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FROM THE CEO
Greetings from Finance Derivative and A very warm Welcome to all our readers.
We thank you all the Outstanding and young supporters who keep us inspired to bring this edition to you each time. The engaging content for the year 2024 we bring a lot of exciting topics covering the artificial intelligence, automation in finance and banking transformations.
Modernising banking infrastructure is both a pressing necessity and a formidable challenge. Despite wide-spread aspirations among banks to advance digitalisation, a mere 30 percent have managed to effectively implement their digital strategies. This gap highlights that there are challenges and obstacles that come with modernising technology in the banking sector.
By leveraging the power of real-time data analytics, organisations can bridge the gap between financial and technological decision-making, fostering a culture of collaboration and shared responsibility for the company's digital well-being. The CIO's efforts to work with every area of the business to gather data for real-time analytics can also help the CFO identify hidden costs and optimise spending.
One of the biggest challenges for financial institutions is how to integrate digital currency systems with traditional payment infrastructures. Effective integration might require leveraging the capabilities of Distributed Ledger Technologies (DLTs) to facilitate efficient and secure transactions. A key concern in digital currency implementation is how central banks will manage and issue digital wallets for public use, meaning central banks must decide whether to directly handle Central Bank Digital Currency (CBDC) wallets or rely on regulated third parties. Efficient wallet management is crucial for widespread adoption and user confidence, as it directly impacts financial accessibility. Let’s find out what is the future of Money ?
Hope you will enjoy reading this issue of Finance Derivative.
Wishing you all great business and success.
Enjoy Reading!
Mehtab Chisti CEO
BANKING:
14. Standardise and simplify regulations: what the digital banking industry needs to thrive
18. Banks need to evolve to stand the test of time
44. A step-by-step guide to banking transformation
50. The Future of Money: How CBDCs Could Transform Banking and User Experience
TECHNOLOGY:
6. How AI-powered chatbots became fraud’s latest weapon
24. Potential to Transform - The Story of AI in Fintech
28. Ethical AI: Considerations, Challenges and Best Practice
30. How fintech is enabling the true potential of the circular economy
46. Dealing with the
56. GenAI: How Compliance
FINANCE:
8. The double-edged compliance
10. Securing the Future: Imperative in Financial
20. What are the risks
22. Future-Proofing Fintech Success
26. Automation in
48. Boosting cyber
24
the demands of DORA
Compliance Can Benefit
FINANCE:
double-edged sword of AI in financial regulatory
Future: Why Digital Transformation Strategies are Financial Services
risks of AML compliance failures?
Future-Proofing Finance: Why Early GenAI Adoption is Key for
Finance: An Opportunity, Not a Threat
cyber security resilience for Financial Services
BUSINESS:
12. Closing the skills gap in finance industry: Strategies for building a tech-savvy workforce
32. How AI can unlock the full value of Customer Experience in finance
34. Automated underground construction gets closer to reality
38. Why CIOs and CFOs must unite to conquer the cybersecurity battlefield
52. ESG and the importance of ‘Digital Hospitality’ for wealth management
54. Strategies to support SMEs as the economy recovers
SPECIAL FEATURES:
40. Finance Derivative || Global Award Winners 2024
How AI-powered chatbots became fraud’s latest weapon
The ways fraudsters are operating is changing and evolving. Rather than seeing solo players, we’re now seeing highly organised teams of criminals, who act more determinedly, and are better coordinated at finding gaps to exploit.
Perhaps the greatest weapon in fraudsters’ arsenals though is AI bots which offer new opportunities for fraud and a new challenge to retailers. According to UK Finance, £177.6m was stolen through impersonation scams in 2022. As AI impersonation improves through the use of deepfakes and recreating voices, the risk of fraud will only increase further.
To combat these schemes, businesses need to stay informed and understand how criminals are leveraging AI-powered bots to amplify attacks; how deepfakes and synthetic personalities are evolving and posing a threat to businesses, and finally (and most importantly) how businesses can fight back.
How criminals are leveraging AI powered chatbots
In the past, scammers and fraudsters’ options were limited in terms of resources. They typically relied on themselves and their ability to deceive people, and would often give up once blocked.
Now, however, fraudsters are entering into highly organised teams, and their ability to deceive is being enhanced by AI.
For businesses operating online, generative AI (GenAI) is making it more difficult than ever to distinguish genuine customer enquiries from fraud. One example of this is attempts to gain access to account information and credit card details. To achieve this, we’ve recently seen fraudsters creating phishing templates generated through ChatGPT and other GenAI tools.
These “chatbots” use AI to impersonate legitimate customers. One way they do this is by replicating customer service queries, using vast amounts of data to
recreate speech and text patterns of real people. Complicating this further is deepfake technology which can convincingly replace a person with an AI-generated likeness.
How deepfakes and synthetic personalities are evolving
Deepfakes are adding complexity to the fraud landscape, with attackers impersonating victims to make high-value transactions. By creating synthetic identities and replicating victims’ voices when calling customer services these deepfakes are so convincing that they’re being used to secure goods with full card details and billing information. Even videos can be adapted with lip-syncing techniques so advanced it makes it difficult to distinguish real from fake.
I strongly believe deepfakes will continue to be a growing challenge and, in the future, we could even see bots making calls on their own, with no human oversight, if we don’t curb attempts now. The risk to businesses and consumers is huge, so responding to these sophisticated systems will demand high-performance machinelearning models built into business’ tech stacks. Increasingly, security is about being able to match the speed and scale of criminals by using AI for good.
To fight fire with fire though, one must learn what tools to use.
How businesses can protect themselves against fraud
Risk intelligence teams like the one I lead are paramount to providing protection from AI fraud. By evaluating different
forms of fraud and collaborating closely with data science teams, they can feed information into the models, cross-referencing with previous consumer behaviours to continue evolving defences as fraudsters pivot to new tactics.
Building resilience to AI fraud relies on merchants working closely with intelligence teams to identify anomalies and input them into the right feedback loops. This allows systems to begin “learning,” and identifying fraudsters becomes faster and easier. This feedback loop also empowers merchants to pinpoint users who are repeatedly committing returns fraud through several fake accounts, identifying them through link analysis, like IP or device information and implementing triggers to block them.
With the rise of AI chatbots, businesses have new threats to worry about, but the good news is that as threats evolve, so do the solutions. First and foremost, businesses need to ensure they have a robust fraud prevention strategy in place. That could be partnering with a fraud prevention provider to mitigate risk, establishing a data intelligence team to monitor behavioural trends, or developing a robust fraud prevention framework that incorporates both in-house capabilities with strategic industry partnerships that allow them to continue focusing on what matters: customer loyalty, retention, and profit.
The double-edged sword of AI in financial regulatory compliance
Daoud Abdel Hadi, Lead Data Scientist at Eastnets, considers the threats and benefits
of
AI and its new generative models for financial institutions.
Global money laundering is estimated to account for a staggering two to five per cent of the world’s GDP, equivalent to up to $2 trillion . In response, regulatory bodies are tightening the noose on financial crime with increasingly stringent regulations.
Financial institutions are therefore turning to AI in a bid to spot and stop fraud as it happens. With this technology, compliance teams can detect complex, anomalous behavioural patterns in real-time, providing compelling insights not detectable by traditional rules-based systems.
According to the Economist Intelligence Unit 58 per cent of banks are now heavily relying on AI for fraud detection. It’s become truly embedded as a tool in the fight against crime. It’s perhaps unsurprising that criminals have taken note and are using it to push back.
This has been accelerated by the arrival of generative AI models. Unlike the forms of AI that preceded it, generative AI can learn from patterns and structures in data to create new content.
As a result, AI is now being used by rule keepers and rule breakers as they try to outsmart each other. It’s the ultimate double-edged sword. This begs the question, how are fraudsters using it?
Examining the risks
Generative AI and large language models (LLMs) are being developed worldwide, with new versions and expanded capabilities emerging at breathtaking speed. It’s widely unregulated and a gift to those who wish to commit an offence.
Deepfake software can generate fake identity documents, images, and videos that appear authentic, enabling the creation of synthetic identities that can bypass KYC/CDD. As fraudsters obtain more personal data and create more believable fake IDs, the accuracy of AI
models improves, leading to more successful scams. The ease of creating believable identities enables fraudsters to scale identity-related scams with high success rates.
Generative AI models can also be employed by criminals during various stages of the money laundering process, making detection and prevention more challenging. For instance, fake companies can be created to facilitate fund blending, while AI can simplify the generation of fake invoices and transaction records, making them more convincing.
By bypassing KYC/CDD checks, it’s possible to create offshore accounts that hide the beneficial owners behind money laundering schemes. Generating false financial statements becomes effortless and AI can identify loopholes in legislation to facilitate cross-jurisdictional money movements. The possibilities are endless. If a human can imagine a way of committing fraud, generative AI can probably find a way to achieve it.
Harnessing AI’s potential
The good news is that AI can be used for good as well as bad. While fraudsters explore the malevolent potential it offers, the future of fraud detection and prevention lies in the positive contributions AI can make.
AI’s ability to detect, deter, and halt crime stands as the most compelling application of the technology within the world of finance. And it has long been recognised as such. The US Financial Crimes Enforcement Network (FinCEN) emphasised the importance of AI and machine learning back in 2018 , stating that these technologies can, “Better manage money laundering and terrorist financing risks while reducing the cost of compliance.”
The Financial Action Task Force (FATF) echoed this sentiment , stating that
AI-based solutions can help identify risks, respond to suspicious activity, and enhance monitoring capabilities with greater speed, accuracy, and efficiency.
Navigating the path ahead
With the battlelines drawn for the fight between two opposing sides, the only way forward is to fight fire with fire by adopting AI-enabled AML and fraud prevention solutions. Only by doing so can financial institutions effectively address regulatory requirements and maintain compliance. However, it is imperative to ensure transparency in AI decision-making processes, enabling audits and reporting for regulatory compliance.
To navigate this path, compliance departments must build multi-faceted teams adding data scientists, data analysts, forensic accountants and professionals
with a programming background. If financial institutions can build the right skills and work with the best-equipped vendors, the next step is transitioning from rulesbased technology to AI. This usually requires a move to the cloud, because the computing power required by AI and ML can be huge.
As the financial sector navigates these uncharted waters, embracing the potential of AI while mitigating risks, the fight against financial crime can be strengthened, ensuring a safer and more secure future for all.
In the ever-evolving landscape of financial services, the digital revolution is not just imminent; it's imperative. With both recent and long-standing disruptions from Royal Mail on account of strike action and reductions in services, the time to transition to digital processes has never been more certain.
In recent years, industries worldwide have witnessed a surge in innovative technologies like AI, marking the dawn of a new digital era. However, many within the financial services sector find themselves lagging behind the wave of innovation, due to a reliance on outdated legacy systems. As the digital landscape evolves, embracing transformation becomes paramount to staying relevant and competitive.
As financial institutions navigate this transformative journey, four key pillars emerge to execute seamless digital transformation: embracing paperless processes, understanding emerging cyber threats, using this knowledge to enhance cyber protection and security, and empowering people to drive forward best practices through training and upskilling.
Embracing Paperless
With the Royal Mail continuing to increase stamp prices and disruptions to services beginning to look like an evergreen issue for postal services in the UK, financial institutions face a pressing need to adopt digital solutions for both time and cost-efficient communication. As of last month, a standard letter with a British first-class
stamp costs £1.35 - rising for the fourth time since March 2022, when the cost of a first-class stamp was 85p.
In addition to the cost savings benefitand assurance your mail will arrive on time - transitioning from paper-based to digital processes also aligns with sustainability goals, reducing a business’s carbon footprint. With digital footprints, interacting with customers through digital channels helps improve data management for both businesses and consumers - and often leads to a more efficient interaction with customers.
Mitigating Cyber Threats
While digital transformation offers numerous benefits, it can expose businesses to
Why Digital Transformation Strategies are Imperative in Financial Services"
a growing list of cyber threats. Research indicates a rising tide of cyberattacks on businesses in the UK, underscoring the importance of implementing robust cybersecurity measures to help safeguard from a potential attack.
