pooja, Author at Magic FinServ

May 3, 2023

Diversity, Equity, and Inclusion (DE&I): How Asset and Mutual Funds Managers Win Investor Confidence with Intelligent Tools

Posted on May 3, 2023June 20, 2023 by pooja

Investors are increasingly looking at how organizations are embracing diversity, equity, and inclusion. If we look at it from the ESG (Environmental, Social, and Governance) perspective: the diversity, equity, and inclusion triad are the “S” in ESG and are as important as the “E” or environmental impact component.

With DE&I, investors are trying to measure how organizations discharge their responsibility towards their people — employees, contractors, customers, vendors, and investors. They are looking at quantifying the value of a firm based on its DE&I measures, and it is increasingly becoming important as investment opportunities are tied to it.

Let us consider the following two scenarios:

As a Mutual Fund, Portfolio Management, or Asset Manager, you are obligated to ensure conformity with the changing preferences of the millennial investors who are picky when it comes to issues like sustainability and inclusivity. For a delightful customer experience, you must be willing to tread the extra mile. It would be a clear breach of trust if their funds are somehow not found to be as sustainable as they expect them to be.

As a Fintech or Financial Organization, vetting the investor enthusiasm/confidence in your offerings or services could be a steep climb and more so when you have absolutely no idea how to compile and aggregate all the data you have related to the DE&I efforts that you have undertaken, as the millennial investor pushes the boundaries of stakeholder capitalism.

You can onboard additional skills, but why burden your existing teams or spend countless dollars in cleaning and compiling data when there are intelligent tools like Magic FinServ’s DeepSight^TM to compile and aggregate data in one common repository?

Let us first decode what are the DE&I guidelines.

What is DE&I?

Diversity: Accept differences whether of race, creed, ethnicity, gender identity, etc., in the workplace.
Equity: Provide equal access or equal opportunities for pay, promotion, training, and other aspects of employment, regardless of race, creed, color, sexual orientation, age, etc.
Inclusion: Foster a sense of empowerment and belongingness.

Why DE&I matters

Whether you are actively promoting DE&I or choose to do it subtly, there is no questioning that the stakes have been raised, and hence showcasing your DE&I initiatives gives you a competitive advantage.

Investors are actively pursuing stakeholder capitalism: Stakeholder capitalism is quite simply a system that ensures that the interests of all stakeholders – customers, suppliers, employees, shareholders, and local communities, are kept in mind and pursued to ensure long-term value creation as engagement/relationship between the multiple parties progresses. With businesses today pursuing this new business model, promoting DE&I initiatives beyond tokenism becomes necessary.
ESG is part of institutional investors’ big vision: Institutional investors are keenly considering ESG as part of their vision, mission, values, and operations, and are actively seeking organizations that promote or adhere to these values and hence the need to showcase the DE&I efforts whether you are a mutual fund or a portfolio manager or asset manager or even a fintech or financial institution desiring be a part of the investor’s big vision.
The investor has the right to know: As organizations could either be explicit in their support of DE&I like Quicken Loans, with a vision and mission statement showcasing their DE&I commitment and ensuring that all reports pertaining to DE&I efforts are made available on public channels that can be accessed free or for a price like GRI (Global Reporting Initiative), Bloomberg, Refinitiv, etc., or it could be subtle about their DE&I commitments, either way the investor has the right to know.
As an Institute for Sustainable Investing, Morgan Stanley states, “Increasingly proactive, individual investors seek products and solutions across asset classes tailored to their interests. They also want to measure the environmental and social impact of their investments.”
There’s evidence that DE&I promotes innovation and productivity: From the perspective of organizational efficiency and productivity, there is enough evidence to indicate that gender diversity and inclusivity result in greater productivity and innovative thinking. For Asset Management Firms, there iss enough evidence to prove that diversity and inclusion can in fact enhance the risk-return characteristics of investment portfolios. (Source: SASB)
Walking the talk and not forgetting the governance aspect: It is not enough to spell out your commitments, you must be ready to walk the talk. The governance aspect of ESG is unarguably the most crucial element of ESG because it highlights the policy decisions taken by a company with respect to DE&I and how deliberate actions are taken in this regard.

Where to find DE&I data?

Here are some of the commonest sources where you can find information related to an organizations DE&I’ measures.

Employment Information Report (EEO-1):

Component 1 of the EEO-1 reporting is one of the tools for evaluating diversity. It is an obligatory filing,

On May 17, 2022, all employers in the United States of America, with 100 or more employees submitted Employment Information Report (EEO–1) report on the Equal Employment Opportunity Commission (EEOC) portal. The survey contains inputs on demographic workforce data, including data by race/ethnicity, sex, and job categories, and is an obligatory filing as per federal regulations.

Platforms for Disclosure for Diversity and Inclusion efforts

With data collected from the public domain, Refinitiv Diversity & Inclusion Ratings ranks over 12,000 publicly listed companies based on their diversity and inclusion efforts across 24 separate metrics enlisted below. The pillars across which the efforts are computed include the Diversity Pillar, Inclusion Pillar, News and Controversies, and People development.

Bloomberg’s GEI index: There are five metrics across which an organization’s efforts related to gender inclusivity are measured. These include female leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, sexual harassment policies, and a pro-women brand image.

GRI Equality and Diversity Standards

The GRI (Global Reporting Initiative) Equality and Diversity Standards is one of the most notable frameworks for ESG and helps in providing a glimpse into the sustainability standards.

Like Quicken Loans, there are many financial organizations notably – EY, PWC, USAA, Visa, and Amercian Express, that are explicit about their mission to promote a diverse and culturally inclusive workplace. They have statements to that effect on their websites and on their mission and vision statements.

Unstructured data and social media

And lastly, there is a massive amount of unstructured data existing in organization websites, public press releases, annual reports, investor briefings, brochures, organizational collaterals, spreadsheets, social media platforms etc., that provide a clue about the organization’s DE&I initiatives, which ideally must be compiled in a single repository. However, since it is not counted as core revenue-generating activity, this task is long overdue in many organizations. . There are other sources of unstructured data such as HR initiatives and organizational culture, which can provide a comprehensive view of an organization’s diversity and gender inclusivity efforts, but which remain hidden as organizations lack resources and the mindset to aggregate them in one place.

In a Nutshell

Today, some organizations are very vocal about their DE&I practices, and they make it a formal affair to showcase their focus and support on the same by publicly listing on their websites, they have a specific DE&I related reporting and so on. But there are some other organizations which may not be vocal but are supportive and we can notice their support through social media channels, websites, annual reporting and much more. So, there are two parts-

Formal Regulatory Reporting which has been asked by EEO commission and requires to submit a report, and organizations have made it available on their website, in their mission statements etc.

Voluntary Reporting – This is where organizations support the DE&I norms as it is a part pf ESG framework, and all of this is available across organizations various platforms and channels in unstructured way.

So, DE&I is becoming increasingly important aspect both from companies’ perspective as well as cultural perspective as research has shown that the companies which practice DEI (Diversity, Equity, and Inclusion) have been seen to be taking better decisions as it has got diverse culture and people across the organization.

As an investor or an analyst who wanted to take a call based on DE&I performance – our process optimization platform – DeepSight^TM can support both sides of a coin. It can compile all the organization data which is present in unstructured formats and help prepare those DE&I reports and for the analysts when they are investing and their major issue is DE&I, it can make all the multiple reportings accessible to them.

The Big Question? How to Build Reliable Data

The big question is how to collate and compile data for relevant insights. Extracting insightful data is easier said than done. How does a company assess inclusion and belonging? We have everyone, from the regulators to the investors and shareholders, and employees and new recruits questioning “Where are the numbers?”

Manual data extraction is impossible as data is far too fragmented, there are multiple frameworks such as the GRI, SSB, Bloomberg, and Refinitive, among others, where organizations file their details, and multiple and varied unstructured data sources that must be considered for a complete round-up of the organization’s DE&I initiatives.

Data Compilation and Extraction with Magic DeepSight^TM

In the fast-paced business environment that Asset Managers and Mutual Funds work in where data is typically updated every minute on multiple websites and a similar amount of unstructured data is also generated every day, going through zillions of data manually is indeed a cumbersome task.

Instead, intelligent tools relying on OCR, NLP, AI, and ML can make it easier for these analytics-driven organizations to not only extract data, but systematically examine data for validity and conformity using means like rules, algorithms, look-up tables, etc.

An intelligent rules-based tool and process optimization platform DeepSight^TM when leveraged appropriately can significantly help ensure transparency and accessibility of the DE&I data by first ensuring extracting the relevant data elements at significantly fewer costs and compiling, cleaning, validating, and augmenting that data so that they can be fair and ethical when making investment decisions. We will help you adopt the best approach powered by AI (Artificial Intelligence) and machine learning for eliminating the scattered and siloed legacy of demographic data while ensuring visibility and accessibility. Share the nature of your concern, or write to us mail@magicfinserv.com.

April 25, 2023

With Love, from AI: Stealing Hearts Effortlessly!

Posted on April 25, 2023March 27, 2024 by pooja

There is a competition between Cupid and Norah Ephron! Cupid today is as cold as steel. It is more calculative than Shylock. But it is still sassy as Samantha, the artificially intelligent virtual assistant, with a remarkable tenacity for learning.

