 35

October 2019
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -

                             Letter from
                             the editors
                             Big changes; big opportunities
                             If change is the only constant then transformation is the only option. And so it is for
                             Financial Services executives around the world. Massive changes — in business
                             models and operating strategies, in regulatory environments and customer
                             expectations, and in technologies and competitive advantages — are sweeping across
                             the marketplace. And Banks, asset managers and insurers are all looking to seize on the
                             This edition of Frontiers in Finance explores some of the great challenges now facing
                             Financial Services executives as they strive to balance their short-term objectives
                             against their longer-term transformation imperatives. As organizations move to
                             re-evaluate, re-imagine and re-define their business models and operating strategies,
                             this edition offers some insights to help executives create and execute sustainable
                             transformation in an ever-changing world.
                             The articles in this edition are concentrated around three main drivers of change: the
                             desire for efficiency; the shift to digital; and the evolving regulatory environment.
                             Yet the lessons being shared by the banking, asset management and insurance leaders
                             interviewed for our articles are broadly applicable, regardless of the change pressures
                             your organization is facing.
                             Some of our articles — such as our cover story with Paytm’s CEO or interviews with
                             MUFG’s Head of Global Transaction Banking or with the Head of Global Consumer
                             Business, Goldman Sachs — offer deep insights into the pace and scope of the
                             change that is now underway across the industry. Others, such as our articles on the
                             changing nature of M&A, the introduction of IFRS17 and drive for improved operational
                             excellence, take a focused view of the new strategies at play within key areas of the
                             financial services organization.
                             What this edition of Frontiers in Finance clearly shows is that the leaders are not waiting
                             for clarity on what exactly the future may hold; they are taking bold steps and making
                             radical changes to their businesses to find and create their own opportunities for
                             transformation and growth. This edition provides practical ideas how they are doing it.
                             On behalf of KPMG’s global network of financial services professionals, we would like
                             to thank all of the executives and business leaders who took the time to share their
                             thoughts, experiences and insights with us.
                             If you would like to learn more about the issues raised in this edition of Frontiers in Finance,
Adrian Lee
Head of Financial Services   or to discuss your own unique transformation opportunities, we encourage you to contact
KPMG in Malaysia             the KPMG team in Malaysia listed at the back of this publication.
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Contents                                                                          Chairman’s message

                                                                                  Cover story
                                                                                  Paytm: Solving problems to
                                                                                  create opportunity

   10                                              22                                           40
     Creating efficiencies                           Digital models take hold                      transformation

10	What ails European banks?                   22	Agility with discipline:                  40	Next-generation banking
    Exploring the challenges facing the             Transforming MUFG’s                          technology and tax implications
     European banking sector, and ways               Transaction Banking business                 As operating models change, tax
     in which to transform.                         Ranjana Clark shares her views on             teams in traditional banks must
                                                     digital disruption in banking and four        broaden their horizons.
14	Capturing the benefits of                        pillars for success.
    simplification                                                                            46	AI offers the smartest solution
    Simplification as a vehicle to a faster,   26	Connect to compete: Delivering                for transition to RFRs
     leaner, more agile business.                   the next-gen target operating                 LIBOR transition presents the
                                                    model                                          opportunity to transform a manual
18	Accelerating transformation:                    What will the next-gen target                 and error-prone process. Are you
    Beyond signing the deal                          operating model look like?                    ready?
    A new way to look at, and achieve
    value from, M&A and deals.                  30	Does banking’s future outweigh            50	Tax, transfer pricing and
                                                    its past?                                     transformation: What Asset
                                                    New business models will halt the             Managers may be forgetting
      Voices on 2030                                band-aid approach to legacy systems           Tax-savvy asset managers
      The Future of Financial                       as banks look to new architecture             undertake five key activities
      Services                                      that is digital to the core.                  to ensure they aren’t missing
      Video interviews with                                                                       opportunities or creating new risks.
      leading and start-up financial            35	Spotlight: Goldman Sachs
      institutions on the future of the             breaking new ground with Marcus           54	When opportunity comes calling:
      industry — interconnected,                    A discussion with Harit Talwar,               Using the deferral of IFRS 17 wisely
      collaborative, frictionless.                  Head of Global Consumer Business,             Five critical commercial and
                                                    Goldman Sachs, on starting a                  operational opportunities for
                                                    digital bank.                                 insurers from the delay to IFRS 17.

                                                36	Flexibility for growth:
                                                    Operational excellence in an
                                                    era of digital disruption
                                                    What will it take to achieve
                                                    operational excellence in today’s
                                                    insurance industry?
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Chairman’s message

Finding the fortitude
to transform
          inancial service executives know they need to get serious about
          transformation if they want their organizations to survive. Now
          they just need the organizational fortitude to make it happen.

James P. Liddy
Global Chairman, Financial Services
KPMG International
Partner, KPMG in the US

As an industry, we have spent years               Start with a healthy appetite                 In part, this reinvigorated commitment
talking about the need for radical                The reality is that, until today, few         to transformation is being driven by
transformation. Yet, notwithstanding a            executives have seemed willing to risk        concerns around competition. Executives
handful of truly innovative leaders, the          their careers on a wholesale organizational   are starting to realize that the more
reality is that little has actually changed       transformation. Yet my conversations          innovative brands are starting to look and
in the way most financial services                with banking, insurance and asset             act quite unlike a traditional bank. They
firms operate.                                    management leaders around the world           also understand their customers no longer
                                                  suggest that the mood is starting to shift.   want the same types of financial services
Sure, over the past decade, many key
                                                  Executives and organizations are starting     they did just a few years ago. And that is
processes have been digitized and
                                                  to find the intestinal fortitude to do what   leading many financial services executives
automated; some exciting new channels
                                                  they know they must.                          to reconsider where they want to position
and innovative tools have been added;
                                                                                                themselves in the go-forward economy.
new business models and operating                 Consider this: In KPMG International’s
models have also been adopted.                    recent global survey of financial services    While most executives recognize that
                                                  CEOs,1 22 percent of respondents              transformation is now an absolute
What we have not yet seen, however,
                                                  admitted they were primarily driven           imperative, my discussions with them
is widespread appetite — or, more
                                                  by short-term growth pressures. But           suggest that many are worried they
importantly, competition — around
                                                  47 percent said they were more motivated      may not have the people, processes or
full-scale transformation programs.
                                                  by much longer-term objectives such as        organizational agility to be able to do what
Instead, we have seen smaller-scale
                                                  upholding the values of customers, making     is necessary to compete. They want to
efforts and initiatives, largely aimed at
                                                  an environmental and socioeconomic            progress, but they are concerned they may
achieving cost cutting and efficiency
                                                  impact or innovating the business model.      not have the right foundations for success.

