Global Banking & Finance Review Issue 56 - 2023 Banking Awards - Business & Finance Magazine

Issue 56

Incofin: Leading the Movement in Investing for Impact Geert Peetermans, Co-CEO, Incofin Investment Management

Paul Buysens, Co-CEO, Incofin Investment Management

www.globalbankingandfinance.com

CONTENTS

Chairman and CEO Varun Sash Editor Wanda Rich email: wrich@gbafmag.com Head of Distribution & Production Robert Mathew Project Managers Megan Sash, Amanda Walker Video Production and Journalist Phil Fothergill Graphic Designer Jessica Weisman-Pitts Client & Accounts Manager Chanel Roberts Business Consultants Rick Saikia, Monika Umakanth, Stefy Abraham, Business Analysts Samuel Joseph, Dave D’Costa Advertising Phone: +44 (0) 208 144 3511 marketing@gbafmag.com GBAF Publications, LTD Alpha House 100 Borough High Street London, SE1 1LB United Kingdom Global Banking & Finance Review is the trading name of GBAF Publications LTD Company Registration Number: 7403411 VAT Number: GB 112 5966 21 ISSN 2396-717X. The information contained in this publication has been obtained from sources the publishers believe to be correct. 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

FROM THE

editor Dear Readers’ Welcome to Issue 56 of the Global Banking & Finance Review. Whether you're a longstanding enthusiast or discovering our pages for the first time, we're delighted to guide you through the intricate world of finance.

In this edition, our front cover story takes you inside the world of Incofin Investment Management, a pioneer in the impact investing sector. Based in Antwerp, Belgium, Incofin's journey from humble beginnings to a leading asset management company epitomizes dedication and foresight. Co-CEOs Geert Peetermans and Paul Buysens provide an exclusive look into the company’s evolution, reflecting on their growth from a small team to a global presence with offices in five locations and a team of over 25 nationalities. They discuss strategic milestones like the launch of the Fairtrade Access Fund in 2012, marking a significant shift into agri-finance. This story is more than just about growth; it's about the transformative impact of dedicated investing. Dive into this inspiring narrative on page 24.

As we approach the end of 2023, Helena Müller, VP Banking at Diebold Nixdorf, invites us to pause and reflect on the transformative journey of the financial services industry. In her insightful article 'Creating Value-Added Banking for 2024', Müller emphasizes the necessity of looking back to strategize effectively for the future. The article delves into the remarkable advancements and shifts in the industry, highlighting the integration of digital technologies and the implementation of new legislations safeguarding banking and cash services. With an eye on 2024, Müller explores the critical topics and trends poised to shape strategic decision-making in the dynamic world of finance. Discover the key trends shaping banking's future on page 22.

At Global Banking & Finance Review, we aim to be more than a magazine; we are your compass in the dynamic finance landscape. Our mission is to deliver unparalleled insights, breaking news, and diverse perspectives. Whether you're deeply embedded in the financial sector or simply have a budding curiosity, there's something in these pages for you.

Enjoy!

Wanda Rich Editor

®

Stay caught up on the latest news and trends taking place by signing up for our free email newsletter, reading us online at http://www.globalbankingandfinance.com/ and download our App for the latest digital magazine for free on Google Play and the Apple App Store

Issue 56 | 05

CONTENTS

Inside...

10

BUSINESS

10 It is what you know and who you know?

Stefan Thomas author of

36

Business Networking for Dummies and Win The Room

14 How to adapt expense

processes to changing employee demands Matt Clementson Head of Enterprise UK&I SAP Concur

30 Governance, Risk, and Compliance (GRC) can’t be effectively managed in silos Florian Haarhaus International General Manager NAVEX

28

34 Three ways CFOs can lead in

uncertain times: Resilience is the key to reducing workforce risks Tom Brennan CFO/COO meQuilibrium

40 Should everybody be back in?

Jacqueline Bird Head of Move and Change Management Crown Workspace

42

42 Scope 3 Supply Chain & Financed Emissions

Alexis Normand Co-founder and CEO Greenly

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CONTENTS

FINANCE

12

16

26

46

Top 6 trends in digital finance over the next 10 years

This Issue TECHNOLOGY

18 CFIUS cares about your data:

Evolutions in national security

Nikola Tchakarov

Nathan Fisher

Head of Market Expansion

Managing Director

Noda

StoneTurn

Cross-border payments search for their Netflix moment

28 How AI is facilitating finance transformation

Edward Ireland

Marco Torrente

Joint Head Commercial Product Management

Global CFO

– Financial Messaging, Bottomline

WebBeds

How traders can diversify their portfolios during periods of inflation

32 Financial industry use AI to

understand who their customers are

Kate Leaman

Jonathan Sharp

Chief Market Analyst

CEO

AvaTrade

Britannic

Defeating Frankenstein’s monster: A tale of the financial industry’s fight against synthetic identity fraud

36 How marketplaces provide

technology ecosystems for international sales strategies Tony Preedy

Alex Tonello

Managing Director

Chief Revenue Officer

Fruugo

Trustfull

48 Exploring the history of point-of-

sale devices and standards Must read...

Ron Carter,

22 Creating Value-Added

Executive Vice President of EMV® Cryptomathic

Banking for 2024 Helena Müller VP Banking, Europe, Diebold Nixdorf

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CONTENTS

Cover Story...

Read it on page 24

Incofin: Leading the Movement in Investing for Impact

Geert Peetermans, Co-CEO, Incofin Investment Management

Paul Buysens, Co-CEO, Incofin Investment Management

Issue 56 | 09

BUSINESS

It is what you know and who you know?

Recently I was speaking to some students about the subject of networking and one of them remarked that their Mum had told them ‘it isn’t what you know, it is who you know’.

And I didn’t like that, because I felt it massively undervalued the three or four years of study they had put in, as well as the expertise of their lecturers and mentors. So here’s my take on it.

You can be the most qualified person in the world, but if nobody knows who you are, those qualifications and even experience are unlikely to lead to the job offers or business opportunities you’re seeking. So I advocate that as well as focussing on building their education, qualifications and experience, students should also build their network too. And it is NEVER too early to start.

The same applies to the rest of us too.

Any business and business owner needs a network, as well as needing to be excellent at what they do.

Networking doesn’t have to mean networking events. At the time I write this, in late 2023, there are many other options to build our network, our visibility and our credibility, even if we never leave our desks!

Stefan Thomas author of Business Networking for Dummies and Win The Room

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Firstly, and I massively advocate this to students, start with your peer group.

Who do you already know? For students it makes so much sense to connect with their fellow students AND their lecturers and mentors. These folk may well be sat the opposite side of the desk from them in a few years at a job interview. There is absolutely nothing wrong with having the unfair advantage of already knowing the person who is interviewing you!

BUSINESS

For those of us in business, our existing address book is often overlooked in the quest to make new contacts. A really sensible activity for anyone new in business is to go through their ‘phone and look at who they know who might be able to help them. I have done this over and over since I went into business in 2007. Not only are these folk already ‘warm’ (they know us) but very often they are more than happy to help with introductions. Old work colleagues, old bosses, old mentors as well as our social connections too.

Secondly, online and social media plays a massive role in building and maintaining our network these days. I constantly look for people who are talking about the subjects I have expertise in on social media, and join in the conversations.

I actively seek out people I’d like to do business with and engage with them online before I ever approach them with an offer of my services. And I constantly post content too, so that if potential customers are checking me out they can see that I know what I’m talking about (or at least be able to make up their own minds about that!).

By expressing my opinion on various topics online, and by posting my advice on networking, as often as possible, I am often told by clients that they hired me because they ‘felt like they already knew me’. I was booked for a major speaking gig, at an annual conference for a large organisation a few years ago. I didn’t meet the organisers until the day of the conference, by which point I had already been paid. I asked them why they chose me as their key speaker for the day and they replied that having been recommended to me, they checked me out online and felt like they ‘already knew me’.

The massive uplift in trust when you put effort into your online relationships, and the content you put out online, can have a huge impact on your career and business.

Thirdly, if you can bring yourself to leave your desk, events and networking events are still as important now as they ever were. I’m travelling to a business show next week where, in the course of the five hours or so I’ll spend there, I’ll meet dozens of folks, including catching up with some existing contacts, and meeting new people along the way. I am amazed at how many times I turn up to an event like this and someone who I know says “oh, I’m glad you’re here, I’ve been meaning to call you”. Try your hardest to get along to networking events, industry conferences and anywhere else you have the opportunity to meet existing contacts and new folks too.

Every big opportunity starts with a little conversation. I’ve made my career from starting little conversations, turning some of them into big opportunities, and teaching others how to do the same.

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FINANCE

Top 6 trends in digital finance over the next 10 years The financial landscape is rapidly evolving and driven by digital innovation, societal shifts, and user expectations. As we look ahead, several major trends in digital finance are emerging that promise to reshape the industry over the next decade.

Here’s a comprehensive look into what the future holds:

•

1. The Rise of Central Bank Digital Currencies (CBDCs)

The increasing digitization of finance brings with it potential pitfalls:

CBDCs, or digital versions of a country’s native currency, are making waves:

•

• Nikola Tchakarov, Head of Market Expansion Noda

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•

Direct Consumer Access: CBDCs could enable consumers to have accounts directly with central banks, reducing reliance on traditional intermediaries.

Streamlined Cross-Border Payments: Interoperable CBDCs promise swifter and more cost-effective international transactions.

Monetary Policy Efficacy: Central banks might be better equipped to implement monetary policies, from exploring negative interest rates to executing direct stimulus transfers.

2. The Challenge of Cybersecurity and Data Privacy

•

•

Sophisticated Cyber Threats: Financial institutions will face advanced persistent threats, deepfakes, and challenges posed by quantum computing.

Stringent Regulations: As cyberattacks become more frequent, rigorous standards will be pushed to safeguard consumer data and financial assets.

Building Trust: Ensuring consumers of the security of their data and assets will be pivotal.

FINANCE

3. The Big Tech and Fintech Revolution

5. Open Banking: Reshaping Financial Data Exchange

The boundaries between technology and finance are blurring:

Open banking, underpinned by regulations and technology, is fundamentally changing how financial data is shared and accessed:

•

• •

Innovation and Disruption: While fintechs offer groundbreaking solutions, Big Tech companies are delving deep into financial services, posing competition to traditional banks.

