Global Banking & Finance Review Issue 48 - Business & Finance Magazine

Working Toward Responsible AI:

How businesses should ensure that AI is fair, accountable, safe and governed

Fraudsters Targeting Mid-Sized Financial Institutions – FRAML Technology Counters Attacks

Banks are facing a “new liquidity reality” due to global economic fluctuations

Chairman and CEO

Varun Sash

Editor Wanda Rich email: wrich@gbafmag.com

Head of Distribution & Production

Robert Mathew

Project Managers

Megan Sash, Amanda Walker

Video Production and Journalist

Phil Fothergill

Graphic Designer

Jessica Weisman-Pitts

Client & Accounts Manager

Chanel Roberts

Business Consultants

Rick Saikia, Monika Umakanth, Stefy Abraham,

Business Analysts

Samuel Joseph, Dave D’Costa

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editor FROM THE

Dear Readers’

I am pleased to present Issue 46 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

This issue is filled with exclusive insights from financial leaders across the globe.

In this issue Alexei Zhukov, VP, Technology Solutions at EPAM Systems, Inc. outlines five steps companies can take to foster responsible AI. (Page 34)

Eric Tran-Le, VP & Head of Premier, NICE Actimize discusses the key fraud trends hitting mid-sized financial institutions and how advanced AI and machine learning – powered solutions are help. (Page 26)

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 me your thoughts on how I can continue to improve and what you’d like to see in the future.

Enjoy!

Wanda Rich Editor

Stay

24

BANKING Banks are facing a “new liquidity reality” due to global economic fluctuations

Phillip Straley, President of FNA

32 46

The March of MX messaging

Phil Flood

Global Business Development Director – Regulatory and STP Services, at Gresham Technologies

How banks can boost customer loyalty to weather the cost-ofliving storm

Magith Noohukhan

Head Customer Engagement Evangelist at Braze

16

BUSINESS

System Integration is key to successful mergers and acquisitions

Nathan Shinn

Founder and CSO of BillingPlatform

20 28

The Importance of Digital Trust for your Business

Andrew Woodhouse

CIO of RealVNC

Navigating today’s business communication transition

Shiran Weitzman

CEO and Co-founder of Shield

44

Five ways to drive projects forward faster

Josef Hajkr

Genius Group Mentor and Co-Creator of Wealth Dynamics for Project Management 5.0

Optimising Payments – and the transition to ISO20022

David Guiver

How

14

TECHNOLOGY

Retail technology predictions for 2023

Guy Hanson

VP of customer engagement at Validity

Customers become more than numbers with Internet of Things technology

Mike Hoy Technology Director at Pulsant

Working Toward Responsible AI: How businesses should ensure that AI is fair, accountable, safe and governed

Alexei Zhukov VP, Technology Solutions at EPAM Systems, Inc.

The truth about blockchain

Ryan Gledhill co-founder and CEO of Thallo

Head of Transact and Infrastructure Products at IR

FINANCE

Fraudsters Targeting Mid-Sized Financial Institutions – FRAML Technology Counters Attacks

Eric Tran-Le | VP & Head of Premier | at NICE Actimize

Read it on page 26

Moving banking from transactional to a 'destination'

Matt Phillips | Head of Strategic Advisory Servies, Eurasia | at Diebold Nixdorf

Read it on page 37

Read it on page 10

Philippine Private Broker: The Regina Capital Experience

The Next Generation of Management at Regina Capital: Victor (Alvin) Limlingan | Jr., Regina (Ria) Limlingan Laquindanum | Luis (Luigi) Limlingan

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Philippine Private Broker: The Regina Capital Experience

In 1989, Dr. Victor S. Limlingan, then a professor at the Asian Institute of Management received an unusual offer from the Makati Stock Exchange, then one of the two stock exchanges operating in the Philippines.The Makati Stock Exchange was considering offering five new brokerage seats to interested investors. After some deliberation, they decided not to auction the seats to the highest bidder but to offer the seat at a designated price to those who could contribute the most to the development of the exchange. As none of the present brokers had an academic background, they chose Professor Limlingan to provide the academic perspective.

After consulting with his wife, Marita who was a bank executive before she became a full time housewife, the couple accepted the offer and thus founded Regina Capital Development Corporation. The Philippines at that time had just witnessed a People Power Revolution and was in the midst of political turmoil due to the coup attempts of some rightist military officers. In fact due to a coup attempt on December 1, 1989, the Regina offices were not officially opened until the middle of December.

Within the context of political uncertainty, a survey of the Philippine capital market showed a small number of listed Spanish (San Miguel and Ayala) and American (PLDT and Meralco) companies who were the

blue chips, mining companies (Atlas, Philex and Lepanto) who were the speculative stocks and the up-andcoming stocks (Benpress and Jollibee) of the rising Filipino taipans (tycoons). In terms of investors there were the trust departments of the existing banks as institutional investors and then the retail investors. The mutual funds did not yet exist at the time.

Regina Capital decided that its opportunity lay in being private broker to the rising Filipino taipans as well to the high-net worth Filipinos whose number were increasing. With respect to the Filipino taipans who were well aware of the fundamentals of their companies as well as with the high networth individuals who have access to these taipans, Regina Capital decided that its main contribution way not in fundamental but in technical analysis. Not recommending what stocks to buy but recommending on the timing of the purchase or sale of their chosen stock.

By a stroke of good fortune, Marita A. Limlingan, President of Regina Capital gained the trust and confidence of a leading Filipino Taipan. In addition to becoming part of a select group of brokers acting as specialist broker for the stocks of the companies of the taipan. Regina Capital acted as a member of a select group of discrete brokers who accumulated stocks in companies that the taipan wish to acquire.

This assignment allowed Regina Capital to meet the bank officials in charge of the trust departmemts. The trust department were the repositories of large blocks of stocks of the target companies owned by passive investors.

In 1992, with the election General Fidel Ramos as President of the Philippines, the Philippine stock market attracted the attention of foreign investors. With this interest, the new Philippine Stock Exchange arising from the merger of the two existing exchanges welcomed international brokers such as Merrill Lynch to become members of the Philippine Stock Exchange. With this development, Regina Capital realized that it could not compete for the account of the foreign investors.

Focusing on providing valuable services to its traditional clients consisting of the local taipans, the trust departments and the high net-worth individuals, Regina Capital advised them to focus not on stocks they prefer but to the stocks that the foreign investors preferred. This would be the stock that would show greater capital appreciation. In search of Philippine stocks that would be of interest to foreign investors, Regina Capital started researching on the research reports issued by the foreign brokers. Based on these reports, Regina Capital could provide advice to the taipans on the financial measures of interest to foreign investors, advice to trust departments and high net worth individuals on the industries, sectors and specific companies of interest to foreign investors.

These experiences allowed Regina Capital to upgrade its reports to meet international standards. Moreover, to differentiate its reports, Regina Capital included special reports from its political and economic consultants on the public policy issues confronting the Philippine government as well as the political dynamics at play among the different constituencies. Drawing from these reports, Regina Capital was able to point out their impact on the financial prospects of the listed companies.

In 1998, when the Asian Financial crises occurred Regina Capital experience its first bear market. As its traditional clients shifted their investments to the money market, Regina Capital noted a market imperfection. When the Philippine stock market declined , the clients of Regina Capital shifted their investments to fixed income securities, Regina Capital noted that they were investing mainly in peso-denominated treasury bills.

The interest rates were low as in the Philippines government securities are considered high grade securities. However, outside the Philippines where Philippine securities are rated below investment grade due to country risk considerations, the interest on ROP (Republic of the Philippines) bonds were much higher. And yet the issuer of the treasury bills and the ROP bonds were one and the same entity, the Philippine government. Regina Capital survived the Asian Financial Crisis by buying ROP bonds for its clients.

In 2001, then Vice President Gloria Macapagal Arroyo became president with the ouster of President Joseph Estrada in a second people power revolution. Under her administration, the political situation stabilized. Moreover reforms in fiscal and energy policies revived the Philippine capital market. Her fiscal policy reforms improved the credit rating of the Philippines. Her reforms in the energy sector led to a more market-friendly environment. For example, Petron, the largest oil company listed in the Philippine stock market returned to profitability when price caps on gasoline prices were lifted. On the other hand, the Philippine capital market was not adversely affected by the Lehman crisis of 2008 as no derivatives market existed in the Philippines.

The 2010’s marked a generational change in the management of Regina Capital. Dr. Victor S. Limlingan took a leave of absence to serve as Managing Director of DMCI Holdings, Inc., the publicly listed holding company of the Consunji Family. He was able to do so, given the entry of the next generation into the management of Regina Capital; Victor (Alvin) Limlingan, Jr., Regina (Ria) Limlingan Laquindanum and Luis (Luigi) Limlingan.

Alvin Limlingan worked successively for an international fund management company (Clemente Capital), the government (National Economic Development Authority). As strategy officer of Sun Life Philippines he set up its mutual fund. He then finished his MBA from Kellogg School of Management. For his internship he worked with Cerberus (General Motors Acceptance Corporation). Upon his graduation he was appointed Managing Director for the Philippines of a Hong Kong private equity firm (Argyle Street Management). He joined Regina Capital as Managing Director for Business Development. His mandate is to develop relations with the next generation of family members taking over the management of the companies of the taipans.

Ria Laquindanum worked for Globe Telecom and A T & T Philippines. She then finished her MBA from Darden Business School. For her internship, she worked for Johnson & Johnson in Malaysia. Upon graduation, she worked in marketing for New Jersey Company (Avaya) and then as Operations Manager of Cisco Systems International in the Philippines. She joined Regina Capital as Managing Director for Finance and Adminstration.

In that role, she upgraded the backroom operations of Regina Capital. She hired the services of Reyes, Tacondong and Company, an RSM member as external auditor. Working with them, she instituted systems to comply with Anti-Money Laundering protocols (AMLA) and ESG principles to comply with the standards of the Capital Markets Integrity Corporation (CMIC) the regulatory arm of the Philippine Stock Exchange and the Securities Exchange Commission of the Philippines.

Victor Limlingan Regina Capital

Regina Limlingan Laquindanum Regina Capital

Luigi Limlingan worked in the credit card department of Hong Kong and Shanghai Banking Corporation and then as fund manager for ATR KIM Eng (Philippines). He then finished his MBA from the London Business School. For his internship, he worked for a British hedge fund (Stark Investments). Upon graduation, he worked as strategy manager in Philips Electronics (Singapore). He joined Regina Capital as Managing Director for Sales and Research.

