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Experience certainty. IT ServicesBusiness SolutionsConsulting
2017 Number 28
plus n DBs on Future-Proof TCS BaNCSFaster Payments n loss Accounting n Service Fabric
n QuArtz for Blockchain
tmx group
NExt pHASE oF trANSFormAtioN
jourNEy powErEd by TCS BaNCS
Visit TCS BanCS at Booth L44
A
ShapE- ShIfTINg
trAnsformAtions
At TCS Financial Solutions, we are aligning our business
strategies to help our customers cope with a disruptive
cocktail of boundary-breaking technologies. Our solution
stack has been significantly expanded with relevant solution
options, flexible features, and embedded integration tools.
We believe these capabilities will enable our customers
to undergo transformational innovation to keep up with
changes in the broader marketplace.
The foundation of a Digital business is built upon three
primary layers – data at the base level, networks and
ecosystems in the middle, and the capacity to change at the
uppermost layer.
At the foundation of a digital organization is data, and
the ability to process internal and external data has become
essential to providing a contextual customer experience.
Financial institutions are embracing new ideas in analytics
and artificial intelligence in its many forms, including
machine learning and bots. With these tools, organizations
can better understand, interpret, and monetize the data
assets they already possess, as well as integrate sources of
data that originate from outside.
TCS BanCS has demonstrated strength in providing core
solutions across different segments of the financial industry.
These core solutions represent a treasure trove of data. We
are bringing to our customers a set of solutions that will help
them leverage this data in today’s Digital context.
The second foundational element is composed of networks
and ecosystems. We operate in an economy characterized
by network effects. This brings to mind Metcalfe’s Law, which
states that the power of a network is proportional to n2, where
n = the number of connected users in a system. As networks
increase in power, so do the incentives for new entrants, and
therefore the extent of disruption and disintermediation.
With blockchain technology, we can see a clear example of
ecosystem-level disruption. Blockchain technology is capable
of forging trusted counterparty relationships, eliminating
duplication, and forming the backbone of tomorrow’s
financial ecosystem. In many ways, Blockchain can do to the
back office what the Internet has done to the Front office.
For society at large, we may expect benefits in terms of
democratization and improved access to financial products
and information. The expected proliferation of connected
By Venkateshwaran Srinivasan, Head of TCS Financial Solutions,
R Vivekanand, Co-Head of TCS Financial Solutions+
2
and intelligent devices will only accentuate this effect. In
addition, industry movements like open banking will further
give momentum to this.
Perhaps the most important foundational element, which
brings the together the ability to leverage a modern core
along with digital enablers, is the capacity to change. In a
rapidly-changing industry, financial institutions will need
the flexibility and speed to capitalize upon important trends
emerging from the underlying data, while at the same time
adapting to the ongoing reconfiguration of networks and
ecosystems.
The capacity to change comes into play, for instance, in
areas such as payments, where market evolutions such as
PSD2 call upon institutions to expand the scope and breadth
of their offerings. In much of the world, we expect payments
to be near-real-time, at least for domestic transfers, in a
foreseeable near future. Preparing for this is not just about
processing more data or joining a few more networks, but
rather creating the capacity to respond to the immense
marketplace creativity that will be unleashed from faster
payments.
To build a strong foundation on these three layers,
institutions of all sizes are transforming their core systems.
We see this trend among large banks, small banks,
custodians, market infrastructure players, and insurance
companies — all of whom consider a modern core to be an
essential component of their digital strategies.
Keeping with our own advice, we have cultivated the
capacity to change throughout the TCS organization. We will
continue to modernize and improve TCS BanCS and related
products and services to ensure that our clients build strong
foundations for Digital business.
At TCS Financial Solutions, our investments and strategies
are aimed at ensuring our customers have the best core
systems in the financial industry, complemented by Digital
solutions that leverage the data available to them, provide
world class experiences, and succeed at mastering new age
technologies that help create trust and collaboration as an
integral part of the emerging financial ecosystems.
The TCS BanCS Customer Forum will be held this year on
Wednesday, October 18 in Toronto. We look forward to seeing
you there. n
3
Capacity to change
networks and Ecosystems
Data
from the editorle
tter
* For more on this concept, read: “What’s Really Fueling the FAnG Stocks?” by Michael Lippert, Barron’s, Sept. 13, 2017. ($) http://bit.ly/fueling-fang
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For any inquiries: Email: [email protected] Phone: +91 80 6725 6963
The biggest names in the digital economy all benefit from network
effects: The more you use them, the better they get; and the
better they get, the more you use them.* Amazon gets better at
recommending products, netflix at recommending movies, Spotify
at recommending songs, and so on. For these digital leaders, it’s
a virtuous growth cycle that places highly personalized customer
experiences at the core.
Can you imagine what a bank could do with similar business
models? We’re about to find out. Personalized experiences are soon
to become a reality in financial services, and those that figure it out
will win big.
In this issue, we cover strategies for technology transformation that
will enable financial institutions to modernize their business models
in step with—and ahead of—the leaders in the digital economy.
In Toronto, TMX Group (see page 6) is enabling traders in Canada
and worldwide to optimize the deployment of capital across asset
classes, which in turn will drive more trading through TMX Group
exchanges. Also, inspired by Amazon, they are building a platform
to deliver a variety of services to the capital markets and financial
industry.
In Singapore, DBS Bank (see page 10) has deployed a single
TCS BanCS instance for settlements and asset servicing across
all its custody centers in Asia. This enables DBS to help each of
its customers to adapt quickly to regulatory changes in their
jurisdictions, which in turn will drive greater assets under custody
with DBS Bank.
