Global Banking & Finance Review Issue 64 - Business & Finance Magazine
How GFT’s Marco Santos is Guiding Banks Through a New Digital Frontier
Marco Santos, Co-CEO at GFT
Chairman and CEO
Varun SASH
Editor
Wanda Rich
email: wrich@gbafmag.com
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editor
Dear Readers’
Welcome to Issue 64 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.
Our cover story features Marco Santos, Co-CEO of GFT. In "How GFT’s Marco Santos is Guiding Banks Through a New Digital Frontier," we explore Marco’s remarkable journey with GFT, starting as the Country Manager of Brazil and scaling the business across multiple markets. Now, as Co-CEO, Marco is leading GFT through a new technological era characterized by AI and data-driven experiences. Discover how he has transformed GFT into a trusted brand in the financial services sector.
In "Chom Capital: Embodying the Principles of Sustainable Finance," we delve into how this Frankfurt-based asset management boutique is navigating industry changes to comply with regulations and drive transparency. Christoph Benner, CEO of CHOM CAPITAL, shares insights on how the company has enhanced its ESG integration and reinforced its commitment to sustainability principles, creating long-lasting value for its investors.
Richard Fayers, Senior Director, Data & Technology at Slalom, explores the varying attitudes towards AI, from optimism about its potential to concerns about ethical implications and job displacement, in "Optimism, Scepticism and Guilt: Emerging trends in the application of Artificial Intelligence."
Helena Müller, VP Banking Europe at Diebold Nixdorf, examines the impact of ESG strategies in "Is an ESG focus helping banks maintain a role in the community?" This article discusses how the green agenda is influencing consumer attitudes and the potential for ESG strategies to support a bank’s community positioning.
James Sherlow, Systems Engineering Director, EMEA at Cequence Security, addresses the challenges of deploying generative AI in the finance sector in "Compliance Constraints: Why the finance sector is unable to leverage GenAI." He explores the considerable obstacles due to regulatory requirements and the need for transparency and traceability in AI outputs.
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
BANKING
Collaboration Is the Key to Open Banking Interoperability
Alex Reddish, Managing Director, Tribe Payments
Is an ESG focus helping banks maintain a role in the community?
Helena Müller, VP Banking Europe, Diebold Nixdorf
BUSINESS
Preparing for the European Accessibility Act: The Countdown to 2025
Hilary Stephenson, Managing Director, Nexer Digital
The Future of Global Trade Will Be Green or Not at All
Aylin Somersan Coqui, CEO, Allianz Trade
Empowering Employees with Data: The Key to Effective Business Decisions
Elias
is unable to leverage
James Sherlow, Systems Engineering Director, EMEA, Cequence Security
Navigating the complexities of transaction reporting
Paul Joseph, Global Relationship Manager, Consulting, Davies
Moving from embedded finance to embedded treasury: what does this mean for businesses?
Félix Grévy, VP Product, Open API and Connectivity, Kyriba
& NIS2 means for financial institutions
Ben Stickland, Hive Member, CovertSwarm
Unbundling payments: the next great frontier in
Lucian Daia, CTO, Zitec
Unveiling the DoubleEdged Sword of AI in Public Relations
Marleen González-Hernández
Bridging the digital divide in client engagement
Matt Ryan, Chief Transformation Officer, Reef
Optimism, Scepticism and Guilt: Emerging trends in the application of Artificial Intelligence
Richard Fayers, Senior Director, Data & Technology, Slalom
Persistent challenges: the hindrance of legacy systems
Nick Botha, Global Payments Lead, AutoRek
Why Cybercriminals Favor the Financial Sector and how application security can help
Neatsun Ziv, CEO, Ox Security
Interview Cover Story
Chom Capital: Embodying the Principles of Sustainable Finance
Christoph Benner Founder, CEO, and
CHOM CAPITAL
Portfolio Manager
Marco Santos Co-CEO GFT
Collaboration Is the Key to Open Banking Interoperability
Global Open Banking payments transaction values are expected to exceed $330 billion by 2027, up from $57 billion in 2023. But are they truly global? The simple truth is that the bulk of transactions are domestic and not international. To make global Open Banking a reality, the industry needs to overcome a huge obstacle in the way – interoperability.
The promise of a global Open Banking ecosystem is exciting, dangling the potential of truly frictionless yet ultra-secure payments in front of us. The UK market is often held up as an Open Banking success story, with the number of active users reaching eight million at the end of 2023. But dig deeper and the UK numbers are just a drop in the ocean of overall payments –right now, only 10% of the UK population is using Open Banking. While a record 14.45 million UK Open Banking payments were made in January 2024, this pales into insignificance when compared with the tens of billions of card transactions processed by the major global card schemes.
Even though we live in a world where cross-border payments are eating a bigger share of the overall payments pie, making Open Banking work across borders is fraught with difficulties, because systems in different countries aren’t linking to each other. The vision of Open Banking – to increase competition amongst retail banks and strengthen consumer protection – will not be realised until data can flow effortlessly between different industries and indeed different countries.
There are a few notable exceptions. The Asia-Pacific region has seen significant innovations and developments in Open Banking, such as India with its groundbreaking Unified Payments Interface (UPI). While UPI’s success is in large part due to India’s 1.4 billion-strong population driving a critical mass of transactions, UPI’s interoperability with other AsiaPacific payment systems including those of Singapore, Thailand and Malaysia is also a key element. During 2024, UPI has already linked up with Google Pay to enable international payments, and France’s Lyra to enable acceptance of UPI payments in France. UPI is now also facilitating crossborder QR code transactions between India and Nepal, allowing Indian travellers to make instant UPI payments across various businesses through UPI-enabled apps.
But elsewhere, the vision of interoperable Open Banking has yet to be fully realised. Other regions will need to develop common rules, standards and the technical building blocks to bring it to life.
Why interoperability plays a crucial role in Open Banking
A key component of Open Banking is the ability for authorised third parties to access account information and to initiate payments with customer consent. Banks can do this in two ways: through their existing customer interfaces or through dedicated APIs. But there are no standardised APIs – it’s been left to players themselves to develop their own interfaces. While there have been several regional standardisation efforts, APIs are still widely fragmented, making interoperability difficult to achieve.
Interoperability is vital in ensuring that the patchwork of systems run by different banks, fintechs and third-party players (TPPs) can all talk to each other, exchange data securely using a common standard, and allow customers to view all of their financial data easily, no matter who their bank or service provider is.
But interoperability won’t be achieved without standardisation, and right now, most Open Banking markets adhere to local standards. Singapore, whose regulator was the first in the region to set out a framework for Open Banking in 2016, has subsequently enjoyed high adoption of APIs, as have South Korea and Hong Kong which took similar approaches. Australia has taken a regulator-led approach with its Customer Data Right mandating financial institutions to adopt Open Banking. Cross-border data sharing involves many legal hurdles to jump, but the regional examples outlined above show that it can be done.
Interoperability challenges are not simple to overcome, but nor are they insurmountable. Some tough questions need to be asked. Who funds interoperability, or indeed the building of a new payments system altogether? Gaining consensus and budget is hard enough, but ensuring adherence to various technical and legal baselines will require Herculean efforts in markets where there is no central body to organise the workflows. No payments player would dare strike out on its own and commence work without an overarching regulatory framework to guide them. It could be argued that it will be difficult to ensure regional or global interoperability without regulatory intervention at a national level first. But as we have seen above, national market-led approaches have been effective too.
In Europe, with its long-established harmonised legal frameworks like PSD2, national bank and TPP licenses are recognised across member states. The Asia-Pacific region has adopted a mix of marketled and regulator-led approaches to ensure API standardisation and technical building blocks are in place to provide the conditions for Open Banking to take off.
Successful Open Banking implementations happen when financial institutions and third-party players collaborate under the auspices of regulatory input. To make this work on a global level, we need regulators in different countries to learn from each other, share best practices, and invite Open Banking entities and standards bodies like ISO to work together too.
Payments regulation is paving the way for interoperability – act now
In Europe, the payment industry is now gearing up for PSD3, the new Payment Service Regulations (PSR), FIDA, and other frameworks that will transform the way fintechs and financial services firms work with customer data on a pan-European level – and further level the playing field between banks and non-banks. Now is the time for industry players to reframe Open Banking from a compliance obligation to a market opportunity.
Under PSR, Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs) will be allowed to build custom API interfaces that can connect directly to banks and other payment providers. On the face of it, this should improve uptake and adoption of Open Banking. But banks and payment entities will also have to disclose quarterly statistics on their API performance and availability. This API ‘league table’ could spur faster user adoption, by galvanising better API build quality to interface with banks, and direct businesses towards the betterperforming providers.
PSD3 flexes more muscles than its predecessor PSD2 and is wider in scope, considering new challenges in fraud, digital payment transformation, access to payment systems, and baselines for Open Banking. But while PSD2 made Open Banking a reality, with bank APIs enabling customers to consent to their data being shared with third parties, the proposed PSD3 text states there will be no charging for the use of Open Banking interfaces, and there will be no mandating of standard APIs, meaning potentially thousands of PISP/AISP APIs operating differently. In this respect, the shortcomings of individual APIs and no clear consensus on commercial pricing could act as a drag on adoption and slow down the journey to interoperability between Europe and the rest of the world.
FIDA proposes to give financial information service providers (FISPs) the right to access real-time customer data arising from nearly all financial services data, including current and savings account, credit cards, mortgages, loans, and pension accounts. It means that lenders and credit providers for example can draw upon more and better-quality data to make more informed lending decisions. To give you a snapshot of what that could look like, according to Experian data from 2022, over five million so-called ‘credit invisible’ people in the UK were excluded from the best credit rates and deals due to insufficient data about their financial track records. FIDA could potentially pave the way for millions of ‘thin credit file’ but otherwise creditworthy people to access more services based on real-time data, and not the static historical data typical of traditional credit scoring models.
By leveraging real-time transaction data from a wider range of consumer account products, fintechs and banks can improve data-driven decision-making, reduce risk exposure, lower default and delinquency rates, and benefit from reduced credit losses. Instead of relying on fragmented snapshots of customers’ financial circumstances, real-time Open Banking and Open Finance data gives lenders a full high-definition picture of individual’s financial circumstances. The result? More hyper-personalised products and services that deepen customer engagement, deepen loyalty, and capture more market share.
Banks, fintechs and third-party players need to move now and ensure their technology platforms and processes can adapt to these regulatory changes before they come into effect over 2025/26. Investing in anti-fraud measures, risk monitoring, and a tech platform that can bend and flex in response to changing regulations will offer numerous opportunities for innovation, collaboration, and help to pave the way for a truly global Open Banking ecosystem.
Alex Reddish Managing Director Tribe Payments
Compliance Constraints:
Why the finance sector is unable to leverage GenAI
We’ve seen generative AI (GenAI) deployed in the finance sector across numerous business use cases. It’s being used for document preparation, aggregation and analysis, in customerfacing processes such as through chatbots to alleviate loads on customer service representatives, in internal processes where it can be used to summarise and present possible course of action, and finally in a cybersecurity context to detect suspicious and potentially fraudulent activity. In fact McKinsey states the technology could see banking alone benefit from a boost of $200-$340bn a year if these use cases are applied.
