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Real-time means now, and don’t you forget it

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I just had a dialogue that was disquieting.  I can’t say with whom, but the dialogue was
about the impact of real-time on the world of regulation.

This person said to me that their regulator ran a
COBOL-based system that could not handle real-time because it was batch based.

Really, I
exclaimed.  It’s the 21st century; surely it’s time for the regulator to
run in real-time?

Apparently maybe not.

Why would a regulator
want to run in real-time,
they asked?

Plenty of reasons,
I replied, with the strongest being the
real-time analytics capabilities that such systems can provide.

What you mean, my companion
asked.

I was becoming exasperated as this is not the sort of dialogue
I anticipated.

In our modern world, everything is moving to the moment of
now.

Not the moment of now – 1 or, as we like to call it, D+ or
T+ a few days.

Everything is in the moment of now.

Now is the real-time.

Real time does not mean a second ago or a second from now.

Real time is real time.

It’s now.

It is as you read this.

It just went.

So if I take anything from transacting online to making a call
on the mobile to sharing a glass of wine over dinner, all of these things take
place in real-time and are then burnt into my memory.

That is what we need in our systems, processes and capabilities.

The ability to track the movements of money in real-time,
and analyse and understand what those real-time monetary movements mean in
real-time.

From a regulatory point of view, this means looking for
real-time compliance and any real-time misdemeanours.

If every transaction transacted by any bank were available
to the regulator on a real-time basis, could they track real-time insider
trading and real-time money laundering? 
Of course not.  But they would be
far better equipped to do this than running such analytics in overnight batch
updates to a COBOL system.

Take another different, but related conversation.

I was talking with a transaction banker – a payments person
if you prefer – about the movement towards real-time payments as offered here
by VocaLink and in Poland by KIR.  There’s
a new service from the BGC in Sweden that offers real-time payment and
real-time settlement, and there are others on their way.

As all of these systems move towards real-time, does it not
make sense to think that a bank will move to collocate their processing to the
real-time centres operated by their clearing houses?

Not really, my
colleague said.

Duh? I replied, in
my normal articulate manner.

Not really, they
repeated and elaborated by saying, colo
is for the high frequency trading world where a nanosecond can make the
difference between getting an order filled or missing the deal.  We don’t live in that world, so colo makes no
sense to me.

What about real-time
fraud
, I felt like screaming but didn’t.

Surely, if we are moving to a real-time world of banking
where millions or even billions of dollars of funds can be transacted, cleared
and settled in real-time, we will then also move to a real-time world where
everything will be connected, integrated and colocated.

This makes sense as everything from the regulatory viewpoint
to the banks own fraud analytics engines will be working in real-time and in
harmony together, to track, trade, transact, clear and settle everything in
real-time from an itunes download of the latest song by Taylor Swift (yeuch!)
to the billion dollars of trade in Apple stocks on a daily basis.

This is because it makes absolutely no difference today,
from a technology point of view, to support and process a fifty-cent trade to a
fifty-billion dollar trade.

Sure the amounts and exposures are different, and hence the security
alerts and blocks will be greater for the latter, but the actual processing and
process is the same.

Therefore, if you don’t think that a real-time regulatory
analysis or real-time fraud analysis will appear very soon on the horizon to go
with your real-time clearing and real-time settlement capabilities, then you’re
missing a trick.

Get with it folks.

 

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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