Our cloud-based deployment model for TCS BanCS enables
banks to undergo a rapid transformation to a modern core banking
solution. For banks that need additional time, we also offer a “Service-
Fabric” approach to TCS BanCS deployment (see page 19) that
builds a bridge between legacy core systems and modern customer
channels.
no matter how they prepare, banks need to be ready for the
massive marketplace changes to come.
In the U.S., the Federal Reserve-backed Faster Payments Task
Force (see page 16) is laying the groundwork for multiple high-
speed, low-cost payment rails, which has huge implications. Here’s
an example—instead of having to analyze monthly statements
to figure out what your bank’s customers are doing, you’ll be able
to make real-time decisions based on individual and collective
spending patterns. To upsell to its customers, Amazon doesn’t wait
a month. neither should you.
Also in the U.S., banks will have to upgrade their analytical
capabilities to come up with forward-looking loss estimates to
comply with CECL requirements (see page 18). Banks should use this
as an opportunity to better understand current market conditions,
and use that information in various ways to drive real-time decision
making, as will be needed in a world of faster payments.
Perhaps the largest change on the horizon is the imminent
commercial go-live of several blockchain initiatives. TCS helps
organizations to get started with business-ready blockchain
solutions, develop new blockchain solutions, and connect with
emerging networks and ecosystems in financial services and beyond
(see page 20).
The fastest way forward? Talk to us at Sibos, booth L44.
Until next time…
Dennis Roman
Editor-in-Chief and CMO
TCS Financial Solutions
Tata Consultancy Services
+1 561 865 3339 office
+1 954 806 6660 cell
+1 561 865 3388 fax
http://sites.tcs.com/tcsbancs/
https://www.linkedin.com/in/marketingasitshouldbedone
5
About TCS Financial Solutions TCS Financial Solutions is a strategic business unit of Tata Consultancy Services. Dedicated to providing business application solutions to financial institutions globally, TCS Financial Solutions has compiled a comprehensive product portfolio under the brand name of TCS BanCS. Our mission is to provide best-of-breed solutions that drive growth, reduce costs, mitigate risk, and offer a faster speed to market for our customers. TCS Financial Solutions delivers state-of-the-art software solutions for the banking, insurance and capital markets industries worldwide. For more information, visit us at www.tcs.com/bancs
About Tata Consultancy Services LTD (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty noother firm can match. TCS offers a consulting-led, integrated portfolio of IT, BPS,infrastructure, engineering and assurance services. This is delivered through its unique Global network Delivery Model™, recognized as the benchmark of excellence in software development. A part of the Tata group, India’s largest industrial conglomerate, TCS has over 387,000 of the world’s best-trained consultants in 45 countries. The company generated consolidated revenues of US $17.6 billion for year ended March 31, 2017 and is listed on the BSE (formerly Bombay Stock Exchange) and the nSE (national Stock Exchange) in India. For more information, visit us at www.tcs.com.
Copyright © 2017, TCS Financial Solutions. All rights reserved. no part of this publication may be reprinted or reproduced without the written permission from the editor. TCS BanCS newsletter is provided to clients and prospects on a regular basis. TCS Financial Solutions disclaims all warranties, whether expressed or implied. In no event will TCS Financial Solutions be liable for any damages on any information provided within the magazine. The information is provided to outline TCS BanCS general product direction. The editorial is to be used for general information purposes. The development, release, and timing of any features or functionality described for TCS Financial Solutions products remains at the sole discretion of TCS Financial Solutions.
contents
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Fintech Forward panel featuring:Joe Reilly, Chief Technology Strategist at ZionS BanCoRpoRaTion
Ashvini Saxena, TCS Financial Solutions
10
6
2 Shape-Shifting Transformations Stay ahead of disruption by establishing the foundation of a digital business
6 TMX Group Canada’s capital markets solutions provider embarks on next phase of transformation journey
10 DBS Frictionless experience for Securities & Fiduciary Services on TCS BanCS future-proof architecture
16 Faster Payments Prepare for the profitable possibilities in US payments
18 Countdown to CECL Are banks ready for the operational challenges posed by CECL?
19 Service Fabric Transform your organization while mitigating risks of large scale modernization
20 Quartz Corner Future-ready technologies provide multiple paths to blockchain preparedness
22 Events TCS Innovation Forum, TMX-TCS Deal Signing, Christensen Institute, and Sibos Toronto
6
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Canada’s capital markets solutions provider embarks on next phase of transformation journey, powered by TCS BaNCS
tmx gROUp
In August 2016, TMX Group launched a business integration
initiative designed to transform the organization into a client-
driven solutions provider to the Canadian and global capital
markets.
The first major milestone was to integrate the operations
and management of TMX Group’s cash clearing and derivatives
clearing businesses, The Canadian Depository for Securities
(CDS) and Canadian Derivatives Clearing Corporation (CDCC).
CDCC was originally a subsidiary of the Montreal Exchange
(MX), which in 2008 joined up with the Toronto Stock
Exchange (TSX) to form the TMX Group. In 2012, CDCC added
fixed income and repo clearing.
CDS, acquired by TMX Group in 2012, provides depository,
clearing, regulatory, and information services for the vast
majority of securities traded in Canada.
In June 2017, TMX Group selected TCS BanCS to replace
the legacy systems deployed by both CDS and CDCC. The
new solution will deliver a seamless client experience across
the clearing houses and the CSD. TCS BanCS is unique in its
ability to support CCPs and CSDs across asset classes, and has
completed similar implementations in other markets.
TCS BanCS will provide rich browser-based access and
straight-through processing using industry standard message
types ISO 15022, ISO 20022, FIX, and FIXML. Additional benefits
to adopting the platform include enhanced reporting and
metrics, a streamlined approach to collateral management,
and the future development and integration of emerging
technologies.