However, the sector is also facing some considerable obstacles in deploying the technology due to the requirements of industry regulations. Regulators demand transparency and traceability which currently isn’t possible in most AI outputs. If we consider bank loan approval processes, for example, these need to be able to demonstrate that Know Your Customer (KYC) processes have been observed to prove affordability which means the KYC system must be able to explain and justify how a decision was reached. This creates a conflict that can only be resolved by resorting to pre-AI processes, causing organisations to resort to deactivating AI functionality.
Not just a compliance issue
Switching of AI processing will hobble the ability of the sector to benefit from AI and could see it fall behind the curve in adoption. This isn’t just a concern in terms of productivity but also how it can learn to use AI in a safe and ethical manner, and it has repercussions for the way in which the sector defends against AI-driven attacks, which are now becoming more prevalent. We’ve already seen a spate of deep fake attacks and business email compromise aka CFO fraud such as in the case of the UK engineering firm, Arup, where a finance worker based in Hong Kong transferred £20m after taking part in a deep fake video call.
According to the NCSC , we are just 18 months away from the near certainty of an increase in the volume and impact of cyber attacks which will be fuelled by AI. At the present time, GenAI is the preserve of malicious actors with access to quality datasets with which to train AI, requiring significant expenditure and resource but in less than two years it will become more widely available and commercialised, placing offensive AI within the reach for organised criminal gangs (OCGs) and nation state actors. The concern is that the finance sector in particular will be a key target due to the rewards on offer, with the US Department of the Treasury issuing a warning to this effect earlier this year.
We’ve seen some efforts made to regulate AI risk in the form of the EU’s AI Act but this is not expected to come into force in 2026. That now leaves financial organisations in the position of having to wait while the AI threat escalates. Indeed, suspicions are that we could well see high volume self-learning attacks by yearend, which are often targeted at Application Programming Interfaces (APIs) which are the glue used to connect applications and services in the digital economy.
APIs as a prime target
Defending against automated attacks is already problematic because most security and bot management solutions will simply ban the IP addresses of the attackers. However, because today’s attackers often use residential IPs they’ve compromised, blocking those has the potential to lock out customers. In order to detect and block attacks like these, its necessary to go beyond simple identifiers like IP addresses and to look at the tools or software, infrastructure and credentials being used, as well as the attacker’s behaviour.
Aside from volumetric attacks, we can also expect AI attacks against APIs to be crafted to fly under the radar of security solutions, using reconnaissance and engineering techniques to hone and focus on specific targets. Often APIs are not exploited due to poor coding but through the attacker studying the role of the API, the calls it makes and information it is able to access. Known as business logic abuse, this enables the attacker to subvert the API’s legitimate processes and to use it to perform content scraping and commit fraud through attacks such as Account TakeOver (ATO), for example. Such attacks are unlikely to trigger any conventional detection mechanisms and can only be spotted by monitoring activity with that API. Following detection, attacks can then be blocked, throttled or deception techniques employed to frustrate and exhaust the attacker’s resources, even in the event AI is used to alter the course of i.e. pivot the attack.
Going forward it’s clear that the financial sector will need to make significant changes to both harness AI and defend against attacks. The US Department of the Treasury has made a series of recommendations in this regard, including calling for data sharing to build anti-fraud AI models to level up the gap that has emerged between the fraud detection capabilities of small versus large institutions, for example. It also calls for the NIST AI Risk Management Framework to be revised to incorporate a section specific to the financial sector on AI governance.
Disabling AI functionality in business processes therefore has some very real ramifications for how the sector moves forward. It’s a backwards step and sends the wrong signal to malicious actors who will see it as an indicator that financial organisations are unprepared for and unable to utilise AI. It’s therefore imperative that steps are taken to make risk manage AI in the organisation in all capacities.
James Sherlow Systems Engineering Director, EMEA, Cequence Security
Preparing for the European Accessibility Act: The Countdown to 2025
As the deadline for the European Accessibility Act (EAA) approaches, banks and financial services firms trading within Europe find themselves at a crucial juncture. By June 2025, the EAA requires that all digital products and services within the European Union (EU) must be accessible to people with disabilities.
Proactive planning, collaboration, and continuous learning will be key for banks and financial institutions to create accessible, userfriendly services that benefit all customers and promote a culture of inclusivity.
With nearly 20% of the world’s population having access needs, delivering accessible services is not just a legal requirement but also a strategic opportunity for firms to boost customer satisfaction, enhance reputation and embrace inclusivity.
Understanding the European Accessibility Act
The European Accessibility Act aims to improve the lives of people with disabilities by removing barriers and ensuring equal access to digital products and services like ATMs, self-service kiosks, and online banking. The EAA outlines specific requirements to make digital services usable for people with different types of disabilities, including visual, hearing, motor and cognitive impairments.
Failure to comply with these requirements will lead to penalties, such as fines and legal proceedings, and can result in reputational damage and loss of customers.
Assessing current accessibility
Before developing a strategy to comply with the EAA, organisations need to conduct thorough accessibility audits of their digital products and services. This means evaluating websites, mobile apps, and other digital interfaces to see if they meet accessibility standards like the Web Content Accessibility Guidelines (WCAG).
Designing inclusive experiences requires a holistic and comprehensive approach. To ensure that no digital assets are neglected, banks and financial services firms need to review all customer touchpoints and services from start to finish. By understanding the full user journey, organisations can see how users interact with different service channels like online chat, websites, call centres and branches. Transition points between service channels often create barriers so it’s crucial to consider those handover points. For instance, users with access needs might struggle to transition from an online service to a phone call due to incompatible technologies or security protocols.
Other common barriers in online user interfaces include poor colour contrast, lack of keyboard navigation, and inadequate screen reader optimisation. That’s why it’s important to check that products and services work with common assistive technologies like screen readers and speech recognition tools.
By running user research sessions with people who have a range of access needs, to identify these issues and understand customers’ needs and challenges, financial organisations can improve accessibility and reduce financial exclusion. Identifying these issues early allows firms to prioritise fixes, allocate resources effectively and improve their products and services before the impending deadline.
Developing an accessibility strategy
After identifying issues and areas for improvement, financial institutions should produce an actionable plan to make their products and services accessible to comply with EAA requirements. This strategy should also consider the Consumer Duty Act, which emphasises fair treatment of customers. Combining its principles with the EAA requirements will help to enhance customer satisfaction and trust.
Cross-functional collaboration is crucial for creating a comprehensive accessibility strategy. Accessibility isn’t just the responsibility of the IT department; it requires input from HR and vulnerable customer teams, legal teams, customer service departments, and other parts of the organisation.
Often, there are pockets of good practice within financial service organisations, but these champions need to be encouraged, scaled and embedded so they foster long-term cultural and behavioural change. Having organisational structures that help teams work together and collaborate across and within the different delivery channels is one way to minimise the risk of cracks appearing in frontend services. Clear lines of responsibility and internal communities of practice for accessibility can drive this change throughout the organisation.
Setting realistic timelines and milestones will help keep the project on track and regular check-ins will ensure continuous progress.
Implementing accessible design is a continual process
Educating employees about accessibility standards and practices is key. Continuous learning and adaptation to evolving accessibility standards will help organisations go beyond compliance and improve user experience.
Training programmes should cover basic accessibility principles, understanding the needs of users with disabilities, applying accessibility guidelines in daily work, and ongoing education to keep up with changes in standards and best practices.
Large firms risk being outpaced by smaller, more agile, and innovative players that integrate accessibility into their services from the start. To stay competitive, larger institutions must adopt a more flexible approach when incorporating accessibility into their digital transformation initiatives and embrace change.
Thinking beyond compliance
While meeting the EAA and WCAG requirements is crucial, organisations should recognise the broader opportunities. Accessible services can lead to higher customer retention rates, a better reputation, and increased market share.
Building accessible services from the outset is faster, cheaper, and more effective than retrofitting. However, legacy systems now can’t be ignored. The cost of improving accessibility is relatively low, but the benefits in terms of customer loyalty and operational efficiency are significant.
The European Accessibility Act presents both a challenge and an opportunity for banks and financial institutions. By prioritising accessibility and embracing inclusive design principles, banks can not only comply with regulatory requirements but also unlock significant business value. The countdown to 2025 is on, and the time to act is now.
Hilary Stephenson Managing Director
Nexer Digital
The Future of Global Trade Will
Be Green or Not at All
Climate change is already here. It has dreadful impacts on people’s daily life, and the public is growing worried about it. According to our latest survey on climate literacy, 75% of respondents across 8 countries are (very) anxious about climate change 1
Climate change is also impacting global trade. The drought at the Panama Canal has halved capacity at a key waterway. Global trade is only getting a taste of its own medicine as around one third of global greenhouse-gas emissions stem from trade itself 2 . As a matter of fact, greening trade is not only critical to reach a sustainable future for all. It is also an existential necessity for global trade.
There can be no green trade without green shipping
Approximately 11bn tons of goods or about 85% of global trade is carried by sea every year. This figure is poised to triple by 2050. Though maritime transportation is currently responsible for only about 3% of global greenhouse-gas emissions, this share could surge to 17% by mid-century if no action is taken today. The share can be even higher in the immediate term due to the recent Red-Sea disruptions which pushed for longer routes. In fact, since 2000, global CO2 emissions from the maritime industry have increased by +42%.
As such, decarbonizing the maritime transportation will play a major role in greening global trade. And it is an urgent race against time: To achieve net-zero emissions by 2050 in the maritime shipping sector, emissions must stabilize around 2025, despite anticipated increased activity, and then decrease until 2030. In this context, greening fleets has become a top priority for the industry: 13 of the world’s 30 largest shipping companies have already set a net-zero target between 2040 and 2060. These ambitious goals naturally come with a price: we estimate that the sector will need to invest a minimum of USD23bn per year to achieve its climate targets.
Let’s aim for more trade of green goods
The transition to a low-carbon economy will only be possible if green goods and technologies – everything from septic tanks and catalytic converters for vehicles to biofuels and mercury-free batteries – are developed, deployed and diffused at an unprecedented pace. In this respect, the trend is quite positive. Green goods as a share of total global exports have grown by around +5pps between 2000 and 2022.
Europe is clearly taking the lead in green goods trade. Germany alone surpasses the US in green exports while the US has become the strongest importer of green goods and technologies besides the EU27 taken as a whole. In fact, 19 out of the 27 EU economies have maintained or even grown their comparative advantage in low-carbon economies. In 2022, green goods represented around 15% of Germany’s total exports. Between 2000 and 2022, the country has also seen the largest increase in exports of environmental goods as a share of GDP (+6.9pps), followed by South Korea and China.
By focusing on the production and export of environmental goods, Europe can tap even further into growing global markets for clean technologies. This can drive economic growth and further investments for the green transition. Removing tariffs on such goods could make a big difference. Barriers to trade in environmental products are still significant, with tariffs at a high 5.4% compared to 8.6% for all goods. Reducing the cost of importing green goods would make them more affordable and accessible to consumers and businesses alike, as well as stimulating competition among producers, driving innovation domestically and globally. We estimate that removing tariffs on green goods could boost exports volumes by over +10% per year, which amounts to about USD184bn.
Greening trade is also about greening our economies
To make trade greener, we must pull on 5 key levers: first, leading economies should re-engage in promoting and facilitating green trade to help increase the supply and lower the price of green technologies. Second, all stakeholders need to agree on what counts as a green product. Third, governments should give clear guidelines and standards for sustainable production and consumption through appropriate labelling and public price subsidies. Fourth, customs duties for green products need to be reduced further or even removed to make them more affordable for consumers. Finally, governments need to redirect excess savings towards financing companies that produce a green product, while implementing additional tax breaks for those businesses.
