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SunTec Xelerate and IBM z16: Co-creating a Powerful Customer-Centric Solution for Banks

Banks Around the World Are Under Competitive Siege

Banks worldwide face several critical challenges that need to be addressed urgently. In fact, it may not be an exaggeration to describe these challenges as “existential”, because banks that do not quickly overcome them may fall by the wayside before long. On the one hand, these priorities relate to ensuring demand and sustaining customer loyalty in the face of competition from traditional rivals as well as new competitors such as neo-banks, fintech and “big tech” players. On the other, banks are also looking for ways to enhance operational excellence, and thereby reduce costs, boost employee productivity, speed up decision-making, and enable faster, more robust responses to customers. Further, in the post-pandemic world, regulators and policy makers are becoming more vocal about sustainability. Pressure is mounting on businesses, banks included, for greater adoption of environmental, sustainability and governance (ESG) related business strategies and practices. An array of new technologies is driving and enabling most of these shifts in the banking industry, just as it is doing in other domains. In this environment, both retail and corporate customers of banks are getting access to a larger pool of innovative functional solutions offered by players outside the banking domain. These non-banking players are not subject to the same regulatory restrictions as banks, which makes it easier for them to go-to-market quickly and compete on price and convenience. Banks therefore, need the right technology solutions and partners to step up and create value for customers.

Software-hardware Synergies Will Play a Critical Role in Shaping the Future Competitiveness of Banks

Software suites such as SunTec Xelerate deliver advanced capabilities around contextual products and offers and relationship-based and pricing and billing for banks and other business enterprises. To win in the race ahead, such cutting-edge software is necessary. However, software performance depends on the underlying hardware. For example, to leverage AI/ML, banks will need hardware that is designed to efficiently and speedily handle the massive volumes of data that will be generated, while also providing unprecedented levels of security, availability, and resilience.

To minimize investment and risks of business disruption, many banks prefer modernizing their core banking applications by incorporating a “middle layer” of intelligent functional applications. In this approach, customer data and business rules remain untouched, while applications in the middle layer incorporate AI/ML algorithms. As more and more customers consume banking services through digital channels, the synergy between hardware and software will become even more critical because of the tangible differentials it can create in terms of customer experience. Banks that do not pay attention to optimizing the hardware-software combination will face increased risks of under-achieving business outcomes and lower-than-expected RoI. Those banks that get this aspect of their technology landscape right will gain significant competitive edge.

Robust technology ecosystems will be needed to efficiently co-create and support innovative hardware and software stacks that complement each other to deliver tangible synergies that are relevant to banks’ operational priorities and strategic imperatives. SunTec and IBM are co-creating just such a powerful ecosystem.

How Banks Can Benefit from Running SunTec Xelerate on IBM z16

SunTec Xelerate can consume data through multiple access methods, depending on the type and frequency of data available in client environments:

  • Files (Fixed format ASCII or EBCDIC, delimited, binary, XML, etc.)
  • Database views (databases, warehouses)
  • Via REST APIs or Web Services (for real time integration)
  • Messaging (queues)
  • Via Streams (Kafka)

Combined with the above data ingestion flexibility, SunTec Xelerate offers powerful capabilities around conversion, transformation, aggregation and enrichment of data. The new IBM z16, designed to extract data-driven insights at speed and scale, efficiently complements SunTec Xelerate’s data, analytics and automation capabilities. When SunTec Xelerate runs on the IBM z16, the latter’s Integrated Accelerator for AI not only augments existing core capabilities but also supports better use of data to enable real-time, contextual offers and pricing by SunTec Xelerate. Revenue management operations are streamlined by simplified synchronization of the core system with downstream pricing and billing systems. This powerful combination of software and hardware also enables banks to achieve better automation of real-time workflows, including multi-level, sequential and parallel approvals. All this is achieved with the reassurance of the unmatched security, scalability, and resiliency of the IBM z16 platform.

The use cases below illustrate how running SunTec Xelerate on IBM z16 can help banks achieve superior revenue and margin management through more effective use of levers such as real-time relationship-based pricing and dynamic offer management.

  1. Strengthens relationship-based pricing management capability:Banks seek to increase customer wallet share and reduce costs by leveraging AI for delivery of comprehensive, personalized, and competitive pricing to their customers in near real-time. The IBM z16’s Integrated Accelerator for AI helps augment existing core banking capabilities, while allowing SunTec Xelerate to make more efficient use of transactional gravity and data. For example, when customers are making international transfers or need to carry out FX transactions, banks need to present the best transaction fees based on various parameters such as relationship status, volume, contracts, exceptions and of course, the exchange rates involved. Some of these data (e.g., exchange rates) need to be inspected in real-time to ensure that the right price is offered and thereafter, used for billing. Infusing AI and automation into the banking product pricing process provides higher accuracy and agility, improved maintainability, and superior end-to-end auditability and traceability.
  2. Enhances dynamic offer management capability: Banks are looking to rapidly design and launch highly personalized banking product bundles and offers for every customer based on customer insights. SunTec’s Offer Management together with AI on IBM z16 can help leverage AI-powered insights to efficiently determine, in real time, the “propensity of offer acceptance” and “next best offer.” Such insights help the bank identify, structure, and make the right offers to customers at the right time. This in turn, helps in enhancing customer engagement, eliminating revenue leakage, and increasing customer lifetime value.

