Selvakumaran S, from iGCB, the retail and central banking solutions arm of Intellect Design Arena, explains how its technology is helping iconic institutions adapt to change
When the Swedish Riksbank first threw open its vaults in 1668, a groundbreaking, eventually globe-spanning new structure was put in place – an innovation that would reshape the movement of money throughout the nascent global economy.
As the very first central bank, the Riksbank redefined how national governments direct and orientate their economies, and it’s a function that has spanned generations, changing only marginally… until now.
The first central bank was conceived exclusively as a means to lend the Swedish government funds and to act as a clearing house for commerce. As time wore on, other roles were allocated to central banking institutions (Napoleon founded the Banque de France to stabilise the Franc in the face of runaway hyperinflation) and central banks came to establish a monopoly on maintaining the currency of nations.
In most recent decades, they have mainly been tasked with three jobs: to maintain low inflation and high price stability; to ensure stability in the real economy (i.e. high employment and stable growth); and to step in when necessary to maintain economic stability during financial crises.
Many central banks now hold inflation targeting as their paramount policy framework, and operate independently of national governments. That requires a granular understanding of where the economy is heading and the sentiment among businesses that participate in it.
Today, a suite of new challenges presents themselves to central banks.
Will digital currencies and blockchain implementation threaten their role, even rendering them obsolete? Has globalisation fundamentally undermined the centrality of the central bank?
A slew of Bank of England reports and International Monetary Fund articles shows their future path is far from clear. But what isn’t disputed is that ongoing digitisation of the financial system, including decentralised finance (DeFi), cryptocurrencies, blockchain tech and the rise of central bank digital currencies (CBDCs) all massively spur the need for central bank digitisation.
“In today’s fast-paced, interlinked, dynamic world, central banks are faced with implementing policies much faster, and they want to have real-time visibility of operations across the nation, with more control over what they can do at a national level,” observes Selvakumaran S, who heads up central banking and treasury operations globally for iGCB, the retail and central banking solutions arm of Intellect Design Arena.
“Take monetary policies. Central banks are looking for clear objectives, choice of instruments, and timely rollout of those policies because a stable and liquid financial market is critical for better macroeconomic conditions.
“We deal with central banks’ executive management teams – governors, deputy governors, and directors – and consistently we are asked for a core banking system that is modern, efficient, scalable, and which can support them with the efficient and faster implementation of policies.”
Intellect Quantum is uniquely designed to do just that and the company has a team of more than 750 domain-rich staff.
“The platform was specially designed for central banks about a decade ago,” says Selvakumaran S. “Since then, we have been transforming many central banks by helping them generate their balance sheet or financial statements in real time, without any reconciliation requirements.
“The second part of our solution is all about Treasury Single Account, giving the visibility of balances spread across the nation, drilling down into ministries, regions, departments. This is, in fact, one of the concepts being recommended by the World Bank and IMF for bringing efficiency at the country level,” he adds.
“Then the platform can offer an advanced payment and settlement mechanism for supporting the central bank with transactions, cutting across monetary policy, collateral management, portfolio management, etc, with integrated operation. That’s supported by real-time integrated currency circulation management and wrapped around with advanced collateral management and monetary policy tools.
“The solution also is equipped with an advanced composability, extensibility and integration framework called iTurmeric that helps central banks to quickly configure processes and put them into production.
A MATTER OF TIME
iGCB has worked with the Reserve Bank of India for almost a decade, its platform successfully managing an almost USD 0.7 trillion balance sheet generation online in minutes with visibility of balances at granular level across the country.
This kind of detailed national database-building was also called for in Accenture’s recent study Now Or Never: High Time Central Banks Embraced Total Enterprise Reinvention. That pointed to the Silicon Valley Bank run, which was initiated by consumer-held mobile devices, as evidence of the new reality that central banking systems face – one in which analogue systems have no hope of keeping up with real-world financial events.
By Accenture’s reckoning, there are four main areas that central banks must embrace to remain relevant. The first is to become more data-driven and analytics-focussed, drawing on the wealth of new financial information available. The second involves an enthusiastic embracing of cutting-edge functionality to achieve the bank’s goals of stimulating and regulating the economy.
The third calls for automation-based efficiency savings, spurring a faster, more responsive banking ecosystem. And the report recommends effective, consumer-centric communications, too, similar to the communication revolution we’ve seen in the last decade in the retail banking sector, with a view to averting fraud and enabling the system to work better with those it serves. Intellect Quantum is designed for central banks from the ground up, allowing them to operate at the kind of scale required to successfully analyse a complex nation-sized system, says iGCB.
“We have, in fact, benchmarked the solution to support 100 million transactions on a peak day, and more than 30 million payment messages on a single day,” adds Selvakumaran S.
“As countries evolve with, for example, CBDCs, or real-time faster payments, the central bank infrastructure is supposed to be operational 24/7, 365 days a year. There is no exception. Our solution has been specially designed to support that kind of scale, reliability, and availability – and not only infrastructure, but application-level design, too, and in terms of ensuring world-class security.
“We have supported the Reserve Bank of India with 24/7 operations for the last few years. And our system is the backbone for the Riksbank’s monetary policy and advanced collateral management, which is connected with pretty much all the depositories and payment systems in Europe. We’re looking at some very key strategic items for central banks now, including the launch of CDBCs, and the integration of generative AI.
“There are some interesting use cases there, including integrated deep risk analytics for market and credit risk.”
iGCB’s technology has been implemented for different segments of central banks of all sizes, from the largest, such as the Reserve Bank of India and the Bank of Indonesia, to emerging economies including the central banks of Mauritius, Madagascar, and Papua New Guinea.
iGCB is poised to announce some large deals in the Americas, too. Whatever their size, all users have a ‘360-view dashboard’ tracking 2,000 attributes for users, enabling them to implement monetary policy faster.
Currency management and public debt underwriting can also be managed via these platforms, offering a comprehensive re-imagining of how a central bank controls activity within the system it is responsible for.
As ever, reliability and availability are key here. The appetite for increased digitisation is being adopted around the world. Germany’s Bundesbank recently ran a series of Expert Panels catering to the Eurosystem central banks, during which it was argued that digital transformation must become a fundamental focus of their development planning, a direction that’s enthusiastically supported by the European Central Bank.
The role of central banks is undergoing a profound transformation driven by a combination of economic, technological, and societal changes. While the traditional functions of monetary policy and financial stability remain crucial, central banks are adapting to new challenges and opportunities
Source: https://ffnews.com/thought-leader/the-fintech-magazine/the-fintech-magazine-issue-30/exclusive-evolution-or-extinction-selvakumaran-s-igcb-in-the-fintech-magazine/
