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Basel Committee highlights rising risks from finance digitalisation in new report

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The Basel Committee on Banking Supervision has recently released a comprehensive report detailing the increasing risks associated with the digitalisation of finance. As financial institutions worldwide embrace digital transformation to enhance efficiency and customer experience, the report underscores the need for vigilant risk management and regulatory oversight to address the emerging challenges in this rapidly evolving landscape.

Key Findings

The report identifies several key areas where digitalisation is contributing to heightened risks:

  1. Cybersecurity Threats: The proliferation of digital banking platforms and online financial services has led to a surge in cybersecurity threats. Cyberattacks, data breaches, and fraud are becoming more sophisticated, posing significant risks to both financial institutions and their customers. The Basel Committee emphasizes the importance of robust cybersecurity measures and continuous monitoring to safeguard sensitive financial data.
  2. Operational Risks: As banks and financial institutions integrate advanced technologies such as artificial intelligence, blockchain, and cloud computing, they face new operational risks. System failures, software bugs, and technology outages can disrupt services and lead to substantial financial losses. The report recommends that institutions develop comprehensive operational risk management frameworks to mitigate these risks.
  3. Regulatory Challenges: The rapid pace of digital innovation often outstrips existing regulatory frameworks, creating gaps that can be exploited. The Basel Committee calls for updated regulations that keep pace with technological advancements, ensuring that financial institutions operate within a secure and compliant environment. Harmonized global standards are essential to address the cross-border nature of digital finance.
  4. Third-Party Dependencies: Financial institutions increasingly rely on third-party service providers for critical functions such as cloud storage, payment processing, and cybersecurity solutions. This dependency introduces additional risks, including vendor lock-in and the potential for service disruptions. The report advises institutions to conduct thorough due diligence and implement robust third-party risk management practices.
  5. Consumer Protection: Digital finance has made financial services more accessible, but it also exposes consumers to new risks, such as digital fraud and identity theft. The Basel Committee highlights the need for stronger consumer protection mechanisms, including transparent communication, effective dispute resolution processes, and education initiatives to raise awareness about digital risks.

Recommendations

To address these rising risks, the Basel Committee offers several recommendations:

  • Enhanced Cybersecurity Protocols: Financial institutions should invest in advanced cybersecurity technologies and adopt best practices to protect against cyber threats. Regular audits and stress testing of cybersecurity systems are crucial to ensure resilience.
  • Operational Resilience: Developing and maintaining robust operational resilience frameworks is essential. This includes regular testing of disaster recovery and business continuity plans to minimize the impact of potential disruptions.
  • Regulatory Innovation: Regulators need to innovate and adapt to the changing digital landscape. This involves updating existing regulations, fostering collaboration between regulators and the fintech industry, and developing new guidelines that address the unique risks of digital finance.
  • Third-Party Risk Management: Financial institutions must implement rigorous third-party risk management policies, including comprehensive vendor assessments, ongoing monitoring, and contingency planning for critical service providers.
  • Consumer Education and Protection: Enhancing consumer protection through education programs and transparent communication about digital risks is vital. Financial institutions should also offer robust support systems for customers affected by digital fraud or other issues.

Conclusion

The Basel Committee’s report serves as a critical reminder of the complexities and risks associated with the digitalisation of finance. While digital transformation brings numerous benefits, including greater efficiency and accessibility, it also introduces significant challenges that must be addressed proactively. By implementing the report’s recommendations, financial institutions and regulators can work together to create a secure, resilient, and inclusive digital financial ecosystem.

Source: fintech.global

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Agora acquires Clearshift’s real estate division

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Agora, a provider of real estate investment management solutions, has acquired Clearshift’s real estate division to “reinvent cross-border payments in investment management.”

The division has utilized Clearshift’s international payments infrastructure to facilitate mass payouts and capital investments between foreign investors, asset managers, real estate property managers, and fund administrators.

While the financial details of the acquisition remain undisclosed, Agora will now serve as the division’s primary client-facing interface, offering “user-friendly investment management tools.” Clearshift will retain responsibility for payment execution and compliance functions.

