Simplifying financial services messaging

About 21 billion euro is the estimated value of the online messaging and data feeds market in the financial services sector. This is according to a Morgan Stanley report quoted by Politico.eu. The stakes in the financial services trading industry are high. Compliance and regulation are key areas of focus in the industry. Therefore, banks and financial institutions invest heavily in communications and trading platforms that are reliable, safe as well as meet statutory requirements.

Reporting about financial services' industry-specific communications platforms, Techcrunch estimated that Bloomberg charges about $25,000 per annum per terminal used. The terminals are used by traders and dealers to record and execute trades as well as to communicate between participants. The same report mentions that a challenger, Symphony, had entered the market and raised $269 million as of May 2016 on the back of a valuation of $1 billion. A number of the leading banks in the world have invested in the software. These "islands" of communication have become important because of an important need.

Hollywood has been fascinated by the excitement of trading floors and dealer rooms over the ages. Wolf of Wall Street is an example of this fascination. In a memorable quote, one of the protagonists in the movies says: "We don't give two...about how technology works. Because all we care about is getting (expletive) rich!". The high demands of the trading floor, false and unrecorded promises made over phone lines or chat messages and genuine errors came under intense scrutiny post the 2008 global banking crisis. Regulators made it abundantly clear that all communications needed to be securely stored and scrutinized. Over the last decade, this business of secure messaging has grown significantly.

Many tools have been introduced to meet this market need. However, we live in a time when messaging platforms like WhatsApp, WeChat and FB Messenger have become as ubiquitous as phone calls and SMS messages were earlier.

The challenge that lies with bespoke industry-specific communication tools is that it presupposes that customers and service providers will be on the same platform. Within the platform, all communications would be securely stored and retrieved. The reality is that there is no standard platform that everybody uses. Some use phone calls to interact, others use social media messaging platforms and quite a few just use SMS messages. This is in addition to using the industry standard platforms.

Jan-Michael Gorecki is the founder and CEO of UK-based KyoLAB (www.KyoLAB.com). Heis a German banker by training. Starting with Commerzbank where he did his apprenticeship and qualified as a banker, Gorecki went on to become an energy trader. He's worked at senior levels in J.P. Morgan, Eni, and Freepoint. Gorecki recognised the basic challenge of multiplicity of formal and informal communications platforms. Rather than figuring a way around it, he chose to develop the capability to work within the regulatory and compliance constraints.

Presenting to the audience at the Citibank T4I competition at the Abu Dhabi Global Market in May of this year, Gorecki outlined the KyoLAB capability. KyoLAB taps into and stores communications made to and by bank personnel. This is permission-based. Usually, either through a process of opt-in by bank personnel and representatives who interact with third-party entities via a bring-your-own-device model or through acceptance of a bank-provided mobile phone. Clients or third-parties interacting with bank personnel would be informed about the process.

For banks and financial institutions, this presents a welcome productivity and control enhancing mechanism. These institutions would be able to reduce the compliance personnel required to monitor multiple channels. At the same time, through the time-honoured process of data collection, data aggregation and data analytics, these messages and communications can be converted into usable information. This information will improve accuracy in exception handling. It could also provide reporting and analytic capabilities for both external and internal agencies that are critically important for ongoing compliance health-monitoring.

The KyoLAB platform enables connectivity to the banks' existing communication tools. Essentially, KyoLAB's technology will enable monitoring and aggregation of both open communication platforms such as social media as well as industry specific communication platforms similar to Symphony.

The market is big. The Association of Professional Financial Advisers (APFA) estimated that there are nearly 25,000 registered Financial Advisers in the UK alone. Add to that the number of financial services staff on trading floors and dealer rooms as well as corporate and consumer bankers. The number easily crosses a six-figure mark. Extend this globally.

Interestingly enough the use for the platform extends far beyond the financial services world. Hospitality and health-care also have a need to retain and analyse information relating to client or patient communication.

KyoLAB is yet another example of why Fintech / RegTech is such a focus area for innovation and entrepreneurship. Wishing the KyoLAB team and Gorecki success.

The writer is a Partner at BridgeDFS, a bespoke financial advisory firm (www.bridgeto.us). He's a digital banking and digital banking financial services evangelist, practitioner, advisor and consultant. Views expressed are his own and do not reflect the newspaper's policy. He can be contacted at ves@vyashara.com

Source: Khaleej Times