Considering the way AI has made entry in our modern lives it is hardly surprising that the dispenser of love spells in the millennial age is AI as well. What began as a game with Tinder’s profile swipes, has now progressed to serious stuff – chat-catalyzing text prompts for enabling small talk and on-demand emojis for better understanding of the non-verbal cues. Making all this possible are smart algorithms, data analytics, easily navigable interphases, artificial intelligence, machine learning, and natural language processing.

Flirty, funny, or formal – How AI plays cupid’s game?

Though lacking the emotional button, the human element as we prefer to call it, AI can still help anyone impress their date just by processing tons and tons of the data that they unsuspectingly left behind every time they swiped left or right, checked a box, or used a conversational tool to for small talk. Let’s have a look at how apps that leverage technology help you date.

Every time the user swipes left or right, the app decodes what the user likes. Further, the innocent survey questions that the user answers hide codes, encryptions, and rules-engines that also help the app accumulate data and build a concrete knowledge base.
Once the match has been made, it is time to initiate a conversation. Some people are intimidated by small talk. Hence, navigating, the next level of dating which necessarily includes some small talk can be tricky or tiresome – not simply because of the lack of words and time, but also because consistently decoding the non-verbal and verbal cues and signals is a challenge for any human.
Now that there thanks to Open AI, multiple conversation starters can be integrated into the dating application. With the help of artificially stimulated conversation, a person can be anything that they want to be – smart, witty, resourceful, formal, flirty, or fun.
As some tools can also help read non-verbal cues, you can progress with the relationship faster. There are AI love advisors for personalized assistance with dating – from buying gifts to resolving minor tiffs, there’s a lot you can approach it for. In short, with AI you can cut short the needless chit-chat and get to work on the relationship faster.

However, it is too early to bet on AI. Some of the experts have pointed out that while AI could be dumb and was indeed completely over the top other times, there were still times when it truly worked. So, we might still have to wait and watch how effective AI is in taking over from Cupid and Nora Ephron, but when it comes to Capital Markets AI, there is no question that AI is a game changer.

AI in Capital Markets

Doing the dirty work: In the world of capital markets, the messiest task is basically extracting and transforming data so that it is always accurate and up to date. For all the brokers, custodians, corporates, fund admins, investment managers and service providers, who hedge and hustle in the market on a daily basis, data is undoubtedly the key player. Whether it is equities, stocks, futures, derivatives, shareholding rights, mergers and acquisitions, sell-offs, buy-backs, corporate actions, etc., the amount of data that capital markets deal with daily is astronomical. Thanks to its ability to leverage huge quantities of data accurately in concert with RPA, AI is making a huge impact in the world of capital markets.

For some time now AI, automation, and NLP have been making it easier for the back and middle offices to streamline their work flows and make their operations smoother with AI. Many of the repetitive tasks in back and middle offices have been made less cumbersome due to AI. Whether it is updating client data in record systems –digitizing it, error reconciliations, or contract data management, the implications of the use of AI are huge as these provide financial institutions with a cheaper alternative.

Using AI for Customer Onboarding – Getting to the Business without wasting time : Now, let’s take another example of the use but from an absolutely dissimilar world – that of the financial services (because that is what we cater to). Let us take the example of onboarding a new customer. How the KYC or onboarding is conducted goes a long way in defining the customer experience and that in turn will have a big impact on whether the customer decides to stay and provide more business opportunities or leave right away. While it would be presumptuous to compare onboarding with dating, there certainly is some common ground.

New Customers are like First Dates

Customers are like first dates and would like to be treated with respect and instead of wasting time, they would like to know whether it would be reasonable to progress with the business initiative. Erratic customer onboarding is not at all acceptable to millennial customers, and many even feel that the product lacks the credibility required.

Hence, a tool like DeepSight^TM , specifically built for broker-dealers, custodians, corporates, fund admins, investment managers and service providers providing customized and compliance-ready solutions is just what they need. It helps navigate the noise, so just like the dating app that matches the profiles, you like, capture only what you want – data from fields that you need.

The tenacity for learning is critical for any AI tool: As the number and type of fresh KYC documents processed into the system increase, the AI engine continuously learns and will be able to interpret, understand and capture data with greater precision.

Seamlessly upload documents and export data: Consolidate documents received from clients from various channels including email, Dropbox, Slack etc. Magic DeepSight^TM allows you to immediately import this data and then directly export the clean, organized, structured data to your existing workflow, without disturbing any existing systems.

In conclusion: A thought to how AI has made lives easier and how it is shaking up the capital markets and the dating game. With AI, you are promised agility and flexibility and quick response times. So, if you too would like to know how you can cut through the unnecessary dilly-dallying and onboard customers faster by providing them a better experience, or how to use alterative and unstructured data for staying ahead of competition, you can write to us mail@magicfinserv.com.

April 7, 2023

Five Ultimate Takeaway Lessons for FinTech from the Boston Marathon 2023

Posted on April 7, 2023March 27, 2024 by pooja

“I never saved anything for the swim back.” Anton in Gattaca.

The Boston Marathon is like no other marathon in the country or the world. Its popularity is such that there are people who run the marathon, not once, but twice, and sometimes even more.

Anyone who has run the Boston Marathon would know that it is the ultimate test of grit, endurance, and perseverance. Considered the oldest marathon in the world, the Boston Marathon was first run in April 1897. The marathon is now entering its 127 th year. The inspiration behind the first Boston Marathon was the 1896 Summer Olympics in Athens, Greece, which featured a marathon for the first time ever in the history of the sporting event.

What makes the Boston Marathon such a singular experience is its inclusivity. You do not have to be a sportsperson to take part in the run (though that does give you an advantage). You could be a banker, a philanthropist, a gamer, or a marketer; you could be in your early twenties or a septuagenarian, the criteria for participating in the Boston marathon is super basic. You must be fit enough to run.

Now that it is that time of the year for many amongst us to take the ultimate test of endurance and stamina – the Boston Marathon – we present some interesting and unlikely parallels between the run and the world of finance in 2023. Whether it is a bank, a financial institution, or a fintech, the rules are inflexible! So, watch out!

1) Be prepared for the unpredictable

Today as people irrespective of sex, age, color, and physical impairments take part in this event, their chances of getting to the finishing line depend wholly on how committed they are, how hard they have trained, and how helpful lady luck is. For there are good days. And there are days (the bad days) when realization hits – like a ton of bricks… that run is going to be way tougher than expected. If lady luck is on your side, you will get an awesome day for the run. If she plays tough, be forewarned…

Be prepared for unpredictable weather turnout. The temperature can be as high as from 90-degree heat (1976) or drop to a low of -30 degrees Fahrenheit (2018). When it is cold, hypothermia is common.

There have been instances where elite runners have dropped out of the race simply because they were not prepared for the mind-numbing cold.

De-risk and prepare for eventuality.

2023, is going to be more or less the same for FinTech’s. Unpredictable. So, how do you prepare for any eventuality. By de-risking and investing in technology. For example, as a financial services firm or fintech desiring to have an edge in capital markets, as well as mitigate any risk, you must be up-to-date, or have the inherent ability to realize how shifting market winds can impact aspects of your business. If you fail to make the best of the opportunity – make amends/or the right choices – even by a whisker, the benefits (for you and your customer) are marginalized.

For you to invest better, deploy capital in the best risk-adjusted investment opportunity/opportunities, you cannot simply continue with the traditional approach that works at a snail’s pace. With the markets getting unpredictable, and customers demanding personalization, there is a need to augment manual efforts with technology – artificial intelligence and automation, that have the inherent ability to consistently upgrade and learn. With AI, you can have better control of what is happening in the market and how you can meet the needs of your customers better by aggregating and collating vast amounts of data dispensed from multiple sources and formats, and exchanges.

So, would you prefer an opportunity to lose and hide costs and (sometimes penalties), or investment in better data management practices and analytics powered by a DCAM strategy and a bespoke tool (Magic DeepSight^TM ) that only gets better with time? Magic FinServ’s solutions cater to an extremely niche segment – buy-side and capital markets. Our focused solutions leverage AI, ML, and the Cloud to enrich your data fabric from Static Data Repositories, and thereby provide the base for real-time analytics.

We are also EDMC’s DCAM Authorized Partner (DAP) and assist organizations figure the gaps in the data architecture and overall data management program with a thorough assessment and analysis. To know more, you can check how we helped a global investment firm save 40% of analysts’ time and make front-office processing activities more efficient with our bespoke tool DeepSight^TM and our cloud-native abilities.

2) Brace yourself for the headwinds: Invest in partnerships!

Runners must also brace themselves for the wind (headwinds of more than 25 miles per hour) and freezing rain. Both these furies slow down the pace of the run and can be super annoying for many runners. So, in many instances, runners have found that it helps to run in a V formation – like the Geese, where you back up the teammate behind.

Partnerships are necessary – Making the most of the Magic FinServ partnership.

A) Let’s take a scenario that is pretty much normal in the world of financial services. You have invested in excellent extension workflows or transactions platform. You are capitulating on it to reduce the workload and streamline process such as reconciliations, data onboarding, governance, risk and compliance, and easing the burden of back and middle office and IT in carrying out regular day-to-day transactions such as contract management. All’s good if the app works within some predefined boundaries of influence. But that is rarely so in today’s business landscape. Not just structured data from the organization’s CRM, or processes, and silos firms would also be dealing with a lot of data emanating from public websites, third-parties, cloud, and exchanges, and in unstructured and ad hoc manner. Extracting, transforming, and validating this data amounts to a complex and mammoth activity in itself. When organizations are literally swamped with tasks related to building a brand name and revenue generation, wasting a significant amount of time in ensuring high-quality data does not make sense. With a partner like Magic FinServ, that has developed solutions that partner and coexist with traditional legacy systems and provide promised benefits.