Tailored Financial Services: Advanced data analytics and AI enable the provision of hyper-personalized financial services for individuals.

Financial Inclusion: Big Tech and fintechs could be the key to reaching previously inaccessible segments, ensuring comprehensive financial accessibility.

4. Mobile Payments and Digital Wallets Dictating Transaction Trends The supremacy of digital payments seems inevitable: • • •

Preference for Contactless: Post-COVID-19, the demand for contactless payments, driven by hygiene and convenience, remains unabated.

Holistic Ecosystems: Future digital wallets might merge multiple services, from payments to loyalty benefits and ticketing.

Universal Payment Standards: With the proliferation of digital wallets worldwide, there might be a universal protocol for seamless global transactions.

• • •

Customer Empowerment: Consumers gain control over their financial data, choosing who can access it and for what purpose.

Innovative Financial Products: With easier access to data, financial institutions can create more tailored and innovative products for consumers.

Enhanced Collaboration: Open banking fosters collaboration between traditional banks, fintechs, and third-party providers, driving industry-wide innovation.

As Nikola Tchakarov, the Head of Market Expansion at Noda, said, “Open banking isn’t just a trend; it’s a seismic shift in how we think about financial data. It’s all about giving power back to the consumers, driving innovation, and fostering collaboration in the industry.”

6. Sustainability and ESG Integration in Digital Finance As environmental, social, and governance (ESG) concerns take center stage globally, digital finance is not immune: • Green Finance Platforms: Digital platforms catering to sustainable investing, offering green bonds or ESG-compliant portfolios, will surge in popularity.

• Transparency and Reporting: Advanced tech will allow for real-time reporting and tracking of sustainability metrics in financial operations, enhancing stakeholder transparency.

• Financing Sustainable Solutions: Digital financial solutions will be pivotal in mobilizing resources to address global challenges, from climate change to social inequalities.

The forthcoming decade in digital finance is set to witness unparalleled transformations, from CBDCs and cybersecurity challenges through Big Tech’s incursion to the rise of open banking and sustainability. As we journey through these shifting sands, stakeholders must adapt with agility and a forward-thinking mindset.

Issue 56 | 13

BUSINESS

How to adapt expense processes to changing employee demands The most competitive companies are those that can adapt flexibly to market and social changes – including the developing ways in which businesses are expected to retain staff through employee benefits.

At one point, ‘traditional’ status symbols such as company cars were an easy win when it came to appealing to employees. However, with sustainability and ethical issues coming to the fore against a backdrop of persistent inflation, the choice of which benefits businesses offer to employees has become much more complicated.

The rise of homeworking, incoming regulations, and changing lifestyles have encouraged employees to expect more from their employers.

As such, businesses are beginning to diversify their benefits to accommodate this changing environment.

However, a more diverse portfolio of alternative corporate benefits can bring tax and finance challenges. So, businesses will have to be mindful of these changes as they continue to adapt with the times.

Changing demands of employees Employee expectations surrounding corporate benefits have shifted in several areas, requiring businesses to similarly adapt their processes.

One of the most obvious areas of change has been brought on by the surge in homeworking since the initial Covid-19 restrictions countries faced. Since then, employees have increasingly expected appliances for home offices to be covered by businesses, with workers in some regions even expecting home Wi-Fi to be paid for by their company.

In addition, flexible mobility budgets that can be used for a broad range of transportation modes are gaining traction with employees as a result of changing benefit expectations in countries such as Germany. For private mobility, some businesses are beginning to offer alternative options or compensation in lieu of a company car, with the aim of increasing sustainability across the brand and offer employees benefits that cater to their unique requirements.

Cost saving measures similarly shifted business events from large, company-wide functions into much smaller team-led bonding exercises. In turn, the task of managing these events no longer rests with a single, corporate event organiser but instead with multiple team leads – each with the responsibility of expensing them correctly.

There’s a bigger variety of expenses making their way through systems than previously. As such, there are now more instances of issues such as incorrect categorising and end user errors when it comes to internal cost allocation.

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BUSINESS

Matt Clementson Employees are increasingly making it clear that they don’t want to navigate the complex systems that often cause these expensing errors. Many employees want access to intuitive and easy expense processes. And as a result, there is a stronger emphasis on user experience when it comes to expense management platforms.

In turn, there’s a big shift towards incorporating mobile apps into expense processes. That’s because businesses and employees recognise and appreciate the benefits of using OCR technology to scan receipts and automatically log expenses into the system with little manual work.

Stumbling blocks that need to be taken into account The risks associated with processing employee benefits in expenses correctly increases, especially as the number of categories and the types of taxable benefits grow. Although these mistakes may be frustrating for finance departments, employees can’t be expected to be tax experts, so processes need to accommodate their expertise. One solution is to reduce the number of overarching expense categories available to employees to file their expenses under.

From an employer perspective it can also be difficult to keep up to date with changing international regulations and understand which rules apply to their ever-growing portfolio of benefits. For these reasons, it can be useful to implement AI solutions that can detect taxable employee benefits through applying the appropriate rules automatically.

Using AI-based tools (to improve back-office productivity) can enable taxable benefits to be categorised and expensed correctly and compliantly all employees need to do is simply upload receipt images.

How companies can react to changes

Head of Enterprise UK&I SAP Concur

Expenses were largely handled by finance departments 10-15 years ago, with minimal input from employees beyond them passing on their receipts.

Over time, the responsibility has shifted further and further towards employees, which has been hugely beneficial to finance teams’ time.

However, this shift towards individual responsibility has also created much more room for error and greatened the risk of depleting employee experience – a risk that only worsens as employee benefits continue to diversify. So, businesses must implement processes that rely less on employee input and uphold compliancy if they want to adapt. And they must do this without pushing additional responsibilities back onto finance teams.

Solutions like Concur Benefits Assurance by Blue dot can be a useful way forward. The secure, dynamically updated tax compliance platform combines sophisticated ML algorithms and intricate tax knowledge to enable three-way matching between supplier data, evidence, and reports to ensure full compliance.

When it comes to introducing new benefits like flexible mobility budgets for private transportation technology can help manage the taxable implications. Employees as well as employers are always on top of their budget management.

Solutions such as those mentioned above can be a huge support to the finance and HR teams in ensuring compliance by matching data to from receipts and expense items.

Essentially, businesses must be able to offer adaptable processes that enable employees to claim expense easily without sacrificing all-important compliance. If businesses can do this, they’ll be able to continue talent retention efforts, while maintaining visibility over finances including expenses.

Issue 56 | 15

FINANCE

If only cross-border payments were as simple as watching a movie. And they can be. Because if you look at the history of digital transformation since the turn of the century, we’ve already seen dramatic achievements in the blink of an eye.

Cross-border payments search for their Netflix moment

For example, in 1997, if you wanted to see the top grossing movie of that year (Titanic) you had three choices. One, go to a movie house and sit uninterrupted for three hours. Second, go to the video store and see if Titanic had been released on DVD to hire. Or three, you could rent the DVD from a new company called Netflix, who would send the DVD by mail delivery to you between two to five days later.

Fast forward just ten years. Now, you simply go to Netflix.com and in just a few keystrokes you can access and watch a movie of your choice, in the comfort of your home. With a few lines of code and a few terabytes of streaming bandwidth, digital technology brought films into the 21st century, just as Apple and Spotify have with streaming music.

This example is a gross simplification of the entertainment industry’s growth, and I can almost hear engineers and other executives from Netflix groaning as I write. But it illustrates a point about cross-border payments, which is, that when you apply digital transformation in this context, the difference can and will be dramatic. Will it be as dramatic as DVDs vs streaming? Time and what steps the banking and payments industry take will tell. But cross-border payments are poised to make a great leap forward, finally making progress on an issue that has proven quite difficult for the industry to solve.

Challenges to making cross-border payments efficient Speed and scale – which have been allies in pushing consumer payments forward – have been harder to achieve for crossborder payments which until now, have been slow and inefficient. The reasons for this have been well-documented.

First, the absence of standardized formats and protocols across different payment systems and banks hinders interoperability, leading to delays and errors in processing transactions. Second,

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cross-border payments often involve multiple banks and intermediaries, each with its own systems and processes.

Third, the time factor. Banks and financial institutions operate within specific business hours, which can cause delays in cross-border payments that need processing outside these hours.

But the biggest hindrance also contains a clue to its future: legacy payments infrastructure can contribute to inefficiencies in cross-border payments, as they lack the necessary digital technology and connectivity for faster and more streamlined processes. A bank that maintains legacy processes for cross-border payments will be slow and inefficient. Banks that have aggressively embraced digital transformation on their development roadmap have made crossborder payments faster, more transparent,

and more efficient. I would argue that the reason the industry has been slow to progress is because so many individual banks – and countries – have themselves been slow to progress. If you want speed, you need scale. If you want speed and scale, you need to be digital.

So, while cross-border payments have certainly improved, there are still steps that need to be taken by the payments industry before we can achieve that “Netflix” moment. There are three key tasks.

The way forward – three key steps SWIFT cooperation: I recently returned from SWIFT’s flagship conference, Sibos, where it was apparent that the organization has done a great job taking cross-border payments and settlements forward. I don’t see any other company

FINANCE

or international organization putting forth their own version of the truth in this area. It starts with SWIFT gpi, which introduces a set of standardized processes and technologies to enhance the entire payment process. One of the key features of SWIFT gpi is the ability to track payments in real-time. Another vital aspect of SWIFT gpi is the introduction of faster settlement. By leveraging existing messaging standards and optimizing processes, SWIFT gpi enables near real-time availability of funds in the beneficiary’s account, reducing the time it takes for cross-border payments to be credited. Along with new complementary regulations from the EU Parliament on instant payments and the UK’s New Payment Architecture initiative, I’m confident that SWIFT will continue to lead the way in bringing cross-border payments into the digital era.

Aspire to end-to-end visibility: Banks need to use all the tools available to improve cross-border payments, because when they do so, more businesses and consumers will use them. For example, look at the UK’s Confirmation of Payee name checking service, which was developed by Pay.UK and mandated by the Payment System Regulator. Although the payments here are domestic, this example is useful. The industry had a huge problem with authorized push payment (APP) fraud that stopped businesses and consumers from using push payments. By developing and mandating Confirmation of Payee, businesses and consumers no longer have to guess whether their payments will arrive at their desired destination.

