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Time Flies, But Memories Remain


I am excited to present Issue 4 of Finance Digest bringing the latest news and opinions from leaders in the industry.

CEO and Publisher M. Murphy

Featured on the cover is Rawbank a leader in the banking market providing innovative products that help build and scale profitability and also serve the community in their social and environmental change. In an exclusive interview with Mr. Michel Brabant, Head of Retail and Privilege Banking at Rawbank discusses the Bank’s position in the country, the challenges ahead, how they steer the way with the products to suit customers and finally the role they play in their community engagements.

Editor Chethan Govindaraj

Inside you will also find engaging and insightful commentary from industry experts. Lee Rhodes, Founder of Rhodes Advisory discusses the Importance of a Mortgage Advisor and Graham Elliott, CEO of Azur opens up about the digital future of insurance.

Editorial Co-ordinator Mitch Fleming Head of Distribution Mayha Das Project Manager Sean Dias Business Analyst Sofia Rego Graphic Designer Jessica Weisman-Pitts

We strive to capture the breaking news and trends involving the world’s economy, financial events, and banking game changers from prominent leaders within the industry and public viewpoints from the word of finance. Send us your thoughts on how we can continue to improve and what you’d like to see in the future.

Advertising Sean Dias Email: Phone: +44 2088580616

Happy reading!!!

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Admin Murali Ram

Company Registration Number 09713797 V.A.T.: GB 237 9358 69 ISSN: 2514-6971 Printed in the UK by The Magazine Printing Company





Open Banking in Practice


Redefining corporate banking with virtual accounts


Bank smarter, not harder, in the intelligence age


Designing the bank of the future


2019: What’s in store for the banking industry?


Onboarding client organisations in banking is an onerous affair - but LEIs can help


Simple Ways to Increase Online Banking Conversions with Identity Verification


Investing in your Future




Curtains for cash?


Businesses must innovate or risk getting left behind


The Changing Nature of Office Design in Financial Services


It is vital to communicate well during M&A


Make 2019 the year of cyber safety for business Call to action to ensure organisations invest in the right protection for the coming year




How a reworked approach to data can empower Generation Rent to buy 5


Don’t get left behind in the insurance digital transformation race


Pegasystems’ Tony Tarquini on Insurance tech trends for 2019


Insurtechs or Incumbents: the digital future or insurance


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Docial Media’s Impact on Financial Services


2019: The year retail fights back


There’s much more to Peer-to-Peer...


The importance of a Mortgage Advisor


The Journey of FP&A and Finance


Will payee confirmation solve push payment fraud in 2019?


The Rise of Royalty Financing


Retail and payment service providers - the new bread and butter of payment partnerships?


How to improve pension communications in 2019


Beyond Spreadsheets: How to Manage Changing Accounting Standards


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Cloud or on-Premise? Selecting the right Purchase to Pay model for your business needs


Consumers crave deep connection how financial providers can drive brand affinity through their data


Evaluating the emerging technology landscape



Deploying the right technology will go a long way to helping finance teams comply with GDPR


Six types of video distribution technology and why you need most of them


Predicting the impact of Artificial Intelligence in 2019


The future of fintech and digital banking


Understanding AI’s impact on the office of finance


Electronic Receipts


Fintech for good - fighting financial exclusion with innovation


You company phoneline could be a potential security risk

COVER STORY 46 Rawbank the first bank of DRC

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Open Banking in Practice At the start of this year, when open banking came into effect, there was much speculation about what change it might deliver. Almost one year on, it is starting to yield results as the first wave of fintech products make their way to market. The world has been watching the UK to see how we have progressed from regulatory reform through to real products and services that make life better for consumers and small businesses. Since open banking began, the UK’s Competition & Markets Authority (CMA) mandated that the nine largest current account providers must offer standardised Application Programming Interfaces (APIs) for approved third parties to deliver Account Information Services (AIS) and Payment Initiation Services (PIS). APIs are considered more secure than solutions such as screen scraping because they enable applications to share data without sharing account credentials. While this is still just the start of the journey, we’re gradually starting to see a new generation of financial products, services and platforms emerge, enabled by the secure flow of financial data. The UK’s small business community in particular is benefiting from these reforms. And seemingly there is a 8

strong desire amongst SMEs for financial products that provide them with much needed help and support. More than 60 per cent of SMEs said that they would use new services from their bank – such as Bitcoin and peer-to-peer lending 1 – if they were on offer, and 37% of SMEs already use non-bank financial apps 2 to make B2B payments suggesting that they are comfortable with fintech and alternative financial service providers.

banking for SMEs. Originally part of a package of reforms from the Competition and Markets Authority to shake up retail banking, the Open Up Challenge was created and operated by Nesta. In the case of the Open Up Challenge, the prize was designed to encourage the development of new fintech products with the potential to safely and securely utilise the data made available through open banking and create substantially more value for small businesses.

The appetite is clearly there, but adoption will only take off when fintech companies can show more cautious small businesses that their early-adopter peers are solving real problems with the help of new technology – and that security and privacy is being protected at all times. We need to remember that this is new territory for the UK’s 5.7m SMEs. However, reassuringly a number of the new products and services are originating from reputable initiatives with a stamp of approval from the SME community, reformers, government and the banking sector.

Over the past few years the 25 companies we’ve backed as part of the Open Up Challenge have been transforming how small businesses find the best bank accounts and loans, manage cashflow, reduce financial admin and trade with one another. These tools are diverse in their offerings, underpinned by the latest in machine learning and technology such as Coconut - a current account for freelancers and self-employed people that keeps track of expenses and how much tax is owed. It automates their accounting, saving money on their tax bill and getting access to financial products that are right for them. Then there’s Fluidly, an Intelligent Cashflow engine whose technology plugs into accounting packages and bank accounts and uses machine learning

For example, the Open Up Challenge recently announced the winners, mainly fintech start-ups, who have created solutions that leverage open


to predict and optimise business finances. Or Funding Options, an online marketplace for business finance, that uses its technology to scan the market to find the financing options that best suit a small business’ needs. For the banks, open banking is a dichotomy: they can no longer rely on data lock-in to retain customers, but this is counterbalanced by the opportunities that exist to drive deeper relationships with customers. Several prominent banks have already announced open banking enabled services, such as account aggregation, which they will unroll across their customer bases in 2019. Fintech companies, for whom acquisition costs are often the biggest impediment to growth,

are eyeing up distribution deals with the incumbent banks. At the same time, they’re watching carefully to make sure these banks don’t claim the mantle of open banking – while failing to provide third parties with access to the high quality, reliable APIs required by the CMA. Expect fireworks if this concern is borne out in 2019. What’s clear for everyone involved is that the train has already left the station and there’s no turning back. The UK is a world leader in fintech but it’s reforming zeal mustn’t lose momentum. Through better, faster feedback loops between market regulators and market innovators we can build a sustainable model of financial innovation which works for consumers and small businesses.

Chris Gorst Challenge Prize Lead Nesta References: 1

“News.” The Top 5 Data Management Challenges and How to Overcome Them | BBA, news/insight/big-rewards-are-open-to-banks-thatbuild-a-different-relationship-with-sme-customers/#. XC8x22gzbIW.


Pymnts. “FIS Survey On Small Business, Big Banks.”,, 30 July 2017, www.pymnts. com/news/b2b-payments/2017/fis-small-businessbanking-survey-mobile/.



Redefining corporate banking with virtual accounts



orporate banks are facing huge changes, and it’s time for them to either jump on board and keep up or fall behind and lose out. Regulations such as Open Banking, the rise of fintech disruptors and increasing demands from customers pose a number of challenges in the corporate banking space. The solution? Looking to innovations such as virtual accounts will make banking easier for businesses.

are in complete control and can manage their finances at the touch of an app. This fast-paced transformation has forced traditional, larger banks with legacy infrastructure to shake things up in order to survive. Disruptors and challenger banks are not just meeting increasing customer expectations, but are influencing what we use and how we operate on a day-to-day basis.

The customer is always right

The corporate disconnect

The customer is always right, or so the mantra goes. Yet in the banking space, organisations are failing to meet rising customer expectations. Technology is steering the future of banking. You just need to look at retail banking to see how much technology has affected the financial sector. Challenger banks such as Revolut and Monzo are redefining the bank, putting the customer’s needs front and centre of their agenda. Customers

Corporate banks have traditionally been less agile, and in an Open Banking era, this has been a source of frustration for corporate customers who expect to see the same degree of transformation as experienced with their personal bank. In turn, there is an increasing disconnect between what corporate banks are offering, the service their customers are getting and how banks aim to innovate in order to address this. Corporate banks are facing


an increasing challenge to not just win new business, but retain existing business. In our recent independent research with Ovum Consulting 1 , we found that half of the European corporates surveyed considered moving their main banking relationships in the past year and nearly two thirds (62%) of the banks stated that retaining and winning new business is more challenging now than a year ago. Corporate banks need to prioritise meeting the needs of the customers. The rise of virtual accounts is helping banks step up to the mark through offering customers a more flexible and productive banking experience. Rising to the challenge with virtual accounts Virtual accounts present a clear benefit for corporate banks, from steering digital transformation to addressing the cash management challenges their customers are facing. Virtual account management offers one single, overarching view of all pooled accounts, each mapped to bespoke customer needs and attributes. Virtual accounts streamline efficiency for

corporates by offering strong financial analysis and real-time cash forecasting. This enables businesses to take full control of all their accounts, both internal and external, across multiple geographies. In addition, virtual accounts offer full alignment of corporate customers’ ledger systems with their real bank accounts. Needless to say, the benefits of virtual account management are endless. Our research proves that virtual account management gives banks a way to help close the service gap with their customers. This customer demand for innovation is highlighted by Andy Young, Head of Finance, LV=: “Virtual accounts have transformed the way we do business and shows that banks can’t stand still when faced with innovation. It mimics the low cost airline industry. Things will inevitably change, it’s just whether that change will be too quick or slow enough for you to keep up. Fintech companies are generating new ideas all the time. When someone has that great idea an entire industry can be wiped out overnight unless it adapts.”

The old motto that the customer is always right still rings true. The corporates that are reaping the benefits of virtual account management are meetings customer demands and in turn, standing out from their competitors. Those banks that welcome this new ‘virtual reality’ will bridge the corporate disconnect - ensuring their service offerings and the expectations of their customers, are in perfect harmony.

Tim Martin Product Manager Cashfac References: 1

“Our New Research in Partnership with Ovum:‘Virtual Accounts: Closing the Service Gap in Corporate Banking.’” Cashfac,



Bank smarter, not harder, in the intelligence age D emand from young consumers for quicker decisions regarding their finances means that financial institutions are relying increasingly on modern data-processing techniques to enable real-time empowerment. A fresh generation of consumers, accustomed to having instant access to information, is now demanding the same from financial institutions. They want to deal in real time on their mobile devices 1 when banking online, and they want newer, faster, better digital experiences; banking that is intuitive, dynamic, and responsive. However, as banking processes become more digitised, bankcustomer relationships could become increasingly dehumanised and disconnected. To prevent this, and sustain productive relationships with their users, banks will need to provide a new, more secure, and highly personalised service. To create these engaging relationships with customers, banks will require not only accurate and useful information, but also to ensure that the way in which they interact with customers is convenient (for the customer), relevant, and occurs in real time. This will allow banks to dynamically guide their customers towards increased financial health and develop and sustain a more enriched trust relationship over time. The dilemma of digitisation? An issue of concern for banks is that is that consumers’ banking relationships are shifting away


from one of engagement towards something more transactional as increased digitisation reduces the need for human interaction. The proportion of customers using a bank branch at least once a month for example, has fallen from 52% in 2015 to 32%. 2 However, modern technology, such as cloud and mobile technologies, has given banks the opportunity to completely redefine the banking experience for their customers and re-establish personal relationships. These tools will help banks to work smarter and faster. It is now not simply about processing data and reporting on what has happened in the past, but about the ability to make informed financial decisions about the future.

or how it might impact their spending budget for the weekend away at the end of the month. This kind of personalised communication will enable informed buying decisions and effective financial planning.

Younger consumers want fast, eventdriven interactions with their banks, based on data regarding their overall financial position. Historically, banking has been appointment-based and took time – whether you needed to sit in front of a PC or in a branch. Now, the younger generation tends to perform many on-demand, quick banking actions from their mobile devices, wherever they happen to be.

What has already become common practice among banks is to send SMS messages to the appropriate customers to advise them against overspending on certain days such as Black Friday, or during certain high-spending days of the month, for example. Communications like this re-establish interaction and symbiosis between banks and their customers. The bank provides long-term financial support tailored to an individual’s spending habits on one hand, and the customer is more likely to advocate and maintain their loyalty to the brand on the other.

Harnessing modern technology The great advantage of modern technology is that it can provide consumers with the context in which their financial transactions take place. This will prove increasingly important as consumers’ demand for a personally tailored service grows. For example, a person buying a pair of shoes using a banking app could be made aware of how the purchase might impact their clothing budget,

Moreover, modern technology can examine a person’s overall financial position and behavior, allowing banks to make trusted, opportune financial health recommendations. When a buying event occurs, it can be automatically contextualized against affordability, cash flow, and general financial health. Previously, events occurred in isolation. With modern technology, payments can be seen holistically against the backdrop of a person’s financial wellbeing.

Banks can also use modern technology to build trust with consumers and further cement their financial relationship. It provides the ability to make faster decisions for customers, and improve customer recommendations, advice, and experiences. Banks need to bridge the


gap between what they are currently offering, and what customers want and have come to expect in the contemporary highly connected world. The entire financial services industry is embracing modern technology at an intensifying rate. As this trend of digital modernisation continues, consumers are likely to see and utilise more and more innovative automated services designed to offer them advice and encourage financial responsibility. Banks will need to choose between developing these innovations internally or collaborating with fintechs by utilising their existing expertise. There are also a number of other new technologies that are facilitating

improved relationships and more secure interactions between banks and their customers, in real time. Products that enable push authentication, user notifications, and secure, rich media communication – such as voice and video –are protecting devices and transactions from hackers, while mobile payments that allow banks to be ‘present’ at the point of purchase give them the opportunity to influence consumer behavior before the payment is made (instead of reporting on the impact of the decision after it has happened). By embracing and developing these sorts of products in accordance with the changing behaviour of customers, banks can provide a service that is increasingly constructive, engaging, responsible, and helpful.

Frans Labuschagne Country Manager UK&I Entersekt References: 1

Entersekt. “A New Security Paradigm for the New Digital World.” Entersekt,

2 gb-en/_acnmedia/PDF-78/Accenture-2018-UK-FinancialServices-Customer-Survey.pdf#zoom=50



Designing the bank of the future T

he financial sector has undergone more than its fair share of turmoil over the last decade, first with the financial crisis, then its aftermath followed by years of digital disruption. As it reshapes itself, new kinds of banks are starting to take shape, yet the jury is still out as to what form tomorrow’s bank will really take. Having worked with financial institutions since the nineties, I take a keen interest in the forces at play, including the frictional resistance of banking culture and heritage. If you cut to the chase, banks are regulated brands, buffeted by changing customer needs and attitudes like everyone else, but with the need to comply with ever more regulation. It may have taken longer for financial brands to have been affected by digital disruption, but as their customers’ needs and attitudes change, existing banking brands risk losing their relevance. Tomorrow’s financial customer craves experiences that are simple, personal and real-time. Existing retail banks have a business model based on cross-selling and so are, by definition, complex. Challenger banks and alternative financial providers are entering the market with simpler propositions, aiming to build meaningful relationships around a single product and then, guess what, cross-sell others. While they appear different, most are mimics. Many of these brands are targeting millennials and using cutting-edge digital design to 14

differentiate the user experience and low-cost business models to offer better value. With agile cultures are backed by private equity, they are aiming to transform financial brand horizons. But will they? It’s a big risk to ignore the threat, so there is an urgent need for the leaders of today’s banks to figure out what tomorrow’s banks should look like. The firm foundations they once believed they could rely on, such as their heritage and trust, could crumble in an increasingly promiscuous market. All tomorrow’s banks will need a powerful, differentiated brand that stands for something customers value beyond the generic. This needs to be rebuilt on a compelling purpose that resonates with Millennials and iGens. Millennials, in particular, are now in the driving seat, their expectations set by bigtech whose success has been founded on highly personalised services and best-ofbreed user experiences, especially on smartphones. These tech-savvy customers won’t think twice about switching to a service they deem better suits their needs. Accenture’s consumer banking survey in North America confirms this. 18 percent of millennial customers switched their primary bank within the past 12 months – compared with 10 percent of customers aged 35–54 and 3 percent of people 55 and older. Millennials are therefore six times more likely to switch bank accounts than their Baby Boomer parents. That’s a totally different marketplace; one where complacent brands will feel real pain.

There are new competitors too. Other financial institutions are no longer the only threat, instead big technology players focused on innovation are increasingly able to offer simple solutions for specific needs in the value chain. Banks have been lucky so far, as the so called ‘challenger banks’ have not really challenged, instead they have used traditional business models, and with a few exceptions, such as Clear Bank in the UK, who partnered with Microsoft to create the first new clearing bank for one hundred years, have not really reinvented the technology of banking. Much fêted Monzo started as a pre-paid Mastercard debit card account and is only now developing into a bank. Revolut is applying for its first banking licence now it has 3m customer accounts. To counter this threat traditional banks need to leverage their assets: scale, financial capital, regulatory compliance, brand recognition, customer data, distribution and, despite their problems, a reasonable level of customer trust. Granted they are also slow, predictable, political, risk-and-change-averse; and mostly remain reliant on thirty-or-fortyyear-old legacy technologies. So, how can incumbent banks reframe the current challenges and turn them into opportunities?

Radical new thinking For the last few years, most financial services companies have focused on ‘digitisation’ and removing the ‘pain points’ in the customer journey. To drive future growth, more radical


thinking is required, with a focus on new ideas and relevant value propositions based on personalisation. While much of the focus is around how to leverage technology to attract younger demographics from millennials to Gen-Z, yet $30 trillion of investable assets are controlled by the 50-plus population in the U.S. Not to mention the vast number of people who don’t have their own financial advisors but are looking for the best strategy in drawing down their assets to ensure they don’t run out of funds in later years. 15


Ultimately, the same solutions that will help millennials figure out how best to invest their funds can be harnessed to help sandwiched generations plan for finances between multiple households and generations. Machine learning and AI will play a big part here. Behavioural economics principles that nudge consumers to take the proper actions towards a more secure financial future can be employed for a wide spectrum of audience regardless of age. Banks should be asking why the likes of Marcus has had such a big impact on the market and wonder whether the aura of Goldman Sachs will be tainted by lawsuits in Asia and elsewhere.


If Millennials are more interested in ethical investing, why aren’t there more ethical products available? Why hasn’t a UK/US bank applied Sharia-like banking concepts to offer more transparent products to this socially aware generation? Why hasn’t a high street bank cracked the equity release market for older customers wanting to help their children get on the housing ladder? Who is focused on the financially marginalised in society, other than rapacious pay day lenders? This kind of disruptive thinking may be at odds with what made banks successful in the first place, however creating innovation cultures will help them take the required leap of faith and embrace new models. The new mindset should be based on life events, health and aspirations. It should be dynamic and adaptive to changing societal and market conditions.


Collaborative approach Bright new fintechs have already spotted some of these opportunities and if banks do nothing they will start carving out profitable niches that nibble away at what were once highly profitable core banking services. Meanwhile, techfin players (bigtech companies entering financial services) may enter the market with new platforms for payments (it’s happened before, remember PayPal’s origins), investments and even p2p debt, leaving traditional banks struggling to appeal to the next generation of customers. Not to mention the potential scenario where a bigtech company buys a challenger bank to create a regulated techfin offer. In this context, collaboration would be a natural way for banks and fintech to leverage each other’s strengths, but culture is always going to be a challenge when an agile innovator comes together with a slow-moving incumbent. Perhaps a more successful a pp ro a c h wo u ld be for bank s to di stri bute so me f in t e c h p ro ducts or par tner w i th them t o re c r u it t h e ir n ext generati on customers (c hild re n , s t u d e n ts, unbanked). If they w ork , t he b a n ks c a n a f ford to acqui re the star t-ups. R e m e mb e r, JP M organ has an annual $11bn t e c h n o lo g y b u d g et.

To m o r r o w ’s b a n k s m u s t b e c o m e m o r e l i k e technology companies, using historic data and real-time information to anticipate customers’ needs and make the best o f fe r s i n t h e e x a c t m o m e n t t h e y r e q u i r e i t . Products and services will be tailored to each i n d i v i d u a l ’s s p e c i f i c r e q u i r e m e n t s .

Why brand is key in a changing world In this crucible of change brands provide reassurance. And where brands need repositioning - or even transformational change - a disciplined branding methodology is essential. The approach itself focuses on the problem that needs to be solved, engages and motivates the leadership team in a rigorous process of reinvention that is laser-focused on satisfying customer needs, now and in the future. Usually the process also works from the ground up, engaging and revitalising the whole organisation by re-branding the business from the inside-out. The result should be a clear, differentiated and compelling value proposition and an engaging and consistent customer experience that recognises how different generations want to access financial services. Banks need to think big and re-imagine a future where they use their data to become trusted customer experts, leveraging their insights drawn from customer behaviour to improve the customer experience and deliver useful personalised financial services in real-time. This way, the bank of the future will remain relevant and useful and their brand equity will grow, enriched by next generation customers.

Banking’s hidden gold Customer data is banking’s hidden gold and incumbent banks must learn how to leverage this hugely valuable asset, just as bigtech has, to better serve individual customers. Ac co rd in g t o t h e D i gi tal U ni verse i n 2020 St u d y - le s s t h a n 1% of the w orl d’s data i s a na ly s e d , an d over 80% i s unprotected.   There i s cle a r ly ro o m f or usi ng fi nanci al data to i m prove p e r s o n al i sed ser vi ces.

Peter Matthews CEO Nucleus




What’s in store for the banking industry?


018 was a turbulent year for banks. The rapid growth of online and mobile banking has led physical branches to close at a pace not seen before. In fact, the UK has lost twothirds of bank branches 1 in the past 30 years. We’ve also witnessed new and sophisticated threats emerge. For example, UK banking customers lost £500 million 2 to fraud in the first half of 2018, and in July the Bank of England issued a warning 3 to banks to prepare for future cyber-attacks. But alongside this, security methods have also advanced to tackle these threats, with the development of intelligent adaptive authentication, and biometrics and behavioural analytics moving front and centre. Regulations, such as PSD2, are also aiming to foster a more innovative and secure way of carrying out transactions. With this in mind, here are three trends that will dominate the financial services sector in 2019:


Consumers will force banks to up their security standards Given the rising threats, consumers now expect high security from their bank as standard, without clunky login processes slowing them down. So 2019 will see intelligent authentication become a necessity for financial institutions looking to gain a competitive edge by delivering better experiences, lowering costs, reducing risks and increasing revenue. Banks and financial institutions are already looking to simplify their customers’ online and mobile transactions without compromising on security with the likes of adaptive authentication. The next step to this is complete and continuous intelligent authentication, which will prevent missteps, like repeatedly asking users to fulfil the same login requirements, regardless of the potential risks (or lack of) of a particular transaction.