But we also need to ramp up our efforts toward greening all industries to reduce the carbon footprint of all manufactured goods that are traded globally. In this regard, businesses will need public support and incentives in various areas. On borrowing and reduced investment uncertainties through tools like contracts of difference; making eco-friendly investments profitable and scalable through subsidies; addressing climaterelated challenges through innovative unemployment schemes; transitioning to sustainable and secure supply chains through holistic risk management and advancing a true circular economy by introducing quotas to offset cost concerns.
Greening trade is no longer an option and we must use all available technologies and policy options to do so. Over the last couple of decades global trade has been a great driver of development and poverty reduction 3 ; it is our duty to support firms and push policy makers towards now making it more sustainable.
Aylin Somersan Coqui CEO Allianz Trade
Unveiling the Double-Edged Sword of AI in Public Relations
The other day, while I was at the gas station filling up my car, I stumbled upon a clever campaign. A mirror caught my eye with the Spanish words, “You are looking at the best thing you will see today.” Intrigued by its cheekiness, I noticed a QR code below the mirror inviting customers to take a survey and upload a selfie for a chance to win a year of free gasoline. Now, you might be wondering, what does this have to do with PR and AI? Well, turns out, AI-powered bots are the brains behind this campaign, and how they’re used could make or break it.
In today’s digital age, artificial intelligence (AI) is shaking up industries left and right, and PR is no exception. It’s like a Swiss Army knife for communication, helping us work smarter, not harder. But while AI offers loads of potential benefits, it also brings its fair share of challenges and ethical dilemmas, making it a bit of a double-edged sword.
AI technology has its fingerprints all over PR, from media monitoring to content creation and beyond. These AI tools can crunch data faster than you can say “crisis management,” giving us insights into public perception, sentiment trends, and emerging issues. They’re like our secret weapon for making data-driven decisions, predicting potential PR storms, and tailoring our messages to hit home with our target audience.
And let’s not forget about AI-powered chatbots and virtual assistants— they’re like our sidekicks in customer service, always ready to lend a hand. They not only make communication smoother but also create personalized experiences for our audience, building stronger connections with our brand.
But here’s the kicker: if we let these bots run amok without keeping an eye on them, we could find ourselves in some pretty murky waters. Alongside the potential benefits of AI in PR come
some serious challenges. One biggie is algorithmic bias, where AI systems unintentionally pick up and amplify biases present in the data they’re trained on. This can lead to skewed results, inaccurate predictions, and even discrimination, putting our PR efforts at risk.
And then there’s the elephant in the room: the rise of automation in PR raises questions about the future of human professionals in the industry. As AI takes over more and more tasks, we run the risk of losing the human touch—the intuition, experience, and creativity that make us PR pros. Sure, AI can streamline processes and boost efficiency, but it can’t replace the nuanced judgment and emotional intelligence that come from human communication. So, striking the right balance between human expertise and AI-driven automation is key to making the most of this technology in PR.
I mean, with over 75% of agencies incorporating AI into their firms, just take a glance at the headlines these days—stories like “Disney Sends Worldwide Manipulation Message Through AI Bot Social Media Attack – Inside the Magic” or “AI Chatbots Have Thoroughly Infiltrated Scientific Publishing.” If that doesn’t ring alarm bells for an AI PR crisis looming in the shadows, I don’t know what does.
You know, with all this AI-generated content floating around, things can get a bit tricky. These AI tools are getting pretty darn good at mimicking human speech and writing styles, making it tough for folks to tell the difference between the real deal and AI-generated content. And that’s where things get interesting. It raises some serious questions about authenticity, transparency, and trustworthiness. How can we ensure what we’re reading is legit, and how do we maintain journalistic integrity and credibility in the midst of it all? It’s definitely a puzzle worth solving.
Marleen González-Hernández is an independent Public Relations Professional with extensive experience in crisis management. With a proven track record of navigating challenging situations, she excels in maintaining composure and guiding clients through turbulent times. Marleen’s strategic approach to crisis communication ensures swift and effective resolution while safeguarding the reputation and integrity of her clients.
Manually add the alt attributeSo, here’s the deal: AI has some serious potential to shake up PR in all the right ways, opening doors to fresh ideas and game-changing innovations. But let’s not jump in headfirst without looking both ways. It’s crucial to handle AI adoption with care and a critical eye. When used responsibly, AI can supercharge communication, drive strategic wins, and keep stakeholders happy. But let’s not forget, diving into the AI pool means wading through some pretty murky waters. There are complexities and ethical dilemmas that need serious attention. That’s why we’ve got to approach AI with a healthy dose of caution, making sure it’s a force for good, not a doubleedged sword. Because when a crisis hits, there’s no substitute for human intuition, experience, and creativity to navigate those choppy waters and come out on top.
Marleen González-Hernández Independent Public Relations Professional
Bridging the digital divide in client engagement
For some time now, we’ve all been operating in both a physical and digital world. However, in the financial industry, there is still a divide between these for firms. Too many financial services (FS) organisations and institutions have not streamlined their face-to-face operations, whether working with clients or meeting prospective investors, and their digital engagement efforts, including, company social media channels or webinars.
So how can this divide be bridged? I’ll explore how the latest audience engagement technology can provide the key for FS firms to create online and offline experiences that genuinely drive engagement. Let’s dive in…
Defining client engagement
Client engagement is the lifeblood of any successful organisation. Essentially, it’s about both building and then maintaining relationships with clients and customers. It’s an ongoing interaction between a company and its desired audience, where both parties communicate, exchange information, and derive mutual value.
Whereas this was a traditional face-to-face activity, since the realm of digital, these interactions extend into digital now. From inperson meetings, social media channels, webinars, or other online frequencies, effective client engagement depends on meaningful interactions that cultivates trust, loyalty, and satisfaction.
From in-person to virtual
When engaging with clients today, diversity is the key. As we’ve covered, face-to-face meetings are no longer the primary mode of interaction. Now, many firms utilise a variety of channels to engage with their clients, each serving a unique purpose and catering to different preferences.
Of course, in-person remains invaluable for FS firms to build trust and personal connections – whether it’s a consultation with a financial advisor or a pitch meeting with potential investors, the ability to have real-time, inperson conversations fosters a deeper level of understanding and rapport.
From a digital perspective, social media platforms have emerged as very effective tools for client engagement. Most firms utilise LinkedIn, Twitter, and Instagram to share news and insights, interact with clients, and showcase their expertise and innovation. It is through engaging content and active participation in online conversations where firms can both humanise their brand and establish deeper connections with their intended audience. Webinars too represent another effective means of client engagement, fostering engagement and knowledge sharing.
Overcoming the pitfalls of digital engagement
In a digital age where personalisation is king, FS firms can no longer afford to take a one size fits all approach to client engagement. Generic sales funnels and mass emailers do not resonate with today’s discerning clients who expect experiences tailored to their needs and preferences.
Another pitfall to avoid is that too often, FS firms focus solely on transactions, neglecting the importance of building genuine, longlasting relationships with their clients. In a digital age, organisations must prioritise relationship-building efforts that extend beyond the point of sale.
Finally, personalisation is a necessity in today’s digital landscape, but many firms still fall short when it comes to customising their client engagement strategies. For example, while some might fail to leverage customer data to deliver targeted content, others might be offering generic solutions that fail to address individual needs. Either way, a lack of customisation can turn clients off completely, or at the very least hinder engagement efforts.
Technology plays a pivotal role
The latest modern day technology exemplifies a ‘high-tech, high-touch‘ approach, leveraging cutting-edge technology to facilitate meaningful interactions between firms and their clients: successful technology is that which shapes human experience.
Matt Ryan Chief Transformation Officer Reef
A good example of this is social media. It has fundamentally restructured the way we meet and converse with humans, as well as consume news and popular culture. Today’s FS firms aren’t all tech firms but they build a stack of tech through which to interact with clients: website, emails, etc. While many know they ‘need’ to do this, it is those firms that embrace the high-tech, high-touch paradigm that will create their tech stack more consciously, not only using and staying abreast of the latest technology but using it in a way that communicates directly with potential clients that addresses their needs. For example, feeling that the organisation they are doing business with has the knowledge and expertise to give them what they need. That is something that the high-tech, high-touch modality is well suited for.
The digital and physical divide is shrinking…omnichannel solutions are the requirement
Those FS firms that adopt a complete digital and physical approach to client engagement will be best placed to thrive in the future. By prioritising customisation, personalisation, and the integration of cutting-edge technology, businesses can bridge the gap between online and offline engagement, delivering value to their clients at every touchpoint.
Is an ESG focus helping banks maintain a role in the community?
The go greener agenda is gaining traction across every industry, as we all consider how to generate more sustainable ways of working for the future. The financial services industry is no exception, and it is not only influencing how customers are served banking solutions, but also consumer attitudes towards their provider and their overall brand affinity. With this desire to have a greater alignment between personal environmental values and those of the bank you choose, is there potential for environmental, social and governance (ESG) strategies to support a financial services’ community positioning?
Creating accessibility for all
One of the most topical debates around services is where they are offered. Although the rate of bank branch closures appears to be slowing down slightly in some countries, physical access to services is still a key priority as we shape the future of banking.
There have been many discussions and ongoing community concerns around the reduction of, or limited access to, cash or bank branches within a reasonable proximity. With this in mind, we are seeing many governments step in to take action and safeguard the landscape of physical services and cash solutions. These physical services could take different formats, ranging from video interaction to face to face in-branch meetings. In Sweden, an ATM must be provided within a 25km radius of every person, and this is similar in the Netherlands, which governs a 5km radius. In the UK we have also seen legislation introduced to protect access to cash and the delivery of physical services for both those who want and need it.
Accessibility can also be viewed beyond the actual provision of banking services, if we consider how the solutions are offered. For example, are pop-up branches offered with convenient opening hours? Can you complete a variety of transactions at the pop-up branch or ATM? Or is the ATM even available when you come to use it? Reducing the number of touchpoints available to the enduser drives a greater focus on the availability, effectiveness and usability of remaining services.
When viewed through this lens, you can appreciate the important roles that fit for purpose and reliable solutions play within the community. This can impact more vulnerable customers and those less able to travel and influence the choice and convenience available for all consumers.
Building sustainability from the product up
Achieving the delicate balance between cost discipline and driving opportunities for revenue expansion is an ongoing challenge. With the spotlight on highly available, highly effective solutions for all, innovation and technology become even more important to an organisation’s approach to ESG, as well as its long-term profit strategy.
Firstly, the efficiency of services and products is crucial. Reducing the manufacturing carbon footprint, optimising energy consumption, and using recycled and recyclable parts should all be part of the sustainably mix for new technology. This not only reduces the initial impact of service implementation, but also the continuing environmental footprint of the banking solution. For example, powering down technology when not in use and utilising energy saving modes can facilitate both greener solutions, as well as delivering sizeable cost savings.
Secondly, implementing adaptable services is crucial. Flexible and modular designs of hardware often give increased flexibility to be nimble within a dynamic market. Changes within consumer preferences are accelerating faster than ever before and the financial services sector is increasingly expected to keep pace. Moving away from ‘one size fits all’ product portfolios, consumer offerings now need to shift and align with an evolving market. Recent research supports this, showing that banks could boost revenue from their primary customers by building stronger and more meaningful connections.
