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editor
Dear Readers’
Welcome to Issue 63 of Global Banking & Finance Review. Whether you are a longstanding reader or joining us for the first time, we are delighted to bring you the latest insights and trends from the financial sector.
In our cover story, Sunil Kohli, Chief Executive Officer of Dhofar Insurance, discusses "Putting Customer Centricity at the Core of Development." Since its establishment in 1989, Dhofar Insurance has grown to become one of the largest insurance companies in Oman. My conversation with Sunil Kohli explores the pivotal decisions that have driven their impressive growth and continued success. (Page 24)
Turn to "Is ‘Courage’ the New Buzzword?" by Helena Müller, VP Banking Europe at Diebold Nixdorf. In today’s complex economy, financial institutions face immense pressure to adapt and innovate. Müller examines how courage can be a pivotal trait for leadership, driving proactive approaches, fostering innovation, and building consumer trust in the financial sector. (Page 20)
Next, we feature an exclusive interview with Xavier Cornella, CEO of Creand Group. With nearly 75 years of experience, Creand has maintained its leadership in customer assets under management and loan investment. The group’s focus on innovation, social, and environmental sustainability has been central to its operations and growth. This interview delves into Creand’s dedication to delivering value to its customers, employees, shareholders, and society as a whole.
Explore the world of AI with "The Good, The Bad and The Ugly of AI Chatbots." The rise of AI chatbot technology presents both opportunities and challenges for financial institutions. Akber Datoo, CEO and Founder of D2 Legal Technology, emphasizes the importance of implementing AI responsibly and effectively, with a focus on legal, ethical, and data privacy considerations.
At Global Banking & Finance Review, we strive to be your trusted source of insights and perspectives in the financial sector. Whether you are an industry veteran or a curious newcomer, there is something here for you. We value your feedback and invite you to share your thoughts on how we can better serve your needs in future editions.
Enjoy the journey through our latest issue!
Wanda Rich Editor
Stay caught up on the latest news and trends taking place by signing up for our free email newsletter, reading us online at http://www.globalbankingandfinance.com/ and download our App for the latest digital magazine for free on Google Play and the Apple App Store
Delia Pedersoli, COO, MultiPay
Ashley
BUSINESS
INCREASED RESILIENCE DRIVING BUSINESS VALUE: THE ROLE OF INTEGRATED DATA AND ANALYTICS IN MODEL RISK MANAGEMENT
Muzammil Shabudin, Head of Risk Advisory, SAS UK & Ireland
Unlocking business potential: The power of payment orchestration
Nathan Salisbury, Managing Director, Worldline Payment IQ and VP, Indirect Sales within Worldline
With potential change on the horizon for non-compete clauses, how can you protect your business’s confidential information?
Anna Birtwistle, Partner, Farrer & Co
Tom Cleeve, Associate, Farrer & Co
Is ‘courage’ the new buzzword?
Helena Müller, VP Banking Europe, Diebold Nixdorf
Manuel Blasini,
Ed Sherrington, Head of Product, Banking at Codat
Latin American Investment Horizon: Trends and Insights
Andrew Seiz, SVP of Finance, Kueski
Piers Williams, Global Insurance Manager, AutoRek
Michael Tansley, CFO/COO, AVANA Companies, LLC
Vikas Krishan, Chief Digital Business Officer, Altimetrik
Good, The Bad and The Ugly of AI Chatbots
Akber Datoo, CEO and Founder, D2 Legal Technology (D2LT)
Aaron Holmes, Founder and CEO, Kani Payments
Garry Robertson,
Shlomo Assa Chairman, Co-Founder, President, and Chief Technology Officer Acclaro Medical and UltraClear Laser
AI Data Gap causes problems for Small Financial Institutions
Al Pascual, Cybercrime Expert, Founder, Inventor, and Advisor, BioCatch
Creand Group: A Model of Committed Banking
Interview Cover Story
Xavier Cornella, CEO, Creand Group
America’s next top B2B payment method
Cash and checks have long dominated B2B payments in the US. Despite high costs and long processing times, the transition to faster & cheaper means of payment has been long and slow.
But the tides are turning. AFP’s 2022 Digital Payments Survey reported that checks and cash make up 33% of all business-to-business (B2B) payments in the U.S. and Canada. That’s a significant drop from 51% in 2016, and an alltime low since AFP began tracking this data in 2004. At the same time, 33% of B2B payments still represent over $9 trillion, and therefore a huge opportunity for those that can capitalize on the continued shift.
What will fill the void? As a follower of industry news, you may point to the launch of the Federal Reserve’s instant payment method FedNow, which promises to revolutionize the payment process by facilitating real-time transactions, not unlike The Clearing House’s real-time payments (RTP). However, FedNow’s success hinges on its widespread adoption by banks, a critical step towards offering a viable alternative to the entrenched practices of checks and Automated Clearing House (ACH) payments.
While early providers of the FedNow service are planning to receive real-time payments, few plan to adopt “send” capabilities, according to Forbes . As such, despite the excitement around FedNow and RTP, widespread adoption of it is unlikely to come any time soon.
Meanwhile, there has been a noticeable uptick in B2B card payments, a trend poised for acceleration. The catalyst? The growing adoption of virtual cards.
Virtual card is the new king – here’s why
There are more than a few reasons businesses are ditching traditional payment methods for this more modern alternative.
Let’s start with one of the most important benefits of virtual cards over cash, checks and plastic cards – the access to credit lines.
Virtual cards provide easy access to credit lines, allowing businesses to improve their working capital position while also paying suppliers sooner. Quicker settlement balances the higher acceptance cost of card payments for suppliers, while access to credit provides paths to growth for businesses that aren’t available with checks and cash.
always had physical credit cards linked to a credit line, but it isn’t practical to give credit card details to all of their suppliers. Virtual cards are suitable for B2B payments because, although it’s essentially the same credit line under the hood, each supplier receives unique details, so suppliers can charge only what they are owed, simplifying the process for finance teams.
There’s also the incredibly important issue of security. Check and ACH fraud trends are rising. In fact, checks are the most targeted payment method for fraud within B2B payments, according to NACHA. A 2023 report by AFP shows that organizations reporting incidents of ACH or check payments fraud stood at over 65% at the end of 2022.
The issue of fraud only worsens with RTP, as we’ve seen in other countries like the U.K., which saw a significant jump in fraud cases following its Faster Payments launch.
On the flip side, virtual cards are issued with a unique 16-digit card number that expires when the payment is completed or when the allocated time frame is reached, creating a significantly lower risk of potential fraud and misuse.
Beyond the financial mechanics, virtual cards can enrich the B2B payment experience with added perks, like rewards, rebates, and expense management tools, adding layers of value that extend beyond the transaction itself. This holistic approach underscores the growing appeal of virtual cards in the B2B domain.
So, what’s the catch?
Some will argue that acceptance fees are blocking more widespread adoption of virtual cards. But as awareness of the benefits increase, and with the prospect of lower fees driven by the bipartisan Durbin-Marshall Credit Card Competition Act, it is an argument that is getting weaker.
If the act gets signed into law, it could save merchants and their customers at least $15 billion a year, says Doug Kantor, general counsel of the National Association of Convenience Stores. The Senators leading the bill also sent a letter to Visa and Mastercard last fall calling for a reversal of plans to increase credit card swipe fees on merchants and consumers, which would cost American businesses and merchants an additional $502 million annually.
The way forward for B2B payments
There’s a phenomenon in commercial banking where new, innovative payment methods are introduced while the ones already in play are not being used to the fullest extent – why?
B2B payments are often intertwined with complicated workflows, and changing processes can be difficult.
But ultimately, we need to drive B2B spending out of the dark ages and onto more convenient and secure methods.
As we stand at the crossroads of payment innovation, it’s tempting to chase the allure of shiny new tech, like FedNow or RTP. But perhaps the answer is closer at hand?
Virtual cards offer a viable, attractive option for businesses & their suppliers. They may just be what brings America’s B2B payments up to par with the rest of the world.
Ed Sherrington Head of Product, Banking Codat
INCREASED RESILIENCE DRIVING BUSINESS VALUE: THE ROLE OF INTEGRATED DATA AND ANALYTICS IN MODEL RISK MANAGEMENT
Whilst latest market indicators may suggest recent volatility and uncertainty are cooling, the persistent threat of sudden market shocks are now a seemingly constant challenge for UK financial institutions. So, a sharp board-level focus on operational resilience – by design – is key.
To achieve this, there is an array of different elements organisations need to consider. From how they can remain competitive, to avoiding regulatory penalties – establishing more robust data and model risk management (MRM) practices are central to long term success.
A changing landscape
We are all aware of the MRM regulations that are due to come into force in a matter of weeks and this will be a key moment for the UK financial services industry.
From 17 May 2024, organisations in scope must abide by the Bank of England’s Model Risk Management Supervisory Statement SS1/23, a set of principles that outline the regulator’s expectations regarding firms’ MRM practices.
These regulations come after years of calls for the industry to do more to stabilise itself in the wake of the Global Financial Crisis and subsequent market shocks. Only last year we saw the collapse of Silicon Valley Bank and Credit Suisse – highlighting that no organisation is immune from the impact of ineffective governance processes.
Despite The Bank of England having been firm that the UK’s banking system is robust , it did admit that any lasting impact on bank funding costs could harm the nation’s financial stability, warning the impact of financial market volatility could expose weaknesses in the UK’s financial system.
Data quality and evolving technology
To avoid regulatory penalties, organisations need to be investing in technology that can enable integrated and more explainable decisionmaking. Alongside pressure from regulatory bodies, research has found that the financial cost of poor quality data typically costs organisations between 10% and 30% of revenue. This is due to the additional risks that emerge from a lack of data lineage and governance, including inaccuracies in source system design and underlying control issues.
There’s also the non-monetary costs to consider such as strategic decisions where the benefit of diversity of thought is limited, increasing the risk of reputational damage. According to Experian’s 2021 Global Data Management Research report , 95% of businesses have experienced such impacts related to underlying poor data quality.
Specifically, navigating poor quality across the data lifecycle is a common challenge for UK banks, due to many well-known reasons. From many of the long-established financial institutions, problems range from over-reliance on legacy systems and siloed data, to data integration projects taking years to complete –given the impact of make- or breakcareer decisions, it’s sometimes just too high a risk for executives to run.
However, with AI-based models being used to increasingly inform strategic decision-making and automate operational processes, executives need to know the business can quickly identify and manage the risks associated with the use of artificial intelligence (AI) in modelling techniques such as machine learning ( ML ), but not everyone has a statistics degree. Should underlying data errors go unnoticed, a single
anomaly can amplify and become much more difficult to fix – especially if the organisation is unsure where the error even originated.
Hence AI-model governance is one of the issues SS1/23 is aiming to address, with five key principles to ensure an effective model risk management (MRM) framework at the institution- and sector-level. These require a number of governance enhancements, including having to report on the effectiveness of MRM processes to the Audit Committee and appointing a single person to be responsible for the MRM framework.
Regardless of the quality of the data that goes in, if institutions are not continually reviewing their processes around model development, usage and reporting, there is a chance that these models become unfit for purpose over time. Effectively designed, carefully operated and appropriately validated model management processes are therefore central to a fit-for-purpose Enterprise Risk Management Framework.
Ensuring a level international playing field
SS1/23 largely follows regulation SR117 in the US, which for over a decade has been the set of governing principles regarding effective and robust MRM. The objective of the UK regulation is similarly to increase the overall stability of the UK economy. The European Banking Authority may choose to enforce similar regulations in time, perhaps after reviewing the impact of the introduction of SS1/23 on internationally active financial institutions.
The UK principles are intended to complement existing requirements and supervisory expectations, whilst addressing specific recently observed international shortcomings, in order to reduce the probability and severity of future similar crises across the UK and global financial sector.