By Lokesh Rai, Head of TCS Financial Solutions, Canada
7
“ ”
We have a shared vision of how we
expect market infrastructures
to evolve.
GLENN GouChER, President and Chief Clearing
officer, CDCC, and President of CDS, is tasked with leading
the integration of the two clearing businesses.
As we evolve from being a customer-owned, managed utility
into being a solutions provider, one of the challenges we’ve
encountered is how the market perceives us. As the operator of
two systemically important pieces of market infrastructure, our
traditional role has been to stay inside our sandbox. In the past,
we managed change at the request of our participants. Today,
we are building toward a new vision for post-trade.
We provide a central hub of connectivity. All the elements
of the Canadian capital markets – the custodians, the banks,
and the brokers – have connections into the post-trade
environment at TMX. We’re expanding upon the successful
relationships that we already have, including the north-South
relationship with the U.S., to provide similar access to other
marketplaces.
I have a vision of what we’d like to be able to deliver to
customers, both in Canada and in international markets. We
want to provide capital efficiency for our participants wherever
possible, and we are designing infrastructure to support
that. We want to improve collateral management for repo
transactions, and support cross-margining for the Canadian
capital markets between the cash and derivatives markets.
To execute on that vision, we need not just state-of-the-art
technology solutions for what we’re doing today, but also an
infrastructure capable of supporting changes to our operating
environment on a more timely basis.
In meeting with the senior team at TCS, we found that we
have a shared vision of how we expect market infrastructures
to evolve. This gave me great comfort that TCS, as a partner,
could help us evolve our business.
We are very early in the project. We are working to
understand the technical impact, both internally with all
our interfaces, and, more importantly, the implications for
our direct participants. That engagement has begun in
multiple streams as we identify the opportunities for an
improved relationship between the post-trade environment
and our stakeholders. Given the pace of change, we expect
to be adapting and adopting new tools and technologies
throughout the implementation process. Also, collateral
benefits require not only technical changes, but also changes
to the rules of the clearinghouses.
I’m very optimistic about the success of this project. The
senior management at TCS has demonstrated their diligent
commitment to us, and to developing and implementing this
world-class solution.
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Jay RaJaRaThiNam, Chief information officer,
TmX Group, has responsibility for the development and
execution of the overall technology vision and strategy for
TMX Group. His areas of focus include managing IT client delivery,
optimizing the company’s technology assets, and leading
TMX Group’s ongoing technology operations and integration
initiatives.
CDS and CDCC came to TMX through acquisition, and their
legacy technologies were getting in the way of introducing new
products and capabilities in a timely fashion. The systems were
very different, even though they were doing similar functions.
When I joined TMX, a very extensive selection process
was already underway. We looked not just at the technical
capabilities and price points of the broad array of possible
platforms, but also the innovation roadmap, integration
ability, timely support, and cloud capabilities of the respective
providers. The entire selection process, including proof-of-
concept, took almost a year and a half. We looked at every
possible option available globally, talking to reference clients
and visiting multiple vendors around the world.
A senior team visited the TCS offices in Chennai in 2016. We were
just blown away by the quality of the people and the innovative
ideas they were working on. These were not just concepts and
white paper ideas. They demonstrated detailed working models to
us. This gave us great comfort in our eventual selection of TCS.
We do have prior experience with TCS as a service provider for
the legacy platform, but when we looked at TCS BanCS, it was
a fundamentally different platform. With TCS BanCS, we could
deploy quickly, integrate easily with other systems, and customize
everything for our needs. Once we’re on the new platform, we
expect to continue and improve everything that happens today in
terms of business capabilities, resilience, and stability. The exciting
part will be the ability to launch new products much, much faster
– literally in weeks rather than years. On our legacy systems, it was
a major production for us to do any upgrades. With TCS BanCS
and its modern, componentized architecture and ability to deploy
microservices, we’ll be able to upgrade and perform maintenance
on individual components without disrupting the overall systems.
We’re also looking forward to integrating with other systems,
whether for data visualization or blockchain solutions.
The project is in the very early stages, and we’ve been focused
on getting our requirements right. We’ve set up a test-drive
environment using an out-of-the-box cloud deployment of the
clearing and settlement solution of TCS BanCS. With that as a
baseline, we ask our users: “What would you change?” and “What
would you add?” The immediate feedback allows for a much more
iterative and agile process for accelerated requirements gathering.
We’ve already gathered requirements for all the things we were
looking for and the things that were most important to us, future-
proofed to the best of our ability.
We are no longer just an infrastructure provider. We’re a
solutions provider for the capital markets, coming up with creative
technology solutions and putting customers first. Our focus is
shifting from just the mechanics of the internal infrastructure to
the focus on our customers.
To be a solution provider, we are trying to provide a platform.
Think of Amazon—there may be many vendors providing services
behind it, but you engage with Amazon to meet your needs. We
think of ourselves in the same way for capital markets and financial
services. We’d like to open up our platform and capabilities to
make it easy to deliver a variety of services to our customers.
The biggest single project we have at TMX at present is the
CDS-CDCC integration. Our longstanding partner TCS is also
an ideal partner for us in this transformation, and we’re looking
forward for that partnership to continue for many more years.
8
“ ”
We’ll be able to upgrade and perform maintenance on individual components
without disrupting the overall systems.
9
JohN LEE, head of innovation and Enterprise Delivery for TmX Group, leads the
innovation initiatives around emerging technologies including distributed ledger technology,
machine learning, and artificial intelligence.
TMX Group offers a full-service stack in the capital markets. We’re one of a very few number of
exchanges that can offer the full listing process, trading across equities and derivatives markets,
access to transparent market data for institutional and retail investors, and the clearing and
settlement cycle. That’s a tremendous value proposition for issuers and investors alike.
