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Opinion

Is the end nigh for the Channel Islands? Aonghus Fraser, Technology evangelist and CEO of ATAM ID Technologies, argues that Guernsey and Jersey will suffer a gradual demise if they don’t get to grips with technology IN THE EARLY 19th century, the unanticipated downfall of shipbuilding in the Channel Islands was triggered by steam-powered vessels and the transition from wood to steel – the first industrial revolution. Not technology as we know it today, but technology nonetheless. As quickly as Airbnb disrupted the hotel industry and Uber disrupted taxis, shipbuilding in the islands was gone. Shortly after World War II, the tourism boom barely lasted a generation, as lower cost air travel made it more cost-effective to spend a week in Spain or Greece than a relatively expensive Jersey or Guernsey. Economies of scale, coupled with supply and demand and aircraft fuel efficiency, were all factors in this shift. The pivot from tourism-dependent economies to globally renowned financial centres of excellence didn’t happen overnight – there was a very deliberate collective effort. The Channel Islands have re-invented themselves through the centuries. But if we don’t pay attention and act on the threats to our current dependency on financial services, we risk becoming irrelevant and obsolete in a competitive global market.

FINTECH REVOLUTION Technology isn’t new in finance, but the term fintech is relatively recent. It isn’t just an amalgamation of the words finance and technology, but signifies a disruptive approach in the finance industry, leveraging technology. Over one million traditional banking customers have switched to services provided by fintech start-ups such as Revolut and Monzo. Both offer pre-paid currency cards with a richer user experience, consumer-friendly features, reduced FX costs and better service – all thanks to technology. Fintech start-ups have significant advantages when competing with established traditional financial services companies – no legacy estate; no difficult

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roadmap to plan; the ability to leverage cloud services; and no legacy (human) resource pool. The technological advantages of fintech start-ups are fairly obvious. Arguably a greater benefit for start-ups, however, is their attitude and culture. A traditional workforce that’s set in its ways and resistant to change can result in an institutional failure to adapt quickly enough, and presents a significant risk to those organisations. An adaptive culture is as important as the correct adoption of technology – the famous Peter Drucker quote ‘Culture eats strategy for breakfast’ rings true.

GRADUAL DEMISE If the Channel Islands are collectively unable to adapt to the evolving landscape, there’s no doubt that business will start to trickle away – a death by 1,000 cuts. This will be echoed in supporting industries and will have a dramatic effect on our economies as a whole. The finance era initially attracted experienced financiers and accountants, and we’ve since been successfully ‘growing our own’ too. However, an unintended side-effect of the success of the finance industry is that many school leavers without a specific vocation will default to ‘just getting a job in finance’. Lower skilled, relatively manual jobs that are widespread in the finance industry are in real danger of being replaced permanently by automation and artificial intelligence. Anything that’s easy for a human to do will soon be automated. Organisations capable of reducing their dependency on the lower skilled administrative jobs by automating them will be able to scale cost-effectively and reduce their costs. Those that continue to rely on manual, paper-based approaches will be left behind. This shift in mindset needs to be mirrored between industry and education – it’s important for the default ‘just getting a

Illustration: Thinus Slabber

job in finance’ school of thought to evolve if we want to be able to adapt. The gradual decline in the finance industry is a concern. However, it’s not one that we’re powerless to stop – we can start working towards a smarter future. As small jurisdictions, there’s a need to recognise that we’re in permanent competition with an increasingly global market. Globalisation and advances in technology continue to make doing business even easier – with anybody, in any location, at any time. Whilst this presents opportunities for the Channel Islands, new markets with hungry, lean, low-cost start-ups are also presented with these opportunities. So, there’s increasing opportunity, but increasing threat. What are our unique selling points? What areas are going to present the best opportunities for the Channel Islands to compete? What will continue to ‘keep the Channel Islands great’? There are local advantages that could be more competitive globally and mitigate some of the risks our islands face.

WORKING TOGETHER Trading on our reputation is a real advantage. All financial services organisations are trying to implement cost-effective Client Due Diligence (CDD) and Know Your Client (KYC) programmes, each investing separately in technology and people (some with large offshore teams). Automated reporting to regulators is another area that can be a significant cost to financial services organisations, yet will become the norm. What if the debatable advantages in

Bl Magazine Issue 54 January/February  

We begin 2018 with nine insiders looking at the state of play in finance, technology, tourism and law. Our experts give their view on the cu...

Bl Magazine Issue 54 January/February  

We begin 2018 with nine insiders looking at the state of play in finance, technology, tourism and law. Our experts give their view on the cu...