However, forecasting and risk models can only work if the governance framework in which they operate ensures that any amendments or recalibrations that need to be made are identified in a timely manner. Hence the PRA’s consultation period with UK institutions prior to the finalisation of SS1/23, where responses were sought from domestically-focused as well as internationally active institutions. Good governance impacts all key decisions that any bank will need to make across their operating territories, such as strategic initiatives, financial performance, risk management, outsourcing and remuneration, which is why the impact of SS1/23 on UK and international operations is just as important as the guidelines themselves.
The new principles make boards explicitly accountable for promoting good MRM culture from the top down, setting clear model risk appetite, approving the MRM policy and appointing an accountable individual to be responsible for implementing a sound MRM framework. Many institutions have therefore promoted model risk into the ‘Level 1’ category – requiring the most direct level of board oversight, again, by design.
Taking action
SAS works with organisations across all aspects of the financial services sector, having partnered with over 80 banks to implement robust MRM processes.
With the Bank of England’s Model Risk Management Supervisory Statement SS1/23 coming into force on 17 May, which will apply to all UK banks, building societies and PRA-designated investment firms with internal model approval, now is undoubtedly the time for firms to adopt a more strategic approach – not only to MRM but across risk management, governance and control, to meet supervisory expectations and maximise opportunities to drive business value from regulatory compliance.
Muzammil Shabudin Head of Risk Advisory SAS UK & Ireland
Latin American Investment Horizon: Trends and Insights
During the first half of 2023, we saw a significant pickup in activity when the market reopened for IPOs in September. Latin American (LatAm) companies were able to tap almost $2 billion in equity funding in the five months leading up to November – nearly twice as much as the first half of 2023.
The late-in-the-year market activity of 2023 should bode well for 2024. The Fed funds rate has most likely peaked and it is really a question of what magnitude it should decline this year. Below is what could transpire in the LatAm investment space during 2024:
Boost in Latin American Venture Capital Funding
With the Fed funds rate peaking at 5.25 percent to 5.5 percent and rate cuts anticipated by July of this year, inflation in the U.S. and other key markets is likely to continue to subside.
This should be good news for venture capital funding in LatAm, given the broad correlation with the U.S. rate cycle and risk appetite for emerging markets. Within Latin America, Mexico and Brazil will likely be at the forefront of this focus given their market sizes, underbanked populations, urbanization, and demographics driving growth.
Investments in Consumer Credit Fintechs
There was an expectation that rising interest rates would increase delinquencies in consumer and corporate credit. As such, fintechs operating within this space were considered vulnerable – especially those which had longer duration assets and/or a reliance on market sensitive funding. Largely consumer and corporate credit remained relatively resilient (at least so far)
given that the economic slowdown induced by high rates has been relatively shallow. Although there are exceptions, fintech business models and underwriting practices demonstrated resilience and an ability to adapt to changing business cycles. A resilient private credit market has enabled borrowing costs for venture stage companies to remain, for the most part, competitive.
Assuming we’ve avoided a recession, borrowing costs will become more accessible, which should encourage increased consumer interest. And because data showed that these portfolios did not weaken as anticipated, investors will have more confidence in the sector. This shift is likely to attract more attention to companies in a position to secure funding more easily, especially in cases where the decline in valuations has been excessive relative to the risk profile.
Increased Interest in Closer-to-Home Markets And Nearshoring
Venture capital volumes in Latin America declined by 65 percent in the second quarter of 2023 compared to a year earlier as investors became more discriminating. As conditions stabilize, U.S. investor attention will naturally shift back to closer-to-home markets, with a gradual expansion to more distant opportunities in search of yields and riskier asset classes.
With geopolitical risks in Eastern Europe and the Middle East and ongoing concerns over growth in China, LatAm continues to stand out as a relatively safe haven. Moreover, the secular trend toward nearshoring and bancarization, which favors a wide range of sectors in LatAm including infrastructure, logistics, and consumer credit should be in place for the next five to 10 years.
Andrew Seiz SVP of Finance, Kueski
Beyond geographic proximity, Mexico in particular offers a large, low-cost labor force and free-trade agreements with the U.S. and Europe – all of which should facilitate high levels of FDI and a closer trade partnership with the US.
Generative AI – Multiple Applications within the LatAm fintech space:
Generative AI (GenAI) can play a crucial role in fraud detection and prevention within the financial sector, providing crucial support to financial institutions in mitigating potential harm. It also supports comprehensive risk evaluation and therefore makes better use of existing large data sets – to help inform better credit and pricing decisions. At the same time, GenAI should help facilitate better investment decisions. Expedited research endeavors should allow investors to conduct better company, industry and macro analyses.
The strong performance of asset markets so far in 2024 should bode well for Latin American venture capital funding this year. The backdrop should be healthier and more sustainable compared to the 2020/2021 period with investors being more selective and looking for business models with proven resiliency in jurisdictions benefiting from favorable secular trends.
Pay By Bank – A New King Arises
Payments have never been and will never be static. As technology, security, and consumer demands evolve so do payment methods. While card payments may rule the roost today, their days are already numbered.
What will supplement card payments is still up for debate, however some strong contenders are arising. Built to deliver business benefits to retailers and an enhanced customer experience (CX), Pay By Bank is one contender with eyes on the throne.
The new king in town
For those who haven’t heard of Pay By Bank before, it is an alternative payment method (APM) that requires no additional downloads for a customer. Instead, when in-store and at checkout, a customer selects Pay By Bank as a payment option. They then scan a uniquely generated QR code on the checkout terminal, opening the customer’s banking app. From there, with one click, customers can authorise the payment. A bank-to-bank transfer then sends funds instantly to the retailer’s account.
Data from the British Retail Consortium (BRC) found that APMs already account for 5% of all transactions in the UK. At the same time, research from EY discovered that 85% of US merchants expect to accept new APMs in the next three years. As demand for APMs rises across the world, Pay By Bank is well on course to be at the forefront of the queue to replace card payments.
Turning zero into a hero
However, it is not just rising demand for APMs that makes Pay By Bank a challenger to credit card payments. The evolution of consumers is equally important. In recent years we have witnessed the rise of “ zero consumers ” who have no brand loyalty and no patience for bad service. This lack of patience for bad service makes Pay By Bank a powerful tool in retailers’ arsenals. Offering a quick and easy checkout process that bypasses the need to enter card details or navigate cumbersome checkout procedures provides a hassle-free way for consumers to pay, significantly boosting the overall customer experience.
Offering a new and easy way to pay is not the only way Pay By Bank boosts CX. Connecting seamlessly with existing loyalty programmes means data and insights generated by Pay By Bank payment systems can easily be used and combined with online payment data for a full 360-degree view of the customer. With a more detailed view of each customer merchants can provide tailored offerings and promotions that enhance customer relationships and prevent customers from becoming zero consumers.
Operational savings without a CAPEX cost
While Pay By Bank’s enhancements to CX are very impressive, possibly the biggest benefit it offers is operational improvements. Firstly, Pay By Bank provides significant cost savings to merchants by eliminating interchange and scheme fees. These savings can then be used to drive growth, improve operations, enhance CX, or simply added to the bottom line.
Secondly, Pay By Bank also sees funds instantly transferred from the customer to the merchant’s account. Having funds arrive instantly provides accurate and realtime visibility into revenue and quick access to reserves. Furthermore, as funds flow seamlessly between accounts, there is a minimised exposure to fraud, further reducing operational losses.
Accessing the advantages Pay By Bank offers doesn’t have to break the bank, either. It is a versatile solution that meets retailers’ immediate requirements and lays the groundwork for future advancements. Working with the right technical partner, retailers can seamlessly integrate Pay By Bank into existing hardware and software payment systems. This eliminates the need for substantial capital investment, improving Pay By Bank’s ROI.
Too good to be true?
Is Pay By Bank too good to be true? Well, Pay By Bank is already in use with millions of consumers each day. Over in Sweden, for instance, the Swish payment platform, an early version of a Pay By Bank type system, has 8 million users, with the average user making over 10 transactions in May 2023 alone. With the arrival of newer systems, retailers worldwide can now quickly and easily deploy their own Pay By Bank solution and begin taking advantage of its benefits.
Ultimately, payments are constantly evolving. Retailers must be ready to adapt and offer the latest payment method to maintain a positive relationship with the new breed of “zero consumers”. The good news with Pay By Bank is that it is available now, is quick and easy to install, and provides power features that can transform today’s retailers. While card payments may rule the roost now, no merchant can afford to miss out on the next payment king.
Delia Pedersoli COO, MultiPay Global Solutions
Unlocking business potential: The power of payment orchestration
In the dynamic realm of financial transactions, payment systems continuously evolve to address the intricate challenges within the customer purchasing journey. With numerous gateways, processors, and payment methods, coupled with persistent concerns about fraud and security, navigating the complex landscape of payments is a formidable task. This game demands payment providers to remain agile and adaptable as the rules are ever-changing.
Amidst the complexities of diverse payment methods, seamless transaction facilitation, evolving consumer preferences, and regulatory compliance, payment orchestration (PO) emerges as a powerful solution for businesses. Payment orchestration simplifies the management of all payment operations through a unified platform. This not only streamlines operations but also enhances payment success rates, improves customer experience, and ultimately drives revenue growth.
Streamlined Scalability and Market Reach
One of the primary advantages of payment orchestration is its ability to streamline the payment process. By consolidating all Payment Service Provider (PSP) connections into a single platform, businesses can eliminate the need to juggle multiple interfaces and systems. This consolidation results in a simplified payment process and a better-organised workflow, making it easier for merchants to manage their payments. Notably, even smaller businesses with limited resources can benefit from this advanced payment management solution, as it requires minimal development resources to implement and operate, especially when utilised through a hosted checkout page.
Furthermore, the integration of smart routing enables merchants to dynamically direct payments based on specific criteria such as card type, transaction location, bank success rates, and transaction time. This not only increases approval rates and decreases transaction costs but also ensures uninterrupted transactions, thereby optimising the payment process.
Fortified Security and Compliance
Payment orchestration enhances security and compliance in financial transactions through seamless integration of Know Your Customer (KYC) checks. This additional layer of security verifies customer identities before transactions are processed, guarding against fraudulent activities and ensuring adherence to international anti-money laundering regulations.
KYC checks play a pivotal role in mitigating the risks associated with identity theft, account takeovers, and financial fraud. They also contribute significantly to regulatory compliance, safeguarding businesses from penalties and reputational damage. Leveraging advanced technologies like artificial intelligence and machine learning, payment orchestration platforms streamline KYC verification while maintaining accuracy and security.
In summary, integrating KYC checks within payment orchestration fortifies transaction security, ensures regulatory compliance, and instils trust among customers amidst increasing cyber threats and regulatory scrutiny.
Harnessing Advanced Technologies for Fraud Prevention
Using advanced technologies, payment orchestration strengthens security measures by integrating anti-fraud providers and rules within its systems. These tools continuously scan and analyse transaction data in real-time to detect and prevent suspicious activities, employing techniques such as pattern recognition and anomaly detection.
By scrutinising transaction amounts, frequency, location, and user behaviour, these systems swiftly flag and halt suspicious transactions, safeguarding businesses from financial losses and preserving customer trust. Furthermore, payment orchestration platforms continually evolve their fraud prevention mechanisms in response to emerging threats, staying ahead of fraudsters through ongoing monitoring and analysis.
Nathan Salisbury Managing Director of Worldline Payment IQ and VP of Indirect Sales within Worldline
The streamlined payment process facilitated by payment orchestration directly impacts scalability by reducing operational complexity and optimising resource utilisation. This enables businesses to seamlessly scale their transaction volumes without incurring excessive operational overheads, essential for expansion and accommodating spikes in transaction volumes.
In essence, payment orchestration is the cornerstone of modern payment infrastructure, offering businesses a comprehensive solution for managing diverse payment operations with unparalleled scalability, security, and efficiency. By centralising Payment Service Provider connections and implementing smart routing, payment orchestration simplifies workflows and enhances operational agility, enabling businesses to adapt to fluctuating transaction volumes and evolving customer demands with ease.