Cross-border payments find themselves at a similar juncture. Why make a crossborder payment unless you are confident it will be completed accurately? SWIFT has doubled down on the use of pre-validation, which is the cross-border equivalent of

Confirmation of Payee. By using prevalidation, banks can verify payment details in advance, ensuring all necessary information is accurate and complete before sending the payment, which will reduce errors and delays.

Take ISO 20022 to the next level: ISO 20022 messaging supports the use of pre-validation checks, but it’s only one of the reasons banks need to continue their journey with this messaging format. The UK has mandated its use, but only at the most basic “connectivity” level. ISO 20022 provides a standardized and structured approach to payment messaging that arguably contains all the cures for the ills that plague cross-border payments. It enables financial institutions to exchange comprehensive payment information, reduces the risk of errors, and streamlines the payment process to enhance the overall cross-border payment experience.

A positive future There are other obstacles to crossborder progress, such as the continued use of correspondent banks, and also additional factors that could contribute to its success – for example, the IXB initiative from The Clearing House in the US. But I’m confident that the three steps outlined above will move the needle toward more speed, scale and efficiency.

Will cross-border payments have that Netflix moment? Realistically, it might not be that dramatic. But, given the continued momentum toward digital transformation, the industry can only benefit from working better together to drive greater ease and efficiency in cross-border payments.

Edward Ireland Joint Head Commercial Product Management – Financial Messaging, Bottomline

Issue 56 | 17

TECHNOLOGY

CFIUS cares about your data: Evolutions in national security We have come a long way from, “data is the new oil.” Data, in fact, may be a more precious asset than that.

In recent years, data privacy has become a concern of paramount importance. Individuals, businesses, and governments are interconnected like never before through the exchange of digital information. But for all the benefits the availability of data may offer, we should be equally concerned with understanding who has access to this data and how it is being used.

Regulators and government bodies, including the Committee on Foreign Investment in the United States (CFIUS), are assessing such risks. But these risks are not simple, especially as data and technology continue to evolve at an increasingly rapid pace.

The Data Dilemma Data has evolved from being a mere byproduct of user activity into a strategic asset valued for the insight it can offer into personal information, intellectual property (IP), and discreet business information. In the most extreme cases, data may reveal sensitive, or even classified, national security information. These risks drive concerns about the unauthorized access and misuse of data.

As individuals and institutions entrust their data to others, they should demand appropriate handling and protection of that information. These expectations are reflected and endorsed in the rapidly evolving landscape of international, jurisdictional, and industry privacy regulations. Even if not currently subject to legal requirements, forward-thinking organizations are wise to recognize that responsible stewardship of data fosters customer trust and strengthens brand reputation, while also mitigating the risks of potential data breaches.

Where CFIUS is Concerned Predating the new-age attention to data privacy, CFIUS was first established in 1975 and empowered with authority to review (and potentially block or otherwise mitigate) foreign investments into the US for potential risk to national security interests. As global commerce and technology have evolved through the years, so has CFIUS’ interpretation of national security vulnerabilities. Consequently, CFIUS has seen an expansion in its authority and jurisdiction and is increasingly focusing its attention on the digital realm. This year the President issued an executive order requiring CFIUS, among other things, to maintain a laser focus on the security of US citizen data.

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Per its own annual report for calendar year 2022, CFIUS reviewed a record number of covered transactions. [1] Of the total number of notices received, the majority of transaction parties were categorized as coming from what CFIUS defines as the “Finance, Information, and Services” sector. This sector includes, among others: publishing industries; telecommunications; data processing, hosting, and related services; professional, scientific, and technical services; and hospitals. When viewed against historical records, a visible trend emerges demonstrating the CFIUS pivot to increased focus on transactions involving technology companies and entities with access to sensitive user data.

In short: CFIUS has recognized the value and risk of data and its potential to affect social, political, and economic influence, and the Committee is not sitting idly by— they are taking action.

TECHNOLOGY

Convergence: Where National Security Meets Data Privacy This convergence of data privacy and national security represents a critical juncture in the modern information age.

Foreign adversaries (geopolitical, economic, military, etc.) now recognize data as a strategic resource. Consequently, the US government has placed increased emphasis on ensuring US persons information and other sensitive data is appropriately safeguarded. In July 2023, the White House published the National Cybersecurity Strategy Implementation Plan, providing a roadmap to achieving enhanced national cybersecurity defenses and providing guidance to external partners on the capabilities of Federal agencies in incident response and recovery. [2] Additionally, in early August 2023 the White House also announced new commitments to strengthen cybersecurity protections for America’s public schools. [3]

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TECHNOLOGY

While these initiatives are well-intended, the effort is made more difficult by the lack of federally mandated or universal framework standards. Both information security and data privacy programs borrow from a number of similar but competing standards and industry authorities, such as National Institute of Standards and Technology (NIST), International Organization for Standardization (ISO), General Data Protection Regulation (GDPR), and California Consumer Privacy Act (CCPA).

These inconsistencies across differing jurisdictions complicate CFIUS’ efforts to determine and prescribe appropriate safeguards and mitigations to covered transactions. While CFIUS is dedicated to protecting national security interests, it must be equally committed to enabling economic growth and innovation when able.

Key elements in this effort that DHS and CISA can lead include: 1.

Transparency: Encourage a more transparent definition of national security interests and threats. This would enable transaction parties to more effectively conduct appropriate due diligence reviews and better assess themselves and the transaction for risks to data privacy and other national security interests.

2.

Establish a Framework: Define the minimum expected standards for data governance.

Given CFIUS’ mandate concerning transactions involving foreign entities, the standards endorsed by CISA should be sophisticated enough to be recognized and accepted by those international jurisdictions with stringent requirements.

3.

Technical Controls: Prescribe hardware and software solutions to safeguard information against unauthorized access and misuse. Mandating security solutions such as encryption, firewalls, multi-factor authentication (MFA), and the practice of least privilege serve to decrease the likelihood of a breach and mitigate the risk posed by such an event.

The Path Forward To be successful in this charge, CFIUS must pursue greater collaboration with private sector, government, and technology experts in establishing expectations and standards to be applied consistently in the interest of national security. Each member agency that comprises CFIUS may play a role in this process – particularly the Department of Homeland Security (DHS) and Cybersecurity and Infrastructure Security Agency (CISA) which has been charged with leading the defense of our nation’s cyber and critical infrastructure interests.

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TECHNOLOGY

Conclusion Regard for data privacy is now deeply entwined in the CFIUS and broader national security mission. As technology offers unprecedented opportunities in innovation and global investment, it also poses significant risk which drives the critical need to protect sensitive data from compromise and misuse—whether that’s in the corporate ecosystem, or targeting data-rich institutions, such as academia or research organizations.

CFIUS must strike a balance enabling growth and economic development while protecting national security interests, including the sensitive information of U.S. businesses and people.

That balance can best be achieved by inviting businesses and technology leaders to the table in defining the path forward. DHS and CISA can best represent CFIUS in this collaborative effort by offering guidance to the public and private sectors on appropriate information security standards, suitable for protecting corporate and national security interests alike. Steps taken now to clarify and strengthen will reinforce tomorrow’s national security posture.

[1] Treasury Releases CFIUS Annual Report for 2022 | U.S. Department of the Treasury

Nathan Fisher Managing Director StoneTurn

[2] https://www.whitehouse.gov/briefing-room/statementsreleases/2023/07/13/fact-sheet-biden-harrisadministrationpublishes-thenational-cybersecurity-strategyimplementation-plan/ [3] https://www.whitehouse.gov/briefing-room/statementsreleases/2023/08/07/biden-harris-administration-launches-newefforts-to-strengthen-americas-k-12-schools-cybersecurity/

Issue 56 | 21

FINANCE

Creating Value-Added Banking for

Reflecting on where you are is always a good way to start planning for the future.

As 2023 begins to draw to a close, we can take a step back and recognise the significant progress and change achieved within the financial services industry. From the augmentation of digital solutions to new legislation protecting banking and cash services, evolution continues to unfold alongside a shifting economic and consumer landscape.

As we look to 2024, what topics and trends will be at the forefront of strategic decisions for the year ahead? Let’s look at some of the key areas of focus.

1. Deepening customer connections Helena Müller VP Banking, Europe, Diebold Nixdorf

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Maintaining a customer-first mindset will continue to dominate. We know that to be truly effective, banking needs to go beyond the transaction and align with a consumer’s values and way of life - futureproofing both customer satisfaction and loyalty.

This is not so easy however when also faced with efficiency drives and an ongoing streamlining of services.

This is where the power of technology can step in. Customer experience, underpinned with data and personalisation can be the gamechanger in delivering a deeply connected experience. Customers want to be understood and engage in experiences that truly meet their needs, and the power of intelligence and more customised offerings will help deliver that next level of interpreted engagement for the future.

2. The structure of the banking landscape Legacy platforms are still holding back progress in some areas, but 2024 will be the year that this changes. In a world where consumers are increasingly intolerant of disconnected experiences and want instant services, there really is no other way to remain competitive and profitable but to match these needs.

Building an agile core infrastructure will help enable this and create the adaptability to offer services across multiple channels in a more flexible way. Despite the ongoing acceleration of digital, delivering a blended mix of both physical and digital banking will ensure reliable and predictable services that meet the needs of consumers in that moment; as well as, of course, maintaining consumer choice.

FINANCE

From a physical banking point of view, we have already seen the channel mix shifting with an increase in ATM pooling, outsourcing and branch-in-a-box concepts, and this will accelerate moving forward. Shared banking and collaborative relationships will no doubt expand and spread as the industry focuses on a service-orientated architecture.

3. Resiliency and sustainability A key driver of recent industry shifts has been efficiency and the need to create more streamlined and cost-effective ways of working. Whilst efficiency continues to be important, resiliency has come to the forefront and will be a strategic priority for 2024. The last few years have demonstrated to us all that the ability to easily adapt is truly a necessity, and this will ignite a reset on certain operations and services.

