Yet, this is something many businesses, SMEs in particular, currently struggle with. Below David Duan, Data Science Stream Lead & Principal Data Scientist at Fraedom, explains why AI is key to the relationship between banks and business.

Research from Fraedom found that almost a third of UK SMEs claim to have a clear picture of business spend at the end of each month but little visibility on a day-to-day basis. As banks begin to remedy these issues, we are seeing the introduction of more technologies that make use of artificial intelligence (AI) and machine learning (ML). Consequently, businesses could soon benefit from a wider range of capabilities, tools and controls with AI having a major impact on the following areas:

Control over spend

Through the use of AI, banks will be able to more accurately forecast how much credit businesses require and limits on spending will be set automatically, enabling banks to gain a better understanding of their spending. This can also be implemented within the organisation as AI will allow for credit limit redistribution based on what different employees regularly spend. This means that credit will be allocated in an optimal way, ensuring the amount of credit employees are given reflects their spend history. This ensures that those employees who often make large transactions are given the credit to do so, while those who use their company accounts for lower-cost transactions don’t receive as much, so as to ensure credit is being used to the greatest effect.

Account protections

As banks make better use of AI for fraud detection, businesses will benefit from improved security features. In these scenarios, AI will help businesses keep their accounts safe by detecting any anomalies in their accounts and fraudulent activities much quicker than previously possible. This works by the model having an understanding of what is ‘normal’ for each account or card and recognising patterns based on past transactions and behaviours. For example, if 99% of the transactions for one account happen Monday to Friday, a transaction that occurs at the weekend will be seen as abnormal and flagged as such. Of course, anomalous transactions aren’t always fraud. Often they’re just out of the ordinary, requiring some more investigation – flagging them to the business would certainly allow for this. With companies currently losing an average of 7% of their annual expenditure to fraud, these technologies will help lower incidences of fraud as shown by Visa’s use of AI reducing global fraud rates to less than 0.1%. In the future, AI could be used to detect fraud in real-time, stopping fraudulent transactions from being processed altogether.

[ymal]

Expense management

In addition to providing banks with a greater degree of control and understanding of their finances, banks are also beginning to use AI to offer businesses extra tools and services. A prime example of this is expense management systems which use AI to simplify the expense process and reduce the amount of time employees and finance departments spend on such tasks. As with fraud detection, the system would establish patterns based on the employees historic spending behaviour. For example, it may pick up that once a week the sum of £5 is spent in a coffee shop which the user then applies a particular expense code to. Once this behaviour has been demonstrated enough times, it becomes a pattern. So, the user will no longer have to code the transaction themselves, the system would automatically identify the type of expense it is and code it correctly.

As the system establishes more patterns and understands what the user or business is doing, smart coding could start to be applied to a greater number of transactions. This would significantly reduce the amount of time spent manually sorting through and coding expenses as the employee then only has to check that the correct codes have been applied.

Ultimately, the use of AI and ML will help banks build up a more accurate picture of their business customers and result in the ability to automate more processes. In turn, this will provide organisations with a greater level of control over their accounts, improved visibility and a better understanding of their finances. As this is realised, businesses will begin to reap the rewards of their employees spending less time manually interrogating accounts and instead being able to focus on more value-adding tasks.

You visit your local bank branch’s ATM to withdraw cash or to print out a mini statement and you are met with a message informing you that the ATM is out of service. That is frustrating at all times but can be especially aggravating when there is no other cash machine available nearby. On the theme of banking resilience, here Alan Stewart-Brown, VP EMEA at Opengear, discusses with Finance Monthly the network issues banks are currently dealing with.

For retail banks, the issues and challenges presented by ATM network downtime are likely to be high on the agenda. Financial institutions are reliant upon a resilient network to ensure unique compliance requirements are met, address customer needs and adapt to evolving industry trends. ATM resilience is an important element of this.

Many banks have extensive ATM networks across the UK and often further afield. They may have an ATM in every town or city across the country, and in some places, they may be running multiple ATMs. They are likely also to have machines in many other more remote sites.  If they have network issues or outages, a large number of ATMs could suddenly be out of commission and that presents a huge range of issues and challenges to the bank.

Whenever ATMs go down, it will inevitably result in a loss of revenue and customers for the bank, as they switch to other providers. It is likely to also have a negative impact on a bank’s reputation and brand image. Less well understood, but equally important, it presents a security issue, as the engineer will have to open the ATM up while on site.

