Finance Digest_Issue 3

DIGEST BANKING BNP PARIBAS A CSR STRATEGY IN LINE WITH THE SDGS

BUSINESS FUTURE-PROOF YOUR DATA STRATEGY

FINANCE CASHLESS SOCIETY: MOBILISING MILLENNIALS TO PAVE THE WAY INVESTMENT IS YOUR BUSINESS PRIMED FOR ACQUISITION & INVESTMENT BASED GROWTH?

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FROM THE EDITOR

I am ineffably elated and abundantly pleased to cruise you the Third Edition of Finance Digest. In this issue, we acquaint you with the new and eclectic perspective coming from authors with rich experience which would keep you riveted & captivated. We hope you would fi nd it an array of good mix of opinions and information just not only from fi nance, but also the power of data, the bitcoin bubble, hidden costs of cloud computing, cashless society and fi nancial crisis which led to crowd-funding. Find out here what exactly does digital transformation mean and how can it enable businesses to reimagine their fi nance function. BNP Paribas discusses with Finance Digest their top priorities in 2017, which is to contribute to attaining the Sustainable Development Goals (â&#x20AC;&#x153;SDGsâ&#x20AC;?). Also as part of its long-standing commitment to help combat climate change, BNP Paribas has committed to becoming carbon neutral by the end of 2017 in terms of CO2 emissions arising from its own operations, being therefore one of the fi rst banks worldwide to do so and strengthening its position as one of the European banks making the most effective contribution to attaining the COP21 climate goals. Across several sectors, businesses are facing new challenges to continue increasing their revenue and deliver greater profi tability for shareholders. The rise and access to new technology is making a great impact, and with the use of business intelligence, data is playing a larger role across sales and marketing departments. Finance digest keeps you updated with the importance of the modern payment experience in Business success. We hope that through our magazine we keep you updated about the latest in the ever evolving fi nance industry and the various sprinting economies around the globe and with latest contributions on the website as well. Happy reading!!!

Anchal Gupta

CEO and Publisher M. Murphy Editor Anchal Gupta anchal@financedigest.com Head of Distribution Mayha Das Project Manager Sean Dias Business Analyst Sofia Rego Graphic Designer S M Ramesh Advertising Sean Dias Email: sean@financedigest.com Phone: +44 2088580616 Admin Murali Ram Contact Address Three Six And Nine Limited 15 Bunhill Row London, EC1Y 8LP info@financedigest.com, news@financedigest.com Company Registration Number 09713797 V.A.T.: GB 237 9358 69 ISSN: 2514-6971 Printed in the UK by The Magazine Printing Company

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BANKING 16

Why data is the most important commodity for banks

How Accurate Data Capture Can Enhance the Customer Experience

Retail banking’s revival: The state of customer satisfaction in the UK

What does it take for banks to become truly digital-first?

A CSR strategy in line with the SDGs

How banks can compete in the fintech arena

The next hurdle for banks will be adapting marketing to the digital revolution

A lack of fee transparency is holding back banks in the money transfer market

INSURANCE 46

Demystifying blockchain – unlocking the opportunity for insurers

Tackling regulations and compliance in an uncertain world

Calling a halt to the insurance industry’s race to the bottom Insurance

All change - how data is revolutionising the insurance sector

The unforeseen consequences of IFRS 17

How AI is Transforming the Insurance Industry

BUSINESS 8

Delivering the Deal

Making time for success: The advantages of outsourcing online payments for businesses

Why getting to grips with data is the first stop on the journey to AI for SMBs

Future-proof your data strategy

PSD2 : Three Stages for Fighting Fraud

The Importance of the Modern Payment Experience on Business Success

Powering a Spread Betting Infrastructure

The benefits of outsourced communications

TECHNOLOGY 42

A delicate balancing act: how to digitalise your customer service

Four ways to convert today’s distracted consumer

The hidden costs of cloud computing

Legacy ITSM Systems Ill-Equipped to Empower Enterprises in Digital Economy

The future of work: technology’s role in liberating people from the most alienating aspects of work

INVESTMENT 14

Is your business primed for acquisition and investment based growth

Speculating on the Bitcoin bubble won’t make you a skilled investor

What are investor syndicates and how can they work for you

FINANCE 10

Unlocking the Power of Data Why Finance Holds the Key

MiFID II: Options for firms looking to guarantee compliance

Why travel companies are struggling with cross-border payments

10 years on Why the financial crisis led to the rise of crowdfunding

Too big, too fast? How expanding your finance team can come back to haunt you

Engaging with Financial Services

What digital transformation means for finance

teams

CFO’s are out of touch with Future Finance

How global commodity markets are using the cloud to increase connectivity

4 Tech Hacks to Faster Customer Onboarding in the Banking & Finance Industry

How can financial services firms manage the growing issue of human risk?

Cashless society: mobilising millennials to pave the way

Protecting digital property and reputation with a ‘single source of truth’

Late payments, and the challenges facing financing and accounting teams

BUSINESS

he finance director in a private equity-owned business plays a unique role, shouldering responsibilities far broader than peers working in a typical corporate setting. The FD is a partner to the chief executive in delivering the growth plan, and equally accountable. In addition to the strong financial skills always 8

expected of the role, an FD needs to show leadership, be decisive, and grasp the challenge of working at a fast pace as management executes a number of growth initiatives. It is a high profile, hands on role. Finding the right talent is critical to the success of any investment.

BUSINESS

More than just the numbers While as investors our role in appointing an FD is limited, we have found that the most effective hires are individuals with whom we can build a relationship. They understand what we are trying to achieve and our goals align. Any FD considering a role within a portfolio business must be committed to the growth strategy. The implementation of the growth plan can be extremely demanding on your time and energy. The FD is expected not only to oversee finance functions, such as cash flow and budgeting, but business-wide initiatives that enable growth, for example successfully executing a buy and build strategy and the efficient integration of add-on investments in pursuit of synergies. A good FD needs an eye for detail, as well as the bigger picture. Demands on an FD’s skillset will rise as the business grows. Any FD working in a private equity-backed business needs to continuously acquire competencies that will support the business as it moves along its growth trajectory. Build a team Although an FD within a portfolio company is required to work independently, often without a large department to delegate to, transforming a business is a team effort. Ideally, the skills and experience of the FD and CEO complement each other and not just in finance but in operations too. That peer relationship is critical to the success of the deal and requires mutual confidence. When recruiting a finance team, picking the right talent to support you and incentivising hires appropriately is vital, as is defining targets and KPIs upfront. Like the FD, the team needs to understand the demands and rewards of the private equity journey. A strong financial controller plays a key role in the team, and making the right hire is critical. The goal should be to establish robust processes and controls that could function without you, if necessary.

and have answers ready. It is a leadership role that requires you to interact with the business at large, both internally and externally, and not only when things are going smoothly. Be ready Unlike most other businesses, a portfolio company is always potentially up for sale. Its books, processes and controls must always be ready for scrutiny. As one FD told us, part of his job is to “make sure everything is tidy”. This may require, for instance, preparing accounts in a dual format for the UK and US if the ultimate buyer is expected to be a US-based entity. This can save time in the long run and increases the confidence of a US buyer in the information provided. As investors, one of our goals is always to professionalise the organisation of a portfolio company, including processes, roles and functions. Ensuring the business meets industry best practice and is compliant with current regulations is central to its evolution. The FD plays a key role in enforcing proper governance. The consequences of failing to meet standards, including loss of market position and reputational damage, will undercut value creation. Conversely, by instilling solid governance, the FD assists growth, for instance by securing financing on more favourable terms. Effective compliance procedures are inevitably reflected in the valuation of a business. Rewards of the role The financial rewards of working in a private equity-backed business are high. However, in our experience, the most effective FDs are always more motivated by the challenge and excitement of growing a business. Ultimately the FD is the guardian of the integrity of the deal. He or she is a central figure in creating value, with an impact on both profits and the business’ ultimate valuation

Confront issues The path to value creation is almost never a straight line and FDs need to be effective problem solvers. Being able to stick to the growth plan engenders confidence, but inevitably challenges arise. Effective FDs do not wait to flag issues or delays, or worse, hide them. They are upfront and have the courage to admit early on that something is not working. They communicate consistently with shareholders and the board and are able to revise plans to get back on track. The best FDs have read everything, are informed

Dan Adler Partner Lyceum Capital

FINANCE

Unlocking the Power of Data Why Finance Holds the Key

very company is on a hunt to rapidly access, integrate and analyse enterprise data to inform optimal decision-making. Unfortunately, this quest is often hindered by technology systems and applications that don’t “speak” to each other. CFOs are well acquainted with this dilemma. The old adage that Finance personnel spend 90 percent of their time acquiring, cleaning up, validating and verifying data—and 10 percent analysing it—still holds true in many organisations. This sorry state of affairs can no longer be tolerated, not at a time when digital data is approaching colossal proportions. Forty trillion gigabytes of

data will be produced by 20201. To put this in perspective, the volume equals all the grains of sand on all the beaches on the planet times 57. Yet in their strategic planning and for their tactical business decisions, companies are leveraging a comparatively trifling volume of this data.

There are proven methods for companies to radically alter the status quo, but it requires someone in the organisation to lead the charge. That someone is the CFO, given our fiduciary obligation to assist the CEO, board of directors, shareholders, and other stakeholders in identifying business opportunities and averting business risks.

Most companies expect their CFOs to be a business partner to the rest of the organisation, not just cutting cheques for lines of business to acquire technology tools but ensuring all these tools are connected to generate a fluid flow of information driving business momentum. The challenge is the extraordinary upsurge in cloud-based business applications for sales, HR, customer service, spend management, subscription billing, quote and order management, and ERP systems. Visually, these dozens of applications resemble a bar chart—a series of siloes disconnected from each other. Out of the box, they promise a modicum of integration, but the truth is their endpoints behave differently. Consequently, IT

FINANCE specialists have to manually upload and download data from one application into another, a wearying process that consumes substantial time that can be dedicated to more value-added tasks. A recent survey2 of CFOs highlights the dilemma. The study affi rms that CFOs are eager to dedicate more of their time to more strategic pursuits, but are thwarted in this mission by data integration diffi culties. Six in ten CFOs cited data integration as the “primary technology hurdle” standing in the way of “gaining actionable information,” necessitating “manual data aggregation that eats up time and leads to inaccuracies,” the report stated. Obviously, not a position any CFO would want the business to confront. What we in Finance (and others up and down the value chain in the enterprise) want is the ability to instantly access, integrate and analyse business data. CFOs yearn to do much more than validate, verify, and report the numbers. We want to partner with our lines of business colleagues and with IT to leverage data at the point of attack. To do this, technology systems and applications need to speak to each other.

The old model of Finance pulling together a couple of databases of information based on a perceived business need, and then formally requesting that IT integrate the data and develop algorithms to provide the business import must be jettisoned. It just takes too long. Instant answers to database queries are required to stay in front of today’s furious pace of business. As integration technologies advance, CFOs have the ability to quickly and seamlessly change applications or create advanced datasets on the fl y, turning data siloes into a connected storehouse of powerful information. Otherwise it’s waiting for Godot, an interminable search with no end in sight. Companies can end the wait by canvassing today’s modern data integration technology solutions. Yesterday’s tools were often complex, immature, diffi cult to manage, and frequently requiring updates that insisted upon specialized services from IT. Fortunately, three “mega trends”—big data, cloud computing and self-service—are colliding to support the fl uid fl ow of business data across on-premise and cloud-based applications.

Even better, innovative cloud providers are providing continuous improvements in data integration software and infrastructure to give Finance faster insights into information in the simplest and most fl exible ways possible—on a self-service basis. At last, data is becoming more accessible and useful in a business context—just in time, too, as the volume and velocity of information threaten to overwhelm us all

Elizabeth Loar Vice President of Finance SnapLogic References: 1 2

https://www.companydebt.com/ https://www.gov.uk/government/publications/ company-strike-off-dissolution-and-restoration/strike-offdissolution-and-restoration

BUSINESS

Making time for success: The advantages of outsourcing online payments for businesses

ccording to a poll of 34,000 companies carried out by the Institute of Directors1, 60 per cent are optimistic about their future business performance. In todayâ&#x20AC;&#x2122;s society, and in order to see continued success, processing online payments is a must for businesses as it allows customers to pay online or set up a direct debit for regular, automated payments. Organisations of all sizes will need to deal with the collection of payments at some point, but should businesses outsource or look to process payments directly? That is the question. 12

There are lots of advantages to outsourcing this responsibility. Particularly when payment processing comes with a certain degree of risk and, as such, can be resource intensive to maintain compliance. For any business that wishes to process card payments of any kind for its customers, it will need to obtain a Merchant ID (MID) from its bank. This allows the business to be identified by the banks and card institutions in order to accept credit card payments. This means taking on additional risk and administration to manage that risk. The lengthy approval process, which

includes credit checks, can put a lot of strain on a team. For direct debits, a Service User Number (SUN) is required from the bank which can be particularly time consuming and a bond is sometimes required. Small businesses may even have their requests declined by the bank. If a company decides to outsource the processing of its payments instead to a specialist payment services provider, the right supplier will be able to supply the MID and SUN, thus taking on the risk, administration and compliance and minimising the amount handled internally.

BUSINESS fi nes for either not being compliant or not maintaining compliance. However, becoming PCI DSS compliant takes time, money and ongoing resource and, for small organisations in particular, these are in short supply. PCI DSS assessments for level 1 Payment Service Providers have to take place on site and it can take weeks or even months before compliance is determined, depending on what is in scope and the complexity of the cardholder data environment. Outsourcing PCI compliance to a Level 1 PCI DSS compliant payment service provider can make a material difference in upfront and ongoing costs. For example, outsourcing can see organisations only having to complete a shorter version of a mandatory Self-Assessment Questionnaire (SAQ) to their merchant acquirer and not having to invest their own resources and time into meeting new mandatory standards. The threat of cyber-attacks shouldn’t be ignored and organisations should ensure their chosen suppliers meet high standards for cyber security through government-backed accreditations like Cyber Essentials Plus.

A supplier that is able to handle the risk surrounding the authorisation of a Merchant ID, will also be able to help manage other forms of risk for its clients - for example, the challenge of adhering to the Payment Card Industry Data Security Standard (PCI DSS). As security breaches become increasingly common, it is critical for organisations of all sizes to prove and maintain PCI DSS compliance. If it was discovered that an organisation involved in the processing, transmitting or storing of cardholder data had caused a card breach, the organisation in question could face severe

Processing payments directly can be time consuming for other reasons, particularly around ensuring the offering and interface is attractive to customers. Third parties can help businesses to offer their customers greater fl exibility on collection dates and frequencies – and provide an automated re-presentment facility on any failed payments – helping to boost take-up and reduce arrears. Outsourcing the processing of payments can also result in a more user-friendly experience for both businesses and their customers. Some suppliers can provide multiple payment channels across online, phone, mobile and text to ensure ease and reduce the likelihood of missed payments. Additionally, online payments can come with the added security benefi t of 3D Secure authentication on every

transaction, which allows the customer to confi rm the transaction with the use of a password, reducing the risk of chargebacks. For direct debits, a third party will not only provide an online scheduler which makes set-up easier for customers, allowing them to set up mandates online or over the phone with the ability to automate administration tasks for the organisation including the submissions to Bacs and correspondence to customers through email. Additionally, they can support organisations through the latest regulatory and industry changes such as payment notifi cations to support customers and the ability to challenge indemnity claims. Third-parties will be investing in their systems to respond to market changes allowing organisations to benefi t directly from their investment. In conclusion, if UK businesses are to successfully navigate the challenges and succeed in a post-Brexit world, they will need as much time and as many resources as possible. Outsourcing certain tasks, including payment processing, can free up the team’s time and enable them to focus on other areas that are more likely to contribute to better customer service, client relations and lasting business growth. It also ensures that you and your customers benefi t from the latest technology and features without having to invest in your own IT resources and development

Ross Macmillan Head of Research & Intelligence Allpay Limited References: 1

http://www.telegraph.co.uk/news/2016/12/26/britishcompanies-optimistic-future-post-brexit/

INVESTMENT

IS YOUR BUSINESS PRIMED FOR ACQUISITION AND INVESTMENT BASED GROWTH?

ou’d be right to think that UK businesses have a lot to be nervous about when it comes to business growth, either through third party investment or acquisition. For instance, according to a new report1 from the CBI, as many as four out of ten businesses claim that Brexit has negatively affected their investment decisions, over concerns about the UK’s relationship with the EU. But Brexit is only one issue. To delve deeper, we embarked on a research2 project asking over 200 UK senior managers at mid-market UK businesses about their growth ambitions and what they consider to be the biggest challenges in this area. What was clear was that many want to take advantage of third party investment but are not yet primed to do so. We also found that a quarter of respondents said that seeking acquisitions or new investment was their most important growth related strategy - however 29% also said that a lack of business investment was standing in the way of these ambitions. Barriers to investment The research uncovered a number of barriers to investment or acquisition growth. Firstly, a lack of profitability was considered the top constraint, with 60% admitting to not adequately controlling their spending and costs. 82% also said 14

they don’t have the necessary analytics in place to demonstrate how the business is performing, with just over three quarters of respondents confessing that potential investors would struggle to do due diligence with them too. Finally, 39% also cited compliance as an investment block, being unable to demonstrate watertight financial processes. The suggestion here is that there is significant work to be done before many UK businesses can realise their investment goals. For instance, 42% admitted that getting their financial reporting in order would be a slow and resource-heavy process that could defocus the organisation from its day-to-day activities. Also, 40% expressed concern about acquisitions creating supplier duplication and other conflicting financial and procurement processes which arise from a merger. Bridging the gap Mid-market firms are the lifeblood of the UK economy and for any organisation looking to expand through investment or acquisition, it’s essential that they have the right foundations in place to present their business in the best light and can scale as the business demands it. If a business is serious about investment as a key growth strategy, then employing financial best practice and ensuring the right foundations are in place is

essential. Here are three key points to consider: 1. Get a grip on purchasing – investors will want to see that the organisation they are interested in is profitable and all purchasing throughout the business is controlled, managed and cost effective. Introducing purchasing guidelines or automating the entire process means that anyone buying within an organisation does so compliantly and all spend is closely monitored.

2. A healthy cash fl ow – if a business has inconsistent and uncontrolled purchasing processes, and adopts labour-intensive manual invoice processing then payments out of the business become very hard to control and account for. Automating these processes, from purchase to payment, creates transparency, prevents errors and speeds up payment,

INVESTMENT ensuring cash flow remains predictable.

many still need to address.

3. Prepare the supply chain – Is the business’ supply chain ready for expansion? Any business readying itself for investment needs to ensure its supply chain is able to scale alongside any plans for expansion. Also, if growth comes as a result of a merger, where does that leave existing suppliers? Can they scale or how easy would it be to source new ones that can, quickly and effectively?

It’s time for businesses to see the bigger picture and that without the tools to automate and optimise they will remain

References: 1

Investing in procurement Investment in finance and procurement processes is clearly critical for addressing these challenges. However approximately only a third of our survey respondents said they have a dedicated procurement function for both managing purchasing and dealing with supplier sourcing. This is clearly something that

unable to accurately showcase business performance or scale to meet their growth demands. Getting the foundations in place will ensure that the business is ready for potential investors before they walk through the door. Don’t let slow and laborious processes stand in the way of plans for expansion

http://www.cbi.org.uk/news/brexit-affecting-investmentdecisions-now-survey/ http://www.waxdigital.com/secret-diary-sneak-preview-6challenges-facing-procurement-managers-today/

Paul Ellis Managing Director,Wax Digital 15

BANKING

Why data is the most important commodity for banks

he scale and speed of digital disruption has left many banks struggling to keep up as they deal with increased competition from smaller challenger banks and advances in technology. If traditional banks are to survive and prosper in this digital environment, they need to start utilising many of the inbuilt advantages they have as incumbents; one such advantage being data which in the digital economy is rapidly becoming a valuable commodity. Banks have always held vast amounts of data inside their institutions but extracting insights from this data along with monetising its value is something they have found difficult to achieve. This is set to change with the introduction of new regulations such as the second Payment Services Directive (PSD2) and the push towards Open Banking. Open Banking brings bank and customer data and third party providers together. This will increase the value of data and will transform the relationship between banks and their customers. Open Banking will require banks to re-think how they create value for their customers through data. It will mean establishing a more accurate understanding of their customers and the context in which they consume services. With better insights from data, banks could recommend alternative products and services; an example could include recommending a more affordable gas and electricity supplier to a customer or cheaper home insurance. This kind of service based on data insights will help improve the overall customer experience. The emergence of Cognitive Banking In a world where we are witnessing the move 16

from human driven cars to autonomous vehicles; a similar development is taking place in banking. We are seeing an evolution from banking to autonomous or cognitive banking. One where artificial intelligence and machine learning are changing the customer experience of banking. Cognitive banking is about having fast data, good User Experience and Interfaces (UX & UI) for customers. It also includes automatic or robotic artificial intelligence deployed in executing data quickly, accurately, cost effectively and predictably; significantly improving the digital banking process. In the world of digitalisation and the digital economy, cognitive banking expresses all the digital requirements and more. As well as providing services in a digital way. Banks must reach conclusions on the engagement strategy with their customer base, either directly or indirectly on real time data from multiple sources. This forms part of the cognitive banking process which encompasses the analysis, processing and production of insights resulting in new products and deeper more targeted customer value. Banks and financial institutions are working towards establishing new business opportunities by identifying how customers consume and are made aware of products. Decisions can be made on which additional services can be offered to secure customer loyalty along with understanding how banks should communicate specifically with individuals through applying more behavioural analytics to segmentation. If banks apply greater machine learning and

BANKING artificial intelligence techniques and technology, a far more personalised and focussed message is created, one that is targeted more effectively and with the added benefit of improving each customerâ&#x20AC;&#x2122;s appreciation of what their bank can do for them. Moving from Big Data to Fast Data Deriving greater value and insight requires â&#x20AC;&#x2DC;Fast Dataâ&#x20AC;&#x2122;. The defining feature of Fast Data is the rapid gathering and analysis of data in real time. It is about the ability to consume, analyse and execute on the insight generated from multiple data sources. Unlike big data which focuses on storage, fast data takes a consumption orientated view of data and provides a richer context in terms of analysis and decisions making. This allows banks to provide a more enhanced and personalised customer experience. The value of data Faced with the prospect of increased competition from challenger banks and fintechs, the traditional bank must ensure it utilises data effectively. If oil was considered the most valuable commodity at the start of the 20th Century then data is emerging as the 21st century equivalent. Data is the most competitive advantage that banks have; they need to evolve and become data-driven organisations that will deliver knowledge banking. This will lead to better financial products and services based on available information and more appropriate to the needs and expectations of customers. Previous levels of customer loyalty can no longer be relied upon, and banks must offer greater levels of personalisation in the services and products they provide if they are to remain relevant

Christian Ball Head of Retail Atlantic Region 17

BUSINESS

WHY GETTING TO GRIPS WITH DATA IS THE FIRST STOP ON THE JOURNEY TO AI FOR SMBS

he tale of man versus robot has been around for decades, with the debate over who will win the struggle hitting the headlines at various points over the past few recent years. But to me, the idea that robots will steal your job or run you out of business is a little premature. Soon, we’re going to witness worldwide economic growth becoming increasingly powered by artificial intelligence and automation. I’m excited by the huge amount of potential artificial intelligence has for businesses of all sizes, particularly SMBs. A deep dive into the value of AI for businesses was recently published by global accounting firm PwC. Gross Domestic Product is predicted to increase by 14% (or by US$15.7 trillion to the global economy) by 2030, thanks to artificial intelligence. That’s more than the combined efforts of China and India right now. Europe as a whole stands to benefit from a 10% rise to our GDP - a US$1.8 trillion rise. I want small businesses to see the opportunities in artificial intelligence. It frees up businesses and their staff from mundane data entry and other routine tasks to focus on doing higher value-adding work and personalising consumers’ and customers’ experiences to sucker their loyalty. Any business that doesn’t runs the risk of being undercut by automation on not only costs, but experience and turnaround times.