In connection with this, sustainability will continue to remain a hot topic. Operating sustainably, as well as evaluating customer offerings with a more conscious mind, will elevate strategic ESG conversations. ESG ‘checklists’ also will form a bigger part of decision-making processes for financial institutions moving forward. With half of the lending portfolio of tier-one banks predicted to be linked to sustainability by 2025, proactively adopting a greener approach is wise. In the future, we may see sustainability becoming a non-negotiable factor for many consumers.

In summary, the outlook for 2024 is all about adding value. Whether that is greener operations, delivering services when and where consumers want them, or offering a more personalised customer journey, the time for financial services to be relevant and meaningful is now.

Issue 56 | 23

COVER STORY

Incofin: Leading the Movement in Investing for Impact Headquartered in Antwerp, Belgium, Incofin Investment Management is a global impact investment management company with over two decades’ dedication to the development of the impact investing sector. Now occupying 5 offices and with a team comprising over 25 nationalities, it promotes both physical and cultural proximity to its investees. In 2023, it scored the unique achievement of being announced as the Belgian Asset Management Company of the Year for the third consecutive year at the Global Banking & Finance Awards.

When Wanda Rich, editor of Global Banking & Finance Review met with Co-CEOs Geert Peetermans and Paul Buysens, Geert began by describing Incofin’s journey from its inception in 2001 to its present-day prominence as a leading asset management company in Belgium.

“Over the last 20 years, we have experienced steady growth, establishing ourselves as one of the leading impact investors in Belgium,” he said. “But when I co-founded Incofin, we were a small team of three people, working from a tiny office in the suburbs of Antwerp. We started by providing debt to microfinance institutions during the first 10 years of our journey. As we increasingly worked with microfinance institutions in rural areas, we naturally decided to launch the FAF (Fairtrade Access Fund) to diversify into agri-finance in 2012.”

The FAF operates in Latin America, the Caribbean and Africa, providing financing to smallholder farmers and agricultural exporters who are committed to sustainable development.

Incofin has always been a pioneer in impact investing, Geert revealed, and the entrepreneurial spirit has been an intrinsic part of its identity. “We continually strive to work in high-impact sectors where capital is scarce. For instance, early this year we launched our latest fund, the W2AF (Water Access Acceleration Fund), which aims to provide 20 billion litres of safe drinking water in 2030 to 30 million people.

“Thanks to each one of our team members, we manage assets worth USD 1.4 billion, with offices located across Cambodia, Colombia, India and Kenya, and a team of 93 professionals.”

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Operating in an industry comprised of multiple moving parts, not least the ever-changing market dynamics and global challenges, Incofin has recognized the need to evolve its strategy accordingly. “We have always been at the forefront of pushing the envelope in the industry,” Paul said. “We were one of the first investors to adopt client protection principles in the microfinance sector to ensure that clients are not overindebted. Over a decade ago, after being focused on economic inclusion alone, we shifted our investment strategy to place explicit focus on improving gender outcomes through our work. This meant supporting our investees in building products and services that disproportionately benefit women.”

Today, as the world grapples with a climate crisis, Paul reported that Incofin is incorporating a climate-lens approach into its investments. “We think of finance as a vital tool for building adaptation and resilience in the most vulnerable communities in emerging markets that are at the forefront of the effects of climate change.”

Early in 2023, Incofin’s mission was redefined as ‘We invest for impact to drive inclusive progress and sustainable transitions.’ Geert elaborated on what this means for clients and how it differentiates Incofin from other asset management firms. “There are three important parts to our mission. First, we invest for impact, not just with impact. Second, we look for inclusion in every investment – be it economic, be it gender, or any other form of marginalization. Finally, with the climate and other crises, we want to ensure that the world we leave for the next generation is better than what we inherited.”

“Our impact strategy is built on three key pillars,” Paul continued. “A genuine intention to create meaningful impact, the capability to measure this impact through our in-house tools, and our commitment to delivering additional value that would not have been delivered in the absence of the investment.”

Each of Incofin’s funds has its own distinct environmental and social policy, accompanied by specific impact goals to be achieved over the course of the investment vehicle’s lifespan. These are aligned with the UN SDGs and compliant with international standards such as the IFC Performance Standards and ILO Labour Standards, among others.

“In practical terms, upon signing the investment contract, our clients commit to regularly providing us with their impact data,” Geert explained. “This information is subsequently processed and incorporated into our impact framework.”

COVER STORY

Given the industry’s constant and ongoing evolution, staying ahead in terms of innovation and adaptation is a key component of Incofin’s strategy. With teams physically located across all target markets as well as in Belgium, Incofin is able to maintain proximity to both clients and investors. “We like to keep our ears close to the ground,” Paul affirmed. “The feedback that we receive feeds into our investment and impact strategy, which is continuously refined.

“Let me share one example. Several of our investment managers reported that our microfinance clients needed support to develop green microloans and climate risk analysis tools. Our investors, on the other hand, told us that while they are seeing several funds for climate mitigation, they are not seeing enough opportunities in the climate resilience and adaptation space. From this feedback, we initiated the development of the Incofin Climate-Smart Microfinance Fund, designed to address the social dimensions of climate change. The fund will invest in climate-smart financial institutions to promote financial inclusion and mitigate the social dimensions of climate change.”

He emphasised that the team remains cognizant of the things they do not know and takes the necessary steps to fill any knowledge gap. “For this reason, we establish partnerships with players who bring complementary knowledge and expertise. For example, we launched the W2AF in collaboration with Danone, and are in the process of launching our Nutritious Foods Financing Facility with GAIN (The Global Alliance for Improved Nutrition).”

Geert Peetermans, Co-CEO, Incofin Investment Management

Given the unique nature of impact investing, Incofin has taken care to effectively attract, develop and retain the talent it needs to align with its mission. “We have been successful in attracting a great and diverse team of global employees,” Geert said. “Our team members are passionate about social impact and appreciate the meaningful and intellectually stimulating nature of the work. Our culture is highly entrepreneurial and we encourage innovation.

“We offer competitive benefits and ensure the wellbeing of our team members. This includes a focus on achieving a healthy work-life balance, regularly reviewing career plans, and providing opportunities for employees to easily transition between teams and offices, thereby enhancing employee engagement.”

Paul concluded by reflecting on his aspirations for Incofin’s future in terms of its impact and growth in the asset management sector, underscoring its focus on innovation and meaningful collaborations. “Above all, we want to inspire more people to join the movement of investing for impact. We would like to maintain our pioneering role in impact finance through innovation in our investment and impact theses. In 2021, we embarked on a strategy to double our assets under management by 2025, and thanks to the confidence of our investors, we are on track to achieve this goal. Early this year, we also welcomed Korys and DPAM as two new shareholders into the company. The capital increase will boost our capacity to launch new initiatives and enter new geographies, helping us deepen our impact.”

Paul Buysens, Co-CEO, Incofin Investment Management

Issue 56 | 25

FINANCE

How traders can diversify their

portfolios during periods of inflation

In the wake of the pandemic and the ongoing Russo-Ukrainian war, inflation rates have continued to increase in the European Union, United States, and many other regions. In fact, the war has further exacerbated already high consumer prices caused by the COVID-19 pandemic and disrupted supply chains, leaving central banks with no choice but to further increase interest rates to tame price hikes.

susceptible to inflation risk due to their longer duration periods.

When inflation rises, long-term bond prices are more sensitive to interest rate changes, leading to losses for investors.

This surge in global inflation has sent ripples throughout the financial landscape, leaving traders and consumers alike suffering the consequences. Nonetheless, as prices soar and monetary value weakens, it is increasingly important for traders to adopt a proactive approach that safeguards their investment portfolios.

Protecting your portfolio

Inflation jeopardising portfolios Rising inflation rates can have significant implications for traders as well as their portfolios. In an inflationary environment, the value of money diminishes, leaving the purchasing power of cash to decline over time. As a result, the returns on investments (ROI) may not keep pace with the rising cost of goods and services. This can lead to a decrease in the real rate of ROI, effectively eroding the value of a trader’s portfolio.

With this in mind, it is essential that traders avoid making investments in specific asset classes that may be more vulnerable to the impact of inflation. For example, fixed-income securities, such as bonds, typically suffer from diminishing real returns during periods of inflation. Long-term bonds are even more

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As such, when responding to inflation, it is crucial for traders to adjust their investment strategies by diversifying their portfolios.

During periods of inflation, traders can implement various strategies to protect their portfolios by making high-quality investments that are resilient to rising prices. One effective approach is to diversify their holdings across different asset classes known to perform well in inflationary environments.

Equities can play a vital role in helping to protect a portfolio, particularly stocks of organisations with robust pricing power and the ability to pass on increased costs to consumers.

These organisations can adjust their prices to keep up with rising expenses, ensuring their profit margins remain healthy.

Additionally, investing in real estate is another worthwhile strategy when it comes to hedging against inflation. Real estate can see its value appreciate in line with inflation, and rental income can also offer a steady cash flow. Irrespective of the economic climate, there will always be a need for homes, making this asset a safe investment.

What’s more, investing in commodities is another useful strategy to beat inflation. For instance, the value of gold and silver tends to increase when the purchasing power of

FINANCE

currencies such as the US dollar and Euro decline. The pair are often perceived as a store of value with intrinsic worth, serving as a hedge against inflation’s erosion of currency value.

These precious metals offer diversification benefits to a trader’s portfolio. In a scenario in which traditional assets like stocks and bonds are underperforming due to inflation, gold and silver often move in the opposite direction, helping to balance the overall risk in a portfolio.

Strategically diversifying While a number of assets and commodities are capable of withstanding inflation, there is still a certain amount of risk. In terms of real estate, as inflation increases the prices of goods and services, construction costs often rise too, impacting a property’s value and the expenses associated with property maintenance. Similarly, prices of precious metals can be highly volatile, influenced by various factors like economic conditions and even geopolitical events.

As such, traders should make various inflationresistant investments to protect their portfolios during inflationary periods. Strategically diversifying helps mitigate the risks associated with any single asset class. By holding a mix of assets that tend to perform well during periods of inflation, such as equities and real assets, traders can better safeguard their portfolios and maintain their purchasing power as the value of money declines.

