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Capital Markets & IT - lakyara April 2020

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Financial institutions are under constant pressure to reduce costs, improve operational efficiency, adapt to regulatory changes and grow their business. NRI believes that a combination financial knowledge and information technology are crucial to the industry’s growth and development.
Through our lakyara reports, NRI identifies the various capital markets and IT issues impacting our clients and the future of their business.

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  • Retail Business

    How to fix bias concealed in credit scores

    Senior Researcher Financial Market & Innovation Research Department

    Ryoji Kashiwagi

    Automated credit scoring services that quantify individuals’ creditworthiness are here to stay, but recent sexism accusations against some of these services have sparked concerns about algorithmic biases that could institutionalize discrimination. Credit scoring algorithms need to undergo input-through-output audits.

  • Retail Business

    Liquidity vs. convenience vs. knowledge

    Executive fellow Financial Technology Solution Division

    Yasuki Okai

    1. How can high-touch financial businesses best add more value and how will their added value evolve in response to digitalization? To answer these questions, it is important to re-clarify the nature of the value added by financial businesses.
    2. We examine financial businesses’ added value through the lens of zero-commission competition among US online brokers. Specifically, we look at how US online brokers derive revenue from each of their services to identify value-additive factors in financial businesses.
    3. Broadly speaking, financial businesses add value in four forms:financial liquidity, market liquidity, convenience and knowledge. Inlight of the characteristics of each, we expect high-touch financial businesses’ added-value mix to become increasingly tilted toward knowledge.
    4. While knowledge and digitalization are often seen as being at odds with each other, the US offers at least one good example of digitalization as a lever to add more value in the form of knowledge.In essence, the example bodes promisingly for the emergence of a new, up-to-date knowledge management.
    5. In Japan, high-touch financial businesses (particularly full-service brokers) are far behind the curve in terms of deriving added value from knowledge, but knowledge-based business models have substantial potential. Now more than ever, management teams need a mindset makeover toward embracing knowledge as an added-value driver.