Global Banking & Finance Review Issue 23 - Business & Finance Magazine

Issue 23

Luis P. Rodrigues, CEO, Banco de Fomento Internacional

23 9

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717008

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EDITORS LETTER

FROM THE

Chairman and CEO Varun Sash

editor

Editor Wanda Rich email: wrich@gbafmag.com Web Development and Maintenance Anand Giri

Dear Readers’ I am pleased to present Issue 23 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

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Featured on the front cover is, Luis P. Rodrigues, CEO of Banco de Fomento Internacional, S.A. (BFI). I recently had the opportunity to speak with Luis and discuss how their custom-fit approach allows them to build valued partnerships with their clients, how the impact of COVID-19 must be accommodated to ensure sustainability, and much more. Read the full interview on page 30.

In this edition we take a look at the how businesses are adapting as result of the coronavirus pandemic. In ‘Creating a people-centric workplace centered on flexibility, experience and wellbeing’, Anne Marie Ginn, Head of Video Collaboration at Logitech EMEA discusses the ways will working practices change, and how the physical workspace evolving (Page 26). David Brightman, Director of Product Marketing at BlackLine explains how the coronavirus pandemic has underlined the vital role that automation plays in the finance function (Page 36).

We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook. We have gone that extra mile to ensure we give you the best from the world of finance.

Send me your thoughts on how I can continue to improve and what you’d like to see in the future.

Enjoy!

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The publisher wishes to stress that the information contained herein may be subject to varying international, federal, state and/or local laws or regulations.

The purchaser or reader of this publication assumes all responsibility for the use of these materials and information. However, the publisher assumes no responsibility for errors, omissions, or contrary interpretations of the subject matter contained herein no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the publisher

Wanda Rich Editor

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Issue 23 | 03

CONTENTS

BANKING

8

THE IMPORTANCE OF PEOPLE-CENTRIC BANKING IN THE COVID-19 ERA Colin Brown, CEO, Aryza

10

Will COVID Finally Give Big Banks Their Direction?

Shreya Jain

18

The Time is Now for Traditional Banks to Embrace the New Paradigm of Digital Asset Custody Alexandre Lemarchand, Vice President, global sales, Ledger

BUSINESS

22

Corporate Governance & Blockchain?

26

Creating a people-centric workplace centered on flexibility, experience and wellbeing

Steve Pomfret, CEO, Cygnetise Limited

Anne Marie Ginn, Head of Video Collaboration, Logitech EMEA

FINANCE

36

Automating your way out of disruption

39

2021: a huge step forward for humanity…and payments

David Brightman, Director of Product Marketing, BlackLine

Jeremy Nicholds, CEO, Judopay

FINTECH

42

The role of data and digitisation in banking’s future Ben Allison, VP, Global Media, VaynerMedia

46 TECHNOLOGY

22 26

Automating your way out of disruption David Brightman, Director of Product Marketing, BlackLine

2021: a huge step forward for humanity…and payments Jeremy Nicholds, CEO, Judopay

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What can the world of Fintech expect in 2021?

Björn Goß, CEO and Co-founder, of Stocard

CONTENTS

30 Cover Story BFI: MORE THAN JUST A SERVICE PROVIDER Luis P. Rodrigues, CEO, Banco de Fomento Internacional

Issue 23 | 05

Because you motivated us today we are recognized as t

Banco Santander Chile: Infórmese sobre la garantía estatal de los depósitos en su banco o en www.cmfchile.cl. Publicidad valida solo para Chile.

Tu banco

s to grow as a digital bank, the Best Digital Bank in Chile.

SANTANDER, CHILE’S BEST DIGITAL BANK We celebrate to have been chosen by Global Banking & Finance, as the Best Digital Bank and the Fastest Growing Digital Bank in Chile in 2020.

Thank you for inspiring us to improve every day.

BANKING

THE IMPORTANCE OF PEOPLE-CENTRIC BANKING IN THE COVID-19 ERA

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The Coronavirus pandemic has impacted all industries and put thousands of people in vulnerable financial positions - often for the first time in their life. Here, Colin Brown, CEO of the Aryza Group discusses why this year, it’s never been more important for the banking and finance industry to create people-centric solutions designed to better support customers.

According to a study by PwC, more bank and building society branches closed in the first half of 2020 than the whole of 2019. The data shows that 11,120 chain operator outlets closed in 2020, with some of the UK’s biggest banks closing a number of high street stores. This is almost double the number that closed in 2019.

The pandemic has tested the nation’s financial resilience and has forced millions into financial hardship. With the number of bank branch closures increasing, experts fear this could have a detrimental impact on society’s most vulnerable.

Covid-19 restrictions and consumer trends have been a huge driving factor in this and have left the future of face-toface banking unclear.

Combined with long waiting times on phone lines, these closures have made it virtually impossible for some consumers

BANKING

to receive basic banking services or advice. Those who rely on face-to-face banking, such as the elderly or those in need of more tailored support have, in many cases, been hit the hardest.

The industry must now work to develop easy-to-use solutions that are inclusive of all capabilities and accessible from a range of devices.

By leveraging the huge opportunities presented by new technology, forwardthinking fintech companies are now bringing to market people-centric solutions designed to help consumers better manage their finances, even if they cannot access face-to-face advice.

No matter the wider context, for a person struggling financially the process can feel overwhelming. It’s therefore understandable - particularly in this climate, that many are reluctant to discuss their financial situation with a stranger, often expecting a digital alternative.

Globally, these technologies are becoming increasingly popular as more consumers transition to slick and easy-to-use online solutions.

This is evident in the data from the Global Mobile Consumer Trends Report, showing that in the first half of 2020, downloads of mobile banking applications grew globally by 20 per cent. According to the Financial Brand, 35 per cent of customers adopted online banking and a further 30 per cent have also increased their use of mobile banking, since the start of the Covid-19 pandemic.

When dealing with their finances, it’s also important for consumers to feel in control of the process, with a clear picture of their level of affordability and the most suitable options available. Repayment plans

should always feel manageable and sustainable for the consumer, and the ability to login to an intuitive platform can help bring peace of mind during times of financial difficulty.

Presenting simple breakdowns of the process can enable the information to be digested quickly, whilst also presenting the best outcome for each individual. These solutions also aid lenders in understanding the different types of vulnerability risk, enabling them to personalise debt repayment plans, automate capture of income and expenditure data and ensure the fair and responsible treatment of consumers.

The emergence of digital solutions, such as Aryza Recover, allows consumers to engage with lenders via their smartphone, tablet or PC, making the process far easier than waiting on hold for a call centre operative to answer the phone. Technology such as Open Banking helps a bank or lender run a quick and simple affordability check, which can help create a more personalised and effective service, while presenting the consumer with a range of options within a matter of seconds.

With the rise in consumers wanting to self-serve and self-manage their financial circumstances coupled with the closure of many bank branches, it’s crucial that flexible tools are made available to prevent people from falling into financial difficulty.

As we look ahead to this coming year, we expect to see a number of exciting products launched that will enhance consumer confidence and provide them with a more personalised and reassuring journey back to financial health.

Colin Brown CEO Aryza

To find out more visit, www.aryza.com

Issue 23 | 09

BANKING

Will COVID Finally Give Big Banks

Their Direction?

If the recently finished 2020 has taught us anything, it is that we’d do well to re-evaluate the way things usually work. And in a world, that is still struggling to its feet after a tumultuous year, one can look around and notice that some pieces of reality have played musical chairs: social activities once regarded as keystones of public life are now greeted with deep suspicion, even fear; previously stable industries are on life support; and minimum wage employees suddenly bear the mantle of “essential workers” despite few immediate benefits of this increased responsibility.

Life, in other words, is not behaving as usual. And neither are the banks.

According to FDIC data, a record $2 trillion has been deposited in U.S. banks since the coronavirus first struck the U.S. in January. More than 5.2 million loans were issued by banks participating in the Paycheck Protection Program (PPP) to keep several businesses afloat during the COVID-19 induced pandemic. This is the primary role of banks – to accept deposits and to grant loans.

In a direct juxtaposition to this primary role, if we look at the sources of revenue for banks to determine its role, especially during crisis, it however tells a story of banking institutions deviating from their primary role.

Consider the revenue distribution for a few top banks (Fig. 1):

“Should Banks be in a Growth Business?”

Fig. 1: Composition of total revenue in 2019 H1 and 2020 H1

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BANKING

For all three of these banks, an increasing percentage of total revenues has been coming from the Investment Banking division, primarily driven by the Fixed Income Market.

In fact, in the most recent Dodd-Frank Stress Tests (DFAST), Goldman Sachs and Morgan Stanley are ordered to hold the most capital of all the 34 firms tested- 13.6% and 13.2% respectively. Goldman Sachs and Morgan Stanley have particularly high stress buffers because of the nature of the Fed’s exams, which put extra pressure on banks that rely heavily on capital markets; Goldman Sachs also has their decision to maintain dividends.

There is an intriguing question in all this – one made easier by recent developments.

There are a number of sources to draw from for a possible answer. We have a number of lessons from the past. The Glass-Steagall Act is a 1933 law that separated investment banking from retail banking. By separating the two, retail banks were prohibited from using depositors' funds for risky investments. Only 10% of their income could come from selling securities. They could underwrite government bonds.

However, the banking industry soon objected that the act was too restrictive. They believed they could not compete with foreign financial firms offering higher returns as the U.S. banks could only invest in low-risk securities. They wanted to increase returns while lowering overall risk for their customers by diversifying their business.

“Should Banks be in a Growth Business?”