As head of sales, Luigi upgraded the trading system to handle electronic trading through subscription to Bloomberg and setting up an e-trading platform. As head of research he retained the advisory services of Professor Romulo Neri, a professor of finance of the Asian Institute of Management and former Director General of the National Economic and Development Authority to set up the analytical framework for Regina Capital Research.

Professor Neri introduced his ISOQUANT Model. This, together with the Limlingan Financial Model (an expansion of the Dupont Model) formed the proprietary portion of all Regina Capital Research reports.

Given this solid research foundation, Regina Capital then started issuing industry notes and corporate reports. From there, special briefings were given to selected clients. Quarterly outlook presentations were regularly presented. These caught the attention of business media such that Regina Research staff were regularly interviewed by the business press and media.

The Economist in its annual report, The World Ahead 2023, noted that its correspondents and outside experts considered the interlocking challenges facing the world: the war in Ukraine, high food and fuel prices, the fight against inflation, the transition to renewable energy, and China’s uncertain post-pandemic path. For Regina Research all this means is translating such developments into research reports and briefings that will enable its client to make more informed investment decisions.

Luis Limlingan Regina Capital

Retail technology predictions for 2023

Technology-led strategies will be at the forefront of many marketing campaigns in 2023, as brands attempt to better connect with their target customers. As retailers aim to combat challenges such as the reduced purchasing power of their customers and evolving data privacy regulations, it is expected that there will be a redirection of advertising spend in favour of more traditional channels, such as email, which is expected to double by 2027.

Economic influences

A top concern for brands in 2023 will be inflation and the costof-living crisis, which is causing 61 percent of consumers to cut back on discretionary spending. Ultimately, these events will play a big role in determining marketing methods. Brands will turn to tactics that generate the best return on investment (ROI) such as email, which is widely considered the most effective channel during a recession or economic downturn.

Marketers will have to cater to a customer base that has considerably less disposable income available, and are likely to be changing their buying habits to focus on necessities and own-branded products. As the number of goods consumers are considering is reduced, the read-times of marketing emails will also decrease. This is because customers will be more focused on quickly finding the best deals. However, brands can’t just race to have the lowest prices; they need to make a profit, or they will go bust. They will also need to use tactics that don’t simply involve reducing prices.

Right now, it is a good time for brands to connect with their customers through empathy-based marketing. To maintain their connection with their customers, brands will have to empathise with those who may be in difficult situations while using less space and maintaining good accessibility practices. Considering this, we will see ‘value statements’, practical advice in emails on how to make money go further, and the resurgence of daily deal programmes, such as those offered by voucher codes. If brands fail to connect in this way, customers may feel taken advantage of and loyalty to that brand could decrease.

Additionally, brands themselves will have reduced budgets, so we will see them going back to basics with their marketing strategies. There will be greater focus on customer retention and re-engagement, rather than growing their customer base, due to reduced budgets. Marketers will also have to learn to do more with less. Email designs will have to be more intentional, and brands will have to keep their customers’ priorities at the forefront of all they do.

Email carbon footprint

It is expected that the number of worldwide email users will reach more than four billion by the end of 2023. Although the number of email users is expected to continue increasing, there is not enough awareness around the environmental impact of sending an email, as well as the equipment recipients use, such as laptops, tablets, and mobiles, which also have a carbon footprint. Becoming more sustainable will

Guy Hanson VP of customer engagement Validity

be essential for brands wanting to prove their authenticity. Even the more pricesensitive customers want the brands they buy from to be socially responsible.

Research has found that a standard email without an attachment has a carbon footprint of 4gm of CO2e. Unsurprisingly, every email requires electricity, and if a small attachment is added, it can dramatically increase the carbon footprint to 19gm CO2e.There are several ways that an individual can reduce the carbon footprint of email, such as getting out of the habit of using ‘CC all’. In addition, people who are out of office should always make sure they define the timeframe they are away for, so out of office emails stop sending after a certain point.

However, sending fewer emails is only part of the solution. The infrastructure for sending emails exists whether or not those emails are sent, and every part of the email process has a role to play. Email Service Providers (ESPs) could stop operating with cost per thousand (CPM)-based pricing models, mailbox providers should make their server farms more energy efficient, and telecommunications companies should commit to carbon neutrality.

Data privacy in 2023

2022 saw tech giants hit with some of the biggest fines ever seen for data breaches or the mishandling of consumer data, with GDPR fines totalling £731 million for the year. For many smaller brands, this will have brought a greater focus on data privacy and now we are starting to see smaller brands being fined for relatively low-level breaches, such as sending an email to the wrong person. Additionally, the imminent deprecation of third-party cookies, and a shift to first-party data, will diminish the whole programmatic marketing model, meaning a redirection of advertising spend.

In light of these fines, it is important for brands to ensure that all their customer data is collected and managed in line with data privacy regulations. A shift to first or zeroparty data will be beneficial, as it can provide clear consumer preferences to help tailor content better aligned with

their needs. Data accuracy is vital and accurate data drives relevant content, meaning a better chance of increasing sales for the business. This means revisiting customers on a regular basis, to ensure the data collected is up-todate and still valid.

Additionally, using first or zeroparty data provides retailers with the opportunity to build advertising platforms on top of their own data, putting them in direct competition with the established paid media providers such as Meta and Google. Retailers already have an advantage over the established platforms because they know when consumers have purchased specific products, and when they are likely to do so again. This means the timing of replenishment ads become far more accurate. When these strategies are executed successfully, organisations will reap the benefits in both the short and long-term, and hopefully reduce the risk of any fines.

AI in marketing

Generative AI, such as OpenAI’s ChatGPT, will be a game changer for email marketers in 2023. This technology can be used to assist a whole range of tasks, from copywriting to customer service. As marketers become familiar with this capability, the ability to create artificially generated copy is going to see widespread adoption, with massive benefits in terms of time savings and improved productivity. What will really be useful to email marketers is the option to create AI generated images. Most consumers take in information better, and more quickly, through visuals. However, finding original images for each piece of content can be time consuming and expensive. Essentially, generative AI allows marketers to create new images quickly and at a low cost, that they can use in email content.

However, as is the same with any new technology, people fear that generative AI could replace jobs as it can complete creative tasks at a higher level. It is expected that these new developments will only create new jobs in the coming years. For example, one can imagine an entire industry will come into being focused on the optimisation of queries that are submitted to ChatGPT to ensure they provide the best answers. AI, no matter how developed, does not have the same ability to convey empathy and loyalty as humans can, which are essential skills for marketers.

Technological developments in 2023 are certainly set to benefit marketers. However, they will have to be aware of the economic uncertainty many of their customers are facing and ensure they can adapt to these circumstances.

System Integration is key to successful mergers and acquisitions

Since 2010, over 500,000 mergers and acquisitions (M&A) have been completed globally – and that number keeps growing. According to a survey from KPMG, global mergers and acquisition activity in 2021 even surpassed pre-pandemic levels, nearly meeting the peaks of activity from 2007 and 2015.

As a growing business tool in today’s economy, M&As can function as an essential method for corporate development. With the number of M&As predicted to climb over the upcoming years, a multitude of businesses are searching for ways to improve their M&A capabilities.

The benefits M&As can provide businesses are endless, offering more products and services, and greater financial strength and economic power, leading to a higher market share and reduced competitive threat. They contribute to developing new social and economic environments that can help companies expand into new markets. However, whilst M&As offer a range of benefits, the challenges they produce are important to take note of.

The main challenge

A primary reason as to why M&As can collapse is the failure of establishing a solid IT integration strategy. IT is the main challenge during a merger as each company has its own data and processes, therefore conjoining two businesses and combining or replacing methods of operations, information and technologies is a

time consuming and difficult process. Thorough planning for system integration in advance is vital for a smooth transition, from reducing the threats of interruption to guaranteeing continued data integrity.

Data integration is vital, allowing businesses to address the significant data difficulties that can be encountered post-transaction and gain maximum value from the deal. Each business maintains private, confidential and important information which ranges from customer account history, to prior billing and invoicing information, which must be integrated if the newly established firm aims to uphold their reputation and provide clients with assured quality service.

The absence of an appropriate data integration strategy can result in the inability to be proactive, restricting the ability to respond to opportunities in a timely manner. Firms risk tainting the quality of service that their customers have come to expect, which could result in a loss of business and profits. In addition, an ineffective cost structure post-merger or acquisition could make achieving the synergies anticipated from the initial deal a challenge, costing revenue and failing to produce the outcomes originally guaranteed or forecasted to board members and shareholders.

To efficiently and effectively merge data from two companies, such as customer billing and invoicing information, businesses need to obtain tools which can manage the extraction and loading of data

into a solution of choice. They require solutions that possess the capability to collect, deduplicate, consolidate, convert and route the information, matching records where possible and creating new accounts where necessary.

However, organisations often forget that bringing in a multitude of new platforms and technologies, or relying on legacy solutions, to merge customer data have their own set of complications. Instead, firms should search for a single solution they can implement, which can be easily integrated and run existing processes, from data extraction to creating new accounts.

Finding

a simple solution

Proactive businesses are solving this issue by prioritising cloud-native solutions which not only reduce time to market and costs, but offer scalable and flexible solutions capable of consolidating disparate and legacy systems into a single, automated platform to store all customer-related activities. Supporting practically any business model, they offer tools which ensure continuous delivery and improve customer experience.

By being able to identify cloud solutions that support M&As better, the acquiring or newly established firms can constructively bring data together from separate organisations without having to overload the process with numerous technologies, or depend on outdated and inefficient platforms. Cloud solutions can

Nathan Shinn Founder and CSO BillingPlatform

accelerate the integration process without harming the customer experience, or the merger and acquisition benefits from the second the transition takes place.

As more firms begin to develop and evolve, the business sector continues to grow competitive. M&As are rapidly becoming a significant mechanism for businesses striving to consolidate and expand their positions in current and new markets. Although M&As can provide multiple benefits, their challenges, including data integration, must not be overlooked. Should they be neglected, firms risk hindering the benefits of an M&A.

Poorly handled and unorganised system integration between merging companies can jeopardise business goals. By implementing cloud-based solutions to collate, consolidate and manage all data in one place, businesses can ensure that their merger or acquisition deals are a success while maintaining their reputation and customer satisfaction too.