We’re innovating with new technology in several areas, including three prototypes using
blockchain. With these prototypes, we’re not looking at them from a pure technology point of
view, but rather from a full-stack business perspective. We want to explore how we can operate
these platforms in our heavily-regulated environment, taking into account legal, regulatory and
commercial risks and strategic considerations, as well as some of the disintermediation effects
that come with these technologies.
In the past, we couldn’t do these experiments because of the time and money it would take.
none of these prototypes involved significant spending, allowing us to test the waters in a
much more timely and efficient manner before we commit.
In the areas we are exploring, conventional technology could theoretically work, but the cost
to run, manage, and maintain this conventional technology, along with the business processes
that need to exist for reconciliation across all the different parties and intermediaries, would be
significantly higher compared to a well-managed blockchain.
We’ve been in dialogue with the innovation specialists and the CTO organization at TCS
about Quartz, and other areas where TCS is making inroads with blockchain. I would hardly call
TCS a fintech startup, but they are keenly focused on innovation to develop and explore their
organization’s suite of products. n
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In 2006, DBS deployed TCS’ market-leading
custody solution, NCS, on a mainframe
platform. Over the years, TCS worked closely
with DBS to meet client needs.
By 2015, DBS made the decision to
switch from mainframe to open-source IT
architecture. By moving away from mainframe
technology, DBS intended to reduce operating
costs and improve service capabilities to its
diverse, multinational client base.
The move enabled DBS to deploy the latest
version of TCS’ next-generation, market-ready
TCS BaNCS platform. This platform provided
DBS with a robust rule engine, exception-
based processing, easy navigation, high
levels of STP, and built-in support for multiple
markets and regulatory regimes.
DBS now runs the latest version of TCS
BaNCS on a future-proof, open-source
IT architecture managed in-house. The
implementation covers four solution areas:
settlement processing, corporate actions,
reconciliation, and reporting.
The first go-live was in Singapore in
November 2016. DBS completed the fifth
and final go-live in India in August 2017 —
5 markets in the span of 9 months.
DBS Frictionless experience forSecurities & Fiduciary Services onTCS BaNCS future-proof architecture
By Sumeet Kumar, Program Director,
TCS Financial Solutions
10
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TCS BaNCS provided us with the flexibility and scalability we wanted to handle our business growth, as well as to keep ahead of market and regulatory pressures.
“
”Ee Fong Soh, DBS
12
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EE fong soh managing Director, securities & fiduciary services, DBsWe have had an ongoing relationship with TCS for a number of years
as we been using an older version of TCS’ custody platform. When we
were looking to upgrade our legacy platform, the decision to choose
TCS BanCS was an easy one, since their open-source deployment
options fit effortlessly into our infrastructure strategy.
Besides having an open platform, we wanted the upgraded
system to provide us with the flexibility and scalability to handle
our business growth across all our markets. We wanted an effective
way of keeping ourselves ahead of market and regulatory pressure.
Regardless of where our customers choose to engage with us, we
wanted our platform to ensure we can offer a consistent service level
across all our markets.
We decided to upgrade our custody platform to the latest version
of TCS BanCS as it met our needs.
We have, over the course of the years, developed a strong
partnership with TCS, at all levels. This long-standing relationship was
also factored into the selection process. Throughout the project, TCS
demonstrated their industry experience, showed great commitment
to deliver their platform based on what, when and how we needed it.
713
ChEE siong ChAng Executive Director, securities & fiduciary services, DBsWe pride ourselves as being an Asian-focused bank. We continue to invest in
the business of securities services and gaining market share in Asian markets,
whilst others may have exited this space. Our commitment and service
capabilities have been recognized consistently over the years with major
industry award wins. DBS was also recognized as the first recipient of the
Euromoney “World’s Best Digital Bank” award.
To enhance our competitive positioning, we wanted to improve our overall
offering with a system that would allow us to stay ahead of our competitors,
manage increasing risk and regulatory demands, and adopt the SWIFT ISO
20022 standard.
Foremost among our needs was to support our growing business with an
increase in capacity. In addition, we needed a system that could respond to
customers’ increasingly complex reporting requirements. We also wanted to
enable our customers to trade closer to the market cut-off times by providing
end-to-end straight-through processing.
With our legacy mainframe system, the changes would have been both
costly and cumbersome. We needed a solution that could be implemented
without severe disruption to our clients and existing infrastructure.
The TCS BanCS upgrade addressed all these areas. There has been a
marked improvement in servicing capabilities across all the markets in our
footprint. We have been able to quickly and easily enable our customers to
adapt to mandated practices and regulatory changes. The reduced rollout
time has proven to be a tremendous advantage.
14
secu
riti
es aT a GLaNCECompany
DBS, Institutional Banking Group,
Securities & Fiduciary Services
headquarters
Singapore
Business Challenge
Upgrade from legacy mainframe solution
to open-source architecture.
Solution
TCS BanCS for settlement processing,
corporate actions, reconciliation,
and reporting.
Ashish guptA, senior Vice president, institutional Banking group, technology, DBsTechnology is evolving continually. TCS BanCS runs on the latest technology
stack, giving us the flexibility to seamlessly integrate with the entire financial
services ecosystem.
During the implementation, we had to ensure seamless interoperability
while keeping costs and timelines under control, and we met those
objectives through the collaborative partnership between DBS and TCS. With
their vast experience, the TCS teams addressed our challenges promptly,
providing intuitive solutions throughout the project.
With the TCS BanCS deployment, we now have an integrated, multi-entity
product suite for all custodial services, connected with the bank’s cash,
limits, general ledger, and analytics systems across markets. This enables us
to offer a standard operating model for both global and domestic custody
operations.