The PwC research identifies three areas in industries with the biggest potential for AI. Here are a few of them. Healthcare AI will be most impactful where healthcare practitioners use data to boost diagnostic support (i.e. comparing patients or detecting variations in their health data); helping to identify potential pandemics early, by tracking incidence of the disease to help better understand its spread and how to prevent it; and in imaging diagnostics. Automotive Self-driving fleets of vehicles for ride sharing is the way of the future for this industry. AI-powered driver assistance and smart cars, as well as predictive maintenance, are also on the horizon. Financial services AI is already hard at work automating transactions and powering fraud detection and anti-money laundering within this sector. As a result, consumers and customers are starting to expect more customised and personalised solutions to money management. The accounting industry in particular should look to move to higher valueadding work like business advisory services.

Retail Retail consumers will notice already how product

BUSINESS

recommendations are being made to them based on their preferences. That’s all being supported by artificial intelligence and machine learning on the back of the data retail businesses collect on customers’ shopping habits. AI in this field will lead to greater availability of what people want, and when and how they want it. Manufacturing Better monitoring and correction of processes, the optimisation of supply chains and production, and ondemand manufacturing are the three areas tagged for change in an AI-driven future. There’s a real chance for manufacturing businesses to build processes for anticipatory production and more efficient delivery of products, and capitalise on those demands from customers. Transport and logistics Autonomous trucking and delivery, traffic control, and reduced congestion are on the cards for this industry. Businesses can look to grow on the back of 24/7 runtimes, smarter scheduling, and real-time route adjustment to speed up transport, which are a real possibility with AI. How to get your business ready for artificial intelligence There’s no doubt about it - the potential of AI is huge. What businesses can do now is learn to how to pair people and software harmoniously. However, before you can even begin to think about where AI may play a part in improving your business, the first huge challenge you’ll need to grapple with is the mountain of data you’ll need to collate to create a picture of how your business operates today, for without this you have no basis from which to begin to think about even basic, rudimentary automation never mind the lofty goal of artificially intelligent automation. And not just the few odds and ends of data that may already be already floating around inside your current systems, you’re going to need a monumental amount of data to enable you to build complete and comprehensive insights into every customer interaction, customer behaviour, touch point, all your internal and external workflows and processes, and every product or service line. And that’s just for starters.

It’s very likely that much of this necessary data is simply not being captured or recorded today, and once you’ve worked out how to address that, and which areas of your business require data instrumentation, it’s also likely that you’ll need outside help to collate it, make sense of it and begin to form hard insights about every nook and cranny of your organisation and which aspects could be automated. Once you have these quantitive insights, you’ll then need to marry them up with your qualitative insights of your own, from your people and from your customers. Again, more data. But the truth is, the only businesses that will full harness AI in the next couple of decades will be the ones that crack the data nut

Gary Turner Co-Founder & UK MD Xero

INVESTMENT INVESTMENT

Speculating on the Bitcoin bubble won’t make you a skilled investor

riple digit price growth of Bitcoin in recent months has made cryptocurrencies enormously popular with young investors. This is encouraging, as it shows Millennials are keen to take control of their financial futures, and make their money work for them rather than have it languishing in the low return accounts offered by the traditional banking sector. Many of us will be familiar with anecdotes of early Bitcoin users that generated fortunes practically out of thin air. In the early days of the currency, Bitcoin could be ‘mined’ using nothing more than the compute power of a regular laptop, and single units of Bitcoin traded for mere pennies.

are estimated to be regular commercial transactions. It is thought that of these actual sales and transactions, the majority are centred around the sale of illicit goods and drugs via the dark web. But as the prices of goods are usually tied to a traditional currency, Bitcoin acts more as a payment technology than a currency, and a bad one at that - small payments can take hours, even days, to process (and the price can change dramatically after the trade is agreed).

Fast forward a few years, and with the price breaking the US$3,000 barrier, it’s easy to understand why it has attracted young, would-be investors. They’ve seen this stratospheric price growth and think that if they get on board early enough, they too can turn modest sums into great riches. And therein lies the main problem faced by Bitcoin and its investors. Defining it as a currency is fraught with difficulty. In a normal sense, a currency is used as an exchange of value for the transfer of goods or services, however only a small fraction of Bitcoin transfers 20

Instead, the bulk of Bitcoin trades are carried out by

individuals and businesses buying into the currency in the speculative belief that the price will continue to rise. In many ways, this makes it closer to trading a commodity - and the hard limit on the amount of Bitcoin that can ever be created would support this view. So, without the mass adoption of people willing to actually use it as a currency, the underlying economy to keep it afloat, or a central bank to prevent a rapid and massive drop in value, all things considered, Bitcoin would appear to be a highly volatile and risky investment. And so it has proved to be so far, with quite a few bubbles to date. The most significant of these was in November 2013, with Bitcoin trading in excess of US$1,200 only to reach lows of just above US$200 a few months later. But all bubbles present an opportunity to make money, and only the most puritan of investors could ignore the massive

INVESTMENT

returns that investments in Bitcoin and other emerging cryptocurrencies such as Ethereum have delivered for some in recent months. While the price of these cryptocurrencies has undergone a market correction in June, prices have stabilised to some degree and we could see some rises again before a likely crash. Building diversifi ed portfolios is the surest strategy for anyone new to investment as it will limit your exposure to potential losses in times of volatility. Bitcoin can indeed be one part of this portfolio, but the obvious risks canâ&#x20AC;&#x2122;t be ignored and the proportion invested should refl ect this. Donâ&#x20AC;&#x2122;t think diversifi cation simply means investing in different types of cryptocurrencies at the same time, however.

ways to invest and put their money to work.

These are all likely to be affected by the same market factors, so you should look for a blend of stocks, equities, bonds and other fi nancial products that are unlikely to impact on one another. As your experience and knowledge grows, you will feel more skilled at making investments and understand when itâ&#x20AC;&#x2122;s the right time to take a risk. While cryptocurrencies themselves may not represent a sound long term investment prospect, they have energised a new generation of investors. With interest rates being practically non-existent for the last decade, tech-savvy Millennials are hungry to explore new

The technology now exists for them to establish their fi nancial independence - trading is no longer something that a stockbroker is essential for. This empowerment will send shockwaves throughout the fi nancial establishment and will make a much bigger and lasting impact than the cryptocurrencies currently dominating the agenda

Kerim Derhalli CEO & Founder fintech app invstr 21

INVESTMENT

WHAT ARE INVESTOR SYNDICATES AND HOW CAN THEY WORK FOR YOU?

ngel investing is by its nature a risky endeavour. Every investor naturally has an overarching goal to minimise risk and maximise returns. In the context of angel investing, ensuring that the relevant elements needed to achieve this are in place is easier said than done. Investor syndicates are an excellent way of optimising risk and return. In broad terms, a syndicate is simply a group of investors that work together to leverage each other’s resources. In this way, investors can work as a group to find, assess, and invest in opportunities, and thus as a group can benefit from sharing in the associated risks and rewards. When it comes to the structure of a syndicate, there is no set modus operandi. The syndicate structure can be established to suit the investors’ preferences and thus a gradient of alternatives might apply. Broadly, syndicates might be structured formally or informally. In a formal structure, investors collaborate to source and evaluate opportunities; when an opportunity is identified and the group decides to invest, the investment might be made through a vehicle created specifically for that purpose. This vehicle is the official nominee of each of the group’s investors who retain beneficial ownership of the underlying investment. The syndicate charter may require all syndicate investors to unanimously agree on a opportunity and perhaps a minimum contribution, although this is very much dependent on investors’ preferences. As this structure is a formal legal entity, there is an associated burden in the form of an administrative cost to ensure accounts are filed and personnel such as Directors and Non-Executive 22

Directors are carefully appointed, as well as appropriately defining their individual responsibilities. The advantage of this structure, particularly from the point of view of the management team of the investee business is that there is less of an administrative burden in dealing with one entity representing a group of investors as opposed to many individual investors, the latter of which may make it difficult to negotiate and agree terms. The alternative is an informal, lighttouch structure in which investors also work together to source and evaluate opportunities, with the difference being that each member ultimately invests directly in their individual capacities and thus become direct shareholders of the investee entity. As there is no formal syndicate entity, this structure does not have any of the administrative or cost burdens associated with a formal structure. Regardless of a syndicate’s structure, there are many advantages to syndication as opposed to operating purely on an individual basis. Portfolio diversification is perhaps the most beneficial aspect of investing through a syndicate. Leveraging the expertise and experience of fellow syndicate members allows efficient and thorough due diligence, and individual investors can take comfort in investing in opportunities that may not necessarily be in their own sector expertise. This might, for example, occur if an investor with deep expertise in a sector decides based on her knowledge and due diligence that she is willing to be a lead investor in the funding round. Investing as part of a syndicate therefore means that investors can operate fluidly across a range of diverse industries,

particularly when the expertise of syndicate members is spread across diverse industries. The pooling of skills, experience, expertise and contacts can also create significant benefit and value add for the investee businesses as they grow and look to raise additional capital. This creates a virtuous circle, where investee businesses benefit from their investors above and beyond the capital they bring and investors are able to drive value creation for their portfolio of investments. Formal syndicate investors may also have the advantage of being able to invest in larger deals where investee management teams have set a minimum ticket size for individual investors. One question we hear all the time is, ‘how can an investor syndicate work for me?’ It’s always a matter of preference – it’s your personal capital. It is important to get to know your fellow investors, particularly the professional skills and experience they bring to the table and how these can be combined with yours and other members’ skills to minimise risk and maximise value for all stakeholders. Get to know your fellow investors personally; as with any business relationship, trust is paramount. This will ensure all stakeholders’ interests are aligned for the long term

Zafar Kanani Manager Forbury Investment Network

INVESTMENT

FINANCE

MiFID II; Options for firms looking to guarantee compliance

n 2018, new MiFID1 regulations will take effect that will require all financial sector employees who are directly involved in trading to record their calls. In theory, this will promote increased accountability in the financial sector. However, in an industry as extensive as finance, is it possible to ensure compliance for every conversation across every channel? Not only is it possible, by moving to cloud-based solutions, financial companies can simplify their recording strategies and gain better insights into conversations. The MiFID II legislation states that, regardless of the original intent of the call, if any conversation evolves into a trade, the whole conversation must be recorded and stored. This is a significant change to previous MiFID policies which were historically almost entirely focused on arbitrage within the finance sector. The new MiFID legislation expands the directive to cover anyone providing advice that may lead to a trade. Under these new regulations, recorded conversations must be stored for five years and be searchable to the extent that any record can be sourced and analysed immediately upon request. These guidelines are meant to make conversations both measurable and defensible, 24

and policy makers are confident that this will thwart insider-trading attempts. For many cloud providers, this directive also presents an exciting opportunity; companies will need a scalable, cost-effective system with substantial storage capabilities in order comply with these new rules. However, there is one important challenge to address; many of the conversations are taking place on channels that are not currently being recorded. In wake of the announcement, how can organizations ensure that they are complying with these regulations across all channels? In addition, what technology solutions are currently available to the finance sector? Ensuring compliance across all channels These new regulations require companies to enact policies that control communication within their organization, such as enforcing the use of company-issued devices, loading recording applications to personal devices, or enforcing policies that restrict the use of personal devices when conducting official business. However, if these conversations happen away from the regulatory reach, how can companies in the financial sector ensure compliance?

To mitigate this risk, they can turn to new analytics technologies that have the power to track not only what is and is not said, but when and how things are communicated. For example, if tools have not recorded any calls from an employee in two or three days, alerts can be sent to management to warn them business calls may be happening outside of recorded channels. This highlights that due diligence is instrumental in identifying employees who fall off the radar in order to ensure MiFID II is as effective as possible. An enterpriseâ&#x20AC;&#x2122;s best defence is to set clear paths for MiFID II compliance and educate employees on best practices to stay on the right path. To comply from a technological standpoint, they must decide if calls will be recorded using cloud or on-premises solutions. Compliance using legacy solutions Faced with impending regulation changes, larger companies may opt to simply rely on legacy systems and hardware for their compliance initiatives. However, this is a costly proposition, as legacy call recording solutions will require additional hardware installation, expert personnel, software licenses and the hardware itself. The average lifespan of hardware is three-to-five years, so it wonâ&#x20AC;&#x2122;t

FINANCE

be long before they’re making hardware purchasing decisions again. Equally, in a traditional business environment, the average server is using approximately 15 percent of its total storage capacity. The rest of the time, servers are occupying data centre space, consuming power and producing heat. Only around half of data centre power is actually used to fulfil IT requirements. IT equipment generates lots of heat, HVACs need power to remove heat and cool equipment which continues to run and generate more heat, and the cycle restarts again. Power usage equates to a huge environmental impact. Another important consideration is customer concerns over security and confidentiality when recording their calls. While many companies have security measures in place, these are not nearly as secure as using a third-party hosting provider. Equally, the means of retrieving data through these legacy solutions forgoes smart searching, making it nearly impossible to locate certain call information. However, in spite of the hurdles, many multinational companies are armed with their own compliance officer and have the means to store a vast amount of

data, those multinationals may still consider sticking with their incumbent storage solutions. The case for the cloud For companies who are looking to modernize call-recording capabilities, migrating to a cloud-based solution is the most logical answer. The cloud significantly reduces the storage footprint and the cost of IT labour, and respected cloud providers often have better security measures in place than in-house solutions.

focus on what matters most: ensuring compliance with new legislation. New compliance endeavours can feel overwhelming, especially if conversations are taking place across all channels at all times. However, the cloud is a company’s most flexible, cost-effective, and scalable option to ensure quick compliance and avoid getting in regulatory hot water. With modern regulations pressing down on financial organizations, it’s important that they deploy modern technology to meet regulatory standards

The cloud provides all the scalability required by an enterprise, along with the service value of a chief compliance officer. With utility-based billing, the cloud is often more economic and uses green, environmentally friendly technology. A well-architected cloud-computing environment can have average server utilization as high as 85 percent. Another benefit of choosing a cloud solution is “ease-of-use,” as cloud services can be delivered over the internet with an intuitive user interface. With the cloud, the technology provider simply delivers cloud computing and storage, it is still up to the enterprise to comply with relevant regulations. However, with less hardware to manage, companies can

Ralph Awad Director of Cloud Operations Calabrio

References: 1

https://www.fca.org.uk/markets/miﬁd-ii

BUSINESS

Future-proof your data strategy The UK’s referendum result back in June 2016 deﬁed all the pollsters when the nation voted to cut ties with the European Union and go it alone. But what does this historic change mean for how businesses handle that increasingly valuable asset of personal data.

t the time of the Brexit vote, the shock result caused political upheaval, a tumbling FTSE 100 and economic uncertainty. Some might argue those immediate aftershocks have continued as the UK government has worked towards and, on 29 March this year, triggered the Article 50 notice required to start negotiations for departure from the EU club. Some of the more recent and upcoming developments in data protection laws in the UK and the EU may have been rather overshadowed by the Brexit vote last summer and the continuing effects of that outcome. However, it’s important to consider where this leaves businesses as they continue to handle the personal information of UK customers and contacts. The new EU General Data Protection Regulation (GDPR) came into force in May 2016 and will automatically take effect throughout the EU (including the UK if it is still part of the EU at that time) from 25 May 2018. So, many will ask, should Brexit alter the approach to data

protection being taken by any business handling the data of its UK based customers? In short, no, because Brexit, as we now know, is going to take time. After the Article 50 notice was issued, triggering negotiations with the EU, we were automatically in a window of at least two years. During this negotiation period data protection compliance will mean abiding by the current UK Data Protection Act 1998 and the EU Directive from which it derives. Until the GDPR takes effect in May 2018, at which point those handling UK customer data or selling their goods and services into the UK market will need to comply with the new GDPR. As a result we all have less than 18 months now to prepare for and adapt our approach to data in order to meet the more stringent regime of the GDPR. Whilst key data protection principles have not changed fundamentally in the GDPR, many have been strengthened to place more structure around how compliance is achieved. For example, aspects such as the appointment of data protection officers and reporting of security breaches have moved from discretionary to mandatory requirements. Compliance with GDPR isn’t a wasted effort; compliant organisations will be able to leverage from that position to

react to the UK’s response to GDPR post Brexit with minimal disruption In November 2016, the Secretary of State for Culture, Media and Sport confirmed that as the UK will still be a member of the EU in May 2018, businesses do need to continue to plan for full compliance with the GDPR. Likewise, clear comments coming from the Information Commissioner, Elizabeth Denham, also support this approach; the UK data protection regime will have to adapt to align itself closely with the new approach in the GDPR, regardless of Brexit. Once the UK is outside the EU, it is going to need something very similar to the GDPR in place in order to make transfers from the EU to the UK compliant. Achieving compliance with GDPR is, therefore, not going to be a wasted effort as it will be work which all organisations can then leverage from to ensure they are then compliant with whatever UK legislation replaces GDPR upon Brexit – essentially looking at this issue now is a way of future-proofing compliance in this space. GDPR includes various signiﬁcant changes such as the expansion of compliance requirements to include data processors (not just data controllers), mandatory reporting of data breaches within stipulated timescales and increased ﬁne

thresholds of: • up to 2% of annual worldwide turnover of the preceding financial year or 10 million euros (whichever is the greater) for violations relating to internal record keeping, data processor contracts, data security and breach notification, data protection officers, and data protection by design and default; and • up to 4% of annual worldwide turnover of the preceding financial year or 20 million euros (whichever is the greater) for violations relating to breaches of the data protection principles, conditions for consent, data subjects rights and international data transfers.

for what happens to the personal data that is involved in that service – the business will remain responsible for data protection purposes and so remains liable for the acts of that outsourced provider processing the data on its behalf. Data compliance is key to an effective cyber strategy as well as being a legal requirement

Another key consideration relating to compliance with data protection laws is the risk posed by cyber security threats to any business. Recent attacks on the likes of TalkTalk and Sage have highlighted the two sides of this threat – the external hacking of customer data suffered by TalkTalk and the internal employee failure experienced by Sage. After an inquiry into the TalkTalk cyber-attack, the Culture, Media and Sport Committee issued a cyber security report which gave some useful guidance to organisations facing a data breach.

The Sage incident is a timely reminder of where organisations might best focus their energies in the compliance battle around protecting personal data and the privacy of individuals. Businesses are increasingly interested in how to protect themselves from the risk of external cyber-security breaches (and rightly so), but the security threat posed by internal breaches is potentially just as damaging and possibly harder to detect. Whilst it might come down to simple human error, weak password management or a disgruntled ex-employee having retained unauthorised access to systems when they should not have done, there is probably more scope for businesses to mitigate these areas of internal risk than those of the external variety.

It’s important to remember that even if a business has outsourced a business critical service, such as accounting and payroll functions, this doesn’t remove or transfer that organisation’s responsibility

These data breach incidents involving household name businesses continue to inform our own awareness of personal vulnerability to identity theft, an aspect which the Culture, Media and Sport

Committee were also keen to encourage as a matter of public vigilance. Likewise they highlight how the strength of a business strategy designed around full awareness of your business’s data and compliance with data protection laws can help protect against such risks. Businesses need to be looking to achieve good data protection compliance not only to counteract cyber risks more generally, but also to place themselves in a position to adapt to the developing data protection landscape. By doing so any business will be able to achieve an element of future-proofing, as the UK data protection regime adjusts to accommodate Brexit, whilst also ensuring compliance when GDPR begins to bite come May 2018

Emma Roe Partner and Head of Commercial Shulmans LLP

FINANCE

Why travel companies are struggling with cross-border payments

hen we think about booking travel, we think glossy brochures and aspirational pics on websites as part of the process to find the perfect break at the best possible price. Few of us think about the huge amount of operations going on behindthe-scenes to make sure that hotels, airlines, tour operators and other suppliers are booked and paid. Then there’s the potential minefield of managing cross-border transactions. With global e-commerce revenues expected to more than triple by 2025, managing payments is an ever-increasing headache for travel companies. Rising costs and complexity are exacerbated by three major trends: currency fluctuations, a growing consumer demand for exotic travel, and a higher risk of fraud and supplier default. Here, we look at how travel firms can overcome these industry pain-points to improve customer experience (CX) and drive overall business performance:

Fluctuations in currency after booking therefore means that when it comes to settlement, travel companies can see their already tight profit margins eroded. Mark Warner, one of Britain’s biggest tour operators, hit the headlines last year for adding a retrospective charge to its customer’s bookings as a result of currency fluctuations, increasing the cost of the holiday. And ABTA reports that at least seven other companies have added similar post-booking surcharges in recent months. The negative customer experience can be costlier than the loss in profit. Companies providing travel services need to move quickly to put in place systems which streamline their operations and enable them to keep costs competitive. Some tour operators are also using new virtual payment options to lock-in currency at the time of booking, meaning no surprises for the travel agency or the consumer. It also means they have a more accurate picture of profit and loss throughout the year.

Currency fluctuations One of the most immediate consequences of the Brexit vote was the instant drop in the value of the Pound. The recent UK snap Election certainly hasn’t helped matters either. The result? According to the CEO of TUI, Klaus Mangold, the decreasing buying power of Sterling – combined with rising prices in holiday destinations – will inevitably impact the price of holidays for tourists. Many travel companies book with suppliers but don’t settle until later. 28

Currency fluctuations are more unpredictable, and none of us have a crystal ball to tell whether values will go up or down. Is it really worth the risk? Increasing demand for exotic travel In the nineties and noughties, we typically spent our holidays relaxing on beaches, taking advantage of all-inclusive deals and guaranteed sun just hours from home. But more recently we’ve been exploring exotic destinations and seeking out offbeat travel experiences. Mastercard’s

Global Destination Cities Index1 demonstrated this trend perfectly with cites including Osaka, Tokyo, Seoul and Bangkok all surging in popularity over the past couple of years. This shift in the way we travel has inevitably meant that travel agencies are doing more business internationally. As an example, recent research by travel industry research specialists Phocuswright found that, in the past three years alone, the number of European travel companies accepting payments in more than ten different currencies doubled. Some even reported grappling with over 50 different currencies. Choice has become the energy behind customer experience. In fact, our new customer experience whitepaper2 includes a comparison between the range of destination listings and the number of customer recommendations a travel agent receives. It reveals that those offering more choice, have more satisfied customers that are prepared to recommend them to others. Clearly, it’s in the interest of travel companies to meet the needs of the more adventurous tourist – but it could come at a price. Doing business in more markets means dealing with additional

FINANCE

foreign exchange and cross-border fees. Then there’s also the additional administration costs for setting up banking arrangements in new countries. Many travel companies continue to rely on traditional payment methods for international transactions. But few agencies are aware of the hidden costs, such as surcharges and FX fees, which increase the cost of payments. For example, our analysis of bank fees showed agencies relying solely on their bank for international payments could be paying 3% more on each transaction compared to alternative options – a cost which significantly erodes margins. The good news is that payment options have evolved to lower the cost of international payments. This includes offering local funding and settlement which dramatically reduce the cost of payments by avoiding surcharges and fees. Supplier default and consumer protection Travel companies branching out into new markets are dealing with previously unknown suppliers, which heightens

the risk of fraud and supplier default. With 40% of travel firms already stating that credit card fraud is their biggest challenge, according to Phocuswright’s research, protecting against fraud and working with safer solutions will become an even bigger priority and mountain to climb in the future. A Virtual Account Number (VAN), which is an automatically generated 16digit Mastercard number, simplifies payments between travel agencies and their suppliers. And, because a unique number is used for each new booking or payment transaction, it protects against fraud. And chargeback capabilities provide protection in the event of supplier default. There is a range of EU legislation in place to protect travellers when they book holidays including protection if a travel company goes bust and for delays to flights. Brexit negotiations mean that new UK regulations will need to be put in place. In the interim, one way of protecting travel companies and holiday makers is to use VANs: these will provide a digital record of the transaction which can be used to validate payments if an operator goes bust.

With international travel continuing to increase at a pace, it’s now more important than ever that companies re-evaluate their international payments strategy. It is a fundamental step to protecting travel spend, satisfying changing destination demands and delivering an exceptional customer experience. By making the entire payment process faster and more efficient, travel firms will not only reduce costs, but they will drive more customer advocacy. This is key for travel firms looking to increase growth, profitability, and overall business success

Anthony Hynes CEO & MD eNett International References: 1 2

http://vans.enett.com/cxwhitepaper https://newsroom.mastercard.com/wp-content/ uploads/2016/09/Global-Destination-Cities-Index-Report. pdf

BANKING

How Accurate Data Capture Can Enhance the Customer Experience

igital banking has rapidly disrupted the traditional banking model and has made way for a much more customer centric approach to financial management. As more and more customers make the move towards online banking, there is increasing pressure on banks to adjust their offering to provide customers with the fast, secure and efficient experience they have come to expect.

fastest possible customer journey for high volume signups.