B) We can also take the example of SDFR submission that was due on 31 st December 2022. Much of the data required was dependent on third parties and despite best efforts wasn’t available on time and when it came in the nick of time it was in an unstructured format. In the likelihood that the data is structured, automation is still a viable option as most firms are literally swamped with work year end. For conversion into machine-legible data, a tool like Magic DeepSight^TM is ideal for both large and small firms as it releases resources.

C) Not just the SDFR submissions, there are many instances where we partner fintech’s and financial services organizations in enabling last-mile process automation solution. We can work as a team. Whether it is KYC, AML compliance, onboarding, cloud migration, aggregating and consolidating data for reconciliations, shareholding and voting rights disclosures, we could be the lead runner taking the brunt of the headwind, leaving you and your teams with ample time to tackle core business objectives and revenue-generation activities.

3) Be cautious of the downhills – there’s a steep climb ahead

Be careful of the downhills. The road ahead isn’t that easy. Rookie runners are lulled into a false sense of complacency when they run downhill. They run faster in the beginning because of the initial endorphin rush. But that is a bad maneuver, as muscles – quadriceps tire down real soon. And when the real test comes, the uphill run, they are out of energy and luck. The muscles cramp when the need is to fire it up.

Planning, continuous testing and agile are key to success.

Whether it is the Boston run or how FinTech’s manage to preserve their energy in 2023 – it all boils down to one thing. How carefully have they planned? That is the whole idea of having enterprises that are agile and have robust data management practices. The incorporation of specific roles and responsibilities and success criteria at each stage is keenly tied to Agile practices, and automation and technology are essential for dealing with unpredictability. As in certain formulae races, drivers take time out to test the terrain. Whether it is a new idea, a new product, a cloud migration, a thorough testing for performance, system integration, APIs, acceptance, quality reassurance, and bugs is necessary. Our 3- Step Automation strategy ™ ensures that we keep reducing the manual test effort while increasing the test coverage. We offer the entire range of testing services under one roof for your financial services business along with extensive experience with on-cloud, on-prim & mobility products.

4) Learn to deal with the curveballs: There will be plenty your way in 2023

We have also seen the business ethos go through a subtle change. It is sustainability that investors are looking for. The Unicorns have seen their time of the day, now it is time for the centaurs – companies that reach $100 million of annual recurring revenue (ARR). A new milestone when compared to the unicorns which are techs valued by investors at $1 billion or more. Centaurs are ones that have reached a stage of maturity, there is no false hope or false aura surrounding them. They are completely de- risked.

Considering that the fintech’s success is being seen in a new light, and investors have different parameters for evaluation of the value of stock, how can the fintech’s and challengers dodge the curveballs of 2023?

The answer is by becoming more data-driven or data-centric.

For example, let’s take the example of a very likely scenario – a new requirement cropping up, one that had not been anticipated earlier. The firm finds that they must migrate a process or database to the cloud to remain competitive, or they find that they have been missing certain critical data elements required for an onboarding/KYC, regulatory compliance, etc., which is common as rules change frequently. One way to doge curveballs is to eliminate the additional human/manual effort wherever possible, so that teams have the time and bandwidth to deal with the “unpredictable”. Tasks such as uploading and downloading data from consumers on an average 40% time that could have been better utilized for other purposes. Automation releases that time and provides insights faster than ever. Furthermore, if there is a pattern or curveball sitting in the data, the ability to extract it faster with tools like Magic DeepSight^TM provides a definite advantage.

5) Focus on your core strengths rather than diversify: there will be plenty of time to seek new adventures later

Remaining true to your core objectives. Do not invest your time and energy in too many unnecessary activities. Whether it is a payments platform, or portfolio management, or traditional banking, or a new idea that you are bringing to the market, concentrate on making the customer experience richer and better. For what seems like curveballs can be an opportunity.

Realize the importance of data: this is the time to make it right with Magic FinServ

In the past few years, we have seen organizations going through a roller coaster when it comes to digital transformation, which has created a great deal of confusion regarding data. The risk of data existing in silos and data impersonation has increased as there are hundreds of SaaS devices and legacy tools that a mid-sized enterprise could use. Hence, the need to rethink a data-centric approach whether it comes to risk management, compliance adherence, smarter digital transformation leveraging APIs, cloud, AI, ML, and deep-rooted intelligent devices.

Magic FinServ brings a deep understanding of the financial services business to help FinTech and Buy- side firms build and support their EDM platform. We offer sophisticated tools, products, and services using AI, ML, NLP, and Analytics to manage data repositories, organize business glossaries, create and improve data lineage, review and optimize reporting rules, create and manage semantic frameworks and improve data quality of financial institutions. Here are some of the benefits that we bring to firms:

Greater productivity: Handling the astronomical amounts of data existing in different formats online and offline.
Reducing the gap between the front and back offices and thereby curbing inefficiency and rising operational costs
Ensuring on-time, on-demand delivery of services with automation, AI, ML and data-driven approaches.
Meeting the regulators requirements for transparent and granular data whether it be shareholding disclosures, ESG, or Basel III, MiFiD II, AML/KYC, etc.
Channeling greater customer delight by meeting the changing customer expectations every time.

Remember there’s always a silver lining for every dark phase if you do not give up

While the layoffs have generated a lot of debate, these contractions, many of the experts believe are related to the pandemic-era expansion. With online being the preferred mode for almost everything, the demand for online services skyrocketed. While there is no comparing human intelligence, many of the modern tools that combine automation, NLP, and artificial intelligence can streamline cumbersome processes and cut processing time significantly, so that you can reach your customer faster, sooner, and in a more personalized manner.

In Conclusion: Hold on to the strengths that made you invincible in the first place

And lastly, because we are talking about comparisons with the Boston Marathon, inclusivity is an essential ingredient for success. As the Boston marathon is one of the most inclusive sporting events, it is certainly more popular than the others. The fintech growth story too is powered by inclusivity. What the conventional financial services could not offer, encumbered as these were in legacy systems and an inflexible brick-and-mortar model, the fintechs delivered these in a matter of minutes.

The millennial fintechs made it easier to open accounts. Onboarding, due diligence, and KYC was way faster ever before, payments (even international ones) could be made from within the comfort of home, and customers could have an inside view of how their stocks fared and make better decisions with personalized updates on the mobile.
The modern financial services had a winning edge over the brick-and-mortar models because they provided customers with the same personalized service and preferential treatment that they had become accustomed to in the retail and e-commerce space.
Inclusivity begins with the cloud. As the biggest instrument of inclusivity, the cloud levels the playing field tremendously. The cloud has gone a long way from simply serving as an alternative to the physical server.
Not just the cloud, but also powerful levers like artificial intelligence, hyper-automation, machine learning, natural language processing, etc., have broadened the playing field. Whether it is a new tool, or service, inclusivity means that efforts are directed to build for any user/customer, ensuring simplicity and clarity.

In all of this, as niche player in the financial services ecosystem, Magic FinServ with its expertise in the cloud, enterprise data management, capital markets, artificial intelligence-based solutions for buy-side and sell-side, have partnered with organizations big and small retain their edge by retaining their fundamental strength – inclusivity – while optimizing returns, and increasing productivity and efficiency by manifold times. Our teams – Quality Engineering, Platform Engineering, DevOps, Application Support, and Smart Contract testing, Cloud, and DeepSight^TM – have several customer success stories to their credit and ensure that your product, service, innovation, or idea matches the market requirements/promises. Thereby catching the curveballs before these could disrupt or steer you off course. So, if you too would like to doge the curveballs in 2023, write to us mail@magicfinserv.com

April 7, 2023

Unravelling the Complexities of Shareholding Data Management with Magic FinServ’s Data & Technology Solution

Posted on April 7, 2023June 21, 2023 by pooja

Managing shareholding data is a complex business. Understanding how corporate events such as buybacks, mergers and acquisitions, dividends, bonus shares, spin-offs, and others affect a company’s total share outstanding value and total voting rights is even more complex due to the proliferation of often expensive data sources, complex shareholding disclosure rules, and multiple jurisdictions. Additionally, companies invest in multiple equities spread across diverse geographies, which further increases the complexity of the task. The data itself comes from various jurisdictions and exchanges in different formats, and changes are notified in different ways, which adds to the level of complexity. Therefore, analysts must be familiar with the form and type of notifications issued by various exchanges.

Another key concern is to maintain up-to-date shareholding information, including an account of the company’s total outstanding shares, their value, and total voting rights. This information is critical not only from a fiscal and financial perspective – to calculate business growth, equity per dividend, and other downstream calculations – but also to ensure compliance with predefined compliance and disclosure rules.

