For financial institutions, leveraging data to gain insights and inform decision-making has become more important than ever before as digital transformation agendas become more focused on enterprise-wide initiatives that deliver elevated customer experiences. However, these efforts are currently being hindered due to overly complex data infrastructures that rely on a disjointed set of technologies for data management, semantic layers, data pipeline, data integration, and analytics. This is leaving firms unable to obtain data fast enough, and in a way that is easy to interpret and share to drive their organisation forward. 

Consequently, to solve these issues, many are looking for a new approach to data management. This has led some of the world’s leading financial institutions such as Bank of America, Citi, and Goldman Sachs, to implement data fabrics. But it’s not just larger firms that stand to benefit from data fabrics. Slated as the “future of data management”, this new architectural approach to data management can help firms of all sizes to achieve smarter data enablement, 'information fluidity', and a simplified and futureproofed data architecture to maximise the value of their data. 

The future of data management

The growing popularity of data fabrics is down to their ability to speed and simplify access to data assets across the entire business. A data fabric accesses, transforms, and harmonises data from multiple sources, on-demand, to make it usable and actionable for a wide variety of business applications without creating additional data silos. This is a far cry from the overly complex architecture most firms are currently used to. 

Smart data fabrics extend these capabilities even further by embedding analytics capabilities directly within the fabric, such as data exploration, business intelligence, natural language processing, and machine learning. This makes it faster and easier for organisations to gain new insights and power intelligent predictive and prescriptive services and applications. 

Another major benefit of a smart data fabric is that it allows data to remain at source while adding new functionality and levels of flexibility. This means existing legacy applications and data can remain in place so firms can maximise the value from their previous technology investments, including data lakes and data warehouses, which is particularly beneficial for smaller firms with tighter budgets. Additionally, this approach ensures firms don’t have to worry about moving data to a centralised store and all the challenges that can entail, such as latency and duplication of data. After all, it’s these issues that can call into question whether the data can be trusted and if decisions based on it are truly informed. 

Elevating the customer experience

Once implemented, smart data fabrics give financial services institutions the ability to more fully leverage their data, customer and otherwise, and open up a world of possibilities. By weaving together different data sets and providing easy and uniform access to data, a smart data fabric can help generate insights to better understand customers, predict behaviours, and provide customised experiences in real-time. These capabilities promise to help firms to elevate the customer experience and enhance business results. This has the effect of helping organisations to expand customer opportunities, retain existing customers, and gain a competitive advantage in an increasingly competitive landscape.

The use of a smart data fabric also caters to business users’ demand for more direct and simplified ways to derive insight from the firm’s data assets, while also helping firms keep up with regulatory imperatives that require support for advanced data quality, lineage, security, and governance capabilities. 

Smart data fabrics for all

With their ability to unify data from both internal and external sources on-demand, without creating additional silos, and provide accurate and seamless access to that data, smart data fabrics present the opportunity for financial services firms to do more with their data. This will put the power to accelerate business innovation and obtain or maintain a competitive advantage firmly within the grasp of organisations of all sizes. In what can be a challenging and volatile environment, this can make a significant difference to how firms respond to changes within the landscape and position them to use their data to inform their next move.  

As firms turn their attention to implementation, working with experienced technology providers and partners will offer the best path forward and ensure they are able to make the best use of the various data management, integration, and analytics technologies that make up a smart data fabric. 

By taking this step forward by implementing and embracing this next-generation data management approach, financial firms will set themselves up to succeed both in today’s landscape and well into the future, giving them the capabilities they need to deliver an elevated, customised, and differentiated customer experience every time.

Even small businesses can achieve massive feats when people go the extra mile with their productivity. But you cannot expect it to happen by itself as employees tend to go slack when not supervised or motivated. The decline may be deliberate or unintentional, but low productivity always hurts the employer in more than one way.

As a business owner, you will need to invest in your team and drive them to achieve more with less. It may take some effort, but there is no other way to boost people and get your business ahead. A positive mindset and motivational approach give you a good start, but they are not enough to boost your workforce. You need to realise that technology is the driving force that makes a real difference, and investing in it is non-negotiable. Let us explain how you can leverage technology to build a productive workforce for your business.

Empowering with flexibility

Flexibility makes people productive, and it is all the more crucial in the remote work era. The right technology solutions empower your team to work from anywhere and anytime. You cannot expect to survive and thrive without implementing these solutions. They enable workers to connect and collaborate with each other and the clients, no matter the constraints of location and time. A flexible workforce aces on all fronts, including productivity. They also feel motivated because a flexible approach breeds trust. Let them work their own way, and they will give extra effort to do their best. Moreover, it is no longer a choice for businesses in pandemic times. Learn to live with flexibility, and productivity will grow organically.

Automating time-tracking

Employees often lose track at work because they get distracted or take extended breaks, sometimes unintentionally. The problem seems like a small one, but the implications of lost time are far-reaching. Thankfully, you can rely on apps to automate time-tracking to keep an eye on people. They are significant right now as people work from home and there are more chances of wasting time when away from physical supervision. Once you have these solutions in place, employees become more conscious, and you can save hundreds of work hours every month. They can even help employees to keep a check on their performance and do their bit for the employer. Time-tracking apps are a small investment that takes your business a long way.

