This Year’s AFP Guide Highlights Robotics in Finance

This post is written in reference to “AFP’s Guide to Emerging Technologies: Robotic Process Automation”, published in 2019.

The AFP “Executive Guide to Emerging Technologies: Robotic Process Automation” for 2019 included an in-depth analysis of Robotic Process Automation, its prevalence in the financial industry, and the implications robotics have on the industry, its efficiency, and jobs moving forward. In summary, the AFP guide, underwritten by Kyriba, highlights the impact automation is currently having on financial institutions; mainly, helping expedite business processes and adding value to jobs. The topic of robotics and automation has previously been broached in an abstract manner, as a tool of the future—that is no longer the case. The use of robotics will soon be the marker of successful and efficient processes.

Blades International, Inc. is aware of the importance of automation and robotics technology. Through the use of API and Bloomberg software, Blades International has developed an innovative technique called FX Rate Integrity®. FXRI® helps corporate clients understand and monitor their FX costs to ensure they are receiving Fair FX Markups.

Read the AFP Guide.

-Paola Gasca, Analyst

 

The Vanguard Group Testing the Use of Blockchain Technology in FX

The Vanguard Group, one of the world’s largest investment companies, has begun testing the use of blockchain technology in FX trading. It has been reported by Bloomberg that Vanguard has partnered with Symbiont, a blockchain technology provider, to create an FX trading platform that allows for peer-to-peer FX trading. Blockchains have had a growing presence in the foreign exchange market as it is a faster, more efficient, and more reliable way of transferring funds. If successful, the Vanguard-Symbiont partnership could challenge client-bank relationships as it will help alleviate corporate clients of the high markups and costs associated with FX transactions. Additionally, the platform would make it easier for corporate clients to exchange foreign currencies.

While there are still uncertainties with the platform, which has few users so far, the partnership seems promising. Regardless, the Vanguard-Symbiont partnership signifies the digital change occurring within the banking industry. As banks begin to modernize and technology advances, there will be a pressure to monitor and lower excessive FX markups. Until FX costs and markups decrease, FX Rate Integrity® is there to address the issue of Excessive FX Markups.

Read more on Bloomberg.

The Digitalization and Use of Computer-Generated Algorithms in Banking Highlights Importance of FX Rate Integrity®

Although it has been disputed that banks should collaborate with fintechs in order to keep up with digitalization, recent news suggests otherwise. The Banker writes that as banks are beginning to keep up with the modernization and digitalization of the banking industry, many are ending their partnerships with existing fintechs. As banks had a hard time keeping up, they ​needed ​ fintech partnerships to compete, but as more banks embrace technology and the use of APIs, fintechs are less necessary.

Many banks now have “cloud deals” with Google, Amazon, or Microsoft and can perform wider and more advanced functions on their own, writes The Banker. Typically, banks use algorithms to determine a client’s fx markup; it is important for clients to understand how their markups are determined in order to effectively monitor their FX costs. FX Rate Integrity® uses cloud technology to help clients identify how they are being charged to complete FX transactions by their banks.

Read the full story on ​The Banker.

-Paola Gasca, Analyst

The Emergence of Open Banking and APIs

By: Paola Gasca, Analyst

References “Open Banking and the Future of Financial Services” published by MuleSoft

Open banking is essentially a system that provides users with a network of a financial institution’s data using APIs (application programming interfaces). The idea of open banking is appealing to clients of financial institutions as it relies on a network, not the centralization of banks, to define how financial data should be created, shared, and accessed. The concept of open banking has been reluctantly accepted by most financial institutions as it is seen as a threat to established banks. Essentially, open banking forces large, established banks to be more competitive with smaller and newer banks; in order to compete with open banking systems, established banks have to change their operating processes, adopt new methods, and spend money adopting new technology. Financial institutions that adopt an open banking system are more likely to see lower costs, better technology, and better customer service.

Open banking is attractive to clients as it provides them with easier and quicker access to more information. Open banking APIs facilitate easy fund transfers, evaluate consumer transaction data, and can compare product offerings to identify the best financial products and services for a consumer. Additionally, open banking systems can help lenders evaluate a client’s financial situation and risk level. The use of open banking APIs makes data more accessible to clients and their financial institutions, making data procurement much easier and faster.

