Quercus Corporate Finance advised the shareholders of Future Industrial Services (FIS) on the sale of the company to waste and resource management group, Augean.

FIS is a Liverpool-headquartered provider of hazardous waste management and specialist industrial services with branches in Rugby, Hull, Plymouth, Honiton and Berwick. The firm’s client base includes government bodies, major utilities and national and multinational corporations, and its operations extend across five waste processing, treatment and recovery sites – among them the UK’s only mercury recovery facility.

Acquired by Ancala Partners and Fiera Infrastructure in October 2021 in a £390 million deal, Augean is a Wetherby-based group that boasts 23 sites across England, Wales and Scotland. FIS chief executive David Lusher lauded the combination of the two companies in a statement. “I am incredibly proud of the FIS team and their clear focus on making us a better business for our customers, investors, employees and the environment,” he said. "It is important that the company we have built up together continues to flourish and grow. That ambition has culminated in becoming part of the Augean Group today."

Quercus Corporate Finance advised the FIS shareholders with a team led by partner Mark Whelan and associate partner Neil Giles.

An Interview with Mark Whelan at Quercus Corporate Finance

Please give us some background into this transaction and the role that your team played.

Quercus acted as joint M&A advisers to FIS and NorthEdge, alongside EY Manchester, on the sale of the company to Augean. This involved preparing the business for sale, identifying and engaging with buyers and negotiating an agreed deal.

I had a prior relationship with David Lusher and Colin Stirling, FIS CEO and Chairman respectively, for a number of years and helped David to put together the MBO when David and NorthEdge acquired the business in 2017, so it was a real pleasure to have the opportunity to work with them again. Conversely, this was our first sale for NorthEdge and I am extremely grateful to Andy Ball and John Hammond for trusting us with this important exit.

What unique skills and professional experience did you draw upon as part of your involvement in this transaction?

Our philosophy at Quercus is to develop deep, proprietary knowledge in our chosen sectors, and our demonstrable experience in and around the circular economy was very important on this transaction. It meant that we understood precisely where FIS sits in the waste value chain and hence, we could best position the business in the market.

Our strong relationships with all the industry players at a senior level were also extremely valuable in approaching and engaging with potential buyers.

When advising on sales of this nature, what are the key considerations that you take into account?

Firstly, we only take on mandates where we think we can add value and deliver a successful outcome. As an independent owner-managed business, Quercus does not operate a portfolio business model, so deal completions are very important to us!

Every sale throws up different challenges, but the key consideration is always the client’s objectives.  Many naturally want to maximise value whilst others are looking for a good home for a lifetime’s work. Ultimately, we want to create options for our clients and in our experience that is only possible on the back of high-quality preparation, so that is a big area of focus for us.

Did you encounter any significant challenges during the course of this transaction? How did you overcome them?

FIS is an exciting and fast-growing business, built on both acquisitive and organic growth initiatives. Our preparation for a sale coincided with a particularly strong period of organic growth, with some important new customer wins along with recovery from the effects of the COVID-19 pandemic. In addition, FIS continued its track record of strategic acquisitions with a highly complementary bolt-on to the Honiton business mid-way through the process. As a result, we had to carefully analyse and then articulate that growth and future upside to potential buyers to ensure that their valuations of the business properly captured that growth, rather than looking backward at historic results. We believe that we achieved this and got the buyers to focus on the right value drivers.

In what ways would you say that your work as a part of this deal fits the profile of your firm?

The sale of FIS is a very good example of the type of work Quercus targets as a firm. We are sell-side specialists with significant buy-side and capital raising expertise. We also have a particular specialism in the waste and recycling sector built on my 30 years of working in and as advisor to that sector. Our value proposition is very much built around our experience, expertise and international reach, and all three were very important on this transaction, especially our deep waste sector knowledge and our relationships with the key industry players.

What impact do you expect this deal to have on Augean and FIS, or on the UK waste management sector more broadly?

The coming together of both businesses will undoubtedly benefit both FIS and Augean and their respective employees as the strategic fit is strong, with plenty of opportunity to leverage each party’s strengths. More broadly, the deal is undoubtedly an important sector milestone because it demonstrates the important role that mid-market private equity investors like NorthEdge can play in helping to shape and develop the sector.

The deal has generated a lot of enquiries for Quercus from other waste operators looking to realise value and I am confident that the sector will remain busy. If you will forgive the pun, the Future is bright.

Unveiling the Power of Fairness Opinions: Adding Independence and Transparency to Corporate Transactions

 John Agogliati III, CFA, ASA and Simon Koo, CFA of Marshall & Stevens Transaction Advisory Services - https://marshall-stevens.com/

Recently, Finance Monthly was delighted to speak with John Agogliati, Senior Managing Director, and Simon Koo, Director of Marshall & Stevens Transaction Advisory Services. Marshall & Stevens provides a full range of valuation services to deliver independent insights into the value of businesses, securities and assets for a multitude of purposes. John and Simon have been heavily involved in fairness opinions for Special Purpose Acquisition Company (SPAC) transactions since 2021.  John was also featured in Finance Monthly in April 2022, explaining Fairness and Solvency Opinions. In that article, John explained, among other things, that the purpose of a fairness opinion is to independently determine if the transaction is fair from a financial point of view. Here, we follow up with a fascinating article concerning the hot topic of SPACs and Fairness Opinions.

How have fairness opinions for SPACs evolved in the past two years?

Our process has slightly evolved, but not significantly changed. We still perform the same methodologies, approaches, and rigorous due diligence.  However, the biggest change to SPAC fairness opinions is the availability of information – specifically with regards to the financial projections that the target and the SPAC are willing to disclose to us and to the public shareholders.  Many SPAC targets are pre-revenue or early revenue companies with little history. In 2021, SPACs would readily provide 5+ years of projections without hesitation. Now, with the potential removal by the Securities and Exchange Commission (SEC) of the Private Securities Litigation Reform Act of 1995 (PSLRA) safe harbor provisions around projections, SPACs and targets generally want to provide only limited projections or none at all.

How do you perform a valuation without any projections?

This is a question we deal with almost weekly. As with any valuation assignment – the answer is “it depends on the facts and circumstances of the assignment”.  The general rule is that we need projections in some form. Whether the target develops the projections, or we do, generally one needs to forecast the company’s future performance profile to have a defensible valuation. If the company is pre-revenue or very early revenue, no projections are provided, and the target will not cooperate with us in developing projections – sometimes the assignment cannot be done. We have walked away from some fairness opinion work for this reason as we need sufficient information to complete our task. If no projections are available, we typically find that the SPAC and the target’s management are willing to assist us; in these cases with limited forward information, we increase our due-diligence efforts to fully understand their view of the target’s value proposition, including such items as the target’s competitive moat, their growth drivers, total addressable market, market share potential, and risks and challenges. We can often develop a supportable set of projections that we will also benchmark with industry and competitor data for reasonableness.

If we still feel that there are gaps in the information received, we will supplement this with our own research. For example, we may research the target company’s competitors and their product price points to understand the competitiveness of the potential pricing pressures they may face in the future. Another example is that we may research growth and investment plans of the target company’s top customers’ to better understand if these customers’ intentions are consistent with the target company’s sales expectations.  If there are potential inconsistencies, we present these points to the target company and give them an opportunity to explain. Our research may also translate into the development of sensitivity analyses. If, for example, we are concerned with the target’s future product pricing plan, we may reflect this in our analysis by reducing profit margins in our discounted cash flow analysis. This helps us understand the impact on value if the company were to face pricing pressure. These analyses are then considered, along with other datapoints, when we assess the overall fairness of the deal.