Offers cannot remain static; they need to be consciously managed for them to deliver targeted business outcomes. Once offers are made, SunTec Xelerate running on the z16 can more efficiently measure their performance, thus enabling banks to make tweaks as needed. Profitability of products and clients can be projected and monitored in near real-time, thus making it easier for the bank to adjust pricing on future offers. AI enables algorithms to be self-learning; this means that future offers can be individually finessed to improve the odds of acceptance.

We’re excited to welcome the newly launched IBM z16. If you’d like to know more about how you can benefit from the synergies unleashed by the powerful SunTec Xelerate-IBM z16 combination, write to us at [email protected].

8 Must Have Features of a Robust Revenue Management Solution

The banking and financial services sector has been going through intense disruption over the last decade. The 21st century customer expects hyper-personalized, seamless, on-demand banking services and products, and is not afraid to try new entrants in the market if their needs aren’t met. And digital native fintechs are ready to step into the fray with their innovative offerings and uberized service models. For traditional banks and financial institutions, the writing is on the wall – comprehensively transform strategies and operations to customer-centric models or be forced out of your industry leadership position. As banks focus on creating new offerings, capturing new revenue streams, and optimizing digital channels, it also becomes important to manage risk, maximize operational agility, and ensure margin controls. You cannot achieve all of this without automated comprehensive revenue management solutions in place. 75 percent of transactional operations and almost 40 percent of strategic functions can be automated to drive better efficiency.1

But modernizing your legacy banking cores is not without substantial risk. So, most banks choose to work with third-party vendors who offer powerful middle layer solutions that sit over the core and help transform pricing and revenue management. The question is, how can you choose the best revenue management platform for your needs and what are some of the must-have features you must look out for? Here are the 8 top features that a robust revenue management solution must offer any bank looking to move to modernized customer-centric strategies.

1. 360-degree View of Customers and Intelligent Insights

The customer lies at the heart of modern banking. Yet most banks do not have a comprehensive and detailed understanding of their behavior, needs, and wants. Information silos across the enterprise hold it back from implementing better customer segmentation and from analyzing behavior. The challenge lies in consolidating data across multiple branches, departments, systems and even storage formats. You need to invest in pricing platforms that can cut across data silos to present a consolidated view of customer engagement. You must also be able derive intelligent and actionable insights from the data. A powerful analytics engine can help devise hyper personalized strategies, better relationship-based banking strategies, understand customer trends, and implement better loyalty programs.

2. Localization Support

Globalization is an integral part of business today with most banks operating across multiple countries. Customers too want to deal with a single bank with regional operations. You need a robust pricing system that can work across multiple currencies, be able to retrieve currency value in real-time to being able to charge transactions. A revenue management system capable of localizing services across geographies can have a significant impact on your revenue streams and is a critical part of your expansion plans. For example, one of the main reasons behind Target Corporation’s failed expansion in Canada was the absence of a robust pricing system that could handle currency conversions effectively.

3. Handling Complex Pricing Decisions

In the modern banking sector, differentiated and variable pricing strategies hold the key to long-term success. In fact, a 10 percent improvement in pricing can improve profits by 25 percent.2 You must invest in a pricing platform that can handle complex pricing strategies such as multi-tiered pricing, multi-product pricing, hierarchical pricing. It must be able to automatically detect changes in customer lifecycle or commitment levels and reprise transactions based on established rules. And it must allow key personnel like relationship managers to tweak standard prices to offer hyper-personalized pricing for customers. The platform must be able to optimize prices to ensure profitability, and it must be centralized and be accessible to key personnel across departments.

4. Accurate and Quick Go to Market

The modern customer is spoilt for choices and banks must move quickly to offer innovative and personalized new services and products to engage them in a long and mutually rewarding relationship. Unfortunately, manual processes and absence of set rules can slow you down considerably. Automated pricing systems with easily configurable business rules and process workflows are an essential and integral part of 21st century banking.

5. Platform Agnostic and Scalable

The technology stack in use at a bank is usually highly fragmented and heterogenous with multiple hardware and software solutions deployed at different points of time. A robust revenue management platform must be able to retrieve and process data from across platforms and databases to ensure that diverse products are accurately priced and billed. Without an automated platform, you will have to rely on error-prone, time-consuming manual efforts that can lead to revenue leakage. A technology and platform-agnostic pricing solution can form an orchestration layer between all the systems in play. As you grow your operations, and digital channels continue to evolve and grow, a good revenue management platform must be able to aggregate and analyze increasing volumes of data from diverse sources in real-time. And it must be able to do this while ensuring agility and uninterrupted service to customers.

