Global Banking & Finance Review Issue 13 - Business & Finance Magazine by Global Banking & Finance Review®

Issue 13

Dr. Chutamas Vongvorakit Group Executive Director & Founding Board Member of Anametrics Holdings Limited

Bridging the Trade Finance Gap

Exclusive Interview with Dr. Steven Hensen, Chairman of Anametrics Holdings Limited

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I am pleased to present Issue 13 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

Featured on the front cover this issue is Dr. Chutamas Vongvorakit the Group Executive Director & Founding Board Member of Anametrics Holdings Limited. She is a pioneer in providing innovative business solutions that help build and scale profitable and sustainable enterprises dedicated to social and environmental change. In an exclusive interview with Dr. Steven Hensen, Chairman of Anametrics Holdings Limited we discuss the risk and opportunities of trade finance and how Anametrics Holdings helps to bridge the gap between sellers and buyers. In this edition you will also find engaging interviews with leaders from the financial community and insightful commentary from industry experts. Mike Schnurr, Kate Stothers, and Ed Solari of the Global Fixed Income Currencies and Commodities (FICC) within BMO Capital Markets give us an inside look at their institutional trading operations and their plans for the year ahead. We discuss the potential for AI and Machine Learning in financial service with Clairvoyant CEO, Chandra Ambadipudi. We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook. We have gone that extra mile to ensure we give you the best from the world of finance. Send us your thoughts on how we can continue to improve and what you’d like to see in the future. Happy reading!

Wanda Rich Editor

Stay caught up on the latest news and trends taking place by signing up for our free email newsletter, reading us online at http://www.globalbankingandfinance.com/ and subscribe to the print magazine for direct delivery.

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CONTENTS

inside... BANKING

Assuring good customer outcomes in a digital world James Nethercott, Group Head of Marketing at Regulatory Finance Solutions

A new landscape: How technological innovation is transforming transaction banking

Daniel Verbruggen Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services, BNY Mellon. Bana Akkad Azhari, Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services, BNY Mellon.

Taming the flow monster in real-time payments

What are the strategies for banks as the world adopts instant-transfer schemes Bhupendra Warathe. Chief Information Officer (CIO) for the Corporate & Institutional Banking (CIB), Standard Chartered

BUSINESS

Three Customer Service Practices Middle East Organizations Need to Change

Mark Ackerman, Regional Director, MESAT & EE, ServiceNow

How to tackle the late payment culture

The marketing challenges facing the financial services industry

Lee Murphy, Founder, Pandle

Gavin Dimmock, MD, Northern EMEA at Marketo

104 BUSINESS

116

Adding value to share price during M&A: A bit of effort will reap rewards

ORAL CONTRACTS â&#x20AC;&#x201C; I DON'T THINK SO

Supreme Court Rejects Once More A Common Contractual Workaround Nick Storrs, Senior Associate, Signature Litigation Johnny Shearman, Professional Support Lawyer, Signature Litigation

104

Expansion across the Americas: The importance of maintaining national rapid growth Sunny Ackerman, President of Americas at Frank Recruitment Group

Carlos Keener, Founding Partner, BTD Consulting

126

Maintaining consumer loyalty by cracking the chargeback process Neil Smith, Regional Head of Issuer Partnerships EMEA at Verifi

134

Three Tips to Unleash the Creative Entrepreneurs in Your Community

Sean Norris, Executive Vice President EMEA & APAC, Accuity Alice Loy, PhD, CEO and Co-Founder, Creative Startups

INSURANCE

114

Blockchain: The Foundation for an Undisrupted Insurance Industry

Pat Renzi, Principal and CEO, Life Technology Solutions, Milliman

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CONTENTS

FINANCE

A new path to financial inclusion

How Enterprises are Finding Their Fintech Edge to Generate New Sources of Cash

Paul Randall, Executive Director from credit risk management experts Creditinfo

Nilay Banker, Founder and CEO of Inspyrus, Inc.

12 TECHNOLOGY

Avoiding the cloud anarchy curse

Blockchain can offer solutions to Brexit pitfalls

Allan Brearley, Practice Lead at IT services and cloud consultancy ECS

Five trends changing the face of payments

Matthias Setzer, CCO, PayU

Flinging the doors open to Africa’s booming market opportunity Patrick Gutmann, Managing Director, Corporate & Institutional Banking at BACB

The Path to Proactive and Pragmatic Financial Compliance

Phil Fry, Vice President of Financial Compliance Strategy at Verint

It’s time for a new approach to crack financial crime

2018 Europe Working Capital Survey

Richard Grint, financial crime and tax evasion expert at PA Consulting

mprovements in Receivables, Inventory Drive Best Working Capital Performance in a Decade Paul Moody, Associate Principal REL Consultancy Group, member of the Hackett Group

Danial Daychopan, CEO and Founder, Plutus

Blockchain and the supply chain share a future fastened around trust

Shivani Govil Global VP, AI and Cognitive Products, SAP Ariba

Top Budgeting Challenges in 2018 – And How to Solve Them

120

John Orlando, CFO, Centage Corporation

On the frontline of fintech: Building a personalised digital platform catering to a global audience

Sally Crimes, Chief Product Officer, Ten Lifestyle Group

128

Could your smart refrigerator be giving hackers a path to corporate data? Ray Overby, Key Resources

132

Wall Street Likens Automated Intelligence to Transformers, Both Good and Bad Michael Alexander President, Broadridge Wealth and Capital Market Solutions

INVESTMENT

Go East: Securing investment from Asia Dr. Johnny Hon, Chairman – the Global Group

TRADE

Challenging the traditions of trading

Is the Metals Industry Prepared for Regulatory Change?

Rob Brockington, CEO, Finatext UK Ltd

Brian Collins, Managing Director, Metals, Allegro Development

108

Institutional Trading with BMO Capital Markets

122

Using Corporate Event Data to Navigate Low-Latency in Equity Options: Strategies for Institutional Traders and Market Makers

Mike Schnurr, Kate Stothers, and Ed Solari of the Global Fixed Income Currencies and Commodities (FICC) within BMO Capital Markets

Barry L. Star, CEO of Wall Street Horizon

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inside... EUROBANK, THE LEADING SAVINGS BANK IN GREECE 69 Iakovos Giannaklis, General Manager of Retail Banking, Eurobank Ergasias

69 COMMITTED TO YOUR SUCCESS BANKING IN SRI LANKA WITH NDB BANK 96 Mr. Dimantha Seneviratne, Director/ Group Chief Executive Officer, National Development Bank PLC

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THE FUTURE IS HEREAI AND MACHINE LEARNING IN FINANCIAL SERVICES 110 Chandra Ambadipudi, Chief Executive Officer, Clairvoyant

110

BRIDGING THE TRADE FINANCE GAP 72 Dr. Chutamas Vongvorakit, Group Executive Director & Founding Board Member of Anametrics Holdings Limited Exclusive Interview with Dr. Steven Hensen, Chairman of Anametrics Holdings Limited or Dr. Steven Hensen, Chairman of Anametrics Holdings Limited discusses the risk and opportunities of trade finance and how Anametrics Holdings are helping to bridge the gap between sellers and buyers.

Cover Story

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EMEA 12 Issue 13

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A New Path to Financial Inclusion According to the World Bank’s Global Findex Database 2017 1, 69 percent of adults worldwide have an account, either with a financial institution (i.e. bank account) or a mobile money provider. Financial services are the bedrock of a nation’s economy, funding and providing access to other critical services including health, education, entertainment and business. Yet the stark reality is that 69 percent is too small a number. A whopping 1.7 billion adults across the globe remain ‘unbanked,’ with no bank accounts and no access to formal finance. Most, if not all, of these unbanked individuals live in the developing world, in regions such as Africa, India and China. What’s more, an additional 200 million micro-, small- and mid-sized businesses in growth markets lack access to

savings and credit, according to a recent McKinsey report 2. A lack of banking infrastructure in these developing markets has led to significantly lower numbers of formal finance. This lack of formal finance creates a poverty trap that is hard to climb out of. Poor people around the world are relying on cash to pay their utility bills; budding entrepreneurs are overlooked for loans because of a lack of credit history. But the outlook needn’t be so bleak. The good news is the unbanked population is slowly diminishing. But how can we close the financial inclusion gap even more swiftly, on the road to universal financial access in the not too distant future? The answer lies in the innovation that both incumbent and emergent fintech companies are bringing to the credit risk management table.

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By changing current approaches to credit lending, and providing those with lending power with a new mentality, and the infrastructure required to make better decisions, we can tap into an unbanked and underbanked population to the benefit of economies globally. Here, we’ll take a look at what this road to financial inclusion looks like in reality, particularly for developing regions such as Africa – and it’s more practical, achievable and realistic than you might initially think. Potholes in the road to financial inclusion Consulting firm Accenture has estimated that bringing unbanked adults, as well as businesses, into the formal banking sector could generate about $380 billion in new revenue for the financial services sector. With $380 billion to gain, why wouldn’t players in the industry want to unlock that potential?

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A report by the World Bank 3 outlined the importance of infrastructure in support of economic growth. This is specifically pertinent for developing markets, where access to infrastructure, or the ability to build a banking infrastructure from scratch, is often just out of reach. The historical infrastructures designed to manage corporate loans and consumer savings are ill-equipped for the challenges generated by both the substantial increases in volume of credit and the specific requirements of an unsecured lender. This lack of infrastructure is especially poor for the initial risk assessment, where much of the process is manual. The development of a robust banking infrastructure, underpinned by government and private sector investors and the participation of local and foreign businesses, is imperative in unlocking the huge population of unbanked and underbanked individuals in developing regions.

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In a recent blog by The Brookings Institution 4, a US non-profit public policy organisation, Africa was proclaimed as the continent of the future. For some years now, the World Bank has driven an initiative to promote the installation of credit bureaus across Africa and other developing regions, with a view to facilitating lending to consumers and small businesses.

This means banks and other lenders can provide access to financial services at a lower cost, to more people, while also reducing risk. However, the conundrum in Africa lies in providing access to financial services to individuals who have very little or next to no credit history, thereby making it difficult for those credit bureaus to provide an accurate picture of solvency to lenders.

If you build it, they will lend You can teach an old bank new tricks The International Finance Corporation’s (IFC) Africa Credit Bureau Program supports economic growth on the continent by providing the advisory services, infrastructure, credit risk management technologies and support to central banks and other private sector stakeholders in order to build a banking backbone that supports increased access to formal lending. Part of this program involves the development and implementation of credit information sharing, supplemented by automated application processing systems so that lenders can make more informed decisions more quickly, and at scale. These credit bureaus play a crucial role in creating the infrastructure that has been so severely lacking, by allowing banks to make lending decisions based on quantitative models of risk.

“When there’s little information, then there’s little financing,” said Luz Maria Salamina of the IFC. Traditional lending and underwriting methods typically screen out the huge pool of ‘thin file’ customers that reside in developing markets like Africa. These are customers without a credit history, or one that’s too small for traditional risk analysis. Thin file companies are typically very poor – they’ve been ignored by the formal sector, and as such tend to pay for services with the little cash they have. So, without information on the billions of these individuals currently without access to finance, the financing stops. Enter fintech disruptors, who are facilitating change in the credit lending industry by helping banks to tap into and use new sources of data that can unlock both the large pool of thin file customers and, by extension, the wider unbanked population. Some of the largest investors into fintech companies are banks, with some mainstream lenders now acquiring, adopting and developing the new technologies that these fintechs have created. What’s more, established, bestin-breed credit bureaus have adopted these fintech techniques, providing banks with a single source of data, whether that’s through a traditional credit file, or a digital file of aggregated data.

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These fintech companies have made an excellent job of mining new data sources from social media, mobile transactions and trade data. Amazon is an example of this new way of thinking – the tech heavyweight used its vast data source to lend $1bn to SMEs over the last 12 months. Companies like Amazon have been able to teach banks new tricks when it comes to making better decisions more quickly, particularly when it comes to thin file customers. Better the debtor you know Normally, credit histories are a record of a borrower’s ability to pay back debts. Sources of data include banks (does Bob pay his bills on time?), credit card companies (how many credit cards does Bob have?) and collection agencies (has Bob previously defaulted on any debt, such as loans?) The data is combined, an algorithm is applied, and the subsequent report details how likely it is for that particular borrower to pay back or default on debt in the future.

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As banks and fintech companies join forces to harness innovation, they are unlocking new data sources, which include the new concept of psychometric testing to fill in the gaps on thin file customers. While it’s true that not everyone can currently access credit, everyone has a personality.

New data can be created on individuals’ personalities and their likely behaviour, complementing existing risk assessment processes to produce a rounder picture of an individual. The psychometric test can also be expanded to business loans, allowing more companies to start and expand.

There are now new, innovative solutions for credit lenders to measure the risk of potential customers who may have been overlooked for formal finance in the past, by assessing their core personality. Just like credit bureau data, where millions of raw variables are split into segments such as default, early stage and revolving arrears, or credit card performance, so personality data is split into segments in a similar way.

Mobile lending as a litmus test for change

By uniting psychological models with traditional risk analytics, lenders can reduce risk with existing customers and start new relationships with prospective customers, thereby increasing affordable access to financial services products.

Smartphone and mobile money data can also be harnessed to open up the financial services sector to both individuals and businesses in Africa. As an example, Kenya has an intrinsic entrepreneurial spirit, from informal shops and roadside stores to sophisticated web-based start-ups. However, as with other emerging economies, a high percentage of Kenyan start-ups fail within the first three years of operations, with working capital identified as one of the main reasons for failure.

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Entrepreneurs who previously struggled to obtain formal finance due to a lack of credit history now have an opportunity to benefit from mobile lending solutions. With the number of African citizens with access to smartphones increasing, startups have an opportunity to widen their customer base through a host of digital platforms, reducing the overall overheads, whilst being able to better manage their business, finances and inventory. Over the coming years, we’ll see various regions in Africa benefitting from the growth in mobile lending, with the result being those loan records being stored within credit bureaus. The World Bank’s goal is that, “by 2020, adults who currently aren’t part of the formal financial system are able to have access… as the basic building block to manage their financial lives.” The road to universal financial inclusion might be peppered with hurdles, but these are hurdles that can be overcome, through collaboration, open-mindedness and a new approach to the credit risk management industry. Financial inclusion isn’t just about financing businesses and, for the cynics amongst us, creating more debt. It’s about levelling the playing field globally, giving everyone access to the services they require and, ultimately, giving people the opportunity to lead a better life; a chance to climb out of poverty and into a society that is fair and creates ‘wealth’ in its many shapes and forms.

Paul Randall Executive Director Creditinfo

“Home | Global Findex.” Home | Global Findex, globalfindex.worldbank.org/.

Manyika, James, et al. “How Digital Finance Could Boost Growth in Emerging Economies.” McKinsey & Company, www.mckinsey.com/featuredinsights/employment-and-growth/how-digital-finance-could-boostgrowth-in-emerging-economies.

http://siteresources.worldbank.org/IDA/Resources/IDA15Infra-SectionI.pdf

Arezki, Rabah, and Amadou Sy. “Financing Africa's Infrastructure Deficit: From Development Banking to Long-Term Investing.” Brookings, Brookings, 8 Aug. 2016, www.brookings.edu/research/financing-africas-infrastructuredeficit-from-development-banking-to-long-term-investing/.

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How Enterprises are Finding Their Fintech Edge to Generate New Sources of Cash

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Adopting a fintech mindset can have massive impact within the four walls of the enterprise, streamlining and accelerating the payment process and the financial supply chain — resulting in dramatically better outcomes for both customers and suppliers. Digital disruption is making way for new entrants and new models in the banking and financial services arena ala “fintech”, but corporate finance departments are also catching the fintech bug to innovate and streamline the financial supply chain for better, faster outcomes that empower both vendors and suppliers. In the past, Accounting and Finance have been overlooked when it comes to the latest business transformation innovations. But they’re finally getting credit where credit is due. Today, technology is revolutionizing the procure-to-pay process, providing the requisite velocity and transparency to support payment automation and dynamic discounting (where suppliers proactively offer early payment discounts on approved invoices awaiting payment). Forward-thinking executives are taking advantage of payment automation and dynamic discounting for fierce financial impact – tapping into a new source of cash that’s changing the finance game. Payment automation along with dynamic discounting allows businesses to dramatically increase payment efficiencies, cash-back rewards and early pay discounts by increasing automation, reducing the labor burden

on both AP and IT, and providing a much more “supplier-friendly” early-pay discounting approach. By automatically processing payments based on the scheduled pay date (since invoices were already approved during the invoicing process) and moving all supplier payments to electronic forms of payment, organizations will see a quantum leap in process efficiencies, reduced costs and increases in cashback rewards. In addition, by giving suppliers the ability to request early-pay discounts when they need cash and the added instant visibility of inflight invoices, enterprises can expedite processing of discounted invoices and see a marked improvement in supplier participation and cash flow. Arming the enterprise with the ability for suppliers to dynamically request early-pay discounts fundamentally changes the game, providing a winwin for both sides of the procureto-pay value chain. Coupled with payment automation, it delivers the fastest payments for suppliers, while maximizing discount returns for customers – especially when compared to traditional legacy investment alternatives notorious for their slow time-to-value.

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EMEA FINANCE Payment automation and dynamic discounting are fast becoming critical tools of today’s new breed of forwardthinking CFOs who are discarding the outdated practice of sitting on cash, delaying payments and writing checks—which has proven to deliver inadequate returns and tremendous inefficiencies (in terms of process, resources and cost). The 2017 AP & Working Capital Report 1 by PayStream Advisors identifies the top ways organizations are optimizing working capital, leveraging new

disruptive approaches to transform Accounts Payable (AP) functions from cost centers to profit centers by unlocking hidden value, unleashing new and significant revenue streams and process efficiencies. According to the study, dynamic discounting – once relegated to only to the most sophisticated best-in-class finance organizations – continues to expand its sphere of adoption due to the provocative business case and the number of organizations saving millions of dollars, by implementing dynamic discounting as a discipline. Payment automation is also increasing the value AP departments bring to the organization. According to The State of ePayables 2018 2: The Future of AP is

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Now report by Ardent Partners, “… tasks such as invoice matching, supplier inquiries cutting paper checks, and any manual- or paper-led processes within invoice and payment management, erode the potential value of AP by reducing the amount of staff time available for more strategic activities.” Organizations leveraging payment automation and dynamic discounting are surging ahead of their peers by making early-pay discounts a real and significant source of cash—capturing $5 per payment in benefits and up to

2% of corporate spend directly back the bottom line and optimizing cash management in real-time. As a result, CFOs of these organizations are blazing a trail for the “new normal” in corporate finance where the accounting department is now a profit center. According to the Bavelos Group, a consulting firm that advises companies on ways to improve working capital, “leading companies are rapidly finding that early payment discounts are an attractive option for treasury to invest cash at double-digit, risk-free returns. A 2% discount for a 20 days cash acceleration is a 36% annualized return. And while not all suppliers offer this level of savings, over 50% of early payment discounts yield better than a 30% return.”

By paying early and creating a supplier friendly and flexible environment, CFOs are transforming AP functions from cost centers to profit centers by unlocking the value trapped inside payables – and supplier relationships. To maximize the potential of this paradigm shift, organizations need speed, visibility and agility. Payment automation and dynamic discounting needs to be coupled with next-gen invoice automation and supplier enablement to ensure that the procure to pay process is a high-performance, well-oiled machine; this enables

enterprises to quickly capitalize on cash-back rewards and every earlypay discount available, properly nurture their supplier networks and substantially reduce invoice processing and payment costs. To realize this new finance nirvana, it’s critical to take a holistic and optimized approach where these capabilities along with invoice automation and supplier enablement are combined and deeply integrated into the ERP system into a single, unified solution—known as the AP Automation Platform. Anything less creates undue complexity, risk and lackluster improvements that ultimately undermines automation and business performance goals.

EMEA FINANCE The industry is rife with examples of failed or underperforming projects due to fragile, piece-meal integrations of disparate solutions. The AP Automation Platform delivers a truly innovative approach that maximizes the value and performance across the entire AP invoicing process and value chain – delivering new and compelling levels of automation and sources of cash. Other key enablers of this transformation are cloud and mobile technologies. Together, these technologies dramatically accelerate time-to-value and enable processing work and approvals to be done anytime, anywhere and via any device — eliminating traditional processing bottlenecks and enabling Finance to securely bring other key stakeholders – suppliers – directly into the payment process. Providing a supplier portal provides the self-serve means for suppliers to easily check the status of payments, see purchase orders for all their sites, quickly flip POs into invoices — and most importantly, easily request early-pay discounts. Bringing suppliers directly into the process

enables suppliers to create invoices that are validated and exceptionfree from the get-go. And by creating valuable frictionless experiences for suppliers, companies can see a tremendous boost in supplier adoption to drive an equally impressive increase in early-pay discounts and new process efficiencies. Adopting a fintech mindset can have massive impact within the four walls of the enterprise, streamlining and accelerating the payment process— resulting in dramatically better outcomes for both customers and suppliers. The revolution in enterprise payment operations is charging full steam ahead. Success favors the bold in today’s forward-thinking finance organization, where incremental thinking is being left behind in favor of real innovation and value creation.

Hurty, Sven. “Solutions”. Inspyrus, 26 July 2018, inspyrus. com/solutions/.

“The State of EPayables 2018: The Expected Trajectory of AP - Part I.” Payables Place, 15 Aug. 2018, payablesplace. ardentpartners.com/2018/08/state-epayables-2018expected-trajectory-ap-part/.

Nilay Banker Founder and CEO Inspyrus, Inc.

Nilay Banker is the Founder and CEO of Inspyrus. He is a Stanford Computer Scientist with over 23 years of experience with cutting edge technologies and successfully delivering business software products for Fortune 500 companies. Previously, as Director of Product Development— Oracle Fusion Middleware and WebCenter, he was instrumental in developing strategies and roadmaps for several products in addition to taking these products to market.

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Five trends changing the face of payments The payments industry sits at the very core of modern life. As a market, it is multifaceted and complex, relentlessly evolving, scaling and disrupting, with new trends continually emerging across different countries and regions. In order to flourish in such a fast-paced, dynamic landscape, payments companies and merchants must continually observe market patterns and tailor their business offering to be in line with industry trends and changing consumer demand.

The following are the top five trends that I believe to be the most disruptive to the payments landscape. Technology disrupting payments Many leading payment companies are already capitalising on the benefits of new technologies like artificial intelligence and machine learning, both of which will help revolutionise the payments industry. Data produced by AI and machine learning systems will prove invaluable to payment providers, allowing for unique insight into a group of consumers whose habits may have been previously ungraspable. Rapid consumer adoption of modern technology is having an ongoing impact on the way that merchants are able to access consumers across different geographies. For example, in India more than quarter of the population will use a smartphone in 2018. This means that a huge portion of the population will be accessible via digital channels in a

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way that simple was not possible in the past, presenting a massive opportunity for businesses to reach new customers. With all the buzz around new technologies, one should not be tricked into overlooking the more traditional solutions. For example, the deployment of large scale database applications, an abundance of open source technologies at scale and cheap cloud-based hosting options have allowed payment companies to build advanced solutions for consumers and merchants. Regulation The regulation of financial markets is one of the most hotly discussed global trends that is set to continue reforming the traditional payments landscape. The biggest challenge in this space is the need for regulation to keep up with the pace of technological innovation and also adapt to both local and global nuances. Take a look at PSD2 that went live in Europe earlier this year. By acknowledging the rise of fintech companies, the playing field was levelled out for payment service providers, while improving security and strengthening protection for customers. However, while all eyes in Europe were on PSD2, where we really need to look is to high growth markets like Argentina, where they’re leading the way with Data Protection changes. In fact, along with Uruguay, Argentina is the first Latin American country to be recognised as an ‘adequate country’. This is the European Commission’s method of measuring whether a country outside the EU offers an adequate level of data protection. And Brazil openly takes inspiration from PSD2, as seen through their marketplace regulation, or GDPR, that will most likely come into effect later this year. In India, in the world’s second most populated country, regulation plays a substantial role and has huge impact. The pace of change facilitated by regulation is likely unprecedented with regards to its speed and number of people impacted.