A way through inflation Diversification is key in creating a resilient portfolio. A mixture of stocks, bonds, real estate and inflation-protected assets can help mitigate the risks associated with inflation. When inflation strikes, the overarching goal for traders should be to construct a portfolio capable of withstanding its erosive effects.

Kate Leaman Chief Market Analyst AvaTrade

Traders should focus on quality investments with strong fundamentals that have the capacity to adapt to evolving economic conditions. Staying informed about market trends, especially inflation rates, is imperative for making informed decisions and adjusting investment portfolios as a means of protection against the challenges posed by inflation.

Issue 56 | 27

TECHNOLOGY

How AI is facilitating finance transformation In recent years we have been faced with growing economic and political uncertainty. Companies more than ever need flexibility and agility to compete in a fast-changing market. The shift to digitisation is an essential part of adapting during these challenging times – necessary to keep pace with the changing demands of the business world. It has the potential to be a game-changer at times of crisis, a base on which businesses can build their futures.

The advancement of AI is a key element of this. While some see AI as a threat, it can be used as a form of evolution when applied correctly. It doesn’t have to involve job losses. It is possible to create new, clearly defined roles for employees – that involve higher value work – within new structures, by providing the right training and incentives.

Ultimately, this can result in better outcomes for everyone. And more and more, companies are incorporating AI into their day-to-day functions. It is increasingly seen as a crucial element of building and modernising a robust and successful business.

Because the finance department has such a central role in any business, informing decisions across departments, AI can be used to great effect in finance transformation. It can improve efficiency and creativity, ultimately helping the business gain a competitive edge.

It fits nicely into the broader finance transformation strategy. However, it should be introduced in a balanced way.

Machine learning – an application of AI – can also improve decision-making in the back office, for example through cash flow or automated revenue forecasts. These forecasts can help the company predict what its situation will be in six months or a year – in terms of revenue and profit, for example. The company can then take action to make sure it delivers what it needs to deliver to meet stakeholder expectations.

The introduction of AI can take place on the front line with the final consumer, while a lot can be done in the back office as well. In the future, increasing numbers of basic tasks and repetitive activities will be done by AI, leaving staff to focus on more complicated roles.

However, while AI can help decisionmaking, what it cannot do is make decisions for humans. It would never, for example, be able to predict Covid or the war in Ukraine. It can be used as a baseline, but humans must react.

On the front line, a quicker and higher quality customer experience can be created through chat boxes, real-time answering and immediate reconciliation.

In fact, all consolidation between supplier and customer can become automatic, while payments can become automatic as well. AI can even be used as a virtual travel agent, giving people advice and tips on specific destinations, for example the best restaurants and hotels.

And to make sure the finance department maximises the benefits of finance transformation, the integration of AI is also needed in the back office. AI can be used to reconcile all the transactions between suppliers and customers. By reducing the transactional activities, this frees up time for analytical reviews.

Marco Torrente Global CFO WebBeds

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Ultimately, the use of AI frees up the brain capacity of staff – who can spend more time analysing data rather than creating them, being creative and problem-solving, and adding value. By giving people more time to spend looking at data, creating scenarios and being proactive – rather than spending that time simply building and consolidating data – it greatly enhances the potential of the company. People are able to focus more on supporting strategic decisions for the business, such as entering into a new market or choosing the best partners, as well as day-to-day decisions.

Finance transformation and the introduction of AI is a challenging process.

It requires a high level of resources, new technologies and systems being introduced – and is unlikely to result in any initial significant return. There must be an acceptance that the transition may take a number of years, so patience is needed.

The role of staff will change – so training and upskilling programmes are required.

There must be a shift in mentality and culture. Staff should be emboldened to try new things with AI – experimentation is an important part of this, although there must be the proper checks and balances in place. But, in the end, the benefits for the business can be vast.

TECHNOLOGY

Issue 56 | 29

BUSINESS

Governance, Risk, and Compliance (GRC) can’t be effectively managed in silos Digital transformation is critical to business expansion, so the management of the risk function is imperative. While the board’s mandate is to ensure the business can effectively thrive and benefit its stakeholders, it must have and be presented with a holistic view of the organisation’s risks in order to succeed.

Yet, risk is often treated in silos – making governance, risk, and compliance (GRC) trickier than necessary (if not impossible in cases) to manage.

An organisation may have to deal with many types of risks across different areas of the business in a quick and compliant way. Extended enterprise (third parties) is one type of business risk that is becoming more acute due to various new pieces of legislation being introduced across Europe. However, there are many other threats that business leaders must grapple with including risk introduced by front-line employees and the impact of (non-) compliance.

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In addition, some front-line workers are prepared to take career risks to speak up against misconduct and unethical practices in the workplace. So, it is important how companies handle reports.

The front-line serves as first point of contact that can provide rich intel toward stopping risks before they can even happen.

A culture of compliance impacts a company’s entire risk posture, and when done well, it is a driver for growth. Technology and workplace behaviour has changed much since the pandemic, now businesses need to adapt to these shifts. Hybrid and remote work models can result in gaps in internal controls and compliance.

This heightens organisational exposure to risk, internal wrongdoing, and misconduct. For example, when employees access work-related information using their personal devices, it can create opportunities for accidental or deliberate misuse or loss of data.

BUSINESS

Florian Haarhaus International General Manager NAVEX

Moreover, dominant siloes pose a great challenge for IT decisionmakers as some businesses are using external, thirdparty tools to reduce incidents. This is an impractical and ineffective approach as it makes it more difficult for the incident response team to report to the board and take immediate action. The extra time needed to address the incident could be detrimental to the business, which could lead to a data breach, reputational damage, and a loss of trust.

Who’s responsible for keeping the business compliant?

The board may wonder who is ultimately accountable for managing these responsibilities within the organisation.

The business can face a plethora of risks, some easier to mitigate than others, so it is easy to assume the role falls on the relevant department to address problems independently.

However, GRC cannot be managed effectively in silos. Companies should consider hiring, if there is not already a position in place, a Chief Compliance Officer or Chief Risk Officer. They will have the authority to remove these obstacles to enable effective risk management and implement the necessary collaborative approach that is critical to success. There are still many opportunities to educate the market to adopt a board level view, so all decisions become strategic. By providing visibility of non-financial reporting, monitoring, and GRC – everything comes together.

A holistic approach A culture of integrity must be intentionally shaped. A strong ethics and compliance programme, built on an organisation’s values and principles, is the bedrock for creating a culture that is focused on outstanding quality and business outcomes. As global regulations continue to evolve, a holistic approach is needed to remain compliant.

However, today many companies are still quite siloed. For instance, some companies manage hotlines, training, third parties and speakup across different departments. Whilst more advanced companies are bringing it together with a single view of GRC, rather than a tick box procedure.

Ideally, there would be a robust security infrastructure in place that aligns with the organisation’s compliance posture. One way to effectively see and manage risk across the enterprise is with a GRC Information System (GRC-IS) that gives companies a full view of: • • •

Front-line employees, who are the organisation’s human security system.

A reporting system that allows them to report issues as they occur.

The back office via sanctions management, third party management, and more.

To thoroughly understand and present the company’s risk posture to the board, digital transformation is imperative, and an intelligent GRC-IS platform would be at the heart of this.

A good example of where this has worked can be found in an adjacent area of digital transformation. Companies have been trying for decades to create a ‘single customer view’ but by and large failed, until the marketing, sales, and customer service functions were brought together on an integrated, single customer platform by the new generation CRM SaaS platforms. This created a view across all stages of the customer journey. A single integrated GRC system could deliver the same effect across the different areas to create an overall view of their risk and compliance state, allowing board level reporting of critical metrics across people, third parties, and processes.

Issue 56 | 31

FINANCE

Financial industry use AI to understand who their customers are The financial industry has a sea of data that isn’t being used to make intelligent strategic business decisions with a colossal amount of knowledge is left unknown. It’s a dangerous place to be if you don’t know why your customers are contacting you and what their challenges and issues are with your service or product. It is very much a sink or swim situation, but if you don’t know then it is imperative that you find out, so you don’t drown and lose your customers to competitors.

Now is the time to deep dive into the interactions your customers have with your company to discover the detail that you have been missing, which can be turned into real treasures revealing what areas in your processes you need to improve and why. AI interactions analytics can provide a 360° comprehensive view of your digital interactions identifying and analysing key trends and patterns to enable you to implement strategic business decisions that will save money, increase efficiencies, improve customer service and increase margins.

Night Swimming A lot of banks and financial companies are swimming in the dark and don’t know how to improve their customer experience because they don’t know what the problems are and where they sit in the process. The omni-channel environment in the financial industry has a myriad of channels from email, voice calls, social media, reviews, comments, text messages all for customers to contact you on. That is a lot of channels for agents to manage and the data garnered from them is huge and overwhelming that many companies do not analyse it to their advantage, and often it sits there not being used.

Pearls of Wisdom Often banks and financial companies have a strategy whether that’s to improve customer service, reduce waiting times or increase first time resolution for example. Solution Providers need to understand what the strategy is and what the success criteria is so they can identify the problem areas to improve.

Working with customers to understand exactly what their customers digital journey entails and using AI interaction analytics to analyse the text created from transcribed phone calls, emails, text messages, social media and online reviews etc. AI can then identify key words and patterns so problem areas or opportunities are highlighted and make decisions based on the findings. For example – a bank can identify emails that are enquiring about a loan and pass them onto the relevant team. A Solution Provider can then design and deploy

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an automated solution that will handle your digital enquiries, so they can be either be dealt with an automated and proactive digital update, or transferred to a human agent if need be. This enables the business to use the data to make intelligent business decisions and design automated solutions to handle enquires and make a difference.

Understanding Sentiments AI interaction analytics is a fascinating solution that can not only collate and analyse text in data but also customer sentiment analysing customers emotions and categorising if it is negative, neutral or positive. Identifying if customers are upset, angry or happy so businesses can understand their experience and improve it. This can be done by analysing voice calls and through text as well.

Customer feedback forms, forums and traditional call recording evaluations only provide a fraction of the feedback you require, and it is often from point in time and when people are emotive, so it is not a true reflection. Whereas AI interaction analytics are because they analyse data and customer sentiment constantly providing an accurate 360° picture and a deep dive into sentiment and the nuances that usually aren’t revealed.

