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editor
Dear Readers’
Welcome to the 65th edition of Global Banking & Finance Review. Whether you're a longtime subscriber or joining us for the first time, we are pleased to bring you the latest insights and developments from the financial industry.
In this issue, we feature Wilson He, CEO of OCBC Securities, on our front cover. Turn to page 24 to read my interview with Mr. He, where he discusses the integration of AI technology with personalized customer service. With the introduction of the AI-powered A.I. Oscar, OCBC Securities is setting new standards in the brokerage industry. Mr. He shares how these innovations, coupled with a strong focus on customer experience, have helped OCBC Securities earn recognition as Singapore’s Best Mobile Trading Platform and Most Innovative Trading Platform. Discover how OCBC Securities is advancing digital trading while maintaining a personal touch.
Continuing our focus on leadership and innovation, turn to page 30 for an insightful conversation with Pedro Carvalho, CEO of Absa Bank Moçambique. Under his leadership, Absa Bank is making significant strides in supporting SMEs, enhancing workplace quality, and empowering women in the workforce. Learn how Absa is driving digital transformation and championing economic growth in Africa, all while maintaining a strong commitment to social responsibility and environmental sustainability.
On page 20, Natalia Petrova, CEO of Concord Asset Management, shares how Concord is shaping Bulgaria's investment landscape through innovation and a strong focus on ESG leadership. With a particular emphasis on alternative investment funds and sustainable development, Concord is not only leading the market but also setting a precedent for responsible investing. Explore how they are adapting to global economic changes and attracting the next generation of investors through digital platforms and educational outreach.
Don't miss our thought-provoking article on page 22, "KYC & Changing Risk — The Critical Role of KYC in Onboarding and Modern Compliance," by Adam McLaughlin of NICE Actimize. As financial crime evolves, so do the methods of compliance. This piece dives deep into the shift from traditional KYC practices to a more dynamic, perpetual KYC model, using AI and automation to enhance risk management and customer satisfaction.
At Global Banking & Finance Review, our mission is to be your trusted source of information and insight in the ever-evolving world of finance. We are dedicated to bringing you the stories that matter, keeping you informed and inspired. We hope you find this issue both engaging and informative, and as always, we welcome your thoughts and feedback.
Dive in, engage, and let us know what you think!
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
Inside...
In-event interaction is soaring for the financial services sector – don’t get left behind
Matt Ryan, Chief Transformation Officer, Reef
The hidden price of communications noncompliance
Tom Padgett, President, Enterprise Business, Smarsh
How climate risk impacts discount rates—and what today’s investors should know
Kenny Grant, Managing Director, BRG
Jose Jimenez-Pereira, Associate Director, BRG
Matthew Stein, Managing Consultant, BRG
The opportunity of PayTech as a force multiplier for your company success
Robert Kraal, CBDO and Co-Founder, Silverflow A Trend to Topple the Card Giants?
Azimkhon Askarov, Co-Partner, CONCRYT
Gregor Mowat, Co-CEO and Co-Founder, Loqbox
Vikas Krishan, Chief Digital Business Officer, Altimetrik
Andy Parsons, Chief Digital Advisor, Version 1
Charlotte Webb, Operations and Marketing Director, Hyve Managed Hosting
David Dumont, Partner, Hunton Andrews Kurth LLP
Anna Pateraki. Counsel, Hunton Andrews Kurth LLP
Adam McLaughlin
Global Head of Financial Crime Strategy & Marketing, AML, NICE Actimize
Russ Rawlings, RVP, Enterprise, UK&I, Databricks
Natalia Petrova, CEO, Concord Asset Management
Interview Cover Story
CEO of Award-Winning Absa Bank Moçambique on Empowering Africa’s Tomorrow
Pedro Carvalho, Chief Executive Officer, Absa Bank Moçambique
OCBC Securities CEO Wilson He on Integrating High-Tech Tooling with High-Touch Service
Mr. Wilson He, Managing Director, OCBC Securities
How climate risk impacts discount rates— and what today’s investors should know
In Berkshire Hathaway’s 2023 letter to shareholders, Warren Buffet highlighted that the company’s most “severe earnings disappointment” occurred in its electric utility business because the company “did not anticipate or even consider the adverse developments in regulatory returns” arising from climate risk.
Buffet is not alone in his reassessment of the impact of climate-related risk on asset returns. In 2020, for example, Barclays implemented an environmental, social, and governance (ESG) valuation framework. Other equity analysts have increasingly commented on the impact of tightening regulations around carbon emissions, fossil fuels, and other climate-related risks in determining asset values.
To consider these risks in discounted cash-flow valuation, we observe equity analysts adding premia to discount rates and/or applying haircuts to cash flows for assets perceived to have higher exposure to potential regulation to limit carbon emissions (e.g., nonrenewable energy companies). These adjustments aim to better align asset valuations with evolving regulatory and market realities, such as potential carbon taxes or other climate-related regulatory measures. We also note that economic transition presents opportunities for companies positioned to take advantage.
In this article, we explore mechanisms by which climate change may affect the discount rate within the Capital Asset Pricing Model framework. We conclude that climate risk over time may impact a company’s exposure to market risk, as measured by the beta coefficient, but that analysts should be cautious of making ad hoc adjustments to discount rates.
The Capital Asset Pricing Model
The Capital Asset Pricing Model (CAPM) divides risks associated with assets’ return volatility into two categories: asset-specific risks and exposure to marketwide risks.
The CAPM is premised on the theory that risk-averse investors can mitigate asset-specific risks through diversification. Consequently, investors only price market risk. Assets with greater exposure to market risk are priced lower, all else equal.
The CAPM quantitatively measures an asset’s exposure to overall market risk using a metric called beta. Beta is equal to one when the relevant investment is as risky as the overall market, lower than one when the relevant investment is less risky than the overall market, and greater than one when the relevant investment is riskier than the overall market. For example, a beta of two would describe an investment that generally increases or declines by twice the observed change in the overall market. It means that we would expect its value to fall in price by 10 percent when the overall market falls by 5 percent.
In short, assets with higher betas are expected to carry greater market risk and thus bear higher discount rates in valuation models that produce lower asset values when those higher discount rates are applied to projected cash flows. Lower betas, on the other hand, indicate the asset is less risky to a diversified investor and lead to greater value, all else equal.
Climate change’s theoretical impact on betas
The systemic attributes of climate-related risk would, in theory, affect an asset’s beta to the extent that they increase or decrease that asset’s price along with the overall market. If climate-related risk factors increasingly impact the overall market portfolio, assets with greater exposure to these risks would tend to see their betas rise.
While literature on the potential impact of climate events on future economic activity continues to proliferate, one theory posits that the uncertain impact of climate change will give rise to what practitioners refer to as “fat tails”; that is, a greater-than-otherwise expected likelihood of extreme outcomes. Since extreme events can have outsized impacts on asset returns, and to the extent that investors continue to increase the degree to which they price these “tail risks,” it stands to reason that the market portfolio’s returns will be increasingly impacted by perceptions of climate-related risk.
Climate change’s impact on the practical application of beta
Ideally, beta should reflect investors’ current expectations of how asset returns will relate to future market changes. However, this is often difficult to determine in practice.
Investors frequently rely on historical data to estimate beta, effectively assuming that past market behavior provides a useful benchmark for future developments. Practitioners typically analyze historical correlations between an asset’s return and a global asset market index and consider questions around the duration of the historical period, return frequency, and whether to include comparable peer assets.
Factoring in climate-related risks presents additional challenges. As the market’s understanding of climate change evolves, the historical relationship between an asset’s return and the market may become outdated, making betas based on long or even short historical windows less indicative of present dynamics.
Consequently, practitioners face a choice: continue with the existing practical approach, based on historical correlations; or adjust the discount rate to account for potential changes in beta due to shifts that arise from new information.
How to account for climate-related risks
In a previous article, we advised against incorporating premiums into discount rate calculations that are unrelated to the components of the discount rate. This includes, for example, adding premiums for risks that can be diversified. However, in some cases, we anticipate that practitioners may choose to adjust betas in their discount rates to account for the contemporary significance of climate risks. This approach may not violate the theoretical principles of the CAPM.
Nevertheless, adjusting betas to account for climate risks poses significant trade-offs.
First, the extent to which an analyst would adjust an asset’s beta is subject to a degree of arbitrariness. In particular, how would an analyst precisely determine, based on recent trading data, the extent to which a beta appropriately captured an asset’s exposure to market risk?
Second, limited adjustments to the existing practical approach may suffice. For example, practitioners may carefully select their information window when considering climate risks by solely relying on trading data after a significant event or announcement takes place, such as the passing of important climaterelated regulations.
In conclusion, as investors increasingly acknowledge climate-related risks, there is a growing need to reassess how we value assets. Weighing the advantages of integrating the latest developments against reliance on subjective judgments and limited data is critical.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.
(1)Barclays Equity Research, European Mining: ESG driving value differentials (November 2020).
(2)Ibid.
Kenny Grant Managing Director BRG
Jose Jimenez Pereira Associate Director BRG
Matthew Stein Managing Consultant BRG
The opportunity of PayTech as a force multiplier for your company success
The $6.3 trillion eCommerce market is experiencing a huge amount growth, with $199,771 USD spent online in just a second. Cash still accounts for 16% of POS payments globally, but the remaining 84% (and 100% of eCommerce sales) takes place over a variety of digital networks, often proceeding through a number of intermediary companies that are invisible to the payer and payee.
While customers in a brick-and-mortar shop, for example, may not be aware about who the intermediary is between the merchant and card payment network, independent store owners may be scrutinising their payments systems more closely. If optimised, they may be able to save a few percentage points off each transaction, and potentially lead to hundreds or even thousands saved each year.
Meanwhile, some major chains may deploy teams dedicated to maximising profitability by optimising the payment process of each sale. Payment companies which support this could be viewed as an interchangeable commodity, or something different with many different services and prices. Let’s explore…
Are payments really an interchangeable commodity?
When a transaction is completed, a small percentage of the payment is taken at each stage of the process by the payment providers and card networks. However, while these costs do vary, businesses should investigate how these costs can be reduced. Industries which operate within razor thin profit margins (such as online retail which operates with a net margin of 0.64%) would be significantly affected even with only a few percentage points on each transaction. Moreover, businesses operating internationally may find it difficult if interchange fees are imposed on cross-border sales.
Having the right payments system in place to keep costs low is crucial for a business with this mindset, so should this be treated as a commodity? The definition of a commodity is something that is purely interchangeable. For example, one barrel of Brent Crude is identical to every other barrel of Brent Crude and there is no ‘premium’ barrel of Brent Crude that you would be willing to pay more for – paying more for an identical product simply has no benefit. That said, should we view payments the same way if there is an abundance of companies out there with a huge range of technology? And does the lowest cost per transaction necessarily mean it’s the best?
Are payments a force multiplier?
Unlike commodity prices, payment service costs are rarely simple. While your company doesn’t determine the price of crude oil you purchase; payments companies frequently distinguish between companies and individual payments based on the nature of the business (such as its risk type or their risk appetite), as well as the nature of the payments (such as international payments). Even if a payments company currently offers the best price for a domestic payment, your low price is going to go up if your company is subject to high levels of fraud or excessive chargebacks.
Therefore, we may have to set aside the commodity argument, and treat payments as tools dedicated to a specific job, or ‘force multipliers. An electric drill, for example, is a force multiplier that allows someone to complete the same task as a screwdriver but in a more efficient and less manual way – payments also might have the right combination of features to be a force multiplier to your company.