Regulation is a factor that creates a need to adopt, invest and potentially even stop certain businesses. There are still significant regulatory borders, for example with regards to import/export regulations, currency exchange or taxes. Technologies and logistics would allow for even greater international exchange of services, goods or capital without any real borders. Regulation opens up tremendous opportunities and helps to build stable environments in which to invest and build. Partnerships Relentless consumer demand poses both an opportunity and challenge for organisations, who find themselves under constant pressure to supply a continuous stream of innovative technological solutions to an insatiable customer base. In order to meet demand, incorporate new technologies, scale markets effectively and conform to local regulation, a solution for businesses can be to collaborate with another organisation to form a strategic partnership. When successful, partnerships can provide the resource and expertise needed to succeed in a particular market and as a result, hugely boost business revenue and reach. Research undertaken by PwC predicts1 that there will be an 82% increase in partnerships between financial institutions in the next 3-5 years. This perfectly demonstrates how businesses are increasingly recognising collaboration as a way to strengthen their service offering. Access to credit Access to credit remains a significant barrier that is prohibiting financial advancements across the world. In recognition of this, the World Bank has set the target of achieving universal

financial access by 2020. Undeniably, progress is being made to reach this goal, but access to credit is a challenge that continues to plague consumers, merchants and payments facilitators alike. Innovative technology is emerging as the most promising solution to help provide access to credit for millions of underserved populations. High scale adoption of advanced technologies including automation drives down cost and allows for a further distribution of financial services. Companies are using AI and machine learning to move away from the traditional lending models based around an individual’s financial and repayment data. Instead, they can focus on collecting relevant data through alternative methods, such as social media channels via smartphones. The relevant data points are then compiled in such a way that creates a personal credit score, enabling tailored financial decisions to be made for the individual. Traditional credit score models are being reinvented. When considering the rise in smartphone adoption in high-growth emerging markets such as India, this innovative digital approach to credit analysis is a powerful tool has the potential to open up financial systems to millions of people in currently underserved markets.

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The changing face of the consumer We live in an increasingly connected and digitalised world. Consumers have become accustomed to living a life of constant connectivity and maximum convenience. The digitalisation of services means that consumers now have a social and intellectual network quite literally at their fingertips, accessible through the tap of a screen at any time, day or night. Nor is this convenience purely confined to the bounds of the virtual. Services like Amazon Prime Now enable customers to place an order online and have the physical item delivered to their door in a matter of hours. The payments industry has seen the manifestation of this trend through everincreasing consumer expectations. Features such as instantaneous connectivity, mobile access to financial services, a higher degree of personalisation and seamless, frictionless transaction experience are no longer considered luxuries, but necessities. In order to compete, organisations are under mounting pressure to integrate these features into their offerings. This shift inevitably means that the preferred environment for payments is moving from the bank branch to the digital sphere. Evidence of this can be seen through the increasing popularity of alternative payment methods – payments made using something other than a credit card e.g. bank transfers, prepaid cards, cash, coupons, etc. – which currently2 account for 59% of transactions across the globe. The international demand for easilyintegrated transaction methods that deliver on the consumer demand for real-time, personalised and seamless payment experience, is palpable.

What next? As technology continues to innovate the payments industry, traditional infrastructure will become more and more displaced and legacy payment methods uprooted. The landscape is likely to become more densely populated with a growing number of players capitalising on the opportunity of digital to create flexible payments solutions that offer a wide range of services. In order to ensure a consistent level of service and security, regulations will be implemented. To support regulatory compliance in new markets, maximise business scalability and expand their technology portfolio, organisations will find themselves incentivised to forge strategic partnerships with other businesses. The monumental potential of new technologies such as AI and machine learning, along with continued deployment of traditional solutions such as costefficient storage, computing power and open source, is poised to be at the core of revolutionary advancements, the impact of which could be ground-breaking. When considering all that is going on within the payments space, I can’t help but feel as though we are just at the start of a hugely exciting chapter in the future of payments.

Matthias Setzer CCO PayU

“Most Global Financial Services Companies Plan to Increase FinTech Partnerships, as 88% Fear Loss of Revenue to Innovators.” PwC Press Room, 5 Apr. 2017, press.pwc.com/ News-releases/most-global-financial-services-companiesplan-to-increase-fintech-partnerships--as-88--fear-loss-of/s/1bb9507c-65f4-4014-a3ab-3784ac2ed7eb.

http://offers.worldpayglobal.com/rs/worldpay/images/ worldpay-alternative-payments-2nd-edition-report.pdf

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Three Customer Service Practices Middle East Organizations Need to Change In today’s subscription economy, customers’ expectations are heightening. People don’t want to tell a company they’re having a problem. They just want it fixed. And if problems do arise, customers increasingly expect the company to acknowledge their pain, and fast. In fact, according to McKinsey, customers are less likely to renew or repurchase from the same company if the customer experience was only average; but when the experience improves from average to wow, customers are 30 to 50% more likely to renew. Unfortunately, for many companies, average customer service is the norm. Now to be fair, organizations haven’t specifically decided this is the type of service they want to provide, it’s simply the consequence of several bad habits and practices that have made their service no better than mediocre. Given the pace at which customer service is evolving, if organizations are to retain customers, it is essentially that they do away with three archaic customer service practices.

Repeating the mundane The first practice involves agents performing work that doesn’t make sense. Consider that much of a contact centers’ work volume is consumed by common, repeated customer requests. These could be topics ranging from requests for more information about a product or service, to payment issues and shipment status. These types of inquiries are ripe for answers delivered via self-service. Self-service can take many forms— knowledge base articles, automated solutions, chatbots, and online communities are some examples. Using these, customers can help themselves and reduce or even eliminate the need for agents to address these issues. One result is that agents will be happier. Though customers might still contact them with these issues, a greater share of the common topics would be addressed through customers self-serving. Agents can then focus on more challenging tasks, making work more interesting and reducing burn out. Another benefit is that customers will be happier.

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permanently resolved and to work with teams outside customer service to solve them. Consider the example of a customer calling for information about a product or service. Let’s assume it’s because usage instructions in the product manual are unclear―perhaps they are poorly written or have entirely omitted a step. While this is a fairly easy issue to address with selfservice—as updated information in a knowledge base article or making an updated manual in PDF format available for download—it’s still not convenient for customers.

Remember, customers actually prefer self-service1. They expect solutions at a time and place convenient to them. By not providing self-service options, you are technically doing them a disservice, which may, in turn, impact CSAT and NPS. Ignoring the root cause While automating solutions to common problems is a good start, the underlying issues are still present. As such, for organizations serious about improving their customer service, it is important to identify those common issues that could be

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With an issue like this, it would be easy for customer service to work with the documentation team to point out the problem. They can offer a solid business case for the reasons to address the issue in future product manual printings by sharing the volume of live complaints as well as self-service use by customers. The entire process of addressing the issue—from identification in customer service to the decision to reprint the manual, along with all collaboration, milestones, and tasks along the way—can be managed through workflow. By addressing the root cause in this manner, the business benefits in two significant ways: •

Future calls, chats, emails and other live assistance is eliminated, resulting in cost savings.

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•

The customer experience improves because customers no longer encounter this roadblock.

Neglecting to be proactive The last practice to break is lack of proactivity, but this might also be the hardest. It’s a challenging one to address because it requires being ever vigilant and acting quickly. It means breaking from the reactive mode of customer service—waiting for customers to contact you with their issues—and instead taking preemptive action. There are three phases to proactive service: 1.

Identifying and notifying likelyaffected customers of a problem.

Keeping them aware of progress towards a solution, including setting expectations as to when a fix will be ready.

Alerting them when a solution is available.

The key to all this is keeping customers informed. Sharing information with customers during these phases can take many forms. Customers can be kept notified via email. A recorded message might be played in the telephone queue. A pop-up message could be shown on the customer service website. An inapp notification could be presented. Consider what channels make most sense for your customers and communicate accordingly.

Make the change For human beings, change is never easy. Breaking a bad habit2 is even harder! Now factor in changing several poor behaviors, inside a company, which involve many processes and people (all very set in their ways). It sounds insurmountable, but it’s not impossible. If your customer service is like others’, it’s not alone in suffering from all three of these bad practices. Start with addressing the common problems through self-service and automation. From there, move on to working with teams across your company to address the root cause of issues. Delivering proactive solutions becomes faster and easier when customer service is working beyond its walls to fix problems. In the end, when you change these bad practices, you will find that not only has your overall customer service improved, but your customer experience has, as well.

Mark Ackerman Regional Director, MESAT & EE ServiceNow

“Top Customer Service Trends For 2018.” Forrester, 31 July 2018, go.forrester.com/blogs/top-customer-service-trendsfor-2018/.

Vozza, Stephanie. “The Science Behind Why Breaking A Bad Habit Is So Hard.” Fast Company, Fast Company, 22 July 2016, www.fastcompany.com/3060892/the-science-behind-whybreaking-a-bad-habit-is-so-hard.

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Avoiding the cloud anarchy curse

Those of you with long memories will remember when the Sex Pistols burst onto the music scene with their first single, Anarchy in the UK. While punk rock has been confined to the annals of history, today many respected financial services firms are struggling to contain a different kind of anarchy within their business. Cloud anarchy is taking hold in many large financial services firms because of the sheer accessibility and ease of consumption of cloud services. In their haste to increase business agility, support innovation, reduce time to market for new products and services and compete more effectively with born in the cloud challenger banks, many firms now find themselves exposed to an alarming number of piecemeal cloud adoption projects. On paper each project seems like a great idea but together they threaten to cause chaos.

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Shadow IT projects are a particular concern. It’s not unusual for a department to become frustrated by the IT department’s seemingly slow progress and sign a contract for a SaaS offering without considering the impact this decision will have on the rest of the business. Problems also arise when boards rush to embrace cloud without having defined a comprehensive vision and strategy that takes into account existing business processes, employees’ skills, company culture, and, of course, all the legacy IT infrastructure. While a cloudfirst approach might begin well, the lack of an articulate company-wide vision and strategy means a loss of impetus is guaranteed.

The knock on effect of cloud chaos should not be underestimated

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The anarchy resulting from this laissezfaire approach is particularly problematic for heavily regulated industries. Our experience helping large banks weighed down with legacy infrastructure move to the cloud reaffirms the view that setting out a comprehensive enterprisewide roadmap at the outset in readiness for a controlled transition to running production workloads in the cloud pays dividends every time. It also swerves the likelihood of stepping on virtual landmines that can set off explosions in areas such as corporate governance, purchasing, and IT service integration. Take governance, for example, where a lack of clarity and visibility surrounding which cloud services are being consumed where, and whether appropriate controls and standards are being met, makes it hard to demonstrate that you are: mitigating risk, managing IT security appropriately, managing audits

and suppliers effectively, and putting appropriate controls in place to ensure compliance with regulations around data sovereignty and privacy such as GDPR. Plus firms also need to demonstrate that they are managing material outsource risks effectively, in order to comply with FCA regulations. The uncontrolled purchase and use of SaaS or PaaS services without the appropriate level of IT engagement throws up a whole raft of integration, visibility, security and support headaches that can impact not just internal systems but also your customers’ experiences – and could ultimately damage your firm’s reputation. ‘Technology snowflakes’ are another cause for concern. They indicate that the same problem is being solved in different ways by separate teams, leading to IT support inefficiencies and additional costs.

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Financial services firms need to factor in other financial implications of cloud anarchy too. These include a fragmented procurement process, which will make it difficult to cut the best deal with providers, as well as questions over how those teams consuming their own cloud services manage their budgets in the context of consumption-based services (pay per use). Thwarting cloud anarchy With digital agendas now centre stage, a move to delivery practices such as DevOps is inevitable. Part of managing cloud anarchy involves establishing the controls which seek to bring order to the landscape. These controls are often blamed for inhibiting innovation and agility, but they don’t have to do so. By having the right controls embedded in the right places and using automation and self-service to allow the development community to consume pre-rolled, well defined (and safe) cloud environments, it is possible to land in the sweet spot of agility, innovation, speed and control. Whether your organisation is struggling to contain cloud anarchy or has managed to avoid it so far, there’s still time to take control of the cloud journey. Choose to go it alone in-house if you have the appropriate expertise, or consider engaging a third-party cloud consulting team to work with you. Either way, here are some recommended priorities, from planning through to delivery: •

Discovery Run a discovery workshop where key stakeholders get to assess the current internal landscape and discuss the opportunities that a move to the cloud will bring to the business. This will help everyone understand the cloud rationale and define the business case.

•

Mobilisation The mobilisation phase prepares your business for a move to the cloud. This includes: a readiness assessment, which maps the maturity of your organisation’s processes, people, and technology capabilities; defining an outline cloud operating model; and business case development to establish baseline costs taking into account the various economic levers (e.g. opex vs capex, elasticity, rightsizing, on-demand environments and so on). It’s also important to agree on appropriate metrics to track at this stage, which can be used later to demonstrate success.

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Other tasks to undertake at this stage include one or more public cloud Proof of Value or Proof of Concept initiatives, along with an initial assessment of suitable application migration candidates. •

Assurance It’s sensible to combine industry good practices with your own in-house frameworks to provide assurance. Focus on defining and reviewing your cloud architecture, as well as undertaking a comprehensive review of the security, regulatory and migration considerations relating to your cloud deployment.

•

Delivery Use an enterprise-grade cloud migration framework that is proven to support large-scale migrations to avoid any wholly preventable glitches from occurring at this important stage. The framework needs to encompass the orchestration and de-risking of the migration of major and/or critical services in a controlled and predictable way.

“Don’t know what I want but I know how to get it” Perhaps the Sex Pistols’ Johnny Rotten was half right when he screamed the immortal lines: “Don't know what I want, but I know how to get it”. In the enterprise cloud world, doing the up-front work to establish a clear cloud vision and strategy avoids the dangerous scenario of not knowing where you’re heading, how you’re going to get there, or even when you’ve arrived. It’s also important to put in steps at this stage to ensure that everyone within the bank is pogoing to the same tune. This means creating a company culture that embraces the cloud in a structured way, ensuring that employees are fully engaged, and that any skills gaps are plugged promptly. With a clear cloud strategy underpinned by appropriate controls and employee buy-in, your business will have the tools it needs to innovate faster and reduce time to market for new products and services ultimately boosting competitiveness. And any trace of cloud anarchy in your firm will have been mothballed – just like those Sex Pistols records.

Allan Brearley Practice Lead IT services and cloud consultancy ECS

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Flinging

the doors open to Africa’s booming market opportunity Africa currently houses nine of the fastestgrowing economies on earth within its colossal borders, and the pace is not slowing. As Africa’s unstoppable juggernaut of industrialisation rumbles onward, buoyed on a groundswell of projected infrastructure investments ($6 trillion by 2040), there exists an increasingly insatiable hunger for imports to power this progress, from machinery and chemicals to fuel such as diesel and gas. Meanwhile, the United Nations Environment Programme has underlined a need for annual investments of about $7-$15 billion by 2020 1 as governments seek to harness

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Africa’s substantial renewable energy resources to provide electricity to the 600 million people living off-grid across the continent. In fact, the sheer pace of these infrastructure projects are producing an annual financing gap of as much as $108 billion, according to the AfDB 2. Historically it has been the export of resources, from mineral to agricultural that have fuelled Africa’s global growth; providing consumers around the globe with everything from

EMEA FINANCE

their morning caffeine hits to high quality cotton garments. Today, as its domestic infrastructure and economies grow, so too does its own consumerisation, creating a demand for goods and services flooding in as well as out. With a rapidly expanding middle class and a market of 1.3 billion people – the equivalent of almost 20 UKs - McKinsey predicts Africa’s consumers will out purchase Russia by 2020 3.

That is not to say the demand does not exist. Far from it. The International Chamber of Commerce Rethinking Trade & Finance report6 demonstrated that the Middle East and Africa combined sits behind only China and Western Europe when it comes to offering the largest opportunity for proposed trade finance transactions by region. This puts UK exporters in a strong position to unlock fast-growing sectors in Africa.

Africa is embracing tech like never before. Mobile banking, for example, is already mainstream in countries such as Kenya and is being taken up to such as extent that it has been highlighted by the City of London as an entry route for UK fintech firms into the continent 4. Heads are being turned and we are already seeing a number of UK and European firms looking to Africa for a market to sell their manufactured goods, from B2B machinery to consumer goods and services. They have found an open market in Africa.

However, many banks see the situation differently and many have withdrawn from the continent due to perceived risk. This leaves corporations in dire need of a banking partner with presence on the ground, the right levels of risk management in place and enough local expertise to enable strong market entry. The situation is a shame, and in our view short-sighted, because the reality of trading with and banking in Africa is not as simple as high risk or low risk; it is about understanding a far more nuanced picture than that. That’s why where trading with Africa is concerned, the value of market expertise cannot be understated.

When it comes to open markets, Africa’s may have far more to deliver thanks to the recent signing of the African Continental Free Trade Area (AfCFTA) agreement. Imagine the opportunities generated by crossborder harmonisation of standards and tariffs, supported by a network of supply chains spanning the continent, no longer stopping and starting at each border, or, in some cases, barely starting at all. With an unmet need for trade finance estimated by the AfDB at over $90 billion annually5 and until the gap in financing is closed these opportunities won’t be realised.

Any bank that has committed long-term to the more challenging markets such as those in Africa will offer reassurance and security. Relationships, local knowledge, and teams take many years to establish and maintain, yet in my experience make every ounce of difference. Although the digitalisation of trade finance is often heralded as the future, with blockchain as the buzzword of the moment, the banks that are making the difference are those still offering the human touch and expert eyes on every detail.

Patrick Gutmann Managing Director, Corporate & Institutional Banking BACB a UK-based bank with four decades of experience in Africa.

Mutsa ChirongaAcha LekeArend van WamelenSusan Lund. “The Globe: Cracking the Next Growth Market: Africa.” Harvard Business Review, 8 June 2016, hbr.org/2011/05/the-globecracking-the-next-growth-market-africa.

https://www.afdb.org/fileadmin/uploads/afdb/Documents/ Publications/African_Economic_Outlook_2018_-_EN.pdf

Into Africa – Adrien Couderc - Demos, www.demos.co.uk/ blog/into-africa/.

“Global Trade Liquidity Program.” African Development Bank, www.afdb.org/en/topics-and-sectors/initiatives-partnerships/ trade-finance-program/global-trade-liquidity-program/.

“2017 Rethinking Trade & Finance.” ICC - International Chamber of Commerce, iccwbo.org/publication/2017rethinking-trade-finance/.

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Assuring

good customer outcomes in a digital world Online banking is fast becoming the norm and brings with it many benefits. However, it is not without risk. How can firms ensure that customers are being best served by these new ways of transacting? Benefits, but not without risk Digital banking has many benefits. For customers they can instantly manage their finances from any location using an â&#x20AC;&#x2DC;always-onâ&#x20AC;&#x2122; service. For firms, they can scale, gain reach, save cost, capture data more easily and build loyalty. However digital is not without risk. The same risks of mis-selling, poor servicing and inadequate complaint management are still present; albeit in different ways. Control frameworks need to be in tune with these new ways of interacting with customers. The FCA is clear that good customer outcomes should always result, regardless of the channel. Research from Forrester indicates that rather than undergo a re-design, many products have simply been migrated online. Products designed for sale in branch or by telephone may not be suited to online. Digital demands an alternative way of thinking. When using an electronic interface, customers behave differently than when talking to an adviser. Natural

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cognitive biases go unchecked and people may be prone to making rushed and less optimal decisions.

Digital readiness demands more Provider side, digital typically tends toward a pre-occupation with optimising conversion rates. Less attention can be given to end-to-end service design and compliance. Digital readiness means more than having high performing front-end interfaces. It also demands the right back-end processes, policies and controls. Without this good customer outcomes can easily be compromised. As with most sectors, omni-channel experiences are standard. Customers will switch from one channel to another throughout their journey and firms need to ensure continuity. Typically, this demands good CRM processes so that customers are treated consistently and appropriately at all touchpoints.

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Given the risks inherent with digital, a thorough testing programme is recommended. This provides assurance that each channel is working; and where not gives the insight needed to put things right.

The five key risks of digital Risks in digital may manifest in different ways to other channels. Here are the most critical areas where good customer outcomes need to be assured. 1. Buying the right product Without an advisor to carry out a thorough needs assessment, and then recommend products, customers may select products that are not best suited. Online journeys need to guide customers through a process that is easy to follow and provides them with a good match to their needs and circumstances. 2. Disclosure Effective disclosure is particularly problematic in digital journeys. Customers may overlook important information and be prone to over-confidence in financial decision making. It is important that digital journeys provide clear, unambiguous and impartial information. Firms need to be sure that customers fully understand the risks, and this understanding needs to be complicit and tested.

3. Decision making The data that customers provide needs to be adequate, appropriate and verified. In addition, the decisionmaking processes used need to be made clear. This is so customers understand how their information is being used and the terms by which they have been approved, or denied, at any stage. 4. Product servicing During the life of the product, service must be effective. Documentation, account servicing, complaints, cancellations and renewals all need to be readily available and compliant. There also needs to be integration with other channels, so where need be, customers can rely on human advice to help them achieve good outcomes. 5. Vulnerable customers Firms need to ensure that vulnerable customers are supported and neither disadvantaged or marginalised by digital. Some are unable to access online services, or to use them effectively. The same levels of service must to be available offline, either for the whole or part of the customer journey. In addition, firms need to consider how vulnerability is identified in an online environment, and then provide appropriate treatment to ensure good outcomes.

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Technology vs. humans in a digital world The industry is already speculating on how technology can be used to improve compliance. The first steps are simply to optimise existing sources of data so that it can be used for analysing compliance performance. More sophisticated approaches, such as applying voice recognition and semantic technology, will only be a matter of time. However, humans are far from redundant in this. Humans can spot patterns and anomalies in ways that have not yet been coded, and humans are also capable of moral and ethical judgements that machines are not. Machines also need to be taught, calibrated and checked, a task that needs â&#x20AC;&#x2DC;realâ&#x20AC;&#x2122; input and intervention. FCA concerns over robo-advice shows that we may have gone too far in putting all parts of a process to machines. Instead a balance is needed that incorporates the best of technology and the best of people. For the time being, at least, people still have a place in ensuring good customer outcomes.

James Nethercott Group Head of Marketing Regulatory Finance Solutions

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How to tackle the late payment culture Every year 50,000 businesses in the UK are forced to close because customers have failed to pay on time, if at all, for services provided. The late payment culture is fast becoming the norm, but it comes with a price tag with the Federation of Small Business estimating that £2.5bn is lost annually to late payers. The collapse of construction giant Carillion earlier this year highlighted the scale of the problem, with the company accused of forcing onerous payment terms of 120days on an army of small scale suppliers. Carillion, MPs said, showed ‘utter contempt’ for its suppliers by using them as a line of credit to shore up its balance sheet while concealing the scale of its debt. The full extent of the damage done by Carillion’s collapse is yet to be fully realised. In 2016 the company spent £952m with local suppliers in 2016, using an extensive network of small firms. In the wake of its failure it emerged that up to 30,000 small businesses were left with unpaid bills. The long-term future of those businesses has been jeopardised simply because they had not been paid on time by a client many had presumed reliable and solvent.

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Build UK, the representative organisation for the UK construction industry, claimed that in the past were contractors have failed, around 18 per cent of creditors did not survive the next five years. Of course, Carillion is an extreme example of what can happen to an army of contractors when a big business goes bust. Nevertheless, the Carillion saga has served to highlight the late payments culture that has come to dominate UK businesses, with those at the smaller end of the commercial scale most adversely affected. Whether you are a micro-business employing a small team of people or working as a self-employed plumber, getting paid on time is essential if you are going to keep the bank happy and your business thriving. For a row over late payments to escalate and threaten the ongoing flow of work is a situation most business owners want to avoid. The aim must be to try and maintain a sustainable relationship.

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Remember, not all late payers are cynical, there may be a valid reason that the cash is yet to hit your commercial account.

number and bank details. Also, be clear about who you are sending it to, so you know where to chase.

Managing money is a tough regardless of the size of your business. It is tougher still for those at the lower end of the commercial spectrum, where the chances are the same person who is doing the day job is also doing the administrative work.

Essentially, the policy should include details of any penalties for late payers or, to entice early payment, offer discounts to customers who pay on time.

The good news is that there are plenty of tools online to help business owners get to grips with admin, many of which are free. Pandle, for instance, can automate the process of chasing and reminding customers for you, something that will have an immediate impact on reducing the number of debtors you have.

Getting organised with your payments and keeping track of who owes you what and when can be a stressful task, especially if you have had a long day working.