In the past, when an ATM went down, an engineer would be scheduled. Depending on availability; how remote the ATM was geographically and the severity of the problem, that could mean at the least hours or even days of downtime.

Even when the engineer arrived on site after a potentially long journey, fixing the problem might not necessarily be straightforward. The ATM may be owned by a third party organisation, not necessarily the bank itself. It may therefore be difficult to access because it is located in a building or facility belonging to another organisation and/or because the engineer’s visit happens out of normal working hours.

Finding a Solution

Banks with ATM networks need something that allows them to get these remote units fixed without having to waste engineering time travelling to the site and dealing with the security issues of opening the box up and the logistical issues that may be involved in gaining access to the ATM itself. They need a solution that can give them remote access when the network is up and running and also when it is down. And they need one that can allow them to power cycle the equipment within the ATM when the router hangs - a common problem in these environments.

These networks also need a solution that is vendor neutral on the equipment it connects to but also on the power equipment it can manage. An out-of-band management unit can be added to each ATM to reduce downtime to just a few minutes and bring them back up very quickly. It also negates the need for someone to physically go to the site, and most importantly removes the necessity for the secure opening up of the ATM.

Keeping Branches Up and Running

ATM failures are of course one key aspect of a broader requirement facing banks to keep their retail branches up and running at all times. At Opengear, we are seeing a growing demand for solutions that deliver network resilience from core to edge in financial networks. One of the top performing banks in the US recently needed an out-of-band solution for its multiple locations across the country. With the challenge it faced highlighted by a recent outage at a remote location, the bank wanted to reduce the burden of travelling to geographically-distributed sites, decrease downtime and ensure compliance requirements were met. It chose to deploy ACM7000 Resilience Gateways from Opengear at each branch location, paired with the Lighthouse Central Management System (CMS), also from Opengear.

Failover to Cellular (F2C) and Smart Out-of-Band (OOB) technology ensure security requirements are met while also providing access to infrastructure during a disruption, with an alternate path to the primary network using 4G LTE. In addition, the bank is able to deploy and provision new sites remotely.  It is a great example of the benefits of resilient access to networks in financial services when an outage occurs.

In summary, outages are bad news for banks and other financial institutions. ATM outages are arguably especially bad because they are particularly visible to customers; cause immediate loss of revenue and customer churn; as well as negatively impacting reputation and presenting a security risk. But they are inevitable because of human error, cyberattack, and the ever-increasing complexity of network devices, modern software stacks, and hardware devices. To keep consumers happy and the institution’s reputation intact, financial services must be prepared for outages. Smart OOB with Failover to Cellular can keep services running even when part of the network is down.

It’s no secret that small and medium-sized enterprises (SMEs) are the lifeblood of the UK’s economy. Representing 99.9% of all businesses, they employ 16.3 million people and have a combined annual turnover of £2 trillion, which accounts for 52% of all private sector turnover. Whether driving growth, opening new markets or challenging the status quo through a new product or service, SMEs are essential to UK plc’s growth story.

Yet the future for some of the UK’s boldest entrepreneurs is not a rosy one. The Department for Business, Energy and Industrial Strategy (BEIS) estimates that the number of SMEs fell by 27,000 between 2017-18, and there is no evidence to suggest an upturn going forward. Growth forecasts are dismal, and sterling is in decline.  As with a lot of things, it is Brexit that is causing the most concern, with many businesses unprepared for the impact of a 'no-deal' on their balance sheets.

The Government is trying to mitigate the dangers. Sajid Javid,  who was recently appointed as the Chancellor of the Exchequer, has set aside £2.1 billion to prepare for a no-deal, of which £108 million will be made available to “promote and support businesses to ensure they are ready for Brexit”. Given the contribution UK SMEs make to the economy, this appears a paltry sum. We also have yet to understand how the money will be used, the means by which it will be distributed, or when it will be made accessible.

So if the Government’s efforts to empower our SMEs are lacking, who can they turn to?

Whether driving growth, opening new markets or challenging the status quo through a new product or service, SMEs are essential to UK plc’s growth story.