Beyond transaction facilitation, payment orchestration integrates advanced technologies and value-added services such as Know Your Customer (KYC) verification and fraud prevention measures. These features not only bolster security but also ensure regulatory compliance, safeguarding businesses from potential risks and penalties associated with non-compliance. Leveraging artificial intelligence, machine learning, and data analytics, payment orchestration platforms continuously refine their fraud detection capabilities, staying ahead of cyber threats and fraudulent activities.
In the rapidly evolving digital landscape, payment orchestration emerges as a strategic asset for businesses looking to optimise efficiency and drive sustainable growth in an increasingly competitive market environment. By embracing the transformative power of payment orchestration, businesses can streamline their payment processes, mitigate risks, and unlock new opportunities for innovation and expansion. Whether it is enhancing customer experience, improving operational efficiency, or ensuring regulatory compliance, payment orchestration empowers businesses to navigate the complexities of the digital economy with confidence and resilience. In this era of rapid technological advancement and digital transformation, payment orchestration stands as a beacon of reliability and agility, enabling businesses to thrive in an ever-changing landscape.
With potential change on the horizon for non-compete clauses, how can you protect your business’s confidential information?
Over the last 12 months, “non-competes” – clauses which prevent an individual joining a competitor for a certain period following termination of employment – have been the subject of considerable debate in both the US and the UK. In particular, there have been several developments in the US’s approach to non-competes – but how significant are these? And will we see similar changes affecting UK policy moving forwards?
US reforms
On 23 April 2024, the US Federal Trade Commission (FTC) voted to ban non-compete provisions for the majority of individuals. Subject to any legal challenges, the ban will take effect 120 days from publication in the Federal Register, which is expected to take place imminently.
Although non-competes were already banned in certain states, most famously California, a federal ban is a significant step. This new ban will apply countrywide and overrule conflicting state laws. It is also wide-ranging and covers not only employees but also workers, independent contractors, and volunteers.
Assuming the ban comes into force, any individuals who are currently subject to non-competes will no longer be bound by them – save for a limited exemption for qualifying senior executives and it remaining permissible to include non-competes in business sales and franchisor/franchisee agreements. The ban excludes senior executives who earn $150,000 a year, are in policy-making positions, and have an existing non-compete in their employment contract. For those individuals, their current non-competes will remain enforceable. However, once introduced the ban will prevent new noncompetes for all individuals regardless of seniority or salary.
The FTC’s ruling is already the subject of legal challenge by the US Chamber of Commerce and other trade groups. They have filed a lawsuit requesting that the ruling be declared unenforceable and that individual states be able to determine how non-competes are governed. As such, the ruling may not be enforceable until those lawsuits are resolved.
Proposed UK reforms
By contrast to the US, the proposed reform to non-competes in the UK does not go as far as an outright ban. Instead, in May 2023, the current Government announced its intention to limit the maximum length of non-compete clauses to three months and confirmed:
• The three-month limit will only apply to non-compete clauses in contracts of employment and limb (b) worker contracts
• The limit will not interfere with employers’ ability to use paid notice periods or garden leave, nor will it change the position of confidentiality, nonsolicitation, or non-dealing clauses. It also won’t affect non-competes in equity arrangements, partnership agreements or shareholder agreements
• The Government has ruled out introducing mandatory compensation for the period of non-compete clauses
Anna Birtwistle Partner, and Tom Cleeve, Farrer & Co
Tom Cleeve Associate, Farrer & Co
Since the announcements last year, the Government has said nothing further on noncompete reform and the proposed 3-month limit has been thrown into further doubt in light of the upcoming general election on 4 July 2024.
So far, Labour has similarly made no mention of limiting or banning non-competes, notwithstanding their proposed significant shake up of UK employment law if elected; with examples including making unfair dismissal a “day one” right, creating a two-tier system of “worker” and “self-employed”, a ban on fire and rehire, and strengthening trade union rights.
Will the UK follow the US?
While it is possible that a Labour government would be influenced by the FTC’s recent ban, it is important to bear in mind that the UK and US labour markets have significant differences and the drivers behind the Federal ban in the US are not ones that necessarily apply in the UK.
Significantly, the prevalence in the US of noncompetes is on a wholly different scale and the FTC argues that they are widely used against people who work in low wage positions, such as in the hospitality sector. In the UK, non-competes would not generally be enforceable for people in those positions and are usually restricted to more senior roles.
That said, the Government estimates that around five million employees are subject to a noncompete clause and a typical duration is around six months. The FTC also highlighted that noncompetes are widely used in the US healthcare sector, whereas this is not the case in the UK.
How else can businesses protect confidential information?
The main aims of a non-compete are to protect a business’s confidential information and its client/ customer base. They are a useful tactic in an employer’s armoury for preventing employees who have detailed knowledge of a company’s confidential information and connections from immediately joining a competitor following termination.
On the other hand, some argue that for this very reason they prevent innovation, particularly in certain sectors such as technology and pharmaceuticals.
It is important to remember that there are other ways for a business to protect confidential information and that prevention is better than cure. As such, a well-drafted employment contract and robust operating policies can still provide effective protection even without a non-compete.
For instance, businesses should think carefully about what types of confidential information they have and ensure a tailored definition is used in their contracts.
It is also effective to require employees to sign up to other forms of restrictive covenants such as non-solicitation of clients/customers and employees, non-dealing with clients/customers, and an obligation on an employee to inform the company if they are approached by or receive an offer from a competitor.
In day-to-day operations, it also essential to ensure that only those who require sight of the information have access to it (for example, by password protecting sensitive information and marking documents as confidential).
Alongside this, policies such as an IT Acceptable Usage and Data Protection Policy which cover how information and data-sharing is governed will further support information security. These policies should cover issues including the removal of documents from the office, sending company property to personal email addresses, and downloading information to external drives. A breach of such policies should be explicitly stated as a potential disciplinary offence. These can be bolstered further by monitoring employees’ use of company devices –particularly in the context of exiting employees.
Finally, businesses can also include longer notice periods and the right to put an employee on garden leave during this time in their contracts (although this can be costly as the company will need to either pay the employee for the entirety of the notice period or pay in lieu of such period).
As is clear, then, there are many other ways besides non-competes for a business to protect its confidential information. In respect of non-competes in the UK, for now the position is very much watch this space.
Is ‘courage’ the new buzzword?
Helena Müller VP Banking Europe, Diebold Nixdorf
In today’s complex economy, financial institutions are under huge pressure to fulfil many roles while continuing to be consumer service ambassadors. From regulation and end-user expectations to sustainability agendas and delivering new technologies – the ability to deliver in so many areas simultaneously is a significant challenge for most providers in the industry.
Gone are the days of traditional priorities, and today’s progressive landscape requires a fresh outlook and way of working. Could courage be the pivotal word to help the industry effectively navigate this shift?
Leading from the front
Embracing courage as a leadership trait is the first step to moving the industry forward. It could be argued that courageous change is only possible in a permissive climate, and factors such as complex regulation and industry governance could inhibit the scope for progress. However, courage can take the form of evolution rather than reinvention. As long as strategies are clear, backed by data and empowered across the organisation, significant developments can be achieved.
Confronting changes and taking proactive approaches in an ever-fluctuating market can ensure that organisations are optimising market changes where possible. As opposed to being laggards and reactively responding to industry and economic variations, a forward-first approach can drive more valuable and effective outcomes for all.
The courage to think outside of the box
Stepping ahead with a gallant approach can also offer the opportunity to become a differentiator in the market. With a shift towards greater market stabilisation, the financial services climate is now conducive to igniting product and service innovation. Taking the courage to question the norm and challenging the mindset of ‘this is how we operate’ can create new consumer angles and fresh thinking.
Strategising growth opportunities in this way creates the platform for high-performing banks to step ahead. Although the playing field between incumbent banks and digital newcomers is levelling, competition is still intense. A global survey showed that 59% of people recently acquired a financial services product from a provider other than their main bank, highlighting the market share opportunities.
The industry has access to more innovation than ever before, and technology is creating the foundation for new services to be delivered. Advancements in areas such as AI have a host of applications to create new consumer services, for example, analysing customer intent to help build increasingly tailored offerings. Therefore, the opportunities for product and service progression are ripe for the taking but require a bold mindset and a true re-evaluation of the organisation to foster a culture of change and courage.
Championing consumer trust
The successful adoption of new services in the market does, however, require a solid foundation of consumer trust. We need to shift away from transactional relationships to something more meaningful. Digital solutions have no doubt added convenience and choice to our daily lives but have also pushed us towards more ‘faceless’ banking. Creating more meaningful interactions with customers is the way forward and requires the industry to champion consumer trust.
This involves better understanding customers and offering tailored advice and more personal interfaces. Research shows that 63% of consumers like seeing branches where they live and 67% turn to the branch to solve specific and complicated problems, highlighting the need to maintain a physical presence and connection with end users.
Breaking free of traditional best practices, financial service providers must realign the delivery of services, fostering collaboration rather than simple transactional banking. By applying the wealth of data banks hold on their customers and embracing technology, the aspiration must be to support consumers to achieve their monetary goals and take a more active and interconnected role within their lives.
Short-term view versus long-term gain
We have all seen how organisational change is already abundant within the industry, but are these changes significant enough to truly capitalise on the longer-term opportunities within - and outside of - the industry? Very often driven by the need for more immediate, short-term gains some decisions may not be conducive to building the road to a stronger future. Creating the ambition to leverage bigger market trends and truly committing to wider priorities, such as environmental, social and governance (ESG) agendas, requires the leadership and vision to create a forward-thinking culture.
Recent years have made this somewhat difficult as many resources have been focused on managing sizeable social, political, and economic changes. However, change will continue to be a constant and operating in a siloed or restrictive manner is unlikely to unlock new potential for growth or drive any competitive edge.
What is clear is that we need more flexibility for the future. Resilience will continue to be a strategic focus, and this requires an adaptive consumer offering and the determination to think and act differently. Organisations that wish to excel above their competition need to embrace a culture of calculated change and the spirit to be adaptive in a fluid market. The ability to withstand an unpredictable industry and economy requires new ways of thinking, and courage is at the heart of this visionary outlook for the future.
For firms operating in the insurance industry, transactional volumes and associated data is growing year-onyear. But managing this growth with spreadsheets presents an operational inefficiency as the industry continues to expand. This is worrying, with more than one-third of firms still relying on spreadsheets for their data matching and reconciliations. In today’s rapidly evolving landscape, the insurance market is increasingly turning to insurtech solutions to streamline operations, enhance customer experiences, whilst also remaining competitive.
Insurers are recognising the imperative to innovate to meet the changing needs and expectations of customers, which is partially being driven by a new generation of clients that have greater technology literacy. Many are actively seeking partnerships and collaborations with insurtech startups to leverage innovative technologies such as artificial intelligence (AI), data analytics, intelligent process automation, and machine learning. Not only does this
Why the need for insurance firms to innovate cannot be overstated
allow insurers to stay ahead of the curve, but it also increases profits and provides enhanced insurance solutions to their customers.
What innovations are being driven by fintechs in the insurance space?
When considering how to embrace digitalisation, there needs to be a holistic approach with integrated technology. We have seen a notable shift away from one-size-fits-all solutions to engaging with best-inbreed solutions for each business area and use case. Insurers must begin thinking outside the box to stay competitive in the digital age.
Fintech and more specifically insurtech firms are playing a key role in transforming the insurance industry by offering innovative solutions that address various pain points and inefficiencies. For example, fintech companies are leveraging intelligent data analytic tools to analyse large amounts of data and extract valuable insights. By
harnessing data analytics, this allows insurers to understand customer behaviour better, assess risk more accurately, and personalise insurance offerings. Furthermore, fintech firms have developed automation technologies that streamline the premium and data processing workflow, reducing administrative overhead and accelerating cash flow. With features such as real-time reporting, connected workflows, and advanced rule sets, insurance firms can unlock capital and recognise revenue quickly and accurately.