6. Regulatory Compliance

Given the sensitive and critical nature of the banking business, and the highly complex risk environment, banks must ensure complete compliance with rapidly changing regulatory frameworks. Banks must also keep track and comply with local regulations across every region they operate in. As you strive for greater innovation, personalization, and customer-centric relationship- based banking models, you must ensure strict compliance with every applicable regulation as the consequences of non-compliance are severe. Any pricing system deployed must comply with regulations and ensure that pricing strategies are also compliant. Pricing systems that have compliance mechanisms built in are a smarter way to go than trying to integrate compliance tools later.

7. Multiple Implementation Models

Different banks have different levels of investment and varying profitability levels. And strategies may also differ considerably, as may deployment models. A pricing platform must be flexible enough to meet varied requirements. From on-prem deployment vs cloud hosting, to different modules and features to be implemented, an effective pricing platform must offer varied deployment models and features to suit different risk and investment appetites.

8. Support Constant Innovation

The future of the banking sector lies in its ability to constantly innovate and come up with differentiated offerings and operating models for customers. Pricing innovation and effective revenue management are key to long-term customer engagement and competitive success. Banks must look to deploy pricing platforms that can leverage emerging technologies to come up with offerings that put it well ahead of competition. A flexible, scalable, and agile pricing platform can not only support constant innovation but also ensure quick implementation and foolproof revenue optimization.

 

Sources

1McKinsey
2Deloitte

Collaborating for Customer-Centric Transformation

Banking is not what it used to be. Once considered one of the most stable pillars of the economy, banking today is rife with disruption, competition and most importantly, changing customer expectations. With the emergence of new digital technologies, customers have become used to on-demand availability of services, hyper-personalized offerings, and relevant, ongoing engagement from providers. Naturally they expect the same from their financial institutions, but these traditional enterprises are often not able to meet their expectations. Fintechs, neobanks and technology giants are increasingly filling this void with their innovative, personalized, value-driven services and customers are not afraid of trying them. 22 percent1 of American customers intended to switch banks in 2020 and fintech adoption amongst SMEs has already surged to 25 percent2 and could go up to as much as 65 percent over the next few years. The writing is on the wall – banks must transform the way they strategize, operate, and engage to ensure lasting customer loyalty, grow their revenues, and retain their leadership position in the future.

Transformation Now, a Critical Business Requirement

Evidently, banks must accelerate their transformation journeys to grow their business in a complex and competitive market. But this transformation is not about technology alone. The process must start with an in-depth understanding of what customers want and how they can deliver it. Moving to a customer-centric, value-driven strategy and operating model is the only way forward for financial institutions. They must be able to move quickly and realign their business processes to suit customer requirements. Unfortunately, legacy banking platforms are not scalable or agile enough to deliver the on-demand, hyper-personalized banking experience that is required today. Of course, partnering with fintechs is an option that many banks are choosing, but it is vital to transform their own platforms and infrastructure. A sound way of doing this is by working with third party vendors who can implement a middle layer to sit over their legacy platform that is agile and scalable enough to help them adopt customer-centric strategies.

Working Collaboratively with Partners

When choosing third party vendors to work with, banks must remember that the process of transformation is a collaborative one.  Banks need to work with partners who can lockstep with them to help realign processes and systems with a robust product infrastructure. And banks themselves must be willing to adjust or change their processes and systems to meet evolving client expectations. A comprehensive cloud-native, micro-services-based platform can help banks implement relationship-based, customer focused strategies. For example, a leading South African bank wanted to transform their pricing and billing functions to meet emerging customer demand for hyper-personalized, relationship-based offerings. This marked a significant acceleration in their digital transformation program, but in a fast-growing economy, it was a critical step for the bank to meet changing customer demands. They implemented SunTec’s cloud powered middle layer solution that helped them revamp critical processes. These included the accrual process that was used for finance tracking and was more accurate than conventional reporting. It helped automate consent-based debiting processes that was a regulatory requirement and digitized pricing letters that provided detailed pricing computation and transparency for the customers. The solution deployed by the bank also facilitated group pricing capabilities with tier-based pricing models.

Customer-centric transformation is no longer a good to have initiative for banks. It is crucial for protecting and growing revenues in a market characterized by unprecedented disruption. As more banks pick up the pace on their transformation efforts, they must ensure a razor-sharp focus on fully revamping existing platforms, processes, and systems to be customer-centric. An agile technology partner that is committed to helping them achieve their goals can be an invaluable asset. Together, they can usher in a new era of banking that is based on relationships and value.