Banks aren’t playing ball

Traditionally the UK’s banks have been seen as the 'one-stop-shop' for SMEs looking to borrow money for investment. Yet they are not playing ball. The financial crisis of 2007–2008 revealed substantial weaknesses in the banking system, the effects of which continue to weigh heavily on the UK’s economic growth and financial stability. Consequently, SMEs are being starved of funding and forced to jump through hoops in order to access vital cash, because the big high street banks are wholly focussed on de-risking their balance sheets and shoring up capital.

The inescapable fact is that banks aren't lending to SMEs because it's not profitable for them to do so. Under Basel III, the global regime under which banks are regulated, banks are obliged to hold almost twice as much capital against an SME loan as they are for, say, a buy-to-let mortgage. Reserving more capital means making less profit – unsurprisingly therefore, banks naturally migrate towards activities that deliver more to the bottom line, to the detriment of SMEs desperately in need of business liquidity.

If SMEs can no one longer rely on traditional bank loans for finance, it begs the question as to who can support frustrated business owners in the tough times ahead.

Alternative finance providers pick up the slack 

Fortunately, alternative financial services providers are picking up the slack left by traditional financial institutions, by creating innovative ways for SMEs to access funding via a myriad of means such as peer-to-peer lending, crowdfunding and venture capital.

Changing the mindset of SMEs regarding the importance of borrowing to invest is also of vital importance.

For example, Hunter Jones has been successfully raising development finance for SME property developers via ‘Property Bonds’. Investors’ capital is offered as a loan to a development company and their contract clearly explains how the investment will be used, how the capital will be secured, and when the investment will be repaid. Our work means that many construction projects in the early stages of development are being 'green-lit' and prospering. In return, investors are receiving a highly competitive fixed return on their investment with the benefit of 'bricks and mortar' security. The uptake has been extraordinary and we have seen £50 million raised for UK developers in a five-year period, with expectations to raise a further £25 million in 2019 alone.

The future of SME finance

If SMEs are to improve their outcomes and thrive, more will need to be done by the Government and the financial services industry to tackle the lack of innovation in SME lending and the grip of the banking oligopoly that dominates it. But changing the mindset of SMEs regarding the importance of borrowing to invest is also of vital importance – particularly in ensuring there is accurate understanding as to the meaning and benefit of ‘alternative finance’.

It has recently been announced that the Chancellor has set aside £138 million to boost public communications and help people and businesses get ready to leave the European Union on 31st October.

My fingers are firmly crossed that part of that money has been allocated to educate SMEs as to the importance of alternative lenders as a source of finance, and a viable means to empower UK plc in the tough times ahead. If not, ‘investment’ will become a dirty word and the financial services status quo, and its associated problems, will continue unabated – a situation that none of us, least of all our SMEs, can afford.

But according to James Butland, VP European Banking at international payments platform Airwallex, this is changing.

Innovative solutions and more customer centric business banking platforms are on the rise, and, as a result, SMEs are moving away from their current banks in their droves. This is highlighted by the UK’s Current Account Switch Service reporting that there were 17,687 business account switches using the service during Q2 of this year, compared to just 8,000 switches during the same period last year.

Clearly, SMEs are hungry for new services that help them to manage their money more effectively, and with Brexit and a fluctuating currency potentially causing issues, it couldn’t come sooner.

World changing SME banking 

The need for services that better meet the demands of businesses has seen payment fintechs such as Accelerate, Square and Monzo partner with the likes of Mastercard, eBay and Visa to provide more up to date technology in the B2B banking world. These innovations are aimed at speeding up payments and helping SMEs to compete in an increasingly globalised and competitive economy.

Innovation within international payments has also seen similar developments. This is largely due to the opaque nature of current FX practices. A new paper from the European Central Bank recently revealed that banks across Europe have overcharged SMEs for foreign exchange services, and have earned hundreds of millions of euros each year, at the expense of their small corporate customers. These SMEs have often been presented with misleading exchange rates and secret charges by banks, while unfairly being offered lower exchange rates compared to larger businesses at the same time.

This is a big issue. Particularly as 232,000 of UK SMEs exported to overseas markets last year, representing 10% of the country's small and medium-sized businesses. It’s why companies such as Airwallex, through our Global Accounts and FX capability, is helping SMEs to break through murky FX practices, and access exchange rates that have been typically only available to large corporates. Customers can be shown correct and clear rates and can act as a local in new markets. These new platforms, services, and in some cases new banking entities, are removing the complexities of exporting overseas and therefore allowing SMEs to focus more on growing their business.