What are the key factors driving the changes in fairness opinions for SPACs?

The two biggest factors are the proposed rules by the Securities and Exchange Commission (SEC) and public opinion. The SEC disclosed proposed rule changes on March 30, 2022 (Release Nos. 33-11048; 34-94546).  These proposed rule changes – which have yet to be adopted – affected several areas, including the projections issue discussed above. SPACs have also seen a lot of negative coverage in the media over the past two years – much of it misplaced.  This has called for added scrutiny and disclosure requirements by the SEC on registration statements.

Have any notable shifts in the methodologies or approaches been used in the past two years relating to Fairness Opinions and SPAC transactions?

In general, and as stated above, our overall approach has remained consistent, which is based on commonly accepted valuation methods combined with robust financial analysis and research. One shift we have observed is a significant increase in deals that are structured with earnout or clawback provisions as part of the purchase consideration. A large part of this increase is due to the economic climate (e.g., higher interest rates, inflation, recessionary fears) throughout 2022 and the unfavorable de-SPAC performance over this same time period. Given these factors, SPACs have been attempting to mitigate their risks: from potentially over-valuing the target or from execution risks associated with the target’s financial projections. Consequently, we have adopted option pricing methods to quantify the economics of such provisions. This is important – because if the earnout portion is material to the overall purchase consideration, the earnout could potentially over-dilute existing shareholders in the future and significantly reduce their rate of return on their investment. This is a concept that our clients often struggle with, because they incorrectly believe that the future performance of the company, post de-SPAC, will automatically cover the earnout and any dilution. A simple question we usually pose is: “is an investment in a company with an earnout provision the same as an investment without an earnout provision?”.  The answer is obviously “No” due to the potential for dilution.  This will usually help them understand that the earnout does not have a non-zero value and that our approach to this piece of the analysis is appropriate and required.

How have investors’ expectations and demands regarding fairness opinions for SPACs changed in the past two years?

Prior to the SEC proposed rules, less than approximately 15% of SPAC transactions obtained a fairness opinion. From our casual observations, it seems that the current picture is that most legal advisors to SPAC boards are encouraging their clients to obtain an independent fairness opinion. Although there is no formal requirement for a fairness opinion currently, the proposals by the SEC were enough to create ‘best practices’ as if the proposed rules were enacted.

What potential implications or future trends regarding fairness opinions for SPACs can be anticipated?

We anticipate the need for independent fairness opinions to remain relatively constant for SPACs given that they are now perceived as a ‘best practice’ by many.  We could also see a significant uptick in demand if the SEC’s proposed rules described above become final.  While these rules do not explicitly require a fairness opinion, Item 1606(a) of the proposed rules would require a statement from the SPAC as to whether it reasonably believes that the de-SPAC transaction and any related financing transaction are fair or unfair to the SPAC’s unaffiliated security holders, as well as a discussion of the basis for this statement. Additionally, SPACs and their boards are beginning to see the fairness opinion process as an unbiased independent check on the value of the potential target, which provides them additional comfort when deciding whether or not to approve the transaction. If performed in an independent, unbiased manner, we view the fairness opinion as a ‘value-add’ to the transaction process versus a hindrance. In this respect, the “need” to have a fairness opinion converts to a “want”.

For more information on Fairness Opinions, visit: https://marshall-stevens.com/

An Interview With...

Julia Shamini Chase

Pioneering Compliance Leader and CEO of Gold Leaf Consulting Limited

Recently, Finance Monthly was delighted to speak with Julia Shamini Chase, the Founder and CEO of Gold Leaf Consulting Limited. Julia Shamini is a highly respected figure in the BVI regulatory law and compliance arena. With an exceptional track record and unwavering dedication to excellence, Julia Shamini has positioned Gold Leaf as the gold standard in the compliance industry. She is a highly sought-after authority in the British Virgin Islands regulatory and compliance regime and beyond. Julia Shamini brings a wealth of expertise and experience to compliance consulting.

In this article, we delve deeper into Julia Shamini's insights into the BVI regulatory regime and explore her perspective on anticipated changes and upcoming trends, offering readers a comprehensive understanding of the regulatory landscape in the BVI.

How would you describe the current regulatory environment in the BVI, and how has it evolved over the years?

The BVI business company (BVI BC) and the broader BVI financial services industry are widely recognized as essential enablers of global commerce, establishing the BVI as a prominent international financial centre. With the evolution of its financial services landscape, the BVI has progressed from primarily facilitating company incorporations to offering value-added services encompassing corporate, commercial, fund management, and succession planning products. The BVI BC has gained popularity as an asset-holding vehicle and secured listings on international stock exchanges.

To support its sophisticated offerings, the BVI has developed a robust regulatory framework to prevent misuse of its products, services, and jurisdiction for illicit activities such as money laundering, terrorist financing, and proliferations financing. Compliance with the FATF recommendations and OECD guidelines is a priority for the BVI, demonstrated through its ongoing good standing ranking and membership in the Caribbean Financial Action Task Force.

Building upon its solid foundation, the BVI introduced comprehensive legislation for virtual asset service providers in February 2023, following the establishment of the BVI Fintech Sandbox regime in 2020. The Sandbox regime allows eligible fintech service providers to test their innovative products and services in a quasi-regulated environment.

Investors have consistently shown interest in leveraging the BVI’s exceptional financial landscape to facilitate their trade. In summary, investors recognize the BVI as an all-encompassing business environment emphasizing a harmonious blend of innovation, usability, and regulation.

Gold Leaf has been an active observer and stakeholder, witnessing and participating in the evolution of the BVI’s regulatory landscape. Our deep-rooted relationship with relevant stakeholders and regulators has enabled us to foster a strong understanding of expectations and priorities. Through my appointment as a member of the BVI FSC’s Fintech Steering Committee, we have actively contributed to shaping the virtual assets regulatory landscape in the BVI. Through these collaborations, we have provided valuable insights and perspectives, ensuring that the BVI’s regulatory framework remains robust, transparent, and responsive to the needs of businesses and investors.

In September last year, the BVI Financial Services Commission approved the Territory’s first investment business license, which authorizes the holder to operate a cryptocurrency exchange. Can you tell us more about it?

The approval of the BVI’s first cryptocurrency exchange license marked a momentous occasion for the jurisdiction and Gold Leaf as the regulatory counsel behind the successful licensing application. We take immense pride in having played a pivotal role in preparing and overseeing the application on behalf of our client, ensuring compliance with the stringent regulatory requirements. Our client was also the inaugural participant in the BVI Fintech Sandbox license. Through strategic planning, we successfully navigated the licensing process. We utilized the Sandbox regime to facilitate our client’s operational familiarity within the BVI’s regulatory landscape, fostering innovation and a secure virtual asset ecosystem.

During the Sandbox phase, as regulatory and compliance consultants, we assisted our client in developing and enhancing their policies, controls, and procedures to ensure compliance with BVI regulatory requirements. Once our client was confident operating within the BVI’s regulatory framework, we applied for their full Category 7 license under the BVI Securities and Investments Business Act 2010 (SIBA) specifically for cryptocurrency exchange platforms. We continue to act as regulatory counsel and as the approved compliance officer for our client, through Gold Leaf Corporate Compliance Services Ltd., the licensed corporate compliance service provider arm of Gold Leaf’s business.

The enactment of the BVI’s Virtual Assets Service Providers Act, 2022 has expanded the regulatory regime for BVI entities and legal arrangements involved in virtual assets. This legislation complements the existing regulatory framework, supports fintech development, and aligns with international standards for virtual asset regulation. This has not only bolstered investor confidence but has also attracted a new wave of entrepreneurial ventures to the BVI, positioning the jurisdiction as a favorable destination for cryptocurrency-related activities.