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BANKING

The most audacious move was when Citicorp and Travelers Group — a commercial bank and financial services company, respectively - merged to create Citigroup Inc. It was an unforeseen event that took the financial world aback for a number of reasons – not least of which was that such a move was technically illegal. But Glass-Steagall had a number of exploitable loopholes. This was just one possible outcome.

On November 12, 1999, President Clinton signed the Financial Services Modernization Act that repealed Glass-Steagall. This consolidated investment and retail banks through financial holding companies. , creating new entities supervised by the Federal Reserve. For that reason, only a few banks took advantage of the Glass-Steagall repeal. Most Wall Street banks did not want the additional supervision and capital requirements.

Those that did take advantage became “too big to fail”.

The Bigger They Are… The focus today on “Growth” above and beyond what would otherwise be allowed under Glass Stegall Act has been worrisome.

The thirty-four participants in the severely adverse scenario of this year’s Dodd-Frank Stress Tests (DFAST) estimated their riskbased Common Equity Tier 1 (CET1) capital ratio would trough to 9.9%, from an end-2019 amount of 12%. In the worst-case scenario – assuming a W-shaped recession where the US is hammered by a second wave of the illness– banks’ aggregate CET1 ratios are projected to plummet to 7.7% after taking $680 billion of loan losses.

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While it’s true that banks with trading focus have fared better recently due to an unusual rally in the stock market, there is still some cause for concern. Should that rally turn into a correction or a crash, the FED- and ultimately the American taxpayers - could have to actually bailout these too-big-to fail banks.

A New York Fed paper, using data for more than 200 banks in 45 countries, found that banks classified by rating agencies as “more likely to receive government support” engage in more risk-taking. Moreover, the label of “too big to fail” and passing stress tests may create a false sense of security for large banks, thus encouraging them to continue taking risks with depositors’ money. Said differently, banks engaging in riskier behaviour are also more likely to take advantage of potential government support. Figure 2 shows that Banks with a higher probability of government support (as indicated by support rating floors – NF to AA-AA indicating increasing likelihood of government support) also have more trading assets on average.

The support itself is not seen as bearing great future results either. The paper shows that following an increase in government support, we see a larger volume of bank lending becoming impaired and increase in net chargeoffs. Additionally, we find that the effect of government support on impaired loans is stronger for riskier banks than safer ones, as measured by their issuer default ratings.

So, should a Bank be focusing on its growth?

Should Banks be limited in what they do? Is the present Stress Test sufficient? Or does passing the stress test only contribute to an inflated confidence and outsized risk tolerance given the potential consequences?

BANKING

Fig 2: Summary Statistics of Bank’s Balance Sheet by Support Rating Floors

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BANKING

…The Harder They Fall

A number of open questions that the banking industry still has to figure out….

Let us turn once again to lessons from the past, 2008 The Financial Crisis.

The financial crisis of 2008 had its foundation in bad mortgages, but this wasn’t what ultimately brought the banks to the brink of collapse. Volcker noted when he proposed his idea (Volcker rule, a federal regulation that prohibits banks from conducting certain investment activities with their own accounts and limits their dealings with hedge funds and private equity funds, also called covered funds.) that the culprit wasn’t bad loans, but the exotic trades banks had made around them.

At the time, there was discussion of reinstating The Glass-Steagall Act but the banks argued that doing so would make them too small to compete on a global scale. The Dodd-Frank Wall Street Reform Act was passed instead. This Act requires the Fed to conduct an annual stress test of bank holding companies with $50 billion in assets – otherwise known as “too big to fail.”

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Section 619 of the Act was The Volcker Rule aimed, once again, at separating the commercial and investment banking divisions of banks, but not with the same stringent restrictions as Glass-Steagall Act. It aimed to prohibit banks from using customer deposits for their own profit. Moreover, restricted banks from owning, investing in, or sponsoring hedge funds, private equity funds, or other trading operations for their own use. These steps were meant to protect depositors from the types of speculative investments that led to the 2008 financial crisis.

The idea became law in the Dodd-Frank reforms of 2010, but the rule-writing took another three years due to squabbles over how to separate prop trading from marketmaking and hedging. Instead of blanket bans, regulators sought to define each situation and carve out a string of exemptions, which is how the rule grew. The final rule also clarifies that certain activities are not prohibited, including acting as agent, broker, or custodian. As a result, the Volcker Rule has been in force since July 21, 2015

BANKING

When the final version called on traders to certify the intent of each transaction, Jamie Dimon, the chief executive officer of JPMorgan Chase, complained that traders would need a psychologist and a lawyer by their side to make sure they were in compliance. Fed researchers found that the rule resulted in less-liquid markets for some bonds in times of stress. But by and large, banks adapted to it, though that did not stop them from lobbying for years to win procedural changes.

Under the Trump administration, regulators showed a strong interest in simplifying the rule. The revamp, known as Volcker 2.0, is a steady effort to soften Volcker regulations during Trump’s administration.

Volcker2.0 - “Volcker 2.0” went into effect on October 1, 2020.

The Proposed Rule adds four new exclusions to the definition of “covered fund” — credit funds, venture capital funds, family wealth management vehicles and customer facilitation vehicles — thereby exempting them from the scope of the Volcker Rule.

Changes in proprietary trading include eliminating a requirement that banks reserve an initial margin over 15% of Tier 1 capital and may allow banks to invest in up to $40B more in creditdefault swaps.

More capital will be available to venture capitalists, therefore making additional capital available to start-up companies. However, many believe this may be a short-lived change following the 2020 presidential election.

Volcker 2.0 is representative of a pendulum swing in financial regulatory compliance away from the strong reaction to the financial crisis of 2008.

Banks evaluated their capital market businesses to identify opportunities to leverage newly permitted activities and the reduced operational burden of Volcker 2.0. Different banks have commenced new strategies by increasing trading volumes and holdings. As an example, the table below (Figure 4) illustrates a trend in the commercial bank sector, and how the trading assets volume increased in 2019 in anticipation of the Volcker amendments.

Fig.4 : Total Trading Assets for Commercial Banks in the US

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BANKING

Is COVID-19 the new lesson? Is FED, via Stress Test trying to tighten regulatory burdens for Banks majorly associated with proprietary trading driven revenues such as Goldman Sachs and Morgan Stanley? As per FED Stress Test in 2020, Goldman Sachs and Morgan Stanley were the two banks that faced the highest jump in the required minimum CET1 ratio – 4.1% and 3.2% respectively. (Fig 5)

Fig.5: Minimum CET1 ratio in 2019 and 2020 On one hand, financial regulators eased the financial crisis-era Volcker Rule.

Conversely, the same regulators brought about tighter requirements via Stress Test for banks that are focussed on Trading revenues.

The change in minimum CET1 ratio is inversely related to the PEG ratio (Q3 2020) right after when the minimum CET1 were to be met. Morgan Stanley and Goldman Sachs had PEG ratios of 0.97 and 1.44, the lowest amongst their peers, while they had the largest change in minimum CET1 ratio - 4.1% and 3.4% respectively.(Fig 6.)

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Fig.6: PEG Ratio post change in required minimum CET1 ratio

Do Banks Get a New Normal Too?

100 percent reserves policy would break our current system’s bundling of risktaking with the job of keeping accounts safe and offering payment services. Only then, by ensuring depositors (and voters) aren’t at risk when there’s a crisis, would governments have the will to let banks fail – without any regard to their size – and at no cost to taxpayers.

Oz Shy, a professor at MIT proposes that if we were to ensure policymakers let banks fail – we need to prepare in advance for the next wave of bank failures by protecting depositors’ money, instead of just focusing on stress tests or size reductions.

And if a few banks want to be in growth business, they should be treated very differently than the other banks with a pure focus on transmission and custodian roles. More than what current stress test does. Maybe that’s the “new normal” banks need.

With another administrative change (new government) will the Volcker Rule be changed again to go closer to what it was intended for. Will banks be forced to choose between proprietary trading and having a PEG ratio comparable to its peers?

Depositors should be simply allowed to have access to accounts that maintain 100 percent reserves. That is, every cent of their savings would be backed by hard currency. His research has shown that moving in this direction improves social welfare relative to the current system of purely fractional banking, in which banks only hold a fraction of their deposits. A

Shreya Jain

Issue 23 | 17

BANKING

The Time is Now for Traditional Banks to Embrace the New Paradigm of Digital Asset Custody

The new financial paradigm – digital asset adoption – has arrived. This time, unlike the days of the dot.com boom, banks cannot afford to fall behind and miss ripe capital generating opportunities for their clients. It took many “Big Bang” types of events for the financial industry to cautiously warm up to digital assets. The financial crisis in 2008 – and the decade that ensued – saw the big banks lose the trust of customers that, until that point, had no other choice but to utilize their services.

Since that time, banks have been in the spotlight for all that went wrong, and it took many years to repair that damage – and some mistrust still exists.

Looking at where we are presently, it is easy to see, on a worldwide scale, the level of sweeping changes that have taken place both economically and politically, which have affected the financial services industry. A dichotomy exists between the “old world” and the “new world”, and both seek to gain autonomy. Countries such as India, China and nations

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throughout both Africa and South America are demanding a monetary democratization take place, while countries throughout western Europe and the U.S. endeavor to stay ahead of the curve. Understanding this shift is the most essential part of accepting where the world is today and why digital currencies are poised for their most important act to date.

Knowing the industry’s history and where we are today, it is apparent that no bank wants to lose control of the newest class of assets – ones that are quickly becoming more mainstream – and they certainly don’t want to be left behind as the future of finance unfolds. Therefore, traditional custodian banks need to become a part of the new system. And the future of digital assets lies in the fact that currency is experiencing a fundamental revolution, and those assets need to be regulated.

We know nothing will happen in an unregulated world as there has to be an inherent trust.