Training and Development Quality management recruiting and training contact centre agents is always a challenge and AI interaction analytics can be structured to help you with identifying training gaps and share best practice. Companies can use data to not only improve customer service but also discover areas where they can cross sell or use for training and personnel development.

FINANCE

Matching Personas People can do the same thing but with some it works and with others it doesn’t. This is because we have different ways of doing things and sometimes people get better on with others and this what makes us human. By blending AI and humans together we can use AI analytics to match personas of agents/sales people and customers ensuring that we are getting results and improving the customer and agent/sales person experience will be more likely. By looking at their behaviour, sentiment, competence and understanding what are the successful outcomes.

All the above helps drive brand delivery ensuring that you are delivering your brand promises which will increase the power of your brand.

Measuring, Evaluating, and Improving It is critical with any strategy that you define your success criteria so you can measure exactly how you are performing and identify problems and design improvements and test to see if they make a difference. This is an evolutionary process just like the AI interaction analytics solution is, it needs to be taught and will continue to learn with you. It is a evolutionary process that needs to be nurtured to grow with you and will reap the benefits. The more you know about your customers the more you will be able to offer them personalised services, you will retain them and reduce customer and agent churn, save costs by re-engineering your processes and even increase revenue. It is a win-win!

Jonathan Sharp CEO Britannic

Issue 56 | 33

BUSINESS

Three ways CFOs can lead in uncertain times: Resilience is the key to reducing workforce risks After three years of disruption to every part of work and life, it’s now clear that calm is not returning to the world, or to the workplace. We’ve entered an age where new risks lurk around every corner; economic uncertainty and volatility, changes in attitudes about flexible work, rising burnout, and a tight labor market.

It’s a time of paradox, where some may be navigating planned workforce reductions, while others may be struggling to hire in key markets or for critical roles.

Tom Brennan CFO/COO meQuilibrium Tom Brennan is the CFO/COO of meQuilibrium, the leading employee resilience solution. He joined the company in January 2017 as CFO and expanded his role to CFO/COO in June 2021.

In this combined role, Tom is responsible for managing the finance, analytics, HR, compliance, and other operational aspects of the company. Tom graduated from College of the Holy Cross and earned his MBA in Finance at the Fuqua School of Business at Duke University.

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BUSINESS

This means that today’s CFOs must play offense and defense at the same time. You have to right-size and stay agile while retaining and hiring the critical talent needed to take advantage of change. Businesses have concerns about productivity due to an evolving remote/hybrid digital workplace, while organizations and their people are leveraging the transformative potential and the flexibility it provides.

One of the things we’ve done here at meQ to help our people adapt and recognize opportunity in disruption is to build a culture of transparency. We publish goals and KPIs at the beginning of each year and share them company-wide. They have a prominent place on our company intranet, and departmental and individual objectives tie back to the goals and KPIs. On a quarterly basis, we review our performance with the entire company using a simple-to-understand “stoplight” chart which shows which goals we’re on track for in green, which goals are potentially at risk in yellow, and goals in red require us to go on the offensive.

Strategic CFOs understand that in times of disruption, the difference between companies that adapt and grow and those who stagnate is the ability to understand the resilience of their workforce, and analyzing the data that can predict workforce risks. This is critical data that can assist in driving better staffing decisions, improving retention, and reducing the costs of attrition. The question is no longer how well a workforce can perform in a structured, familiar, situation, but how people across a diverse workforce can adapt to new challenges and circumstances. A resilient workforce is a key strategic advantage in today’s volatile business environment.

Resilience is more than determination and grit. According to The World Economic Forum, resilience is “the ability to deal with adversity, withstand shocks, and continuously adapt and accelerate as disruptions and crises arise over time.”

Fortunately, resilience can be measured, learned, and trained at scale using digital tools such as interactive lessons, activities, and readings which are designed to create new habits and ways of thinking.

CFO’s can lead during uncertainty by predicting with data, prioritizing employee well-being, and preparing the workforce for change by building a growth mindset.

1. Predict with Data Prediction is the first element of setting the foundation for resilient growth.

Prediction detects disruptions, quickly discovers the extent of the disruption and its implications, then identifies an appropriate response. Predictive data is transformative for the organization and transformative for the CFO. Data is critical to drive awareness across the C Suite and to drive action in building a more resilient workforce.

Predictive power helps you establish sensory mechanisms – through both Active and Passive listening – to detect disruptions in population resilience and wellbeing. According to Mercer, more than half (54%) of executives understand that deteriorating mental health will impact their businesses, and 43% realize that the impact could be catastrophic.

While executives may acknowledge the scope of the problem, many struggle to understand mental wellness within their organizations. Predictive People Analytics (PPA), which uses data, algorithms, and analysis to predict future events based on past events, can help organizations predict burnout, stress, performance, and well-being.

2. Prioritize Resilience Training and Mental Well-being According to research by meQuilibrium, it’s likely that 1 in 2 employees lack the important resilience skills to succeed in a volatile environment. The data makes it clear that people with low resilience have higher risk for burnout, depression and anxiety, are more likely to quit, and are less productive. Specifically, highly resilient people are: • • • •

60% less likely to experience burnout 31% more engaged 80% less likely to exhibit signs of depression 88% better at stress management

Resilient people possess seven key qualities, defined through more than 25 years of research: • • •

Emotion Regulation: the ability to control their feelings under adversity Impulse Control: the ability to control their behavior under adversity Self-Efficacy: the belief in own abilities

• • • •

Reaching Out: the willingness and ability to take on challenges and opportunities Empathy: the ability to understand the emotions and behaviors of others Realistic Optimism: the ability to maintain a positive outlook without denying reality Causal Analysis: the ability to unpack a problem and solve what can be solved

Whether you are working to improve KPIs, manage risk or navigate planned workforce reductions, personalized digital resilience training can address many well-being issues before they have an adverse impact. Initiatives like Employee Assistance Programs (EAPs), resources for employees struggling with a range of mental health concerns, and virtual care options are essential to protecting employee well-being.

3. Prepare the Workforce for Growth Preparation means laying the foundation for growth. Designing and developing the skills—and orientation—of your people for growth. Preparing includes empowering people to rise, build their capacity for change, and ultimately having the willingness and ability to take on challenges.

To prepare people we need to do more than just teach them the basics of wellbeing such as broccoli and breathing, sleep and treadmills. These are necessary, yet not sufficient basics. We need to get to the psychological basics, most importantly growth orientation—also known as growth mindset—and psychological safety.

Resilient workers can identify and correct unproductive thinking patterns to face problems, while remaining optimistic.

Resilience is a solution for building a flourishing workforce in a volatile and disruptive climate.

In times of uncertainty, the difference between organizations that adapt and grow, and those which stagnate, is resilience. To succeed in an environment of rapid change and disruption, organizations and their employees need to become more resilient. Navigating the short and the long term at the same time is at the heart of the CFO’s role and building a resilient workforce is the key to achieving those goals.

Issue 56 | 35

TECHNOLOGY

How marketplaces provide technology ecosystems for international sales strategies

Tony Preedy Managing Director Fruugo

For retailers wishing to bolster their sales intake and grow their business, marketing products overseas is a highly effective way of doing so. Expanding their reach beyond their borders can be a powerful protection against decreased demand at home.

Plus, a new study from Juniper Research forecasts that 33 percent of ecommerce spend will be cross-border by 2028. As ecommerce growth shifts to developing markets, the cross-border ecommerce market is predicted to grow by 107 percent over the next five years, from $1.6 trillion in 2023 to over $3.3 trillion in 2028.

As more and more consumers shift to online shopping, it is increasingly important for retailers to implement a well-thought-out, international ecommerce strategy to meet the needs of the modern-day customer and tap into both local and growing global demand.

There are a number of hurdles that retailers must clear to sell their products internationally, and these are often expensive and complex to manage.

However, cross-border marketplaces offer a number of tools that substantially reduce these difficulties.

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Complexities of selling internationally For retailers who wish to sell overseas from their own website, they firstly need to adjust the languages and currencies of each product page to fit each market to which a retailer wishes to sell. This includes deciding whether to continually update prices when exchange rates shift.

When it comes to the language adjustments, these must be uniform across the retailer’s website, from the product categories, onsite search engines, the site-wide banners and each individual product page. Once this task is complete, it needs to be repeated whenever that seller wishes to list a new product on their site – meaning continuous updates. This also applies to advertising campaigns, which must be localised for each region and must direct the customer to the respective regional website.

Even once the website’s content is ready in each region, the checkout process needs to be robust enough to manage intercontinental traffic; a crucial undertaking that is no mean feat.

TECHNOLOGY

As well as supporting with all of the above adjustments and updates required for selling in different markets overseas, cross-border marketplaces can also support their sellers with the respective taxes for each country or area – from VAT to shipping – which is often a timeconsuming task.

Some specialise in orchestrating regional advertising on behalf of their retailers’ products, using their algorithms to constantly scan the universe of shoppers for opportunities to match global demand to supply.

Having access to all this support in one integrated platform means that all a retailer needs to do is arrange for the package to be delivered to the customer. By simplifying these tasks, sellers can more easily jump through the necessary hoops of cross-border selling and reduce both complexity and cost. In turn, retailers benefit from the perks of a sophisticated cross-border selling strategy and what would otherwise be a series of expensive digital transformation projects.

In addition, many of these platforms operate on a policy where retailers only collect fees when their products are sold, meaning they can retail in these new markets, and in front of many more prospective customers, with much less risk involved.

This in turn allows sellers to put a greater focus on other aspects of the business, such as making the most of their inventory without compromising on costs. For example, instead of applying reductions to clear their inventory in their domestic market, sellers can pivot to other markets where there is still demand and sell at full price.

More prospective buyers, increased sales Provided, there are numerous tools and third parties which are able to support sellers with these individual processes. However, given the number of tasks that must be completed, this will result in significant time and cost investment. For an exercise that has no guarantee of being successful, it is a risky one that could prove ruinous for smaller retailers.

How marketplaces simplify cross-border selling This is where utilising the tools that marketplaces have to offer becomes beneficial. When listing their products on these platforms, sellers are able to take advantage of a plethora of tools all in one place, which simplify the individual components of cross-border selling.