Optimising Payments –and the transition to ISO20022

Payment models are changing radically, creating both challenges and opportunities for financial institutions. New digital-only banks have accelerated innovation, while the pace of global change has created a new competitive landscape. UK financial institutions also face the additional pressures created by the need to migrate to new technology platforms to support ISO20022 based real-time and high value payments.

In this new landscape, the quality of the experience is paramount – for merchants, businesses and the end consumer. The need to avoid hugely expensive downtime is a given, but banks must also optimise service delivery to meet evolving expectations – and that requires real-time insight into the performance across the entire payment infrastructure. David Guiver, Head of Transact and Infrastructure Products, IR explains the importance of multi-layered end-to-end infrastructure monitoring in a realtime payment world.

Rising Expectations

Every aspect of the payments model is experiencing change and while the UK lead the way in the creation of real-time payments with the development of Faster Payments, the rest of the world has rapidly caught up, even surpassed, the services delivered by UK financial institutions. Customer expectations have also changed, driven by the ease of mobile payments and the rising limits for real-time payments.

The pace of change is significant. The limit for Faster Payments in the UK is now £1 million per transaction. In the UK, the value of products purchased via mobile devices in 2020 was around £65 billion and by 2024, m-commerce retail revenues are predicted to surpass £100 billion. There is no tolerance amongst merchants, businesses or consumers for glitches in these payment processes. Expectations are for 100% reliable, immediate transactions with zero errors. At the same time, of course, banks are facing ever tighter regulatory scrutiny plus financial penalties for failure to process payments within the defined timescale.

Real-Time Insight

It is vital to ensure the critical infrastructure supporting payments is functioning well. But today’s complex and evolving payments environment has multiple possible points of failure. Is a payment failure due to network availability issues? Internal network problems? A lack of telco service causing POS outages in one area? Or a glitch in a mobile wallet update? Are delays in processing a high value payment caused by problems in manual Know Your Customer (KYC) or Anti-Money Laundering checks – and is the bank at risk of missing a costly deadline as a result?

Monitoring in real time has become an essential tool in the financial services armoury, providing the insight required to minimise expensive downtime. Extending traditional open systems infrastructure monitoring to cover application and transaction level activity provides an extraordinary depth of insight to support far more effective and reliable payment operations.

Efficient Operations

The ability to avoid just one outage, and the cost associated with lost business as well as reputation damage, immediately recoups the cost of performance monitoring technology. But it is the depth of insight provided by real-time, multilayered monitoring that is providing financial institutions with the ability to continuously adapt to deliver an optimal performance. Transaction level insight, for example, allows a bank to rapidly highlight issues, such as excessive declined payments, with a specific merchant or device type and enables remedial action to be taken.

It allows Treasury departments to proactive manage liquidity and risk, through effective control over sanction, fraud and liquidity checks associated with high value payments. Anecdotally, around 50% of high value payments are not automatically processed and require additional manual checks. Using real-time monitoring to track queue length and automatically reassign workload between operators, allows banks to confidently meet the payment deadlines while also achieving these complex and vital checks.

Continuous Change

In addition to the ability to respond to immediate issues, monitoring is an essential tool to support financial institutions’ understanding of changing business and consumer customer expectations across the evolving payment landscape. It can, for example, provide new insight into trends in payment preference – such as the rise in mobile wallets – helping financial institutions to plan and prioritise investments.

This depth of insight will be particularly important for the UK banking world as it faces up to the challenges of achieving this optimal experience while also undertaking highly complex and demanding migrations to the new payment platforms. This year, SWIFT high value payments are moving from older legacy message standards to more modern ISO20022 based messages –and, banks will also need to migrate the long-established Faster Payments systems from ISO8583 to ISO20022 over the next two years.

Any development on this scale will create significant operational risk. Without real-time visibility across the entire payment process, at infrastructure, application and transaction level, banks will struggle to deliver the new payment platforms without compromising performance or the quality of experience.

Conclusion

The increasingly demanding, complex and competitive payment market is creating new operational risks. Avoiding outage is absolutely essential, but banks need to do more than just avoid outage. They need to be constantly improving the quality of service and ensuring investment is targeted towards the areas of most value and growth to deliver a frictionless payment experience.

Furthermore, while each payment mechanism creates different challenges, they can no longer be considered in isolation. Implementing a single performance monitoring solution across the entire payment infrastructure – cards, real-time and high value payments – is hugely valuable. With an omnichannel view, financial institutions achieve cross infrastructure understanding. This insight can support the new levels of agility required to respond to an unprecedented pace of banking change, and customer expectation for a frictionless experience irrespective of payment type.

David Guiver Head of Transact and Infrastructure Products, at IR

The Importance of Digital Trust for your Business

According to a recent McKinsey Digital survey, organizations building digital trust are more likely to see growth rates of at least 10% on their top and bottom lines and yet — as evidenced by the announcements of data breaches that seem to happen daily — there is clearly a gap between customer expectation and is actually being delivered.

McKinsey defines digital trust as “confidence in an organization to protect consumer data, enact effective cybersecurity, offer trustworthy AIpowered products and services, and provide transparency around AI and data usage.” In a field where data security is paramount, such as the banking industry, customers should be completely sure that their data, and ultimately their money, don’t fall into the wrong hands. This means well-defined processes and proven security, with a transparent approach need to be in place.

Results from the survey show digital trust is clearly of great importance to customers, but are organizations doing enough to earn – and retain –their trust?

How important is digital trust to companies?

According to the 2023 Edelman Trust Barometer, a survey consisting of more than 32,000 respondents, a lack of faith in societal institutions has brought us to the point where businesses are the only institutions seen as competent and ethical. Consumers depend on businesses to advocate for the truth and be sources of reliable information, promote civil discourse, and hold false information sources accountable.

For these reasons, digital trust is of great importance for businesses and will continue to have a direct impact on financial gains. The main problem we see today is a disconnect between what organizations say about their stance on security and their performance results.

Most organizations believe they are doing well when it comes to respecting their customer data. From the McKinsey research, nearly 90% of companies describe themselves as “at least somewhat effective at mitigating digital risks” and a similar number report that they are being proactive regarding risk management. Yet, 57% of executives reported that their organizations suffered a data breach in the past three years.

It’s clear there is a disconnect between what an organization believes it’s doing and the effectiveness of the policies designed to protect customer data. It seems that everyone thinks about security and knows it’s important, but companies don’t always practise what they preach. That’s what bad actors take advantage of, leading to security incidents. But it doesn’t need to be that way, provided you implement a number of security strategies across your organization.

Things digital trust leaders do

To gain and retain customer trust, there are several important strategies that should be implemented across an organization:

• Have a clear, easily accessible and easily understandable privacy policy.

• Ensure everyone in the organization is aware of security and data protection policies. Everyone should accept that security is vital and not just a bullet-point on a product page.

• If you are developing software, use secure development practices. Ensure developers and delivery teams have the time and resources to understand secure development.

• Adopt an information security framework such as the NIST CyberSecurity Framework or ISO/IEC27001 to help your organization better understand and manage digital risk

• Measure the effectiveness of your security and data protection policies through a regular internal audit process.

• Ensure your contractors and thirdparty data processors respect your customer data to the same extent you do, and that they comply with your security and data protection policies. Put in place contractual agreements that ensure this. In particular, if you are processing data for European citizens a Data Processing Agreement is required by the GDPR. Other data protection regulations, such as the California Consumer Privacy Act, may also require this.

• Develop a culture which values and rewards the detection and mitigation of vulnerabilities across the organization.

• Prove to your customers that you’re secure. Commission regular penetration tests – and white-box security audits – by trusted independent providers. Act on the results and challenge your competition to do the same. That’s the only way in which things will truly improve in the future.

Conclusion

When it comes to establishing and maintaining digital trust, especially in the software industry, secure development practices, like a shift-left security approach, can make a huge difference.

Security has both internal and external fronts. Internal security focuses on having clear policies and practices and making sure that these are followed in a consistent fashion. This also includes making sure that your company culture rewards finding issues and vulnerabilities. External security refers to constantly commissioning white-box security audits by independent providers and implementing fixes for all issues found.

The most important thing to remember is to make sure that the results are public. That will prompt customers to challenge the whole industry to follow suit.

RealVNC

Andrew Woodhouse CIO

Joe Susienka Senior PM GTreasury

How Treasury Teams Can Approach Payments Modernization Right Now

The recently-released treasury survey report, Pressure Points, Payments & Plans for Automation: The Road Ahead for CFOs and Treasurers, offers fresh insights into some of the biggest treasury trends that are expected to prevail in 2023. Conducted by Topline Strategy, the global report surveyed a cross-section of corporate treasurers and CFOs from more than 20 industries. The survey results show that corporate treasurers and financial leadership are understandably concerned over ongoing economic uncertainty. However, they nevertheless remain optimistic about their own enterprise growth and their ability to weather fiscal headwinds by introducing more efficient practices and technologies.

The report showed that payments will be a particularly big focal point for achieving more cost and operational efficiency. Organizations report payments technology and platforms as being a significant area of investment, but one that is expected to pay quick dividends as treasury and finance teams undergo increasingly-urgent technology and process modernization. In fact, payments were the single-most-important automation target for treasury teams heading into 2023, with 82% reporting that payments automation was ‘very’ or ‘extremely’ important.

Here’s how treasurers should consider approaching payments automation and modernization efforts this year.

1) Real-time payments are becoming more advantageous across an increasing breadth of use cases.

As the survey showed, treasury teams are actively exploring new payment technologies as a way to reduce costs. Real-time payments, via the RTP network, will continue to gain traction among treasurers, enabling instant payments at a fraction of the cost of wire transfers. The FedNow Service debuting this year will also increase the prevalence and accessibility of real-time payments.

The math is pretty simple. Look at your wire volume and the average wire transfer cost of about $8. Then, calculate the savings of converting most of those wires to instant and automated RTP transfers. They cost about a quarter, if that. Most treasurers and financial leaders can look at those numbers and easily see the cost savings they need to justify implementation.

At the same time, rapidly advancing RTP capabilities are also spurring an uptick in adoption. Just a year ago, the limit for RTP payments was $100,000, making the technology inapplicable for many corporate payments. That limit is now $1 million. Also, over 260 banks have opted into the RTP network. Further expansion of RTP capabilities will continue going forward, and treasurers’ options will only grow as FedNow launches and gains volume.