From here, companies also then need to work out how to make payments easier for their customers through their payments partners rather than just only focusing on the cheapest option. For example, a major differentiator for companies is to reduce decline rates – 15% of recurring credit card transactions are declined, with even as many as 30% in some industries. While transactions can be declined for plenty of legitimate reasons, the system needs to be improved to prevent false declines among that number. Why? Because the total cost of false declines is estimated to come at a cost of $443 billion every year – a stark figure. Although customers will retry rejected transactions, there’s the risk that many others will go elsewhere, then the company will lose out on making money.
We must also address fraud. Many anti-fraud tools and measures are put in place within the payments process but if these are too lax or too stringent, then you stand to lose money and harm the customer experience. Moreover, high levels of fraud can class your company as high risk and increase your fees. Having a cheaper payment partner that doesn’t solve these issues could damage your company in the long term.
Finally, data is a key component that can optimise the payments process and allow companies opportunities to evolve and prosper. However, payment companies have previously been unable to share transaction data in full because we have been relying on decades old networks that have limited bandwidth. Data is key to optimisation. and limited among of data.
A new era of payments for a new era of business
Technological innovation brings many opportunities for companies to turn their payments systems into a force multiplier. A fully modernised payment provider has so many advantages compared to a no-frills, low-cost company. If a payment provider charges higher prices, it doesn’t mean that it absolutely delivers a premium service, and not all the less expensive companies offer low quality services. Therefore, businesses must understand that not all payments companies are interchangeable commodities, since they provide radically different services, some with transformative potential for them to grow their brands. It’s time to explore the market!
Kraal CBDO and co-founder, Silverflow
Robert
AI could transform Financial Services but it needs a data-driven focus to unlock its potential
Artificial intelligence holds huge potential for transforming the Financial Services sector. Recent news from both Goldman Sachs and JP Morgan on the intended use cases for AI powered LLM’s potentially augmenting, and even supplanting research teams has bought both the revenue earning and business efficiency capabilities of AI to the fore. And yet, despite early adoption of AI technologies, many firms are still grappling with where to start or how to fully leverage their capabilities to drive tangible business outcomes. The key to unlocking AI’s true power requires a fundamental shift in how organisations manage and integrate their data.
The Data Imperative
At the heart of every successful AI implementation is high-quality, accurate data. This cannot be stressed enough: AI is driven by data. The more accurate data an AI system has, the better it can learn and make trustworthy predictions. This simple yet profound reality underscores the critical importance of data integrity in the AI ecosystem. Many Financial Institutions are falling short in this crucial area – bpth on their ability to utilise internal data but to also provide accurate, timely external data. As companies grow, so does the complexity of their data environment.
This expansion often leads to the creation of data silos, degradation of data quality and the proliferation of disconnected data repositories. The result is a fragmented data ecosystem that hampers AI’s ability to deliver meaningful insights and drive process improvements. Here, Financial Institutions should look to develop a Single Source of Truth (SSOT). A SSOT provides a unified and consistent view of data across an organisation. This authoritative source of core data helps identify operational inefficiencies, monitor customer behaviour and execute strategies to drive much needed growth.
The key benefit of a SSOT for AI applications lies in its ability to generate valuable data insights that can uncover patterns and trends more quickly than traditional methods. This enables companies to react faster, avoiding adverse impacts on financial performance or capitalising on market opportunities. By continuously monitoring operations and vital information in real-time, Financial Services firms can pinpoint areas for improvement and make proactive suggestions to customers regarding their asset holdings or loans.
Breaking Down Silos
To ensure businesses are accessing the full potential of AI, Financial Services firms must break down these data silos and foster a culture of collaboration across departments. This means moving away from the traditional model where teams work in isolation. Instead, Financial Services firms should move towards a more integrated approach to data management. By creating a unified data strategy, organisations can ensure that AI platforms have access to a comprehensive, accurate and up-to-date view of the business. This holistic approach not only enhances the quality of AI-driven insights, but also promotes cross-functional collaboration and innovation. Through this change in cultural practice, the business takes ownership in delivering outcomes, ensuring teams follow a sprint agile process for better outcomes.
The Incremental Path to Success
While the promise of AI is enormous, it is important to recognise that successful implementation is not an overnight process. It’s clear that a big bang approach is both ineffective and expensive. Therefore, emphasis should be placed on solutions that involve business ownership, the selection of high ROI use cases, and the engagement of all stakeholders.
A much more holistic, incremental approach to data management as part of a unified strategy is vital. AI’s potential to transform the financial industry rests on how quickly firms can adopt a Digital Business Methodology (DBM). Through this holistic approach a better understanding of the customer’s key challenges, maturity level, and the relationship between IT and the business can be understood, leading to a more effective roadmap. The DBM enables companies to adopt and implement digital business. It provides a defined path that orchestrates and converges data, technology and people, delivering an outcome-driven approach that drives results with speed, consistency and scale. DBM aims to break down complex projects into manageable bite-sized components through collaboration across all stakeholders.
This measured approach allows organisations to build a robust data foundation step by step, ensuring that each phase of the AI journey is built on solid ground. Through this underpinning of DBM, there is more of an emphasis on data and AI engineering rigour, including governance, security, and compliance. Centralised cloud platforms such as Snowflake and Databricks offer the essential infrastructure to create and manage data assets efficiently, ensuring consistency, speed, and scalability. Integrating a DBM with this platform is essential for businesses to effectively engage with AI. This integration operates within the customer’s environment, while remaining independent of their complex and siloed systems.
By adopting this incremental methodology, Financial Services players can identify and prioritise highimpact areas for AI implementation. Firms can build confidence in AI-driven processes through quick wins. Businesses can then continuously refine and expand AI capabilities based on lessons learned during the staged roll-out. The future belongs to organisations that can effectively harness AI to drive innovation, improve efficiency, and deliver superior customer experiences. By investing in the necessary data infrastructure and talent development, Financial Institutions can not only participate in the AI revolution but lead it, securing their place at the forefront of the industry for years to come.
Vikas Krishan Chief Digital Business Officer Altimetrik
Navigating the cloud’s challenges in financial services
Financial services (FinServ) firms no longer need to be convinced of the value of the cloud for businesses. Economic uncertainties and disruptions, such as increasing inflation, growing interest rates, and the pandemic, have been powerful drivers for digital transformation initiatives such as the cloud within the financial sector. Alongside the challenges, the emergence of innovative payment solutions and AI and blockchain technology has also fuelled progress in the financial industry. As such, financial institutions recognize the value of cloud infrastructure as we navigate from original cost optimization to the current day, where security, data analytics and scalability are crucial, with 91% of FinServs viewing a cloudfirst approach as an essential factor in business growth.
However, as more FinServ firms embrace the shift toward more agile and resilient cloud infrastructure, they face specific challenges such as complex regulatory compliance landscape, data security, integration challenges and cost management constraints. FinServ organizations need to understand the key issues and best practices for secure cloud deployment, compliance, data migration and management to successfully navigate cloud technology in a highly regulated and competitive industry such as finance.
As a guideline for smooth navigation through the cloud transformation, FinServ organizations could consider further suggestions in this article.
Best practices for cloud migration for FinServ
Develop a strong foundation: To successfully adopt and leverage cloud technologies, FinServ organizations need a clear vision of how these solutions will improve performance, streamline operations and enhance security across the business. Key considerations include designing an architecture that supports scalability, provides security, integrates seamlessly with existing systems where required and is cost-effective.
By integrating the latest and most advanced cloud technologies and stringent security protocols from the earliest days of working in the cloud, FinServ organizations will unlock the full potential of modern cloud solutions and gain a competitive edge in today’s digital-first marketplace.
Prioritize risk management: Centering cloud transformation strategies around data risk management for optimal data security is paramount for financial institutions. In 2024, 86% of data breaches in the financial services industry involved a cloud asset. That’s why FinServ firms must consider comprehensive risk assessments to identify vulnerabilities and develop robust security protocols.
The industry’s severely low tolerance for downtime means businesses must regularly update and test their disaster recovery strategy to achieve a low recovery time objective (RTO) and recovery point objective (RPO). To combat ransomware threats amid cloud migration, companies can adopt advanced threat protection (ATP) strategies that leverage machine learning, behavior analysis, and signature-based detection to identify and block these attacks as they initiate.
Robust security features such as data redundancy, versioning, and isolated backup storage also help businesses maintain secure backups and ensure no data is compromised when faced with evolving threats.
Leverage expertise and internal communication: For organizations without in-house expertise, the complexity and ever-changing nature of cloud technologies can present challenges at all stages of cloud adoption. Critical aspects of cloud adoption, such as regulatory compliance, data security and legacy system integration, often require specialised skills. FinServ firms should consider partnering with experienced managed service providers (MSPs) to address potential challenges. MSPs provide critical insights and support to help firms manage costs, comply with regulations and secure the cloud environment.
Adapting to the cloud also involves changes in day-to-day operations so that MSPs can help correctly communicate this shift to the FinServ firm’s employees. Close collaboration between the FinServ organisation’s product teams and the MSP ensures that cloud solutions fully align with business goals and functional requirements.
Consider cloud diversification: FinServ’s organisations should consider diversified cloud platforms from the early days of adopting the cloud. Relying on a single cloud provider, as illustrated by the recent CrowdStrike incident, creates a single point of failure. And if a critical service from that provider is disrupted, it can significantly impact the organisation as a whole. Multi- or hybrid-cloud architectures can help reduce risks and improve overall security by spreading workloads across multiple platforms, some of which could be private clouds. And for many financial services organisations, diversified cloud is already a reality, with 57 per cent of financial services organisations using multiple cloud service providers (CSPs) for their IaaS/PaaS needs.
From migration to innovation
Cloud transformation in Financial Services is more than a change in infrastructure. It’s a strategic leap towards a more agile, secure, and innovative financial future. The accelerated innovation cycles powered by cloud-based solutions enable FinServ firms to introduce new services, experiment with new features and deliver financial services that meet customers’ expectations in the digital age.
FinServ organizations have all the tools to address the unique challenges of cloud migration and on-demand scalability required to compete. As market expectations rise, successful financial services cloud adopters will be better positioned to maintain a competitive advantage.
Charlotte Webb Operations and Marketing Director Hyve Managed Hosting
Navigating Innovation and ESG Leadership:
How Concord AM is Shaping Bulgaria's
Investment Landscape
Concord Asset Management is the second largest asset management company in Bulgaria in terms of AuM in mutual funds and AIFs. The company manages six UCITS funds, one NIF and two AIFs – one in Bulgaria and one in Luxembourg. During the last six years, it registered 4.5 times growth in AuM. Concord AM launched the first interactive learnings for mutual funds and saving plans in Bulgaria and Concord's online platform for mutual funds offers a completely remote onboarding process. Concord AM is the first alternative investment fund manager in Bulgaria with a full license. In 2022, it acquired a RAIF-SICAV platform in Luxembourg. Currently, Concord is pioneering in ESG investments, launching the Concord Fund – 9 Green AIF.
Natalia Petrova has over 20 years of experience working in asset management, capital markets, equity and fixed-income trading, and UCITS products and services. She holds licenses from the Bulgarian Financial Supervision Commission to provide investment consulting and brokerage as well as a certificate for trading with government securities from the Ministry of Finance of the Republic of Bulgaria. Currently, she is the CEO of Concord Asset Management, on the Board of Directors at European Investment Management SICAV – RAIF, a procurator at ABC Finance. She is a Chairperson of the Management Board of the BAAMC (the Bulgarian Association of Asset Management Companies) and a board member at EFAMA. Natalia also holds a Ph.D. in finance and has been a university lecturer for 20 years, teaching subjects such as stock exchange markets, corporate finance and portfolio management, among others. She has participated in numerous initiatives to promote the asset management sector and increase the level of financial literacy in Bulgaria.