Sources

1GlobeNewswire
2EY

Loyalty Management – Standardizing Multi-Party Interactions in a Banking Ecosystem

If we asked a hundred people to name the services they associate with loyalty programs, chances are, most would name airlines, retail, hospitality, or even car rentals. Some would name credit cards and virtually none would name banks as a service sector that they associate with loyalty programs. Yet as the business of banking gets increasingly challenging, financial institutions cannot really afford to continue operating with lackluster and irrelevant rewards programs. How then, can modern banks revamp loyalty strategies and manage multi-party loyalty programs to better engage with customers? In this session on “Multi-party Loyalty Management” at the BIAN Global Summit 2021, I’ve answered these pertinent questions.

The New Push for Customer Loyalty

Up until recently, banks did not have to worry about loyalty. Customers maintained accounts with one or two banks at best, and banking relationships usually were for life – quite often based completely on the proximity of a brick-and-mortar branch. They did not have much choice in the matter as there were no non-banking options available to them. The situation is significantly different today with the emergence of fintechs and technology giants and changing customer expectations. Customers today want uberized, digital, hyper-personalized, and relevant services and products from financial services providers and are not afraid to switch from one to the other if dissatisfied. In 2020, 22 percent of the banking population in the USA – as many as 44 million Americans-considered moving from their old banks to a new primary financial institution.1 And as more digital native millennials enter the formal banking economy, the fight for long term share of wallet will only get tougher. A solid base of loyal customers is essential for banks under these circumstances.

Existing Banking Loyalty Programs – Irrelevant and Ineffective

Unfortunately, existing loyalty and rewards programs are not very effective. Almost USD 100 billion worth of loyalty points go unused every year.2 Evidently, there is a deep mismatch between what banks offer in terms of rewards and what customers want. Most loyalty programs are product-centric and not customer-centric. Most banks today have programs built around their credit card business, but the rewards offered are not personalized and the program is not extended to other parts of the business. As a result, customers often find them to be irrelevant or not useful and never redeem them. As banking increasingly transitions into a customer-centric model, they must consciously extend the same to loyalty and rewards programs as well.

Customers also find it difficult to redeem points as banks work with a small, closed network of partners. Limited options to earn and redeem points coupled with the lack of options to redeem points in real time make existing programs unattractive and unusable for most. And in the absence of mechanisms to measure the direct correlation between loyalty and profitability, banks too lack the motivation to implement real change in their loyalty programs.

Banking Loyalty 2.0

At this juncture, banks must completely overhaul their loyalty programs and implement customer-centric strategies. Such a new revamped program must be pervasive, seamless, contextual, and truly rewarding for the customer. This can only happen if banks and non-banking partners come together to create an open, inter-operable, multi-partner ecosystem. Standardized APIs will facilitate easy partner integration. In this ecosystem loyalty points will be akin to digital currency – easy to use, easy to redeem across a wide network of partners. Points rewarded by the bank must be redeemable in real time and must be relevant for the customer and they must be recognized by partners across multiple ecosystems. For instance, a banking customer must be able to seamlessly change their bank rewards into air miles, only then will they see value in banking loyalty programs and engage with the bank on a long-term basis.

Support for Multi-party Loyalty Ecosystems

As financial institutions accelerate transformation for their loyalty programs, here are three key areas to help banks transform loyalty and rewards programs in a multi-party ecosystem. First, they must establish standardized norms for multi-party interactions within the ecosystem. This includes the program owner, earnings partners, redemption partners, aggregators, and customers. Second, they must enable an inter-operable framework opportunity similar to a distributed ledger that can facilitate seamless, secure and trusted transactions between various parties in an open partner ecosystem for rewards. Finally, this is an opportunity for industry bodies like BIAN for to define standards and bring in more non-banking parties into the loyalty partner ecosystem.

The larger banking sector is moving to customer-centric, value-driven models and loyalty programs cannot be left behind in this transformation drive. While banks still enjoy considerable customer trust and loyalty, they cannot take it for granted given the disruptive and competitive market scenario they operate in. As banks look to becoming orchestrators of a customer-centric ecosystem, they must also extend the same strategy to their loyalty programs and industry bodies like BIAN have a crucial role to play in this.

Sources

1GlobeNewswire
2AdAge

Embedding Banking into Everything

What will the bank of the future look like? To be honest, I am not sure there will be a physical bank where financial transactions take place. This is not to say that the banking industry will cease to exist. Banking systems have existed in some form, or the other as long as human beings have engaged in transactions and is likely to continue for as long as we do business. But banking in its current format and structure may not be around much longer. Deeper integration of financial services, or embedded banking is likely to be the norm in the future.