Technology is also transforming the ways financial data flows are managed, overcoming challenges with data volumes, quality and varying formats. Effective financial data management can help finance operations functions streamline their processes whilst increasing efficiency and control. For financial reporting functions, effective financial data management can ensure the accuracy of reporting and enable real-time reporting, facilitating datadriven decision-making.
Global Insurance Manager at AutoRek
Aside from implementing the latest technology, there has been a wave of insurtechs innovating the operating model of insurance organisations, actively challenging the incumbents in the market. They directly compete with insurance firms and are targeting the same market share. This is notable on the distribution side of the market, with the emergence of new technology-enabled Managing General Agents (MGAs) and Managing General Underwriters (MGUs). Many of these newer firms have built their businesses off the back of shortcomings of traditional market players, particularly within the personal lines and SME commercial risk space. To ensure success and longevity, it is important organisations embrace – rather than compete with – these firms.
How to accelerate your insurance innovation journey
Increasingly insurers are leveraging digital ecosystems where complimentary technology vendors work together and excel in their area of focus, whilst providing a connected environment that streamlines data, breaks down silos between teams and enables a truly digital operating model. If insurance firms can deliver a modern, market-leading back and middle-office infrastructure they will be well-positioned to better serve their customers and fend off digital competitors with comparable offerings while using the considerable capital resource and reputation in the marketplace.
No-code, flexible, rules-driven solutions are crucial for any organisation’s medium to long-term objectives. Firms need to innovate and evolve in line with changing market conditions rather than standing still and getting left behind. Therefore, it’s vital that technology is flexible enough to accommodate these changes and adapt over time. This is where the power of no-code comes in, enabling business teams to evolve their solutions and financial operations processes.
As well as this, AI has been a game-changer for the insurance industry. Mainly because firms are able to deploy the technology to real-world business scenarios. AI will present many opportunities to insurance firms such as streamlining operations, most of which are still to come. However, in the short term, AI can enable skilled staff to complete more tasks in less time, driving increased productivity and efficiency.
Another way for insurers to remain competitive in the digital age is through e-trading platforms. While these platforms have been present for some years within specific distribution chains, a significant portion of the market uses legacy operating models, which can result in many challenges and operational inefficiencies. Fortunately, there are many solutions entering the market to assist with streamlining both the business-to-consumer (B2C) and business-to-business (B2B) distribution processes, facilitating the connection and streamlining of premium and claim payment processing operations.
What does the future hold for insurance firms?
The insurance industry is undergoing a significant transformation driven by technological innovations and consumer expectations. To ensure longevity and success, it is important for organisations to embrace partnerships with insurtech startups and leverage the capabilities that they offer, rather than competing with them. This will ensure insurers stay ahead of the curve and meet evolving consumer demands. It is no longer an option for insurance firms to avoid leveraging innovative technologies. Instead, it is a necessity.
Piers Williams
Sunil Kohli Chief Executive Officer
Dhofar Insurance
Dhofar Insurance’s CEO on Putting Customer Centricity at the Core of Development
Dhofar Insurance was registered as an Omani Public Joint Stock Company incorporated in the Sultanate of Oman on the 5th of September, 1989. The company’s principal activity comprises the writing of all classes of insurance. Since its establishment 25 years ago, the successes of Dhofar Insurance have continued to this day. It is now recognised as one of the largest insurance companies in Oman in terms of premiums and capital, and was announced the winner of Best General Insurance Company – Oman at the 2024 Global Banking & Finance Awards. Wanda Rich, editor of Global Banking & Finance Review, spoke with the Chief Executive Officer of Dhofar Insurance, Sunil Kohli, to gain some insight into the strategic decisions that have been pivotal to its success.
“Dhofar Insurance embarked on a transformational plan three years ago, focusing on customer centricity and various actionables with milestones,” he said. “The focus was on digital transformation, distribution channel management, customer service delivery mechanisms and product innovation.”
Every industry is undergoing transformation thanks to advances in technology, and the insurance sector is no exception. For Dhofar Insurance, it is important to balance technological innovation with traditional customer service according to the wants and needs of customers, and it takes an earsto-the-ground approach to remain abreast of current demand. “We do customer surveys on a periodic basis to gather feedback on their preferences,” Sunil revealed. “We balance digital versus traditional customer service accordingly. From their feedback, we have observed that as of today, a large percentage of customers prefer traditional customer
service while the preference for digital services is increasing. We are flexible on this and provide both options to our customers, since they want to experience both solutions on a product-to-product basis.”
He went on to name some more of the key measures the company has taken to utilise this data to ensure customers are receiving the best customer experience possible. “We have taken feedback on various aspects to understand customer needs and preferences,” he explained. “We have focused on developing new products to fulfil customer needs, optimising various processes to make the customer journey easy, digitalising many processes for better customer experience, governance, control and delivery, and developing the skills of our employees via training, mentoring, and educational certifications for better understanding of the subject matter.”
This customer-centric approach lends itself well to all areas of the business, including product and service development. As customer needs evolve as rapidly as the market itself does, Dhofar Insurance is tackling the challenge of staying ahead by developing solutions that meet these changing demands. “The answer is listening to the customers on a regular basis,” he said. “By being in touch with the customers, taking their feedback and being open to ideas, we keep ourselves aware of their requirements and develop products according to that. We also have strong, long-term relationships with leading reinsurers of the world. We engage with these reinsurers, as well as various experts, to keep ourselves aware of new trends, products and developments in other parts of the world. We study those and the suitable ones are brought to our market.”
One dominant trend shaping the insurance industry in Oman, as well as globally, is the climate crisis. Wanda asked Sunil how Dhofar Insurance is positioned to adapt to this challenge. “The world is facing many challenges due to the enhanced frequency of environmental disasters brought about by cyclones, typhoons and heavy rains as a result of climate change. The insurance industry, being part of the risk management mechanism, is getting affected by the same,” Sunil said. “We are working with global insurance and reinsurance players to develop solutions that will mitigate risks associated with natural catastrophes. The effect of pandemics and other health-related events on the medical insurance and life insurance business is also shaping the market, globally as well as locally.”
Finally, while the strategy for the year ahead for Dhofar Insurance includes maintaining a balanced portfolio and working on new products, Sunil pointed out an additional area of focus that represents a key component of its business model: the socio-economic development of Oman.
“Corporate social responsibility is a very important part of the existence of any organisation, and more so an insurance organisation,” he affirmed. “Our basic purpose is to support society in times of distress, accidents or similar events. Dhofar Insurance has always been front and centre for fulfilling its duty to society. During cyclones and heavy rain events in the past, Dhofar Insurance team volunteers went to affected locations, helped people to come out of damaged areas, helped clean flooded houses and provided food and clean water. We also support many charities, hospitals and sporting activities as part of our CSR initiatives.”
The EU AI Act: help or hindrance to Financial Services?
The explosion of Artificial Intelligence (AI) and its capabilities has taken the world by storm. In fact, it would not be too much of a stretch to suggest that most people have now heard of AI and its business impact thanks to the coverage across mainstream media outlets , as well as potential doomsday scenarios predicted by Elon Musk. We have also seen the rise of ‘deep fakes’ where celebrity’s voice and/or image has been replicated by AI (Taylor Swift being perhaps the most notable), fooling many into believing they are video or the image of the person themselves. This has provoked serious concerns around AI and its potential use by fraudsters. It is against this backdrop that the EU AI Act has come into being, with the aim to help regulate the use of AI technology in the European Union. The Act in its current form requires producers of AI to meet strict standards for transparency, accountability, and human supervision. Although yet to become law, the Act intends to set clear legal requirements for the use and creation of AI tools.
The Financial Services industry in the EU and across the world is already strictly regulated and compliance is a fundamental tenet to operate. By contrast, some critics of the Act have suggested it is too open for interpretation. So, will the Act be a help or a hindrance to the financial services sector?
Expected to come into force in the summer of 2024, the EU AI Act has wide-reaching consequences for AI use within Financial Services organisations. The Act aims to standardise the rules for AI usage, development, market spread and adoption. The wide scope of the
Act has the potential to impact developers and deployers of AI systems based in the EU but also much further, to businesses with an office within the EU, as well as international companies that produce systems that are used within the EU.
Within the Financial Services Industry, multiple models are used to assess use cases ranging from individuals applying for loans, when checking their suitability for a financial product through to complex pricing models for Financial Instruments. These models require internal review and validation and must have the appropriate documentation that can be shared with the regulator where required. It is in these scenarios that the use of AI is viewed as particularly problematic unless properly regulated, due to the potential for bias in the technology’s development as well as the explainability of model outputs.
Striking the right balance
One challenge for European lawmakers lies in the very definition of AI. In fact, draft versions of the EU AI Act have already seen its definition amended several times. Having clarity on what AI is, will be central to the Act’s effectiveness.
Well-documented concerns around the potential for institutional and societal biases to be embedded in the creation of AI is also a key issue that the EU AI Act aims to address. After all, AI is only as good as the data with which it is fed, and if that data contains ingrained biases against gender, disability, age or other social demographics, then the output that AI creates will also have these biases, unless carefully constructed safeguards are put in place.
These valid concerns are again countered with the desire to take advantage of all that innovation through AI has to offer. We are yet to see compelling evidence that governance frameworks and conformity assessments will limit innovation. I would argue there is a compelling argument for creators and users of AI to say how it will be used, as will be required under the Act. The challenge will be the burden of reporting for those Financial Services organisations using AI.
Evaluation of risk
For those working in Financial Services, it is critical to understand that the Act broadly categorises AI into several categories based on their level of risk for societal harm. ‘Unacceptable risks’ are AI systems which will be prohibited under the Act. This includes systems that deploy subliminal techniques beyond a person’s consciousness to influence behaviour, systems that exploit vulnerabilities within a specific group of people and potentially discriminate based on a person’s age, disability, or socio-economic backgrounds.
‘High risk’ uses of AI are classified as those scenarios that could put the life and health of individuals at risk if something goes wrong. These scenarios will now require a conformity assessment.
‘Lower risk’ are systems where there are several transparency requirements such as the need to let users know that part of a screening process is undertaken using AI. With these systems, disclosure of AI use is required.
Finally, the ‘minimal’ or ‘no risk’ category of AI use, includes video games and spam filters, which will be subject to voluntary codes of conduct under the Act. The key challenge for lawmakers and indeed financial services is the potentially subjective nature of what activity or scenario falls within these risk categories.
As an example, the use of real-time facial recognition using AI at ATMs or in High Street banks would be considered an unacceptable risk. This use of AI would be perceived as too far reaching due to the public nature of the AI use and impact on people’s right to privacy. Facial recognition to access a banking app on a personal mobile phone, which is classified as private usage, would not be considered unacceptable under the Act, however.
Whilst self-regulation has been proposed by some AI producers as an alternative to the Act, this comes with its own issues. A particular concern is that a self-regulatory body would not have the teeth needed to effectively tackle immoral AI use and creation – we have seen this as a common complaint with press self-regulation in the UK for example. There is also concern around bias towards AI producers and a self-preservation mindset that would see an allowance for bending of the rules and so a lack of protection for the end consumer.
With the EU AI Act, there may be some merit in creating a separate regulatory body to oversee AI production, this would need to be a coordinated effort across the EU and an effort that would require strong levels of harmonisation with the UK as well as US regulators. This is important not only to ensure that the general principles around what constitutes unacceptable risk, high risk, minimal and no risk is understood, but also that the regulatory burden on individual downstream providers of AI systems is not so onerous as to prevent them from innovating and developing more effective AI solutions for the marketplace.
In its current form the EU AI Act puts a lot of obligation on providers. The Act also classifies those clients who use large language models as providers if they modify the AI programme which they are using. This can prove problematic, with clients then subject to the same regulatory burden as providers. This changes the dynamic as well as the economic use case for AI.