Banks will have to reinforce their core systems and technologies to align with changing customer expectations. A key aspect of this will be implementing smart technology into everyday apps that ensures the appropriate level of authentication at the correct time. Securing the mobile channel will continue to be a wild ride Mobile app development shows no sign of slowing down in 2019. But 2018 saw several high-profile attacks via mobile, and users are more concerned than ever with privacy. And although new and old attacks to mobile devices and applications are appearing daily, financial institutions and organisations are still not taking proactive steps to protect apps. This is worrying, given that some of the scariest threats in mobile – overlay attacks, phishing attacks and mobile app threats – will only get more


dangerous as the popularity of the mobile channel grows. Ransomware attacks on mobile devices will also continue to increase, along with codeinjection attacks. These multi-payload attacks will be one of the scariest threats in 2019 and they will also be easy for anyone to create. In 2019, the industry will work harder to provide the best protection against hacking and phishing attacks. Application shielding will continue to play a major role in protecting mobile apps, as the technology can detect and mitigate any tampering to prevent the injection of malicious code before it can cause damage. Open Banking will increase innovation The global adoption of Open Banking will be a dominating trend in 2019, especially for the United Kingdom and European Union. Open Banking allows third-party payment service providers (TPPs) to obtain consumer data from banks and initiate payments directly through bank accounts. By accessing banks’ APIs , TPPs will be able to build innovative financial service solutions for consumers and enterprises, such as new payment methods and account aggregation applications. This should give rise to more diverse payment mechanisms, with lower cost and increased convenience for users.

TPPs and regulators about how this authentication can happen, and a range of approaches have already been suggested, from redirection to embedded and decoupled authentication. Given that financial institutions must provide Open Banking APIs by September 2019 in line with PSD2, this conversation will likely dominate the first half of 2019, particularly in the EU. Security is hot on the agenda for banks and financial institutions for 2019. But this pressure will be coming from two directions. In addition to the increasing threats from cybercriminals, the expectations from customers and regulators alike for banks to keep financial data secure is higher than ever. With mobile banking showing no signs of slowing, the mobile channel will be a main target for attack and will require the appropriate methods to combat this. And with an increased focus on security will also come further innovations in technology, which is set to shape the way we bank in and beyond 2019.

Frederik Mennes Senior Manager Market & Security Strategy Security Competence Centre, OneSpan

References: 1

Agyemang, Emma. “UK Has Lost Two-Thirds of Bank Branches in 30 Years.” Financial Times, Financial Times, 16 Nov. 2018,


Association, Press. “UK Bank Customers Lost £500m to Scams in First Half of 2018.” The Guardian, Guardian News and Media, 25 Sept. 2018, money/2018/sep/25/uk-bank-customers-lost-500m-toscams-in-first-half-of-2018.


“BOE Tells U.K. Banks Cyber Attacks Are Coming, Now Get Ready.”, Bloomberg, 5 July 2018, www.

Authentication is also a major topic that needs to be addressed under Open Banking, because banks must be able to securely and conveniently authenticate users, even when within the TPP applications themselves. Currently, there’s still a lot of discussion between financial institutions, 19


Onboarding client organisations in banking is an onerous affair – but LEIs can help I n today’s digital age, people have come to expect a fast and streamlined experience in every sector from retail to banking. If made to wait too long, most consumers will abandon the process and look elsewhere to get a better service. The same is increasingly true for businesses, and banks are under growing pressure to deliver a fast and streamlined onboarding process for their clients. But, our recent report, A New Future for Legal Entity Identification1, looked into the challenges of entity identification in financial services, including know your customer (KYC) due diligence, and found that streamlined onboarding is far from a reality in the sector. In fact, over half (57%) of salespeople in banks said they spend 27% of their working week (or more than 1.5 days per week) onboarding new client organizations. With half (50%) of financial institutions using, on average, four identifiers to help identify client organizations during the onboarding process, inefficiencies are plaguing the process for many businesses. This has significant consequences, with 39% of respondents reporting that there is a risk of losing business due to the length and complexity of the process. So, what does this mean for senior salespeople, what are the challenges to onboarding and what can be done to address these?


A challenging situation for businesses When it comes to the challenges businesses are facing in relation to the quality of the identifiers they are using, there is a clear consensus. The same themes of reliability, contradiction and time come up consistently. Nearly half (49%) said that middle-and backoffice activities related to onboarding are a major burden. What’s more, on average, it takes six weeks to onboard a new legal entity. This increases to seven weeks if more than four identifiers are used.   Interestingly, respondents weren’t able to pinpoint exactly why the process is so lengthy. For some, the biggest drain on time was KYC due diligence (18%), while for others, it was documentation management (16%) or identification of the legal entity (15%). Transparency and visibility (or lack thereof)   These issues are having a significant impact on the broader business. Just some of the challenges associated with multiple identifiers include inconsistent information, complex processes, a drain on resources and a lack of transparency. Tellingly, 46%

of respondents recognise that this lack of transparency when identifying and reporting corporate structures does not bode well when it comes to meeting compliance regulations in financial institutions. The effect on business prospects   But it’s not just time and transparency that are at stake, the research also reveals that clients are not always understanding about the regulatory requirements placed on businesses in the financial sector. Half (50%) of respondents think that it’s becoming more and more difficult to comply with KYC regulations. This is partly because of the risk of losing business due to the length and complexity of the process (39%), but also client security concerns around who is able to access and view their documents (38%) and continuous changes in KYC regulation (37%).   The consequence for businesses is clear, inefficient onboarding can result in lost revenue. In fact, the respondents believe that 15% of business is at risk as a result of the client losing patience with the process and 14% is lost because the client identity cannot be verified. Ironically, clients might not find the


process to be any quicker if they do take their business elsewhere with the research finding that the majority of financial institutions are using four or more identifiers to onboard new entities and therefore face the same inefficiencies. The benefits of LEIs   So, what can be done to reduce the time taken to onboard clients, increase transparency and ultimately cut the amount of lost business?   The fact that 52% of respondents believe the time to onboard will increase over the next 12 months means there is a clear opportunity to align on one identifier to generate efficiencies. Banks operate in multiple jurisdictions and therefore need a global standard. The Legal Entity Identifier (LEI) offers businesses a standardised, one stop approach to entity verification. Via the Global LEI Index, we make available the largest online source that provides open, standardized and high-quality legal entity reference data. No other global and open entity identification system has committed to a comparable strict regime of regular data verification.   Integrating the LEI into other entity verification methods, including solutions based on digital certificates and blockchain technology, will allow anyone to easily connect all records associated with an organisation, and identify who owns whom. By becoming the common link, the LEI will provide certainty of

identity in any online interaction, making it easier for everyone to participate in the global digital marketplace. Financial services businesses can gain greater transparency and work in a more streamlined fashion by adopting an LEI for each client organisation. In addition to improved financial data quality, adopting LEIs gives them slicker onboarding, reduced inconsistency, less risk of business losses and more efficient use of valuable resources.   Replacing disjointed information with a globally accepted approach by adopting LEIs would remove complexity from business transactions and deliver quantifiable value to financial services firms. As demonstrated in our joint white paper, The Legal Entity Identifier: The Value of the Unique Counterparty ID, with McKinsey & Company2, introducing LEIs into capital market onboarding and securities trade processing could reduce annual trade processing and onboarding costs by 10%. This would lead to a 3.5% reduction in overall capital markets operations costs (or U.S.$150 million in annual savings) for the global investment banking industry alone. Financial services businesses shouldn’t have to lose time and money when they make a business transaction because of a range of inefficient processes. By adopting LEIs for their clients, they could eradicate these issues and ensure the onboarding process is fit for the 21st century.

Stephan Wolf CEO GLEIF References: 1


Ukfadmin. “Finance Industry Stops £1.4 Billion in Gleif. “LEI in KYC: A New Future for Legal Entity Identification.” GLEIF Identifies That Over Half of Salespeople in Banking Spend 27% of Their Working Week Onboarding New Client Organizations – GLEIF Blog – News & Media – GLEIF, www. Gleif. “McKinsey & Company and GLEIF White Paper: Creating Business Value with the LEI.” GLEIF Identifies That Over Half of Salespeople in Banking Spend 27% of Their Working Week Onboarding New Client Organizations – GLEIF Blog – News & Media – GLEIF,





Simple Ways to Increase Online Banking Conversions with Identity Verification



t’s no secret that online banking is fast becoming the norm for consumers today. But while 71 percent of adults used internet banking in 2017 according to IT Pro, the application process remains a barrier between the bank and customer for many. Particularly so for millenials, with 38 percent of online bank account applications abandoned by this age group due to long or complicated enrollment processes, according to a survey by Javelin Strategy & Research and Jumio. More than ever before, banks are striving to increase new account enrollments through faster, easier and lower-cost digital channels. Yet, the current regulatory and cybersecurity landscape creates a layer of complexity. Consumers want the convenience of signing up online without having to go into a branch office, but financial institutions must comply with anti-money laundering (AML), Know Your Customer (KYC) and GDPR regulations that have historically driven new customers out of their preferred digital channel. It’s therefore vital that the online verification stage isn’t the hurdle standing in the way of you and your potential next customer. In order to ensure you’re providing a slick and seamless application and verification process, here are the top five considerations you should be thinking about.

Ensure global capability with a local touch The ability to cover multiple markets is only going to extend your reach and potential customer base. But if you can’t address that user base in a regional way, you’ll soon see your conversion rates drop. Start with the basics—make sure your authentication and verification processes are in the right languages. According to independent research firm Common Sense Advisory, 60 percent of foreign language speakers never even look at a site if it’s in English. This clearly demonstrates the importance of local languages. The next consideration for servicing multiple markets when it comes to verification is the need to accept a variety of different ID types. You simply cannot expect that a passport or driving licence are the go-to ID types in every country. For example, in countries like Germany, ID cards are commonplace. In India, the Aadhaar Card is used widely. Being able to automatically capture and verify a wide range of ID types is important in maintaining and boosting conversion rates. Make it easy Simplicity works. Modern identity verification solutions enable banks and financial institutions to modify the look and feel of the screens so they mirror your brand, including the colours, the text, the buttons and even the number of screens included in the user journey. This goes a long way in making the verification process feel as though it’s another step in the journey, as opposed to a completely different one. In addition, ‘quick wins’ like pre-populating forms where possible will add to the ease of use for the customer. By shortening the identity verification process to just three screens, some customers have seen a 15-percent increase in conversion rates. Offer a truly omnichannel solution Importantly, browsing habits of consumers have changed and your onboarding process needs to mimic that. More and more traffic is moving towards mobile web, especially in developing countries where everyone has just a phone and no desktop computer. This means it’s important to offer truly omnichannel solutions, and to ensure all steps of the onboarding process can be done seamlessly whether on web, mobile or tablet.



Many ID verification solutions only support smartphone image capture and exclude other channels such as desktop webcams. By excluding webcams, these vendors are excluding large market segments who are more comfortable on their desktop and laptop computers. Being omnichannel also means supporting API-based, mobile web and native mobile implementations. For companies looking to cast the widest possible net, including some older people who may not be comfortable with newer technology, it just makes sense to ensure that your identity verification solution offers the broadest number of channels to your users. Feedback is essential If a would-be customer is declined during the onboarding process without feedback, it’s a sure-fire way to ensure they won’t make a second attempt. But it could be that they have been declined for something easily rectifiable. Better verification solutions will return additional information about why an ID was rejected— for example, if the photo taken was a photo of a computer screen, or a selfie was actually a photo cropped from the physical ID. These extra details are exceedingly valuable for banks and financial service organisations to improve conversion rates and lessen the friction of its users. With a simple “yes” or “no” solution, these good users would be rejected out of hand without being given the chance to course correct. Unfortunately, many online solutions return only a score, usually falling into the following: clearly good, clearly bad and a large middle-ground of grey transactions. If users can rectify the mistake during the session, you’re going to see a far higher conversion rate.

Compliance matters It may be a dry topic, but it’s incredibly important. You absolutely have to be able to support different compliance and regulation rules. From AML to KYC, you have to adhere. Particularly when it comes to providing feedback on why an application was denied—the recent GDPR stipulates that the organisation must be able to give a reason within 30 days of request. Importantly, you need to be aware of any local regulations too. For example, German authorities require masking particular data points (ID number and Access Number) on IDs to protect the end users. Quality online identity verification solutions mask these data points accordingly, which means the data points are not stored or returned to businesses, thus helping businesses remain compliant. The onboarding process need not be the stage at which you see potential customers drop off—it should be the stage that proves your accessibility and ease of use. With a quality online identity verification solution in place, you stand to convert more customers while also offering a userfriendly onboarding experience that sets the tone for future interactions.

Reinhard Hochrieser Director of Product Management Jumio



Investing In Your Future E

xternal fundraising will be a necessary step in the journey for the vast majority of tech companies. Besides the obvious economic necessity, external investment can be an exciting means of growing your business, giving you access to the experience and expertise of professional investors with a proven track record. That said, the investment process can be a complex and daunting one, especially for those who haven’t been through it before. For companies who have not yet embarked on their first funding round or who are currently at the early stages of doing so, there are actions you can take to prepare for it. A typical fundraising will have the following key steps: Preparation of a business plan. What do you want to do with the technology, when do you want to do it by and how are you going to achieve that? This is a key document as it will go a long way to helping investors decide whether or not to invest. Finding one or more agreed investment partners - unfortunately there is no magic formula for this, and there are various routes for doing so. Negotiating heads of terms - a nonlegally binding document setting out the key investment terms – principally how much investors are willing to invest and for how large a stake in your company.

Due diligence - essentially a series of questions and answers to enable investors to fully evaluate your company and identify any legal, financial or commercial risks. Negotiation of legal documents – principally an investment agreement and articles of association. Together these will set out shareholders’ rights – more on which below. Signing of the legal documents and injection of the investment funds. Some tips to help you prepare for and manage this process: Get ahead of the curve on due diligence in advance, by ensuring that the IP which is key to your business is registered in the company’s name; that you have signed copies of key contracts; and that your books and records are in order, and that all this can be provided on demand in an organised manner. Manage your expectations as to what investors will ask of you – the following are all standard investment features:

Warranties – the investment agreement will contain a series of “warranties” (contractual statements of fact about your business). They will typically expect management to personally give these warranties alongside the company (meaning you could be personally liable if the warranties are untrue). Engage trusted advisers to advise you on the legal documents and guide you through the process. They can also help you identify and address any issues in advance of an investment (such as checking that you actually own your key IP) and provide a good sounding board for any concerns you might have – their experience can be invaluable. Scotland’s tech sector is booming and we’re seeing a lot of success stories where investments are enabling companies to achieve their ambitions. It’s all about finding the right partners and taking opportunities. It’s an exciting time to be involved and a positive outlook for the industry.

Reporting – post-investment, investors will insist upon regular reporting (management accounts, board meetings, financial projections and so on). Controls – investors will typically look to add a director to the board, and will insist upon having a veto over certain business decisions.

Paul Scullion Senior Associate Burness Paull 25


Curtains for cash? Knocking down the barriers to a cashless society


espite most us welcoming online banking, online shopping, contactless and mobile payments with open arms, the idea of an entirely cashless society is often met with resistance. In the calls to ensure that physical cash does not cease to exist, we hear the same, familiar arguments cited; namely the marginalisation of the underbanked, the annihilation of cash-reliant small businesses, and issues around security. Yet cashless societies are a likely and not too distant reality, as more and more of us choose alternative payment methods. Sweden, South Korea and Turkey – three digital payment powerhouses - are currently leading the charge in the race to innovate and respond to changing public preferences. Sweden’s central bank is pushing to pilot the ‘e-krona’ in 2019, the nation’s own digital currency. Years ago, when people predicted the demise of cheques, it was met with the same degree of shock and scepticism, but now it is accepted that they are largely redundant in today’s world. If we address the issues on which people protest against the end of cash, and find means of minimising the perceived risk, then a cashless society seems like the next logical step on the road to slicker, quicker payments. It could also present considerable opportunities for consumers that are often overlooked. 26

The underbanked Ensuring that those in society who do not possess a bank account are not marginalised is one of the key arguments against driving towards a cashless future. Although this is still an issue, there are now banks out there which make it easier for people that may – for various legitimate reasons - struggle to get a bank account. Therefore, this should be seen as an opportunity to address, rather than as a barrier to innovation. What a cashless society would help to eliminate is criminal activity such as organised crime and tax evasion, from people who chose to be underbanked for that very purpose. The complete digitisation of payments would make this type of crime, along with money laundering and terrorism, extremely difficult, as every transaction and every source of income becomes traceable. In Sweden, tax receipts have increased by 30% in the past five years due to the huge rise in digital payments. There are some groups, however, who genuinely cannot or do not possess a bank account. Homeless people, for example, rely on charitable cash donations, and as a society, we have a responsibility to ensure their situation is not worsened. Yet far from reducing our ability to provide aid, the end of cash could actually mean we can help more.


We have already seen some smallscale initiatives where technology is being used to facilitate donations to homeless people, which could be adopted on a national level. Smartphones can be used as a giving mechanism, whereby people can use their phone to scan a wearable QR code worn by homeless people. This type of technology can bring up a profile of that individual so you’re more aware of their circumstances, but it also means you can could see what that donation is actually going towards, by being linked to a set of targets managed by a third-party charity. Giving cash to a vulnerable person can lead to a whole host of problems and perpetuate a vicious cycle, but by going cashless, we could take great strides towards alleviating one of the major societal problems of our times. People that come to work in the UK from overseas are other legitimate groups that are often underbanked. This is largely due to difficulties in satisfying the proof of address requirements set out by most banks to open an account. If you’re on a six month temporary contract or probation period at work, you might chose to rent a room from someone through Airbnb for that period

rather than committing to buying or taking on a lease for a property. Cash then, might be the means of subsistence for these people. Digitally native banks, such as Revolut and N26, are making UK current accounts more accessible by waiving the proof of UK address requirement and simply asking for ID verification through submitting a picture of your passport, for example. To ensure people aren’t excluded in the move to cashless, we need businesses to be advising employees to explore these types of banks, and we also need greater willingness from more established banks – which people might turn to in the first instance – to recommend more accessible alternatives.

Security A significant proportion of people who chose to be underbanked are our elderly, and in large part, this comes down to a lack of trust in banks. The statistics, however, clearly speak for themselves in demonstrating that the risk is far greater with stashing money away in your home, and the end of cash could contribute to a decrease in burglary, theft, and violent crime rates.





For those that do bank, however, the reliance on online banking instead of traditional infrastructure is a big barrier to the notion of a cashless society - and it’s not just the elder generation that holds this fear. To many, digital banking is an unfamiliar and sinister world where hackers lurk and data is not safe, and therefore the inevitable closure of cash machines and bank branches could leave them financially stranded. If we think about the future of security, however, it is much more likely to centre on biometrics than on abstract data such as account numbers and passwords. We are already seeing moves towards embeddable near field communication devices in the form of microchip implants, and advances in retina scanning technology, and in the coming years it is likely we will be increasingly reliant on this. This would raise the difficulty stakes very high in terms of being able to access someone else’s account, which would deter most from even attempting.

Small businesses In a move that seems to ignore changing consumer preferences, some small businesses remain cashonly. Local taxi companies, hairdressers and independent shops are typical examples. To them, the transaction and processing fees that come with card payments, which make a small dent into their profit margins, are a major deterrent in offering an alternative to cash.

Put simply, these businesses are operating on borrowed time and will not survive the next few years without offering consumers a choice, so the idea that going cashless would destroy independent, local businesses is less and less relevant. In an increasingly competitive market – particularly in the retail space – businesses need to be delivering on customer expectations in order to remain sustainable. The majority will be losing more custom than the small savings from not paying card fees are worth.

Visibility isn’t a bad thing Privacy is a hugely important and emotive issue, and for many, the thought of reducing this in any way is quite a scary concept. Indeed, one major argument we hear against going cashless is that people don’t like the idea of their banks knowing what they spend all their money on. Visibility, however, is not a bad thing – provided we have nothing to hide. For most of us, it actually means we can receive better products and services. A cashless society would be a huge boost to open banking, as it would allow for a complete view into spending habits rather than only a partial one. Rather than being seen as intrusive, it could bring many benefits to the consumer. Budgeting apps, for example, that arise from open banking will be more effective, because total expenditure can be taken into account. People will be able to see a completely accurate breakdown of how much they spend on food in a month, or in a certain bar over a year. It will allow for a greater degree of personalisation as service providers gain a better understanding of your preferences as a consumer. As an example, health insurance could come with ultra-tailored perks, such as free coffee, in what judging from your total spending habits - are your favourite haunts. Financial advisors would also be empowered to do their job more effectively than they are currently able to do. The enhanced transparency will lead to more relevant, expert advice. Retirement goals might be achieved more easily, as total savings will be visible, rather than partially obscured by separate pension pots hidden under beds around the nation.

What still stands in our way? While many of the main barriers to going cashless can be addressed, there remains some hurdles that will require further consideration and contingency plans in place in order for us to move forward. If our economy was entirely digital, for example, it would be very difficult for consumers to get away from negative interest rates, and this would need to be addressed. The other big area of concern centres on system failures. If this happened on a large scale in a cashless society it could be catastrophic – we saw the impact of Visa’s payment system crashing in June 2018, leaving millions unable to make or accept payments. Before a cashless society could take hold, the Bank of England would need to ensure that measures and regulation were in place to ensure that similar payments failures do not happen again. Once we are able to address the remaining barriers that stand in the way of us driving towards a cashless future, there would be no truly compelling reason why we shouldn’t embrace it. This isn’t going to happen overnight and it will be a gradual process. More people than ever are choosing alternative payment methods, and it is a trend that will not reverse as our overwhelming social demographic comes to be comprised of people who live and breathe digital. The future is cashless – how long it takes us to get there is the only question.

Sarah Green Head of Mortgages & Retail Banking, Europe Sutherland Global Services



Businesses must innovate or risk getting left behind Brickendon, the transformational consultancy, forecasts key trends set to make waves in 2019


nnovation is not a new concept and whilst many businesses have already put a big emphasis on embracing it, in 2019 there will need to be a larger and more focused approach to drive it forward. Those businesses that fail to innovate, and quickly embrace technological innovations as part of their core offerings, risk being left behind in the race to triumph in the competitive global market. 2018 was pretty much as predicted, high aspirations of innovation were hindered by resources being channelled into regulations such as MiFID and GDPR, as 30

well as large investment decisions being delayed by the uncertainty surrounding the outcome of the Brexit debate. As expected, digitalisation, data analytics and increased automation dominated the agendas of many business boards, but they ultimately failed to reach their climax.   Even though financial markets managed to shake off the effect of the credit crunch and the following regulatory curfew on resources, they have so far been unable to shift their investment to innovations that create value for clients and make a major difference in their businesses.