VP Banking Europe, Diebold Nixdorf
In addition, a foundation of adaptable software is a key building block on the path to more efficient and effective solutions. For many in the industry, we are seeing a shift away from customised software and greater favour towards more standardised and compliant offerings. Typically, easier to integrate, standardised solutions not only save financial institutions time and money, hence satisfying efficiency goals, but also offer the flexibility needed to be responsive in the market and deliver the adaptable services consumers expect.
Maintaining Consumer Connections
Assuming the implementation of the right services in the right place, how can physical banking services actually help financial institutions build and maintain consumer connections? Research shows that having access to physical and digital options sit within the top five criteria for selecting a bank, highlighting the significance of branches and self-service touchpoints within the channel mix.
Despite the rise in digital offerings, many consumers place significant value on the ability to access cash services, complete supporting banking transactions or gain advice from a banking associate face to face. With this in mind, we are seeing how physical services are presented to consumers changing. For example, some branch concepts have shifted to be purely cash hubs. Popping up in convenient locations, they offer fast, secure and dedicated access to cash services.
In other examples we are seeing some branches reformat and shift to be client relationship hubs, offering financial information and advice to support the ongoing depth of one-to-one consumer relationships.
When viewed with a consumer mindset, there is no doubt that these kinds of services are helping banks to keep close ties with local communities. However, when refocusing on the need for cost discipline, the importance of offering such solutions in a sustainable way becomes almost non-negotiable. Financial services need to be effective, efficient and crucially available. Focusing solely on ESG priorities while ignoring consumer needs is counterproductive, just as basing services exclusively on consumer requirements prevents financial institutions from fulfilling their ESG goals and maintaining their community-based brand identity. Therefore, it is essential that these two elements work hand-in-hand to create services that are not only effective, but also pave the way for a more sustainable industry in the future.
Helena Müller
How GFT’s Marco Santos is Guiding Banks Through a New Digital Frontier
When Marco Santos began his journey with digital transformation company GFT almost 13 years ago as the Country Manager of Brazil, the market was a completely new frontier for the company—and for Marco, who accepted the challenge of building the business completely from scratch.
Not only did he scale GFT's internal operations by initiating a phase of rapid growth which took the local team from 80 to 3,414 professionals today, he also introduced the Germanbased digital consulting giant to a number of banks and financial institutions in the region. Marco led the charge to scale Brazil’s financial portfolio, working with companies on various cloud migration, core system modernization and data transformation initiatives.
Since then, Santos has done the same in a number of other markets—Costa Rica, Mexico, and most recently, the US and Canada as CEO of GFT Americas. In this role, Marco has fostered consistent year-over-year growth in the region, transforming GFT from an almost unknown entity to a trusted brand amongst the largest financial services and manufacturing brands throughout the Americas.
As Santos’s momentum continues to climb he has now taken on his next challenge: the role of co-CEO of GFT alongside Marika Lulay for the rest of 2024, ahead of continuing as sole CEO in 2025. In this new endeavor, Marco is applying what he has learned from scaling GFT's offerings across the Americas to the entire company—from the top down and across the global markets GFT serves.
Global Banking & Finance Review recently sat down with Santos to learn more about this journey and how he's successfully transformed a company with virtually no awareness into one competing with household names.
With GFT’s more than 35 years of experience in the banking and financial industry, we also wanted to hear how a company that’s been on the front lines of digital innovation for decades now is approaching a new technological frontier characterized by AI and data-driven experiences.
The same exponential mindset that enabled him to break GFT into entirely new markets across the Americas, says Santos, is what's now informing the company's work to lead banks as they enter unknown digital landscapes.
Laying the Foundation for Exponential Growth
AI is at the top of the agenda for many organizations today. They want to use the technology to unlock unrealized operational efficiencies and capitalize on years of historical data to make better-informed decisions—all with the click of a button.
"What banks and financial institutions are encountering now with AI and other new digital capabilities is similar to what I experienced with each new market I entered with GFT. Innovation doesn't happen overnight. Before I could experience the tangible results of our growth in Brazil, Costa Rica, Mexico and the US, there were periods of quiet—sometimes even unnoticeable—work to lay the foundation for this growth," said Santos.
"Many financial organizations are still in the process of laying the foundation for digital innovation. While it may seem at first that the rest of the industry is moving forward without them, the time is coming for this work to pay off exponentially," he continued.
GFT is a partner to the world's largest cloud providers including Amazon Web Services (AWS), Google Cloud, Microsoft Azure and SalesForce, and it is one of the top three providers of AWS cloud migrations worldwide. The company also partners with multiple cloud-based solution providers in the banking and finance industries, including Thought Machine, Mambu, Oracle, Finastra and Lemonedge. These partnerships enable GFT to provide clients with customized solutions that meet their specific needs.
From this vantage point, the company has been helping banks transform their legacy core systems into modern digital architectures, setting them up to capitalize on new digital technologies, such as AI, as soon as they emerge.
Transforming Alongside The Industry
Santos began studying AI long before it became a mainstream business priority, both at the Institute of Mathematics and Statistics at The University of São Paulo in Brazil and later in a specialized course at the Massachusetts Institute of Technology (MIT).
"AI was entirely conceptual back then. We didn't have the machines or the technological resources to actually make real business change happen," said Santos. "Part of our role as a digital transformation company is making these tools and resources available to companies."
Marco Santos Co-CEO GFT
Drawing on this background, Santos has been intimately involved with GFT's continued development of its AI.DA Marketplace, a catalog of ready-to-implement AI and data-based use cases and solutions. Beyond the standard capabilities, Santos also encourages his team to think outside the box and come up with new, client-specific applications for each project and deployment.
"As new AI and data capabilities have emerged, our clients understand the importance of harnessing these technologies and implementing use cases into their existing business workflows," continued Santos.
Digital transformation provides the foundation businesses require to accurately deploy AI across the enterprise in a way that capitalizes on existing data stores, best practices and historical knowledge. With the proper groundwork in place, Santos believes that the only limit to the possibilities of AI is the human imagination.
"I often talk about the need for an exponential mindset in business. We're experiencing an exponential process unfolding right before our eyes, and we've only scratched the surface," said Santos.
The Next Frontier of Global Growth
Now, as Marco takes on a new leadership position at GFT, he is looking to continue executing on GFT's commitment to working hand in hand with clients to bring them the AI-powered solutions to build better businesses. "We have seen the areas of AI, data, and architecture modernizations drive growth across our business," said Santos. "The deployment of generative AI into the software development cycle has proven to drive efficiency, and I look forward to continuing this momentum."
Empowering Employees with Data: The Key to Effective Business Decisions
In the modern business environment, data has become a crucial asset for empowering employees and optimizing organizational processes. From my perspective as an industrial engineer and consultant, I have observed firsthand how the integration of data into daily operations transforms various aspects of organizations. It provides leaders with visibility, changes decision-making, and allows us to predict challenges and trends with precision. This article explores how data empowers employees and how businesses can leverage this resource to improve efficiency and competitiveness.
Data as the Pillar of Decision-Making
Previously, business decisions were primarily based on intuition and experience. However, the increased availability of data, advanced analytical technologies, and artificial intelligence have fundamentally changed this paradigm. Employees can now access and analyze large amounts of information using various data visualization applications and the latest AI technologies. Different AI applications use various algorithms to make informed and evidence-based decisions.
Integration of AI in Decision-Making Processes
According to Jose Javier Torres, LSSBB at Principal Consultant|Rethink Consulting, integrating artificial intelligence into decision-making processes involves using machine learning models that analyze large volumes of data to forecast trends, optimize resources, and improve the accuracy of strategic decisions.
For example, supply chain data can provide detailed information on inventory levels, delivery dates, and market demand. Machine learning algorithms predict future demand patterns, identify potential disruptions before they occur, and recommend actions to optimize inventory and reduce costs. This allows employees to more accurately predict potential problems and make more effective decisions. In this way, AI and data not only improve operational efficiency but also reduce the risk of making decisions based on guesswork, allowing companies to be more proactive and competitive in the market.
Tools for Data Visualization and AI Applications
Tools like Tableau and Power BI connect to various sources to visualize data in an easy-to-understand way. Additionally, we employ AI applications that provide sentiment analysis for surveys and predictive analysis for our social media and website traffic.
Another important aspect of empowerment through data is the ability to anticipate challenges and trends. Predictive analytics based on machine learning algorithms and AI techniques can identify patterns and predict future events with high accuracy. For example, in HR departments, data analysis can predict employee turnover trends and help managers implement proactive retention strategies. AI enhances the accuracy and speed of these analyses, providing more detailed and customized information to meet each organization’s needs.
Case Study: Predictive Analysis in Practice
Rethink Consulting collected data from social media to understand traffic and search trends using machine learning algorithms. We found an interest in topics such as digital transformation, people management, and seminars/ webinars for learning. We are currently developing courses on two specific topics: “Unlocking Yourself” and “Unlocking Your Business.”
Similarly, AI-driven data can reveal new trends in consumer behavior and help companies better adapt their marketing strategies and product development to market needs. AI tools can analyze large amounts of data in real-time, allowing a deeper and more dynamic understanding of consumer preferences and behavior. In a world where adaptability is key to business survival, the ability to anticipate change and respond quickly is a critical competitive advantage, and AI plays a key role in this capability.
Fostering a Data Culture
For data to truly empower employees, it is important to foster a data culture within the organization. This includes not only implementing the right tools and technology but also continuous training and development to help employees interpret and use data effectively. AI plays a key role in this process, facilitating the analysis of large amounts of data and providing actionable insights through advanced algorithms and machine learning.
We focus on a digital-first approach, minimizing physical paper creation to ensure all data is systematized and analyzable in various ways according to needs. We also promote continuous learning of the latest in data analysis and visualization. As an industrial engineer, I have worked with various companies to design and implement data management systems that integrate information flows from multiple sources. AI-based solutions enable the automation of data collection and analysis, improving the accuracy and efficiency of the process. A comprehensive approach ensures that data is accurate, accessible, and relevant at all levels of the organization. Additionally, AI can create intuitive dashboards and personalized reports, making it easier for employees to view and understand information, facilitating informed strategic decision-making.
Ensuring Data Accuracy, Accessibility, and Relevance
We use data management systems with automatic validations and regular audits to ensure the accuracy, accessibility, and relevance of data at all levels of the organization. We also create “poka-yoke” processes to minimize potential data entry errors.
Integrating People and Processes
The true power of data is realized when effectively integrated into business processes in collaboration with the people who execute them, especially when leveraging AI. Data-driven process optimization powered by AI algorithms not only enhances operational efficiency but also improves employee satisfaction by eliminating redundant tasks and allowing them to focus on higher-value activities.
AI-Driven Operational Efficiency
AI helps us make decisions quickly with greater precision and efficiency. It also supports us in eliminating over-analysis and cleaning data to obtain clear information. For example, in the production plant, data analysis combined with AI can more accurately and quickly identify bottlenecks and opportunities for improvement in manufacturing processes. By addressing these issues with data and AI-based solutions, companies can increase productivity and reduce waste. Moreover, AI systems can predict problems before they occur, enabling proactive intervention. Employees involved in data-driven and AI-enabled decision-making experience greater ownership and results, as AI tools can provide deeper and more specific insights and enhance decision-making capabilities.