As of 2016, 60% of individuals said that they used online banking1 regularly - a figure which is only set to rise. Never before have customers been faced with so much choice. So how can banks and financial institutions ensure they provide the best service for their customers, and stay one step ahead of the competition?

Less people are stepping inside banks than ever before – mainly because we are getting more and more impatient while placing greater trust in technology. This year alone, as many as 525 banks are expected to close across the UK2. Taking this into account, banks need to adjust their offer to fit into the mobile, omnichannel world of customers expecting a personalised experience, and who take for granted the ease with which transactions happen.

Rethinking UX Capturing customer data using address verification technology is one of the ways that banks can streamline their online user experience. Removing friction in the signup process is vital to ensuring that financial organisations deliver the 30

With the proliferation of online financial institutions, banks are becoming more and more customer-centric. Technology has changed customers’ expectations for good and banks, just like telcos and retailers, need to follow suit and adapt to the busy day-to-day lives of their customers.

The Importance of Data Capture If finance and fintech companies want to maintain an effective data capture

strategy, the entire business must buy into the importance of the process. If one team is cutting corners and not entering similar data in the same way as other teams, for instance, then this can cause inconsistencies in your database and reduce the usability of the data collected. Customers expect instant access to the right data, so it’s vital to make sure that you have the right information first hand to avoid conflicts further down the line. It is also a good idea for financial organisations to review their customer touchpoints, whether it’s new account registration, change of address or fraud detection, to check for opportunities to confirm user details and perhaps add more value. This can then be used to contact clients in future to promote offers and services in order to increase profits and deliver tailored services for the customers. Enhancing Know Your Customer (KYC) Processes in Finance While there are no specific legal or regulatory requirements for “Know Your

BANKING

Customer” (KYC) or data capture processes, both are important contributors in the fight against money laundering and criminal activity. With rising cyber crime rates, fraud cases are soaring. Last year, the annual cost of fraud in the UK was estimated at £193bn3 - the equivalent to nearly £3,000 per head. Although 90%4 of fraud taking place is not a direct to end consumer cost, those lost funds still impact individuals in the form of higher costs on products and services. Each transaction from purchasing an item to paying money into a savings account, is affected. Unsurprisingly, customer security is at the top of the agenda for financial institutions. The objective of KYC guidelines in banks is to prevent confidential customer information, which is entrusted to the banks, from being used, whether intentionally or unintentionally, by criminal elements for money laundering activities. The benefits of implementing KYC processes also extend to customers service, allowing the customer to feel

that the company is helping to maintain their information securely and to help with all touchpoints.

it’s for setting up an account to verify new customers, for internal systems use or on customer facing websites.

The Benefits of Address Verification Address verification technology enables banks and financial organisations to identify customer addresses near instantaneously - in less than point two of a second. The reduction in processing time means that banks can eliminate bottlenecks in account registration processes, saving time and expense.

Customers expect streamlined communications across all stages of their banking journey, and address verification is the next step towards delivering a secure and customised digital experience

Having the correct details to hand can be make or break in the fight against nefarious, illegal behaviour. Implementing a managed address verification service ensures that bank data is kept up to date, so companies can avoid sourcing data from third parties. Users are able to input accurate bank information directly, reducing risk of incorrect data and removing reworking costs.

Chris Boaz Head of Marketing PCA Predict References: 1

Address verification works via an application processing interface (API), which can be customised to fit into any application that the bank sees, whether

2 3 4

https://www.statista.com/statistics/286273/internetbanking-penetration-in-great-britain/ http://www.telegraph.co.uk/personal-banking/savings/ year-525-banks-will-shut-will-disappear/ http://www.bbc.com/news/uk-36379546 http://www.experian.co.uk/blogs/latest-thinking/fraudcosts-uk-economy-193-billion-year-equating-6000-lostper-second-every-day/

BANKING

The state of customer satisfaction in the UK

anks are upping their game when it comes to customer service, according to the latest Institute of Customer Service Index (UKCSI)1 report released last week. The research reveals that banks are beginning to match the likes of the retail industry when it comes to delivering exceptional customer service. Banks First Direct, Nationwide and M&S1 all featured in the top 10, in the July rankings and overall banks scores were up more than one-point year on year. Clearly the banking industry is ramping up efforts to put the customer first. The way companies and consumers engage with their banks has changed dramatically in as little as a decade. Customers now rely on technology more than ever before. The world is filled with banking apps and retail apps – all vying to provide us with the best customer service out there. This has led to a seismic shift in the way that banks interact with customers. Gone are the days when low interest rates signaled a banks competitive edge and a customer’s main grumble was that you were the only shop closed on a Saturday afternoon. Now people expect constant service any time of the day, from anywhere in the world. And with banks now being pitted against the likes of Amazon, Waitrose and John Lewis – in the customer service story expectations are heightened. Banks are beginning to realise that technology can be harnessed to deliver great client services, with chatbots operating in nearly all major banking chains. Take for example The Bank of America’s Erica who currently offers a voice and text enabled service to customer’s – helping them to make smarter purchasing decisions2. This use of chatbots reflects just one of the ways that the banking industry has improved its customer services and

with the Aspect Consumer Experience Index noting that 49 per cent of customers in 2016 stopped doing business with a company due to bad customer service3, it’s critical that banks continue to prioritise the person. A human touch Even with so many rapid advancements in automation and Artificial Intelligence (AI), informed human interactions continue to be of paramount importance to customers. In fact, research conducted by Vanson Bourne maintains that 91 per cent of respondents surveyed still preferred a human driven customer experience4. The evidence is compelling and reverberates the concrete role that humans have in driving customer care – after all bots can only do at present what they are pre-programmed to do, they can’t think on their feet or comfort a bemused and confused customer. Where the technology comes in, is in supporting humans in giving them the information they need intelligently at a time they need it. It complements the job, not replaces it. Enabling the employee Automation is bolstering employee productivity and delivering insightful, clean and up to date data to workers so they can better advise the consumer. Take for example, customer relationship management systems that streamline data to employees – giving them a 360-degree view of who they’re talking to. These practical platforms allow employees to be both proactive and reactive to situations enabling them to respond to problems through informed judgement. With the emergence of Relationship Intelligence these systems have now evolved from basic platforms to productivity enablers, and I’m certain that the banking industry will do more to improve employee performance given its continued strife for great customer service.

And with the UKCSI’S 2017 report noting that banking industry has one of the highest complaint escalation problems; rising from 39.1 per cent to 52. 9 per cent1 it’s critical that banks harness this in tandem with the human workforce to resolve this tarnish. What does the future look like? If we look backwards, technology has had the power to improve and disrupt the way businesses perform. Yes, there have been scares that the human workforce may become redundant with the rise of robots, but as hindsight now informs us this was nothing more than hearsay. The release of the 2017 UKCSI has made clear that the banking industry values its customers. However, if it wants to continue to advance and knock the likes of Amazon and ASOS off the UKCSI leaderboard table then they will need to harness technology in tandem with the human workforce to stay ahead of the game

Larry Augustin CEO Sugar CRM

References: 1

https://www.instituteofcustomerservice.com/researchinsight/research-library/ukcsi-the-state-of-customersatisfaction-in-the-uk-january-2017 https://www.aspect.com/globalassets/2016-aspectconsumer-experience-index-survey_index-results-ﬁnal.pdf https://az766929.vo.msecnd.net/document-library/ boldchat/pdf/boldchat-research-effective-mobileengagement-report-2016.pdf https://www.cnbc.com/2016/10/24/bank-of-americalaunches-ai-chatbot-erica--heres-what-it-does.html

BANKING

WHAT DOES IT TAKE FOR BANKS TO BECOME TRULY DIGITAL-FIRST?

igital-first, digital transformation, digital disruption. These buzzwords of the most recent technology movement are popular among businesses in every sector. The problem for banks and other financial institutions is that they cannot keep up with the hype – namely the speed at which technology is moving. In the last two weeks, I’ve had meetings with innovation units from various banking multinationals; I’ve been on conference calls with four different governance representatives, and attended fintech brand Revolut’s product development keynote to celebrate its latest funding round. All of these organisations are talking about the same thing: “How to become truly digital-first while still offering a customer-centric experience.” But what is customer centricity if not a phrase derived from “digital speak” around designing products with a certain persona in mind and its needs? The “disrupters” within financial services, like Atom, Monzo and Tide, to name but a few, are approaching banking differently. They are asking the obvious question – “What do our customers want?” – and then finding a way to facilitate this. Revolut, for instance, a market-proclaimed “next generation” bank, created a sophisticated money card system that mirrors the benefits of a current account, without technically requiring the brand to hold a full banking license. It cleverly identified a niche, created a product quickly, avoided the regulatory black hole and then evolved the product at a rapid rate. 34

But how do traditional banks achieve the same approach, and become truly digital-first? To answer this, we need to define what we really mean by “digital-first”. Really, it’s about being primarily concentrated on the digital experience. And in practice, there are some simple rules to follow:

: Understand that digital-first means exactly that; first, not only. Strategically, any digital directive must be directly aligned to the goals of the business and, therefore, enhanced by other, more traditional mediums. For example, it would make absolutely no sense for a bank to create a new virtual chatbot to encourage users to discuss the best mortgage deals (like Habito), if it was then unable to successfully follow up on a mortgage enquiry.

2: Align spend to the strategic business objectives. Ever since the early Noughties, we no longer live in an economy where organisations have lots of money to throw at the next big thing. Today, guarded by procurement teams and the need for accountability, budgets need to be fought for. It is crucial to create a strong proposal to justify how your digital-first initiative will support your business objectives.

3: Learn to fail fast. While failing fast is another buzz term, this one is vital. Digital technology allows companies to test concepts very quickly within a closed group, and quickly validate

BANKING

Pete Gatenby Client Services Director, B60

hypotheses. Once a proven concept has been identified, further investment is then required.

5: Future proofing is about continuous improvement.

Following this, a Minimum Viable Product (MVP) can be created, taken to market and measured, meaning pointless investment is minimised.

When attempting to do digital, businesses cannot stop. If they do, they will be swiftly overtaken. The only way to create a future-proof value proposition is to constantly ask two questions:

One of the many beauties of digital is that everything can be tracked in real time. Performance can be analysed and improvements (or pivots – changes in direction) can be actioned quickly.

1 – Is this digital entity achieving real strategic business goals? 2 – What is the next phase for this entity product?

4: Processes must evolve. Emerging technology moves very quickly. Gartner stated that the mobile market moved eight times faster than the initial digital market (the Internet). Meanwhile, new technology (chatbots, artificial intelligence [AI] and voice assistants) are moving faster still. Currently, many financial services companies rely on traditional business processes. Budgets are commissioned for known requirements and to invest in necessary technologies at the beginning of a period. But these requirements and technological possibilities are now evolving faster than banks are set up for, especially from a customer perspective. Banks must evolve their development process to become more agile, which often means commissioning time, budget and people before the full requirements of a project are known.

An agile approach relies on a product never being finished. Instead it should be continuously improved and evolved.

6: Consider the people problem. The biggest problem holding digital transformation back isn’t the technology. It is the people. Businesses must therefore seek to create a culture (such as via training) that proactively embraces change and can handle the demands of becoming digital-first. In the past few years, digital has passed from being a question mark into a pressing necessity. While traditional financial services brands aren’t typically set up to embrace innovation, they can achieve it by following a few simple rules. Becoming educated – in understanding what digitalfirst means, identifying routes to it, training staff – and then making appropriate investments is vital. Those that make smart choices now will be in pole position to earn their place in the pockets of generations to come

BANKING

A CSR strategy in line with the SDGs

Laurence Pessez Global Head of CSR BNP Paribas

One of BNP Paribas’ top priorities in 2017 is to contribute to attaining the Sustainable Development Goals (“SDGs”). They are the 17 Goals adopted by all the United Nations (“UN”) member countries with a 2030 target. Their purpose is to eradicate poverty, protect the planet, ensure prosperity for all and contribute to the energy transition. Aligned with the SDGs, BNP Paribas CSR strategy aims to contribute to build a more sustainable world. In addition, by offering financing to all business sectors, the Bank is one of a small number of economic actors which have the privilege of contributing to all SDGs. As an example, one of the key performance indicators of our Corporate Social Responsibility (“CSR”) measures the share of loans to corporate clients that contribute strictly to the achievement of the SDGs: this proportion must be at least 15% of our credits, and amounted 16.5% in 2016. This objective is among the CSR indicators on which 20% of the 36

long-term variable compensation of the top managers of BNP Paribas is based. This is an innovative mechanism that reflects the Bank’s strong commitment to the SDGs, and it has been singled out by the UN as an exemplary practice. BNP Paribas contributes as well to guide its customers’ savings towards these sectors. Several products have therefore been created as part of an initiative with the support of the United Nations called “SDGs Everyone”. It is based on an index that reflects the financial performance of 50 companies identified as very contributory to the SDGs. BNP Paribas also offers to its retail customers funds which participate directly to attaining the SDGs, such as BNP Paribas Aqua, a fund of 2 billion euros that contributes to financing companies focused on water supply and sanitation. Moreover, In order to develop better awareness and empowerment of its internal staff regarding SDGs, BNP Paribas organizes a cycle of conferences in partnership with

BANKING

UN members. Externally, BNP Paribas was notably selected by Corporate Knights to take part in their 5th “Business for a Better World Case Competition” on the subject of “A strategy that places UN SDGs at the heart of a global bank’s strategy, while also growing market share”. A leading bank in financing the energy transition In 2016 and 2017, BNP Paribas was elected by the magazine The Banker as the most innovative investment bank for climate change and sustainability. The Group is also considered by the extra-financial rating agencies (e.g. Carbon Disclosure Project, Robecco SAM, Sustainalytics, FTSE) as a leader in its class regarding the environmental dimension and climate. These recognitions are due to the strong commitment in the support to companies which make a big difference regarding the energy transition, with especially 9.5 billion euros of outstanding loans to renewable energies as of end 2016 worldwide, in line with the 2020 target of 15 billion euros. Besides, BNP Paribas reaches the top 3 position of the world as regards green bonds, a financial instrument enabling to guarantee market financing to large environmental projects. Furthermore, the Group has committed to investing 100 million euros up to 2020 in innovative start-ups involved in the energy transition. Simultaneously, BNP Paribas is reducing its support to fossil energies, starting with coal, the most CO2 emitting energy source: the Group has entirely ceased financing coal mining and coal-fired power plant projects in any country, and will finance electricity companies only if they have drawn up a plan for reducing the proportion of coal in their generation mix.

carbon neutral by the end of 2017 in terms of CO2 emissions arising from its own operations, being therefore one of the first banks worldwide to do so and strengthening its position as one of the European banks making the most effective contribution to attaining the COP21 climate goals. Carbon neutrality will be achieved via 3 complementary initiatives: (i) reducing the Group’s direct CO2 emissions, with a target of a 25% reduction per employee by 2020, (ii) using only low carbon electricity in all countries where it is available and (iii) offsetting CO2 emissions that remain through partnerships with benchmark organisations. A major partner of social businesses Financing and investing in social businesses illustrates BNP Paribas’ goal to combine a sustainable economic growth and a positive impact on society. Both social enterprises and microfinance institutions meet this definition, the first working in social and environmental fields, such as access to employment, international solidarity and responsible consumption, the second because they help fight against poverty, mostly in low income OECD countries. To support its social enterprises customers, the Group has adapted its internal methodology to match their business model, with for instance dedicated relationship managers who are trained to understand their specific ecosystem and a credit policy designed to apply specific analysis.

In all the Group’s business lines, products and services are offered to corporate and retail clients willing to play a role in the energy transition: a wide range of green funds, notably invested in alternative energies, access to water and sustainable building, enable them to allocate their savings into environmental projects, and loans are also offered to improve their home energy efficiency.

Started 25 years ago, BNP Paribas is one of the leading banking partners of microfinance institutions (“MFI”) in the world. In 2016, the Group was present in 18 countries, with as an example an historical support of Adie in France, a microfinance pioneer in Europe, helping unemployed people to start their business, with who was structured the first French Social Impact Bond. Another significant example takes place in India, representing 41% of the world’s micro-borrowers, where BNP Paribas supports 15 MFI which exclusively address women, including Step, a MFI giving micro-loans of 90 euros on average in the slums if Kolkata (ex-Calcutta).

Finally, as part of its long-standing commitment to help combat climate change, BNP Paribas has committed to becoming

These are concrete examples of BNP Paribas’ direct positive impact on society and contribution to attaining the SDGs 37

FINANCE

10 years on: Why the financial crisis led to the rise of

CROWDFUNDING

n 14th September 2007, almost ten years ago to the day, customers queued outside Northern Rock demanding to withdraw their savings. It was the first run on a British bank since 1866 and it happened after news broke that Northern Rock had asked the Bank of England for an emergency loan. During an extraordinary few days, the Chancellor, Alistair Darling, stepped in to offer government support. But it wasn’t enough. Within 6 months, Northern Rock was state-owned and the first significant victim of the credit crisis in the UK. What followed was even worse. The global economy was in the throes of the greatest financial crisis in decades. The housing market entered a state of turmoil, stock markets dived and, most damagingly, credit markets tightened, especially for businesses, to the point of near non-existence. We all remember panicked headlines, the torrent of bad news and Doomsday projections. Despite the devastation, from the ashes of the credit crisis, a phoenix emerged: crowdfunding. This simple method of financing used technology to give start-ups and SMEs access to funding via the general public. The rise of crowdfunding in place of the conventional lending system is one of the few positives that can be drawn from a very dark, uncertain period for global finance. And the two events are inextricably linked. It is not true to say, “without 38

the crisis, crowdfunding wouldn’t have emerged”. Crowdfunding – certainly debt crowd finance – existed long before the credit crunch. However, the crisis threw the business community into turmoil, especially in the UK, with the short and long term effects of the severe credit squeeze looking catastrophic for the backbone of the UK economy. Fortunately, the democratic system of collective funding, coupled with online marketplace technology, came together as what we now call crowdfunding to deliver a lifeline and, in the following years, an opportunity for businesses to grow and flourish. Here’s how. The credit crisis affected millions of people all around the world in profound ways, but the business community in the UK was particularly badly hit. SMEs and startups make up 99% of the UK economy and it was these businesses that lost access to credit when banks, looking to protect their own balance sheets, stopped lending. All of a sudden, businesses couldn’t refinance or invest, and the UK economy slowed almost to grinding halt as a result. Unemployment began to spike, there was no velocity of money, and panic gripped stock and bond markets throughout 2007 and 2008, as business and industry felt the knock-on effects of the housing and credit crises from delinquencies, defaults and bankruptcies both domestic and overseas. What

followed

compounded

the

problem for SMEs and startups. Attempting to keep the UK economy afloat, the Bank of England began its first program of quantitative easing (QE) in March ‘09 in an attempt to stimulate growth in a flatlining economy. This free source of capital was eaten up by large institutions trying to shore up their balance sheets in the hope they could put to bed fears investors still had about their resilience. But what QE really did was provide a capital injection into the British economy that didn’t trickle down to the businesses that needed it most. QE provided insurance and security for the financial system but the everyday UK economy, built upon one-man-bands, small teams and independent businesses, did not benefit. Banks didn’t seem to mind; their balance sheets and futures were secured. But they no longer were able or willing to take risk with their still shaky lending books. Rather, the money from QE earned them returns on a pile of money that wasn’t theirs, providing zero velocity, confidence or reassurance to the rest of the still ailing economy. So, whilst the impact of QE had a positive effect upon the UK financial system and – to be fair – staved off paralysis in global financial markets, UK businesses and startups still gasped for oxygen. At a time when government assistance was most needed, there was little help given, with priority granted to the behemoths

FINANCE

of Canary Wharf and the City of London. With hindsight, this was a failure perpetrated by central banks the world over. So the lifeboat that emerged – crowdfunding – was borne out of design, creativity, and also out of necessity. The rise of crowdfunding wasn’t an accident, but it was likely an accident that had been waiting to happen and whose emergence satisfied an enormous demand from businesses, who needed access to capital. Where others couldn’t or wouldn’t lend, crowdfunding gave businesses and startups the opportunity to raise funds when they needed it, using digital technology to access a large, new group of potential investors. In comparison to the bone-dry conditions in traditional business financing, the wave of money flowed through crowdfunding platforms was a welcome relief for businesses, investors and for the UK economy. It should be said that crowdfunding wasn’t done for benevolent reasons. It was a business, fashioned in order to create value for investors, businesses and platforms alike. But the conditions in which it grew throughout the last 10 years have been the perfect conditions for growth. And that growth – including investment opportunities, business exits and platforms – has been nothing short

of phenomenal. An example to illustrate this point is Brewdog, a Scottish beer company, who, in a little over 10 years, have built a globe-conquering business. Their story provides a good example of how the crowd economy has flourished in the post-credit crisis era. At the time of the crisis, Brewdog – an emerging craft beer brand with little record of success, brewed by two guys in their mother’s garage – wasn’t an attractive proposition for banks and traditional methods of financing. So they were forced to seek funding elsewhere. This led them to crowdfunding and the rest, as they say, is history. Brewdog now has a valuation of over £1 billion and, if it weren’t for the emergence of crowdfunding following the financial crisis, it may never have got out of the garage. Many other businesses – both large and small, from restaurant chains, like Chilango, to apps, like goHenry, to property developers, like Pocket – have enjoyed similar success, only possible in part because of the access to capital that was granted by the crowd when more traditional methods of financing seemed less accessible. It’s safe to say that the emergence and growth of crowdfunding was not

contingent upon the financial crisis. It’s likely that this pre-existing method of raising money, in both debt and equity, would have emerged at some point. However, the conditions created by the financial crisis 10 years ago were the perfect opportunity for this revolutionary and democratic method of financing to be fully tested and developed. What has emerged has been revolutionary. The growth and success of the industry – and the businesses, like Brewdog, that is has supported – is based upon a need that became more acute during 2007 and 2008 when business financing for SMEs and startups in the UK all-but-dried up. Without crowdfunding, these businesses may never even have existed or survived the following decade. And there is no better testament to the success of crowdfunding than that

Emily Mackay CEO, TAB 39

FINANCE

TOO BIG,TOO FAST? How expanding your finance team can come back to haunt you

n 2017’s business environment, growth is emphasised to the point where it supersedes profit. Huge international tech companies – Uber, Twitter, Amazon, Snapchat, et al. – become dominant and receive colossal valuations on the basis of their size. That they struggle to post profitable quarters (and in many cases, have yet to experience one) is a side issue, if it is an issue at all. But unless you have unlimited funds, there is such a thing as unsustainable growth. Entrepreneurs are naturally optimistic: they hire because they have anticipated a future need, rather than perceived a present one. But hiring the wrong person is expensive: they have to be recruited, onboarded, and trained – and this requires an expensive combination of money and time. Worse, if you make the wrong call, you have to 40

repeat the process six months down the line. The infrastructure that supported a small business buckles under the weight of a larger one to the point it ceases to function effectively. This issue is especially pronounced where finance teams are concerned with the added risk that without accurate information, it is all too easy to hit a cashflow crisis. Here’s why you should think twice before hiring more finance staff. Finance fiascos In its purest form, finance is a fundamentally simple function: money comes in, money goes out. Issues arise when the fundamental certainty of the function is compromised.

As you grow, the quantity and value of invoices increases, but the business won’t be aware of them until they’ve arrived – and they won’t be reflected in accounts and cashflow until they’ve been captured, processed, approved, and posted. And as the volume of these invoices increases, pressure on finance will

FINANCE increase in kind and they end up being 100% committed to just getting the invoices posted into the accounts system. As a result, the team will receive more queries from suppliers chasing payment and from senior managers and budget holders asking the same questions, but finance increasingly struggle to answer them – to the point where departments will simply stop asking. A ‘better to ask forgiveness than permission’ culture is created which is extremely dangerous, as the first time finance knows about spend is often a matter of days before those same invoices are due for payment. Often, the natural response is to add additional staff to deliver the extra capacity, but it is the process that is broken, and more resource simply perpetuates a way of working that is putting the business in jeopardy.