At Brickendon we’ve always been at the forefront of organisational change. Here we have taken our years of experience working with global clients to solve their challenges and help them thrive in competitive markets and put together the four trends we believe will dominate the business agenda in the coming year. AI and Machine Learning will change the workforce Artificial Intelligence and machine learning will once again be a prominent topic in 2019, with a focus on innovation to stimulate business growth rather than just for cost cutting. Businesses which embrace these


concepts are more likely to be successful in the transition from just surviving, to thriving in the business world of the future. We’ve already seen the workforce go through a paramount shift this past year and we expect this to continue in the year ahead. The inevitable increase in automation will reduce the need for as many repetitive jobs and shift the focus to the workforce’s ability to innovate or disrupt. This automation happens through machine learning and robotics, changing the need in the workforce from repetitive and predictable tasks to more strategic and value-adding roles. This will not necessarily lead to a significant reduction in the workforce as the increased ability via AI and Robotic Process Automation (RPA) will also proportionally increase the expectations from customers, regulators and agents. As a result, in 2019 we expect to see the relationship between financial services and technology firms becoming tighter, but equally more complicated, with each side trying to capture market share from the other. Data - Moving Beyond the Buzzword Data will continue to play an important role in 2019, though like in most other areas, the focus is expected to shift to innovation. The holy grail is no longer about predictive or prescriptive analytics. Businesses need to go one step further to decode the black box of algorithms and provide an explanation to the user and give context around predictions.  Explainability will become a key feature in the data world, along with technology, algorithms and architecture. The key for organisations going forward will be to focus on actions and solutions that can be rolled out into production. In the areas of data science and big data there have been a lot of proof-of-concepts (POCs) and siloed implementations, which now need to be turned into scalable solutions in the production environment. As such, developing a mature software house capability for their data business will be paramount in delivering the business vision for the future.

The Role of Financial Regulation

What’s Next?

In many ways regulation has become excessive over the past few years, with most of it emerging as a kneejerk reaction to unexpected financial issues, errors and misconduct. On the other hand, there are still areas, products and players, where regulators play an important role. For instance, asset managers who managed to escape the attention of the regulators for many years are now seeing the impact on their business.

To conclude, the biggest unknown in 2019 is Brexit and its outcome is impossible to predict. Excluding this elephant in the room, 2019 is likely to see a continuation of momentum in some of the areas that have come under the spotlight in 2018. Digitalisation, data analytics and machine learning will continue to be hot topics. The focus on regulation and compliance will continue to taper away and be replaced by the need to embrace technological innovation quickly and efficiently.

In 2019 the impact of regulators on the financial services sector is set to decrease, with the regulatory agenda taking on a more business-asusual form and focusing on ongoing conduct. Having said that, regulators are also expected to take a more pro-active approach and apply their experiences to some of the as-of-yet relatively untouched areas of business. As the number of new regulations decreases, the agility to migrate and allocate resources to growth areas will be equivalent to first mover advantage. In 2019, businesses that manage to adapt to innovative technologies as part of their core offerings will set themselves from the competition. Brexit

Firms face changing political landscapes on both sides of the Atlantic and need to fend off fintech challengers who are starting to make inroads into core business areas in many sectors. As a result, for 2019 firms will need to refine their strategy and leverage the latest technologies if they are going survive in the decade ahead. How things will play out precisely remains to be seen, but there is no doubt that businesses globally will need to embrace the innovations on offer if they are to succeed and gain first mover advantage in what is becoming an increasingly tight and competitive marketplace.

A peek into the crystal ball for 2019 cannot be complete without a nod to Brexit. While progress appears to be being made in the overall debate, Brexit will continue to dominate the agendas and minds of businesses on all sides. It will, without doubt, evolve significantly in 2019, with clarification on today’s unknowns providing certainty in some areas and new mysteries in others. The biggest risk to any business is uncertainty and the longer the process takes, the more likely firms are to look for jurisdictions where they can make long-term decisions with confidence. All businesses, but especially those in financial services, should be prepared not only for multiple scenarios and ongoing change, but also to survive any potential crisis caused by major uncertainties which come out of the finalisation of the Brexit deal.

Chris Burke CEO Brickendon



The Changing Nature of Office Design in Financial Services F

our years ago, the right to request flexible working became UK law. Since then, flexible working has become more prevalent, to the point that half of the UK workforce is predicted to work remotely by 2020. This year PWC introduced a ‘work when you want’ policy, giving new recruits the opportunity to choose their hours worked. This action was taken following a study the firm commissioned which found 46% of workers prioritise flexible working and a work-life balance when searching for a job. This huge shift in working culture has also meant office design trends are changing. With more employees working remotely, businesses are finding new ways to utilise their office space to facilitate modern working practices, such as hot desking and video calls. While many people consider this sort of setup to be part of start-up culture, we are increasingly seeing large enterprises embrace new-age office design. For example, UBS recently commissioned WeWork to redesign their New Jersey office, as the banking giant looks to move away from the usual aesthetic that financial institutions tend to adopt. London-based fund managers are also starting to move to more open, collaborative spaces to facilitate agile working, accompanied by music rooms and restaurants.


More companies are looking to redesign their spaces, and so it’s important office managers are on top of trends and aware of the latest technologies that can help with any desired change in office layout. The impact of technology on design Advancements in technology and changing corporate cultures have helped the flexible working revolution. The advent of cloud technology means that workers can access their files online from virtually anywhere, across all their devices. Collaboration software has made communication between employees effortless, even if they aren’t working in the same building. As a result, we are seeing more employees working away from the office, whether that be at home, a coffee shop, or on the road. Research from Gensler has shown that in the average workplace individual workstations are only occupied 55% of the time, likely due to the introduction of flexible working. Because of this, many companies are reluctant to move into large office spaces, and instead actively plan for a reduced desk to employee ratio looking for smaller spaces that can facilitate flexible working practices. With this comes open plan offices, huddle rooms and hot desking policies, all with the aim of making more efficient use of space and meeting the need of an agile, mobile workforce.

Spaces are evolving One example of changing spaces in modern offices are meeting rooms, due to the shift to video calls. According to a recent survey by research firm Frost & Sullivan, most C-level executives prefer video calls to audio-only, finding that they boost productivity, accelerate decision making, and improve customer experience. Video meetings are becoming increasingly common, and so companies are investing in huddle rooms optimised for video calls rather than just large meeting rooms designed for face-to-face meetings. There are a wide range of different conference cameras available for these spaces, so it’s important office managers and IT buyers know which type is appropriate for each room. A smaller, portable conference camera like Logitech’s Connect could be shared between huddle rooms, whereas a large meeting room may need a more advanced fixed conference camera, with additional microphones and speakers depending on the size of the room. Portable peripherals are having a big impact on office design trends too. For example, the deployment of tablets can completely change the customer experience. A customer of ours in the financial sector replaced all desktop PCs with tablets on their customer service floor, so that their consultants could better interact with


Businesses must innovate or r getting left behind

customers when talking about loan or mortgage applications. Considering the kind of cases and keyboards you use is important with this type of deployment, and products like the Folio case, with an integrated keyboard, can be a good bet. Feedback from the bank has been positive, who report a better, slicker experience for its customers.

The benefits of new office design

More employees want to be able to work away from their desks, and so companies are investing in transforming different areas of their offices into breakout areas suitable for both work and meetings. For example, Alphabet’s offices in London use its reception area as a workspace, with the large reception desk doubling up as a desk for workers in the building, and other large tables and chairs available for use.

When office design is done well, it improves employee satisfaction, which in turn helps to boost employee productivity. As a result, it is also beginning to play an important role in employee recruitment, where a great office layout can be the difference between hiring an outstanding candidate and losing them to another company.

Many of the new office layouts also help to bring about increased collaboration between employees. Open plan offices and break out areas are designed to promote discussion between workers, while rooms designed specifically for video calls can boost productivity in meetings.

Anne Marie Ginn Head of Video Collaboration EMEA



It is vital to communicate well during M&A M

ergers and acquisitions are challenging at the best of times. There are always issues to deal with, always unforeseen problems that require attention. This is the nature of the beast. But a strong communications strategy that has in its sights the full range of employees, customers, investors, media and any other stakeholders, that is well planned and well implemented, and that is flexible enough to react to unforeseen circumstances, can be the difference between a successful and a poor integration.

And then there are customers. They will need to believe it is to their advantage to remain with the new business rather than jump ship to a competitor. Will they get a better service, new services, more efficient fulfilment, greater value for money, higher quality products? It will be important to explain clearly, and without creating falsely high expectations which might come back and bite you later on.

One size does not fit all

To meet all these different needs for communication requires a lot of attention to detail, and plenty of planning. Sometimes organisations think that they don’t need to think about planning their communications strategy until after the announcement is made. They can feel that the uncertainties during talks around a deal mean that they should keep silent. This is a fallacy and can be very damaging. Of course there should be no public communication until the deal is done, but public communication isn’t the only kind.

As soon as the announcement of a merger or acquisition is made, questions will be coming at you from all sides. You will need a clear and comprehensive communications strategy with excellent spokespeople. Shareholders, analysts and media will want to understand why the deal is being done. They will want to know that you have a clear vision for the new organisation that will be formed as a result of your merger or acquisition, and will expect to see a cogent and logical explanation of that vision. They will also want to know how your plans will create uplift in the value of the business. Staff will also need information. Satisfying their needs might be complex. Different people with different roles are likely to be party to different levels of disclosure, but the new senior management team will need to keep the whole workforce on side to create trust and loyalty in the new business.


Plan early, and plan well

Before the deal is announced, the seniors who are involved in the deal-making process will need to talk among themselves and to their advisors about the deal, the value it can bring, and how it should be handled. As the signing of the deal gets closer, it is likely that more and more individuals will need to be brought into the fold. A communications strategy is needed to understand who should be brought inside the tent when, and to ensure there is clarity about how much they need to know – because not everyone will necessarily need to know everything about the deal-making process.


As this pre-deal communications strategy progresses, it should expand to include plans for announcing the deal. These plans should include both the formal processes and timeline of what is announced to whom and when, and also who will make the announcement, what they will say, and which spokespeople will be subsequently available. The announcement will be the first time shareholders, analysts, media, customers and staff hear about the deal. It needs to explain the rationale of why it is happening, the expected uplift in business value, and perhaps finer points such as dealing with the business in different territories, handling any duplication of business lines, or other issues. It needs to demonstrate confidence that you know what you are doing. None of this can be made up on the day – it all has to come from pre-deal planning. Keep it coming, keep it evolving These early communications are the foundation stones of longer term communications that should take place throughout the integration period. An integration might take a couple of years to complete. During that time a lot will happen and each stakeholder group needs to be kept in touch with what’s going on and why. It might be tempting to announce the deal and then get your head down and focus on all the things that have to be done to achieve integration. But it would be wrong to ignore all those stakeholder groups on which your success ultimately depends. A good communications strategy does not allow silences to develop because they can create space for speculation and rumour, which can erode trust and lead to a lack of confidence in the new venture. Let this get out of control and the integration may be doomed. If key staff become unsure of their future in a newly merged business, they may get worried and leave. If too many staff leave, the business might find itself in trouble. After all, a state of the art fabrication plant with nobody to run it is not particularly useful. If the business relies on a number of specialist staff for its success, for example if it is a technology business which relies core skills built up within a group that works comfortably and effectively together, and these staff get worried for their future and are lured away by a competitor, this could be very damaging. It is also important to keep incoming lines of communication open. Thinking that all that’s needed is a steady outflow of ‘updates’ on where we are now may well not be enough for stakeholders to really know they can trust that things are on track. Responding to concerns and questions might not be as easy as delivering the agreed line on how things are progressing and which milestones have been met, but maintaining a dialogue can help to ensure that you take key stakeholders along with you, and can respond to any concerns they might have.

Put communications at the heart of M&A In the final analysis, good communications is a vital component of a successful integration. It needs to start before the deal is announced, and progress throughout the whole process until integration is completed. During that time, which could be several years, it will change character, moving from having a relatively narrow focus in the pre-deal phase to having a very broad reach during integration. But for all that it can change character, focus and method, communication needs to exist within an overarching strategy. It needs a seat on the board rather than being sidelined to a management team that does not have oversight. It can be outsourced very successfully, but only to specialists in M&A communications who are then brought fully inside the tent. It is quite amazing how often these basic principles are ignored by organisations that don’t fully understand the role of communications, or how vital good communications is to the success of a deal. So let’s be clear about it – communications isn’t an add-on, it is the heart of a successful M&A. For further information visit

Carlos Keener Founding Partner BTD Consulting



Make 2019 the year of cyber safety for business Call to action to ensure organisations invest in the right protection for the coming year 2018 has seen its fair share of high profile security breaches - British Airways 1 , Amazon 2 , Facebook 3 and FIFA are only a few of the organisations that have been hit this year and sadly, cyber attacks are occurring more frequently. Cyber security is not only something large global organisations need to worry about, but investors as well. More than two in five businesses (43%) in the UK identified breaches through viruses and malware, fraudulent emails and ransomware 5. While GDPR compliance has helped businesses get a tighter hold on their data, there is still a long way to go for firms to protect themselves and their investments from cyber-related threats. With 2019 on the horizon, business leaders are naturally looking ahead. At all times they should be ensuring that they are working to minimise the risks posed by potential cyber threats. They should be investing in measures to 36

protect themselves across all areas of their organisations and encouraging their clients to do the same. Cyber attacks are a relatively new phenomenon and many businesses fail to understand what cyber insurance cover is available, let alone what to require from any clients in their investment portfolios. It is more than just a case of ‘you get what you pay for’ when it comes to selecting the right cyber insurance to protect your organisations from disruption. Now is the time for the financial industry to review the protection that they have in place from the risk of cyber threats. Businesses need to be working with their insurance brokers and advisers to educate themselves on all things ‘cyber’. Here are a few tips and best practices to help navigate the changing world of cyber safety and insurance:

From the outset, make sure you properly invest the time and work closely with a trusted insurance broker - this is particularly the case when it comes to cyber insurance, given how complex the product is. Make sure this practice becomes part of your due diligence when you’re looking to invest in new organisations, as well. Cyber insurance is a complicated product that requires complex and well-considered advice. Don’t assume that because its Cyber it can simply be purchased on-line. Product selection is key. When it comes to a potential cyber attack, you must analyse where your organisation is potentially vulnerable or exposed. Then, with the help of a trusted broker, our advice is to find a policy that covers those areas - ensuring you have the best possible cover in place to suit your organisation’s needs. Cyber insurance


policies vary greatly and are not ‘one size fits all’ and you need to ensure your investments are well protected. When you are about to purchase cover, it is important to understand what you’re buying and the terms of the insurer. Ignoring the policy Ts & Cs could cost you at a later stage. Consult a trusted IT expert and get them involved in implementing counter measures in accordance with your policy. This is something we have done within our own business to ensure that we are compliant with every aspect of our cyber insurance policy. Put strict processes in place to comply with every criteria in the insurance terms. Failure to comply with the terms could result in an insurer refusing to pay out in the event of a breach. At Harris Balcombe, as an example, all staff laptops are fully encrypted with three passwords - we have seen first-hand, the consequences of not putting such rigorous measures in place.

Educate all your staff and any portfolio clients you may have on what they need to do to comply and ensure they do it, as an example regularly changing passwords. This is the first line of defence! Ideally your organisation and your clients should each have a detailed IT Policy that all staff are required to sign, and compliance should be checked periodically. Cyber criminals are constantly changing their tack and finding new ways to disrupt and businesses with disparate, unprotected investment portfolios are particularly vulnerable. Businesses need to ensure that they have the best protection in place to keep their investment portfolios, clients, data and reputations safe. Investing a day with a trusted IT provider and broker may seem like a lot, but will save valuable time and money in the long run, should you ever be hit by cyber attack in the future.

Steven Nock Partner Harris Balcombe References: 1

Reporters, Telegraph. “British Airways Hacking: Customers Cancel Credit Cards as Airline Defends Handling of ‘Sophisticated’ Cyber Attack.” The Telegraph, Telegraph Media Group, 7 Sept. 2018, news/2018/09/07/british-airways-hacking-customerscancel-credit-cards-airline/.


“‘China Spy Attack Hits Apple and Amazon’.” BBC, BBC, 4 Oct. 2018,


James Titcomb; Margi Murphy; James Cook; Natasha Bernal. “Facebook Security Breach Exposed 50 Million Accounts to Attackers.” The Telegraph, Telegraph Media Group, 28 Sept. 2018, technology/2018/09/28/facebook-security-flaw-exposed50-million-accounts-hackers/.


Gov.UK Cyber Security Breaches 2018: UK Business and Charity Findings.



How a reworked approach to data can empower Generation Rent to buy Purchasing a property. It’s a key life goal that so many Millennials aspire to - yet one that, in recent years, has become frustratingly unachievable. The statistics around first-time home ownership make stark reading: just a decade ago, home ownership amongst 25-35 year olds was 35% higher whilst today only 30% of social tenants believe they will be able to own a home. The chances of owning a home in the UK have more than halved over the past 20 years, and the average age of a first-time buyer is now 30. We also know from our research that, even for those that can afford to buy a home, purchasing a property is one of the most complex, prolonged, fragmented and stressful processes to navigate. It’s one that involves numerous products, services and dealings with various professionals – all of whom have their own agenda and interests, most of which first-time buyers don’t fully understand. Something must change. Young people need more support, a structured framework, and ultimately greater empowerment. A key part of this, we believe, lies in their data. Data collection, and the subsequent analytics and processing to build a profile of a buyer, is nothing new in the property world. But for too long this data has primarily served the benefit of the agent or platform, not the buyer.


To truly help young people realise their aspirations on the property ladder, we – as an industry – need a reimagined approach to data: a model that services the end user. A model that uses data to help people help themselves. Firstly, we need to ensure our profile of each potential buyer is as hyperpersonalised as possible, whilst using as limited an amount of data as possible to find a better balance of privacy and personalisation

At FirstHomeCoach any data entry is fully explained and is only processed to provide the buyer with specific requested feedback or a clear benefit. For instance, we ask for Date of Birth to establish if a consumer can apply for a Lifetime ISA, not to target them with gaming console adverts. We ask for your salary details so we can assess if a shared ownership mortgage could be a suitable product, not to offer holidays to the Bahamas.

No two potential property buyers are the same, and everyone needs to be understood on an individual basis, rather than placed in generic segments, bands or profiling groups, as if often the case. At FirstHomeCoach we provide people with a bespoke plan allowing them to quickly see how to realise their ambition and then adjust their plans accordingly, all without asking for a name, address or email.

We also aspire to re-use as much data as possible where we introduce buyers to relevant partners. Working with the wider industry on this is a key ambition and technologies like APIs and Digital Identities provide us all with a real opportunity to make the entire experience of home buying better.

Secondly, the ways in which we utilise personal data must be more transparent and responsible. We need to remember that this data belongs to the individual not the firm and it is being provided to us for a particular reason.

Thirdly, as we move into an era of open data, we must do much more to demonstrate how consented data, when utilised responsibly and transparently, can be used to empower and benefit a buyer.

Following the Snowden, Cambridge Analytica and Facebook exposes, consumer trust in organisations to ethically process our data for our benefit is at an all-time low and big data has today for consumers become synonymous with targeted advertising, surveillance and intrusion.

Take Open Banking for example - a secure way for consumers to share their bank data with third parties. Last year we were asked by HM Treasury to develop a system that, using Open Banking, enables renters to share their rental payment data with a credit rating agency, thereby improving their credit prospects.


In the case of home ownership, having a thin credit file can be just as large a hurdle to securing a mortgage as having a poor credit file. The consented, transparent and responsible use of data in this instance can therefore tangibly improve the prospects of young people hoping to buy a home. Open Banking and the sharing of consented data can also make the process of saving for and purchasing a property far less cumbersome. From tools to support budgeting through to identifying better savings rates and undertaking mortgage affordability assessments, Open Banking has the potential to inform, educate and streamline the home buying journey. The reality is however that the vast majority of buyers don’t want to talk about their data or the merits of Open Banking. To win back their trust, we must establish new systems and engagement methods that - rather than taking advantage of naivety - use transparency and design to

demonstrate that their data can assist them in achieving their life goals. Doing so, as an industry, will be a major step towards empowering young buyers to take their first home ownership step. This isn’t a first for professional services and a big personal inspiration in our industry is TransferWise. They are proud about being ruthlessly transparent, committed to explaining their business model and always working to benefit the consumers’ interests. If changing currency can be made this good, then why not home buying?

Ben Leonard CEO and Co-founder FirstHomeCoach 39


Don’t get left behind in the insurance digital transformation race The insurance industry, particularly in the area of trade credit, has more challenges now than at any time in the last ten years. Not only is it undergoing massive digital transformation, it is also navigating the peaks and troughs of fluctuating global economic markets and a significant change in customer demand for bespoke insurance products and services. Given this backdrop, the year ahead is set to be an interesting one with both winners and losers emerging.


One of the key factors is the change in the risk landscape, which is only set to sharpen as company insolvencies continue in an upward trajectory. The threat of this is likely to prompt a demand for greater governance and more transparent insurance products, particularly since reinsurance capacity, which has been abundant over the last five years is set to change. Reinsurers will look for proven and sustainable insurance models that have already undergone digital transformation to lower costs and improve customer satisfaction.