For financial institutions holding vast amounts of sensitive and personal data, there is added pressure to make sure documents are safe from the hands of threat actors. The ICO has reported a 30% increase in data breaches in UK firms between 2022 and 2023, highlighting the need for organisations within FS to invest time and energy in formulating digital transformation strategies to prevent the threat of a cyber-attack - in both a financial and reputational sense.
When considering migrating to digital platforms and integrating services onto mobile applications, ensuring robust cybersecurity measures are in place is a necessity. Any digital progression must be met with a proportional increase in cybersecurity to safeguard against cyber threats and maintain business continuity.
Understanding the Threat Landscape
Throughout the transformation journey, businesses must address legacy infrastructure vulnerabilities and enhance threat detection and response capabilities. Secure communications play a pivotal role in protecting sensitive customer data, emphasising the need for proactive cybersecurity measures to prevent data breaches and interception.
Alongside implementing robust safeguarding measures and leveraging the technologies required to facilitate a seamless digital transformation process, governments and industry leaders must also do their part and focus on bridging the digital skills divide and encouraging competition amongst global markets.
Putting people first
Effective digital transformation hinges on upskilling individuals tasked with driving change. Appointing digital-savvy leaders and providing comprehensive training fosters a culture of innovation and agility.
Research indicates that organisations led by digitally literate management are more likely to succeed in their transformation endeavours, highlighting the importance of prioritising human capital in digital initiatives.
In a rapidly evolving landscape, embracing digital capabilities is not merely an option but a necessity for financial institutions. Delaying digital transformation risks missing out on opportunities for growth and innovation, ultimately jeopardising competitiveness in an increasingly digital world.
For financial services to thrive, it's imperative to adapt to the evolving digital landscape, leveraging technology to enhance operational efficiencies and meet evolving customer expectations. By prioritising digital transformation, financial institutions can future-proof their operations and pave the way for sustained success in an increasingly digital world.
Closing the skills gap in finance industry: Strategies for building a tech-savvy workforce
Ash Gawthrop, Chief Academy Officer, Ten10
The demand for digital skills has become more important than ever, especially in the finance industry. In fact, recent research by the Financial Services Skills Commission found that approximately 160,000 workers in the financial services sector need upskilling. Firms are now finding it difficult to fill positions that require digital proficiency, particularly in data architecture, data science, and analytics, which significantly hampers their growth, innovation, and ability to implement new technologies effectively.
As the industry increasingly adopts AI and advanced analytics, the need for a workforce well-versed in these digital tools becomes essential. Without addressing this gap, financial institutions risk falling behind in a competitive market where efficiency and technological expertise are key drivers of success.
Understanding the growing demand for advanced digital skills
The increasing popularity of AI in the workplace is likely to create new roles and departments focused on integrating these technologies into daily operations, making data analytics a critical area in terms of building expertise. Companies now need individuals who can interpret data accurately, generate insights, make recommendations, and communicate findings effectively. This requires a combination of technical skills, creativity, data visualisation, and communication abilities.
For roles such as data architects and analysts , assessing the maturity of current capabilities is essential. While upskilling internal talent can be viable if the organisation already has a foundation, starting from scratch may necessitate a mix of external recruitment and internal training. Recognising the unique skill sets required for each role and leveraging existing expertise within the organisation can ensure a successful strategy for closing the digital skills gap.
Executives across financial firms should understand that the most effective way to address the skills shortage is through focused skill development. By providing professional development opportunities, institutions can equip their teams with the necessary financial and technological expertise to remain competitive.
Facilitating training for the right individuals from diverse backgrounds
Identifying the right employees for reskilling initiatives is crucial yet often overlooked. Instead of confining individuals to their current roles, firms should assess employees based on their capability, aptitude, and drive for new positions.
Facilitating tests such as aptitude testing can help uncover essential traits and behaviors that align with the skills required for new roles, revealing whispering talents in employees who might not fit traditional molds. This approach challenges industry assumptions and opens up career growth opportunities for employees from diverse backgrounds.
After identifying promising candidates, companies should go the extra mile to support their development. This means providing comprehensive training and reskilling programs. Financial assistance for external certifications and courses can help overcome cost barriers, while dedicating work time for learning ensures employees can focus on these qualifications.
Additionally, ensuring job satisfaction during the transition is also important. Businesses should gradually reduce current responsibilities while increasing training and new role duties. This strategic approach helps manage the transition effectively and ensures employees feel supported throughout the process.
Ultimately, prioritising capability, aptitude, drive, and determination when selecting candidates for reskilling initiatives is necessary. By embracing a holistic approach to talent development and challenging traditional assumptions, financial firms can unlock the full potential of their workforce.
Preparing for the future
When undertaking training initiatives to transition employees into roles such as data architects or analytics translators, financial institutions must be mindful of several potential pitfalls. For instance, imposter syndrome is a common challenge for those entering unfamiliar roles, and organisations should offer robust support to individuals experiencing this. It is also important to recognise the differences in skill sets and communication styles between existing team members.
Another challenge is the disparity between traditional academic training methodologies and the practical needs of data-centric roles. Traditional bottom-up methods, focused on theoretical concepts, may not align with the real-world applications and problem-solving required for these positions. Therefore, organisations should adjust their training programs to employ top-down strategies that emphasize practical, real-world applications.
By addressing these pitfalls proactively, financial institutions can maximise the success of their training initiatives. And if properly managed, these efforts can produce positive results, empowering employees to excel in their new roles and driving overall organisational success.
Standardise and simplify regulations: What the digital banking industry needs to thrive
Sarah-Jayne Van Greune, COO, Payen
From mobile banking apps to online investment platforms, convenience and accessibility have become essential for financial management. However, rapid change has created the need for more regulation to protect consumers and the overall economic stability of our country. Now, digital banking organisations are seeing an influx of overlapping regulations, making it a complex and monumental task for organisations to navigate.
While regulation is imperative, the sheer number of rules for financial services to adhere to can feel like a constant uphill struggle. Clear answers that focus on simplification, where both parties work in tandem to keep the industry safe, are needed. But first, let’s explore the three top areas, why you as an organisation, may feel as if the UK’s regulatory landscape works against you and not for you.
The battle against financial crime
One of the most pressing concerns for regulators and banks is the ever-present threat of financial crime. As digital transactions surge, so do attempts at fraud, money laundering, and other illicit activities.
Know Your Customer (KYC) and AntiMoney Laundering (AML) regulations remain at the forefront, requiring banks to implement robust customer identification and verification procedures. This includes verifying user identities, monitoring transactions for suspicious activity, and reporting any potential breaches. These measures are essential for safeguarding financial systems, but they can add friction to the user experience, potentially slowing down onboarding processes and online transactions. For example, Fenergo found that it took banks on average 95 days to complete a KYC review in 2023, up from 84 days in 2022.
Although there should never be a trade-off
between speed and KYC/AML, ensuring effective implementation of these regulations and a seamless user experience remains a key challenge for digital banks.
Data protection in the digital age
Data privacy remains another top concern for digital banks, fuelled by the vast amount of personal information collected. This data, which includes financial transactions, spending habits, and other personal details, raises significant concerns about potential misuse. It’s why banks are at a high risk of cyber security attacks with research from ServieNow showing that 68% of the banks surveyed had experienced at least one serious incident.
Regulatory bodies like the European Union's General Data Protection Regulation (GDPR) and similar laws worldwide have responded by mandating strict data protection practices. These regulations go beyond just secure storage; they also empower users with greater control over their information. This includes the
"right to be forgotten," allowing individuals to request the deletion of their data under certain circumstances, and data portability, enabling them to transfer their information to another service provider. And with so much data to manage and process, it leaves more room for inadvertent errors and can increase the risk of data breaches increases. Navigating this and the red tape is a hefty process.
Emerging tech and the regulatory question mark
The drastic rise in AIs presence across the digital banking industry adds further convolution. On the plus side, AI algorithms can improve digital banking experiences for both the business and the customer. For example, AI can proactively detect fraudulent activity before it’s too late or help to offer personalised financial advice at speed.
On the other side, the ethical implications of AI present a concerning risk. Biases ingrained in the data used to train
algorithms can lead to discriminatory lending practices or unfair financial product recommendations. The upcoming FCA Consumer Duty aims to address this directly, demanding fairness and transparency in AI-powered decision-making for UK financial services. While this regulatory nudge ensures that AI serves as a force for good, not a facilitator of discrimination, the rules of AI use and the intersection with other regulations aren’t yet clear.
The resolutions
Digital banking took off around ten years ago and shows no signs of slowing down. The current regulatory environment in the UK, however, is failing to keep pace and there is now a disconnect present between regulators and the organisations they oversee.
Resolving this is multifaceted. Firstly, there needs to be a new focus on clarity. Regulations tend to be wordy and confusing. Small to medium players, in particular, struggle to navigate this, hindering their
ability to compete and innovate.
Another answer lies in collaboration. Regulations should focus on desired outcomes, allowing flexibility in how banks achieve them. This fosters a deeper understanding between regulators and banks, ensuring rules effectively address potential risks without stifling innovation.
Standardisation is another crucial step. Currently, due diligence requirements and Know Your Customer (KYC) processes vary wildly across institutions, for example. This creates unnecessary friction and a substantial administrative burden for all parties involved. Technology, specifically RegTech solutions, plays a vital role in streamlining these processes.
Finally, technology itself can play a significant role in enhancing compliance. RegTech solutions, for instance, that leverage AI can automate many compliance tasks, making processes more efficient and cost-effective. Additionally, innovations like biometric authentication can
offer enhanced security and transparency, aligning with regulatory goals while improving the user experience.
Striking a balance
Navigating regulations is an ongoing challenge for digital banks. However, by embracing a collaborative approach with regulators, leveraging technology for compliance, and focusing on innovation within regulatory frameworks, digital banks can ensure a future that offers both security and the convenience that consumers have come to expect.
The future of digital banking relies on striking a balance between responsible innovation and robust regulatory safeguards. The UK has a thriving digital banking sector with immense potential. By simplifying regulations and fostering a more collaborative environment, we can unlock this potential and solidify its position as a global leader in digital finance.
It’s difficult to pinpoint the start of banking as we know it. Some historians believe the first formal financial institution opened in twelfth century Venice; others trace it back to the use of temples to safeguard gold in ancient civilisations. From the use of gold coins, to cash, to card, to contactless, our deep-rooted relationship with money – and therefore banking – has always adapted to the changing needs of society. It only makes sense that the trend continues and, today, that means bringing together banking and technology as one.
Over a third of people in the UK (36%) already have access to a digital-only bank account – so it’s clear that emerging technology is changing the way we discuss, spend and manage our finances. Meanwhile, global digitalisation is showing no signs of slowing down, leaving the banking industry in the midst of another era-defining transition.
Great expectations for great experiences
These modern times mean modern customers have modern expectations.
Typically, they want their preferred bank to provide seamless, personalised and secure digital experiences (DEX). If not, the accessibility of neobanks, mobile-only banks and digital banks means a willing competitor is always just a few clicks away.
Convenience is key for all users, regardless of whether their interaction is on mobile, online or even in-branch. In fact, almost two thirds of customers (62%) think experiences should flow naturally between physical and digital spaces. In this omnichannel world, banks need to
be primed to provide superior DEX in all customer-facing areas.
The banks that have traditionally relied on the strength of their brick-and-mortar portfolios are therefore now under pressure to diversify their customer service offerings – a concern that’s accentuated by McKinsey’s observation that fintechs and neobanks release new product features every two to four weeks on average. To compete on all fronts, industry decision-makers must evolve their digital operations at the same rapid rate.
Digitise to thrive
In this case, innovation must start with introspection. Enhancing DEX across the board requires traditional banks to
review and refine their IT estates, which often consist of legacy IT sporadically supplemented by newer solutions.