Employee Training and Development
We promote a culture of continuous learning and are always seeking training alternatives for our team. The integration of AI tools has reduced the burden of repetitive tasks and analysis, allowing employees to focus on more strategic and creative activities, increasing their satisfaction and commitment to the company and our clients.
Being a small company, we always collaborate on all issues and leverage different knowledge areas to maximize and provide value to our company and clients through data and AI. For example, we have used AI to perform sentiment analysis using an employee satisfaction survey. This data allows AI to summarize the health of an organization’s employees and facilitates the process of recommending solutions.
Conclusion
Data has revolutionized the way companies make decisions and anticipate challenges and trends. By providing employees with accurate and relevant information, companies can become more efficient, adaptable, and competitive. In this context, AI is playing a key role by automating complex analyses, uncovering patterns in large amounts of data, and providing insights that were previously difficult to achieve. However, to fully harness the potential of AI-driven data, it is important for companies to foster a data culture, effectively integrate technology and processes, and train employees to make optimal use of these resources. As a principal consultant at Rethink Consulting, I firmly believe that success in the information age lies in the synergy of people and processes supported by solid data, advanced analytics, and the transformative power of AI.
Javier Torres Business Consultant
Rethink Consulting
Jose Javier Torres is a seasoned professional with over 7 years of expertise in product management, operational excellence, and strategy execution. He holds a Master’s in Engineering Management and a Bachelor’s in Industrial Engineering and is certified as a Scrum Master and Lean Six Sigma Black Belt. Currently a Business Consultant at Rethink Consulting, he has led initiatives in process improvement and digital transformation. His career spans optimizing IT systems, improving production efficiency, and managing strategic projects across various industries, including manufacturing, healthcare, and banking. Passionate about integrating methodologies to achieve business objectives, Jose Javier drives innovation, continuous growth, cost reduction, and resource optimization.
Jose
Chom Capital: Embodying the Principles of Sustainable Finance
Frankfurt-based Chom Capital GmbH is an owner-operated asset management boutique, licenced to conduct financial services in the form of investment brokerage, investment advice, contract broking and financial portfolio management. It is a member of the German Association of Independent Asset Managers (VuV) and won the award for Best ESG Equities Fund Europe at the 2024 Global Banking & Finance Awards.
Christoph Benner is CHOM CAPITAL's CEO and one of its three founding members. As head of the management board, he plays a key role in shaping the company's overall strategy, is a portfolio manager and is operationally responsible for the risk controlling of funds, IT and sales. Global Banking & Finance Review editor Wanda Rich recently spoke with Christoph to learn how CHOM CAPITAL is navigating industry changes to comply with regulations, drive transparency and create long-lasting value for its investors.
He began by explaining how CHOM CAPITAL has focused on deepening its fundamental analysis approach and reinforcing its commitment to sustainability principles over the past year. “Strategically, we've enhanced our ESG integration by refining our proprietary models and incorporating more granular data,” he revealed. “Operationally, we've expanded our team, bringing in new talent to enhance our analytical capabilities and improve our decision-making processes. Our market presence has grown through increased engagement with our investors and stakeholders, driven by transparent communication and consistent performance.”
This approach sets ESG firmly at the core of its operations, and its integration within CHOM CAPITAL has been made successful courtesy of a number of initiatives. “One key advancement is the development of more sophisticated proprietary models that allow for detailed monitoring and simulation of sustainability impacts,” Christoph said. “This includes being able to track and simulate our UN SDG exposures as well as sustainable investments. Moreover, it involves measuring various KPIs (from different emission profiles, such as water and waste) not just for the respective holding companies, but also across each company's entire value chain.”
Global sustainability policies are continuously evolving; in Germany, ESG regulations are influenced by both EU law and national standards. Since these regulations aim to drive greater transparency, accountability and environmental stewardship, the impact on the investment landscape is welcomed by CHOM CAPITAL.
“For us, these changes align well with our existing practices and will further validate our approach,” Christoph affirmed. “We anticipate that stricter ESG regulations will enhance the quality of available data, improving our analysis and decision-making processes. Moreover, regulation will impact market mechanisms and business models, resulting more than ever in sustainability transitioning from a mere CSR/reputational measure to a core fundamental value creation driver. Our strategy remains focused on being at the forefront of sustainable investing.”
He discussed CHOM CAPITAL's efforts to set itself apart from its competitors in the asset management industry through the principle of “PERFORMANCE DRIVEN BY SUSTAINAMENTALS®,” which holistically combines sustainability and fundamental analysis. “This approach allows us to identify companies with strong potential for long-term value creation and risk mitigation, resulting in attractive performance at best-inclass risk levels. Our commitment to investors, transparency and strong financial performance underscores our unique position in the asset management industry. Close and established management contacts and over 600 interactions and production site visits round up this edge on a qualitative basis, consistently ensuring a good overview of the status of our holdings and the validity of our investment theses.”
Christoph Benner Founder, CEO, and Portfolio Manager CHOM CAPITAL
Given the volatile market conditions and economic uncertainties, CHOM CAPITAL has had to adapt its investment strategies to maintain performance. Christoph described how it has emphasised a flexible and dynamic approach to portfolio management in response to these variables. “We have increased the frequency and depth of our market analyses, allowing us to quickly adapt to changing conditions,” he said. “Our active investment strategy, underpinned by rigorous fundamental analysis and ESG integration, helps us identify resilient companies that are capable of weathering economic fluctuations.”
He added that, under such conditions, exercising transparency and building trust remain key to maintaining investor confidence, which CHOM CAPITAL has achieved through its strategic approach to reporting. “Consistent and open communication with investors through monthly reports and updates ensures transparency, maintaining their confidence in our ability to navigate turbulent markets,” he explained. “Our reports provide detailed updates on portfolio composition, performance, and market insights. We also prioritise personalised interactions, offering tailored advice and addressing investor concerns promptly. Transparency in our investment process, coupled with our proven track record, reinforces our credibility. By aligning our interests with those of our investors and adhering to high standards of integrity and responsibility, we foster long-lasting trust and confidence.”
Finally, he discussed the proactive role he believes institutions such as CHOM CAPITAL should fulfil to support social and economic development in their communities.
“Financial institutions play a crucial role in supporting socio-economic development by channelling capital towards projects that drive positive social and economic outcomes,” he said. “At CHOM CAPITAL, CSR is integral to our business model. We adhere to the principles of good corporate governance, a socially responsible HR policy, and an environmentally conscious use of resources.
“Our investment strategies focus on supporting companies that contribute to the UN SDGs, and we actively engage with our portfolio companies to improve their sustainability practices. By promoting responsible investments and ensuring that our actions positively impact society and the environment, we embody the principles of sustainable finance.”
Optimism, Scepticism and Guilt:
Emerging trends in the application of Artificial Intelligence
The notion of artificial intelligence (AI) as a key tenet of society has been around for some time. Since the introduction of Chat GPT and other consumer-facing AI products into the marketplace, employers and employees alike have clamored to understand the benefits and best uses of AI for their respective individual sectors.
It has become apparent that AI has already and will continue to change not just the way that we work but also wider society, whether that be the way we interact with each other, the way we perform are jobs, or the way businesses run.
Despite this, growing trends have emerged regarding the application of AI. Both scepticism and optimism are rife, owing to competing levels of knowledge around the use of AI but also because of the relatively early stages of business and employee understanding.
Optimism, Euphoria, Pessimism and Guilt
AI provides exciting yet challenging times for many businesses. The technology poses the prospect of revolutionising the way we work through automating processes, reducing human error and maximising productivity.
However, with this comes the understandable anxiety that AI could replace jobs that currently exist. It is important to remember though that generational shifts in technology have happened throughout history and rather than erasing the need for humans, have shifted and altered our working priorities, offering people the opportunity to upskill, pivot and utilizing their existing skillset within the same field but in different ways.
AI must be embraced as a tool that allows employers and employees alike to enhance jobs rather than replace them, and its endless possibilities do indeed provide a new dawn for the business community.
However, in places, optimism around the opportunities AI presents should be tapered. A phenomenon being dubbed “AI euphoria” has swept across many sectors of the economy whereby business leaders are unilaterally implementing technologies without the understanding of potential consequences. Whether it be bias, incomplete data or ethical concerns, AI must be introduced with a coherent plan whereby it benefits business interests and its employees if it is to be fully and successfully utilised.
On the other end of the scale, recent reports have suggested that there has been a trend among younger workers to suffer from what is being described as “AI Guilt.” Data has shown that 36% of Gen Z employees feel guilt when using AI in the workplace and feel they may be relying too heavily on applications such as ChatGPT, which 1 in 3 believe will hamper their critical thinking skills.
This guilt is also reflected in the number of people expressing concern about the future of AI. While Gen Z adults believe it poses no immediate threat to their jobs, 61% believe that in the next decade it could replace their roles. This pessimism is not reserved for those at the start of their working life either, almost 60% of Brits fear their jobs could be replaceable by artificial intelligence.
The importance of an AI Strategy
The concept of optimism, scepticism and guilt around the use and application of artificial intelligence centres on the importance of an AI strategy. Research by Slalom has highlighted that only 6% of businesses have a clear and coherent strategy in how best to use artificial intelligence and education and training will be crucial in bridging the divide between businesses who are actively using AI and those who have an effective strategy in place to leverage its use.
The development of an AI strategy can be a complex process for many businesses but is crucial in maximising productivity and ensuring a competitive edge. However, it is critical than any AI strategy should provide solutions to address areas of scepticism, guilt, mismanagement, risk, and enhance optimism – driving benefits and ensuring appropriate usage.
Richard Fayers Senior Director, Data & Technology
Slalom
Without clear understanding of how models have been created and through poor usage, AI has the potential to lead to biased outcomes. Considering this, a strategy must be devised by a diverse set of individuals who are able to mitigate the risks of racial, gender and other forms of AI bias (while also ensuring outcomes are not factually or historically incorrect). This aspect speaks to a wider set of concerns regarding the implementation of AI which is risk. A robust risk management system must be in place before any form of AI solution is applied, with not just a technological but also a human-centred lens at its heart, able to identify where risks may exist that the technology is unable to predict.
The future of work is unpredictable in many ways; however, it is guaranteed that artificial intelligence will play a crucial role within it. Whether individuals, businesses or the wider society are optimistic or pessimistic about the role it will play, it is vital that understanding and education is put at the heart of its future use.
AI has the ability to enhance the workforce rather than replace it, maximising productivity and automating processes that allow employers and businesses to spend time on more meaningful tasks. However, if the full potential of AI is to be exploited, strategies must be put in place in order to mitigate risks.
Slalom is a next-generation professional services company creating value at the intersection of business, technology, and humanity.
The Future of Banking will be Personalized and Open
In the year 2024, persistent challenges notwithstanding, there is an optimistic outlook for a continued decline in inflation. Should this trend be effectively managed, it is anticipated that the banking industry may witness a transition to lower interest rates, paving the way for a potentially smoother trajectory. However, until such positive developments materialize, financial institutions find themselves compelled to showcase resilience and concentrate on both retaining and growing deposits within an intensely competitive environment. The lending landscape remains intricate, marked by elevated borrowing costs, and expected decreases in credit quality and collateral values. The paramount importance of fortifying operational resilience is underscored, ensuring that customers experience secure and uninterrupted services, thereby bolstering their confidence and loyalty.