As digital assets gain popularity as a form of currency, traditional banks are rethinking how they can manage, secure, and interact with these assets. Along with the concern that customers have expressed toward banks, those same customers have also grown tired of shelling out exorbitant fees for slow transactions and limited services, all the while having very little control of how their money is being held and protected. To gain customer trust, banks need to demonstrate their support for digital assets and that they have a way to keep them safe.

Banks do recognize that securing digital assets is not done the same way as gold or paper money would be secured; hence, the fact that a new crop of operational risks have arisen from this new paradigm. Next generation assets call for next level custody, which can only work if customers feel this class of assets are receiving the same level of security that would be

BANKING

given to traditional fiat money. Crypto is an asset that regularly circumvents hackers, with very few actors having the wherewithal to fully understand and tackle the nuances of the industry.

Moreover, something to think about is the fact that the custodians of today will not have the same clients tomorrow now that big companies, such as Square and Microstrategy, which are outside of finance are buying mainstream crypto, including Bitcoin, Ethereum, Ripple, etc. This is where the real future of finance truly comes into play. One thing that is clear is that digitized assets do not make custody less needed; if anything, these assets need more custody and security solutions because of new operational risks. So, what are banks,

who traditionally have been custodians and maintain security on premise to do going forward? The linchpin lies with third party technology providers.

While building bespoke technologies has worked for banks to fill voids in the short-term, especially related to custody of assets, long-term solutions will reside with third-party custody solutions offered through trusted and well-known actors specializing in technology for institutional needs.

Banks delivering another layer of technology is beneficial; it is not; however, the endgame for a true digital transformation to take place and thrive.

As the cryptocurrency world starts to become more regulated, technologybased custody solutions will continue

finding themselves playing an extremely important role – and they are ready for their time in the spotlight. The reason for this is that digital assets will need to have a stamp of approval through regulations, which will impact custody and the lasting need for it. Furthermore, the future of custody will need to be blockchain agnostic for banks to justify employing outsourced solutions.

In the past, banks created their own bubble through these in-house solutions. And for a time, they were working. But disruption eventually happened. This time, they have a chance to get ahead of and join the disruption with an activist asset class that is set to become conventional over the coming years. Banks realize that digital assets require a further level

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BANKING

of innovation that they themselves may not have the resources to provide custody services, especially as various cryptocurrencies come into play. For this very reason, third party technology providers will become a vital part of the ecosystem. The newer generation of banking customers sees the system as one that is running in place instead of moving forward. Speed of service as mentioned earlier, is also a big factor in the future of banking and finance.

We can look at neo-banks as a model example for employing novel ways of thinking and showcasing belief in pioneering products.

With that, there is investment underway at traditional banks regarding their support for major blockchains and cryptocurrencies. Our belief is that integration and interoperability will be important customer factors. Thirdparty technology providers will not only be used for security by custodian banks. Through these partnerships and integrations, new services such as clearing, settlement and prime brokerage will also be offered by these actors, cementing their place in the ecosystem. The way things were done in the past no longer applies; this is the time to reimagine standards and create news ones.

The network effect and being interconnected is a vision that we believe in and one that we can get behind. The future of custody is simply process flow, master security and master key and meeting all the regulatory requirements, while being as flexible as possible to easily integrate key blockchains and additional services to add value for customers. Financial and non-financial and persons will require custody solutions. This strategy will bring forth companies that are outside of straight finance, including conglomerate types that may require custodianship solutions as it is costly to build and maintain and not everyone can do that.

The network effect and the buildout of these solutions are well underway.

Compliance and regulation for the so-called tech providers is happening now. It is only a matter of time before we see larger rollouts. Investments in security and customer trust will be made to have solutions ready for what’s to come in the new year and beyond for institutional custodians, asset managers, exchanges, brokers and, of course, banks.

There is a network effect that will take place for very siloed types of companies—think of major bank holding companies, as an example. In the very open centralized world, the key thing to anticipate is direct connection and the ability to move to and from various points rapidly. All of this must happen while having the highest level of security and lowest possible constraints to meet those expanded customer expectations.

Alexandre Lemarchand Vice President, global sales, Ledger Alexandre Lemarchand is a global leader at Ledger and a proponent and ambassador of digital transformation.

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Corporate Governance & Blockchain?

Corporate governance has come under the spotlight over the past few years and is a critical part of organisations’ overall corporate strategy. Steve Pomfret, CEO and founder at the UK-based blockchain start-up Cygnetise, explains “why” and how potentially blockchain technology could help this.

Why are corporations and financial institutions focussing so much on governance?

The interest in the corporate governance practices of corporations and financial institutions has increased dramatically over the past two decades. Mainly due to the collapse of some large corporations (due to fraudulent activity) in 2001-2002, the financial crisis of 2007-2008 and more recently, the surge of ESG business criteria.

What does corporate governance really mean?

A dictionary type definition of corporate governance is: the collection of various mechanisms, rules, and processes used to control. Quite literally a framework used to ensure the organisation is sufficiently governed.

Governance protocols identify the distribution of rights and responsibilities among different

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participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, stakeholders, and their employees) and include the rules and procedures for making decisions in corporate affairs.

However, governance is not restricted to the upper echelons of an organisation. To be effective, governance policies must permeate throughout an organisation and be implemented at all levels. An example of this is the management of corporate signatures which has a direct impact on everything from contract management to the signing of company cheques/checks and times-sheets.

Such governance is necessary because of the possibility of conflicts of interests between stakeholders, shareholders and senior management (and their delegated authorities).

ESG: Environmental, Social responsibility and Governance When failures in corporate governance occur, the impact can be wide-ranging and catastrophic.

Infamous examples are to be found in Enron, MCI and Parmalat. The media brought the collapse of Carillion to the public eye and with it, the importance of Corporate Governance:

BUSINESS

“The collapse of Carillion is a lesson in how not to do Corporate Governance and companies should see it as an opportunity to reassess their processes…..Carillion’s case shows 10 areas of weakness.

Red flags were not raised, whether through negligence, complacency or incompetence”, ref. ACCA. The reality of the collapse? Carillion was Britain’s second largest construction and outsourcing operation, a FTSE 250 company with annual revenues of £4.4bn. The liquidation had repercussions for all stakeholders: the shareholders who lost their investment; the 43,000 employees whose jobs were threatened; the 28,000 pension scheme members whose retirement income was reduced; the thousands of suppliers,

sub-contractors and creditors whose invoices were at risk; and the many local communities and customers, including the government, who faced non-delivery.

Governance here is the ‘G’ in the much talked about ESG investing, which has now started to take a central role in corporate strategy and policy agendas pushed by the ever-increasing pressure for its integration from investors, governments, and the general public.

Inevitably, business and politics will drive this momentum forward. Such is the importance of governance as part sustainability that it fits alongside environmental and social matters.

Backed by the United Nations, the PRI – Principles for Responsible Investment, is an organisation offering guidance on ESG and now has over 7,000 members across 135 countries.

ESG is here to stay.

The Future of Work: Corporate Governance in the new digital-first economy and remote working environment It has always been difficult for large organisations to maintain sufficient governance protocols with thousands of client and counterparty relationships, thousands of employees and offices spread across many jurisdictions.

Now there is the added challenge with widespread remote working enforced by lockdown measures due to the COVID-19 global pandemic, that are likely to stay.

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BUSINESS

On the positive side technology has advanced exponentially and solutions are available to help. In-fact we have technology that is ‘ahead of its time’ because we aren’t using it to its full potential. Why is this? Mainly due to a natural resistance for change, and perhaps fear of the unknown.

adoption from established corporates and organisations. These organisations, in turn, are already reaping the benefits of its integration.

But the change is finally happening after COVID turned the world upside down.

These inherent benefits of blockchain that can be directly related to corporate governance include:

For example, video conferencing is now a critical form of communication, as are electronic documents and signatures. So, with remote working becoming the norm, how can we maintain optimal business continuity and, arguably, why weren’t we doing this anyway?

However, is a migration to new work practices, ‘the Future of Work’, and the adoption of new technologies sufficient to maintain and improve governance? Probably not.

As further digitisation occurs, governance control measures need to be updated and enhanced. The governance policies and applications need to work hand in hand with the changes in technology and business protocols.

A disconnect between the two nullifies the benefit to both.

There has been much talk about how blockchain will be a technology of the future providing a decentralised control on the movement of data.

Blockchain, can it enable Governance?

Blockchain is most commonly associated with cryptocurrencies, such as Bitcoin. However, it has a myriad of uses that can actually help organisations enhance and engage their governance protocols.

There are companies out there that are very effectively building applications that use blockchain technology and are gaining

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Rather than delve into the complicated principles and coding mechanics of the technology, it’s best just to look at the benefits that it provides.

Ownership - Owning and controlling your own data. Customers of blockchain based applications are usually in charge of their own data and can do with it whatever they wish, including who can see their data.

Responsibility – Data is shared on a peer-

to-peer basis, so there is no 3rd party required to be an intermediary, or conduit.

Accountability – Data cannot be deleted, so

there is a permanent record that can show all changes made.

Security – The data is validated and

encrypted in various nodes, or copies of the same storage facility (database). This makes the data tamper-proof from external parties.

BUSINESS

With the ever-increasing focus on governance we can expect to see more examples of the JP Morgan solution coming into use. Innovative technologies will provide the platforms that will allow companies and organisations to safely share data in trusted environments. This, and the acceptance that mass adoption of good governance principles is the quickest route to raising the bar, will set us in good stead for the future and significantly reduce the chances of repeating the mistakes of the past.

