New Hybrid Digital Bank, PurePoint™ Financial

This development marks a true milestone in terms of the global development of Japanese banks.

We have already seen Japanese insurers using M&As as they seek to internationalize their operations, including telematics-based auto insurance, as they enter the fray in cutting-edge financial services in mature markets.

Until now, overseas expansion in Japan’s banking sector has typically started with transaction banking and hinged on wholesale operations (trade finance, foreign exchange, and investment banking services to support the overseas development activities of Japanese companies).

This initiative signifies an expansion into retail operations of locally incorporated subsidiaries in North America with which the bank has a long history and abundant goodwill. This initiative will also provide valuable feedback that can be applied to the Japanese market. To succeed in this market will require meeting the needs of the millennial generation with state-of-the-art technologies such as IoT and AI and conducting operations in a way to develop next-generation digital financial services.

 

Celent Report Recommendation: Defining a Digital Financial Institution: What “Digital” Means in Banking

 

ハイブリッドデジタル銀行:ピュアポイント

またひとつ、本邦金融機関によるグローバル展開のマイルストンが刻まれた

既に保険セクターではM&Aによるグローバル事業展開が進んでおり、テレマティクス自動車保険をはじめ、成熟市場における最先端の金融サービスへの参入が始まっている。

これまで銀行セクターの海外展開は、トランザクションバンキングを筆頭に、ホールセール業務(なかでも、日系企業の海外展開を支援する貿易金融や外国為替、投資銀行業務)が中心であった。

本取り組みは、長い歴史と強い暖簾を持つ北米現地法人における個人向けリテール業務の展開であり、その挑戦と成果は、日本市場へこれまでにないフィードバックをもたらすであろう。

ミレニアム世代のニーズにマッチしたIoTAIなど最先端のテクノロジー活用と、相応しい事業体の運営による次世代デジタル金融サービスの展開が大いに期待される。

 

関連したセレントレポートの推奨:

バンキングにおける「デジタル」とは何か

日本の銀行業界におけるレガシー・モダナイゼーション パート2:銀行業界への提言

 

 

 

JAPAN’S REGIONAL BANK CONSOLIDATION

This is just the beginning of a battle for survival in the red ocean.

The intense competition is not the result of financial authorities' encouragement but rather grows out of the zero interest policy and resultant alteration in the operating environment.

Japan's banks have already been striving to raise efficiency by consolidating their core systems.

Now what they need to focus on is leading the digital initiative, which can be adaptable to diversifying needs, rather than focusing exclusively on gaining broader market to increase ROE.

New markets and customers should be calling for innovative financial services.

Setting and implementing a new strategic framework that has not existed up until now is key to success in this era.

Nikkei: Japan's regional bank consolidation gains momentum

 

Related releases:

(JP) Legacy Modernization in the Japanese Banking Industry Part 2

(JP) Legacy Modernization in the Japanese Banking Industry Part 1

English version will be forthcoming shortly!

 

WHAT DOES IT MEAN TO MODERNIZE? (Part 1)

In Order to Modernize

Before proceeding any further, let’s pause to consider what core system modernization signifies to a brokerage firm. Celent surveys have found that to brokers modernization means agility in operations and reductions in IT costs.

This prompts the question of how to make modernization a reality. Celent focuses on two jumping off points or angles from which to approach this: One is trading lifecycle optimization (TLO), the second is improving risk management, that is to say, realizing of a dynamic risk-adjusted investment cycle.

Trading Lifecycle Optimization (TLO)

The digital advances in trading environments have spurred the proliferation of algorithmic trading and high-frequency trading (HFT), developments that have reduced the number of traders needed. At the same time, Asia has witnessed increasing fragmentation that is particular to the regional market, spurring the spread of smart order routing (SOR).

Social media and big data are increasingly being used as market data and exerting greater influence on the market at the same time that high touch sales by sell-side firms remains. In addition, increasing diversification is evident with significant variation in the degree of digitization across asset classes and markets, and in terms of liquidity and trade type (bulk, block order, small orders, etc.).

Against this backdrop, a new electronic “hybrid” trading that fuses traditional high-touch trading with HFT and algorithmic trading has emerged in modern capital markets and trading environments. This has extended technology application beyond traditional areas of focus such as trade execution management and portfolio management. Indeed, the role and importance of technology is only growing, particularly in these areas: linking pre-trade compliance in order management, post-trade compliance in the middle office, and the various financial intermediaries (account keepers, transfer agents, administrators, prime brokers) that work across the front, middle, and back offices.

