With their bold new business model, digital “challenger” banks are shaking up the long-held traditions of the banking industry. But even the newest of “neo” banks must meet the same regulatory requirements as their more established competitors. That makes a robust treasury and risk management framework a must-have from the start – and presents both challenges and opportunities for the virtual institution.

Let’s start by looking at the challenges. Like all banks old and new, digital banks must manage vast quantities of data. But according to the 2021 FIS Readiness Report, only 35% of banks around the world believe their data integration capabilities are up to scratch.

Without the power to easily integrate data, every bank will struggle to meet another growing priority – a more holistic approach to risk, balance sheet management and the simulation of profitability, capital and liquidity under various scenarios into the future. It also becomes harder for banks to carry out proactive stress testing and clearly see the impact of their strategic decisions as required increasingly by both regulators and board-level executives.

However, with tight budgets across the industry driving the need to keep costs down, data integration remains largely an unresolved issue.

While no bank can entirely escape this universal problem, new digital banks are actually in a stronger position than most to solve it. Because unlike their older peers, they have the chance to get risk right from the start.

Traditional banks have historically managed their risks in silos, with risk data coming from multiple sources and legacy systems. When there’s no consolidated view of data and different data sources, ensuring accuracy and consistency of bank-wide results can literally become a full-time job.

It’s a different story for the digital challenger bank, whose newness and lack of legacy is a valuable asset in itself. When setting up a bank from scratch, a single source of truth for data is the starting point, providing a perfect foundation to build all processes on a centralized, digitally-driven data management strategy. No duplications, no errors, no inconsistences – the best practice for holistic treasury, risk and balance sheet management.

But what about the costs? Here again, digital banks are in luck. Not only are there savings on real estate costs by moving away from “physical” branches, but also today’s challenger institutions can capitalize on the emerging possibilities and ongoing innovations of cloud computing.

When a treasury, risk and balance sheet management solution is in the cloud, there is much less need for dedicated IT resources, and renting the support infrastructure on a ‘pay-as-you-go’ basis becomes a viable option. Plus, there will still be access to powerful capabilities for capturing and analyzing data.

The cloud also gives a bank the flexibility to scale up infrastructure easily as it grows, in line with its balance sheet management solution. Whether there is a need to cover different risk types or build more sophisticated models, the choice of a cloud-ready platform allows the institution to start small and simple yet build its capabilities over time.

FIS Balance Sheet Manager (formerly Ambit Focus) can meet all such risk management objectives, whether current or future, in a single platform.

Available as a managed service in the cloud, Balance Sheet Manager comes with built-in tools for data management and analysis. And with a modular structure, the solution can be extended quickly to not only cover the core areas of treasury, risk and finance, but also meet a range of front-office pricing and regulatory requirements. With all functions drawing on the same source of data, the institution is already set up for a holistic, integrated approach to balance sheet management.

Ultimately, that puts organizations in a stronger position than many of their competitors, even those that have been around for much longer.

What better start for a challenger bank?