Since the rules governing voting rights for a certain set of corporate actions differ across multiple jurisdictions, these actions could impact your beneficial interests due to indirect investments. To address these problems, data must be collated and extracted, incorporating the rules governing that data for the particular jurisdiction and updating their impact on the value of outstanding shares, voting rights, and more. It is critical to keep shareholding information up to date, as there have been serious consequences and hefty fines levied on Asset Managers, Hedge Funds, and Portfolio Managers in recent years for not being up to date with shareholding disclosures. For instance, French regulators recently penalized an activist fund and recommended a fine of 20 million Euros for failing to provide correct and timely information to the Autorité des Marchés Financiers (AMF) about a takeover bid, thereby harming the interests of minority shareholders and impacting the market’s integrity.

Decoding Shareholding Disclosure Rules

There are shareholding disclosure rules that asset managers and hedge funds must comply with. These rules help establish control and trigger warnings in a timely manner, ensuring that the interests of the market and investors are not compromised.

Shareholding Disclosure Rules

Not a cakewalk!

Although not keeping an updated record of shareholding can result in serious consequences, keeping track of shareholder data and voting rights is not a simple task that can be done with a flick of a wrist like a magic trick. Many firms still rely on manual data collection and aggregation, making the process even more challenging. This is how the traditional, largely manual As-Is business flow for shareholder disclosure and shareholder data management operates:

Secondly, globalization has led to firms investing in equities globally. This trend has made shareholder data management complicated, as firms now have to contend with multiple jurisdictions.

Getting Clear and Updated Shareholding Data! What are the options available?

Asset managers require a comprehensive understanding and reporting of various types of shares, including equity shares, authorized share capital, issued share capital, right shares, bonus shares, sweat equity shares, preference shares, cumulative and non-cumulative preference shares, participating and non-participating preference shares, and convertible and non-convertible preference shares. These shares should be available in both structured and unstructured formats within company reports such as the balance sheet and financial statement, as well as data terminals.

Additionally, it is necessary to consolidate and aggregate the different types of shares mentioned earlier. A precise centralized data system must be in place, complete with a rule-based intelligent process that accesses data sources in a timely manner and stays up to date with corporate events that impact shareholding and voting rights.

As highlighted earlier, managers who hold international stock holdings that fall under different jurisdictions face complex regulatory and compliance issues. For example, the company issuing the stocks, also known as the issuer, may have different share capital requirements depending on the jurisdiction and market, including preference shares, unlisted shares, or derivatives trading.

As an asset manager or hedge fund, firms have three options to consider:

A) They could use their own platform/product to process compliance or regulatory filings. This would result in the firm managing shareholder information on its own while using the data services of a data vendor.

B) Alternatively, the fund could use the services of a third-party platform such as a Reg-Tech and compliance product. In this case, the third-party platform/product would use shareholder information from another data provider for the securities portion of the portfolio. The third-party organization will charge costs depending on the jurisdiction they are covering, as this is an on-demand service.

C) Alternatively, funds and wealth managers could outsource the shareholder disclosure and reporting task in its entirety to a BPM vendor to save time and effort while keeping up with the latest requirements. This would give them everlasting peace of mind as they would no longer have to worry about missing deadlines or regulatory requirements.

Process Automation: Benefits of Automated, Rules-Based, Comprehensive, End-to-End Solution

Since the 2008 financial crisis, shareholding disclosures have become an obligatory reporting requirement. However, over the years, the associated complexities with reporting have increased manifold. It is no longer feasible to manually review financial statements and public website data to ensure timely compliance. Process automation is the solution to simplify shareholder data management and shareholding disclosures, ensuring accurate and timely insights for downstream calculation, compliance adherence, and other activities related to the organization’s health.

A complete end-to-end niche solution, like the one offered by Magic FinServ, that combines technology and managed services and is driven by a team of experts in both the financial and technology domains, can help eliminate the pain points associated with shareholder data management and shareholding disclosures. With a unique “rule-driven” solution that aligns with geographical requirements, such a solution can keep funds and wealth managers up to date with the latest developments.

Key Features of Magic FinServ’s Solution Component:

Data Management: This feature manages all instrument identifier data and all other information required for extracting information from exchanges in multiple jurisdictions.
Document Record Management: This feature manages all documents and stores them in a structured or normal PDF format after conversion from unstructured formats.
Rule Engine: The rule-based engine is a critical component of Magic FinServ’s offering as it defines the rules for extracting information from documents.
API Integration: The solution can be easily integrated with other existing platforms and systems for data consumption.
Reporting and Dashboard: This feature demonstrates and generates a report based on business criteria.

Solution Features

Timely and accurate data is always important, especially with regards to shareholding disclosure and voting rights, particularly when the threshold is crossed for substantial shareholders and takeover bids. However, extracting and feeding correct information into workflows can be an excruciating exercise and not as simple as pulling a rabbit out of a hat.

Magic FinServ helps achieve all the objectives mentioned earlier in a timely manner. This begins with tracking corporate action events, automatically accessing relevant notification sites, reading, and extracting the data to identify key value pairs, and transforming it to the investing company’s data standards. Rules are then applied, and the final outcome is fetched into the investment table and various other reporting forms.

If you would like to learn more about how we can help, please connect with us today at mail@magicfinserv.com

April 3, 2023

Infographic: AI in the World of Fintech

Posted on April 3, 2023June 21, 2023 by pooja

The world of finance is constantly evolving, and the emergence of artificial intelligence (AI) has brought about significant changes in the fintech industry. AI technologies are being utilized by financial institutions to streamline operations, reduce costs, and enhance customer experiences. In this infographic blog post, we will explore the impact of AI on the world of fintech, its various applications, and the potential benefits that it can offer to both financial institutions and consumers.

March 29, 2023

Solving the Investment Monitoring Dilemma to Stay Ahead of the Game

Posted on March 29, 2023June 20, 2023 by pooja

As an investment compliance team or an Asset Manager, one of the chief responsibilities is to monitor and administer the position holding of high-value institutional investors in a manner that is beneficial to the investor while meeting regulatory obligations. When it comes to investment monitoring, asset managers must ensure high levels of transparency. This is necessary as unethical practices such as short selling, account takeovers, disproportionate flow through, etc., not only harm the stakeholders’ interests but also result in massive fines and build a bad reputation. For example, an asset management company had been fined £7.2 million in 2013 for not heeding investment protection compliance regulations.

For private market investment, the buy-side asset manager (which acts as investor/LP) also needs to maintain transparency and identify or control the risk associated with their investment cash flow. To do this, the investment monitoring team gathers and monitors all the investment records and distribution received from the General Partner (GP) in a timely manner and relates this with the fund market value.

(A) What is Investment Monitoring in terms of Beneficial Disclosure and Position Limit Monitoring?

For asset managers and institutional investors who hold multiple securities (listed and traded) in a regulated market governed by different jurisdictions, shareholding disclosures continue to be a mammoth task. The challenge is further compounded by the fact that firms must also ensure compliance/make specific disclosure for:

Investing in a sensitive industry
Involvement in a takeover bid.
Accumulating substantial shareholding in a security
Engaging in short selling

Monitoring Shareholder Information and Calculated % of Disclosure/Threshold
- Shareholder information pertaining to the company’s share capital data and voting rights
- Used for the calculation of the holding % ownership (threshold). When the value exceeds the threshold (depending on the jurisdiction) monitoring and reporting must be carried out accordingly.

Beneficial Ownership Reporting

“A beneficial owner is any individual who, directly or indirectly, owns or controls at least 25 percent of the ownership interest of the reporting company.”

Beneficial ownership reporting (against violation as per law defined by the jurisdiction) to the NCA (National Competent Authority). For example, Schedule 13/Form 13 filling to SEC in case the jurisdiction is in the US.

Position Limit Monitoring

Position Limits represent the maximum number of holdings of the future/option contract corresponding to a given security.

The position limit or threshold is defined by regulatory bodies like CFTC, ESMA, etc., and the exchanges (CME, ICE, etc.) differently.

The investment manager must monitor the thresholds mentioned herewith and inform the respective bodies in case there is a violation.

Exchange Position Limit: This limit is defined by exchanges like CME, ICE, etc.
Regulatory Body: The regulatory body, for example, ESMA defines the position Limit in MiFID 2 Article 58/58

What does the typical investment monitoring workflow look like and why are asset managers not in control?

This is what a typical investment monitoring workflow looks like for Shareholder & Position Limit Monitoring:

When it comes to shareholding disclosures, here are some of the challenges that asset managers face:

Data Consolidation from Multiple Sources system (IMS, OMS, 3rd Party Data Provider, Exchange)
New Customer Onboarding Challenges
Data Transformation, Tagging, Data Validation or Completeness.
Netting/Aggregation of Position
Monitoring the % Disclosure value on Timely manner due to dynamic effect of Corporate Action event.

Role of RegTechs!

When it comes to investment monitoring, it would be difficult to envision how to get things done without Regtech’s involvement. Regtech is the management of regulatory monitoring, reporting, and compliance within the financial industry through technology. Regtech systems can not only monitor the current state of compliance against upcoming regulations but ensure real-time compliance as well.

How Regtech Support the Business?

Challenges for RegTech?

Magic FinServ’s Operational Model paves the Way for Change for both Reg-Tech Partner and Asset Management Firms:

Before embarking on a new journey with automation and analytics, firms must ensure that the mapping of data is accurate and complete. And herein lies the biggest challenge. You can onboard a platform or system, but if the system does not recognize the data or information, automation is pointless and real-time updates are skewed or not verifiable.