When we account for the forthcoming operational challenges, banks need to recognize the importance of identifying and investing in the acquisition, service, and retention of their most lucrative customer base. In my opinion, we will see retail banks center their attention towards personalized offerings for the affluent user segment. With nearly USD 27 trillion in wealth, and recognizing the vast potential within this demographic, the affluent segment comprises of individuals with investable assets between USD 250,000 to USD 1 million.
To attract affluent customers, retail banks are providing exclusive benefits and personalized experiences. For instance, Standard Chartered Bank launched the Wealth $aver account in Singapore 1 offering higher interest rates based on total assets under management. Similarly, Citi introduced relationship tiers with increased benefits 2 , and Société Générale launched SG, the Group’s new French retail bank with focus on affluents 3 . J.P. Morgan upgraded First Republic Bank branches to appeal to high-wealth customers 4 , Standard Chartered plans additional outlets for the affluent in Hong Kong 5 , and Wells Fargo launched LifeSync 6 , a digital platform for prosperous clients.
This trend indicates a convergence in deposit banking, lending solutions, and wealth management to meet the diverse needs of affluent customers. The move toward early engagement and tailored premium services recognizes the potential for these customers to amass greater wealth over time. Through better rates, waived fees, personalized services, and value-added offerings like financial planning, retail banks aim to build a lasting relationship with their affluent customers. The integration of banking and wealth management services creates opportunities for banks to cross-sell across the customer lifecycle, allowing them to capitalize on synergies as affluent customers expand their wealth. As banks focus on securing long-term loyalty, the affluent segment becomes a crucial driver for future financial growth.
Delivering services to customers, particularly the affluent class, necessitates a robust data and digital infrastructure to explore new avenues for creating and communicating value to clients. The global rise of open banking is transforming data from a proprietary asset to a shared, open resource, driven by regulatory initiatives and increased consumer awareness. In the European Union, robust frameworks and policies paved the way for open banking, with global adoption following suit in regions like Saudi Arabia, Australia, Brazil, and the United States, which is now introducing regulations to fuel broader adoption.
Examples include Mastercard’s European open banking capabilities 7 , ING’s collaboration with Salt Edge 8 for open banking use cases, and Experian’s partnership with Zopa Bank 9 to enhance credit card decisions. BNY Mellon’s Bankify, developed with Trustly 10 , allows firms to receive customer payments from bank accounts.
The impact of open banking is two-fold: customers gain control over data, access a wider range of services, and benefit from increased competition; alternatively, banks unlock transformative opportunities and may forge innovative partnerships to develop distinct branded products. As open banking evolves, more regulatory frameworks are expected. Recently, the European Union’s Financial Data Access framework enables retail banks to become lifestyle partners deeply embedded in non-financial customer journeys. The journey towards open data continues, promising increased collaboration, competition, and enhanced customer experiences in the financial services sector.
These trends underscore a broader industry shift from traditional banking models to more customer-centric, adaptive strategies. As the financial landscape undergoes significant transformations, leveraging the groundwork laid by the open banking initiative becomes pivotal for banks. With open finance looming on the horizon, institutions need to build upon the principles and frameworks established in open banking. This transition underscores the necessity for banks to not only adapt to current innovations but also proactively position themselves to embrace the broader spectrum of opportunities that open finance offers.
In conclusion, the fusion of catering to affluent customers and adopting open banking heralds a dynamic and inventive future for the banking industry. Through a proactive approach to comprehend and address customer needs throughout various life stages via personalized services and harnessing the potential of open data, banks are well-positioned to navigate the intricacies of the ever-changing financial terrain. This strategic alignment ensures not only sustained growth but also resilience in the face of continual challenges the financial ecosystem might face going forward.
Elias Ghanem
Global Head of Capgemini Research Institute Financial Services, Capgemini
Navigating the complexities of transaction reporting
Over recent years, we have seen many banks impacted by substantial regulatory imposed penalties relating to erroneous transaction reporting and/or inadequate processing controls.
These high-profile incidents highlight the critical importance of transaction reporting, which must adhere to regulatory requirements but also involves significant challenges.
The impact on organisations goes beyond monetary fines, although these fines can be substantial. Reputations are also damaged as these penalties are widely reported, which in turn will likely impact the company bottom line.
Additionally, regulators may enforce unfavourable timelines for remediation, resulting in costly and subpar solutions. This perpetuates an inefficient process that incurs high operating costs. Moreover, operational areas may be stretched to capacity without sufficient resources for scaling.
So, why is it so important? Firstly, transaction reporting serves as the first line of defence against financial crime, making it a vital tool for maintaining market stability, as well as detecting and investigating market abuse.
Secondly, to support market stability by providing a view of transactions for aggregation and oversight by the regulators.
From a financial crime prism, the need for complete and accurate reporting has never been more important. However, the vast and diverse challenges posed by managing a global trading book add significant complexity to this task.
A deep understanding is required of various elements, including the types of instruments; the timing of transactions; how they came about; the parties involved; how to capture all relevant data; reporting within the required and possibly almost instantaneous time constraints. But more on this later.
Correctly interpretating regulatory guidelines
Regulatory guidelines obviously play a significant role in shaping best practice for transaction reporting. In the UK, for example, the FCA “expects firms and market participants to apply the guidelines to the extent that they remain relevant and to sensibly and purposefully interpret”
But what does this mean?
In short, that the onus is on the institution to ensure it interprets the regulatory reporting requirement correctly, applying the appropriate actions allowing for scale, counterparty and jurisdictional diversity.
Navigating the complexities of transaction reporting requires a strong and nuanced understanding of the appropriate guidelines and their applications.
Example penalties levied for reporting non-compliance.
A large US Investment Bank was fined £13.2 million for failing to correctly report on transactions. The fine reflected a failure to address root causes over several years.
Elsewhere, the London branch of a leading European headquartered bank suffered a fine worth £4.7 million for inaccurately reporting its Equity Swap CFD transactions. Similarly, a major UK bank was fined £5.6 million for failing to report 37% of their relevant transactions and breaching their requirement to have adequate management controls.
Paul Joseph Global Relationship Manager, Consulting at Davies
These examples highlight the severe consequences of non-compliance the global banks are facing despite their undoubted sophistication and available financial and intellectual resources.
Looking beyond tier 1 banks, it’s hard not to consider the exposure faced by other institutions. The financial and reputational impacts on these firms could be significant if issues and anomalies are discovered, especially as regulatory scrutiny broadly expands.
Accessing transaction data and streamlining the automation process
In today’s interconnected global landscape, transactions often span multiple international jurisdictions, involving equally geographically diverse counterparties and regulatory regimes.
The complexity of transaction reporting is further compounded by the sheer volume of applicable transactions to be reported on. To address this challenge, a robust and efficient automation process is essential. This is why many businesses turn to specialist technology firms such as Broadridge and Bloomberg for processing.
Additionally, they may seek the expertise of consultancies, such as Davies Consulting, to establish data and technology foundations. These foundations enable effective and efficient data acquisition, standardisation, and aggregation. They are also governed for data quality, ensuring timeliness, completeness, accuracy, consistency, validity, and uniqueness.
Moreover, data, technology and governance strategies should be developed in consideration of each other rather than sequentially to ensure maximum effectiveness and efficiency. A siloed approach to developing each element individually creates high friction environments that suffer from considerable inefficiency.
The integrated data, technology, and governance approach is being adopted by the Trade Reporting and Transaction application vendors. Indeed, vendors are incorporating industry reference data sources into clients’ regulatory reporting data governance strategies. Regulatory harmonisation, particularly through initiatives like the CPMI/IOSCO Common Data Elements (CDE) and the adoption of ISO 20022, is helping to simplify one aspect of the data challenge.
As vendors publish increasingly similar data to different regulators, albeit with some exceptions in interpretation, they face higher regulatory scrutiny regarding data sourcing and accuracy.
Therefore, a robust data processing, management, and governance strategy is crucial for responding to regulatory audits. And there is a growing need for alignment between counterparts, such as increased focus on pairing and matching breaks under regulations like EMIR, as well as the increasing complexity of UTI generator determination.
The question is why this approach is not being taken by many for the data layers that feed the Trade and Transaction Reporting applications.
Perhaps because there are some common challenges in large data programs, which often struggle to provide effective solutions without resorting to workarounds, high costs, and complexity. Work is not easy after the reporting tool has been implemented, it’s just the beginning.
Too frequently, businesses are overlooking some important best practice strategies. For one, they fail to align reporting requirements with data and technology needs, often resulting in simplistic approaches or prioritising technology over data design.
Additionally, they miss the opportunity to integrate data processing, management, and quality into a unified design, tackling them sequentially instead, which leads to suboptimal outcomes. Finally, they design systems as expedient solutions rather than as a coherent set of components, risking effectiveness and longevity.
Seamless regulatory reporting
If businesses can implement – rather than overlook – these best practices, organisations will have a much clearer picture of their digital landscape and, more specifically, their transaction data. In turn, this will make it significantly easier to automate their systems to give accurate reports that match their interpretation of the guidelines laid out by regulatory bodies like the FCA.
For many businesses, such an overhaul of their data governance regime might seem daunting. As such, seeking out partners who are able to assess existing systems, identify gaps, and recommend solutions to enhance data quality, streamline processes, and enable seamless regulatory reporting is of immense and critical value.
Paul Joseph is a Global Relationship Manager within the Corporate Functions team at Consulting at Davies. Formerly known as Sionic, Davies acquired the global consulting firm specialising in financial services in 2021, and it is now referred to as Consulting at Davies. Joseph has 20+ years of experience in the banking and financial technology sectors.
Persistent challenges: the hindrance of legacy systems
In the past manual reconciliation processes have sufficed but placing heavy reliance on such can lead to inefficiency. Currently, 84% of UK and US payment firms rely heavily on manual tasks and spreadsheets to perform the reconciliation control process, while 86% say their data lacks the transparency and standardisation required for effective reconciliation. This raises the question of what can be done to ensure that effective reconciliation takes place.
Reconciliations are a fundamental control mechanism for finance and accounting but many firms across the financial services sector continue to rely on legacy systems such as Excel spreadsheets to carry out this crucial process. These systems are generally human-error-prone, repetitive, lowvalue tasks and despite the day-today value spreadsheets provide, there is the issue of scalability when it comes to financial reconciliation. With the payments industry being a big growth sector, relying on manual tasks can become increasingly complex and can slow down operations.
Ultimately, businesses need to streamline their operational frameworks to effectively navigate potential disruptions to remain profitable and competitive in today’s demanding, fast-paced environment. Businesses must be able to handle vast transactional volumes and growing payment methods. However, relying on manual reconciliation can hinder this ability, especially when it comes to customer needs which is a key priority for businesses. Despite this, significant investments remain to be made.
Hindering the ability to remain responsive to customer needs
With customer experience and retention (49%) and reducing operating costs (49%) being among the top priorities in 2024, businesses are aiming to balance meeting customer expectations with optimising operational efficiency. In the past, focus has been divided between customer expectations and operational efficiency. However, in today’s landscape, these cannot exist without each other especially as customers now expect to have seamless and personalised experiences and businesses must align their operational capabilities accordingly. This means integrating new technologies to increase efficiency but also ensuring that these tools can work alongside existing legacy systems – something that can be challenging due to outdated infrastructure.