What makes BVI so attractive to institutional investors in the crypto industry?

When discussing the attractiveness of the BVI to institutional investors in the crypto industry, it would be remiss of me to not only highlight the jurisdiction’s favorable regulatory environment which I will discuss in more detail, but also its natural beauty. The BVI’s unique combination of regulatory excellence and breathtaking surroundings contributes to its appeal as a preferred destination for institutional investors in the crypto industry.

In addition to its stunning beauty, the BVI offers the following key elements that make it attractive to institutional investors in the crypto industry:

1. Regulatory Clarity – which the BVI has established with a clear and well-defined regulatory framework specific to virtual assets, through the passing of the BVI Virtual Assets Service Providers Act, 2022 (VASP Act). The VASP Act addresses the licensing and supervision of persons and entities engaged in virtual assets activities. It establishes a framework for compliance, risk management and reporting obligations which enhance consumer protection and investor confidence in the virtual assets space.

2. Investor Protection – the VASP Act implements robust investor protection measures, such as custody and safekeeping requirements, capital adequacy, testing, auditing, and, robust money laundering, terrorist and proliferation financing, and fraud detection measures, to ensure overall investor protection.

3. Compliance and Reputation – The BVI has, and continues to maintain, a stellar reputation as a compliant and robustly regulated jurisdiction. The VASP Act and the BVI Anti-Money Laundering, Counter-Financing of Terrorism and Proliferation Financing (AML/CFT/PF) legislative framework imposes a risk-based approach on virtual assets providers, to demonstrate that their AML/CFT/PF policies and procedures remain adequate and effective to combat their inherent money laundering, terrorist financing and proliferations financing risk exposures. Such robust compliance measures are attractive to institutional investors who prefer investing in jurisdictions that actively combat financial crime, as it reduces the risk of their investments being involved in illicit activities inadvertently.

4. Stable and Political Environment – The BVI Government has demonstrated its support to help develop a robust virtual assets sector, which reduces uncertainties and risks associated with sudden regulatory changes or sudden policy shifts. It has also established a strong and stable economy, which is reflected in its fiscal policies, sound financial structure and proactive measures to mitigate risk.

What other trends do you expect to see around regulation and compliance in the British Virgin Islands?

The BVI has consistently demonstrated its foresight and tenacity to evolve and adapt as a leading offshore finance centre. At Gold Leaf, my team and I actively engage in monitoring and analyzing emerging trends that shape the regulatory and compliance landscape in the BVI. As a forward-thinking and commercially minded consultancy firm, we anticipate several key areas of focus in the BVI’s future regulatory and compliance landscape:

1. Embracing Regtech Solutions – The BVI has always been a forward-thinking jurisdiction, as evidenced by its embracing of Fintech. This has allowed the jurisdiction and, moreover, the BVI FSC as a regulator, to foster innovation while ensuring robust and transparent regulation. I foresee the BVI adopting more regulatory technology solutions to streamline compliance processes, automate reporting, and improve data analytics capabilities. Regtech adoption will enable more efficient compliance management while reducing costs and increasing accuracy. The BVI AML Legislation already permits the use of electronic or digital verification (ED) provided that such ED satisfies certain prescribed criteria within the legislation.

2. Strengthening of Virtual Assets Regulations – With the introduction of VASP, and as the industry continues to develop and mature, we anticipate further enhancements and refinements to the regulatory framework governing virtual assets. The BVI will likely continue to focus on ensuring compliance with the FATF Recommendations, by focusing on preventing illicit activities, while fostering a secure and transparent virtual assets ecosystem.

3. Continued Commitment to Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) and Proliferations Financing (PF) – The BVI will continue to maintain its strong stance on AML/CFT/PF and sanctions compliance. The AML/CFT/PF framework has matured into a risk-based framework which ensures that the internal controls being implemented by licensed entities are not only adequate but effective in achieving regulatory compliance. I believe we can expect to see ongoing efforts to enhance these AML/CFT/PF frameworks to strengthen due diligence procedures and ensure the highest standards of financial integrity.

As a jurisdiction, we are certainly set to continue our path of furthering regulatory and compliance advancements. These trends reflect the BVI’s commitment to staying at the forefront of regulatory best practices, embracing technology, and maintaining a robust and trusted financial ecosystem.

How does Gold Leaf ensure that your clients stay ahead of the curve when it comes to complying with new and changing regulations?

At Gold Leaf, we take pride in our commitment to keeping our clients ahead of the curve when it comes to complying with new and evolving regulations. Our approach combines proactive measures, industry expertise, and cutting-edge solutions to deliver exceptional compliance services.

1. Continuous Monitoring – Our diverse and expertly skilled team continuously monitors regulatory landscapes, both locally and globally, to stay informed about upcoming changes and emerging trends. We keep a finger on the pulse of regulatory developments, enabling us to anticipate and quickly respond to regulatory shifts, preparing our clients well in advance.

2. Tailored Compliance Solutions – Through our patented SFC-Solutions Focused ComplianceTM (SFC) methodology and tools, we design tailored compliance programs that are sustainable for implementation to help protect our clients’ peace of mind. By tailoring our solutions, we ensure that our clients have a robust framework in place to address new regulations and adapt to changing compliance demands. Also, using our SFC-Solutions Focused ComplianceTM we have created proactive compliance assessment tools that go beyond the minimum requirements. Our assessment tools identify potential gaps and vulnerabilities in our client’s compliance frameworks. By proactively addressing these areas, we help our clients fortify their compliance posture and minimize the risk of non-compliance.

3. Expert guidance and advisory – Our team is comprised of experienced compliance professionals who contribute extensive industry experience and regulatory expertise. Through our wide network, we also work closely with and have access to, leading global consultants who we engage, as necessary, in the delivery of our services. Our goal is to provide timely and informed guidance to our clients, whilst also offering practical strategies on how to navigate regulatory challenges effectively.

4. Training and Education – A fundamental ethos at Gold Leaf is that knowledge is key to maintaining compliance excellence. We offer training tools and solutions, to keep our clients updated on the latest regulations, industry best practices and emerging compliance trends. By investing in continuous learning, our clients are equipped to adapt to new requirements and seize compliance-related opportunities.

How does your company approach balancing a client’s business goals with their regulatory obligations?

Our clients are leaders in their respective markets and industries. We appreciate that they must maintain a keen focus on their business productivity and profits. In balancing their business goals with their regulatory obligations, our approach is underscored by our mission to become our clients’ trusted partners, enabling them to achieve compliance excellence and peace of mind. Our team at Gold Leaf possesses not only extensive knowledge of regulatory frameworks but also a deep understanding of business operations and strategies. This distinctive combination of regulatory expertise and business acumen allows us to effectively guide our clients in navigating the complex landscape of compliance while achieving their business objectives.

We demonstrate this actively through:

1. Client-Centric Approach – We prioritize our clients’ unique business goals and objectives. Our team takes the time to understand the specific client, operational nuances, and growth strategies. By aligning our services with their business priorities, we ensure that compliance becomes an enabler rather than a hindrance to their success.

2. Customized Solutions – We recognize that compliance is not a one-size-fits-all approach. Our team of professionals works closely with each client to develop tailored solutions that meet their specific regulatory requirements while aligning with their business goals. We strike a balance by designing compliance frameworks that are practical, efficient, and customized to their industry and operational needs.