Steve Pomfret CEO Cygnetise Limited

Of course, banks are investing in blockchain research and indeed beginning to use blockchain technology in a number of ways. Whilst applications that support governance may not have the cache as say, Cryptocurrency, they are still critical to creating a sound basis for building a secure organisation as well as offering the opportunity to simplify, de-risk and reduce costs associated with antiquated processes.

Issue 23 | 25

BUSINESS

Creating a people-centric workplace centered on flexibility, experience and wellbeing The light is appearing at the end of the long, dark tunnel that has been 2020. With vaccination schemes now underway, we can (albeit cautiously) dare to dream of a general return to relative normality. Yet in the wake of the pandemic, neither our personal lives nor our work lives will ever be quite the same.

A wholesale change to working practices, and the nature of how and where we work, is set to be one of the big lasting legacies of 2020. Cal Henderson, co-founder of Slack, recently came forward to say he thinks that the age of the office is coming to an end. In a less extreme view, AWS’ CEO Andy Jassy predicts we’ll see the rise of ‘hot offices’, where employees will mostly work remotely, only coming into the office when they need to work on specific projects. And Microsoft founder Bill Gates predicts the age of business travel is over, with only 50% of business trips set to resume.

As the office evolves it’s clear employers will have to adapt their spaces in line with new, postpandemic wellbeing and workplace trends, and create an office centred around “super experiences” that makes it a destination in itself.

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So, in what ways will working practices change, and how do we see the physical workspace evolving?

Re-focussing on the employee Ultimately, the pandemic has re-focussed the discussion on how employees can best work, and how teams are spending their time. It has also given employers the opportunity to ensure they’re in a better position to help people find a good work life balance.

Yet even after Coronavirus, it’s clear we won’t be working from home forever. The UK government says work from home orders may stay in place until April 2021 and with this in mind a flexible, and hybrid, way of working is set to stay.

Employees feel that way too – a recent Simply Communicate survey found only 2% want to go back to the full week in the office.

With the digital tools available and the experience gained over the past 10 months, the idea of everyone being in the office everyday seems old fashioned and unnecessary. People don’t want to travel into an office to then just be sat at their desk for eight hours. What they want is to connect with colleagues, to learn, to be inspired and to share with others.

BUSINESS

An office designed for the people working in it Offices will become destinations unto themselves - for collaboration, innovation and strengthening team relationships - and less about deskbased or task-based work. The space should also be vibrant and different.

These offices should offer a mixture of meeting rooms and open operational space, which will promote gathering for teamwork, collaboration and companywide networking events. At the same time, smaller collaborative working areas, enabled by video, will facilitate break away group work for those both physically present and working remotely.

Banks of individual cubicles will disappear, and instead we’ll see occasional, dedicated concentration pods for when employees need to get their heads down between meetings. And how about relaxation pods should employees want a quick break and recharge?

Whilst getting your head down to work is important, social time and collaboration is equally valued, and central to general wellbeing. For many employees, their work is central to their sense of self, their meaning and purpose, and after a long period of being at home alone, they’ll be yearning for those inperson, face-to-face experiences. This should be placed at the forefront of modern office culture and design.

Beyond work, offices also need to become social destinations in themselves. A recent JLL study found that nearly half of employees hope their office will prioritise social spaces, such as coffee areas, lounges or outdoor terraces and gardens.

Common areas play a central role in nurturing informal work relationships, which improve development opportunities and help career outlook - especially crucial for people early in their work life. These spaces allow employees to maintain the inspiration, energy and social connection that comes with belonging to a physical team and environment – something which many found a real challenge to maintain virtually during the pandemic.

Issue 23 | 27

BUSINESS

Flexible schedules and shared spaces will also lead to a “rightsizing” of office space, where organisations will rethink their real estate, in what will undoubtedly save costs. Some are even predicting that we’ll see the creation of an office ‘ecosystem’, which will comprise of employees working from offices, houses, and third places such as cafes, coworking spaces, and libraries.

Tech and video as the glue for hybrid working While all of the above will support flexibility, functionality and employee wellbeing, for it to all work it needs high-end peripherals, such as Logitech’s MX Series of highperformance mice and keyboards, and collaboration software to pull it together. This tech needs to help us and not take us away from people, helping our collective mental health in environments that could be potentially isolating.

This human centred approach to work collaboration requires non-intrusive, seamless video conferencing and productivity tools. Through each space

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in the office, from large town hall style areas, through to smaller huddle rooms, personal workspaces and even satellite offices in the suburbs, these video solutions and smart productivity technologies can help to bring together a team as one.

Tied together by smart technologies such as video, this hybrid office has the potential to make employees happier, more motivated and equipped to do their best work. Video will pivot from being the technology we used to survive during the pandemic to the one we use to thrive.

Fortunately, there are a wide variety of high-quality video tools available that can fit the needs of the modern worker within each individual environment.

From large 4K cameras with the ability to pan, tilt and zoom to focus on an individual speaking within a large room, to wide angled huddle room cameras for smaller groups, and webcams with integrated high-quality microphones and optics to make sure remote workers are seen and heard just as clearly as if they were physically in the office.

The hybrid opportunity The hybrid office presents itself with an opportunity to make work better for employees, while creating a more committed and motivated workforce. There’s also potential to save money through reduced office related overheads.

Anne Marie Ginn Head of Video Collaboration Logitech EMEA

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Issue 23 | 00

INTERVIEW

Luis P. Rodrigues, CEO, Banco de Fomento Internacional

30 | Issue 23

INTERVIEW

BFI: More Than Just a Service Provider Banco de Fomento Internacional, S.A. (BFI) is an investment bank in Santiago, Cape Verde, that has been providing its clients with a broad range of quality products and services since it was established in 2002.

Wanda Rich, editor of Global Banking & Finance Review, met with the CEO of BFI, Luis P. Rodrigues. They discussed how the custom-fit approach allows them to build valued partnerships with their clients, how the impact of COVID-19 must be accommodated to ensure sustainability, and much more.

How has BFI had to adapt operation as a result of the current pandemic?

The tremendous humanitarian fallout of the COVID-19 crisis will certainly have a correspondent disruptive economic impact.

The path ahead is hence an insecure one, driven by plenty of uncertainty.

Being primarily an investment bank, investments will be considered, evaluated and ranked in a different way from now on. Upstream, we foresee three things. One, a regroup on the activity sector’s priorities; two, an even greater care and awareness for overall wellbeing, and three, an ever more meticulous project analysis.

Downstream, investors will become more conservative.

Having said that, BFI did not in fact go through a rigid adaptation. Obviously, we had to adapt in terms of workflow as we had to be - and continue to be aware of needs for remote working and the team’s capacities. However, in terms of business, BFI strategically preferred to specialise in projects and sectors that would pretty much continue to be of relevance in times to come. This includes green energy, environmental issues, health, infrastructure, tourism – all related to wellbeing and, for the most part, normally engaged with authorities.

In this regard, the Board did not feel the necessity to adapt the strategic plan.

BFI differentiates commercial banking from investment banking. Why is this so important for Cape Verde?

It is as important for Cape Verde as it is for the rest of the world. Investment banks have different responsibilities and specialise in services that are very much custom-fit and custom-oriented, not mass offerings. Investment banks are much more related to structured projects at the macro level of the productive economy. Commercial banks are fundamental funding machines.

BFI, as an investment bank, attracts savings into productive projects, promotes foreign direct investment

(FDI) into local projects, provides diversified investments in state-of-theart sectors and engages in practices that aim to achieve a levelled wellbeing.

These principles and assumptions are important to the majority of countries, but are even more so for those considered developing countries, such as Cape Verde.

How does BFI assist companies in devising the best plan to obtain funds?

It’s difficult to standardise as each case is unique. Our approach is to place ourselves in our client’s mind, and understand their objectives in order to devise the best plan, regardless of the purposes - fund raising, balance sheet performance, debt restructuring etc.

We allocate a project leader and/or an account manager to follow up with the client. Before we engage ourselves with a project, we must feel confident that we can be of value. We want to create partnerships rather than be a simple service provider.

If we believe we can be of help, we introduce the project into our networking and try to maximise it.

BFI works with the most recognised international institutions, with special emphasis on those that target Africa.

Issue 23 | 31

INTERVIEW

BFI is regularly involved in providing comprehensive finance packages for projects in various industries. What are BFI’s advantages compared to local banks, and what is its outlook for the business?

I rather like to think that BFI works with local banks. There is a complementary essence with local banks, mainly with the commercial banks. First and foremost, commercial banks are critical agents in gathering funds. That is why they are keen to evaluate more complex, medium and long-term projects; the simple house mortgages, personal finances and corporate day-to-day businesses do not consume all their needs and, mainly, do not adjust their balance sheet risk in time horizons. If a term deposit - a liability - is gathered for a medium or long period then a correspondent asset, period wise, should be part of their balance sheet. Also, the regulatory limitations specifically in terms of credit exposure - and balance sheet dimension, prompt syndications between banks, which leads us to work with local banks. We are very keen to work with them.

In terms of outlook for the business, one cannot ignore the impact that this Covid environment has created, and will create. Rather than talking about the disruptive economic impact, I prefer to focus on the new opportunities that will be created. It is certain that the principal investing countries are facing economic impact, which may induce limitations in investment opportunities with a stronger impact on economies that are dependent on the economic performance of others.

But it is up to us – and businesses like ours - to promote alternatives and find the prosperous projects to invest in.

COVID-19 is a major market disruptor that has led to unprecedented levels of innovation. Due to the lockdown, so many businesses have had to reinvent themselves with a new 'business as unusual' philosophy, a new wave of tools and a new way of keeping in touch.

Education will be reimagined. Remote working is a reality. Sustainable sectors must accommodate these factors.