The blind spots created by this patchwork digital architecture are depriving IT teams of full visibility into their applications and infrastructure. It’s crucial to overcome this to meet customer demands and keep pace. Streamlining core internal processes as part of a wider digital transformation offers banks an opportunity to put DEX at the very heart of their operations.
Bringing things together
Fortunately, solutions capable of spearheading this change are readily available in the market. The industry consensus appears to be that observability and artificial intelligence for IT operations (AIOps) platforms offer a valuable opportunity to digitise, with the research revealing that 92% of business leaders believe unified observability is important for staying competitive and delivering a seamless DEX.
By harnessing the power of AI, observability platforms bring together complex digital infrastructures by consolidating data from multiple sources into one single view. This end-to-end visibility produces high-fidelity insights that help IT leaders make better decisions – unlocking new data-driven strategies for optimising application performance, prioritising the most valuable customer touchpoints and providing informed feedback on employee productivity.
Intuitive interfaces like these also often provide a breakdown of the full IT estate’s energy consumption, making it easier to meet and exceed today’s increasingly stringent compliance regulations. Additionally, intelligent automation features can help banks to sustain service availability without the added costs of hiring round-the-clock support teams.
Organisations that factor observability and AIOps into their digital strategy can
even benefit from accelerated transaction speed and fortified transaction security. With these added capabilities, banks can forge a reputation for prioritising the safe handling of sensitive financial data without compromising on those all-important customer-centric efficiencies.
A constant evolution
In our always-on, omnichannel world, it’s critical for financial organisations to drive customer loyalty by introducing user-friendly interfaces and cybersecurity-minded principles. Solutions that improve the safety, speed and sustainability of digital operations can enrich the digital experiences of banking customers and employees, anywhere, anytime – and most importantly, for the future.
As the old saying goes, ‘money makes the world go round’ – and the constant innovation of the banking industry is what keeps everything turning. Facilitating a digital transformation with AI-powered observability platforms can empower banks to continue evolving into the next generation of DEX – and beyond.
- John Atkinson
What are the risks of AML compliance failures?
By Andrew Doyle, CEO, NorthRow
Anti-Money Laundering (AML) compliance checks form a fundamental part of the regulatory framework for financial institutions in the UK. Designed to prevent the flow of illicit money through the financial system, these checks are really important when it comes to maintaining the integrity of financial markets. This is especially true when you consider that two to five percent of global GDP, as much as two trillion dollars, is laundered every single year according to data from Deloitte.
Failure to meet these checks rightly poses significant risks to financial firms, which can impact their financial standing, reputation, operations, and overall stability. However, research from NorthRow shows that worryingly one in five regulated businesses are unaware of the penalties associated with non compliance so let’s take a closer look:
Financial penalties and legal consequences
Financial penalties are one of the most immediate and severe risks of failing AML compliance checks in the UK. The Financial Conduct Authority (FCA) and other regulatory bodies are empowered to levy swingeing fines on institutions that fail to meet AML requirements - just ask NatWest, which was slapped with a whopping £264.8 million fine for serious AML failings back in 2021, or HSBC who was also fined £63.9m for AML failing, and Lloyds Bank is currently undergoing an extensive investigation by the FCA for suspected breaches of AML regulations
Beyond fines, non-compliance can lead to legal consequences, including lawsuits from stakeholders such as customers and investors, who may be adversely affected by the institution's non-compliance, and criminal charges.
Reputational damage
Reputation is a crucial asset for financial institutions, and failing AML compliance
checks can inflict significant reputational damage. We live in an age where news spreads in seconds and so any hint of involvement in money laundering can immediately tarnish an institution's image.
HSBC faced a huge scandal in 2012 when it was found to have facilitated money laundering for drug cartels and terrorist organisations, which not only included a $1.9 billion fine but also a severe blow to its reputation, resulting in a loss of customer trust and investor confidence.
Rebuilding a damaged reputation is a long and challenging process, often requiring years of sustained effort and significant investment.
Operational disruptions
Regulatory bodies can impose stringent measures (including restricting or suspending certain business activities) until compliance is achieved, which can disrupt day-to-day operations, delay transactions, and impact customer service, causing real operational headaches as a result.
Addressing AML compliance failures rightly requires a thorough review and overhaul of existing processes and systems. Implementing new AML controls and ensuring staff are adequately trained requires time and significant investment, adding to the operational burden caused by any breach.
Impact on employee morale
Compliance failures can also negatively impact the internal culture and morale of an organisation. Employees may feel demoralised and disengaged if they perceive their employer as unethical or if they experience the repercussions of non-compliance, such as job insecurity or restructuring. A demotivated workforce can lead to higher turnover rates, loss of talent, and a decline in productivity, further complicating the institution's ability to recover from compliance issues.
The importance of robust AML compliance
The risks associated with failing AML compliance checks in the UK showcase
the importance of robust and proactive compliance management. Investing in comprehensive AML programs that include regular training, internal audits, and the adoption of advanced technology to detect and prevent money laundering activities, as well as staying abreast of regulatory changes and fostering a culture of compliance are essential steps in adherence to AML regulations.
In a highly regulated environment, the cost of non-compliance far outweighs the investment in strong AML frameworks. By prioritising AML compliance, financial institutions can avoid severe repercussions, protect their reputation, and build a foundation for sustainable growth and long-term success.
Vigilance in maintaining AML compliance is not just a regulatory requirement but a strategic imperative for thriving in today's competitive and closely monitored financial markets.
- Andrew Doyle
Future-Proofing Finance:
Why Early GenAI Adoption is Key for Fintech Success
Imagine effortlessly opening a new bank account and onboarding through an intelligent virtual assistant – one that guides you through account setup, financial goal-planning, and hyper-personalised advisory services through intuitive conversation alone.
Not long ago, Generative AI (GenAI) was little more than a boardroom whisper in the fintech world – a mythical concept, not an operational reality. Fast-forward to today, GenAI has exploded into a transformative technological force reshaping the Banking, Finance and Insurance industry.
The innovators who identified this wave early and embraced the disruption are already far ahead of their peers. While
others remained apprehensive, these front-runners swiftly transitioned from cautious experimentation to wholeheartedly adopting GenAI as a core strategic driver woven throughout their products, services, and operating models.
The advantage of being an early mover is clear. A recent Market.us study indicates the world's financial giants integrating GenAI at scale could realize up to 30% productivity gains. For the global banking leaders, that equates to potential annual cost savings and revenue uplift in the tens of billions.
For fintech enterprises, GenAI represents an extraordinary opportunity. Enhancing product suites with GenAI and integrating
language models to drive better customer outcomes are just the initial steps in this AI-fuelled revolution.
Improved CX and Streamlined Operations are Just the Start
From front-office functions such as personalised advice and frictionless customer service to middle- and back-office operations like underwriting, compliance, and fraud detection, GenAI is primed to be a high-impact enabler across the finance and insurance landscape.
In the insurance sector, GenAI’s solutions, like talk-to-policy interactions, allow professionals to engage with the system as naturally as conversing with an expert.
This seamless integration of advanced language models and machine learning streamlines complex policy comprehension, ensuring consistent and accurate interpretations every time. They can now quickly grasp the nuances of even the most intricate cases, reducing processing times and errors.
But the transformative impact extends far beyond mere operational efficiencies. Arduous tasks are now automated through advanced context awareness, while human error has been minimised as professionals focus on strategic decision intelligence.
By delivering faster, more reliable service, these GenAI solutions enhance customer satisfaction – a critical differentiator in an era of constantly changing consumer expectations and access to quality services.
How can companies effectively harness the power of GenAI?
Harnessing the full transformative power of GenAI demands a unified, multi-dimensional strategy for organisations and fintech disruptors. A robust technical foundation is mission-critical, encompassing scalable cloud infrastructure, machine learning operations capabilities for continuous iteration, and enterprise data modernisation initiatives to ensure AI model accuracy. However, the human factor cannot be overlooked.
As fintech innovators, we must cultivate cross-functional AI teams and establish robust workforce training programs. This talent pool, skilled in leveraging AI and comfortable operating in perpetual beta environments, will be the driving force behind long-term competitive advantage.
Executing a GenAI roadmap requires an enterprise-wide cultural pivot, with innovation and sustainable growth as core values. Committed leadership championing the potential of AI is the key. Fintech players who can skilfully blend technical mastery, human enablement, and cultural
revitalisation will dictate the industry's ever-evolving strategy. Those still wired around legacy systems, and outdated processes, will inevitably fall behind.
Embracing GenAI’s Paradigm Shift
GenAI is picking up speed with relentless, disruptive force, and the fintech sector has a particularly compelling imperative to be an early adopter. Finance is an information-intensive domain dealing with massive volumes of complex data, regulatory requirements, and the need for personalized customer service at scale. GenAI's capabilities in natural language processing, predictive analytics, and intelligent automation are tailor-made to address these challenges.
In customer preference analytics, GenAI can analyse vast datasets of consumer insights to identify trends and evolving needs over time. This level of hyper-personalized intelligence allows fintechs to proactively tailor offerings, messaging, and services with pinpoint accuracy –forging deeper relationships and delivering exponentially more relevance than conventional segment-based approaches.
GenAI is an all-or-nothing proposition now, demanding a wholehearted commitment and an unwavering leadership vision. The future market winners will be the ones unafraid to be early adopters and pacesetters. Now is the time to make a definitive choice – are you a GenAI pioneer or a bystander? Whichever path you choose, the reverberations of that decision will be felt for years, perhaps decades, to come.
Barath Narayanan, Global BFSI and Europe Geo Head at Persistent Systems.
Potential to Transform
-The Story of AI in Fintech
Scott Harkey, EVP, Financial Services & Payments at Endava
Nearly every industry is being revolutionised with the powers and capabilities of artificial intelligence (AI), and the financial services sector is no exception. From driving automation to personalising customer experiences, it’s redefining how users access and control their finances. Through enhancing banks’ ability to catch financial criminals and mitigate harm, it provides an extra layer of protection.
There’s no doubt that AI is a game changer and a key driver for businesses looking to stay competitive. The global AI in fintech market is booming and is set to reach $61.30 billion in the next decade, having been valued at $8.23 billion in 2021.
But with the popularisation of ChatGPT and similar models, data security remains an industry-wide concern. AI is nothing without the data that feeds it, and how this data is collected, stored and analysed is hugely important for not only the safe and responsible use of AI, but to be GDPR compliant and cyber resilient.
Missed opportunity
Machine learning has been around for decades, and the payments sector has been reaping its benefits for some time. However, implementation of AI has been largely confined to fraud prevention, with industry leaders focusing efforts on creating solutions to this effect.
Corporations using generative AI to their advantage are often facing an uphill battle to integrate the technology into their infrastructure without compromising data security. Instead of applying its capabilities to daily business automation, many corporations are playing it safe and using AI for less impactful tasks, such as chatbots for test case examples or content creation for marketing purposes.
While understandable in a world wary of data-security breaches, this approach means businesses are missing out on so much more…
The paradox
For financial services, two primary pain points stand out. The first is the battle against fraudsters, who continue to drain people of their hard-earned money using increasingly sophisticated tactics. The second is the technical hurdles that many individuals face when trying to access or move their finances. Banks are faced with a paradox; preventing and minimising financial crime through strict security barriers, while enabling easy entry for their customers and improving the overall user experience.
This is where AI comes in; enabling both fraud detection and a frictionless user experience to co-exist. However, to ensure integration runs smoothly, institutions will need to ensure they encourage innovation without compromising customer safety or failing to comply with regulation.
For those attempting to strike this balance, data privacy concerns should be front of mind. While data is necessary to facilitate long-term change in any industry, those that use it to their corporate advantage must be hyper-aware of regulations such as the General Data Protection Regulation (GDPR) and the Payment Services Directive (PSD2, soon to be PSD3). With the objective of ensuring that individuals know how their financial information is used by corporations, any corporation that fails to comply will be seen as lacking awareness and thought for their customers. To reflect this, knowledge of data privacy should be the foundation of any AI model and considered throughout its implementation.