3. Proactive Compliance Planning – We adopt a proactive approach to compliance planning. By staying ahead of regulatory developments and trends, we can anticipate potential impacts on our clients’ businesses. This allows us to provide early insights, assess the potential implications, and develop strategies to address regulatory changes efficiently. Through advance planning, we help our clients navigate evolving compliance landscapes with confidence.

4. Streamlined Compliance Processes – Our SFC-Solutions Focused ComplianceTM (SFC) tools, technologies, and streamlined processes are designed to minimize the burden of compliance on our clients’ day-to-day operations. We leverage automation, digital platforms, and innovative solutions to simplify compliance tasks, reduce manual efforts, and improve efficiency. This enables our clients to focus on their core business goals while we handle their compliance needs effectively.

5. Safeguarding Reputation – We understand that our clients’ reputation is a valuable asset. Our services are designed to safeguard their reputation by ensuring compliance excellence. By implementing robust compliance frameworks, conducting thorough assessments, and providing ongoing monitoring and support, we help our clients mitigate compliance risks and maintain their integrity in the marketplace.

Our approach to balancing a client’s business goals with their regulatory obligations is rooted in our client-centric philosophy, customized solutions, proactive planning, streamlined processes, and a commitment to safeguarding their reputation. In every engagement, we are our clients’ trusted partner, allowing them to focus on their core business while we provide comprehensive compliance support. Trusting us to deliver gold-standard solutions, our clients can achieve compliance excellence, peace of mind, and perpetual business growth.

About Gold Leaf Consulting Ltd

Gold Leaf has established an unparalleled reputation for delivering tailored, practical, and efficient compliance frameworks, making them a trusted partner for organizations navigating the complex regulatory landscape. Under Julia Shamini’s astute leadership, Gold Leaf has achieved an outstanding milestone—an impeccable 100% track record for the approval of licensing applications in the BVI. This remarkable achievement speaks volumes about Gold Leaf’s expertise, meticulous approach, and deep understanding of the regulatory landscape. Clients entrust Gold Leaf with their licensing aspirations, knowing that their applications are in the hands of a proven industry leader.

Gold Leaf’s commitment to its clients extends far beyond licensing approval. Organizations seeking to navigate the intricate web of compliance requirements highly value Gold Leaf’s sought-after services. With their comprehensive understanding of evolving regulations and a practical, client-focused approach, Gold Leaf offers tailored compliance solutions that enable businesses to thrive while upholding the highest standards of regulatory adherence.

Contact:

Gold Leaf Consulting Limited

Units 6 and 7, Road Reef Plaza

Prospect Reef, Tortola

British Virgin Islands

T: 1-284-494-9559

E: info@goldleafbvi.com

By Bruce Martin, CEO at Tax Systems

Yet, within this important movement, a key aspect of finance – tax – can often be neglected, with many organisations missing significant opportunities to boost effectiveness as a result.

In reality, this is not surprising. As a constituent part of the overall finance function, tax may not be viewed as a priority area when organisations come to implement digital transformation projects. Moreover, tax is ultimately driven by compliance, so the effects of any changes implemented here are felt much less widely than those in other key areas of finance – which are more likely to have a significant impact across the business. As a result, the percentage of the overall finance budget dedicated to digital tax projects typically pales in comparison to other finance functions.

Think of it this way: in getting Environmental, Social, and Governance (ESG) planning and implementation initiatives off the ground, for instance, businesses tend to do the bare minimum until regulations or other pressures force more urgent change. The same idea can be applied to allocating time and resources to tax transformation. What’s more, the unique needs of each business, its position in the finance and tax lifecycle and the proficiency of the finance team play important roles in the budget allocation relating to digital transformation projects.

In this context, and with many CFOs coming from an accountancy rather than a tax background, it’s simply more likely that they will focus on areas more aligned with their roles and experiences.

Untapped potential

And herein lies a growing problem and an important opportunity for positive change. By overlooking tax transformation, many businesses are missing out on valuable insights and efficiencies. Often seen as a compliance box-ticking exercise, businesses do what's needed to remain tax efficient and compliant. Yet, beyond these core objectives, tax transformation holds immense potential.

In practical terms, what does this mean? Implementing tax transformation is all about enabling tax professionals to focus on their areas of expertise: evaluating tax positions and maximising efficiency, while automation assumes the role of handling repetitive tasks. While this could be unsettling for some, the objective is to use advanced tech tools to boost efficiency and productivity. It’s certainly not – as some people fear – about using AI to replace jobs, and for those people at the sharp end, tax transformation frees them to do the jobs that fit their expertise, not the jobs that automation can replace.

In this situation, tax professionals are empowered to focus on more value-add tasks that can make a material impact on business performance.

These are crucial considerations given that the general direction of travel is clearly in favour of greater digitalisation of the tax function at all levels. This includes HMRC, which is gradually integrating technology more deeply into its capabilities and processes. As they work towards building a “trusted, modern tax administration system,” changes they bring forward will inevitably be reflected in the way organisations interact with them.

Ultimately, using technology to deliver tax transformation can undoubtedly contribute positively to a company's cash flow and overall financial strategy. Organisations can only reap these benefits, however, if they adopt a mindset which sees the tax function as being driven by more than just regulatory compliance.

By viewing it as an integral part of a wider digital transformation strategy, it becomes possible to leverage the capabilities of both tax professionals and emerging technologies for maximum impact. In the future, those organisations that give tax transformation the investment and strategic insight it requires will be ideally placed to deliver on the capabilities and efficiencies that have become synonymous with the digital age.

What are the steps involved in creating an effective financial plan?  

In short, an effective financial plan motivates a client to action. For some individuals, that takes pages of projections and numbers to prove the recommended course of action, and for others, it is a simple summary that lists out the recommendations with a brief explanation of the “why.” It is the art of the financial advisor to find the best way to communicate recommendations in a way that resonates with each client. To create a plan that meets this criterion, it takes time to understand how an individual thinks. The more time you take to learn about the unique goals of each individual and the more questions you ask, the better you will be at communicating the important pieces of the financial plan. It is hard to gather all that information in one or two introductory consultations, which is why I believe that you need multiple meetings and touchpoints to create an effective financial plan. My process starts with gathering data and asking the right questions early on so that I know what to ask for and I don’t have to send pages of fact-finding questions for the client to fill out.

After I have the documents I’ve requested from the client, I set up a meeting with the individual or family where I don’t provide any recommendations, but the purpose is to ensure I fully understand their complete financial picture and review the goals for the engagement. You’d be surprised by how much often gets left out of documents and the prospect meetings that are uncovered after starting the financial planning process. After we have ironed out the finer details, I’m setting up additional meetings with the client to review each core area of their financial plan. We review these in person, and they also receive a written report of the analysis and recommendations. After the initial plan has been laid out, there are likely a dozen action items that need to be done to make sure the plan that has been laid out comes to fruition. At this point, the client has an expensive piece of paper.

If I haven’t done my job to motivate the client to act, they have a detailed roadmap of what they can achieve financially. That roadmap still needs to be implemented and the course corrected as life happens. Our firm is in the minority in that we allow clients to stop at this point in the process and take a “do-it-yourself” approach with the recommendations. If a client sees the value that we provide in this initial planning process, then we can often partner with them to implement the recommendations that are within our scope and provide accountability for the action items that we can’t handle directly. At this step of the relationship, as the advisor, I would transition from being the map-maker to the guide and provide the most value by ensuring each step of the plan is implemented and the client is on track to meet their goals.

What are the key legal and technical aspects that must be considered 

during this process?  