Well-governed models will also be popular if they can provide long-term value creation and cost-efficiency. Standard trade credit insurance products are no longer always fit for purpose because the needs of organisations as they expand, particularly overseas, are complex and changing. Newer entrants to the market, and some established insurance companies are now using technology that is helping them deliver a digital response to these changing demands. This includes interfaces


and tools that engage organisations as ‘customers’, not just as ‘users’, and they can analyse data to extract highly valuable and detailed business intelligence. Most importantly, customer experience and satisfaction can be more easily assessed. By using these solutions, insurers are able to put in place best practice policies and improved governance, which, in turn finds favour amongst reinsurers. Instead of providing only off-the-shelf products, they can offer tailor-made solutions as part of a more customer-centric strategy, which will help them to boost policy growth. This is important after five years of soft pricing and a slowdown in credit insurance growth. If insurers can be seen to be reactive, transparent and flexible with the products they are offering, companies are more likely to engage them to secure the right policy to suit their specific needs and their appetite for risk at that time. There is no doubt that these changes are taking place in the context of digital transformation. Not all insurers are at the same stage, indeed some have not even begun. But for those that are already in the process, there is a clear understanding that technology is underpinning a revolution in the services that they offer and how they offer them with the customer front and centre of the proposition. This is a real departure from the previous approach to customer relations, and emulates the seamless, personalised experience offered by the digital giants Amazon, Google and Apple. It is incumbent on insurers to deliver a fast response with services based on high quality data, rigorous research and real-time analytics. If they fail to do this, they will be left behind. Customers are the driving force behind ‘product development’ and customer-centric design principles are increasingly being used by insurers to extract greater meaning

from interactions. The detailed level of direct feedback shines a light on customer expectations and experiences and informs the way that policies are built. We see this in the emergence of customer portals, chatbots driven by artificial intelligence and machine learning that can steer customers to the best policies based on current risk assessments. To manage this change in approach insurers are seeking help from technology partners who in turn are developing innovations that break through many insurance conventions. Integration with the extended ecosystem is a good example, not just receivables finance, bonding and surety or the supply chain, but with new transactions processes such as Distributed Ledger Technology (DLT) and blockchain too. These are disruptive in what has always been an industry defined by traditional practices so it’s not a surprise that it is taking time to embed them to the point where their value can be fully realised. Looking ahead to 2019, it seems clear that to stay ahead in the trade credit insurance market, providers will have to embrace emerging technologies. Without the enormous benefits of advanced integration and deep analytics in the platforms that are being used to manage trade credit globally, how else are insurers expecting to keep up? The fact is, however, that the introduction of new platforms and solutions clashes with the continued use of outdated legacy systems, processes and practices that the industry has come to rely on. Transformation is essential. Indeed, in today’s competitive, global environment, transformation is the most conservative, not the most ambitious investment and implementation decision that insurance companies can make. To enable this, technology partners are creating solutions that facilitate the

process, and which have been tested and refined to suit the needs not just of insurers but of their customers too. This has brought about a new era of collaboration. As a technology provider we work with a number of insurance companies and credit agencies and we have seen that where, until recently, they were satisfied with offline processes that took over two weeks to offer credit insurance policies on select buyers, now they can deliver the same service in just a few minutes using an online portal. There are many other similar examples, all of which have come about because the industry is collaborating with software developers to respond to the new challenges and opportunities. Overall, the industry accepts that change is not only inevitable, but beneficial too. Some worries about larger, more established players losing out to nimble newcomers still linger, but these diminish with the daily evidence of improved portfolio management, dedicated policy development, detailed risk assessments and better customer experiences. Those already engaged in digital transformation will be winners in 2019, but any insurer that is still vacillating, or making only cosmetic changes, will find it increasingly difficult to compete. The industry is moving on.

Michael Feldwick Head of UK and Ireland, Tinubu Square 41


insurance tech trends for 2019 What does the insurance sector have in store for 2019? Tony Tarquini, European Insurance Director at Pegasystems, comments on his top five insurance tech trends expected for 2019. Push for a pre-emptive service Most insurers are looking to move away from just being a reactive provider of services, fulfilling a transaction when the insured calls in, to providing personalised, proactive services that customers will appreciate and see the value of. This not only helps insurers with retention but helps them from falling into a “price only” commodity driven sales competition. By showing additional value, insurers can create a feeling of good will with both their clients and agents that will help insurers sustain long term profitable relationships. We are now set to see businesses move from a proactive to pre-emptive approach to insurance, whereby they use AI to understand things about their individual customers before they even realise their need for a product or that


options may be available that they hadn’t considered. Examples of these personal circumstances and life events could include financial planning when someone turns thirty (for the life insurance industry) and offering usage-based insurance for automobile coverage for someone who works from home (for the Property Casualty industry). Revolutionary no-code/low-code tools Insurers will start to utilise no-code/ low-code application development tools. Why? Because consumers are demanding the fastest user experience ever. Insurers must stay agile – they will not be able keep up with customer demands if they have to employ a programmer to implement constant updates to their platforms. Nocode/low-code allows insurers to focus on how to do business in an agile, fast paced and cost-effective manner.

Who owns the data? The introduction of telematics, whereby insurers use data to help build up a picture of policyholder behaviours, such as whether they are a generally ‘safe’ or ‘unsafe’ driver, has already helped insurance firms make the most of data, for example by using it to easier to predict the likelihood of who will make a claim and prevent it happening in the first place. However, its full potential is being held back by ambiguity around who owns a driver’s data – Volvo states the data is owned by the driver, whereas BMW would argue the car company owns the data. Next year, there will be steps made to address the problem so that the full capabilities of telematics can be realised.


Plethora of partnerships Pegasystems predicts that Amazon, a relatively new entrant to the insurance market, will rapidly grow UK insurance market share and that 2019 will see Amazon truly take hold. Unlike traditional insurers which contend with massive legacy systems, Amazon is a digital native. This enables it to more easily deploy and harness technologies like AI and image recognition and therefore deliver customer experiences that allow it to set itself apart from the competition. In the same way that they have teamed up with US insurance company, Travelers, to offer discounted security equipment, the tech giant will start partnering with British insurance firms and price comparison sites. Furthermore, we might see Amazon take the role of the broker and use a number of different insurance companies to underwrite their products. Move to microproducts In an age of austerity, consumers are sacrificing insurance. In fact, over five million households in the UK 1 don’t have

home insurance. This is why next year microproducts will truly come to the fore. People who can’t afford to insure all of their belongings will be able to insure key items which have significant value. For instance, there is a growing consumer demand for microinsurance from university students and generation rent – individuals who may not be able to justify the high costs of home contents insurance but heavily depend on access to a working smartphone and laptop to go about their everyday lives. However, this will make the market more competitive, and insurers will have to be clever about how they approach microproducts. For example, they could appeal to consumers by offering a better price for having more products insured with them. With emphasis on proactive and preemptive rather than reactive service, deployment of no code/low code tools, digital natives such as Amazon partnering up to improve their offering and insurers expanding choice with the introduction of microproducts, the already hugely competitive insurance sector is set to get even tougher in 2019. The industry will continue to be subject to scrutiny in 2019, especially in

relation to data ownership and how they are adapting to meet the needs of ever demanding customers and grow market share. There is no doubt 2019 will be a challenging year for the industry, but it is also certainly an exciting one with huge potential for growth.

Tony Tarquini European Insurance Director Pegasystems References: 1 over_five_million_households_in_the_uk_have_no_home_ insurance



Insurtechs or Incumbents: the digital future of insurance In the insurance industry, digital transformation can mean different things to different people. For those running insurtech companies, it may mean the construction of new platforms and business models that cut out middle man and disrupt traditional insurers’ business models. From the latter’s perspective, digital transformation means bringing a legacy book of business into the 21st Century game. There’s room within the insurance ecosystem for both. Whatever strategy a company takes, formidable technical and commercial challenges lie ahead. One way or another, the transformation must happen, as growing numbers of customers demand a high quality, personalised user experience like those already delivered by other online service providers. In future, a growing number of markets for B2B and B2C insurance products will be dominated by propositions that offer, in effect, Insurance-asa-Service, purchased online. So, how can insurance companies meet these users’ expectations? Tackling the problem Thinking back to those two possible forms of digital transformation, a useful analogy is the two approaches an architect might take when creating a new home: designing a scheme for renovation


of an existing property, or designing a completely new building. Both methods can deliver the same end product, but no matter how it’s achieved, the foundations must be addressed before the fancy exterior architectural features or disaster awaits. It’s much the same in insurance. Incumbents will have to start their transformation by tackling the core systems. If they don’t, transforming the user experience and the customer-facing aspects of insurance propositions is futile. New and renovated buildings each depend above all on strong foundations and core infrastructure, just as an insurance company depends on the quality and efficacy of its core IT systems. For an incumbent, the key problem is that legacy IT systems will not be fit for purpose as the foundation for digital propositions. They’re simply unsustainable. Whilst they won’t be put out of business anytime soon, these more traditional firms do need to consider how to transition to new technologies and working methods if they’re to continue thriving. But board members who lack a deep understanding of digital technology may opt instead for what they regard – wrongly – as


a lower risk strategy: backing away from investment in new technology platforms to try to squeeze more value out of legacy systems. This instinctive urge to stick to what you know may also be intensified by the need to keep producing strong quarterly earnings. But it will almost certainly prove to be a false economy, slowing down the transition to digital and putting them at a disadvantage in the longer term. Insurtechs also face a fundamental problem. While incumbents are likely to be well-capitalised, even those insurtechs that have been able to attract significant external investment may struggle to fund construction of brand new systems with the scale needed to deliver mass market propositions. They may have superb technologies and propositions, but their challenge will be achieving and maintaining commercial sustainability until they achieve critical mass. As John Maynard Keynes once warned: “The market can stay irrational longer than you can stay solvent”.

Collaboration is key As incumbents find it difficult to meet the costs of a renovation approach and insurtechs struggle to scale up in a financially sustainable way, many will conclude that collaboration may be the best strategy. This trend is already well underway: the number of investments made in insurtech firms reached a record high in the second quarter of 2018, including a significant contribution made by traditional insurance companies, according to figures from Willis Towers Watson 1. In future we will surely see many more such partnerships, as incumbents turn to insurtechs to help them find the innovation and risk-taking needed to bring their company into the digital age. A digital transformation is coming to insurance, encompassing new ways of creating and delivering products and services and new ways of building and managing the core systems upon which every proposition and business model will rely.

The inescapable conclusion of this analysis is that 2019 can only be a year in which more incumbents begin to realise the need to address the core legacy problem. Some brave incumbent souls will embark on the journey, some highly promising insurtechs will simply run out of resources. At the end of the year, the world will look largely the same as it does today, but the seeds of the future will begin to take root.

Graham Elliott CEO Azur References: 1

“Quarterly InsurTech Briefing Q2 2018.” Willis Towers Watson, insights/2018/09/quarterly-insurtech-briefing-q2-2018.



Rawbank the first bank of DRC

Mr. Michel Brabant, Head of Retail and Privilege Banking of Rawbank discusses the Bank’s position in the country, the challenges ahead, how they steer the way with the products to suit customers and finally the role they play in their community engagements. RAWBANK being the leader in the banking market, in your view, what are the current challenges and opportunities facing the banking sector in DRC? With a 10% bancarization rate, growth prospects are very strong in the DRC, which banking market currently represents about $3.6 billion (deposits). The future prospects are particularly promising for Rawbank in a favorable economic context and in a sector whose growth rate is estimated at 25% per year. RAWBANK, with 25% market share, relies on its expertise and the profitable growth potential of its market. Democratic Republic of Congo is a very large country with 2,345 million square 46 46

kilometers area, the banking sector is still facing issues in terms of logistics and infrastructures to develop its branch network at reasonable costs in order to increase the financial inclusion rate of the Congolese population. However, RAWBANK’s plan is to be present in all twentysix provinces of the country. For the next years, DRC should remain an attractive country for doing business and investors. The banking sector would benefit of all these new investments in the local economy. Last year RAWBANK drew $15 million from AFBD (March 2018) and $10 million from TDB (April 2018) for the SME market. This prove RAWBANK is resilient and its fundamentals are strong in a challenging environment.


What innovative products and services are created in keeping customers’ needs and wants in mind? To meet its customers’needs, Rawbank launched the following products: Factoris. A factoring product. Our clients do not have to worry about receivables recovery, we take care of making sure their receivables are being paid. Easy Energy. We wanted this product because we believe the planet fate is in our hand and we must commit to make it a better place to live. This loan is dedicated to giving clients the opportunity to buy the whole set of solar panels for a residential installation. Easy Fly. This dedicated loan gives clients the opportunity to buy a plane ticket with an instalment payment plan. Diaspora pack. This pack is tailored for individuals living abroad but having economic ties with DRC. These clients are given the opportunity to have both a current and a saving account with a debit card, a digital access to internet banking, a mail alert and our mobile app (Illico Cash). Okapi The first Congolese savings product giving access to the international financial markets. The OKAPI account is indexed on the GURU index returns. Okapi Copper. A structured product with capital guarantee and indexed to the performance of Goldman Sachs Commodity Index. Illico Cash. A downloadable mobile app allowing users to manage all

their accounts from their mobile phones. Checking account balances, making payments, transferring money and topping up their mobile phone credit. What is your retail banking strategy for the year ahead? In order to pursue one of the objective of RAWBANK’s strategic plan, the retail banking strategy will focus on two main axes in 2019: •

Develop closer relations with its clients by adapting and developing products and services specifically tailored to suit their needs; and by keeping the client relationship at the heart of the bank’s strategy.

Develop cross selling among different segments by leveraging our client acquisition through our mobile banking app. This client acquisition will be also developed through stronger ties with our Corporate, Institutions and SME clientele which employees are source of potential clients.

What are the current trends you see taking place in the private banking sector?

RAWBANK is committed to the communities they serve? What initiatives or development plans will take place regarding your Corporate Social Responsibility (CSR) policy? RAWBANK makes a point of honor to invest in CSR, through actions to support the elderly, education of children and people with disabilities. We want to contribute to the construction of a more inclusive economy. Each year, Rawbank allocates significant resources to charities for the poor. The main aim is to support local associations that carry out charitable activities, rehabilitate buildings of public interest or make donations in the fields of health and education. Because CSR issues are no longer just a cosmetic matter but a real issue for all economic actors which requires real answers Education is crucial for development. RAWBANK is fully aware of this, and school renovation is one of the focuses of his charity actions. Here again, the bank assists associations in school renovation projects, providing benches, or teaching materials for pupils.

Private banking sector in DRC is becoming more and more professional with a very distinctive approach compared to a massmarket approach. It is crucial to develop a dedicated and sophisticated offer to high-networth clients, as RAWBANK Visa Infinite card or Okapi Cooper, which are a part of the offer that RAWBANK can provide to them. 47


Social Media’s impact on Financial Services T

he rise and further rise of social media and other forms of digital communication has made a profound impact on so many areas of modern life. This includes the corporate world where companies have a new and often more efficient route to reach their market and also where consumers have been given a public voice to air their views on both the merits and the shortcomings of businesses with which they engage. For banks and other financial services businesses the development of social media has created new possibilities but it also presents a threat to those which fail to grasp the opportunity and suitably manage the new form of interactivity between themselves and consumers. While many financial services businesses have invested in the resources needed to engage customers through social media, the key issue is whether this is being done in an effective and imaginative manner. While some, especially smaller disruptor companies, are doing it well many within the sector are lagging behind. This does actually matter as failure to improve digital outreach and engagement could see such businesses struggle to secure new customers while they lose existing ones. We live in a world whose demographics are significantly changing. Over the course of 2019 50 per cent of Americans will be either Millennials or Generation Z’s, part of a digitally sophisticated generation with little trust in governments or big companies. Many of the individuals within these consumer segments are focused on making the world a better place to live and keen to protect the reputation of brands they identify with while shunning those which go against their values. This most certainly includes banks and other financial services providers. In responding to the changing demographics within the marketplace, many of these businesses are learning that digital communication is not as simple as setting up a social 48


media account, putting some money behind it and posting some content that loosely represents a bank or savings account. For these and indeed all organisations wishing to really engage with people (and ultimately generate a commercial benefit in doing so), a mere social media presence isn’t enough. Today’s audience is increasingly looking for actual substance behind the content being posted which demonstrates how an organisation is being socially aware and responsible. In developing their social media presence, banks and other financial institutions need to respond to these changing demographics if they want to remain relevant. It is therefore increasingly important for all businesses, particularly those in sectors like financial services which have a direct bearing on people’s lives and the communities around them, to ensure they are not only operating with strong values and a commitment to social responsibility but also communicating this to their audience in a way that has impact and meaning.

It’s also important for banks and other financial services companies to take a stand on the issues that matter to their customers. This may spark fear in larger institutions concerned about alienating a wider customer base, but standing up for social justice can actually make good commercial sense: one of Bank of America’s most successful Instagram posts was in support of Pride Month. In the world of banking, many of the bigger established corporate players are now facing a challenge from techinfused organisations such as Monzo, the emerging ‘smartphone’ bank. Unlike the model used by many traditional institutions, Monzo has developed a more vibrant and interactive way of communicating with customers with impressive results so far. The 51,000 tweets they have posted since opening for business have received 26,100 likes, an impressive 51 per cent level

of engagement. Compare this to RBS which has posted 71,500 tweets on their customer-support social channels with only 50 likes amounting to less than one per cent engagement. While these are entirely different businesses with different levels of complexity, these numbers certainly tell a story. Regardless of whether they are classified as traditional or disruptor businesses, digital communication does matters across the financial services sector. An effective social media strategy is increasingly important to those firms that want to ensure they can continue to successfully engage with their customers and attract new ones. In this age of digitally led consumer empowerment, companies need to consider how their brand and its values connects with their target customers. The changing demographics in society bring with it a need to and reinforce the human side of the financial services sector with social media offering the ideal channel to deliver that positive message.

Using great images as part of social media content is a good starting point. But to actually be effective, these images must resonate with an organisation’s audience and its brand, According to marketing software producers HubSpot, visual content is more than 40 times more likely to get shared on social media than other types of content. It’s important to personalise the stories that are told through social media. For financial services companies this could include highlighting a compelling story about how a customer overcame adversity, the role it played in supporting a business or individual and the impact this had on their lives and within their local community.

Gill Grant Strategy Director UK creative agency LEWIS 49


2019: The year retail fights back


n 2018, the UK’s retail and hospitality sectors suffered a difficult year. In 2019, they will fight back. Merchants the world over are realising they need to up their in-store experience to complement the convenience of ecommerce. As 2019 approaches, we wanted to look at how retailers will set themselves apart from the competition; technology and improved customer experiences will be the cornerstones of the renaissance. Here are five things to look out for next year, in the world of retail. Retailers unlock the full potential of unified commerce: In the new payments world of 2019, unified commerce is king. Rather than a source of competition for investment, retailers will start to see bricks and mortar and online as one unified channel.


Key to this is understanding the power of payments data that can unlock new revenue. Data consolidated from across channels enables retailers to create a clearer picture of their customers and build more compelling loyalty offers or personalised shopping programmes. For example, using unified payments data, retailers can find customers that haven’t shopped with them for a while and apply the right initiatives to entice them back. That’s not all. Payments data can also help retailers understand their loyal customers’ channel preference, average transaction value and shopping frequency, helping to optimise retargeting efforts.


H os p it alit y g o e s bi g on tech With the rise of challenger brands and food delivery companies that offer a ‘luxury dining’ feeling for people in the comfort of their own homes, the hospitality and quick service restaurant (QSR) sectors have had their own challenges. This will only continue into 2019. The race is now on for businesses in these markets to introduce new innovations that cut waiting times, but which still cater to consumers who are hungry for a seamless, highquality service. Against this backdrop, there are a lot of exciting innovations emerging in the QSR industry to make the dining experience better than ever. For example, chatbots will allow customers to pay at the table at their convenience, without having to wait for a waiter, a card machine or change. This type of technology looks set to boom in the coming months. O p en Ba nki ng creat es n ew cu s tome r e xpe ri ences As more sections of the European Union’s Payment Service Directive 2 come into effect, the Open Banking movement will start to take hold. Open Banking is one of the biggest shake ups in the banking sector for a generation, and the rest of the world is watching to see what they can learn. New developments will give individuals and organisations the opportunity to securely share their financial data with registered third parties, giving consumers better insights into spending habits, regular payments and companies they spend with. By providing permission to use their data, consumers are also given access to better products, services and prices, aimed at improving their experience and making providers work harder to attract their custom. This also enables completely new customer journeys and payment methods based on more intelligent use of data.

I nnovatio n ma kes frau d p reven t io n m o re cu st o mer -frien d ly Adyen’s research shows that fraud is on the rise, with 60% of retailers experiencing an increase in fraudulent activity in the past year. Previously, some security measures such as 3D Secure (3DS) have not been consumer-friendly, but that will change for the better in 2019. 3DS 2.0, which will be implemented widely in the coming months, will help improve both fraud prevention and customer experience. Thanks to new APIs created under PSD2, payment providers will be able to run fraud checks in the background as customers complete their purchase, creating a seamless payment experience. Transactions that require strong authentication will be streamlined, so customers can confirm their purchase using biometrics such as fingerprint recognition, voice recognition or facial scans, as well as SMSdelivered two-factor authentication. It’s exciting to think about the opportunities 2019 presents for UK retail. Although it’s hard to predict exactly what lies ahead, what we are certain of is the importance of delivering a high-end customer experience by continuing to invest in new technology – something retailers will need to stay on top of to survive the competitive market.

Myles Dawson UK Managing Director Adyen 51


There’s much more to

Peer-to-Peer… A

lternative finance in the UK powers on with data compiled by the Cambridge Centre of Alternative Finance showing last month a 35% growth in the sector to £6.2bn. The real driving force, with the largest proportion of the total market, and the fastest growth, was Peerto-Peer (P2P) business lending. SMEs borrowed £2bn in 2017 from P2P platforms, a 65% increase on the previous year. Part of this growth in funding has been enabled by a shift in the investor base. No longer is this market dominated by individual investors, as it has increasingly attracted institutional investors such as pension funds and asset managers. Much has been written and said about the rise of P2P, with supporters pointing out the speedy turnaround times, technological superiority and more flexible lending criteria, whilst sceptics debate the soundness and commerciality of some in the sector and predict tears to come. Sceptics notwithstanding I am persuaded that this model is here to stay, albeit as an evolved form of where we are now. The basic principles of direct lending are just too attractive from an investor standpoint to simply disappear. Which brings me to my main point about the new opportunity for P2P platforms, Self Invested Personal Pension (SIPP) providers, and investors. Until very recently the cohort of P2P investors had consisted of individuals, either directly or through an Innovative Finance ISA and some institutional money passing through the bigger player’s platforms. So, pensions, the largest single source of long-term money in the UK (or, indeed, the world), had been ignored. 52

There are technical reasons why. For instance, an early one was the prohibition of connected party transactions where, although highly unlikely, an individual’s pension monies might find its way onto and through a P2P platform and be lent out to a connected individual, something explicitly prohibited under HMRC rules. There also remains the capital adequacy issue and the professional indemnity/non-standard product problem where advisers, having been badly bitten in the past, are reluctant to engage with, or advise on anything that isn’t mainstream. So, overall you would have thought that the prognosis for P2P loans entering the mainstream SIPP market was pretty grim. And yet there is a truly staggering amount of money sloshing around in private sector pensions, somewhere around the two and a half trillion-pound mark. As a result of the relatively recent pension freedoms regime a considerable chunk of this will ultimately end up in drawdown products looking to provide a steady income without having to purchase an annuity. In an era of ultra-low interest rates and stock/bond market volatility this can be seriously challenging. However, things are changing in that one or two of the more technically capable SIPP providers have managed to overcome the circumstantial challenges facing SIPP/P2P investments (mentioned above) and now happily accept them. One, Morgan Lloyd, having carried out extensive due diligence now publishes a list of ten or more platforms that it will accept within its Qualitas and Directors SIPP products.


Adam Tavener Chairman Alternative Business Funding (ABF)

I firmly believe that this change will profoundly affect the supply/demand side of SME funding as now that the bridge has been built, others will follow, and in time the hundreds upon hundreds of billions of pounds of income hungry pension monies will begin to flow into the sector. This will mean that the supply side of P2P will shoot up, which in turn necessitates a corresponding increase in the demand side, something that can only be achieved by pushing down pricing or the creation of pooled lending products to challenge for ever the traditional distribution systems of the big banks in the SME lending space.