How should the finance sector prepare for the EU AI Act?
Financial Services Institutions must start thinking about AI in a co-ordinated way, much like we saw with the introduction of GDPR regulations. Unlike GDPR, however, we are not currently seeing organisations reviewing their operations in such a stringent manner. I would certainly expect to see the role of Chief AI Officer being introduced to help ensure compliance with the Act and what will be undoubtably more complete frameworks over time.
There is a very clear need to establish a formal AI governance structure within businesses that includes ownership of the comprehensive risk management framework which will be required to comply with the requirements of the Act. It is important to raise awareness and communicate effectively about the Act, not just internally, but also throughout your ecosystem of providers and clients.
Financial Services Institutions need to begin the process of assessing their technical landscape and thinking about their future technology, AI and data road map, to better understand how they will be impacted by the introduction of the EU AI Act. These institutions will need to identify which areas of their operating model will be most impacted and so will require prioritisation and focus, as well as the necessary remedial actions that will be required to comply with the Act.
The introduction of the EU AI Act represents a crucial step towards regulating the burgeoning field of AI within the Financial Services sector and beyond. As the Act approaches implementation, it is crucial that Financial Institutions adapt and take note of its requirements, ensuring compliance while also taking advantage of the innovations AI-driven solutions have to offer. The Act not only sets out to mitigate the risks associated with AI, such as biases and privacy concerns, but also encourages transparency and accountability. Financial institutions must therefore establish robust governance frameworks that can manage these new regulations effectively and position themselves to be as frictionless as possible in adhering to new Regulatory frameworks.
Vikas Krishan Chief Digital Business Officer at Altimetrik
What the rise of private credit means for social impact investments
More investors are seeking ways to align their portfolios with their social interests. Private credit has given those investors a powerful and effective way to do so. With private credit, an investor can directly participate in helping small, local businesses develop and grow.
With private credit, a business can gain financing from an investor rather than a traditional bank. Private credit—sometimes called direct lending—offers the business unique advantages like the speed of execution and a customized structure that suits its specific needs. Meanwhile, investors have the assurance that their capital is being applied to the type of businesses they want to support.
Private credit directly influences employment and economic wellbeing at the com]munity level. At a time when banks are restricting their lending, small and medium-sized businesses are turning to socially minded investors. The results have been clear. Data from EY shows that “the economic contribution of private credit to the US economy in 2022 was an estimated 1.6 million jobs earning $137 billion of wage and benefits.”
How Private Credit Works
Private credit, which is different from fixed income, allows investors to direct their capital to businesses that resonate with their social leanings. Unlike traditional investment options like equities and bonds, a private credit investor can gain indepth knowledge of the projects and businesses they help fund. This transparency is a major benefit to investors who want to participate in the rise of small businesses and help drive the economic success of their surrounding community.
For example, an investor can review the details of the businesses they’re considering investing in. They can assess how green the project is, the implications for job growth in the surrounding area, and the degree to which the loan might empower minorities. The investor’s “closeness” to the businesses they support makes private credit different from merely being a shareholder of a monolithic corporation.
Risk and Private Credit
In addition to serving as an impact investing tool, investors are increasingly turning to private credit as a way to de-risk their investments while still earning a strong return with a diversified portfolio. Consider that over the past decade, through 2022, private credit has returned 7.8%, on average. It’s no surprise that the private credit market grew at a 12% average annual rate between 2010 and 2019. Additional research from Goldman Sachs echoes the power of private credit, which, over the past decade, “generated higher yield than most other asset classes, including 3-6% over public high yield and broadly syndicated loans.”
What makes these returns so attractive to investors is their uncorrelated nature. Private credit returns do not follow the same ebb and flow of equities and bonds. Research from T. Rowe Price shows that during periods of market turmoil, private credit drawdowns were considerably less than those seen with high-yield bonds and equities. Private credit is growing as an asset class as more investors discover this characteristic. Private credit assets surged by 460% to over $1.4 trillion between 2010 and the end of 2022, according to data from London-based investment data company Preqin.
Impact Investing
An emerging body of research shows that private credit is having a real and meaningful impact on job growth. EY calculated that companies receiving private credit added 545,000 jobs, related suppliers added 406,000, and related consumer spending supported 645,000 jobs.
In addition to job creation, private credit is now offering opportunities to minority business owners and underserved communities that would otherwise not be able to access capital. This option could not come at a better time. Banks increasingly choose to tighten their lending standards, leaving more businesses with fewer options. Tier 1 capital needs, margin compression, and renewed fears brought on by recent high-profile bank failures have all contributed to reduced lending. The roughly 33 million small businesses in the US, which employ 61 million people, are increasingly turning to private credit.
Notably, private credit offers much-needed support to small businesses that are often more sensitive to economic shocks. By having non-traditional sources of capital to turn to, small businesses can prevail during downturns like those seen during the global pandemic. Many middle-market companies would have risked failure without access to capital from private credit sources during the 2007-09 financial crisis.
Michael Tansley Chief Financial Officer/Chief Operations Officer, AVANA Companies
As Chief Financial Officer, Michael has 30+ years of industry experience in financial services and operations. He currently serves as CFO/COO of AVANA Companies, LLC where he joined in December 2021. Most recently, prior to joining AVANA, Michael was the CFO/ COO of an investment manager in alternative investments for 10 years. Prior to that he served in several senior finance and operational roles at JPM Asset Management and GE and before that at PriceWaterhouse he was a senior manager in the financial services group. Michael is a graduate of Manchester University, Manchester, England, where he studied Aeronautical Engineering. He is also a chartered account from the Institute of Chartered Accountants in England and Wales.
Creand Group: A Model of Committed Banking
Creand (formerly Crèdit Andorrà) is a global financial services group with nearly 75 years of experience and expertise in retail banking, private banking, asset management and insurance. The vocation of service and closeness to customers has defined and guided the bank throughout its many decades of operation.
It is the leader in customer AUM and loan investment in Andorra, and has a significant presence in other financial centres in Europe (Spain and Luxembourg) and America (Miami). In these markets, it offers a personalised and specialised private banking and wealth management service in a boutique format.
Creand is a financial group focused on innovation, being a pioneering model of committed banking, and working to deliver value to its customers, employees and shareholders, as well as society as a whole. It is committed to social and environmental sustainability, aiming to generate a positive impact on customers, society and the planet.
Recent successes have earned Creand the accolades of Best Digital Bank Andorra and Best CSR Bank Andorra at this year’s Global Banking & Finance Awards. This comes in the wake of another successful year of operation for the group, having closed 2023 with a business volume of EUR 27.62 billion, 10.47% more than the previous year and over 14% above target, and a significant profit increase to EUR 71.3 million.
Global Banking & Finance Review editor Wanda Rich asked the CEO of the Creand Group, Xavier Cornella, about the critical factors that made these achievements possible. “In recent years, Creand has developed a strategic business plan based on specialisation, innovation and excellence in customer service,” Xavier began. “This has allowed us to consolidate our leadership position in Andorra and achieve sustained growth in the other markets in which we have a presence. The organic growth experienced in the past few years has been complemented by some corporate transactions that have enabled us to consolidate our presence in different geographies.”
One catalyst for this was the acquisition of Vall Banc, the private banking specialists in Andorra, which accelerated the objectives of Creand’s 2021-2023 plan. “This meant the bank was able to strengthen its position in this business area. In Spain, where the bank has seen remarkable growth in recent years, the acquisition of the high net worth advisory and family office business of GBS Finance has allowed us to create the Creand Family Office division within the structure of Creand Asset Management. From here, we offer a comprehensive and high-added-value service to customers.”
“Over the last financial year, profits have increased in an atypical context, given the swift rebound in interest rates,” Xavier added. “In addition, the consolidation of the synergies obtained from the aforementioned acquisitions, as well as the good performance of the international business and the insurance business, made a significant contribution to this growth.”
Through the strategic plan for the next three years, Creand is well-positioned to build on these successes. “The new 2024-2026 strategic plan is geared towards growth in product and service specialisation, strengthening the commercial and management team, continuing to drive innovation and digital transformation and ensuring global efficiency, all with the aim of improving financial services,” Xavier reported. “In terms of geographies, Creand is aiming to bolster its leadership in Andorra while being an active part of the country’s economic and social progress. On the other hand, having consolidated our presence in Spain, Luxembourg and Miami in recent years, another aim is to further secure the business model in these territories, with a focus on the personalisation of services, the creation of differentiating products and services and enhancing resources for the digital transformation. This will undoubtedly lead to better customer service and improved operational efficiency.”
Cornella CEO Creand Group
Xavier
He revealed that the bank will also continue to promote strategic alliances with leading institutions, to strengthen the group’s capabilities as well as its growth in different markets and business segments. “It is clear that one of the keys to growth in the banking business lies in specialisation, in having the best teams of experts in different fields, and in encouraging the engagement of all professionals. Of course, process efficiency and customer service capabilities, adapting to customer needs in an ever-changing and increasingly competitive environment, are also among the group's priorities for the coming years.”
Driving the push for innovation while maintaining highquality customer service can require a careful balance, which is crucial to uphold while implementing new technological advancements as digital banking continues to evolve. “We have a management model for a customer profile that demands quality, trust and innovation in equal parts,” Xavier said. “Our long history of nearly 75 years is our best endorsement. To meet customer needs, we are driving a strategy based on embracing the digital transformation and innovation processes. The customer is becoming more and more informed, and demands new services that are adapted to the evolution of the market and have a high technological and digital component. Naturally, we also take the service and personalisation component very much into account, as differential elements to maintain their trust in the long term.”
As part of this process, Creand has recently launched a new online banking application and service, heralded as mobilefriendly, agile, intuitive, customisable with multiple digital features, and offering a robust security system and an enhanced user experience. “It is a channel that adds to and complements the personalised service for our customers,” Xavier said. “Also worth noting is the investment portal, which makes it much easier for customers to manage their investments and have access to market information, including reports from our experts and advanced analytics.”
“However, it is clear to us that, even with such a level of technological innovation, the defining feature of future success in customer relations will continue to be maintaining the closeness and personalisation of service as the best way to respond to customer needs with a high degree of specialisation.”
“As a result of this effort to offer a comprehensive service, the strategic alliance with a leading company in the digital assets sector was also born,” he added. “We have signed an agreement to develop a cryptoasset trading and custody service in Andorra, in a secure environment, in line with national regulations and European and sector-specific standards.”
Adaptability is not just a requirement but a necessity in the ever-changing global financial industry, and these changes come from all directions. “The present and future of financial services depend on the ability to adapt to the environment, technological challenges and the expectations of customers,” Xavier said. “It is about providing a more efficient service through an integrated team of professionals who can offer solutions in a fast and coordinated manner, covering different disciplines of global wealth management.”
The Creand approach to innovation incorporates developing the latest technological tools to make its services more efficient, connect with new generations, and facilitate the development of new products and services. “We as a bank continue to pursue this – for example, as I mentioned earlier, through the development of cryptoasset trading and custody services. We are also incorporating the transformation brought by AI to develop products and services that are better adapted to customer needs. We are pioneering the use of data to deliver better service, and moving towards becoming a ‘data-driven’ company thanks to the implementation of predictive AI.”
“Our success depends on remaining faithful to a banking model that allows us to offer differential value – a model that generates added value for our clients as well as the economy and society,” he continued. A good example of this is the Innovation Hub, Creand’s pioneering project in its home market of Andorra, to generate and share knowledge between Andorran companies and the start-up sector. “The Innovation Hub is another step forward in our efforts to promote an innovation and entrepreneurship ecosystem in Andorra.”