Supplier strain The most immediate effect of these issues is that supplier relationships become strained. Every time cashflow becomes tight, stretching supplier payment terms is typically the easiest option available. This causes no end of agitation. Most suppliers, unsurprisingly, are unhappy to increase their financial exposure to clients that pay later. The result of this is a deterioration in trust, accompanied by very tight credit limits and harsh payment terms. If this happens with critical relationships, the knock-on effects will be felt throughout the entire business. The way to keep suppliers happy is to spend more money with them and pay them on time. This puts you in a

much better position when it comes to negotiating better prices and making available funds go further. You can do neither when an overburdened finance team habitually makes late payments. Addressing the risks The best way to tackle these issues is firstly to avoid over-hiring. Secondly, it’s essential to delegate financial responsibility and accountability to budget holders. To achieve this, businesses have to automate the purchasing process. If budget holders have a transparent, realtime view into everything they’ve bought and are planning to buy, they will have a better idea of how to manage their departmental budgets and resources. Good financial management is not about

having funds handed down from on high, on demand: it’s about ensuring that team leaders can plan and manage their spending by providing the tools to achieve this, saving everyone a huge amount of time and making sure everyone is totally accountable for their actions. Financial directors and CFOs must recognise this, and educate departmental heads accordingly. If you can ensure that monetary commitments aren’t made without good reason and there are rigorous real-time controls in place, you’ll have more room to focus on operationally important tasks. To improve supplier relations, it’s worth eliminating paper invoices: by delivering a detailed view of all cash commitments from the moment an invoice arrives, supplier payments can be approved and processed quickly. This will have a positive effect on your key

relationships – and your terms. Growing strong Adding staff for the sake of getting bigger, without considering automation to increase productivity, is a bad idea – for businesses and finance teams alike. Rapid expansion should be a natural extension of your plans for the company; it should not be done in light or cavalier fashion. It is better to invest to get the best out of the resources you have, than to further complicate an already overburdened way of working.

When building for the future, it’s vital that you remember to future-proof. Delegating effectively, modernising with new technology, and ensuring that you never make unnecessary hires will go a long-way towards protecting your company and your finance team. You don’t have to get big to move forward

Neil Robertson CEO, Compleat Software

TECHNOLOGY

A DELICATE BALANCING ACT: HOW TO DIGITALISE YOUR CUSTOMER SERVICE

he digital revolution has fundamentally changed the way banks operate for their customers. In fact, a recent report published by the British Bankerâ&#x20AC;&#x2122;s Association shows that 4.4 million web chats were hosted on UK banking apps or websites last year â&#x20AC;&#x201C; up 24% from 2015. This signals clear consumer demand for greater digital choice. As a result, financial services providers of all sizes have made progressive updates to their customer management 42

strategies, and digital customer-centric tools such as apps and web chat now form an essential part of many banking services. Our dynamic, digital world is now moving fast towards integrating messaging, IVR, chatbots, and virtual assistants - all facilitated by interaction analytics. It is the seamless integration of all the digital channels backed up by human intervention that can provide a truly omni-channel and effortless experience to customers.

This is especially true for challenger institutions and fintech start-ups, which have added fiercer competition to the retail banking market as customers look for easier options for their banking. In the face of these fresh-faced fintechs, itâ&#x20AC;&#x2122;s essential that banks are doing all they can do digitise their services and provide a truly competitive offer to challenger brands. So, what must banks bear in mind when looking to digitally transform their customer service?

TECHNOLOGY Webchat best practice

transaction history, and pay bills.

Webchat may have been around for a while, but many banks struggle to make the most of the channel and use it in an intuitive and efficient way.

Capital One’s approach is both a cautious and sensible one. While bots can have disastrous consequences when applied in the wrong setting or for the wrong audience, they can also be hugely useful when solving straightforward transactions and simple questions, or to shepherd customers on a relatively linear journey, such as everyday banking queries.

With messenger, brands have an opportunity to engage with their customers in a much more meaningful way in order to steer them towards a resolution. It is vital that agents on messenger are sufficiently empowered to be able to resolve a customer’s problem quickly and efficiently. In doing this, they should take care to demonstrate the same empathy and engagement that they would through voice channels or face to face. Customer experience must remain paramount – and agents should be careful that they do not let the relative informality of the channel distract them from this. Providing an intuitive and personal connection with customers will also help build brand loyalty. And, by taking a leaf out of fintech banks Monzo and Plum’s book, even the use of emojis or text speak – where appropriate – can help show the personality behind your brand, and make customers feel as if their interaction is as familiar as a conversation with friends. AI’s potential for customer experience With digital consumer tools such as apps and webchat now a huge part of banking services, the industry is gradually turning its attention to the potential application of automation and AI for customer experience. This is seeing banks follow in the footsteps of brand giants including Uber, Twitter and Microsoft - who have all begun trialling chatbots across their services. Several banks are already dipping their toes in the chatbot water. Capital One, one of the US’ largest banks, recently launched their chatbot “Eno”, which lets customers text to see their balance,

Integrating chatbots into your customer management strategy also frees up agents to deliver a more streamlined process, and help consumers with more complicated questions. This in turn helps drive great customer experience – a winwin for any business who can get it right. Back oﬃce automation Digitisation can be used for more than just customer management; this technology has the potential to unlock value across a wide range business functions. Top of the list for financial services companies considering how to use digital solutions to deliver benefit to their businesses, should be a look at how automation can help transform back office processes. Automation can be used to transform more complicated tasks such as commercial finance operations. This holds special significance for the financial services industry, where efficient and cost-effective operations are paramount to success. Automation can also further remove the room for human error in heavily regulated industries.

- and instead remain focused on the customer journey across all channels: online, through voice, and in real life. Consumers still have their doubts about automated advice, and reasonably so. A recent study by Firstsource revealed that for 44% of consumers, the availability of a bank branch is the primary deciding factor when selecting a banking provider. Indeed, a digital-only approach in banking fails to account for the complexities of context and journeys. While customers tend to use digital service for their everyday banking needs, they still demand security and the comfort of voice or face to face contact for more important processes. When things go wrong – or get complicated – customers will seek human interaction, not that of a bot or a webchat conversation. The key is to ensure there is a thorough understanding on what journeys are best resolved through which channels, and then building a strategy to steer customers accordingly. This needs to be backed up by a seamless channel switch, when required, in terms of experience and effort. To this end, training frontline agents in a contact centre must be given the same amount of attention as the user experience on an app. Failure to do so may mean risking alienating huge customer groups. It’s a delicate balancing act, but the providers who get it right will reap the rewards

And by automating simple but time-consuming tasks, companies can free up employees to focus on more complex and value-added work. Beware of over-digitisation Despite the many benefits of digitisation, providers must be careful not to place all their eggs in a digital basket

Bhupendra Gupta Global Head - Robotics & Digital Firstsource Solutions

BANKING

HOW BANKS CAN COMPETE IN THE FINTECH ARENA Jason Rolles CEO BlueOptima

intech attracted $6.5bn (£5bn) of funding world-wide in the first half of the 2017, $564m (£433m) for British start-ups alone; representing a year-on-year increase of 37%, according to trade body Innovate Finance. With investors confident in healthy returns from these aggressive and lean fintech entrants, how can banks counter competitive threats without losing control of ROI on these initiatives? Banks have software development powerhouses at their disposal but identifying and deploying a reliable way to quantify the productivity of software teams engaged in specific initiatives – and the quality of code delivered into those initiatives – can be challenging. There is no shortage of anecdotes pertaining to significant software development projects foundering. How can banks know they are getting a reasonable output from the large investments they make in software engineering? The need for banks to up their game in terms of innovation is driven by the increased use of mobile technologies, new regulatory obligations, security concerns and fintech competition. Rapidly shipping reliable software plays a vital role in banks’ ability to offer engaging, leading products and services. The urgency to deliver highly innovative new value 44

propositions, as well as maintaining and improving existing products, makes software development a strategic imperative. As a major area of investment, it is increasingly important for banks to control software development costs and monitor quality to optimise the speed to market of new digital services. Fintech companies are certainly adept in terms of delivering outstanding software as they are typically founded by former software developers at banks. Quantifying the output of software engineers, and controlling resources appropriately, will see banks better positioned to compete. This isn’t an entirely new idea, banks and financial institutions have explored a number of approaches to measuring the productivity of software developers, including: counting lines of code, analysing Function Points and Story Points. Finding the right approach to measuring software success is key Counting lines of code is one way to measure the productivity of software developers: how may lines have been produced in a particular time frame? If a bank were to deploy this measure, it must be assumed that the number of lines of code is proportional to the

progress of a project – which is not always the case. The measurement also assumes each line of code represents the same amount of work, and that this is consistent across all languages and source file types. Lines of code are susceptible to manipulation – threatening their accuracy and compromising the value of code. If software developers know their employers are using a particular metric to judge their progress and productivity, they can alter their working practices to meet requirements. Developers are effectively incentivised to bloat code bases with unnecessary lines of code to appear more productive, when fewer lines of more succinct code will most often result in more maintainable software that runs more efficiently. Functional measures Functionality is central to the purpose of developing software. Each Function Point represents fulfilment of one step towards producing software with the functionality required. However, measurable points vary depending on the processes used to measure them and the architectures or languages used across the applications within a portfolio. The insight Function Points can

BANKING

provide on an application-by-application basis can be interesting, but only if consistency of measurement can be achieved. They are not a reliable, consistent, or fair basis to make comparisons across applications in a software estate. In addition, Function Points require different amounts of work depending on the language used and they do not account for the amount of work invested in developing software that does not contribute to delivering functions. By assessing coding productivity, banks can identify the highest performing teams and individuals, in order that they may take on the most important work as well as serve as an example of best working practices. Individual contributions are not divisible at the point of counting function points; Function Points are not attributable to individual developers or teams. They are written into source code by many contributors.

This is a complicated, long-standing problem, but one that has nevertheless been solved. Based on seminal research at University of Cambridge and a decade and a half of industrial Research and Development, BlueOptima calculates a consistent measure of Coding Effort based on up to 36 measures of every revision made by each developer working on the code base. These measures are then benchmarked against a dataset of more than 7.5 billion measures which have been placed on a multi-dimensional statistical continuum to ascertain the Coding Effort any given code change has required.

improve the way they manage their software development operations.

The technology simultaneously reveals delivery rate and quality of the output – to the end of maintainability and stability of the code. Coding Effort Analytics technology is now used by seven of the world’s top 10 Universal Banks (by revenue) and has enabled them to identify significant opportunities to

Monitoring the productivity of software developers enables banks to stay competitive by cost-effectively bringing new software products and software enabled operations to market faster, and improving the operational efficiency of so called “legacy” infrastructure through digital transformation

The technology market is bringing great disruption across all industries, but financial services will be one of the first to be completely changed by automation. The fintech phenomena has shown the barriers to entry are low in financial services – there are many start-ups that will look to take revenue from banks. Banks need to digitise their offerings to compete with technology-led financial services, and successfully managing software development is essential.

The expense associated with gathering such data is also a significant disadvantage. Data must be collected manually and requires iterative recounts for valid measurement. Case in point Conceptually related to Function Points are Story Points - and above them, Use Case Points. Both are different measures for codifying the functionality needed. It is fiendishly difficult to get consistency of measurement across applications, teams, or even individuals, and would be a poor choice for evaluating the performance of software developers within a bank or financial institution. Confidence through consistent, reliable metrics For banks to be confident that software developers are being productive and writing quality code within budget, they need to deploy a consistent, reliable metric to enable a strong and robust comparison of individuals, teams, and projects. 45

INSURANCE

lthough still in the early stages of adoption in some sectors, blockchain technology is beginning to emerge as a strategic force across multiple industries. The insurance industry is seeing plenty of action of its own. Some of the world’s largest insurers have taken notice of the potential of this technology. They have started industry initiatives like B3i, which is a collaborative effort to explore increased efficiencies in the exchange of data between reinsurance and insurance carriers. There is an increased realisation that the use of globally distributed ledgers is quite disruptive for some of the most foundational insurance processes, such as underwriting, claims and reinsurance. As a result, there is a need to evolve strategies to address those disruptions. Simultaneously, traditional players are also being prompted to think more innovatively due to the emergence of smaller ‘insurtech’ start-ups, threatening to encroach on the territory of leading insurance companies. These firms often have technology at their core and are likely to rise in popularity as we see innovations such as driverless cars enter the mainstream, challenging insurers to create new models that cater to these developments. As the insurance industry is traditionally slower to adopt change, insurance firms that get to grips with, and start using blockchain technology, will have a significant and positive impact on the industry.

ly 46

However, in order to successfulimplement blockchain, insurance

companies will have to balance the range of benefits and challenges before it can become a regular feature. Claiming the future Although blockchain could still be defined as ‘emerging,’ the technology has a number of potential applications and exciting implications for insurers. As a distributed ledger increases in security as more parties access it, providing an extra layer of verification, blockchain could help reduce the burden of reporting, balancing and payment reconciliation while claims paid timelines could see a reduction in physical damage claims from two-three weeks to a week. Combined with this, blockchain’s automated nature could result in numerous efficiency benefits for insurers, through the use of smart contracts. A smart insurance contract would pay out against the insurable event without the policyholder having to a make a claim or the insurer having to administer the claim. This will essentially remove the cost of claims processing and minimise fraud. For example, imagine your travel insurance policy being ‘activated’ at the exact moment a cruise ticket is purchased, ‘de-activating’ when the ship docks at its final destination. In the event that the ship could not depart on time, blockchain-enhanced insurance would automatically trigger the claims process. Thereafter, a smart contract would reimburse a policy holder without the need for any administrative input from them or the insurer. In the future, , assume that

you want to insure the contents of your cabin, the policy is automatically quoted based on cabin size and location alerting you on the mobile phone, the quote and binding agreement are done automatically through digital policy processing core systems and the premium and commission to the cruise company are automatically credited using blockchain. Blockchain also has the potential to enable the growth in popularity of peerto-peer (P2P) insurance models - a prominent facet of the ‘insurtech’ revolution. Certain companies already enable small groups of policy holders to pay into a collective claims pool, rather than enter a contract with an insurer. In this instance, blockchain ensures that payments comply with terms agreed to by all parties. Transparent and almost fully automated, claims management could be sourced to a third party that connects related ledgers to verify and settle a personal claim. That blockchain has use cases across traditional claims processes and innovative ‘insurtech’ models demonstrates how versatile the technology is in enhancing the offerings of all types of insurers. Breaks in the chain Despite the plethora of applications of blockchain for insurers, firms of all sizes have several challenges to overcome before it can be fully integrated into their business models. While the reliance of blockchain ledgers on public key encryption or cryptography means they are safe from many traditional cyber-threats, it

INSURANCE

has the potential to cause significant upheaval resulting from the disintermediation and the transformation of how business is conducted in insurance firms. More broadly, there is the ever-present issue of how best to integrate new technologies with legacy systems; concerns surrounding the transition phase between systems is an obstacle for businesses. Organisations will need to test and deploy blockchain technology that fits with existing systems, to overcome formidable integration challenges. It will also mean that organisations give up some of the control they have over certain transaction and data exchanges. For example, a policyholder does not have to rely on the decision of the insurer to cover damages, as the insurer will pay before claims managers are even aware of the claim. However, as insurance decisions have the potential to seriously impact peopleâ&#x20AC;&#x2122;s lives, there will still be a need for human intervention and analysis to regulate this automated claims processing. Building (on the) blocks Insurers are getting wise to the benefits of blockchain. Executing proofs of concept is an important first step. This will allow them to understand blockchainâ&#x20AC;&#x2122;s potential and limitations, rather than measuring early deployments on their return on investment. Adopters should consider running hackathons, building developer communities and even crowdsourcing innovation rather than managing the whole process

in-house as opportunities to innovate exist on many dimensions. In the current climate, it would seem that regulatory and security concerns â&#x20AC;&#x201C; in addition to upfront costs - are still tipping the balance versus the potential efficiency and cost savings associated with the distributed ledger in the long term. After all, despite the benefits, blockchain is not a guarantor of authenticity. However, as it matures, blockchain could prove to be the key to delivering the tailored products and services that insurance customers now expect, in a manner that address some very longstanding issues around creation and exchange of value

Michael Clifton Senior Vice President Cognizant 47

ENGAGING WITH FINANCIAL SERVICES T

he digital revolution has changed communications for good. It has transformed media habits, put consumer participation at the heart of communications and enabled innovations in targeting that offer a personalised and increasingly automated experience. Yet, through all this change (which has seen technology companies establish pre-eminence across

the industry) communications strategies of financial services brands have remained much more resistant to these changes than those of other industries. As a sector, a reliance on both paid-for media and a safety-first approach to comms still remains the norm, despite radically different approaches from leading and emerging brands in both the b2b and b2c sectors.

FINANCE

In many ways, the financial services sector remains the principal apologists of Bryon Sharpe and his philosophy for brand growth. There remains an apparent belief that reaching all potential customers all the time is key, and that saliency (and market share) is driven by outspending competitors. Take the investment management sector, for example, each of Fidelity, M&G Investments and Blackrock have spent in excess of €10M on average over the last 3 years across Europe (with Schroders, Invesco and JP Morgan AM not far behind), and all largely prioritise the same media channels – over-indexing on Print, Sponsorship and Outdoor. This herd mentality has also extended to brand positionings, which, being charitable, are ‘far more similar than different.’ It is hard to find an authentic and distinctive brand truth in the recent offerings of leading players – Aberdeen’s ‘Strictly Asset Management’, Old Mutual Global Investor’s ‘Building better solutions’, Artemis’ ‘Profit Hunter’ and Aviva Investor’s ‘For Today’s Investor’ name just a few. Even when looking at retail banking, is it Lloyds or Nationwide who are ‘at’ or ‘by your side’ and do consumers really identify with the difference? Whilst for bigger incumbent brands, this ‘safety first’ approach is at least understandable, this caution creates opportunities for others, especially challengers, to be bolder and to stand out in this sea of dullness. Take State Street Global Investors, who, since McCann’s appointment in 2015, had done nothing notable in conventional advertising. However, its Fearless Girl campaign – the statue that is staring down Wall Street’s Charging Bull sculpture – not only swept this year’s award shows, but also went a long way to differentiating SSGA from its closest competition, all with limited paid for spending. Similarly, in the UK, Close Brothers (who have always used innovative media strategies to help its ‘Modern Merchant Banking’ positioning stand out), has recently strayed into more ‘sensitive’ subject matter areas such as ‘Brexit’ to differentiate itself from mainstream competitors

to customers and deliver enhanced return on marketing investments in the process. Merck’s Bravecto brand – which provides flea and tick prevention for dogs and cats – built its hugely successful “Expect The Extraordinary” global campaign on a blend of a digital and content-first approach that targeted influencers as well as direct consumers and included digital tools and experiences, vet and consumer apps, social media campaigns, and even a tablet game for cats - all focused on demonstrating the extraordinary power of Bravecto. Lockhead Martin, meanwhile, went further still with their ‘Fieldtrip to Mars’ campaign, which harnessed the power of virtual reality to create a group VR experience that took schoolchildren on a virtual tour of Mars. The view through the windows of the school bus the children were on was transformed, via specially developed VR tech, into a Martian landscape, helping position the brand to be seen as at the forefront of technical innovation. The campaign also gained more coverage in trusted earned media than any amount of paid-for media could have generated. These techniques are not going to be right for all financial services brands, and, indeed, I am not advocating, or predicting that all FS brands throw the ‘baby out with the bath water’ and focus all of their efforts on developing a truly unique and differentiated positioning. In many cases, shifting a brand’s entire marketing strategy in one go to a content and experience-driven approach or targeting and automation strategy aimed at delivering personalised communications is likely to be unnecessarily risky – but there are opportunities to take steps in this direction. As brands review their marketing strategy, consideration should be given to developing a new positioning that means something to their customers and actually helps to both sell products and build a brand in tandem. We should always be asking ourselves - can we use our media strategy to set ourselves apart from key competitors, and can we devote a portion of budget to content led activity? If we then test it and measure the results – they may have a surprising outcome!

Challengers such as LDF – the finance provider to UK SMEs - have been more direct in challenging the competition with its ‘Welcome to the Flipside’ campaign. The campaign aims to directly contrast its ‘no-nonsense approach’ to lending with the ‘bureaucratic experience’ of the high street banks. In other sectors brands have been bolder still, embracing the potential applications that digital and emerging technologies have to offer more distinctive experiences

Peter Reid CEO MSQ Partners 49

FINANCE

What digital transformation means for finance teams D

igital transformation has become a necessity for all facets of business. If your finance function has yet to be disrupted, it won’t be long. Because, if you don’t lead the change yourself, someone else will. But what exactly does digital transformation mean and how can it enable businesses to reimagine their finance function? Put simply, digital transformation is the use of advanced technologies, such as cloud computing and its consumption as a software-as-a-service (SAAS) model, to transform the way organisations operate and service their customers. There are big advantages such as increased control and efficiency and, at its most fundamental level, it helps businesses drive future success. The cloud can also drive down costs and form ‘connected’ finance teams to create and analyse much larger datasets of business information (not just financial) across the business. In addition, there is the integration of the Internet of Things (IoT) that delivers context and data, with the potential of bringing to life a business and enabling transparency of supply chain and business performance like never before. This has the potential to promote greater transparency around budgeting, forecasting as well as spotting anomalies and trends more rapidly to stay ahead of the competition. Furthermore, technologies such as invoice automation can help companies comply with different types of financial legislation. Automating basic transactions also gives accounting departments more time to spend on critical thinking. So where are we in terms of the maturity levels of digital transformation? IT advisory and analyst company IDC suggests that two thirds of SMEs are already using new technology to improve their business through a digital transformation strategy. However, focusing purely on technology is a misconception with regards to ensuring success from digital transformation projects. Transformation also requires a change in culture, structure, processes and even personnel. To be fully digital, organisations need to ensure they are rethinking and refreshing their existing business models, but also the people they hire and the way they work. Many employees may be wary of a digital shift coinciding with fewer jobs in the finance function – but they needn’t be. Rather than seeing it as a threat to their jobs, digital transformation can positively impact the sector by allowing it to be more influential in both strategy and decision making. People should be freed up to work on higher value tasks, for example creating insight from ‘connected’ data with reporting that is (near) real-time, rather than waiting for month end. Furthermore, a formal digital strategy shouldn’t mean companies get carried away with making

FINANCE digital technology changes for change’s sake. Companies should start with the positive impact they want to achieve in three areas: • The functioning of their accounts team or accounting practice to save time or remove manual tasks • The ability to provide organisational leaders with business and financial insight they need for better decision making • The impact the financial/performance insight can deliver and how it can enable the business to stay one step ahead of their competition This is where the CFO leading the accounts team needs to work closely with the CIO or CTO – where technology and financial practices collide in the most positive, connected way – to agree, for example, what technology changes need to take place with what investment. The bottom line is that digital transformation is a journey, not a destination. It does not mean going from one state to another in a single project. It’s more about getting to a state where a company can continually adapt as technology develops to remain agile and open to change. However, with the existing IT infrastructure of many companies, this isn’t possible. Archaic technology and processes don’t allow for companies to continually evolve. So digital transformation will require incremental changes. Simple shifts from moving from paper to using digital processes, using workflow software to prevent bottlenecks and breaking down the barriers of communication between different departments are just some ways businesses or accounting firms can make a digital transition. Whether hiring a chief digital officer or empowering the CIO or CTO, someone must take the lead to oversee the digital shift in every function within the business. What’s clear is that it’s no longer an option to incorporate digital technology into the organisation –it’s a necessity. And it will be the accountants taking the first steps now that will overtake their counterparts in the years to come

Jon Wrennall CTO Advanced 51

BANKING

The next hurdle for banks will be adapting marketing to the digital revolution â&#x20AC;&#x153; The challenges faced by banks and how they can adapt to a new age of brand-agnostic customersâ&#x20AC;?

en years ago last week, the collapse of UK bank Northern Rock marked the first ripple in a financial crash whose shockwaves are still being felt in the banking sector today. With customer confidence in banks and bankers still damaged by the effects of the crisis, traditional banks need to update their marketing strategies to keep these wavering customers before they are lapped up by new, cloud-based challengers. A survey on customer confidence in banks has found that only 39% of consumers say they have complete trust in banks with branches, compared to 44% who put their trust in internetonly banks.1 This amounts to a crisis of customer confidence in banks, with non-traditional banks coming out, albeit narrowly, on top. Banks need to reach out to their customers in a personable, individualised way to start fixing this relationship, before online banks increase their advantage. The last year has seen a rise of many app-based digital banks that, offering tailored services such as retail discounts and financial advice to help customers save cash, are taking customers away from traditional banks. Challengers are offering tangibly better rewards to their 52

customers, and finding a new generation of brand-agnostic customers happy to switch providers to get them. In fact Kasasa has found that eight out of ten millennials would switch banks if a different bank offered better rewards.2 The emergence of these new, agile alternatives means that older banks can no longer take their customers for granted, and will have to compete on a more open field. This is likely to only get worse in the wake of the Open Banking Initiative, and the second Payment Services Directive (PSD2), which comes into force in January 2018. This will force banks to share customer account data with third parties (with the customerâ&#x20AC;&#x2122;s consent) and open up the back end of their programmes to other external developers. Customers will be able to compare the value that each financial services company offers them, without having to shop around. It also means that third parties will be able to carry out transfers of money without having to go through the bank, so switching money around electronically will be even easier. In real terms, competition will be democratised and made extremely fluid. Banks have historically not had to invest a huge amount of attention into

marketing themselves, because of the sheer inertia of the industry. Consumers tend to not change banks once they have chosen one, even if they are dissatisfied. But this is changing. Last April saw a record number of customers switch to a different provider,3 and PSD2 will make the reasons to switch much more obvious. Banks will have to respond to this new, more consumer-focused market, and develop successful marketing strategies to make sure they do not haemorrhage customers. The main advantage that online banking providers offer is a tailored, personalised approach. No longer able to rely on the quality or brand loyalty to retain customers, banks need to offer real value exchange to customers, in a personalised way that appeals to each customer as an individual, to stop them from switching. But how can banks tell which offers and strategies are the most effective for each customer? The best way to implement this and make sure it is done in an effective way is to make the most of the customer data available to them, which will soon also be available to their competitors. Using demographic and account information about their customers, marketers can parse the customer

BANKING

base into distinct categories, based on things like account size or time spent as an account holder. Once a category with key common purchasing and/or demographic traits is identified and isolated, marketers can develop a variety of different, personalised marketing strategies to it. Temporarily dividing this segment into a few sample groups, marketers can try different strategies, such as promotions, personalised offers or reduced charges. The revenue that each strategy produces can be directly measured through customer transactions, and this can tell marketers which strategies are the best for particular types of customer. AI programmes can be used to make smart observations on the results of these trials, isolating not only the most successful strategies, but also the types of customers who respond best to each strategy. Based on the relatively large starting segments can be further narrowed down, at the same time as marketing strategies are perfected.