Natalia recently spoke with Wanda Rich, editor of Global Banking & Finance Review, to provide some insight into how Concord AM has become Bulgaria’s largest non-bank asset manager, the strategies it has implemented to maintain its leadership position, and its ability to continue growing in a competitive market.
Over the last few years, Natalia explained, Concord AM has been strategically focusing on expanding its range of alternative investment funds, significantly boosting its AuM. “Our eighth fund, Concord Fund – 8 Alternative Investment Fund, has grown to over 100 million BGN (more than EUR 50 million),” she said. “This success stems from offering diverse investment strategies tailored to Bulgarian investors' needs, and we continue to see robust demand for more alternatives and options. By consistently innovating our product offerings and maintaining a keen understanding of market trends, we aim to stay ahead in this competitive landscape.”
Innovation, of course, relies significantly on the integration of new technologies that stand to shape the future of the industry. She discussed what that looks like for Concord AM. “We are most excited to utilise new technology in order to increase our core competencies and operational efficiency as well as improve our product,” she revealed. “This is an area of focus for many asset managers, so the need to stay informed and utilise new technology is greater than ever. Additionally, we are staying informed in regard to the demand and possibilities for investments into new tech-driven asset classes, such as tokenised assets and cryptocurrency.”
Natalia also brought up another area that Concord AM is actively exploring: platforms for accurate ESG ratings and systems that ensure the credibility of data. With ESG factors becoming increasingly important, integrating them into the company’s investment strategies and product offerings is a key focal point. “We are pioneering the first ESG-focused green alternative investment fund in Bulgaria,” she
reported. “Our strategy involves carefully identifying companies and projects that are committed to sustainability with solid business plans. We conduct thorough analyses of their financials, management practices, and, of course, sustainability initiatives. By investing in companies with strong ESG commitments, we are working towards our goal to build a diversified portfolio, targeting core sectors such as renewable energy producers and energy efficiency projects, thereby fostering sustainable development while delivering robust returns.”
Recent global economic events have also reshaped its asset management strategies, and critical adjustments have been made in order to adapt to these changes. “The rise in global risks, be it global trade disruptions or geopolitical tensions, has necessitated a more strategic approach to managing investments and their exposure to those risks,” she explained. “We have implemented a more comprehensive risk management framework to better anticipate and address these challenges, allowing us to mitigate losses and capitalise on opportunities.”
Natalia is focusing on these opportunities moving forward. One of the biggest areas of opportunity that lies ahead for the asset management industry is engaging the new wave of younger investors who are increasingly seeking alternative investments, and Concord AM is well-positioned to address the challenge of meeting it. “The expectations of these tech-savvy investors regarding accessibility, transparency, and speed are challenging,” she confirmed. “However, we are confident that our commitment to innovation, enhanced digital platforms, and a customer-centric approach will position us well to attract and retain this demographic.
“We are also focusing on education and outreach to better inform younger investors about the benefits and risks of alternative investments, ensuring they feel confident in their investment choices.”
Natalia Petrova CEO, Concord Asset Management
KYC & Changing Risk — The Critical Role of KYC in Onboarding and Modern Compliance
Adam McLaughlin Global Head of Financial Crime Strategy & Marketing, AML, NICE Actimize
Traditional, manual Know Your Customer (KYC) practices often struggle to keep up with the fast-paced nature of banking and the complexities of onboarding, especially when it comes to corporate entities. KYC is essential not only to help manage risk and ensure compliance, but also for ensuring customers are offered the right products and services. KYC processes and technology needs to ensure a smooth, positive customer experience, particularly during the onboarding phase.
The challenges are especially pronounced in corporate onboarding, part of the "Know Your Business" (KYB) process. KYB is complex, as businesses are owned and controlled by individuals, often multiple individuals. Companies can span various jurisdictions, including secrecy jurisdictions, and changes to ownership structures, controllers, or operating locations can be made quickly and with relative ease. To top it off, corporate entities can change their activity, the value, and volume of activity, or even expand and enter new markets without informing the financial institution, even if these changes heighten the business risk.
Financial institutions must move towards a perpetual KYC (pKYC) model. This ongoing approach ensures the customer is continually monitored for changes in customer information or activity that will materially change the customer risk, allowing firms to proactively manage compliance risk effectively, with speed and precision. Not only this but pKYC can also ensure the customer is continually offered the right products and services, maintaining customer satisfaction whilst ensuring maximum revenue potential for the financial institution.
Typically, KYC relies on periodic verification at set intervals—often annually for high-risk customers or every three or five years for lowerrisk customers. Many organizations categorize clients as low, medium, or high risk, determining how frequently their information needs revalidation.
Given the rich data available today, this traditional KYC approach needs to be revised. There are a number of data points which need to be assessed, including third-party services like adverse media monitoring and internal data like transaction logs, customer communications and how the customer is interacting with the financial institution. Doing this manually on a periodic basis is time consuming and introduces avoidable risk.
With periodic reviews there is a risk something significant changes between the initial account setup and the scheduled review, potentially years later. What if a material event, like a significant change in corporate ownership, alters a client's risk profile? If this change goes unnoticed until the following review, the firm could unknowingly expose itself to new threats or not be offering the customer the post appropriate financial offerings. This example highlights traditional KYC limitations, which depend on static, time-based reviews rather than real-time data monitoring.
The Transition from Traditional KYC to pKYC
Operationally, traditional KYC often involves extensive contact with customers to confirm accuracy of information on file or to provide evidence of changes. This is often time intensive, manual effort which can be costly.
These processes are also burdensome from the customer's perspective. Customers may be contacted multiple times to re-verify their information, sometimes by different departments within the same financial institution. Often, these departments might request duplicate information for other purposes. This repetitive contact is inconvenient and can lead to frustration, potentially damaging relationships or resulting in client attrition.
As the banking sector digitalizes and technologies like artificial intelligence (AI) continue to advance, firms can transition away from this traditional KYC approach. In its place, compliance teams are increasingly adopting pKYC practices that leverage automation and AI algorithms to analyze vast swathes of data and continuously monitor for changes in a client's status or risk profile. This approach enables more efficient and real-time customer information management, fostering better and more robust compliance.
Distinguishing KYC from KYB in Client Onboarding
During onboarding, there are two categories of clients: retail (i.e., a person) and corporations. Each category requires different types of checks, as per regulatory requirements.
For individuals, financial institutions must complete KYC and collect and verify basic information on standard documents such as a national ID. Proof of address, occupation, and income is also often required. The FI will then verify the customer's identity and screen the client's names against various watchlists, finally determining their risk profile based on findings and analysis.
For corporate clients, financial institutions must complete KYB and determine a business's corporate structure, true nature, purpose, jurisdictions of operation, and often expected activity. These checks can be more complex because they require a thorough understanding of the company's corporate makeup, including parent companies and subsidiaries.
They also require determining the ultimate beneficial owner (UBO), controllers, and geographical risks.
In contrast to retail clients, verifying a corporate client can involve a broader range of documents or considerations. These include financial statements, incorporation or registration documents, annual reports, or tax records, depending on the business's risk profile, and regulatory obligations.
One significant difference between corporate and retail clients is the frequency of events that could alter their risk profile.
Due to the dynamic nature of business, corporate clients are usually subject to more regular and sometimes dramatic changes. For example, while a name or address change prompts a KYC update, it is infrequent for an average person. In contrast, corporations may face shifts in operations, changes in ownership, or expansions in geographical reach as part of everyday business, requiring more consistent KYB updates.
pKYC is particularly useful here. It strengthens the KYC and KYB process by continuously updating client information from internal and external sources and reducing reliance on periodic reviews. This approach is more practical and effective, as it facilitates real-time monitoring and allows firms to quickly detect and address potential risks like money laundering or fraud as they happen.
How pKYC transforms KYB
Implementing an ongoing monitoring approach to KYB processes has significant benefits. Leveraging public and private databases, such as corporate records, adverse media, global sanction lists, or transaction details, pKYC actively monitors for discrepancies like changes in the UBO, adverse media, additions of any parties on watchlists or unusual/ unexpected transactional activity.
Once detected, it automatically alerts compliance teams and where appropriate operations teams for appropriate reassessment of the customer and necessary action to be taken. This proactive, automated approach allows for timely decisionmaking capabilities that address the intricacies and rapid pace of change common to corporate customers
Not only can automated monitoring and collection of customer information be applied during ongoing monitoring, but it can also be applied during customer onboarding. Because of its inherent complexity, onboarding corporate clients can be more manual and expensive than retail clients.
One report estimates that the time to complete KYB ranges between 18.5 hours and 62 hours, depending on the corporate structure. This is also reflected in the costs, where KYB costs approximately $311, compared to just $12 for a retail client. These high costs present a massive opportunity for more efficient and innovative solutions.
The Strategic Role of pKYC in Modern Compliance
Automation can significantly reduce manual labor and human error. This, in turn, reduces operating expenses. For first-line defense teams like KYC, it alleviates heavy workloads and repetitive tasks, significantly contributing to employee retention. Automating data collection and risk assessment frees compliance teams to concentrate on higher-risk or more complex cases that require urgent attention. This strategic shift enhances efficiency and the overall effectiveness of risk management.
Clients benefit from a smoother, frictionless experience, as they are only contacted when necessary. Enhanced communication also avoids redundant information requests, fosters client trust, and improves operational efficiency.
Overall, pKYC streamlines the efforts of KYC operations and compliance teams, steering them towards riskbased analysis and identifies revenue opportunities earlier, rather than unnecessary manual file reviews.
Traditional KYC needs to be updated to meet the demands of modern antifinancial crime compliance programs. By adopting a pKYC approach, financial institutions improve their customer and risk management, particularly in the complex areas of KYB. This proactive strategy is crucial for firms wanting to maintain compliance and efficiently manage the complexities of corporate customers and their associated risks.
OCBC Securities CEO Wilson He on Integrating High-Tech Tooling with High-Touch Service
OCBC Securities, a wholly owned subsidiary of OCBC Group, is a top brokerage firm in Singapore offering reliable, secure, end-to-end encryption trading. It serves customers ranging from retail to corporates and institutions. Wilson He has held the position of Managing Director since 2020, when he was brought on board to use his years of experience in online trading platforms to drive the brokerage’s digital transformation. OCBC Securities has recently launched A.I. Oscar, Singapore’s first artificial intelligence (AI)-powered model which gives personalised stock ideas to customers.
This year, for the third year running, OCBC Securities won the Global Banking & Finance Awards for Singapore’s Best Mobile Trading Platform and Most Innovative Trading Platform.
“These accolades validate our commitment to pioneering digital solutions, enhancing our customer experience, and maintaining a competitive edge in the market,” Wilson told Wanda Rich, editor of Global Banking & Finance Review. “They reflect our dedication to integrating advanced technology with personalised service, reinforcing our position as a leader in innovation within Singapore’s brokerage industry.”
Reflecting on OCBC Securities' 38+ years of experience, he offered his perspective on the drivers behind the organisation’s success. “The pandemic period marked a pivotal moment for OCBC Securities, accelerating our move towards digitalisation,” he said. “We revamped the iOCBC Mobile Trading app based on extensive customer feedback through customer labs. This redesign has made our platform more intuitive and user-friendly, enhancing the overall trading experience.
“Our focus on customer needs has been central to our success,” he continued. “Through experiential labs, we gather insights directly from our users, which guide our continuous platform enhancements. This customer-centric approach has led to the development of features that address specific pain points and improve usability, such as real-time profit and loss tracking and integrated banking and trading services.