If done correctly, with considerations of data privacy paramount, businesses can foster a consistent and trusting user-base whose pain points are addressed.
Trust and transparency
Now more than ever, it’s crucial for businesses to demonstrate that they are simultaneously powering innovation whilst protecting their customers’ data.
A proactive way to find this balance is by integrating security measures into chosen AI solutions from their development. However, as this may not be sufficient for long-term compliance, policy makers should ensure the language used is clear, enabling easy application into the future. Customer trust is hard to gain, and easy to lose. Curating a relationship of understanding between those making regulation and those applying it can facilitate customer trust in AI.
Businesses should also seek to place value on transparency. Through educating both internal and external stakeholders on AI’s capabilities, they can encourage correct use of the technology, and foster an open conversation to highlight and address potential concerns.
With so much at stake, it is understandable that businesses can feel overwhelmed and under pressure when navigating AI implementation. Leaning on experienced technology partners can not only alleviate some of these pressures, but can help businesses implement AI quickly and efficiently, at a lower cost. Drawing from industry expects is how businesses continue to meet and exceed consumer expectations, setting them apart in an increasingly competitive and crowded market.
Adam Zoucha, MD EMEA & SVP International
Automation in Finance: An Opportunity,Not a Threat
In today’s financial landscape, the rise of automation is often seen as a double-edged sword for accountants, with concerns about accuracy, job displacement and reduced human oversight dominating the discourse. However, automation when applied correctly should be transformative, helping to alleviate the mounting pressures on finance professionals.
Accountants face a myriad of challenges. From the continuous demand for accuracy and efficiency, to chasing receipts and invoices each month when closing the books. The attention to detail required day to day is relentless, particularly taking into account the increasing complexity of compliance. Keeping up with rapid regulatory changes brings a whole slew of challenges: an increase in costs per control, additional processes to organise, data to find, and an overall lack of bandwidth. These difficulties not only hinder finance teams but can also cost organisations if managed incorrectly.
On top of this, the chances are teams are battling the skills shortage that’s gripped the industry, trying to deliver great work with a stretched team whose morale may be wavering. Unless you’re one of the lucky ones, many teams are also dealing with plenty of inefficient systems and
processes that add unnecessary stress to the whole situation. Traditional processes are becoming unsustainable, leading to burnout and errors. That’s why employers are turning to automation, seeing it as an opportunity rather than a threat.
Automation and operational excellence
Without automation, there is greater room for error, a lack of transparency, and potential for missed deadlines. Without this helping hand, accountants' days will often be filled with mundane, tactical, and repetitive tasks that are both time-consuming and often frustrating. Automation should be a support to employees, empowering them to achieve operational excellence. It can reduce the risk of employee error during high-pressure moments, limit the need to revisit jobs, and allow employees to focus on value-added tasks.
Automation provides a foundation for
excellent work. Great accounting is based on accuracy, which requires completeness, attention to detail, and unity – all information in the same place and format. Automated accounting software delivers this faster than humans, handling the chasing and checking that’s so draining for accounting staff. Then rapidly compiling and presenting all the figures in a usable format. That, in turn, reduces the chance of employee error. There’s still the chance that an invoice will carry a typo or that an expense will be miscoded, but the fundamental acts of information transfer and number crunching are carried out with pinpoint accuracy at high speed, even during the periods of highest pressure.
Leaders may still question the completeness of automation. However, it’s important to stress that automation shouldn’t replace but complement finance teams. Through the resulting streamlined processes, accountants are given back time
to spot-check reports, giving leaders confidence in their results. Automation not only ensures more reliable month-end and year-end numbers, but also reduces the likelihood of reconciliation reruns. This blend of automated efficiency and expert oversight ensures accuracy and peace of mind.
Navigating compliance and regulation
It’s not easy keeping up with regulation these days. UK businesses are often faced with a bewildering array of changes in the red tape department. It’s robust compliance and control processes that are essential to help steer companies from potential breaches and inefficiencies.
can drastically enhance compliance processes. It streamlines workflows, eliminates inefficiencies and leads to a significant reduction in manual efforts. It can help your team stay on top of new forms, reports, and data requests. With regular tasks automated, staff are free to handle more valuable work; efficiently meeting compliance needs, reducing control burdens, and accelerating positive change.
Automating elements of the compliance function is crucial for improving transparency, efficiency and collaboration and can ensure important deadlines are met.
Transparent, efficient, and happy
With 99% of accountants encountering some degree of burnout in their career, reducing mundane tasks is crucial. By using automation to help handle the basic
figure-wrangling, accountants can not only go home on time, but are freed up to do high-value, strategic work.
Automating ‘dull tasks’ allows accountants to exercise their intellect more often and tackle broader financial challenges. They can offer strategic advice to senior leaders and line-of-business teams, increasing job satisfaction and retention. Accountants will spend fewer evenings banging their heads against spreadsheets, and more time enjoying their work.
There are no magic bullets. However, integrating automation into your regular accounting workflow can make a significant difference. As the profession navigates a tricky market let’s leverage favourable changes. With the right tools, accounting can remain a deeply satisfying role.
Ethical AI:
Considerations, Challenges and Best Practice
In recent years, AI has moved into the mainstream, bringing major implications to the worlds of work, entertainment and society in general. However, as the technology increasingly impacts every aspect of life, there must be a renewed focus on its ethical implementation.
To develop AI ethically, those in the sector must understand its short- and long-term implications. The technology should not discriminate based on race, sexuality, age or gender. From its inception and development, equality should be a central consideration in business use cases and wider society. For model
training, huge amounts of data must be used to ensure that the technology is inclusive and does not reflect bias towards certain groups or individuals. If bias is detected, developers must proactively add balance into the systems and its data. However, not all AI presents the same level of risk. Therefore regulators are focused on the uses that could have a more negative impact.
High-Risk Areas
Two of the most sensitive areas for AI implementation are the healthcare and criminal justice sectors. In healthcare, the paramount concerns are privacy, data
security and bias mitigation. Sensitive patient data must be handled ethically, with proper consent and confidentiality always in place.
In both healthcare and criminal justice, profiling is a major consideration. As AI is trained on existing data, unintentional bias can become engrained in new systems. Therefore AI algorithms must be rigorously vetted to minimize biases that may perpetuate disparities in healthcare access and treatment. Similarly, in criminal justice, algorithmic biases must be addressed to avoid unfair treatment or sentencing.
Rather than using AI, particularly Generative AI, for decision-making, this should be left to trained professionals with the ability to understand and assess critical factors. In these sensitive and individual instances, AI should only be used in a controlled, supporting manner to reduce potential harms.
Transparency and Accountability
To foster accountability, there should be clear documentation and disclosure highlighting the data sources, algorithms and decision-making processes involved in AI systems. By recording this vital information, regulators, industries and the wider public can understand how decisions are made and identify potential biases or errors, where necessary.
Moreover, organizations must establish mechanisms for auditing and validating AI systems, for independent parties to assess their fairness, reliability and performance. Accountability can underpin governance frameworks to define roles and responsibilities for the development, deployment and monitoring of AI systems. This includes establishing channels for recourse and redress in case of algorithmic errors or adverse outcomes. Finally, there must be ongoing conversations with diverse stakeholders, such as communities, experts and regulators to keep AI systems aligned with societal values and serve the public interest. If transparency and accountability are a priority, AI technologies can gain trust and potential risks will be limited.
For stakeholders to be accountable and guide implementation, regulation is necessary. The EU’s AI Act is the first piece of legislation from a major regulatory body to specifically address the technology. This legislation is groundbreaking and will likely be used to benchmark new laws worldwide.
As understanding, monitoring and testing of AI improves, it will be more widely accepted as part of our everyday lives.
How Stakeholders Can Shape The Ethics of AI
Stakeholder involvement is critical to shape AI ethics, with groups and individuals delivering unique perspectives and responsibilities. Governments and regulatory bodies should establish and enforce legal frameworks to govern the development, deployment and use of AI technologies. Regulations address ethical concerns including fairness, accountability, transparency and privacy protection. Industry leaders and technology companies are responsible for the design and implementation of AI systems to align with ethical principles. Part of this responsibility involves rigorous risk assessments, mitigating biases, promoting transparency and fostering accountability throughout the AI lifecycle.
Researchers and academics are critical in advancing our understanding of AI ethics and developing ethical guidelines and best practices. Civil society organizations, advocacy groups and ethicists serve as watchdogs, highlighting ethical concerns related to AI technologies and advocating for responsible development and deployment. Finally, end-users and impacted communities should be actively engaged in the design and implementation of AI systems to reflect diverse perspectives, values and needs. By collaborating and engaging, AI can be developed and deployed ethically.
AI ethics must be a key focus for all those involved with the technology. Obviously, developers must look to remove bias from their products and understand potential harm associated linked to AI. Underpinning this is a solid framework for best practice and strong team leadership.
A growing trend is the appointment of Chief AI Officer to coordinate effective and responsible AI development and deployment. As AI proliferation continues, this title and function will become more prominent.
Additionally, sales and marketing teams are tasked with responsible positioning of AI products and tools. Following honest and careful positioning, consumers and users should have realistic expectations of AI, how it could and should be used.
As further AI laws are passed, legal and policy teams must ensure compliance and to guide overall best practices. For international organisations, this will be particularly relevant to understand under which jurisdiction they fall.
Aligning Values and AI Systems
To ensure AI systems are aligned with human values, collaboration must happen across society, beyond just governments and technologists. In addition legislation to guide AI away from harmful uses and outcomes, these discussions require insights from academia, social justice organizations, ethicists and technologists.
The reality is that everyone – regardless of their link to AI – wants the same outcome. We need it to help improve our cybersecurity, energy efficiency, medical research analysis, etc. while avoiding discrimination, bias and manipulation of human behaviour.
Sampak Garg, Associate General Counsel and Senior Director of Government Affairs, Juniper Networks
Francesc Altisent, VP of Product, Mangopay.
How fintech is enabling the true potential of the circular economy
In the face of soaring living costs and an ongoing climate crisis, we're witnessing a notable shift in how people buy and sell second-hand items. Recommerce is reshaping the way people buy and sell second-hand items and innovative payments solutions are powering the growth of the sector by adding revenue opportunities, cutting costs and fighting fraud.
The digital revolution
Gone are the days of car boot sales and bric a brac; we've entered the digital era of the circular economy, known as ‘recommerce’. Platforms like eBay and Craigslist initially paved the way, simplifying the process with online classified ads. But from there, against a backdrop of contributing macro-economic factors, the concept has grown wings. Today, the US recommerce sector is on track to hit a mind-blowing $245 billion by 2025 according to Statista, representing a significant contribution to global e-commerce sales. A Future Market Insights report claims that secondhand goods sales in Europe are expected to reach US$ 71,903.2 million in 2024, indicating that this isn't just a trend; it's a booming movement for consumers across the globe.
So, what is it that’s driving this trend? Well, we’re all acutely aware of the impact of the increased cost of living in recent years, which has led to growing numbers of consumers looking for new ways to get some extra cash in their pocket and make the clothes gathering dust at the back of the wardrobe generate some return. Then there’s the eco-conscious consumer. A growing number of people are mindful of the environmental impact of buying from new and are making choices which will limit their carbon footprint.
First Insight found that 62% of Gen Zers and Millennials prefer buying from sustainable brands. Some of these generations now shop secondhand almost exclusively for clothes and accessories because it not only allows them to buy higher-quality products which they might
not otherwise be able to afford, but also helps to minimise the environmental impact of how they shop.
The role of payments
Now, here's where it gets interesting for us in the payments industry. As the recommerce space evolves, there's a golden opportunity for us to step into the payments processing arena and shake things up. Payments specialists such as Mangopay can be extremely valuable for recommerce platforms, as we provide the solutions to add incremental revenue opportunities as well as helping reduce costs and safeguarding against fraud.