The concept of open banking revolutionizing the financial industry, meaning established banks would be wise to adopt the new technology.

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“Those who treat Open Banking as an opportunity to re-define and prioritize what value they add in the value chain will be thrivers, and will win, both short- and long-term”

“Traditional banks know that to compete [with newer, more technologically advanced banks] they must develop digital capabilities to avoid being dis-intermediated completely by new entrants with superior, more agile offerings”.

-MuleSoft

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APIs: Application Programming Interfaces

An API, or Application Programming Interface, is a programming code (or set of codes) that queries data, analyzes appropriate responses, and sends instructions between softwares according to the analyzed data. APIs are often used in trading in the form of algorithms. For example, banks managing foreign exchange trades will use automated trading algorithms to determine a markup price between currencies; an API helps connect data from involved financial institutions to expedite the exchange of information.

Prudential Financials’ Recent Acquisition Highlights the Influence of Digital Transformation in Business

This post references an article originally published by The Wall Street Journal on September 5, 2019 and an interview published in the Financial Times on August 28, 2019. 

Prudential Financial Inc. has acquired online startup and life insurance provider Assurance IQ Inc. for $2.35 billion. The deal is an attempt by Prudential to combine their traditional services with the efficiency and effectiveness of “insuretech” firms to reach a broader audience. The merging of traditional insurance companies with online startups is a current trend, The Wall Street Journal reports, which seeks to “benefit from data analytics driven by algorithms”. Assurance currently uses “data science and machine learning to assess needs” and attract customers in a mutually beneficial way.

The acquisition highlights the unstoppable influence online startups and algorithm-driven business practices are having on every market. In a recent interview for the Financial Times, Costis Maglaras, who serves as the dean for Columbia Business School, emphasized the importance of recognizing and adopting digital transformation. “We need to embrace how tech and data algorithms are actually transforming different businesses”, explains Mr. Maglaras, “Data analytics is essentially transforming pretty much every industry”.

We see data analytics transforming the FX Markets. BII is a leader in analyzing FX Algorithms. It is notable with FX Rate Integrity®, BII is helping clients benefit from data analytics and maintaining fair and competitive FX Markups.

Read the full story on the Wall Street Journal.

 

-Paola Gasca, Analyst

MarketAxess Success Highlights Rise of Automation in Trading

This post references an article originally published by the Financial Times on August 30, 2019.

MarketAxess has qualified for the S&P 500 index of biggest U.S. companies, signaling a new era in trading. “The days of young men and women barking into phones to connect buyers and sellers are slipping away. Bonds are being traded electronically and via algorithms”, writes the Financial Times. The success of MarketAxess, an electronic bond trading platform, highlights the technological change affecting markets and financial institutions. Like MarketAxess, financial institutions will benefit from the rising influence of algorithms; for example, some banks use algorithms to price and execute foreign exchange trades faster, more efficiently, and with little human involvement. However, as automation brings costs down and efficiency up, it also brings a set of challenges.

FX Rate Integrity® can help clients manage and negotiate algorithms associated with their FX trades. In foreign exchange especially, algorithms need to be closely monitored. Computer-generated algorithms are subject to error and should therefore be regularly checked. FX Rate Integrity® closely monitors corporate clients’ FX trades, helping catch rare, but probable, algorithm errors.

Read the full article on Financial Times.

 

EU Launches Investigation into Facebook and Libra

This post references an article originally published by the Financial Times on August 21, 2019. 

Since its announcement earlier this year, Facebook’s Libra has been subject to skepticism—a fact that has not changed despite public support by major companies. Most recently, the currency has faced scrutiny by EU antitrust regulators, who have set out to investigate the Libra project. The Financial Times reports the EU seeks to investigate “potential anti-competitive behavior” relating to the use of consumer data and “possible competition restrictions”. Since Libra’s conception, Facebook has assured the currency does not seek to shut out rival crypto-currencies or financial institutions, but rather work with them.

Blades International previously outlined the benefits and drawbacks of a cryptocurrency like Libra disrupting the market. As The Libra Project continues to move forward, we are reminded of the importance of transparency and awareness in cross border payments.

Read the full story on the Financial Times.

Read about FX Rate Integrity®

-Paola Gasca, Analyst