“The competitive brokerage landscape, especially with the rise of fintech brokers, has driven us to innovate and improve continuously. Our integration with OCBC Bank allows us to leverage the OCBC Group's resources, providing customers with a more comprehensive financial ecosystem.”
Wilson provided some insight into the strategy behind the firm’s digitalisation efforts, much of which, as mentioned, was driven by the pandemic and the effects it had on customer behaviours.
“The COVID-19 pandemic accelerated our digital transformation, increasing our focus on the iOCBC Mobile Trading app,” he revealed. “This shift resulted in a significant rise in online trading, with digital transactions surging during the pandemic. This trend underscores the growing preference for digital solutions among our customers, where trading activity among our young investors increased 50% during the pilot period with the use of A.I. Oscar’s stocks from October 2023 to April 2024.”
One of OCBC Securities’ primary goals has been to integrate its trading platforms with OCBC Bank’s other digital banking services. “We now provide OCBC Bank customers with the option to manage their banking and investment needs through a single app,” Wilson said. “This integration ensures a seamless financial experience, providing a comprehensive view of their assets and enhancing their potential investment opportunities.”
In line with OCBC’s corporate strategy, of which investing in accelerating transformation and digitalisation is a key pillar, OCBC Securities is looking for new ways in which AI can be incorporated to enhance the trading experience for its customers. “This will help them make more informed trading decisions and stay updated with market trends. Our aim is to offer a high-tech yet high-touch service, balancing advanced digital tools with personalised support from our trading representatives.”
Given its decades of experience, it’s fair to deduce that OCBC Securities has become more than equipped to take on the challenges of the ever-evolving securities industry. The digital transformation journey presents its own hurdles, and Wilson went into how the firm is working to overcome them. He first discussed the surge of fintech companies entering the increasingly competitive market. “These fintech competitors have deep pockets for both digitalisation –without the barrage of legacy systems – and marketing promotions,” he said. “While we benefit from the strong reputation of our parent company, OCBC Bank, we are also committed to overcoming this challenge by investing significantly in digital transformation, in terms of both IT infrastructure and employees.”
Second was the rise in digital scams and cybercrimes, which requires prudent action to be taken and additional safeguarding deployed in order to protect customers. “To overcome this challenge, we worked closely with our business risk, cybersecurity, and IT colleagues to reduce the time and resources required to implement the additional safeguards,” Wilson continued. “We have implemented comprehensive educational initiatives, including regular notices and detailed educational content on our website to raise scam awareness. This proactive approach not only protects our clients but also reinforces our commitment to their security and well-being.”
Another challenge that OCBC Securities has faced as digitisation has boomed is how to address the many different user experiences and expectations across its diverse customer base. “Younger generations may be prioritising transparency, convenience, digital accessibility, and personalised services, often with a focus on lower costs,” Wilson reported. “In contrast, our traditional customer base values trusted human relationships that are complemented by our digital offerings. To bridge these differing preferences, we have focused on creating a balanced approach that integrates the best of both worlds, ensuring that all segments of our customer base find value in our services.
“To do so, we collaborate closely with our customer experience colleagues and conduct frequent and extensive customer labs to better understand the different needs of our customers. Our trading representatives have found A.I. Oscar to be useful too, as the stock ideas generated can serve as a starting point for discussion between our trading representatives and customers.”
He went into more detail about A.I. Oscar, an AI enhancement that OCBC has leveraged to great effect in order to stand out amongst increasing competition. “A.I. Oscar is our AI-powered virtual trading assistant that is able to help traders reduce time spent on research for market updates,” he explained. “It is trained using machine learning, and continuously improving with new feedback. A.I. Oscar can highlight stocks that are showing potential for short-term price movements. The model trawls through large volumes of market data, including historical prices as well as fundamental and technical indicators, to identify stocks with potential for short-term price fluctuations.”
He noted that while past performance is not necessarily indicative of future trends or performances, the use of AI tools to automate some elements of research can save customers valuable time and help them make better-informed trading decisions. “What’s unique about A.I. Oscar is that it can offer personalised stock highlights based on a customer’s past trading behaviour with OCBC Securities. The more a customer trades with OCBC Securities, the better A.I. Oscar will be able to offer personalised stock ideas.”
While the introduction of a hyper-personalised AI system offering stock ideas based on a user's trading history is groundbreaking, Wilson emphasised that maintaining data privacy remains paramount. “The model does not make use of sensitive personal data. Despite being personalised, all data that is processed is anonymised using system-generated identifiers,” he explained. “To put it simply, a customer is tagged as a six-digit code. The specific customer cannot be identified in any way. While we harness the vast amount of platform data with the intent to generate more useful and relevant content for our customers, personal and identifiable data is never used by A.I. Oscar.”
He added that the stock suggestions generated by A.I. Oscar are based on market data provided by LSEG Data & Analytics, a renowned data provider, which does not receive any user information or customer data. “LSEG Data & Analytics solely supplies the market data necessary for stock analysis, such as P/E ratios, analyst predictions, and high and low-price targets. To ensure user privacy, stringent measures are implemented throughout the process. Customer data are securely stored and processed internally within the Bank's ecosystem, which operates independently of the market data provider. This separation ensures that user data remains confidential and is not shared with external entities.”
In such a changeable financial landscape, it’s wise to anticipate and prepare for emerging trends or disruptions that might not yet be on the industry's radar. One way in which OCBC Securities keeps an ear to the ground is by hosting experiential labs with customers to understand their motivations and pain points firsthand. “Conducted frequently, in detail and with several different customer groups, the labs allow us to discover customer behaviours across various segments,” Wilson said. “Using such insights, OCBC Securities can design a trading platform that caters to the needs and wants of customers.”
He revealed how the intel derived from the labs led to the creation of an order ticket that allows key details to be viewed in one holistic look before customers place a trade. “We upgraded our platforms with a more comprehensive set of trading tools so that customers would not have to navigate to multiple places to perform their technical analysis. The portfolios have been revamped to reflect real-time values and even include corporate action adjustments.
“By continuously improving our platform based on detailed customer feedback and behaviours, we stay ahead of the curve,” he went on. “Designing an order ticket that consolidates key details ensures that our platform remains user-friendly and efficient, addressing potential disruptions in the user experience. Upgrading our platforms with comprehensive trading tools and realtime portfolio values helps us meet evolving customer demands and market conditions, ensuring our services remain relevant and robust amidst industry changes.”
Though change can be challenging for large, established institutions, Wilson recognises the importance of OCBC Securities upholding a culture that is deep-rooted in understanding and addressing customer needs so that, as an organisation, it can remain adaptable to change. “Human nature causes us to perceive change as daunting, but we at OCBC Securities endeavour to view change as opportunity,” he reported. “As a team, we work together towards the common goal of progress; we actively foster a philosophy of seeing challenges and mistakes as stepping stones. We acknowledge our small victories and take our mistakes as lessons learnt, working cohesively to take the first step and move towards greater goals.”
OCBC Securities’ commitment to innovation is reflected in its strategic priorities, which include championing new ideas, embracing digital transformation, and embellishing its advanced technologies with AI. “As we leverage digitalisation to improve ourselves, we strive to remain grounded in our uncompromising, customercentric approach to stockbroking. This ensures that our innovations are aligned with our actual customer needs, making it easier for our team to embrace and implement changes that genuinely improve the customer experience.”
An additional influence on OCBC Securities’ innovative efforts is its collaborative environment. Wilson gave the iOCBC Mobile Trading app as an example; while being largely driven by the digital business team, the app’s development and continuous improvement are made possible by the firm’s collaboration-centric culture. “This environment integrates expertise and insights from multiple teams, ensuring a holistic approach to innovation,” he said. “The collaborative efforts involve constantly reviewing customer feedback to identify strengths, areas for improvement, and potential new features. Enhancements are rigorously tested internally to ensure they meet the highest standards before being launched. This process includes leveraging advanced analytics to personalise user experiences, optimising app performance, and aligning the app’s capabilities with customer needs and financial goals. By fostering open communication and collective problem-solving, OCBC Securities ensures that diverse perspectives are considered, leading to well-rounded and customer-centric solutions. This multi-team collaboration is key to the continuous evolution and success of the iOCBC Mobile Trading app, keeping it at the forefront of digital trading solutions.”
A potential drawback to continued digitalisation is the lack of a personalised, human touch. However, OCBC Securities seeks to set itself apart from online-only brokerages with a steadfastly customer-centric stance. “As we continue to embrace digitalisation, we take measures to ensure the human touch is not left in the dust,” Wilson confirmed. “We believe that the human touch always has a place in the world of trading, regardless of expertise and experience. Our trading representatives are committed to assisting clients to stay ahead of the latest market trends and shifts, offering personalised support. They are equipped with the knowledge and expertise to help investors navigate the dynamic market landscape. Our trading representatives assist customers to see beyond numbers. Their empathy and soft skills serve to complement the information that AI provides, enabling our customers to make much better use of that information.”
With the seamless integration of advanced digital tools and the personalised support of trading representatives, OCBC Securities strives to offer a balanced experience where technology and human interaction go hand-in-hand. “This synergy allows us to offer the convenience and efficiency of digital services while maintaining the trusted, humancentred relationships that our customers value. Our trading representatives are always just a call away, ready to assist our customers in their trading journey. This approach ensures that we continue to provide the personalised service that differentiates us from purely online brokerages.”
Finally, Wilson commented on the further advancements he predicts for OCBC Securities in the near future, namely technological integration, product innovation, and enhanced client support.
“We will continue to integrate advanced technologies like AI to offer personalised, data-driven insights and timely market updates, helping customers make more informed decisions,” he said.
“We will expand our product offerings to include more innovative and sustainable investment options, like our recent collaborations with Lion Global Investors to launch ETFs. These products allow investors to capitalise on major market trends such as technology growth, China's market potential, and the need to transition to a low-carbon economy.
“Despite our focus on digital tools, we will maintain a strong emphasis on human interaction,” he added. “Our team of trading representatives provides guidance, helping customers navigate the complexities of the market. This combination of high-tech solutions and high-touch services will ensure we meet the diverse needs of our clients.”
How AI is revolutionising financial services
Strict regulation, along with time and cost restraints, means that the financial services industry must take a measured approach to embracing technological advancements. However, with the emergence of generative AI, particularly large language models (LLMs), organisations have an opportunity to maximise the value of their data to streamline internal operations and enhance efficiencies.
Embracing generative AI has never been more important for organisations looking to stay ahead of the curve, as 40-60% of the global workforce will be impacted by the growth of AI. Moreover, global adoption of generative AI could add the equivalent of $2.6tn to $4.4tn in value annually to global industries, with the banking sector standing to gain between $200bn to $340bn.
But whilst the financial services industry can gain incredible benefits from generative AI, adoption is not without its challenges. Financial organisations must prioritise responsible data management, while also navigating strict privacy regulations and carefully curating the information they use to train their models. But, for companies that persevere through these obstacles, the benefits will be substantial.
Building customised LLMs for financial services
Whilst consumer chatbots have brought generative AI to the mainstream, the true potential of this transformative technology lies in its ability to be tailored to the unique needs of any organisation, in any industry, including the financial sector.
Risk assessment, fraud prevention, and delivering personalised customer experiences are just some of the use cases of custom open source models. Created using a company’s proprietary data, these models
ensure relevant and accurate results, and are more cost-effective due to their smaller datasets. For instance, banks can use a customised model to seamlessly analyse customer behaviour and flag up any suspicious or fraudulent activities. Or, a model can leverage sophisticated algorithms to assess an individual’s eligibility for a loan.