By experimenting with these different approaches, marketers create an optimum combination of marketing strategies and channels for each segment, to boost revenue. AI programmes can sort through the results, making observations on which strategies are most successful and which parts within every group are most responsive to different strategies. This reveals subsections of each segment, who respond in similar ways to particular marketing strategies, giving marketers a deeper understanding of individual customer behaviours, preferences and needs. Agile, cloud-based challengers to traditional banks are competing for customers on a personalised level, with tailored offers and individual financial advice for each user. Soon, with the Open Banking Initiative on the horizon, they will have access to the account data of traditional banksâ&#x20AC;&#x2122; customers. To get a head start on their competitors they need to make the most of this data, to

develop personalised relationships with customers that offer them real value and communicate with them on an emotional level

Alon Tvina Chief Commercial Officer Optimove References: 1

http://www.ey.com/gl/en/industries/ďŹ nancial-services/ banking---capital-markets/ey-trust-without-it-youre-justanother-bank https://kasasa.com/landing-pages/switching-millennials. html?utm_source=the%20ďŹ nancial%20brand&utm_ medium=guest%20post&utm_campaign=2017-PartnerMarketing&utm_content=switching%20motivator%20 for%20millennials&utm_term=millennials http://www.telegraph.co.uk/business/2016/04/19/recordnumber-of-customers-switch-their-bank-account/

BUSINESS

PSD2: THREE STAGES

t’s easy for Payment Service Providers (PSPs) to get caught up in the details of Payment Services Directive 2 (PSD2), whether that’s rules for Strong Customer Authentication or the technical standards for open banking. PSD2 aims to drive innovation in banking and make payments — particularly remote payments within, into and from the European Union — more efficient, reliable and safer. However, PSD2 will also create new opportunities for criminals to capitalise on the confusion that follows any system change. To meet the regulation’s demands while processing transactions efficiently and protecting against fraud, PSPs are advised to adopt a three-stage approach. 1. Prepare: Get ready to balance regulatory compliance, fraud prevention and customer experience PSD2 makes payment fraud prevention the responsibility of PSPs and it mandates how they should tackle it. The Strong Customer Authentication (SCA) regulation requires PSPs prove that transactions are being initiated by genuine customers using at least two of these factors: • Something they have, such as a security token or mobile device • Something they know, such as a password or secret information • Something they are, such as a biometric When customers must provide this verification it interrupts their transaction, leading to a poor customer experience. To attract and retain customers, PSPs must ensure that they limit friction in the customer journey. While SCA can be the enemy of this, there is an answer – Transaction Risk Analysis (TRA). PSD2 allows TRA for qualifying payments under €500, securing them in a way that is invisible to the customer and therefore doesn’t affect their experience. But it is only available to those PSPs that can keep fraud under specified rates. PSPs must therefore understand the parameters set for the use of TRA in the PSD2 Regulatory Technical Standards and prepare by: • Understanding their current fraud rates • Determining where they need fraud rates to be in order to use

Transaction Risk Analysis • Understanding in detail what causes fraud rates higher than the desired levels • Devising and executing a plan to reduce fraud levels in line with PSD2 reference rates It is also worth noting that PSPs will not only have to prepare for PSD2 for themselves, they must also prepare their customers. This means not only educating them about the likely effects of PSD2 on them but also telling them about SCA and enrolling them for appropriate authentication methods when required. As all fraud managers know, reducing fraud rates by even a fraction of a basis point is not simple and will take time to realise. But when it comes to PSD2 and fraud rates, failure to prepare really is preparing to fail. 2. Protect: Real-time evaluation of more transactions with better accuracy With fraud prevention and customer protection being a key driver for PSD2, it requires, as a minimum, that every transaction is monitored for signs of fraud, including signs of malware infection, known fraud scenarios and the amount of each payment transaction. This increases the number of transactions a

BUSINESS

FOR FIGHTING FRAUD PSP needs to check in real time as well as significantly altering the volume and complexity of the data that informs decision making. PSPs must have decisioning systems in place that can record and assess the specific criteria set out by PSD2, as well as the multiple criteria they use in fraud prevention. This means fraud systems must analyse more transaction data, build more complex profiles and evolve better, more adaptive models to fight fraud. While this is a challenge for PSPs, it is also an opportunity. By deploying systems that are fit for purpose to manage fraud under PSD2, PSPs can keep their fraud rates below the reference levels set by the European Banking Authority and secure more payments without deploying SCA. 3. Adapt: Quickly understand how the threat landscape is changing, and future-proof your business with machine learning The introduction of open banking means that third parties such as the Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs) will be forming relationships with consumers. For the PSP, this is a dilution of

the relationship they have with their customers and means that they are receiving data about their customers through the filter of the PISP or AISP. This is the data that they base fraud decisions on, but at the moment itâ&#x20AC;&#x2122;s difficult to know if the PSP will receive more data, less data or just different data. The fraud data landscape will inevitably evolve over time as new service providers emerge. Fraudsters will also change how they operate in response to the limits put on their activity by PSD2. Prolonged change means that PSPsâ&#x20AC;&#x2122; fraud management systems must include adaptive models to identify evolving fraud, and have monitoring, reporting and governance processes that enable them to take proactive action. Without information on how to adapt their fraud detection systems, PSPs risk either frustrating customers, leading to lost revenue, or losing money to fraudsters, and then losing customers and revenue. In such an environment of change, machine learning can be invaluable to PSPs. Machine learning models can adapt quickly to emerging fraud patterns without the need for vast amounts of data. The use of these unsupervised machine learning methods can then be enhanced and improved as more data related to fraud under PSD2 becomes available. PSD2 creates both a daunting challenge and an exciting opportunity for PSPs. But those PSPs that understand what is required of them, improve their fraud detection procedures and implement machine learning-based fraud prevention technology to stay ahead of developing threats will be in pole position to reap the rewards in terms of customer satisfaction and, ultimately, revenue

Matthew Cox Fraud Consultant FICO

CFOS ARE OUT OF TOUCH WITH FUTURE FINANCE

t wasn’t so long ago that filling in the ledger was a pen and paper affair. This all changed with the launch of Excel some 30 years ago. At the time it was a revolutionary development for finance professionals, speeding up processes and allowing the easy visualisation of data. So great was its impact that it has dominated the finance and accounting landscape ever since. However, and to use an old cliché – you can’t stop progress, and today the sun is finally beginning to set on the era of Excel. The young upstart looking to take Excel’s crown is financial automation software. Many forward-thinking organisations are beginning to embrace the efficiency boosts offered by automation, changing the role of the F&A department to focus on more value-added, strategic jobs rather than the rote, repetitive number-crunching tasks currently associated with the financial close.

FINANCE

To say that this is the new norm, however, would be a grave overestimation. Old habits die hard in finance, and a 2017 FSN study1 revealed the disheartening statistic that only 37% of CFOs feel comfortable with technology. This is worrying to say the least. Future of Finance The future of finance lies in technology. Automation, along with emergent tech in AI and machine learning, promise to dramatically shift the way the F&A department operates. An Accenture study2 predicts that, by 2021, digital disruption in the finance department could deliver a two-fold increase in productivity, a 40 per cent reduction in finance costs, a threefold increased focus on strategic tasks, and a 75 per cent boost in time spent on analysis. If these predictions prove correct, those organisations which are embracing these technologies today will clearly be at a competitive advantage in the years to come. This should be a wakeup call for those CFOs less comfortable with technology. If organisations stand a chance of not being outstripped by more tech-savvy competitors in the future, CFOs need to stop posing a barrier to technological innovation and spearhead these implementations themselves. It’s time for CFOs to face their fear of tech. Power to the people CFOs’ reticence to embrace technology is even more worrying when you consider that their workforces are already clamouring for it. The 2016 edition3 of the FSN study I referenced above also highlighted that over two-thirds of finance executives regard manual effort as the number one bottleneck in the financial close process, 48 per cent see current systems as a barrier to improving the effectiveness of the finance function, and 40 per cent

say they spend too much of their time on transaction processing.

through greater automation. Their roles will shift, but they’ll remain intact.

A similar study4, published by IMA in 2016, revealed that more than two-thirds of finance executives are under pressure from upper management to speed up the closing process. The Hackett Group has found that world-class organisations have 90 per cent greater levels of automation than their peers and, on average, are four days faster at closing, consolidating and reporting.

There’s also the need to recognise which processes within the department are actually suited for automation. When we work with new customers we always stress that any project needs to be tailored specifically for their particular needs and goals. It’s an incremental process, and CFOs and finance heads need to work closely with vendors to decide upon realistic aims and expectations for increased agility.

It’s clear then that finance professionals are under greater pressure than ever before to increase efficiencies, but are being hindered by the processes and systems currently in place. If senior finance professionals demand greater efficiencies and results from their workforces, they’ll have to step in to provide them not only the tools to do so, but also create the environment in which they can be used effectively. Fostering a future finance environment What’s important to understand is that financial automation software is not a one-click solution, and the groundwork has to be laid down before any successful deployment can take place. It’s up to the CFO to play the lead role in fostering an appropriate future finance environment. Firstly, there’s the necessary upskilling within the department itself. We’re already seeing an increase in the number of “systems accountants” in the finance departments of larger companies. These are the more tech-minded finance professionals with engineering, programming and supervisory skills, who understand how to implement and maintain the systems which automate reconciliations, and analyse high levels of data. Upskilling within the department not only allows for the more efficient utilisation of automation software, but reassures staff that their role is not made redundant

Reimagining the CFO None of this can be achieved if CFOs aren’t prepared to become better acquainted with new technologies. In FSN’s Future of Finance Survey, just 16% of CFOs ranked innovation as an area where they could add most value. This mindset has to change. If the role of the finance department is to move to a more strategic one, and away from the traditional number-crunching role, then its leadership has to not only reflect this, but also lead it. The age of the spreadsheet is over, and CFOs need to get with the times

Andy Bottrill Regional Vice President BlackLine References: 1

3 4

https://www.blackline.com/resources/whitepapers/thefuture-of-the-finance-function-2017 https://www.accenture.com/gb-en/insight-finance-2020death-by-digital https://www.blackline.com/resources/whitepapers/ future-of-the-finance-function-survey-2016/thank-you http://www.fsn.co.uk/channel_enterprise_financials/ fsn_future_of_the_finance_function_survey_2016_reveals_ cfos_role_is_overhyped#.Wbfk48gjHIV

INSURANCE

TACKLING REGULATIONS AND COMPLIANCE IN AN UNCERTAIN WORLD

ast year, the insurance industry went live with one of the most complex regulatory regimes it’s ever experienced. From a finance and risk perspective, the introduction of Solvency II meant many insurance companies had to significantly change processes around data collection, data management, reporting and risk management. At the time, this meant a big time and cost investment, and unveiled some challenges within the insurance community, specifically around the complexity of reporting. Coupled with wider economic and political upheaval, including Brexit and the US election, the finance function within the insurance industry is grappling a whole host of challenges. However, facing this period of volatile and unstable environment, some finance executives are looking at this period as an opportunity for positive change. The main goals of Solvency II are to increase the level of policyholder protection and improve the resilience of the insurance industry in the event of a new financial crisis. To do this requires adopting a much more forward-looking approach to the traditional backward-looking reporting that many in the insurance industry, up until now, have relied on. With so much uncertainty in the market and threats from ‘green field’ entrants and non-traditional insurance brands higher than ever, looking forward is really the only option for those that want to 58

stay relevant, open and successful. The finance team plays a vital role in this shifting of gears. Detailed financial analysis and business insights are absolutely key to providing businesses with the tools that they need to plan and pivot for any change, risk or opportunity that comes along. For example, with Brexit impacting exchange rates and potentially even the regulatory landscape, agile planning will significantly increase the likelihood of success in such an uncertain market. The implementation of the new IFRS9 requirements, where financial institutions will need to move from an “incurred-loss” model to an “expected-loss” model, leveraging forward-looking information poses another big challenge. The sensitivity of the economic forecasts, the number of variables and volumes of data involved in the calculation of the provisions, and the ability to run multiple scenarios during the period of transition, will require flexible modelling and forecasting tools to report in limited time periods and evidence assumptions, audit trail and transparency of the process. The agenda driven by new regulations, such as IFRS9, is not just about how to remain compliant but also how to anticipate all factors impacting the business models of financial institutions, supporting management decisions both from a finance, risk and technology perspective. Scenario-based modelling and forecasting, but also collaboration

between finance and risk, are needed to reconcile financial and regulatory reporting under the IFRS9 framework. Similar technology capabilities will be required to support the adoption of IFRS17 in insurance. Introducing new rules of accounting and valuation for insurance contracts, IFRS17 is anticipated to create major impacts on the recognition of insurance activity results and will require the monitoring of new sets of key-performance indicators in the financial reports. This outlook may result in significant re-evaluation of the existing technology architectures. First, insurers will need a scalable platform to accommodate a much deeper level of data granularity on the contracts and to embed actuarial calculations in the financial reporting process. Then, the systems will have to be agile enough to quickly make changes based on revised assumptions. In managing the period of transition, insurers will also run a multitude of what-if scenarios and proformas, relying on the flexible modelling of their financial platform. Finally, the IFRS17 implementation will require a high degree of collaboration to reconcile IFRS17 actual and forecast data with Solvency II. Yet, forecasting processes are spreadsheet-based, often focused on the profit and loss account and do not provide the level of detail needed for today’s

INSURANCE

fast-paced and constantly changing world. For example, businesses now require multiple forecasts a year as well as scenario planning and enhanced insights which the traditional model struggles to provide. What the finance function needs for today’s business environment is a more controllable, repeatable and efficient planning process for forecasting and performance management, leveraging agile and powerful tools. Cloud-based business modelling and planning software allows finance teams to simplify and speed up the reporting process, enhance scenario analysis to simulate the impact from future volatility, increase the level of granularity of finance analytics and focus on key performance drivers. It also allows them to create a more collaborative workflow to help break down barriers and siloes within their organisation.

All of this creates a more sustainable operating model and helps businesses become more disruptive, agile and datadriven. Some insurance companies are already seeing the benefits of this approach. Being forced to change with the introduction of Solvency II, has actually lead some insurance companies to adopt better practices. For example, insurers ‘growth strategies are typically documented in a strategic plan. Also, from a Solvency II prospective, insurers define their risk governance in regards to the “Own Risk Self Assessment” (ORSA) methodology. In connecting the strategic and operational plan to the risk management framework, insurers can balance the performance of the business development with the risk governance and drive a growth strategy fully aligned with the risk appetite and the capital requirements of the company, generating value-add.

Now is the time for the insurance industry to unburden itself from the legacy of outmoded finance processes and tools and transform finance into a function driving real business impact

Henri Wajsblat Head of Financial Services Anaplan

TECHNOLOGY

4 WAYS TO CONVERT TODAY’S DISTRACTED CONSUMER

he evolution of technology brings with it many benefits when it comes to the opportunities to market to consumers. There are an ever-growing number of channels in which brands can communicate with their customers. This however, also means that we have a new breed of customer - the ‘distracted consumer’. Where once an individual’s attention span could solely be focused on a TV programme, it is now more than likely that the individual-in-question also has a tablet or smartphone - and maybe even a smart home device like Amazon’s Alexa - to hand. A consumer spends on average 2.42 hours a day on their smartphone, interacting with it around 2,6171 times in just one day. This reliance is driven by the increase in internet accessibility and a peak in smartphone market penetration – with a whopping 43.6 million smartphone users (eMarketer) across the globe. With the internet at our fingertips, so too is access to the world of online retailing and today many consumers prefer purchasing products online - with 67%2 of millennials preferring to purchase on e-commerce sites rather than shopping in-store. However, with today’s consumer being increasingly distracted by simultaneously watching TV, checking emails and surfing the net, on average3 69% of

online shopping carts are abandoned. According to Forrester, an effective campaign can improve conversion rates by 0.2 percentage points. Loosely translated, if your revenues are tied to conversions and currently convert at 2% then that 0.2% increase actually equates to a 10% increase in income, because your conversions will now be 2.2%. And yet pinning this extra portion of consumers down is no easy feat. It becomes necessary for brands to ensure that they are not only satisfying in terms of product or service delivery, but to also ensure they are providing a great customer experience as well. This is in consideration of a single conversation, let alone longstanding brand loyalty. For brands looking to convert the distracted consumer, where do you start? 1. It may sound obvious, but make the consumer central to the online shopping experience In a perfect world, the internet should serve our requirements and preferences. We’ve all been there we’ve purchased a product online, say a rucksack, but banner ads for that exact rucksack follow us around for weeks and weeks after we’ve already purchased it. For consumers, this is a frustrating experience that will likely impact on brand loyalty and for brands, budget is being unnecessarily wasted.

2. Use what you’ve got to ‘individualise’ the customer journey Despite the vast amounts of customer data available, many brands are failing to individualise the customer journey. Not only should brands ensure that the buyer journey is frictionless and optimised but also catered to the individual customer. For years, brands have been talking about the importance of curated content, yet this mission never seems to get past one small segment of the market… for example, a razor advert aimed at women age 25-35. Today’s data-based technology makes it possible to take data and provide an experience that speaks to the individual.

3. Consider deeper analysis with artificial intelligence Nowadays, businesses are dealing with vast amounts of data that physically cannot be processed by humans, and so machine learning and artificial intelligence must be used to analyse this behavioural data. The rewards for this process are great. It becomes possible to convert abandoned transactions by gearing opportunities to be most relevant to the consumer, whether that be upselling or cross-selling. 4. Seamless experience With around 98% of visitors leaving a site without making a purchase, there are a number of touchpoints throughout the customer journey that you can optimise to improve site conversion and provide a seamless experience. ‘Double screening’, using a phone and tablet or laptop and TV simultaneously, is now the norm. The end result of this is that consumers who aren’t logged in to a brands website on both devices have become impossible to track, data-wise. And if you can’t track consumer data, how are you going to communicate your offering? The good news is that technology can now predict if multiple devices are being used by the same person,

with behaviour similarities reviewed across up to 15 touchpoints including location, device and time zone. When it comes to increasing sales, this means that if a product has been added to a basket on a laptop, brands can then tailor their offering on that individual’s smartphone to convert the consumer. Retail businesses typically convert just 2.8% of online shoppers. To boost conversions, Gartner predicts over 50% of organisations will redirect their marketing investment to customer experience by 2018. As a result, we are seeing a huge shift whereby the consumer’s frustration with the increasing barrage of adverts is leading to an appetite for new technology to make the internet work better for consumers and businesses alike. Businesses that do implement commerce optimisation technology, even to convert two customers in 100, can not only bring down the cost of customer acquisition and grow their business, but will also drive loyalty and increase connections with customers

James Critchley CEO and Co-Founder Cloud IQ

References: 1

2 3

http://www.dailymail.co.uk/sciencetech/article-3662555/ Are-obsessed-phone-Researchers-reveals-addicts-touchhandset-5-400-times-DAY.html http://wwd.com/business-news/retail/consumer-surveyonline-shopping-behavior-10473209/ https://baymard.com/lists/cart-abandonment-rate

G FINANCE

HOW

n the financial industry, every asset class has been affected by the changes in market structure, regulation and business models. We are seeing some interesting trends in commodities due to this asset class having traits that make it very different from financial assets. A fundamental difference is that commodities – agricultural products, livestock, energy, industrial metals and 62

LOBAL COMMODITY MARKETS ARE USING THE CLOUD TO INCREASE CONNECTIVITY

precious metals – are real assets that offer inflation protection, while financial assets – stocks and bonds – are claims to a series of cash flows against an economic unit. An important structural change being witnessed in the commodity markets is that more and more buy-side firms, especially pension funds, are making significant investments in commodities. Positive impacts of increased buy-side participation include lower risk premiums, reduced cost of hedging and a drop in the volatility of commodity futures prices.