Simplifying small tasks

When it comes to making your workforce more productive, you must start at the most basic level. Consider investing in technologies that simplify the smallest of the daily tasks at work. You can provide relevant tools to handle these tasks. Just imagine the problems employees can face when they have too many temporary files on their work devices. It sounds like a small issue, but the extra files can slow down the system and hamper the workflow significantly. Eventually, it will affect their productivity too. A simple cleanup tool can resolve the concern in minutes and get devices back to work seamlessly. Choose simple tools people can use without help.

Bolstering employee engagement

A happy workforce is bound to be more productive and efficient. So employee engagement is a worthy investment for any business. You can invest in engagement apps and gain in the form of a positive impact on work output. Several organisations are already leveraging gamification solutions to engage teams and foster healthy competition among people. As employees invest extra efforts to gain points, their productivity gets a boost. Similarly, feedback solutions go a long way in enhancing the engagement of the workforce. They let people know where they stand and how they can improve their performance with the adoption of the right measures.

Ramping up training initiatives

If productivity is your top priority, you need to have effective training initiatives for your team. The idea is to enhance their skills over time so that they deliver more and better. Once again, workplace technology can play a significant role in employee training. You can leverage high-end learning management systems to train through simulative technologies. Many businesses are also using simulative apps that leverage Augmented Reality and Virtual Reality to deliver lifelike learning experiences to the employees. Remote training is another area where technology emerges as a saviour right now.

Building a productive team should be a priority for every business, even if it takes effort and investment. It becomes all the more crucial at this point when organisations need to optimise resources and cut down costs. Technology takes you a step ahead with the initiative, so you must pick the right solutions to empower your workforce at the earliest. You will soon realise that technology pays for itself, so the investment is worthwhile. 

The ultra-low interest rate environment and fee compression in areas like payments continue. Competition from challengers and fintechs is intensifying. Customer digital adoption has grown, and the bar of expectation continues to rise.

The impediments to change that traditional banks face are not going away - high cost-bases, inflexible and complex legacy technology estates, and operating models that lack customer-focus and agility.

Banks face the imperatives of increasing and diversifying revenues, optimising costs and increasing business agility. In this article, Simon Hull, Head of Financial Services at BJSS, looks at the revenue challenge and why smart use of digital technology is the key to success.

Revenue drivers

Banks are looking to win new customers, retain and maximise business from existing customers and diversify the traditional deposit and lending business with fee-based products and services. Some of the key elements banks are focusing on in this respect are customer experience, customer intelligence, and product and service range.

Customer experience is a battleground and competition is intense. Last year's Ipsos Mori poll has Monzo and Starling coming out ahead on many customer service metrics. Digital channels are becoming primary. Customers are attracted to slick and intuitive digital experiences and expect increasingly personalised service as banks learn more about them.

However, the empathetic human touch is still essential, as is the consistency of service across in-person, phone and digital channels. Customers want the choice of channels to use for different tasks, and preferences differ across demographics. The brand experience is just as significant, with social and environmental responsibility top of the list. The combination of service and brand will drive loyalty and recommendations.

Customers want the choice of channels to use for different tasks, and preferences differ across demographics.

Customer intelligence is about gaining a deep, holistic and continuous understanding of the customer - their needs, behaviours, preferences and influences. With this, a truly customer-centric operating model can be created - one where product and service development, marketing, distribution, and customer service are aligned and evolve alongside the customer. This enables a broadening of the relationship to maximise customer wallet share by tailoring to their needs to build multi-product relationships.

Banks need to assess their current product and service range, consider discontinuing low volume or low profitability products, and ensure the rest are available on their digital channels. In parallel, banks must move to an agile product and service development model to enable rapid innovation based on customer intelligence. This will help sustain and protect revenues as needs change and diversify into fee-based products, as many major banks are doing in areas such as financial advice, wealth management, insurance, point-of-sale financing and subscription models.

Digital technology solutions

Digital technologies, used in the right way, hold the key to delivering these three revenue drivers.

Investing in user-centric design is critical for banks to understand customer needs, jobs to be done and interaction preferences. Web and mobile digital technologies power responsive and real-time banking apps, compelling user journeys and more frequent interactions and alerts. They are also a critical source of customer data which can be used to refine interactions and develop new products and services iteratively. Banks should move their full product and service range onto their digital channels, and also focus on customer education and self-service. The same technology can be used to digitally enable branch and call-centre staff, creating more informed and rich customer interactions.

Data and AI is really the heart of digital customer-facing banking. Capturing and combining datasets involves both making the vast troves of data stuck in siloed legacy systems available, capturing real-time customer data from digital platforms and also bringing in additional third-party sources. AI can be used to join the dots and identify patterns to better understand and predict needs, which can drive timely interactions and personalised products and services. It also enables a better understanding of personal situation and risk, prerequisites for new services such as wealth management and insurance. Broadening the model of the customer extends the opportunity to establish multi-product relationships. This generates more interactions and data, so a cycle of continual analysis and innovation is formed.