Another huge benefit of these tailored systems is trust and security. Deploying a custom open-source model eliminates the need to share sensitive information with third parties – something that is crucial for organisations operating within such a highly regulated industry. This approach also democratises the training of custom models, allowing organisations to harness the power of generative AI whilst retaining control and compliance.
Using data intelligence to boost AI’s impact
To truly harness the power of generative AI, organisations must cultivate a deep understanding of data across the entire workforce. Every employee, regardless of how technical they are, must grasp the importance of proper data storage, as well as how it can be used to improve decision-making.
Organisations can use a data intelligence platform to help implement this. Built on a lakehouse architecture, a data intelligence platform provides an open, unified foundation for all data and governance, and operates as a secure end-to-end solution tailored to the specific needs of the financial services industry. By adopting such a platform, businesses can eliminate their reliance on third party solutions for data analysis, creating a streamlined approach to data governance and accelerating data-driven outcomes. Users across all levels of the business can navigate their organisation’s data, using generative AI to uncover important insights.
The future of AI in the financial sector
The path to success lies in embracing generative AI as a canvas for crafting bespoke solutions. Whilst no two financial institutions are exactly the same, the industry’s tools must strike a delicate balance between supporting specific use cases and addressing broader requirements, Customised, open source LLMs and data intelligence platforms hold the key, sparking transformative change across the sector. These tailored solutions will empower financial businesses to integrate cutting-edge innovations and ensure security, governance and customer satisfaction. Organisations that embrace this change will not only gain a competitive edge, but also pave the way for larger transformations, re-shaping the financial landscape and setting new standards for the industry.
Russ Rawlings RVP, Enterprise, UK&I, Databricks
CEO of Award-Winning Absa Bank Moçambique on Empowering Africa’s Tomorrow
Absa Bank Moçambique is one of the oldest financial institutions in the country, having been founded in 1975. Over time, the bank has undergone several transformations, both in terms of its brand and service provision, always striving to uphold values such as trust, resourcefulness, stewardship, inclusion, and courage.
As one of the main banks in Mozambique, Absa has invested significantly in digital transformation, sustainability, social responsibility, gender equality, and support for small and medium-sized enterprises (SMEs). It continues to invest in digital services to enhance the experience of its clients.
Pedro Carvalho, Chief Executive Officer of Absa Bank Moçambique since September 2022, has over 30 years of experience in the banking industry. He joined Absa in Mozambique in 2014 as the Chief Operating Officer, then under the Barclays brand. Later, in 2018, he was appointed Director of Retail and Business Banking, a role he held until being designated CEO.
This year, Absa Bank Moçambique was the winner of three Global Banking & Finance Awards: for Mozambique’s Best SME Bank, Best Place to Work, and Best Financial Institution for Women Empowerment. When Pedro spoke with Wanda Rich, editor of Global Banking & Finance Review, he gave some insights into what has contributed to the bank’s ongoing – and award-winning – success.
He began by discussing what is a key area of focus for Absa Bank Moçambique: its significant support of Mozambican SMEs. “Absa Bank Moçambique is dedicated to supporting SMEs through partnerships and tailored banking solutions,” Pedro said. “In 2023, we formalised an agreement with the Institute for the Promotion of Small and Medium Enterprises (IPEME), the Public Institute (IP) and the Association for Small and Medium Enterprises (APME) to boost SME development and revitalise the national economy.”
This partnership, he explained, enhances Absa Bank’s understanding of SME needs, enabling it to refine its offerings to better meet their requirements. “We facilitate access to bank credit for SMEs and provide treasury support to help them become more competitive. Our SME loan campaign has disbursed approximately 250 million meticais to SMEs, with 144 million disbursed this year alone. Additionally, we are developing innovative solutions to reduce financial access risks for SMEs within corporate value chains.”
He went on to outline another factor in Absa’s success story that has received recognition, namely, its commitment to a healthy working environment that supports the well-being of its employees. “At Absa, we recognise that the success of any organisation is closely linked to the well-being and satisfaction of its employees. We have a genuine commitment to creating a working environment that stimulates the talent, creativity and dedication of our people.”
He added that the quality of Absa’s working environment has been augmented by substantial investment. “This includes diversity initiatives, flexible working policies, cultural development and comprehensive employee training programmes. We also promote continuous career development, ensuring that our diversity initiatives are aligned with principles of equality and fairness. Notably, we are the only national financial institution to achieve gender balance within our Country Management Committee.”
Within Absa Bank Moçambique, efforts to advance diversity and gender equality have made headway, and new projects are in the works to carry these objectives even further. “At Absa, we have implemented inclusive hiring policies and professional development programmes for women,” Pedro said. “In 2022, we launched the ‘EmpowerHer’ programme featuring masterclasses and dialogues on topics such as bias, inclusive leadership, alliances, sustainability and mutual promotion. In 2023, the ‘IgniteHer’ programme focused on developing confidence, contextual leadership, self-care and building relationships, involving organisational leaders, male employees and line managers to promote sustainable workplace change.
“As part of our 2023-2025 strategic plan, approximately 40% of women in middle leadership positions are taking a postgraduate course in leadership skills, covering topics like servant leadership, assertive communication, bank management and agile decision-making. Additionally, we have established the Women’s Forum, which promotes a safe space for women and men to share experiences and ideas and foster the development of professional women. We plan to launch further initiatives focused on female leadership and create a more inclusive work environment.”
These persistent principles of flexibility and inclusivity are similarly reflected in Absa’s digital transformation strategy, as is demonstrated by the wide range of new technologies it is embracing to enhance its operations and improve the client experience. “Our strategy includes the implementation of advanced digital banking platforms, mobile banking applications and online services that offer greater convenience and accessibility to our clients,” Pedro reported. “We continue to invest heavily in our digital services, aiming to provide a seamless and efficient banking experience. By digitising our services, we have made it easier for clients to access their accounts, perform transactions and manage their finances, anytime and anywhere.”
He also revealed that Absa is leveraging AI (artificial intelligence) and ML (machine learning) to drive predictive analysis, offer personalised investment advice and streamline financial product offerings. “These technologies bring significant benefits such as increased efficiency, better decision-making and new job opportunities in fields like data science and AI development.
“Our commitment to digital transformation extends to ensuring a responsible and regulated implementation of these technologies. We are focused on a gradual approach that allows the banking sector and its customers, partners and employees to maximise the benefits of digitalisation. By continuously enhancing our digital infrastructure, we aim to lead the market in providing innovative and customer-centric banking solutions.”
Absa Bank Moçambique has taken a number of actions to reaffirm its commitment to environmental sustainability, including becoming a signatory to the United Nations Global Compact in 2021. “We are investing in renewable energies and digitising services to reduce paper usage,” Pedro said. “Across the country, we have inaugurated environmentally friendly branches that are powered by photovoltaic solar energy.
“Our latest environmental commitment, aligned with SDG 13 (Climate Action), involves a Memorandum of Understanding with Maputo National Park to promote environmental conservation, community development and high-value collaborative networks. This project impacts more than 168,000 families living in the surrounding areas, fostering environmental awareness and sustainable practices that benefit the entire community. These actions are part of our broader effort to support the SDGs and contribute to a greener, more resilient Mozambican economy.”
In addition to its environmental initiatives, Absa exhibits a deep commitment to social responsibility through programmes involving youth and children, as detailed by Pedro. “We support initiatives that focus on inclusion and preparing young people for the work environment, aligned with SDGs 4 (Quality Education) and 8 (Decent Work and Economic Growth). Our ‘Ready to Work,’ ‘Ready for Art,’ Graduate Programme and ‘Xiquitsi’ projects are prime examples of this commitment. These programmes provide training, personal development and professional skills to young people, fostering their inclusion in the economy and equipping them for future employment opportunities.
“By integrating these social initiatives with our sustainability efforts, we strive to create a holistic impact on Mozambique’s development, ensuring that our contributions are comprehensive and far-reaching.”
Pedro expanded on some recent examples of impactful CSR (corporate social responsibility) initiatives that Absa has engaged in, and highlighted how they have benefited local communities. “Absa’s CSR initiatives are numerous and impactful. Our Ready to Work, Ready for Art, Graduate Programme, and Xiquitsi projects have significantly contributed to the personal and professional development of young people, promoting gender equality (SDG 5) and inclusive economic growth and decent work (SDG 8). Since its inception, Ready to Work has trained over 18,000 young people, while the ‘Xiquitsi’ project has benefited 250 children and teenagers in vulnerable situations.”
Absa has also launched financial education projects in schools, Pedro explained, training young people in practical financial management skills. “In 2022, our financial education campaign reached over 1,760 fifth graders nationwide. This year, we initiated a financial literacy campaign through humorous radio soap operas in 12 national languages, including Portuguese, trying to reach all the population covered by the regional radio stations. These programmes have a profound impact on local communities by empowering them with essential knowledge.”
The Ready to Work and Graduate Programme initiatives, in particular, focus on youth development and employability, and Pedro noted that they have been instrumental in preparing young people for the professional world. “Ready to Work is not just a training programme but a strategic tool that helps young people transition from academic life to the workforce and has trained over 18,000 youths in its eight years of existence,” he said. “Meanwhile, our Graduate Programme exposes young people to the banking sector, consolidating their academic knowledge and fostering new skills. These initiatives have positively impacted youth employability, helping many to secure jobs, start businesses or join Absa Bank. Since its inception in 2016, 126 young individuals have spent nine months working in various departments of the Bank, gaining exposure to different realities and experiences. Out of these, 81 were absorbed by the Bank, while 41 went on to pursue different opportunities in the job market.”
Finally, he discussed what he sees as coming next for Absa Bank Moçambique, including the key challenges and opportunities he predicts the bank will need to navigate over the next few years. “We face challenges such as technological evolution and regulatory changes, but we also see opportunities to innovate and expand our services,” he said. “Mozambique presents numerous investment opportunities in public infrastructure, industrial production, mechanised agriculture and the oil and gas sector.
“At Absa, we aim to contribute to Mozambique’s economic growth by supporting key sectors through our services. We see significant opportunities in expanding our offerings and strengthening our market presence, positioning ourselves to navigate the dynamic landscape of the banking industry effectively.”
Pedro concluded by reaffirming Absa’s commitment to Mozambique. “As a bank that prioritises people, we aim to continue enhancing the lives of Mozambicans, particularly the youth, by supporting their investments and innovations with Absa as their trusted partner. We plan to strengthen our community relationships, making a positive contribution to Mozambique’s economic development and fulfilling our purpose: ‘Empowering Africa’s tomorrow together... one story at a time.’”
Pedro Carvalho Chief Executive Officer Absa Bank Moçambique
Letting go of legacy systems: How the FSI can achieve transformation through cloud-based solutions
The financial services industry (FSI) stands at a crossroads of tradition and innovation, grappling with the unenviable task of navigating a rapidly evolving digital landscape while simultaneously maintaining and introducing new services for users.
As technology evolves, new applications, tools and services are continuously being launched, with challenger brands entering the FSI as digital natives. The latest technology offers both traditional and newer financial institutions additional efficiencies and improved ways to provide their services to customers. Yet many established organisations are still running core business functions on legacy systems. The Financial Conduct Authority (FCA) found that 90% of financial firms still rely on legacy technology, leaving newer brands at an advantage.
This reliance on legacy technology is impacting established institutions’ ability to meet modern demands for flexibility, speed, and integration with modern technologies. It also incurs high costs and a heavy consumption of resources, which can impede innovation and drain finances. Additionally, legacy systems often fall short in meeting today’s stringent compliance and security standards, making them vulnerable to old and new threats.