We can secure and onboard new clients faster, as recently demonstrated
in India where we deployed new functionalities in a matter of months, a
major feat in this fast-changing market.
We can also assist our customers to manage regulatory change more
efficiently, as TCS BanCS enables us to manage dependencies and synergies
across clients’ regulatory initiatives and other ongoing projects.
Our decade-plus partnership with TCS has been further strengthened with
the TCS BanCS implementation. The dedication of the project teams and the
management from both organizations has been commendable in achieving
this strategic milestone.
15
FaST FaCTS DBS Securities & Fiduciary Services
offers end-to-end solutions covering custody,
clearing and settlement, asset servicing, fund administration,
transfer agency, trustee services and escrow services.
accolades for DBS include
“World’s Best Digital Bank” by Euromoney,
“Asia’s Best Bank” by The Banker and Euromoney,
and “Asian Bank of the Year” by IFR Asia.
The bank has also been named “Safest Bank in Asia”
by Global Finance for nine consecutive years
(2009 to 2016).
EDwin BolDrEy hsu senior Vice president, tech and operations, institutional Banking group, DBsThe deployment of TCS BanCS is an integral part of DBS’ vision
for Digital Transformation.
We have deployed a single instance for settlements and asset
servicing to drive consistency across all our custody centers.
Clients will have a seamless experience, no matter where they
engage with DBS custody services.
Furthermore, the open architecture of TCS BanCS allows easy
interfaces, both internally to upstream and downstream systems,
and externally to depository interfaces and information services.
We are introducing new functionalities, and expect to
maximize productivity and standardization through a single-
instance platform that supports multiple entities in multiple
markets.
The close partnership between TCS and DBS played a critical
role in the success of this project. Our teams worked together
to arrive at the most viable solutions, and through the collective
efforts of the partnership, we achieved our goals.
The success of the project required a transformational
mindset. We prioritized tasks based on client needs, while
establishing a roadmap for future development. We are still
building toward the future, and look forward to TCS’ continued
partnership on that journey.
16
anal
ysts
brie
fing
It is said that we all want to be accepted and a payment is
no different. Real-time payments are fast becoming a reality
worldwide with initiatives including Faster Payments in the U.K.,
the new Payments Platform (nPP) in Australia, SPEI in Mexico,
FAST in Singapore, and the forthcoming SEPA Instant Credit
Transfer in Europe.
With the support of the Federal Reserve as a catalyst, the U.S. is
gaining momentum.
In September 2017, the Federal Reserve outlined its next steps
toward payments improvement: exploring the need for enhanced
settlement services, analyzing potential security vulnerabilities,
supporting industry standards for interoperability, assessing the
challenges and opportunities for cross-border payments, and
facilitating stakeholder engagement.
Unlike other regions, the U.S. will not have a hard deadline
or regulatory mandate for faster payments. Although the goal
is to have ubiquitous receipt of faster payments by 2020, U.S.
financial institutions will not be compelled to participate in any
specific initiative. Instead, the industry will support adoption and
overcome barriers in a cooperative and consensus-driven manner
to encourage multiple approaches.
The strategy for improving U.S. payment systems was
developed through the Fed-backed Faster Payments Task Force
(FPTF). Convened in 2015, the FPTF was formed with over 300
people representing financial institutions, end users, solution
providers, and others. The FPTF came up with 36 “effectiveness
criteria” for evaluating faster payments proposals based on
ubiquity, efficiency, safety and security, speed, legal, and
governance.
Using this criteria, the FPTF evaluated proposals from a range
of providers, and issued a final report with evaluations and
recommendations. Yet it’s not the role of the FPTF or the Fed
to pick winners. Instead, the overall objective is to guide the
industry’s development of safe, ubiquitous real-time payments by
advocating for shared objectives, harmonization, and building the
necessary supporting infrastructure.
As a result, while a few are building traction, there won’t be
one single network for all participants across all use cases. We
expect to see the proliferation of multiple networks for different
purposes and markets, with varying characteristics in support
of competition and innovation as well as for settlement timing,
clearing mechanisms, and the cycle times for the posting of
funds. Over time, we expect the various solutions to converge
into interoperable payments networks.
Preparing for speedThe good news for U.S. financial institutions is that there’s no
absolute compliance deadline.
That’s also the bad news. If you wait until the last minute to
figure out a payments strategy, the risk is that you would fall behind
your competitors, which will include fintech companies entering
the marketplace as well as fast adopters from inside the industry.
Banks will need to manage significant operational changes to
handle faster payments. For example, on some of the proposed
networks, payment entries will be irrevocable. Unlike credit card
or ACH payments that can be reversed at the sender’s request,
an irrevocable fast payment would be functionally equivalent to
a cash payment. As a result, the payment-sending institution will
have to conduct much more comprehensive risk management
prior to approving a transaction.
Advice for faster payments
ISTOCKPH
OTO
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Prepare for the profitable possibilities in US payments by building workflows based on ISO 20022
By Regina Williams hendrick Product Manager, TCS Financial Solutions
At the same time, banks should plan on reevaluating cost
structures associated with legacy payments systems. As
faster payments take hold in the marketplace, there will be a
corresponding decline in slower forms of payments rendered
obsolete by the new networks.
That’s why banks will need to take advantage of the revenue
opportunities enabled by faster payments, and the most
promising competitive responses will involve the creative use of
the information associated with payments.
Instead of having to wait hours or days for clearing and
settlement, businesses will be able to send and receive payments in
mere minutes or seconds. not only that, payments will arrive with
detailed information about the underlying transactions, enabling
companies to update their accounting systems faster, apply funds
to associated invoices, and rapidly account for any variances.