Such forward-thinking measures are characteristic of the bank’s allegiance to the communities in which it operates, and Xavier observed that for Creand, growing sustainably and profitably means creating value for all stakeholders in service to a variety of different needs. “At Creand, we promote this through the committed banking model that defines us: committed to customers, by offering inclusive solutions that respond to their real needs; committed to society, by promoting financial education and investing in economic, cultural, social and environmental protection actions (exceeding EUR 3.5 million in 2023); committed to Andorra, by supporting strategic projects for the country related to snow or tourism, for example; committed to the entire team of internal collaborators whose motivation, effort and commitment make all the difference, and lastly, committed to our shareholders, by working to provide a robust bank with a long-term perspective.”
The discussion concluded with the subject of Creand’s award-winning focus on CSR. Creand has several avenues through which it is working to develop its corporate responsibility strategy, and Xavier highlighted 2023’s incorporation of the new Sustainability Unit into the bank’s organisational structure. “This unit reports directly to the CEO, a further example of the importance we give to this area, whose main function is to define the strategic sustainability agenda and promote, from the highest executive level and with a cross-disciplinary approach, the incorporation of ESG (environmental, social and governance) aspects into the bank.”
“We are the only bank in Andorra to have a stand-alone foundation, one of the most important in Andorra, which allows us to run social, educational and cultural programmes for the benefit of the whole community,” he went on. “We are also the only bank in Andorra to enter the national carbon credit market, with the installation of four of our own electricity production plants powered by photovoltaic panels. In addition, we are the first and only financial institution in Andorra to have issued our own sustainable bond, earmarked for investments to promote the country’s environmental and social development. We are members of the United Nations Global Compact and a signatory to the UNEP FI Principles for Responsible Banking to move forward with a defined roadmap.”
“Ultimately, corporate responsibility and social engagement have been with us since our beginnings, and we strive to promote them to harmonise business criteria with social progress and environmental protection.”
Even when data standards exist, they are not always universally followed, and companies can become overwhelmed by the sheer size complexity of their datasets. Too many processors and data reconciliation providers are built on old legacy tech, reliant on rigid on-premises infrastructure and can’t standardise data in the way their clients deserve.
Automated reporting and reconciliation is a business game-changer
A payment company’s success depends on having strong financial controls and the right tools to ensure timely and accurate reporting and reconciliations, especially as regulators ramp up scrutiny. For example, recently introduced rules on customer fund safeguarding require companies to prove that segregated funds are not mixed with funds belonging to other parties. If a business can’t ensure funds are being held where they’re supposed to be and not comingled with other accounts, regulators will come down hard on them.
While some companies attempt
to mitigate these challenges by building their own platforms to handle reporting and reconciliation, all too often DIY platform builds go way over budget and schedule, causing the business even more financial pressure and poor performance. And this doesn’t take into account the updates, on-going regulatory changes and payments-data knowledge needed to maintain an internal system.
A platform built by experts inherently familiar with the nuances of transaction data can help companies save vast amounts of time and costs, simplify complex and fragmented data and standardise it into a common language that can be understood by everyone.
Aaron Holmes Founder and CEO
Kani Payments
Kani Payments’ platform helps BIN sponsors, challenger banks, acquirers and other fintechs by ingesting their vast, complex datasets to complete weeks of transaction reporting and reconciliation work in under 30 seconds, with full transaction audit history trails. And, due to Kani Payments’ auto-data feature that parses and normalises data automatically when it is ingested, ensuring that it is in a common view for accurate reporting and reconciliation, the platform provides users with complete assurance of standardised data.
Automated reports can be configured to existing formats or bespoke requirements, can be scheduled or produced ad-hoc, and any errors or exceptions are instantly identified with alerts sent to relevant teams for manual investigation if needed. Another game-changing benefit is that these platforms can be automatically updated when any payment scheme or regulatory changes occur, ensuring firms stay in full compliance.
Ultimately, as real-time payment volumes surge, data standardisation is the key to maximising the value companies can extract from their data, ensuring fintechs and payment firms can get to the actionable insights they need to grow and strengthen their bottom line.
Achieving Work-Life Balance:
Insights from Experts on Maintaining Harmony
In today’s fast-paced world, maintaining a healthy work-life balance has become more challenging yet crucial than ever. The increasing demands of both professional and personal life can leave individuals feeling overwhelmed, stressed, and burnt out. Drawing from my experience and expertise in the field, I will outline the signs of imbalance, strategies for improvement, and the role companies play in fostering a supportive environment.
Recognizing the Signs of Work-Life Imbalance
It’s essential to recognize the warning signs of an unhealthy work-life balance early on. Common indicators include:
• Persistent stress and anxiety.
• Physical symptoms such as fatigue, headaches, and sleep disturbances.
• Decreased job performance and productivity.
• Strained relationships with family and friends.
• A sense of being overwhelmed or unable to manage daily tasks.
• Neglecting personal needs, hobbies, or self-care.
Setting Boundaries in a Remote Work Environment
With the rise of remote work, setting clear boundaries has become more critical. Here are some strategies to help:
• Designate specific work hours and stick to them.
• Create a dedicated workspace separate from personal spaces.
• Take regular breaks and avoid working during personal time.
• Use tools and apps to manage work notifications.
• Clearly communicate availability and boundaries to colleagues and supervisors.
Strategies for Managing Stress and Preventing Burnout
Effective stress management and burnout prevention require a personalized approach. Here are some strategies that many find useful:
• Practice mindfulness and relaxation techniques like deep breathing or meditation.
• Set realistic goals and priorities.
• Take regular breaks and vacations to recharge.
• Engage in physical activities or hobbies.
• Seek support from friends, family, or professionals.
• Ensure adequate sleep and maintain a healthy diet.
The Importance of Hobbies and Activities Outside of Work
Having hobbies or activities outside of work can significantly improve worklife balance. These pursuits provide a mental break from work-related stress, foster creativity, and personal growth, improve mood and overall well-being, enhance social connections, and help maintain a sense of identity outside professional roles.
The Role of Time Management in Work-Life Balance
Effective time management is crucial for balancing work and life. Here are some practical tips:
• Identify what truly matters and focus on it.
• Eliminate procrastination and handle tasks efficiently.
• Establish boundaries between work and leisure.
• Create a daily or weekly schedule.
• Utilize technology like calendars, planners, or digital timers.
• Set clear and achievable goals.
• Divide tasks into smaller, manageable steps.
How Employers Can Support WorkLife Balance
Employers play a vital role in supporting their employees’ work-life balance. Common errors include assuming a one-size-fits-all approach. Instead, companies should focus on flexibility and individualized support:
• Foster a culture that appreciates individual preferences.
• Listen to employees’ needs and meet those needs.
The Impact of Work-Life Balance on Mental Health
A healthy work-life balance significantly impacts mental health by:
• Decreasing stress and anxiety levels.
• Enhancing mood and emotional stability.
• Increasing overall life and work satisfaction and happiness.
• Preventing burnout and supporting long-term health.
• Fostering healthier relationships and social interactions.
Techniques for Improving Mindfulness and Relaxation During a Busy Workday
To maintain mindfulness and relaxation throughout a busy day, consider these techniques:
• Practice deep breathing exercises.
• Take short mindfulness breaks to focus on the present moment.
• Engage in quick stretching or light physical activities.
• Use guided meditation apps.
• Create a calming work environment with minimal distractions.
Communicating Needs for Better Work-Life Balance
Effectively communicating needs for better work-life balance involves:
• Clearly stating needs and boundaries with honesty and specificity.
• Explaining to your employer how they can meet these needs by offering practical solutions or adaptations.
• Presenting requests in a way that highlights benefits for both oneself and the team.
• Setting aside dedicated time to address concerns with supervisors.
• Being ready to negotiate and reach compromises when necessary.
Overcoming Guilt and Anxiety About Taking Time Off
For those feeling guilty or anxious about taking time off, here’s some advice:
• Understand that feeling this way is normal in many work environments.
• Recognize that taking time off is crucial for long-term productivity and health.
• Remember that personal well-being positively impacts work performance.
• Communicate openly with employers about the necessity for time off.
• Plan and organize work tasks beforehand to facilitate seamless transitions.
• If your employer doesn’t understand despite numerous attempts, it might be time to seek a new job.
Policies and Initiatives Companies Can Implement
To promote a healthy work-life balance, companies can:
• Provide flexible working hours and remote work options tailored to individual preferences.
• Conduct regular mental health check-ins and offer support, including inhouse therapists.
• Train supervisors in mental health first aid to enhance their ability to support employees’ well-being.
Creating a Supportive Work Environment
Creating a supportive work environment involves:
• Leadership modeling work-life harmony and communicating the importance of balance.
• Developing authentic relationships with employees to gather meaningful feedback.
• Regularly reviewing and adjusting policies based on employee feedback.
• Recognizing and rewarding employees who manage work-life balance well.
Fostering a Culture That Prioritizes Employee Well-Being
Company culture plays a critical role by:
• Establishing clear expectations and norms regarding work hours and availability.
• Emphasizing values that prioritize well-being over continuous productivity.
• Fostering open communication and transparency concerning workload and stress.
Leadership can foster this culture by:
• Demonstrating a commitment to work-life balance through their actions.
• Providing resources and support for employee well-being.
• Encouraging a collaborative and supportive work environment.
• Regularly checking in with employees about their needs and experiences.
Achieving a healthy work-life balance is a multifaceted challenge that requires the combined efforts of individuals and organizations. By recognizing the signs of imbalance, implementing effective strategies, and fostering a supportive culture, both employees and employers can work towards a more harmonious and productive environment.
Manuel Blasini, PsyD, combines clinical psychology expertise with business acumen in the consulting field. Holding a PsyD in clinical psychology and certifications in family business advising, leadership, and change management, Manuel has a profound grasp of human behavior and organizational dynamics. He has utilized this knowledge to provide therapy to leaders, drive organizational effectiveness and development initiatives, and lead culture transformation and change management strategies.
Manuel Blasini PsyD
Manuel Blasini, PsyD, seamlessly integrates clinical psychology expertise with business acumen in his consulting practice. With a PsyD in clinical psychology and certifications in family business advising, leadership, and change management, Manuel possesses an in-depth understanding of both human behavior and organizational dynamics. He leverages this knowledge to provide therapy to leaders, enhance organizational effectiveness, and spearhead culture transformation and change management initiatives.
The Good, The Bad and The Ugly of AI Chatbots
The implications of AI chatbot technology – in both its glory and denunciation – are becoming increasingly evident. While Klarna’s customer service story was heralded for its success, there are one or more converse situations (e.g. Air Canada) where incorrect information has lead to fines and reputational damage. Slowly, but surely, it is not only the transformative nature of AI that is being recognised, but also the importance of stewardship that must sit alongside it.
Before rushing headlong into deploying AI, especially in customer-facing roles, companies need to invest in appropriate AI usage policies, frameworks, and architecture—as well as train people to better understand how AI is changing the way they work.
As Akber Datoo, CEO and Founder of D2 Legal Technology ( D2LT ) explains, to maximise the opportunities and mitigate the risks associated with AI, it is vitally important to build the skills and knowledge to use AI legally, ethically, and effectively while maintaining data confidentiality.
Introduction
Since Open AI’s ChatGPT entered the stage in November 2022, AI has taken the world by storm. Within a matter of months, the potential and promise of generative AI was seemingly within reach of every individual and every organisation. Yet as with many things adopted at such a phenomenal rate, there is an almost wilful misunderstanding – or blissful ignorance – of the associated (and considerable) risks.
It seems that the sheer ease of use of these tools is further undermining the risk perception. Do organisations understand enough about how these tools operate to be able to adequately utilise them in a safe manner with appropriate processes cognisant of their limitations and risks? How many have assessed the implications for regulatory compliance, including data privacy (e.g. GDPR, CCPA), Know
Your Customer (KYC) and Anti-Money Laundering (AML)? Or recognised the vital importance of well–governed and appropriate–quality data to deliver effective, accurate and trustworthy output?