Successfully implementing realtime payments generally requires modern treasury systems and expertise to harness banking APIs. Treasury teams also need to have tight controls in place: as with wire payments, real-time payments are

irrevocable. Ensuring that payments have the correct details is crucial, as any mistake can cost time and money. That said, the API call request response for a real-time payment will instantly confirm that the payment went through, eliminating lengthy waits and offering operational efficiency in addition to hard cost offsets.

2) All payments options should be considered.

While many in the survey report said that their organizations have lagged in progress toward real-time automated payments, the pressure of economic uncertainty now has treasury departments systematically exploring every payment alternative.

Beyond real-time payments, treasurers should consider a matrix of variables for each of their payment responsibilities, from the speed at which a payment needs to settle to the available payment types and cost per transaction. For example, in some circumstances getting a file a day earlier could mean completing payments via local settlement rather than more expensive options. This emerging best practice has treasury teams adopting strategies that leverage the most beneficial avenues available to them, completing payments at the best cost and pace for each use case.

3) Security and fraud protection is a must

As mentioned, real-time payments are irrevocable. That means there’s no room for error when it comes to tight access controls and strong fraud protection. The simplicity and peace of mind that treasurers gain from those security measures are a welcome complement to real-time payment automation. Whereas wires

can take hours to go through and ACH payments days, the ability to submit a payment and receive instant confirmation means no waiting and no context switching. Real-time payments are also unique in including extra fields for sending information associated with a payment. For example, a treasurer can directly include file attachments, rather than working out how to email a needed document to the right location. That’s not just a positive for security, it also makes treasurers’ days easier.

4)

B2C payment experiences are increasingly influencing B2B treasury workloads.

Organizations that make frequent B2C payments are now embracing services such as Zelle and Venmo to expedite transactions and deliver a fast and seamless customer experience. For example, an insurance company can now have a customer submit a claim by taking pictures by phone and then receive a claim payment over Zelle in hours. These companies are differentiating their solution in the market with newer payment technology. While B2B payments require a stricter set of controls, in time that same shift in the ease of completing a payment is making its way into the hands of treasurers as well. It’s definitely a trend that treasurers will want to keep an eye on. A big year for payments modernization

Even in (and perhaps especially in) what may be a very challenging year for budgets, modernizing payment systems and processes for better integration and automation makes fiscal and operational sense. Faster settlements, improved cash flow, more convenience, fewer errors, lower costs—the benefits are there for the taking.

Banks are facing a “new liquidity reality” due to global economic fluctuations

The way in which banks approach liquidity management has changed on a fundamental level.

Think back to the time before the global financial crisis of 2008, when sizeable profits kept banks in comfortable, lucrative positions. Banks were never very good at managing liquidity risks, simply because they didn’t need to be. They could leave piles of money on the table and still be generating 25% plus returns on equity.

Back then, liquidity was cheap. There was still the requirement to uphold some basic management and reporting requirements, but the regulatory risk to not doing better was low. This changed – albeit slowly – over the decade post financial crisis.

Now, everything is different. Changing conditions are demanding a rethink to re-establish control over liquidity in the face of rising interest rates, quantitative tightening and economic uncertainty. Liquidity is now scarce and costly, and this requires a change in mindset and handling by banks.

Why is liquidity more important now?

Liquidity management is a bank’s ability to fund assets and meet financial obligations without incurring unacceptable financial costs. Essentially, it’s the task of having money when and where you need it, without excess idle money sitting on the balance sheet.

The fundamental issue is that liquidity costs are rising, which requires banks to pay greater attention to the way liquidity is managed.

A primary cause is increasing central bank interest rates, which ultimately set the benchmark for liquidity in general. This has meant that structural liquidity is equally more expensive, meaning higher interest rates on corporate and consumer deposits. As banks’ own funding costs increase, these are passed on to the customer through increased lending rates.

Further, intraday and overnight rates between financial institutions are impacted, though not necessarily all in the same way, meaning liquidity takes on an even higher premium.

Phillip Straley President of FNA

With times getting tougher, we’re seeing greater corporate earning issues. Banks are now in a position where they’re looking out at the market and seeing less creditworthy borrowers. Banks therefore have two options: they can take more risk, or become more risk averse.

Given the uncertainty around how long the current quantitative tightening will last – which could be as long as another year, or more–it’s clear that banks need to become more cost efficient.

What can banks do?

There are three core areas that banks should focus on to tackle liquidity management.

Visibility

The impact of an economic downturn

The direct impact of inflation, affordability issues, and a rising costof-living takes the form of increased credit problems for individuals as well as companies, particularly SMEs.

For most banks, this has not yet led to large defaults or credit charge offs, but we can expect this to worsen throughout 2023. In fact, we’ve already witnessed the start of increased credit provisions for expected losses.

There is a first level benefit of rising interest rates for bank profitability, as rising interest rates are generally good for earnings. Banks are able to re-price loans quicker than deposit rates.

However, this may be quickly replaced by negative headwinds of credit losses as provisions rise over the next 12-18 months.

A fundamental challenge that banks face is a lack of visibility into their liquidity.

The first step is therefore to conduct an evaluation of the cash flow characteristics, structure and stability of each major asset and liability category to determine the impact of liquidity risk. Understanding the distribution of liquidity risk across the business fills the gap left by years of opacity.

Armed with a granular view, banks must assess the information in the context of their business objectives, such as cash and capital restrictions and projected cash movement.

Funds classification

Next is the need to differentiate between operational and nonoperational cash, which rose to pertinence after the 2008 financial crisis when changes were made to the way that banks must evaluate the deposits they have, and as liquidity

reserve requirements rose. This assessment allows banks to better manage liquidity to strike the balance between lending to the public and preserving funds to make payments on behalf of their clients, and to meet liquidity buffer standards.

Technology

Finally, banks must recognise the role that technology plays in improving liquidity management, which can be broken down into three key areas. The first is data centralisation, from a global scale to core operational system maintenance. Next is regulatory reporting and metrics, and recent years have witnessed an exciting combination of new market entrants and industry incumbents introducing technology powered solutions to the market. The last element is analytics, with a greater focus on simulation technology for organising and optimising payments to reduce liquidity costs.

The new reality

There is a huge opportunity for banks to adapt to the new liquidity reality by bringing together realtime data and smart algorithms, integrated into payments schedulers and payments gateways.

Beyond optimisation, resilience is also key. In particular, banks can enhance their durability by monitoring the early warnings of market stresses and changes in customer payments behaviours.

We cannot avoid the reality that liquidity is becoming more expensive. Banks’ income statements are therefore going to be put under huge amounts of pressure, meaning saving liquidity costs is becoming critical for bank profitability.

Fraudsters Targeting Mid-Sized Financial Institutions – FRAML Technology Counters Attacks

As global financial institutions continue to armor themselves again increased fraud, fraudsters and their associated emerging fraud types continue to move from financial institution to financial institution, with mid-sized FIs on the receiving end of an onslaught of new scams and other fraudulent attacks – with the fraudster often hoping that these FIs may be less resistant to fighting off the assaults.

Eric Tran-Le VP & Head of Premier NICE Actimize

Digital fraud losses are anticipated to surpass $343 billion globally between 2023 and 2027, according to a Juniper Research study of online payment fraud. With a fresh crop of fraud trends gaining momentum— including synthetic fraud, insider recruitment, lending fraud, and social media scams—midsized financial institutions (FIs) must rethink their approach to fraud prevention.

Why is it essential for mid-sized Fis to stay alert? The stakes couldn’t be higher in a diversifying competitive and digital landscape, and customer loyalty and brand reputation are on the line. Community banks, credit unions, and regional banks can't afford risk management to be hindered by fragmented point solutions, lack of contextual insight, and data silos.

Key Fraud Trends Hitting Mid-Sized FIs

2023 is likely to be another definitive year in fraud, but many areas should be more prevalent than others as fraudsters launch their assaults and the first wave of what’s expected this year.

First, there is the "Just Your Friendly Neighborhood” Scammer. The rule of thumb for scams is that if it’s easy to make a payment, then it’s easy for scammers to make money. Phishing, spear phishing, baiting, scareware, whaling attacks, and pretexting are a few standard social engineering techniques used to prey on a victim's vulnerabilities. Social engineering is especially effective because it relies on psychological tactics— scammers know how to use a victim's fear, greed, or respect for authority against them.

Social media scams will continue to be prevalent. The Federal Trade Commission (FTC) says 2021 was a banner year for social media scammers, with $770 million in social-media–originated fraud losses reported, and there is no question that this trend will continue through 2023.

Though not an exhaustive list, fake merchandise scams, charity scams, fake job scams, romance scams, and investment scams regularly start on social media. These scams result in authorized push payment (APP) fraud, account takeover (ATO), money mule activity, identity theft, and credit card fraud. NICE Actimize's own research, derived from its annual Fraud Insights Report, has also seen year-over-year increases in authorized fraud, money mule activity, and more that are certain to impact mid-sized institutions.

Google voice scams are another unique scam threat assaulting midsized financial institutions. Over 37% of the scam reports received by the Identity Theft Resource Center in the first half of 2022 were connected to Google Voice scams. A Google Voice account isn't even necessary for a scammer to victimize someone and perpetrate Account Takeover (ATO) or identity theft.

Remember that any scam loss statistic that you read about is likely to be much higher than the actual numbers indicate. The shame and stigma frequently associated with scams can prevent victims from sharing their experiences with the proper authorities. As it stands, industry estimates state that $3.6 billion is lost globally by businesses alone in 2022 to scams and fraud, averaging $1.78 million in losses per case.

Another type of prevalent fraud, Synthetic Identity Fraud, is just a swipe away. Artificial intelligence (AI), machine learning, and deep learning technologies give even more legitimacy to sophisticated fraudster behaviors and tactics. Synthetic media capabilities, offering the means to

modify or construct video, images, and audio, are readily accessible to the public through a number of different products. Mainstream text-to-image synthesis and generator tools, auto-generated and downloadable synthetic faces, smartphone native AI-powered image eraser tools, and synthetic voice generator tools are available for free or as little as a few dollars. Fraudsters have been adept at adopting these tools against their victims. These tools blur the interpretation of reality, and they’re anticipated to influence the trajectory of SIF in 2023.