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AI capabilities can also be combined with RPA to enable Intelligent Automation of many customer service tasks such as standard enquiries that can be handled by conversational AI. Highly responsive, accurate and information-rich conversational interfaces improve the customer experience. This in turn, enables staff to provide a better customer service by focussing on personal service and higher value or more complex needs.

Cloud is a crucial enabler of much of the above in several ways. The inherent agility of cloud-based services enables rapid innovation and the delivery of new services and features through microservices. Elastic scalability enables the platform to adapt to usage expansion and maintain responsiveness under high load. Native out-of-the-box data and analytics capabilities will accelerate the AI journey. The fast provisioning of new environments supports an agile product development methodology.

For traditional banks, legacy modernisation must feature in the digital change programme. Legacy systems can negatively impact the speed and cost of change. Modernisation must be prioritised, and iterative strategies applied such as facading systems behind APIs, breaking out elements of monoliths as standalone reusable services and cloud migration. Legacy systems contain critical data that is needed to build a holistic customer view. Modernisation of the change function to a customer-centric agile model is a broad enabler for all revenue-generating activity.

Conclusion

The industry is at an inflection point, and banks face a considerable challenge to drive revenue opportunities. The key to success is precision of focus on business goals and aligning the right digital technology combinations to deliver on the customer experience, customer intelligence and rapid product and service innovation goals. Banks are at different stages on this journey, and of course, revenue must also come with profitability. Hence, costs are another challenge that must be faced in a similar way.

The present invoicing and billing technologies were developed to manage the payment processes for businesses. Paper invoicing remains a popular option for several companies in the United States. But the majority of them have shifted to electronic methods of billing and invoicing.

The country was lagging far behind to adopt the technological advancements in electronic invoicing compared to Europe and Latin America. However, the current trends have revolutionised electronic billing and invoicing for the past couple of years.

These advancements are responsible for the gaining popularity of the current invoicing and billing technologies. Let’s see how technology has shaped the way businesses in America send bills and invoices to their clients.

Automation of the Invoicing Process

The automation of the invoicing process has reduced the need for companies to track their financial transactions. Most companies in the United States have stopped using paper bills. Even those companies that have not automated their entire billing process prefer using blank invoice templates for service providers. 

Automation of the process enables organisations to get reminders for due dates and delays in receiving payment. It has also helped companies in the country stay on track with their billing and payment schedules.

Automating the manual responsibilities of creating and sending bills allows business owners and staff to focus on other essential tasks. Companies can also save money because they do not require additional staff to take care of these responsibilities.

Several companies have also adopted blockchain technology to streamline their billing and invoicing processes. It allows them to keep a record of all their financial transactions. It also eliminates the need for additional resources or third-party vendors.

Automating the manual responsibilities of creating and sending bills allows business owners and staff to focus on other essential tasks.

Blockchain technology has not only made financial management smoother but has also improvised the entire invoicing process. The technology prevents any manipulation or accidental deletion of invoices once they are recorded and sent to the client, thereby eliminating the risk of fraudulent activities.

With the gradual adoption of blockchain technology in American businesses, we have started noticing the decline in traditional invoicing systems.

AI and Machine Learning

The advancements in AI and machine learning technology have taken the automation of invoicing solutions up a notch. Most software providers can offer a holistic approach that features functionalities beyond the basic invoicing cycle.

The intervention of AI and machine learning unlocked humanly unimaginable software abilities. Companies can process hundreds of invoices in a short time while processing significant amounts of financial data.

It is also easier to identify or verify past transactions, which gives the business better control over their cost and supply chain. Using AI and machine learning technology can also spot anomalies and errors with the least amount of human intervention.

Cloud Invoicing

With the increase in the use of the Software as a Service (SaaS) model, most billing technologies have started operating from the cloud. They allow businesses to access financial records and data from a device connected to the Internet anywhere in the world.

Cloud-based invoicing also enables people to receive real-time business updates and take the required action. Business personnel can address any urgent issues with the payment in real-time to maintain their company’s reputation. Digital wallets have also become a part of cloud invoicing already.

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Most business owners and managers can access cloud invoicing through mobile apps these days, which has made the process extremely convenient. With the increase in remote working due to the COVID-19 pandemic, most companies have started relying on cloud-based software instead of traditional ones.

In the present times, any company that fails to provide mobile billing options is bound to lose valuable clients.

The Rise of Real-Time Global Payments

Gone are the days when companies had to wait for days or weeks to send invoices and receive payments. Every business expects real-time transactions these days. The COVID-19 pandemic affected the economy of the entire world, so businesses need their money in real-time.

That is why most companies rely on electronic billing and invoicing processes, as they tend to be faster and more accurate than the manual ways of raising a bill or sending an invoice.

Businesses of every size have started adopting electronic invoicing because they reduce the cost and increase efficiency. As we mentioned before, most countries in Europe and Latin America had already started using electronic invoicing before America. Therefore, to continue business relations with these countries, American companies have to adopt electronic billing and invoicing methods.