Integrating payments processing into a platform such as a secondhand marketplace can unlock a wealth of opportunities.
It's not just about making transactions smoother for users – it's about creating innovative, integrated products that both ramp up platform usability and throw open doors for marketplaces to diversify their revenue streams or grow across borders.
Platforms can actively motivate consumers by offering enticing rewards for participating in the trade-in process. From payments and loyalty points to discounts, these incentives not only make a positive environmental impact but also shower consumers with tangible benefits. It's more than just a transaction – it's a vibrant cycle that celebrates and appreciates individuals which makes the platform stick.
The fintech frontier
So why does the fintech space matter so much here? Well, think about instant payouts, deferred payments, cash advances for regular sellers, and partnerships with
banks for online wallets offering interest on balances.
There are also many clear advantages for the platforms themselves, not least upgrading revenue streams from advertisements to a percentage of transaction volume turbocharges growth.
When we consider all this, we can see how the fintech world has an obvious connection with recommerce opportunities.
But of course, no trend comes without its challenges. Buying from or selling to someone you don’t know throws up a lot of questions which simply might not feature if you’re buying from a traditional high street retailer. As the facilitator of these transactions, we have a job to do in terms of enabling trust and creating a secure environment which reassures all parties.
This is where fraud prevention and customer protection come in. Implementing
Know Your Customer (KYC) and AntiMoney Laundering (AML) controls are critical here. And let's not forget keeping a close eye on items sold to protect customers against online misrepresentation.
What’s next?
Payment orchestration has been the go-to for many e-commerce sites for a while, with recommerce often playing catch-up due to its unique challenges. The good news is that providers are emerging which offer both payment orchestration and compliance capabilities to meet the most stringent of regulations. This means that recommerce platforms can break free from traditional constraints and plot out a route for innovation.
As the recommerce sector continues to boom and shows no signs of slowing down, it’s a really exciting time to be in platform payments.
How AI can unlock the full value of Customer Experience in finance
Contact Centres serve as the face of brands, influencing customer perceptions and impacting organisational reputation. By offering timely assistance and solutions to issues, Contact Centres and their agents play a key role in the customer journey, and have the power to enhance customer satisfaction and build long-term loyalty.
Financial organisations that thrive in this environment set themselves apart by consistently delivering personalised, responsive, and empathetic interactions to customers. These are the organisations that continually enhance their processes and service technology to ensure customers feel valued, agents are well-supported, and brand integrity is maintained at all times. Such efforts can be revolutionary for brands, as research shows us time and time again that organisations focused on customer experience (CX) emerge as leaders in their field.
The value of investing in the customer experience
Delivering exceptional Customer Experience (CX) doesn't just keep customers satisfied, it can also drive revenue growth and foster repeat business. Research by McKinsey shows that when CX leaders take opportunities to continually refine the customer journey and take into account customer feedback, shareholder returns are 35 percent higher than those of their “laggard” counterparts. Indeed, McKinsey also notes that those “leading” organisations achieve double the revenue growth of those classed as “laggards”. Consequently, failure to take onboard customer input or embrace necessary changes can be detrimental to the brand, with the same research finding that for every one customer lost due to bad customer experience, organisations will need to find three new customers to offset the loss.
Financial organisations who see the value of CX understand its use as a primary differentiator against competitors. Research from Contact Babel underscores this, revealing that over half of UK businesses prioritise customer experience above other factors – such as competitive pricing – when competing in the market.
The benefits of CX don’t end with the customer though. Quality CX also plays a pivotal role in boosting employee engagement, with research finding that organisations which excel in CX have 1.5 times more engaged employees than those with subpar CX. This is because engaged employees who are happy will work harder and are more motivated to deliver better service.
Achieving this level of Customer and Agent Experience is not, however, without challenges. Amidst surging customer demands and heightened expectations, Contact Centres are also facing issues
with staff retention and tight budget constraints, none of which shows any sign of abetting as the global economy continues to struggle. This is no different in the world of finance. As such, many organisations are being forced to do ‘more with less’, which is prompting Contact Centres to look to technology to help address the problems. This is where tools, such as automation and AI, are set to play an essential role in the modern Contact Centre.
Do more with AI and automation
As Contact Centres deal with a surge in inbound inquiries but lack the budget or staff to hire more staff, they must explore alternative methods to offer timely assistance to customers. Conversational AI, like voice bots, can provide customers of financial institutions with faster, and more personable responses to simple queries round the clock. By diverting such routine queries to a bot, agents are freed up to spend more time with customers who actually need to speak to a human agent. Indeed, with consumer confidence growing in such tools – boosted by the likes of Alexa and Siri and their natural speech personas – uptake of this technology will only continue to grow.
Beyond this, by alleviating heavy workloads during staff shortages, AI ensures seamless customer support, unaffected by internal changes and help to mitigate the impact of high attrition rates.
But it’s not just about filling in the gaps. AI also goes a long way to enhancing existent human interactions. For example, “Human in the Loop” solutions incorporate real-time AI assistance during human-led calls, suggesting knowledge articles and next-best actions to ensure consistent, regulated responses.
AI can auto-summarise calls, simplifying lengthy interactions into brief paragraphs, provide relevant follow-up actions and automatically score interaction quality based on predetermined 'good scores' from past interactions AI tools, like speech and text analytics, are also pivotal to helping Contact Centres understand customer
interactions better and can reveal insights on sentiment and emerging trends. With this invaluable data, Contact Centre teams can make proactive changes to address customer concerns and foster a culture of continuous improvement and service excellence.
Yet, with the immense potential of AI comes significant risk, especially to brand image, as a couple of well-known brands have recently discovered, hitting the headlines for their chatbots providing customers with offensive or incorrect information. When it comes to the finance industry, organisations must ensure that whatever AI technology they use is deployed by the right partner to work in harmony with human agents and transform the customer experience. Once in place, AI can unlock capacity gains, cost savings, and enable overall improvements in customer satisfaction. Indeed, according to IDC Research, organisations that successfully integrate AI into their CX operations achieve 1.5 times higher NPS scores than those that do not.
Harnessing innovation
The role of Contact Centres in shaping customer experiences in the finance industry cannot be overstated. These are not just service providers but the face of brands, and their actions can make or break a customer’s perception of an organisation. Amidst growing customer vulnerability and expanding market options, it's never been more important to prioritise exceptional experiences at every touchpoint along the customer journey.
As financial organisations increasingly recognise the value of positive experiences, tools like automation and AI are allowing them to elevate CX despite the current cloud of uncertainty surrounding business operations. From providing seamless self-service options, to predictive analytics for anticipating customer needs, these technologies empower Contact Centres to survive and thrive in meeting today's customers' evolving demands.
Steve Murray, Director of CX Solutions, IPI
Automated underground construction gets closer to reality
Two years is an extremely long time in business, let alone a disruptive start-up.
Indeed, a lot has happened since Finance Derivative first covered the hyperTunnel concept, which leverages automation, virtual reality and swarm robotics, among other technologies, back in 2022 (issue 4). At the time, the automated underground construction system was undergoing scaled concept testing and the Basingstoke, UK-based team was about to build the world’s first robot-built tunnel, which it did successfully at its outdoor test facility.
Since then, progress has been rapid with hyperTunnel’s testing and development programme reaching the point where it has completed pre-production testing of its robot fleet. With a project to build an underpass at the Global Centre of Rail Excellence (GCRE) and an agreement signed with AmcoGiffen for the UK rail sector, the company is tantalisingly close to bringing hyperTunnel into the commercial market.
Steve Jordan, CEO and Co-Founder, hyperTunnel
hyperTunnel is developing a radical alternative to the way in which the ground is entered and treated for construction, monitoring and repair – a real change to incumbent techniques such as tunnel boring or drill and blast that will deliver cost, time, safety and sustainability benefits to the industry. Its potential applications extend much further however, to ground stabilisation, resolving water ingress issues and landslides, building cross passages, underpasses and asset monitoring or maintenance.
Harnessing the power of an information rich digital twin, hyperTunnel uses an innovative approach comprising swarm robotics. This allows a ‘work everywhere at the same time’ construction philosophy in contrast to techniques that see slow progress from working in one small area inching slowly forward, and this is the gamechanger in terms of productivity and cost.
The first step of the process involves installing a simple grid of HDPE pipes in the ground. The grid provides access along the entire length of the structure for the swarm of hundreds or thousands of semi-autonomous robots. The robots move throughout the grid and facilitate an additive manufacturing process to build the structure from the grid, somewhat akin to 3D-printing, using the geology to support the build process.
The first level of the technology, called hyperDeploy, improves the geology that is there whilst hyperCast, due for release during 2025, replaces the geology with new material creating the most precise lining that has ever been built.
The processes and activities are managed and monitored by the AI and machine learning-integrated digital twin.
From lab testing to real-world projects
hyperTunnel has put its products through a rigorous testing programme to achieve Technical Readiness Level 8. This means that a technology has been tested and qualified through demonstration and is ready to be implemented into an existing system, while the manufacturing process is stable enough to begin small-scale production.
An initial fleet of 50 modular robots has been run continuously around the clock, through a 12-meter representative grid, at hyperTunnel’s indoor lab in Basingstoke, performing successfully as a swarm on a project simulation.
The simple, expendable robots consist of separate drive, payload, and power components. They perform a range of tasks, including digital surveying using tools such as ground penetrating radar, installing fittings in the HDPE pipe to access the geology, and deploying chemistry. The list of tools is growing all the time, which allows for rehearsals of real-world scenarios.
Here, robots are fitted out with precise payloads per contract specifications, mimicking real client jobs. Their positioning is measured with extreme accuracy down to fractions of a millimetre, allowing the test team to pinpoint whether errors stem from software or hardware issues. This meticulous testing for accuracy and realism is critical to demonstrate on-time delivery performance and build customer trust prior to actual construction.
hyperTunnel is now ramping up our deployment of hyperTunnel into the real world.
Last year, the company got government funding to build a full-scale underpass at the Global Centre of Rail Excellence (GCRE) in South Wales. Meanwhile, in October, it struck its first exclusive distributor agreement (EDA) with AmcoGiffen for maintenance applications of the hyperTunnel technologies and systems in the UK rail sector.
The agreement grants exclusive rights to leverage hyperTunnel technologies for critical underground activities such as enhancing, repairing, rehabilitating and monitoring spaces, as well as stabilising slopes and managing track bed infrastructure water issues.
Commercialisation is the next step of the journey, and these developments bring swarm construction ever closer.
Why CIOs and CFOs must unite to conquer the cybersecurity battlefield
Acompany’s board is the hub of strategic decision-making, responsible for charting the course for the future. To navigate the known and unknowns that lie ahead, a unified and cohesive approach is essential. However, organisational silos continue to pose challenges, particularly between two key players: the Chief Finance Officer (CFO) and the Chief Information Officer (CIO).
CFOs, as the guardians of financial performance, prioritise profitability above all else. On the other hand, CIOs are entrusted with the task of achieving technological objectives to enhance operational efficiency while also deciphering the intricate world of digital security for the board. Historically, these two senior executives have worked side by side, but their engagement has been somewhat limited.
However, the current business environment necessitates a shift towards collaboration. As threats to corporate assets escalate and attack methods grow increasingly sophisticated, CIOs require cutting-edge tools and technology to stay ahead of the curve. This, in turn, demands support from the entire organisation. The challenge arises when the CFO and other board members are not fully aware of the magnitude of the risks involved, leading to potential conflicts and inefficiencies.
Cost centre to strategic enabler
In the past, CFOs often perceived CIOs as a cost centre rather than a revenue generator. With substantial technology budgets, CIOs were seen as a drain on resources that could be better allocated elsewhere. CFOs would often express frustration when CIOs requested yet another piece of technology.
Martin Greenfield, CEO, Quod Orbis.
The crux of the issue lies in the lack of effective communication between the two parties. In the past, cybersecurity was often perceived as a dark art, too complicated for those outside the IT department to comprehend, leading to a disconnect between CIOs and CFOs. CIOs frequently struggled to present a compelling business case for investing in IT security infrastructure in terms that resonated with their financial counterparts.