In the payments space, it is crucial not to fall behind with the latest developments and advancements in technology – such as generative AI. To achieve this, companies need to ensure that they have the correct payment tools in place, as well as education and training to encourage new ways of working that align with new technology. However, when implementing new tools there is a risk that enhancement will not be achieved. This is because legacy tools lack forward-thinking capabilities and should be replaced or used in combination with other tools to complement one another. Failure to do so can prevent businesses from offering new features/ services that meet customer expectations.
Reducing legacy-based costs through modern reconciliation
Upgrading to modern reconciliation can address challenges such as customer retention but also improve compliance and reduce errors in manual tasks. By doing so, businesses can position themselves as a trusted source that is compliant, efficient, and competitive. However, it is important to note that the decision to transition is often influenced by budget considerations.
Companies are showing an increased interest in adopting automation but it’s essential to have a better understanding of the costs and the potential savings involved. Despite resulting in significant benefits, businesses are often reluctant to go through with the transformation due to the high expenses.
However, recent research highlights the urgency of this decision as the number of payments organisations expecting their cost of compliance to increase over the next 12 months has doubled since 2023, jumping from 38% to 80%. The shift reflects the growing regulatory scrutiny on payments firms worldwide and with the FCA looking to announce changes to safeguarding regulations this year, safeguarding is predicted to look more rules-based, similar to CASS regulations. This has led to businesses adopting safeguarding principles to protect customers in the event of liquidation or bankruptcy.
Assuming volumes in the payments market continue to grow, a firm’s ability to scale its back office will be increasingly critical to its business model. In 2023, 22% of businesses acknowledged that their costs accelerate when volumes increase. This number rose to almost three in ten in 2024. These figures suggest that investments in automation usually prevent significant rises in back-office processing costs as volumes rise. By driving higher levels of automation, firms will realise the benefits associated with economies of scale.
To conclude, with the expansion of the digital economy, rising transaction volume, and ever-changing regulatory obligations, there is a need for additional education around reconciliation to help businesses automate manual processes due to these legacy systems no longer being fit for purpose. By transitioning to full process automation is imperative because businesses can focus primarily on growth objectives –all while reducing operating costs and liberating staff from dull, repetitive data work. Furthermore, a commitment to internal education and regulatory compliance is paramount.
Iberian Peninsula Global Payments Lead AutoRek
Moving from embedded finance to embedded treasury: what does this mean for businesses?
There was a time when accessing financial services such as payments, lending, and investments depended on in-person visits to the bank or calling service centres and having to wait for the next available agent. However, once the digital evolution started transforming industries, businesses have slowly transitioned to a digital-first approach, with the pandemic accelerating it alongside the adoption of Software-as-a-service (SaaS). Digital tools have been introduced across the sector to ensure that businesses are keeping up with the fast-paced world of modern banking whilst also remaining efficient, secure and competitive. As a result, businesses have reported an increase in performance and profitability over the past 24 months thanks to digital transformation.
One of the solutions adopted includes embedded finance, which is the practice of integrating financial services into non-financial platforms to be able to provide the support needed directly to the end user. Thanks to software platforms, software enablers, and banks, financial services can now be seamlessly embedded into non-financial services contexts.
What does embedded finance truly mean for businesses and where does embedded treasury come to play?
The rise of embedded finance
Embedded finance is generally focused on payments, money transfers and lending to name a few. Having said that, now more and more businesses are leveraging these methods internally to process payments in real-time and sync more seamlessly to treasury management systems. It is evident that embedded finance is invaluable for the success of a business so much so that the practice is predicted to continue growing. Specifically, the global embedded finance market is expected to see a growth rate of 148 percent from 2024 to 2028, totalling a transaction value of $228 billion by 2028.
The transition to embedded finance methods is spearheaded by the growth of open banking and application programming interfaces (API). These API systems have made it much easier to incorporate financial services right into the heart of existing business operations. Previously, it could have taken at least six months to embed payments from one bank into an organisation’s Enterprise Resource Planning (ERP) due to the need for specialised resources. Today, this can be done in a matter of days or weeks, which is due to Open APIs, providing transparent specification and standard protocols.
The monetary and time investments associated with digital innovation often outweighs the benefits of embedding finance into operations. This is made even more complex for mid-market and enterprise businesses who have relationships with a number of banks, which is due to an array of, sometimes, conflicting systems that must be navigated. With embedded finance, however, all necessary information is in one tool thanks to software enablers who use APIs and SaaS models. These have been crucial in delivering embedded experiences using host-tohost connections.
Financial services institutions in the US, Europe and other regions have made investments in APIs to help improve payment transactions. In the US, this move has been market-driven, whilst in Europe, regulations such as the Payment Services Directive (PSD2) have helped this transition, even in the corporate space, where banks are proposing premium APIs. The motivation behind this is to reduce complexity, improve efficiency, agility and security with payments, which also helps to drive further innovation. This move empowers businesses to automate their downstream treasury or other nontreasury business processes to better align with their organisations’ operational goals.
Transitioning from embedded finance to embedded treasury
The move from embedded finance to embedded treasury is significant and involves integrating treasury functions directly into the tools used by the finance team at any organisation. For example, the treasurer and a treasury payment analyst may need to discuss an urgent payment using their internal communications platform. Traditionally, the analyst would have been forced to access another system, such as the bank portal, to initiate, approve, and release the payment. However, with an embedded treasury model leveraging APIs, requests can originate, be approved and released within the messaging system itself. This provides real-time visibility into the account and there is no need to switch between multiple systems.
Additionally, treasury-centred API systems can also act as a catalyst for upstream or downstream process or system modernisation. Through leveraging APIs, the same system can process real-time requests for loans or payments, for example, and so better sync with treasury management systems.
Due to the significant rise of embedded finance and more businesses adopting treasury APIs, the ways in which financial services are delivered and consumed is transforming. Treasury APIs also facilitate building a system of applications around the treasury management system itself. This enables the team to act on insights gathered in their treasury system within a single user experience. The use of APIs unifies this model for treasurers, and overcomes the need for multiple systems, screens, and login steps. This is much better integrated into financial services within their existing systems and processes.
Altogether, these features significantly enhance the productivity of the finance team and eliminate the need to contact the Treasury Management Solution or the treasury department for information. As such, reducing complexity, and driving agility and innovation.
The future of embedded finance models
It is vital for businesses to fully understand and embrace the benefits of embedded finance and embedded treasury. The future of the financial services sector is ever-changing and organisations should consider adding such methods to their digital transformation strategies to gain significant advantage in the future.
Businesses must also review their current operations and performance to strategise how they can better create a successful embedded treasury mode that is unique to their needs. This will create strong building blocks for future transformation and keep them ahead of the competition in the market.
Félix Grévy VP Product, Open API and Connectivity Kyriba
What DORA & NIS2 means for financial institutions
What DORA & NIS2 means for financial institutions
The Digital Operations Resilience Act, or DORA for short, is a new EU regulation aimed at improving the cyber resiliency of EU-based financial institutions.
The NIS2 directive is an EU-wide legislation which asserts that ‘essential’ and ‘important’ entities, including financial institutions, implement technical, operational, and organisational measures to mitigate the risk of cyber threats. Rather than enforcing regulations, the NIS2 directive provides guidelines to ensure the consistent adoption of local law across EU member states.
DORA’s requirements are set to come into force on January 17, 2025, while NIS2 is expected to come into play by October 17, 2024. However, each EU member state must apply this to their local legislation so enforcement dates may vary.
Both of these legislations affect all EU-based financial institutions and any financial institutions that work with EU entities; if it’s not affecting your organisation now, there’s a high chance that it will in the future.
DORA consists of a regulatory framework based upon digital operational resilience in which all financial institutions and their critical IT suppliers must ensure they can withstand, mitigate, and recover from cyber disruptions and threats, while NIS2 applies to a broader range of ‘essential’ and ‘important’ entities across various sectors.
Within DORA, penalties for financial entities are decided by competent authorities whereas IT suppliers are fined based on a percentage of their global revenue. NIS2 imposes fines based on turnover for both ‘essential’ and ‘important’ entities.
What are the requirements for financial institutions?
Although the main requirements of DORA remain clear, greater details regarding technical standards will be published as part of the final draft in July. Nevertheless, the five regulatory pillars of DORA include:
• ICT risk management: Financial entities must establish internal governance and control frameworks to effectively identify, assess, and mitigate ICT risks.
• ICT-related incident reporting: Financial entities must classify and report ICT-related incidents that compromise their security and have adverse impacts on data integrity or service availability.
• Digital operational resilience testing: All financial entities, except micro-enterprises, must periodically conduct advanced testing, known as ‘Threat Led Penetration Testing’ (TLPT), to prevent incidents. The frequency of testing may vary depending on the size and risk profile of the entity.
• Management of ICT third-party risk: Financial entities must safeguard against external vulnerabilities by ensuring their third-party providers are secure and compliant.
• Information and intelligence sharing: Financial entities are encouraged to share informative content about internal and external ICT-related incidents.
NIS2 expands upon existing requirements from NIS, such as corporate accountability and business continuity. However, it also introduces new obligations for organisations, including risk management and reporting obligations.
Here’s a closer look at the four overarching areas of NIS2 and what they entail:
• Corporate accountability: corporate management must supervise, authorise, and undergo training on the entity’s cybersecurity measures.
• Risk management: organisations must implement measures to mitigate cyber risks, such as incident management, supply chain security, network security enhancement, access control improvement, and encryption deployment.
• Reporting obligations: ‘essential’ and ‘important’ entities must establish procedures for promptly reporting security incidents that significantly impact their service provision or recipients and adhere to specific notification deadlines.
• Business continuity: organisations must strategize how to maintain business operations during major cyber incidents, incorporating plans for system recovery and establishing a crisis response team.
Who is affected?
Although there are many exceptions to the rule, at its base level, DORA primarily affects EU-based financial institutions and their ‘critical’ IT suppliers. This includes:
• Financial institutions such as banks and credit institutions
• Credit agencies and account information service providers
• Pension funds and investment firms
• Crypto-asset service providers
• Insurance providers
• Crowdfunding providers and alternative investment fund managers
• Intermediaries and ICT service providers
NIS2 applies to entities operating in the EU, regardless of the organisation’s geographical presence. Both ‘essential’ and ‘important’ entities will need to comply with the NIS2 directive. The industries affected by NIS2 include:
•
•
‘Essential’ sectors:
• Energy
Space •
Transport
Banking
Public administration
Financial market infrastructure
Health
Drinking water
Wastewater
• Digital infrastructure
•
• ICT service management (B2B) ‘Important’ sectors:
• Postal and courier services
• Waste management
• Manufacturing
• Digital providers
• Research
• Production, processing, and distribution of food
• Manufacture, production, and distribution of chemicals
What happens if financial institutions fail to comply?
Financial institutions that fail to comply with DORA will be subjected to penalties determined by competent authorities. Depending on how each EU Member State decides to implement the penalty, organisations may face criminal and/or financial consequences.
If an IT supplier fails to comply with DORA, they could risk a penalty of up to 1% of their average daily worldwide turnover in the preceding business year. This is applied every day for up to 6 months.
It’s worth noting that penalties and fines under DORA will abide by the concept of proportionality. In other words, smaller financial institutions won’t be held to the same standards as larger, multinational companies.
For ‘essential’ entities, fines for noncompliance can range from 10 million EUR up to 2% of the total worldwide annual turnover. ‘Important’ entities may face fines from 7 million EUR up to 1.4% of the total worldwide annual turnover.