Biggest Obstacle to Automation is Data: Resolving the challenge the Magic Way with DeepSight^TM

Unsurprisingly, despite the advancements in technology, what remains the biggest challenge for Asset Managers, Portfolio Managers, and Investment Managers is data, or rather the state of data. No prizes for guessing that correctly, for data is always at the center of controversy. If it is in good shape, organizations reap rich dividends by being on top of the game, but poor data is no good. When it comes to investment monitoring and the data conundrum, some of the chief concerns that asset managers and hedge funds face are:

Data onboarding and transformation: client data is not in the required format and is scattered in silos: When you have heavy unstructured data, data ingestion takes longer than required.
Data incompleteness or missing data points – Another concern is data lineage or finding the source of data which is critical for data transformation.
Data validation – Checking the quality of source data before processing data.
Collaboration among diverse teams and appropriate knowledge sharing is another key challenge.

At Magic FinServ, we believe that the Investment monitoring mechanism can be simplified by understanding the client’s compliance requirements first. We need to thoroughly analyze the client’s data files and understand what is it that they really need support with before – is it the lack of data, the incompleteness of data, the lack of understanding of the regulatory mechanism, or quite simply process simplification, before integrating the system or aligning the product to requirements.

This would also imply supporting the client in data transformation and reconciliation. This means cleaning the data, loading it, and validating it.

For example, let us consider a scenario wherein the senior leadership of a company “X” who are also shareholders of the company decides to short-sell to a bank or Venture Capital fund, which has also invested in the company and thereby are shareholders of the company. Now depending on the Regulatory policies as per corresponding jurisdiction, this is a clear violation of Threshold and must be reported to the regulatory bodies accordingly.

Now for alerts or triggers to be generated for action, there must be a clear-cut definition for raising an alert. However, this is not possible in a vacuum.

Processes must be streamlined, a rule-based system must choose accurately from the fields and columns of the data provided, and quickly raise alerts in case there is a discrepancy (or a cause for an alarm) and update it on the compliance system.

DeepSight^TM AI/ML automation solution has the capability to extract relevant information from multiple sources and reconcile it based on any applicable business rules. Provided below are some use cases where automation can transform processes completely.

Use Case 1: Maintaining & Monitoring dynamic values of shareholder data and voting rights due to Corporate Action event in Timely manner

Firms must keep up to date with real-time values of company shareholder data and voting rights because any corporate action change can cause a material change to a company and affect its stakeholders. Information about corporate action is published in the form of news alerts or web links which are unstructured data sources. With DeepSight^TM firms can automate shareholder-managed services and support the compliance monitoring team.

Speedier Migration and Quicker Transformation of Data with Magic FinServ

Systems do not understand data and its sources. Hence, implementation remains a challenge. Even the most perfect tools and platforms lack the comprehensive (and comprehending) power of humans. The biggest misconception that organizations fall prey to is getting an expensive tool and hoping it will automatically run one fine day. It simply does not work that way. The system does not understand the rules of the game (investment monitoring). It must be taught. It must be provided directions.

Helping the system understand.

And how does the system understand? It is possible only when both files are understood, and a one-on-one mapping is done. Thereafter, the rules are applied as per the defined jurisdiction or client requirement. And here’s how we can help.

So, for example, there is a new client that desires to use a tool/platform for investment monitoring of shareholding business. The cornerstone for setting up the tool is understanding the set of procedures required for running the data on the system daily. The workflow must be onboarded to the automation tool – the system.

However, before that, some files such as the security and position files are shared as a sample. Thereafter the mapping is done – map all the information in it (files shared) with the automation tool’s data scheme. When the schema is completed mapped, then only can the desired impact of automation for investment monitoring be perceived.

Use Case 2: Client Onboarding made easy with DeepSight^TM

Generally, client onboarding on a system is a laborious affair if it is done manually. It is also highly expensive and error prone. With our Agile Project Management approach, we ensure speed and transparency even under the most excruciating of circumstances. Migration and transformation of data that was unusually long and laborious is streamlined. The results are evident more quickly as we ensure support to analysts and SMEs during all the critical milestones.

DeepSight^TM simplifies new customer onboarding. It aggregates position values (based on regulatory rules) easily. It can facilitate the setup of an exception and alert mechanism when threshold limits are breached. Overall, our solution saves unnecessary costs and efforts, and by eliminating challenges related to data profiling, data completeness, and data lineage, ensures compliance with established standards.

By integrating and configuring the customer source system using DeepSight^TM automation tool and including steps such as data profiling, data completeness, transformation, and mapping data, the process is made smoother without any manual intervention.

The biggest benefit that you get with Magic FinServ is a less irksome and less time-consuming client onboarding (on the compliance system for investment monitoring). With analysts spending less time monitoring the tools, your teams can engage in more productive tasks and leave us to take care of how real-time data will be integrated in the system.

(B) Investment Monitoring: Private Equity (PE) Investment by Buy-Side Asset Manager (Acts a Limited Partner (LP)

Now let us take the specific case of Investment monitoring by the Endowment Investment Institute, which is a Limited Partner in private equity, venture capital, and private market investment funds.

DeepSight^TM helps customers manage all requests and documents in a digital library. The strategy for managing documents is based on the company’s investment fund strategy, making tracking, monitoring, and auditing processes easier.

It also helps customers manage and reconcile private equity fund cash flow information, along with other calculated values such as total commitment, funded commitment, recallable capital, and unfunded commitment for each private equity fund.

DeepSight’s AI/ML-enabled automation solution for Private Equity Fund can create Delta or Comparison reports based on internal data reconciliation and generate reports related to the Private Investment’s cash flow in a timely manner for each fund investment. It also creates alerts in case of any violations. It can also export information through an API or any other mechanism and generate reports using standard metrics.

Use case 3: Extract and reconcile data (from multiple sources) and carry out reporting for all the private equity investment cash flows and market value/fund performance:

With DeepSight^TM ‘s automated solution, compliance, and investment performance teams can easily extract and reconcile all the cash flows and investment performance information from the structured and unstructured sources. Investment performance teams can also identify the delta and create an alert if the fund administrator fails to execute the order on time.

DeepSight^TM can make things easier for you. For more on how we can be of help, write to us mail@magicfinserv.com

March 28, 2023

Regulatory Fund Reporting: Affixing the Nagging Headwinds with Streamlined Processes and Intelligent Tools!

Posted on March 28, 2023June 20, 2023 by pooja

In this world, headwinds are far more prevalent than winds from the astern (that is, if you never violate the Pythagorean maxim). – Author: Herman Melville

In our earlier blogs on investment monitoring and transaction regulatory monitoring, we provided a detailed description of the challenges that institutional investors, hedge funds, and asset managers face with respect to filing and monitoring of reports. And along with the challenges, the panacea – an automated rules-based solution that speeds up the data extraction process by a zillion times, enriches and transforms data with tags and maps, while integrating easily with the required workflow and facilitating last-mile process integration. So that regulatory filings no longer remain the nagging pain for business heads and analysts that arises every time it is filing time. And that is every quarter!

Here in this blog, we will be discussing another monumental legacy of entrepreneurship across the world -private equity funds. Along with it, the obstacles, or the headwinds that financial advisors to hedge funds, and hedge funds and asset managers themselves face while filing their reports such as form PF, and alternative asset management funds.

Considering that volatility of the markets, the inglorious end of the Credit Suisse chapter (plagued by constant reprimands from the regulators in the last couple of years for financial irregularities) and Silicon Valley Bank closure that is creating a ripple effect that reverberates throughout the financial and capital markets, and increasing pressure to conform to the regulatory requirements, this blog will be on how Magic FinServ and DeepSight^TM purports to be the “wind beneath the wings.”

What are the key filings?

We begin with a definition of the key filings and the historical relevance of these funds. In the global business eco-system, private equity funds hold an elevated place as these have not only resurrected or reinvigorated companies but have provided them with the much-needed capital leverage during their start-up or fledgling phase. You need to look no further than what is considered the most valuable company in the world today – Apple – which too received funds from private equity during the initial phases.

Because the funds in question are huge, hedge funds and asset managers, and financial advisors that manage them are required to ensure that risks are mitigated, and there is transparency. Some of the key regulatory filings that are applicable to funds include:

Form PF: A registered investment adviser with at least US$150 million of ‘private fund’ is required to file Form PF with the SEC, which requires disclosure pertaining to

gross and net performance,
gross and net asset value,
the aggregate value of derivatives,
a breakdown of the fund’s investors by category (e.g., individuals, pension funds, governmental entities, sovereign wealth funds),
a breakdown of the fund’s equity held by the five largest investors.
summary of fund assets and liabilities
including Sections 2a (Aggregate Positions) for $1.5 billion in hedge fund assets under management, 2b (Risk Measure),

Form CPO-PQ: As per CFTC regulations most derivatives are included as ‘commodity interests’ that cause a private equity fund holding such instruments to be deemed a ‘commodity pool’ and its operator to be subject to CFTC jurisdiction as a CPO or its adviser (typically the investment adviser) to be subject to CFTC jurisdiction as a CTA, and, unless an exemption is available, to become a member of the National Futures Association (NFA), the self-regulatory organization for the commodities and derivatives market. Source: Regulation of private equity funds in USA.