Industry sources estimate that there has been a 9% increase in small and midsize business (SMB) lending fraud since 2020 and that trend will hold throughout 2023. Synthetic business credentials, created from stolen business and consumer data, make it challenging for FIs to distinguish authentic loan requests from fraudulent ones. Fraudsters use synthetic media to impersonate business profiles and resources on social media to misrepresent employees, execute scams against the company or other victims, or create replica websites to obtain sensitive data.

AI and Machine Learning Closes Gaps in Risk Exposures

Mid-market financial institutions, regional and community banks, and credit unions are recognized for their member-centric banking model but often face specific fraud prevention challenges and risks.

Fortunately, as fraudsters continue to up the ante with dynamic new trends, game-changing technology, and analytics, innovations are available to mid-sized Fis that help address these scams and frauds.

Advanced AI and machine learningpowered solutions are helping midmarket financial institutions, including regional banks and credit unions, address specific fraud prevention challenges and risks. For example,

credit unions have risk exposures that include manual reviewing processes, insecure email networks, leaked personnel data, and outdated fraud prevention systems.

To protect their customers, assets, and organization, mid-market FIs must adopt a holistic fraud strategy that incorporates fraud and AML solutions in a single platform –this approach is often nicknamed FRAML in the industry. With AI, data intelligence, and behavioral analytics, mid-sized organizations can detect attacks at early stages and intervene before any money movement occurs. Connected fraud and AML solutions can also respond to new threats without alienating customers, often relying on behavioral biometrics that can automatically discover unusual patterns across channels.

Most importantly, these new FRAMLbased technologies expedite accurate risk scoring and leverage actionable insights based on contextually enriched customer profiles. Other benefits of these emerging technologies, including the ability to streamline alert and case investigation and provide automatically discovered relationships and linkages. To benefit AML capabilities, the FRAML approach improves investigation efficiency with real-time KYC and CDD entitylink analysis and pre-populated case details for regulatory reports.

Fraud is a living, breathing threat that shape-shifts in many new forms. For mid-sized financial institutions to protect themselves, a holistic, intuitive fraud prevention program that interconnects with the institution's anti-money laundering efforts should be at the heart of any financial crime program, able to respond to fraud and other threats in whatever iteration they happen to materialize. “FRAML” may sound unusual, but the results that a linked Fraud and AML-focused approach can bring to mid-sized financial institutions is not.

Shiran Weitzman CEO and Co-founder of Shield

Navigating today’s business communication transition

Today, electronic communication apps like Slack, Zoom and WhatsApp are important to businesses when it comes to overall collaboration and communication between employees and customers. These communication apps represent a massive shift in the way we communicate across industries, especially those regulated by government agencies like the Securities and Exchange Commission (SEC). Regulated industries, like banking and finance, have historically been hesitant to use communication apps outside of monitored channels where the data could be properly stored, or “archived”. In the past, organizations could easily archive communication data when conversations were happening on business phones and email. In the modern age, however, the

number of communication apps used across business makes archiving and monitoring a significant, costly challenge.

While most employees are using electronic communication apps because they are accessible, some, unfortunately, are participating in bad behavior, like money laundering, insider trading, data leaks and more. In addition to market abuse, as businesses continue to rely on WhatsApp and other electronic communication apps, we’ve also seen a rise in workplace harassment across these channels. These types of risk can cripple any business. In finance, the world’s biggest banks have already faced billions in fines, while executives with 30 years experience are being fired for simply

using unapproved communication channels, even if they weren’t doing anything wrong or illegal in their communications. Banks have even started to fine employees directly if they’re caught using WhatsApp.

So what can global banking and finance executives do to ensure employees are effectively communicating both internally and with clients, while also meeting changing regulatory requirements globally?

A Siloed Approach No Longer Works

Global regulators have made it abundantly clear that record keeping and archiving is crucial when it comes to communication channels. In this time of great communication transition, however, it’s become increasingly difficult to apply a once siloed approach across all communication channels. Historically, legacy vendors were able to provide an archiving service for email and web surveillance, and another service for phone surveillance. But now? The number of electronic communications channels is driving a dire need for workplace intelligence and monitoring solutions that proactively surveil all communication channels, from WhatsApp messages to Zoom video calls, as well as the more traditional phone and email. Beyond surveillance, modern electronic communication tools must alert on all company conversations to reduce regulatory, reputational, and information risk.

Organizations struggle with electronic communication compliance because the insights they need to stay ahead of market abuse, internal bad actors, and increasing regulatory risk are invisible to them. As regulators prioritize data management and archiving across written and voice communications, global banks must break the inefficient silos between text and voice compliance. Banks need to introduce tools that offer a complete data management and surveillance platform and bring to light the invisible insights hidden throughout

employee communications. This is important because conversations via communication channels always leave breadcrumbs to more nefarious or illegal activity that may be taking place internally.

Despite Historic Hesitancy, Shift to the Cloud

Financial institutions have been historically averse to moving to the cloud, but the WFH era is forcing banks to introduce new offerings that traditionally wouldn’t have been considered. Historically, banks have kept all compliance platforms on premises, however, when employees started working from home, the only viable communication option became electronic communication channels such as Microsoft Teams, Slack and WhatsApp. Crucial to continuity, banks and finance institutions had no way to monitor for market abuse as regulators cracked down on these channels.

Pre-pandemic, banks and other financial institutions relied upon on-premise data archives to meet compliance requirements, but the monumental shift in the amount of data created from today’s electronic communication channels has prevented legacy archiving solutions from keeping up with demand. When employees started working from home, the only viable communication option became e-channels such as WhatsApp, Slack and even private text messages. While this is crucial to business continuity, banks are finding it more difficult to monitor for market abuse as global regulators investigate these channels.

The complexity of traditional on-premise data management applications is hindering banks from adapting to meet regulatory requirements and accurately archiving the overwhelming amount of organizational data from these communication channels. On-premise applications also cost organizations more in the long run, as they rely on strict hardware, IT staff, new software integrations and other various costs associated with malfunctions.

What’s more, on-premise solutions also make adoption of emerging advanced technologies such as machine learning and artificial intelligence more difficult to integrate. As we continue to see these advancements being implemented through the financial industry, it’s important that banks have the ability to adopt and deploy these technologies quickly and seamlessly, on the cloud.

What’s the Solution?

Crucial to productivity and security, banks and financial institutions must simplify and standardize electronic communication channels to meet the specific needs of its organization. When employees use inefficient or unapproved applications repeatedly, it leads to frustration, a lack of collaboration and opens the business up to security vulnerabilities. Organizations must seek out the electronic communication tools best suited for their employees and operations, and then eliminate those that are no longer needed to avoid application sprawl.

After simplifying communication channels, banks should then find a monitoring and archiving solutions that ensures data privacy, while also mitigating business risks. The first signs of nefarious activity can typically be found in electronic communication, so organizations need to seek out deep tech solutions that can tailor to their specific needs when it comes to archiving, transcription, discovery and surveillance.

Customers become more than numbers with Internet of Things technology

The Internet of Things (IOT) holds enormous potential to positively impact the future of the banking industry, bringing new flexibility and new personalised service offerings, while vastly streamlining and improving the customer experience. The market is already growing fast. According to research from Fortune Business Insights, it is projected to grow from $478.36 billion in 2022 to $2,465.26 billion by 2029, at a compound annual growth rate (CAGR) of 26.4 per cent over that forecast period.

From a commercial perspective, this rapid expansion is enabled by a combination of highspeed, high-bandwidth 5G connectivity and rapidly-developing edge computing platforms. Edge computing, based on a highly connected network of regional data centres, is critical. It enables specialised gateway hubs in those data centres to process or pre-process massive amounts of data generated by the millions of devices that comprise the IoT.

Being close to the source of the data means this processing is accomplished at low latency – a vital requirement for many advanced applications, including artificial intelligence (AI) driven solutions and services. Processing all this data at the main public cloud providers’ data centres is not a viable option because the latency is unsustainable.

Gateway hubs, by contrast, aggregate and filter the data in the edge data centre, while operating actuators and translating between the sensor protocols used to connect to a network. They also perform the critical role of passing on critical information to proprietary applications hosted in the public cloud, using the high speed backhaul connections of the edge platform. The good news is that the increasing ubiquity of the UK’s edge infrastructure platform will bring these advances to almost every business and location in the UK.

Edge computing takes care of processing the data

For banks, one of the most important aspects of IoT technology is its ability to develop use cases from the data generated by billions of smartphones. Statista believes that by 2030, consumer internet and media devices such as smartphones will number more than 17 billion globally. The data is increasing in volume all the time. According to IDC, IoT big data statistics show that, with increased adoption, numbers will reach 73.1 ZB by 2025, which equals 422 per cent of the 2019 output, when 17.3 ZB of data was produced. As companies integrate IoT devices into their network infrastructure, they will need edge infrastructure platforms to manage, process, filer and transmit this data.

The ability to exploit such vast networks of consumer devices will lead to far higher levels of personalisation together with, much greater emphasis on frictionless transactions and higher quality of customer experience. This is vital in a market where fewer customers now have direct relationships with bank managers or their branches. Using personalisation and customer experience to build loyalty is certain to be a key feature of retail banking as consumers are now more likely to switch bank than their parents ever were.

Higher levels of personalisation

Banks can, for example, use a customer’s location as a trigger not just for offers and discounts related to nearby businesses or facilities, but also simply to provide a more complete information service. In doing so, the compute capacity of the cloud and the edge working in tandem enables them not only to build up a profile of each customer’s preferences, but also to aggregate, analyse and respond to data about consumer trends very quickly.

IoT technology will also improve the quality of integrations with digital assistants and wearable devices, again upgrading personalisation without being intrusive or risking loss of confidentiality. Edge computing plays an important security role in all this, enabling implementation of AI or machine learning-driven anti-fraud and hacking-detection technologies to protect a hugely extended network.

The roll-out of 5G is pivotal for IoT because it enables faster, more stable, and more secure connectivity. For IoT to accelerate, access to high-quality connectivity is essential. Applications focused on real-time and aggregated data analytics need connectivity that has either low jitter, loss and lag or has dedicated high bandwidth. The telecommunications companies have been first movers in this market with 5G, but carrier fibre is an alternative and in many ways, more dependable. Yet we should not forget that strong IoT growth also depends on edge platforms with genuine compute power, network connectivity and resilience, and friction-free, fast access to the proprietary applications hosted with the big names in public cloud.