Modern billing and invoicing methods have enabled American companies to build better business relationships within the country and the world. With increased productivity, companies can save costs and time.

The present billing and invoicing technologies played a prime role in mitigating the challenges faced during the COVID-19 pandemic. We can expect the technology to progress further and increase productivity while reducing losses.

Payrolls, for a majority of the workforce, acts as a motivational factor. It is only when they get accurate and timely income that they feel inspired to keep putting their best foot forward. After all, it is all about money at the end of the day.

This is what makes it important to effectively process payrolls. Accurate payrolls makes sure that employees are neither getting underpaid nor are they getting anything more than they were expected to receive. 

Moreover, effective management is also about handling confidential documentation, ensuring accurate benefits, sorting out reimbursements correctly, and everything else that revolves around the employees income. 

So, how exactly do you manage payrolls effectively so that both employees and employers keep happy? Read about the solution below. 

Get most out of advanced technology

Thanks to advancements in technology, there are now ample tools and software on the market that have been developed to make business operations a lot easier, even payroll management. Payroll system software was designed specifically to ensure that organisations manage their payrolls effectively. 

These tools automate almost every payroll-related task. Not only is this tool reliable to get accurate timings and amounts, but there are variations that come with additional helpful features. These features could include tracking attendance, managing budgets, filing taxes, calculating overtime of employees, tracking employee work hours, and many more. 

You can easily find a tool that basically takes care of everything related to the human capital of your organisation. All you need to do is select the tool effectively and with patience and research.

Payroll system software was designed specifically to ensure that organisations manage their payrolls effectively. 

Streamline tasks

Organisation is the key to success. The more organised you are, the easier your life will be. When there is chaos, the chance of errors increases. 

Thus, make sure you are always working to get more organised at work and in life. Start by reviewing how your current processes are. Learn about all the areas that need improvement. 

Once you have these areas, start working on them. Determine the type of pay schedule that will work best for your organisation as well as your employees. If you have distributed hours, identify the best course of action to take care of that. 

When you are trying to improve, start by analysing and identifying.

Go paperless

In this world of digitalisation, it is perhaps high time to adapt to more advanced technology. After all, the digital world is the future. There are plenty of benefits that going paperless can bring.

The main benefits include offering an easy and less cluttered way to employees to manage and monitor their finances.  When you opt for digital solutions, employees won’t have to stand in line and pick up their checks. This will save time and offer them more hours to focus on more important tasks like achieving their targets.

You can offer a self-service portal where employees can themselves look into their documents and payslips when the need arises.

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Consider outsourcing payroll management 

Many find it difficult to delegate tasks. They feel the more they keep the work to themselves, the better and more accurate it will be. That’s completely wrong.

When you have too much on your plate, it is going to be truly difficult for you to focus on even one thing. Neither would you be able to carry out payrolls effectively nor the other tasks in hand. And payrolls need accuracy. Thus, consider outsourcing your payroll management. This will help you retain your employees and keep them productive as they will be getting accurate and timely pays. No delays. This is because the chances of the brands that you will outsource payroll management from will probably already have updated software. 

Thus, consider letting go of the burden of manual payrolls and begin storing important documents securely.  

Conclusion

The bottom line is that automation and easy life goes hand in hand. If you can find any way to automate your tasks, be it using a digital tool or by outsourcing the management, you should certainly consider doing that. It will give you more time to focus on things that actually matter. 

A number of the world’s biggest private equity firms, including Silver Lake Partners LP, Thoma Bravo LP and Blackstone Group Inc, have seen their stakes in software firms greatly devalued following a wide-reaching hack on software provider SolarWinds Corp.

SolarWinds stock has slid 20.8% from last week’s close after reporting on Sunday that suspected Russian hackers had inserted malicious code into software used by the company to carry out updates, allowing the operatives to access sensitive systems undetected.

The “Sunburst” operation, remarkable for its size and sophistication, constitutes the biggest cyberattack against the US government in more than five years. Around 300,000 companies and agencies use systems provided by SolarWinds, with around 18,000 believed to have used compromised versions of its software since the attack began in March.

SolarWinds’ customers include most US Fortune 500 companies, all of the top 10 US telecom providers, the US military and various other government branches. The UK government and the NHS are also listed among the company’s clients.

Silver Lakes holds a stake of nearly 40% in SilverWinds. Following the plunge in the value of its shares, this stake is now worth $2.3 billion, and Thoma Bravo’s 33% stake is now worth $1.9 billion.

Blackstone’s $400 million November donation in cybersecurity firm FireEye Inc also suffered from the hack, as the company’s shares fell 11% after hackers stole a collection of hacking tools used to test clients’ cyber defences. FireEye, which has contracts across the US national security sector and with its allies, uncovered the SolarWinds breach while probing this attack.

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Regulatory filings showed that, following the theft of its tools, FireEye amended its deal with Blackstone and co-investor ClearSky to make it more favourable to the private equity companies. The firm opted to convert the FireEye-preferred shares that the investors stood to receive to common stock at $17.25 rather than the initially agreed $18.

FireEye shares traded at around $13.58 on Tuesday afternoon.