The two challenges faced by commodity market participants Today’s commodity markets offer greater connectivity among market participants, increased transparency and a broader variety of opportunities to trade. The use of derivative contracts to gain access to commodities along with the growth and change in the mix of buy-side participation have created two principal challenges for market participants: 1. Having reliable and secure connectivity throughout the trade lifecycle

FINANCE

2. Gaining and maintaining rapid access to a ready-made ecosystem of market participants, including buy-side firms, sell-side firms, liquidity venues, interdealer brokers, institutional investors, trade lifecycle services and market data, and clearing and settlement services Connectivity is a critical element for the successful ideation and execution of an investment thesis. It is vital in every aspect of the trade lifecycle – order creation, order placement, trade execution, clearing, settlement, reporting and market data delivery. Additionally, risk management and compliance for commodity portfolios are key areas that are greatly dependent on connectivity throughout the trade lifecycle and access to an established ecosystem of market participants. The need for communication, connectivity and collaboration Communication, connectivity and collaboration solutions are instrumental for a number of reasons. Firstly, it’s crucial for firms accessing a range of independent market data sources to more accurately calculate net asset values and assess risk. It is also required for those reaching a global community of liquidity venues to reduce the market impact costs of liquidating large, concentrated positions. Thirdly, it is important when collaborating among various groups within a trading firm to record, confirm and reconcile trades – this includes having a secure and reliable infrastructure for communication among the front, middle and back office. And finally, firms need these solutions to connect to a range of trade lifecycle services, including risk management, portfolio management, execution management and order management systems, to enforce position and risk limits. When addressing these two principal challenges, as well as tackling risk

management issues, firms are trying to make the most of financial extranets, latency-sensitive connectivity solutions, business continuity planning, voice communications, and collaboration tools – which is where the cloud comes in. Cloud-based solutions for reliability, savings and success The cloud has been widely spoken about in the financial industry, however, as regulations tighten and competition grows, it is now being taken much more seriously. It’s therefore not a surprise that to achieve all of these needs cost effectively, more and more market participants are deploying cloud-based solutions to execute commodity trading strategies and manage associated risks without the investment in, or ongoing management and maintenance of, their own infrastructure. New cloud options offer market participants adaptive, on-demand connectivity throughout the trade lifecycle and across multiple asset classes. Indeed, they can effectively address the market’s communication, collaboration and connectivity needs – especially for small and medium-sized firms. Cloud-based solutions enable market participants to: • Access counterparties, liquidity and trade lifecycle services reliably, securely and at any time, from anywhere and with any device

• Minimise infrastructure and operational expenses Financial organisations are under growing pressure to have always-on, seamless communications that enable them to conduct business without interruption or delay, wherever they are located. Tighter regulations, emerging markets, and competitive pressures mean they need to work smarter and faster, with minimal overhead. Indeed, with the likes of MiFID II pending, traders need to ensure that their interactions are quick, reliable, secure and transparent. The good news is that cloud adoption is becoming much more accessible, providing global financial markets with the mobility, business continuity, lower total cost of ownership (TCO), agility, and rapid time-to-market they require, with minimal IT support. As generating alpha within the commodities markets becomes more challenging, cost-effective communications through the use of cloud-based solutions are making it easier to maintain reliable and secure connectivity and access to an ecosystem. These are necessary to execute trading strategies, as well as communicate internally amongst various roles and across geographically dispersed locations. It’s undoubtedly becoming a good thing to have one’s head – or at least one’s critical communications – in the cloud

• Meet regulatory requirements, including capture, archiving, analytics and retrieval of all voice, mobile, email and Instant Messenger (IM) data associated with communications • Execute complex cross-asset class trading strategies • Mitigate business, operational, investment process and market risk

Ganesh Iyer Director Global Marketing IPC

FINANCE

4 Tech Hacks to Faster Customer Onboarding in the Banking & Finance Industry

ustomer onboarding or client onboarding (CoB), as we call the process of ‘entering’ new customers in the organization is an important moment of truth. It’s when you really make the difference, deliver upon the promises why people became a customer to start with and the stage when the seeds of customer retention and high customer lifetime value are planted. When it’s done poorly, customer onboarding is where the seed of churn are planted. In some industries onboarding takes more time and is more complicated, due to among others the complex nature of the service and the loads of information and data that are involved.

Banking and financial institutions that get customer onboarding right can improve customer satisfaction, reduce costs, enhance regulatory compliance, lower churn and gain better insights into customer preferences. Customer onboarding is a critical first stage in customer experience. After all, first impressions make lasting impacts. Evidence suggests we form first impressions in about 1/10 of a second, and that they stick with us for the duration of a relationship. Because of this, better, faster customer onboarding translates into growth: most business leaders agree it is cheaper to

retain a customer than it is to acquire one. Also, 94% of customers who have a “low-effort experience” will buy from that same company again. Not only that, but once your customers are happily onboarded, they return the favor with of lower-touch annuity revenue. To get both sides of the equation happy, you need to make the process as easy as possible. And that starts by reducing complexity. In the Era of Data Chaos1, routine processes like customer onboarding frequently become bogged down by the sheer volume of data and documents. This leads to an onboarding process that takes too many steps and zig-zags

FINANCE between paper and digital touchpoints. This of course is not a good start to a long-term customer relationship. Streamline Customer Onboarding in 4 Quick Steps The good news is that improving the customer onboarding process doesn’t have to be a massive undertaking. Making small improvements to customer onboarding can have a sizable impact. Change in this regard is both critical and possible - we chose the word ‘hacks’ to describe the tips below because these incremental steps have substantial payoffs, and don’t take a great deal of time or resources. You can move the needle - today - by streamlining customer onboarding: 1. Standardize where you can. Connect where you can’t. Repeatability is key to increasing efficiency. If your customer onboarding looks different every time, it’s important to establish standards for interaction with new customers, including everything from the order of email and phone communication to required documentation at different stages. It is true that some customer needs will vary and require special attention. A standard process gives you a straight line to internal efficiency, but it doesn’t give all your customers the flexibility they need in the real world. Not every customer can come into the office to make a copy of their identification, for example. But in this case, when you can accept a picture taken from a smartphone, a customer’s experience is smoother, and they’re onboarded faster. Even better, modern web-capture solutions2 can connect to your backend systems, reducing manual effort on your part to input customer information. 2. Use paper as an input, not an endpoint. Customer onboarding typically relies heavily on paper. In finance, examples are account/card applications, credit

reports, and loan origination documents. For law firms, it could be intake forms, depositions, and release forms. Every industry has a mountain of paper documents that come with new business. Customer onboarding with paper as an input is able to process information at the speed of business. Rather than relying on paper - which can only be in one place at once time - as a final record, modern customer onboarding uses web capture to quickly scan, categorize and distribute customer information to internal stakeholders. 3. Automate needs assessment where possible. On a first visit with a new client, much of your upfront time may be spent asking questions that are fairly routine, or gathering documents that could be submitted before the appointment. Where possible, automate. Create an online survey for onboarding questions, or allow web submission for needed signup forms. You save massive amounts of time on busy work, and your customers are able to complete their parts at their convenience. 4. Reach out early with helpful welcome resources. Greeting your customers with helpful documentation and tutorials not only indicates thoughtfulness, it also improves the speed of onboarding. Welcome packets and online libraries do this by serving as customer support that works for you: customers can get their questions answered on-demand. If left on your website or product passively, your new customers may have to go hunting for information when they need it. Much like websites, where first impressions are formed in 50 milliseconds, customers will have quick reactions to your product. Don’t let your customers get discouraged and give up after they’ve committed to your product and your business.

Proactively reach out with helpful tips and information, so they feel comfortable using your offerings and know they have support available a click away. A great way to do this is with a welcome series of emails. After they sign up, use marketing automation tools to serve them up a collection of emails with tips on getting started and getting the most out of your service or product. You can also bring new levels of engagement with automated physical mailer delivery. Lob.com3 is a new service that enables you to “programmatically send physical mail at scale.” The value to your organization is in significantly reduced costs and increased speed. You Can Speed Up Customer Onboarding Today As far as experience is concerned, customers need to know you’ve done this before. You are experts at delivering great experiences with your products and services. When they are greeted by a clear outline, informed of the steps upfront, and guided effortlessly through the process, the positive first impression will pay dividends. And when it comes to efficiency, it’s a simple concept with tangible implications: making a plan is always a good first step toward improvement

Gregoire de Clercq EAMER Marketing Director Kodak Alaris References: 1

2 3

https://www.kodakalaris.com/en-us/b2b/insights/articles/ harness-the-power-of-data-chaos https://www.kodakalaris.com/en-us/b2b/industrysolutions/position-papers/info-input https://lob.com/

BANKING

A LACK OF FEE

FEE TRANSPARENCY IS HOLDING BACK BANKS IN

THE MONEY TRANSFER MARKET A

few years ago when a new wave of overseas money transfer services, such as World Remit and Transferwise, hit the market, it was a good indicator of how the financial services market was about to change. At the time, these new players were seeking to disrupt the incumbents - traditional banks and money transfer services such as Western Union - by offering a greater deal of transparency, convenience and value for money. It was a wake-up call to the industry, challenging the status quo with digital services that put the consumer ahead of profitability.

While Western Union seemed to get the message and focused on providing a better digital service in order to compete with the new kids on the block, many banks stuck to their guns. Most have kept their existing service pretty much the same, determined to wring as much profit out of what would otherwise be a low-value endeavor, regardless of the fact competitors are offering much better deals. From one perspective, this is understandable. If there is no benefit to the bottom line, then a counter-attack against the usurpers would be a costly war to fight. But forward-thinking banks recognise that there is also a big opportunity here.

BANKING

So then, there are three major reasons why banks need to examine their approach in this area. Firstly, while money transfers could be seen as a low-value endeavor, this is somewhat short-sighted. In the world of ‘open banking’ which is fast becoming a reality, thanks to PSD2 regulations and the UK’s forward-looking approach to retail banking services, banks that aren’t open about their fees and how they calculate exchange rates are putting a lot at risk. Open banking means that customers now have a lot more choice in who their financial service providers are. While in the pre-digital world churn was low among banking customers as switching accounts was not a straightforward process, things are very different now. The increased competition for customers means they have to think about how to tap into new audiences and market segments. As a result, many banks are looking to find killer products and innovations that help them tap into a new audience. If they can develop one service that attracts a large number of new customers - or market an existing service in a way that similarly brings consumer business to their door - then they have the chance to impress these customers, upsell to them, and increase their profitability. Therefore money transfer services should not be seen as a low-value endeavour, but instead as an opportunity to diversify and increase the bank’s customer base. But all too often, banks hide their money transfer services away from non-customers. Only existing customers of the bank will be able to access this service, and even then the way the fees and exchange rates are communicated can be misleading. The potential customer is pushed away towards the competition, and may never return.

meaning that they are made by migrant workers, sent back to their families wherever home might be. And very often, these are some of the world’s poorest countries. In many nations, remittance payments make up a significant proportion of GDP1 - for example, the Philippines, more than 10% of GDP is accounted for by remittance payments, and Liberia, where the figure is more like 30%. The reason why remittance payments are so important for helping these countries is that they arrive in a different way to aid payments. While the latter are payments made to governments that then trickle down into the overall economy - some of it inevitably finding its way into the pockets of corrupt officials remittance payments are bottom-up. The money is going to the people who most need it, and being distributed into the local economy directly. To apply extortionate fees and unfair exchange rates to payments like these - or to obscure the information and access to these services - puts the bank in a bad light. Even if the bank is involved in other projects to help poorer, developing economies, being an obstacle to fairer remittance payments reflects badly on them. So while the plethora of money transfer services now available has been a wonderful thing for people who need to use them on a regular basis, they represent a missed opportunity for banks to increase their customer numbers and present a better image to the world. What they need to do is to take a leaf out of the book of their new competitors and offer understandable, transparent and fair fees for these services to everyone

Secondly, banks should be cautious about losing any national or international payments, even if the fees aren’t directly contributing in any major way to their bottom line. Transactions are directly linked to deposits and encourage customer ‘stickiness’, which ultimately opens doors to other revenue generating activities. The last reason for doing a better job with money transfer services is that banks should be doing their bit to help the world become a better place. Many overseas money transfers are remittance payments,

Francois Briod CEO and Co-Founder Monito References: 1

https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS

INSURANCE

Calling a halt to the INSURANCE industry’s race to the bottom

he number one factor when it comes to choosing insurance is price. Loud and brash ads from GoCompare or Compare the Market are a reflection of quite how simple the competition has become. It’s a price race to the bottom.

social good to the profits the company generates. All important and powerful innovations, but what truly matters to the customer is expert communication, guidance and transparency right from the very outset throughout the lifecycle of a customer. First impressions

When you consider what insurance really is, it’s a funny juxtaposition with how we purchase it. Fundamentally these companies are promising to be there for us when it all goes wrong, to ensure we don’t go without when we’re in need, but we buy it as an add-on or a necessary evil. A quick and cheap resolution to something we hope never to use. As consumers, whether we truly value what insurance provides or not, there’s a whole lot more that could be done in this slow moving space of assurances. After all, when we buy anything else we’ve grown to anticipate a certain extra level of service from the provider we’ve chosen. If we book a holiday for instance, airport pick-up, free breakfast and effective communication throughout all add to a positive experience. This is what insurance needs. Direct Line for example exists as a shining light to the industry of a how a business can rise above simply a battle of price, by finding something else to offer customers, their service. This is part of the reason they steer clear of price comparison sites. Of course, start-ups such as Lemonade have set about re-inventing the wheel, changing up brokers for AI and introducing a

Consistency is essential in building credibility behind brand promise. From the word go, communications need to reflect the value the customer represents to the business and create an expectation of how the customer can expect to be handled in future. This extends to everything from the tone of the language to the communications channels used. Picking a tone of voice can certainly sound fluffy to seasoned finance professionals, but the numbers don’t lie. In a recent consumer survey we carried out, 64% of total respondents surveyed preferred a female voice when speaking with their service provider. This figure rises to 71% when we look at male respondents. People want to hear the voices they can truly connect with, and regions and dialects is key in achieving this. For example, when asked to pick from a given list, two thirds (66%) of Scottish people would prefer to hear a Scottish accent, a third (33%) of Londoners would prefer a London accent and 35% of Welsh consumers would prefer Welsh when receiving an automated call. Sounds simple right? Well so many companies fail to get even close to these levels of personalisation. What this proves is delivering on service isn’t necessarily

INSURANCE

limited to the perks and throw-ins. Insurance providers can establish their name beyond the listings of comparison sights by building rapport with customers on a personal level, turning economic buyers into advocates. Two-way communications It’s also important to consider the customer service toolset. It’s easy to handle referrals from comparison websites via the website and pass the customer off on to email for all future communications. This is missing a trick. Fundamentally, insurance is a process that is fully understood by few. When thinking about service it’s crucial to consider the opportunity around educating and guiding the customer. Imagine having the CEO call each new customer to introduce the business and thank them for their custom. Not only does this establish a more personal connection between brand and customer, but creates a great opportunity to offer advice direct from a trusted expert and establishes a two-way means of communication with the customer, a touchpoint they will pay attention to and turn to for information. If we think about some of the biggest challenges brands can face - take an airline facing severe delays – imagine how differently this scenario plays out where every customer anticipates and answers a voice call from the airline explaining the situation and what they can do to minimise disruption to their travel.

This is the opportunity machine learning has brought to insurance’s door, offering this personal touch at scale. Handling this many customer relationships manually would be impossible and costly yet now voice technology can adapt to customer responses and direct them to the information they need in the most effective way possible. None of this is re-inventing the wheel. After all, winning just a fraction of the customer base over to voice could represent a huge shift in the renewal rate achieved and this in turn represents an enormous change in revenue for insurance providers. I believe this industry is at the precipice of a new era in competition. Businesses now have to take this new opportunity to realize the clear potential for change, generating far greater returns for their company, and generating a massively positive change for customers

Sam Madden UK Director Wiraya

INSURANCE

All change – how data is revolutionising the insurance sector

he insurance industry’s landscape has been transformed in recent years, with more changes on the horizon. Thanks to a large increase in consumer data collection, these developments will both test the sector, and augment its opportunities. In addition, the replacement of traditional, paper methods with digital ones and the rapid increase of technological-based enterprises will profoundly affect how this industry conducts itself. In this time of transformation, how are organisations planning to adapt, and will they be successful? The changing quantity of data Of primary importance is the increase in the amount of data that is openly available, and changes concerning how that data can be shared. For example, all banks are currently subject to the Competition and Markets Authority’s retail banking review, under which they must share details of current account transactions by the first quarter of 2018. The impact of this is twofold. Firstly, the sharing of such data requires conformity to all Data Protection Regulations – complicated by the introduction of new General Data Protection Regulation (GDPR) next year. Secondly, but more positively, those who share their data will benefit from increased clarity, and will gain access to new services and products. These changes in the banking sector will also be felt in the insurance industry – along with many other sectors, they will need to add to the amount of control (and trust) they give the consumer. Not only is the way data is shared changing, but the amount of data is too. Thanks to new data sources, such as social media, portable technologies and even connected cars, the quantity 70

of data available is unprecedented. The Internet of Things will allow businesses to interact with consumers like never before. The interconnected nature of data Across all industries, a top priority for businesses is organising all of a customer’s data into one place - with 97% of companies having this as their ultimate goal. The benefits for insurers are evident to see – efficient collection of customers’ data, such as accounts and activities, would allow a more productive service. Experian is at the forefront of technology which would make this goal a reality. Businesses are encouraged to link the data of over 2 billion data records, and create a single unified view, by assigning a unique pin to nearly every UK consumer. Putting data to the test Although the sheer quantity of data is impressive, the power of data is only realised when it is employed in business contexts – for example, to drive efficiency or consumer satisfaction. The more data there is, the more analysis will be needed. The best way to deal with this challenge is with advanced decisionmaking capabilities, such as automated systems that analyse, and answer data with decision making in real time. Thanks to optimisation, these decisions can be made in under 30 milliseconds, allowing companies to quickly and efficiently ascertain the best steps to take. Putting the customer at the heart of business It seems cliché but although innovation is important, it

INSURANCE

cannot be to the detriment of the consumer. Businesses will still need to lead by the needs of their customer, and even as technology plays a larger role in everyday life, customers will still look to businesses to deliver a smooth and personalised experience in tandem with their digital service. Alongside new developments in technology, opportunities are opening up. These opportunities range from the everyday to the extraordinary – by 2020, 90% of cars will be connected. These revolutionary changes will lead to new ways of collecting data, and, based on better insights, will enhance products and services - but not just for the car industry. Although complicated, technology such as machine learning, the Internet of Things, wearables and connected homes will all enable organisations to better understand their customers. Although there is much to do, there are lots of developments to be excited by for those willing to get involved. Another important development is the provision of dynamic customer journeys. Like many other sectors, insurance companies are going through the process of digitising their value chain. This not only has benefits for acquisition, but also gives businesses a more profound understanding of customers, such as informing them about which customers are higher risk, and

which are most likely to convert. Additionally, digitisation can also be applied to an organisation’s contact centre, informing the company of how best they should allocate their resources. A team effort With every industry development comes new solutions. It’s therefore greatly important to ensure the insurance industry is aware of new developments and regulations. This will help to maximise their opportunities. At this time of change, a collective mentality will allow the industry to make the most of data’s possibilities, whilst maintaining efficiency, growth and strong customer relationships

Michael Henderson Strategic Client Director Experian 71

BUSINESS

The

Importance of the

Modern Payment Experience

on Business Success A

cross several sectors, businesses are facing new challenges to continue increasing their revenue and deliver greater profitability for shareholders. Today, companies spanning every industry are trying to gain insight into their customers purchase behaviour to make better business decisions and ultimately increase sales.

The rise and access to new technology is making a great impact, and with the use of business intelligence, data is playing a larger role across sales and marketing departments. Access to unlimited sources of data and purchasing behaviour is helping improve retail business, for examples in the rail, ticketing, leisure and airline sectors.

As companies look to provide competitive prices, they are investigating new ways to increase revenue. With greater expectations from consumers, progressive companies are looking at how to deliver new services and optimise sales of their ancillary services. In travel, for example, this includes travel updates, onboard entertainment, Wi-Fi capabilities and destination attraction packages. The average consumer is demanding more personalised experiences as they travel. Secure, personalised and convenient onboard payment and services is the logical next frontier for the travel industry. Given this, how can companies incorporate business intelligence systems to improve their customer service and payment experience in line with consumer expectations? Go Contactless: Research shows that passengers on average spend double on journeys when

BUSINESS they’re able to pay for goods by cards. Contactless card payment and mobile wallets are increasingly becoming the norm with consumers enjoying the convenience of ‘tap-to-pay’ technology. According to the UK Card Association, the UK is one of the most contactless-ready countries in the world. This high adoption is not only driven by changing consumer behaviour, but also the wider regulatory environment set out by prominent financial institutions. Both VISA and MasterCard are introducing a contactless mandate, which states that merchants accepting payments must establish contactless payments as standard by 2020. This increased uptake of contactless means that companies are now considering updated payment systems to replace their outdated chip and pin kiosks or ticket desks. Companies also need to consider if they can support additional payment methods such as multiple currencies, vouchers, and more. Most importantly, they need to question if their overall payment strategy meets modern customer expectations. Progressive businesses are already exploring all-in-one, contactless, MPoS technologies to support personalisation, sales and the overall customer experience. Think Omni-Channel Increasingly, when consumers are looking to research and purchase their tickets, they use several channels. This can range from comparison websites, mobile apps, web search to travel agents. With these multiple touch-points, companies are given numerous opportunities to reach their audiences and personalise the consumer purchase journey. While many companies are capitalising on tracking these moments and data points, many still aren’t. Opportunities include, selling ‘add-on items’ such as

insurance, accommodation, food and beverage, seat upgrades, retail and even destination attraction ticketing. Analysing this purchasing journey can allow companies to form a more holistic view of their target customers across the entire consumer lifecycle, which will in turn support sales programmes, deliver better customer service and drive growth. Personalisation driven by Business intelligence With the right Point of Sale (POS) and Business Intelligence capabilities, businesses can explore how to improve and efficiently manage their retail sales before and after journeys as well as onboard. Intelligent on-board POS systems can provide greater speed and accuracy in understanding huge volumes of data. Updated MPoS systems can now play a larger role in supporting inventory automation and stock management. It can open opportunities for analysing each stream of data for greater insight in respect of stock, product price, consumers’ preferences and buying tendency – all of which can impact business profitability. By collecting and using big data, companies can predict purchasing behaviour and offer customers relevant offerings to increase spend whilst travelling. This data, and insight, also enables companies to develop sophisticated loyalty offerings. This means that they can better understand passengers’ travel habits and enhance their retail services.

from longer consumer exposure time. The time for travel businesses to adopt and modernise is now. The question remains whether they value the potential at hand to provide personalised retail offerings to their passengers before, during and after their journeys, and if they view the significance of business intelligence in adding to that customer experience and supporting sales efforts. In today’s world, where convenience, personalisation and customer experience is key, companies need to consider whether their services are still relevant, and whether their payment options, including MPoS strategies, are fit for purpose. Conclusion Business needs to embrace technological change to support their growth goals. Considerations around contactless payment strategies, delivery of an Omni-channel experience, personalisation driven by business intelligence and a seamless connection are factors in ensuring companies innovate and stay ahead of the competition. In today’s world where personalisation and customer experience is key, organisations need to consider whether their offering is still relevant, and importantly, whether their payment options – including MPoS strategies are still fit for purpose

Seamless Connection Increasingly, passengers expect onboard internet connectivity, a seamless customer experience, a convenient and modern payment experience and relevant retail offering across their purchasing journey. The travel sector, unlike ‘stationary’ or ‘walk-in’ high-street stores can capitalise

Simon Pont CEO ECR Retail Systems

BUSINESS

POWERING A SPREAD BETTING INFRASTRUCTURE

pread betting, an increasingly popular form of wagering, requires a platform that can process and analyze vast amounts of data in real time. Terry Erisman, Vice President of Marketing at GridGain Systems, looks at the key requirements of a spread betting platform and discusses how in-memory computing can deliver the required performance and scale. The popularity of spread betting Tradefair, one of the largest betting companies in the UK, has seen 20 to 30 percent growth in spread betting per year for the past 10 years. More than a million people in Great Britain have now opened spread betting accounts. The popularity is due to a number of factors, the most important of which is the broad array 74