Alternative Investment Fund Manager Directive (EU AIFMD): Any manager that operates a fund in the EU is subject to AIFMD regulation. The Alternative Investment Fund Managers Directive (AIFMD) is a European Union (EU) regulation that applies to alternative investments, many of which were left largely unchecked prior to the 2008-09 global financial crisis. The directive sets standards for marketing around raising private capital, remuneration policies, risk monitoring and reporting, as well as overall accountability.

Where does the challenge lie?

Finding the needle in the haystack: As apparent, the regulatory filing is a massive exercise involving humongous amounts of data from which relevant field items or data points must be picked. The entire process can be likened to finding a needle from a haystack. Manually filing and reporting is an extremely time-consuming exercise. It disrupts normal business as additional effort is required to process it in time. And to make matters worse, the manual approach is also massively error-prone

Lack of process standardization results in duplication of effort: When filing and reporting is being conducted manually, firms due to time constraints are not focusing on information generation, rather they try to meet the deadlines. Whether it is Form PF or Form CPO-PQR filings, the processes are different, and with no efforts made to standardize the information, firms end up going through the same set of information again and again. The absence of a centralized repository complicates results in rework. Creation of a compliance data repository for all the relevant and necessary data, as well as the creation of business values for calculating measures and risk metrics.

Different systems complicate processes: Another headwind is the task of compiling, netting, aggregating, and validating data from the different business ecosystems as each functions differently. Each ecosystem could rely on processes, approaches and workflows that are different from the others making it tough to validate and reconcile data.

Testing and creating a sample for automation. Ensuring last-mile process optimization and coordinating with the regulator

Lack of collaboration and process standardization are the headwinds: Siloziation culture, and lack of process standardization come in the way of timely and accurate filings. Working out a sync between internal and external parties – exchanges, data vendors, compliance teams, and third-party vendors so that important action items are not missed and reported in a timely manner constitutes another operational challenge.

Navigating the challenge with an automated and rules-based data-driven tool

In order to meet the Form PF and Form CPO-PQR filing requirements in a manner that is accurate, transparent, and up-to-date while ensuring that it is in consonance with the regulatory and compliance guidelines of SEC, CFTC, and European Union’s AIFMD among others, hedge funds and asset managers must adopt a clear-sighted and streamlined approach that funnels the power of cutting-edge technologies such as artificial intelligence and machine learning while concentrating on data-centricity so that there is a centralized data repository, and streamlined processes that can be can be leveraged for optimal utilization of resources. In case there are additional filings for regulators in other jurisdictions as per need, streamlined processes can easily meet the need. It also requires a standardized data gathering and compilation process, and consistent data usage across business units.

An automated and rules-based approach tool is ideal for cutting the slack and for ensuring timeliness and accuracy, and we combine that with our knowledge in the financial services domain and our team of experts who are well-versed in the nitty-gritty of regulatory compliance practices to make fund regulatory filings a pain no more.

Here’s how we can make monitoring and reporting streamlined and hassle-free.

The Roadmap

Assessing Needs and Gaps: Begin by assessing and analyzing the requirements.

Find out what it is that the firm requires.
What are the reports that are to be filed (Form PF, and Form CPO-PQ, and in addition additional investment)

Identify the sources of data, extract relevant data & transform data using DeepSight^TM

Identify where it is that you get the data, the websites or external sources, and the internal systems such as the portfolio management system(IMS, etc.) What are the gaps that exist? What could have been an extremely complicated exercise, is simplified with DeepSight^TM

Using a rules-based approach, and leveraging its AI and ML capabilities, DeepSight^TM intelligently captures data from different sources – websites and internal systems and transforms it in a manner so that data is accurate, complete, and validate it.

Further, in case gaps exist, liaise with the data providers and exchange where requisite information can be available. Ensure that a golden copy of data is in a centralized data repository for further aggregation and analysis as per need.

Validating data and calculating key business values using DeepSight^TM

Our powerful AI and Machine learning enabled DeepSight^TM to analyze and validate data for completeness and accuracy. Data is enriched and categorized as well. Lastly, when it comes to the analysis of certain key elements required by Form PF, such as portfolio duration, turnover, liquidity, and market risk metric, DeepSight^TM can be an invaluable ally.

Another key functionality of DeepSight^TM is related to the calculation of key business values or metrices.

For more on what how we can make fund regulatory reporting less painful, reach out to us, at mail@magicfinserv.com

March 27, 2023

Navigating the Complex World of Transaction Regulatory Reporting for FinTechs

Posted on March 27, 2023June 20, 2023 by pooja

Transaction monitoring is “the process of reviewing, analyzing and administering the transactions processed on a business application or information system”. It is extremely critical for Asset Managers, Hedge Funds, Banks, and Financial Institutions for downsizing risks in a volatile market and ensuring that the most stringent regulatory requirements are met.

Considering recent fiascos such as Silvergate and Silicon Valley Bank and the Black Monday of 2020 when global stock markets crashed on 16 March, and US stock markets suffered from the biggest single- day fall since the 1987 crisis, there is a lot at stake for Portfolio Managers, Asset Managers, and Financial Institutions as situations such as the above could have far-reaching consequences and create a negative ripple effect.

While Silvergate and Silicon Valley Bank suffered an ignominious ending, the Black Monday of 2020 resulted in banks and reserves globally cutting their interest rates and bank rates and offering unprecedented support to investors so that a repeat of 2008 would not happen.

Decoding the challenges faced by Asset Managers and Financial Institutions

Regulatory compliance: From a regulatory perspective, banks, investment firms, and asset managers must comply with certain transaction-based regulatory standards like the Money Market Statistical Reporting (MMSR) Regulation, the Markets in Financial Instruments Directive II/Regulation (MiFID II/MiFIR), European Market Infrastructure Regulation (EMIR), and the Securities Financing Transactions Regulation (SFTR). For banks and financial institutions, failure to monitor and report in a timely manner could result in massive penalties and further corrode their reputation.

Bogged down by bad data: However, monitoring and reporting in a timely manner is not easy. Asset Managers, Banks, and Financial Institutions are bogged down by many challenges, particularly those related to data. The data collected by old and archaic systems are constrained and rules/scenarios are not applicable or fail to produce the desired results. Banks and Financial Systems must also counter the fact that data is generally of poor quality – that is incomplete and inaccurate. With data emerging as the mainstay of an effective transaction monitoring system, inevitably, there is a lot that must be done to ensure accuracy, consistency, and fewer false positives.

Tackling potential disruptions quickly: Whether a Bank or an Asset Manager, they must make a case for dynamic transaction monitoring for gaining insights quickly so that potential scenarios can be tackled quickly. However, when they are burdened with humongous amounts of false alerts, monitoring becomes a challenge, and banks and financial institutions either need bigger teams or smarter technology and AUTOMATION.

Other challenges: Some of the other micro and macro challenges faced by Asset Managers and financial institutions today when it comes to regulating and streamlining transaction monitoring are:

Lack of standardization in the labelling of data.
Incompleteness of regulatory data information as per business need.
Monitoring and controlling data quality issues.
Lack of expertise for the implementation of regulatory requirement workflow in the financial system.
Managing the regulatory database and monitoring streamlined data flow
Reconciliation and distribution of feedback status from NCA, ARM to the Client.

How Big is the Risk? For Banks and Asset Managers

In 2018, the US Bank National Association of Cincinnati, Ohio, (U.S. Bancorp) was fined $598 million. There were deficiencies in its AML program. To quote the experts, “systemic deficiencies in its transaction monitoring systems, which resulted in monitoring gaps…” It had among many deficiencies “outdated systems to conduct appropriate monitoring and due diligence.”
Similarly, we can also consider the example of UBS which was fined $15 million for weaknesses in its automated monitoring system that resulted in poor monitoring or less than thorough monitoring of wire transfers by FinCEN in 2018.
The worst single-day dip in the stock market happened on 16 March 2020, when the Dow Jones plunged by 2,997 points (earlier, on 9 March, there was a dramatic 2,014-point drop in the Dow Jones Index was followed by two more drops of 2,353 points on 12 March). This could have easily led to a seismic shock in the stock market, but a repeat of 2008 did not happen through the bullish phase of the stock market came to a halt.

In all the stories that have been mentioned above, we can observe a common thread, the regulators coming down heavy on banks and financial institutions for failing to meet the regulatory standards- and the chief culprit – an outdated and archaic mechanism that is unable to cope up the fluctuations in the market. When it comes to trading and stock market fluxes due to unforeseen circumstances, handling the spike in guideline violations, or emails can be tricky but with automation and a post-trade monitoring workflows that incorporate multiple levels of alerts, we can be

Today, as risk management teams are spending more than 10 % of the revenue on compliance adherence and regulatory announcements associated with fraud and Anti-Money Laundering (AML) have increased by more than 500% globally, there is increasing pressure to de-risk with automated and Artificial Intelligence and Rules-based solutions. And this is where a tool like Magic DeepSight TM comes in. A highly proficient rules-based data extraction platform that leverages technologies like artificial intelligence, and machine learning to provide massive (70% cost savings), exceptionally higher data accuracy, while streamlining your internal and regulatory transaction monitoring workflows and navigating the complex world of transaction monitoring with ease.

Automation, Rule-based, Process Standardization, and Data-Centricity – The Key Levers of Smarter Transaction Reporting

Automation is the key to keeping up to date and ensuring timely resolution of the alerts and triggers thereby saving time, money, and manpower and ensuring quality and standardization. Here’s how processes can be streamlined.