Financial advisors are asked to cover many different disciplines, and our work often crosses over into areas including tax, insurance, and estate planning. Each of those professions and certain types of advice in those fields requires specific licenses that a financial planner may not have. It is important to know what your limitations are. If you aren’t qualified to do something, it’s important to work with quality referral sources in those professions. Financial advisors should have a comprehensive view of the client’s financial outlook. It often makes sense for them to coordinate when multiple professionals need to work with the client.

How does the process differ when the subject of the plan is a family or 

an individual?  

The process of financial planning itself does not change all that much. Sometimes you find that two individuals in a family may have a list of goals that do not necessarily align. A lot of financial planning has to do with scarce resources. Even with high-net-worth clientele, you’re never working with an unlimited income or asset base, and trade-offs need to be made. If not everyone in a family has the same priorities or values, then there can be some tension.

In the case of multigenerational planning, it is still all too common for only the benefactors to be involved in that process. This also can become a problem when doing multigenerational planning, where the divergence in life stages, goals, and values can vary much more. Despite these potential conflicts, I think going through the process of financial planning and working on identifying the goals and understanding what is realistic can be very helpful for the family dynamic. By bringing in younger generations and creating transparency, it allows the older generation to explain why they are structuring things the way that they are, which can be very helpful when that person passes and avoid conflict between beneficiaries.

What other factors can complicate the creation of a financial plan?  

Involvement from the family or individual. The numbers are objective, but a lot of financial planning is subjective and requires feedback from the client. I can create what I think is an amazing financial plan for a client, but they are the ones that must live it, and the plan needs to reflect their preferences. I will do most of the heavy lifting, but a good financial plan requires collaboration and involvement from the client to create a quality finished product.

How has your approach to financial planning developed during your years 

in practice?  

I first entered the industry right after college. I was focused on getting my licensing, CFP® marks and trying to learn all the theory and technical aspects of financial planning and investments. I wanted to know what my colleagues who had more experience than me did and how to recommend and implement complex strategies for clients. I also thought that managing investments was primarily what a financial advisor did and that to provide value, I had to outperform markets. In my earlier years, this led to lengthy spreadsheets and more complexity around investments, and while being technically sound, I feel that they may not have resonated with all my clientele.

As I have matured in my practice, I still stay on top of all the changes to financial planning theory and the various investments available, but my focus is more on being a good communicator and coach. While investments play an important role in what I do ongoing for clients, there is a lot in financial markets that nobody can control, and I’ve realized that as an advisor, I should focus my expertise on the factors of financial planning that we can change and that will create a larger impact for my client. As I mentioned earlier, I think the most valuable piece of a financial plan is that it is actionable. If I provide the most complex recommendation with tens of thousands of dollars in tax savings or a better investment structure, it means nothing if I can’t communicate it in a way that not only informs my client but motivates them to act on it.

BIO

Chris Siraganian - https://firstfinancial.is/chris-siraganian/

Chris Siraganian is a Financial Advisor at First Financial Consulting. Chris works with individuals and families to help them make sense of their financial landscape and assist them in pursuing their own unique financial goals. He would tell you that the relationships he cultivates with his clients are the most important part of what he does, and he believes it is an integral part of giving tailored financial advice.

Chris Siraganian has been with First Financial Consulting since 2012 and sits on the firm’s Investment Committee. He obtained his Bachelor of Science in Business Economics from Azusa Pacific University and then completed his CERTIFIED FINANCIAL PLANNER™ education through the UCLA Extension. He is also an active member of the San Gabriel Valley Financial Planning Association and is always looking to better the financial planning profession.

About First Financial Consulting - https://firstfinancial.is/

At First Financial Consulting, we believe in fully empowering people to achieve their financial goals by providing totally objective financial advice. Accordingly, we work on a “fee-only” basis to remain free from any potential conflict of interest. Simply put, our success is measured by the success of our clients in achieving their financial goals.

There’s no doubt that financial organisations in the UK take the threat of financial crime and fraud seriously. The recent True Cost of Compliance report from Oxford Economics and LexisNexis Risk Solutions shows the cost of financial crime compliance for an average UK firm stands at over £194 million per year.

Financial organisations have invested huge amounts in technology, software, and training over recent years to counter criminal attacks. Fraudsters and scammers, however, are relentless in their determination to circumvent these sophisticated security processes and their most recent approach is to weaponize banking customers.

The weaponization of true customers

Effective customer due diligence is often built on a chain of robust checks, knowledge, and understanding. Multi-factor authentication at onboarding and login – relying on layers of knowledge and intelligence drawn from the user themselves, their device, and their patterns of online behaviour – can be extremely effective at keeping criminals out. Realising this, criminals use genuine customers to gain entry. 

Multifaceted fraud attacks

Once in, a fraudster in full control of their victim can instruct them to send money wherever they please – effectively making them complicit in the fraud. Known as automated push payment (APP) fraud, it’s a massive issue for UK banks, costing victims over £600m in the first half of 2022 alone.

Alongside APP scams, application fraud and Account Takeovers (ATO) are two other types of attacks that prey on genuine customers.

Application fraud is a broad term, but the fundamental approach is that a fraudster opens an account with an organisation using identification attributes that are either fake, stolen, or both. The primary objective is usually to abscond with funds or to receive transfers of stolen money to the account. In both instances, the owner of the stolen information is unwittingly weaponized and only suffers the consequences later when the bank pursues them for unpaid debt, fees, or fines. 

ATO fraud sees a fraudster take control of a genuine customer’s account, without the true holder’s knowledge or consent. Personal information, login details, and passwords can be obtained via the dark web or a combination of social media skimming and phishing or smishing attacks, or through manipulation. Once access is gained, the fraudster has free rein to empty accounts, apply for credit, or make high-value purchases, without the victim’s knowledge. 

Consumer expectations for online and mobile services to be quick, convenient, and seamless only add to the challenge for financial services providers in addressing these criminal attacks. This is where behavioural biometrics signals come into their own, as part of a multi-layered fraud solution.

Distinguishing between patterns in human behaviour

Behavioural biometrics offers firms the ability to measure and uniquely distinguish patterns in how people behave. To be clear, these insights are quite distinct from physical biometrics, such as facial and fingerprint recognition. 

Pure behavioural biometrics technology concentrates on the individual traits and habits that make us human. The speed and cadence of our typing, how much pressure we exert on the screen, the typical tilt of our device, and which hand it’s held in – known colloquially as ‘type and swipe’ signals – that every device detects when in use. The unique advantage of leveraging this intelligence is that it can’t be mimicked or stolen by a fraudster.

Sophisticated machine learning analyses a customer’s behaviour to form an expectation of how they act. This intelligence helps build a unique profile of the customer that can be used to authenticate them at subsequent logins, protecting both them and the organisation from fraud attacks. The benefit of this in helping improve the experience for genuine customers and also preventing APP scams is clear – a victim being manipulated by a scammer is likely to display altered behaviours during a transaction. Typing erratically or making errors due to stress, pausing as account information is dictated to them, or switching between typing and holding their phone to their ear – behavioural biometric analysis can flag these anomalies and alert the bank to consider imposing additional layers of security, or pause the transaction altogether.

Of course, no single piece of intelligence – whether digital or physical – is a fool-proof fraud detection measure by itself. But, combined with myriad other layers of data and intelligence, behavioural biometrics form a completely passive layer of user authentication, requiring no additional interaction or effort from the genuine customer.

Click here to learn more about behavioral biometrics.