Conversely, CFOs have traditionally viewed cybersecurity as an operational matter rather than a strategic imperative. They may not fully comprehend how vulnerabilities in the company's digital assets could result in financial losses, intellectual property theft, or damage to customer trust. There is often an underlying assumption that "it won't happen to us" until a breach actually occurs.
However, with the increasing frequency and severity of cyber attacks, the threat is now closer to home than ever before, making it crucial for CFOs to actively engage in cybersecurity discussions. It is becoming increasingly recognised that digital security is not just a cost but an enabler and an investment that delivers tangible business value, even if its benefits are not immediately apparent on a daily basis.
In the wake of a cyber attack, not only is there a significant cost associated with investing in recovery technology, but there is also the potential impact on the brand to consider, which ultimately affects the overall financial health of the organisation.
To mitigate these risks, the CIO should be responsible for developing and executing a comprehensive IT strategy that encompasses both defensive measures. Although the Chief Information Security Officer (CISO) may have a direct line to the board, they typically report to the CIO on a daily basis to ensure seamless coordination and implementation of the organisation's technology initiatives.
It is crucial for the CIO and CISO to drive the strategic conversation and adapt their communication tactics to make cybersecurity relatable to the language of the CFO and easily understandable for the entire board. By changing the rhetoric, they can address how the whole organisation can face these new and evolving challenges together.
The more a company invests in the CIO upfront, the less the financial impact will be in the long run. Automation is a significant driver of improved efficiencies; eliminating manual processes helps increase engagement across teams using shared digital platforms rather than manual spreadsheets and data. The more automation the CIO can implement, the more effective they will be, and from the CFO's perspective, the more the business can get out of every single individual.
Investing in the CIO saves money in the long term – while there may be an initial cost, this is greatly outweighed by the savings and benefits realised over time.
Unleashing the potential of real-time data analytics
To secure complete business buy-in, CIOs must effectively communicate the company's digital health to the board in a language they can comprehend. However, before they can achieve this, CIOs require comprehensive visibility of the entire digital infrastructure. This necessitates working closely with every area of the business to gather the necessary data for real-time analytics.
The challenge lies in the fact that businesses often operate with a patchwork of disparate tools, legacy systems, and a combination of cloud and on-premises solutions, which have long hindered the ability to obtain a clear picture of an organisation's operational resilience. CIOs must collaborate with various departments to identify and catalogue their digital assets, which can help uncover hidden costs and inefficiencies that may be of interest to the CFO.
Traditionally, business tech stacks have been managed in an outdated manner. Companies may acquire 20 products, but they often operate in isolation, failing to communicate with each other in a meaningful way. It is crucial to understand how firewalls relate to network systems, as this level of intelligence, gained through continuous monitoring, is essential for a robust security strategy.
Many regulatory compliance frameworks are now incorporating the need for continuous monitoring to provide businesses with real-time data on their security posture. However, companies must elevate their security strategy beyond mere regulatory compliance; if they are investing in technology, it is imperative to maximise its potential.
Continuous Controls Monitoring (CCM) emerges as a powerful solution to address this need. By seamlessly integrating with various systems and tools across the IT ecosystem, CCM offers a unified view of an organisation's digital health. It breaks down silos and enables real-time analytics, empowering both the CIO and CFO to make informed decisions based on up-todate information.
Real-time analytics, powered by automation, aligns the interests of the CFO and CIO. With immediate access to accurate and current data, both executives can work together to optimise resource allocation, identify areas for improvement, and make strategic decisions that drive business growth while maintaining a strong security posture.
By leveraging the power of realtime data analytics, organisations can bridge the gap between financial and technological decision-making, fostering a culture of collaboration and shared responsibility for the company's digital well-being. The CIO's efforts to work with every area of the business to gather data for realtime analytics can also help the CFO identify hidden costs and optimise spending.
The CFO and CIO have clear objectives: the CFO aims to boost profitability, while the CIO must effectively communicate the state of security to the board, which requires complete visibility over the digital ecosystem. CIOs have had to adapt their communication approach, articulating cyber threats and the role of technology in mitigating risks in a language that resonates with other stakeholders, particularly the CFO. By applying business context to both finance and technology, these previously siloed roles can collaborate effectively, demonstrating that they are two parts of the same whole.
AWARDS WINNERS LIST 2024
Winners Titles
Aafiya TPA Best Health Insurance TPA Service Provider UAE 2024
Alveo Land Most Innovative Real Estate Developer Philippines 2024
Amana Takaful Insurance-SriLanka
Best Takaful Insurance Company Sri Lanka 2024
Arab Financial Services Company-AFS Best Digital Payment Solutions Provider Bahrain 2024
Arab Financial Services Company-AFS-Egypt
AsiaPay
AsiaPay
Best New Digital Payment Solutions Provider Egypt 2024
Best Digital Solutions Provider Singapore 2024
Best Digital Payment Service Provider Hong Kong 2024
AsiaPay Best Digital Payment Service Provider Malaysia 2024
AUCTUS Capital Partners AG
Best Private Equity Firm CEO Germany 2024- Dr. Ingo Krocke
AvaTrade Best Trading Platform Spain 2024
Bank Nizwa Best Islamic Bank Oman 2024
Bank of Industry Best ESG Financial Company Nigeria 2024
Banka Kombetare Tregtare-BKT
Banka Kombetare Tregtare-BKT
Best Digital Bank Kosovo 2024
Best Retail Bank Kosovo 2024
Beltone Holding Best Fixed Income Fund Company (B-Secure) Egypt 2024
Beltone Holding
Bite Investments
Bite Investments
Bualuang Securities Public Company Limited
New Fund Management Product (Sabayek) Egypt 2024
Investment Technology Solution Provider UK 2024
Innovative Alternative Investment Fintech Company UK 2024
Leading Investment Banking Company Thailand 2024
Caye International Bank Best Private Bank Central America 2024
China Asset Management Co., Ltd Best Asset Management Company China 2024
China Asset Management Co., Ltd
China Asset Management Co., Ltd
Best Sustainable Investment Asset Management Company China 2024
Best ETF Manager China 2024
CI Capital Asset Management Best Performing Asset Management Company Egypt 2024
Commercial Bank of Ceylon PLC
Commercial Bank of Ceylon PLC
Best Digital Bank Sri Lanka 2024
Best SME Bank Sri Lanka 2024
Dunav Voluntary Pension Fund Management Company Best Pension Fund Management Company Serbia 2024
Winners
Faraday Venture Partners
Fast Cover Travel Insurance
First Capital Bank Botswana
FOO
Forex Masters
FOREX TIME, (FXTM)
Fosun International Limited
Genero Capital LLC
GIG Insurance Egypt
Hong Leong Financial Group
HPS
IC Markets
Ilani Concepts
Invest Chile
JFD Group Ltd
Joyalukkas Exchange
Jubilee Allianz General Insurance Company of Tanzania Limited
KBC-Asset Management
KCB Group
KCB Group
KdedeC Consultancy and Traınıng Company
Mashreq
Mashreq
Mashreq
M-DAQ Pte Ltd
Metropole Property Strategists
Nedbank-South Africa
NordFX
One Asset Management
PETRONAS Dagangan Berhad
PETRONAS Dagangan Berhad
Principal Asset Management Berhad
Titles
Most Customer Centric Venture Capital Firm Spain 2024
Best Travel Insurance Company Australia 2024
Best Corporate Bank Botswana 2024
Best Fintech Company UAE 2024
Best Forex Training Company South Africa 2024
Best Forex Education Provider Nigeria 2024
Best ESG Company Hong Kong 2024
Best SME Financial Advisors UAE 2024
Best General Insurance Company Egypt 2024
Best IR Company(Financial Holding Company) Malaysia 2024
Best Digital Payment Solution Provider Morocco 2024
Best Forex Broker Seychelles 2024
Best Web Designing Company Kenya 2024
Most Leading Investment Promotion Agency South America 2024
Most Transparent Forex Broker Cyprus 2024
Best Foreign Currency and Remittance Exchange UAE 2024
Best General Insurance Company Tanzania 2024
Best Sustainable Asset Management Company Belgium 2024
Best Banking Group Kenya 2024
Best Internal Communication Campaign Of The Year Kenya 2024- Biashara
Best Aviation Consultancy and Traınıng Company Turkey 2024
Best Retail Bank UAE 2024
Best Bank For ESG & Sustainable Development UAE 2024-Nature Saver Account
Most Innovative Banking Products UAE 2024- Multi Currency Accounts and 1 Click Deposit
Most Innovative FX Solutions Provider Singapore 2024
Best Property Investment and Wealth Strategist Company Australia 2024
Best Digital Bank South Africa 2024
Best Crypto Broker South East Asia 2024
Most Innovative Asset Management Company Thailand 2024
Best IR Team Malaysia 2024
Most Outstanding Energy Solutions Providing Company Malaysia 2024
Best CEO( Asset Management Company) Malaysia 2024-Munirah Khairuddin
Inviting Banks, Companies and Business Leaders to participate in our Annual Awards Program 2024 Submit Your nomination now to awards @financederivative.com
A step-by-step guide to BANKING TRANSFORMATION
Modernising banking infrastructure is both a pressing necessity and a formidable challenge. Despite widespread aspirations among banks to advance digitalisation, a mere 30 percent have managed to effectively implement their digital strategies. This gap highlights that there are challenges and obstacles that come with modernising technology in the banking sector.
Digital transformation challenges
Businesses often face obstacles which usually stem from underestimating the cost and complexity of digital transformation, particularly when they surpass initial budgets and timelines, but also where benefits are not being delivered. Surprisingly, some
banks have yet to establish a dedicated budget for their transformation process, even though approximately one-fifth of their IT budget is allocated to digitalisation. This disparity highlights a potential misalignment between strategic goals and resource allocation within these institutions.
Driven by the need to stay competitive and meet evolving customer demands, financial service enterprises have made substantial investments in their operations over the years. However, the rapid pace of technological advancements has led to the accumulation of unused or outdated technology within these organisations. Despite investing in their operations, many financial institutions struggle to fully leverage their technology assets, resulting in a surplus of underutilised resources.
This excess technology poses significant challenges when it comes to digital transformation initiatives within the banking industry because it represents both a blocker for change as well as a run cost to be met. This does lead to banks having to make difficult decisions between allocation of budgets between ‘run the bank’ and ‘change the bank’. In turn, this can hold back growth and efficiency initiatives. It also blocks the steps which need to be taken to effectively modernise financial services institutions, especially in areas like differentiating on customer service delivery.
A
step-by-step guide to transform banking operations
1. Spot the gaps
To ensure the success of technology modernisation efforts, banks should first conduct comprehensive audits of their current operations to identify gaps in technology that hold back the attainment of service standards and efficiency goals.
This assessment should encompass both a front to back view of systems evaluating their connectivity and interaction to pinpoint areas requiring improvement. With a clear understanding of these deficiencies, banks can then establish transformation goals and devise strategic plans tailored to address their specific needs, laying the foundation for a successful modernisation process.
2. Shake up the mindset
In addition to addressing technological shortcomings, banks must also evaluate the cultural dynamics within their operations, recognising that effective modernisation often entails reshaping organisational thinking and structures.
Despite the skill level of individual employees, breakdowns in internal communication and patterns stemming from structural and business process design can hinder overall success. Organisation structures need to be supported by the technical systems aligned to them.
To mitigate these challenges, financial service institutions must foster a culture of internal collaboration that emphasises the integration of technology, data, and customer-centric approaches to deliver operational excellence.
3. Seize on AI to do much more
Take advantage of the opportunity to harness the potential of creating an autonomous enterprise by utilising the capabilities of modern technology. One way to do this can be by integrating sophisticated artificial intelligence (AI) algorithms and automation mechanisms throughout every aspect of your business operations.