These issues are just the start when it comes to creating a robust corporate AI strategy. Organisations are rushing headfirst to deploy AI chatbots – not only internally but in customer facing roles – without even considering the fact that they may have no right to use the AI output due to IP ownership issues. Or assessing the different risk postures associated with developing an in-house tool versus using a commercial option, not least the implications for data confidentiality and associated risk of a compliance breach. Where is the legal understanding to mitigate these very significant risks?
Mixed Messages
The temptation to accelerate AI adoption is understandable. There is no doubt that AI has the potential to deliver substantial operational benefits, as Klarna’s AI assistant has evidenced.
However, for every good news AI story, there are multiple instances of AI providing incorrect or inconsistent information. TurboTax and H&R Block have faced recent criticism for deploying chatbots that give out bad tax-prep advice, while New York City has been compelled to defend the use of an AI Chatbot amid criticism and legal missteps following the provision of incorrect legal advice to small businesses. Even more high profile was the case where Air Canada’s chatbot gave a traveller incorrect advice – advice which was upheld by the British Columbia Civil Resolution Tribunal , which then insisted the airline pay damages and tribunal fees. Moreover, this has raised vital discussion around where the liability rests when a company enlists a chatbot to be its agent.
Akber Datoo CEO and Founder of D2 Legal Technology (D2LT)
Endemic AI Misperceptions
The big question, therefore, is why are so many organisations rushing ahead in deploying AI chatbots without either understanding the technology or undertaking a robust risk assessment? Without in depth understanding of how the AI technology works, it will be impossible for organisations to determine how and where to deploy AI in a way that adds value and mitigates the risk appropriately.
Increasingly, examples highlight the issue of AI generating hallucinations – but do organisations understand why AI is prone to such behaviour? Generative AI is non-deterministic, which means: ask the same question in sequence and the answer could well be different. Plus, models exhibit drift: not only are they changing constantly based on the ever-growing depth of training information but the AI is learning on the job.
In a legal context, for example, AI is bad at finding citations and tends to make up fictitious citations when trying to justify the answer to a question. There is no truth or falsehood embedded within the parameter weighting, the simple fact is that the underpinning Natural Language Models (NLM) have a fundamental disadvantage when it comes to factual information. The AI
does not understand the content it is generating, in the same way that a calculator does not know that it is producing numbers.
Understanding Business Implications
The implications of this disadvantage when it comes to business problem solving were highlighted in a recent study undertaken by BCG Henderson Institute . The study revealed that when using generative AI (OpenAI’s GPT-4) for creative product innovation, around 90% of the participants improved their performance. Further, they converged on a level of performance that was 40% higher than that of those working on the same task without GPT-4.
In contrast, when using the technology for business problem solving, participants performed 23% worse than those doing the task without GPT-4. Even worse, even when warned about the possibility of wrong answers from the tool during a short training session, its output was not challenged – underlining the misperception and false sense of security created by the apparent simplicity of such tools. Organisations need to invest in robust training that ensures individuals have an in-depth understanding of AI and, critically, continue to update their knowledge in a fast-changing environment.
These findings underline the need to put a human in the loop. There is no traceability with AI, and no explainability as to how it operates or how output has been generated. Nominating an individual to be responsible for ensuring that nothing inappropriate, inaccurate or incorrect is provided is a fundamental aspect of any AI development.
Techniques to Mitigate AI Chatbot Risks
That said, a number of approaches can (if used correctly), be used to enhance the accuracy and performance of chatbots –particularly when combined with the addition of the human in the loop.
These include:
• Fine-Tuning: By adapting a pretrained language model to a specific domain or task, fine-tuning customises a chatbot’s behaviour and responses, making it more suitable for specific use cases.
• Retrieval Augmented Generation (RAG): This approach enhances large language models (LLMs) by incorporating a humanverified knowledge base into the response generation process. RAG dynamically pulls information from specified data sources, leading to more accurate and relevant chatbot interactions.
• Function Calling: This refers to the ability of a language model to interact with and utilise external tools or APIs (Application Programming Interfaces) to perform specific tasks. Complementing RAG with function calling enables precise queries to external databases, further optimising response accuracy and relevance.
Conclusion
Growing numbers of organisations are warning about the danger of unmanaged AI chatbots. The Consumer Financial Protection Bureau has warned the increased use of chatbots in the banking sector raises the risks – such as noncompliance with federal consumer financial protection laws, diminished customer service and trust and potential harm to consumers.
The onus is on organisations, therefore, to take a far more robust approach to understanding the technology, the evolving legal debates and risk perception. To truly unlock AI’s value, it is imperative to understand the different iterations of AI technology, determine appropriate use cases, identify robust data sources and assess the correct postures. Critically, individuals at every level of the business need to truly understand the difference between how AI could and should be used within a regulated industry.
What lies ahead for the financial services industry?
Garry Robertson Client Lead for Financial Services esynergy
In the last two decades, the financial sector has changed completely. Banks have shifted to online services and customers now use apps much more than brick-and-mortar branches. Digitally native ‘disruptors’ such as Monzo, Vanquis and Starling have put pressure on more traditional institutions to adapt as they snapped up thousands of customers. Cybersecurity has become more of a worry than physical robberies, and regulations on have struggled to shift to adapt to this new digital world. And this is not the end.
New innovations such as AI and GenAI especially will challenge the sector to shift yet again, and systems even a few years old are beginning to be out of date. So, what does the future hold for financial institutions? How will they keep up?
This sector faces a unique challenge
Because of the nature of finance, security is paramount. As these behemoths have shifted to an online space, they have been forced to the vanguard of cybersecurity, identity checks and multiple levels of verification. A breach in security would mean dire consequences – both for institutions and for the customers who have placed their faith in the bank.
At the same time, disrupter banks emerged, pushing the industry towards a more digitally accessible model. Apps needed to be more appealing and easier to use, while still meeting regulatory and security standards. Continuity is also a concern. Many organisations are nervous about making any changes to existing programmes in case something goes wrong. While the instinct of financial institutions is to stay with programmes and platforms they are familiar with, this leaves them at risk of falling into ‘technical debt’ and becoming stuck with legacy systems that will leave them behind the curve. Sticking with what feels safe instead of continuing to evolve could cost an organisation efficiency, money and customer loyalty.
The finance of the future
As Generative AI has been taking the world by storm, the financial sector will need to be flexible enough to transform itself once again. Not only will GenAI shape the security protocol and engineering of systems in finance, but it presents a huge opportunity to meet a growing need: hyper-personalised customer experiences, customized products and contextual services.
Consumers are calling for more and more specific set-ups: apps that can display all their accounts and investments in one place, being able to choose investments based on personalised criteria, and market projections that are relevant for them and their interests. Institutions should be considering the potential of AI in this space to deliver innovative consumer experiences that will keep up with mounting expectations. For example, we are currently supporting a large financial service provider to set up GenAI chatbots for instant, 24/7 contextual responses to customers. This includes personalised customer interactions using data, and crucially provides scalable support during peak times. There is no going backwards in terms of consumer expectations for banking technology – they will only continue to evolve.
If there is one take-away for financial institutions, it is that they should prepare to invest in AI and GenAI solutions that will empower more personalised platforms with guard rails of compliance and explicability for their customers and regulators. It is the organisations that embrace this new technology early that will reap the benefits.
Expert Partners
For extra confidence, banks can choose to partner with industry experts through the digital transformation journey who can offer them several benefits as they navigate their way. For complete success it is crucial banks choose experts who understand how to strategically align with the overall aims and broader strategic objectives of the bank, such as enhancing competitiveness, improving operational efficiency, and driving growth.
Experts can also bring deep knowledge and experience in specific areas including ALM, risk management, regulatory compliance, and financial technology. Their insights serve as a guide, helping banks navigate complex challenges and make informed decisions throughout the transformation journey.
Industry experts also have access, often exclusively, to best practices, cuttingedge technologies, and tailored solutions. These resources can accelerate digital transformation initiatives and lead to better outcomes for banks seeking to modernise their operations whilst maintaining successful operations. This also provides benefits when collaborating on risk mitigation so banks are able to address potential risks such as implementation challenges, technology disruptions, and regulatory compliance issues more effectively. Experts offer guidance and support to ensure that crucial elements like stress testing, IFRS9 compliance, and risk decisioning are properly managed.
As SAS, we’ve been working with banks to ensure success in an evolving digital world through leveraging analytics, AI , cloud, open banking APIs, fintech and RegTech technologies. Through managing increasing regulatory demands, stopping fraud, maximising return on capital and achieving operational excellence, we help banks offer customers what they really need when needed.
Navigating Modernisation without Disruption
To ensure banks can maintain smooth operations whilst navigating digital transformation, thorough planning is essential to ensure coordination and efficient execution. They should develop detailed implementation plans that outline specific timelines, responsibilities, and milestones and must adopt an incremental approach to ensure they break down larger changes into smaller, manageable steps. Clear communication with stakeholders, including employees, customers, and regulatory bodies, is crucial to manage expectations and address any concerns proactively. Industry experts can provide experience and knowledge to support this process.
Overall the decision to modernise systems and processes is critical for banks to remain competitive, mitigate risks, and meet the evolving needs of customers and the market. However, the process of migration can be complex and disruptive. It requires careful planning, substantial investment, and effective change management to minimise potential disruptions to operations and ensure a smooth transition.
Ashley Crawford Risk Specialist
SAS UK
Retaining Payment Choice to Maximise Retail Profitability
Inclusivity has become a core component of Corporate Social Responsibility strategies in recent years, yet with growing numbers of retailers opting for ‘card-only’ payment models, a significant swathe of the population is becoming disenfranchised. Refusing cash may appear to simplify the operational model, especially for retailers struggling to recruit and retain enough staff, but what is the bottom line impact when seven in 10 (71%) people still have some level of everyday reliance on cash?
Retailers are increasingly exploring technologies, such as Quick Response (QR) codes that reduce the pressure on staff, while improving customer flow. But, again, this model undermines the concept of inclusivity and can deter even previously loyal customers. Removing the payment transaction from the staff remit is a great way to improve staff experience and customer throughput, and, with the right approach, retailers can become more efficient without losing any customers, irrespective of their payment preference.
Fivos Polymniou, Director, ASK Global Solutions , explains how kiosks that support both card and cash payments can ensure a retailer welcomes every customer whilst also transforming the efficiency and confidence of retail staff..
Cash Value
Cash usage is without any doubt in decline, but it is still used by a significant proportion of the public. Despite the closure of bank branches, UK consumers are still withdrawing £209 million a day from cash machines and nearly half (48%) of people said they would find a cashless society problematic. As such, access to cash was protected in 2023, through legislation passed as part of the Financial Services and Markets Act.
Despite this, growing numbers of retailers have announced they will no longer accept cash, citing both the cost and time associated with managing cash payments. Given the continued difficulties faced in recruiting and retaining staff, the decision to refuse cash goes hand in hand with other streamlining trends, such as the increasing use of QR codes to place food orders. It enables retailers to reduce pressure on staff and prioritise other areas of customer service.
But what if there was another approach? One that enabled retailers to improve the staff experience whilst also accepting whatever payment method a customer preferred? Not only would that ensure the retailer remained inclusive, but it would also avoid the risk of revenue loss associated with those customers still preferring to use cash. It would also free up staff from undertaking any payment activity, allowing them to prioritise other areas of customer service.
Offering Choice
The use of kiosks that accept both cash and cards enables retailers to offer customers a choice. Kiosks have already gained traction within the fast food industry, especially at transportation hubs, including airports and motorway service stations – although these systems tend to limit accessibility by being card only. There is no reason this model cannot be expanded to other parts of the retail sector. Indeed, across Europe card/cash kiosks are widely used everywhere from bakeries to convenience stores.
Allowing customers the chance to order and pay for a product at a kiosk and then collect it from a counter, allows staff to focus on the core business activities – such as preparing and serving food or wrapping and packing purchased items for collection. It is also far more hygienic, as staff have no need to touch either cash or card (for those payments requiring a PIN), thus reducing their exposure to germs and, critically, avoiding cross contamination, especially with food items.