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In terms of project preparation and development, is Cape Verde more challenging than elsewhere?

simple service provider. We take care of our clients’ projects as if they were our own.

Cape Verde is indeed challenging. I cannot say if it is the most challenging, but it certainly is challenging. There are two main factors.

In our line of business, we have the chance to gather plenty of information in different areas, industries, projects etc. Our accumulated experience meaning critical information, our main commodity - and relationships with our network allow us to determine and prioritise functions, stages and definitions that maximise value for our clients’ businesses.

The first is that Cape Verde’s GDP ranks in between the 10th and 20th percentiles according to international indicators. Its banking sector is also characterised by its limited dimension.

Unfortunately, when discussing projects with international partners, dimension is critical. It seems that the positive aspects of Cape Verde are relegated.

Thus, it becomes our challenge to emphasise that Cape Verde, according to the World Bank, is one of the topranked countries in Sub-Saharan Africa in governance indicators, particularly in the fight against corruption. It also has one of the best business climates in the region with stable political institutions.

People are well educated and, as far as foreign policy is concerned, the country remains closely linked to Western Europe, which is a major source of tourism and FDI. The exchange rate cooperation agreement with Portugal guarantees the Cape Verdean Escudo convertibility with a fixed parity. Cape Verde has liberalised all economic and financial operations with foreign countries, and investors are able to open bank accounts in a foreign currency. It is a challenge.

The second challenge is an internal one.

A Cape Verdean bank in the middle of the Atlantic Ocean constructed a portfolio of projects with significant and relevant parties in different countries over the past almost 19 years, and strives to achieve greater accomplishments. Given the circumstances, that is another challenge for us – one we undertake with pleasure.

How does BFI help maximum business value?

Customers are at the centre of our strategy. That is the concept for maximum business value. As I had the opportunity of mentioning, BFI is not a

It has been very useful and important in assessing and following up projects, mainly those under the umbrella of project finance where details may influence outcomes.

Why use a project finance structure as opposed to corporate finance?

Nowadays, long-term infrastructure projects call for solutions that ease some critical issues for their promoters and/or the beneficiaries.

The main aspect is that the amount of debt that can be raised in project finance is based on the project’s ability to repay debt through the cash flows generated by that project alone. In corporate finance, lenders can generally claim for guarantees and collateral assets of the entire company, or even from other entities.

Is that an advantage? We believe so, mainly for long-term projects, which are normally – but not only - participated in by state entities. There are normally turn-key solutions which are optimal.

These projects include an A-Z effort: the identification of the need, the formatting of the solution, the choice of partners, suppliers and stakeholders, determining the funding structure, following up the project and closing the deal. Project financing is greatly appreciated in governments that are keen to provide new infrastructures but have budget limitations. This solution may levy public debt issues, increase FDI and establish a financial reputation.

INTERVIEW

How do you organise the project financing structure to reduce risks?

As I mentioned, there are a number of efforts that go into project finance. One must choose the right partners, assess all risks and ensure a mitigation plan. It is, indeed, a complex procedure.

We rely mainly on our expertise, past experiences, the quality of our partners and, obviously, on the risk mitigation instruments available in the market.

Foreign exchange, country risk, operational and other coverages all have entities and instruments defined to address risks. But risks exist in any business. The purpose is to mitigate them as much as possible.

I would say that the best way of mitigating risks is to have an experienced industry partner in the project.

As we specialise in specific sectors, we are at ease with this type of project.

What are the challenges and opportunities you see for investors right now?

That’s a very difficult and broad question for a short answer!

on the magnitude of the investment, the risk tolerance one may assume and the nature of the investment (direct investment versus passive investment). There is a long list of parameters that define the challenges and opportunities for investors. Again, for BFI, each case is unique and our organisation is ready to assess the best opportunities through its private banking unit.

Nevertheless, there are general certainties one may claim: one, that the most daunting challenges a modern investor faces are the volume, means of communication and speed of information available, and two, that if you stay loyal to your principles and investment definitions you will always find interesting opportunities.

Looking back, what was 2020 like for BFI and what is it going to be like in 2021?

The latest strategic plan approved was in 2019, for the three subsequent years.

2020 was the year of consolidation of policies and actions that substantiated the guidelines of the strategic plan undertaken. It

was a year of implementing a new IT system, introducing more and better governance policies and consolidating best banking practices.

We reinforced our network of partners and knowledge. There were two main drawbacks: we were unable to visit our clients as much as we wished and used to, and the professional training that was projected fell short. Both of these constraints were due to the limitations imposed on travel.

Financially, we reinforced our balance sheet. We will have, shortly, our General Assembly.

For 2021, we will continue striving for excellence, hopefully finishing the implementation of major policies and actions in progress and increasing the proximity with our clients.

We are, in some ways, optimistic about new projects/mandates and about the result of the most recent developments, both structural and technological, that were introduced in 2020 with regard to attracting new customers. We expect 2021 to be a demanding but profitable year. We are very excited and look forward to accomplishing our clients’ goals.

It depends on the type of investor.

If it is a private investor or an institutional one, it depends

Issue 23 | 33

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2021

FINANCE

Automating your way out of disruption

The coronavirus pandemic has underlined the vital role that automation plays in the finance function. Manual tasks, inefficient processes and a lack of data insight are holding back finance functions that have not yet automated – and preventing them from competing effectively in a tumultuous market. For these organisations, the ongoing business challenges caused by the pandemic should be seen as an opportunity to ensure future projects have the best chance of success. This means facilitating standardisation and planning, as well as redesigning processes so that the same inefficiencies are not perpetuated.

Unfortunately, the finance function, like most aspects of business, are facing severe disruption as a result of the pandemic. Numerous projects relating to implementing or scaling automation have been delayed or cancelled, and many distributed teams are battling with an over-reliance on paper-based documents or office-bound tasks that are no longer feasible. Many of these

36 | Issue 23

issues would have been softened had companies already completed the move to digitise their processes before the pandemic, but research suggests that very few companies have fully addressed the automation gap.

The automation gap In fact, a survey commissioned by BlackLine and conducted by FSN suggests that only 9% of organisations managed to completely transform their finance function through automation before the pandemic. This is despite the fact that digitally transformed companies are two and a half times less likely to report delays in their existing project timescales compared to companies that have not invested in finance automation – and 20% are less likely to report delays to future automation projects.

Having already experienced the benefits of automation, these companies are also less likely to have reduced their budgets for finance

automation projects. Furthermore, the research found that finance and accounting (F&A) teams that entered this crisis further down the automation path were better positioned to weather the pandemic.

This is because automation enabled these finance professionals to spend a greater amount of time on valuable, strategic tasks that could help guide the organisation through the changing business landscape.

And when business was in flux, and teams had to transition to remoteworking with little time to prepare, they had more resiliency to ensure the financial close ran like clockwork, without compromising financial statement integrity.

With such a strong case for automating, what is holding finance teams back?

Challenges to effective finance transformation The majority of organisations are yet to jump on the automation bandwagon and there are a number

FINANCE

of reasons why. Challenges include a lack of commitment to fully instigate automation across the business, a lack of resources, short timeframes for implementation, and pressure from executives who want to see a faster ROI, to name a few. With pandemic-related issues added to the mix, it’s understandable that there is some hesitancy when it comes to investing in automation.

However, from managing data, assessing risk factors, stress testing, to uncovering inefficiencies and budgeting, automation can and has been proven to help. For those organisations that still have reservations, looking at existing automation successes and learning from their peers is an excellent way to kick-start your own business automation strategy.

It’s important to remember that modernising your finance function can have a huge impact on business outcomes, producing real-time updates that can be used to guide decision making and risk management. However, moving to modern accounting means taking a unified approach.

Integrating systems and data for a single source of truth, so you can standardise and control processes for consistency, efficiency, visibility, and change management is the only sustainable path forward.

Tips for initiating automation within your business To begin with, businesses must have a clear understanding of the current state of their finances and where they stand within the industry landscape.

What are the challenges? Where are the potential bottlenecks and opportunities for efficiencies to be created? This is a vital step in improving transparency.

If businesses don’t have a clear view over what is happening within their own organisation, how can they expect to make important decisions that will improve business outcomes?

To achieve this, finance teams should look to migrate any on-premise applications to the cloud. This will enable easier access and control over how and where data is stored, while also integrating applications to function as one whole system that communicates with all necessary business departments. This will give a clearer, realtime overview of where the business is at and where necessary changes are most critical.

Issue 23 | 37

FINANCE

Next, CFOs need to look at simplifying and streamlining some of the tasks F&A teams face day-to-day. For example, when automating financial close and reconciliation processes, it's essential that process owners, not technical staff, can make changes quickly. Updates like adding or changing accounts for reconciliation automation, or applying technology like artificial intelligence to transactional matching, modifying variance exception thresholds, changing standard or custom report fields, should all be within accounting's span of control. Ensuring the right people have access to the right data and reports, as and when these are needed, reduces bottlenecks considerably. This in turn leaves more time for making sure reports are up to the highest possible standard and insights are used to make any necessary adjustments fast.

Once transparency is instilled and time wasting bottlenecks are reduced, businesses can begin to regain control of their systems, through investing in new ERP systems and automating their budgeting, planning and forecasting (BPF) processes. Without transforming the BPF process that provide agility and insights, businesses would be forced to run in circles, producing forecasts that would become obsolete within days. In these uncertain times, companies need to be reforecasting daily and weekly, or at the very least monthly to have any sort of handle on the business. Where some organisations were getting by with minimal sophistication in their BPF, the unprecedented effects of lockdown have exposed significant weaknesses in these processes.