Either way, the seemingly small technical evolution which now let’s pension money invest in P2P has the potential, over time, to create the biggest impact in SME lending for a generation. That’s a pretty exciting prospect and one that will affect borrowers, advisers and investors alike. Adam Tavener is chairman of Alternative Business Funding (ABF), one of the Government’s three designated finance platforms for the Bank Referral Scheme.



The Importance of a Mortgage Advisor F

or many people, buying a home or investment property will be one of, if not the biggest and most stressful purchases of their lifetime, often spending hundreds of thousands or even millions of pounds. You will use an estate agent to find you the perfect property to purchase, a solicitor or conveyancer to make sure the legal aspects are correctly looked after, a surveyor to make sure the property is of sound construction, but many people overlook the importance of professional financial advice from a mortgage broker or advisor. With many price comparison sites available online, as well as lenders publishing their rates quite openly to the public, with some leg work a lot of consumers could find the best available rate or very close to it themselves. However, when it comes to rates, something to consider is that some brokers, or those working through a network, do attract exclusive rates from certain lenders, the consumer wouldn’t be able to pick these rates without going through one of these brokers. Likewise, if you walk into a branch of a lender or call their mortgage teams, you should keep in mind that they are only going to offer you the products and rates from that particular lender. Some lenders do offer direct only products, it is unlikely that a mortgage broker would have access to these or would be able to offer you advice on these. However, mortgage advice isn’t usually just about finding the best rate. A decent mortgage broker will spend time getting to know their client, understanding their circumstances and situation and then 54

finding a lender who is competitive on rate but who’s criteria the client will meet. There is no point applying to a lender with an amazing rate, if they won’t accept the application because it falls foul of their criteria or affordability checks. Each time an application is made to a Lender, a credit check will be performed, too many credit checks in a short period of time can have a negative impact when applying for further credit or another mortgage application. There are many lenders in today’s market, each has its own criteria, affordability calculation and underwriting process, sometimes automated and sometimes manual, this is where a mortgage advisor should know their stuff. Advisors not only have knowledge of the lenders but will also build up relationships with contacts at the banks, sometimes even the underwriters, so they can help to ensure your application is processed smoothly. They should not be firing applications off left, right and centre. An experienced and knowledgeable advisor should know, based on your situation and circumstances, where to carefully place your application and have a very good idea that it will be accepted on the first attempt. Of course, there are sometimes exceptions to this, you should always be open and honest with your advisor, especially if you think there is something in your situation or history that could impact a mortgage application. If your advisor doesn’t know, they can’t be prepared for it. As well as advising on your mortgage requirements, most mortgage advisors will also be able to help

you navigate and advise you on the various insurances available and sometimes required when buying a property. There is of course the need for buildings and contents insurance, which the lender will usually require to be in place (buildings insurance) upon exchange of contracts. There are also many “protection” policies that can be taken out to cover your mortgage or income should you die, get ill, have an accident or get made redundant. These might include life insurance, critical illness insurance, income protection insurance as well as accident, sickness and unemployment insurance. These are often known by other or similar names and come in many forms with optional extras. Your advisor should be able to explain these to you and help you reach a decision on which ones are necessary. Finally, and Importantly anyone giving mortgage advice must be qualified and regulated to do so. Changes in legislation brought in by the Mortgage Market Review in 2014 resulted in tighter rules for mortgage affordability checks that lenders must comply with, along with tighter rules for mortgage advisors


and the qualifications they must hold and the information they must supply about their services and fees. We think this has improved the quality of mortgage advice given to clients and means the advisor should have a detailed understanding of your needs and requirements, your income and commitments as well as your current and potential future circumstances.

Lee Rhodes Lee is a Mortgage & Insurance Advisor and the Founder of Rhodes Advisory, he has over 13 years of experience in Financial Services. So far this year Lee has helped clients raise over ÂŁ7m in mortgages. His company is an appointed representative of Openwork, an award-winning financial advice network, giving him access to exclusive rates not found on the high street. 55




Journey of FP&A and Finance

hange comes part and parcel of working in any modern business or industry. Shaped by the latest trends in technology, the evolution that is now underway will gradually impact every part of the business ecosystem; from customer target demographics, to market dynamics, organisation culture, operations and the nature of job roles. This ongoing change has been a constant variable for finance departments over the past five years, as new technologies, the availability of data, and better analytics have given teams the platform to steer business performance. An uncertain road for finance   But the next five years will be equally eventful, and the role of Financial Planning and Analysis (FP&A) will continue to evolve. It has moved from a CFO support mechanism of record keepers and controllers to a team of strategists and catalysts for change. This rise in status has also broadened the number of professionals who are invested in the success of FP&A – no longer just the CFO, but now the entire C-suite, as well as leaders of business divisions and key markets. Getting to grips with the implications of this change – what future planning needs for sustainable success, the skills that the office of finance will need to adopt, the challenges, the opportunities, the expectations – is all still proving to be a challenge.


Navigating the years ahead  Businesses face disruption from economic volatility, political uncertainty, currency and commodity fluctuations, changing regulatory pressures, new business models and digital technologies. This change is unrelenting and continuous. As organisations and FP&A teams adapt their processes and systems in response to disruption, the budgeting and forecasting often needs to be reimagined. To achieve this, there are four emerging trends that finance teams need to consider as they navigate the years ahead:   • Real-time forecasting: Planning platforms will connect all aspects of the business with one another so that changes in workforce, for instance, immediately flow into forecasts. Production scheduling changes will be driven by, among other things, demand forecasts that accommodate impacts of trade promotion, pricing decisions, and demand-sensing indicators. Changes to operating tactics flow seamlessly to the financial plan in real-time, and decisions and assumptions are easily accessible, whether you’re making day-to-day decisions or the C-Suite strategy. •

Out with the annual budget: The annual budget will be replaced by a regular focus on longterm strategic decisions


throughout the year, in combination with fast, reliable forecasts. Examples of this include frequent reviews of footprint strategy, profit pool, innovation, and mergers and acquisitions. Business decisions regarding strategy will be supported through continuous, real-time forecasts and scenario analysis. Resource allocations are tied to the plans on which forecasts are based. Resources are available as needed, and not through detailed annual budget allocations. Indeed, forecasts become the primary steering mechanism for business performance. •

The role of innovative and emerging technologies: In the future, organisations can anticipate focusing only on considerations in the plan that could prevent the system from calculating the right forecast, such as a unique event or human factors. Advanced analytics such as machine learning, and statistical methods will help reduce cognitive bias in forecasts, helping to achieve improved levels of variation, significantly eliminating effort, and increasing the speed of the forecasting process.

Embrace rolling forecasts: Internal performance will be viewed as a continuum of “innings” rather than tied to financial year ends and will no longer be tied directly to fixed external metrics, but rather, directional, ambitious, and relative goals such as growth relative to competitors. Attainment of the internal metrics will deliver the conditions for



outperformance of the external metrics. Planning and forecasting will be in real time, continuous, and much more lightweight from the user perspective. There will be a clear focus on putting effort onto the exceptions with the majority of the process automated and connected throughout the organisation.

downstream waste and liability. Any leaks in the system should be identified and resolved to maintain data health. •

Become familiar with external, ambiguous, and unstructured data - and explore how external indicators can deliver insight to the business. This is where advanced analytics such as machine learning and related technologies can help.

As data sets deepen across the organisation and beyond traditional boundaries, FP&A professionals will need to connect data to insight, decisions, and action in order to create real value. This capability will become even more critical in the future. This demand for connectivity and insight accelerates the need for FP&A professionals to sharpen their skills in areas that may not come naturally, especially for those who work in controlling or traditional finance positions.

Adopt toolsets that facilitate Connected Planning - and start connecting plans. This includes the adoption of dynamic technology and collaborative business processes that can link business units across the enterprise with one another in real time.

Begin breaking down the end-to-end business planning logic for a fresh approach - “lift-and-shift” should be challenged as the default option.

The prevailing mindset needs to shift towards a focus on business drivers, leading indicators of performance, external data, and non-financial data. Finance teams need to understand lead-time response in the business and how it determines forecast time horizons, and how to match frequency of forecast or reporting updates to the variability in the business.

Build capabilities for better collaboration across the business - and free up time for executing change. This gives the internal teams the experience and rewards of driving finance transformation in the organisation.

Connecting the dots and plotting the route with planning

A deep understanding of analytics, the ability to work with ambiguity, strong communication skills with senior leaders outside of finance and the capability to simplify problems and quickly find solutions, are all going to be crucial to FP&A roles. In the short term, organisations can take steps to prepare for long term success. Evaluating the following six areas will help pave the way for long-term change: • Ensuring any data that the company holds is clean - in all areas of the organisation, not only finance. Data is the foundation on which the future of finance is built. •


Confirm that data governance is in place - throughout the organisation and fix any data issues early to avoid

Ultimately, it is possible for organisations to prepare for the future by embracing and implementing new and emerging industry trends including the likes of accurate, realtime forecasts. Great expectations do lie ahead for finance. The journey is not easy but if they harness all the tools at their disposal, organisations and individuals can ensure they are ahead of the game.

Michael Judd Senior Director Strategic Finance Transformation, Anaplan


Will payee confirmation solve push payment fraud in 2019? A

uthorised push payment (APP) fraud has been in the spotlight recently. For the first time, UK Finance has released annual figuresi for APP fraud losses, which reached a staggering £236 million in 2017. APP fraud occurs when a person or organisation is tricked into making a payment to a fraudster, who often poses as a legitimate supplier. To tackle the problem, Pay.UK, the UK’s leading retail payments authority, has announced that from next year there will be a ‘confirmation of payee’ serviceii. This will allow those sending payments to check that the name on the account matches that of their intended recipient, to ensure that the money ends up in the correct account. The service will stop some push payment fraud, but it won’t stop it all – and there may be unintended negative consequences for banks, businesses and individuals. How will confirmation of payee work? The service will work within online banking channels in a process that is illustrated in figure 1.

The payment process starts with a payer entering the payee’s details, which triggers the payee’s bank to check if the name entered matches the account name. This is when a few possible scenarios emerge: 1. The names match and the payment goes through. 2. It’s a partial match – for example, ‘John Smith’ when the payee’s name is ‘Johnny Smithson’. The payer is sent the account name and asked to confirm the payment. 3. There’s no match. The payer is informed and told to contact the recipient they’re trying to pay. However, there are limits to the effectiveness of this proposed service. It won’t work for business-to-business payments Businesses generally make payments in batch, mostly via BACS but also via the UK Faster Payments system. Pay.UK’s confirmation of payee service relies on the payer using online banking to enter payee details, which isn’t the case for B2B payments.



Customers could be fooled by close name matches Imagine a scenario where criminals obtain a list of all the parents at a school. For minimal investment, they could set up a business and a bank account that looks very similar to the legitimate school’s name and send out fake invoices to parents. In instances like this where the name on the fraudulent bank account is very similar to that of the legitimate supplier, people are unlikely to be suspicious even when the payee’s name is returned to them for confirmation. Confirmation prompts could cause confusion In Pay.UK’s new system, the final decision to proceed with a transaction lies with the payer. People who receive a request to confirm a name may mistakenly believe that this means that there is no fraud risk. If fraud then happens after a positive confirmation of payee, the victims are likely to be both confused and angry. Conversely, just as a positive confirmation doesn’t mean no fraud risk, a ‘contact recipient’ instruction doesn’t automatically indicate fraud – but it may be construed by customers as such. For example, if a local public house is part of a wider chain, the ‘contact recipient’ prompt might not look familiar to the customer as the account may be registered in the chain’s name. This could cause issues for businesses that are legitimately trying to collect payments. It could lead to an increase in direct debit fraud Direct debit fraud happens when a fraudster uses someone else’s bank account details to pay a direct debit.


The confirmation of payee service will, in effect, allow criminals to ‘test’ bank account information so that they can build a fuller set of data to use in setting up fraudulent direct debits. The ability to ‘test’ the bank account details of individuals as well as businesses could see an increase in direct debit fraud. Fraudsters may well target individuals who are more vulnerable, as they are less likely to check their bank accounts and direct debits on a regular basis. It may put consumers in touch with criminals If a confirmation of payee returns the recommendation: ‘contact the person you’re trying to pay’, the person trying to make the payment may well use the contact details on the invoice or other paperwork related to the payment they are trying to make. In cases of fraud, the contact information is likely to put them in touch with a fraudster. Criminals who are well-grounded in social engineering will have many plausible reasons prepared as to why the payment should go ahead: ‘I’m using my grandmother’s account for payments’, for example. When this happens, victims may well be upset that they were instructed via their bank to talk to a criminal.

Why tackling APP fraud demands a holistic approach The complications and unintended consequences of the proposed confirmation of payee service means that it cannot be considered a ‘silver bullet’ for APP fraud – indeed, nothing can. As with any kind of fraud, APP fraud is constantly evolving and necessitates a layered approach to effectively combat it. To achieve this, there are three main areas banks should focus on.

1. Advanced transaction risk analysis As part of a layered approach, transaction risk analysis is an essential component for banks to constantly monitor payments made by and to their customers. In fact, it’s a tactic the recently implemented Payment Services Directive 2 (PSD2iii) has forced them to start exploring. While some banks already use transaction risk analysis for push payments, to be truly effective in stopping fraud they should design their solution to: •

Work in real-time to avoid irritating customers who expect instant payments.

Apply risk analysis to payments arriving into accounts, as well as those leaving. Victims of push payment fraud sometimes look to the receiving bank for recompense, particularly in cases when the fraudster has opened an account using a stolen or synthetic identity – since it’s argued that their Know Your Customer (KYC) process was at fault.

Be adaptive – unsupervised machine learning technology that can self-learn is particularly useful when dealing with new scenarios where historical data does not exist to inform fraud models.

2. Analysis based on standardised reporting

Without measuring a problem, it’s very difficult to solve it. Fortunately, reporting on APP fraud has been given additional impetus since the first UK Finance report in 2017. The European Banking Authority


has also tackled reporting for APP fraud in their PSD2 Fraud Reporting Guidelinesiv, in which they lay out a framework for the consistent and mandatory reporting of fraud, which includes fraud that involves ‘manipulation of the payer’. With these PSD2 reporting requirements coming into force from January 2019, banks will soon have more data to feed into their analytic models to help build their strategies. They should look to take advantage of this new data as soon as it becomes available. 3. Mutual authentication A significant proportion of APP fraud happens when fraudsters trick their victims into believing that they are the victim’s bank. The techniques used are sophisticated and include email and SMS spoofs, which can make it hard for everyday consumers to detect if they are not cautious. The protocols by which customers authenticate themselves to their banking providers are well established, but the protocols that banks use to authenticate themselves to their customers are inconsistent and poorly understood.

Sarah Rutherford Solutions Marketing Manager FICO References:

Although an industry-wide approach is lacking in this area, individual banks can take the initiative to ensure consistency in their outbound customer communications, have standard procedures by which they prove who they are, and regularly educate and update their customers on these. Confirmation of payee will prevent some cases of fraud. It is not, however, without its shortfalls. To properly tackle the problem of push payment fraud, a layered approach will yield the best results. 2019 holds possibilities for banks to develop these layered strategies, empowered by the wealth of new data that PSD2 reporting guidelines will mandate.





Ukfadmin. “Finance Industry Stops £1.4 Billion in Attempted Fraud.” UK Finance, 15 Mar. 2018, www. “Confirmation of Payee.” Pay.UK, confirmation-of-payee/. “Regulatory Technical Standards on Strong Customer Authentication and Secure Communication under PSD2.” EBA Publishes 2018 EU-Wide Stress Test Results View Press Release - European Banking Authority, eba. “EBA Publishes Final Guidelines on Fraud Reporting under PSD2.” EBA Publishes 2018 EU-Wide Stress Test Results - View Press Release - European Banking Authority, eba.

Sarah Rutherford is director of fraud solutions marketing for analytic software firm FICO. She blogs at 61 61


The Rise of Royalty Financing R

oyalty financing is probably one of the biggest sectors you have never heard. Popularised among the North America mining and pharmaceuticals sector, this form of alternative financing is estimated to be worth around $50 billion in the region. But its relative obscurity in the UK and Europe is quickly changing in the long wake of the 2008 financial crisis. That is because the concept, which sees well-established companies receive capital in return for a slice of their revenues, has since been altered to serve the needs of small and medium-sized enterprises (SMEs). Models can vary, but typically royalty financing works as a type of ‘corporate mortgage’, where a business exchanges a small percentage of its revenues over a long period of time in exchange for capital today. Royalty financing is a new concept to the UK and Europe, but providers, such as London Stock Exchangelisted Duke Royalty, are now starting to gain traction. That is because the advantages are clear: unlike other options, royalty financing enables businesses to realise their longterm business goals without compromising owner control, diluting equity shares or adding amortizing bank debt to the business.   Since the royalty company is taking a slice of revenue from the business, it also means that the interest of the two partners are aligned (arguably, unlike other traditional finance methods), with the repayment percentage adjusted annually to reflect any movement in an investee’s revenues.


On top of that benefit, the company’s repayments cover the principle as well as the interest. Many companies use the money to replace existing short-term debt to allow them to grow. Royalty financing eliminates re-financing risk because it has a payback over decades, hence the analogy to a ‘corporate mortgage’. The transatlantic jump for royalty financing also comes amid a shift in how SMEs perceive and deal with their banks. Nervous banks In May, the UK’s Federation of Small Business (FSB) reported that small credit business approvals had fallen to a 30-month low, with only 60% of small firms that applied for credit being successful. The worrying statistic reinforced a sentiment that is already widely known and reported on in the country, being the ‘SME funding gap’. This gap is a major concern for the financial sector as SMEs employ 60% of the UK’s private sector workers. Despite this concern, in March 2018, pressure group the SME Alliance, which represents thousands of small businesses, told MPs on the House of Commons Treasury Select Committee that they are finding it more difficult than ever to take out loans with banks. While a recent report from the Treasury Committee on SME Finance found that the percentage of SMEs using external finance has stalled in recent years, sitting at 38% in 2017, compared to 37% in 2014, 2015 and 2016.

While this stagnation in traditional banks’ lending to SMES makes for concerning reading, it also highlights the opportunity for alternative finance solutions like Duke Royalty. Although royalty financing may still be in its infancy the UK, as more SMEs are educated and learn about its benefits, it will continue to play an ever-growing role in lending to businesses that traditional banks are increasingly ignoring. Duke Royalty, for example, has deployed £43m in the last 18 months alone through five new investments, and three followon investments. With its aforementioned advantages and amid a quickly changing finance environment among SMEs in particular, royalty financing is set to grow from strength the strength across the UK and Europe. You could call its sudden rise a surprise, but all the right conditions have been there for growth of the industry.

Neil Johnson CEO and co-founder London-listed Duke Royalty Limited




Retail and payment service providers - the new bread and butter of payment partnerships? At a time when retailers are facing an increasingly globalised and competitive marketplace, they simply cannot afford to lose customers to due to inferior experiences, non-availability of relevant or even preferred payment methods or even a system downtime. Sophisticated, secure, highly scalable and well architected payment platforms have never been so important to business success. For this reason, it’s becoming increasingly common to see merchants partnering with payments platforms to provide this service. There have been numerous highprofile partnerships between retailers and payment service providers in 2018, including e-commerce titan Walmart partnering with payment giant PayPal. More recent players to the market are also seeing huge returns, for example Venmo, which handled up to $12 billion in transactions in the first quarter alone, and H&M which invested into Klarna to develop a a better customer experience. All these partnerships are formed with a unified objective: to fight for a bigger share of the wallet. The key to forming a successful and lucrative partnership is for an organisation to recognise the areas it can improve upon and identify a partner whose offering is best suited to provide this service. The best, most rewarding, collaborations will exploit each other’s strengths to create industry leading service offerings. The advantages of partnerships between retailers and payment providers are clear. If retailers are able to deliver a frictionless payment 64

process, customer satisfaction will improve. Meanwhile, payment providers become more tightly integrated with the merchant while seeing a boost to overall transactions. What is the driving force behind these partnerships? The retail industry is undergoing a transformation. With data 1 suggesting that over 40% of the global population will use a smartphone by 2021, it’s clear to see that technology will continue to infiltrate every aspect of our lives. The rapid international adoption of technology is responsible for transforming the shopping experience and generating a plethora of opportunities and challenges for both consumers and merchants. Research conducted by PwC 2 showed that consumers rank social networks as the number one source of inspiration for purchases, showing just how important digital presence really is for organisations of all sizes. Never before has a company’s projection of its brand online been so important, not just for advertising purposes, but also when considering how easily and publicly consumers can review their customer experience.


To ensure the best chance of success in an increasingly digitised world, businesses must deliver a service offering at a consistently high standard and with globally competitive pricing, in a way that causes as little disruption to the consumer as possible. Research shows that the industry is recognising this, with 54% of retailers naming customer experience as their most important focus. In a world of so much connectivity, there is simply too much choice to risk system downtime. If merchants are to succeed, they should invest in well architected payment infrastructure that can be relied upon to deliver a seamless and positive customer experience. Something that can contribute to this is in fact one of the greatest opportunities of the move to digital shopping. Thanks to digital shopping, retailers now have access to data that can help them tailor the consumer’s shopping experience. From the initial targeted ad via a social media channel, to the payment transaction, and right through to the delivery method, each touchpoint can be tailored to ensure the best possible experience. Not only can this increase customer satisfaction it also has the potential to create loyal customers who keep coming back. Scalability: the key to merchant success The drive for global digitisation has led to an ‘always-on’ culture, where people demand connectivity and convenience from every area of life. This expectation is very much apparent in the retail industry, where we see unparalleled expectation for

instantaneous service and transaction time. It’s a culture that is exacerbated by the prevalence of smartphones, which provide consumers with uninterrupted access to e-commerce. In addition to negotiating the demand from today’s consumer base, merchants would be foolish not to look ahead to the future and plan accordingly. Research 3 from Statista shows that in 2017, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars and e-retail revenues are projected to grow to 4.88 trillion US dollars in 2021. With market growth expected at such a rapid rate, retailers need to make sure they are prepared to scale with the change. By investing in highly scalable and secure payment infrastructure, merchants can ensure they are able to deliver the speed demanded by consumers of both the present and the future. It will become more commonplace to see retailers forging partnerships that capitalise on the benefits of innovative technology to build new, more agile, dynamic and scalable business models. By doing this, they can not only future proof their business offering, but also help to solidify their position as market leaders. Customer benefits As outlined above, partnerships between payment service providers and retailers can prove hugely beneficial to the consumer. The use of more sophisticated payment architecture will make the overall end user experience faster and more seamless. Consumers making international payments will reap the benefits of improved connectivity to facilitate frictionless transactions. 65


One issue that comes hand in hand with the rise in e-commerce are increasing concerns about the safeguarding of consumer data. There are strict regulations around data safeguarding that payment service providers are legally bound to obey. By partnering with a strong payment service provider to create an area of the business solely dedicated to payments and using the most up to date technology to improve IT security, customers should expect to benefit from better protection against data breaches. In addition, when merchants partner with a global payment service provider, they will be able to offer consumers local payment methods for their market. This will mean a greater array of choice for the consumers including more convenient payment methods. For example, in Brazil as much as 70% of local payments are made by card payments with instalments and almost a quarter of online payments are made with Boleto Bancario, a cash payment method. If merchants can offer tailored transactions, they can capture more market potential, gaining access to a wider consumer pool. Building walled gardens While mainly positive for consumers, as with any large partnership or innovation, there can be potential downsides that shouldn’t be overlooked. Retailers can use the exponential amount of data that is generated by online devices to hyperpersonalise product offerings to each individual consumer. As retailers expand product and service offerings to sell a wider range of products than ever before, there is a danger that we can see the creation of a walled garden in which the consumer becomes ensnared. It remains to be seen the impact that a deep collaboration between a payment provider and one particular retailer will impact future collaborations between the provider and other retailers. These all-embracing retail models are only successful if they can hold the majority share of a consumer’s attention and money. If partnerships become more 66

exclusive, providing certain services to certain retailer in order to differentiate themselves from competitors, it will ultimately reduce consumer choice compared to a fully open and diverse internet. It is hard to predict to what extent innovation and competition, even between these ‘walled gardens’, will compensate for this or perhaps even facilitate greater choice. The future As time marches on, we will undoubtedly see partnerships becoming an increasingly prevalent trend across the payment landscape. Specifically, it is likely we will see partnerships between retailers and smaller, more technologically innovative players, who will be used by their partners to get ahead in the increasingly competitive market landscape. Partnerships can be a gamble and of course have their challenges, but if one thing is for certain, they are a proven way of sustaining a leadership position in a market that’s becoming more digitalised and competitive than ever before.