There is plenty that business owners can be doing to make sure they get paid on time. By following my advice and making a few changes you can boost your productivity, get paid on time, and ensure you remain on friendly terms with your bank. Be clear about your payment policy Regardless of the size of your business or the size of your clients creating a clear payments policy will put you on the right path to getting paid on time. If you are in the contracting trade, for instance, you may want to include a link to a standard note on your estimates on your website, whereas if you are an IT contractor it may be preferable to issue terms and conditions tailored to the clientsâ&#x20AC;&#x2122; needs. If you send a letter of appointment or contract, make sure your payments policy, whatever shape it takes, is mentioned on this. If you ask customers to sign the document, it is an enforceable contract that you can later rely upon should matters take a turn for the worse. As well as having the customer name and address right, your invoice should include your business details with the correct VAT registration number, any purchase order

Let software take the strain

If doing the books and checking payments and expenses are being handled properly takes too much time, then it is worthwhile looking online for cloud-based applications and bookkeeping tools that can do the job for you. Many of them are free and do lots of things automatically, such as send reminders to late payers. Pandle, for example, also gives real time cash reporting and forecasting so that you can easily spot current or future cash flow problems and react. Simply by sending payment reminders to customers you will see an improvement in payment terms. Debtor Days It may come as no surprise that the longer a customer waits to pay the less likely it is that they will. It is not uncommon to wait 60 or even 90 days for payment from larger businesses â&#x20AC;&#x201C; or 120-days in the case of Carillion. If there is an error on the invoice it will be longer. It may be tempting to take on larger contracts as they can be profitable, but make sure you work out the impact on your cashflow before agreeing to work. Most businesses that go insolvent are profitable, they just donâ&#x20AC;&#x2122;t have the money in the bank to pay the bills. Beware of falling into this trap. If the payment terms are bad and put you under pressure, think about whether it is worth the risk.

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You may want to consider your payment terms. If like most small businesses you are quoting 28 days as standard, you may want to consider reducing it to 14 or fewer. Also, some businesses are willing to pay in advance if you offer a discount, so think about these sorts of options and negotiate them at the start. Get more money up front It is worth considering whether to ask a client for a deposit on the payment should the work be cancelled so you are not left out of pocket. If you have set a week aside for a project that falls through or gets postponed, you are left with nothing to show for it. Consider whether it is worth asking for as much as 50% to make sure the work goes through? Likewise, you may want to discuss phased payments with clients, particularly if you are working on a longterm project. Making sure you get paid for your time as well as the end product can be difficult. If you keep a note of hours and bill in phases you are more likely to be remunerated for all the work you have done.

What if you still haven’t been paid? Of course, there are those who simply don’t pay on time, no matter how friendly and professional your reminder service is. Unfortunately, these are the tricky customers who need a tougher line. This is particularly difficult if you want to keep their business. There are a few different options you can take. Firstly, if they want more work done then you can insist that they settle their debts first. You can also insist on a different payment system going forward. Other options include selling your invoices and getting someone else to do the chasing for you known as invoice factoring (an important option if you need the cash, but you won’t get anything like what you’re owed), or pursuing a claim for payment legally, perhaps through the small claims court. Taking control of your payments policy needn’t be a chore. By automating the system and handing it over to someone else you will find more time to focus on making your business a success, and ensure you get paid for the services you provide.

Lee Murphy Founder Pandle

Lee Murphy is the founder of Pandle (www.pandle.com) the cloud bookkeeping software specifically for small businesses and the self-employed.

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The Path to Proactive and Pragmatic Financial Compliance With the need to comply with regulatory mandates such as the Dodd-Frank Act in the US and MiFID II in the EU, effective, reliable, and accurate communications capture—as well as ongoing, proactive communication monitoring and fraud analysis—is quintessential in today’s elevated compliance era. The cost of regulatory compliance has risen dramatically in recent years, and most of the cost was and is driven by the addition of staff dedicated to testing, monitoring, and other oversight responsibilities. Indeed, in the 2017 Compliance Risk Study: Financial Service1 conducted by Accenture Consulting, 89 percent of respondents anticipated an increase in compliance investment over the next two years. However, many institutions are coming to the realization that continuing to throw endless amounts of resources at the compliance conundrum is not a sound business strategy. Researchers at McKinsey & Company, in a report on this topic2 state, “At many financial institutions, compliance and risk practitioners are beginning to question the sustainability of the resourceintensive approach to managing compliance risks.” To this end, compliance must be reinvented and automated to address the full breadth of requirements. This should encompass the broadened scope of what must be recorded, stored, and at the ready for retrieval. It should also meet new mandates around defensibility in maintaining and ensuring compliance— all while reducing cost and complexity in the compliance equation.

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A best-practice, holistic ecosystem of financial compliance capabilities is necessary. It needs to address interaction and data capture, archive and retrieval, as well as proactive interaction management and automated infrastructure testing and verification— allowing effective control to be exercised at acceptable cost. Aligning Capabilities with Today’s Key Compliance Requirements Let’s review a checklist of today’s key compliance requirements in depth and the requisite technology-enabled capabilities financial institutions need to address these needs: Issue: Organizations need the means to manage the growing proliferation of new collaboration channels for both outgoing and incoming communications. Requirement: Financial institutions must have compliance solutions that work with today’s new ways of working – including voice, mobile, SMS, IM, video, file share, screen share, and more. This poses new challenges to compliance because strict data capture regulations require ALL of these to be recorded, monitored, and stored. This capability is not supported by most financial compliance recording solutions. This expansion in the scope of communications also increases the opportunity to commit breaches of applicable compliance regulations with inappropriate conversations and information sharing. To this end, organizations need modern solutions that can capture the full range of communication modes offered by Unified Communications tools while remaining compliant with the most stringent regulations.

Issue: Verifying compliance and/or monitoring transactions is a time- and resource-intensive task. Requirement: Verifying compliance or monitoring transactions doesn’t have to be time and resource-hungry task if you put automation to work for you. Automated testing and verification can enhance the efficacy of your compliance initiatives while improving efficiency. Automating the monitoring, testing, verification and surveillance of communications and infrastructure helps reduce the workload of IT, Operations and Compliance teams, letting them focus on more value-added tasks, instead of repetitive, timeconsuming processes where human error can have serious consequences. Issue: Organizations must demonstrate defensibility and reduce the potential for compliance issues. Requirement: After-the-fact compliance is not enough. Reacting to noncompliant actions still means a failure has occurred. Once a fraudulent action happens, there is no going back; there is only costly remediation in dealing with the aftermath. But imagine if you could stop a fraudulent phone call before it even takes place? You can. Today, technology brings a new, innovative, and proactive approach to compliance by focusing on dynamic, in-the-moment issue prevention to close this “compliance gap.” Employees are now immediately alerted to act on issues and inconsistencies before they become systemic issues or sources of non-compliance.

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Phil Fry Vice President of Financial Compliance Strategy Verint

Issue: Need to future-proof compliance investments and ensure sustainability. Requirement: It takes a village—financial compliance by its very nature is complex and cannot be addressed solely by one vendor. In reality, compliance requires integrating leading capabilities from multiple RegTech and FinTech vendors and partners. Fortunately, some vendors are sympathetic to this significant pain point and offer a solution in this regard—not simply selling products. Look for a vendor that takes an open standards and holistic approach that supports interoperability and embraces the need to work within the broader compliance ecosystem. Time for a New Compliance Mandate The advent of stricter, more extensive and geographically diverse regulations requires a more focused approach to compliance practices as well as data collection, retrieval and analysis.

Phil Fry has more than 30 years' experience in the financial services industry, including nearly 20 years at Deutsche Bank heading up Voice Engineering, where he implemented leading-edge, innovative solutions for both front and back office voice technologies, as well as regulatory and compliance tools and automated assurance capabilities. Phil is vice president of financial compliance strategy for Verint, a provider of reactive, active and proactive compliance solutions for the new regulatory environment.

This is an important challenge— especially for large financial enterprises that need to comply with different regulations, with varying requirements, in disperse regions. This requires adaptability and technology that enables them to keep up with the changing demands. Compliance professionals know all too well the penalties and pains associated with a failure to meet regulatory obligations. Unfortunately, they also must endure painstaking efforts to put in place the right systems to achieve compliance. It’s time to mandate the removal of “difficult,” “costly” and “complex” from the compliance lexicon. And it’s time to simplify the building of a robust compliance infrastructure that can bring true, end-to-end interaction capture, transcription, electronic communications surveillance and automated verification, unlocking the benefits of state-ofthe-art technology to fully address the challenges faced by financial services.

2017 Compliance Risk Study: Financial Service

Kaminski, Piotr, et al. “Sustainable Compliance: Seven Steps toward Effectiveness and Efficiency.” McKinsey & Company, www.mckinsey.com/business-functions/risk/our-insights/ sustainable-compliance-seven-steps-toward-effectivenessand-efficiency.

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EMEA TRADE

46 | Issue 13

EMEA TRADE

Challenging the traditions of trading With over a decade’s experience running algorithmic engines on the trading floor, including eight years running Deutsche Bank and HSBC’s tech teams, CEO of Finatext UK Ltd Rob Brockington was disillusioned by established financial institutes’ approach to digitalising old practises. Now he’s making currency trading digitally native with his first mobile app Pipster. It can be a sobering moment when you’ve been working on and around the trading floor for 12 years to look around and realise just how disillusioned you’ve become by what you do. The trading industry has evolved dramatically in the last few decades; major fintech advances have seen online brokers and trading platforms introduced to the global market, while the powerful influence of social media has added a new dimension to trading. However, while the traditional financial industry may be digitalising rapidly, other aspects remain very much the same. The world of trading has kept its reputation as an exclusive place dominated by the rich and well-connected, the elite of the elite, where power and influence are

driven by dollars and pounds. So, for the average joe, breaking into the trading market, and making a genuine return can feel nigh on impossible. On top of this, investing brings a number of other daunting challenges. The sheer volume of information and navigating market inaccuracies can be overwhelming for an inexperienced investor, while overconfidence, unrealistic expectations and a lack of specific financial know-how can all stop a novice trader in his or her tracks. However, that’s not to say it is an impossible task - there have been substantial technological disruptions in financial trading for retail clients. Retail investors – people who are investing their personal capital – have become an influential part of the global market, and with this new demographic of investors comes a new opportunity for brokers. It’s time to disrupt the traditions of trading and offer people an equal, more accessible way to invest – and it starts with education. Transparent, fair and easy to understand information.

Issue 13 | 47

EMEA TRADE

One of the primary issues for many retail investors is the lack of familiarity with trading and financial literacy. Our society does little to champion it, schools don’t touch on it and negative headlines appear in the media more often than not. Why then, would you feel comfortable taking the leap into the market? True risk awareness paired with education is the key to expanding the retail involvement globally. Many believe they need to be experts to start investing; you don’t. You just need access to the right resources to help you learn the basics, an understanding of sensible risk management strategies and, in addition, access to new technologies such as AI and automated platforms, which are already making marks on this industry. There are resources online that help to simplify financial jargon and it’s important to familiarise yourself with them before you start to invest, but these can feel disjointed and, if not written in a language everyone can understand, leave you more confused than when you started.

Many also believe they need a huge amount of capital to start investing; you don’t. A recent survey by Tangerine Investments found that 70% of noninvestors said they don’t have enough money when asked to select the reasons why they don’t invest. The truth is you can start investing for a small fee each month - it is a common misconception that you need a deep pockets to start trading. So, in reality, there is no time like the present to make your money work for you, and in the long-run, your investments should produce far greater returns than those you’ll receive from even the best savings accounts, as long as you work to create a true strategy, rather than throw in money based on emotion as many newcomers do. The mystique that’s surrounded financial trading till now is slowly falling away – and we have the rise of cryptocurrency, technological advances, and the sharing economy on social media to thank for that. Financial institutions must now share their knowledge and democratise the metaphorical trading floor for anyone that wishes to be a part of it.

Rob Brockington CEO Finatext UK Ltd

Issue 13 | 49

EMEA BUSINESS

The marketing challenges facing the financial services industry As an industry, the financial services sector has been slightly more delayed to adopt the latest technologies available to them. Often large institutions with narrow profit margins, finding the budget to sufficiently invest in technology can prove difficult, leaving employees with outmoded, legacy technology and antiquated ways of operating. While the industry has often been pre-occupied with one regulation or another, be it MiFID II or GDPR, that excuse no longer carries weight. In an industry that is traditionally slow with the uptake of new technology, it’s imperative that marketers push their firms to change, to address the challenges the industry faces. Addressing the CX revolution A recent study carried out by Walker 1 indicates that by 2020, customer experience will overtake price and product as the key brand differentiator. What this shows, is that offering the best deal or best product is no longer enough to gain and retain customers, that’s not the sole priority of the consumer. Ultimately, what’s

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important to savvy customers today is the experience they get when they interact with a brand. They want to feel listened to and they want to be treated personally. The days of a one-size-fitsall approach in terms of marketing and customer service will no longer cut it. The problem for financial institutions is that they are not best-placed to offer that best-in-class customer experience. With customer experience being so important today, it’s not just a case of retail banks competing against each other to be as hospitable as possible with the resources they have – longstanding organisations now have to compete with the more agile, emerging banks – who have perhaps been set up specifically to offer the best customer service. So, rather than offering the best prices or industry expertise, these agile start-ups can take advantage of the consumer demand for a better customer experience. With fewer clients and a business model set up to address the current trend, challenger companies are in a place to offer a personalised experience that makes the older, larger institutions look impersonal.

Delivering the right message at the right time Timing is everything. Nothing says ‘out-of-touch’ like a company sending you a promotional email or letter for a service you’re already paying for – it makes the customer feel as though they’re not valued, as if they’re just another number. This feeling is part of the reason financial institutions are losing customers to challenger companies and even companies that don’t specialise in the space, but provide an off-shoot app that is more convenient than communicating with a large financial institution. The marketing teams in many traditional financial institutions are hamstrung by the outmoded technology they work with, as well as the large customer bases they have to contend with. Marketers need to be armed with the requisite technology to do their job properly. With the marketing approach of the financial services industry often being based in generic brand messaging or mass distribution of offers, they put themselves at risk of

EMEA BUSINESS

irritating their customer base. In order to retain customers, and especially to attract new ones, it’s increasingly important to offer personalised experiences, that let the customer know they’re valued. Marketing and GDPR Ensuring compliance is one thing, but the end result for marketing teams is fewer contacts to connect with, which means marketers need to be more creative and take an omni-channel approach, to ensure they’re talking to customers on the platform that best suits them. The industry needs to be focused and efficient in who it targets, making sure they get value by providing personalised marketing to the right channel. The ‘spray and pray’ approach isn’t viable under GDPR, a targeted approach, focussing efforts on the strongest leads is the way forward. As with marketing in any industry, marketers need to be able to justify what they go out with, who they target and what their results are. In order to so, analytics tools that can track interactions and show results are essential to proving value.

The overarching problem for financial services is doing more for less. They need to be able to offer more personalised marketing, to a potentially large number of people, at the right time, on the right channel, against fiercer competition and with legacy technology. That’s a tall order. For this to be viable, it’s essential organisations empower their marketers with end-toend marketing solutions that automate and streamline their processes. The key to addressing these problems is investing in a single marketing platform that can offer an end-to-end solution; from identifying leads to analysing the results. In the process, financial institutions will create time efficiencies and reduce costs across the business, while improving the quality of their marketing offerings.

Gavin Dimmock Managing Director, Northern EMEA Marketo

“32 Customer Experience Statistics for 2018.” CRM Blog: Articles, Tips and Strategies by SuperOffice, 27 Sept. 2018, www. superoffice.com/blog/customer-experience-statistics/.

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TA K E CONTROL OF YO U R T R A D I N G

D O N ’ T TA K E CHANCES

T H E U N I T E D

L E A D I N G

K I N G D O M

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S P A I N

T R A D I N G 

S O U T H

E D U C A T I O N A F R I C A

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P R O V I D E R

A U S T R A L I A

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W W W. L E A R N T O T R A D E . C O . U K

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P H I L I P P I N E S

EMEA BUSINESS

ORAL CONTRACTS â&#x20AC;&#x201C; I DON'T THINK SO Supreme Court Rejects Once More A Common Contractual Workaround In recent years, the Supreme Court has shown a keen enthusiasm for going back to legal first principles to consider fundamental issues of law which have affected commercial parties over the years. A recent significant decision of the Supreme Court has continued this trend. In May 2018, the Supreme Court gave its judgment in the case of Rock Advertising Limited ("Rock") v MWB Business Exchange Centres Limited ("MWB") [2018] UKSC 24, a case which explored the effect and impact of "No Oral Modification" clauses. A No Oral Modification clause is one which precludes oral variations to a contract. The Supreme Court in its judgment found that these should be given legal effect.

jurisprudence which had introduced uncertainty into commercial relationships, particularly in cases where misunderstandings have arisen between commercial parties who have through the course of their relationship 'agreed' matters orally. The Supreme Court's decision has now given parties helpful guidance as to how they should understand the interaction between a pre-existing contractual commitment and their continuing freedom to agree matter. At the heart of this lies an issue of fundamental importance: which rules supreme, an agreement or a party's autonomy to agree?

At first blush this may seem unsurprising. However, this decision lies against a background of

The dispute arose under a licence agreement in which MWB permitted Rock to occupy office space in London for a fixed term of 12 months. The

Background

licence agreement contained a No Oral Modification clause requiring all variations to be "agreed, set out in writing and signed on behalf of both parties before they take effect". After some time Rock fell into arrears and was unable to pay the rent due under the licence agreement. To try and resolve the issue one of Rock's Directors called MWB's credit controller and proposed orally to revise Rock's rent payment schedule. When Rock then started making payments in accordance with the revised schedule, MWB terminated the licence agreement and evicted Rock from the property. A dispute arose as to whether the revised rent proposal had been agreed by MWB. This led to MWB initiating proceedings for the unpaid rent and Rock counterclaiming for wrongful exclusion.

Issue 13 | 53

EMEA BUSINESS The decision at first instance went in favour of MWB but that decision was overturned by the Court of Appeal. The Court of Appeal determined that the revised and rescheduled rent proposal amounted to an "oral agreement" between the parties which varied the terms of the underlying licence agreement and amounted to an agreement to dispense with the No Oral Modification clause. In reaching its decision, the Court of Appeal emphasised the importance of party autonomy noting that parties should be able to contract out of requirements stipulated in an underlying agreement. Although the arrears where relatively modest (approx. ÂŁ12,000), MWB appealed against the Court of Appeal's decision.

The Supreme Court's Decision On appeal, the Supreme Court unanimously allowed the appeal. The Supreme Court determined that (i) the No Oral Modification clause in the licence agreement was legally effective and (ii) the parties had not impliedly dispensed with compliance through their oral communications. Lord Sumption gave the leading

54 | Issue 13

judgment. He concluded that the law should take the following approach: firstly, No Oral Modification clauses which specify formalities to be observed for a variation are, and should be, given effect by English Law; and secondly, once a contract is concluded, party autonomy is only permitted "to the extent that the contract allows". In reaching this decision, Lord Sumption confirmed that there is no public policy reason why No Oral Modification clauses should not be upheld by the courts and that they neither frustrate nor contravene any specific policy of law. He referred to the fact that often statute prescribes the form of an agreement. For example, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires agreements for the sale of property to be in writing and signed by the parties. Therefore, there was no good reason why contracting parties should not adopt a similar requirement by agreement; in effect creating their own private law. This is the supremacy of contract. Lord Sumption reasoned that No Oral Modification clauses provide commercial parties with legal certainty and avoid disputes about the

validity of any variation (and its exact terms). They also provide a mechanism for organisations to monitor their own internal rules limiting the authority to agree variations. The counterpoint to the argument for supremacy of contract is that parties remain autonomous to reach agreements and which may have the effect of undoing a previous bargain. Lord Sumption gave this short shrift, describing party autonomy as "a fallacy". He said "the real offence against party autonomy is the suggestion that [parties] cannot bind [themselves] as to the form of any variation". Many other jurisdictions uphold such clauses, whilst also imposing no formal requirements for the validity of commercial contracts. Whilst the Supreme Court's decision was unanimous, Lord Briggs gave different reasons. While Lord Sumption's view was that it is simply not possible to orally amend a contract where a No Oral Modification clause exists, Lord Briggs considered that parties should have capacity to orally agree to amend a contract in instances where the parties expressly comment on the No Oral

EMEA BUSINESS Modification clause (where one exists). In his words, a No Oral Modification clause "continues to bind until all parties have expressly (or by strictly necessary implication) agreed to do away with it"; an argument in favour of the supremacy of party autonomy. However, Lord Briggs was in the minority. In reaching its decision, the Supreme Court acknowledged the potential for injustice in cases where a party has relied on an oral variation but finds itself unable to enforce it. The safeguard in these cases lies in the various doctrines of estoppel.

The impact The importance of this decision should not be underestimated. It provides some very helpful clarity on the approach parties should take when agreeing and adhering to the terms of an agreement. In the background lies the issue of certainty, to ensure commercial parties are able to work together knowing the terms on which they are to operate are reasonably clear. Before the decision in Rock Advertising, No Oral Modification clauses were often found to be ineffective and, in

practice, often ignored if not merely overlooked. However, the Supreme Court's decision, means this can no longer be the case. Parties must take care to check the terms of their existing contracts and ensure that No Oral Modification clauses are adhered to (as necessary) to ensure any amendments or variations to their agreements are effective. Even to adopt an approach whereby an oral variation is agreed and later put into writing would, in Lord Sumption's words, be "courting invalidity with [one's] eyes open". This is because there is a real risk that a party may act to its detriment on a purported oral variation only for it to be held to the terms of the original contract. But the decision does not only impact No Oral Modification clauses, it extends to other parts of a contract which similarly regulate commercial certainty. Entire Agreement clauses, for example, usually seek to exclude prior 'agreements' or oral representations from the bargain to ensure all sides proceed on the same footing. There have been a recent series of cases involving parties trying to circumvent

entire agreement clauses, claiming the existence of oral collateral contracts sitting alongside a set of terms which have been clearly and carefully reduced to writing. Often the result of some misunderstanding between parties, the potential for disagreements to arise in respect of 'collateral contracts' in the face of Entire Agreement clauses creates uncertainty and risk which commercial parties would prefer to avoid. It is easy to understand why. Although the outcome of this case may introduce some additional administrative burden in ensuring stricter compliance with the terms of an agreement, commercial parties should take comfort knowing that there is now only limited scope to depart from the terms of an agreement as a result of oral discussions. The decision in favour of supremacy of contract gives healthy clarity and certainty.

Nick Storrs Senior Associate Signature Litigation

Johnny Shearman Professional Support Lawyer Signature Litigation

Johnny Shearman is a Professional Support Lawyer at Signature Litigation, specialising in commercial litigation with experience in handling a broad spectrum of domestic and international disputes.

Nick Storrs is an international arbitration and commercial litigation specialist, with experience in managing complex multi-party international disputes across a wide range of industry sectors, including natural resources, banking and financial services. www.signaturelitigation.com

Issue 13 | 55

EMEA FINANCE

It’s time for a new approach to crack financial crime No one could accuse the financial services sector of turning a blind eye to financial crime. Businesses spent around £8.2 billion in 2017 on anti-money laundering compliance, up from £3.8 billion in 2008. Yet, the problem is still growing. According to the UN, criminals currently move $2 trillion a year through mainstream financial systems – up from $1.6 trillion in 2009. Clearly, the industry, government and law enforcement agencies must make a change. Our recent report, Partners Against Crime, which draws on interviews and insights from those involved in this work highlighted two actions that will give them the upper hand over financial crime. These are to share more data, more widely, and then use smarter technology to analyse it faster and more deeply. Only then will they be able to follow crime in real time, instead of trailing in its wake.