Banking as we know it today is vastly different from what our grandparents or even parents knew. Consider this – when was the last time you went to a physical bank branch to carry out a banking transaction? Do you use cash or even your debit card anymore or have you been primarily using mobile apps, digital wallets, and UPIs? The emergence of new technologies has opened the doors to a whole world of digitally powered experiences and banking is no exception. Customers have been vocal in their demand for uberized banking services with greater flexibility, ease of use, control, and personalization. In the face of increasing competition from fintechs and tech giants, banks too accelerated their digital transformation journeys. And the COVID-19 pandemic has proved to be the biggest driver of digitalization in banking. Social distancing rules and fear of infections led to increased adoption of online transaction methods, and these are likely to stay post pandemic as well.

The pandemic has in fact, accelerated the pace of technology adoption across the banking and financial services world and changed the rules of how businesses engage with financial services. At the heart of this transformation lies the modern customer and their expectations of seamless, and intuitive service. Banks are now exploring newer more customer-centric business models that call for deeper integration with non-financial businesses to offer a comprehensive and easily availed range of services.  For example, Tesla is offering a quick and easy insurance program which allows customers to buy insurance directly from Tesla almost as soon as they buy their car.1 This also costs less than a policy from a third-party partner. Cab hailing company Lyft is offering debit cards for drivers that allows them to receive their payments immediately. Drivers can even set up savings accounts via this initiative. This sort of embedded finance model is built around the customer – get all the services and products need at one place quickly, and effortlessly, making this a seamless and optimized experience. And it is expected to grow exponentially, reaching an estimated market value of USD 138 billion by 2026.2

Evidently embedded finance is not a fad. It is here to stay because it ensures a win-win situation for all parties – customers find it easy to access what they need, and by making the process pain free banks and third-party businesses are more likely to close deals. It is also an excellent means for banks to study customer spending habits and requirements to finetune their personalization strategies. By building an embedded finance ecosystem banks and third-party vendors can encourage cross-selling and mutual growth. Embedded finance that finds expression in point-of-sale finance options or Buy Now Pay Later schemes can also help banks reach customers who were previously left out of the formal banking system.

Embedded finance can be used in several ways. BNPL options are of course one way of using it. Banks could take it further to even issue loans for larger amounts in partnership with companies working with bigger credit systems. Or like Tesla, businesses could embed insurance services into their offerings making it quick and convenient for buyers to insure their new purchases. Embedded finance tools could be used for investment and trading activities to connect users with their physical banks to make appropriate investments. And of course, as technology and customer requirements continue to evolve, financial technology-as-a-service models are rapidly making their presence felt in company portfolios, handling everything from deal management and customer acquisition to invoicing and revenue management

It is safe to say that banking will not be the same in the future. Banks will increasingly become orchestrators of ecosystems centered on customer needs. And banking itself will be deeply integrated with a variety of related and unrelated businesses delivering greater convenience and value to the customer than ever before. To do all this, banks need to move quickly to leverage emerging open banking opportunities. And for that, they need to continue accelerating their digital transformation journeys with well thought out investments in the right technology platforms and partners. The bank of the future will be digital and embedded into every aspect of a customer’s purchase journey.

Sources

1Finextra

2Businesswire

Understanding SAF-T and What It Entails in The Modern World of Tax and Accounting

Organizations that have global operations are required to adhere to different tax reporting standards and regulations in each country that they operate in. Standard Audit File for Tax or SAF-T is the Organization for Economic Co-operation and Development (OECD) recommended electronic exchange of reliable accounting data from organizations’ accounting system to the tax authority for compliance purpose. It aims to create a standardized file format (XML) for the exchange of audit data.

In a globalized environment, data standardization is crucial to detect tax fraud promptly and effectively. This regulation applies to global organizations or their subsidiaries with a presence in the European Union or any of the 35 member countries under OECD. Following the SAF-T regime is a mandatory requirement in most of these countries.

Typically, a SAF-T file includes Accounts Receivable & Payable, Fixed Assets, General Ledger Entries, and Inventory. This regime has been used by many European tax agencies to acquire greater control over tax data. Currently, SAF-T is mandatory in France, Poland, Spain, Norway, Lithuania, Portugal, Luxembourg, and Austria.

The SAF-T file format benefits two parties:

  • The taxpayers who can easily provide their electronic records to tax auditors.
  • Revenue authority staff and auditors who can review accounting records that can be used for compliance checking purposes.

Businesses can improve the quality and availability of data by using SAF-T as a file source. It allows tax administrators to conduct audits more quickly and efficiently as well as encourages tax compliance by making reporting obligations simpler and making the auditing process easier for tax authorities.

It can further be implemented by different countries specific to their tax needs. For example, countries like France and Norway have implemented SAF-T with just a subset of the data required in sync with their tax needs.

Why Banks Need a Reliable and Automated Solution to Comply with SAF-T?

The objective of SAF-T is to decipher a business’ tax records to determine timely tax payments in accordance with domestic tax regulations. With increasing regulatory requirements, about 9-10 countries have already introduced a SAF-T mandate in the last two years alone. Besides, businesses that do not comply with this mandate will have to face charges for non-compliance, litigation costs, etc. In fact, complexity of tax and data security related regulations have increased multi-fold in the recent years. Implementing an automated tax compliance solution can bring down the cost of compliance significantly.