    Global CEO Outlook 2019, KPMG International

4 | Frontiers in Finance
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Chairman’s message

Add the right ingredients                         Customer focus: Perhaps not
My view of the banking, insurance and             surprisingly, around two-thirds of
asset management industries suggests              financial services CEOs agreed they
there are five key areas where financial          will need to significantly improve their
services executives will need to focus            understanding of customers going
on if they hope to have the organizational        forward. The problem is that today’s
capabilities, capacity and fortitude              customers lack filial loyalty to historical
required for sustainable change.                  institutions. They want what they want,
                                                  when they want it, and they don’t really
Talent: One of my greatest concerns               care who they get it from. That makes it
is whether today’s financial services             extraordinarily difficult to retain customer
workforce has the skills and capabilities         loyalty and deliver on customer needs
required to be successful as the workforce        on a consistent basis. The leading
of tomorrow. Financial services firms are         brands are applying a wide range of
full of people with really good production        technologies, partnerships and models
capabilities; what they often lack are            to improve their understanding of their
innovative thinkers at the operational level.     customers. And they are communicating
The leading firms are reorienting their           with their customers in ways that
workforces to focus on recruiting and             enhance convenience, build loyalty and
developing employees who are data-                inspire trust.
driven, analytically inclined, attuned to the
technological change in the marketplace           Efficiency: Building a new organization
and keenly aware of the shifting needs of         on top of inefficient foundations is not
their customers.                                  the key to successful transformation,
                                                  particularly in a time of increased market
Culture: Financial services firms will need       volatility and uncertainty. While many
to start delivering the types of products         banks are currently focused on cutting
and services their customers require. And         out costs and improving bottom-line
CEOs recognize they will need to foster a         financial performance, the leading
much more innovative and entrepreneurial          brands are those that are using the
culture in order to achieve that. In fact, in     opportunity to improve organizational
our survey of financial services CEOs,2           agility, encourage flexibility and enhance
84 percent said it was critical to ensure         overall resilience. They view large-scale
their employees feel empowered to                 transformation as a way to reduce the
innovate without worrying about the               day-to-day managerial burden of the
negative consequences; just 56 percent            organization so that decision-makers and
believe their organization has a culture          employees can focus on creating value.
where failing in pursuit of innovation is
tolerated. Cleary, more must be done to           I’ll have what they’re having
create an innovative culture.                     As this edition of Frontiers in Finance
                                                  clearly illustrates, the path to
Security: In today’s financial services
industry, providing a safe and secure             transformation need not be fraught
environment is often seen as table-stakes         with risk. Indeed, this publication is
by customers. But that does not make it           filled with stories of banks, insurers
any less of a priority. It is no longer good      and asset management organizations
enough to manage cyber events when                that are taking transformation head-on
they occur. Cybersecurity needs to be a           and finding ways to turn their risks into
                                                  opportunities for competitive advantage.       James P. Liddy
core competency within the organization —                                                        KPMG in the US
one that customers can trust. Our survey          What differentiates the leaders in             E:
of financial services CEOs indicates that         this publication from the rest of the          Jim is the Global Chairman, Financial
almost seven in 10 organizations see                                                             Services, KPMG International. He
                                                  industry? In my opinion, it’s that they
information security as a strategic function                                                     also leads KPMG in the US’ Financial
                                                  had the intestinal fortitude to take the       Services practice. Prior to assuming his
and a potential source of competitive             first step on the road to fundamental          current roles, Jim served as Americas
advantage.                                        transformation.                                Leader, Global Financial Services.

    Global CEO Outlook 2019, KPMG International

                                                                                                                      Frontiers in Finance | 5
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Cover story

Paytm: Solving
problems to create
        aytm has revolutionized India’s payment environment,
        and at the same time is creating massive opportunities
        for banks, insurers and asset managers.

Harinder Takhar, Paytm Labs Inc.

6 | Frontiers in Finance
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Cover story

If you own a smartphone and spend any         available to them. Less than 2 percent of
time at all in India, there’s a good chance   the population had a credit account. Cash
you have the Paytm app on your home           and cheques were the norm.
screen. Most people living in India do:
They use it for everything from buying
                                              Harinder and Vijay Shekhar Sharma
                                              (Paytm’s founder) realized this was a
                                                                                            Users of Paytm’s
groceries and paying school tuition fees
through to selecting insurance products
                                              problem they could help solve. In 2014,       app have access
and getting loans.
                                              the company introduced the Paytm
                                              Wallet. “Allowing customers to store          to a stunning
Adoption rates have been amazing —
even by today’s standards. The company
                                              money in their virtual wallet meant that
                                              Indian consumers could now make
                                                                                            array of goods
was founded less than a decade ago.
Yet, today, more than 7 million merchants
                                              transactions using digital money,” noted
                                              Harinder. “It was a game changer.”
                                                                                            and services.
across India use its QR code-based                                                          At last count,
mobile payment system. The app has
been downloaded more than 100 million
                                              A super-app in the making
                                              Over the next few years, Paytm
                                                                                            the platform
times; the number of registered users
has jumped from just 11 million in 2014 to
                                              added dozens of new use cases for its
                                              technology. Paytm’s mobile payment
                                                                                            boasted more
more than 420 million today. Revenues
soared to US$480 million in 2018.
                                              platform was, for a time, the only            than 15 million
                                              payment method accepted by Uber in
                                              India. It partnered with a wide range         merchants
Finding the source of the pain
Paytm’s core business has always
                                              of transport, utility and entertainment
                                              companies to create digital payment
                                                                                            across more than
revolved around payments. But the
company sees itself more as a ‘problem
                                              systems. And it launched an
                                              e-marketplace where customers can
                                                                                            200 different
solver’ than a bank or a tech firm.           find almost any item or service available     categories of
“Our approach is to identify the pain
points for customers and then solve
                                              in India, often at a discounted rate.
                                              “Our typical customer comes to us
them really, really well — better than        because of a needs-based reason —
anybody else can,” said Harinder              they need to take a bus or pay a bill — but
Takhar, former CEO of Paytm in India          over time, they start to discover that we
and current CEO of Paytm Labs Inc. in         can actually help them solve a much
Toronto, Canada.                              wider range of needs, from paying their
                                              kids’ tuition fees through to finding a
The first pain point the company solved
                                              great deal on an item they really need,”
for India’s consumers was around
                                              added Harinder.
pre-paid mobile top-ups: Paytm allowed
customers to top their accounts up            Users of Paytm’s app have access to a
instantly on their phones rather than         stunning array of goods and services.
going to a store, buying a top-up card and    At last count, the platform boasted more
struggling with an extraordinarily long       than 15 million merchants across more
password. That allowed it to build brand      than 200 different categories of service.
awareness and a loyal customer base.
                                              Many of those categories involve
Fixing the system                             what is traditionally seen as financial
                                              services. For example, Paytm offers
The company’s next objective was              customers the ability to insure a wide
much more ambitious — to make India’s         range of purchases — including bus
payment system more inclusive, more           trips and movie reservations. It has a
efficient and more reliable. It was an        ‘fractionalized asset ownership’ product
audacious goal.                               that allows customers to pay as little
When the company was founded, the             as 1 rupee for a fraction of a stock or
vast majority of India’s population had       asset. Its Paytm Gold Savings provides
no access to formal banking services at       customers with a long-term savings
all. Those that did have bank accounts        vehicle.
often struggled to use the instruments