Today’s systems fall short It’s clear that criminals exploit the sophistication and speed of digital systems. They mingle legitimate funds with the proceeds of

56 | Issue 13

counterfeiting, drug and people trafficking using shell companies, mule accounts and more. They cover their tracks in seconds. Yet the system to combat them uses largely manual processes that are too slow to keep up. That makes the chances of spotting crime as it’s happening virtually nil. Of course, banks’ systems flag suspicious activity, and they generate Suspicious Activity Reports millions a year, in fact. But they’re mostly false alarms, and law enforcement agencies act on very few of them. They can also lead to banks closing off certain types of ‘risky’-looking customers or industries, even though they’re largely legitimate. So, businesses bear the cost more than once and ultimately, it makes little impact on crime. In Europe, authorities only seize about 1% of the criminal money in the financial system every year. Businesses and the public sector are now trying to address this through new information sharing partnerships. In the UK, the Joint Money Laundering Intelligence Task Force (JMLIT) has had some success, with its efforts leading to more arrests and money seizures. But it’s still not making a

EMEA FINANCE

big enough dent in the problem. From October 2018, the National Economic Crime Centre (NECC), co-ordinated by the National Crime Agency, will build on JMLIT by combining data from different sources. However, it, and its equivalents elsewhere, still need a standardised, uniform and automated approach to sharing and analysing data. Yet, as police and crime commissioners have pointed out, this is potentially going to get harder after Brexit if the UK loses access to EU databases.

Moving data in all directions Financial services institutions, regulators, law enforcers and other government agencies all now need to work together more closely. As a senior figure at a regulator, interviewed for our report, told us: ‘Collaboration is the key to making the UK a hostile environment for financial crime.’ That means sharing more data – reference, transaction and behavioural data, and for everyone to share it with each other. It should not just go in one direction, as it does now, from banks to law enforcers. Finally, all the partners need to be able to gather the data from a central communication hub and analyse it. This should be automated to let everyone spot emerging trends and types of crime in real time, as this is the key to disrupting crime, not just piecing together what happened after the event.

To make this happen, a number of practical issues need to be solved. Those involved need a common technology platform that operates alongside their own systems while letting them contribute to, and draw from, the central hub. They also need to agree what kinds of data to share, in what form and at what intervals. A new system will also need clarity about how to handle data and keep it anonymous and secure. This should be underpinned by a regulatory framework that provides data protection while still allowing information sharing.

Secondly, new systems will also bring cost reductions as businesses become more efficient and redeploy resources away from the labour-intensive manual processes they use today. Finally, once the new system brings its first successes in preventing crime, those involved will see their reputations rise. They will have bolstered trust in the established system, but they will have choked off the money behind crime.

Reaping the rewards Of course, it also requires funding and that, in turn, demands a strong business case, as financial services institutions already spend heavily on compliance systems and technologies. However, thinking differently, investing in innovation, and going beyond anti-money laundering compliance, will bring three clear rewards. The first of these rewards is that new technology and automated systems will lower compliance risk. Regulators are handing down ever-bigger fines for compliance breaches. In 2017, for instance, the FCA fined Deutsche Bank £163 million over weaknesses in its AML controls. Penalties like this pose a real threat to annual profits, not to mention individual banks’ image as safe, dependable institutions. So, anything that reduces that threat is a significant benefit.

Richard Grint financial crime and tax evasion expert PA Consulting The innovation and transformation consultancy

Issue 13 | 57

EMEA TECHNOLOGY

BLOCKCHAIN CAN OFFER SOLUTIONS TO BREXIT PITFALLS Brexit is widely believed to be a source of financial instability. Sterling has slumped in the face of financial fears and a possible departure from the single market will have serious implications for international trade. However, even as Britain looks to sever ties with the European Union, border-agnostic blockchain technologies such as cryptocurrencies are building irreversible bridges across the continent. These tools have a wealth of advantages: in its essence a blockchain is a fast, secure and transparent system where information is stored across many computers worldwide using cutting edge digital encryption. The information on the system is validated in real time as any transaction is made. Any computer in the network can check the authenticity and parties involved in a transaction. British businesses, banks and the government itself now have the opportunity to reap the rewards of blockchain powered tools as they reach maturity and in the process bypass the worst of the looming financial storm, be it through international payments in cryptocurrencies, transparent trade, smart contracts, or the heightened efficiency and security that blockchain offers.

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So what are the applications when it comes to Brexit? In the face of Britain leaving the EU, cryptocurrencies offer an entirely new paradigm of making international payments. Transfers can be made quickly and securely across borders with blockchain. Also, as financial instability grows, investors and business alike are turning to digital assets such as cryptocurrencies as an alternative store of value because, unlike assets like gold, crypto provides an immutable method of exchange. Trade is a major source of worry for businesses: in the aftermath of Britain leaving the EU new structures will likely need to be put in place to reflect the new relationships agreed upon in trade deals. When applied in this scenario, blockchain could enable the UK customs union and tax authorities to have total transparency of trading and tracking both imports and exports. Both the UK government and businesses would benefit from blockchainâ&#x20AC;&#x2122;s superior efficiency and transparency, something that would go some way to offset the instability introduced by new trading relationships - especially in the instance of a no-deal Brexit, where these deals will have to be rebuilt from Scratch.

EMEA TECHNOLOGY

Blockchain can also help modernise bank’s systems. Brexit will put a great deal of pressure on British banking institutions, which will need to work overtime to adapt to regulatory changes, make new cross border transactions, and serve EU clients. Cryptocurrencies such as Bitcoin allow anyone to send money instantly with relatively low fees and banks like Barclays are already working on adopting blockchain technology to make their business operations faster, more efficient and secure. Smart contracts will likewise prove to be an essential tool for businesses. These documents, enabled by public blockchains, see networks validate transactions when certain conditions are met. Companies can effectively automate processes that would often have required a third party. This will be particularly useful when it comes to navigating the complex legal frameworks that take shape post-Brexit. If a contract is breached this can be identified and the necessary measures can be executed without a drawn out back and forth. The British government stands to gain a huge benefit from blockchain. Government systems are often relatively slow, opaque, and in some instances prone to corruption. Implementing

blockchain-based systems can significantly reduce bureaucracy and increase security, efficiency, and transparency of government operations. Dubai (UAE), for example, is aiming to put all its government documents on the blockchain by 2020. The political process itself can also be streamlined: in a world where voting systems are increasingly scrutinised, blockchain could negate any risk of foul play all the way from voting registration to the final tally. Any future referendums or elections can be safeguarded by this decentralised approach to handling information and no one will be able to second guess their outcomes. So as we enter what is certain to be a period of instability, blockchain can play a key role in streamlining processes. It can provide solutions for cross border payments, customs tracking, and help governments and businesses introduce simplified frameworks Businesses that recognise the potential of this technology will reap the rewards even as others struggle to adapt to new legislative and legal frameworks and the UK government can work to become more efficient and to build trust with an electorate that feels increasingly disenfranchised. Blockchain could be our way out of the Brexit rut.

Danial Daychopan CEO and Founder Plutus

Danial Daychopan is the CEO and Founder of Plutus, an application powered by autonomous application to make contactless Bitcoin payments possible at any NFC-enabled terminal worldwide. Daychopan’s creation is praised as a huge innovation in the fintech world, as customers can now not only invest in cryptocurrency, but easily spend it across the globe. Since 2013, Danial’s entrepreneurial skills have allowed him to flourish within the fintech and payments industry. He’s played an active role in the groundbreaking blockchain and bitcoin ecosystem as it has grown. Danial has co-founded LazyCoins, a digital currency exchange and was the Director of Crypto Software Solutions. As the founder of Plutus, Daychopan’s vision is to create a next generation payment system by utilising decentralised applications and harness the true potential of contactless payments and blockchain technology.

Issue 13 | 59

EMEA FINANCE

2018 Europe

Working Capital Survey Improvements in Receivables, Inventory Drive Best Working Capital Performance in a Decade. After Years of Ignoring Working Capital Performance, European Companies Finally Make It a Priority

Issue 13 | 71

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In many respects, 2017 was an anxious year for Europe, but not when it came to the economy. Every European country experienced an economic recovery and improvements in their labour markets. Investments strengthened on the back of favourable financing conditions, strong global demand and the need to expand capacity. The improved conditions reflect a global upswing in advanced economies and emerging markets alike.

While 2017 saw a robust performance in cash conversion overall, payables performance fell but was offset by strong performance in inventory and receivables. Overall, across all nonfinancial industries: •

Days inventory outstanding (DIO) improved by 6.1% or 3.9 days, reversing the upward trend since 201

Growth rates for the European Union (EU) and the eurozone beat expectations in 2017 to reach a 10-year high of 2.4%, and the good times are forecast to keep rolling into 2019.

•

Days sales outstanding (DSO) bettered itself by 5.2% or 2.6 days

•

Days payable outstanding (DPO), the third component of working capital, dropped by 4.9% or 3.6 days – a substantial decline that dampened overall CCC improvement

This strong performance enabled Europe’s top 1000 nonfinancial companies to improve their cash conversion cycle (CCC) by 7.2% yearon- year – their best performance since 2008. Overall, however, the absolute total of net working capital still grew. Collectively, this meant that for another year, Europe’s companies again lost the use of over 1 trillion euros.

The performance was markedly different than in the US where among the top 1000 DIO stayed flat, DSO deteriorated by 4% and DPO improved by 6%.

EMEA FINANCE

Not all of these improvements are driven by macroeconomic trends. Some companies seem to have understood the advantages of better working capital management. In 2017, the upper quartile performers were seven times faster at converting working capital into cash than the median performers. (FIG 1)

FIG. 1 Working capital performance of upper quartile versus median companies Days sales outstanding

Days inventory on hand

Days payables outstanding

Cash conversion cycle

50%

90 days 37% 53 days

Median

58 days 33 days

Upper quartile

60 days

67%

44 days

19 days Median

Upper quartile

87% 6 days Median

Upper quartile

Median

Upper quartile

The positive record of the top performers should suggest to the lagging three-quarters that working capital management is just like any other aspect of business in that much more depends on strategy and execution than luck. Their success suggests that much more can be done to reduce the mountain of 1.1 trillion euros currently tied up in excess working capital. Last year, this amounted to 7.3% of FY2017 European GDP of 15.3 trillion euros. Of that, the receivables opportunity represented 353bn lost euros; inventory, another 367bn euros; and payables, 394bn euros. (FIG 2)

FIG. 2 The working capital opportunity

€1,115B

Total working capital opportunity €353B

€367B

€394B

A/R opportunity

Inventory opportunity

A/P opportunity

Source: 2018 Europe Working Capital Survey, The Hackett Group

Issue 13 | 61

EMEA FINANCE

To be fair, however, businesses faced some unusually powerful headwinds in 2017. As we have seen in the past, there is typically a lag between legislation going into effect and the payment practices on the ground actually changing, and this softening appears to reflect a delayed response to some earlier regulatory changes. In this case, new regulations, particularly the European Late Payment Directive and related initiatives by several important member states, appear to have softened payables performance. In 2014, the German legislature finally implemented the European Late Payment Directive as national law after an extended debate on how stringently to interpret the rule. In the end, Germany opted for a strict interpretation of the directive. As a result, payment terms in Germany are assumed to be 30 days, unless explicitly contracted at a longer credit period. And while terms greater than 60 days are technically allowed, the German Civil Code states that a payment term longer than 60 days will only be valid in exceptional cases. Additionally, 2017 saw the rollout of the UK’s Duty to Report regulation, which aims to create transparency of payment practices. Under the new government guidelines, all medium and large companies operating in the UK have a statutory reporting duty to provide statistics on payment performance, narrative descriptions, and statement of policies and practices. The Netherlands also introduced new payment term legislation in 2017 aimed at protecting small- and medium-sized

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enterprises (SMEs). Under the new Dutch law, buyers cannot offer SMEs payment terms of more than 60 days. Past agreements with payment terms longer than 60 days are no longer valid and automatically convert to 30 days, after which the supplier can claim interest. This interest claim is enforceable for five years. These three initiatives may have made buyers wary of running foul of legislative requirements and led them to shy away from payment term optimisation programmes. While this is a very understandable reaction, the reality is that many companies can still improve payables performance within the current legislative constraints by looking at payment runs, payment terms model and the payment clock – before evaluating further gains, which could be achieved through the use of supply chain finance. At the same time, where companies are backing off longer payment terms with suppliers, the natural result is to see improved DSO performance.

On the flip side, 75 companies in the 1000 deteriorated for three years in a row. More worrying still, six companies have deteriorated for five years in a row and four of these for seven years in a row. These 4 companies have taken on much more debt (91% increase compared to 40%) and watched their cash on hand rise only 22% compared to the other companies. However, their revenue growth did improve, climbing 59.5% compared to the average of 27.4%. Overall, their CCC has slipped by 92.8%. Outlook: Robots and revenue The next big game changer for working capital management will undoubtedly be the digitalisation of business. Companies have traditionally relied on enterprise resource planning reporting with limited insights into working capital outcomes, but now a whole new world is unfolding that makes it easier to understand the impact of certain business decisions on key cash-related processes. In particular: •

The dramatic advances in data visualisation over the past few years have greatly improved the ability of managers to access and analyse operational working capital performance.

•

Better forecasting and optimisation software is helping forecasting and replenishment teams make smarter supply decisions. The new technology is enabling supply chain teams to process historical and incoming data faster and analyse it in real time.

Sustainability stays out of reach Despite the payment term legislation, one thing stayed the same in 2017: almost all companies had difficulty extending their gains in CCC. Since 2010, only six companies have managed to improve their CCC every year – revenue and cash on hand are up by 52% and 73% respectively, far ahead of the growth rates of their peers. Additionally, CCC cycles have fallen by an impressive 49% – well above the 6% improvement seen by others – and all this was done while decreasing debt levels by 25% compared to a 40% increase in debt by the average company in the survey.

EMEA FINANCE

•

This quicker access to real-time data is making it easier to introduce appropriate corrections on the fly. Advanced machine learning and optimisation algorithms can look for and exploit observed patterns, correlations, and relationships among data elements and supply chain decisions (e.g., when to order product, how much to order, where to put it).

•

Robotic process automation (RPA) looks for ways to automate and streamline repetitive processes. For example, RPA can greatly reduce the time it takes to create an accurate invoice.

•

Further automation of transaction processing, such as self-service portals and automated approval processes, is also gaining momentum.

Historically, the most fruitful area of improvement for payables has been through the optimisation of payment terms and conditions with suppliers. However, the European Late Payment Directive limits how much can be achieved with this lever. For European companies, the way forward for payables is still to look first to optimising payment terms and conditions and only then to supply chain finance. Here, too, however, technology may provide a solution. While still in its early days, blockchain technology is expected to transform supply chain finance solutions. Blockchain-based supply chain finance solutions will contain smart contracts to enable all parties in a supply chain finance platform to act on a single, shared ledger. A supplier, customer, and every other participant will update

their own parts of the transaction, adding efficiency and an unprecedented level of trust and transparency on a secure and immutable ledger. Blockchain will give companies and banks increased control, speed and reliability at a fraction of the cost of their current infrastructure. By giving buyer and seller more visibility and control, blockchain will create more robust supply chains in the long term. In 2017, a number of leading companies in the survey demonstrated that they are well ahead of the curve in working capital optimisation. We expect that as the decade draws to a close, the laggards will be trying harder to catch up. For some, the adoption of these new technologies may give them the extra capacity they need to make a significant move forward.

Paul Moody Associate Principal REL Consultancy Group Member of the Hackett Group

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EMEA BANKING

A new landscape:

How technological innovation is transforming transaction banking

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Transaction banking is undergoing significant change. While a combination of factors is responsible – including new regulatory requirements, globalisation and evolving client demands – it is technology that is really driving the transformation. For example, the growth of digital solutions across finance is contributing to evolving consumer expectations, while PSD2 regulations have been introduced in response to the growth of fintech. This new landscape is challenging banks, which must adapt to manage an increasingly technology-focused environment. Yet, importantly, technology is introducing a multitude of opportunities, enabling banks to leverage this shifting industry and its capabilities to optimise their transaction services. Transaction banking needed change Transaction banking stands to benefit considerably from innovative, digital enhancements. Trade processes, for instance, are often plagued by time and cost inefficiencies, with manual, paperbased tasks increasing labour costs and decelerating cash flow. Meanwhile, administrative, documentation tasks

– required for trade services – can prevent staff from concentrating on more strategic priorities, thus further driving down efficiency. Payment processes – particularly those involving international payments – are also subject to inefficiencies. The outdated back-end systems and procedures involved can result in slow and expensive transactions, with the tracking and transparency procedures required for cross-border operations further increasing banking costs and processing times. Innovation is enhancing processes Certainly, transaction banking is an environment ripe for reform, with technology providing the catalyst. A number of initiatives – including SWIFT’s global payment innovation (gpi) initiative, artificial intelligence (AI), application programming interfaces (APIs) and blockchain technology – are being explored by banks to help transform payments and trade. SWIFT gpi, for example, aims to enhance transaction banking by delivering improved speed, efficiency and

transparency to international payments. The first phase of gpi is already live and delivering tangible benefits: over 180 banks are now members1 and the majority of the approximately US$100 billion worth of SWIFT gpi messages sent in the daily flow of transactions are being credited within 24 hours2. Gpi is also improving payment visibility through its Tracker. Unique tracking codes enable visibility of the lifecycle of a payment, allowing them to be traced with ease. Such visibility can reduce tracking operational costs for banks by up to 50%3. AI is also being leveraged by banks. BNY Mellon, for example, is utilising AI robots to automate certain straightforward, manual procedures, and is experiencing significant improvement in processing times as a result. One branch of AI – known as “machine learning” – has the potential for higher value applications. Machine learning is the ability for applications to use datasets to learn how to identify patterns and trends – and then apply this knowledge to “think” in a logical way. Applying the full capabilities of machine learning is still some way away, but its practical applications could include supporting fraud detection, and enabling

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algorithmic trading – AI systems that make extremely fast trading decisions. Elsewhere, APIs can be harnessed to enrich the payment and trade space. APIs permit streamlined communication between various software components and can be particularly valuable in creating digital ecosystems that are accessible by clients.

overall effect of speeding-up the entire transaction. Similarly, trade services often involve ecosystems of external partners, with each independent participant further decelerating the process. As blockchains facilitate transactions under one system, ongoing developments aim to also support faster trade operations. Leveraging the digital space

Blockchain technology could also deliver value-added payment solutions. Blockchain is a digitalised, decentralised ledger that is inviolable and transparent, and it could potentially be used to streamline payments between people operating under different levels of regulation and security; which has the

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The innovations touched upon are just some of those that could enhance payments and trade. But how can banks ensure they leverage these new capabilities in order to optimise their transaction services?

At the heart of any banking strategy should be client value. The first step should therefore be to determine which initiatives will enhance the experience of the client. Every region is different, so banks must consult their client base to develop deep insights that determine which clients will benefit from each initiative. If banks believe the developments will enhance their clients’ experience, it is then a case of prioritisation. With new fintechs continually entering the market – and one in four failing4 – banks should be prudent when investing in technology, looking at what will add value to client relationships in both the short and the long term.

EMEA BANKING

A collaborative approach Of course, leveraging the digital space is rarely simple. For smaller – perhaps local banks – investing in cutting-edge technology can pose a significant challenge. Technologies can change rapidly, picking winners in this environment can be complex. It is here that a collaborative approach can provide a solution. Non-compete alliances between local and global banks combine the capabilities and skillsets of both parties – local banks gain access to the technology solutions needed to enhance their services while global banks gain access to unrivalled, country specific insights and expertise from local banks. Corporate clients can therefore benefit from an experience fuelled by the strengths of both parties. Yet, collaboration does not need to stop there. The new landscape is also

generating opportunities for partnership that extend to fintechs. A bank-fintech alliance is equally valuable. Participation not only gives banks access to technology services, but also allows fintechs to benefit from the extended reach of banks.

Bana Akkad Azhari Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services BNY Mellon

Technological innovation is transforming transaction banking. Technology solutions can deliver enhanced capabilities, transforming payments and trade. And by collaborating, banks of all sizes and reach can access these enhanced services, delivering a new, value-added experience to clients. The views expressed herein are those of the authors only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.

Daniel Verbruggen Head of Relationship Management Europe, and MEA & CIS respectively, Treasury Services BNY Mellon

https://www.swift.com/news-events/news/seb-goes-live-onswift_s-global-payments-innovation-service

SWIFT gpi press release, “SWIFT gpi reduces cross-border payment times to minutes, even seconds”, February 2018.

SWIFT press release, February 2018.

https://www.payfort.com/press/new-state-of-fintech-reportforecasts-250-fintech-startup-launches-by-2020/

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EMEA INTERVIEW

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Eurobank, the leading savings bank in Greece Mr. Iakovos Giannaklis, General Manager of Retail Banking at Eurobank Ergasias SA, describes the current state of banking in Greece and the bank’s commitment to building strong client relations through customized banking solutions. Could you give us your views on the current situation of the banking sector in Greece?

Iakovos Giannaklis General Manager of Retail Banking Eurobank Ergasias

Iakovos Giannaklis: The Greek economy, especially the banking sector, was affected by the 2010 debt crisis and Greek banks have been recapitalized three times in the past eight years. However, since 2017, country’s figures have improved significantly. Greece, following stagnation in 2015-2016 and average growth around 1,4% in 2017, exited the eight-year EU bailout program. In addition, GDP increased by 1.8% in the 2nd quarter of 2018, on an annual basis, completing six consecutive quarters of growth, the longest period, since the beginning of the crisis. These form an important milestone in the recovery process of the Greek economy, marking the beginning of a more positive and promising phase

for the Greek banking sector and a good starting point to cope with the important main challenges: The high percentage of Non-Performing Exposures (NPEs), the return of deposits that were withdrawn from Greek banks during the crisis and a sustainable profitable course. Following the successful completion of the Stress Tests and the improved financial results announced for 2018: Q2, what are your expectations for Eurobank’s goals and targets? Iakovos Giannaklis: Eurobank performed remarkably well in the stress tests. Our capital base has shown resilience to external shocks and in the baseline scenario, the bank was capital accretive over the three-year period examined. The ECB exercise confirms that, notwithstanding the strict assumptions of the adverse scenario, Eurobank remains resilient to external shocks. Eurobank’s total capital, at the high end of the sector, and its overall solid performance, allow us to streamline all our efforts in order to implement and deliver our business priorities.

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In Retail, we focus mainly on the following pillars: 1. Effectively manage and rapidly decrease our stock of non-performing exposures, in line with our plans 2. Implement our plan to lure deposits back to Greek banking system 3. Provide adequate financing to our clients, both households and businesses. Regarding NPEs â&#x20AC;&#x201C; which include debt obligations, our main goal is to reduce drastically the relevant portfolio. For this purpose, we try to be in constant cooperation with all our customers when searching for viable solutions. This is a critical field for the Greek banking sector in total, to be able to finance at an accelerating pace to the Greek economy. Financing the real economy, at this important juncture while it is exiting a decade of recession, is something we are heavily focusing on, with a special emphasis on small and mediumsized enterprises (SMEs).

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The return of deposits and increase of savings remains one of the key challenges for the banking system in Greece. We are working hard to bring in the deposits that were withdrawn from the banking system during the crisis. H o w d o e s E u ro b a n k s u p p o r t t h e increase of savings? Iakovos Giannaklis: In Europe, economic crisis has affected the rate of savings for individuals. Based on ECB figures, for 2017, the savings as a percent of GDP for individuals is 12% in EU while

at the same time in Greece, is -7.3%. However, at Eurobank we believe in the value of savings and we consistently try to conserve it. Along with the offering of savings products, we aim to educate and create awareness in the importance and value of savings to Greek families and the society at large. We visit primary schools nationwide to sensitize students about the value of savings. Specifically in 2017, our branch managers visited more than 200 primary schools, while 20.000 metal piggy banks were given as a symbolic gift to students, along with a children's book "The most beautiful treasures" which is creatively addressed to children educating them in the value of saving. We have also launched an interactive application for children which teaches them in a fun and interactive way how to manage and save virtual money in a digital piggy bank. Furthermore, we have the museum of Savings, where visitors learn about the meaning and value of savings over time.