Celent has advocated the concept of trading life cycle optimization (TLO)[1].

TLO has come under scrutiny due to market environment changes that traders face in addition to factors including disparate or unevenly distributed trading technologies as well as trading risks (time, location, asset class, trader).

Hybrid trading environments combining traditional high-touch trading with HFT or algorithmic electronic trading, could clearly serve to benefit from TLO. Spanning the trading process—before, during, and after trading—it is vital to integrate across administration, monitoring, and auditing metrics for governance, risk, and cost (GRC). This makes extremely important to harness market data, which can serve as criteria for TLO.

Trading Lifecycle Optimization (TLO):

Areas targeted for optimization by trading technology block (types of technology used) can be broken down into the following four: infrastructure, operation, trade execution, and allocation.

These technology blocks are very important such as when it comes to audit requirements, sponsor descriptions, trader performance reviews, and identifying automated and discrete ranges. At the same time, these are also seen as crucial functional requirements for the front, middle, and back office systems in next-generation trading.

Celent believes that trading technology modernization should mean for both the sell side and buy side a focus on amending disparity and gaps in this technology.

To be continued…

 

Related releases:

Legacy Modernization in the Japanese Securities Industry, Part 1

Legacy Modernization in the Japanese Securities Industry, Part 2


 

WHY MODERNIZE?

Celent has consulted on many securities firm legacy modernization projects. At the outset of these projects, Celent asks the CEO and CIO a number of questions similar to those below.

CEO Questions:

  • How much time and money were required the last time your firm had to rework connections to exchanges, settlement and verification institutions, clearing and settlement institutions and respond to system reform?
  • What is your average cost per transaction? What is your average cost per customer?
  • How many systems must a call center staff member access to answer customer questions? What is the average time required? The average cost?
  • How many staff members are required to work on applications to open a new  account? How many systems must be accessed?
  • What are the foreseen costs and risks associated with outsourcing IT department operations?
  • What are your legacy systems and what are candidates for modernization?

CIO Questions:

  • What was the volume of code that need to be modified the last time your firm had to rework connections to exchanges, settlement and verification institutions, clearing and settlement institutions and respond to system reform?
  • How easy is it for you to integrate existing and new applications?
  • Are you spending more on maintenance or new projects?
  • Is your IT certainly capable of supporting new business acquisitions?
  • How many systems are there for risk management, compliance management and reporting to authorities? How much are your costs to maintain your IT?
  • Do you have any maintenance contracts that will be ending soon?

These are among the questions that executives need to ask themselves when they look to tackle IT challenges (e.g., data model rigidity, lack of application flexibility, IT duplication, and associated labor efforts). If you already know the answers to these questions, then the typical challenges securities firms face spelled out in this post likely do not exist for you. The issues broached here are not the kind of challenges that can be resolved by improving peripheral systems or patchwork core systems solutions.

For financial institutions that have designed, developed, operated, and maintained core systems themselves, formulating a replacement strategy is akin to putting together a plan to travel to an unknown world. Such a situation requires correct understanding, which mandates a bird’s-eye view or systems map of the entire firm (as-is state) coupled with recommendations for the system to be (to-be state).

Moreover, companies must select the solution that best matches their needs from existing solutions in the market. The key is the business requirements document (BRD). This means defining the operational functions and system requirements that will satisfy the next system’s needs. Often, understanding the current situation accurately is not easy, the ideal system goes unrealized, and companies end up with something approximating a reproduction of the legacy system. Thus, it is crucial to distinguish between the legacy and modern systems.

Legacy Systems and Modern Systems: A Comparison:

To be continued – Click to read more

 

Related releases:

Legacy Modernization in the Japanese Securities Industry, Part 1

Legacy Modernization in the Japanese Securities Industry, Part 2

Digital Transformation of the Securities Industry in Japan and Asia

Modularization of Industry

Industries across the board are undergoing structural change. This change extends beyond individual firms and spills across industrial sectors. Other industries that have been exposed to the tide of technology-driven structural changes have through the process harnessed technology to be reinvented as new industries befitting this evolution in industrial structure. The financial industry traditionally has been far from the vanguard of this change.