What steps should financial institutions take to reduce the risk of non-compliance?
Two components of DORA set it apart from other regulations, in that they mandate security testing to ensure both the appropriateness and effectiveness of your security controls.
A key part of the regulation is to carry out regular ‘Threat Led Penetration Testing’ (TLPT), which is far beyond today’s typical penetration testing regime; this starts by thinking like a real-world attacker, building an attack plan for your environment, and then carrying it out at depth throughout your infrastructure. The TLPT exercise should then fold back into your security program to address the discovered vulnerabilities, whether these are people, process or technology-based.
Article 25 of DORA mandates that applications and infrastructure are tested after each new deployment or change, therefore a great way to approach this is to move to a model of continuous testing; one where you have capacity on demand, and that can work in step with your SDLC and change management pipelines.
Asset management is key to compliance. Financial institutions need to know what’s on their estate, what they’re using and interacting with and what the risks and threats are to them, as well as how their third-party suppliers operate. From here, organisations can leverage the frameworks and embed policies and frameworks for evaluating and prioritising risks. This is where deploying tactics like threat-led penetration and cybersecurity testing, instant reporting, and instant management come in.
Risk management within finance and banking is incredibly complex. When it comes to third-party vulnerabilities, there’s much more engagement required with supplier management. Finance institutions need a deep understanding of their contracts with their IT provider and where the roles and responsibilities lie. DORA is really emphasising this point and it’s the area that will carry the biggest penalties – potentially on both sides. Institutions need to be crystal clear on which party is managing what and who is accountable.
An example is patching and monitoring: if there were to be a compromise on the third party, how much responsibility falls on the financial institution for spotting it, if any at all? This is a simple example, but it underpins the importance of laying clear roles for responsibility in all cases.
There is still time to address any indistinct gaps in responsibility; approximately 6 months until 17 January 2025. Now is the time to comb through any contracts and clearly outline and tackle any areas of ambiguity to avoid legal implications and potential reputational damage later down the line.
The importance of the regulations
While some may see compliance with the DORA and NIS2 regulations as a check box exercise, it’s become essential given the increase in pace and scale of cyber security attacks, particularly in the finance sector.
Customer trust is so important for financial institutions; if a bank’s customers suspect it’s vulnerable to hackers, the bank is certainly going to lose its customers and receive a damaged reputation. DORA and NIS2 have been developed to build better operational resilience and to bring every institution up to the same standard, making attacks from nefarious actors as difficult as possible.
Ben Stickland Hive Member CovertSwarm
Why Cybercriminals Favor the Financial Sector and how application security can help
Neatsun Ziv CEO Ox Security
In every organization with a profitmotive, the sectors, deals and verticals which you target will be determined by the associated gains they offer – ideally, with the least effort or resources utilized. In this respect, cybercriminals operate no differently from legitimate businesses. They will choose their targets based on the maximum gains available to them. This, in many cases, leads them directly to the financial sector. Financial services is an area of business which has been forced, by consumer habits and technological advancements, to digitally transform at speeds which vastly outstrip other industries. This, coupled with the obvious fact that there’s a sizable financial reward for hackers targeting financial institutions, has meant they remain firmly in the firing line.
Last year, the financial sector was the second most breached industry, experiencing 566 incidents primarily in the U.S., Argentina, Brazil, and China. These incidents resulted in over 254 million compromised records , highlighting significant vulnerabilities in cloud products and third-party software solutions used in banking. A notable example of third-party risks was the SolarWinds incident in 2020, where malicious software updates exposed numerous organizations, reflecting the extensive potential impact on the financial industry. Additionally, a 2023 ransomware attack on a cloud IT service provider caused significant disruptions for 60 U.S. credit unions , underscoring the systemic risks of third-party IT dependencies.
Code injection attacks pose another critical threat, where attackers introduce malicious code during software development or via compromised third-party libraries, potentially leading to major data breaches and unauthorized access. For instance, compromised development libraries have served as conduits for attackers to breach banking systems. Insider threats also remain a significant concern, as demonstrated by a 2019 incident where a former employee of a cloud service exploited a firewall misconfiguration to access sensitive data, showing how insider access and technical errors can result in severe data leaks.
These episodes highlight the pressing need for the banking sector to enhance transparency and strengthen security measures. Progressive banks are adopting automated security orchestration and automated incident response systems, which significantly decrease response times and reduce the scope for human error. However, To effectively mitigate these significant threats posed by thirdparty dependencies and breaches, financial institutions must also rigorously address vulnerabilities that arise during the software development process itself.
The banking sector often grapples with the challenge of fully securing applications, particularly due to the reliance on legacy systems and the complexity of integrating diverse technological solutions. This can sometimes lead to application security being somewhat overlooked, despite the heavy investments in broader cybersecurity measures. Rapid technological advancements necessitate continual updates to security practices, which may not always keep pace with the development of new banking applications. Moreover, the sector faces a critical shortage of cybersecurity professionals equipped to handle emerging threats, further complicating the effective management of application security.
To overcome the challenges in application security (AppSec) highlighted in the context of the banking sector, several strategic and operational measures can be implemented:
• Embedding Security in the Development Lifecycle: Integrating security measures throughout the software development lifecycle (SDLC) through a DevSecOps approach is crucial. This means security is considered at every stage of development, from planning to deployment, making it intrinsic rather than an afterthought.
• Regular Security Training for Developers: Providing continuous security training and awareness programs for developers helps mitigate the risk of vulnerabilities being introduced during the development process. This includes training on secure coding practices and awareness of the latest security threats and mitigation techniques. Sadly, Gartner suggests that this kind of continuous training is still rare.
• Utilizing Application Security Posture Management: Find an ASPM platform that not only identifies vulnerabilities in both the code written by the organization and third-party components, take it a step further to provide prioritization and remediation capabilities. .
• Upgrading and Patching Legacy Systems: Regularly update and patch legacy systems to close security gaps. Where possible, consider modernizing legacy applications using more secure frameworks and architectures.
• Implementing Threat Modeling: Conduct regular threat modeling sessions to anticipate potential attack vectors and understand where the most critical vulnerabilities might exist within applications. This proactive approach can guide effective mitigation strategies.
• Enhancing Third-Party Risk Management: Establish a robust third-party risk management framework that includes rigorous security assessments before onboarding vendors, as well as continuous monitoring of third-party services to ensure compliance with security standards.
• Adopting Advanced Security Technologies: Leverage advanced technologies such as machine learning and artificial intelligence to detect unusual patterns and potential security threats in real time. These technologies can enhance the effectiveness of security measures by providing faster and more accurate threat detection.
While implementing these recommendations are crucial, it is equally important that financial security leaders effectively communicate these actions to key stakeholders. They should articulate how these processes not only make security teams more responsive and effective but also increase the costeffectiveness of the organization’s technology stack without sacrificing security. This also involves identifying tools with overlapping capabilities and refining security strategies to reduce both costs and risks. By taking such comprehensive approaches, financial institutions can significantly strengthen their application security frameworks, better protecting themselves against the evolving landscape of cyber threats.
Conversely however, an approach which aims to provide insights into your entire cloud infrastructure may provide answers which require more complex solutions. The key thing that financial institutions should turn to the security industry is visibility: If they have visibility into their cloud environment, they can work to better understand the blind spots where they might be vulnerable.
Unbundling payments: the next great frontier in banking?
The traditional model of bundled financial services offered by banks that we’re all too familiar with is being increasingly revamped by a more specialised and tailored approach, driven by unstoppable tech advancements and regulatory requirements like PSD2 and looking even further ahead, PSD3.
This shift towards unbundling and open payments is perhaps poorly captured by the term ‘trend’. It seems like the genie is totally out of the bottle, becoming a permanent change, shaping how consumers and businesses are now interacting with financial services. Let’s break down the shift.
Breaking down unbundling
Unbundling refers to breaking down complete banking services, such as traditional checking accounts that combine features like deposits, withdrawals, bill payments, and access to savings or loans under one umbrella. These services are instead separated into distinct, specialised offerings, in order to gain greater flexibility and cost efficiency. This allows customers to select and pay only for the specific services they need, reducing overall banking costs and adapting more easily to their financial needs.
This approach allows consumers to cherry-pick services tailored to their specific needs, allowing for a more personalised and convenient financial experience, much like they expect when they’re browsing their favourite online stores. For example, this might look like using a digital wallet for everyday transactions, choosing ‘Buy Now Pay Later’ (BNPL) services for larger purchases, or using realtime payment systems for instant transfers.
Change starts with the consumer experience
The consumer stands at the heart of this transformation. Unbundling empowers individuals with greater control over their finances, enabling them to select services based on factors like cost-effectiveness, speed, and security. Digital wallets and mobile payment apps are a great example of this shift. In fact, 56% of consumers globally, revealed they use their digital wallet more frequently in the month than they use credit cards or conduct bank transfers. They provide users with instant access to their funds and the ability to conduct transactions anytime, anywhere in the world they may be. More than this, BNPL solutions cater to the evolving preferences of a digitally savvy demographic that values flexibility in payment options when pay-day hasn’t quite arrived yet, with 62% of consumers globally saying it could replace their credit cards
unbundling of payment services has been largely facilitated by the rise of open banking, a market now indicated to be worth as much as $164 billion by 2032 , and which also had the consumer front of mind, mandating banks to share customer data securely with third-party providers via APIs. This not only increases competition but also stimulates innovation by enabling fintechs to create new services that seamlessly integrate into existing banking infrastructures. By using the power of open APIs, businesses can offer enhanced functionalities such as advanced data analytics, personalised financial advice, and automated savings solutions.
Impact on innovation
Unbundling also promotes competition where fintech start-ups and bigger players can innovate without the constraints of traditional banking models. This competition drives down costs, improves service quality, and fosters a culture of continuous improvement, which further benefits consumers and the businesses they engage with.
Regulations such as the Payment Services Directive 2 (PSD2) in Europe have also been instrumental. These regulations not only protect consumer rights but also spur collaboration between traditional financial institutions and agile fintech start-ups too, leading to the development of innovative payment solutions.
Collaborations facilitated by open banking APIs have led to the development of new payment solutions and we’re seeing that most payment service providers (PSPs) have started adding account-to-account as a payment channel. For example, the Netherlands native e-commerce payment system, iDeal, accounted for 70% of all e-commerce transactions in the Netherlands in 2022
Call security! (or advanced data management)
However, with these opportunities come challenges, particularly in data management and security. As financial services become more interconnected through APIs, robust data governance and security measures become even more important.
Advanced data management techniques, including cloud-based analytics and machine learning, are crucial for processing vast amounts of transactional data securely while extracting meaningful insights to enhance service delivery and customer experience.
That’s why strategic partnerships and robust project management frameworks are crucial for successful implementation. These frameworks emphasise agility, scalability, and rigorous testing to ensure seamless integration of diverse systems and technologies.
So, what’s next?
From what we’re seeing, the unbundling of payment services and the rise of open payments represent a major transformation in the fintech sector.
By embracing modular financial solutions and leveraging open banking frameworks, businesses can unlock new opportunities for growth and differentiation. For consumers, this evolution translates into greater choice, enhanced financial control, and a more tailored user experience. As technology continues to evolve, so too will the possibilities for transforming how financial services are accessed and delivered, shaping a more connected and empowered global economy for those who choose to get started.