EMEA INTERVIEW

What customized products has the bank created to meet customer needs and help them achieve their financial goals? Iakovos Giannaklis: Our strategy has a main pillar: Customers come first. We are focusing on providing valuable time, attention and knowledge to our clients through our expert staff whose role is to help them meet all their banking needs. We constantly monitor the needs that have not been covered and create new products in the field of savings, insurance, investment or trading. In all cases we believe that our proposals must be tailor-made meeting our clients’ specific needs. To this end, for example, deposit options vary, providing flexibility in terms of duration, performance or even a combination of interest rates and reward programs through our loyalty scheme. Eurobank has adopted a differentiated approach for different client categories. How does this model work? Iakovos Giannaklis: We have established a clientcentric model, based on a segment-oriented approach throughout the whole process of our interaction with each customer. Specifically for individuals, we have subdivided our clientele into groups: employees, pensioners, small business banking individuals and youth. To take better care of each category, we have created a tailor-made bundled offer for each one, covering all banking needs, so that we can serve the diverse needs and demands of our customers, establishing Eurobank as their first choice retail bank.

through prize draws, by giving the chance to double account balances up to €50,000. Our second main savings product is addressed to individual customers and offers a preferential interest rate while at the same time rewards regular savings. What are the new technological methods applied by the Bank in its products? Do you offer the choice for an online current account to your clients? Iakovos Giannaklis: Embracing technology and innovation is a strong, long lasting, strategic priority for Eurobank. It is worth mentioning that in early 2009, we were one of the first in the Greek banking sector to launch online account opening, by offering our “Live Account” product. “Live Account” aims to cover all customer needs for day-to-day banking, offering many privileges such as competitive interest rates and either free or low-cost banking transactions. The account exhibits a growing trend preference throughout the years, with more than 7% of our customers to have an active live account. In the digital era, Eurobank has made a strategic choice to increase and improve its products and services through all digital channels in order to become the premier digital retail bank in Greece.

What is the “flagship” of your savings accounts? Iakovos Giannaklis: Supporting Greek households saving efforts, Eurobank offers the “TT Growing Up Account” and “TT Regular Savings Account”, which can cover the savings needs of each family member, depending on client’s life stage. More specifically, for children and adolescents up to 18 years old, we have the “TT Growing Up Account” which provides an extra boost to savings

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ASIA INTERVIEW

Bridging the Trade Finance Gap Dr. Steven Hensen, Chairman of Anametrics Holdings Limited discusses the risk and opportunities of trade finance and how Anametrics Holdings are helping to bridge the gap between sellers and buyers. Can you tell us about Anametrics Holdings? Anametrics Holdings Limited (also known as AHL) was established from a Strategic Management Buy Out (MBO) of a US Fortune 500 environmental and testing company across Asia more than a decade ago. AHL rapidly grew into other business sectors such as mining, international trading, trade finance services, manufacturing, biotech, renewable energies and infrastructure developments over the years. Anametrics Holdings Limited is now a global entity, and a mission-oriented conglomerate. AHL's primary focus is on projects that are located in and/or with particular applications to emerging markets. When making our investment decisions, we donâ&#x20AC;&#x2122;t merely assess financial returns. We also take into accounts, how our investees can help solve some of their critical challenges facing the international concern

for sustainability. This corporate philosophy enables us to invest in projects with greater diversities when they possessed impact on sustaining their community(s). What is Trade Finance and why is it important? Our Group Structured Trade Finance products and services, provides businesses, traders and entrepreneurs with bespoke trade finance and working capital solutions to assist them in growing their business globally.Â We believe that in order to continue to grow at the current pace, all entities with good business models should be provided with a financial solution that is right for them, irrespective of the size of the business. The products we offer focus on the stock and working capital cycles of the business, which we believe is the anchor for growth.

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How does Anametrics Holdings help bridge the trade finance gap? Many companies do not have the business history or real financial strength to let them enter into the buying and selling of commodities/ goods or services. They have difficulty convincing the supplier to sell products to them. That is where Anametrics can assist. We work with our customers and clients to overcome those shortcomings. After our rigorous KYC and approval process, along with legal arrangements being satisfactory put in place… trade finance tools such as Documentary Letter of Credits or any other suitable financial instruments shall be issued to facilitate the trade from an importer or buyer’s perspective. In your opinion, what are some of the risks of trade at the moment? What do you see as the biggest opportunities? Some of the risk involved with trade are country risk, foreign exchange control risk, industry risk, bank risk and ultimately, fraud. Our approach to investment risk at Anametrics is proactive, which means being prepared for unlikely events and learning from market crisis. This applies to both market risk and non-market risks such as counterparty, operational, leverage and liquidity.

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Adequate and reliable trade finance creates exports opportunities: It enables firms which would otherwise be considered too risky, to link into expanding global value chains. At such our assistance contributes indirectly to employment and productivity growth. Trade is no longer just an income source for the big boys. Small Medium Enterprises (SMEs) can now play a more active role in wealth creation of building a nation.

the main bottom line. Our “win – win” philosophy is our primary strength by clearly setting forth our mission and objectives, we hope to provide our business community(s) and partners, the freedom to bring out their best, while working in unison towards a common set of goals.

Can you tell us about the strategic partnerships you have built and the advantages it offers?

Trading overseas can be profitable, but it also involves risk. Exporters must ensure they are paid for the goods that they provide, and importers must receive the goods that they had paid for. We can offer a range of Trade Finance solutions to help our clients manage risks, negotiate credit terms, win business and trade confidently. Our clients can benefit from the expertise of our experienced Trade specialists based in Asia and overseas. We understand the importance of

Our group develops and maintains more than 300 banking relations globally. From traditional trade products to bespoke finance solutions we can assist our client in their import and export activities. Such assistance allows our clients to maximize their international and domestic trading potential. Improving cash flow would eventually be

What are the trade solutions available to help clients develop their trade potential?

ASIA INTERVIEW

international Trade Finance in both reducing pressure on your cash flow and in enhancing your ability to trade globally. We work with our clients from the basic can-do attitude. Finally, the go/no-go decision is made with input from compliance and legal, risk and credit committees, and finally, building on relations with our clients. How is technology impacting the way you do business? Technology is very interesting at the moment, especially with regards to trade finance. There are lot of ways that blockchain technology may affect transactions in the future. Other developments include the use of more bank payment undertakings and credit tokens are currently under consideration. And of course, there is information technology that affects everything. Now there is sensory overload of “information”. Sorting through the good and the bad, the real and the bogus information will be a challenge. However, we are always ready to jump on technology bandwagon as long as it is proven that it can enhance our client’s bottom line.

What are your plans for further growth and development? As international trade is one of the most important driving forces for economic development in any developing countries and emerging markets… the availability of trade financing is extremely important for sustainable development. The integration of small and medium-sized enterprises (SMEs) into international trade is essential for emerging markets and developing countries to promote economic developments in an effective and sustainable manner. Trading in “intermediate” products has now become more important than “end” products trading since goods are primarily produced within global value chains. Two thirds of international trades are based on trade with intermediary products. We are pleased to announce that our focus have recently been targeting Africa, with emphasis on food security, renewable energy and agricultural sectors whereas Asia Pacific has always been the center of our business activities. We believed that our existence is organic and justifiable, as we engage in assisting more and more clients to breach boundaries that limits their growth.

Dr. Steven Hensen Chairman Anametrics Holdings Limited

Dr. Steven is one of the key founders of Anametrics. He has more than 35 years’ experience in all the areas mentioned above. He is currently working and residing in Asia for the past 25 years. He is a trained chemist and has an MBA from Regis University.

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ASIA TRADE

Is the Metals Industry Prepared for Regulatory Change? Volatility, complexity and uncertainty. Increasingly, these are defining characteristics of the international metals industry as it experiences a period of intense change. Stricter environmental regulation and demands for responsible sourcing are key drivers of these changes. Carbon emissions standards are placing additional pressures on mining practices, for example, while NOx-emissions standards in shipping influence the routes and logistics of marine transport. Waste management, provenance and modern employment practices throughout the value chain are all under the spotlight. The question is: are metals firms prepared to respond to these regulatory changes effectively and mitigate new risks that emerge? The metals sector may not be unique when it comes to greater regulatory risk, but the challenge is nonetheless an acute one. Prices have traditionally been heavily influenced by external factors, such as imbalances in

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global supply and demand, as well as geopolitical uncertainty in primary metal regions. But as more stringent and more diverse regulation increases the compliance burden, internal factors like management capability, operational efficiency and internal control mechanisms become more influential. Managing the move to a low-carbon economy The general shift towards a lowcarbon economy is forcing metals market participants to think differently. Every aspect of the metals value chain faces more stringent environmental standards and more intense scrutiny. Carbon pricing is just one example of this broader trend. According to the World Bank 1, some form of carbon pricing mechanism has already been established in more than 40 countries and more than 25 sub-national jurisdictions (cities, states and provinces, for example).

ASIA TRADE

That still leaves plenty of room for the concept to spread, particularly given the attractive revenue-generating opportunities and reputational enhancements it offers to local and national authorities. In the process, more metals and mining firms will be exposed to this particular form of regulatory risk, as well as the financial penalties and drop in shareholder value that comes with compliance breaches. As more metals and mining businesses come under the auspices of external pricing – or indeed adopt their own internal pricing mechanisms – they will need the ability to track prices effectively, hedge their exposures and calculate

the true financial impact of any operational trade-offs. Without this capacity, quarterly earnings become more erratic, accounting becomes more complex and stakeholder value becomes less predictable. Waste management becomes a global concern Of course, carbon is not the only waste product that is under scrutiny. Deleterious waste generated at each stage in the production process is also subject to increasingly strict standards and regulations. Many industries have been grappling with this problem for some time. However, it is particularly egregious in the metals sector – where the average amount of waste produced by the

12 major metals and commodities is around four times the weight of the total metal extracted. What’s more, as ore grades decline and firms tap into deeper ore deposits to compensate, the ratio of waste to produced metal is only set to increase. In previous decades, the metals industry was able to circumvent the initial forays into environmental legislation by moving their mining operations or refining facilities emerging economies with lower regulation standards. Increased demand has inevitably led to increased production in these countries; and more product increases revenues – at least initially.

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ASIA TRADE

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ASIA TRADE

However, the resulting increase in waste material has upped the pressure from government bodies to develop appropriate mitigation strategies. As a result, operational costs have also increased around the world and will continue to do so as more areas reject all but stringently monitored, managed and audited waste management procedures. Traceability is key to future success Increasingly, customers and end consumers demand assurance that each stage of a supply chain for finished or semi-finished products meets these stringent environmental and ethical standards. At the same time, sanctions regimes and other political measures for prohibiting trade create a different kind of jeopardy for international metals businesses – often in a very short time frame. In this environment, regulatory arbitrage is a much more difficult game to play. The rippling consequences of compliance breaches have a longer-term impact than indicated by a blip in the share price, and metals businesses may have to adopt new strategies in order to stay on the right side of both the law and public opinion. Meeting stricter traceability standards requires the right tools: firstly, to ensure that responsible sourcing is taking place and, secondly, to prove it to the competent authorities. Traditionally, metals and mining have been under-served by the right kinds of tools. Even when commodity trading and risk management (CTRM) solutions with the necessary functionality to manage regulatory risk are in place,

they have often fallen short on functionality specifically designed for metals. Rigged-up generic systems and business software are even more unsatisfactory. The ongoing success of metals and mining businesses will depend on having these tools in place – and ensuring that the right people within the organization have access to them at the right time. When uncertainty is the only thing businesses can be sure of, they need the technological support to deliver efficient operations, insight, analysis, agility and control. These are the characteristics of successful businesses that are both responsive and compliant Brian Collins in a fast-paced world. Managing Director Metals, Allegro Development Metals industry participants need a solution that can be easily adapted to individual processes and prepare them for industry changes and business growth; CTRM solutions, such as Allegro Horizon developed by and for the metals industry, should increasingly be seen as a critical success factor. Managing regulatory risk as it changes shape and creates more volatility is as essential to good business as managing price risk. The future for the metals industry will be both exciting and challenging. Having the best technology platforms could very well determine the winners and the losers.

Brian joined Allegro in January 2018 to lead the expansion of the company’s existing solutions in the metals industry. He is responsible for a global team tasked with delivering all aspects of the metals product strategy, development, and delivery of the company’s metals products. Brian has over 30 years of experience in the management and delivery of software solutions to the commodities sector, with a primary focus on the metals industry. Having initially co-founded a company that delivers front-office derivative pricing and risk tools to the LME options trading community, Brian has held executive and commercial positions spanning all aspects of managing and developing value=adding commercial solutions to the commodities sector.

“Pricing Carbon.” World Bank, www.worldbank.org/en/ programs/pricing-carbon.

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ASIA INVESTMENT

Go East: Securing investment from Asia During my more than 20 years as Chairman of the Global Group, a venture capital, strategic advisory and consultancy firm, I have seen the investment landscape between the East and West evolve and change drastically. Opportunities for collaboration between businesses from both sides have diversified and multiplied greatly. As the Asian markets, particularly China, continue to grow at a healthy rate, Western entrepreneurs are presented with unprecedented opportunities to secure overseas investment and grow their businesses. How UK businesses can seek and secure investment from the East For many years now, the UK has been a popular and welcoming place for foreign investment. In this age of globalisation, it has adapted well to suit a variety of needs for an array of investors. London, in particular, has an unrivalled capacity

to attract investment and has become the epicentre of the nation’s renowned entrepreneurial spirit and start-up culture. With this well-established reputation and economic heft, there is plenty of scope to attract foreign investment - but finding the right kind of investor is not as easy or as straightforward as it might at first appear. UK businesses are strongly advised to do their research before they begin their search for foreign investment. The Chinese economy is now the world’s second largest, and its most dynamic, but this in itself doesn’t always mean quality investors will be easy to find. For example, many entrepreneurs or start-ups may not be best advised to target the biggest cities, on whom so much global attention is lavished and where consequently competition is fiercest, like Beijing, Shanghai, Guangzhou and Shenzhen. Rather they may be better advised to consider looking for investors and partners amongst China’s second,

third and even fourth tier cities, each of which has its own sector specialisms and plenty of potential. Yangzhou, for example, a city of some 4.5 million people in central Jiangsu province, has experienced 73% growth between 2012-2017, far greater than the 59% national average. As such, it’s important that businesses seeking investment research their options thoroughly before setting out to explore the highly complex Asian markets. Finding the right business partner who understands your business and its goals is vital. Not only can partners help you find the right kind of investment that is suited to you, they can also ensure that you understand local culture, customs and expectations. One must not lose sight of the fact that Asian culture and civilisation is deeply rooted, with an unbroken history of millennia, and that it can be markedly different to that of the west. One ignores this at one’s peril.

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However, if you can prove to potential investors that your concept is already a success in a market such as the UK’s, and that it therefore enjoys bright prospects, it will put you in a far stronger position in your search. Businesses open for investment UK businesses are already attracting overseas investors across a very wide range of sectors, not least as the country has a very liberal investment environment and is more relaxed than most other developed economies when it comes to investing in national infrastructure.

The energy sector is a good example of this, not only in terms of basic utilities such as water, electricity and gas, but even in the case of nuclear power. Hinckley Point nuclear power station, which is being co-invested in by state-owned CGN of China and EDF of France, is one of China’s largest UK investments to date. The UK is also establishing itself around the world as a hub for technology and innovation. East London’s Tech City, also known as the Silicon Roundabout, and the Silicon Fen area around Cambridge are both excellent examples of the UK tech industry’s growing reputation and financial strength.

As both are located within easy reach of the City’s key financial district, they continue to entice investors who value the unique opportunity to combine the highly profitable finance and technology sectors via the new world of fintech. Global Britain and the ‘golden era’ During her China visit in February of this year, Prime Minister Theresa May recommitted herself to the ‘golden era’ for the China-UK relationship that Prime Minister Cameron and Chancellor Osborne had earlier forged with President Xi Jinping. If the post-Brexit vision of a Global Britain is to become a reality, such relationships will be vital. The UK remains a welcoming home for high net-worth individuals and families, with a favourable tax regime and the rule of law. Furthermore, the UK benefits from a more flexible labour market, compared to some other countries where more rigid codes apply. Patterns of global business and the political environment are changing rapidly, but I am convinced that the UK will remain a key hub for foreign investment and, with the Asian markets continuing to expand, there is still plenty of opportunity for Britain to explore postBrexit. I look forward to seeing the links between the UK and Asia continue to grow.

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ASIA INVESTMENT

Dr. Johnny Hon Chairman Global Group

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Blockchain and the supply chain share a future fastened around trust According to a growing chorus of business technologists around the world, blockchain stands poised to revolutionise nearly every industry. Momentum has gathered pace as companies around the world evaluate proofs of concept and pilots using this emerging technology and venture capital investment flows toward startups embracing it. Every week, it seems, a blockchain-related conference or event takes place somewhere in the

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world. I was initially a skeptic when the technology first came on the scene a few years ago. I thought it held promise, but many aspects remained unproven. Fast-forward a few years, and I have evolved from pure skeptic to cautious optimist. While none of us can foresee precisely when or in what form blockchain will transform business, I believe the technology has the potential to revolutionise the world of enterprise software as we know it.

ASIA TECHNOLOGY

from the fact that the “digital truth” is replicated to many blockchain nodes and thus everyone can own a digital copy (or one can have many nodes operated by different organisations). is commonly associated with cryptocurrency, the two are not interchangeable. The former is a technology, while the latter represents its application. But what is it, exactly? Blockchain uses cryptography, peerto-peer networks and consensus algorithms to create a digital ledger or repository of transactions. Every participant in a blockchain can observe these transactions, which are verified and recorded in a connected chain of information. Blockchain allows multiple participants to share information and conduct business transactions directly with each other, eliminating the need for third parties. The transparency of information is built-in, because blockchain allows multiple parties to retain an identical record of the history. Any updates to the repository can only be achieved via consensus from all impacted participants. It is important to note that while blockchain

Several factors make the technology appealing to enterprise software: 1. Trust Blockchain is a decentralised, distributed, digital ledger that stores a registry of transactions, secured through cryptography. Blockchain writes data as blocks of transactions, where each block contains a hash of the previous block. It is not possible to change data in a block without effectively destroying the chain. Once data has been written to the blockchain, it cannot be updated or deleted. Trust is achieved through this immutability of data and is unlike traditional centralised databases where data can be changed in most types of records. Trust comes not only from immutability and cryptography, but

2. Transparency Because no centralised entity owns the blockchain data, all parties to a transaction enjoy a full view. This transparency, not unlike Wikipedia or other crowdsourced platforms, becomes important in scenarios such as a supply chain, where multiple parties need to contribute information — or when data needs to cross organisational boundaries. 3. Verification Blockchain enables buyers and sellers to rely on the same, verifiable set of information. This audit trail means that if someone tries to make a fraudulent transaction, the decentralised nature of the chain will encourage others to thwart it before it goes through. This aspect of blockchain removes the intermediaries traditionally involved in commercial transactions, making them faster and more efficient.

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4. Smart contracts One of blockchain’s core features — smart contracts — contain executable code designed to trigger a particular action when predetermined conditions are met. For example, if a transaction exceeds a set dollar amount, the smart contract initiates an additional level of management approval. This conditional requirement, coded within the blockchain, can help procurement professionals to ensure compliance and meet budgetary goals. Those of us working in digital procurement have understood the importance of these attributes for years. That’s because, long before the emergence of blockchain, the architects who designed the first digital networks realised that until they instilled trust, businesses would never turn away from pen-and-ink ledgers and dead-tree product catalogs. Two decades later, today’s cloud-based procurement networks facilitate secure, encrypted commerce among millions of buyers and suppliers in nearly every country on earth. However, there are still several limitations need to be overcome if blockchain is to be widely adopted:

2. Ecosystem adoption Blockchain adoption is not simply about the technical details. It is equally important to have the involvement among all stakeholders in an ecosystem. For example, in the procurement scenario of “Know your supplier,” where a buyer needs to know the details and certifications of key partners, the solution can be useful only if all suppliers adopt the blockchain and enter their information. Similarly, in seeking to verify the provenance of raw materials, the related business partners must be on the blockchain in order to track from origin to end-product. 3. Bad data The immutability of blockchain records becomes a challenge the moment faulty data is entered, since correcting it requires unanimity on the part of transaction participants. Companies that own and develop “systems of record” have an inherent advantage, as they can ensure the accuracy and authenticity of the data at inception. When bad data is entered, it is kept forever and can have long-lasting negative impact. 4. Speed and power consumption

1. Complexity For many, blockchain can be confusing. More than merely an innovative technology, it represents an evolution in people’s approach to commerce itself. There is limited talent who understand how this technology works — and even the experts often think about the technology slightly differently from each other. Moreover, expertise in the technology is not distributed uniformly but clustered in certain parts of the world. Yet the solutions it enables are global, so adoption requires a widely dispersed talent base who understand it well.

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Today, the speed at which most blockchain transactions are processed remains limited. Blockchain platforms are not designed to process millions of transactions in seconds, as credit cards do. For example, the Bitcoin network is capable of processing a maximum of seven transactions per second. Imagine applying this processing time to a network of millions of people; one’s wait time would be a century, give or take! In contrast, Visa processes thousands of transactions per second, enabling the network to move with fluidity and ease. There are some protocols enabling much higher volumes of

transactions per second – still not yet comparable to the credit card payments – but sufficient for many enterprise scenarios. In addition to speed, there is a concern about the total volume of data stored in the Blockchain, which can also slow things down. 5. Interoperability across blockchains There are several different public blockchain protocols. In addition, many companies are moving to launch “permissioned” blockchains. These are a variation of public blockchains, where only certain people are invited and allowed to view the data. As public and permissioned blockchains are set up, the challenges related to the interoperability of all the emerging protocols and consortiums arise. Despite the aforementioned constraints, blockchain boasts many strengths and enables new capabilities that can unlock value across a business. And industry leaders are working to figure out how they can leverage the technology to do this. In many organisations. Procurement is taking the lead. And it’s only natural. After all, procurement networks — like blockchain — are global and secure. both depend on trust to function

ASIA TECHNOLOGY

properly and require information-sharing, across company boundaries, among buyers and sellers. Blockchain has the potential to become the complementary technology layer to digital networks, where data-sharing across parties can be facilitated and execution of transactions can be enabled and buyers and suppliersâ&#x20AC;&#x2122; ability to share data exclusively, authenticate each other reliably, collaborate on products virtually, evaluate third-party risk instantaneously, and maintain an audit trail permanently enhanced. And this is a good thing for technologists and procurement professionals alike. Because together, they can shape a future where digital networks and blockchain aid buyers and sellers everywhere in securing products and services in a more secure and trusted manner.

Shivani Govil Global VP, AI and Cognitive Products SAP Ariba

The author is global vice president for artificial intelligence and cognitive products at SAP Ariba, the worldâ&#x20AC;&#x2122;s largest business network, linking together buyers and suppliers from 3.4 million companies in 190 countries.

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ASIA BANKING

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ASIA BANKING

Taming

the flow monster in real-time payments What are the strategies for banks as the world adopts instant-transfer schemes As the world adopts real-time payments, creating massive volumes of instantaneous transfers in seconds, the challenge for banks has evolved from managing liquidity to managing velocity. Digitisation is driving the growth and future of real-time payments. In Singapore, funds transfers between two local accounts can be done almost instantly. Hong Kong, which launched its near-instant payment scheme this month, may see bank-to-bank transfers completed just as quickly. Such payments have not only created the need for 24x7 funds flows but also at higher frequencies. As a result, payments and treasury departments can no longer adhere to batch and daily processes, and the need to move to real-time systems is urgent. While most of the development in fast payments has focused on domestic transfers between individuals with a capped sum, in some jurisdictions participants have included non-bank businesses such as remittance providers and e-commerce players. With the current pace of implementation, it is a matter of time that cross-border instant payments is fast becoming a reality. Just earlier this year, SWIFT held exploratory talks 1 with banks from the Asia Pacific region about the development of an Asia Pacific crossborder real-time payments system based on SWIFT global payment innovation.

How do banks respond to the challenge? The demand for instant liquidity, dynamic FX exposure management as well as the ability to process real-time cash flow and transaction data mean that banks have begun to deploy the combined strength of Distributed Ledger technologies, Artificial Intelligence and Application Programming Interfaces (APIs) to transform into a highly effective, high-performing and value-added banking for clients. The speed of real-time payments also makes it vital for banks to perform instant fraud and identity checks before the payment is sent. At Standard Chartered, these systems are supported by as many as 12,000 coders and technologists, and they now account for about 15% of the workforce. The numbers also underline the extent to which banking has become a digital business. As we move forward, speed and agility are two critical factors driving success. In the past, software upgrades took place once in a few months, but with the rapid changes in todayâ&#x20AC;&#x2122;s environment, the development of software, upgrades and deployment need to happen at a much faster pace. DevOps (Development Operations) is one way to deploy software into the production environment quicker. With this approach, testing and deployment processes are fully automated. New code is dropped into production while the system with the previous codes will still function, allowing the end-user to continue using the services.