                                                                                                    Frontiers in Finance | 7
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Cover story

Creating markets
While it may seem as if Paytm is taking
on the traditional banking system, it is
not. In fact, as Harinder is quick to note,
Paytm is providing a pivotal intersect
                                              ... Paytm’s goal is not just to sell
between India’s population and the
established banking order.
                                              products to users. It’s also to
“We see Paytm as a way to bring half
                                              help users achieve their own
a billion unbanked Indian consumers
into the formal banking system,” noted
                                              goals. That often means helping
Harinder. “People who work in the             them establish themselves in the
informal economy or in rural areas have
pretty much the same financial services       mainstream economy.
needs as everyone else. But they are
often left out of the system because they
are not on anyone’s radar.”
Indeed, given its rapid rate of growth
and adoption in India, the app is quickly
becoming the top distribution channel for
financial services in the country. Through
the merchant store, users can access
a wide range of traditional financial
products, from home and life insurance
policies through to investment assets
and products.
“We help our users discover the
products and services they need,”
added Harinder. “The traditional banks
and insurers love the fact that we have
access to people they simply could not
reach before.”

Driving customer acquisition
Yet Paytm’s goal is not just to sell
products to users. It’s also to help
users achieve their own goals. That
often means helping them establish
themselves in the mainstream economy.
In a cash economy, small businesses
and merchants are often overlooked
by the traditional banks due to a lack of
reliable records and credit history. Paytm
helps to solve that pain point by using its
technology to create a robust and reliable
view of its business users — their
cash flows, their customers, their daily
balance sheet status and so on. And they
use that view to help the business
establish their credit-worthiness.

8 | Frontiers in Finance
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Cover story

“More often than not, we’ll then help                        founder was featured in Time’s 100 Most
that merchant find a bank that wants                         Influential People (2017)2 and Harvard
to work with them based on the data                          Business Review did a case study about
we have collected,” added Harinder.                          Paytm titled, Paytm: Building a Payments
“We are helping banks acquire new,                           Network (2017).3
credit-worthy business and personal
                                                             China-based Alibaba Group and Japan-
customers that simply didn’t exist in
                                                             based SoftBank have both made
the mainstream economy before the
                                                             significant investments into Paytm over
digitization of payments.”
                                                             the past 10 years. So, too, have Western
Out of India                                                 investors such as Sapphire Ventures
                                                             and Berkshire Hathaway. As of the start
So what is Harinder — Paytm’s first                          of last year, the company was valued at               Contributors
CEO and long-time friend of founder                          more than US$10 billion.
Vijay Shekhar Sharma — doing at Paytm
Labs in Canada? Solving more pain                            “Investors like that we solve problems.
points, of course.                                           And, since we do it better than anyone
                                                             else, our customers keep coming back,”
The company has been looking for                             noted Harinder. “We still have significant
opportunities to use its technology                          room to grow in our home markets and a
to address payment opportunities                             world of amazing opportunities overseas.”             Harinder Takhar
outside of India. Last year, the company                                                                           CEO — Paytm Labs Inc.
partnered with Japan’s Softbank and                                                                                Harinder is the CEO of Paytm Labs
                                                             Ready to partner                                      Inc., the Toronto-based research and
Yahoo! Japan to launch a new digital
                                                             From his vantage point, Harinder is                   development division of Paytm. In
payment system in Japan.
                                                             confident that the current state of                   his previous role, Harinder led Paytm
“When we launched PayPay in Japan, about                     disruption in financial services will                 as its first CEO in India when Paytm
87 percent of personal retail transactions                   continue for the foreseeable future.                  launched in 2011. At Paytm Labs
                                                                                                                   Inc., he is responsible for two key
were happening with cash,” said Harinder.
                                                             “Consumers clearly expect the way they                objectives: building Paytm’s machine
“Japan is such a large economy with                                                                                learning and big data technologies
                                                             discover and use financial services to
significant consumer spending. The                                                                                 and growing Paytm’s presence in
                                                             fundamentally change,” he noted. “We
opportunity to apply our technology to help                                                                        North America.
                                                             can’t expect things to continue to happen
solve that problem was obvious.”
                                                             in the same old ways. As an industry, we
Paytm also sees significant opportunity                      need to keep up with expectations.”
in Canada where the organization has
                                                             Harinder sees Paytm as the technology
already developed a consumer app and is
                                                             geek that understands what customers
now investing into its merchant-acquiring
                                                             really want and need. And they are able
capabilities to create more value for
                                                             to move faster than most traditional                  Amarjeet Singh
customers. The Lab in Canada is also
                                                             financial services organizations to deliver           KPMG in India
where Paytm develops and tests many
                                                             on those expectations. The opportunities              E:
of its investments into new technologies.                                                                          Amarjeet is a Senior International Tax
                                                             for partnerships are immense.
                                                                                                                   and Regulatory Partner with KPMG
Capital and commendations flow                               “We look forward to working with                      India specializing in the area of internet
Paytm’s ability to solve problems with                       all sorts of banks, lenders, insurance                commerce and start-ups in the Fintech
technology has made it a darling of                          companies and asset management firms                  space. He is a qualified Chartered
                                                             to bring these new technologies and                   Accountant and has advised a number
technology investors and pundits. The                                                                              of Corporates in relation to inbound
company has won the FT Future of                             customer interfaces to market,” added                 and outbound investments from India.
Fintech Award and Forbes’ Outstanding                        Harinder. Expect to find the Paytm logo               He is also the Lead account partner for
Startup of the Year Award.1 Paytm’s                          on your smartphone soon.                              Paytm in India.