The proliferation of the Internet and digital technologies is only accelerating the evolutionary modular shift across all industries. This stands in stark contrast to the traditional non-modular, vertically integrated structure (that is to say, the antithesis of a modular structure, where all the products and services are provided through and within one exclusive value chain) that the industry has historically embraced.

However, disruptive new market players have visibly forced conservative, existing entities to begin to seek new approaches; at the same time, regulatory authorities have also started to embark on establishing a new, more robust system for regulating the financial industry.

The Securities Industry of the Future

The securities industry can be regarded as the first sector in the financial industry to have embarked down the path of modularization. A major area that has been involved in this first step toward modularization has been mutual funds.

In the closed model era of brokers and mutual fund firms, which was the norm until the 1960s, mutual fund firms would outsource sales to securities companies (full service brokers). Then, the market witnessed the emergence of no-load funds starting in the 1970s. This era was characterized solely by diversification of sales methods, and was entirely absent changes to the closed model that covered planning, manufacturing, and sales. Finally, change descended on the market in the form of the mutual fund supermarket revolution. Metaphorically speaking, this approach was akin to companies putting mutual funds on the shelves of a supermarket and charging commissions only for the products sold. The interface between mutual fund companies and securities companies opened up, with this the creation and sales components were decoupled and functionally modularized.

The Role of New Technology: Robo-advisor

Robo-advisor initiatives can be expected to accelerate the speed of advances in modular demand structure. Presumably, coming delivery channels will seek to optimize information and investment expertise provided, driven by approaches that respond to the needs of investors by sometimes providing "automated advice" and sometimes harnessing brokers as "a human support mechanism.”

In Japan, megabanks, startups, and dedicated online brokers are all jockeying to leverage their strengths in a way that accords them the most advantageous position possible. Their robo-advisor initiatives so far largely appear tailored to support the sales of mutual funds. As easy-to-use, non-face-to-face channels, they are garnering interest from investors with a level of comfort with IT and a degree of financial literacy. Moving forward, further advancements that draw on both the asset management facet and technology are expected in the 4 areas; diversity of products, diversity of services, automation, accommodating B2B.

Excluding Japan, Hong Kong, and Singapore, Asia is a fragmented market for retail investors, and therefore it’s still inaccessible. In addition, such markets as Taiwan and Korea are showing an increase in home bias. Thus, how the robo-advisor business thrives in the Asian market will depend on its distribution dynamics, along with its asset growth potential and product development.

Legacy modernization in the securities industry is much more than the application of novel technology. Rather, it portends nothing less than a wholesale structural overhaul of the securities industry that is an opportunity to envisage anew and redefine the industry’s future. There can be no doubt that this transcends the mere establishment of a digital channel; rather it will certainly impact products, services, IT units, and sourcing models, and, in so doing, provide the securities service providers of the future a chance to seriously consider exactly what kind of companies they would like to be and the corporate cultures they would like to foster.

 

Related releases:

Legacy Modernization in the Japanese Securities Industry, Part 1

Legacy Modernization in the Japanese Securities Industry, Part 2

Fintech and Robo Advisors: Booming in Japan

Legacy Modernization in Japan’s Financial Industry, Part 2: What the Auto Industry Can Teach the Financial Sector

 