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A rapidly changing environment has also caused banks turned to partnerships to help them adapt quickly. In recent years, the concept of Open APIs has become increasingly prominent in our industry. In the next 3-5 years, we project a massive integration of service providers’ platforms with banks leading the charge. Open APIled transformations will enable banks to accelerate collaborations with outside organisations and third-party developers. Increased co-created systems will allow a bank to redraw the boundaries of the products and services it offers.

Without a doubt, real-time payments are redefining the banking landscape. In the next few years, there will be a multi-fold increase in volumes, with clients expecting 24x7 availability and scalability to handle peaks and troughs. We foresee intense competition for talent and resources, not just in the banking industry, but also with tech firms and telcos. A survival of the fastest, the organisations which can react to the change the fastest will be the true winners.

Banks need to change the way they operate With ever-changing consumer needs, Agile ways of working can help banks embrace changing requirements. Agile software development, an approach based on iterative development that brings together small, cross-functional teams to develop solutions within weeks rather than months, allows a product to go live sooner. At the same time, a project that is not on track could “fail fast,” allowing the team to recalibrate and take a different course quickly. The prevalence of technology in every aspect of our lives also means that IT cannot be a department that sits on its own in a corporation. As banking becomes a seamless digital process, IT professionals are now integrated with every banking department. At Standard Chartered, besides having IT professionals across our 60 markets, four Centres of Excellence – two in India, one in Malaysia and one in China – support and provide expertise for our global operations. IT teams are now closely integrated with respective product/client solution teams for agile delivery. Talent and resources are critical for any strategy. Besides having the best talent, there is also a need to be faster and more scalable. There is a progressive shift to cloud-based infrastructures which can connect with multiple platforms such as those of industryspecific clearing houses, e-commerce platforms, large commercial and government institutions. 1

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“SWIFT Explores Asia Pacific Cross-Border Real-Time Payments.” SWIFT, 20 Apr. 2018, www.swift.com/newsevents/news/swift-explores-asia-pacific-cross-border-realtime-payments.

ASIA BANKING

Bhupendra Warathe Chief Information Officer (CIO) for the Corporate & Institutional Banking (CIB) Standard Chartered As the Chief Information Officer (CIO) for the Corporate & Institutional Banking (CIB) business, Bhupendra is responsible for the entire technology and operations value chain for the CIB business, which includes driving the operations strategy to streamline processes, enhance productivity and improve controls. Prior to this, he was the Global Head of Operations and Regions, where he led the CIO teams across 44 countries and was responsible for operations globally. Since joining Standard Chartered in 2006, Bhupendra has held various leadership roles including Global Head of Product Engineering for Banking Products (Cash Management, Trade Finance, Commodity Finance, Retail Banking) and Global Head of Technology and Operations for Cash and Trade. Prior to joining Standard Chartered, Bhupen was Global Head of Trade Finance Technology at Deutsche Bank and held various senior roles there. Bhupendra was part of the SWIFT advisory committee that sets the standards for the industry between 2008 to 2010. He is also an active participant at various international symposiums, speaking on trade finance, cash management, mobile payments and compliance.

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ASIA TECHNOLOGY

On the frontline of fintech:

Building a personalised digital platform catering to a global audience

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The financial service industry is unremittingly global. For both bankers and clients, their tech travels with them. Tech is undoubtedly the biggest driver for globalisation. It speaks multiple languages, understands currency conversions and makes landing in a foreign country and culture feel a lot less foreign. Â Uber is a great example of this, same app, same language and same process across multiple cities worldwide â&#x20AC;&#x201C; providing that familiarity that makes travelling so seamless. Â

ASIA TECHNOLOGY

Our challenge was to build an online travel and concierge service that would be white-labelled for numerous global banking clients. The purpose, to give their clients access to the world’s best restaurants, shows, hotels and whatever else they may decide they need as they travel the world, allowing them to trust in their banks to help them beyond just their financial needs. Global-first For years, the digital industry has been focused on the mobile-first approach, building for every device and making life

more portable. This is standard practice now, it goes without saying that your application must work for all modern devices, large and small. For us, our focus is global-first. Every good personalised digital service platform must use location as its starting point. The financial services world and their clients are notoriously globe-trotting, whether travelling for pleasure, business or setting up a new life in a new country. What makes their lives easier is if the services that they rely on can travel with them seamlessly.

When I go to a new city or country I want my tech to know that I am there and to cater to me based on my location. There is no point receiving recommendations for restaurants in Kings Cross in London, if I am working in Singapore for a week. I want to see what I am near, as I move around. Of course, as we travel, we expect to access our bank accounts as usual, we expect that our credit cards will work and that we can get hold of someone at our bank whenever the time of day.

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However, building a digital platform that goes beyond the day to day expectations of a bank and into a differential offering requires harnessing local knowledge, the local language and cultures and having a footprint in each new place. If you build a digital platform for one market, and then attempt to scale that out globally further down the line, it will be harder to re-architect and refactor to provide a meaningful local experience, and many organisations will need to invest far more than expected compared with taking a global-first approach. If you have global ambition for your digital platforms, build this into the initial architectural design from the get-go, and consider every local angle.

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Harnessing the power of local knowledge Local knowledge is incredibly helpful. When we began building our platform, we did so for 35 locations around the globe simultaneously. While we did this, we made sure that anyone accessing the platform could also have access to a phone number and email address that went straight to an expert who could do the job of the platform practically in parallel. For example, launching in Hong Kong, the digital platform appeared in Chinese, operated in HKD, and knew the most trending restaurants and the hottest shows.

We were keen to make sure that we built a platform that can create parity with our high touch service, with a holistic approach at every opportunity possible. And, from a business perspective that meant providing and, in some instances, promoting the option to speak to an expert directly. Biggest challenges and lessons learned There are of course a multitude of challenges, large and small. Unsurprisingly, sometimes the smaller ones can be where you learn some of the biggest lessons. For example, we learned pretty far into our build that in the USA, consumers are not used to seeing a separate ‘house number/name’

ASIA TECHNOLOGY

Sally Crimes Chief Product Officer Ten Lifestyle Group

input field when submitting addresses. It felt alien to them and we had no idea. If we wanted this digital experience to feel natural for Americans, this is something we now needed to consider. Small mistakes like this that often require local knowledge that your team may not possess and can often result in additional hours reworking and unpicking parts of the platform, that with specific local insight could have been avoided. Learning this lesson has been invaluable in our planning ever since. Bigger challenges when building and launching a global digital platform could fill several volumes. But, I can give an

example that is quite typical of the issues that we come across. Each area of our Platform gives the user numerous options to choose from. Rental cars are a useful example. Each car rental company has its own unique offering – its own pricing, availability, car types, descriptions, inclusions, depot opening hours, naming conventions and much more. We needed to translate all these data differences into one global, consistent experience in multiple languages and currencies for 35 different markets. The relationship between Financial Services and Travel & Lifestyle Concierge is a very natural one. After

all, what do people do with their money? They use it to travel, to dine out, to see their favourite shows, their favourite sports-to create memories. Giving financial services the ability to help their clients and accompany them at home and on the move, is no easy feat. But, with the right mix of insight, local knowledge and working in a flexible and agile manner it is more than achievable. It gives both those working in Financial Services and their clients a great advantage as they travel the globe, while at the same time helping banks to offer a really valuable addition for their members that differentiates their business.

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ASIA INTERVIEW

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ASIA INTERVIEW

Committed to Your Success Banking in Sri Lanka with NDB Bank Since 1979, National Development Bank PLC (NDB Bank) has been committed to the financial success of Sri Lankans. Global Banking & Finance Review interviewed Mr. Dimantha Seneviratne, Director and Group Chief Executive Officer at National Development Bank PLC about the bank’s customer focused approach, product creation and their continued commitment to development in Sri Lanka. National Development Bank (NDB) has been working with SME clients for over 30 years. How has this market evolved over the years? NDB’s inception goes back to 1979, as a premier development financing institution in Sri Lanka, which was an apex body in disbursing credit lines from foreign investors. Since then, to date, nurturing SMEs has been one of our core commitments. As such our contribution to SMEs is perfected over the many decades we’ve served them. SMEs over the years have evolved significantly. In terms of economic significance, SMEs which were relatively less prominent in the past have now become a major force in the Sri Lankan economy. They also

possess the potential to develop in to large scale businesses in the future. Furthermore, SMEs have seen making deeper penetration in to a vast number of industries such as agriculture, fisheries, textile, handicrafts, floriculture, constructions, retail, etc. They are also seen to be embracing technology to greater extents, with quite a number of successful SME ventures being based on online selling platforms. We also see a considerable and an encouraging increase in women participation in SMEs. What are the biggest challenges facing SME clients? Access to financing at the right time could be a challenge still faced by SMEs. This proves true with start-ups in particular. The gap in knowledge about

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the avenues available for SMEs in the formal banking stream and absence of basic project proposal handling skills may contribute to this challenge. This could result in the ventures resorting to informal high cost borrowings, which would adversely affect their funding structure and profitability, and even the potential to expand further.

adapting the banking practices around the customer’s business needs, be it preferential rates and discounts on transactions, quick approvals for SME loans, trade financing, bank guarantees or mobile banking including dedicated Relationship Management, with a precise understanding of the importance of time for the entrepreneur.

Technical know-how could be another challenge. Especially if the SMEs are exporters who are required to meet international manufacturing standards, and are competing with other leading manufacturers at a global level, it is vital that they have access to this knowledge, are aware of the best practices and possess the technical know-how. There could be instances that certain SME industries do not have such support, or are not making the full use of the support available.

From Business Star current accounts for small scale business owners to Business Class and Business Premier for Middle Market business owners, NDB Business Banking benefits include specialized current and savings accounts and investment opportunities for business owners where the product offerings differ according to the scale of business. Business Banking also offers project loans and re-finances schemes for business expansions or asset replacements, with flexible terms.

Technology is yet another aspect which may pose a challenge, as well as an opportunity to SMEs. Whilst a number of start-ups are doing exceptionally well via on line platforms and social media, there is still a gap to the extent which technology is adopted by SMEs. Order taking, inventory controls, customer relations and marketing are some key areas in which SMEs could deploy technology, to make their ventures more competitive.

Small scale business owners can now obtain business loans of up to LKR 10 million with a hassle free, quick approval process, where all credit documentation has been centralized.

Can you tell us about your Business Banking Unit and how it will support the growing needs of SMEs?

NDB Business Banking customers will also receive a complete suite of Trade Products and Services and Unique Value Added Services for Trade Clients with Supply Chain Finance. Meanwhile, Business Banking also offers digital transaction banking which make it easier for business owners to perform transactions on a digital platform.

NDB recently launched its Business Banking Unit which includes a new specialized offering for SME business owners in a variety of savings, investments and lending products.

Retail Customer needs have always been at the forefront of product development at NDB, one example of this is the Dream Maker Loans. Can you tell us more about this type of loan and how it differs from other loans offered?

Customers of the business sector can now enjoy a host of tailor made services and focus on the prosperity of their business while the Bank focuses on

We offer the industry’s most popular and sought after personal loan product, branded as Dream Maker Loan. Living up to its self-explanatory title, the product

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indeed assists the beneficiaries actualize their dreams via a convenient and nonrestrictive set-up. The loans are offered for any legitimate purpose, may it be for educational/ higher studies purposes, home improvements, acquisition of a motor vehicle, a wedding, etc. We take pride in providing the necessary financial empowerment to realize the personal dreams and aspirations of our clients. The internal processes in handling this product are streamlined in such a manner, that an eligible candidate’s loan will be approved within one day, under the Fast Track method. NDB’s personal loan product surpasses the competitor offerings, considering the flexibility it offers via means such as being collateral free and a free insurance provided against death or permanent disablement to the borrower. Any individual with the required repayment capacity may obtain a Dream Maker Loan, whether the person is salaried, a professional or a business owner. Dream Maker loans make a significant contribution in uplifting the lifestyle of individuals and enhancing their quality of life. The product offering is further strengthened by our “Feet on street” sales force, which disseminates banking at the door-step, whereby they visit the customers either at their work places or residence. Another great example we note is your recently launched NDB Araliya an account for women; can you tell us about this unique product, what led to its creation and the benefits? NDB Araliya was developed in response to the changing dynamics of the females within the economy. 51% of the Sri Lankan population is females, and their contribution to the national economy is significant with their presence in many

ASIA INTERVIEW

sectors. They also make invaluable contribution in the capacity of homemakers. NDB Araliya is a guiding hand to these countless women in Sri Lanka, giving them the support they need to take care of themselves and their families, making women, in every essence, the true caretaker of the family. It is to her that NDB has specifically designed “Araliya”; a savings account which will support women and their families through good times and bad. Araliya is a unique women’s savings account in the Sri Lankan banking industry that provides life insurance and medical insurance not just for the account holder but also for her immediate family members. It also comes with added benefits of gifts at the 21st birthday and a free NDB Shilpa children’s savings account upon the birth of a child. The product is designed in such a way that encourages women to save, and inculcates the habit of regular savings. It truly yields financial independence to aspiring women in ensuring the wellbeing of themselves as well as their loved ones. Do you have other innovative products you’ll be launching this year? We are constantly looking at means to enhance the experience our customers have with NDB. In doing so, we look out for innovative solutions as well as enhancements to our existing offerings. As of now, our product portfolio is quite diverse with lifestyle offerings to individuals, SMEs, corporates, middle markets and even micro ventures. We will augment these offerings through the deployment of digital solutions thereby increasing customer convenience. We will also come up with new products in response to the evolving customer dynamics. As we have now embarked on a digitally driven journey, our core focus in terms of innovation would be in that line.

How are customer behaviors and the increased movement towards cashless transactions changing banking in Sri Lanka? There is indeed an increasing trend towards cashless transactions. This has trigged banks to come up with digital based solutions to enable seamless, rapid and secure payment methods. E-wallets, mobile banking platforms, online banking platforms and even card based payments are made available to customers by banks, with novel features to ensure customer convenience. This has led to banks making considerable investments in such digital infrastructure. It has also brought in a need for added security and data protection methods. How is NDB supporting the social economic growth in Sri Lanka? We are National Development Bank PLC. National development is in our identity. It forms a core purpose of our existence. Our support to the economic growth of Sri Lanka is multifold. We empower individuals and families in financial prosperity through our lifestyle banking offerings. We have a strong savings proposition which we offer to our customers, through tailored products to match any stage in life. We strongly believe that empowerment of individuals and families play a crucial role in overall economic development of the country. We have one of the strongest project financing units in the Sri Lankan banking sector. Our Project Finance Unit has extended financial support to a large number of development projects taking place in the country. Colombo’s skyline is evolving with large scale residential, leisure and infrastructure facilities, and we are glad to be a part of this economic upbeat.

Our contribution to SMEs and micro finance ventures, in both financial and non-financial aspects and our assistance to corporate customers all make direct and valid contribution to national economic development. What does the year ahead look like? We had an exceptional year of performance in 2017. We have shown sound results in H1 2018 as well, above market averages, as evident in our published results – in line with our new strategic goals of growing the SME and Retail base of our business. 2018 has been satisfactory so far. The Bank embarked on a new strategy in 2017, targeting 2020 to become a systemically important bank. With the successful implementation of this strategy, we are now strategizing on our way forward beyond 2020. We also bring in our NDB Group synergies and expertise in a host of capital market solutions including investment banking, wealth management and stock broking activities, so our customers can have all their financial needs met under one group of companies.

Mr. Dimantha Seneviratne Director/ Group Chief Executive Officer National Development Bank PLC

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Adam Truelove, Global Trading Floor Director, Learn to Trade Pty Ltd

AMERICAS 104 Issue 13

AMERICAS BUSINESS

Expansion across the Americas: The importance of maintaining national rapid growth When it comes to great moments in a company’s lifecycle, expansion is among the most exciting. Watching your business grow and develop is thrilling, and an indisputable sign of your continuing success. If you’re in a position where you think it may be time to take on a new market, there are an enormous number of considerations to wade through to ensure that you don’t overreach and jeopardize the strong foundations of your company. Expanding your operations or opening a new branch can feel almost as dicey as starting a new business; so, is it worth the risk? They say in business, you’re either growing or you’re dying. Growth rate is the ultimate indicator of the health of your organization—you might focus on turnover, market share, profits, sales, or head count, but however you measure your growth rate, if it’s not climbing, then your business viability is in question. Even if you’re happy with the level that your business is operating at now,

by eschewing growth opportunities, you’re rolling out the red carpet for your competitors to move into that space and snatch up more market share. In addition, fixating on one location, or market, is akin to putting all your eggs in one basket, giving you no backup if business were to dry up in the future. Maintaining growth is more complex than ever in the modern age, but remains of principal importance for the majority of businesses. Gartner’s 2018 CEO Survey 1 reported that CEOs ranked growth as their top priority for 2018/2019, and while many CEOs are looking for deeper structural sources of growth, national expansion remains one of the most effective ways to expand your company. There’s no business without customers, so clearly reaching new audiences in new markets is crucial to increasing your profits and allowing your business to develop. In an increasingly connected world, there is more opportunity than ever for businesses to expand their operations across the country, with minimal disruption to primary operations.

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AMERICAS BUSINESS When I joined Frank Recruitment Group as President of Americas earlier this year, I immediately began looking for strategic locations from which we could build our presence across the North America. Since then, we’ve opened a new office in Tampa, bringing the number of US hubs to six; two more are set to open in Denver and Phoenix later in 2018. As niche technology recruiters, we see first-hand how fast the tech sector moves; this constant innovation makes it an incredibly exciting space to work in, but it can also create skills gaps when tech professionals can’t catch up with mushrooming demand for experience. As President of Americas, my job is to make sure we’re serving the US as best we can. There is enormous opportunity in the tech sector right now; tech is far and away the fastest growing industry in the country, and vibrant new tech hubs are springing up all the time. Maintaining rapid expansion can be challenging even in the most blooming markets, however—when you’re looking to take your business into pastures new, here are a few of the core issues to consider before throwing a dart at the map.

Identifying new market locations No one wants to stagnate, and you should always be ready to move into new spaces when opportunity and circumstances allow. However, be careful to avoid expansion for expansion’s sake. When business is good, and your feet are getting itchy, it can be all too easy to get caught up in the excitement of a move and breeze through your due diligence. You need to take the time to identify the right place for your business to move into. Find out where the growth in your industry is taking place, or even better, where it may take place in the near future. Trying to get in on the ground floor is always more risky than expanding into a geographical market that’s already established, but the rewards can be huge if done right. Five years ago, almost every tech company in the US wanted to have a base in Silicon Valley. The Bay Area was the place to be for both start-ups and established tech enterprises, but today, the high costs of doing business and over-saturation of tech companies, many firms are beginning to branch out from the California tech bubble. We used to think of the tech industry being concentrated in the country’s costal conurbations, but digital transformation is happening everywhere—and with it comes massive job growth. Places like Denver, Austin, Chicago, Minneapolis all have booming start-up scenes, with many cities funnelling massive amounts of money into start-ups to help drive local tech economies. If you keep your ear to the ground in terms of which cities are piping money into your industry, you can get a good idea of where your sector will be taking off next.

Talent acquisition A great team is the backbone of any successful business and having the right people in your corner becomes doubly important during expansion. Employees hired to help your business grow have a heavy load to bear; not only do they need to live up to the standards that’ve helped your business succeed so far, they’ll also need to be able to shoulder the business through the busy and often stressful growth period. When moving into a new market, your employees are on the frontlines of business development, and the impression they leave in your new base of operations can make or break your expansion plans from the moment you land.

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AMERICAS BUSINESS If you’ve spotted a great opportunity to grow or have set your expansion an ambitious timeline for your ribbon-cutting, you need to make sure that your time-to-hire isn’t coming at the expense of quality acquisitions. This doesn’t just apply to new hires, but also to any internal moves you may be planning to staff your new location. Culture is fast becoming one of those corporate buzzwords, but the sentiment behind it is crucial; the most important factor in expansion hiring is finding people who share your vision and have the passion to help carry your business forward. That said, it’s still important to do some research into your new market—average salaries, local regulations, competitor businesses— to make sure you’re attracting the right people.

Driving brand presence Once you’re set up in your new market, you need to let people know you’re there. Most businesses don’t carry the kind of prominence that allows a company to drop a new branch anywhere they like and gain instant recognition. Brand awareness needs to be built all over again when it comes to new locations. The good news is that by this point you’ll have already mapped out your target demographic, your customer personas, and your brand voice will be well-established, so putting all those pieces together to form a marketing strategy shouldn’t be too big a task. Brands thrive on customer loyalty, and brand advocates are hugely significant when it comes to building a name for yourself in a new market. Setting up a referral plan to help generate business is not only great for getting your name out there, but also provides the added bonus of steeping your brand in the sense of trustworthiness and reliability that can only come from a recommendation from previous customers. Advertising can still be a massive win for businesses when done right, but don’t forget about thought-leadership when it comes to establishing your brand presence. Teaming up with local publications to provide useful, relevant advice and insight is a great way to position your company as a knowledgeable, supportive force in the market. The ever-pervasive power of social media can’t be undervalued either. Focusing your efforts on the most appropriate platform for your business type can help you target new customers at a granular level, in a way that other, more traditional methods of advertising just don’t allow. Whichever way you decide to build your presence, the most important part of new market penetration is keeping your brand essence intact. Translating what makes your brand unique and successful is key to growth—expansion is about reproducing your achievements in a new space, not diluting your brand. What you’re aiming for is a full-colour reproduction of your operations, not a copy of a copy of a copy, and as long as you’re achieving that, you’re heading in the right direction. 1

Sunny Ackerman President of Americas Frank Recruitment Group

Sunny Ackerman is President of Americas at niche technology recruitment firm Frank Recruitment Group, responsible for overseeing the company’s rapidlyexpanding presence across North America. Sunny has over two decades of experience in staffing and recruitment and is committed to delivering a successful and strategic mind-set of going above and beyond business expansion.

“Gartner Survey Reveals That CEO Priorities Are Shifting to Embrace Digital Business.” Gartner, www.gartner.com/ newsroom/id/3873663.

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Institutional

Trading with BMO Capital Markets BMO Capital Markets provides topranked research, exceptional service and superior execution to help clients navigate the markets. Mike Schnurr, Kate Stothers, and Ed Solari of the Global Fixed Income Currencies and Commodities (FICC) within BMO Capital Markets give us an insider look at their institutional trading operations and their plans for the year ahead.

Can you provide status on BMO Capital Markets institutional FX business? BMO’s institutional FX business has grown significantly over the past few years. This has been achieved by fully integrated client coverage making targeted efforts to ensure BMO is seen as a strategic partner to our clients across all FICC asset classes. As such, BMO has leveraged our relationships in other areas of our firm to strengthen our FX institutional franchise.

How has the institutional FX business grown in the last year? While the institutional FX business continues to grow its revenue base by leveraging existing BMO relationships,

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we have spent the last year intensely focused on resource optimization and technological enhancements.

How are industry and regulator drivers impacting FX institutional trading? The regulatory landscape is everchanging and increasingly complex. Regulatory compliance requires diligent focus to allow us to continue to offer a world-class client experience for our sophisticated institutional client-base. A robust approach to regulatory oversight reaches well beyond market and trade disclosures – we practice careful coordination with our legal and regulatory businesses partners and proactively and continuously communicate any requirements to our clients.

What advantage does your global presence offer clients? The institutional landscape continues to change. Globalization of client activity, and coverage, has continued apace. Through strategic resource optimization in Europe and Asia we are in a position to focus even

more strongly on the needs of our clients. By having offices in mainland China and Hong Kong we are able to offer specialist insight and market intelligence into the constantly evolving local markets, an important and unique selling proposition for our business. Wrapping this in with our European colleagues allows us to offer our clients seamless 24-hour coverage.

What is your business strategy this year? We are pursuing aggressive growth in both the US and Europe this year following the strong Canadian blueprint of a fully integrated client model. Specifically, we will leverage our relationships in other areas of our firm outside of Canada, particularly our Fixed Income business that has rolled out aggressive growth initiatives in the US recently. This will be achieved via an organized and targeted plan rolled out by our experienced sales professionals across North America. We continue to focus on technological enhancements and new product offerings that are the most meaningful to our clients. We have a client-

AMERICAS TRADE

centric approach to adopting new technology based on our clients’ needs which we anticipate based on our strong relationships and the intelligence they provide. We listen to our clients. We will not only introduce better technology but are focused on optimizing resources where it makes sense.