Some examples of how this will work in practice:
l Following a major storm, insurance adjusters approve
damage claims. Since the insured clients may have been
displaced without access to home postal services, their payments
for claims can be credited directly to their bank accounts.
l A restaurant needs to replenish supplies on short notice
from a local supplier that does not extend credit. The real-time
messaging feature would allow the supplier to request and
immediately receive funds from the restaurant.
l Two related college students attending different universities
are on the same cell phone plan. The older one wants to pay
his sibling for his portion of the bill, and instructs his bank to
immediately pay his brother.
Financial institutions will likely need to participate in multiple
faster payments networks to serve their customers. While some
of the faster payments networks will be upgraded versions of the
existing ACH or credit/debit networks, other networks will rely upon
the ISO 20022 standard for financial industry messages. To maintain
strategic flexibility, financial institutions should develop capabilities
and workflows to process ISO 20022 messages. By doing so,
financial institutions will be able to take multiple approaches to
faster payments, including entirely new methods of value exchange
enabled by blockchain-based distributed ledgers.
By the FPTF’s target date of 2020, we expect to see widespread
adoption of faster payments. Well before then, the industry
leaders will find ways to monetize the information associated with
payments. In such a scenario, you don’t want to be the last one to
come up with a viable strategy.
Even though the implementation details of the underlying
networks have yet to be determined, banks should start
immediately working through the strategic implications of faster
payments. By doing so, you can uncover the most promising
profit possibilities.
Our advice: Develop the requisite technology skills in ISO
20022. Talk to your technology providers to align your technology
roadmaps with expected marketplace capabilities. Most
importantly, expect and anticipate the future as it surely is coming
fast as well.
ouR aDViCE: Develop the requisite technology skills
in ISO 20022. Talk to your technology providers to align
your t echnology roadmaps with expected marketplace
capabilities. Most importantly, expect and anticipate the
future as it surely is coming fast as well. n
Advice for faster payments
ISTOCKPH
OTO
The Financial Accounting
Standards (FASB) has proposed
a new impairment standard
known as the Current Expected
Credit Loss (CECL) model, which
will profoundly change the way
banks record their Allowance for
Loan and Lease Losses (ALLL).
Instead of the backward-
looking incurred loss
approach currently in place
that extrapolates past losses
to estimate future losses, the
forward-looking CECL model
will require banks to estimate
expected losses using a more
dynamic set of indicators.
At inception of each loan,
banks will need to consider
relevant internal and external
information to determine
“reasonable and supportable”
forecasts to support their CECL
estimates. Many industry experts
believe CECL will increase the
ALLL reserve by 30% or more,
and that a one-time capital
adjustment will be needed to
account for the change.
Financial institutions
may begin applying CECL
methodologies in 2019.
Any publicly-listed financial
institution that files with the SEC
must be operationally ready for
CECL by 2020. Other financial
institutions have until 2021.
CECL poses significant
operational and management
challenges. Financial institutions
will have to implement new
processes, and find people with
strong statistical modeling skills.
new data points will be required
from internal stakeholders and
external data providers, and
these will need to be vetted
and merged in a cost-effective
manner.
To implement CECL, banks will
have to implement changes in
the following 4 areas:
1adopt new methodologiesAlthough FASB guidance is
not prescriptive, most banks
will need to update their loss
estimation methodology
to support “reasonable and
supportable” CECL forecasts.
Any industry-accepted
approach—such as DCF, Loss-
Rate, Probability of Default
(PD)/Loss Given Default (LGD),
Migration and Vintage—may be
implemented.
2 Source data from disparate systemsCECL calculations will have to
draw upon several years’ worth
of loan-level data, tapping into
core banking systems that may
not have access to data going
that far back. In addition, banks
will need to compile credit
risk data from department-
level data marts that are often
inaccessible to the rest of the
enterprise. Therefore, banks
should perform a compre-
hensive source data mapping
exercise to identify required
data elements and to pull
them together into a central
repository with appropriate
oversight of controls and data
governance.
3 automate workflowsBanks need a repeatable process
for deriving CECL estimates
meeting the “reasonable and
supportable” regulatory standard,
with speed and agility. To do so,
banks will need to store a vast
amount of historical loan and
credit data, perform sophisticated
“life of loan” calculations, and
analyze forecasted results using
new methods. In contrast to prior
loss estimation methods, manual
spreadsheets will not be plausible
for these new tasks. Given the
new methodologies and diverse
data sources involved, banks
should automate as much of
the workflow as possible as part
of a technology transformation
initiative.
inte
rvie
wbr
iefin
gCountdown to CECL Are banks ready for the operational challenges posed by CECL? The time to act is now.
By h. marcus lee, US GAAP Accounting Lead, TCS Financial Solutions
18
aLLL vs. CECL Compared
Fintech Forward panel featuring:Joe Reilly, Chief Technology Strategist at ZIONS BANCORPORATION
Ashvini Saxena, TCS Financial Solutions
B C D E 4 Auto loan portfolio $100 million 5 6 Allowance for Loan and Lease Losses (ALLL) approach 7 Historical loss rate 1.50% 8 Total 1.50% 9 10 Expected ALLL loss 1.5 million 11 12 Current Estimated Credit Loss (CECL) approach 13 Historical loss rate 1.50% 14 Adjusted for current conditions 0.20% 15 Adjusted for forecast 0.25% 16 Total 1.95% 17 18 Expected CECL loss 1.95 million 19 20 Increase from ALLL to CECL .45 million
3o% increase
SErviCE faBRICCountdown to CECL
Are banks ready for the operational challenges posed by CECL? The time to act is now.4 provide analyticsOnce the CECL estimate is
processed, bank analysts will
need to communicate forecasts
and the underlying drivers
to management, auditors,
regulators, and investors.