This integration will enable enterprises to quickly adjust to evolving circumstances while simultaneously and autonomously optimising its processes. However, it is essential to note that human oversight remains crucial, especially for managing the most complex cases, even as automation becomes more prevalent.
4. Be savvy on impact of regulations
As banking technology continues to advance, it is imperative for financial institutions to stay up to date with how the regulatory landscape is changing. In particular, as we progress through 2024, banks must prepare for how the EU AI Act will affect how they use AI to serve customers and run sensitive parts of their operations as it has become law. There are also significant national laws
like the UK’s Consumer Duty regulation that must be considered. When embracing technological advancements, banks must also ensure compliance with regulatory standards to maintain trust and integrity in the industry.
Rethinking digital transformation
At the core of every digital strategy within the financial services sector has to be a thorough understanding of the business case driving the transformation. To kickstart this process, institutions need to pose critical questions aimed at determining the necessity and rationale behind embarking on such a transformative journey.
These inquiries should cover several key areas, including an initial assessment of the current technology's effectiveness in meeting both business and customer requirements. This involves identifying any gaps in the technology infrastructure and developing strategies to address them. They also include evaluating the institution's alignment with advancements in banking technology and gauging its resilience and agility in facing future challenges. Financial institutions can only fully understand the driving force behind their transformation efforts by addressing these fundamental factors.
Steve Morgan, Global Banking Industry Market Lead at Pegasystems
Dealing with the demands of DORA
The International Monetary Fund (IMF) described the financial sector as uniquely exposed to cyber risk due to the sensitive data and transactions it handles as well as the fact it poses the ideal target to create economic disruption. But the IMF also describe the cybersecurity frameworks these institutions use as ‘insufficient’ and points out the need to strengthen resilience. As a result, the introduction of the Digital Operational Resilience Act (DORA), a subset of the Digital Finance Package, should come as no surprise.
DORA is a landmark standard in that it is the first time that the sector has been mandated to document its ICT risks. It’s likely to be disruptive at first but it will also harmonise rules relating to operational resilience within the financial sector and ICT third party service providers. It will also see 22,000 entities ranging from banks to insurance providers and investment companies and also third-party providers of ICT services brought into scope. All of these entities will need to meet new risk management, testing and reporting requirements for their ICT systems by 17 January 2025. So where should they look to begin?
Getting to grips with DORA
To start with, it’s worth stressing compliance is not a tick-box exercise. The regulations are very much geared towards creating a culture of ongoing improvement and mirror the priorities outlined by the IMF which called for
better identification of risk, moves towards achieving cyber maturity, improved cyber hygiene, the sharing of cyber threat intelligence and operational resilience.
DORA has five pillars: ICT risk management, incident classification and reporting, digital operational resilience testing, ICT third party risk management (TPRM), and ICT third-party critical oversight. These are not linear, but they are interdependent and to some degree inform one another. This means there is an element of flexibility in terms of how organisations implement the requirements.
Current levels of fragmentation in terms of how entities handle ICT risk management, reporting, resilience testing and third-party management mean the steps that need to be taken to achieve compliance will differ on a case-by-case basis. Many ICT service providers, for instance, already observe UK Operational Resilience, TPRM and Technology Risk Remediation and they’ll be keen to avoid any duplication of effort and leverage any synergies. Conducting a gap analysis is therefore a must to identify any overlapping areas. This can then be used to form the basis of a compliance roadmap which identifies how DORA can be integrated into the existing risk management and reporting processes.
In addition to the risk management framework, entities must also have in place incident response processes, seek to test their systems on a regular basis by
conducting vulnerability scanning and scenario-based assessments annually and red team-type penetration tests every three years, map out third-party risks and are compelled to share threat intelligence. The testing element is very similar to the TIBER-EU framework which should again allow entities to achieve some simplification if they already comply with this.
Reporting obligations
Incident reporting will depend on whether the breach is a ‘major incident’ in which it must be reported to the relevant national authorities or a ‘significant cyber threat’. Malicious unauthorised data loss will automatically count as a major incident but meeting two other impacts from the list can also qualify the incident as major i.e. if it impacts transactions, the entity’s reputation, causes downtime, has geographical reach, data loss or economic impact, although each has its own criteria. An entity may voluntarily choose to disclose a ‘significant’ cyber threat.
In reality, banks and financial service providers will already be meeting many of these requirements although those for TPRM and third-party critical oversight could introduce more demanding processes and are likely to involve the renegotiation of contracts. Those who may
find the regulations the most onerous are ICT providers who will now need to put in place procedures to meet the requirements of each of the five pillars. They’ll have to identify, monitor and manage the risks presented to their ICT systems, ensure mechanisms are in place to detect suspicious activity, have detailed business continuity/ disaster recovery policies in place which are tested annually, and processes to allow for continued improvement.
Yet while meeting the requirements under the five pillars may prove time-consuming and potentially challenging, there’s little doubt it will be a worthwhile practice. DORA promises to create an effective baseline that will improve ICT security, data safeguarding and the sharing of intelligence all of which will boost resilience in one of the most heavily targeted sectors.
David Adams, Security Consultant, Prism Infosec.
Boosting Cyber Security Resilience For Financial Services
Our recent research, which surveyed over 500 CISOs and cyber security decision makers across industries on the performance of their current cyber defences, found that 44% of Financial Services firms say their cyber security providers are underperforming. In fact, the Financial Services sector came out on top as one of the most underperforming sectors when compared to other industries such as Healthcare, Professional Services and Manufacturing.
Considering the Financial Services sector deals with personal client information every single day, the industry will always be susceptible to cyber attacks. The events of last year in the hacking
and ransomware attack on ICBC, one of China’s largest banks, provides clear evidence around the vulnerability of financial systems all over the world. For innovative financial firms that use technology such as online banking, apps, and electronic trading systems, the need to develop a strong relationship with providers is essential to ensure complete cyber resilience for the future.
Spporting CISOs and under-resourced teams
The current landscape for the Financial Services sector is stark, with the survey revealing that 77% of organisations have experienced a cyber attack. More worryingly, only 26% of CISOs and cyber
security decision-makers across the sector say their organisation’s capabilities and defences are resilient.
One of the biggest challenges facing CISOs is overstretched teams with lack of capacity to handle cyber threats, leading to burn out and fatigue. This was one of the contributing factors why organisations are choosing cyber security suppliers, with 46% selecting speed as a key consideration due to the rapid response approach needed to address incoming cyber threats.
Another common problem organisations face is the accuracy of their providers, as 28% say that their current suppliers are escalating too many false positives. As
a result, the Financial Services sector is losing confidence in supplier implementation with 33% announcing they do not feel confident with the current cyber security operations to respond to alerts within 30-minutes.
The underperforming criteria of cyber security providers
The key to success for providers is mitigating any risks by using tactics such as threat intelligence to not only interrupt attackers through Attack Disruption methodology prior to an attack but preempt incoming attacks by utilising a proactive rather than reactive approach to cyber defence. But according to survey respondents that fully outsource their cyber security operations, 42% feel their current threat intelligence is having no measurable positive impact and 7% say the solution has not even been implemented.
Response from the sector proves organisations are looking for much more from their suppliers. Transparent pricing and clear fees with no hidden charges are important factors for decision makers (44%) as well as access to real-time visibility of reporting dashboards (37%) to summarise any attacks and provide an overview of security across the entire organisation. Learning from the recent attack on ICBC, hackers often target financial organisations to not only steal funds but also gather mountains of highly sensitive data to initiate further attacks. This shows the growing need to have live regular information on potential attacks to stop them at the point of entry before it’s too late.
The long-term future of cyber security contracts
Another big problem Financial Service organisations face is being tied down to long-term contracts. While there are some benefits such as allowing for predictable costs, these are far outweighed by the downsides which include not being able to adapt to the changing and ever evolving cyber defence needs of businesses. This lack of flexibility can lead to expensive bolt on services to address these challenges, restricting agility due to the long process of onboarding.
In the face of rapidly evolving cyber threats, teams need to implement proactive measures, fast. Despite disappointment in the performance of their providers, 67% of Financial Services organisations that outsource say they would be happy to relinquish more control in return for quicker decisions, with others requesting faster response times and less reliance on in-house skills. This suggests that providers should integrate more closely with in-house teams to develop a cyber defence strategy that will allow them to keep pace with the evolving landscape.
For the Financial Services sector, flexibility will play a fundamental role in organisations’ cyber defences in 2024. Longterm fixed contract terms with no strategy will cause
businesses to become increasingly vulnerable as threat tactics evolve. Without this structure and versatility in place, the Financial Services sector will be open to attack, not only posing a growing risk to the organisation itself but also the personal information of service users and wider customers.
Dominic Carroll, Director of Portfolio, e2e-assure.
The Future of Money:
How CBDCs Could Transform Banking and User Experience
- Jorge Lesmes
Jorge Lesmes, Senior Director, Client Partner, Growth, Banking & Capital Markets, NTT DATA UK&I
Central Bank Digital Currencies (CBDCs) offer a unique opportunity to redefine finance, especially when it comes to user experience and accessibility. While technology continues to work its way further into day-to-day financial operations, capturing the attention of consumers and shareholders alike, we must not overlook the potential of CBDCs to revolutionise finance and change the way we interact with money.
The European Central Bank (ECB) recently announced that it is beginning trials using Distributed Ledger Technology (DLT) for transactions in central banking, which is a major step forward in exploring and understanding how digital currencies can reshape the financial systems we are accustomed to. The ECB’s trials aim to explore how DLT can facilitate security settlements and cross-border payments, highlighting the potential of CBDCs to enhance efficiency and security across all financial transactions.
DLT offers promising solutions for integrating digital currencies into established financial systems. However, we have an important decision to make. During integration, should we build CBDCs on DLT/ blockchain technology or traditional relational databases? This choice could significantly impact how CBDCs are folded into existing systems and their effectiveness across various financial applications.
Unlike decentralised cryptocurrencies such as Bitcoin or Ethereum, CBDCs are digital representations of a nation’s fiat currency. Backed by the government, CBDCs are a more reliable and stable form of currency for everyday transactions. Understanding the difference between CBDCs and decentralised
cryptocurrencies is a key part of increasing public awareness. Better understanding around how digital currencies could change our engagement and relationship with money, and impact financial accessibility, is necessary.
One of the biggest challenges for financial institutions is how to integrate digital currency systems with traditional payment infrastructures. Effective integration might require leveraging the capabilities of Distributed Ledger Technologies (DLTs) to facilitate efficient and secure transactions. A key concern in digital currency implementation is how central banks will manage and issue digital wallets for public use, meaning central banks must decide whether to directly handle Central Bank Digital Currency (CBDC) wallets or rely on regulated third parties. Efficient wallet management is crucial for widespread adoption and user confidence, as it directly impacts financial accessibility.
Additionally, robust regulatory frameworks are essential to address privacy and security concerns in CBDCs. Building resilient and secure frameworks helps to balance innovation with consumer protection— avoiding issues seen with decentralised
cryptocurrencies. Privacy-enhancing methods can bolster data protection and ensure regulatory compliance, fostering responsible CBDC usage and creating a trustworthy environment where digital currencies operate seamlessly alongside traditional financial systems.
Public perception and education are equally important, if not more so, than addressing technical concerns. Transparent communication about the benefits and limitations of digital currencies is necessary to demystify the technology for the public, potentially alleviating concerns in the process.
CBDCs have the potential to transform the financial landscape. Two factors will determine their success and ease of use for the end user: integrating technological advancements and focusing on consumer-centric operations. The integration of digital currencies into traditional financial systems offers opportunities to enhance financial transactions and improve user experiences. However, this success requires close collaboration between policymakers, financial institutions, and the public to enable responsible innovation and adoption. CBDCs have the potential to define the future of money, they just need the right support to be successful.
ESG and the importance of ‘Digital Hospitality’ for wealth management “
Business travel accounts for 3-4% of all carbon emissions, but face-to-face (F2F) meetings remain the gold standard of client interactions, especially in high-value industries like financial services. Dinners and golf are still a vital part of many financial services companies’ outreach and it is very unlikely that they will be replaced by digital alternatives.
