Navigating New Revenue Streams and Risk Mitigation in Banking: Insights from an Expert Panel

In a recent panel discussion, industry experts Chetan Cariappa , Akanksha Snyder , Michael Knorr , Courtney H. Trimble discussed the evolving landscape of banking, highlighting the significance of data-centric strategies in revenue generation and risk mitigation. This blog covers the key takeaways from this insightful conversation, focusing on the impact of ISO-20022, the varying approaches of banks of different sizes, and the urgent need for strategic planning in response to these changes.

Key Takeaways were:

Value-Added Services Through Data

The panel emphasized the potential of appending transactional data to external datasets, offering opportunities for both growth and risk mitigation. This approach can lead to the creation of new revenue streams and value-added services, particularly when tailored to specific industries.

Industry-Specific Solutions

A crucial point raised was the need for industry-specific solutions. Different sectors have unique needs and challenges; thus, banking products and services must be tailored accordingly, addressing specific gaps and requirements within each industry.

Mindset Shift in Banks of Different Sizes

Global Banks

They see ISO standards changes as a strategic opportunity beyond compliance, focusing on improving customer experience and developing new services.

Mid-Tier Banks

Generally, adopt a minimum compliance approach to manage costs, often partnering with Fintechs for solutions.

Regional and Local Banks

Minimize immediate costs and take a reactionary approach, adapting when necessary.

Strategic Versus Compliance Mentality

Moving beyond a compliance-only mindset is crucial. Banks should leverage the additional 30-40% data provided by ISO upgrades for broader strategies, like applying machine learning, rather than merely updating systems for compliance.

The Build vs. Buy Approach

Large banks tend to build bespoke solutions (highlighted by an example of a bank dedicating 80 people to ISO translation), while smaller banks lean towards buying solutions. This decision significantly influences the approach to data management and service development.

Preparation for New Standards

The panel underscored the importance of early and comprehensive preparation for ISO-20022. It involves understanding the message flow, the additional data elements, and how they impact the entire payment ecosystem, including reporting and customer-facing channels.

Consequences of Non-Preparedness

Banks unready by the deadline face severe repercussions, like the inability to send or receive high-value wires and interoperability issues with institutions that have migrated to ISO. This particularly impacts cross-border payments. 8. Utilizing Testing Opportunities: The Fed’s provision of a dedicated testing system was highlighted as a critical resource for banks. Engaging with these test systems early is essential for identifying and resolving issues well ahead of deadlines. The panel conversation was more on crucial evolution banks must undergo in response to new standards like ISO-20022.

The overarching message is clear,

"banks need to adopt a strategic, proactive approach, focusing on industry-specific solutions and leveraging data for enhanced services and risk management, rather than just aiming for compliance. "

The conversation walked us through different challenges and strategies for banks of various sizes, emphasizing the urgency and significance of preparation and adaptation in this dynamic evolving sector.