38 | Issue 23

Finally, F&A teams should seek to connect with a community of experts dedicated to driving modern accounting and the automation journey, to achieve a more collaborative accounting experience. This could include networking, tapping into virtual best practices and finance transformation summits, and hearing from peers at other organisations about what has worked (or hasn't) on their modern accounting journey. For automation to succeed, it's also critical that F&A control their destiny. Ownership means F&A can take charge of process automation themselves, without relying on IT or technical consultants.

This ensures that technology can be confidently owned and managed by end-users – those closest to reengineering the business processes themselves. If the technology creates friction to driving change, digitisation efforts will ultimately grind to a halt.

This has been a trying year, and businesses have a lot to learn from recent months – successes and failures alike. Taking a holistic approach to automation, understanding the benefits of automating each process, and identifying the competitive insight that can be generated through new techniques and technologies will enable CFOs to work their investment in automation harder and smarter. If you haven’t already decided what your automation plans are for the upcoming year, this is the time to begin.

David Brightman Director of Product Marketing BlackLine

FINANCE

2021:

a huge step forward for humanity… and payments

No industry completely escaped the challenges of 2020. For some it meant adapting to a new way of working, but most businesses needed to continually embrace change, to survive. The coming year will no doubt be transformative also, as we get back on our feet, try and recover from the year just gone and adapt to our new normal.

Unsurprisingly, given how central they are to our day to day lives, payments play a key role.

The way we have interacted with each other has been paramount in stemming the spread of the virus; how we buy our groceries, how we pay for transport, even down to which payment method we’re choosing to use.

Businesses significantly reduced the use of cash last year as well as the number of “touch points” at the point of sale in order to reduce contagion risk.

Contactless became an essential component of the shopping experience in 2020. Indeed Visa’s 2020 annual report shows that contactless transactions now account for 65% of all face-to-face transactions outside of the US, which is still catching up with other parts of the world.

The limit for card based contactless payments was raised from £30 to £45 in April and now looks set to rise further.

This helped the uptake, including by those consumers who previously were not using the method.

But contactless is not the only “touch free” payment method, and as we get further into 2021, and there is a continuing need to maintain social distancing measures, we are likely to see new, innovative solutions gain further ground.

Issue 23 | 39

FINANCE

The growth of app-based commerce in 2021 Apps have a huge role to play for many sectors - enabling businesses to engage with their customers in a better way and improve the buying experience. One app feature that became particularly important for the hospitality industry last year was ‘pay at table’ functionality. Done well, this offered an easy way to maintain social distancing whilst making it more convenient for customers to pay and make repeat purchases. Apps offered another key benefit over cash and card payments - in terms of identifying and communicating with customers who may be at risk if an outbreak of COVID-19 occurred at a venue.

This widespread adoption of apps will continue to spur on the growth of app-based commerce in 2021. As we continue to adapt and recover from the impact of the pandemic, apps will continue to play a vital role in reducing unnecessary contact during the checkout process.

Contactless payments need to go one step further Contactless has paved the way for safer and more hygienic payments in public. They mitigate the need for customers to physically touch anything other than their own card, but they are still required to get close enough to the payment terminal for the transaction to be completed. And this usually means there is a member of staff nearby.

For example, some restaurants or

40 | Issue 23

pubs bring the payment terminal to the table, but payments made this way are taking place at a distance much closer than the two metres recommended by the government.

The next logical step is to make payments really touch free, allowing customers to complete their transaction at a safe distance. We will likely see this technology, already available in the market, taking off in 2021. Such a solution enables a staff member to display a QR code on their own tablet or smartphone which is then scanned by the customer using their own phone, instigating the payment. This helps not only the nation’s small and medium sized enterprises (SMEs), get back on their feet following previous and current lockdowns, but the whole country.

What will be required of the payments industry in 2021?

Many customers are likely to continue shopping from home rather than venturing out into the public. 2020 forced them to adapt to the latest technologies available to them, and they are now comfortable with ecommerce being a staple point of their retail experience. So, solution providers should ensure that payment methods are transferable into the digital sphere.

Having been hit hard during lockdowns, SMEs want to get back on their feet as quickly and efficiently as possible. This will drive the need for solutions that will support them in doing this by removing any complications associated with using multiple payments providers.

At the same time, having faced downturns in revenue and unreliable cash flows, it is unlikely that SMEs will be looking to take on high fees associated with setting up payment terminals or integrating costly hardware into their business structures. Providers need to offer cost-effective solutions that democratise payments. So not only enterprise businesses have access to the latest technology, but SMEs can benefit from it too.

If payments providers can offer all of this, they will be contributing to the recovery plans of businesses as they emerge from lockdowns.

A new year and a new normal With the vaccinations continuing apace, lockdowns coming to an end and physical stores reopening for business, this year looks to be a promising one. We expect that it will also be an interesting one for the payments industry, which has an important job ahead of it – assisting SMEs and the wider economy in their COVID-19 recovery plans.

Like many big events in history, and due to our adaptable nature, it is likely that we will see some exciting new solutions being born from the changes that take place over the next 12 months.

FINANCE

Jeremy Nicholds CEO Judopay

Jeremy is Chief Executive Officer of Judopay, the leading enabler of mobile web and app commerce – helping companies across multiple sectors serve their customers with a better way to pay.

Jeremy has previously been an Executive Director at Visa where he drove mass market adoption of NFC Mobile payments across multiple markets and led the launch of compelling new propositions like Apple Pay. Jeremy previously led Visa’s commercial and business development activities across Europe, working extensively with Europe’s major banks. Before Visa, Jeremy held roles at Mastercard being SVP, Sales and Marketing and NatWest where he headed up NatWest’s consumer card business.

Judopay is the leading mobile payments platform. Born out of the frustration with friction-filled checkouts we built a flexible solution designed to drive sales and improve the customer experience. Working closely with partners such as Mastercard, Discover Global Network and Visa, Judopay is continually building ways to enhance the overall payment experience for both the merchant and their customers. Available across multiple sectors, our solution is used by KFC, Connect Cashless Parking, Revolutions Bars, Chip, The Pharmacy Centre, Young’s Pubs and many more.

For more information please visit: judopay.com or find us on Twitter: @Judopay

Issue 23 | 41

FINTECH

The role of data and digitisation in banking’s future

Recurring lockdowns, government restrictions and pandemic-induced changing consumer behaviour have fundamentally affected financial services. The banking industry was already undergoing an identity crisis as new fintech challengers entered the field, creating consumer demand for increased digitisation, easier onboarding and omnichannel, consumer-focused experiences. Covid-19 has forced high street banks to confront this digital transformation head-on.

understanding and use of data from purely transactional and logistical to powering how, when and where they communicate with their customers. If we look elsewhere at a fast-growing brand like Gymshark, recently valued at $1.3bn, it has built its entire offering based on this, with the backend data infrastructure able to learn and develop based on those consumer needs. This allows the brand to create seamless omnichannel experiences, mirroring consumers and how they interact with the world around them.

Mobile banking is becoming increasingly commonplace – 34% of Brits use a mobile banking app at least once a week – and competition is coming from multiple directions as seen with the announcement that JP Morgan is entering the UK market with a digital-first consumer bank, under its existing Chase brand. While there are many potential positives that come with digitisation, including embedded or open banking, increased speed of innovation, or more seamless onboarding, the most important thing remains that the consumer is at the centre of it all.

Legacy banks have the distinct advantage of trust and breadth of products, but they must continue to evolve their offering in line with customer expectations and the persistent market competition. To gain that critical edge in the market, financial brands need to dramatically change how they behave, moving from a service provider that mitigates risk, to a partner that engages and maximises new channels and embraces how, where and why customers look to engage with their financial partners.

All the banks’ innovation must start with the customer and for traditional banks that means they must evolve their

42 | Issue 23

Banks that fall behind on the digital battleground will be unable to expand and grow their customer relationships from that of a service provider that lends

money or allows transactions, to a trusted partner that helps support consumers and businesses across their spectrum of needs, both offline and online.

This is not only an internal process of innovation for banks. It requires a stepchange in how they work with partners – specifically in how they think about their internal and external marketing and sales processes and relationships.

Historically, agencies have retained a large amount of information and data on the media they are buying, the underlying costs or rebates associated with those agreements, and the direct ownership of the customer and performance data.

If banks are to fully digitise, they will need to rethink how they work with marketing and media agencies to ensure that there is a transparent and frictionless flow of information between their internal and external teams – and that they have complete control and ownership over their customer data. This will require embedded resources and integrated team structures across disciplines, both internal and external, as banks continue to build in-house expertise while relying on external experts to help support those growing functions.

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Complete data ownership – including how different messaging has performed, who it was served to, and the resulting impact of that message – becomes the foundation for how banks will digitise and how they will use that to become more effective and efficient partners.

Again, looking outside the sector, brands like Disney, with the launch of Disney+, have been built on an infrastructure of complete data ownership, both in terms of on-platform behaviour and in user acquisition and performance data.

Merging these data sets allows them to effectively personalise marketing messaging and better predict lifetime value through a deeper understanding of what mechanisms positively contribute to user retention.

This data, and the insights that it will fuel, will be what powers banks’ relevance to consumers and businesses, propelling how they can communicate with consumers in personalised ways, based on their specific needs.

This data feedback loop will unlock insights that drive effective creative messaging across media channels and placements. While many brands have already begun the necessary process of

reintegrating creative and media within their marketing, there is a limit to how contextualised and personalised their marketing can be without proper data ownership and feedback.

Historically this data has helped create effective advertising campaigns through channels like Search or Display, driving efficient customer acquisition in isolated channels. But now these offer the opportunity for holistic communication across living room inventory sources – through OTT/CTV, mobile devices – and the ever-expanding Digital Out of Home inventory with real-time capabilities.