The switch to CECL will likely
involve larger reserves and
therefore reduced capital for
lending, which makes it critically
important for analysts to deliver
a comprehensive data trail. A
robust analytical and reporting
platform can help analysts to
provide evidence to support
their CECL estimates.
After diagnosing the current
state of their existing systems
and workflows to identify
functional gaps, banks will
be ready to deploy a future-
proof CECL solution with new
methodologies, expanded data
sources, automated workflows,
and effective analytical
capabilities.
While some banks may
be tempted to build their
own in-house solutions,
we recommend that banks
accelerate their ability to come
up with CECL forecasts, even if
they delay implementation of
the new methodology. Early
adopters of CECL will achieve
significant benefits in terms of
gaining forecasting experience,
understanding how to manage
reserve requirements, and
generating business value from
risk management in a highly
competitive lending market. n
Transform your organization while mitigating risks of large scale modernization.
By gomathy subramanian, Solutions Specialist, TCS Financial Solutions
How can a bank trapped on legacy technology turn into a digitally-led, future-ready
enterprise? The marketplace is changing rapidly with the entry of new players,
new technologies and a plethora of devices, while the customer demands for
convenience, ease of use and quick response are ever increasing. To keep pace,
banks need to become both agile and nimble.
Banks are expected to become experts at building personalized products and
offering integrated customer experiences across a distributed ecosystem. Yet to
incorporate “in-the-moment offers” or “rapid loan adjudications,” banks will need to
overhaul their systems accordingly.
To address some of these needs, banks adopted a “middleware” approach,
connecting channel systems with back-end systems through a middle layer. This
addressed some of the issues of point-to-point connectivity. However, depending
upon the architecture and implementation, much of the processing and data
rested with core processing systems, and were not available to channels in real-
time. This led to the channels storing their own data and the proliferation of data
and processing across the enterprise.
TCS BanCS has a “Service-fabric” approach to address some of the needs cited
above. This approach allows banks to run with their core processing engines and
at the same time, serve the digital and channel needs. The “Service-fabric” consists
of business-ready, functional services which can service both the channels and
the back-end systems, abstracting some of the common functions into the fabric
while retaining the core processing engines to perform foundational functions.
This also eases connectivity by disintermediating point-to-point integrations, while
externalizing functions for fintech inclusions.
The architecture offers functionally-rich, standards-based services for delivering
common functions across the enterprise, with persistent data that can serve
channels with real-time information. The approach allows for progressive, need-
based deployment, thus eliminating the risk of a typical large transformation.
The key benefit of this approach is allowing banks to become agile within their
existing legacy. Flexible inflection points and deployment by domain enable
quicker benefit realizations. Additionally, a bank’s ecosystems can be opened up to
external integrations. Banks can focus on engaging with customers at the front end
while achieving agility and openness to foster innovation. n
19
3o% increase
The technology of blockchain is maturing at a rapid pace.
After months of successful trials, the financial services industry
has identified many areas where we can move forward with
distributed ledgers. The first major commercial implementations
will begin in early 2018, and we expect the effects to be
transformative.
Blockchain has both internal and external applications for
financial institutions. While both are important, it will be the
external applications, particularly when applied in an ecosystem,
that will compel rapid adoption.
Internal applications of blockchain enable organizations to
consolidate duplicate databases into a single distributed ledger.
Compared to multiple internal databases that require difficult
and time-consuming reconciliations, a single distributed ledger
can deliver higher efficiency at lower cost. For that reason, we
recommend that financial institutions look for areas in which
they have duplication of data, and then assess how distributed
ledgers can reduce cost structures. Yet, as we have seen in the
past, banks can mask operational inefficiency for a long time
before it compels transformation.
External applications of blockchain allow organizations to
access and update shared ledgers that contain a single view
of data for multiple parties. This will enable a wide range of
use cases across business domains, and it is in these networks
and ecosystems that financial institutions should focus their
attention to extract the full benefits of the technology.
We estimate that financial institutions will be pressured to
move forward with external blockchains within a very short
timeframe. Cooperative networks are already being formed, and
multiple blockchain ecosystems are poised to launch in early
2018, with participants including broker/dealers, custodians,
commercial banks, CSDs, clearing houses, insurance companies,
and central banks.
At TCS Financial Solutions, we are working on two projects for
go-live in 2018, and three proofs-of-concept projects that may
transition to operational status later in the year.
For those financial institutions that haven’t yet started
with blockchain, you have about three months to start
experimenting with pilot projects. Otherwise, you’re choosing to
be left out.
Figure out what’s happening around you, study the
marketplace, and identify the domains and functional areas
in which your business would benefit from participation
in emerging blockchain networks and ecosystems. Early
participants will have a much stronger voice in how they
are governed, and therefore an experience and positioning
advantage as the networks mature.
20
quar
tz c
orne
r corner
BloCKChAin READY
Future-ready technologies provide multiple paths to blockchain preparedness
By R Vivekanand, Vice President and Co-Head, TCS Financial Solutions
CommErCiAl BAnKs
insurAnCE CompAniEs
CEntrAl BAnKs
ClEAring housEs
CustoDiAns
CsDs
BroKErs/DEAlErs
21
BUSInESS SOLUTIOnSQuartz Smart Solutions: TCS has built several
business-ready blockchain solutions that can
be adopted by any organization, not just TCS
BanCS clients. Solutions are currently available
for multiple use cases across four domains:
l TRaNSFERS & SETTLEmENTS: OTC
settlement, Give-up/take-up requests,
Repo
l DiGiTaL iDENTiTy: KYC, LEI, ISIn
l iNFo EXChaNGE: Announcements,
prices, limits
l DiGiTaL aSSETS & REGiSTRy: Loans,
collateral, trade receivables
Blockchain-enabled TCS BaNCS: For existing
customers of TCS BanCS, we provide ready
connectivity to blockchain through an easy-
to-use Quartz add-on that allows your own
teams to try out blockchain without having to
bring on specialists or separate technology. For
example, organizations can work with Ripple,
a blockchain-based global payments network,
through TCS BanCS.