                                                                                                                                        Frontiers in Finance | 9
Frontiers in Finance Reshaping financial services - On the cover Harinder Takhar, Paytm Labs, page 6 -
Creating efficiencies

What ails
European banks?
Francisco Uria, KPMG in Spain

         aking generalizations about European banks — as about
         North American or Asian banks, for that matter — is
         always rather unfair. Each region, each entity, each
business model faces wildly diverse circumstances, such as the
degree of progress made along the path of digital transformation,
the regional setting or the range of products and services on offer.

10 | Frontiers in Finance
Creating efficiencies

Nevertheless, there are aspects common          analysts and institutional investors about    traditionally buoyed up the profits of
to most banks that indicate that European       any improvement in the short term, given      financial institutions. Nor will achieving
banks are having a very difficult time of it.   that the lack of economic growth can slow     revenue growth be easy. In all likelihood,
                                                down the rate of growth of credit demand.     only by slashing costs, reducing the
Objectively, most European banks
                                                                                              number of branches and making staff
are experiencing problems of lack of            Sure enough, the global economic context
                                                                                              cuts will institutions be able to make a
profitability, the origin of which is the       and, particularly, trade tensions between
                                                                                              positive contribution to profit and loss.
subject of discussion.                          the US and China, on the one hand, and
                                                                                              This scenario has dealt a considerable
                                                between the US and Europe, on the
On the one hand, banks and the                                                                blow to aggregate stock market
                                                other, are affecting European economic
associations that represent them claim that                                                   capitalizations as was seen when the
                                                growth and slowing it down, as both
the source of the problem is essentially                                                      closing bell rang at the end of 2018.
                                                the European Commission and the ECB
the European Central Bank’s (ECB)
                                                have previously stated. Obviously, other      Regulation has not helped. In recent
policy of lax money and negative interest
                                                political factors such as Brexit and the      months, the individual levels of MREL
rates that, as we recently learned, are
                                                uncertainty it has created have also played   (minimum requirement for own funds
set to continue for some time due to the
                                                a part in the lacklustre performance of       and eligible liabilities), which represent a
weakness of the eurozone economy. ECB
                                                the economy compared to that reported         sizeable burden for small and medium-
spokespersons at the highest level have
                                                some months ago.                              sized entities that are less accustomed to
repeatedly contested this claim, arguing
                                                                                              raising finance on capital markets, have
that the real source lies in an excess of       Against this backdrop, the general
                                                                                              gradually come to light.
installed capacity and the attendant need       outlook for the European financial sector
for countries that have not yet undertaken      is one in which the beneficial effects of     On 2 July 2019, the European Banking
restructuring and streamling processes, to      digital transformation on efficiency are      Authority quantified the aggregate impact
do so — and soon.                               still nowhere to be seen. New players         of the new Basel III capital adequacy
                                                (singularly, the Big Techs) are moving        requirements, which mainly affect the
Combined with this perceived lack of
                                                in, affecting areas of business that have     larger banks, at Euros 135.1 billion.
profitability comes the pessimism of

             Faced with new competitors, heightened regulations and greater capital adequacy requirements, European
             banks would do well to respond with a combination of the following strategies:

   1         Diversification of revenues, reinforcing positions in asset management, insurance and private banking.

   2         Efficiency improvements through the implementation of effective strategies aimed at cost cutting and
             streamlining of operations.

   3         Monetization of technological investments such that the ‘digital dividend’ derived from the
             transformation that has already taken place can materialize.

   4         Use of market opportunities to shed non-performing asset portfolios (NPLs), in order to comply with
             the repeated requests of the regulator and the supervisory bodies, and entry into agreements with
             industrial partners with a view to developing specific business segments (consumer credit, loans to
             SMEs, asset management, depositary services and custody, payments, etc.) in anticipation of the arrival
             of new competitors.

                                                                                                                     Frontiers in Finance | 11
Creating efficiencies

In the new environment, with old and new          On the other hand, regulatory
competitors threatening the profitable            fragmentation clearly persists in such
areas of the bank, and with legacy systems        delicate areas as consumer protection,
that require much more than a simple              deposit insurance, the insolvency
patchwork update, the investments                 regime, etc. This fragmentation means
traditional banks need to do are massive.         that banks do not have complete
But it would be a mistake to think that the       freedom of movement, even within the
change is only related to technology.             eurozone.
On the contrary, it is not just, or mainly,       It is discouraging to think that it has not
about taking advantage of what                    been possible to make progress in the
technology can offer. It is a question of         creation of a European deposit insurance
undertaking an integral transformation of         scheme (EDIS), despite the time that has
the business model of the entities and to         elapsed since the political agreement
rethink their strategy. The key question to       was reached to build a banking union in
respond is how the banks will create and          the eurozone.
monetize value for their clients and the
                                                  Furthermore, this fragmentation, in the
society as a whole in the future.
                                                  case of a cross-border merger, prevents
This is also a critical point for many European   synergies from being captured as they
banks: how to position themselves in the          are in a purely domestic context, so any
marketplace. They should carefully select         potential efficiency gains are greatly
their target markets, business and clients        attenuated by the limited expectation of
and also decide if they can make this work        an increase in turnover. Risks of every
alone or if they need some partnership and        type are inherent to the integration
with whom.                                        process in which cultural, linguistic and
                                                  other factors also come into play. One
Aside from these strategic decisions, there
                                                  might well ask, why such insistence in
is also the issue of consolidation. Naturally,
                                                  this regard by the ECB?
in the above context, an increase in size
can be a means (though not the only one)          For all of the above reasons, and
to achieving efficiency gains and boosting        notwithstanding the view that integration
profitability. One should be aware that such      processes between credit institutions
gains usually occur after a certain period,       from different countries can be
and that initially, at a time when the sector     beneficial, the most prevalent view is
is experiencing difficulties, the profit and      that both in markets where financial
loss statement (P&L) may be adversely             sector restructuring and consolidation
affected. On the other hand, these are            are still pending, and in markets where
mergers that would make sense from an             sizeable mergers have already occurred
industry perspective and that, given the          but where other transactions may still
characteristics and position of the entities,     be in the offing, the most typical form of
would bring about the creation of solvent,        consolidation will continue to be, at least   Contributor
competitive institutions.                         for some time, consolidation among
                                                  domestic entities.
Consolidation also raises the question of
whether it should be cross-border within          In conclusion, the European financial
Europe or whether domestic integration            sector continues to struggle in a
should prevail.                                   highly complex scenario where
                                                  limited profitability, a new wave of
Although the ECB, among other
                                                  regulation and difficulty in gathering        Francisco Uria Fernández
legitimate voices, has promoted cross-                                                          KPMG in Spain
                                                  profits through efficiency gains from
border mergers, there are several reasons                                                       E:
                                                  technological investments (digital
why, with exceptions, these have not                                                            Paco is a Senior Partner with KPMG in
                                                  transformation) in the short or medium
materialized for banks in the eurozone for                                                      Spain and the EMA Head of Financial
                                                  term, create a situation in which the only    Services, Banking & Capital Markets.
some years, even within the scope of the
                                                  strategy within reach appears to be cost      A qualified lawyer, he holds a Doctorate
Single Supervisory Mechanism. The main
                                                  cutting. There are not many elements          of Law (Banking Regulation) from the
reasons for this are limited expectation
                                                  that would lead us to believe that the        Complutense University of Madrid.
of drumming up business and modest                                                              Paco has also authored a number of
                                                  situation is going to improve in the near
profitability, as well as the uncertainties                                                     publications mainly related to financial
that a merger always brings with it.                                                            regulation.