Matthias Setzer CCO PayU References: 1

“Smartphone Penetration Worldwide 2014-2021.” Statista, Statista,



“Global Retail e-Commerce Market Size 2014-2021.” Statista, Statista, worldwide-retail-e-commerce-sales/.


How to improve pension communications in


Engaging employees in pensions is an ongoing challenge for employers. The British Confederation of Industry and Aegon 1 reported that just one in 10 companies are satisfied with their employees’ level of engagement with pensions. Communications is at the heart of pension engagement. Punter Southall Aspire recently published a research report ‘It’s Time to Change’, 2 which offers fresh insight into how companies can transform and optimise their pension communications. As part of the research, 2035 UK employees were surveyed in July 2018. The research found four major issues are affecting pension savings which employers need to address to develop an effective pension communications strategy. These are: 1. Pensions aren’t a priority for everyone because ‘now matters more than then’ People are more concerned with their current finances than looking to the future. Competing financial pressures are partly to blame. Half of respondents are paying off a loan or credit card, 30% regularly use an overdraft facility and 45% have financial dependents to support. The need for instant gratification also plays a part. 88% would rather have £400 now over the chance of £800 in the future and 66% claimed they would be more likely to respond to communications that referred to ‘now’ rather than the future.

2. People fear for the future but aren’t taking any action Nearly half (46%) say their biggest fear for the future is not having enough money in retirement, but almost a third (30%) admitted retirement isn’t part of their current financial planning. 66% said they don’t know if they are saving enough for retirement. The reason for this could be that 78% of people are budgeting monthly, rather than looking further ahead and only 28% claim they stick to their budgets. 3. Apathy about pensions is widespread Nearly one in five of those aged 16 to 24 have no idea if they have a pension and 30% said they don’t think pensions are important. Almost a third (32%) couldn’t remember their contribution rate and claimed it was the amount the employer set as default. Another reason for this widespread apathy is optimism bias - three quarters believe their retirement will be fine, despite their inaction. 4. Employers need to consider stepping up their communications One of the major findings of the research was that employees want more support from their employer when it comes to pensions. 82% said they want their employer to guide them in a positive direction about pensions and 72% want them to educate them about planning for the future. 68% would also like their employer to keep reminding them to review their pension even if they don’t respond.



What’s the solution? Timing is everything. The research highlighted that effective pension communications resonate most if they are targeted at key points in people’s careers. Typical communication strategies tie into a yearly calendar, but companies need to rethink this. Pension communications received at the start of the calendar year only got a 53% response, whereas communications sent at the start of the tax year received a response from 68%. The research also found that people are more likely to react to communication about pensions during a time of benefit changes, a change of salary and when they leave a company. Pensions should be included in conversations about employee benefits and rather than rely on pension providers to issue their annual statements, companies should proactively educate their workforce and discuss the key benefits of saving regularly.


Effective communications should also move away from focusing on the risks and perils of not saving as these don’t work. Instead, companies need to use positive and relevant messaging and highlight the benefits of saving more. The best ways to capture people’s attention with marketing and communications materials is with ‘powerful imagery’, ‘humour’, ‘moving words’ and ‘colour’. Technology plays an important role too and tools such as financial dashboards can help employees become more engaged with improving their financial wellbeing and engaging with pensions and savings. Tools such as MyAspire, Punter Southall Aspire’s online financial dashboard, enable employees to view all their finances in one place. It includes interactive planning tools, videos and financial education delivered in bite size chunks and calculators that help employees plan their savings and retirement. Punter Southall Aspire have also created a 7-Step communications model which offers a bespoke and

strategic approach to improving pension communications. Understanding what employees want and how they would like to be communicated with can help companies deliver effective communications strategies that will improve pension engagement.

Johanna Nelson Associate Director, Communications Punter Southall Aspire References: 1

“Engaging with Staff on Workplace Pensions ‘Fundamental’ to Successful Retirements.” CBI, www.cbi.


“It’s Time to Change (g).”, itstimetochange_g.




Beyond Spreadsheets: How to Manage Changing Accounting Standards As the end of 2018 looms large, the new lease accounting standards 1  (ASC 842) is about to kick in for organisations, and corporate accounting teams are focused on getting ready. This isn’t an easy transition for many companies. In the interview below, we spoke with Tim Wakeford, vice president, financials product strategy, EMEA at Workday to understand the impact of the new lease standards, the challenges they create, and how finance should be thinking differently about compliance with these and future changes. How will finance organisations be impacted by the new lease accounting standards? There are two significant changes in accounting standards that will come at once and most accounting departments have been working overtime to make 70

sure they can meet these changes. In addition to recent changes in lease accounting rules, there are new standards for revenue recognition 2 for contracts. The new standards for leases (ASC 842 for U.S. companies and IFRS 16 elsewhere) require a significantly higher level of data collection, analysis, controls, and review than had been the case until now. Companies must adopt completely new accounting frameworks for contracts and leases and, for most, the accounting is more detailed and complicated than before. Most departments are experiencing heavier workloads implementing and complying with the new standards. And unfortunately, they’re being overwhelmed at a time when they should be stepping back and taking a comprehensive look at how best to handle lease accounting. They

especially should consider how to balance the needs of all stakeholders involved with equipment, IT and real estate leases while reducing administrative workloads and ensuring compliance. If we think about how accounting for revenue and leases have been dealt with in the past, this is quite a shift. Are we seeing some kind of trend at play here? In my opinion, this is the new normal as far as accounting standards are concerned. This is the world we’re moving to. Underlying the new standards is the aim of providing investors, analysts, and other users of financial statements with more complete and objective disclosures. These disclosures require richer well-controlled data sets and more insightful analysis than was the case


in the past. The new standards also are intended to be principles-based, which for U.S. companies is a switch from the more rules-based approach that was the norm. Principles-based accounting, which is more in line with how the rest of the world applies standards, gives businesses greater flexibility in applying a standard than a rules-based approach. At the same time, principles-based accounting requires enhanced process and calculation controls to ensure consistency of accounting treatments. The introduction of these new standards assumes that companies have IT systems and IT-supported processes in place for efficient compliance, such as the ability to gather a broader set of data from multiple departments and support the required analysis. However, many finance teams are still working in spreadsheets, which cannot support the complex processes and controls needed for compliance. To your point about control, finance teams continue to rely on spreadsheets for lease accounting. Do you see that being an issue when it comes to meeting the new accounting compliance standards? Well, despite what some might say, I think spreadsheets are still a massively important tool for finance. However, they’re the wrong choice for any repetitive, collaborative enterprise task like lease accounting. A study from Ventana Research shows that spreadsheets errorprone: 35 percent of organisations said they routinely find errors in data and 26 percent find formula errors in the most important spreadsheet they use. Because of errors and process issues, spreadsheets are the hidden productivity killer in finance departments. On average, people in finance spend 18.1 hours per month maintaining the most important spreadsheet they use. Accounting for leases is complicated because most larger companies and even some midsize ones typically have hundreds and even thousands

of property and equipment leases in force at any time. Lease data needs to be analysed to create journal entries. These entries will need to be reviewed and approved, which makes controlled workflows a necessity. Companies must be able to reliably capture a wide range of financial and non-financial data related to the lease and make it available in a single authoritative system rather than scattered across the company on multiple servers or individual hard drives. In the absence of a single source of the truth, departments will have to spend time on checks, reconciliations, and correcting mistakes. Spreadsheets circulated as email attachments aren’t the right choice. They unnecessarily multiply administrative burdens of lease accounting. The new lease accounting standards require periodic remeasurement of the lease. How does that affect finance departments and the systems they use? It’s worth saying that lease accounting is no longer static; all leases must be reviewed periodically and their value remeasured when necessary, such as when a lease has been modified. Even without a signed change to a lease, remeasurement may be necessary. For example, if options to renew aren’t likely to be exercised because a store is losing money, the lease obligation will be reduced on the balance sheet. This is a cross-functional process, where owners of the lease arrangement—the real estate department and operating managers—must methodically examine their leases and report any material changes that can affect their valuation to the finance department. Managing lease reviews and remeasurement often requires the use of complex models and formulas to assess the value of lease obligations, which is more difficult and time consuming to do in a spreadsheet.

Do you think now is the time for finance organisations to evaluate their current financial systems and consider whether they’re adequate to support the changing compliance landscape? Using spreadsheets for lease accounting will continue to be an ongoing productivity drain because of their inherent limitations. They were never designed to perform repetitive collaborative enterprise tasks. In addition, finance organisations should look beyond compliance with the new revenue and lease accounting standards and evaluate whether their financial management systems can handle similar accounting standards as they are introduced as well as the inevitable tweaks to–and changes in interpretations of–the new standards over the next several years. Large and midsize enterprises are adopting cloud-based financial management systems to support increasing regulatory change. Rather than requiring a company to perform its own modifications or reimplementation of software, the software vendor makes the changes, which are then available to their customers.

Tim Wakeford Vice President, Financials Product Strategy, EMEA Workday References: 1


Finance departments need a system that ensures that calculations are performed accurately and consistently with baked-in high-level controls and documented compliance.

“Readying Your Organization for New Lease Accounting Standards.” Workday Blog, 29 Sept. 2017, blogs.workday. com/readying-your-organization-new-lease-accountingstandards/. “In Good Company: Workday’s Adoption of the New Revenue Recognition Standard.” Workday Blog, 6 June 2018, blogs.





Cloud or on-premise? Selecting the right Purchase to Pay model for your business needs Helena Lindblad, Head of Product Operations at Palette, examines the different deployment purchase to pay (P2P) deployment models and provides advice on how businesses should approach the decision


s companies embrace digital transformation, many are migrating critical business applications to the cloud. Demand for these services has consistently increased year on year, and cloud-based solutions are being deployed across all business departments. Indeed, research suggests 1 that 79% of organizations had adopted SaaS applications in 2017, while SaaS accounted for nearly 69 percent 2 of public cloud deployments. The benefits of SaaS The increased demand for SaaS has largely been driven by the shift to the cloud which reduces workload for internal IT staff as well as required hardware capacity. With cloud solutions, staff can focus on the core business instead. These benefits can be further enhanced with a SaaS (Software as a Service) model as continuous upgrades are included in the package. Furthermore, cloud and SaaS solutions are scalable – when your business expands you can change your subscription and increase transaction volume without having performance issues due to more data. This also applies to P2P and as such vendors have developed SaaS solutions that make it possible to automate the entire P2P process with a SaaS offering in the cloud. This

enables P2P to be managed outside of the organization with no need for hardware investment, while removing the need for maintenance of servers and software. Depending on preference businesses can also select whether the offering is hosted in a shared or dedicated cloud environment. However, a cloud-based SaaS model might not be the best solution to meet business’ requirements. Depending on the requirements of the business it may be more appropriate to utilize an on-premise P2P solution. And if the cloud is the best option for the business how should an organisation decide between a shared or dedicated cloud environment? Evaluating the delivery models To evaluate which option is best suited for your organisation’s needs it is critical to understand how each model works, assess how the solution would work within your existing infrastructure and how this fits with any P2P project goals. As such the best-fit for your business will largely depend on the requirements of your organisation, existing IT infrastructure, IT investment strategy and internal security requirements. So let’s first take a look at each of the three models, how they operate and the strengths and limitations of each offering.

Cloud – shared environment With a shared environment hardware resources are shared between you and other customers. This requires the supplier to clearly delineate different environments from each other, so that business data cannot be accessed by unauthorized parties. It should remain possible to integrate the solution with locally installed ERP systems, although there may be limitations on integrating with other software, such as customized reporting tools. Furthermore you might not be able to set up communication via VPN channels, but integration would instead go through the organisation’s web service. It is also important to consider that many companies, authorities and organisations have an IT policy that does not allow a shared environment in the cloud. Cloud – dedicated environment The limitations of a shared cloud environment can be removed with a dedicated cloud environment. This model affords you much more flexibility in terms of possible customisation and integrations, enabling full integration with other systems and existing IT infrastructure.



Furthermore it can allow you to set up stricter and customer-specific routines with regards to accessing the solution. Although this type of solution is more expensive, large businesses will see significant return on investment from this model. In particular, organisations with significant volumes of invoices and/or transactions, and/or organisations with specific requirements regarding integration and security will benefit. On-premise The on-premise option enables businesses to manage both the operation and the maintenance of servers and software internally. As such you will retain control of the location of servers and will be able to tailor the level of data security as required. Integration with other systems, like reporting or business intelligence systems, is also a huge advantage of deploying an on-


premise solution. The same applies if you have geographic restrictions regarding data traffic – for example if data must not be stored outside of the country, an on-premise solution would be the only option. The benefits of P2P are well established but by assessing the different deployment models against business requirements and overall project goals, as well as how they would fit within your existing IT infrastructure, organisations will be able to maximise the return on investment that they can achieve from their P2P deployment.

Helena Lindblad Head of Product Operations Palette References: 1

Ukfadmin. “Finance Industry Stops £1.4 Billion in Gleif. “LEI Harris, Richard. “SaaS Adoption Is Increasing.” App Developer Magazine, 19 Sept. 2017,


“Worldwide Public Cloud Services Revenue Growth Remains Strong Through the First Half of 2017, According to IDC.” Halo Top Creamery Is Now the Best-Selling Pint of Ice Cream in the United States | Business Wire, 6 Nov. 2017, home/20171106005140/en/Worldwide-Public-CloudServices-Revenue-Growth-Remains.


Consumers crave deep connection – how financial providers can drive brand affinity through their data

Fast-evolving consumer expectations present one of the biggest challenges facing the financial services industry today. Consumers expect their financial institutions to deliver the same intuitive and dynamic digital experiences that tech giants like Amazon and Netflix offer. They are keen on hyper-personalized experiences that simplify their financial lives and help them make sound decisions. A recent Deloitte survey 1 of banking customers found that technology brands have established stronger emotional connections with consumers than their banks. Questions ranging from ease of use, the transparency of service terms and fees, and the consumers perception of the quality of the products and services each resulted with at least a 12 per cent gap between their rankings of favourite tech brands and their primary bank. To replicate the digital success of their tech counterparts, banks should consider: 1. Removing friction from the overall banking experience; 2. Supporting users through their financial decision-making process; 3. Understanding and anticipating users’ changing financial needs.

1. Simplify consumers’ financial lives by removing friction from engagements Tech startups like meal kit delivery service HelloFresh have found success in removing friction and inconvenience for their customers and taking the guesswork and effort out of everyday tasks. The Berlin based company gained early traction with customers in London, Amsterdam and Berlin as their young, urban customer base latched on to the concept of quick, simple recipes with fresh ingredients delivered seamlessly to their doorsteps. Well-designed user experiences and simple account management options allow customers to update their delivery frequency, select specific menus and pause delivery through the app. Convenience and compelling menus have helped propel HelloFresh’s growth beyond initial urban markets and they have seen rapid growth throughout suburban areas in Europe and the United States. Similarly, simplifying and removing friction from the overall financial management process will be key to creating an emotional connection between banks and their consumers. Digital banking consumers should be able to take care of all or most of their banking needs through their digital app of choice — open an account, apply for a loan, make a deposit remotely, and deactivate or reactivate a lost debit or credit card.  

Voice and chat channels are another great way banks can simplify the overall banking experience. Voice and chat offer an intuitive way for consumers to find answers to their questions, complete common tasks like transferring funds between their accounts, or pay bills. Additionally, these dialogues with consumers give a bank the opportunity to update consumers on new features in the pertinent context. Finally, analysing the exchanges generated through conversational interfaces can help banks prioritize the points of friction they should address next. Sa nta nde r wa s the f irst b a n k i n t h e UK to introduc e a voic e as s i s t a n t tha t a llowe d c ustome rs t o m a ke pay m e nts, c he c k the ir a cco u n t ba la nc e , re por t a lost c a rd , a n d a s k a bout the ir spe nding usin g a vo i ce a ssista nt. Ac c ording to Ed M et zg er, Sa nta nde r UK ’s he a d of i n n ova t i o n , the ba nk “sa w voic e te c h n o l o g y a s a n oppor tunity f or in- app b a n k i n g e x pe rim e nta tion not j ust b eca u s e of its rising popula rity, bu t a l s o be c a use it’s na tura l f or c u s t o m er s .” Use r c omf or t a nd f a m ilia r i t y with voic e te c hnology drove t h e a doption of this te c hnolo g y. 2. Support consumers in making sound financial decisions To help consumers make sound financial decisions, banks need to personalize 75


their support and provide guidance and recommendations. Amazon is a good example of how personalized recommendations are key to deepening relations. It’s estimated that Amazon’s recommendation engine generates 35% of all Amazon sales. Its recommendation algorithms seem to be based on a few key data points including a user’s purchase history, items in their shopping cart, items they’ve rated and liked, and what other customers have viewed and purchased. Amazon analyses these data elements and draws conclusions about recommendations that are then provided at the point of purchase or through email marketing. The key to their success is the personalization aspect. To emulate this type of experience, banks need to develop and implement a robust data strategy that moves them from a product-centric focus to a consumer-centric focus. This means breaking down internal data and operational silos to organize data around the consumer. Over time, banks should also consider mining unstructured data sources on their digital sites like search results and conversational data. They should also consider asking for consumer 76

permission to bring in external data sources to get a better understanding of the consumer’s overall financial picture. A mash-up of these data elements can enable banks to recommend the best products and experiences. An effective way of engaging with consumers is through monitoring their account and transaction level data, analysing the results, and pushing out helpful insights that they can take action on. Account level alerts that notify consumers about low balances or suspicious account activity is a good starting point, but more can be done. For example, consumers with high cash balances in low-interest accounts are great targets for highinterest savings account offers. An insight that notifies the consumer of the recommendation and offers a seamless way of opening a new account and transferring funds can help build goodwill. It also gives the bank permission to ask the user to invest more in the digital experience. As an example, the bank can ask the user to link accounts they hold at other financial institutions to go through the same monitoring process.

This is what we refer to as the “give to get” model. By providing tangible value to the consumer, the bank can ask for additional data elements from the consumer that help deepen the relationship and improve the overall experience. The consumer and bank are creating a virtuous cycle of data and associated value. 3. Understand and anticipate changing needs Finally, to make a true emotional connection, any experience should anticipate a consumer’s changing needs and adapt product offerings, guidance, and experiences accordingly. Netflix uses explicit and implicit data points to predict user preferences. Users tell Netflix about their preferences by giving explicit ratings to what they’ve just seen. Recently Netflix replaced its star rating system with a thumbs up/thumbs down rating “which is widely understood to imply that you are training an algorithm to know what you like,” according to Netflix’s Cameron Johnson. “That simple change led to an over 200% increase” in ratings.


Matt Cockayne VP of Sales EMEA Envestnet | Yodlee The inclusion of a “per cent match” number also reinforces the idea that these recommendations are personalized. Netflix also uses implicit data that tracks user behaviour and user profiles over time.

Author bio: Matt Cockayne helps

Envestnet | Yodlee bring about innovative and flexible data aggregation solutions to both new and existing customers in the fast-paced and changing financial services environment in EMEA. He is responsible for expanding Envestnet | Yodlee’s global sales footprint and identifying opportunities which unlock new business and revenue opportunities in the region. Matt has a wealth of experience having spent the last several years at Smart DCC and SunGard FIS where he was instrumental in managing revenue, P&L and business growth. Matt’s earlier experience includes scaling and running the EMEA commodities business for SunGard FIS and leading EMEA delivery organisations at OpenLink International and Allegro Development. Matt started his career at Accenture and has a Masters in Science from Imperial College London.

These two data types are critical components of the analytics model that generates personalized recommendations for Netflix subscribers. To anticipate their consumers’ needs, banks should consider building feedback loops into their experiences to capture user preferences and behaviour. Soliciting feedback on insights and asking users to share their financial goals can help banks personalize the overall experience and anticipate financial needs.   Significant investments in machine learning (ML) and artificial intelligence (AI) are needed to fully implement these initiatives but there is much that can be done in the short term. Embedding data derived insights into digital experiences can help simplify day-to-day financial management and acclimate consumers to engage and share feedback and data. The secret is to start small, iterate, and evolve capabilities over time. Remember that it’s not only your capabilities that need to evolve. Consumers will also need time to adjust to a more prescriptive banking experience. Listen. Respond. Tackle one issue at a time to create traction and build connection and trust. As Desmond Tutu wisely said, “there is only one way to eat an elephant: a bite at a time.”

References: 1

“Accelerating Digital Transformation in Banking.” Deloitte United States, industry/financial-services/digital-transformation-inbanking-global-customer-survey.html.