IoT in insurance and commercial banking

As we look further forward in insurance and commercial banking, the ability of edge platforms to process and transmit data from 5G-enabled telemetry devices is likely to have significant positive impact on the quality and speed of policy and credit approvals, providing accurate, verifiable data on everything from vehicle usage to agricultural or factory outputs.

In trade finance, sensor data in ports, ships, and from containers and vehicles gives banks and insurers a new level of transparency about the transactions, carriers and cargoes they are asked to support. This will reduce costly delays and frauds and increase insight into the efficiency of individual operators. All organisations will improve access to working capital.

Overcoming the remaining hurdles

Admittedly, banks may have some work to do overcoming the challenge of integrating IoT devices and their workloads into an existing business architecture. The growth of artificial intelligence-driven (AI) applications, for example, means architectures will have to facilitate the processing of data at the edge for decision-making in intelligent IoT systems.

And as with all sectors, banking and finance institutions face the problem of acquiring staff with the requisite skills to manage and maintain IoT effectively. The surest way to overcome this endemic difficulty is by selecting partners with deep expertise in the developing relationship between edge platforms and IoT implementations.

Organisations must also ensure they have access to a truly resilient edge infrastructure platform that comprises compute, network and cloud to deliver seamless, high performance. As edge capabilities expand, banks and insurers will want to implement and use IoT applications in the way that cloud applications are currently employed. Their IoT applications must work on edge infrastructure that is proof against outages and operates across a national high-speed fibre network and has fast and diverse backhaul to the public cloud providers such as AWS, Azure, IBM and so forth.

For the finance sector, the evolution of IoT technologies, operating on edge infrastructure promises to be a highly significant development, providing a much higher quality of service and far greater personalisation. If implemented with insight and expertise, it will enable new models of business that are currently only concepts, and lead to substantial increases in customer loyalty and revenues right across retail and commercial banking, and insurance.

Mike Hoy Technology Director, at Pulsant

The March of MX messaging

When Genghis Khan marched his Mongol armies on the great cities of the Jin empire over 800 years ago, he would ensure that there were rows upon rows of drummers. They would be beating out a steady rhythm, signalling their impending arrival, and conveying deadly intent on the residents. The noise would be so overwhelming and steady that, as the siege begun, residents would become gripped by fear as the conclusion drew closer and closer. With the initial adoption date for MX messaging in banks of March 20th of this year now locked in, safe to say, the drumbeat has begun.

MX will become the new standard in cross border currency payments messages carrying far richer information, and as a result, firms need to have ISO 20022 front of mind. The migration from the current MT standard across to MX makes a lot of sense – it is intended to provide a single standardisation approach to be used by all financial standards initiatives. Although there is a co-existence period with the current MT standards until 2025, this can be compared to the often years long sieges that the Mongol armies employed to break down resistance. The end is there – staring at banks just down the road, and the conclusion is that they must be ready when the co-existence period finishes. It won’t last forever, and the fact is, the larger banks have already either set the wheels in motion, or implemented the internal technology that enables them to adopt the preferred MX messaging format now.

This is a real issue when one considers just how behind the curve many smaller banks are, who are often largely relying on the coexistence period to get their ducks in a row. Why? Mainly due to the fact that these firms are regularly dealing with the large banks, and therefore could find themselves being dragged onwards adopting the MX standard at a quicker pace, if that is what the larger counterparties are already using. When a tier 1 investment banks drops a stone in the pond, the ripple effects are felt by all the wildlife living in it. ISO 20022 is no different.

The biggest pain point being felt by these small and mid-sized banks right now is their overreliance on legacy technology, that has been built and structured around payments processes that are rapidly becoming outdated. Many firms are reluctant to tackle this technology issue head on, due to the perceived high risks and cost involved, making it incredibly difficult to introduce new processes that will be effective in the new payments landscape. This is all because the MT message format is likely to be heavily embedded in many of these legacy systems, investment banks may not realise this until they begin trying to send or receive MX messages – which could be as soon as March 20th of this year!

On top of this, whilst ISO 20022 is bringing with it standardisation across the payments space, it will still cover a myriad of different message types and formats. It won’t be immune from future changes, additional validations or updates. Keeping pace with these, and the technical challenges that even a relatively minor update can present for the back-end of a bank, will be hugely time-consuming, especially if these technological additions are being made onto an already complex web of legacy systems that aren’t fit for modern purposes. The pressure that this will put on in-house IT and operational teams, particularly if the firm is lacking in deep domain expertise (which comes at a premium in 2023), will prove to be damaging from a longterm efficiency perspective.

As MX messaging marches on, the investment banks standing in its way cannot batten down the hatches and hope it passes them by. This is a major change to the payments industry, and banks need to be ready to adapt by tackling this revolution head on. They aren’t, and shouldn’t be, alone in this – they can rely on the expertise of their technology partners in order to support them through this vital stage of the ISO transformation. Only then will all banks be able to successfully integrate MX messaging into their payments infrastructure to ensure greater standardisation and improved efficiencies moving forward.

Phil Flood Global Business Development Director – Regulatory and STP Services, Gresham Technologies

Working Toward Responsible AI: How businesses should ensure that AI is fair, accountable, safe and governed

AI is increasingly engrained in everyday activities, from reading the news online and listening to music, to banking and driving to work. Its impact on our everyday lives is growing as algorithms minimize some or all decision-making. With worldwide business spending on AI set to reach $110 billion annually by 2024, it is undeniable that AI is an essential aspect of numerous industries. AI systems are now widely adopted as central to decisions regarding routing, purchasing, customer service and fraud detection across the banking, finance and insurance sectors. In fact, the financial services industry is regarded as the second biggest adopter behind retail.

With its ever-increasing impact on our lives, it is hardly surprising that governments and regulatory entities are becoming more concerned about AI’s widespread, evolving nature. In Europe, it is widely expected that the proposed EU AI Harmonisation legislation will be enacted in early 2024. The UK Financial Conduct Authority is also consulting on whether additional clarification of existing regulations may be helpful and how policy can best support safe and responsible AI adoption. In the United States, the Federal Trade Commission has emphasized that the agency already has enforcement powers with applicability to AI under three laws. The Algorithmic Accountability Act was also introduced in February 2022 in both Congress chambers.

Humanity has already borne witness to glimpses of what can go wrong with AI. In September 1983, the world averted a nuclear escalation thanks to Stanislav Petrov’s life-saving decision to wait for corroborating evidence, instead of triggering the chain of command, following

an erroneous AI diagnostic that Russia was under attack. We have also seen how quickly a seemingly innocent chatbot like Twitter’s Tay can turn into a misogynist and racist conversationalist without the proper safeguard. Furthermore, with the increased intra-connectivity of AI services, realistic threat models must account for unpredictable systemic interference and sophisticated collusion that could take place and go completely undetected.

In parallel with the technological boom which has given AI much more power in recent years, the idea of how to do AI responsibly has also evolved and matured. The AI scientist, while having access to more powerful and complex algorithms, now also has access to a certain number of tools to decompose and dissect these complex algorithms. A certain number of frameworks and assessment tools are now available to ensure that the application of an AI solution is fair, accountable, appropriate, safe and governed.

And thus, in the absence of a strong negative reaction from consumers, and in a similar vein to what happened with the introduction of tighter Data Protection legislation a few years ago, it is very unlikely that AI will be stopped in its tracks. We could very well, however, witness the end of the Uncontrollable AI era and the birth of the Responsible AI era. And firms that will embrace this new era will be the AI winners of tomorrow, with a quicker return on AI investment and better AI innovation for their customers.

Five Steps Companies Can Take to Foster Responsible AI

As AI legislation continues to evolve and uncertainty remains, there are five proactive and practical steps companies can implement to promote responsible AI.

1. Communicate: The first step is to anticipate cross-organizational AI regulation challenges. Working with AI systems will mean addressing complicated technical, economic and legal difficulties when conducting business. Investing in efficient communication strategies across interdisciplinary teams is a prerequisite to effective AI development and utilization.

2. Contextualize: This next step involves organizations familiarizing themselves with relevant legislation in their jurisdiction(s). This is especially important for those who operate in multiple states or countries. While designated personnel overseeing AI related-projects must be aware of the current regulatory landscape, businesses should also work to coach, mentor and train all relevant staff members and decision-makers on this topic to encourage any required behavioral changes. Furthermore, the executive should determine how the ongoing changes in legislation will be monitored. This is a good time to introduce horizon service management. It is also helpful to develop hardline evaluation criteria to determine if a project oversteps established AI guidelines. Organizations must be ready to manage the characteristics of self-modifying AI, which means creating and managing well-specified baselines will be critical.

3. Compare: Next, organizations should acquaint themselves with trustworthy and respectable AI safety companies and adopt their same practices. Brands will benefit by reaching out to these third parties, leveraging their professional capabilities and using them to make independent evaluations. Due to the immense complexity and potentially stochastic behavior of AI systems, effective monitoring through a well-developed measurement strategy is key to mitigating risks and maximizing the utility of AI.

4. Control: The fourth step involves objectively defining how to self-regulate the risk of any AI programmatically and, if necessary, utilize the assistance and impartiality of a thirdparty provider in this, too. Whether businesses elect to monitor their use and management of datasets and algorithms themselves or use an outside source, they should create a risk assessment process for AI to prevent projects from crossing ethical boundaries. Depending on the jurisdiction, failure to do so may result in criminal liability.

5. Community: The final step for working toward responsible AI is planning for ongoing systems monitoring, continual testing and validation. This includes introducing responsible design principles across all business units interacting with AI systems. AI is dynamic, and therefore pursuing responsible AI will require an ongoing commitment. Companies must remember that humans design AI and even with the best intentions applied, unintentional biases might appear in algorithms. Ultimately, the organization should create and apply social policies to ensure that AI is transparent and ethical. This is far from being only a technology problem. Policy and governance designers should seek and incorporate a balance of skills and experience from stakeholders across representative sets of roles.

Alexei Zhukov VP, Technology Solutions EPAM Systems, Inc.

Rising

Michael Saunders Senior Policy Advisor Oxford Economics

neutral rates: what is happening, and why does it matter?