12 | Frontiers in Finance
Voices on 2030
    The Future of Financial Services

The digital disruption of financial services is well underway, from the explosion of fintechs to the opening up of financial services. But
what will the industry look like when the dust has settled? KPMG spoke to prominent figures from fintech to big banks, insurers and
asset managers to software providers and social enterprise — who shared their vision for the future of financial services.

                    “In 2030, the whole survival game is:                                  “Speed and adaptability is the new
                    are you in the right ecosystems?”                                      competitive battleground.”

                    Piia-Noora Kauppi                                                      Claire Calmejane
                    Managing Director,                                                     Risk Product Owner,
                    Finance Finland                                                        Lloyds Banking Group

                    “In 2030, the question will be how                                     “Be ready for an open ecosystem.”
                    much does the financial sector
                    contribute to sustainable development.”
                                                                                           Sopnendu Mohanty
                    Sasja Beslik                                                           Chief FinTech Officer,
                    Sustainable Finance Expert                                             Monetary Authority of Singapore

                    “With open insurance you will have                                     “Finance will become more
                    the ability to connect services and                                    accessible and frictionless.”
                    fetch data to make really interesting                                  Nick Middleton
                    services for the end customers.”                                       Executive Director,
                    Kristin Linmark                                                        UBS Wealth Management,
                    CIO, SPP                                                               Head of UBS SmartWealth UK

                    “Our platform is going to allow                                        “Insurance will be more predictive
                    us to do more intelligent risk                                         in 2030.”
                    management.”                                                           Blair Turnbull
                                                                                           Managing Director,
                    Ning Tang                                                              Digital & Retail
                    Founder and CEO, CreditEase                                            UK and International, Aviva

                    “All these ecosystems will be totally                                  “Data analytics will form the core of
                    frictionless for a customer.”                                          your financial crime unit by 2030.”

                    Sébastien Marotte                                                      Colin Bell
                    Europe, Middle East and Africa leader,                                 Group Head of Financial Crime Risk,
                    Google Cloud                                                           HSBC

                                                                                                                      Frontiers in Finance | 13
Creating efficiencies

Capturing the
benefits of
Hessel Verbeek, KPMG Australia
Ian Smith, KPMG in the UK

      inancial services
      executives know they
      need to simplify their
organizations to support
sustainable growth and to
adapt to secure a successful
tomorrow. But are they
approaching simplification in
the right way to thrive in the
longer term?

14 | Frontiers in Finance
Creating efficiencies

Everybody knows that most financial              However, dig into the investment case
services organizations, apart from the           behind many of these initiatives and —
most recent disruptors, are far too              interestingly — most are founded on
complex. There is a huge amount of
legacy that is impairing the ability to
                                                 return and efficiency metrics such
                                                 as Net Present Value (NPV), Internal             We are seeing
adapt and meet the rapidly evolving
needs, requirements and expectations of
                                                 Rate of Return, and cost and head
                                                 count reductions. Of course, these are
                                                                                                  some banks
customers. Customers want convenience,
efficiency, information, education and
                                                 important metrics: Shareholders expect
                                                 returns and competitors are differentiating
                                                                                                  and insurers
seamless, frictionless experience across         on cost and efficiency, but these should         replace key
multiple channels at a time that suits
them. They expect rapid deployment of
                                                 not be the only drivers.
                                                                                                  elements of
new tools and innovations, which are not
just relevant, but also engaging. They are
                                                 Go beyond efficiency
                                                 Cost efficiency is far from the only benefit
                                                                                                  their core
looking for transparency and trust.              that can be accrued from simplification.         systems and
Simply put, they want their banking,
insurance and investment transactions to
                                                 Simplifying what you do today doesn’t
                                                 necessarily set you up for future success        consolidate
be simple. And most of today’s financial
services organizations are anything but
                                                 if the market is changing rapidly and
                                                 business models are being disrupted.
                                                                                                  their ancillary
simple.                                          Simplification also has to support
                                                 changing what you do tomorrow.
                                                                                                  systems in
Nothing simple about it                          A simplified architecture can also support
                                                                                                  an effort to
It’s not for lack of trying. Most financial
services firms are now executing on
                                                 innovation, for example, developing,
                                                 testing and launching new propositions
dozens — sometimes hundreds — of                 and getting to market faster and cheaper.        their IT estate,
different initiatives that, ultimately, should
simplify the business. Some of these
                                                 For example, a simplified core banking
                                                 system would allow firms to make                 modernize their
efforts represent unprecedented change
agendas, with all of the associated bear
                                                 upgrades and integrate new technologies
                                                 in a fraction of the current time. Entering
traps. KPMG member firms are seeing
some banks and insurers replace key
                                                 into new alliances and partnerships will
                                                 be more feasible and viable for a simpler
                                                                                                  reduce costs
elements of their core systems and               business.                                        and, at the
consolidate their ancillary systems in
an effort to rationalize their IT estate,
                                                 It should also support scalability, reduce
                                                 future cost, increase the speed of change
                                                                                                  same time,
modernize their capabilities, reduce
costs and, at the same time, provide
                                                 and provide improved risk management             provide the
the capabilities to adapt and evolve their
business models to secure future growth.
                                                 and resilience. Straightening out the
                                                 spaghetti bowl of systems and processes          capabilities
Others are working on more focused
                                                 also creates better visibility which, in turn,
                                                 should allow financial services firms to
                                                                                                  to adapt and
pain points and complexities. Some
are rethinking the fundamentals of their
                                                 get much closer to customers, improve
                                                 operational resilience and control over
                                                                                                  evolve their
products and their wider portfolio of            performance, and better understand               business
products. Others are examining their
current financial, business and operating
                                                 and anticipate risks. Simplified control
                                                 environments and processes should                models to
models, and outsourcing arrangements.
Many are working on simplifying specific
                                                 help organizations adapt quickly to future
                                                 regulatory changes.
                                                                                                  secure future
client and risk pain points like KYC, claims
and remediation.
                                                 Perhaps most importantly, simplification         growth.
                                                 of the business allows decision-makers to
Simplification is as much about creating         focus their scarce capital on investments
and applying the capabilities to support         that actually matter to the business and
improved customer experiences,                   its customers. Just imagine the clarity of
innovative propositions, speed and               mind that would come from overseeing
automation, scalability and increased            a vastly simplified financial services
visibility as it is about cost efficiencies.     operation. IT budgets would be focused,