According to a study by Investopedia, the cost of non-compliance is 2.7 times higher than the average cost of compliance. If banks stay compliant to these requirements, it helps them safeguard their reputation in the eyes of the customers, thereby, avoiding the chances of a declining customer base.

Further, banking processes often have manual interventions, and it may lead to computational errors and other such inaccuracies. A proven solution can help avoid such vulnerabilities. A trusted taxation solution acts as a safety net as it offers advanced reporting capabilities and can be used to cross-check and verify with other multiple sources of truth.

Let’s look at how SunTec’s Indirect Taxation solution helped one of our banking clients in Europe to stay SAF-T compliant and enabled them to save costs. With Xelerate as the backbone of their billing and tax requirements, here’s how the solution helped the bank:

  • As an invoicing solution enabling businesses to be SAF-T compliant, Xelerate kept a track of all non-booked transactions that lay outside of the system and consolidated data across systems into one file and format (enabled data exchange between different business systems). This helped record a client’s tax activity and generate bills on a daily basis for transactions of this nature.
  • With its functionality to allow external data to pass through the systems for verification purposes, it deciphered multiple tax variations to be invoiced in a centralized manner.
  • Additionally, in the case of incorrect computations or matters of credit adjustments, features such as charge code validation and amount validations were introduced to ensure customer’s claim amounts were verified with the original invoices. This helped monitor fraud or any other errors for the company.
  • The invoicing mechanism was further customized, with the inclusion of flat rate taxes and computation of taxes upon other transaction values.
  • Lastly, all data was generated in an XML format based on the client’s requirements to stay SAF-T compliant.

With such a standardized format and simplified procedures, the client benefited from a reduction in compliance costs, increased efficiency and effectiveness of both self-audit and external audit and improved the quality of tax declarations.

Our solution can seamlessly be implemented with existing GST/VAT systems and components required for the generation of audit reports can be re-aligned based on country specific rules. To learn more, email us at [email protected]

Sources

1Investopedia

References

https://www.tjc-group.com/insights/saf-t-compliance-how-the-burden-of-reporting-is-growing-due-to-covid

https://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/45045602.pdf

Negative Interest Rates Explained

The outbreak of the COVID-19 pandemic disrupted global business and economies at a scale barely ever seen before. Governments and central banks across the world have responded to the emerging crisis with aggressive fiscal policies in a bid to address the economic impact of the pandemic. Record low interest rates was one of the key tools deployed by most central banks. But by now, it is evident that COVID-19 will remain with us in some form or the other for a long time to come. While vaccinations can help to stave off serious illness, emerging variants will keep the disease circulating in the population as it hopefully will become endemic like the flu. Given this long-term perspective there are growing calls for central banks to move the negative interest rates (NIR). Most central banks and even the International Monetary Fund (IMF), however, say that NIR has eased financial stress and supported growth and inflation.

NIR first emerged in 2012 when central banks of Denmark, Japan, Sweden, and Switzerland adopted the policy to address below target inflation rates that were impacting jobs and economic growth. This move was in response to a situation where interest rates had dipped to a very low neutral rate that was neither contractionary nor expansionary. While they were envisaged as short-term booster shots for the economy, they have been in use for a while now.

But what are negative interest rates? To put it simply, it refers to a policy where one is paid to borrow money from banks, or one is made to pay money to keep money in bank accounts. The idea is to encourage people to borrow more money and spend more money, which will in turn boosts a flagging economy. Given the current economic impact of the pandemic, a policy that encourages spending and getting money into circulation is a sound move. There is no question about why this is being strongly proposed as a tool to stimulate financial growth the world over right now, but does it make sense to continue with this even after the pandemic is over?

NIR essentially means that banks are charged money to maintain excess liquidity in the system. The system disincentivizes banks to maintain excess deposits and forces them to lend more money. Customers can borrow money at very low rates and may even be rewarded for borrowing. In Denmark where NIR has been in play for many years, banks don’t pay cash to the customer when they take out a mortgage. Instead, they adjust the monthly outstanding mortgage amount by more than what the customer has repaid and shorten the overall mortgage payback period. The objective here is to encourage a real estate boom as customers can pay off their mortgages easily and be open to further investments. It is likely to then have a spiraling effect on the economy by boosting spending on related products and services like insurance, home décor and more.