Over the last year, neutral rates have risen significantly in the US, Eurozone and UK. Historically, neutral rates have been extremely and consistently low, particularly in pre-pandemic times. Yet, various drivers including rising inflation expectations and inflation volatility have caused an unprecedented growth.

A shift in neutral rates

Before deep diving into the drivers and implications of neutral rates, though, it’s important to firstly understand their meaning and their shift over time. Neutral rates are, at a basic level, the rates at which monetary policy is neither accomadative nor restrictive for economic growth. The rate changes overtime in conjunction with various supply shocks and structural factors. However, from the 1980s up to the start of the pandemic, the rate remained constantly low.

Banks expected this low level to continue, yet in over the course of the last two years, rates dramatically shifted upward. Market pricing for UK short-term rates rose from 1-1.25% in 2021 to 4% today, compared to the average of 2-2.5% from 2015-2019. It is anticipated that this growth will continue into 2023 and the following years ahead.

The effect of this on economic structures will be somewhat destabilising: higher neutral rates will result in new policy rates and extreme pressures on public finances. Central banks will feel this pressure most prominently and will likely struggle to stabilise real output. If the anticipated aggressive global trends and negative supply shocks of 2023 prevail, it seems neutral rates will continue their upward trajectory, giving way to an uncertain economic future.

Underlying drivers

Numerous factors determine the neutral rate. The pre-pandemic decline, spanning multiple decades, can be explained by abrupt demographic changes, slower productivity growth, global capital flows and a decline in long-term inflation expectations. Some of these factors have continued over recent years. Economic productivity growth, for example, has averaged 0.5% from 2020 to now. These persistent conditions can be systematically ruled out when questioning the complex cause of increase in rates. Although the increase could be down to a correction of excessively low levels of forward rates in 2020-2021 or a shift to quantitative tightening, it is most probable that the underlying driver is rising inflation expectations.

High inflation expectations are evident across numerous advanced economies. Data has revealed increasing household inflation expectations in the US, UK and Eurozone. Higher wage growth than unemployment and elevated service inflation is also apparent. The current soaring levels of inflation caused people to assume that rates will continue increasing, even if headline inflation falls. These expectations are not unfounded; we saw the same pattern in the 1970s and 80s. Consequently, with higher inflation assumptions, higher levels of nominal policy rates are needed to achieve inflation targets.

Inflation has also become more volatile in recent times which may explain the rising neutral rates. From 2000-2019, UK inflation volatility was at a record low of almost 2%. Globalisation, the end of Cold War and growth of democracies stimulated a political consensus in favour of openness, interaction and trade, resulting in increased supply chains and reduced inflation. High volatile inflation was considered a thing of the past. Yet, this has changed sharply in current times due to damaging supply shocks such as Russia’s war in Ukraine. Although it will be difficult to predict the upcoming shocks in 2023, it can be expected that aggressive global trends like authoritarianism, localisation of trade and reduced globalisation will contribute to an upward bias of inflation.

The future outlook and impact of neutral rates

It is expected that neutral nominal rates in 2023 will remain elevated versus pre-pandemic norms, prompting cyclical swings in central bank policy. However, there are some potential risks that may result in neutral rates declining. If the headline inflation rate falls and unemployment rises, we may see a decline in household inflation expectation and pay. Similarly, globalisation may revitalise and impart a downward impetus to inflation, in turn reducing neutral rates. Despite this, it can be assumed that if there are further adverse supply shocks, inflation expectations will remain up, leading to growth in market-implied interest and neutral rates.

In terms of impact, higher levels of nominal interest will prove adverse for public finances as increases in debt service costs would outweigh likely gains from higher tax receipts on interest income. This would be a less favourable environment for investment and evoke challenges for central banks. As a result, banks might struggle to judge what level of policy rates will be enough to return inflation to target and place more emphasis on traditional business cycle indicators. It will be hard to calibrate policy precisely within this tightening. Central banks will also be more likely to develop a need to act through monetary policy to ensure expectations are achieved, making it hard to stabilise real output. As a consequence, financial institutions might be more reluctant to pivot to monetary easing.

Essentially the rise in neutral rates is a notable and critical shift for the global economy. It is fair to assume these rates will continue considering the aforementioned underlying factors that are widespread and deep rooted. The challenge therefore turns to banks and how they will manage policy within a new climate of growing rates.

ESG in hotel real estate:

Green financing and the hotel operational edge

Hotel real estate is typically reputed to be a tricky asset class; its operational intricacies making it seem – to the unacquainted – less attractive than the lure of the traditional real estate classes of offices, logistics, and retail, which tend to be perceived as more stable.

The truth is, however, that hotels are often as versatile as they are misunderstood.

With various operating models from leases to management agreements, franchise agreements and everything in between, hotels are well-poised to offer a slice of the pie for every type of investor. Similarly, when it comes to green financing, hotels are no onetrick pony – its operational layer could in fact bring additional opportunities for obtaining that coveted green label, making them no less suitable for green financing than their ‘traditional’ counterparts.

Back to basics: Green real estate financing

Currently, there are a few common ways through which the eligibility of real estate assets for green financing is assessed, including:

1. Obtaining a minimum threshold in international green certifications such as BREEAM or LEED;

2. Fulfilling certain energy efficiency criteria (including the integration of renewable energies) or carbon emission thresholds; or

3. Achieving certified compliance with regulations such as the EU Taxonomy.

With these methods, the ability of a hotel asset to become green eligible may be determined through one or both stages: (i) based on the building’s design and construction, for example, where sustainable materials had been extensively used for the building’s construction and fit-out; or (ii) while the building is operational, such as maximizing resource efficiency by employing energy or water saving means, or implementing social initiatives that contribute to the local community.

Accordingly, similar to other real estate asset classes, hotels may first and foremost qualify for green financing through appropriate design and construction methods. In addition to which, the operational aspect of hotels means that being maintaining ESG-friendly implementations throughout its useful life can also be a key piece to the compliance puzzle.

Operational edge: The green hotel advantage

The transient nature of hotels may make them seem inherently more resource-intensive, to cater to the higher volume and turnover of guests. The solution, however, would not be to simply get rid of hotels – but rather, make use of both the needs and opportunities for hotels to maximize their green potential.

Need: Environmentally-friendly initiatives such as introducing LED bulbs or solar panels have time and again proven to not only reduce resource usage, but also save costs. For hotels, maximizing

operational efficiency is the cornerstone to uplifting cash flows and driving returns. In other words, both hotel owners and operators should have a common interest in implementing such measures that can help the environment whilst increasing profit margins.

Opportunity: Hotels may also benefit from having a single operator, who has greater control over implementing environmental initiatives during its operations. In 2010, the ITC Maurya hotel in New Delhi, India, received the world’s first LEED Platinum certification under the ‘Existing Building’ category – part of its initiatives being operating a private biogas plant, which could recycle and reuse 99 per cent of their solid waste, with the organic components being reused as manure.

Meanwhile in contrast, other asset classes may not have the operational capabilities to implement such initiatives, while having multiple tenants could also fragment efforts by leaving the onus on individual tenants to reduce their usage.

Putting the ‘S’ in ESG

In terms of the oft-forgotten social aspect of ESG, hotels generally thrive on individuality and ‘going local’ – hotels in the middle of a Balinese jungle or a previously uninhabited islet in the Adriatic Sea are not unheard of, and often seek to add that local flair to their offering.

Sitting 2,000-metres above sea-level, the Alila Jabal Akhdar in Oman is one demonstration of such local integration. Intentionally built to blend into the destination’s natural landscape, traditional Omani construction techniques and local stones were used to deliver a local and sustainable guest experience. Similarly, initiatives such as One&Only Reethi Rah’s turtle rehabilitation habitat, which seeks to provide a specialized sanctuary for injured turtles, also demonstrate how hotels may help promote biodiversity in its community.

In addition, hotels have a characteristically larger operational workforce from a variety of backgrounds, which means contributing to local employment as well as providing a diverse work environment, all of which may help to highlight the ‘S’ in ESG.

Just the beginning

Despite its potential, however, green hotel assets currently remain fairly scarce in the market, majority of which tend to be new builds or recent renovations. The reality is that the nature of (operational) real estate means that building anew or retrofitting will still require significant time and/or capital expenditure to bear fruit in the green market, while establishing and maintaining meaningful ESGfriendly measures throughout a hotel’s operational life would mean a conscious, concerted – but not impossible effort.

Kimberly Yoong Alumna of EHL Hospitality Business School

Five ways to drive projects forward faster

Speaking to any project manager, they’ll tell you one of the biggest sources of frustration is the ability to deliver their projects on time. Whether it’s due to constant back and forth over decisions that need to be made, team conflict, or external factors that are outside the team’s control, there are multiple reasons that mean projects are delayed. However, there is a way to mitigate the unnecessary hold-ups, it just comes down to following a few basic rules. Here are the five keyways that drive project success.

Today’s world is so complex, fastchanging, and increasingly projectbased that you can beat its complexity with one thing. That is simplicity.

1. Understand the capabilities, attitude, and personal character of individual team members

To get your projects moving fast you need to look at three things with people –

1. Capabilities

2. Attitude

3. Personal character

Capability relates to a person’s knowledge and skills.

Attitude is closely related to a team member’s motivation, the importance of what they want to achieve, the right working environment, and fair remuneration.

The third area – personal character – is the most interesting. Each of us is born with specific talents that influence how we learn, our leadership style, our lifestyle, and our natural strategies for building good relationships at work and even managing projects. The wealth dynamics/talent dynamics typology is a great tool for understanding a person’s character. When a person embraces their natural energy, they are much more likely to be in flow. And in flow, they are 5x more productive. The capabilities, attitude, and personal character triangle create a unique project management 5.0 solution that works.

2. Get organised and put your team in the picture

People need to know what is expected of them. It isn’t just about telling people what they have to do and who is responsible for what, but you should give them the information they need to understand what the project involves its purpose, what role each person has, and the deadlines that must be met. This will ensure that everyone is crystal clear on what they’re doing – and, more importantly, why they’re doing it.

Clear communication is equally important with feedback. Focus on the outcome and discuss why something is wrong and how can it be corrected. This minimises repeated mistakes and ensures a smoother workflow.

3. Translate your goal into an action plan

With a clear timeline and plan for your project team members know exactly what they have to deliver and by when.

Work backward from your deadline for project completion and break the outcome down into what needs to be done and by when. This will ensure the project is completed on time.