                                                                                                            Frontiers in Finance | 15
Creating efficiencies

Five steps to simplification
Clarify the financial
strategic focus (such
as purpose, role, client
focus, experience
requirements, value,
ease, innovation) and
make clear choices
around competitive
positioning. This will

                                       Choose a direction for the business architecture
drive strategic choices                (such as the assembly of customer journeys,
around the organization’s              distribution and operations). Many financial institutions
architecture and                       are organized along product and channel lines, giving
operating model.                       rise to silos, which need to be broken down.
                                       Typical considerations for business architecture include:
                                       — customer journeys, segments and product needs
                                       — sales and service approach (e.g. by channel vs.
                                           integrated) and incentivization (e.g. profit or cost

Determine which                        — multi-brand management and fulfillment
activities are                         — high level systems architecture
strategic and provide a
competitive advantage,                 — operations and technology, including centralized
given the organization’s                   services between divisions.
agreed focus in the
first step. This will
drive choices around
which activities should

                                       Assess the simplification options for the
be retained in-house                   organization’s activities in line with its strategic
and which could be                     focus, its business architecture and the (strategic)
outsourced.                            nature of its activities. Four main options should be
                                       considered for each activity:
                                       — CoE creation: Leverage current capabilities with
                                           potential for high performance. This is likely to be
                                           the adoption of a current Centre of Excellence
                                           (CoE) for the wider organization (e.g. migrating
Develop the                                all secured and unsecured consumer credit
simplification road                        assessments to the state-of-the-art mortgage

map, taking into account                   credit assessment platform).
various dependencies.
                                       — Transformation: Transform existing assets/
The road map will be
                                           capabilities that are not restricted by legacy issues
bespoke for every
                                           (e.g. HR management supported by a newly
organization, given
                                           implemented cloud-based ERP system).
their vast differences
in starting position,                  — Development for replacement: Build a new
strategic activities and                   unconstrained capability to take over activities with
simplification options. In                 too many legacy issues to be transformed (e.g.
order for the change to be                 full replacement of firmwide data and analytics
delivered, the following                   functions by a central hub).
must be aligned across                 — Third-party solutions (including partnering/
the business — clear                       outsourcing): Consider third-party solutions
roles and responsibilities                 for non-strategic activities that are not high
and sponsorship to drive                   performing. Decisions should be based on
and ensure ruthless                        reduction of complexity, organizational rigidity or
execution.                                 risk, rather than on productivity alone.

16 | Frontiers in Finance
Creating efficiencies

innovation investments would be highly         tape and glue. Nobody really knows for
targeted, and waste and duplication            sure what the unintended consequences
would be eliminated. Every investment          are when ancillary systems are shut
dollar would count towards the long-term       down. The challenges and risks of major
health of the organization.                    transformations are significant.

Making the case                                Take it from the top
Financial services executives are well         Simplification should never be the             Contributors
aware of the benefits of taking a broader      primary objective in and of itself. When
view on the case for change, beyond cost.      simplification is the only objective,
They know that improved capabilities,          investments in improvements and
agility, risk management and investment        innovation will get penalized. But that only
prioritization is inherently valuable to the   reinforces the status quo.
organization over the long term. But they
                                               While assessing and quantifying the non-
often aren’t sure how to quantify them
                                               cost benefits can be challenging, it is not    Hessel Verbeek
and reflect them in the investment case.
                                               impossible. We help banks, insurers and        KPMG Australia
That is not surprising. What value do          asset managers do it all the time. It does     E:
you put on getting an as-yet-undefined         need a strategic mind-set and a more           Hessel leads KPMG’s bank strategy
                                                                                              practice in Australia. With more than
product to an as-yet-undefined market in       holistic assessment of the broader and
                                                                                              20 years’ experience in strategy
an as-yet-undefined space of time? How         longer-term benefits that simplification       consulting, Hessel helps organizations
do you quantify the value of decision-         can deliver, including support for future      make the necessary but difficult choices
making clarity in financial terms? What        growth. Where the NPV isn’t adding up          required to remain competitive in
does a happy and satisfied customer look       but the full benefits are obvious — this is    today’s rapidly changing industry. He
like on a balance sheet? These are not         worth the effort.                              believes that the sector needs to focus
simple calculations to make.                                                                  on simplification of its strategies and
                                               Instead, financial services organizations      operations in order to best serve its
The problem is that the ‘harder’ benefits      need to see simplification as the vehicle      customers and other stakeholders.
of the investment case — the cost and          to get to a faster, leaner, more agile and
risk considerations — are very clear.          more customer-centric future, supporting
Simplification often requires organizations    new business models to deliver long-
to break the status quo. Sometimes that        term, sustainable and profitable growth.
may mean investing into new systems,           That will be the only way to thrive in
tools or capabilities. It may require new      tomorrow’s uncertain environment.
financial, business and operating models                                                      Ian Smith
                                               We believe that the best way to
and ways of working. Investments will                                                         KPMG in the UK
                                               make sure that simplification is given         E:
be high and no amount of head count
                                               heavy weighting is by ensuring that            Ian is a financial services strategy
reduction will balance the equation in the
                                               simplification is an inherent enabler to       Partner based in London. He specializes
short term.
                                               the core strategy; embedded and driven         in helping banks, insurers and asset
Somewhat counter-intuitively, many             from the top down and shared across all        managers understand how markets
executives are also worried about the          divisions, functions and markets. With         are evolving and identify future winning
                                                                                              business and operating models to
risk of removing the complexity. They          clarity of objectives underpinned by a
                                                                                              secure sustainable growth. Ian has
recognize that some of their current           strategic decision to simplify, the question   worked extensively with many leading
systems, processes and models are stuck        of how to quantify all the simplification      financial services organizations on these
together with the IT equivalent of duct        benefits becomes less sensitive.               complex and critical issues.

