The financial industry is undergoing a transformative shift driven by innovations in open banking and financial services, alongside regulatory advancements like the proposed Financial Data Access (FIDA) regulations in the EU, and the global adoption of ISO20022 for SWIFT messages. Technology and efficient operations are inseparable topics and change often creates anxiety. However, embracing the transformation, inside out, is the path to future growth.

By Alan Goodrich, ERI

The next wave of changes is poised to put further pressure on both siloed legacy applications and even newly created webs of fintech solutions. The required transformations are, therefore, bound to encourage the implementation of a modern integrated core system. Such platforms promise not only to enhance customer experiences and to stimulate new revenue generation opportunities but also to significantly reduce costs in post-trade securities management, settlement, and custody.

Open banking allows third-party providers access to consumer banking and financial data through APIs, fostering a competitive and innovative financial ecosystem. Open financial services extend this model, enabling non-bank entities to offer financial products and services. These innovations lead to a more interconnected financial landscape, where data flows seamlessly across different platforms and providers.

The proposed FIDA regulations aim to standardise data access protocols, enhancing interoperability and security across the EU’s financial services. FIDA’s emphasis on data portability and standardised APIs will drive financial institutions to adopt more integrated systems, breaking down the silos that currently hinder data synchronisation and consistency.

ISO20022 is a global standard for financial messaging that provides a common language and model for financial communications. The transition to ISO20022 for SWIFT messages is a critical step in harmonising financial data formats, enabling more efficient and accurate data exchange. This standardisation is essential for modern integrated core systems, facilitating seamless data integration and processing across various financial platforms.

Legacy systems in financial institutions are often siloed, with each system handling specific functions independently. This leads to delayed processing, inconsistent data, and inefficiencies. Meanwhile, the rise of fintech solutions has created webs of interconnected but often discordant applications, further complicating data synchronisation and consistency.

Implementing a modern integrated core system can address these challenges and offer numerous benefits across all areas of operations:

Improved Customer Experience

• Real-Time Data Access: Customers gain real-time access to their financial information, enhancing transparency and trust while enabling better informed decision making.

• Seamless Service Integration: Integrated systems enable the provision of comprehensive financial services, from payments and loans to investments and insurance, within a single platform.

• Personalised Financial Products: Leveraging integrated data, financial institutions can offer tailored products and services to meet individual customer needs.

Cost Reduction

• Operational Efficiency: Automation and real-time processing reduce manual intervention and errors, lowering operational costs.

• Scalability: Integrated systems can scale to handle increasing transaction volumes without significant cost increases.

• Regulatory Compliance: Modern systems ensure compliance with evolving regulations like FIDA and ISO20022, reducing the risk of penalties.

Modern integrated core systems bring transformative improvements to post-trade securities management. A prime example of which is corporate actions’ straight-through processing (STP), where automation of the entire lifecycle, from initiation to settlement, minimises manual intervention and brings a raft of benefits, for example:

Enhancements in Post-Trade Securities Management

• Timely Processing: Automated systems ensure that corporate actions such as dividends, mergers, and stock splits are processed promptly.

• Reduced Errors: Automation reduces the likelihood of errors, ensuring accurate processing and reporting.

Efficient Settlement and Custody

• Real-Time Settlement: Integrated systems facilitate real-time settlement, reducing counterparty risk and improving liquidity management.

• Enhanced Custody Services: Automated custody operations ensure secure and efficient management of financial assets, providing better service to clients.

Improved Asset Servicing

• Comprehensive Reporting: Integrated systems enable detailed and accurate reporting, essential for asset servicing and regulatory compliance.

• Seamless Data Integration: Harmonised data formats (ISO20022) and standardised access protocols (FIDA) ensure consistent and reliable data across the entire asset servicing chain.

In conclusion, change need not trigger anxiety. Instead, embrace the transformation. The combination of open banking innovations, FIDA regulations and ISO20022 standards is set to revolutionise the financial industry. By implementing modern integrated core systems, financial institutions can replace outdated legacy applications and fragmented fintech solutions, achieving improved customer experiences, enhanced revenue streams and reduced risks and costs. This transformation is particularly impactful in post-trade securities management, where efficiencies such as corporate actions STP, real-time settlement, and enhanced asset servicing are critical for maintaining competitiveness and compliance in a rapidly evolving market.

Alan Goodrich

Regional Sales Manager at ERI

Fellow of the IAP (Institution of Analysts & Programmers)

ERI is the supplier of the OLYMPIC Banking System, offering award-winning levels of innovation, real-time securities processing automation and compliance.