Despite the advent of digital hospitality, traditional client engagement methods such as dinners and golf outings persist as pillars of relationship-building. However, the convergence of environmental, social, and governance (ESG) principles with technological innovation presents a compelling opportunity for financial institutions (FIs) to reconcile these seemingly conflicting priorities".
Reimagining Hospitality in a Digital Age
Digital hospitality has emerged as a strategic imperative for companies seeking to align their operational practices with sustainability goals. While face-to-face meetings undoubtedly hold sway, the integration of digital solutions offers a pathway to reduce carbon emissions without
sacrificing the essence of personalised service. By leveraging virtual platforms, FIs can curate immersive digital experiences that transcend geographical barriers, fostering meaningful connections while minimising environmental impact.
Digital hospitality encompasses a spectrum of innovative approaches, ranging from virtual events and webinars to interactive online workshops. These platforms not only facilitate engagement but also afford greater accessibility and inclusivity, enabling broader participation from diverse stakeholders. Moreover, digital channels enable real-time data analytics, empowering companies to glean actionable insights into client preferences and behaviour, thereby enhancing the efficacy of their outreach efforts.
Enhancing ESG Credentials through Digital Hospitality
ESG is far more than ‘greenwashing’ or performative philanthropy. The ESG framework was developed specifically to hold companies to real standards that make a measurable difference in the world, covering everything from a company’s carbon emissions to whether their supply chain involves slavery. It has been demonstrated that this is an important factor in consumer behaviour: a report by McKinsey shows that “products making ESG-related claims accounted for 56 percent of all growth”.
- Matt Ryan
However, embracing digital hospitality is not merely a matter of environmental stewardship; it also serves as a cornerstone of comprehensive ESG strategies. By implementing technology-enabled solutions, financial institutions can demonstrate their commitment to environmental responsibility while simultaneously delivering value to clients. Integrating digital hospitality into ESG frameworks underscores a company's dedication to sustainability, bolstering its reputation as a socially conscious organisation.
Furthermore, digital platforms offer unprecedented opportunities for transparency and accountability, enabling stakeholders to track and evaluate the environmental impact of business operations in real-time. By providing visibility into carbon emissions associated with travel and events, companies can proactively identify areas for optimisation and implement targeted mitigation measures. This proactive approach not only mitigates environmental risk but also enhances operational efficiency, yielding tangible cost savings over the long term.
Moreover, digital hospitality aligns seamlessly with broader ESG objectives beyond environmental sustainability. By embracing virtual platforms, companies can promote social inclusivity and diversity, ensuring that client engagement initiatives are accessible to individuals from all backgrounds. Virtual events democratise participation, transcending geographical barriers and empowering stakeholders to
About the author:
contribute irrespective of physical location. This commitment to inclusivity not only fosters stronger client relationships but also enhances the company's reputation as a socially responsible entity.
Digital hospitality as a linchpin of ESG strategy
In the dynamic landscape of financial services, the imperative to balance client engagement with environmental responsibility has never been more pressing. Digital hospitality offers a compelling solution, enabling companies to reimagine traditional client interactions through innovative digital platforms. By embracing technology-enabled solutions, financial institutions can navigate the tension between face-to-face engagement and sustainability imperatives, delivering value to clients while minimising environmental impact.
Moreover, digital hospitality serves as a linchpin of comprehensive ESG strategies, enhancing an FI’s credentials across environmental, social, and governance dimensions. By leveraging virtual platforms, FIs can demonstrate their commitment to sustainability, transparency, and inclusivity, thereby bolstering stakeholder trust and long-term resilience. As the financial services industry continues to evolve, embracing digital hospitality will be essential not only for mitigating environmental risk but also for driving innovation and fostering sustainable growth in a rapidly changing world.
Matt Ryan is Chief Transformation Officer at Reef, Powered by Totem. Matt has more than 15 years of experience working with and alongside world famous brands to deliver transformation at every level. After a highly successful exit as an entrepreneur, he has since set about elevating companies ranging from long-standing NASDAQ behemoths to exciting start and scale-up businesses. His industry-agnostic success is founded on a demonstrable and innate ability to identify and understand a marketplace and its customers, often in very different and nuanced ways. This results in a strategy, a construct and a narrative that consistently deliver unprecedented results".
Strategies to support SMEs as the economy recovers
By Warren Mead, CEO, Sumer
It appears 2024 may not be the doom-andgloom year some economists expected. UK inflation fell to 2.3% in April, and interest rate cuts have been making headlines.
Despite challenges like increases in the minimum wage and political uncertainty, there's plenty for SMEs to feel positive about. Reduced concerns about supply chain disruption, a less constrained labour market, and controlled inflation are all great news for sectors dominated by SMEs, such as building firms, pubs, manufacturers, restaurants, and farmers.
Here are my top five tips on how accountants can help firms make the best of the rejuvenating economic landscape in the months ahead.
1. Planning for growth
The primary role of any good accountant is to be a critical friend. Accountants should be using current or live data (and experience) to advise clients on their growth strategy. It’s not enough to simply shine a light on historic levels of sales and margins.
Whether it is locking in prices for key materials, forecasting recruitment requirements, moving into new locations or markets, or determining the optimal
level of pricing, real-time data is essential for decision-making. Accountants are key not only to this information being delivered and accurate but also assisting often lonely entrepreneurs to translate it into action.
2. Driving efficiency
It might not be the most exciting part of running a business, but efficient processes are the bedrock of all successful enterprises. For example, in service industries, such as hospitality, mapping staffing requirements to customer demand is essential. A good accountant can set out key performance indicators tailored to the industry – in this case revenue per hour of staff time. This could shine a light on optimal shift patterns.
3. Making the most of tax changes
With the corporation tax rate increase to 25% from April 2023, accountants should help SME clients plan for cash flow impacts and maximize available reliefs. Full expensing for capital expenditure and the £1m Annual Investment Allowance can benefit smaller businesses. Other areas to consider include pensions in property ownership and R&D tax credits. Early engagement with an accountant can significantly reduce investment costs, as little can be done post-investment.
4. Managing cashflow
Accountants can and should play an active role in helping clients to manage their cashflows. For smaller businesses, even a small reduction in debtor days can make a substantial difference – providing the cashflow to support growth. Helping clients work through their cash management processes is a good starting point.
Even simple ideas – service businesses, such as dentists, might take part payment on booking an appointment, helping clients to set up direct debit schemes, or moving to daily invoicing, can be a massive help. Cashflow is perhaps the most important business process there is – accountants should ensure clients give it the attention it requires and even consider outsourcing their credit control.
5. Funding for growth
Finding growth funding remains a challenge for smaller businesses. High-street banks can be daunting without support. Lenders need high-quality management information, including profitability and cash flow forecasts. Good accountants can explain key metrics like EBITDA and debt covenants. Great accountants have in-house specialists and networks to access various funding solutions at lower costs or preferential terms.
As an alternative, The British Business Bank, which is the government’s economic development agency, has now released a new £1.6 billion round of debt and equity funding for businesses based outside London and the southeast.
Meanwhile, the Growth Guarantee Scheme - a government initiative designed to help businesses affected by the Covid-19 pandemic to secure financial support from banks and other lenders - has been extended until the end of March 2026. Getting solid advice and financial projections from their accountants, UK businesses are in a strong position to benefit from both these schemes.
Things can only get better…
As small businesses grow and succeed, they create a ripple effect throughout the national economy, generating additional employment opportunities, increasing consumer spending, and fostering a positive business environment for all stakeholders.
As Writer Nicole Snow said, "A small business is an amazing way to serve and leave an impact on the world you live in." The economic influence of SMEs is amplified when supported by skilled accountants.
GenAI: How Compliance Can Benefit
- Gabe Hopkins, Chief Product Officer, Ripjar
Reducing Concerns
Generative AI (GenAI) uses complicated algorithms to produce content such as text, images, videos and music. Moreover, the technology can perform tasks and process data to make arduous jobs more manageable and improve operational efficiency. For many industries, this is a gamechanger, saving valuable time and money.
Regarding new technologies, the compliance sector has traditionally been hesitant to act, taking longer to procure and implement anything new due to enhanced caution about perceived risks. Many compliance teams will not be using any AI, never mind GenAI. However, this hesitancy means that these teams are missing out on major potential advantages that other less risk-averse industries are enjoying.
Therefore, compliance teams must look to leverage all AI –and specifically GenAI – in safe, tested ways, without introducing unnecessary risk "
Because GenAI is a new and rapidly developing technology, many compliance teams have some reservations around it’s safe application. These teams will be particularly worried about sharing data which might then be used as part of training and become embedded within future models. In addition, most organisations would be unlikely to share data across the internet without very strict privacy and security measures.
Additionally, governance teams will worry about the black box nature of models, which also casts a spotlight on the potential for systems to embed biases towards specific groups. These are hard to detect and can impact outputs.
Thankfully, GenAI can tackle all of these concerns. From selecting the right models to provide the required security and privacy, to fine tuning those models within a strong statistical framework to mitigate against bias. Organisations will need to find the right resources – whether it’s data scientists or qualified vendors – to support them in that work, which may also prove challenging.
Potential Wins
Following initial hesitancy, analysts and other compliance professionals stand to gain massively from implementing GenAI. For example, teams in regulated industries such as banks, fintechs and large corporations, have to bear
huge workloads alongside resource constraints. Depending on the industry, teams may be responsible for identifying a range of risks – including sanctioned individuals and entities, adjusting to new regulatory requirements and managing huge quantities of data – or a combination of all three.
For those working in compliance, the task of reviewing huge quantities of potential matches can be incredibly monotonous and prone to error. This presents major risks. If teams make mistakes and miss these risks, the potential impact for their firms can be significant – both in terms of financial penalties and reputation. It’s not surprising that organisations can struggle to hire and retain staff, leading to a serious skills shortage among compliance professionals.
So how can businesses tackle the issues of false positives and false negatives associated with modern customer and counter-party screening? GenAI may hold some of the answers.
False positives occur when systems or teams incorrectly flag risks, while false negatives are when risks are missed that should be flagged. These mistakes may come from human error and inaccurate systems, but they are hugely exacerbated by challenges such as name matching, risk identification and quantification. All these errors can be mitigated with the right implementation of AI tools including GenAI.
The Need for GenAI
GenAI can be implemented in many useful ways to improve compliance processes. The most obvious is in Suspicious Activity Report (SAR) narrative commentary. Compliance analysts must write a summary of why a specific transaction or set of transactions is deemed suitable in an SAR. Well before the arrival of large language models, innovative compliance teams have been using technology to semi-automate the writing of narratives. It is a task that newer models excel at, particularly with human oversight.
Producing summarised data can also be useful when it comes to tasks like Politically Exposed Persons (PEP) or Adverse Media screening. These processes involve conducting reviews or
research on a client to check for potential negative news and data sources. These types of screenings enable companies to identify potential issues and prevent them from becoming implicated or face reputational damage as a consequence.
If deployed effectively, summary technology can allow analysts to review match information more effectively and efficiently. With any AI deployment, compliance teams must consider which tool is right for which activity. Combining GenAI with other machine learning and AI techniques can provide a real step change. This involves blending generalised and deductive capabilities from GenAI with highly measurable and explainable results available in well-known machine learning models.
As an example, traditional AI can create profiles, differentiating large quantities of organisations and individuals separating out distinct identities. The techniques move past the historical hit and miss where analysts carry out manual searches limiting results by arbitrary numeric limits. Once these profiles are available, GenAI makes analyst roles more effective and accurate.
Using the latest innovations, GenAI powered virtual analysts can achieve human accuracy or better across a range of different measures. While concerns may slow adoption, future compliance teams will likely benefit greatly from these breakthroughs. These will enable significant improvements in speed, effectiveness and the ability to react to new threats and requirements.