With an NIR policy, customers with existing loans are encouraged to consolidate all their outstanding debts at a lower rate. The money saved can then be spent on other items – which puts the money right back into the economy. But this system discourages savings with banks by not providing any interest on savings or even charging them a fee. Banks in Denmark, Switzerland, Sweden, Japan, where negative interest rates have prevailed for some years now, give no interest to their customers who save with them. In fact, they charge a fee for savings beyond a certain threshold. NIR is bad for anyone trying to save money. With no returns on their bank savings and with ongoing inflation, they stand to lose money by keeping it in their banks. Risk averse investors may end up gravitating towards risky assets in search of returns that will not be available in traditional savings modes. Senior citizens especially stand to lose out under such a system, as they will not receive any interests on their saved income at a time when they can’t earn like before. Such a system is likely to have long term societal impacts as well, as the traditional conservative savings approach is replaced by blatant consumerism, senior citizens push their retirement and rethink retirement plans, investment strategies and pension funds.

Banks will need to rethink their strategies as NIR has a significant impact on their bottom lines. Prolonged ultra-low to negative interest rates, can affect the overall health of the banks and financial institutions, and they would have to find new ways to increase their margins and improve profitability. They may even hold off lending altogether which would adversely impact the economy.  And as depositors shy away from saving their money in banks, there may be widespread cash hoarding, last heard of during the Great Depression of the 1930s. One way of surviving and thriving in a NIR driven economy is to change banking product and service offerings. Greater personalization, and innovation, such as interest earnings on deposits tied to certain cash flows – can be a good start.

From having observed NIR policies in play in Japan and the EU, I think one can safely conclude that cheap money does not always spur business expansion and economic activity. It just takes the cost of money out of the equation. Having said that, economists around the world feel that there is enough merit in the system to implement and sustain this policy for some time to come. Whether they will indeed boost world economy will have to be evaluated at a later time.

Uphar Gandhi

Uphar is an experienced sales professional with a demonstrated history of working in the Information Technology and Computer Software industry for Banking and Financial Services. He is proficient in CXO engagement, negotiation, sales, relationship management, stakeholder management, RFx, market research, as well as team management.

Harness the Power of IBM Z and SunTec Xelerate Under One Umbrella

The business of banking is tougher now than ever before. On the one hand, they have to contend with changing customer expectations of hyper-personalized services, differentiated offerings, and greater innovation. As more millennials and Gen Z come into the formal banking system, the sector will have to change further to meet their demand for greater choice, flexibility, and control. On the other, they must contend with fintechs, challenger banks, and technology giants who have the digital prowess to offer personalized, innovative products and services that customers want. To make matters worse, there are disruptions in the macro-environment – ranging from geopolitical unrest to a pandemic that has complicated the banking landscape exponentially and has necessitated a range of urgent measures to meet the unexpected challenges. The question now is, how can banks gear up to thrive in such an environment?

The answer, as most banks understand well, lies in building the strong technology foundation they need to address evolving customer and market demands. Only with a sound tech foundation can they deliver the agile, personalized, customer-centric strategies that are required to thrive in the complex banking landscape today. Today more banks are exploring the use of cloud-native technologies that can enable them to build highly scalable applications in today’s modern environment with private, public, and hybrid clouds along with the ability to use cloud-native applications with existing core applications on z/OS.

One such cloud-native, micro-services-based technology is SunTec’s Xelerate customer engagement and orchestration application. Banks looking to progressively modernizing the core can build agility for rapid innovation by co-locating this intelligent over-the-top (OTT) personalization application with existing core applications and transactional data on z/OS. This is one of the best solutions for banks looking to transform operations. Co-locating Xelerate on IBM Z creates an agile, rules-driven middle layer that sits on top of and seamlessly integrates with the core banking application platform. Banks can draw on the dual power of Xelerate on IBM Z to modernize key functions such as product management, pricing, revenue management, and more. And best of all, they can do so by leveraging their existing infrastructure investments without compromising on security, performance, reliability, scalability, and maintenance.

Up to 70 percent of enterprise structured data and business workflows resides on IBM Z. It provides the perfect foundation for deploying AI and advanced analytics by increasing access to data and workflows via application modernization. Modern open technology along with open source and ISV offerings on IBM Z enable business acceleration and cost-efficiency. Integrating IBM Z with a bank’s hybrid cloud strategy can drive 2.5 – 5 times the value of a public cloud alone by accelerating business agility, enhancing developer productivity, improving infrastructure cost efficiency, ensuring better compliance management, and deployment flexibility.

To put it simply, this co-located solution delivers two world-class solutions under one umbrella. Banks can leverage a category-leading revenue management and customer experience orchestration solution on a powerful infrastructure to revamp their strategy and operations for the digital era.

SunTec Xelerate co-location on IBM Z helps reduce latency by placing new applications in close proximity to the existing system of record data, e.g., use of APIs for easy access to business-critical applications and associated data running on IBM Z. SunTec Xelerate co-located with IBM Z offers your bank a powerful, intelligent tech foundation for better and faster innovation and personalization without incurring additional infrastructure costs. It is the solution you need to unlock customer delight and long-term profitability.