Ride-hailing giant Uber has moved to sell its driverless car research division to self-driving startup Aurora, a significant shift in the company’s plans for future development.

The autonomous driving unit, known as Advanced Technologies Group (ATG), will be sold as part of a reported $4 billion deal which will see Uber investing $400 million in Aurora in return for a 26% stake in the company. The deal will also give Aurora access to Toyota, which has invested in ATG.

Uber CEO Dara Khosrowshahi will also be joining Aurora’s board, and the two companies expect to collaborate in bringing driverless cars to Uber in the coming years.

“Few technologies hold as much promise to improve people’s lives with safe, accessible, and environmentally friendly transportation as self-driving vehicles,” Khosrowshahi said in a statement. “For the last five years, our phenomenal team at ATG has been at the forefront of this effort – and in joining forces with Aurora, they are now in pole position to deliver on that promise even faster.”

Aurora is a Silicon Valley-based startup founded by former Tesla, Uber and Google executives and backed by Amazon and Sequoia Capital. The firm develops sensors and software for autonomous vehicles, with a focus on the commercial trucking sector over automated ride-hailing taxis. It currently employs over 1,200 workers.

The news follows a prediction from Volkswagen CEO Herbert Diess that autonomous vehicles will be ready for the consumer market between 2025 and 2030. In an interview with weekly German magazine Wirtschaftswoche, Diess said that autonomous driving technologies had progressed significantly, with advances in artificial intelligence continuing to accelerate.

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Germany’s Ministry of Transport has already begun to draft legislation to allow driverless vehicles to operate on public roads. Trials of self-driving cars began in the UK in October as part of the government-backed research scheme “Project Endeavour”.

The drive to access the digital economy during the pandemic has been behind much of the disruption in payments this year. COVID-19 has pushed the industry to think fast and contactless payments have emerged as a lifeline for businesses and consumers. Interestingly, a lot of the innovation that is taking centre stage leverages existing technologies, but in new ways to tackle new problems. Most notably, the QR code saw a revival and has become an increasingly popular way of paying for goods and services.

Crucial to the success of the QR code payment is the fact that simply, it’s a technology that is accessible to anyone with a smartphone in their pocket. And this signals a much bigger trend we’ll continue to see during the pandemic and beyond - we don’t need to reinvent the wheel to create disruptive payment solutions. Instead, the most exciting innovations will leverage technologies that are within reach of consumers and businesses. This will be the key to seeing widespread penetration of new payment experiences.

Opening up the digital economy with the smartphone

While much of the contactless payment drive has focused on the ease of access for consumers, it’s not been such an easy ride for businesses. Large swathes of micro and small businesses that were predominantly cash-based have had little choice but to accept contactless payments during the pandemic. But one of the challenges that come with this payment revolution is that contactless point-of-sale (POS) hardware can be costly and complex to maintain for businesses. This can present a financial burden for micro and small businesses that want to access the digital economy and accept contactless payments.

The launch of Visa’s Tap to Phone solution and the comeback of the QR code show what can happen when you keep innovation simple.

The launch of Visa’s Tap to Phone technology in October is a pivotal step towards breaking down this barrier for businesses. And its genius once more comes down to harnessing existing technologies – again, the smartphone - in innovative ways to open up access. Visa Tap to Phone transforms Android smartphones and tablets into contactless POS terminals so sellers can accept contactless payments from their customers.

By removing the need for costly POS hardware and complex maintenance, it is enabling smaller businesses to download an app and accept contactless card or mobile wallet payments within a matter of minutes. The proliferation of mobile means Tap to Phone is well within reach of businesses of all sizes – and the customers they serve. And this is key if we are to see widespread adoption of new payment experiences among businesses.

Visa’s Tap to Phone innovation signals the end of POS and the start of easy access to cashless payments for businesses.

Easing emerging markets into the cashless economy

What works for one market, might not necessarily work elsewhere. In emerging markets, the technology that is accessible to both consumers and businesses can vary and that can dictate what is possible. With many markets around the world still predominantly cash-based, there is also a greater challenge to ease consumers and businesses into cashless payments, in some cases, for the first time. Again, using technologies communities are familiar with and already comfortable using is an important first step to encourage adoption.

If new payment solutions are to see widespread uptick and success in these markets, understanding of local market behaviours will be crucial. It comes down to learning the unique challenges faced by the local community, as well as their attitudes towards cashless payments. Only then can you explore the tools accessible to them to create payment solutions that stick.

Let’s keep it simple to make real change

The launch of Visa’s Tap to Phone solution and the comeback of the QR code show what can happen when you keep innovation simple. These technologies are transforming payment experiences for consumers and business alike around the world. And it’s all powered by the humble smartphone – a device mostly all of us carry in our pocket.

By using the existing technologies around us, we can expect to see increased penetration of new payment solutions. It might have taken the pandemic for some consumers and small businesses to make the leap to contactless payments, but we can expect to see this shift in behaviour take hold, even as we revert back to normal. We’re only seeing the start of the contactless revolution. The payment solutions that are accessible to all will have the power to scale with ease and will see the biggest success. That’s where the real innovation lies.