As with joining any new service or platform, there will be some tasks that need completing to get up and running on marketplaces, but this investment of time is a oneoff and one that will lead to greater rewards than going it alone. Once complete, they can sell their products across international markets and boost their growth while the platform does the hard work.

With the right tools in place, sellers can capitalise on overseas demand, which can lead to much greater profitability than focusing solely on customers at home. Furthermore, if a retailer were to diversify their sales channels by listing products across multiple platforms, this will lead to an even greater reach, with even more eyeballs on product, and therefore increased sales and revenue.

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BUSINESS

Should everybody be back in?

So, the debate on whether staff should return to the office rumbles on.

Jacqueline Bird Head of Move and Change Management Crown Workspace

Two years ago, hybrid working was being embraced and adopted with open arms. It felt like our workplaces had come of age and we had all finally been given permission to untether ourselves from our desks and work in a way that truly embraced the freedom to be your best, whenever or wherever that may be.

However, over the last 12 months, some of the world’s most famous organisations have made a conscious effort to return their staff to the office.

Strong enforcement tactics have been enlisted as they have reminded their staff that “the office remains the primary workplace.” The Chancellor famously weighed into the debate earlier this year, saying, ‘The default will be you work in the office unless there’s a good reason not to be in the office.’

Such opinions have elicited resistance from many workers, politicians, and some employers, who are very happy with the new WFH/hybrid working models.

The hybrid model does offer many benefits – organisations such as Airbnb have told their staff they can work anywhere in the world without experiencing a pay cut! The ultimate endorsement on how you can do your best work from any location.

This unchallenged level of freedom comes with an overwhelming climate of trust, which focusses and empowers your workforce to do their best work. Hybrid working has resulted in the need for less real estate, highlighted by recent news that Meta has paid £149mn to break its London office lease early as they don’t need all that space anymore. However, this does mean that less energy and resources are required to fuel giant buildings and travel to and from them, reducing the world’s carbon footprint.

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This model does also bring challenges for some; the disconnect from colleagues and peers, diminished friendship groups and relationships can bring a real sense of loneliness and isolation. This solitary model has a knock-on effect on our cities and high streets. With falling demand, they become lifeless as businesses close, leading to job losses for the staff that worked there.

There are entrenched views on both sides, but how can employers who would like their staff to be in the workplace more nudge them back gently, without damaging relationships by making it compulsory or going even further and monitoring and reporting on individuals.

A route we have guided several organisations down recently, is to make it an inviting destination of choice that employees want to be in – and stay in.

Create an appealing environment One way to get teams back into the physical office space is ensuring the working environment is agile and meets the unique demands of everyone within the team. Employers should focus on the aspects that employees value the most and ensure that they provide a distinctive environment that home working cannot equal.

A good way to ensure that you are providing your teams with what they want from a workspace is to get regular feedback and let them be involved in the design decisions. This could take the form of monthly forums or possibly online polls so teams can vote on the interior décor, fixtures and fittings.

BUSINESS

Employers are competing with the comfort of home so they must work to transform workplaces to be welcoming environments, with the right tech needed to do the job effectively and provide ergonomic equipment that matches any orthopaedic requirements that individuals may have.

Look at where you can add value for teams, this can include introducing things such as guest chefs on the days people are less likely to come in, offer free weekly fitness and meditation classes or introduce free snacks and hot drinks.

At one with nature Another way to create an inspiring environment is to incorporate biophilic design. This draws inspiration from the natural world and can be useful for spaces that have no access to outside areas.

Spending time in green space or bringing nature into your everyday life can reduce feelings of stress or anger, improve mood and help with anxiety.

Simple improvements such as adding living walls, plants, water fountains, and even photographs of nature to the office are examples of this. Where the space allows, adding window boxes and rooftop gardens can also add an extra natural element to the workspace. Look to maximise natural

light in the office, placing desks as close to windows as possible, and locating less frequented sections, such as conference rooms in the centre of the building.

Designated areas Offices are not just places to do work anymore; they need to have multiple functions and be spaces that employees want to spend time in. A modern office might, for instance, provide quiet areas, hubs, recreation areas, phone booths for mobile calls, lounge areas and ad-hoc touchdown spaces, instead of requiring employees to complete all tasks at one desk in a designated spot.

By creating a vibrant think-tank space, employers can help make the office a place that sparks spontaneous idea generation and this is more likely to encourage employees to want to spend time there.

Use scent Scents can be used to immediately engage with employees as soon as they enter the workspace, as well as setting the mood and atmosphere for the day or meeting ahead. Research has shown that smell is the sense most closely linked to emotional response and recollection and it is the most sensitive one.

A workspace with a pleasant scent can lead to positive outcomes, such as increased productivity and overall job satisfaction. Popular choices for offices are fragrances that illicit calming, soothing emotions and create a welcoming space that are not too divisive – such as vanilla, tea and camomile.

Looking to the future Employers can communicate to their staff that the physical workplace can have benefits and advantages over the home by making modifications, altering areas for changing needs, developing new collaborative spaces, and focusing on sustainability.

My advice is to find a healthy balance, a place where you get the best from both ways of working. Few people long to return to the office full-time, but many can be persuaded to attend more often, if it’s made a pleasant, worthwhile experience.

Striking the perfect balance has many benefits for both your staff and your organisation – it’s the best of both worlds.

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BUSINESS

Scope 3 Supply Chain & Financed Emissions Increasing environmental-focused regulations around the globe mean it’s no longer enough to rely on internal sustainability and ESG programmes.

Instead, it’s critical to look at the environmental impact of your entire value chain and operations.

Carbon emissions are in the spotlight, with various regulations enforcing the reporting of a company’s Scope 1, Scope 2 and Scope 3 emissions. Scope 3 emissions being all indirect emissions that occur in a business’ upstream or downstream activities (namely, its supply chain). And with supply chains often accounting for more than 90% of an organisation’s emission, it’s vital that businesses not only know the carbon footprint of their entire value chain, and where these emissions are coming from, but also that they take steps to reduce them.

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Getting a handle on supply chain emissions Scope 3 emissions are notoriously the most difficult to measure because they include all other emissions generated outside the company’s own premises and operations – for example, emissions generated by business travel, what happens to products after they are sold, or activities carried out throughout the various supply chains the company has chosen to work with – and therefore rely on external parties to provide the information required.

If a business can decarbonise – or, at the very least, reduce emissions from – its supply chain then it’ll stand a good chance of significantly reducing its own corporate footprint. Which is what regulators and governments are increasingly wanting to see. But how does a business go about this?

BUSINESS

Supply chain decarbonisation From a business’ cloud and IT providers, to physical office space and associated facilities, to customers and suppliers, the size of a supply chain may be vast. To have any chance of making meaningful reduction in Scope 3 emissions, the starting point for any business is to identify which of its suppliers are better than average in terms of carbon intensity. Simply selecting the right partners can help businesses to: reduce the impact of their servers’ electricity consumption, reduce the impact of business travels, optimise their facilities’ energy consumption, implement climate-related terms into their purchasing policies, and much more.

But the real deal for banks and investment firms, when it comes to Scope 3 decarbonisation, are financed emissions.

Understanding financed emissions Financed emissions have gained considerable traction in recent years. These emissions do not stem from a bank’s direct or indirect operations. Instead, financed emissions are generated from the projects, industries, and enterprises a bank chooses to finance; be it through loans, investments, or other financial services.

While banks and finance firms might not physically emit greenhouse gases in the way that an oil company or a steel manufacturer does, the capital that they provide enables these sectors. Hence, the carbon footprint of a finance firm’s financed ventures is attributed to it. And, given the massive scale of financing that global banks and finance firms provide, the collective impact of these emissions is monumental. For example, a coal mine’s operations or an infrastructure project’s construction, though indirectly funded, are tangible extensions of a bank’s ecological influence. By focusing on these financed emissions, regulators, governments and environmental bodies are able to discern the often hidden but substantial influence financial institutions exert on the environment. And, in turn, the urgent necessity for them to steward their resources towards a more sustainable future.

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BUSINESS

Progress towards quantifying financed emissions Prominent banks like Barclays and Morgan Stanley, part of a standard-setting consortium, have been debating the best methods to quantify the carbon footprint of such deals. The core challenge, however, and the root cause of disagreement as to the best approach, is that more than a third of the $669bn directed towards fossil fuel sectors in 2022 by the world’s top 60 banks came not from direct loans, but from underwriting bonds and equities later sold to investors. Yet, the ephemeral nature of underwriting deals, which aren’t typically long-term fixtures on balance sheets like loans, has caused reluctance among bankers to recognise and account for the climate ramifications of this function.

Stepping into this tumultuous debate is the Partnership for Carbon Accounting Financials (PCAF) with its facilitated emissions working group. This group has been deeply engrossed in determining the extent to which banks should be held accountable for emissions linked to underwriting. Some factions within the banking community advocate for banks to take responsibility for just a fraction (as little as 17% or 33%) of these emissions. Others, like NatWest, champion a comprehensive 100% disclosure; mirroring the rigorous standards applied to their loan portfolios.

Yet, as negotiations have intensified, reaching a consensus has proven elusive.

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BUSINESS

Whilst this continues to play out, and adding another layer of complexity, some European banks have proposed amalgamating decarbonisation targets for underwriting with existing net-zero goals for lending. Critics warn that such bundling, if executed using disparate methodologies, risks greenwashing and undermining the genuine intent behind sustainable finance. The stakes remain high as banks traverse this intricate path, striving to balance economic ambitions with environmental stewardship.

Tracking financed emissions Whilst the various bodies and banks thrash out how to quantify financed emissions, all finance firms should be embedding financed emissions into their carbon accounting programmes.

Calculating financed emissions is a meticulous process which requires multiplying an attribution factor (otherwise known as the investee’s estimated share of emissions in relation to the loan or investment, or their outstanding amount divided by their total equity and debt combined) by the emissions created by the investee. However, this requires emissions data from the investee or investor which is often hard to come by. Therefore, increasing the quality of this data through various investor engagement and education programmes should be part of a finance firm’s supply chain decarbonisation efforts.

Setting milestones for decarbonisation Companies can take baby steps to comply with the demands currently associated with disclosing financed emissions, and to prepare to future expectations. For example, a company can implement ESG values into its future investment choices to help to mitigate future financed emissions and encourage more environmentally friendly investments.