Find out how this unique co-located solution can help your bank:

1.) Learn more about the IBM Z “co-locate application pattern” : Click here

2.) Request an IBM Garage Discovery Session to help you quickly identify high impact opportunities for unlocking the full value of IBM Z applications and data as part of a hybrid cloud strategy: Click here

3.) Find out more about IBM Z: Link to IBM Z/ IBM LinuxONE page: Click here

Sreekumar Balachandran, Head of IT at SunTec, Bags the 3rd CIO Samman

We’re pleased to share that Sreekumar Balachandran, Head of IT at SunTec, has been the recipient of the 3rd CIO & Leader Samman (22nd Annual CIO & Leader Conference program) that was virtually hosted on 4 September 2021. The 13 awardees were chosen by a panel of experienced CIOs from prestigious organizations.

This award is marked as an honor for veteran CIOs for their professional achievements as well as their contribution to the community and society.

Hearty congratulations to Sreekumar Balachandran on achieving this remarkable milestone! Wishing him the best ahead!

Weathering the BNPL Storm

The emerging Buy Now Pay Later, commonly known as BNPL is the latest disruption in the once staid banking and financial services sector. Though BNPL has existed for some time now, it has garnered a lot of interest lately. The easy availability of payments via installments at the point of sale is attracting millennials and Gen Z customers who were earlier deterred by the high cost of goods and high rate of interest when purchasing goods on credit cards. Though this service is still niche, it is growing at a fast pace, fuelled in part by the unique restraints and conditions of the COVID-19 pandemic. In fact, reports suggest that BNPL spending at e-commerce point of sale is likely to go up to about USD 680 billion by 2025.1

With BNPL, banks need to address two key questions:

  • Is credit card usage declining and will it eventually make the credit card obsolete?
  • What can banks do to win in this emerging space?

BNPL services can present a significant threat to the credit card industry and the banking sector. Not only do credit card companies stand to lose out on revenues through interests, and late fees, but they could also see their consumer loan business sustaining losses. More importantly, it can lead to eroding customer loyalty. Right now, the BNPL space is dominated by fintechs and tech giants like Apple are also making their way into the fray. While they have the flexible business models required for BNPL, they still don’t enjoy the significant trust that banks and credit card companies enjoy. It is now time for the latter to seize the opportunity to revamp their strategies for the BNPL era.

Joining the BNPL Race

The lack of interest on BNPL transactions is one of its biggest attractions for the younger customers. Incumbent banks are now beginning to explore, interest free or low interest, long term instalment payment options. For example, National Australia Bank (NAB) launched “Straight Up”, a card that allows customers to borrow up to A$3000 against a nominal monthly fee.2 The Commonwealth Bank of Australia is expected to follow suit with a 0% interest card of their own. Citigroup launched Citi Flex Pay and Chase Bank introduced My Chase Plan.3 Both these services allow customers to pay for large purchases in instalments for a nominal fee. They are still linked to a credit card but considering the customer trust they enjoy these cards are likely to see an uptick in adoption. Mastercard and Visa, two of the world’s biggest credit card companies are also working on instalment payment options for their customers.

Banking on an Ecosystem

The other interesting possibility for traditional banks and credit card companies in the BNPL space lies in the emerging banking ecosystems trend. Banks are increasingly working towards becoming ecosystem orchestrators with a plethora of banking and non-banking partners who will deliver value added services to customers. This move is indicative of a fundamental shift in banking to a completely customer centric model. According to a study by Citizens Bank in the US, 76 percent of buyers would be interested in making a retail purchase if they could avail of a simple instalment based payment plan at the point of sale.4 This is a significant revenue opportunity for retailers and sellers. By leveraging existing merchant relationships or forging new ones, banks can drive sales and mutual profits by offering customized interest free instalment payment options. BNPL players have already started partnering with key merchants – Affirm has partnered with Shopify, Gucci, Bonobos, The RealReal and Peloton.5 And Klarna secured an investment from its partner Macy’s ahead of the holidays last year. It is time for banks and credit card companies to follow suit.

Winning Partnerships

Forging symbiotic relationships with BNPL fintechs is also a good strategy. Traditional banks and credit card majors have a depth of customer data and a reach that is invaluable for fintechs looking to make their mark while fintechs have the technology expertise and flexibility required for launching innovative services like BNPL. Barclays has already partnered with Amount for Point-of-Sale BNPL solutions in a bid to connect better with younger customers. The sector is likely to witness many such partnerships, acquisitions, and investments in the years to come.

Shopping on credit is not a new phenomenon and the credit card industry goes back several decades. But BNPL’s attractiveness lies in its ease of use. It comes at a time when customers are demanding easier engagement models, fuss free transactions, and flexible payment options. Banks and credit card companies must use this opportunity to relook at their operating models and come up with innovative new offerings to thrive in this new customer driven economy.

Sources

1Businesswire
2Retail Banker International
3The Financial Brand
4Businesswire
5Banking Dive