Stuart Lane, CEO at Trade Nation, shares his findings on the trading habits of millennial and Gen Z investors and how they have been influenced by emerging trading platforms.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs. A survey by E*Trade Financial Corp found that over half of younger investors have traded more frequently, and while many have made notable gains, there have also been some serious losses.

Roughly 46% of millennials and Gen Zs are trading derivatives more frequently — double the average rate. What’s more, 51% say their risk tolerance has increased. This makes for a potentially dangerous combination, especially for amateurs, of whom there are plenty. Robinhood (by far the most popular trading app of millennials and Gen Zs) has said almost half of its new customers this year are first-time traders who, therefore, may not know the risks surrounding complex derivatives such as CFDs. As Trade Nation notes: “CFD trading certainly isn’t straightforward and there’s a lot of confusing terminology and hidden costs involved too. This means it usually isn’t the best way for traders to kick off their journey.”

And in addition to the risks individual traders may be opening themselves up to, experts like Princeton economist Burton G. Malkiel believe that the outlandish trading activities of millennials and Gen Zs are also wreaking havoc on the financial markets.

Why are young people trading more?

The general consensus is that trading has been a great way for the younger generations to fill extra time and deal with the boredom of lockdown. As the founder of RagingBull, Jeff Bishop, told CNBC: “A lot of people are at home and have got more time on their hands. And many, unfortunately, have lost their jobs and are looking for new opportunities. Younger investors are looking for ways to recoup their money.” Furthermore, many Americans have been able to fund their trading activities with their government stimulus checks, with software and data aggregation company Envestnet Yodlee reporting that trading was among the most common uses for the checks in almost every income bracket.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs.

Apps like Robinhood, eToro and RagingBull have also made trading more accessible for these traders, seeing demand for their services rise by 300%, 220% and 158% in the first quarter of 2020, respectively. And given that the vast majority of millennials and Gen Zs have been using their smartphones more due to the coronavirus outbreak, it’s unsurprising that the time spent on apps like these has also increased.

What are millennials and Gen Zs trading?

The E*Trade survey found that almost half of young investors are trading derivatives more frequently compared to 22% of the general population, while there’s been an especially sharp increase in options trading. What’s more, the surprising nature of their most popular stock picks have stunned, and perhaps even humbled, many Wall Street investors.

"We see a lot of buying activity of specific industries that were impacted by the pandemic," said Robinhood co-founder Vladimir Tenev, as reported by CNN. He singled out shares of airlines, videoconferencing and streaming media companies, and biopharmaceuticals. For example, even though Warren Buffet dumped his airline shares in light of the coronavirus travel restrictions, millennial and Gen Z traders had faith in a recovery. Frank Holmes, CEO of US Global Investors, told CNN that he noticed a surge in interest for the JETS airline ETF in March. Examining Robinhood trends, he learned that plenty of young investors had been buying it after a major dip. The funds' assets went from $34.6 million at the start of March to $615 million by the end of April — a 1600% increase.

“Although a lot of people may say that it’s crazy, it has turned out pretty well,” JJ Kinahan, the chief market strategist at TD Ameritrade, told Bloomberg. “Retail investors for the last few months have been a little bit ahead of the curve. There’s been a lot more perhaps optimism among retail traders around the turnaround than there has been from professionals. This continues to show that.” However, it’s inconclusive whether moves like this are really paying off for younger traders. While some analysts (such as those at Goldman Sachs) claim the stocks of Robinhood investors have outperformed hedge funds and the indices, others have found a negative correlation between these stocks and their returns.

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What are the potential problems of this?

Empowered but inexperienced traders

Robinhood has been the app of choice for many millennial and Gen Z traders, and though their ambition to “democratise finance for all” has clearly appealed to this market, it also means that many amateurs have jumped into trading without any experience and gone on to make grave mistakes.

“Robinhood has gamified investing. Trading is now so simple that it can be easy to make impulsive decisions,” one millennial investor told Financial Times writer Siddarth Shrikanth, adding that they immensely regretted the progressively riskier trades they had made during lockdown. Shrinkanth noted that while Robinhood doesn’t provide investment advice, it does “little to deter poor decisions”. For example, almost 200,000 users were holding very complex United States Oil ETFs in the days after it crashed in April. “Why were younger investors drawn into volatile commodity tracker funds, despite repeated warnings from regulators that these risky products were unsuitable for retail investors?” he questioned.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks. And as well as the potential for devastating losses, this can also come at a tragic human cost. Alex Kearns, a 20-year-old Robinhood trader died by suicide after seeing an unexpected $730,000 negative balance on his account, which he didn’t understand and may have only been temporary.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks.

Volatile markets

In addition to the potential problems for individual millennial and Gen Z traders, it’s also thought that their activities may be having a significant impact on the markets. For example, having filed for bankruptcy in May, Hertz shares had surged 800% just a few weeks later, with this being one of the most popular Robinhood stocks. Stocks like these may be rallying because of the sheer number of users on the platform — there were more than 160,000 Robinhood investors who owned Hertz stock as of 17 June.