Banks are being forced to look at the opportunity, and threat, that increased consumer demand for digital offerings now presents. For them to properly service their customers digitisation is essential. It means placing their customers at the heart of how they think and how they store and use data, which will not only allow for better offerings and reduced friction but also ensure they effectively communicate and market to existing and net-new customers.

Ben Allison VP, Global Media, VaynerMedia Ben Allison is the VP and Head of Media at VaynerMedia London. In this role, he oversees all regional media operations, spanning strategic partnerships, planning, buying and analytics. Prior to this role, Ben served as a Director of Media and business lead in the VaynerMedia New York office. Ben is responsible for driving innovation and consistency in product output for all VaynerMedia London media and global clients.

In this capacity, he works with both brand teams and platform partners to provide best-in-class client and marketing solutions.

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FINTECH

What can the world of Fintech expect in 2021?

Last year was a year like no other as the Covid-19 global pandemic caused us to change how we live and work.

As more providers enter the market to offer financial services, we expect much more debate and discussion around regulation this year.

The pandemic caused huge challenges for people across the world as we sought to survive in new, difficult circumstances, which the fintech industry faced like all others.

For instance, there has been debate about legislation that would offer banks incentives to grow the wealth of their customers, whilst also sanctioning banks if they sell products to consumers that are not in the customer’s best interest.

But the tests brought along by the impact of Covid-19 also brought about the unpredictable growth of more digital financial services such as mobile payments.

Because of Covid-19 these changes were created quickly and the take up rates of consumers greatly exceeded previous industry predictions for adoption of these new technologies.

So what can we expect from the fintech industry in 2021? Here are my thoughts.

PSD2 will give customers more choice Payment Service Directive 2 (PSD2) will come into force this year. This will end the decades long lock of banks that has dominated the industry and let fintech’s access customers’ bank accounts.

Financial institutions have long sought ways to work around the PSD2 regulation to lock in consumers and offer no choice. But this enforced change will give consumers better access to fintech services that are more convenient and effective for individual needs.

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If this new regulation does come into effect this year then banks will need to focus more on offering the most relevant and beneficial products instead of the ones that bring banks the highest profit margins.

Greater European Fintech Success 2021 is set to see strong growth for European fintech companies as more innovation in the sector will see it build on a good performance last year.

Numerous big and successful fintech companies are springing up in areas across Europe, away from the major traditional financial hubs of the UK, France and Germany.

Dedicated solutions that focus on specific areas, like trading, will keep growing this year. But, long-term we will see a consolidation in the market and the European fintech companies that are able to compete in this environment will be those that are truly relevant in our daily lives.

These apps are turning into the first point of contact for everything money related and I expect to see more innovation and growth in this area from across Europe this year.

FINTECH

Rise of the digital wallet super apps The digital wallet super app is becoming the central focus in our lives for everything around money, shopping, and banking as payments and accounts keep migrating to smartphones.

The future of banking will keep shifting to entirely mobile solutions working in combination with other financial services that are in one easily accessible place.

This year I expect the use of digital wallet super apps to grow massively in Europe as consumers look to streamline their digital services and use trusted, simplified apps. This is likely to feature 3 or 4 key players like Apple, Google, Alipay and Stocard.

This will merge shopping, payment and financial services into one wallet app, which consumers favour, as one app with an easy-to-use interface lets them do everything they need to do, in one place.

The consumer can pick the services that are the best at meeting their individual needs, which means the apps that can add the most value beyond banking and payments will shine through in the marketplace this year.

More buy now, pay later, for a while?

There was a growth in buy now, pay later (BNPL) services last year as consumers turned to online shopping. For example, recent research found a 168% rise in the usage of buy now pay later apps last year.

Many consumers saw this way of buying as less risky and took advantage of the convenience of it during lockdowns.

However, the recent high growth in this area was driven by the Covid-19 pandemic and regardless of its recent popularity the BNPL total share of wallet remains very low.

2021 will tell us if the shift to this new way of payment us a short-term change or a long term trend. The investment made by retailers and payment providers will make BNPL options both instore and online more accessible for consumers.

Conversely, there has been a lot of debate about regulation for these services and this may put the brakes on the growth rates BNPL services are experiencing at present.

Björn Goß CEO and Co-founder of Stocard

Björn Goß is CEO and Co-founder of Stocard, Europe’s leading mobile wallet. Stocard has more than 50 million users and it processes over 1.7 billion POS-transactions per year.

Digital management of loyalty cards and mobile payment are just two of the functions of the Stocard app.

Stocard was founded in Mannheim in 2012 by Björn Goß, David Handlos and Florian Barth and the company has a total of 75 employees. In addition to its headquarters in Mannheim, Germany, Stocard is represented in Sydney, Milan, Rotterdam, Paris and London.

Overall, the fintech industry is set for another strong year in 2021 as permanent change in consumer behaviour will keep driving new and improved digital services and innovation hubs.

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TECHNOLOGY

Artificial Intelligence set to transform Asset Tracing Few industries are immune to the power of algorithms to transform the way things are done. Here, Nigel Nicholson, Chief Executive Officer and Craig Heschuk, EVP North America of GreyList Trace Limited, predicts their impact on the complex and labour-intensive work of tracing assets world wide

Introduction As professionals working for many years in financial asset tracing, we deeply admire the community of forensic accountants, lawyers, litigation funders, law enforcement agencies and business intelligence professionals who have developed great skills in financial asset recovery on a global scale. Despite this expertise, asset tracing remains a game of catch up. Criminals are too often one step ahead as they use every possible means, including cutting edge technology, to hide their ill-gotten gains. As a result, the victims of a fraud face a daunting challenge when they seek to recover assets. Everyone is chasing a favourable outcome for their clients, but this can often take years to materialise.

The time, cost and complexity of these processes has long been both significant and unpredictable. Investigators and funders often embark on asset tracing projects knowing that they are extremely unlikely to recover all the assets or money owing and that the resources that need to be deployed may be disproportionate to the returns.

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The good news is that, as an industry, we continue to benefit from advances in technology and the use of artificial intelligence (AI) tools has the potential to be transformational. Using sophisticated algorithms, it is now possible to achieve far better outcomes in terms of speed, cost and accuracy, while also removing much of the “heavy lifting” associated with locating undisclosed assets, and in particular hidden bank accounts.

The legislative framework In the UK and US alone, it is estimated that US$550 billion is laundered each year.

In his pre- inauguration announcements, President Biden has made the fight against corruption “a top domestic and national security priority”. For the first time ever, the US Corporate Transparency Act passed by Congress on January 1, 2021 will require millions of US registered businesses to report their true beneficial ownership to the US Treasury’s Financial Crimes Enforcement Network, as part of a clamp down on anonymous shell companies. The jury may still be out on the effectiveness of this legislation but there are green shoots of change.

TECNOLOGY

In Europe, after years of good intentions, the EU has been stung into action by a massive €230 billion money laundering fraud at the Estonian branch of Danske Bank, Denmark’s largest lender and the disappearance of up to €500 billion routed by the daughter of the former Angolan President through banks in London and Brussels. In November 2020 EU Finance Ministers agreed to create an integrated AML watchdog with supranational power to facilitate cross border law enforcement.

These are signs of progress, but laws are not enough. There has to be the political will to implement and enforce recovery, and this can be enhanced by hard evidence developed quickly and effectively. AI tools can help convert the painful and time-consuming search for a “needle in a haystack” to something more focused and achievable.

Being on the side of the angels is not without challenges. Legal and ethical standards necessitate a disciplined approach to investigation in compliance

with applicable computer misuse and data privacy laws. The asset recovery investigator is faced with the compelling necessity to ensure that any results are admissible in court.

investigator to identify potential claims, isolate critical evidence in support of a claim and develop a narrative of the events that led to an insolvency or a fraudulent act.

Technology Solutions - A Quick Review of The Existing Toolkit

AI for Tracing Banking Relationships – The totally unique GreyList Trace platform allows investigators to establish, legally and within a short timescale, whether an email address (of a person-of-interest) has been used to open and operate bank accounts with one or more of the 220,000 banks and branches in the world. By combining algorithms with a sophisticated bank database, and without ever infiltrating a bank’s computer systems, GreyList can identify, with over 98 percent accuracy, every bank where an individual has a banking relationship or has had one in the recent past. No confidential information is obtained and no computer systems are accessed.

In simple terms, GreyList determines by deduction if the email address of the person-of-interest has been “whitelisted” by a bank.

Technological innovation has already generated a range of e-tools. Let’s start with a quick survey of a few of the key technologies available for fraud investigators.

E-Discovery and Digital Forensics - One of the most indispensable services for law firms, insolvency professionals and companies involved in disputes is e-discovery, digital forensics and AI-driven data analytics. Only the very largest firms can justify having in-house capability to analyse big data. But specialist service providers can bring advanced computing and dedicated expertise to help sift through massive amounts of data and billions of data points. This permits the

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TECHNOLOGY

Cryptocurrency and Blockchain Analysis - The emergence of cryptocurrencies and their rapid adoption has led to the growth of firms like Chainalysis that specialize in cracking the blockchain for law enforcement and other clients that have justifiable cause to examine suspect cryptotransactions. Given the pervasive level of fraud and money laundering in electronic currencies, these services are indispensable for tracking criminal conduct.

The Role of Artificial Intelligence in Combatting Fraud Given that the fraud recovery battle is moving inexorably towards cyber space, adopting technologies that will enhance investigations and shift the advantage in favour of the “good guys” is not just nice to have - it is mission critical. As criminals get smarter and their networks for global funds transfer keep evolving, the use of artificial intelligence (AI) tools is becoming indispensable. AI permits the global investigation of vast repositories of data to decipher a sophisticated criminal network of special purpose corporations and bank accounts.