Continued threat of evolving fraud types

According to a recent report by Cifas, the UK could be heading into 2023 with unprecedented levels of fraud spurred on by the cost of living crisis. The figures reveal that more people have reported being a victim of identity fraud, which has increased by nearly a quarter (23%) compared to pre-pandemic levels.

With no sign of abating, solutions that provide robust identity verification measures must be implemented to combat this type of fraud. By utilising technologies such as biometrics and artificial intelligence (AI), organisations can enhance the security of their systems, all the while improving the customer experience. Biometrics, such as facial recognition and fingerprint scanning, can quickly and accurately verify a customer's identity, reducing the risk of fraud. AI-powered fraud detection systems can in turn analyse large amounts of data and identify unusual patterns, helping to prevent fraud before it occurs.

Our research shows that over half of UK consumers (57%) are more likely to engage with an online financial services provider that has robust identity verification measures in place, so by embracing these solutions, financial services organisations can better combat fraud in a way customers are open to.

Digital identity payments

The shift toward a cashless society has spurred on the adoption of digital payment methods. Debit and credit cards are declining in popularity as consumers opt for the convenience and security offered by mobile wallets and payment apps such as Apple Pay. Biometric authentication of digital identities is a driving force behind this trend; e-wallets and digital banking apps tend to provide a more secure and convenient way to store and authenticate financial information and complete transactions without the need for physical cards or cash. In fact, in 2023, it is expected that the number of transactions made through digital identities will surpass those made through traditional credit and debit cards.

As consumers grow more comfortable with the use of digital identities, financial services organisations should leverage this level of acceptance – and even preference – by looking at ways to implement this technology. We know that the use of digital identities already provides a higher level of fraud prevention, but it could also improve customer acquisition and drive business growth.

Impact of EU AI Act on financial sector firms

The European Union AI Act is a proposed legislation aimed at regulating the use of artificial intelligence in the EU. The draft legislation outlines a risk-based classification of AI systems and provides a certification framework. The Act has been agreed upon by the European Council and is set to be voted on by the European Parliament in April 2023. If passed, financial services firms will likely have to ensure their AI systems meet the necessary standards of safety, transparency and ethical considerations outlined.

It may impact areas in which financial organisations employ the use of AI, such as credit scoring, insurance underwriting and fraud detection, meaning they will potentially have to conduct safety assessments and implement transparent decision-making processes for the AI systems being used. Considering the ethical implications, such as the potential for perpetuating biases or discrimination, would become a requirement.

Firms should take a proactive approach to ensure compliance with the proposed EU AI Act as it represents a significant development in AI regulation that could have far-reaching implications for many industries, financial services no exception. By taking steps to understand the requirements of the EU AI Act now and planning how to address them, organisations can set themselves up for success in an increasingly regulated landscape.

As new challenges present themselves, so too do new solutions. Technology is at the core of this and it’s important for financial services firms to stay ahead of the curve and embrace new solutions to meet the changing landscape. The future is full of possibility, and we can expect to see continued growth and innovation in 2023 to realise the potential that lies ahead.

Robert Prigge is responsible for all aspects of Jumio’s business and strategy. Specializing in security and enterprise business, he held C-level or senior management positions at Infrascale, Secure Computing, McAfee, Quest Software, Sterling Commerce, and IBM.

Financial services enterprises are under greater pressure to digitally transform. According to new Telehouse research, more than four out of ten (42%) financial service enterprises need to transform their IT infrastructure or risk becoming less competitive – a figure significantly higher than the 34% average across other sectors.

Pressure is being driven by a combination of factors, including customer demands for more connected, relevant and personalised experiences (46%), the need to simplify business and operating models to increase efficiency (46%), cyber security (44%) and the necessity to deliver new applications and services to customers (44%). The emergence of nimbler challenger banks and ambitious FinTechs has set the challenge for businesses across the sector to step up a gear and reshape their operations.

For many, a shift from traditional on-premise infrastructure to a more modern mix of colocation, cloud and ultimately, edge computing is the answer.

Scoping the challenge

Today, financial services firms need to react quickly to regulatory demands and take advantage of market opportunities. However, they often don’t have the right systems in place to manage, or effectively use data to respond as quickly as their ‘digitally native’ peers.

The problem is many are still reliant on inflexible, legacy, on-premise infrastructure. The research revealed that financial services organisations outsource the lowest proportion of IT infrastructure to colocation and the cloud of the enterprise sectors polled. So, it’s not surprising the sector also has the lowest confidence in IT maturity, with just 30% of IT decision-makers describing their organisation’s IT maturity as ‘very advanced’.

Transformation is clearly needed but it is not always an easy task. Historically, financial services firms have struggled to adopt new technologies and meet increasingly high customer expectations quickly, often limited by strict compliance and regulatory requirements, which ratcheted up after the global financial crisis of 2008. Even with the appetite to change, many have struggled to make meaningful progress, held back by legacy IT systems. But with the time of the essence and providing personalised, connected and reliable experiences now business-critical, organisations can simply no longer afford to stand still.

Why connectivity is key

As customer demand and internet consumption grow, financial services organisations need to find ways to increase connectivity between offices and countries and improve the user interface on customer-focused technology like apps and websites.

5G will offer many benefits for financial services including reduced latency, which in turn will help decrease transaction and settlement times. It will also facilitate the adoption of AI to enable greater personalisation and improvements to customer experience.

However, as with any new wireless communications technology, the volume of data used will rise significantly, putting more stress on backbone networks. A fifth of financial service enterprises surveyed in the research already say that data volumes have become a serious problem. To succeed, organisations need the ability to quickly ingest and process data and this will be dependent on having a connected, secure, reliable, scalable, flexible, resilient and low-latency IT infrastructure.

Ultimately, more connections mean more risks. So, the challenge is how to take advantage of increased connectivity without compromising security or compliance.

The role of colocation

Many are turning to colocation as the answer; providing the extra capacity and bandwidth required, while also enabling fast, secure and direct connections to cloud service providers. According to the Telehouse research, financial services organisations are already outsourcing 38% of IT infrastructure in colocation with adoption set to increase further as the use of big data; 5G and the Internet of Things (IoT) rises.

By hosting their IT infrastructure in a colocation data centre, organisations can control the migration process, keep on top of regulatory demands and keep a lid on costs.  The research found that the top drivers of investment in colocation are sustainability, faster data access and improved connectivity, likely driven by the need to improve customer experience and connect disparate hybrid IT structures.

More importantly, by deploying a combination of cloud and colocation strategies, organisations can create a resilient and secure foundation for growth. This will enable them to flex and scale operations when building new services and innovations to meet future demand, while also ensuring they provide their customers with a responsive and high-performing service. And by choosing a colocation facility in close proximity to financial markets and exchanges, organisations can benefit from reduced latency and faster data processing to enable real-time big data analysis.

Moving to the edge

Despite lagging behind other sectors in most areas, financial services are leading the way when it comes to edge computing. 72% of respondents have already implemented a strategy for edge computing, driven by a need to optimise data volumes (36%), digitally transform (34%) and match competitor capabilities (34%). However, over a third say they are challenged by a lack of understanding of edge networks and their purpose as well as uncertainty over which locations to gather and manage data in.

Given that it’s now more important than ever for financial services firms to store, access and analyse and access exponential levels of data at record speeds, it is not surprising that interest in edge computing is soaring. Gartner predicts that by 2025, 85% of infrastructure strategies will integrate on-premises, colocation, cloud and edge delivery options, compared with 20% in 2020.

Demand for edge is also likely to be driven by its convergence with other technologies such as cloud and colocation and is evidenced by the fact that many firms opt for a mix of technologies. Ultimately, the key to success for organisations will be building the right infrastructure foundations and connectivity, and the right data centre partner is critical to achieving this.