Mike Schnurr Director, Head of Centralized FX Execution Global Fixed Income, Currencies & Commodities

Can you discuss the role of technology in trading? The FX technology arms race continues as adoption ramps up among buy-side and sell-side players. BMO Capital Markets has launched a refined strategy to bolster our global electronic FX presence. In addition to building out a world-class algorithmic FX trading suite that will launch in the next quarter, we’ve enhanced our global coordination to provide seamless, 24-hour coverage in a wide array of products/ specialties. We’ll continue to partner with our clients to build market technology solutions that serve the needs of our clients and help them to achieve their goals.

Ed Solari Managing Director, Investor Sales Global Fixed Income, Currencies & Commodities

Kate Stothers Managing Director, Investor Sales Global Fixed Income, Currencies & Commodities

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AMERICAS INTERVIEW

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The Future is hereAI and Machine Learning in Financial Services Chandra Ambadipudi, Chief Executive Officer, Clairvoyant discusses the potential for AI and Machine Learning in financial service. What is the difference between AI and Machine Learning? AI is the concept of machines performing tasks that are characteristic of human intelligence -- it is the all-encompassing phase that is highlighted in multiple SciFi movies like Terminator, Matrix, etc. The concept of AI is to address things like recognizing objects and sounds, learning, planning and problem solving. Today most of the AI used in a business context is specific to one area, it displays characteristics of the human intelligence in one specific area like sound, image recognition or problem solving. The evolution of AI to replicate multiple aspects of human intelligence is the next stage in its evolution and that is the focus of new emerging AI initiatives across industries. Machine learning in its most basic form is a way to achieve AI. Machine learning is a way of training an algorithm so that it can learn how to learn. The training here involves feeding large amounts of data into an algorithm and allowing the algorithm to adjust itself and improve. To further expand on this, AI can be achieved without machine learning by writing significant amounts of code or programs, but today machine learning

algorithms make the process of creating AI-based applications much easier than through manual processes.

What are some of the common misconceptions about AI and Machine Learning? People often think that Artificial Intelligence (through machine learning) will replace their job functions completely and perform at a higher level than humans, or that AI has human-level emotions and intelligence. Naturally, these stem from a misunderstanding as to what AI can truly do. While it is capable of processing large amounts of data very quickly, it’s certainly not at human-level in terms of judgement and perception. There’s also a misconception (often fueled by sci-fi movies) that AI applications will suddenly become sentient. AI could certainly become destructive, but not at the level often portrayed in Hollywood. A final misconception is that AI is a silver bullet. AI can solve for a lot of things, but there’s not one magic algorithm that can solve everything. Most AI applications need to be built and implemented for a specific purpose based on the industry and company.

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What are the current applications of AI and Machine Learning in banking, finance and insurance? More and more institutions are utilizing automated processes, and AI is currently driving some of the biggest industry changes in banking, finance and insurance. By making frequently performed duties automated, AI makes it possible to focus on higher level objectives. You see this in tasks such as document management, where it reads through documents, including forms, contracts, etc. The BFSI (banking, financial services & insurance) industry today is also regularly employing chatbots with AI-driven responses rather than having live customer service representatives respond to consumers, saving a great deal of both time and money within customer management. AI is also currently being used to decrease friction by improving workflows and decisioning processes. It is capable of creating models for previously manual procedures -- there are two specific use cases of this in BFSI. The first is creating risk management models for lending and credit risk management; the second is in fraud prevention, where AI systems identify, track and flag potential threats.Â Â

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How does it help with data and risk management? AI can help with every step of the data and risk management process; this happens through creating AI-powered models for the specific purpose of risk management. In risk management, early detection is key, and AI is capable of recognizing risk patterns remarkably early. It utilizes multiple data sources to take a more comprehensive view of the risk assessment. Once the risk is identified, there are significantly faster response times, and a reduced impact of failure. AI also supports the very foundations of data and risk management in increasing accuracy and speed of reporting, data

and overall business. This boils down to is a more precise, efficient process of detecting and mitigating against risk in banking, finance and insurance.Â

What are the key benefits to BFSI and their customers? AI and machine learning can provide a number of tangible benefits to BFSI. The four key benefits to BFSI and their customers are: better customer experience, significantly better risk management and tracking across services, reduced costs through better efficiency, and reduced time to market.

AMERICAS INTERVIEW

What are the potential future applications of AI and Machine Learning in the finance world? As AI and machine learning technology continues to develop, the opportunities for applications in the finance world are significant: from customer service to data security. In the future, AI will provide much better customer experiences across services offered by finance companies. Gartner predicts that by 2020, 85% of customer relationships with an enterprise will occur without interacting with another

human. AI driven management of individual BFSI portfolios is one way in which AI can be leveraged to enhance the customer experience. Another is through managing AI services by voice on the customer’s mobile device -- the BFSI “Siri”. AI and machine learning will also have implications for the back-end of the finance world, beyond customer experience. AI is already being applied widely to protect against security threats and data breaches and can be implemented to significantly lower the risk against these threats. It will also lead to better predictability, for example decisions around credit and consumer lending, thereby lowering risk to the bank or financial institution.

Chandra Ambadipudi Chief Executive Officer Clairvoyant

Chandra in his current role as the CEO of Clairvoyant, co-founded the company in 2012 and has driven the company to become a leading big data player with multiple Fortune 500 customers today. A highly motivated senior leader in software engineering with a proven track record. He also co-founded BlueCanary Data, a predictive analytics product company focused on higher education, and lead it through a successful acquisition last year.

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Blockchain: The Foundation for an Undisrupted Insurance Industry The insurance industry, more so than others, has a history of taking a cautious, steady and at times skeptical approach toward innovation. Fraught with time consuming processes and heavy regulatory requirements, insurance companies can easily fall behind in todayâ&#x20AC;&#x2122;s on demand world. While the industry takes a hard look at how it must reinvent itself in the wake of demanding digital transformation, one emerging technology in particular holds great promise for helping insurers keep pace with the times: blockchain. Blockchain, the technology base for verifying payments, is already disrupting the financial industry and we can expect to see it completely overhaul financial services in the near future. For example, blockchain is drastically reducing settlement periods by digitizing the cumbersome process, saving the industry $65-$80 billion a year1. Global currency exchange and practices are also made more manageable, fast and secure. Blockchain opens up new opportunities and benefits to hundreds of other industries that work with clients and depend on security and confidentiality in their transactions, including insurance. Improved Security Since confidentiality and security are non-negotiable requirements for insurers, blockchain provides the ideal platform for secure and efficient transactions. Despite security being top of mind for insurance companies, fraud is still an expensive problem that plagues our modern, digital world. Across all lines of insurance, $80 billion2 is lost to fraud every year. In the U.S. and Canada, fraud accounts for as much as 5 10 percent of claims costs3.

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Blockchain, which also serves as the backdrop for cryptocurrency and secure payment methods like bitcoin, is a stepping-stone on the path to greater visibility and security for the industry as a whole. As its name suggests, blockchain transactions are made up of a series of stored blocks linking to each following block, making it significantly challenging for hackers to steal data along the way as they would have to alter every block that followed. Each transaction is time-stamped and unalterable making identities far more secure and data more trustworthy. No technology is perfect however, and there are plenty of headlines about devastating blockchain attacks. Whatâ&#x20AC;&#x2122;s important to note, is that it is not the blockchain itself being hacked but the software that sits on the blockchain. Any insurance application would be open to similar vulnerabilities, so it is critical the industry take a cautious and careful step forward into blockchain. As the technology cycle matures, exposed vulnerabilities will pave the way toward best practices while regulatory agencies and law enforcement will be better equipped to prevent attacks and prosecute those responsible. Industry experts anticipate these developments to evolve over the next few years. For the insurance sector, blockchain serves a particularly useful function in cutting out the middleman and conducting transactions solely across relevant parties. Delivering data, invoices, contracts and more is made significantly more secure and instantaneous â&#x20AC;&#x201C; catering to our need for on demand, real time responses.

Customer Interaction As the world turns toward digital options ever more quickly, the ability of brands and companies to reach their customers directly also grows. In fact, it has never been easier to communicate directly to customers in the moments they are most likely to engage. Not only are communication channels expanding in this digital age, the digitization and security offered by blockchain allow for greater efficiency in time-consuming, necessary processes like onboarding new customers, underwriting, claims handling and contract delivery. Smart contracts are a noteworthy stride in keeping time with the digital world. Because they can carry out only the specific functions assigned to them, smart contracts behave with blockchain-like similarities, as each action within the contract is traceable and irreversible. Legal insurance contracts or death benefits can now be shared electronically, putting information right into the hands of the customer. While this technology offers greater speed and accuracy, and the potential of saving hundreds of man hours on timeconsuming processes, the truth remains that regulation holds the key to further innovation and widespread adoption. For example, regulations in some jurisdictions still require paper contracts, and unless this change, innovations like smart contracts may take a backseat.

AMERICAS INSURANCE

Aside from regulation, the question remains whether blockchain is scalable enough to operate at the level needed by insurance providers. Blockchain is still three to five years away4 from feasibility at scale. Any blockchain adoption and advances in this area would require technology capable of handling the highvolume of claims, contracts and more. Ethereum, a cryptocurrency platform built on blockchain5, manages around 14 transactions per second, and Bitcoin only seven6. As it stands, these particular blockchain-based platforms couldn’t support the hundreds of thousands of transactions that would occur between insurers and their customers. However, the blockchain revolution marches on and the future looks promising.

Underserved Markets Providing proof of insurance is often the first step in receiving other financial services. Yet the reality is many in the developing world don’t have access to coverage. Opportunity to serve these markets is critical and global economic growth is dependent on it. In the Philippines, it is estimated insurance penetrates only four percent of the market7 – yet even that is a noticeable jump from Indonesia where penetration is just one percent. These markets are incredibly underserved making it significantly more difficult to climb the poverty ladder. Without the protection that insurance offers, the financial status and needs of millions of people in these areas remain volatile. Insurance companies have the ability to protect the assets and livelihood of those in developing countries. Natural disasters hit frequently, often without warning, sometimes leaving desolation in their wake. Sudden acts of nature aside, individuals also require insurance to protect against the ups and downs of life - everything from crop failure to home damage to loss of income due to illness or injury. Enabling individuals in these markets to access insurance through mobile phones, with blockchain as a foundation, could prove to be the break in the cycle of poverty.

In a new digital-first world, legacy IT systems cause inconsistencies and inefficiencies within the insurance industry. As they fade into a thing of the past, new doors open for digitization within the industry. Blockchain provides an unprecedented platform for the faster and more secure delivery of data, information, contracts and more. It provides the means to access new markets in need of the benefits insurance has to offer. Armed with the potential of blockchain, the insurance industry, like many other sectors, can continue to strive toward modernization as it faces digital transformation

Pat Renzi Principal and CEO Life Technology Solutions, Milliman

Kelly, Jemima. “UBS Leads Team of Banks Working on Blockchain Settlement System.”Reuters, Thomson Reuters, 24 Aug. 2016, www.reuters.com/article/us-banksblockchain-ubs-idUSKCN10Z147.

Jay, Dennis, and Jim Quiggle. “By the Numbers.”Fraud Statistics, www.insurancefraud.org/statistics.htm.

Carson, Brant, et al. “Blockchain beyond the Hype: What Is the Strategic Business Value?”McKinsey & Company, www.mckinsey.com/business-functions/digital-mckinsey/ our-insights/blockchain-beyond-the-hype-what-is-thestrategic-business-value.

Popper, Nathaniel. “A Field Guide to the Hurdles Facing Blockchain Adoption.”The New York Times, The New York Times, 28 June 2018, www.nytimes.com/2018/06/27/ business/dealbook/-blockchain-adoption-faces-hurdles.html.

“How Blockchain Technology Can Transform The Insurance Industry | BR.”Blockchain Review, 29 Mar. 2018, blockchainreview.io/blockchain-insurance/.

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Adding value to share price during M&A:

A bit of effort will reap rewards Those leading on M&A have to emulate the very best of the circus platespinners, keeping lots of lots of different aspects of the M&A process alive at the same time, and not letting any crash to the ground. One of the plates that needs to be looked after carefully is share price. Share price value will generally increase following a merger or acquisition provided the market believes the deal delivers a more profitable business. Everyone intends their M&A to add value, and if they buy and integrate well, it will. But share price can be a tricky plate to keep spinning. It isn’t enough just to tweak it from time to time. Take your eye off it for a moment and it could teeter beyond retrieval, crashing to the floor and shattering all hopes of a successful life post-merger. Prevent share price drop on merger announcement There is a well observed tendency for the share price of the acquiring business to drop on deal

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announcement, especially if the acquirer has paid a premium and fails to convince the market of their ability to more than recover this through integration and improvements postclose. It isn’t always easy to avoid and sometimes the markets will do what they do despite your very best intentions and actions. But you don’t have to be complicit in this by making unhelpful decisions. One of the first public facing things that happen around a deal is the announcement it is taking place. Great care should be exercised with this. A word out of place could cost a huge percentage share price fall. For example, announcing the $19bn acquisition of WhatsApp in February 2014, Facebook’s Mark Zuckerberg said “WhatsApp is on a path to connect one billion people. The services that reach that milestone are all incredibly valuable. I’ve known Jan [Koum, founder and CEO] for a long time and I’m excited to partner with him and

his team to make the world more open and connected.” On releasing this announcement, Facebook’s share price immediately dropped 3.4%, instantly wiping close to $6 billion off their value. It is entirely likely that the market wasn’t convinced that a personal endorsement from Zuckerberg was enough to justify the deal. The markets wanted something more concreate in the announcement – such as a conviction that the deal was going to really benefit Facebook – and how that benefit would be made visible. The market wanted something to justify investment – and a personal character endorsement isn’t enough. Here’s an example of an announcement that bolstered share price. Announcing the acquisition of Dresden Papier in March 2013, the CEO of Glatfelter, a mid-cap manufacturing firm with revenues at the time of $1.7 billion, stated, “The acquisition of

AMERICAS BUSINESS

Dresden Papier will add another industryleading nonwovens product line to our Composite Fibers business, and broaden our relationship with leading producers of consumer and industrial products. Despite the ongoing economic challenges in parts of Europe, we believe the global nonwoven wallpaper business will continue to grow at a compound annual growth rate of at least 10%. This acquisition will also provide additional operational leverage and growth opportunities for Glatfelter globally, particularly in large markets such as Russia and China, and other developing markets in eastern Europe and Asia.” Share price immediately increased by a staggering 28% - and went on to rise by a further 29% in the coming months as integration progressed. Communicate often, and communicate well: trust the specialists Getting the initial announcement right is the first example of what needs to continue in order to maintain – or better, increase – share price as the merger process is

worked through. The golden phrase here is ‘communicate often, and communicate well: trust the specialists’. Both shareholders and markets want to know that things are going well – and they are not clairvoyant. You need to tell them, regularly. It is remarkably easy to lose track of this imperative when you are deep in the mechanics of the M&A process. But you really can’t let yourself lose sight of it. Getting the message across requires skill and dexterity. Many people think they have a novel in them, and there are plenty of poorly written, self-published novels out there that disprove this belief. Similarly, lots of people think they know how to communicate well around M&A, believing they have the specialist skills needed to deliver nuanced messages to markets, shareholders, investors and the general media.

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But even within the field of communications specialists, there are sub-specialisms, and working with key stakeholder groups around M&A is one of these. Unless your organisation is involved in serial M&A and retains staff specifically for that purpose, it is unlikely the specialist skillset required will be in house. So look externally for it, buy it in, and use it well. It will pay you back. Respect the market The market, shareholders and investors, will make or break your share price. They can be a fickle bunch, and wonâ&#x20AC;&#x2122;t always react to the information you feed them with as you might expect. But just as it is a fallacy to stop communicating with them, it is also unwise to hide what you might think is negative news from them because you think it will harm share price.

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If a certain aspect of the M&A is going less well than you thought it would, think about how you will communicate that. Perhaps technology integration is more complex than youâ&#x20AC;&#x2122;d thought, and you have to go back to the drawing board. There will be sound reasons for that, and you can find a way to share these, and explain how a little unexpected pain now will reap rewards later on. The worst thing is to try to hide news like this. Stakeholders will find out, and if news comes out unofficially, there may be all kinds of damaging speculation around it. The very last thing you want to do if you are concerned about share price is firefight bad news. You need to be on the front foot all the time, and taking the initiative in explaining delays or changes of direction can keep you on the front foot.

AMERICAS BUSINESS

A key part of taking the right course of action when reporting delays is maintaining credibility. Even if a particular announcement results in a fall in share price, when the announcement itself is handled well, by skilled communicators, you can retain, and even increase, the degree of respect stakeholders have in the M&A, buoying up your credibility in the face of adversity. The longer term benefit of building trust with stakeholders canâ&#x20AC;&#x2122;t be underestimated.

One of the things that can damage share price is the departure of key personnel. People who were perhaps architects of the M&A, or who were seen as being vital to the success of the new business that will come out at the other end of the process. If such people leave the organisation, a good deal of mitigation may be needed to prevent a fall in share price. How will you handle the departure of your CEO, CFO, CTO, or other board level personnel? Preparation could stand your share price in good stead.

There will always be things in the markets that are beyond your control, and that can drag share price down. But there will be many things you can control, through careful planning, building a strong and capable team of communicators, listening to advice from M&A specialists, and always understanding that you need to take the markets, shareholders and other stakeholders with you on the M&A journey.

Prepare for the bad times The M&A that goes smooth as silk from start to finish is a rare thing indeed. There are always going to be glitches of some kind or another. It can be extremely helpful to build in to the risk management process regular reviews specifically designed to highlight potential issues in the coming period with a special focus on how you will communicate these. Preparing strategies or statements you may never use is not wasted time. If nothing else, it might help you think better on your feet if you have to, and at best it will mean you are better prepared and more confident when you need to be.

There are other areas where some forward planning might help. Where two organisations are combining plant, manufacturing facilities or overlapping staff roles, there may inevitably be some staff losses. This might mean one city or geography suffering more than others. How will you handle that both early on in the process and when the reality starts to bite? Create, maintain and build stakeholder confidence In the end all of this advice boils down to creating, maintaining and building stakeholder confidence through strong, regular and honest communication.

Carlos Keener Founding Partner BTD Consulting

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AMERICAS FINANCE

Top Budgeting Challenges in 2018 – And How to Solve Them For most financial teams, summer heralds the start of budgeting season. Many will spend weeks barely looking up from Excel as they attempt to accurately represent their company’s plan for the coming fiscal year in a spreadsheet. And just when they think they’re getting close, the CEO or board will ask, “what if we did this?” I spend a lot time speaking to financial teams about the challenges they face during budgeting season, and I hear some recurring themes. In the hopes of making life easier this budgeting season, I offer the following tips. Full disclosure: I didn’t think of these on my own. These are insights I’ve heard from financial teams who told me how they successfully streamlined their budgeting processes. Don’t Use Excel If your company has been thriving then it has certainly outgrown Excel. No one

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knows better than you just how difficult it is to build a spreadsheet that represents a complex company. I’ve heard stories about financial teams piecing together multiple spreadsheets and relying on complex formulas and macros to get the answers they need. But the result is a budget that’s a bear to manage and nearly impossible to manipulate in order to test what-if scenarios.

ripple through your budget plan based on rules you’ve set about payment terms, inventory impact, related expenses, etc. to reflect the complete impact on the P&L, Balance Sheet and Cash Flow. So, while Excel is familiar, it limits your budget’s ability to keep up with the speed of business. Do Lots of What-If Scenarios

Nor is it possible to consolidate spreadsheets anywhere close to real time. For instance, let’s say you request input from three project managers on their respective project costs. You will receive back three different spreadsheets that you must now consolidate. What’s worse, the data you enter typically won’t be connected to all of the outputs you’ll need. This is also critical, since inputs don’t occur in a vacuum; enter one expense, loan payment or update rent calculations for a regional sales office and multiple updates should

Our economy is in flux. At this moment in time, economic indicators look strong. In early July, the U.S. Labor Department reported strong job growth1, and the unemployment rate is at a low 4%. Low unemployment translates into higher consumer spending. At the same time, inflation has been growing these past three months2 and there is tension over potential trade wars. Given the flux, it’s highly advisable that you build flexibility into your plan by doing multiple what-if scenarios. For

AMERICAS FINANCE

instance, let’s say the executive team has set a strategic goal to increase your sales team in 2018. What are the potential outcomes if it takes longer to find the talent you need? Will you need to increase recruitment expenses? How will you determine if you need to scale back your plans at some point in the plan? What is the revenue tipping point that will determine whether you move forward or not? I understand that building what-if scenarios in a spreadsheet can be a monumental effort, but there are planning tools that can streamline this process. Given the flux, and the potential of the economy to take a sharp turn in either direction, it may be worth investing in one. Do Forecast Your Balance Sheet, Don’t Rely on Your P&L I can hear the collective groan from my readers, but I promise you, it’s well worth the time and effort because it’s the only way to identify critical details that you could easily miss in your P&L. For example, let’s assume you know your company has earned $1 million in revenue for a month, and has incurred $800K in expenses. Your P&L would indicate that you have $200K in cash on hand when in fact, that may not be the case at all. Your sales team may have offered unusually long payment terms for a client, meaning you won’t realize a chunk of cash until some point in the future. And although you’ve incurred $800K in expenses, your own payment terms may mean you don’t need to pay an invoice immediately or all at once. These are the kinds of details that are captured in a balance sheet forecast and it’s the only way to monitor how much cash your company will have in the months and quarters ahead.

Do Empower Self-Reporting Just because you’re in budgeting season, it doesn’t mean your company has come to a standstill. Sales teams are still selling, marketing is still spending, actuals will still differ from plan. Do yourself a favor and enable self-reporting, so that your CEO, VP of Operations or Sales can run the reports they need on their own. You may need to invest in a Business Intelligence (BI) tool, but the investment will benefit everyone in your company, not just your team. These tools act as a data warehouse, pulling in data from various systems, including CRM, payroll, ERP, GL and so on. Users can pick and choose the data that’s relevant to them and even decide how to display it. This puts you out of the business of generating variance reports and it provides more powerful insights to each stakeholder. A win-win all around.

I’ve heard enough CFO’s explain how these tactics spared them a world of problems. Some are easy and other more complicated, but they could all help to streamline your budgeting process and make this year’s budget season the most accurate and robust for your company's success.

John Orlando CFO Centage Corporation

John Orlando is Executive Vice President and Chief Financial Officer at Centage. Having been with the company for over a decade, John has seen Centage grow from 15 to over 100 people while retaining its entrepreneurial spirit and improving its flagship product, Budget Maestro. Follow on Twitter @centage.

Cohen, Patricia. “Employers' Hiring Push Brings Workers Off the Bench.” The New York Times, The New York Times, 6 July 2018, www.nytimes.com/2018/07/06/business/economy/ jobs-report.html?rref=collection/timestopic/

Kiernan, Paul. “Inflation Is Eating Away Worker Wage Gains.” The Wall Street Journal, Dow Jones & Company, 12 July 2018, www.wsj.com/articles/u-s-consumer-pricesincrease-at-fastest-annual-rate-since-2012-1531398709.

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AMERICAS TRADE

Using Corporate Event Data to Navigate Low-Latency in Equity Options: Strategies for Institutional

Traders and Market Makers Introduction Options remain the closest community of market participants, and the murkiest. Even to its veterans, the options market can seem uncanny; its trading has always been full of mystery. Rumors abound of big-wins and equally huge losses turning on a dime, and there is common sleight of hand. It evolves at its own pace. But wild swings and tectonic shifts can also be born of simple mistakes. Such was the case in 2015, when a pair of microprocessor manufacturers was first reported to be in merger talks. In only a few seconds, the news quietly generated a sizable option contract on one of the companies’ stock prices. Initially costing around $110,000 for more than 300,000 shares, the option went from completely out of the money to worth $2.4 million in less than half an hour. The reporting subsequently proved wrong, adding intrigue and furrowing eyebrows. But in the end, it wasn’t the windfall or the scant information that turned out to be significant; rather it was the speed. The option, most observers agreed, could only have been generated by an algorithm—an incredibly fast one, at that. While neither the first nor certainly the last, this was some of the most dramatic public evidence yet that low-latency and high-frequency trading (HFT) techniques had arrived—and for

that matter, could work—in a space where they had only been casually embraced before. Below we explore new trends in the development of event-based trading signals in the equity options market. Ultimately, we conclude that investors must construct a dual strategy— combining measurable post-trade execution quality analysis with pretrade contextualized indicators of price movements—to effectively mitigate downside risk and exploit market inefficiencies with options.