To remain competitive in a crowded marketplace increasingly disrupted by the rise of fintech companies, digital transformation is crucial. Financial firms must meet the challenge of moving away from legacy technology head-on; identifying the key issues that are holding them back and
developing a robust strategy to overcome them. In this article, we will identify the pain points of legacy technology in financial services, the roadblocks stopping organisations achieving digital transformation and what steps are required to make such change a reality.
An uncomfortable reliance on legacy systems
Legacy systems, characterised by outdated technology stacks and monolithic architectures, continue to be a major pain point for traditional banks and other financial institutions. While some of these systems may have supported organisations reliably over the past few decades, they are not equipped to meet today’s demands for flexibility, scalability, and speed, as well as comprehensive integration with new technologies.
Additionally, the complexity and cost of maintaining legacy technology can come at a heavy price, with one study suggesting that it could cost banks more than $57 billion by 2028. For instance, data centre systems, which have been relied upon for decades, remain functional by constantly adopting new hardware to create space for additional data and processing. This is a costly practice and the FCA discovered that threequarters (78%) of financial services firms’ data is still stored on onpremise infrastructure.
This reliance on legacy storage solutions is just one example of how older technology is impacting financial organisations’ bottom line. What’s more, it is also stifling innovation. The longer resources are spent on
these services and systems, the less money is available to invest in transformation. By comparison, switching to modern cloud systems offers flexibility as they can be scaled to increase, or decrease, the volume of data being processed in line with an institution’s needs, while also being more cost effective.
There are also serious considerations to be made around compliance and security. Most legacy systems will have been created before the introduction of certain regulations, including 2018’s General Data Protection Regulation (GDPR). While updates can be made to ensure legacy systems are equipped to deal with the stringent data handling and privacy standards, this is often very time consuming and adds another layer of processing. By comparison, the companies behind the newer, most advance cloud systems have taken these regulations into account when designing and building the technology to ensure their financial service customers are compliant. Similarly, outdated security protocols and data encryption practices can leave legacy systems exposed to a rapidly evolving threat landscape.
Holistic change drives transformation
If legacy systems are the problem, then the solution, simply put, is to replace these with modern, cloudbased technologies. However, making this a reality is far easier said than done. The sheer size of core banking systems, combined with the depth of the integration of legacy systems, adds further challenges to the already
complex process of digital transformation. It is an undertaking that requires collaboration between tech teams across an organisation, as changing the core solutions that have been replied upon for decades means every other system will need to be tested so they can be integrated properly. Moving on from certain legacy systems to embrace digital solutions could result in a complete overhaul in how certain processes are managed.
To enact transformation successfully, organisations need to start by clearly defining their business and technical requirements. These should be built around user needs and how upgrading systems will benefit customers and employees, rather than based on the technology itself. In addition, regulatory requirements must also be adhered to – from both a financial services standpoint, as well as putting the right processes in place to protect customer data.
With these goals and requirements in place, organisations can then break the transformation journey down into different stages. Though the temptation might be to change as much as possible at once, taking an iterative, modular approach will allow for more flexibility and composability along the way.
Risk management must also be another key focus throughout the transformation process. Not only should financial organisations be thinking about the current security and compliance requirements, but they should also think about how these might change in the future and whether the new systems will be able to adapt to meet new challenges.
Empowering financial firms for a digital future
To remain competitive in an increasingly digital world, the institutions that power the FSI must embrace transformation. The shift away from outdated legacy systems towards modern, cloud-based solutions is not just a technological upgrade. As many businesses continue to be more financially conscious, adopting new technology it is a strategic imperative. Financial firms that embrace this change will be rewarded with enhanced operational flexibility and improved customer service, along with robust security and compliance measures.
While it cannot be denied that transformation is, by its very nature, a lengthy and complex process, adopting a phased and well-defined approach helps to justify the change. Financial institutions that recognise where and how this change can bring benefits can effectively manage risks to ensure a much smoother transition. This will leave them empowered with the tools they need to innovate and grow, with peace of mind that they can overcome any emerging challenges and take advantage of new opportunities.
Andy Parsons Chief Digital Advisor, Version 1
Matt Ryan Chief Transformation Officer Reef, Powered by Totem Matt Ryan is Chief Transformation Officer at Reef, Powered by Totem. Matt has more than 15 years of experience working with and alongside world famous brands to deliver transformation at every level. After a highly successful exit as an entrepreneur, he has since set about elevating companies ranging from long-standing NASDAQ behemoths to exciting start and scale-up businesses. His industry-agnostic success is founded on a demonstrable and innate ability to identify and understand a marketplace and its customers, often in very different and nuanced ways. This results in a strategy, a construct and a narrative that consistently deliver unprecedented results.
In-event interaction is soaring for the financial services sector
– don’t get left behind
The financial services landscape is highly competitive, with highvalue deals and transactions at their heart. Some reports project its value in 2024 at over $33 billion, growing by nearly 8% from last year and this level of growth is expected to grow at a similar rate over the next four years.
So, the question stands: if leading global investment, wealth and asset management firms, synonymous with quality and innovation, want to remain as front runners from the competition, how do they deliver events at high execution standards?
An events space on the rise
This year in 2024, we have seen remarkable growth in the overall events space. Center Parcs Conferences & Events is experiencing its best-ever year for corporate bookings at its dedicated events venue in Woburn Forest. The company has already posted £2m more in confirmed revenue for The Venue than for its previous best year in 2019-20.
Red Bull Technology has seen huge growth in its corporate events business as it continues to evolve its offering, while Dubai won a record 349 bids to host international conferences, congresses, meetings, and incentive travel programmes in 2023. Corporate hospitality is on the up globally – with one firm in the financial services sector reported to have spent over £100 million in a single 12-month period.
This is great news for firms holding events for investor relations, to secure deals and grow their engagement with prospects. However, to truly capitalise on the growth, they must also prepare for the shifting networking trend that we’re seeing: a social media style level of engagement through event apps.
The shifting engagement trend
Historically, event apps might only have been used for hosting agendas, breakout sessions and for content to be uploaded. No more. Due to more pressure to get deals signed and transactions completed. That means attendees are demanding more from their event experiences which means more features and capabilities from event apps.
Now, attendees expect to send text, voice messages and video messages, make voice and video calls, share images, documents, reports, PDF’s, location meetings, and other content. They also expect to communicate through chats, react to and edit their comments, all in real time so they don’t miss the chance to engage and conduct business. This isn’t a prediction but a shifting demand that we’re seeing from our own data.
We’ve reviewed insights from three events over two years to understand this evolution. We analysed private capital’s most senior gathering, SuperReturn International, SuperInvestor, where meetings become investments and The Network Forum, the pre-eminent resource for the network management, custody and post trade community. Our analysis reported strong increases in app adoption – up from 78% to 91% from 2022 to 2024 at The Network Forum and increases of 8% and 7% for SuperReturn and SuperInvestor, respectively – but an exponential increase in the number of people using the messaging feature. At SuperReturn International, the number of messages sent via the app increased by 39% in its second year, from nearly 50,000 in 2023 to nearly 70,000 in 2024. While SuperInvestor reported over 12,000 messages sent in its first year.
Meetings overall play the most crucial of roles at events and is where the most business is completed. Our analysis from The Network Forum reported an increase of over 14,000 in meetings booked through the app in the first year of enhanced functionality, with that number climbing a further 15% in 2024. Similar exponential growth took place at SuperReturn with over a 6,000% rise in the number of meetings booked in 2024 from 2023. By moving beyond just virtual meeting functionality and offering more flexibility to attendees of these events to book them through in person, virtual and video calls we’re seeing a rising trend of interpersonal WhatsApp style engagement that we only expect to grow further into 2025.
Technology: the central role in breaking down the digital/physical divide
Events are a critical tool for many of the largest firms to engage deeper with their intended audiences. Our analysis provides a clear picture of significant change in how attendees are using apps from previous years. For example, only two years ago they were used as an information resource but now attendees are able to view sessions, engage in interactive polls and communicate in real time with connections.
This means that for any financial organisation running an event today, they have an opportunity to leverage data that will allow them to curate groups and offer hosted buyer networking options. However, their challenge lies in finding the right balance between sellers and buyers, identifying and offering the right information to create small target groups that will benefit from being part of that small, curated group and ensuring they continue to offer the features that attendees now come to expect.
The technology is here, let’s utilise it to grow this critical sector further.
A Trend to Topple the Card Giants?
For decades, merchants have needed to accept cards from Visa and Mastercard to capture a larger share of consumer transactions. But today, these global giants could be on the verge of losing their global dominance in payments. Are Pay-by-Bank and A2A transactions poised to take the transaction top spot?
Firstly, it’s worth outlining the main distinctions between traditional card payments, and A2A or Pay byBank transactions.
Pay-by-bank allows customers to make online payments directly from their bank accounts (including A2A transactions). The benefit of the payment method is the avoidance of using card intermediaries (e.g. Visa or Mastercard); customers can simply authorise payments by using their online banking credentials to transfer funds directly from their account to a merchant’s account which allows the merchants to stay on the better fee level and receive the settlements instantly.
Card payments, on the other hand, refer to cashless payments with the use of a bank card. The amount is either debited directly from the bank account of the cardholder or, in the case of a credit card, charged at a later date.
Pay-by-Bank is increasingly favoured over card payments due to enhanced security and streamlined user experience. Transactions are authorised directly through users’ banks, reducing fraud risk as unlike card payments, which require the entry of sensitive card details that can be susceptible to fraud, Pay-byBank transactions are authorised directly through the user’s bank. Additionally, Pay-by-Bank simplifies the payment process, which speeds up transactions and lowers cart abandonment rates.
It’s perhaps unsurprising then, that this method is being embraced the world over, but global adoption has been far from consistent.
How the world is embracing Pay-by-Bank payments
Pay-by-Bank (including A2A payments) is gaining traction the world over, but there are notable discrepancies between countries. According to the 2024 Global Payments report, A2A payments are growing fast in markets like Brazil and India on the back of PIX and UPI schemes respectively, with global A2A transaction values forecast to rise at 14% CAGR through 2027, gaining 1% global share during that time.
A2A payments are also the leading choice for online transactions in developed markets such as Norway, Finland, Sweden and the Netherlands, and according to Worldpay, they are more likely to be popular in emerging markets such as Malaysia, Nigeria and Thailand – not to mention India again, where government support has encouraged rapid adoption. In short, A2A and Pay-by-Bank are among the leading payment options in many regions.
But the real driving force behind A2A and Pay-by-Bank success is the implementation of Open Banking, which effectively gives these payments the boost they need to compete with card payments.
At one time, Pay-by-Bank and A2A payments would have struggled because bank transfers required payers to log into their bank accounts and manually enter account details to make a payment, meaning they would still fall a little short of today’s expectations of convenience. That’s where Open Banking comes in. It removes this friction by making entering account details an automatic process.
South Korea, Australia and India have developed their Open Banking systems, whilst Hong Kong, Japan, and further parts of Asia are currently preparing for Open Banking. In April this year, Canada, a country which launched Open Banking in 2019 but has lagged behind in user adoption, announced new measures that could allow consumers’ financial data to be shared, encouraging more uptake.
Could the US follow? Possibly, but as US regulators consider a decision on Open Banking, Pay-by-Bank and A2A payments face challenges in what is still a very card-dominated market. In the US, card payments account for more than two-thirds of point of sale transaction value and half of e-commerce spendings, according to the 2023 FIS/Worldpay Global Payments Report. But with the launch of the Federal Reserve’s FedNow instant payments service, joining the Real Time Payments network of The Clearing House, and other factors, FIS forecasts A2A payments specifically will see a compound annual growth rate of 14% through to 2026.