TCS BanCS customers can also pursue
blockchain initiatives in banking, market
infrastructure, asset servicing, and insurance.
DEVELOPMEnT & InTEGRATIOn SOLUTIOnSQuartz Development Framework:
Organizations can build their own smart
contract solutions using an integrated
development environment that allows
developers to generate, compile, and package
business code on any underlying blockchain
platform. Quartz Development Framework
ensures adoption of standard behavior for
smart contracts across platforms, and includes
automation tools to ensure consistent and
standard development practices.
Quartz #DLGateway: Enables TCS BanCS
and third-party solutions and APIs to integrate
with any internal or external blockchain, while
providing interoperability with messaging
standards and networks (e.g. ISO, FIX). Quartz
#DLGateway insulates enterprise systems from
the complexities of the underlying blockchain
solution.
nETWORKS & ECOSYSTEMSBaNCS Network: One of the biggest
hurdles to getting started with blockchain is
starting out with a sufficiently rich dataset for
experimentation. BanCS network provides a
sandbox network containing example datasets
in several domains, similar to those to be used
during actual blockchain deployments. This
allows TCS BanCS or Quartz customers to
experiment with blockchain immediately using
realistic data volumes and message types, thus
accelerating the pace of understanding and the
speed to production.
As the network gains acceptance, the
transition from Sandbox to Production usage
will be facilitated. The large network of TCS
customers will be able to collaborate with
one another through a trusted blockchain
network with carefully-managed access
controls. Participating organizations can share
blockchain applications, collaborate on shared
ledgers, and execute smart contracts through
the private, cloud-based BanCS network..
industry Networks: The extensible BanCS
network will include connectivity to outside
industry networks, regional networks, and
other entities as needed. This allows TCS BanCS
and Quartz customers to connect to Industry
networks with open APIs with less integration
work.
TCS BLOCKCHAIn OFFERInGS To ensure future readiness for our customers, TCS Financial Solutions has introduced a set of tools and solutions in support of block-
chain enablement. Each solution is built to support coexistence with existing and future solutions, integration with internal and external
data, and interoperability between multiple blockchains and messaging networks. The solutions are in three categories:
Any of these three solution categories would be a viable starting point for an organization seeking to accelerate adoption
in advance of the impending launch of commercial blockchain applications. n
22
TCS iNNoVaTioN FoRum 1. Attendees from Banco Popular and Evertec joined K Ananth Krishnan,
CTO of TCS (front-and-center) and Ashvini Saxena, TCS Financial Solutions
(at right) at the TCS Innovation Forum in new York held in April 2017.
2. At the American Banker Digital Banking conference in June 2017 in Austin, Texas.
TmX-TCS DEaL SiGNiNG 3. R Vivekanand, Vice President and Co-Head, TCS Financial Solutions,
and Jean Desgagné, President and CEO, Global Solutions,
Insights & Analytics Strategies, TMX Group, sign agreement
for “Project Atlas,” the implementation of TCS BanCS
as a single, integrated technology platform for
Canada’s clearing and settlement businesses (see page 6).
3
1
2
even
ts
Fintech Forward panel featuring:Joe Reilly, Chief Technology Strategist at ZionS BanCoRpoRaTion
Ashvini Saxena, TCS Financial Solutions
The Clayton Christensen Institute
for Disruptive Innovation has
collaborated with TCS on a
four-part series titled “Banking
on Disruption,” written by
Subhajit Das and Aroop Gupta,
Visiting Research Fellows at the
Christensen Institute from Tata
Consultancy Services.
The series can be found at
http://bit.ly/banking-on-disruption.
Banking on Disruption
IDfC Bank and TCS were finalists in the
2017 Best of finXTech awards, held in april 2017
at the finXTech annual Summit in New York
23
sibos october 16-19, 2017ToRoNToTCS BanCS at Booth L44For more information, visit:
https://sites.tcs.com/tcs-sibos/
SiBoS oPEN ThEaTRE 1“Technology Showcase: A Blockchain Platform to Share Asset Servicing Information”monday, october 16, 2017 5.00pm – 5.30pmBruno Campenon, Head of Financial
Intermediaries and Corporates,
BNP Paribas Securities Services, and
Johann Palychata, Head of Blockchain,
BNP Paribas Securities Services, will
share a concrete example of a blockchain-
interconnected market. With remarks from
R Vivekanand, Vice President and Co-Head,
TCS Financial Solutions.
7th aNNuaL FT-TCS BaNCS FiNaNCiaL LEaDERS DiNNER FoRum“The future of fintech – the promises and the risks”Wednesday, october 18, 2017Panel speakers to include: Emma Loftus,
Head of Global Payments, FX and Channels,
JP morgan Treasury Services; Christopher
Mager, Managing Director and Head of Global
Innovation, BNy mellon Treasury Services, and
n Ganapathy Subramaniam, COO and Executive
Director, Tata Consultancy Services. Chaired by
Ade McCormack. Keynote by Ron Kaufman,
Founder and Chairman of UP! Your Service.
To register: http://bit.ly/FT-TCS7
Co-existence. Integration. InteroperabilityQuartz Blockchain Solutions
Synchronize data across entitiesBuild trust and collaborate
Eliminate duplicationSettle instantly