                                                                                                                 Frontiers in Finance | 17
Creating efficiencies

Beyond signing the deal

Ram Menon, KPMG in the US
Giuseppe Latorre, KPMG in Italy

      inancial services firms are
      looking to inorganic growth
      opportunities to accelerate
transformation. And that puts M&A
and corporate development teams on
the front line of the transformation
strategy. Are they ready?

18 | Frontiers in Finance
Creating efficiencies

As the pace of disruption picks up speed          Taking a new view on value
and traditional sources of value start            The problem, in our experience, is
to shift and dissolve, many financial             that far too many banks, insurers and
services executives recognize that ‘more
of the same’ is no longer a sustainable
                                                  asset managers continue to approach
                                                  transformative deals and partnerships as
                                                                                                 ...46 percent
strategy in the long run. Transformative
changes must be made. They must be
                                                  if they are no different from the deals they
                                                  have done in the past.
                                                                                                 of financial
made quickly, and they must be executed
strategically.                                    The reality is that they need to be
                                                                                                 services CEOs
The most prudent also understand that
                                                  approached differently. The vast majority
                                                  of deals historically were focused on
                                                                                                 said they now
the type of transformative change they
require to compete in today’s rapidly
                                                  achieving scale. In those situations,          see inorganic
evolving industry can’t be achieved
                                                  ‘value’ was measurable from a short-term
                                                  perspective in terms of synergies              growth
through organic growth strategies alone.
That has led many financial services
                                                  achieved and market share gains.
                                                  But when making deals for strategic
                                                                                                 strategies as
CEOs to look outside their organization           transformation purposes, ‘value’ is
                                                  typically perceived from a longer-term
                                                                                                 the fastest
for new sources of inspiration to achieving
their transformation objectives. In fact, in      perspective, and thus becomes much             way to
a recent global survey of financial services
CEOs conducted by KPMG International,1
                                                  more difficult to define and measure.
                                                  The first step, therefore, is for financial
46 percent said they now see inorganic
growth strategies as the fastest way to
                                                  services CEOs and their M&A and                their business
transform their business and operating
                                                  Corporate Development teams to
                                                  clearly define future ambition and             and operating
model.                                            design executable strategies that align
                                                  with and enable the organization’s
The sprinters have left the blocks
Many have already started focusing
                                                  transformative goals.                          according
on executing the type of acquisitions,            Defining future ambition                       to KPMG
divestitures, alliances and partnerships
that they hope will enable them to achieve
                                                  Everything should link back to value.
                                                  Understanding the ‘true’ potential value
their transformation objectives. Our view
of the market suggests that the insurance
                                                  of an acquisition or partnership can give
                                                  CEOs more confidence going into a deal
                                                                                                 CEO Outlook
industry — generally speaking — has
been relatively more active in this regard;
                                                  and help ensure that their M&A and             survey.
                                                  Corporate Development teams achieve
many of the larger banks are only just            the value that was expected at the outset.
starting to catch up (particularly around
the payments part of the business).               More than simply working with the
                                                  business leaders to define and understand
Yet KPMG professionals’ conversations             their future ambition, the key to success
with financial services executives suggest        is in using that information to reorient the
that many of those at the forefront are           way the dealmakers think about everything
increasingly finding themselves struggling        from deal origination and valuation through
to convert their desire for transformative        to structuring and integration. It’s about
deals into actual results and value. Several      making sure there is strategic alignment
deals and partnership agreements are being        between the business leaders and the
contemplated or have been signed. But, for        transformative deals being pursued.
the most part, not much has changed from
a transformation perspective. Frustration         The pitfalls of making deals without this
levels are rising, as post-deal transformation    critical first step are myriad and far too
remains a challenge.                              common. We have seen financial services
                                                  firms snap up unique fintech companies
Our view suggests that banks and                  only to squash their uniqueness with
insurers could be doing more to ensure            bureaucratic controls and force-fit
their transformative deals actually enable        cultures. Others have invested early into
the desired transformation, and deal              innovative technologies and then failed
execution is geared towards maximizing            to appropriately integrate and scale the
and accelerating synergy capture and              innovation across the enterprise.
value creation.

    Global CEO Outlook 2019, KPMG International

                                                                                                          Frontiers in Finance | 19
Creating efficiencies

The truth is that even the most                 the transformation of the organization
tough-minded business leaders can ‘fall in      towards ‘acting as one’.
love’ with a potential acquisition target and
                                                In our experience, post-deal business
misjudge its present worth, potential value
and long-term suitability as a strategic
                                                transformation and integration initiatives
                                                require well-informed decision-making
                                                                                               ... when
                                                processes with respect to the strategic        making deals
Those that get this first step right,
however, are the ones that make sure
                                                choices to be made for the combined
                                                organization. Identifying integration          for strategic
the ‘front end’ of the dealmaking funnel
is pointed in the right direction to achieve
                                                options for the prioritized operating model
                                                choices (varying the degree of integration
the organization’s strategic transformation
objectives. They are targeting investments
                                                and the sequence of integration) is critical
                                                for maximizing and accelerating synergy
they already know they can integrate into       capture and value creation.                    ‘value’ is
their business. And they are buying assets
they are confident can scale and adapt as
                                                Clearly, each deal and partnership
                                                opportunity will be different;
the organization grows.
                                                understanding and responding to the            perceived
Designing executable strategies                 nuances of each situation will be key. It
                                                is therefore important to have the ability     from a
Sourcing the right strategic deal and
partnership opportunity is one thing.
                                                to track — and the agility to ‘course
                                                correct’ — any deviation to the proposed
The ability to strategically integrate them
in a way that enables the organization to
                                                value creation plan and attainment of the
                                                defined future ambition.
transform and deliver the value expected
is another thing entirely. But here, too,       Ultimately, the point is that more work
                                                                                               and thus
CEOs and their M&A and Corporate                needs to be done at the front-end and
                                                at the back-end of the deal to ensure
                                                                                               becomes much
Development teams have a critical role
to play. More often than not, deals are         that the deal and/or partnership enables       more difficult
signed and then ‘tossed over the wall’
for the business leaders and functional
                                                the desired transformation and value is
                                                achieved. If transformation is the ultimate    to define and
executives to deal with.                        goal, the days of simply ‘doing deals’ and
                                                ‘tossing over the wall’ are over.
KPMG member firms’ work with
leading financial services institutions         Ready for what’s coming
suggests that not enough time is spent
                                                Financial services institutions are
working with business leaders and other
                                                expecting their M&A and Corporate
internal stakeholders to plan ahead for
                                                Development teams to help them deliver
the integration prior to signing the deal.
                                                on their transformation objectives.
Successful integration of deals that
are done for strategic transformation           Those who are quick to adapt their
purposes require strong leadership,             dealmaking and partnership strategies to
robust governance and relentless                reflect the transformation objectives of
orchestration across the enterprise —           the organization — from deal identification
addressing critical people, process,            through to post-deal integration — will
systems and (perhaps most importantly)          not only be better placed to achieve the
cultural issues.                                transformative value they expect, they
                                                will also be better placed to pivot as the
Clarifying the degree of integration
                                                markets shift.
and level of effort required to maintain
focus on value realization, problem             Those serious about delivering
resolution and value creation is typically      transformative outcomes, therefore, may
underestimated. Addressing cultural             want to start by talking to their dealmakers
issues in both the acquiring company and        on how to enable organizational
the acquired company will help accelerate       transformation.