Critically, it is far more efficient, allowing a retailer to improve customer flow and congestion management. Average customer transaction time is reduced by around 30%, enabling individual staff to handle far more customers per hour and, potentially, allowing a retailer to operate efficiently with a smaller team.
Retail Flexibility
One of the other benefits for retailers struggling to recruit staff is that kiosks relieve staff from the pressure and responsibility of taking a customer payment. In addition to the efficiency gain, this also minimises the likelihood of uncomfortable interactions when customers are unable to make the payment, thus reducing staff anxiety and improving overall morale. It also reduces the initial training process for new recruits, meaning staff are productive more quickly and allowing a retailer to prioritise other areas of customer service to improve the overall experience.
Removing the payment aspect from the staff to customer interaction can have a significant impact on a retail model. Charity shops, for example, rely heavily on volunteers, many of whom may be deterred by the responsibility of handling cash. A cash/card kiosk payment method –branded with the charity’s logo if required – would allow volunteers to focus on other aspects of the job, such as processing donations and interacting with customers.
Difficult design models can be used depending on the retail business and store layout. Kiosks can be either standalone or built into the counter. They can provide a complete closed loop system, including card reader, cash input, a printer to generate the receipt, as well as full accounting and reporting. A customisable screen allows a retailer to create product groups to provide further depth to daily reporting and end of day closing balances. Alternatively, it is possible to integrate kiosks into an existing EPOS system, simply extending the current retail model to include a flexible payment solution.
Conclusion
Cash usage may be declining but it is not disappearing. Around half of the UK’s small and medium businesses (SMBs) still rely heavily on cash , with over a third saying they have no intention of adopting cashless systems. These businesses, therefore, require a way to support cash handling that maximises revenue whilst also utilising staff skills as effectively as possible.
From hygiene to efficiency, staff training to customer service, adding a kiosk payment model delivers significant operational benefits. It improves customer throughput, cutting the risk of lost customers due to queues. It reduces staff anxiety, potentially attracting new recruits to the retail sector. Furthermore, it delivers the essential level of inclusivity key to reinforcing customer loyalty and reputation. From convenience stores to cafes, cinemas to ice-rinks, kiosks ensure everyone – whether an individual or in a group – can be part of the retail experience, whether they are paying in carefully saved coins or a one tap debit card.
Fivos Polymniou Director, ASK Global Solutions
How innovative technology is booming in the aesthetic space
In the dynamic landscape of aesthetics, continual evolution spurred on by technological advancements defines the industry’s trajectory. Among the forefront innovators reshaping beauty standards are laser, light, and energybased procedures. These modalities have witnessed exponential growth, with a staggering 4.1 million procedures conducted in 2019 alone. This surge underscores a paradigm shift in consumer preferences, as individuals increasingly recognize the efficacy of these in-office treatments in rejuvenating and enhancing skin health, surpassing the capabilities of traditional spa therapies.
While laser and energy-based solutions have been excelling in the aesthetic industry, they have also become a standard of skin rejuvenation treatment for many providers. New scientific, engineering, and technology advancements consistently enter the market to meet consumer demands and needs, especially those desired by the younger demographics like Millennials and Gen Z. Nonetheless, these advances are also fueled by and popular among older patients dealing with the signs of aging and effects of gravity.
The Need for Faster and Better Results
Innovative technology in any space comes from consumer demand. While people can use topical products to help with aging skin or popular prescriptions to help with acne, these products take time and compliance to produce results. In contrast, many individuals are looking for quick, easy solutions to everyday issues, such as acne scars, wrinkles, age spots, and more, that entail little to no side effects and minimal downtime. For
instance, 73% of women use skin care products to reduce fine lines and wrinkles, yet only 15% believe they work well. Leveraging that consumer attitude, the energy-based technology burst onto the aesthetic scene.
During the last few decades, laser treatments have proven to be an effective alternative to traditional surgical or invasive methods to improve wrinkles and other skin imperfections. Patients who typically take prescription medications noticed that it took much longer to see noticeable improvements than it did with the use of laser or energy-based devices. These treatment approaches provide quick and dramatic results with less downtime.
Technology Innovations Drive Overall Aesthetic Industry Growth
As aesthetic treatments grow increasingly popular and become more widely accepted and normalized, the industry has experienced a significant spike in the market, largely due to progress in meeting the desires of consumers. The entire industry is witnessing massive innovations in technology, with new and better treatments addressing the evolving and expanding consumer needs and desires. These new and advanced treatments have enabled the aesthetic industry to broaden its reach and cater to a larger audience of people with all kinds of different aesthetic concerns. Technological innovations that have drawn in the consumer and driven the growth of the market include painless procedures, hyper-advanced systems and devices, safer resurfacing treatments, more effective skin rejuvenation options, and more.
Physicians and other skincare professionals can boost their practice revenue by adding these new devices that offer innovative solutions for a wide variety of skin concerns. Investing in new devices and training pays off in the long run as practices can diversify their services and attract a wider range of patients with different skin tones and skin issues while building longlasting relationships with clients that will keep them returning to the practice and spreading positive word of mouth.
The Evolution of Tech in Laser Skin Devices
As laser and energy-based technology in the industry continues to evolve, the opportunities for skin improvements and enhancements are endless. The cold ablative fiber laser is one of the newest and most advanced technologies, gaining tremendous traction and recognition in the aesthetic and medical skincare market. This oneof-a-kind device offers a variety of skin treatment modes and pulsing patterns – essentially a one-stop shop. It can be performed on anyone and everyone with minimal pain or discomfort for patients looking to resolve skin discoloration, scarring, aging effects, and many more common skin problems.
According to the Skin of Color Society, over the next 20 years, more than 50% of the US population will have skin of color. Therefore, it is vital for laser skin treatment options to be safe and effective on all skin types. Currently, post-inflammatory hyperpigmentation (PIH) is the largest aesthetic market barrier, affecting 70% of individuals who are Asian, Indian, or have darker skin. Cold ablative fiber laser technology is leading the industry, delivering safe and effective solutions for all skin tones with its ability to minimize PIH risk significantly.
In Conclusion
As technology rapidly advances in the aesthetic space with new and innovative devices, equipment, clinical approaches and cosmetic procedures, physicians and businesses must keep up with the booming demand for fresh and disruptive aesthetic solutions. Keeping an eye on new devices is crucial for practices to meet client expectations and build longlasting and loyal client relationships. As the industry continues to look for new ways to achieve efficacious cosmetic outcomes and aesthetic treatments, become less taboo, increased consumer interest in innovative solutions to achieve youngerlooking skin continues to surge. The advancement of aesthetic devices such as cold ablative lasers that provide a variety of treatment options tailored to a consumer’s personalized needs, lifestyles, and skin types is just scratching the surface of what is to come in the industry. The future is bright for innovative technology in the aesthetic skincare space. As the market grows and evolves, so will the options and solutions available to providers and the needs and desires of their patients.
Shlomo is one of the leading and most experienced laser experts in the world, with more than 30 years of business development and entrepreneurial expertise in the healthcare and industrial sectors. He is currently the Chairman, CoFounder, President, and Chief Technology Officer of Acclaro Medical and UltraClear Laser. He served as the Chief Technology Officer in Syneron-Candela and helped triple the company’s revenue in four years by driving innovations and developing effective clinical marketing. Shlomo is very experienced at aligning the latest technologies with market demand to transform companies by successfully launching innovative products across culturally diverse environments in the U.S., Europe, and APAC.
Shlomo Assa Chairman, Co-Founder, President, and Chief Technology Officer of Acclaro Medical and UltraClear Laser
The AI Data Gap causes problems for Small Financial Institutions
Artificial intelligence (AI) has been a crucial tool for financial institutions (FIs) in the fight against fraud for the last thirty years. Once the purview of card networks and payment processors decisioning transactions, AI is now delivering value in detecting malicious transactions of all types across a multitude of different organisations and institutions. Yet as highlighted in a recent study, not all organisations are equal in their ability to deploy and leverage AI.
This gap in capabilities makes it more difficult to costeffectively detect and prevent fraud for smaller FIs as criminals move downstream. Subsequently, these FIs are forced to turn to vendors that have significant volumes of data from across their client base, even if it isn’t exactly right for their institution.
With the advent of new AI tools that are just starting to be leveraged by bad actors, this disparity in capability will expose smaller FIs to an even more lopsided degree of risk – which is driving government and vendors alike to push for AI to be better utilised by FIs of all sizes. Worst of all is that the consequences of this threat will extend to not only fraud, but also financial crime creating an outsized risk of fraud losses and fines for the institutions that can least afford it.
The Haves and the Have Nots
According to a recent study by BioCatch , 73% of FIs globally use AI for fraud detection. But small FIs have a chicken and egg problem as AI is only as effective as the data used to train it, and as such, smaller institutions simply have less to work with. And with less data than their peers, the imperative to prioritise investments in the internal development of AI is simply less than it would be otherwise.
This in turn drives smaller FIs to rely much more on third party providers to apply AI to detect fraud and financial crime as both are on the rise. In some ways, this gap – let’s call it the AI Data Gap – is similar to the wealth-gap in that lower income consumers are forced to turn to more expensive credit options than affluent consumers who have access to better terms by virtue of their wealth. This dynamic shows no sign of changing as about half of FIs expect fraud and financial crime to increase relative to 2023, inevitably resulting in many smaller FIs directing an increasing amount of their budget to third party AI companies.
Adversarial AI Makes Bankers Sweat
One of the largest benefits of AI for an FI is the ability to detect activity that would otherwise be missed by a human being. It is this fact that makes the level of interest that criminals have displayed in new AI tools, such as generative AI, so disconcerting. These tools have demonstrated an immense potential for greatly improving the quality and quantity of malicious activities, a fact not lost on bankers.
Fraud and financial crime professionals recognise that not only will AI contribute to activities that increase the rate of fraud , but also the more difficult challenge of scams:
• 45% expect scam tactics to become more automated
• 42% expect AI to be used to locate more customer PII
• 36% expect that scam messages will become more convincing
This doesn’t include other threats, such as the use of deepfake tools to create images, voices, or videos for use in bypassing identity and authentication controls Artificial intelligence is a force multiplier across the board for criminals – meaning that the volume of all types of attacks will increase.
In the face of growing AI adoption by criminals, smaller FIs will suffer the ironic indignity of being far less likely to have enough data to make a significant investment in internal AI resources. Without the ability to bolster the use of internally-developed AI, smaller institutions will feel the adverse effects of AI-enhanced fraud, scams, and financial crime more so than their larger peers who are collecting far more data, far faster – enabling them to detect and mitigate more quickly.
What Has to Happen
To be clear, this isn’t an argument for reducing reliance on AI to detect malicious activity, but rather supplementing it with tools that are agnostic to the use cases to which they are applied, as well as more effective at addressing the threats created by adversarial AI. That can only happen by taking a closer look at fraud- and financial crime-fighting budgets and making decisions that take the long view with anticipated effects of adversarial AI in mind.
Consider that the investments smaller FIs may be considering on newer identity verification and authentication controls may be obsolete sooner rather than later. Instead, bankers should turn to solutions such as behavioural biometric intelligence which can be applied to fraud and scam detection. Further still, despite the advances that generative AI will bring to criminal capabilities, none of them give the criminal an advantage over behavioural biometric intelligence – leaving the bad guys with their new AI toys worse off than they were yesterday.
Quality Over Quantity
The AI Data Gap is real, and the consequences of it will become more dire as the criminal application of AI technology grows. For smaller FIs, their choices are to invest even more in third-party AI solutions and watch their other investments be rendered obsolete, or they can adapt. Applying behavioural biometric intelligence helps level the playing field, making smaller FIs harder targets. And in the difference between the AI haves and have nots, it is the results that really matter – not the hype.
Al Pascual Cybercrime Expert, Founder, Inventor, and Advisor for BioCatch