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For existing Clearshift clients, this integration into the Agora platform promises “enhanced capabilities.” Agora’s clients, not currently subscribed to Clearshift, will gain “a transparent solution to foreign exchange activity” that enables “seamless distributions and contributions in any currency worldwide.”

Ari Dobner, CEO of Clearshift, noted, “After years of refining our fund manager payment solution, it became clear to us that our clients would truly benefit from a full investor management solution with seamless payment integration.”

Bar Mor, co-founder and CEO of Agora, added that the acquisition will enhance their platform with “streamlined and cost-effective international payments,” leveraging the “substantial customer overlap between Agora and Clearshift.”

This acquisition follows the recent closure of Agora’s $34 million Series B funding round, backed by Qumra Capital, Insight Partners, and UK-based investment firm Aleph.

Source: fintechfutures.com

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InScope secures $4.3m to revolutionise financial reporting and auditing

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InScope, a newly launched FinTech company, has successfully raised $4.3 million to expand its innovative financial reporting and auditing platform.

According to PYMNTS, the funding round included significant contributions from prominent investors such as Lightspeed and Better Tomorrow Ventures.

InScope is focused on transforming the traditional processes of financial reporting and auditing for private companies. The company leverages advanced technologies, including generative AI and large language models, to automate and streamline the compilation of financial statements—tasks that have historically been prone to errors and required extensive manual effort.

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The new capital will be used to enhance InScope’s platform capabilities. The company aims to shift accountants’ focus from laborious manual tasks to more strategic initiatives, thereby empowering finance professionals with tools to complete reporting and auditing tasks quickly and efficiently.

InScope’s system compiles data from a company’s core systems, such as ERP, along with publicly available information, and transforms these inputs into GAAP-compliant financial and audit documents.

InScope CEO and co-founder Mary Antony stated, “Our technology dramatically reduces the time and effort required for financial reporting and auditing, eliminating the need for outdated manual processes.” Her co-founder and COO, Kelsey Gootnick, also emphasized the transformative potential of InScope, which they conceived out of their own frustrations with existing financial processes.

The company has already begun collaborating with a select group of companies to refine and enhance their financial reporting capabilities. JC Bahr-de Stefano, a venture capital investor at Better Tomorrow Ventures, commented on this partnership: “InScope is already working with a handful of companies to help streamline their financial reporting needs and enable accountants to complete their reporting tasks in minutes instead of months.”

Source: fintech.global

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Citi extends USD Clearing service to Middle East in partnership with Emirates NBD

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Citi has partnered with Dubai-based banking group Emirates NBD to launch its USD Clearing service in the Middle East.

Through this collaboration, Emirates NBD will offer the USD Clearing service, along with its commercial and treasury payment execution capabilities, to corporate and retail clients via its branch networks in the UAE and Saudi Arabia. This service will enable clients to make cross-border USD payments with continuous availability, addressing current payment flow challenges posed by varying transaction cut-off times in the UAE.

“The introduction of 24/7 USD Clearing will support the growth ambitions of our clients by giving them the ability to seamlessly transfer funds in a timely manner without having to worry about cutoffs and holidays,” said Ahmed Al Qassim, group head of wholesale banking at Emirates NBD.

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Following the initial launch, the service will be extended to all Emirates NBD branches in the Middle East and globally, including partnerships with third-party institutions.

According to its website, Emirates NBD currently operates 853 branches in the UAE, Egypt, India, Turkey, Saudi Arabia, Singapore, the UK, Austria, Germany, Russia, and Bahrain.

Shahmir Khaliq, Citi’s head of services, described the collaboration as “an important step in our journey to creating a multibank solution that is designed to deliver an end-to-end, ‘always on’ experience for participant banks and their customers.”

“Our 24/7 USD Clearing service is a clear differentiator in the market,” Khaliq continued. “It demonstrates the full value of our globally leading cross-border payments and clearing capabilities, which enable our clients to make payments faster and in a more efficient and transparent manner.”

Source: fintechfutures.com

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