Mergers and acquisitions within the financial services technology industry are picking up speed. Momentum is being driven by financial institutions once again focusing on growth, and technology providers looking to take advantage of new market opportunities while deepening customer relationships through more effective cross-selling. Financial institutions are also looking to limit their number of vendor relationships, making it difficult for niche players to compete against larger providers with full product portfolios. The market can therefore expect to see many of these niche players joining forces over the coming months to better meet bank technology needs and offer bundled pricing for … Continue Reading →

The updated Federal Financial Institutions Examination Council (FFIEC) guidance on online fraud mitigation has finally been released. My first reaction: Why did this take more than six months to finalize? The preliminary draft of this guidance was published on the National Credit Union Administration (NCUA) website last December, and a side-by-side comparison reveals very few changes. With all of the activity and commentary on the preliminary draft, I expected to see a more adjustments to this iteration. The only significant changes are as follows: The recommendation that institutions consider offering multifactor authentication to retail customers has been removed from that section and added … Continue Reading →

Over the last several years, financial institutions have done a grand job of destroying trust and creating angst among the consumers they serve and the public at large. I rarely meet a person today that does not have a story about how badly they have been treated by a bank or how hard it is to borrow money. No one is shedding a tear for the banks. On the heels of the financial collapse has been an onslaught of financial reform from powerful legislators such as Chris Dodd, Barney Frank, and Dick Durbin. Who is all this reform really protecting? … Continue Reading →

The Securities and Exchange Commission (SEC) is coming to the rescue of the investment community; it is considering leveling civil fraud charges against credit rating agencies (CRAs) — in particular Standard & Poor’s (S&P) and Moody’s — in relation to their roles in facilitating the 2008 and 2009 financial collapse via mortgage securities’ ratings. This is reminiscent of an old Honeymooner’s episode in which Ed Norton tries to convince his buddy (Ralph Kramden) that he has his best interest at heart: “Who took you to the hospital and took care of you when you got hit in the head with … Continue Reading →

At recent analyst events I have been perplexed by the thinking of some industry colleagues on the issue of “regulating cloud computing services.” Cloud computing requires no specific financial regulatory oversight, but a legal framework for control and responsibility for data and standardization. Many confuse the overseeing of cloud computing services with the outsourcing of important functions, which may require specific financial regulatory oversight. Strict and rigorous conditions are imposed on investment firms that wish to outsource “critical” and “important” functions; most importantly, outsourcing investment services and activities should be considered as capable of constituting a material change of the … Continue Reading →

Michael McRaith, the first director of the brand-new Federal Insurance Office (FIO), takes office today. As a follow-up to my last blog post about the future of insurance regulation, I wanted to acknowledge this historic day and welcome Mr. McRaith and his staff (who have already been hard at work) and the 15 members of the Federal Advisory Committee on Insurance (FACI), and wish them well. In their mission to identify and seal the gaps resulting from the long-established, non-uniform, state-based U.S. regulatory system and ensure the continuity of efficient insurance markets, they now have the opportunity to simplify and … Continue Reading →

The many definitions of supply chain finance (SCF) are standing in the way of corporations receiving the solutions they need from their banking partners. Very large associations of banks and treasurers have recently taken a stab at clarifying what SCF really means. The following are some works on SCF from international associations: In December 2010, the Bankers’ Association for Finance and Trade (BAFT) and International Financial Services Association (IFSA)  published the document, “Product Definitions for Open Account Trade Processing and Open Account Trade Finance.” In September 2009, the Bank of England (BoE) asked U.K. stakeholders to form a working group, … Continue Reading →

I opened an email from my bank the other day. It was a standard marketing piece, advertising the bank’s credit card rewards program. Working in the fraud prevention field makes me cautious at best about these types of communications, and paranoid at worst. I read through to the end of the email, where it said “If you are concerned about the authenticity of this email, click here.” “Click here”? Really?  The last thing a bank should be encouraging customers to do is “click here” if they have concerns about the authenticity of any email. According to Panda Security, 73,000 new malware threats were released … Continue Reading →

As reported by the Wall Street Journal, a recent CoreLogic Inc. report indicates that nearly 40% of cash-out, second-lien home-equity loan U.S. borrowers are now carrying negative-equity mortgages. Upside-down mortgages are worsening an already weak real estate market as homeowners must weather an inability to repay mortgages or access other forms of financing. If only this were the only issue facing the mortgage industry. Irrespective of U.S. economic health, the mortgage industry faces other challenging factors that will affect the market structure for years to come. These factors will have an impact on the issuance, reporting of mortgage backed securities … Continue Reading →

In the U.K. and Ireland, the reputation of international financial reporting standards (IFRS) for bank loans continues to tarnish. IFRS have been subject to criticism from U.K. Parliamentary committee and institutional investors alike — one institutional fund manager said about IFRS, “reporting the train crash has taken place, but providing no warning that there might be a train crash.” Now, the Central Bank of Ireland wants Irish banks to revert to the former accounting convention of generally accepted accounting principles (GAAP) so that the full extent of bad loans and their impact on banks’ capital base may be disclosed. The … Continue Reading →