That said, not everyone believes millennial and Gen Z traders are responsible for inflated stock prices. “In June, Barclays published a study of moves in the S&P 500 and positions taken by ‘Robinhooders’,” explained The Telegraph’s Garry White. “It concluded that retail investors speculating in stocks are not responsible for the market’s rally and the top picks of the app’s users tended to underperform, and moves in the S&P 500 were independent of the positions taken on these apps.” He also concluded that while many Robinhood users may see big gains, ultimately: “this strategy needs a lot of attention to follow market moves and it seems inevitable that most will eventually lose money”.

Nigel Frith, vice president of financial services at AskTraders, discusses how challenger banks have revolutionised the banking industry and the opportunities more traditional banks can explore as they aim to extend their digital offerings. 

As the high street has evolved in order to meet the changing needs of consumers, retailers have been left with no option other than to reinvent themselves. The banking industry certainly hasn’t been immune to these shifting trends either and as a result, over the last few years traditional banks have been forced to adapt and change the way they operate. While their face-to-face services still remain a crucial string to their bow, banks have had to invest heavily in their digital offerings in order to compete with increasingly popular digital-first providers. So, why are these challenger banks such as Monzo and Starling so attractive to customers and how have the big players in the industry risen to this digital challenge?

A focus on challenger banks

With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone. Their customer-centric approach has simplified banking by providing users with features which make daily tasks that little bit easier. From being able to split the cost of meals with friends to keeping track of monthly outgoings, these app-based services have really hit the spot in the eyes of many.

With more than four million customers, Monzo is perhaps the most well-known challenger bank. It started out in 2015 as a prepaid card that could be topped up via its app before transforming into a sole banking brand in 2017. It offers all of the usual current account services regular banks provide but also enables customers to manage their money in an effective and efficient manner. The ease at which you can navigate through the app is certainly a big draw for digital-savvy youngsters who are able to quickly transfer money to their friends and set monthly budgets.

In recent years it has continued to broaden its services such as by adopting a ‘get paid early’ feature which allows users to be paid their salary or student loan a day early. By embracing a channel-based communication model, Monzo has also been able to respond to incidents such as outages in a typically effective fashion. Customers can report any issues using a chat service on the app and they have the ability to freeze a card from their phone should they lose it.

With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone.

Another major benefit of banking with Monzo and many of its other app-based competitors is that it doesn’t have any foreign transaction fees for spending. It has therefore become a highly attractive option with regular travellers and holidaymakers alike.

How traditional banks have risen to the challenge

Although recent analysis of bank branch data has revealed that (if the current rate of closures was to be maintained) there would be no high street banks left by April 2032, there is clearly still a demand for in-person banking. Many people still feel more comfortable going into a bank to pay-in cheques while others are reliant on the financial advice they can access in-store. Clearly there remains a need for traditional banks, such as the big four in the UK - Barclays, Lloyds Banking Group, HSBC and RBS - to evolve their offerings.

In recent years, therefore, these banks have invested heavily in their online and mobile banking services in a bid to compete with digital-first providers like Monzo. This has included providing customers with perks such as being able to pay for purchases using virtual cards on their apps and providing them with the ability to cash-in cheques from the comfort of their own homes.

Leading the way has been Barclays who in 2017 invested £4,148 million into their digital platforms. Now, more than 90% of Barclays’ transactions take place over mobile devices, emphasising the effective nature of their transition to a more digitally-focused way of operating. In December 2018, Barclays also designed a feature which allowed customers to turn off payments towards certain websites should they feel they are unable to curb their spending. More recently, it has taken things a step further by enabling users to view the accounts they hold with rival banks on their platforms - an option which would have been unthinkable a decade ago.

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Key to ensuring customers have felt comfortable transitioning to these digital services has been the commitment banks have shown towards tackling cyber crime. This has seen the banking industry team up with the government, police and other regulators in recent years. Initiatives have been set up to not only raise awareness of the threat scammers pose but to also reassure customers of the stringent measures banks have in place to protect their personal data. Last year, UK banking security systems prevented fraud on an estimated £1.4 billion scale, demonstrating the importance of their investment into tackling cyber crime.

The future

With banks now constantly innovating in a bid to steal a march on their competitors, it is likely we’ll continue to see big changes taking place within the industry over the coming years. One thing that is clear though is that there will be a continued drive by providers to further improve and simplify the customer experience. Although further high street branch closures are inevitable, banks are working hard to maintain their in-person services for those who prefer to operate in this capacity also. While digital banking isn’t for everyone, the ease and efficiency at which millions of people can now complete financial tasks has left a lasting impression on many.

Simon Shaw, Head of Financial Services and Insurance at Software AG, outlines three ways in which larger banks can – and must – make their business models more agile.

In the months since COVID-19 reared its ugly head and changed the way we live, there has been a noticeable uptick in conversations around digital transformation and embedding resilience. In the banking sector, the focus had been on the increased demand for online banking and questions around how banking monoliths will adapt.