The Challenge: Reading Corporate Tea Leaves The growing cohort of investors represents a kind of ‘Goldilocks’ group of options participants. They are compelled to be able to execute in a few seconds, but without the need or wherewithal to move in microseconds. In short, timing matters. Equity options provide an effective way to play on ideas about a listed company’s price—be they changes in market sentiment one way or other, or mitigating short-term volatility. There are myriad ways to construct that option position, from simple binaries up to multistrike butterflies and other wingspread strategies. Either way, doing so inevitably starts with the target strike (or strikes) and tenor for the option1. And they often focus in upon a corporate3 event.

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This exercise requires context—placing a premium on availability and the proper application of data4. Key characteristics of an option are shaped by isolating phenomena and information that drive changes in the underlying stock’s price. Indeed, some of the data points surrounding an event can be highly diverse, and at times hard to find. Their impact and relevance will be open to debate and, like the microprocessor merger mentioned above, crucial signals about the direction can sometimes come out of nowhere, or prove inaccurate. Still, many scheduled corporate events can be planned for and actively monitored in advance5. Empirical research has shown this corporate “body language”— changes and modifications to the calendar and even the structure of the news, itself—can even provide accurate, predictive signals as to the future state of the company’s health6. These data points, whether

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public or primary sourced, can be absolutely crucial if timely and properly structured, verified for accuracy and populated into the strategy. They are essential tea leaves about corporate behavior and future performance of an equity; yet until recently, many investors have been slow to read them7.

Applications There are at least two applications where this data should be applied - corporate earnings calls and disclosure of dividends distribution have significant consequences for pricing, and their timing is fairly predictable. Studies using corporate event data have proven that the nature of the news—positive or negative relative to expectations—can be accurately surmised from changes in calendaring of these events 8 .

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Deploying faster electronic execution enables firms more time to precisely game out these events, take heed of ongoing price movements9 and optimize construction of the option without crossing the spread. Of course, it also allows HFT, low-latency firms and market makers to do the same, swooping in when orders increase around an event to pick off slower flow. Some of the challenges that result from this asymmetry are very complex. For example, correctly structuring sensitivities in multi-strike spread strategies, and aligning the cost of the option against the investor’s level of tolerable risk, are all the more difficult to do in a market where faster players might be lurking. With the right data, other defensive challenges are more easily solved for. This can be as straightforward as missing a change in the timing of the earnings call; likewise, there may be mistaken reporting or even a misdated announcement from the company, itself. Changing dividend amounts and calculated payouts—or the suspension or resumption of a dividend—frequently present another, similar issue of timing. A revised dividend will likely modify an equity’s Sharpe ratio (risk-free versus risk-adjusted returns). Depending on the portfolio’s risk management tolerances, that may artificially skew—and typically, limit—the types of options that can be used.

Rearguard Action: Data Feed Requirements Neither of these problems—misplacement of the contract’s tenor, or an incorrect strike—is unique to an HFT environment. However, they are far more likely to be punished. Likewise, firms that can prove out their defensive techniques are more likely to be able to use that same logic, venue knowledge, and technology in reverse. Even if they cannot move quite as quickly as the top players, concerted investment in this area might just provide two new tools for the options arsenal. How to do it? Faster execution capabilities are unavoidably important; yet a more complete rearguard action

requires building competencies around event data—sourcing it, qualifying its accuracy, digesting it, and putting it into action in a low-latency setting. The other component—predictive analytics that compare patterns of corporate behavior leading up to events against a stock’s “point in time” pricing—is more qualitative in nature and trickier to develop internally. An earnings date that seems askew or payout that appears completely unachievable cannot be evaluated for its veracity without context—which requires filtering tools and curation. Vetting these signals requires not only machinereadable news and natural-language processing elements to discover them (often but not limited to press releases), but extensive warehousing of data to reference and intuitive sentiment analysis guiding the output.

Barry L. Star CEO Wall Street Horizon

Concluding Thoughts Options trading was once a technologically sluggish, space. Expectations were low because, besides occasional murmurs of a big play or a big flop, it was as much a testing ground for theory as it was a good way to hedge or short. For better and worse, the arrival of higher speeds has changed all that. Today, amongst this louder din of highfrequency and lower-latency trading, there is a natural and understandable twitch to try and catch up—to join the herd mentality. For the many participants in the middle, though, to whom that seem a losing proposition, we suggest an alternative approach: a focus on the calendar—not the microseconds—and a mastery of reading for mistakes. Mistakes can include inaccurate dates as well as content and both need to be considered. Then as you increase the speed of the transaction and combine it with accurate data, you achieve an overall better deployment of the data. With a prior back-testing of your strategy, and an ongoing evaluation of your execution quality, your analysis and subsequent transactions should enable you to mitigate downside risk and exploit market inefficiencies with options.

“How one trader made $2.4 million in 28 minutes” reported by Stephen Gandel in Fortune, April 1, 2015.

Investors have increasingly turned to weekly contracts to more closely hone in on events. See “For Traders, a Weekly Gamble” by Kaitlyn Kiernan, Wall Street Journal, January 2014.

Corporate event data can be defined as any single-stock event that can cause volatility in the marketplace such as (but not limited to) the following categories: analyst/investor events, calendar events, company events, company metrics, investor conference related events, corporate actions, dividends, earnings, government and public offerings.

Wall Street Horizon recently explored the development of research in this area in an earlier whitepaper, “Exploring Corporate Event Data and Volatility: Considerations for Academic and Financial Industry Research”

Johnson and So’s 2016 Paper “Time Will Tell: Information in the Timing of Scheduled Earnings News” documents the managerial aspects and institutional self-perception implicit in earnings calendar revisions, proving their predictive power of future earnings.

For further discussion, see “How Reading ‘Corporate Body Language’ Can Boost Stock Returns by Evie Liu, Barron’s , July 2018 and “Reading the Signals: “What Does a Company’s ‘Body Language’ Tell Investors” by Max Bowie, Inside Market Data, May 2018.

“The Unspoken Signals in Earnings Releases” by Rachel Emma Silverman, Wall Street Journal, December 2014.

See Deltix Quantitative Research Team, “An Automated Trading Strategy Using Earning Data Movements from Wall Street Horizon”, 2015. The study used a time-series analysis of ten years of data, proving genuine alpha can be realized by tracking forward advances (positive) and delays (negative) of earnings announcements.

See Shrihari Santosh’s study, “The Speed of Price Discovery: Trade Time vs. Clock Time”, 2016. Santosh finds that asset prices primarily incorporate information, both public and private, through the process of trading.

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Maintaining consumer loyalty by cracking the chargeback process In today’s dynamic retail environment, building and sustaining consumer loyalty for issuers is a top priority. Lose consumer loyalty and there are plenty of challenger banks for consumers to go to, should they be disappointed with their current bank. While many traditional banks understand the need to adapt to changing consumer preferences and create friction-free experiences, not all do this well to secure long-term success. To make matters worse, with consumers progressively exploring the newfound freedom to shop where they want, when they want, and how they want, they’re increasingly discovering more paths to purchasing – creating opportunities for fraudsters to move in. This presents a huge challenge for issuers, as they seek to prevent fraudulent activity across multiple devices and channels. Fraudulent activity within retail often comes in the form of chargebacks, which have mounted to a USD $31 billion problem* for the payments industry.

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What are chargebacks? Chargebacks are essentially the reversal of an outbound transfer of funds from a consumer’s debit or credit card. They occur for various reasons, such as quality issues with products, deliveries not turning up, or confusion over the charge on a bank statement. Usually, a chargeback is initiated when a consumer calls their card-issuing bank, rather than the merchant, to dispute a transaction. In fact, consumers are increasingly leaving merchants out of the dispute process, initiating a fraud-related chargeback directly with issuing banks up to 76% of the time*.

Understanding consumers’ pain When consumers are confused by their card statements or question card transactions, up to 66% of the time they blame the merchant for the problem*. In the majority of transaction disputes, consumers wish to deal directly with their card-issuing bank. However, eliminating merchants from the process means consumers are at a disadvantage dealing only with issuers, who lack the necessary transaction information to determine if the dispute is legitimate. Usually, an issuer will provide a temporary refund, which can serve to alleviate the concern over lost funds and improve consumer loyalty.

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Additionally, consumers will contact their bank a second time for reasons which are two-fold: • The consumer has forgotten what credit the bank has applied to their account and have not been informed as to which merchant the billing descriptor is related •

If a transaction is a monthly subscription, the issuer will refund the customer but not inform the merchant to cancel future payments

Issuers can be more effective through automating the dispute communication process, reducing the resolution time and creating efficiencies for their front line staff. Solution providers, like Verifi, can facilitate this communication method, leading to a smoother and more efficient process for consumers, merchants, and issuers. Issuers also risk losing consumer loyalty, as they are admitting to processing a potentially fraudulent claim and only know about it due to the consumer’s declaration. In continuing with the inefficient dispute process, costs are only set to rise for merchants and issuers, which will ultimately be borne by consumers. Although both merchants and issuers bear the risk of losing future business and damaging brand reputation following a dispute or chargeback, merchants

see the bigger impact on their bottom line. Unfortunately for merchants, 63% of consumers decrease their patronage* when they have encountered a negative chargeback experience. This is significantly higher when compared with the decline in card usage experienced by issuers. 43% of consumers use their card less after a true fraud dispute and 39% for friendly fraud disputes*. Some merchants resist arguing the chargeback and accept it as the cost of doing business, preferring instead to keep the consumer happy. On the other hand, forgive and forget might not always be best practice. Merchants generally bear significantly higher costs associated with the chargeback process. Fines, labour, lost goods, and refunds all combine to create inhibiting costs just to keep the consumer happy. Collaboration is key to crack the chargeback process To proactively reduce or even eliminate chargebacks, merchants need to rethink some of their existing processes. Merchants must remain vigilant against credit card fraud as part of best practices for consumer service to help ensure revenue protection and consumer retention. Additionally, innovations in the payment industry – such as solutions that facilitate better and more timely exchange of pertinent transaction or dispute data between the merchant and the issuer – can further reduce or resolve disputes

more effectively, minimise the negative financial impacts of fraud and friendly fraud, and help retain more sales. Disputes only make their way to merchants a number of days after they have been raised by the consumer. Choosing a partner who can accelerate the dispute notification process can help merchants reduce their chargebacks, improve customer loyalty, and save lost sales. Further still, changes that improve communication among merchants and issuers throughout the dispute process can help reduce chargebacks, freeing up funds and resources that can be better directed towards core business growth. Implementing steps, such as setting up clear billing descriptors and fostering better merchant-issuer collaboration, can improve consumer loyalty for merchant and issuer alike. Merchants can also implement a solution that facilitates real-time dispute notifications, to review and resolve disputes faster to reduce time, resources, and costs associated with the chargeback process. It is in the interest of all parties along the payment chain – for issuers, acquirers, and merchants – to implement improved dispute practices. Consumers will remain loyal if they encounter a positive brand experience, and merchants and issuers can see improvements in their bottom line.

Neil Smith Regional Head of Issuer Partnerships EMEA Verifi

* “The Chargeback Triangle”, Javelin Research and Strategy 2018

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Could your smart refrigerator be giving hackers a path to corporate data? The Internet of Things (IoT) market is exploding, with 7 billion 1 IoT devices already in use globally, as well as 17 billion connected devices. We’re gaining the ability to peek inside our refrigerators to check whether we need more milk, turn on the AC system when we’ll be home soon and access security systems remotely. But along with all the excitement the IOT brings, there are also new security risks. The rise of connected devices presents a multitude of new ways that information can be shared among devices, and each device comes with its own vulnerabilities. Strava and T-Mobile have both recently learned this lesson the hard way. Earlier this year, it was revealed that any military personnel using Strava 2, a fitness app, may have unwittingly shared the location of military bases, causing potential security breaches. T-Mobile, meanwhile, discovered in August that hackers had located an unauthenticated, unhidden API on their servers, through the T-Mobile app itself. That breach allowed hackers to steal

the names, billing information, phone numbers, email addresses, account information and encrypted passwords of more than two million users. Clearly, these new vulnerabilities are an issue, but not just when it comes to consumers and their personal information – also for businesses. With so many mobile phones and connected smart devices traveling around, in and out of offices, hackers have endless entry points to infiltrate and access all the information available on these business networks. Once a bad actor has gained access to the network, it easily becomes a hacker’s playground. They can make lateral moves to access various systems within the network, including the mainframe. It's a lot easier than one might think to access a business's mainframe by hacking an employee's mobile phone or other connected smart device. From an employee's cell phone to smart refrigerator, there are a number of new ways hackers can get into corporate networks. Here are two scenarios.

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The Corporate Scenario Whether employees use a personal or company-issued phone, many organizations allow them to run simple apps that provide access to data stored on the mainframe. Think of apps like email or Simple 3270. Once one of these apps is installed on an employee’s phone, the only step hackers need to take is to get you to run a bad script on your phone that allows entry of a virus. Once installed, a virus can monitor your use of the phone, log which apps you are using, log all keystrokes and log all IP addresses, both local and destination, you’re connected to. Then, the virus frequently phones home to the hacker, posting all the phone’s activity for the bad guys to scoop up and utilize. Even if there is no specific app on the phone that grants access to mainframe data, the malware on the phone can monitor your location. When you’re at work, it will then probe the network you connect to. If the mainframe is not buried behind a heavily protected firewall (isolated from the employee public-use network), the company could be compromised. The Three Letter Agency Scenario Hackers may also take the route of installing rogue apps, like a rootkit, on a cell phone. All that it takes is that your unlocked phone is out of your possession for a mere twenty seconds. The preferred app to load on the target’s phone is the rootkit. One of the most frightening aspects of these rootkits is that they’re able to mask their own existence. Employees with infected cell phones likely wouldn’t know that a rootkit had been installed on their phone. Instead, the rootkit hides in the background, doing its masters bidding.

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Rootkits typically install themselves with the highest level of security access to the device. They embed themselves in many apps, so that even when the malware code itself is found and removed from one location, it is alerted in many other locations. This way, the rootkit can take action to remain in control of the device. From this point on, the device should be considered compromised. It’s nearly impossible to cut the rootkit’s access. If you kill the Wi-Fi, it will switch to 4G. If you kill the 4G, it will wait until any other path to its master is available. All while logging all your attempts to regain control of your device, and happily reporting back to its master. Meanwhile, the device can monitor all networks that the phone connects to and test for a mainframe IP address signature. The mainframe IP address signature is identified by the behavior and tags returned on the responding ports. In this way, rootkits can help hackers locate the mainframe and retrieve the information kept on it.

AMERICAS TECHNOLOGY

What’s Next? As incredible as it may seem, it’s even conceivable that a hacker could access the business network, or the mainframe, through an employee’s connected refrigerator. Let’s say you have an app on your refrigerator that provides you with a grocery list through the internet. A hacker can gain access to your home network through the refrigerator’s IP address. This is sophisticated, but certainly could be worth a hacker’s time, especially if they’re using your device as an entry point to gain access to an enterprise system. With so many IoT and mobile devices connected to corporate networks today, intruders can easily go undetected and unopposed if a business is not properly monitoring the network and effectively protecting the mainframe. That’s why it’s so important that organizations maintain Zero Trust networks and add their mainframes to their vulnerability management processes. As we extend our businesses and digitize our physical environments with IoT devices, a perimeter-based approach to security is useless.

Ray Overby Key Resources

“State of the IoT 2018: Number of IoT Devices Now at 7B – Market Accelerating.” IoT Analytics, iot-analytics.com/ state-of-the-iot-update-q1-q2-2018-number-of-iot-devicesnow-7b/.

PÉrez-peÑa, Richard, and Matthew Rosenberg. “Strava Fitness App Can Reveal Military Sites, Analysts Say.” The New York Times, The New York Times, 29 Jan. 2018, www.nytimes. com/2018/01/29/world/middleeast/strava-heat-map.html.

Franceschi-Bicchierai, Lorenzo. “Hackers Stole Personal Data of 2 Million T-Mobile Customers.” Motherboard, VICE, 24 Aug. 2018, motherboard.vice.com/en_us/article/a3qpk5/t-mobilehack-data-breach-api-customer-data.

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Wall Street Likens Automated Intelligence to Transformers, Both Good and Bad The sci-fi fantasy franchise Transformers, loved by millions of kids and immortalized on Hollywoodâ&#x20AC;&#x2122;s silver screen, presents the classic contest of good versus bad. As the power- and resource-hungry Decepticons fight the human-friendly Autobots for global dominance, these bots present several parallels to the benefits and dangers of the latest cutting-edge business technologies we now see coming to life off-screen. As we find new applications for Artificial Intelligence (AI) in the workplace, both positive and negative potential impacts are top-of-mind for executives, including those on Wall Street. In fact, at the SIFMA

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Operations Conference this year, 46 percent of financial services executives and regulators surveyed by Broadridge equated the future of AI to the Transformers movies, in that there will be a mix of good and bad uses of the technology. The good news is that, unlike in Transformers, AI in the workplace will not jeopardize the fate of humankind. However, financial services firms need to lay the groundwork to ensure that the development and application of AI produces the best possible outcomes for their organizations. This starts with re-imagining the way we bring AI to life.

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Re-Imagining Data Fabric & Network Value As AI becomes a mainstream business technology, gaining an understanding of machine learning (ML), deep learning (DL) and Robotic Process Automation (RPA) has become increasingly important across financial services. Not surprisingly, key to successful AI implementations rely heavily on the availability and quality of data, as well as the data fabric, from data aggregation to data normalization, extraction and analytics to support development. In fact, for many of the firms surveyed, having access to quality data and ensuring that it’s standardized across an organization has become a tremendous challenge (53 percent). A perfect illustration of this challenge occurs when a financial trade fails and both parties involved need to reconcile data in the middle- and back-office, as well as between firms. Currently, the process is arduous and often leads to inaccurate outcomes, in large part because firms do not store and manage their data in the same way. Not only are AI-driven projects inconsistent across the financial services industry, but also many businesses continue to struggle with driving enterprise-wide efficiencies. This makes demonstrating a true return on AI investment, justifying ongoing deployment and resourcing expenses, remarkably difficult. In fact, business justification/ROI and cost were each cited as inhibitors to implementation by approximately

40 percent of survey respondents— leading most firms (96 percent) to consider partnering with an industry leader to benefit from best practices and mutualize investments to maximize ROI. Solving for these emerging challenges within a company’s own walls involves creating an enterprise-wide data fabric that has a consistent data ontology, normalizing and consolidating data across systems and silos and thereby reducing the complexity associated with the availability and standardization of data. However, there is an even greater opportunity to apply AI and a consistent data fabric to automate processes and interactions across a network of firms and market participants. An increasing number of financial services firms are realizing the benefits of industrywide data standardization and AI-codevelopment, creating efficiencies and synergies with a network of partners that no one firm could achieve alone. This desire for network value is evident – 96 percent of firms see value partnering with other firms to build out their AI capabilities.

of AI/Machine Learning/Robotic Process Automation projects for their operations departments (19 percent), and many already have projects in the pilot or production stage (37 percent). From chat bots that detect our emotions, to software that anticipates our needs, or even supply chains that can process information in real time, the future is here – right now – and there’s more to AI’s implementation than meets the eye. Firms can mutualize their innovation investment and unlock the true value of AI with a strategic partner to leverage a consistent data fabric internally and across a network of industry participants. By working together, we can redefine Wall Street as we know it, and for the better.

Re-Imagining AI Beyond the Big Screen AI’s application off-screen is changing the rules of how companies operate, how they service customers and how they partner with each other. Fortunately, a significant portion of firms are already conducting assessments of or due diligence

Michael Alexander President Broadridge Wealth and Capital Market Solutions

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Three Tips to Unleash the

Creative Entrepreneurs in Your

Community

The Fourth Industrial Revolution is upon us. If you are wondering how to take on the challenges of a shifting global economy, investing in creative industries entrepreneurs tackles economic, civic, and social challenges and is found in every community in every corner of the globe. From Boston to Bangladesh, creative entrepreneurs are building companies at the cutting edge of digital fabrication, augmented reality, design and entertainment. The creative economy is huge. And growing. It generates close to $3 trillion in economic output annually. That’s more than the global telecommunications industry. What’s more, creative economy revenues are expanding 8-12% annually, varying by country. In the USA, the creative economy grew straight through the Great Recession, as opposed to all other sectors. Growth will continue as a global middle class rises, expanding demand for entertainment, digital media, and original content and experiences. Consider this: Cirque du Soleil was founded by two street performers who grew it into a global phenomenon and sold it for $1.5 billion to investment firm TPG in 2015. Lynda.com, acquired by LinkedIn in 2015, was started by Lynda Weinman, a graphic

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designer turned educator. Fashionistas, filmmakers, and foodies are launching creative companies that drive value for investors and create high-wage jobs. However, the creative economy is a sleeping giant because leaders and investors, community and economic developers have mostly left the creative economy on the side lines, its full potential sitting dormant. Many leaders think only of “the arts” when they hear the word creative. However, today’s creative companies are anchored in technologies and digital innovations. Take for example Embodied Labs, a VR film company whose films help medical providers understand patient experiences, reducing costs and improving health outcomes. Or Beacon Hill VR, a software firm with artists and gamers on staff who create and bring to life animated AR characters. We suspect leaders overlook the creative economy because they are unfamiliar with its numbers. Creative entrepreneurs are market disruptors building a better and more inclusive future. The innovators behind creative companies are designers, coders, gamers, musicians, and engineers. Akin to tech founders, creative founders are driven by a desire to disrupt a market. Unlike many tech founders, most creative entrepreneurs are also inspired by social outcomes such as engaging disenfranchised communities, providing a living wage, and building culturally connected communities. The creative economy is being built by visionaries who strengthen regional identity, increase livelihoods, and build connected communities.

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So how can you unleash the creative entrepreneurs and talent in your community? Here are three tips to get you started: 1.) Find ambitious creative entrepreneurs who have been overlooked. They might be building the next Cirque du Soleil but everyone else sees them as clowns. With fresh eyes, you might see a billion-dollar business in the making. I have worked with startups who became extremely successful entrepreneurs who have told us that early on “no one took them seriously” because they were designers, or filmmakers, or musicians.

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2.) Host a small gathering with innovative creative founders and investors and ask them to share where they believe your regional creative economy could be more competitive. What assets and competitive advantages do you have that entrepreneurs and investors have already discovered? When we do this, we find investors who are already working with creative companies. They are usually interested in further

building out their portfolio along these lines. And the founders are excited to meet investors who share their vision for the region’s future. 3.) Assume you just don’t get it-yet. Creatives are disrupting markets and they see a future the rest of us don’t see. Take for example the story of Meow Wolf, an “artist collective” based in Santa Fe, New Mexico. When Meow Wolf started out, they sought business support but were told more than once their venture should be a non-profit. They are artists, after all. Today, with over 1 million visitors and $15 million in revenues in less

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AMERICAS BUSINESS than two years, Meow Wolf’s outof-this-world exhibit helped multiply their first investors’ funds within three years. They recently close $17 million with a lead investment by Alsop Louie Partners from Silicon Valley. Meow Wolf is not alone in their ability to see a market before it has fully convened. Lee Francis, Founder of Native Realities, launched the world’s first Indigenous Comic Con to give indigenous youth a chance to see themselves as superheroes. Today Indigenous Comic Con and Lee’s publishing company Native Realities, are leading a global movement to reframe how indigenous youth see themselves in pop culture. 300,000,000 indigenous people are eager to move with them. Ivonette Albuquerque, Founder of Galpão

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Aplauso, in São Paulo, Brazil, believed she could build a world class theatre company employing youth living in São Paulo’s favelas. Today, she has trained over 10,000 youth, nearly all of whom go on to find well-paying jobs after the program. The Fourth Industrial Revolution, like all good revolutions, is disrupting social and economic structures, forcing leaders to rethink old strategies and adapt to new realities. Relentless creativity and imagination will win the day. Fortunately, a giant ally is waiting in the wings. All you need to do is wake it up.

Alice Loy PhD, CEO and Co-Founder Creative Startups

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