78 | Issue 14 44


Evaluating the emerging technology landscape With an array of new technologies coming to the fore that promise to transform transaction banking processes, Christopher Mager, Managing Director of Global Innovation, Treasury Services, BNY Mellon, examines their potential, and asks “are they truly game changers?”


ransaction banking is undergoing a period of change like never seen before. A number of factors are contributing to this – including regulatory demands, globalisation and the increasing presence of millennials in the workplace. Yet, without doubt, the one force that is having the most profound impact is the pace of technological change. Technology is evolving at an unprecedented rate, presenting new opportunities for the industry to revolutionise how transactions are initiated and executed. Technological change is being further fuelled by the emergence – and growing influence – of fintechs in the market. Banks are embracing the new digital landscape, with many exploring how new capabilities can be applied to bring added value to clients. However, with innovative technologies emerging at an accelerating pace, the challenge is determining which ones can solve a real problem and have the credentials to be truly transformative for our business. Understandably, the degree of change taking place can be somewhat overwhelming for many banks. Getting to grips with the sheer volume of acronyms that have recently entered, and are increasingly dominating, the transaction banking vocabulary – such as APIs (application programming interfaces), RPA (robotic process automation), AI (artificial intelligence), IoT (internet of things) and DLT (distributed ledger technology) to name but a few – can be a challenge in itself. But banks need to be able to deliver new solutions in line with the evolving, increasingly competitive landscape – and it is therefore crucial for banks to be clued-up on new innovations, their potential

applicability and commercial viability, and how they can benefit clients, when considering their innovation strategies. Three of the technologies that are derigeur right now are AI, DLT and IoT, and all are tipped to be potential game changers. Let’s examine in more detail what these technologies are – and their potential to transform cash and trade processes. AI AI is similar to RPA, which is the software automation of routine and repetitive tasks. The important distinction is that with AI, the machine has the ability to “learn”. AI applications can be programmed to utilise data to gather insights, detect patterns and trends, and then make recommendations with respect to the action to be taken. Importantly, the technology observes and monitors how those recommendations are then applied by human operators and applies this knowledge, meaning it improves its functionality with experience. AI is presenting a number of exciting opportunities to transform treasury, payment and trade processes. It is already being used in the industry for a number of standard tasks, such as compliance and fraud monitoring, and simple customer enquiries, with perhaps the most well-known application being that of chatbots and virtual assistants. BNY Mellon is currently exploring the potential to leverage AI in the OFAC sanctions scanning process. By being taught to recognise some of the common reasons for unnecessarily flagging, it could help to decrease the number of false 79


positives, thereby reducing the need for unnecessary manual review and, in turn, improving payment efficiency and straightthrough processing (STP) rates. The possibilities of AI also extend into more complex, higher value activities. Treasury management tasks, for example – including liquidity management, cash positioning and payment channel optimisation – could potentially be enhanced through AI. Such functions require a huge amount of data however, and establishing such capabilities would involve complex, sophisticated programming in order to ensure the AI performs effectively and delivers real client value. Introducing these capabilities would therefore take considerable time. Indeed, at this point in time – and likely for the foreseeable future – AI applications require significant structure, with precision around data and instructions imperative for ensuring accurate, usable outputs. For banks looking to implement AI, this must therefore be taken into consideration. A further challenge facing AI is concerns around its potential to impact the workforce. Yet, it is important to note 80

that the ability for AI to take on more human-like traits by contextualising information and applying common sense and reasoning – i.e. artificial general intelligence (AGI) – is believed to be many years away. Furthermore, machines are far from suited to every task. The most effective way forward is therefore to understand where AI can add value, and combine the capabilities of both humans and technology to deliver optimised services and solutions. DLT (or “blockchain”) DLT could potentially be transformational for financial services. It is being explored across a range of processes, where it could deliver enhancements including reducing costs and risks, removing unnecessary and duplicate processes, and increasing efficiency, transparency and security. The concept of distributed ledgers – inviolable databases that are held and updated independently by each participant (or node) in a large network, without the need for a central authority 1 – was first proposed in the 1960s. However, it was not until the creation of Bitcoin and the blockchain

technology underpinning it that the technology began to generate interest on a large scale. Indeed, many financial institutions across the globe are now invested in advancing the concept, with numerous initiatives underway. In fact, what is believed to have started (in the case of Bitcoin) as an attempt to disintermediate central banks, large financial institutions, and financial market infrastructures (FMIs) by challenging traditional means of financial value exchange, may in fact become an integral component of those very institutions’ infrastructure – thus helping to secure their viability, strength and adaptability in the modern, increasingly competitive banking world. There are many projects underway that are exploring the use of DLT in transaction banking. One initiative in particular, which holds real potential to transform payments and reduce risk, is the Utility Settlement Coin (USC) initiative. A consortium comprising of 17 banks – including BNY Mellon – an FMI, and DLT technology company Clearmatics, USC is aiming to create regulated digital tokens representing the main fiat currencies, backed on a one-to-one basis by cash deposits at respective central banks. The concept centres on the fact that, as these tokens would be trusted digital currencies (without the risk and volatility of unregulated cryptocurrencies), it could therefore also be possible to bring the asset clearing and settlement processes of FMIs – the asset exchanges – onto the same or compatible ledgers, along with the financial settlement of the asset exchange.


These utility settlement “coins,” exchanged and tracked on a shared permissioned ledger, could therefore be the means of financial settlement for atomic transactions, where either both the asset exchange and payment happen near simultaneously, or neither happens. This could be transformational; significantly reducing settlement and counterparty risk, as well as reducing costs, collateral needs, and improving liquidity management. With its potential to disrupt legacy payment practices, as well as other use cases involving value transfer, there is much hype around DLT, and it continues to be a hot topic across the finance industry. Yet, it remains in the early stages of development, and many challenges are still to be overcome – including regulatory uncertainties, the development of standards, interoperability, achieving large-scale adoption or the “network effect”, privacy concerns, and potential cost savings. The challenges that must be addressed to deliver real transformation through DLT are extensive, and many of the applications being explored will fizzle – due to either a lack of viability or simply because DLT is not the optimal solution to a particular problem or inefficiency. Indeed, as with AI, DLT is not the “cure for all ills”. Also, it is important is to remember that the purpose of technology innovation is typically to harness it to solve a specific problem, rather than search for a problem that a new, cutting-edge solution could potentially address. Despite the obstacles however, DLT has already been launched for a number of financial market applications, and intense exploration continues for additional high-potential use cases. IoT The Internet of Things is an emerging technology that is even newer than

both AI and DLT. But as it becomes increasingly accessible and usable, it is starting to make significant waves in the transaction banking arena. The growth of IoT is being driven by two key developments. Firstly, advances in technology have enabled actuators and sensors to become smaller and lighter, allowing them to be integrated into all sorts of devices. Secondly, these devices can now connect to the internet for communication with owners, businesses – and even other devices. This is creating a multitude of opportunities to monitor and control these devices remotely, and even autonomously, and also leverage the data they generate. Many of the current or envisioned examples are centred upon eCommerce, with a service or good provided and a payment made for it – for instance, machinery that can predict maintenance needs and self-schedule for such. Additionally, IoT could also fuel the emergence of entirely new business models, with a shift away from paying lump sums for outright ownership of goods, to pay as you go usage models. With devices connected to a manufacturer’s data centre, it is possible to use sensors to track their use, meaning consumers or businesses could pay on a per-use basis rather than owning a depreciating asset – be that household goods or industrial equipment. This would result in different payment and trade flows, completely new financing models for the manufacturer due to altered revenue streams, and new finance processes; all of which would require support from financial services providers. While the majority of IoT eCommerce activity is currently consumer oriented, commercial IoT applications are set to grow, and banks need to be aware of the evolving landscape and how it could affect their clients – and prepared to adapt and support them accordingly.

Of the three emerging technologies examined here, AI is the easiest to deploy, with the fewest external variables to overcome; IoT is also easy to implement – although countless applications will likely emerge over many years. DLT is the technology with the greatest hurdles to overcome, and will therefore take the longest to become widely applied. However, given the promise it holds, the industry is likely to persist in finding ways to bring DLT to fruition. The innovations touched upon here are just some of the emerging technologies that could enhance banking processes. While many may generate inflated and, in some cases, unrealistic expectations, there is no doubt that the potential is there. It is up to us to ensure they fulfil that potential – by obtaining a thorough understanding of the evolution taking place and implementing an optimised innovation strategy – and ensure they are applied effectively and to the benefit of our clients. The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.

Christopher Mager Managing Director of Global Innovation, Treasury Services BNY Mellon References: 1



Deploying the right technology will go a long way to helping finance teams comply with GDPR I

t’s fair to say that, since coming into force, the General Data Protection Regulation (GDPR) has been viewed as a headache for many businesses. This strict legislation brings greater accountability into how organisations process, store and secure their data. The problem is that many hold their data in a multitude of locations and, worryingly, some don’t even know where or how all of their data is stored. Complying with the GDPR, then, becomes extremely challenging. But the regulation isn’t going away – it’s a necessity that all businesses must adhere to. Moreover, the GDPR affects every department in the organisation that holds data – finance included. Compliance can’t be left to the legal experts alone.

compliance, which are often seen as repetitive, time-consuming and, quite frankly, boring. Data can be processed, stored and secured with automation tools much quicker than humans can – and without error. This in turn helps minimise the level of cyber risk and actually improves an organisation’s security. An automated cloud-based document management system, for example, stores, manages and tracks electronic documents and electronic images of paper-based information, in one secure place. It also helps organisations meet GDPR compliance requirements by providing traceability on all documents. This can support them on a range of issues including: •

Achieving GDPR readiness requires everyone to reliably streamline all personal data held in various documents and emails held across disparate systems, network folders, and even those still in paper-based storage. Deploying the right technology will go a long way to helping organisations and their staff manage personal data and comply with the GDPR. • The right technology One technology that can help is Robotic Process Automation (RPA) – also simply referred to as automation. These software ‘robots’ can automate many of the tasks involved in the manual implementation of


The right to be forgotten – locating and erasing all data on an individual is a time-consuming and difficult task, especially if it’s spread over many different sites and locations, duplicated or even lost. By automating the storage of files into one location, finding and erasing the relevant ones is a much simpler and efficient process. Consent – consent rights have been strengthened for individuals under the GDPR. Organisations must not only be able to prove they obtained permission to store and use data from an individual, but supply electronic copies of private records on-demand. Automation can make this task far less difficult.

Privacy by design – the GDPR also talks about ‘privacy by design’, whereby data protection is hardwired into the processes and behaviours of the organisation. Automating key processes encourages everyone to work to the same procedures, and can also show strong compliance by evidencing all communications and involvement with a client, as well as controlling who has access to what data.

The right to access – individuals have the right to access their personal data. The information provided to the individual must be done using ‘reasonable means’ and within one month of receipt. By automating information into one system, it can be easily accessed, and efficiently sent to the individual within the set timescale. All actions will also have audit trails and documents cannot be accidentally deleted, providing confidence that the right data can easily be passed on.

The right to data portability – this allows individuals to move, copy or transfer personal data easily and securely from one IT environment to another. Fulfilling this request is made simple with automation. All the information can be easily located, retrieved and sent on within the set timescale in an approved format.


Breach notification standards – the GDPR introduces a duty on all organisations to report certain types of data breach to the relevant authority, and in some cases to the individuals affected, within 72 hours of becoming aware of it. A breach can be identified and reported immediately using with automation, which is almost impossible to do when dealing with paper documentation in various locations.

Of course, automation will never take away an organisation’s compliance responsibilities, but it can certainly help make the journey to compliance less stressful. And it will only work if there is a willingness from the workforce to adopt it. Employees have to see the value in using automation to achieve compliance and not see it as a hindrance to their role. So how can businesses ensure this happens? The simple answer is regular training and awareness. We often hear that end-users are the weakest link when it comes to data security and

that businesses must provide staff training programs. These, we also know, must be relevant and frequent if employees are to really keep the GDPR in mind. But what organisations mustn’t fail to include is technical training support – that is to show staff what tools can aid GDPR compliance and how they can help them do their jobs better. Automation can be a positive force for just about every business process in every industry in the world. Imagine the impact it would have if it enabled every organisation to put its data in order and comply with the GDPR. There’d be far less headaches for sure. The bottom line? Don’t ignore automation’s potential. It can transform your firm’s approach to privacy, harness the value of data, and ensure it is fit and secure for the digital era. The GDPR is already in effect, but it’s not too late to review your current technologies.

Dean McGlone Sales Director V1



Six types of video distribution technology and why you need most of them Flawless delivery of video across the enterprise requires a sophisticated combination of behind-the-scenes technologies


ideo files can be large and bandwidth-intensive. As a result, the growing need to stream both live and on demand video over corporate networks can - and often does have a negative impact on network performance and user experience.

Technology #1: Unicast

But why is video distribution important? Although the vast majority of end users will never know whether their video is being delivered via Unicast, Caching, Multicast or some other method, the video distribution technology being used has a significant impact on overall user experience and engagement. In fact, studies have shown that viewers will abandon a video if their content doesn’t stream within 2 seconds and after only a few seconds, you can lose a quarter of your audience.

Unicast Pros and Cons – Unicast is a simple, mature and reliable technology requiring minimal configuration and is also supported natively by most network devices. However, establishing a single and dedicated stream for each user causes significant network load when viewing volume is high. To use Unicast successfully in high-volume environments, most companies will be required to deploy Edge Servers at key sites to ensure video is served as locally as possible.

What are the most common video distribution technologies? There are six primary video distribution technologies in use within the enterprise today—and each plays an important role within its specific use case and network environment. Additionally, because large companies typically support multiple use cases across the enterprise, most will require a combination of two or more distribution technologies. 84

Unicast distribution is the simplest form of streaming video within an enterprise, i.e. sending video from a single media server directly to a single recipient.

Technology #2: Caching Caching is a technique that involves storing on demand video content on multiple servers (called Media or Edge Servers) across the network - meaning Caching only applies to on demand video and not live video. When a video is requested by a user, it is automatically stored locally on an Edge Server so that other users in that region or network area may access it.

Caching Pros and Cons – Caching video content on Edge Servers greatly reduces the number of times a single video asset is pulled across a WAN, which both accelerates video delivery and reduces bandwidth usage. But on the flip side, Caching requires the added expense of additional infrastructure. Technology #3: Multicast Multicast involves streaming live video from a Source Media Server to a group of secondary hosts or recipients on a network. A good analogy would be a radio broadcast - the server simply “broadcasts” a video signal and whoever wants to tune in may do so. Multicast Pros and Cons – The biggest advantage of multicast is that it minimises WAN traffic because requests for video assets are not being sent across the network. While this is a key advantage, Multicast is only applicable to live video and requires significant additional management resources. Multicast also requires Multicast-enabled network equipment, browser plugins in most cases and is often not supported by Wi-Fi networks or mobile devices.


Technology #4: Peer-to-Peer (P2P) Peer-to-peer distribution allows devices on the network, like two employee laptops for example, to connect and share video directly from one to the other. P2P is gaining momentum in the enterprise as of late with the emergence of WebRTC, which allows video to be shared directly between browsers without apps or plugins. Peer-to-Peer Pros and Cons – Peerto-Peer can significantly minimise WAN traffic, because the video asset is being streamed from a peer instead of a Source Video Server. P2P is also especially useful in companies with many branch offices, where it is impractical to deploy Edge Servers at each location. However, Peer-toPeer configurations may still require software and storage on each peer device, and may not include native support for mobile viewing.

Technology #6: Virtual Desktop Infrastructure (VDI) VDI is a technology used by many large enterprises to give mobile and thin client devices a centrally controlled set of applications and data - such as a Citrix solution - and therefore a standardised end-user experience. VDI environments are notoriously challenging to provide acceptable video to users at scale, due to the inherent performance limitations in virtualised computing. VDI Pros and Cons – VDI optimisation allows companies to offload video traffic from the Citrix server to an Edge Server, which not only dramatically minimises WAN traffic but also makes “desktop equivalent video” possible for thin client and mobile devices. However, there is one significant caveat: VDI environments are complex and the solution provider must be experienced in delivering VDI video solutions at scale.

Technology #5: External CDN Wrapping it all up External Content Delivery Networks (CDNs) such as Akamai, Amazon CloudFront, Level 3, and Cloudflare are paid services that utilise the internet to deliver video. While not a distribution technology in and of itself, an external CDN can be beneficial as part of the distribution mix in certain use cases.

choose one or more of them for your environment, you can simplify the process by checking out some realworld examples and case studies and also by getting help designing your video network. A well-designed network - one that saves costs and delivers a great user experience - begins with everyone on the team understanding the technical challenges and strategic objectives of the organisation.

Vern Hanzlik President & CEO Qumu

There are multiple types of video distribution technologies and, while it might seem overwhelming to

External CDN Pros and Cons – External CDNs allow organisations to offload video traffic from an internal network and can be a great way to deliver video to remote users on VPN connections or in branch offices with local internet connections. But as with any external connection, companies must ensure that security requirements are met and deal with internet gateway infrastructure and configuration requirements for branch offices and VPN access. 85


Predicting the impact of Artificial Intelligence in 2019


rtificial Intelligence plays a significant role in every aspect of business. We spoke to Russell Bennett, Chief Technology Officer at Fraedom about the impact AI has on banking and developments taking place in 2019. What areas of banking has AI had an impact in 2018 and how might this develop in 2019?     While the term ‘artificial intelligence’ (AI) has been around for decades, the technology’s pace of evolution has grown exponentially in recent years. That’s because AI is incredibly complex and doesn’t represent a single technology. Rather, it’s a multidimensional field encompassing a range of different technologies and methods, each supporting and supported by the others.   There’s a lot to be said about the impact of Artificial Intelligence generally - and Machine Learning (ML) more specifically, in our lives. Whether it’s from an individual consumer or business perspective, these terms are slowly, but surely, making their way into our daily vocabulary. Of course, banking and the finance world more widely, are not excluded from this. On the contrary, if AI’s benefits and limitations are understood, it’s believed this technology will have a tremendous impact on the industry. Speaking of benefits, we’ve already seen AI add value to financial institutions in areas such as: credit risk management, risk and finance reporting, trading floors, customer relationships and of course, security.   86

But I’d like to focus on two areas in particular: 1. Chatbots and virtual assistants: According to a report released by Juniper1 Research, chatbots will be responsible for saving companies $8 billion per year by 2022. Furthermore, a report released by Gartner2 suggests that by 2020 consumers will manage 85% of their total business interactions with banks through fintech chatbots. However frightening this may seem to the banking workforce, there should be little concern. Banks seem to be looking at AI as a tool to help release pressure points, rather than a replacement for employees. “We would like to use AI to bring smarter solutions to our customers and be more effective in our decisionmaking processes,” says Dutch banking group ING in topical FT research. “As such, rather than ‘AI replacing workforce’ we believe in the power of an ‘AI empowered workforce’.3”   In March 2016, Santander became the first UK bank to launch voice banking technology4. Of course, they are in good company today, as a large variety of global banks have adopted this technology in one way or another. JPMorgan Chase, Wells Fargo, HSBC, Capital One, to name just a few.   The Santander example acts as evidence to suggest that banks are looking at utilising AI beyond chatbots.

In July 2017, they also announced that its venture capital arm has taken stakes in two start-ups in the artificial intelligence space. “AI is an area where we see significant potential for things like reducing costs and improving efficiency,” Mariano Belinky, managing partner of Santander InnoVentures, said in an interview. “It’s a very disruptive technology and can bring significant change to our processes. It goes beyond chatbots to areas such as automation and natural language processing5.” 2.

Security, compliance & risk management: One of the key differences between AI applications6 and other, more traditional technological solutions, lies in AI’s ability to continuously learn from the data it is supplied with, hence refining its decision making processes over time.

Cybersecurity is a current hot topic for the financial services sector and regulatory compliance is another. AI can add real value in both of these areas. ML platforms can be coded to identify user patterns and detect anomalous network behaviour, something that’s increasingly essential as cyber-attacks are often disguised with normal looking data or code.   Similarly, take companies like ComplyAdvantage for instance. Their mission, ‘to build the best data and technology to stop money laundering and terrorist financing’


is admirable, yet ambitious. They effectively promise to solve two of their customers pain points: 1 - cost reduction on compliance with Anti Money Laundering (AML) regulation and 2 – an increase the number of illicit funds caught every year. This is not currently possible without the use of AI.   ComplyAdvantage have clearly identified a big data problem and have leveraged technology to create what they claim to be the world’s first AI-powered database on people and companies that pose financial crime risk. And with solid backing from one of the largest European venture funds and over 350 customers around the globe, they seem to be doing pretty well so far.   What customer service technology could have the greatest impact in 2019?   In a study we recently conducted on the UK and US SME market, we found that less than 20% of Small and Medium Business owners in both regions

thought that banks their organisation had dealt with over the past year fully understood their needs as a business. There’s clearly a disconnect and lack of engagement between banks and their smaller customers. Even more troubling is the fact that SMEs make a major contribution to the health and vitality of most local, regional and national economies. They act as a crucible of innovative new ideas and a cradle of entrepreneurship. SMEs should, therefore, be understood and appropriately serviced by their banks.   In these situations, intelligent automation could well be the much-needed answer. Using automated data collection on an ongoing basis, behind the scenes, can ultimately ensure bank relationship managers are better equipped with indepth knowledge about their customers; hence best positioned to support their business and provide a better service. Not to mention the time saved for the relationship manager who wouldn’t have to manually collect data about their

customers and enter it into a system. What major transformations have taken place in banking to improve the customer service in 2018?

Over the past 5 years, technology has been a disruptor and an innovator – it is fundamentally changing the way we do business. Technology is increasingly helping shape customers’ wants, needs and expectations and with a new raft of regulation encouraging the use of technology in banking, there’s nowhere left for anyone to hide. The technology revolution is in full swing and for banks, it’s very much adapt or die.   But how can banks cope, when they don’t necessarily have the tech knowledge and expertise in-house and are burdened with incredibly complex legacy systems? Well, the obvious answer seems to be partnering with fintechs. So, I’d say this is possibly the biggest shift in banking of



late. Fintechs today are incredibly diverse, nimble, they understand technology but crucially, they also understand customer relationships, so they are best placed to support banks in this area.    The PSD2 directive requires banks to open their payments infrastructure and customer data assets to third parties that can then develop payments and information services to their customers. In some ways this legislation heralds a movement towards the third party eventually ‘owning’ the customer relationship. This is far from making banks obsolete, as banks would still be primary holders of the customer’s financial information. But it certainly does point to a future where financial institutions work seamlessly with third parties and fintechs, not against them.   What does the future hold for banks that adopt artificial intelligence?   Although I think the answer to this question isn’t clear-cut, I do believe that AI has the potential to completely revolutionise banking and redefine how banks operate, what innovative products and services they create and how they evolve the customer relationship. Understanding how to best leverage AI, with its benefits and limitations, could drive much needed growth, profitability and sustainability for banks in a fiercely competitive market. It could well provide the key differentiator for their customer base; whether it’s the regular customer with personal bank accounts or large, medium and small enterprises, in a commercial banking context.    Any other technology focused predictions in banking for 2019?   Looking into our own business, I’d like to talk about how we are using Machine Learning to push the boundaries of what we know to be


possible within Expense Management. Our investment in Machine Learning is attributable to driving efficiency. It forms a key part of achieving our ‘Touchless Transaction’ vision where we intend to completely automate processes which have traditionally been completed manually. Of note are two pilots currently in advanced production testing. The first, seeks to automate user expense coding based on the system learning from previous expenses while the second is focused on identifying anomalous spend data. Both pilots provide significant value to customers of the Fraedom platform and provide an increased level of transparency and control to business spend. Machine Learning pilots within Fraedom are focussed on defining our data modelling approach and ensuring scalable solutions can be delivered to our global market. Future uses of Machine Learning include budget forecasting to better assist businesses in understanding how past spend pattern can affect forward planning, and autonomous credit limit management to assist businesses with better utilising their credit exposure.