BUSINESS

of bets that can be placed. Traders bet on whether the outcome of an event will sit above or below a spread set by a bookmaker and there is a huge range of events to bet on, from housing prices to the value of a stock-market index, to sporting events. Just about any type of event works if the result can be measured in one of two directions. The advantages of this model are significant. Take a simple example, a soccer game between a very strong and a very weak team. Instead of betting on who will win, which is perhaps a foregone conclusion, the bet is instead placed on whether the stronger team will beat the weaker team by a certain number of goals – a much more exciting bet. In addition to the excitement level, spread betting currently has low entry and transaction costs, and low bet minimums. Winnings also have enjoyed preferential tax treatment. The performance challenges The challenges of spread betting are also significant. Today, spread betting is conducted in a highly volatile, minimally regulated market. This means there are risks for both traders and operators, especially when the bet is placed on a more complicated event than a soccer game – say on housing prices or a stock index. Minimizing the risks for such bets – by fully understanding the factors that may impact the spread – requires the ability to stream huge amounts of data into systems that compute event relationships and adjust the spread in real time. Employing these systems requires extraordinary processing power. Consider some of the strategies spread betting traders and venues are employing, often in combination. Outcome modeling is an attempt to predict a result using advanced mathematical models. Subscription services offer huge amounts of data that can be streamed into these models. News and sentiment analysis can be

used to look for events and patterns that may impact the outcome and this data can also be fed into the mathematical models. Meanwhile, hedging is a strategy for placing multiple bets on a set of outcomes to limit the downside potential of a given set of bets. The technology solution – in-memory computing The challenge with all of these spread betting strategies is that they require a technology infrastructure capable of processing and analyzing huge amounts of data in real time. To create this infrastructure, companies are deploying a number of technologies that range from standard big data tools, to complex event processing (CEP), to deep learning and artificial intelligence (AI) with a potential goal of creating algorithmic robots that automatically place bets based on specific conditions. While these technologies contribute to increased performance, they are still often deployed on systems that use diskbased databases. This means that applications must constantly read the data into memory from disk, process it, take action, and then potentially write data back to disk. These reads and writes become chokepoints that introduce potentially costly delays in high performance applications, such as those that support spread betting. To overcome these limitations, spread betting traders and venues are increasingly turning to in-memory computing solutions that keep all data in memory. This eliminates the delays inherent in disk reads and writes. The latest in-memory computing platforms offer ACID compliant transactions, enterprise-grade security, ANSI-99 SQL support, and a full range of APIs. Deployed as a distributed, parallel-processing cluster, these in-memory computing platforms offer high availability and can be transparently scaled out simply by adding new nodes to the cluster. The cluster can be

deployed between the existing application and database layers, providing all the performance benefits of in-memory computing with minimal disruption to the existing applications. Companies implementing in-memory computing in spread betting systems have reported processing roughly 1,000 times faster than disk-based solutions. In the past, the cost of in-memory computing hardware infrastructure was too expensive for all but the highest value applications which demanded real-time performance. Today, however, memory prices have dropped significantly. When the performance benefits are factored in, it is now cost-effective to deploy an in-memory computing cluster with gigabytes or even terabytes of RAM. These solutions can now achieve the performance level and other competitive advantages that a growing range of applications such as spread betting demand at a cost that is justifiable. As spread betting continues to grow, traders and venues must avoid suffering from their own success – whether from an inability to scale their infrastructures or from lagging behind the competition in delivering a great end user experience. An in-memory computing platform is now the most affordable path to ensuring the performance and scale that spread betting, and a growing range of applications, require

Terry Erisman Vice President GridGain Systems

FINANCE

How can financial services firms manage the growing issue of human risk?

here are many different types of risk that threaten Financial Services (FS) firms in 2017. Everything from cyber-attack to currency volatility, and political uncertainty to data breaches can keep risk managers awake at night. Cyber attacks especially have grown in volume, profile and severity over the past two years. Security firm ThreatMetrix released data that showed cyber attacks against online lending companies and alternative payment systems increased 122% in 2016, with the fraud estimated to 76

have cost consumers around ÂŁ8bn. But perhaps the greatest threat to FS organisations currently is a little closer to home â&#x20AC;&#x201C; employees and the human risk they pose. It is generally easier to target a firm from within, and disgruntled employees are stealing data, abusing customer records and much more besides. What is behind the rise in human risk and what can FS firms do to protect themselves against it? Financial crisis of 2008 In every service industry, there is

always the possibility of human error. In FS, frontline bank employees and call -centre staff service in particular are vulnerable to this, possibly dealing with a difficult customer at the end of the day, or perhaps having a small but significant gap in their knowledge that causes poor service of some sort. Mistakes happen, and while they can be minimised, they will always occur on occasion. Human risk is different, and is based on actions that employees choose to take. This could be feeling demotivated and not working as hard, or something

FINANCE

• Abuse of internal or customer accounts • Manipulation of wage components • Unjustified charges applied to customers • Abuse of money-bearing advantages and repayments from customer transactions are abused This rise in human risk can be attributed to the many restructures in banking since the financial crisis of 2008. The changes banks felt forced to make - merging, outsourcing or suppression of activities, recruitment freezes and downsizing - led to declining margins and higher regulatory costs and to address this, banks pushed their staff harder and harder, bringing occupational stress and disenchantment. This manifested itself in behaviours such as lower service quality, the loss of decades of experience with the departure of employees and a significant increase in absenteeism. This all in turn increased the likelihood of stolen data and fraud, endangering the FS firm’s reputation and bottom line.

more impactful, such as stealing some company data. There has been a significant increase in such behaviour since the financial crisis of 2008, according to a study by The University of Applied Sciences Western Switzerland (Hes-so). The study involved the research team interviewing executives from European private banks, and found evidence of a rampant neglect and of a lack of leadership, which had led to a toxic corporate culture. Many employees felt dissatisfied and hungry for revenge against those they perceived to be responsible. The five most common acts of revenge were: • Stolen data

because they are often isolated snippets of information, and furthermore can be ambiguous, not fully developed or lacking meaning without a wider context. That’s why the team at Hes-so is teaming up with OXIAL to work with financial organisations on a project that will amplify those weak signals, and allow a business to spot trends in employee behaviour, and prevent human risk from causing too much damage. “Human risk is a highly significant factor in whether or not a bank achieves its business objectives, but it is hard to discover and even harder to mitigate against,” said Magali Dubosson, Professor, Hes-so. “Working with OXIAL will enable us to amplify the weak signals within a bank that could signify the threat of human risk, adding quantitative and qualitative measures to the established framework from our previous studies.”

Amplifying the weak signals Most FS firms will suffer from human risk, but generally speaking, it is harder to mitigate against than other firms of risk. This means that banks and other FS organisations need to adopt a more pro-active approach to mitigating human risk, and identify issues before they arise.

The Hes-so and OXIAL are seeking forward-thinking banks to become part of the upcoming project, benchmarking real-life situations with the partner. While traditional Enterprise Risk Management (ERM) is formal and based around engineering principles, the university research team at Hes-so will use an anthropological approach, based on amplifying weak signals to identify ill feeling and employee disenchantment that could lead to a threat

But in a large, multinational FS firm, that is no small undertaking. That’s where technology can play a significant role, helping to identify and amplify the weak signals in an organisation. Because of the sheer volume of information in modern FS, it can be extremely difficult to notice patterns or trends. It might be some comments by an employee on social media, or perhaps a small comment in a customer service encounter.

Eric Berdeaux

These weak signals are hard to spot and even harder to take insight from,

CEO OXIAL

TECHNOLOGY

THE HIDDEN COSTS OF

CLOUD COMPUTING

lthough the cost of public cloud services seems to be continually falling, potential buyers need to think carefully about what else is required to run a service and ensure that they have carried out a comprehensive analysis of costs. Public cloud costs are on a downward trend as more hosting services become available and providers such as Amazon, Google and Microsoft add new data centres with security capabilities to satisfy all but the most stringent organisation. However, while headline costs seem remarkably cheap, there is much more to running an application than these suggest. Like many things that seem too good to be true, it’s a case of buyer beware, and organisations need consider the ‘hidden’ costs or they will receive an unpleasant shock when their first cloud bill arrives. They could also be putting their organisation’s security at risk. Public cloud is like buying the shell of a house – you can live in it, but you need utilities, flooring and furniture to make it into a home. You also need to realise that these are not individual houses but massive virtual complexes – so you are in effect sharing the bathroom with other residents! The security provided is just 78

for the data centre itself, so as a resident you will have to provide your own front door locks to keep undesirables out. You need more than 9-5 availability Take a service that you believe your organisation uses between 9am and 5pm, such as your CRM (Customer Relationship Management) system. Eight hours of computer time in the cloud can look considerably cheaper than the fully loaded internal costs of running this application. However, you do not run services in isolation – each one requires additional systems (e.g. login/ authentication, security, patching etc.). To have 9-5 availability these need to be powered up beforehand, and you also need to include back-up, so 9-5 quickly becomes 7-9 or longer. Then add multiple systems which interact with your first application, such as ERP and finance, which further increases complexity and cost. As systems do not like to be shut down and restarted (this has to be sequenced correctly, as British Airways recently found to its cost), and factoring in that some employees will want access outside core hours, you may quickly conclude that you need 24x7 running. Your costs are now three times the advertised headline price and you still need to add in monitoring and

management to obtain the final running costs. Now factor in the cost and time of migration, the sunk costs of your existing IT infrastructure (unless all your equipment is coming to end of life), perhaps a disaster recovery solution and staff who know the systems. What was initially an easy cost justification has just become much more expensive. You also need to consider how much data your organisation is storing in the cloud, and the level of resilience you need. Which organisation is hosting and managing less data than a year ago? This can be addressed by asking your IT team to implement data classification and then say to each department: “we have this volume of your data; how important is it to the business and can we delete it?” With cloud you pay per GB of data stored, and these costs become much more noticeable when you see them on cloud invoice every month. All organisations have data that could be archived, or in fact deleted. This needs to be strictly enforced and that means backups too, especially with the new GDPR (General Data Protection Regulation) on the horizon. Understanding and deciphering cloud usage reports and invoices is another

TECHNOLOGY new skill your organisation will need. The first report can be a surprise, for which we have coined the term ‘cloud shock’. There are known costs for servers and storage for the main systems, but then you have to factor in the costs for ancillary requirements and data transfers. The report is very extensive and needs careful scrutiny to comprehend. Prepare a solid business case This does not mean that public cloud is necessarily more expensive than running services in-house – simply that it is vital to prepare a comprehensive business case before moving services. Once you have got rid of your in-house infrastructure and staff, you have to use whatever the cloud provider gives you, however much they charge, unless you migrate services again. This type of migration is not yet proven, particularly for complex applications, and of course it is not in the cloud provider’s interests to make it easy. Their focus is on making the initial sale, and they will do their best to make this part as easy as possible. Migrating your service out as pricing changes will almost certainly require third party software, with additional cost and complexity. It is also important not to discount the soft elements of service delivery. You could accidentally increase costs if you select a cloud platform or supplier that does not have the same risk and value framework as your organisation in their processes and operations. Remember that their entire business is built around the contracts and service delivery elements and ensuring as much ‘cost plus’ is in there as possible. Your organisation’s core skills are other areas, so this will make it more difficult to spot the ‘gotchas’ that have been inserted. In simple terms, if the contracts look more complex than those your company typically uses then you need to be very aware of the potential for unexpected costs. The more legal jargon used, the more difficult a contract becomes to get out of if the need arises.

Question your potential suppliers To help in modelling cloud services to enable comparison between different suppliers, we have developed a checklist of key issues to consider • Availability: do you need a reserved, ondemand or metered service and can the provider deliver this effectively? It doesn’t happen very often, but AWS’ terms and conditions allow them to shut down ondemand instances without any reference to the client. • Optimisation: will general purpose instances suffice or do you need computer, memory or storage to be optimised? Costs for this optimisation vary dramatically. • Granularity: what is actually included or is everything an extra? If so, how is it charged? • Security classification: find out where data will be stored, what security, access, audit and compliance controls need to be in place and if the provider can guarantee them. • Resilience: what is offered and does it meet your organisation’s requirements? • Contractual and commercial relationship: what level of flexibility is offered, and are there any exit or data transfer costs if your organisation wants to switch suppliers? • Operational management: is this done via a portal and how does the supplier handle escalation, service updates and major incidents? • Operational process integration – does the way the supplier operates fit the way your organisation needs to operate? If changes are needed, what are the implications? • Cultural fit – this may seem trivial but do the provider’s values reflect yours? Your organisation is potentially entering a multi-year agreement which will impact the services it offers to its users and it helps to ensure that all parties are aligned before committing to any agreements. • Security standards – does the potential supplier adhere to recognised security standards and can they prove that they have the relevant controls in place?

Retain some skills in-house Some services can and should run in public cloud. If cost effective, fit for purpose Software as a Service (SaaS) is available, with suitable Service Levels Agreements (SLAs) to meet your requirements, it is likely to be a good option. Likewise some applications, particularly hosting and legacy systems, may be better provided through private cloud, and others may be best retained in-house. This will create a hybrid cloud infrastructure that needs central control, co-ordination, management and monitoring. If your organisation does move services to cloud, we recommend that you retain key skills in-house to control both costs and security of the hybrid environment. Your organisation also has to take responsibility for asking your cloud provider to deliver the appropriate levels of information security, and needs to measure and audit them to ensure relevant security is applied. Too often, when costing a move to cloud, technical capabilities are completely removed from the in-house environment, as personnel are seen as a key cost saving. This means that your organisation loses the ability to sanity check the configurations/changes proposed, the provider can easily inflate their pricing and costs quickly spiral. We have learnt all of this through making most of the mistakes discussed above and are now using our experience to ensure that our clients avoid them

Drew Markham Service Strategist, Fordway

FINANCE

What are the benefits to businesses and consumers Is a cashless future simply inevitable How do we prepare for it

CASHLESS SOCIETY: Mobilising millennials to pave the way

he first cash machine was introduced to the world just 50 years ago – an emblem of how quickly transactions change with time. Today, we are moving at speed towards a society that is entirely cashless. Consumer behaviour is changing, something that businesses and governments are starting to recognise and react to.

Visa’s scheme involves asking companies to bid for the money by explaining how going cashless would affect them, their staff and customers. This insight is no doubt crucial to answering some of these questions; and is a smart mechanism that allows Visa to benefit from crucial insight about cashless life in practice.

The news that Visa is considering offering incentives to UK businesses to go cashless1, for instance, is one of many similar incentives. But it raises big questions. What are the benefits to businesses and consumers? Is a cashless future simply inevitable? How do we prepare for it?

Some of the main advantages for businesses going cashless are the efficiency, transparency and traceability that the digital future will permit. However, it is also a way of future-proofing businesses as new, increasingly digitised generations demand cutting-edge payment solutions.

What’s more, there is already a real demand for going cash-free. According to a recent survey from ING2, one in three people would go completely cashless if they had the option. Meanwhile, 68 per cent of people would rather visit a shop that only accepted cashless payments instead of just cash.3 Some countries are already taking steps to actively discourage cash payments. The rapid surge in cash alternatives started with physical notes and coins being replaced by debit and credit cards, which are currently being substituted by the steady roll-out of digital alternatives such as mobile payments. What’s more, a handful of companies such as Expedia, Microsoft and Bloomberg are starting to accept

FINANCE

cryptocurrencies4 like Bitcoin as online payment methods, gradually creating a new marketplace for businesses and individuals. There is clearly a pressing need for organisations, no matter their size, to start exploring future-facing payment solutions.

ambition of catalysing a cashless society.

The millennial turning point

We know that millennials are very different in their attitudes and approach towards brands compared to previous generations. They are not hard to reach, but they are hard to impress. They’re also maturing in an economic environment of uncertainty and mistrust. These factors make it more difficult than ever before for financial services providers to prove their worth.

Millennials are often hailed as the harbingers of digital change. For this generation, technology-based lifestyle solutions are expected. While it means many businesses have been left scrambling to catch up, millennials are also a useful litmus test for innovation. The audience is a perfect fit for businesses with the

The problem is that engaging with and attracting the attention of millennials is hardly easy, especially for financial services brands that people rarely want to hear from in the first place.

At Jacob Bailey Group, we work with a number of financial services brands. We conducted research to better understand the millennial mindset, how they manage their finances, and what they think of financial services companies. Our Millennial Dilemmas research discovered five key traits that typify this generation: 1. Unconfidently confident: millennials need constant recognition and reassurance, but view help as “interference”. They also expect rewards that they don’t often earn. 2. Individualistic and entrepreneurial: getting the social media generation’s attention requires tailored communications, 81

FINANCE offers and rewards. Millennials embody the entrepreneurial spirit of wanting to be listened to and impact organisational direction, without necessarily starting a company. 3. Instantaneously expectant: millennials expect that everything should be ready how they want it, when they want it. 4. Socially and environmentally driven: money isn’t everything to millennials. They value individual benefits and rewards, particularly those which have additional social value. 5. Technology focused: having grown up with digital, millennials prefer instant messaging communication, but find nothing special about it. They increasingly value personally addressed printed material and face-to-face support for bigger decisions like loans or account changes. This invaluable insight is crucial to understanding millennial behaviour and attitudes, enabling financial services brands to tailor their communications and transactional strategies and better their chances of remaining relevant – such as cashless options integrated with a greater value exchange. From insight to action Of course, uncovering and then applying insight isn’t always an easy feat, and not just for traditional financial services organisations. Even digital-first brands face their own hurdles. Take MasterCard, for instance. While

on the forefront of cutting-edge payment solutions, it has no direct interaction with the people using its products and services. Instead, banks take the role of the middleman. This poses a challenge for the business when wanting to understand the present and future needs of its clients, including cashless solutions, potentially slowing down the pace of innovation. How to get around this? MasterCard embarked on an internal campaign targeting the many millennials within its 30,000-plus workforce. Creating a “no cash challenge” proposition, with a digital platform to encourage millennial MasterCard advisers to share their experiences of a “life beyond cash”, information could be gathered about their attitudes towards their finances and a cashless future. Not only did 96 per cent say they would use cash less, 95 per cent of bank branch employees felt better equipped to discuss appropriate payment methods to offer customers. While also doubling up as a training exercise, the campaign helped set the scene for a life without cash being not only inevitable, but also anticipated. Generation Cashless It seems increasingly likely that the future will be cashless, and businesses need to start preparing for it. To be most effective, they must really get to know what their customers need on a day-today basis. This inevitably requires lateral thinking as every business and sector

faces its own challenges. Millennials are the first digital natives driving change, but the next generation is hot on their heels. Generation Z is looking even more tech and media savvy than its predecessors. To meet the challenges each new generation of customers will surely bring, brands must stay on the front foot and continue to evolve their products, services and communications. Today, it is increasingly clear that cashless solutions must be invested in – but who knows what the demands of tomorrow will be?

Rob Manning Group Strategy Director Jacob Bailey Group References: 1

2 3 4

http://www.independent.co.uk/news/business/news/ barclays-branch-closures-54-end-2017-year-cut-costs-ukcustomers-high-streets-a7893656.html https://www.slideshare.net/ING/ing-international-surveymobile-banking-2017-cashless-society/1 https://www.slideshare.net/ING/ing-international-surveymobile-banking-2017-cashless-society/1 https://99bitcoins.com/who-accepts-bitcoins-paymentcompanies-stores-take-bitcoins/

BUSINESS

THE BENEFITS OF OUTSOURCED COMMUNICATIONS

usinesses in the finance sector send out paper documents such as letters, statements, bills and APR and T&C updates, as well as digital messages via e-mail, SMS and EDI, to their customers on an ongoing basis. These customer communications must be accurate and timely not only because they represent a company’s brand and support retention, but also for compliance. The finance sector is of course a heavily regulated industry, and financial institutions must meet their obligations else risk losing their licence – and this can be a huge, costly burden. If an organisation chooses to send out its customer communications directly, using an in-house team, they will need to invest in the associated equipment and resources, and will also need to have stringent processes in place to ensure efficiency, accuracy, compliance and data security. Working with an outsourced communications partner can help to alleviate these pressures. Outsourcing printing, mailing and electronic communications should deliver cost efficiencies, helping to reduce the budget pressures that all businesses face. There will be the obvious resource savings, but significant savings can also be made in capital expenditure, as the level of investment in printing and mailing machinery, technology and software will be much lower. The partner organisation will have the equipment, tools and 84

expertise necessary to print and distribute various documents and e-documents in large volumes – quickly and to a high quality. They’ll also be able to print specialist customer communications; letters in braille being just one example. Postal costs can also be lowered. Most businesses tend to concentrate on the creation of the piece of mail, and while they might consider design and print costs, they don’t tend to think about postage rates, which can sometimes represent as much as 90% of the cost of production and distribution. Even for small businesses with small postal runs, savings can still be made. Postal rates actually differ depending on sortation levels. An outsourced communications specialist should be able to access very attractive mailing rates, because their specialist sorting machinery reduces the amount of work required for the next phase of postal distribution, lowering the mailing costs. Opus Trust has some specialist consolidation machinery for small volumes of mail, which enables us to bring different businesses’ mail together so they can all benefit from reduced postal rates. The accuracy of the addresses on the mailing list also affects postal rates. If ‘bad’ addresses (e.g. address lines containing both the street name and the town, or missing postcodes) can be removed from a mailing list, costs can be

lowered, because cheaper postal rates can be obtained for accurate addresses. Outsourced communications specialists will sort and sift the mail, so that cheaper postage rates can be applied to the proportion with correct address formats. At Opus Trust we identify the ‘bad’ addresses and work with our clients to help them improve their data files for future mailings. Mail with an accurate address will also get to the recipient quicker, which can obviously have a positive impact on business efficiency – for example, the sooner demands for payment or invoices arrive, the sooner they will be paid/processed. At Opus Trust we have also invested in the technology and technical expertise needed to identify errors or anomalies in letters, statements and bills to ensure customers receive the correct mail and the correct information. This can ultimately have a huge impact on customer experience, and satisfaction scores. Outsourcing communications can also help businesses to manage their customer data securely, which, with GDPR just around the corner, is more critical than ever. Compliant data management is essential for any outsourced communications company – and they’ll provide a safe and secure service that protects their clients’ reputations. They will mitigate all risks of a data breach to protect their clients, but also their own business;

BUSINESS not only would they be fined, but they’d also damage their own reputation – perhaps beyond repair. GDPR will introduce tougher fines for non-compliance and breaches, and, as you’d expect, our sector is focused on delivering GDPR-compliant solutions and adhering to the new regulations. We will also provide advice and assistance to help clients navigate the new requirements, such as the new accountability principle. Under GDPR, companies like ours will be data processors. Customers will be data controllers, and, as each one tends to manage data in a slightly different manner, using a different input system and a different range of services, it’s likely a bespoke approach will be needed to ensure that no risk is left unmanaged.

By using an outsourced communications specialist, financial institutions should be able to meet their obligations more efficiently, whether they are sending out regular mailings or urgent, time-critical updates. It should also make compliance and data security obligations easier to manage, while reducing costs and improving accuracy and efficiency – leaving them to concentrate on their core business.

Paul Brough CEO Opus Trust Marketing

Opus Trust Marketing works with 20 per cent of FTSE 100 companies designing, producing and sending nearly a thousand communications per minute – nearly 1.3 million every working day. From physical letters and mailing packs to digital messages via e-mail, SMS and EDI, the company manages over 30,000 critical communications per day on behalf of clients in the finance sector

When choosing an outsourcing partner, a business should check that there are rigorous compliance and security processes in place. The supplier should have the necessary software and an audit trail process in place, so they can prove that every single letter has been mailed out, and that the communications were accurate. Opus Trust’s investment in sophisticated solutions means we can trace postal communications up to the point of arrival at the local postal depot, and we can demonstrate that email and SMS messages have been sent.

TECHNOLOGY

Legacy ITSM Systems IIIEquipped to Empower Enterprises in Digital Economy

rends like digitalization change the way IT is operated, managed, and delivered. It offers tremendous opportunities, but only for those businesses willing to act. According to a recent Gartner study, “Digitalization is no longer a sideshow – it has moved to center stage and is changing the whole game.”1

While the technology landscape is changing, so too is the personnel landscape – and today’s evolving workforce. Millennials bring unique capabilities, especially as the first “native technologist” generation. They are “more technologically adept,”2 and are not afraid to seek out answers to their questions. They also have definite expectations about how digital systems should behave. Millennials see a significant gap between their experience of digital systems on the consumer side and the reality of what digital systems in the enterprise can deliver. IT must shrink that gap if it wants to boost millennials’ productivity and, more importantly, harness their talents to help differentiate the business moving forward. The same is also true for non-millennials.

As technology evolves and workforce expectations change, businesses, IT leaders, and workers must adapt – instead of digging their heels in – if they want to succeed moving forward. Success in this digital world, according to Gartner, requires “flipping from a ‘legacy-first’ to an outside-in, ‘digital-first’ leadership mindset.”1

Some businesses, intent on creating competitive differentiation, are looking to their IT Service Management (ITSM) systems to accelerate service delivery and provide solutions that empower a growing millennial workforce. Unfortunately, legacy ITSM systems – typically 86

TECHNOLOGY aging, on-premise solutions – aren’t up to the task and are hindering IT’s ability to keep pace and ultimately putting businesses at risk of falling behind, for four key reasons.