Benefit vs risk
The benefits of Pay-by-Bank and A2A payments vs card payments for merchants are clear:
• Reduced operational expenses by eliminating chargebacks and reducing the fees associated with traditional card transactions.
• Rapid funds settlement, with funds typically landing in the merchant’s account almost instantly. This is especially where faster payments schemes are in operation, for instance the Faster Payments Scheme in the UK, or SEPA Instant Scheme in the EU.
• As an accessible and preferred payment method for a wide range of customers, it can attract and help retain loyal customers.
But, crucially when it comes to customer retention, these payments offer a big advantage over card payments; a friction-free experience.
Using the U.S. as an example, where fewer than 50% of consumers have a bank card number saved on a mobile payments app, the other 50% has to either physically have their card in order to read off the numbers, or have the number memorised. Other payment methods may require them to create an account, or pose additional challenges. Some will stop a purchase due to complicated checkout processes, or even avoid a retailer if they have to re-enter their card information.
Thirty two percent of North Americans are already using Direct Debit, and bank transfer as their primary payment method online, it’s not unreasonable to expect this trend to continue to grow in popularity in the coming years.
But there are downsides. As with all financial transactions, there is a fraud risk. With stolen account information, criminals can easily take advantage of the vulnerabilities of Pay-by-Bank and A2A services and rails, and lawmakers are calling for better protection for the account holders.
That said, since these payments don’t involve any intermediaries, there is less opportunity for fraudsters to intercept or steal funds. Additionally, because they are typically initiated through a bank’s online banking platform, security measures such as two-factor authentication help to effectively protect accounts.
Changing the face of payments
Pay-by-Bank and A2A payments are changing the way financial institutions operate and impacting the broader payments landscape in many ways, from increasing competition among payment providers and financial institutions to creating opportunities for innovation in the payments space.
For now, some countries are still playing catch-up, a fact keeping Visa and Mastercard on top of the payments pile. But as global adoption increases, we could soon see a significant reversal of fortunes.
Azimkhon Askarov Co-Partner CONCRYT
The hidden price of communications non-compliance
The compliance standards set for top city firms are continuing to rise, with regulatory scrutiny of workplace communications reaching an all-time high. The spotlight placed on financial services firms by regulatory bodies has revealed the complacency of employees, and more importantly, risk managers, when it comes to how sensitive information is communicated. Outcomes of industry probes, such as the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) fining $1.8bn to top city firms in 2022 due to misuse of personal WhatsApp and text messages to discuss sensitive information, exemplify this.
But despite being one of the largest collective resolutions in U.S. regulatory history, it failed to curb this apparent epidemic of non-compliance. Earlier this year, a fresh group of Wall Street firms settled to pay more than $81 million in civil penalties to charges of record-keeping failures, adding to the now more than $2.8 billion in fines inflicted for similar offenses in the U.S. With the UK’s FCA having launched its own probes earlier this year, it is likely that we will see these hefty fines continue to pile up across these two major markets.
While these financial penalties are substantial, they are merely the opening round of punches in what can become a prolonged battle for businesses. The true cost of non-compliance is multifaceted and extends far beyond the immediate financial impact.
Cost of lost trust
The repercussions of non-compliance in communications on a company’s reputation are profound and far-reaching. If a firm has failed to adhere to regulatory standards, particularly surrounding sensitive customer data or possible future deals, the damage to its reputation can be immediate and, in some cases, irreversible.
Trust, once broken, is not easily restored. Clients, who expect the highest levels of confidentiality and integrity, may start to look elsewhere, wary of the risks associated with a non-compliant firm. Investors, too, are quick to react, often pulling back funds or thinking twice about future investments, concerned about the stability and governance of the company.
The public’s perception is equally affected. In today’s digital age, news travels fast, and a company’s missteps are broadcast widely and rapidly. A tarnished reputation can ultimately lead to a loss of consumer confidence and, consequently, a possible decline in market share and having larger financial implications than any initial fine could have been. The impact on a company’s value can be significant, as the market responds to the perceived increase in risk associated with the company’s brand.
Disruption to internal operations
The operational impact of regulatory investigations and the subsequent need for increased compliance measures can be just as debilitating as the financial penalties themselves. The diversion of resources to manage the fallout from an investigation can disrupt business operations, leading to inefficiencies and a loss of focus on core business activities. Employees may find themselves mired in compliance activities, detracting from their regular duties and potentially affecting service delivery.
The strain on employee morale should not be underestimated either. The uncertainty and pressure that comes with a regulatory investigation can lead to a tense work environment, reduced productivity and even staff turnover. Furthermore, the long-term implications of operational disruption can manifest in sustained inefficiencies, as the company struggles to return to its preinvestigation state of affairs.
The burden of heightened oversight
Once a company has been marked by non-compliance, it often faces a future of increased scrutiny from regulators. This heightened oversight can be both exhaustive and exhausting, requiring significant internal resources to manage. Companies may find themselves in a perpetual state of auditreadiness, with the need to produce detailed reports and documentation on demand.
The cost of compliance is likely to rise as firms bolster their compliance departments and invest in training to ensure that all employees are aware of, and adhere to, the new standards. The spectre of more stringent regulations and the potential for additional fines can stifle growth and innovation, as companies become more conservative in their business practices to avoid further infractions.
The need for effective communications compliance
In response to these challenges, there is a clear need for firms to implement effective communications compliance strategies. Such strategies must include robust monitoring systems that can detect not only direct breaches, but also patterns or gaps that may suggest off-channel communications. While the cost of implementing these systems may appear significant, the investment is essential to protect companies from future penalties and to maintain their reputation in the industry.
Effective compliance systems serve as both a deterrent to non-compliance and a defence mechanism against inadvertent breaches. They provide a framework within which employees can operate safely and with confidence, knowing that their communications are being monitored and managed in accordance with regulatory requirements.
The hidden price of communications noncompliance is a complex threat that can undermine the very foundations of a business. Financial penalties, while painful, are only the beginning. The long-term consequences – reputational damage, operational disruption and increased scrutiny – can be far more damaging and enduring. To safeguard against these risks, firms must recognise the critical importance of effective communications compliance and invest accordingly in robust systems. Although an upfront expense, it is a price worth paying.
Tom Padgett President, Enterprise Business Smarsh
CAPITAL INTENSIVE PROJECTS:
THE IMPACT OF FRAUD, ERROR, WASTE AND ABUSE
For leaders managing capital-intensive projects, the challenge of controlling fraud, error, waste, and abuse (FEWA) is ever-present. A common question which is often raised is, ‘How can we secure our investments, while navigating complex supply chains and high-risk environments?’
Neglecting robust anti-fraud measures carries significant risks, as FEWA can erode up to 5% of company spend with annual losses in the UK from procurement fraud alone of £133.6 billion. Complex supply chains and high-pressure timelines create vulnerabilities, which can be exploited by bad actors.
However, there are strategies that leaders of capital-intensive projects can follow to strengthen their defences. Integrating data analytics, fostering a top-down ethical culture, and leveraging third-party data are essential factors for organisations which are looking to detect and prevent FEWA effectively.
More often than not high capital spend projects are complex, requiring millions if not billions of dollars to be spent in a short period of time with suppliers that aren’t necessarily well known and in countries that are even less known. The risk combination can spell disaster if not well controlled. Historically, companies have conducted these types of checks and balances manually or semi-manually on an ad hoc basis, but this isn’t sufficient anymore and analytics powered by cloud computing make another route possible today.
Integrating data analytics
Cloud-based analytics can play a pivotal role in detecting and preventing FEWA in capital-intensive projects. In such projects, vast amounts of data are generated every day for accounting and resource planning, and if this data is analysed effectively, patterns and anomalies which are indicative of FEWA can be identified swiftly and automatically.
By identifying these patterns and anomalies quickly, organisations can document and validate the findings, and take corrective as well as preventative actions to strengthen their internal controls and avoid financial and reputational losses. This ensures a quick mitigation of risks, which is key for prevention of future occurrences of fraud, abuse and waste – not to mention errors.
Real-time data monitoring systems allow for continuous oversight of transactions and activities. They can flag suspicious activities (in particular in payments) as it occurs, enabling prompt human investigation and response. For example, an unusual spike in procurement costs or repetitive minor billing discrepancies could signal potential fraud or waste. The procurement integrity (PI) solution will automatically identify the signals from millions of data items and guide the investigator in creating a case with substantiated evidence if need be.
Laurent Colombant EMEA Payment Integrity Solution Lead SAS
Organisations can also identify potential risks before they materialise, by employing predictive analytics. Machine learning algorithms can analyse historical data to identify these risks,and go on to predict where and when fraud or errors are most likely to occur. This proactive approach helps capital-intensive projects to allocate resources to areas of high risk more efficiently.
The PI solution can ensure that even the most subtle discrepancies are identified by producing regular and comprehensive audits, powered by advanced data analytics. These audits can be automated to a significant extent, reducing the manual workload of employees, while simultaneously enhancing their accuracy.
Fostering a top-down ethical culture
Research has found that FEWA is often committed by internal employees and almost a quarter of organisations have experienced collusion both between employees and suppliers, as well as among different suppliers. As such, an organisation’s culture significantly influences its susceptibility to FEWA, and a strong ethical culture, championed by leadership, can deter potential fraudsters and encourage employees to adhere to best practices.
In fact, executives who engage in occupational fraud can cost their business in excess of 10 times more than lower-level employees who are guilty of it. Leaders must be able to exemplify ethical behaviour themselves, and prioritise transparency, because when top executives are visibly committed to combating FEWA, it sets a precedent for the entire organisation. This commitment should be reflected in their policies, communications, and everyday actions.
It is important that regular training programmes which focus on ethical behaviour, FEWA detection, and reporting mechanisms, are implemented across the organisation, so employees can integrate FEWA prevention methods into their own day-to-day work. They should feel empowered to report suspicious activities without fear of retribution, and clear communication channels for reporting and addressing concerns must be established. This is very much in line with and complementary to whistleblowing.
The final step in fostering a top-down ethical approach within an organisation is creating incentives for when this ethical behaviour is demonstrated by employees. This can reinforce a culture of integrity and rewarding employees who have identified and reported FEWA issues not only boosts morale, but also strengthens the internal control environment within the organisation.
Leveraging third-party data
In complex supply chains, where vulnerabilities can arise, relying solely on internal data is insufficient, but third-party data can provide a broader perspective and enhance the accuracy of FEWA detection. Continuous monitoring of suppliers and vendors through thirdparty data sources can reveal discrepancies which might not be apparent through internal data alone. Not only can external data be used to derive additional insights but also to cleanse and enrich data generated and maintained in ERP systems.
Comparing the ERP data against industry benchmarks can help an organisation to identify outliers, and third-party industry reports and databases can offer valuable insights into standard costs, timelines, and practices. This makes it easier for leaders managing capital-intensive projects to spot any anomalies that might be present within their data.
Organisations can take a further step by partnering with external fraud detection agencies. These agencies often have access to broader data sets and sophisticated analytical tools, which can further strengthen an organisation’s defences against FEWA.
It is evident that leaders managing capital-intensive projects must take a multifaceted approach to manage FEWA effectively. By integrating data analytics, fostering an ethical culture from the top down, and leveraging third-party data, organisations can significantly mitigate the risks associated with complex supply chains and high-risk environments.