Russel Bennett CTO Fraedom References: 1

“Mobile Banking Users to Reach 2 Billion by 2020, Representing More than 1 in 3 of Global Adult Population.” Singapore Named 'Global Smart City – 2016', www.

2 customer-360/C360_2011_brochure_FINAL.pdf


Noonan, Laura. “AI in Banking: the Reality behind the Hype.” Financial Times, Financial Times, 12 Apr. 2018, content/b497a134-2d21-11e8-a34a-7e7563b0b0f4.


“Information Detail - Santander UK.” Www., infodetail?p_p_id=W000_hidden_WAR_W000_ hiddenportlet&p_p_lifecycle=1&p_p_state=normal&p_p_ mode=view&p_p_col_id=column-2&p_p_col_pos=1&p_p_col_ count=3&_W000_hidden_WAR_W000_hiddenportlet_javax. portlet.action=hiddenAction&_W000_hidden_WAR_W000_ hiddenportlet_base.portlet.view=ILBDInitialView&_W000_ hidden_WAR_W000_hiddenportlet_cid=1324582275873&_ W000_hidden_WAR_W000_hiddenportlet_tipo=SANContent.


Yurcan, Bryan. “What Santander's Latest Bets Say about the Future of Fintech.” American Banker, 12 July 2017, www.

6 Documents/risk/lu-ai-and-risk-management.pdf


The future of fintech and digital banking In 2019, we are going to see a continued wave of new robo-advisory offerings in wealth management. There are around twenty significant players in the UK market, but these are mostly from brands which only have a short history in the sector. The choice will improve in coming months as the digital leaders among established wealth management firms and private banks roll out their own robo-advisory services. This shift towards robo-advisory solutions is not only creating new commercial opportunities for specialist wealth managers but is also significant for banks. Banks globally see a lot of inactive cash savings sitting in customers’ accounts, but they haven’t got enough information to know how to recommend investments to their own clients. Using digital onboarding and quizzes to get consumers to identify their goals and risk appetite means a bank has far better understanding about what to recommend. If a saver can get her money to work harder, and the bank now has a clearer picture of a more engaged customer, that’s a win-win. So, in 2019, expect to see banks start to nag customers about uninvested cash, and it will be interesting to see the devil in the detail of how they choose to approach this.

The potential of open banking The sec ond shif t tha t I e x pe c t to see ha ppe ning in 2 0 1 9 is the real i sation of the pote ntia l that open ba nk ing ha s f or the we alth manage m e nt industr y. Aware ne ss w i l l be le d by priva te ba nk s, whic h have to c om ply with PSD2 a nd so are fur t he r a he a d in im ple me nting publ i c APIs. The se priva te bank s w i l l bec ome ve r y signif ic ant channe ls f or the we a lth ma na ge rs w ho can pa c k a ge the ir digita l offeri ng a nd e nte r into inte gra tion par tner ships. We’ve se e n this w ork i ng we ll be twe e n c ha lle nge rs, and there’s going to be nothing to stop es ta blishe d bra nds ta k ing a si mi l ar m a rke tpla c e a pproa c h. As soon as more traditional wealth managers see the commercial benefits of connecting better with a fast-developing ecosystem of financial innovation, they are going to prioritise open banking in their ongoing digital roadmaps. Individual investors may not know or care much about the phrase ‘open banking’ but they will certainly demand the features and convenience. But there are other technology trends that the banking industry needs to keep an eye on.

The top 4 trends to watch in 2019 AI and ML in WealthTech Human wealth managers are more burdened by the volume of data than ever. To tackle cognitive overload, the industry needs cognitive technology. AI working on market and portfolio analysis in the background can surface insights that help human relationship managers do a better job. An example of this is banks introducing technology for keyword analysis and smart indexing from voice call history. Customer Experience takes centre stage Another example of a more cognitive approach to technology is the addition of prompts and advice into digital banking interfaces, so that BI gets more of a CX makeover: banking customers and investors don’t just want graphs, they want to know what it’s telling them. In 2019 we will get closer to this as financial apps compete to make their notifications more personalised. Hybrid robo-advisory services Easy switching for clients between self-service, chat, and video call support when they need assistance from expert advisors. The traditional approach of travelling to meetings in a 89


physical branch or office is off-putting to the modern investor, but they still want the human touch, and this is a big differentiator for established wealth managers to deliver well. XaaS In 2019 with the increasing connection of financial services via public APIs and marketplaces, we’ll see a greater incentive for FIs and partners to design their business models to be available “as a service”. Done right, this is a win-win in banking technology, as the institution reduces costs and increases agility. In the underlying technology, everyone is looking to develop solutions on low-code platforms, making systems easier and more reliable to run, while prioritising performance for the end user. Medium-term trends Voice interface The wealth management sector is looking set to increase its offerings of voice interface add-ons. This


could be, for example, through home IoT devices - “Siri, tell me how my portfolio is doing”, or perhaps a daily financial summary in your bathroom mirror! This will work well for active investors and lead the way to further voice integration in what’s becoming known as “conversational banking”. Voice can help all kinds of investment services make their notifications smarter, providing contextual audio alerts for news or market changes, personalised to an investor’s interests and portfolio. Augmented reality in everyday financial applications While gaming is embracing fully immersive AR experiences, this has yet to go mainstream in the business world or with productivity apps. In the medium term a partial approach with AR through a mobile or tablet screen has more immediate use cases. One example is the ability to point your phone at a bill and get an overlay hovering over it to say whether you have sufficient funds in your bank account (or even if you’ve already paid it).

Cryptocurrency integrations for investment portfolios Many investors are taking cryptocurrency seriously as part of a diversified portfolio, so we’ll see digital wealth management platforms present valuations alongside traditional assets, as well as start to implement API-based trading facilities in partnership with leading exchanges. Cryptocurrencies will remain a speculative and highly volatile investment class in 2019 but that will attract certain types of investors to keep experimenting. Longer-term trends SI: Swarm Intelligence This is an emerging technology to keep an eye on, as quantitative trading strategies look for ways to improve their modelling of complex financial systems. Asset managers who already know how to model predictions will get a competitive edge from exploring hypothetical scenarios more intensively than via traditional methods. For the technology providers, simplifying access is the prime challenge.


Blockchain While cryptocurrencies have gained headlines, the underlying technology is steadily maturing into serious business propositions, and I expect to see select players in asset management and treasury taking advantage of Distributed Ledger Technology in 2019. A number of start-ups are already promoting the idea of the “blockchain bank” but I expect this to take a while to prove in practice before receiving backing from major institutions. AGI and quantum computing I expect more banks will start thinking about the applications of Artificial General Intelligence and quantum computing. Businesses should consider when, not if, the ‘thinking’ power of AI in fuzzy realworld problems will overtake human abilities, probably by a combination of software development and raw computing power. Banks and financial services looking ahead ten years, or more, should consider what money, payments, and investing will look like at this

time – and that includes AGIs as customers. If High Frequency Trading changed financial markets forever, imagine hundreds of superintelligent (probably corporate) minds competing for investment performance and leaving the human analysts in the dust… hopefully not literally!

accelerating the open banking revolution, the business as a whole needs to plug into hundreds of other specialist services and experts, and in turn contribute its own expertise in more autonomous, distributed, and focused ways throughout the ecosystem. The business of the future has to look much more like a swarm than a mainframe.

Don’t go it alone One thing really stands out when you try to survey the multiple threads of technological progress that are weaving to form the future: there is simply too much going on for one specialist or one sector-specific business to keep track of… let alone develop innovations for. This means the key strategic posture to be “future-ready” is to welcome collaboration, systematically and throughout the organisation. Being closed-off means missing out. No organisation can stand alone and thrive in the ultra-fast, ultracomplex near future. Like the APIs and microservices which are

Jo Howes Commercial Director CREALOGIX UK





Understanding AI’s impact on the office of finance Neural networks and deep learning are making CPM even more powerful, enabling CFOs to become a more effective, more responsive, more nimble source of business insight


orporate Performance Management (CPM) software is now well established as a fundamental IT system for the office of finance. But with the push for operational excellence now hitting all areas of business, CPM needs to evolve too. It needs to deliver new efficiencies to the office of finance while enabling CFOs to provide data-driven insights to their senior executives.

Company finance teams typically spend about 80% of their time on 1 manual tasks like gathering, verifying and consolidating data, leaving only about 20% for core responsibilities like analysis and improving the accuracy of forecasts. That grates against the trend for CEOs to demand more from finance teams. Senior executives want more granular analyses with data-backed assumptions driving forecasts and budgets -- and they want them faster and more frequently.

That means taking CPM’s automation features to a much higher level, making them ‘self-driving’ in many ways and freeing people up to focus more on value-adding work. Decision-makers can be supported with new perspectives on the business, while finance team workflow becomes much more forward looking. By building artificial intelligence (AI) into CPM software, it can actually teach itself to process transactions, identify inconsistencies, and execute processes automatically. Taking advantage of neural networks and deep learning technology means automation of finance processes can go even further; creating systems that can automatically learn and improve with experience as they process and analyse new information. The practical impacts on the office of finance range from the generallypositive – saved time, reduced costs, increased productivity, and better accuracy – to the transformational: •

CFOs will be able to generate AIenhanced forecasts that apply deep learning on available actuals, while considering other data sources to better predict future outcomes.

Input error checking happens instantaneously with data anomaly detection capability. This provides automatic feedback while data is input and eliminating the need for a forensic retrospective analysis when the numbers don’t add up.

AI-enabled CPM automatically analyses every entry based on available data and when it notices a conflict or a figure that seems out of place, it automatically suggests a correction.

AI-enabled CPM is also helping CFOs improve collaboration with other senior decision makers by simplifying access to common sets of meaningful data.

As wide-ranging as those benefits can be, AI is not coming for your job. It is however coming for the office of finance. As the technology improves it will become better at providing quick and accurate analyses. CFOs don’t want to replace their employees, but they do want to make better financial decisions, and AI will allow them to do that faster and at lower cost. As finance teams start to use AI-enabled CPM more, we can expect to see a shift in the demand for skills. Administrative and number-crunching roles will decline, while roles requiring creativity data-driven, decision-making, problemsolving, and critical thinking will grow. To make intelligent preparations, CFOs need to be working now with senior colleagues in IT and HR to assess how quickly AI is being adopted in their sector so as not be put at a competitive disadvantage; then scope the the finance needs, processes and roles that can be

Matthias Thurner Chief Product Officer Unit4 References: 1

Adaptive Insights; Q4 2017 CFO Indicator Report



Electronic Receipts One of the unplanned effects of modern payment methods is that we are becoming less aware of the price we pay for things. As we tap and go through transport turnstiles, and at the many thousands of locations where we use plastic to pay for our coffee, our lunch or whatever, the price of the things we buy has been relegated to the background. For those fortunate enough to have enough wealth not to account for every penny, these transactions disappear in the plethora of digital noise that surrounds our lives. For those less fortunate however, it makes the business of managing their money far harder. Cynically, it also allows retailers, transport providers and others to increase their prices without the consumer always being fully aware of the insidious increases. The primary driver of these changes has been the introduction of contactless payments. This increasingly successful payment method comes with the expectation that we won’t receive a receipt for the transaction, and, as a direct result, the chance to reflect on the price of individual items purchased has been removed. A further cause has been the introduction of card on account, one-click shopping services, such as those offered by Amazon and many others. These distance the buyer from the act of consciously considering the cost of the item and make shopping a therapeutic activity rather than a financial transaction that has to be paid for from available funds. And the ever growing move to link online shopping services to instantly arranged lines of credit, only serves to further separate the act of shopping from its financial consequences.


For those in society able to manage their finances effectively; those happy souls who studiously go through every payment card statement and account for every penny, this situation offers no real threat and many opportunities. But for others, it is a world that offers unaffordable temptations and stealthy price rises. One way of rebalancing the system would be to ensure that an electronic record of what has been purchased, and, importantly, the price paid – an electronic receipt - is easily, if not instantly, available to all, weherever and whenever a payment product is used. This would require either a standardised approach that was adopted by all providers, or a collaboration between providers and the agreement to operating a shared, centralised, service. Collaboration, or standardisation, is needed to protect both the consumer and the merchant from the need to have multiple ways of sending and receiving receipts. Commercial attempts to deliver e-receipts have struggled to overcome this problem - and businesses would benefit greatly from an ability to deliver their service from within a standardised, shared environment. Standardisation should also address the form and design of the core elements of both e- and paper receipts. For those who do check their receipts against their statements, or for those completing expense claims, the current wide variations in receipt design, and in the presentation of key information, is frustrating and time consuming. And many receipts contain information that is largely irrelevant to the consumer, unnecessarily consuming paper that simply ends up in landfill sites.

A move to e-receipts on a nationwide basis would save millions of paper-rolls, reduce retailer costs, improve pricing transparency and support money management for all consumers. It would supress devious price rises and provide an opportunity for innovative businesses to provide a variety of technology based services built on the back of the information flows created. It may also allow the tax authorities to gain further insight to expenditure, and make it easier to assess tax. In the past, the UK has been very adept at creating shared infrastructures to support such endeavours. But whilst Open Banking is designed to address access to accounts, and may offer some support for this idea, it cannot address the need for purchase based information. Therefore without a specific and common approach based on UK regulation, and changes to the law governing receipts, the benefits of electronic receipts cannot be realised for the country, its merchants, consumers or tax authorities.

Adrian Cannon Managing Director


Fintech for good – fighting financial exclusion with innovation Fintech is rarely written about or described in the context of how it can help local communities or low-income households. More often than not, media stories focus on how financial technology has propelled a challenger bank into the limelight, about upand-coming providers securing new funding or how Fintech is improving efficiencies and cost saving for customers. Innovation is, of course, both interesting and important – especially where financial services are improved and cost savings are passed onto customers. Not only this, but Fintech is opening up a wide range of new financial services which may previously have been inaccessible or lack transparency for customers. It doesn’t, however, address the vast numbers of individuals who may not have access to those services in the first place. Financial exclusion – namely those individuals across the UK who cannot access financial services and often have to pay a poverty premium because of their low income – is a reality for many. Although innovation and technology adoption in financial services has been slow across the board, financial inclusion may be the

final frontier for Fintech, and one that now needs urgent attention. There is a huge opportunity for Fintech to participate in the ‘tech for good’ revolution – it’s time we saw innovation championing financial inclusion and access to high-quality, affordable services for all.

Tackling the Poverty Premium In the UK, there are around 14 million people who pay more for goods and services simply because they are from poorer households. These individuals and families are subject to a poverty premium which manifests itself in different ways. For example, if you can’t afford to buy household goods and electrical items outright, you may need to use the extremely high-cost rent-to-own model of purchasing these items from providers like BrightHouse. Similarly, many low-income households are forced to pay pre-paid tariffs for energy, meaning they don’t have access to the cheaper tariffs, and 1.5 million people in the UK do not have a bank account – forcing them to use expensive, cost-per-transaction, prepaid card providers.

When it comes to gaining access to finance, these individuals again find themselves side-lined. Many have to resort to expensive payday lenders typically charging between 8001200% APR. It is well publicised, and highlighted by organisations like the End High Cost Credit Alliance and Debt Hacker, that these types of loans and the continued financial burden they put on individuals and families can cause ongoing hardship for years to come. Access to affordable, responsible finance is at the heart of eradicating the Poverty Premium. Namely, giving the financially excluded access to bank accounts, debit cards and lower interest loans so they are paying the same costs as the wider population and not facing long-term, crippling debt. In today’s technology driven world, the potential exists to give everyone access to better quality and cheaper financial products and services. If we empower organisations who work with low-income families and households and offer a viable alternative to high-interest, pay-day loans and bank charges, we can take giant strides towards eradicating the poverty premium in financial services. 95


Enabling ethical banking The key to tackling the poverty premium in financial services must lie with those organisations who can offer fairer and more ethical approaches to lending. Credit unions, community banks and CDFIs are perfectly placed to take on this role. However, there continue to be a number of significant stumbling blocks for these lenders to reaching the individuals and communities they seek to serve. For example, credit unions often offer their members limited branch networks (some have no more than two branches servicing a given geographical area), plus they are struggling with legacy technology and paperbased systems which make their service extremely slow and inaccessible. Traditionally members have had to physically go into a branch to either withdraw or pay in money using only their membership number. At a time when technology is making the very concept of a geographical customer base almost obsolete, credit unions have continued to serve only local communities, despite the fact that demand for their 96

services continues to grow. We know, for example, that membership to credit unions rose by 250% last year. This is despite the fact that nine credit unions went into default in the same period – perhaps due to their difficulties transforming the service they offer in a digital era. Unfortunately, UK Credit Unions, community banks and CDFIs have struggled to compete with pay day lenders such as Wonga and QuickQuid. Rightly or wrongly, these providers have succeeded in capturing the market via easy, online access and high-profile advertising campaigns. The solution is simple. Open up the services credit unions can offer and give access to a wider audience through technology. Better branch access via partnerships with wider networks, plus a debit card (rather than simply a Membership number) would allow the financially excluded to access additionally services at the same price as the wider population and better online access and automation.


Innovative technology for financial inclusion Like all organisations, credit unions must innovate and transform the service they offer Members. A digital offering that increases access and ease of use for customers is absolutely fundamental to that process. Of course, any technology solution for credit unions must be all encompassing. After all, it’s not just about enabling people to apply online in a faster and more efficient way. It’s about giving them financial freedom and access to services such as a bank card and account which they can use, the ability to pay in money at a wider network of outlets and the same level of interaction and engagement that they would receive from a high-street or online bank.

Techno logy whic h would truly i nnovat e must inc lude pa pe rfree, au tom a te d a pplic a tions; automate d c om munic a tion to i ncreas e e nga ge m e nt; 2 4 /7 a c c e ss i ncl udi n g pre - a uthorise d a m ounts and rate s, pre - f ille d a pplic a tions and e-s igna ture s; a utom a te d ID veri fi cation, AM L , a f f ordability a nd credi t s c oring a nd unde r writing; a sel f-se r v ic e we b por tal f or Membe rs to v ie w a nd ma na ge thei r ac c ounts a nd, a s me ntione d al ready, a c c e ss to ba nk ing se r v ic e s i ncl udi n g a de bit c a rd, a n a c c ount number a nd sor t c ode . With technology now available to fulfil these requirements, it’s time that credit unions, community banks and CDFIs seized the chance to enhance and improve their services and become more competitive through innovation. With many credit unions falling behind in a digital

world, it’s more imperative than ever that these organisations embrace technology and subsequently address the problem of financial exclusion and education.

Andrew Rabbitt CEO incuto



Your company phoneline could be a potential security risk In an age of tighter regulation and growing cyberthreats, companies are under increasing pressure to ensure their customers’ financial data is safe and secure. The number of incidents reported in the news about breaches of credit card details, passwords and account information reveal the extent of the challenge that companies are facing. This year alone, British Airways, Delta and Cathay Pacific all suffered cyber-attacks that saw thousands of customers financial details stolen. Whilst the breaches were resolved, and customers informed, the impact on these companies’ brand, reputation and the trust of customers has been substantial. These incidents serve as a reminder that companies can’t afford to just react to cyberattacks – they need to think ahead and implement security strategies that will safeguard their customers financial data. The challenge is to do this while also delivering a seamless, hassle-free purchasing and payment experience to their customers. That experience is being delivered, in most cases, well on online platforms and in person but companies need to remember another crucial channel of communication with customers – the phone. With so many interactions between companies and customers still taking place via the phone, it is crucial that these security strategies extend to calls where payment is being taken over the phone. Contact centres, where the majority of these calls take place, play a crucial role in shaping customers’ perception of a brand, as they are one of the first ports of call for customers to contact when they face issues. They need to be at the forefront of financial security strategies, implementing measures that will safeguard customers’ financial data.


Phone payments need to be as secure as online payments While online payment systems already have a high security level, where payments go through the financial service directly without any input from the company receiving it, payments made over the phone don’t have the same level of transparency and security. By making payments over the phone, customers run the risk of divulging their sensitive, personal financial information without actually knowing what happens to it, how it is used and by whom. For many, particularly older generations, making a payment over the phone is still their preference – so contact centres need a system similar to that used in online platforms to ensure total compliance to regulation and the safety of their customers’ personal data. To offer maximum compliance and protect both their customers and themselves, companies need to equip their contact centres with GDPRfriendly payment systems, that will allow customers to connect directly and seamlessly to the card payment network to make payments while on calls. For instance, enabling the customer to type in their credit card details directly through the phone keypad and share that information directly with the financial service provider, removing the contact agent out of the equation. At the same time, it’s crucial that while they make the payment, customers stay connected with the contact agent through voice to ensure they can flag any issues and complete their payments securely while on the call. The regulation age The recent introduction of GDPR (which imposes heavy fines to

companies who don’t upgrade their security standards and fail to disclose breaches) and PCI DSS (an information security standard for organisations handling branded credit cards from the major card schemes to reduce fraud), coupled with highprofile hacks means consumers and companies alike are getting increasingly concerned about the safety of their personal financial data. Consumers now hear almost every week on the news about a new data breach impacting them and putting their personal data at risk. They hear about those stories and know they might be next on the list of victims – making them increasingly worried about what happens to their financial data when they pass it on to companies to make payments over the phone. Consumer trust is now the hardest thing for companies to gain and retain, in the wake of highprofile data breaches. If that trust is breached, customers won’t think twice about moving to a competitor to get their services. This creates an imperative for companies to stop holding their customers’ credit card information, to remove the risk of it being compromised.


On top of this, empowering companies with the ability to record calls between them and their customers adds another layer of security and compliance, as it will give companies full transparency on what happens during calls and how call agents handle the customers’ data given to them over the phone. Companies know that they can’t afford the financial and reputational loss a hack or data breach could cause in the GDPR era. On top of the heavy fines they would be subjected to, their turnover could be seriously affected by customers deciding to switch to rival businesses. Companies must invest in phone payment systems as robust and secure as their online payment systems. Only then will they be able to fully retain their customers’ trust.

Neil Hammerton CEO and Co-Founder Natterbox 99

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Finance Digest Issue 4  

4th issue of Finance Digest a quarterly Print and Online Publication, providing in-depth coverage and analysis of the global financial commu...

Finance Digest Issue 4  

4th issue of Finance Digest a quarterly Print and Online Publication, providing in-depth coverage and analysis of the global financial commu...