On-premise delivery mechanism contributes to high IT costs. Most legacy ITSM systems are based on an on-premise model. The application stack is implemented in the data center and is supported by on-premise servers, operating systems, databases, and other infrastructure components. With this model, legacy ITSM systems that are supposed to act as a business accelerator ironically contribute to the high cost of merely keeping the lights on. As such, the on-premise delivery model further drains IT budgets and prevents teams from pursuing innovation and progress.

Multiple technologies create added complexity Many legacy ITSM systems are based on a cobbled set of different technologies that have come together through mergers and acquisitions. These pieced-together systems make central visibility and reporting a nightmare for IT teams as they struggle to get systems talking to each other and reporting out the same data. These systems are not easily integrated, and they’re difficult to customize and adapt to constantly changing business requirements. The technological reality is that they are actually holding the business back, making it that much harder to turn IT into a business driver.

Closed frameworks block agility Legacy ITSM systems typically involve closed frameworks that are set up in an authoritative manner. These systems are likely delivering against a predefined set of best practices that tightly adhere to methodologies like ITIL or ISO 20000. While these processes are beneficial, many businesses today want to couple IT tooling with business innovation, and a cookie-cutter set of best practices can only take them so far. They want the ability to build a unique set of processes – customized ITSM service delivery capabilities – aligned with the way they do business. Legacy ITSM systems simply don’t have the agility required to adapt and support requests coming from the business side of the organization.

service, and business continuity. The public cloud market is growing faster than projected, and Forrester predicts it will reach $191 billion by 20203. As more and more businesses embrace the cloud as a trusted enterprise infrastructure, they’re also expecting to work with real cloud solutions that conform to a modern cloud environment. It’s not as simple as taking the functionality of an on-premise solution and moving it to a cloud. When looking for the right cloud solution, it’s important to consider how your data is handled, multi-tenancy issues, performance expectations, security, and more. The reality is that many vendors aren’t equipped to deliver to the expectations of a modern cloud environment.

Information technology looks very different today from just a few years ago. Virtual environments, private/public clouds, mobility, and big data are no longer considered disruptive technologies, but part of the natural fabric that makes up most IT infrastructures today. These trends are changing the way IT operates. Similarly, ITSM solutions must change the way employees work today – how they request and receive services and ultimately perform.

IT departments that are “getting by” with their legacy ITSM systems will very soon hit a point when the challenges and risks become prohibitive. Change is inevitable, as forces outside the business demonstrate. It’s up to businesses to decide how they’re going to respond to that change. For many, it requires a major internal shift that allows IT to quickly and flexibly offer the services that best equip a modern workforce. This is the way that organizations can move toward greater differentiation and, of course, stay relevant in today’s digital world

Mark Ackerman Sales Director, Middle East ServiceNow References: 1

Not all clouds are created equal There’s no denying that the cloud is a business accelerator, meeting high standards for performance, security, quality of

Flipping to Digital Leadership: Insights from the 2015 Gartner CIO Agenda Report, 2014 The 2015 Millennial Majority Workforce, study results, commissioned by Elance-oDesk and Millennial Branding, October 2014 https://www.slideshare.net/oDesk/2015millennial-majority-workforce The Public Cloud Market Is Now In Hypergrowth,” Forrester, April 24, 2014

INSURANCE

The unforeseen consequences of IFRS 17

fundamental change is coming to insurance. The new accounting standard, IFRS 17, will be introduced by the International Accounting Standards Board (IASB) in just under four years and transform how balance sheets are built. In an effort to improve current reporting practices, IFRS 17 will mandate that insurance companies deliver more transparent, comparable information. Insurance entities will need to report the effect of insurance contracts on financial performance and risk exposure in statutory accounts. Significantly, they will also need to prove how they calculated profit and loss figures. This will require simulations; tweaking parameters to understand what factors impact future results and how sensitive a forecast is to single or multiple changes. Without the flexibility or governance to build that understanding then it will be difficult for insurers to explain how they are meeting targets, and how susceptible the financial position is to external and internal events. The changing nature of the balance sheet Currently, there is a lot of diversity within the insurance industry. Insurance businesses have many different systems and processes. For example, at one end of the scale there is car insurance, a simple insurance product that will only last for a year. At the other end is life insurance which runs for decades and has multiple factors that all dramatically impact how a contract’s value could change over time. In addition, insurance companies report in very different ways and there is little consistency across jurisdictions.

It’s no longer appropriate for insurance companies to have opaque models producing valuations that can’t be validated. In today’s world, regulators, auditors and investors all use balance sheets to allow third parties to understand financial information, metrics and performance to make informed decisions. This is increasing the appetite for transparency in reporting, which over time will help drive efficiency and establish best practice. Under the IFRS 17 model, accounting policies will be increasingly standardised and insurers will need to ensure that compliance processes are auditable. While IFRS 17 is being introduced for the right reasons, it will cause a significant amount of change. Insurers have already invested a lot of money in IT because of the capital adequacy requirements stemming from Solvency II and are resistant to having to undertake huge change management programmes. There is a perception that insurers could reuse infrastructure but it could mean they sacrifice important capabilities and efficiencies. At the same time, going back to manual methods will leave insurers open to risks as errors can be made. Forecasting for the future Instead, there needs to be a separate process that glues different processes together and provides the additional capability that will be needed to fulfil auditors’ demands. IFRS 17 will demand greater visibility over contracts being underwritten and require even more data sources to be analysed so businesses understand the impact of decisions over time. As a result, insurers need to be able to understand the impact strategic decisions have and use IFRS 17 to understand, model and forecast key metrics.

As a starting point, organisations need to complete an assessment with accounting advisors to understand what the governing body wants to see over time. Once there is a firm understanding of what auditors want to know then insurance businesses need to focus on procuring systems that can demonstrate compliance. IFRS 17 has raised the benchmark for governance and the quality of documentation required to facilitate a smooth audit sign off. At the heart of fulfilling auditor’s demands is the introduction of systems and processes that ensure the data required to demonstrate compliance is available, fully transparent and auditable. Insurers also need the ability to run different scenarios and understand how any changes in pricing parameters would influence the financial condition of the company, now and in the future. Finally, if the regulation increases in complexity, insurers need to make sure there is a scalable and flexible approach that can be adapted as requirements evolve, in line with best practice being established. While the deadline sounds a long way away, the change is likely to spark a period of consolidation within the insurance industry as it becomes clearer which players are stronger and which are weaker. To save time and keep costs down, insurance companies need to stay in control and plan ahead

Lee Thorpe Head of Risk Business Solutions SAS UK & Ireland 89

FINANCE

Protecting digital property and reputation with a ‘single source of truth’

he march of digitalisation in the financial world has paved the way for innovation, but at the same time, putting these ‘soft assets’ at the heart of way organisations now operate – across products, services and internal processes - has brought its own challenges. Companies are dependent on code and other digital content, which is also included within regulatory and compliance processes. Control, visibility and traceably of these ‘mission critical’ assets is therefore essential, but that has become increasingly hard to achieve, as a result of more complex applications and systems, as well as larger and more varied types of content or files. On top of that, banks and other organizations in the financial sector need to keep ‘legacy’ products live for many years, not just to service remaining customers but also as part of the regulatory and audit process. For instance, if there was a query over a financial product introduced several years ago, a bank would need to have access to all past versions of the code used to develop the software

involved. Finally, lack of visibility around digital assets can lead to security vulnerabilities, leading to breaches that are not detected until it is too late. Single source of truth Clearly, control and transparency of digital assets have become an integral part of risk management and this is why an increasing number of organizations – not just in the financial sector, but across a variety of industries – are adopting a ‘single source of truth’ approach, overcoming the traditionally siloed way that most software has typically developed.

The idea is to create an environment that is highly transparent and collaborative, with a single place for all the digital assets associated with a project or product’s development and lifecycle, from ideation, design, development, test, deployment, release and maintenance. That involves knowing what changed, who made that change, why and when, across all digital assets and contributors, with both real-time and historic views.

Transparent traceability within a ‘single source of truth’ makes it easier to see how two different digital ‘artefacts’ relate to each other or are inter-dependent. Essential software processes such as QA, testing and real-time code reviews are better supported, while it also becomes easier to automate processes and engender improved collaboration between different contributors, whether technical and non-technical. To give the importance of this some perspective, without this level of information teams might be tied up for weeks or months trying to unearth information to keep auditors happy, or to uncover a software problem or security issue. Not just risk reduction Having a ‘single source of truth’ does not just mitigate risk, it has other benefits too. Products and services can be successfully brought to market more quickly, because the tight real-time collaboration between teams means that decisions can be made faster and any potential problems unearthed and addressed

FINANCE more rapidly. Indeed, a ‘single source of truth’ is often a central part of implementing DevOps, Continuous Delivery and Agile methodologies, due to the way it enables greater transparency and visibility. Best practice Like any technology approach, theory is one thing: putting it into practice is another. There are a few attributes of a single source of truth’ best practice. Here are some of the main ones to consider: 1. Version everything – version control systems are typically the foundation of a ‘single source of truth’ and are well established in the software development market for managing code, though these days, they need to be able to store and version every kind of digital asset, at every stage. So, choose a version control system that has been designed to accommodate different types of file or content, plus ensures an immutable history (in other words, the facts cannot be changed retrospectively). 2. Work around users – since most software environments involve people using a variety of systems, platforms and tools, the version control system must work with all these and not dictate new ways of working. For instance, Git is a tool widely used in software development, so look for a version control system that lets

developers carry on using Git, but in an environment that gives IT management visibility and some elements of control over code changes. 3. Make it easy – many projects are going to involve contributors who are not developers or highly technical, such as product and marketing managers, senior management and even third parties (including auditors and regulators). The version control system should be easy and intuitive to use by anyone. 4. Look at the whole lifecycle – take the idea of a ‘single source of truth’ beyond creation and address the whole lifecycle of an asset. Ideation and development is, after all, only the beginning of how a piece of software needs to be managed. 5. Manage access – avoid giving users unnecessary levels of access to the repository of code and other assets. Giving everyone access to everything only increases security risks. Far better is to implement ‘fine grained’ access control, where users have access to what they need, but no more, which as well as reducing risk will also contribute to compliance processes. Protect digitally-based intellectual property (IP) across IP address, user and group, with enforceability at code repository, branch, directory or individual file level, locally or across authorised locations.

6. Inform – make sure that people understand why a ‘single source of truth’ is important and make that relevant to their individual job. Some of the most successful instances we have seen of ‘single source of truth’ adoption – often alongside Agile, Continuous Delivery or DevOps adoption – have been where the organisations involved have placed a lot of emphasis on educating users and regular communication. Achieving a successful ‘single source of truth’ inevitably involves some work, but with the right tools and approach, the benefits are within reach of any organisation and make for a powerful argument, particularly risk reduction. With most financial companies now driven by software in multiple ways, this level of traceability and management over all digital assets is not just desirable, it is arguably vital

Konrad Litwin Managing Director–International Perforce Software

FINANCE

Late payments, and the challenges facing financing and accounting teams

ccording to a recent study by Zurich Insurance, approximately 52 percent of small and medium sized enterprises are owed approximately ÂŁ44.6 billion1. The average small business can often be left waiting for three to six months before being paid for their services. For SMEs this wait can have a massive impact on the companyâ&#x20AC;&#x2122;s cash flow and growth. A survey carried out by R3, the insurance and restructuring trade body, found that one-fifth of UK corporate insolvencies were caused by late payments2. This liquidity squeeze affects more than just the immediate suppliers whose cash flow is restricted by the late payments. It also affects others along the supply chain, multiplies risk for the buyer and, ultimately, affects the local and global economy. In response to the challenges that SMEs are facing, new rules set up by the Department for Business, Energy and Industrial Strategy (BEIS) see large companies and their directors face legal action if they do not disclose their payment conduct with suppliers. The rules are part of an initiative to help address many of the challenges SMEs face when scaling up. Amongst finance and accounting departments who are on the forefoot when it comes to dealing with their daily operations, increasing numbers are turning to technology advancements to improve their 92

operations. Research has found that 75% of finance executives agree that digital technologies are fundamentally changing the way in which the finance function operates3. Technology is shaping how individuals and businesses interact, operate and compete, and these seismic shifts are having a marked effect on finance departments. Whilst fully embracing change can be challenging for some parts of the finance function, major enterprises are waking up to the untapped potential available by embracing next generation automation tools. With the help of IT solutions providers, organisations are making improvements by implementing solutions such as standardised accounting and reporting practices. Advancements in software and automation are opening up business avenues that

can provide financial decision makers with strategic insights enabling them to create cost effective business strategies. Technology has a vital role to play in the finance function of a business, and as a result can see big businesses reducing

addition, provide a low cost solution that can replace a legacy application or meet a need that is currently unmet by existing systems. Companies today are facing increasing pressure to transform, and this increase in pressure often filters down to the accounting teams. As market conditions continue to change, companies require fast response capabilities. that highlight dependencies such as overdue payments, enabling them to deal with issues promptly.

the likelihood of legal action. Many businesses currently work from siloed financial systems for different business processes, making it extremely challenging to have a clear overview. Employing a fully integrated and modular architecture consolidates the information and eradicates the challenge of obtaining a transparent overview of expenditures. IntelenetÂŽ Global Services have partnered with a numberof businesses to develop dashboards

One of the main trends that has revolutionised the sector is the premise of the As-a-Service Economy. This is underpinned by modern technology frameworks that eliminate repetitive work, create automated workflows, and make valuable, actionable data and insights accessible. The Software-as-aService (SaaS) and Business-Processas-a-Service (BPaaS) market offers the finance and accounting function a new level of business agility. Companies are also turning to Robotics Process Automation (RPA). This technology can consolidate and disseminate information whilst reducing the challenges often faced when implementing new systems. Cloud computing models are also being embraced by the sector; a number of finance and accounting applications have been developed specifically for the cloud, they are easy to deploy, and in

The lack of visibility is often part of the reason why businesses make late payments to suppliers. This is motivating financial executives to turn to digital solutions as a way to spearhead financial transparency and gain a more holistic overview of their performance. Ultimately, advancements in data software and automation are opening up avenues for businesses to boost their operational efficiency and to forward plan, which in turn, will drive business growth

Bhupender Singh CEO IntelenetÂŽ Global Services

References: 1

2 3

https://www.zurich.co.uk/en/about-us/media-centre/ general-insurance-news/2017/smes-owed-more-than45bn-in-late-payments https://www.r3.org.uk/index. cfm?page=1114&element=27579&refpage=1008 http://www.horsesforsources.com/digital-ďŹ nancewebcast_040816

INSURANCE

he global insurance industry is going through significant change. This noble, respected profession is seeing its centuries-old operations being disrupted by scrappy startups. Call it the ‘Uber effect’ if you like, but we are seeing major changes in this sector, driven in large part by digital innovations like Artificial Intelligence (AI). It’s fair to say that while the industry may not be considered a technology early adopter, insurers are making significant investments in technology to disrupt themselves before they are disrupted. Often with a particular focus on customer service, in fact, the insurance sector has been exploring ways for AI to augment the end user’s experience and deliver more tailored products for several years. According to the second part of the Tata Consultancy Services Global Trend Study the insurance industry is outspending many other key verticals such as automotive and banking, having invested on average $124 million on AI in 2015, compared to a cross-industry average of $70 million. But with AI investment expected to rise exponentially, we must ask where the value is most apparent and how can it improve the insurance industry specifically? There are also broader questions around the impact on jobs and the ability of people to adapt to these new tools and business models. What seems clear based on our data, however, is that this traditionally conservative sector displays an encouraging willingness to innovate in this space – with some exciting results. AI: Developing Smarter Insurance Artificial Intelligence technology is playing a major role in helping companies prevent injuries in some of the highest risk settings, such as manufacturing, energy, warehousing and distribution, and construction. This is down to AI systems correlating data from a workplace environment with historical data on workplace incidents. Then, the technology is able to determine how best to prevent injuries before they happen. This use of AI is very timely, as workplace accidents kill one person and injure 153 others every 15 seconds. Another innovative way AI is changing the industry is by the use of chatbots. These are computer programs designed to simulate conversation with human users. Chatbots work 94

INSURANCE

how ai iS tranSforming the inSurance induStry through messaging apps many customers may already have on their smartphones. Insurance firms can use chatbots to answer questions and resolve claims, as well as sell products, address leads or complaints, and make sure customers are properly covered by their insurance. The use of chatbots can help the insurance industry to be more efficient and understand its customers, which ultimately supports business growth. The Future is Underwritten Let’s look at underwriting – at the heart of what insurers do. This area of work can hugely benefit from AI. Artificial Intelligence has the ability to automate the entire process, by analysing a customer’s profile to find trends and patterns in his or her lifestyle. For example, someone who has a healthy life and steady job could be deemed to be a safer driver, which could lower insurance premiums. In reality, AI can analyse data better than humans can, to more accurately predict risk, thereby providing customers with the right amount of insurance needed to protect them from accident-prone motorists. Moreover, AI can far more accurately calculate appropriate insurance premiums for drivers through telematics technology that can track the number of miles driven per week and whether drivers stick to stated speed limits or routinely speed. Driven by Data One constant driver in the insurance sector is effective use of data – it is the lifeblood of the industry. This will not change now, or in the future. Data has a dramatic impact on the company’s profit sheet and level of customer satisfaction. Seasoned industry professionals feel that AI is set to shape how data is mined to drive customer experience. For example, many insurance companies offer incentives to customers who send their data back to the company. AI can take this one step further by analysing data patterns. Take the automotive industry for example. AI has the ability to monitor road and traffic data, even predicting where road accidents could occur. Insurance firms not using AI should adopt this technology, as it could lead to customers selecting appropriate insurance cover, driving customer satisfaction and recommendations.

Job Creation in the AI Age There is a perception that AI implementation will lead to job cuts. However, the reality is that insurance companies do not predict a huge net job loss as the result of the ongoing expansion of cognitive computing systems in the coming years. Our research into the job market found that insurance companies felt that AI could automate an average of 10% of the jobs in their own departments in 2016. Looking further ahead, they anticipate that an average of 14% of jobs could be cut in 2020 in functions using AI, and 18% of jobs could be automated in 2025 through AI in functions that use the technology. However, that projected job loss looks to be mitigated by some of the new roles these AI-related systems will create. Insurance executives predicted that AI resulted in average job increases of 8% in functions using the technology in 2016, and additional 10% more jobs in those functions in 2020 and 15% more by 2025 – in many new roles that don’t yet exist today. The Future In a world where there is arguably greater risk than ever before, there is a correlated need for the insurance sector to get smarter too. New products and services are needed to deal with areas such as natural disasters and climate change, as well as the impact of an ageing population. AI can help in servicing these groups better, but also in finding ways of better-predicting the relative risks we face, helping to make the insurance business model more robust and profitable. Insurance is a relatively complex industry, but like any good technology, providing cut through and simplicity is where AI shines. If we are to realise the great promise of AI in the sector, both the nimble startups and major established industry players will need to embrace these tools

Gopalan Rajagopalan Head, TCS Scotland 95

TECHNOLOGY

The future of work: technologyâ&#x20AC;&#x2122;s role in liberating people from the most alienating aspects of work

TECHNOLOGY

ver the past few years we have witnessed the rise of artificial intelligence, big data analytics and automation. These technological advancements form the crux of what we can now refer to as the fourth industrial revolution (or industry 4.0). This fourth revolution has not only arrived on our door step, but has taken a significant step inside our lives and its growth will continue at an exponential pace. As with previous revolutions, its arrival has stoked fears over massive job losses; fears encouraged by the words of John Maynard Keynes, who famously predicted widespread technological unemployment back in the 1930s. But such shrill is misplaced. It’s called the ‘Luddite Fallacy’. Technology will not lead to the widespread destruction of jobs but, rather, to their redefinition. Workers will be liberated from the most alienating aspects of work; the tasks that can most aptly be described as predictable and dull. Technology can invigorate workers’ lives with more vital, creative, social and growth-critical tasks. The first tasks subjected to automation have been those involving routine and specific rule-based activities. Big data algorithms are rapidly entering areas that are heavily or exclusively reliant upon pattern recognition. We also have a new generation of robots whose enhanced senses and dexterity enables them to perform a broader scope of manual tasks. What does this mean for workers? It means they can increasingly move away from mundane and repetitive administrative and manual tasks and into more productive, vital tasks that enable their business to flourish and grow. For example, a good marketing executive does not want to be wasting time pouring over their financial outgoings. They want to develop new markets, devise ingenious ways of selling their products or communicating their product to clients and customers. Technology can liberate them to this end.

TECHNOLOGY New tech-driven services like Soldo can drastically reduce time spent on such mundane financial tasks. Soldo’s multi-user spending account makes it easy for businesses to control and manage every single aspect of company spending - from buying to reporting. Balances and transactions are shown in real time, all the time. The wait for the credit card bill is consigned to a distant yesterday, and expense reports are all wrapped up within a couple of clicks. The result is not only an enormous cost-saving but also - crucially - a removal of all of those tedious tasks which drain both time and motivation. Everyone is immediately freed up to spend more time on more growth-critical tasks. Chatbots are another streamlining-solution that can liberate staff time for more meaningful and useful tasks. Chatbots enable customers to type queries through messaging mediums such as Facebook or WhatsApp and receive an automated response without a paid employee needing to intervene. Customers can use bots to book tables at restaurants, order takeaways or chose specifications for a new computer or car. Chatbots are a great, cheap way of scaling customer service. Today’s customers expect instant and minimal effort in engaging with businesses - the bugbear of many a consumer is sitting on hold to a call centre. The instant answers that chatbots supply can make for a much happier customer experience. Smart businesses must be prepared to adapt and utilise new technologies as they become available. With the opportunity to automate a variety of tasks more efficiently, cheaply and reliably, there will be more time to maximise market penetration across new territories. However, the race starts now. Actions to consider include retraining of current staff, new work and organisational models (for example flexible schedules to match new varied production schedules and flatten organisation structures to make

decision-making processes quicker), recruitment for 4.0 (look beyond formal qualifications because it’s inevitable that they’ll be working on a vaster array of tasks), and strategic workforce planning. A study by Oxford academics in 2013 entitled The Future of Employment examined 702 common occupations and identified the jobs that are most likely to be exposed to automation in the very near future. They included Telemarketer (99%), Loan Officer (98%), Cashier (97%), Paralegal and legal assistant (94%), Taxi driver (89%) and Fast food cook (81%). Workers whose jobs are on some level routine, predictable and repetitive should really look into training and developing in areas that are more relevant. We’re now looking at life-long learning becoming the norm, and everyone should be embracing that outlook immediately. It’s an opportunity not only for the growth of our businesses but also for self-growth as individuals explore and enhance new or under-developed skillsets. Since computers do not have the breadth of perception that we humans do, workers should also prioritise skills and qualities such as creativity, people management, negotiation, and critical thinking. The World Economic Forum actually ranked a list of the top 10 most important workplace skills for 2020, they are as follows:

of Psychology and Marketing at the University of Texas “creativity is a skill you can build, not a talent you either have or don’t.” In order to enhance your creativity, Dr Markman has three practical recommendations: 1. Develop the habit of explaining things back to yourself. By doing this you can enhance your knowledge base so that when ideas appear you don’t need to interrupt your flow by switching to, say, Google to look something up. The most creative people have a lot of knowledge from which to draw. 2. Be open to new ideas, concepts and experiences. If you find that you’re resistant to a new idea, try putting it aside for a day and come back to it. The sense of familiarity may well help open you up. 3. Keep asking questions. The more ask yourself difficult questions about a subject, the more creative ideas may emerge. The future workforce will be a lot more exciting than today. Thanks to robots, software and services, workers will be liberated from the repetitive, routine and predictable tasks and redeployed towards more creative, social and critical roles. Workers will have the opportunity to explore a wider range of skills and develop a lifelong habit of learning that will serve to enrich their experience of life.

1. Complex Problem Solving 2. Critical thinking 3. Creativity 4. People Management 5. Co-ordinating with others 6. Emotional Intelligence 7. Judgement and Decision Making 8. Service Orientation 9. Negotiation 10. Cognitive Flexibility

The key is to be open and adaptable. Time to get started

For those of you who might be concerned that creativity is a talent rather than a skill you can acquire, fear not. According to Dr. Art Markman, Professor

Carlo Gualandri Founder & CEO Soldo

CMY

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