It’s important to factor in time for delays when setting deadlines, if you think something should take a week, it will probably take two, so bear this in mind.

Clear weekly actions will ensure your team knows what needs to be done and will be ready to report at the weekly progress meeting. This keeps the whole project moving forward rather than getting stuck due to lapsed deadlines that affect other team members’ activities.

4. Build a strong team

One of the main problems I see when a project team is put together is the lack of alignment between people’s skillset and the roles they’re given. Look at your individual team member’s strengths and weaknesses, and, if you’re unsure of what they are, ask them. Give your team members roles that they’ll thrive in to make project management smoother and reduce conflict and issues.

Josef Hajkr

Mentor

Always ask yourself ‘Who will do the best job on this task?’. If you have someone who’s notoriously creative, put them in a position where they’ll be able to generate ideas and think outside the box. Similarly, if you have a person on the team who is not so good with people and struggles with communication, put them in a position where they aren’t reliant on others to complete tasks and are not in management roles.

5. Be firm on deadlines, flexible on approach

Hands-off leadership can hinder a project, and too much micromanagement can kill your team’s ability to get on with tasks and make timely decisions. If you’ve delegated responsibility for an outcome, let people get on with it – as long as they deliver on time. Proceed with agility. Step by step, build a self-directed project team.

Your role is to set deadlines, assign tasks and trust that your team will deliver what’s needed when it’s needed. They might surprise you!

Genius Group

and Co-Creator of Wealth Dynamics for Project Management 5.0

How banks can boost customer loyalty to weather the cost-of-living storm

Traditional banks are losing when it comes to customer satisfaction. According to a customer satisfaction survey from Which?, four out of the top five banks in the results were new challenger banks. Therefore, if financial services brands continue to lose the customer experience battle, they should expect poor customer retention.

Creating a strong relationship between consumers and the brand has never been more important as we experience a worsening cost of living, with prices of essentials increasing and banks having to pull mortgage products and replace them with higher interest rates.

In the face of these mounting economic challenges, how can banks improve customer experience to boost customer retention?

Banks must improve their customer engagement

A recent report from Braze shows that banks are falling behind in engaging with their customers. Engaging with customers forms the core foundation for the consumer-brand relationship, establishing trust and transparency from the very beginning of the customer journey.

Half of the consumers surveyed ranked trustworthiness as the top factor when it comes to their bank, whereas only 15% of surveyed marketers thought the same. This highlights the gulf between what marketers deem as important, and what consumers value. When engaging with customers is done poorly, it has a detrimental effect on the way they view the brand, diminishing customer loyalty.

Brands must engage customers in a way that creates a relationship strong enough to withstand turbulent times. Financial institutions have a responsibility to keep their customers informed and educated about the macro economic conditions that will impact them at an individual level – keeping customers at the heart of every action they take. This form of thoughtful customer engagement strategy can inspire customer loyalty and boost retention.

The research from Braze shows that many banks are underperforming when it comes to customer engagement, demonstrating overconfidence. 84% of the EMEA surveyed marketers questioned said that customers are very or extremely satisfied, however more than half of the surveyed customers disagreed.

How do they fix it?

One thing that many banks are doing is over-messaging consumers. The frequency at which messages are sent impacts how your brand is viewed and the value they place on the messages sent to them. Braze’s research shows 60% of consumers prefer to receive communications from their financial services brands less frequently than once a week. Instead, banks must employ a more sophisticated approach to their customer engagement strategy, which is more personalised and tailored to the way customers are choosing to interact with the brand. For example, sending messages after a consumer takes a key action (e.g. begins the process of applying for a credit card but doesn’t finish) can be far more effective than sending messages at a specified time. Braze research shows that this action-based approach can increase conversion rates by 12 fold and open rates by 30% on email and 25% on direct push notifications when compared to time-based campaigns.

This is a simple fix for banks. Having a well-thought-out customer engagement strategy is essential to ensuring that you are not overmessaging consumers.

Simply refraining from overmessaging consumers is not enough for brands to build customer loyalty. They must also ensure that the messages sent are full of valuable insight. Consumer satisfaction with their bank is at 87% among those who feel they receive relevant communications. This is also easy to resolve by implementing a thoroughly considered customer engagement strategy that builds on the consumer–brand relationship.

To provide insightful engagement that adds value to consumers, you must understand what is important to them, but as highlighted by Braze’s research, not all banks understand what interests their clients. For banks to fully comprehend what clients want and how they interact with products, they must begin activating the firstparty customer data that financial institutions have available at the tip of their fingers.

Suppose your engagement strategy is led by the things that consumers are interested in. In that case, they will inevitably be more insightful to any messaging or notifications and therefore valued more by consumers. If consumers gain insight from the engagement, they begin to grow a relationship with the brand, which is exactly what banks need to weather the cost-of-living storm.

Banks have a wealth of first-party data available, and we know that activating this data to provide personalized engagement deepens the relationship between consumer and brand, simultaneously allowing marketing teams to provide insight that resonates better with individuals. If your engagement is based on a consumer’s specific situation, it will add more value to them than a general one size fits all message.

Increased interest rates, the costof-living crisis, and banks needing to remove goods to stay alive will all put pressure on consumer relationships. Banks will also increasingly become a source of bad news and sorrow, putting a strain on how they interact with clients. Taking even small steps can significantly impact their customer loyalty and give them a solid foundation to continue their battles with the newer challenger banks.

Magith Noohukhan Head Customer Engagement Evangelist at Braze

“As Head Evangelist at Braze, Magith Noohukhan addresses the company’s global vision for customer engagement and how Braze can help brands feel empowered to create more meaningful, human conversations with their customers. Prior to joining Braze, Magith held Evangelist positions across Germany at XING and Indeed.com and has more than 10 years of marketing experience. He is currently based in London.”

The truth about blockchain

The collapse of FTX last year hasn’t helped the reputation of blockchain. But blockchain is more than just cryptocurrency. So what is it? And why should you care?

Blockchain is a technology that can be described as a collection of digital records, like a database, where the records are linked to each other, where they’re strongly resistant to being altered and where the records are protected using cryptography.

I’ve been working with the technology for several years and in 2021 I cofounded a climate tech company that is bringing blockchain to the voluntary carbon markets.

The most important attribute of blockchain is that it’s decentralised, so information is shared among every participant in the blockchain. It’s impossible to change, since every participant has a copy of the record. It’s autonomous, so participants can transact without involving governments, banks or other third parties. Blockchain is transparent, with the records publicly available for everyone to see. And finally, blockchain is highly secure, thanks to cryptographic algorithms and the mechanisms of consensus and decentralisation.

Many consider blockchain to be the next version of the world wide web, or web3. Specific applications of this technology include cheaper crossborder payments and remittances; high-integrity audit trails in financial contexts; supply chain management; or for the purchase or trading of carbon credits, which is what my company, Thallo, offers.

Myth 1 – Blockchain is a scam

Unfortunately, blockchain is still most frequently assumed to mean cryptocurrency. But cryptocurrency is only one application of blockchain technology, just like Facebook, Amazon, Netflix or Google are specific applications on the internet.

The vast majority of cryptocurrency is not used for criminal activity. According to a recent report by Chainanalysis, criminal activity represented 0.34% of all cryptocurrency transactions (roughly $10bn of transfers) in 2020. According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity.

Of course, the collapse of FTX has some people worried about crypto and blockchain. To prevent systemic failures and financial contagion, consumers need to be able to inspect and verify the assets underlying a blockchain protocol. However, there are powerful tools to do this, like Chainlink’s Proof of Reserve offering.

Myth 2 – blockchain isn’t secure

It is extremely difficult to attack a blockchain, especially if the blockchain is sufficiently decentralised. To alter a proof of work chain such as bitcoin, an attacker would need to gain 51% of all the power in the network. In the Bitcoin network, that means a single entity would need to gain control of more than 5,000 separate nodes (which are often anonymous) all at once. The more power securing the network, the less possible it is for one entity to have access to enough energy to successfully attack bitcoin, and the more costly an attempt to create a divergence.

Ryan Gledhill co-founder and CEO Thallo

Proof of stake security does not depend on power, but rather access to validators, which are selected at random to add new blocks (information) to the chain (ledger). To attack a proof of stake chain, one would need to control 51% of the entire list of validators. It would be very obvious if someone attempted to accumulate enough validators to attack the chain, and could easily be stopped. If a bad actor is discovered, that validator’s stake is confiscated and re-distributed among the others. Finally, if somehow an attacker was successful, the community could vote to recover the chain to a state before the attack occurred.

Myth 3 – blockchain consumes a lot of electricity and has a negative environmental impact

It all depends on the consensus mechanism. Bitcoin’s high energy consumption, for instance, is inherent in its proof of work consensus mechanism. Proof of work networks are run by miners who compete to add new blocks of transactions to the network. These miners compete by trying to solve mathematical equations by chance, which consumes high amounts of computing power.

This does not apply to all blockchain designs. In a proof of stake consensus mechanism, network validators –which fulfil a similar function to miners in p roof of work mechanisms – support the network by putting up a token stake to determine which transactions are added as blocks to the blockchain.

As the proof of stake validators are not competing through computational power, but through economic resources such as network tokens, energy consumption is only a fraction of the consumption with proofof-work. Blockchain networks that use proof-of-stake mechanisms include Ethereum, Polygon and Celo – blockchains Thallo is currently building on.

Myth 4 – Blockchain is inaccessible and benefits only the tech-savvy

Blockchain’s raison d’être is the right to interact freely without any intermediaries. Blockchain came into existence to support secure, peer-topeer transactions without the need to place trust in third parties such as banks or government. In traditional internet and financial systems, thirdparty verifiers and central authorities are needed because one cannot simply trust everyone on the internet.

Blockchain changes this. Thanks to the creation of immutable and transparent ledgers, smart contracts and decentralised verification, blockchain cannot favour any of the participants of the system so everyone has equal rights and the system is inherently safe.

The next phase is for blockchain to be used alongside the underlying technology of familiar internet applications away from the end user, offering the benefits of blockchain to anyone in the world with a computer or smartphone.

Blockchain and Web3 technology offer a hopeful vision of the future: decentralised, secure and transparent. The very opposite of so-called Big Tech and the internet as it is today, dominated by a few giant players. Share on FacebookShare on TwitterShare on Linkedin