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2016年後半のカンファレンスを振り返る

カンファレンスは、いつも刺激に溢れています。2016年もアジアの各地で、パネルディスカッションやプレゼンテーションの機会に恵まれました。自らのプレゼンテーションを通じて、過去のリサーチ成果を発信するだけでなく、カンファレンス・チェアやパネル・モデレータの役割は、業界ソートリーダーとのインプロビゼーションであり、将来のリサーチトピックスやインサイトテーマを仕込む、貴重な瞬間です。人が出会い、意見を交換し、議論を深める。そのための準備と当日の緊張感は、アナリストの責務であり、醍醐味でもあります。 本稿では、2016年後半の5つのカンファレンスを振り返ります。銀行、保険、証券、ウェルスマネージメントの各業界の議論に共通したキーワードは、引き続き、フィンテック、デジタル、そしてモダナイゼーションでした。 *** Insurance, Digitization and Bubbles(7月1日:東京) 保険業界は変革を迫られています。超低金利、新規事業参入者の増加、激化する価格競争、顧客との関り方の急激な変化が、保険会社の商品/ビジネスモデルを揺さぶっています。モノのインターネットやスマートロボットだけではなく、いまやブロックチェーンも保険業界に大きく影響しつつあります。 こうした新しいテクノロジーは、本当に業界を根底から変えてしまうのでしょうか? 仮に変化があるとするならば、いつ、どんな出来事が、どのような順序で起こるのでしょうか? セレント主催の本イベントでは、世界の保険業界におけるデジタル改革の最新トレンドを紹介し、お招きした日本の保険業界を代表するソートリーダーの皆様と、中長期的な視点での将来像を模索しました。 世界の保険業界におけるデジタルトランスフォーメーションの最新トレンド InsurTechが保険業界の未来、ビジネスモデル、事業運営に与える影響 短期、中長期的な視点での展望、業界の未来図 日本におけるInsurTechの現状と展望 Insurance, Digitization and Bubbles *** Asia Anti-Money Laundering Summit(7月13-14日:シンガポール) アジアにおいても欧米同様に、規制の継続的な改正、最大手の金融機関における規制違反事例など、AMLの運営管理全般を改善する必要性が高まっています。電子取引の爆発的な普及は新たな課題をもたらしており、金融機関が様々な事象をチェックする際に、もはや規制当局や政府公認のブラックリストだけでは不十分な状況にあります。 AMLはまた、海外業務を展開する大手銀行だけのテーマではなく、全金融機関において同様な備えとその効率化が問われる時代となっています。本イベントは、アジアの保険業界を中心としたコミュニティにおいて、AMLとKYCを真正面から討議する場となりました。 セレントからは当日、以下の既刊レポートを中心に、「ユーティリティモデルの隆盛とAI適用」に関する報告を行いました。 KYC/AMLにおけるAIの活用:効率アップの処方箋 顧客確認(KYC)ユーティリティモデルの最新動向 アンチマネーロンダリングの最新ソリューション Asia Anti-Money Laundering Summit *** Asia Insurance Technology Awards(9月5-6日:シンガポール) 2016年も引き続き、セレントは、AIR の主催する Asia Insurance Technology Awards (AITAs) の審査員を務めました。アジア各地の保険業界における、イノベーションと現代化に関する先進的な取り組みを表彰するこのイベントは、セレントの主催するアワード:セレントモデルインシュアラー と併せ、当社アジア保険部門の2大イベントとなります。 新たなテクノロジー、ビジネスモデルそして業界構造や組織変革への取り組みが、6つアワードカテゴリーにおいて表彰されました。中でも、Best Newcomerに輝いた Everledger(英国)、Digital Transformationを獲得した PetSure(オーストラリア)の両社は、InsureTech時代を象徴する取り組みと賞賛されました。 IT Leadership: Liberty […]Continue reading...

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証券決済革命

日本の証券決済制度改革は2000年頃に本格化した。15年の歳月を経てDVPは実現し、STPは幅広く普及した。そして、今まさにその最終ステージに差し掛かり「証券決済革命」の時代を迎えている。 日本の証券決済制度改革の経緯において、以下の4点は重要なマイルストーンであった。 RTGSと照合システムの構築、STPの普及(2001年) 証券保管振替機構の拡充と株式会社化(2002年) CCPの設立とDVP決済の進展(2002-3年、2007年) 株券の電子化(2009年) 現在の日本における「証券決済革命」の残された課題は、以下の5点に集約される。 国債、株式等の決済期間短縮化への取り組み 清算機関(CCP)の機能拡充、利用拡大、連携・統合への取り組み 証券決済機関(CSD)の機能拡充 市場参加者におけるSTPの加速 クロスボーダー証券決済の円滑化 証券決済システム高度化の経緯   セレントは、こうした日本の証券決済革命の動向を基軸に、金融業界のレガシー&エコシステムマイグレーション、イノベーション、そしてエマージングテクノロジーの可能性をレポートしている。 本証券決済革命シリーズにご期待下さい。 証券決済のパラダイムシフトへ:日本市場の現状と展望 http://celent.com/ja/reports/35639 日本株式決済T+2:証券決済革命シリーズ http://celent.com/ja/reports/35596 証券決済革命:日本国債決済T+1と新レポ市場の胎動 http://celent.com/ja/reports/35427    Continue reading...