How to Improve Your Financial Health: A Conversation with Gregor Mowat
We recently sat down with Gregor Mowat, Co-CEO and co-founder of Loqbox, on the inspiration behind the leading financial wellbeing business, the importance of financial education, and the steps you can take to achieve financial wellbeing.
1. Tell us about your background – why are you focused on financial wellbeing and what was the inspiration behind Loqbox?
I spent 20 years working globally in public accounting with KPMG, which exposed me to the widespread issue of financial exclusion. I’ve gone all around the world, and I’ve seen the impact that it can have if the system doesn’t work in your favour. Countries like Thailand and Kazakhstan where if things go wrong, it can be devastating.
Regardless of the market, the impact of financial exclusion is significant. In emerging markets, it can be a matter of survival, while in developed markets, it causes huge amounts of pain and stress.
After leaving KPMG in 2016, I was looking to get involved in ethically-driven projects and met my co-founder, Tom Eyre. Tom’s experience working during the last global financial crisis and his personal experiences – such as his sister being denied credit despite a stable income – highlighted systemic financial exclusion that we wanted to address.
2. Stats from the FCA say one-in-four UK adults are currently in financial difficulty, or on the brink. How does Loqbox support individuals facing these challenges?
The statistics are awful. 11.7 million adults in the UK cannot put their hands on £100 as we speak. In addition, 51% of UK adults do not have an emergency fund to cover three months of costs. What do you do if you lose your job? And then you’re adding to that the escalating cost of goods and services, and it’s only getting worse.
Loqbox’s mission is to give everyone access to a richer life. Every word in our mission is chosen carefully. The first key word is ‘everyone’: Loqbox is for everyone. We don’t want anybody locked out of the financial system or to face the stress and the pain of not understanding or being able to deal with money and therefore getting into difficulty.
The second key word is ‘richer’. We aim to help people be better off financially and live a fulfilled life, achieving their goals without money being a barrier. Most people do not want money for money’s sake. They want it to help them achieve their goals or to live the best life they can live. In some cases, they need it because they are struggling to get by and are worried about whether they can get the school uniform or pay the bills. When we say richer, we mean richer in terms of being objectively better off, but also living a more fulfilled – or richer – life. Achieving your goals without money getting in the way. That’s what we’re all about.
3. What are the steps people need to take in order to achieve a richer life?
We believe there are three key steps to a richer life:
• Firstly, understanding money. Financial stress impacts every aspect of life. Education and habitbuilding are crucial.
• Second: Building a good credit score. A good credit score can save substantial amounts in interest over a lifetime.
• Lastly, building savings: Start with an emergency fund and progressively enhance your savings.
4. Why is financial education so important?
Financial education is essential, but it’s often neglected. There have been sporadic attempts by the government to embed some form of financial education into the school system, as well as efforts by private individuals like Martin Lewis of MoneySavingExpert. com, for example. Noble as these are, the reality is 16 or 18-year-olds leave school not knowing what APR means, or the difference between a loan and a credit card, and crucially they often don’t understand that both have to be repaid. That’s why for Loqbox, education and habit building are always the first and most important piece of the puzzle, because without that you have nothing.
5. Tell us more about the profile of people who use credit.
Credit seekers generally fall into two categories: aspirational and desperate. Aspirational borrowers use credit to help them achieve a specific goal like purchasing a car for commuting so that they can work, while desperate borrowers may lack financial education and struggle with basic budgeting and borrow to make up the shortfall.
Understanding and managing credit responsibly is critical. For instance, a credit card can be a useful transactional tool but a costly borrowing method. Loqbox teaches responsible credit use, helping members build good financial habits.
6. Can you tell us a Loqbox success story?
We get wonderful stories – some heart wrenching stories, but they are heartwarming by the end. My favourite is a lady who wrote to us and said every year in September at the start of school she would get into a sweat about getting the new school uniform for her child. This year she took the money she had saved with Loqbox and bought the uniform. There was some money left over to spare and her credit score has gone up. Many others have rebuilt their credit scores and improved their financial situations massively.
7. How do partnerships with organisations like TSB, ClearScore, and StepChange enhance your services?
Our partnerships fall into three categories: proposition, acquisition, and ethical initiatives. For instance, TSB is one of several financial institutions that we work with. These financial institutions form one element of our proposition. We introduce our members to TSB and other bank accounts and the banks pay us a commission for these introductions. Credit score and report providers, such as ClearScore and Credit Karma, help us reach people who would benefit from improving their credit score. We also direct over-indebted individuals to partners like StepChange for debt management support where appropriate.
8. What are the different challenges faced by individuals in terms of financial wellbeing, and how can they be addressed?
Financial wellbeing needs targeted approaches. There are two distinct groups you can look at; people whose financial wellbeing suffers because they don’t engage with their finances, but who have enough money to survive, and those who just don’t have enough money.
For the first group, the answer is all about education. The habitbuilding we talked about before is basic hygiene, and can be more important for them than credit building. This group needs to lean into their finances and to try and use all the tools available to them. For the second group, it’s all about destigmatising a situation and getting the financial conversation going.
9. What advice would you give to someone looking to improve their financial health?
Start today. Treat financial wellbeing as importantly as physical and mental health. Money remains the leading cause of stress in the UK, but early and proactive management of finances can prevent stress and improve overall wellbeing. Integrate financial care into your daily routine, and seek help whenever needed to build a secure financial future.
Gregor Mowat Co-CEO and co-founder Loqbox
GDPR, AI and Cybersecurity Considerations in M&A Transactions
In today’s digital world, a company’s compliance with the EU General Data Protection Regulation (“GDPR”) and emerging digital legislation can have a significant impact on its valuation in an M&A context.
This article discusses key European data protection, AI and cybersecurity considerations to be taken into account when a company acquires or merges with another business and obtains personal data as a result of the transaction.
Assessing a target company’s compliance pre-closing (due diligence)
Data protection, AI and cybersecurity considerations and related due diligence are growing in importance in the context of mergers and acquisitions. In light of this, deal lawyers should determine key due diligence goals in this respect and seek to identify and assess, at the outset, the target’s:
• Exposure to the GDPR and the emerging digital laws in the EU;
• Data practices (e.g., collection and use of employee and/or customer data, online tracking practices, data sharing with third parties, processing of sensitive personal data, etc.);
• GDPR compliance status and maturity of its data protection compliance program (e.g., notice and consent mechanisms, records of data processing activities, data protection impact assessments (“DPIAs”), agreements with vendors, customers and partners, the existence of a data protection officer (“DPO”) function where required, procedures allowing individuals to exercise their GDPR rights, and other internal governance policies and procedures);
• Approach to international transfers of personal data, including the existence of appropriate data transfer mechanisms, assessments regarding foreign government access requests and measures taken to protect personal data in the destination country;
• Information security, audit and testing program, including pseudonymization and encryption practices if any, incident response plans, and cybersecurity preparedness efforts;
• History of personal data breaches and related notifications made to data protection authorities and/or affected individuals, as well as any ongoing or anticipated vulnerability that may result in an information security incident;
• Exposure to other European digital laws, for example, the EU’s Artificial Intelligence Act, taking into consideration what AI systems are developed or used by the target and what the related level of compliance effort and risk is; and
• Any history of complaints, investigations, legal proceedings or enforcement actions alleging non-compliance with data protection, AI and cybersecurity laws and regulations.
Once the due diligence process is complete, a risk assessment should be conducted to evaluate data protection, cybersecurity and AI-related risks and liabilities that may arise in the event of the merger or acquisition.
From a contractual perspective, the parties should negotiate appropriate risk allocation provisions in purchase agreements or other transaction agreements, including representations, warranties and indemnities. The acquiring party should make sure to obtain important warranties, such as that the target is not subject to pending complaints, litigation, investigations or other enforcement action under the GDPR.
To assess whether the target’s data protection, AI or cybersecurity posture would have a material effect on the transaction, it is important to identify whether any immediate shortcomings can be remediated or mitigated before the deal is concluded or shortly thereafter. For example, major compliance threats or risks may require contractual commitments for indemnity or price correction in a specific case.
Updates to due diligence processes in light of the new EU AI Act
On August 1, 2024, the EU Artificial Intelligence Act (“AI Act”) entered into force. The AI Act introduces a risk-based legal framework that imposes requirements based on the level and type of risks related to the AI systems a company develops or deploys. The AI Act distinguishes the following types of AI systems: (i) prohibited AI systems, (ii) highrisk AI systems, (iii) AI systems with transparency requirements, and (iv) general-purpose AI models. The AI Act applies to “deployers” of AI systems that are based within the EU. The AI Act further imposes stringent obligation on “providers” of AI systems placing AI systems on the EU market or putting them into service, or placing generalpurpose AI models on the market in the EU, irrespective of whether those providers are based within the EU. The obligations set forth in the AI Act will become applicable in different phases. The provisions with respect to prohibited AI systems will become applicable on February 2, 2025. Specific obligations for general-purpose AI models will become applicable on August 2, 2025. Most other obligations under the AI Act, including the rules applicable to high-risk AI systems and systems subject to specific transparency requirements will become applicable on August 2, 2026. The remaining provisions will become applicable on August 2, 2027.
Given the new, comprehensive legal framework in the EU requiring significant compliance efforts from companies developing or using certain AI systems and providing competent authorities with strong enforcement powers, AIrelated due diligence will become increasingly important. Deal lawyers should consider updating existing privacy due diligence processes to include relevant considerations related to the new legal requirements, as well as in connection with the target’s AI management responsibilities, leadership and oversight in general. The requirements and related enforcement risks under the EU AI Act depend on the type of AI systems the target is using and whether it qualifies as a deployer or provider of these systems. If the target company is an AI provider or deployer under the EU AI Act, the acquiring party should obtain warranties and representations regarding the target’s approach to compliance with the EU AI Act, as compliance with the new legal framework can be complex and may require further investment.
Post-closing strategy and assessment of residual privacy and cybersecurity risks
The post-closing strategy should include a more detailed gap analysis to identify the data protection, AI and cybersecurity issues that require immediate remediation (e.g., update privacy notices and consent mechanisms and implement risk-mitigation measures for high-risk data processing activities). In addition, a compliance strategy should be developed and implemented as necessary to address data protection and cybersecurity issues associated with the integration of the target. It may, for example, be necessary to restructure the company’s internal governance, privacy notices, policies and procedures to integrate the newly acquired personal data. From a cybersecurity perspective, additional information security measures or processes may need to be implemented to protect new data sets acquired in the context of the merger or acquisition.
Under the GDPR, data protection authorities may impose administrative fines of up to 20 million euros or up to 4% of a company’s total worldwide annual turnover, whichever is greater. In addition, data protection authorities have the power to issue orders, warnings, and reprimands or impose bans or restrictions on the processing of personal data if such processing violates the GDPR. If severe violations of the GDPR or significant data breaches have occurred at the target, these can be a real threat to the brand and reputation of the acquiring party and undermine the acquiring party’s business objectives, future plans and growth. In some cases, regulators may impose restrictions on what the acquiring party can do with the data to protect the reasonable expectations of customers. There can be significant liability in connection with acquiring a company when fines, orders
or restrictions are imposed on the acquiring party for GDPR violations and cybersecurity shortcomings, in the context of a post-deal enforcement action. There have, for example, been enforcement cases in the past where data protection regulators impose significant fines on an acquiring company for cybersecurity issues that have occurred before the acquisition of a company.
Conclusion
Data protection, AI and cybersecurity risks can result in unanticipated liability, costs and financial harm following M&A transactions if the risks are not identified pre-closing. The acquiring party should carefully evaluate these issues and devise a strategy to mitigate potential risks.