Embracing the connected future

Financial service providers have a huge opportunity to provide the seamless, secure and personalised services that today’s consumers crave. But doing so requires digital transformation.

As data volumes and connectivity increase, new developments such as predictive modelling to prepare for ‘what if’ scenarios, automation of front-end sales and customer-facing environments and the enhancement of customer care by self-service functionality will become commonplace. However, success depends on having the right IT infrastructure to enable fast, secure and seamless connections. It will be those that can build a connected, secure, reliable, scalable, flexible, resilient and low latency IT infrastructure that will be winners in the race to the connected future.

However, these institutions have long been dubbed laggards when it comes to technology, innovation, and the speed at which they can digitally transform. Much of this is due to the legacy infrastructure in place, the regulatory landscape in which they operate, and security and governance protocols they have been hamstrung by. This means that data is not driving the valuable innovation it can do to improve automation, decision-making and risk management.

In comes synthetic data. This is not ‘real’ data created naturally through real-world events. It is ‘artificial’ data that maintains the same statistical properties as ‘real’ data, generated using algorithms. Whether the aim is to make data available across an organisation or accessible to third-party partners it drives speed to innovation within financial services.

This is already happening as the first banks start to roll out synthetic data across various use cases, from testing to AI model training to cloud migration projects. But in 2023, I believe the sector will open its eyes to the notion of synthetic data and how it can fuel growth, support overcoming longstanding obstacles, and totally rejuvenate the way financial services institutions meet and exceed the ever-evolving requirements of customers and regulators.

Revolutionising data privacy 

According to Gartner, synthetic data will enable organisations to avoid 70% of privacy violation sanctions. Financial data, such as consumer transaction records, account payments, or trading data, is sensitive personal data subject to data protection obligations and is often commercially sensitive.

Structured synthetic data has the potential to revolutionise the way financial institutions use data securely. Because this data preserves the statistical properties of real-life data, the strict privacy and security protocols that have previously blocked innovation can now be navigated with synthetic data. So, because no real individuals can be identified from the synthetic data, data protection obligations, such as GDPR, do not apply. This will undoubtedly be top of mind in 2023 for business leaders, with the fifth anniversary of GDPR in May.

Since privacy compliance and information security regulations will no longer be an issue, the new artificially generated data can then be used to create new revenue streams. The banking sector can take their Open Data and data monetisation strategy even further in 2023 since synthetic data will enable them to package this data and sell it to third parties without the need for express consent.

Seamless cloud migration

There’s no doubt that the organisations that are succeeding in these trying times are those that can rapidly scale via the hybrid or public cloud. But well-regulated industries like banking and financial services have been reluctant to go all-in with the cloud. I get it. As soon as data leaves the company campus and servers, the control is lost. Synthetic data allows for a rapid, cross-organisational migration to the cloud without any of the added risks. Something that financial organisations can use to great effect in 2023.

Instead of pseudo-anonymised data (created by traditional processes such as masking and anonymisation) that can still lead to re-identification or redacted data that loses most of its utility, with synthetic data generation, the dataset is totally new and holds no ties to the original. If used, in 2023, financial services can train on their real datasets on-premise – even behind the walls of separate departmental silos. Then, the artificial data can be released into the cloud. And since there’s no personal information in it, the synthetic data can be shared across silos within the organisation — allowing for cross-organisational strategy, insights and analytics like never before.

The commercial impact of generative AI

Generative AI underwent a huge step change in the latter half of 2022. Teams from OpenAI through to StabilityAI have been creating models that can conjure hyper-realistic text and images from seemingly thin air with very minimal verbal prompts. The realism of the responses you can get from these models is in some cases quite creepy and like nothing we’ve seen prior to this year.

So how will this development impact business and society? The jury is still out, but what we do know is that these teams are making these models available for anyone to play with for free right now creating the perfect test ecosystem for developers, hackers and anyone who’s curious to test their ideas.

I am certain that in 2023 we will start to see businesses forming around these tools. For example, there are already examples of text or formula auto-completion tools being embedded into Microsoft Office software that could greatly improve productivity and speed up learning curves of users. These types of efficiency-improving tools have the potential to impact businesses much further afield than just financial services.

There are certainly some concerns and legal challenges that still need to be overcome before this technology can be commercialised. Who owns the output of one of a code auto-completion model if it was trained on data under different licences? Who owns the copyright to images generated from a model?

Despite these challenges, there is huge potential in this technology, and I believe we will all be hearing much more about it in 2023.

The move from one of the UK’s largest banking groups, Lloyds, is a prime example of how the industry is adapting to consumer trends and the shift to online banking. Statistics show that in 2007 around one-third of consumers used online banking. Today, more than 90% of consumers conduct most of their banking needs online.

This shift in behaviour has gradually changed the industry, but it is clear that the future of the financial services industry is digital. However, the closure of bank branches has forced a seismic divide between those who prefer to bank online and those who don’t. It has also raised many questions about the readiness of our high-street banks when it comes to supporting this divide and future-proofing services.

Amid these branch closures, how can banks ensure that they are supporting all customers, both online and via the high street?

It’s true, not all consumers are willing or capable of making the digital change, and there will always be those who prefer to bank manually. As banks continue to accelerate their digital transformation, the closure of more high-street banks is inevitable. As a result, those who prefer to bank in person could be left in the dark when it comes to managing their finances.

We’ve seen some banks providing hands-on support at their branches for those unable to access digital services at home. This approach has helped to improve accessibility and increased education around digital initiatives. It has also encouraged increasingly more people to embrace digital ways of banking. The industry and regulators are also focusing on introducing plans to support those who are less digitally experienced.

What are some of the initiatives that the industry and regulators are putting in place to support those who prefer to continue banking via the high street?

Recently, a pilot agreement was launched for banks to share services to support the local community and the future of cash. Large banks across the UK will assess local needs every time a branch closes. The assessment could recommend a shared branch opens, an ATM installed, or a Post Office is upgraded. Banks will commit to delivering whatever is recommended to support those customers who prefer to bank in person.

What’s more, the Financial Conduct Authority has proposed that banks will have to provide a more detailed analysis to justify closing a branch. The FCA will also have the power to ensure local communities across the UK have access to cash and banks who don’t comply could face fines. This will make sure that in those areas where digital adoption is not common, access to physical services will remain a priority for banks.

These are promising initiatives, but the industry must do all it can to ensure these initiatives are widespread. It must also continue to think outside the box, innovate and develop other initiatives aimed at those reluctant to embrace digital banking.

How can banks focus on innovating and continuing to improve and develop the digital customer experience, while catering for all customers?

There is no denying the dramatic shift in consumer behaviour to digital. This should be taken as an opportunity for banks to future-proof their services and improve the online customer experience.

However, the extensive use of legacy technology within banks, means the speed at which these established institutions can bring new services to life is often too slow and outdated. This challenge is also complicated by a lack of industry standards, meaning that banks continue to be restricted by having to choose partners based on their language and the way they’re able to transform the bank.

To truly digitise banks, they need to overcome these obstacles surrounding interoperability with a coreless banking model. This approach to transformation empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their own technical language or messaging model. By translating each proprietary message into one standard message model, communication between different organisations is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

Are there additional approaches that banks should be considering to further enhance the customer experience?

In addition to taking a coreless approach to banking, banks must form an ecosystem alongside FinTechs, service providers, and aggregators. This will help banks when it comes to the speed they can introduce new products, which in turn will support the customer experience.