Magic FinServ raising the bar with DeepSight^TM

For comprehensive data transformation (and delivery), firms can count on Magic DeepSight™ for the delivery of results within a shorter span of time and from the widest range of data sources. DeepSight^TM aggregates data from different sources (websites). It trawls different websites and identifies the data (for example corporate actions) and downloads it. DeepSight TM extracts only the relevant information from the massive amount of information available, saving considerable time in comparison to manual work. Thereafter, data is reconciled with a static database. In the process, data is transformed – and a Golden Copy dataset for all static data related to the customer account and securities is created.
When it comes to process optimization, the capability of Magic DeepSight TM in bringing the required changes is immense. Process standardization, wherein a standard workflow is defined in sync with the business solution. The approach also involves defining a standard template and creating artifacts and documents for tracking and monitoring the regulatory workflow.
DeepSight^TM adopts a rules-based approach which makes the extraction of data more relevant. Business Rule engine implementation is another critical lever or pillar for streamlining transaction monitoring and reporting and ensuring transparency in pre- and post-trade and email reporting. For defining and implementing the business rules, the reference comes from the Regulatory Technical Standard (RTS), XML schema released by Regulatory Authority bodies such as the ESMA.
DeepSight^TM can be easily integrated with custom and industry platforms, so firms do not have to waste time figuring out how to do it. Lastly, a standard workflow for the Audit and Status report incorporation based on the feedback/acknowledgment received from the NCA enables another critical milestone – last-mile process optimization – without which the actual benefits of automation cannot be reaped.
Below is a pictorial depiction of how Magic FinServ enables compliance and transparency of post-trade and email transactional regulatory reporting business MiFD II, SFTR – data as per ESMA with a data- centric, automated, and rules-driven solution for one of our clients.

Regulatory Reporting Business Process

Case Study: Ensuring System Integration for Back Office Automation Rollout for our Client

One of our clients is involved in all the post-trade transaction regulatory reporting business (MiFID II, SFTR, email, etc.). All the post-trade transaction data must be per the regulatory body ESMA. ESMA provides guidelines on how an asset manager must send all post-trade information to regulatory bodies, for ensuring transparency of business in terms of email reporting, MiFID II reporting, SFTR, etc. We implemented a solution where we got the information (data) from the customer and mapped the data to the XML schema, which is provided by ESMA. Thereafter, all the information defined in XML schema is shared with the NCA, the regulatory body for validation. The body decides whether it is correct or not. If data is missing, they revert to asking for more information to ensure that the regulatory needs are met.

Conclusion: What is in it for you?

Magic FinServ is an apt partner in your automation journey. We can help firms leverage their automation plans related to transaction monitoring with our incisive approach to data and process optimization. Here is how we do it:

Understand the problem statement for filing transaction regulatory reporting
Comprehend why is it that the organizations are not able to file
- Is it a data problem – incompleteness of data, or,
- lack a standard process or,
- firm lacks the ability to understand the regulatory process
Based on the inputs, we define a roadmap
Then either use automation tools or develop internal automation tools on one’s own for streamlining the transaction regulatory monitoring. The biggest advantage is that Magic FinServ brings the technology to automate some of the processes that are extremely time consuming. Our bespoke tool takes away the pain navigating complex transaction monitoring (internal and regulatory). DeepSight TM is purpose-built for the financial domain and can meet the strictest standards to ensure streamlined operations (monitoring and reporting).
- As it integrates seamlessly with platforms both custom-made and industry-leading, it obliterates needless work and ensures smooth workflow across business applications; with the capability to scale up or down as per the need.
- Magic Deepsight™ pre-configured exception-handling rules weeds out errors more proficiently than before.

For more information on how we can add more value to your transaction monitoring, with our solutions you can write to us mail@magicfinserv.com.

March 9, 2023

The Scent of AI for FinTechs!

Posted on March 9, 2023June 21, 2023 by pooja

The Diors and Chanels have ruled the World of Perfumes long enough! It’s time to get a scent that is custom created just for you!

A new-age algorithm perfumery is creating waves in the niche space dominated by Channel, Gucci, Louis Vuitton, and Versace where they are creating custom-made perfumes with the help of AI. However, what is a buzz in the beauty business is a critical requirement for the financial services sector. Customized solutions powered with AI and cloud are fully entrenched with the fintech and financial services objective is to facilitate full-scale digital transformation and elevate customer engagement by providing quicker, faster, and better services.

What comes to mind when we think about perfumes?

Chanel, Gucci, Versace, and Louis Vuitton…and the distinctive scent of each bold, fruity, citrusy, etc.

These perfumes are so exclusive and niche that even the brand ambassadors have a personality that resonates with the distinctiveness of the perfume. So, while Chanel favors the quirky, edgy boldness of Kristen Stewart, Louis Vuitton taps into the mystique of Emma Stone for its Coeur Battant fragrance. The perfume is available in pear, jasmine, ylang-ylang-ylang, and narcissus aromas.

Each of these perfumes is extremely exclusive, expensive, and sometimes a limited edition, and available at only a few high-end couture stores across the globe or in duty-free shops at the airports.

But what if the customer desires something new… or a mix of scents? Something that is super exclusive. – a distinctive perfume blending scents that is different from anything that the client has ever used before!

Now thanks to Algorithmic Perfumery, customized perfumes can be crafted on-demand. A US and Netherlands-based tech company is helping customers create their own perfume/custom fragrances in sync with their tastes and body chemistry. The customer can choose from an exclusive palette of scents and aroma molecules; and the perfumery using a proprietary AI algorithm and the customer’s preferences create a customized fragrance.

Sprinkling the scent of AI in the financial services organizations

While the use of AI for creating customized fragrances in the beauty business is a recent development, fintech and financial services firms have been using AI for creating customized solutions for some time now. In a way, AI has become an indispensable ally for the financial services sector, because of its ability to process copious amounts of structured and unstructured data within minutes and provide clear-cut insights with its inbuilt intelligence and rules engine and automation capabilities. In fact, by leveraging AI and automation capabilities, customized solutions can be delivered at a scale unimaginable. Behind that reminder for payment, or stock update, or timely notification there is the hand of AI.

A Brief History of use of AI and the Rise of Expert Systems

The fintech and the financial services sector have come a long way from 1982, when the quantitative hedge-fund, Renaissance Technologies, became the first organization to rely on AI to parse through petabytes of data in warehouses for analyzing securities prices in any market. Today, its AUM is worth US $ 130 bn (April 2021).

Many financial services organizations were also beginning to use AI-enabled expert systems. One of these was the PROTRADER expert system for program trading. The advantage of the PROTRADER over traditional systems was that only it had the intelligence to provide the insights and keep track of the rapid changes in both markets futures and stock markets usually several times a minute.

Then in the 1990s, the biggest concern for firms was tackling fraud and anti-money laundering activities that was systematically chipping away the brand value that they had created. Around the same time, FinCEN’s Artificial Intelligence system (FAIS) managed to review 200,000 + transactions, and FIs realized how AI would make their life simpler. The same system then identified 400 potential money laundering cases that could have cost organizations $1 billion. This was the wake-up call for the FIs.

How is AI being used in Fintech Industry – New Frontiers and Predominant Trends

Today AI and modern technology has an ever-growing list of use cases in the fintech and financial services sector. The unprecedented proliferation of data – structured and unstructured and the increase of computing power, along with changing customer preferences, have resulted in AI adoption in back, middle and front offices, – from the conversational bots to data transformation engines working quietly in the backend going through tons on data, AI undoubtedly has emerged as a key player. Here are some of the prominent use cases for AI.

AI and ML solutions are used for predicting market trends and customizing portfolios.
Make intelligent underwriting decisions using a rules-based system
Carrying out keyword searches from extensive documentation – SEC filings, company releases, filings, transcripts social media, etc., using a rules-based engine.
With AI, ML, and OCR the processing time for KYC and onboarding is cut by half.
For streamlining fraud management and anti-money laundering processing by ensuring timely triggers are raised.
Protecting the rights of minority shareholders, and the investment company from libel in the worst-case scenario by ensuring accuracy in shareholding and voting rights disclosures.
With Artificial intelligence, you can reduce process automation time considerably by taking over repetitive tasks.
For algorithm trading – trading robots (or bots) carry out operations using the algorithms and data

Magic FinServ: How we customize solutions for every customer with AI, ML, and Cloud

As a partner, enabling the fintech growth journey, Magic FinServ has been providing customized and extremely niche solutions for every stage of the fintech journey. Our services ranging from quality testing and support for application development, smart contracts, cloud support during migration and application development, and intelligent data extraction and insight-building powered with our very own home-grown tool that uses artificial intelligence and machine learning for digital transformation. Here’s the milestones that cover the journey from start to finish.