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What AI offers is the potential to tip the balance from an art form to a science, and to deploy the power of technology and algorithms to take on these challenges. Any national law enforcement agency will tell you that as fraudsters use more and more institutions in more and more jurisdictions to hide their assets, the cross-border task is growing exponentially. While the UK’s Serious Fraud Office might be able to find monies hidden in the UK fairly easily, once assets cross borders the challenge is tough.

missing pieces when the investigator doesn’t necessarily know what the full picture looks like.

Other AI techniques can scrape information from the web, regulatory databases and social media accounts to fit together the pieces of a jigsaw puzzle and predict the images on the

One of the reasons such a process is feasible is because, despite the ongoing evolution of communications technology, the banking industry and many other sectors are still heavily

In cases of money laundering, AI can identify connections with sanctioned and blacklisted banks or sanctioned and undesirable organisations. It is often possible to keep a name out of the “headlines” in such situations but suppressing details of email addresses or other digital identifiers is much more difficult. AI can also establish communications patterns among such groups of individuals.

TECHNOLOGY

reliant on the use of something relatively old-fashioned: an individual’s email address. Banks, for regulatory and operational purposes, rely on hierarchies to filter incoming email communications and know whether those email addresses belong to customers or not. So, in establishing connections, desirable or otherwise, an email address remains a prime source of identification and verification. In fact, it is becoming even more integral to banking relationships than it ever was.

AI in action Technology means it now takes only a few seconds of processing time to prove conclusively, and totally legally, whether any two email addresses have ever communicated with each other, in one direction or both. A rather useful tool when those individuals have denied, including in court, that they have ever communicated. Or where an organisation suspects that a former partner or employee has breached a standstill agreement and is already trying to poach former customers or employees. And because it is possible to establish within a few weeks every bank in the world in which an individual, or any of that individual’s proxies, has an account, it is possible to establish connections with sanctioned banks or organisations in just a few days, or even hours.

The fact that the AI algorithms know no borders is another key element.

Tracing connections in Japan, Ecuador, North Korea or Wales becomes no more difficult than tracing them domestically, because the technology is testing communications, which cuts through any and all physical and jurisdictional barriers. We are all familiar with cases that involve a company established in an initial jurisdiction that becomes a director and shareholder of a company in a second jurisdiction, with that company in turn becoming a director and shareholder of another company until the ownership of the asset or of the bank account has travelled through 30 companies in 30 countries, many of which still have secrecy rules at some level or another.

It is company 30 that has the bank account where the money resides.

Using conventional techniques, finding that connection would require following an incredibly complex ownership chain, and probably failing. With the effective use of AI, the algorithm goes straight to the answer. It finds the connection at the end of the chain. And if there is a need to reconstruct that chain, the good news is that other AI programmes can help in that process.

Transforming the industry The current asset recovery industry is experienced and effective but constrained by many challenges that can make the investigation process frustrating and slow. AI has the potential to speed up many different elements of the recovery process. It is inevitable that the future will mean more automation, more technology and more electronic investigation, because our world is becoming more cyber driven and pieces of paper no longer exist.

Experienced and sophisticated professionals will continue to have a critical role to play in tracing assets worldwide, introducing common sense, insight and experience to the process.

The toolkit available to the global asset recovery industry is getting far more sophisticated, and this is something we should all embrace and harness with increasing pace and urgency.

Nigel Nicholson

Craig Heschuk

Executive Officer of GreyList Trace Limited

EVP North America of GreyList Trace Limited

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TECHNOLOGY

Mobile payment solutions on the boom, but a lack of PCI security could cause serious harm

2020 was an eye-opening year for security and authentication in payments. One of the effects COVID-19 had on the retail industry was that it forced more people to begin shopping online, with reports showing an increase of 38% almost immediately as lockdown began. With many brick and mortar stores closed, some customers had no choice but to shop online, many for the first time. But these inexperienced shoppers were easy targets for those with malicious intent and fraud cases skyrocketed. With it, the need for better payment security practices became apparent.

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Security thus needs to be at the top of almost every business involved in the payment’s ecosystem and many are making steps towards more secure technology. One of the highlights in 2020 for MYPINPAD, was that we were the first to obtain Payment Card Industry (PCI) Security Standards Council (SSC) certification for both Android and iOS software-based contactless payments solutions. This meant we were proven to offer secure payments that protect vulnerable shoppers online and help in the fight against fraud. This was the standard that the PCI council was pushing for.

Unfortunately, becoming fully certified is a lengthy process, and 2020 was a year that has often very much encouraged quick solutions to complex problems (for example the push to quickly get new COVID-19 tests to the public lead to over 50% of positive case being missed).

This has ended up leading to many companies launching payment security products that lack PCI certification and instead have relied on waivers from schemes to go to market. What’s more, this split in the industry between certified and non-certified businesses caused the PCI SSC to re-evaluate its standards, a process that won’t be complete until 2022 at the earliest.

TECHNOLOGY

This decision will influence what we see in 2021 from those involved in the industry, from payment providers and processors, to merchants, to the customers making payments. Ongoing efforts to protect vulnerable customers amid changing security standards will have ramifications for everyone throughout the year.

The rise of PIN on Mobile PIN is the most secure and highly familiar payment authentication method. Unlike CVC and entering card details, which anyone can do as long as they have the card, PIN is a passcode that only the user knows about and can tell people about.

However, with options for shopping currently limited more are moving to online shopping and from this new payment challenges are rising. With less

experienced people shopping through digital channels there has been a 50% rise in online fraud since January 2020 and part of this is because of failure to adapt to new payment methods.

Payment authorisation providers and payment schemes acknowledged the security issues of not using PIN and in 2020 began to act by pursing more PIN on Mobile solutions. The biggest story for this was Apple’s purchase of Mobeewave during the Summer of 2020, showing Apple’s intent to transform iPhones and similar iOS devices into payment terminals. This was the latest venture in its venture into the financial services industry, following Apple Pay and Apple card, and would allow its customers to make PIN purchases through their own devices.

That a big tech company like Apple would make a purchase that encourages PIN on Mobile is a sign that they see a strong future in the technology and in 2021 this will encourage more companies to enter the scene, either new Fintech startups or other big tech companies like Google or Amazon.

Digital adoption is on the rise, but so is fraud While COVID-19 pushed more shoppers and businesses to adopt a digital approach to shopping in 2020, the signs of a shift in this direction were already there. Total online retail sales had slowly been on the rise in the UK before COVID-19 and were accelerated by the lockdown.

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TECHNOLOGY

As a result, more businesses are moving to greater digitisation, and in 2021 it will be the difference between survival and collapse. We will see more businesses drive digital transformations across daily activities and merchants will take advantage of customers’ digital devices like mobile phones to create a frictionless customer experience. The previously mentioned PIN on Mobile is a part of that.

solutions of many ecommerce stores.

Vulnerable customers cover a wide range of shoppers, from the elderly, who tend to be the most negatively impacted by the shift to digital (often due to a lack of knowledge around the latest technology), to those with physical restrictions such as visual impairments, where using small screens can be uncomfortable if not down-right impossible for some.

However, the unfortunate result of this is that fraud cases will continue to rise. Fraudsters have been exploiting, and adapting to, the expanding digital environment brought on by COVID to trick new online shoppers into handing over precious payment data. They did this by posing as the victim’s bank and requesting private details or by scamming shoppers into purchasing items that don’t exist. This was prominent in 2020, as COVID-19 scams meant fraud cases nearly doubled in the first half of 2020 alone and will likely remain the case in 2021, as Juniper Research estimates that global retailers are barrelling towards a $130B loss globally in CNP fraud by 2023.

The issue of supporting vulnerable customers has been one that the payments industry has been facing for a long time, but with the big move to ecommerce it is harder now for some customers to make purchases, whether because of disability, age, or issues with the technology available to them.

The good news is that new technology and regulations are making the shopping experience more secure for vulnerable customers. Regulations like SCA have already taken steps to ensure safer payments in card-notpresent (CNP) transactions and while the new PCI standards won’t come into place until 2022, this does not prevent payment providers from continuing to improve their security efforts in anticipation of the new standards.

Vulnerable customers need more support The increase of first-time and vulnerable shoppers online has highlighted flaws in the payment

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The seeds have been sown in 2020 Customers and businesses alike are set for a better digital experience, whether from the benefits brought about by greater digital environment, to new regulations around security and protecting customers from fraud. These factors will continue to push innovation in technology that will solve, or at least seek to meaningfully improve, the issues that have been brought to the forefront by COVID-19.

In 2021, we will see these seeds sprout and it will lead to merchants being even more proactive in protecting vulnerable customers. And the introduction of new payments technology will make the online shopping experience more convenient and secure for everyone.

Customers who primarily shopped in-stores are more familiar with simple contactless payments or using PIN or swipe to pay, but with ecommerce shops there are more options and more steps to take. Putting in card details may seem like a trivial action to those with years of experience dealing with online shopping, but for new customers the plethora of forms and options in digital checkouts can be a turn off.

As an industry, we have a responsibility to tackle the challenges facing all consumers, especially the most vulnerable. As we continue to develop better financial offerings and services, we must ensure that everyone can understand, access and benefit from these services. In 2021, more steps will be taken to ensure the online shopping experience is as convenient as possible.

This could be done through an increase in the use of tokenisation, so customers don’t need to input all their details every time they shop, or by replicating the in-store shopping experience at home, offering Tap to PIN on customer smartphones.

Justin Pike Founder & Chairman MYPINPAD