The reality is that big banks can adapt – albeit slower than other industries. That’s not to say that change isn’t happening; banks have been transforming for years to align with changing customer needs. However, it’s a distinctly difficult and complex challenge. In fact, one of the primary challenges with digitalisation in banking is that moving quickly doesn’t happen easily. Of course, CFOs and financial leaders would love to quickly pivot their operations to meet changing needs and new requirements, but in their current state, most incumbent banks don’t yet have that capacity.

To achieve digitalisation, banks are grappling with many moving parts. From regulatory requirements, to safeguarding customer data, to overcoming silos – and that’s before we consider the sheer cost of it all. I have identified three ways for established banks to pivot more quickly and efficiently in today’s climate.

1. Go Hybrid or Go Home

A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation. Changes that may seem simple, or are simple in other sectors, can require full programme rewrites when applied in banking. The legacy systems on which most large banks are built are clunky and inflexible. Since these systems don’t run in real-time, they’ll never compete with the efficiency and analytic capabilities of challenger banks. Yet, despite that, these established systems actually hold the key to future success in banking – data.

The wealth of data contained within a heritage system has the potential to entirely transform the customer experience. However, to do so, banks must be able to access and integrate that data at speed.

A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation.

Hybrid cloud presents the best of both worlds; it combines the operational stability of on-premise solutions with the scalability, reduced cost and data accessibility of the cloud. Breaking up isn’t easy but, according to IBM, banks that are outperforming their competitors are 88% more likely to have incorporated hybrid cloud into their business model. For banks with decades of data in monolithic technology stacks, turning certain data and tasks over to the cloud can significantly lighten the load on their ecosystem to improve efficiencies.

2. Visualising Opportunities for Change

Digital transformation has changed banking expectations. Customers want speed and convenience and banks are competing to deliver. Excellence requires efficiency, but that can be difficult to achieve.

Process mining identifies optimisation opportunities and strives for excellence in process performance. As the name suggests, process mining delves into the detail of what occurs as a process is actioned, revealing patterns, anomalies and the root causes for inefficiencies. With greater insight into processes, banks are able to make informed decisions and tangible improvements to quality and performance. To compete with the challengers, established banks need to embed the ability to adapt to changing business requirements and make transformation routine. The first step to this is visualisation.

If hybrid cloud is the vehicle by which digitalisation is achieved, process mining is the check engine light.

3. The Building Blocks of Better Banking 

One of the biggest challenges to transformation lies in evolving away from heritage applications. Transitioning from old to new is daunting and can come with a hefty price tag. Microservices enable banks to transform piece by piece and scale at a controlled rate.

Transformation in data-reliant and regulation-heavy sectors will never be a walk in a park, however, microservices start small by design. This returns much needed control to banks and ensures complex changes are developed and tested independently before being integrated into the banking ecosystem.

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To fundamentally change business operations, the very foundations of that organisation need to be redesigned. This applies across industry, which is why, between 2018 and 2023, the microservices market is predicted to nearly triple as more organisations shift their transformation up a gear.

Microservices embed agility and efficiency from the outset, making digitalisation a cultural and technological change. By returning control and enabling a customer-centric and scalable design, transformation can add big value to big banks.

Agility is essential, but moving a monolith isn’t easy

In banking, where archaic systems and rigidity have been governing organisational change for years, digital transformation really means reinvention and growth. While the end-goal is easily defined – agility, resilience, scalability, digitalisation, etc. – it’s difficult to know what’s needed to achieve it. When the dependencies, regulatory requirements and price of change are thrown into the mix, it’s no wonder that change takes time in the financial sector.

Hybrid cloud, process mining and microservices create the foundations for development by embedding transformation capabilities into the very core of a banks system. While financial institutes will always be subject to a high level of scrutiny, strategic solutions that bring order, visibility and an ability to compete with smaller and more agile banks are truly transformative.

The outgoing Trump administration has unveiled an executive order banning US investment in Chinese firms that it says are owned or controlled by the Chinese military, adding further economic pressure on Beijing.

The order has the potential to impact some of the largest Chinese companies, including telecom companies China Mobile Ltd, China Telecom Ltd and surveillance equipment producer Hikvision.

From 11 January 2021, the order will prohibit US investment firms and pension funds from purchasing the securities of 31 Chinese companies that the Defense Department identified as backed by the People’s Liberation Army earlier this year. However, transactions made for the purpose of divesting ownership in these companies will be permitted until 11 November 2021.

“China is increasingly exploiting United States capital to resource and to enable the development and modernisation of its military, intelligence, and other security apparatuses,” the order said.

It is not yet clear how much impact the order will have. The affected companies do not appear to include publicly traded Chinese tech giants, while several other tech firms (including Huawei) do not trade on the stock market. Some of the firms said to be affected are state-owned companies with no foreign stockholders, such as China Electronics Technology Group, though others – such as CRRC Corp – do have foreign investors.

According to investment strategist Andy Rothman of fund manager Matthews Asia, US investors own around 2% of the value of the companies traded on the Chinese stock market, meaning that the order is unlikely to be greatly consequential to the Chinese economy.

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As the order allows ownership in the listed companies to be retained until 11 November, there is a significant possibility of the incoming Biden administration rescinding the order before it can affect US shareholders.