20 | Frontiers in Finance
Creating efficiencies

Successful integration of deals that
are done for strategic purposes
require strong leadership, robust
governance and relentless
orchestration across the
enterprise — addressing critical
people, process, systems and (perhaps
most importantly) cultural issues.


                                        Ram Menon
                                        KPMG in the US
                                        Ram leads the Insurance Deal Advisory
                                        practice KPMG in the US and KPMG
                                        International. He has led many domestic
                                        and cross-border mergers, acquisition
                                        and divestiture projects, providing deal
                                        and strategy-related advisory services.

                                        Giuseppe Latorre
                                        KPMG in Italy
                                        Giuseppe heads the Global Financial
                                        Services Deal Advisory practice for
                                        KPMG International. He has extensive
                                        experience leading large scale M&A
                                        operational projects, including tender
                                        offer on listed entities, company
                                        valuations, bonds and equities issues
                                        for various Insurance companies, and
                                        in drafting strategic business plans for
                                        medium-term financial institutions.

                                                            Frontiers in Finance | 21
Digital models take hold

Agility with
Transforming MUFG’s
Transaction Banking business

Ranjana Clark, Head of Global Transaction Banking, MUFG
Chris Hadorn, Head of Global Payments, KPMG International

       veryone talks about the need for
       transformation on the consumer
       side of the banking business,
but what about the strategies that
underpin global trade and finance: How
is Transaction Banking changing to keep
up with evolving customer needs and
increasing competition?

22 | Frontiers in Finance
Digital models take hold

Ranjana Clark has no doubt that               processing of payments, or maybe
transaction banking is at the front end       it means more automated and cost-
of a period of massive disruption. As a       effective cross-border transfers. You
former executive at PayPal and Western
Union, she has spent the past few
                                              really need to start with an understanding
                                              of your customers’ needs.”                       Right now,
decades orchestrating and managing
market disruption in the payments space.      Focused transformation
                                                                                               markets around
Today, she is Head of Global Transaction      For Ranjana and her Transaction Banking          the world are
Banking and Head of Transaction
Banking Americas at MUFG (one of the
                                              Americas team at MUFG, the approach
                                              to transformation is centered on four            moving towards
world’s five largest banks by assets),
and Ranjana recognizes that she is, once
                                              main pillars.
                                                                                               ‘open’ architecture
again, staring at the onset of managing a
                                              The first is to create a front end that is
                                              intuitive and easy to use. As Ranjana            models. We need
large platform that is ready for change.      notes, consumers now expect their
                                              banking services to be as easy to
                                                                                               to make sure that
Ripe for disruption
“Generally speaking, payments and
                                              use as Amazon or Facebook. Those
                                              expectations are bleeding into the world
                                                                                               our transformation
transactions can represent pain points for    of Corporate Payments.                           initiatives are
clients, and that creates a lot of room for
technology-led disruption,” she noted.
                                              The second pillar is around open data
                                              and open banking. “Right now, markets
                                                                                               moving us towards
“Particularly in developing markets —
but also here in the US — using money
                                              around the world are moving towards              an open banking
isn’t easy. Moving money across borders
is also particularly difficult. The whole
                                              ‘open’ architecture models. We need
                                              to make sure that our transformation             environment.
                                              initiatives are moving us towards an open
area is ripe for disruption.”
                                              banking environment which, in turn, will
The size of the prize is also luring in a     open opportunities for us to serve clients
range of new players. From VC investors       in new and secure ways.”
to fintech upstarts and tech giants
                                              Similarly, Ranjana’s team is continuously
(Facebook’s new Libra currency being the
                                              exploring how emerging technologies
most obvious), there is a massive amount
                                              (such as machine learning, artificial
of capital pouring into new payments and
                                              intelligence, and natural language
transaction technologies and companies.
                                              processing) might help the organization
The field of competition is getting larger.
                                              achieve its transformation goals faster,
Customer-led                                  more efficiently and more effectively.
                                              “AI may be hugely overhyped in the
Like most banking executives, Ranjana         market, but it is still the trend that has the
recognizes that it is the client that is at   longest legs and most value to deliver to
the center of today’s digital disruption.     the banking sector,” she noted.
Customers — even Corporate Treasurers
and CFOs — are starting to demand             The final pillar — or maybe more
more efficient and accessible services.       precisely, foundation — is a flexible and
And that is influencing the transformation    agile core banking system. Like most
road map within Transaction Banking,          banks, MUFG is actively working to
globally.                                     modernize its core banking systems and
                                              infrastructure. Banks want to deliver
“Whether you are talking to consumers         efficiency and offer the most current
or the Head of Treasury, everyone has         capabilities, all while maintaining safety.
the same basic needs,” she noted.             “Our focus there is to move into the
“They want to save time, save money           cloud while ensuring the highest levels of
and stay secure. For corporate clients,       security,” Ranjana said.
that may mean better straight-through

                                                                                                         Frontiers in Finance | 23
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