In addition to this, having a structured engagement programme with both internal and external stakeholders can help to raise awareness of the emissions created by financial activities and, in turn, facilitate change. Programmes like this can also encourage stakeholders and financial institutions to drive new ideas to avoid future financed emissions and illustrate their commitment to bringing sustainable change to the industry.

Alexis Normand Co-founder and CEO Greenly

Issue 56 | 45

FINANCE

Defeating Frankenstein’s monster: A tale of the financial industry’s fight against synthetic identity fraud What do Mary Shelley and financial fraudsters have in common? They’ve both created fake characters that were made of component parts of other people. Or, to state its proper name in the case of fraudsters: synthetic identities.

This type of financial fraud is no work of fiction – unlike Mary Shelley’s Frankenstein novel. In 2022, 46% of organisations faced synthetic identity fraud and these schemes are expected to generate nearly $5 billion in financial losses by 2024 in the US alone. Fraudsters are pioneers and, like any other money-making industry, are utilising innovative technology such as artificial intelligence (AI).

It’s clear that the financial industry needs a mindset shift, especially as synthetic identity fraud is having a profound effect on the commercial ecosystem and regulatory scrutiny continues to be an industry hot topic. Fintechs and neobanks have struggled with the latter most recently, facing scrutiny over failures that allowed money to be released from flagged accounts, raising concerns about controls against financial crime, and even affecting banking licences from being issued.

This is why banks need to evolve beyond traditional verification methods, supporting the legacy systems with additional evaluation techniques and alternative data sources when opening accounts. The solution to the problem lies in fully understanding synthetic identity fraud and the risks it poses to banks.

The rising menace of synthetic identity fraud Let’s be clear on the type of fraud we’re talking about.

Synthetic identities are defined as the strategic amalgamation of genuine and false personal information, such as names, addresses, dates of birth, and other personal data to create new identities. This personal data is often selected because it has no associated credit history or the information was unlikely to be actively monitored — numbers for children, recent immigrants, elderly individuals, imprisoned people, and even the deceased.

This activity has evolved further as fraudsters now use stolen or synthetic identities to create shell companies to increase their legitimacy when setting up new business accounts, and borrowing money that will never be paid back.

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It’s a sobering thought that authorities cannot be sure exactly how much is lost from synthetic identity fraud, by criminals that are seemingly invisible or hard to trace. Nethertheless, the UK government has issued advice on checking the identity of individuals and have released a new Economic Crime Plan, which highlights the urgent need to fight fraud.

By focusing on financial institutions, we learn that an estimated 95% of synthetic identities are not detected during the onboarding process. Some institutions are not always aware that they have been targeted by synthetic identity fraud — rather they incorrectly classify these accounts as a credit risk. In addition, fraudsters are capitalising on the inaction by companies hesitant to adopt effective software tools for detecting synthetic identities during account setup.

Enhancing Know Your Customer (KYC) with additional screening Know Your Customer (KYC) checks are meant to establish and verify the identities of customers to assess the risk they present.

Detecting fraudulent activity after an account is created can be challenging for any financial institution.

By conducting thorough KYC due diligence, banks are protecting their reputation and maintaining the trust of their customers and regulators. Failure to identify and prevent illicit activities can result in regulatory fines, legal action, and reputational damage.

Let’s not forget that fraudsters are always finding new ways to circumvent standard KYC procedures. So, enhancing these procedures with an additional layer of screening ensures that banks have accurate information about the background of their customers, detecting identity theft and synthetic accounts. Furthermore, it provides banks better information to make informed commercial decisions and helps safeguard banks and their customers from financial losses.

Therefore, a robust KYC screening process that is strengthened with additional checks using alternative data sources is essential for banks to meet their regulatory obligations, manage risks, prevent fraud, and maintain the trust of their customers and regulators.

The extra layer of protection is a critical component of ensuring the integrity and security of the financial system.

Yet to be effective, these additional KYC checks must not introduce unnecessary friction to the onboarding process.

FINANCE

Silent checks and digital signals Now is the time for all banks to explore digital signals as a powerful and predictive addition to the traditional methods of identifying fraud.

Tackling the issue at the source, at pre-screening and early on in the onboarding process, can be extremely effective in preventing synthetic accounts from being created in the first place. Silent checks on phone numbers, email addresses, IP addresses, devices and browsers are the first line of defence against financial crimes for banks and fintechs.

Banks should consider how they can gather new sources of digital signals and utilise machine learning to tackle this challenge head on. There is also an added benefit to implementing digital signal checks. It will not only prevent fraud but get the best consumers through faster.

The parallel between Mary Shelley’s creation of Frankenstein’s monster and the emergence of synthetic identities in the world of financial fraud is a thought-provoking analogy. Much like Doctor Frankenstein’s creation was a composite of disparate body parts, synthetic identities are composed of various components of real and fabricated personal information.

The stark reality is that synthetic identity fraud, unlike a work of fiction, is plaguing financial institutions with alarming statistics and substantial monetary losses, with expectations of further growth in the years to come.

In this ongoing fight against synthetic identity fraud, it is evident that the financial industry must embrace innovative solutions and a proactive mindset. The stakes are high, and the consequences of inaction are severe. By supplementing verification methods, investing in robust KYC screening, and leveraging digital signals, banks can fortify their defences and ensure the integrity and security of the financial system, ultimately safeguarding the trust and financial well-being of their customers and stakeholders.

Alex Tonello Chief Revenue Officer Trustfull

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TECHNOLOGY

Exploring the history of point-of-sale devices and standards The rise of contactless mobile payments is well documented, and experts expect this trend to continue its current trajectory. According to Juniper, the total number of unique contactless mobile payment users will reach one billion for the first time in 2024.

Each mobile payment requires some form of point-of-sale (POS) device to complete a transaction. Yet the POS device is not only there to enable seamless transactions, it also hosts security measures that ensure a safe environment for customers to make purchases. These measures are essential for preventing unauthorized access, mitigating payment fraud, and reducing the risk of payment card information theft or fraud.

The rise of SoftPOS technology has ushered a transition away from traditional, purpose-built hardware POS devices.

SoftPOS leverages both software and hardware to enable smartphones to act as POS devices. Yet concerns persist about smartphones being a much more attractive, and easier, target for cybercriminals.

This requires us to evolve our POS security practices. The development of complete standards for mobile acceptance has taken some time, but now the Payment Card Industry’s (PCI) new standard and compliance program for Mobile Payments on Commercial off-the-shelf devices (MPoC) offers a supportive compliance framework for SoftPOS developers.

The evolution of POS devices Originally, point-of-sale (POS) devices were standalone and designed for the purpose: secure payment transactions. The devices were sealed, only ran dedicated software from the manufacturer, and integrated all necessary security features.

These POS devices, while secure, were expensive and only served a singular purpose. Merchants wanted more flexibility in acceptance, such as offering loyalty schemes or alternative forms of payment.

As a result, some vendors built hardware platforms that ran a variant of Android as the operating system, enabling an applicationbased approach. This made the availability of integrations and functionality in the form of apps easier, meeting merchants’ desire for flexibility in acceptance and integration into their systems.

From a security perspective, this approach ensured all the necessary security hardware but simultaneously brought software security to the fore, especially when related to the cohabitation of apps.

The development of Android tablets provided interesting possibilities and led to the creation of dongle-type devices (separate to the tablet) that accepted payment cards and enabled the entry of a cardholder PIN.

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TECHNOLOGY

Yet, with the rise of contactless payments and increased support for NFC on mobile devices, the demand for physical card acceptance reduced, in favor of a contactless experience. It was this development that provided the opportunity for mobile POS to become a reality.

Initially, PIN entry was not possible on a mobile device.

This was inconvenient for merchants, who had to find other ways to accept PIN entry. As technology evolved, it became possible to enter a PIN via the mobile device, but security concerns persisted about entering a PIN into a mobile phone, especially if the card details were available. There was also no standard for PIN entry on mobile devices, creating potential security risks.

However, the PCI Security Standards Council (PCI SSC) has now released the PCI MPoC, a complete mobile payment standard. This standard is an amalgamation of pre-existing standards and supports all contactless card acceptance when using a commercial off-the-shelf (COTS) device, including the ability to perform PIN entry.

This marks a huge development in creating safe, secure, and open standards for mobile point of sale compliance, but how did we get here?

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TECHNOLOGY

A timeline of POS Standards April 2018 – PCI SPoC (SoftwareBased on PIN Entry on COTS) This security standard, initially released in April 2018, allows merchants to accept PIN-based payments using COTS mobile devices, such as smartphones and tablets. The SPoC standard provides a secure environment for entering PINs and encryption of sensitive payment data, ensuring the protection of cardholder information during transactions.

The PIN is entered on the device, but a dongle (SCRP, Secure Card Reader – PIN) performs the card acceptance and performs the PIN encryption.

December 2019 – PCI CPoC (Contactless Payments on COTS) Specifically for transactions below the contactless limit that do not require PIN, this standard removes the need for an SCRP for contactless transactions. PCI CPoC is a security standard that allows merchants to accept contactless payments through cards, phones and wearable devices, using commercial off-the-shelf devices such as smartphones and tablets.

2020 – PIN on Glass Certification (by Mastercard and Visa) While PCI CPoC removed the need for a SCRP for lower-valued contactless transactions, the arrival of the PIN on Glass Certification removed the need for a SCRP for higher-valued contactless payments. Specifically, Mastercard and Visa created a standard that enabled entering a cardholder PIN on the touchscreen display of a merchant’s phone or tablet.

November 2022 – PCI MPoC (Mobile Payments on COTS) Finally, the PCI MPoC standard brings together all of the preexisting standards and delivers a complete Mobile Payment Standard that defines a number of architectures and security requirements. Contactless card acceptance, including the ability to perform PIN entry, is enabled using just a COTS device, while acceptance of chip and magstripe cards can be done using an SCRP. While the history of POS standards is not very long, the developments achieved in a relatively short period of time indicate a great ability to adapt to customer, merchant and vendor needs. As we increasingly shift towards a cashless society, it is therefore essential that mobile payments, mobile apps and mobile point of sale devices are secure.

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Ron Carter Executive Vice President of EMV® at Cryptomathic