An effective ecosystem strategy will make banks more relevant to their customers, creating an opportunity to drive better relationships and bigger wallet shares by providing the speed, scale and differentiated products that make the most of the opportunity presented by the significant shift to digital banking. If banks fail to take this approach, they will struggle to survive as consumers continue to demand new, digital services aligned to their needs.

So, what can banks do to prepare for the future and make sure they are providing for all customers?

While we anticipate that there will continue to be more high-street branch closures, the industry must continue to adapt based on the needs of every single customer. Failing to do so only means that customers will leave for a nimbler competitor who understands the customers both now and in the future.

This may seem like a hard weight to bear for many across the sector. By taking a core banking approach to transformation, however, supported by an effective ecosystem – banks will benefit immensely. If banks continue to focus on the balance between maintaining previous methods of banking and the development of new and innovative services based on the needs of every customer, the future will be bright.

What is Asset Tracing?

Asset tracing is the process of identifying an individual’s or business’ assets, these may include properties, businesses, vehicles and more. Understanding somebody's financial position can help identify whether they have any adverse credit, hidden assets, or if they own businesses that may lead to a conflict of interest.

How do you go about asset tracing?

As well as utilising the right technological tools and online data sources, we explore both open-source intelligence and human source intelligence. Open-source intelligence is collected from domains within the public domain. This information is carefully analysed and cross-referenced to ensure it is current and valid. The term “open” refers to available sources compared to restricted resources which may include government intelligence. Open-source intelligence is less costly than human source intelligence and it is also easier to access however it will still require a significant level of analysis.

Human intelligence relies on the collection of information directly from people. While it is commonly used by government intelligence agencies, it can also be a key element of asset tracing.

Various resources can be accessed when exploring open-source intelligence including:

Company filings

Personal records

Audit documents

We will also be able to explore key information relating to:

Property assets

Credit reports

Company assets

Vehicles owned

Directorships

Major shareholdings

We can even complete an open-source search on a global level to identify any stray references that could be relevant.

What are the complexities of asset tracing?

Many people try to conceal their assets, some in order to avoid paying tax, others to conceal them from spouses. The most common reason people hide assets is to avoid debtors who may try to have them ceased or subject to legal proceedings such as freezing orders. When a business is liquidated it may take a forensic accountant to distinguish between assets the directors have purchased for legitimate use and personal use but establishing how cash has been spent can be near impossible without an experienced asset tracer.

How do you resolve them?

Our initial enquiries will provide us with an overview of the subject’s finances, assets and business associates. We then interrogate this data and cross-reference this against the profile that has been provided to us by our client. We find that in the vast majority of cases the subjects use friends, family and business associates as mules to avoid using their own name on ownership documents and registrations. By identifying the subject’s immediate network of friends, family and business associated we are able to draw a more accurate picture of their asset portfolio. Identifying historic ownership documents then allows us to trace when ownership was transferred and access to credit data allows us to identify how much equity or liquidity is available from that asset.

Website: https://www.revealpi.com/

Personalised nature of financial services has suffered

For years, the financial services market has become much more transactional. In a race to the bottom on price, consumers have been more concerned with who doesn’t charge maintenance fees and who has the best interest rate for their cards or rewards system for their policies than who has the most convenient high-street locations or who provides the best service. This has placed an over-emphasis on digital, particularly as generations have grown up so that now, the thought of going to a branch office is seen as an alien concept to younger customers. There is no question that the banking landscape has dramatically changed from one generation to the next. The relentless march to digital continues to see swathes of branch closures and has ushered in the death of ‘speaking to your local bank manager’. According to recent figures from the European Central Bank, the bank branch network is getting thinner by the day with a decline in 25 out of 27 EU Member States. According to a report from last year, at least one bank branch closes every day in Belgium.

It has created a dichotomy whereby large swathes of society are now totally reliant on digital financial services - a figure that is only going to increase as digital identity verification becomes more widespread. But at the same time, the narrative to consumers is to ‘protect their data’. As a result, it is creating an environment of mistrust, concern and paranoia, rather than an excitement for what safely sharing data can enable.

Humans: The missing link in financial services

Our Digital Frontiers research identified that two-thirds (67%) of European consumers don’t know who has access to their personal data and how it’s used – just 12% do with any certainty, while the majority (59%) of the public are increasingly concerned about the security of their online digital footprints and how purchasing data is used, interpreted and shared. Indeed, 41% now feel paranoid that organisations are tracking and recording what they do on devices.

At the same time, the near extinction of humans in the financial services sector is creating a void that consumers are not yet prepared to take the leap of faith to cross. Yes, our research uncovered an acceptance that technology can play a vital role in managing our finances - 31% of consumers would trust an app to manage all of their finances if it meant it generated greater returns each month, 39% expect their financial services provider to use technology like artificial intelligence and machine learning to help protect their funds and personal details.  However, it also highlighted that a fully-digital banking network is a long way away. Only a third (30%) of consumers would choose a different bank or financial service provider if their existing one expected them to visit a branch in person. Indeed, only 37% agree that in-person interaction in financial services is almost dead. According to our research, almost two-thirds (64%) of consumers expect the financial services industry to support traditional and in-person services that they do not rely on but know other people may.

In a race to the bottom on price, consumers have been more concerned with who doesn’t charge maintenance fees and who has the best interest rate for their cards or rewards system for their policies than who has the most convenient high-street locations or who provides the best service.

Whether it is the desire for trust, the ability to solve our problems - especially in light of high-profile scams and cybercrime, or to simply deliver a personalised experience, it’s clear that for digital in financial services to reach its potential, people still need people; not necessarily in the high street, but at the end of a message, phone or video.

Digital-first, not digital-only

What consumers are looking for is for financial services institutions to build their offerings with a digital-first mindset and not digital-only, which is good news for traditional establishments - less so for fintechs and NeoBanks. And who can blame them when it’s something they see daily in other sectors. Retail is starting to blend in-store expertise and service with digital innovations around delivery choices yet in financial services, consumers are being offered chatbots to fix problems and are being turned off as a result. This isn’t a digital versus physical discussion but more about creating a blend where the choice of engagement is down to the consumer: from efficient app-based banking to speaking with a real-life person via chat, phone, video or in-person, when required. Data lies at the very heart of this.

Away from devices and evolving customer expectations, there is another driver of change for financial services at a macro level. Governmental and regulatory expectations have translated into a need for banks to play a fuller role in meeting society’s financial needs. Our digital economies depend on organisations and companies being able to unlock the value of data - using it to improve products and services and improve society as a whole. For example, banks are increasingly expected to improve financial inclusion. According to a recent report, seven million adults in the UK are at risk of financial exclusion, meaning that they do not have sufficient access to mainstream financial services and products - something exacerbated by the ongoing branch closures.

Financial Services getting it right

The beauty of this situation is that all the tools and technologies to realise this future are here, today. There are already businesses demonstrating how it can be done to great effect. One example is Achmea, which has a leading position in the Dutch insurance market, with 10 million customers. The insurer makes use of technology and data in a clever way that allows it to quickly add new services or make changes based on customer feedback. Innovations to speed up its claim processes include an app for policyholders to help them find local tradesmen for repairs through to the use of drones to survey weather damage to properties.

Totally secure, friction-free financial interaction

Consumers want totally secure, friction-free financial interaction with absolute trust in how their data is captured, stored and used. But, for a sector that’s designed on digits, people don’t want to be just another number. And in this day and age, these two objectives don't need to be mutually exclusive.

The financial services sector has an opportunity to lead the way globally, demonstrating digital excellence with data to excite consumers, bank the unbanked, connect communities and shape society for the better.