Identifying the need: Whether the client is in search of a scent for a fintech solution, the first milestone is to identify the need. When a customer approaches Magic FinServ, our team of experts comprising the best in finance and technology, take a deep dive into what they truly want. We utilize a mix of extensive research and prototyping to provide solutions that are tailored according to the client’s needs.
Design process: Once the need has been identified, it is time to design the solution. We know that a customer’s requirement changes across every milestone of the journey, and so we scale up accordingly. Our teams are proficient in working in a highly competitive landscape and use the industry best practices to provide a solution that is customized as per your need. We make special mention of the ability to design interfaces that are in sync with industry best practices by combining the collective synergies of the client product management team and our magicians.
Evaluating the samples: As in the perfumery business where multiple iterations are required before a final version of the perfume is handed over to the customer, ideas and innovations whether it is a database transfer or a new product or feature launch, must be exhaustively tested. Tests for performance, latency, bugs, integration, APIs, and acceptance, functionality, etc., are crucial to ensure the desired results.
We offer the entire range of testing services under one roof for the financial services business along with extensive experience with on-cloud, on-prim & mobility products. Today, as citizen developers are playing a more proactive role in all phases of the app development journey, Magic FinServ provides the much-needed boost to platform engineering experience of enterprise application development and financial industry domain knowledge with new-age technologies to power your digital transformation.
Customizing the cloud journey: No talk of customization is complete without a mention of cloud technology. Today, as fintech and the financial services sector become synonymous with cloud-nativity, enterprises must also build the right cloud architecture for their needs. Whether it is hybrid, or public and private approach that they desire, Magic FinServ helps them optimize the journey.
And lastly, Magic DeepSight^TM that takes care of all your data and deep insight needs: As a technology company with years of experience in AI and financial services, Magic FinServ understands the importance of data in the financial services business to re-engineer existing applications, design new platforms and validate machine learning solutions. We have a team of data scientists and engineers dedicating their efforts to develop systems that become smarter over time and reduce operational effort considerably while enhancing decision-making capacities.

We have a library of AI-driven fragrance formulas to inspire you in this Fintech Transformation Journey.
To know, write to us mail@magicfinserv.com or explore more here at www.magicfinserv.com

February 1, 2023

Data and AI supercharging Super Bowl Season 2023 and Fintechs!

Posted on February 1, 2023March 27, 2024 by pooja

The season for football is not over yet.

Though FIFA World Cup Football 2022 has given us an undisputed winner Argentina, the GOAT (Greatest of All Time) – Messi, and a new star, Kylian Mbappé, the boy from Bondy, who left the billions watching the finale incredulous as he single-handedly changed an otherwise one-sided game by scoring two consecutive goals in the last few minutes leading to a super-charged penalty shootout, France lost …BUT that is not the end of the excitement, that is not the end of football season!

For come 2023, and it would be time for Super Bowl, football – the American version!

Decoding Playoffs Favorites!

Considering that both FIFA World Cup and Super Bowl are not just competitive sports, they are a national celebration; there is a different level of emotional engagement involved that is not seen in any other sport. It is therefore not surprising that betting on the winners starts much ahead of the actual game. There are columns dedicated to it and conversations and narratives revolve around it much earlier than the said event.

Super Bowl 2023, promising to be every inch as supercharged and interesting as FIFA 2022, Super Bowl LVII boasting an audience of millions, and a half-time power-packed performance by Queen Bee of Pop, Rihanna, already has some interesting predictions for winner, and surprisingly all this is happening even before the NFL’s first round of the playoffs have been played.

The punters have been betting on Buffalo Bills (+375), the Philadelphia Eagles (+400), and the Kansas City Chiefs (+500).

Artificial Intelligence predicts a different outcome. Cybernetic Semantics, the World’s First Magazine to use AI for writing articles predicts that Denver Broncos will be the Superbowl Season 2022 winner. For those who remember the Super Bowl 2021 season, the amazing display by Russell Wilson (who was playing for Seahawk Seattle then) and was responsible for 4,140 passing yards, a career-best 66.1 completion percentage, and 36 touchdowns (passes) was probably one of the highlights of the game. Russell Wilson is now playing with Denver Broncos and is one of the reasons why the odds for Broncos is so high.

AI writer has also made some other observations that is surprisingly human-like:

Wilson has the arm strength to make throws that land where his receivers can catch it.
Wilson can extend plays – akin to the drama we saw in FIFA, all for a penalty shootout. According to the AI bot at Cybernetic Semantics, Russel Wilson is a master at buying time in the pocket, keeping his eyes downfield, and finding an open receiver.

Another astonishing prediction was by Electronic Arts, the producer of “Madden NFL 15”. In 2015, they predicted the game’s outcome with astonishing accuracy. Madden NFL 15 not only predicted the final scores to the dot, but also the scores of Patriots quarterback Tom Brady. The prediction was that Brady would throw 4 touchdown passes and that the winning touchdown pass would go to wide receiver Julian Edelman. (Source: Forbes)

Now the thing is how on earth could AI predict all that much and with such alacrity?

The answer of course is from data.

Where does this data come from? And how is it being used in competitive sports like Pro-Bowl and Super Bowl?

Not just American Super League Football, other competitive sports like football, lawn tennis, and chess data are actively collecting data to analyze strengths and weaknesses and gain a competitive edge. Today’s sport is not just about athletic powers, it is also about how you can use data to your advantage. For example, for quite some time NFL playoffs have been utilizing data in this manner.

There are chips embedded in pads and helmets to collect real-time position data, as well as data related to the player’s acceleration and speed.
Football involves throws that can unfortunately hit the player on the head as well. Data can be used to predict if the hit has caused damage or not.
Players react differently to the weather. Data can predict if individual plays have been impacted by weather.
Data is used as pointed out earlier to educate and prepare for a playoff. It is also used for scouting talent.
Not just in predicting the winners, data is also changing the way the advertisers approach Super Bowl with targeted campaigns. Data has proved that best-run campaigns are being given a run for their money by those innocuous social media campaigns. Who can forget Oreo winning over the 2013 Super Bowl with its perfectly timed tweet “you can dunk in the dark as well” during the blackout?

How Data Super Charges Fintech and Financial Services in 2023

What Big Data is to Super Bowl, real-time and high-quality data is the fintech industry that is effortlessly servicing customers with varied requirements and interests across the globe. Whether providing personalized content, enabling them to make better decisions about their funds, or facilitating payments by making it easier to onboard and conduct KYC and due diligence, data is at the center of it all. As a FinTech Solution provider, Magic FinServ has been levelling the playing field for the big players the Banks and the established players who are like Broncos, the Seahawks, LA Rams, Cincinnati Bengals) of the game and the Wild Cards – the Neo-banks and the new entrants (fintech) that like Steelers (2005), the Giants (2007), Titans (1999), etc., sometimes establish a surprising early lead thanks to their nimbleness.

Magic FinServ – Transforming the Fintech and BFSI with Data

Data at the Heart of Personalization in Financial Services- How DeepSight TM Elevates the Client Experience

The Financial Services sector relies more on data than ever before. While super bowl coaches and managers use data to gather strengths and weaknesses of the key players and competitors and scout for talent as well, fintech uses data to provide quick, timely, and accurate personalized content and services to the customer. One key area where high-quality data, excellent data management tools, practices and strategy, and technologies like AI, ML, and NLP has been optimizing CX is KYC and onboarding which had otherwise been an area fraught with challenges due to the existence of massive amounts of data that require analysis and emerging exhaust data.

Magic DeepSight™ goes beyond pure data extraction and leverages AI, ML, and NLP technologies to drive exceptional results for financial institutions and FinTechs alike. A complete solution, as it integrates with other technologies such as API, RPA, smart contract, etc., to ensure frictionless KYC and onboarding, thereby making way for a more rewarding experience.

Timely Risk Management and Analytics: Balancing Digital Transformation Efforts while Ensuring Sustainability and Competitiveness

Another key area where high-quality data plays a key role is risk management and analytics – which could emerge due to competition, changing customer preferences, liquidity and credit concerns, and market tailwinds. All this requires analysis of scores of data, which is both in structured and unstructured form. While it is easier to shift through structured data, doing it manually makes little sense as it is extremely time-consuming and error prone. However, unstructured data requires more than a pair of keen eyes, and human intelligence for accuracy and timely analysis. It is here that AI, ML, and RPA paves the way for quicker estimation of risks and opportunities.

Ensuring conformity with ESG guidelines: Accuracy and Transparency with Sound Data Management and Intelligent Tools

While the BFSI sector is understandably undergoing rapid digital transformation to keep up-up with the challengers and the neo-banks, they must take care to ensure that the efforts are sustainable as per the ESG guidelines as per the metrics defined by the prominent frameworks such as SFDR, Task Force for Climate-Related Disclosures (TCFD), and the Global Reporting Initiative (GRI) because sustainability is gradually becoming a KPI of the degree of digital transformation. (Source: Forbes)

Real-time Analytics for Trading and Portfolio Management

Fund Managers and Portfolio managers require accurate real-time view of the valuations and risk of their derivative positions, especially when it comes ensuring that they serve the best interests of their customers. When it comes to shareholding patterns and voting rights, they must ensure that the information is up to date. With intelligent tools, it becomes much easier to improve investment decisions and lower operational costs.

Sports and Fintech are both increasingly relying on data. Whether it is sports of fintech and BFSI, both are increasingly relying on data to churn out accurate and real-time results that result not just in a super charged and thoroughly entertaining fare on Super Bowl Sunday, but also ensures that there is greater insight into the state of affairs when it comes to devising strategies or providing a personalized and customized touch.

Irrespective of what the punters, or armchair quarterbacks or even our favorite AI writer says, we still believe that a game is a game and despite the insights that data and AI provides, it is always the most passionate and the most talented team that wins. For more however in Fintech write to us mail@magicfinserv.com.

INSIGHTS