Partnership benefits for SMEs

SMEs desperately need these developments because previous legacy payments and slow banking processes are not only significantly slowing down the speed at which they can operate at but are also ultimately limiting their growth. The transparency available now to help SMEs understand FX rates and expenses alongside more innovation within payments and banking solutions will prove vital for smaller businesses going forward. This will provide them with confidence over their margins and allow them to grow through enabling them to provide far swifter payments, both nationally and internationally.

To ensure that your life is continually being bettered, you have to resolve to make smarter financial decisions. You can start in this instance by determining to make and embrace the five decisions listed below.

1. Accept help whenever you need it

Stubbornness will get you nowhere when it comes to money. You need to be open to the idea of accepting financial help whenever it’s offered, as that could be the difference between you keeping your head above water and you drowning in debt.

The help that you accept could come in a plethora of different shapes and sizes. It could, for example, involve your parents offering you a lump sum to get you on the property ladder, or it could even come in the form of taking out a loan so that you can pay off debt that desperately needs clearing. The point is, there will always be someone or something out there willing to help; you just need to accept their assistance when they offer.

With regards to the latter, a loan company making a quick cash injection available to you, be sure to never dismiss this route as being financially dangerous. If you know that you are going to be able to repay the money that you borrow by the deadlines imposed on you to do so, there’s nothing wrong with taking out payday advance loans online. Whatever you do, just think it through and don’t make any rash decisions based off of fear or greed. Try to keep your borrowing down, and always use a reputable lending company.

As soon as you understand that the pride of not accepting financial help is not worth the fall that it eventually causes, you’ll find it much easier to accept the assistance you need to better your life.

2. Save all of your small notes

Whenever a small note finds its way into your purse or wallet, tuck it away into your ‘rainy day’ jar. If you do this every time you pick up a $1, $5 or $10 note, you’ll find yourself saving $100s in no time. What you do with that money, whether you keep it stored away for emergencies or whether you use it to pay for a much-needed vacation, will be ultimately dependant on what you think is going to better your life.

The best thing about this saving method is the fact that it doesn’t even feel like saving. It might mean going without a coffee every now and again, but the speed at which this money accumulates will feel like you’re growing money out of thin air.

3. Keep tabs on your bank

It’s easy to ignore your bank account, especially when you’re convinced that you’re not going to like what you see on there, but doing this will get be sure to land you in financial trouble sooner rather than later. By keeping tabs on your account regularly, you give yourself a much better chance of spotting irregularities with your outgoings, and you can stop fraud in its tracks before it has the opportunity to sink its claws into you. What’s more, by knowing how much you can afford to spend, you stop yourself from overspending, getting yourself into debt, and making life a lot harder for yourself as a result.

4. Always think in the longterm

As important as it is to keep track of your current spending habits, it’s also just as important to think in the longterm when it comes to your finances. Amongst a great deal of many other positive effects this will have on your bank balance, doing so will allow you to save an appropriate amount of money to suit your future endeavors. Perhaps you need a certain amount of spending money for a vacation you’re taking in 6 months? If you think in the longterm, you’ll have no trouble saving up this sum of money and, as a result, you’ll be able to truly enjoy your time away from home.

If there’s one thing for sure, it’s that thinking in the longterm will definitely open up your eyes to the amount of money that you spend and have the potential to save. If you’re wise about your money, you’ll take this newfound information on board and use it as inspiration to help you curb your spending. For example, once you understand just how expensive a daily Starbucks can be and how much money it has the potential to drain from you over a sustained period of time (having a $4 latte every day will see you spend over $21,000 over ten years), you’ll no doubt cut back on your caffeine fix. Whether this means avoiding coffee altogether or taking a flask to work each morning, the stark realization of how much you spend will be sure to scare you into saving. Just imagine what you could do with that extra $21,000 in ten year’s time.

5. Use cash, not credit

The biggest mistake you can make as a credit card owner is to treat your credit like it’s free money. By continuing to use your credit card freely and dismiss the spending that you do on it as being a problem that you’ll face another time, you’ll always find yourself in debt of something and owning money to someone. Whether you owe $10 or $100, when you’re in debt, it’s hard to put money aside that is going to better your life.

Instead of using credit to finance your lifestyle, use cash instead. This will see you keep a far tighter rein on your spending, and you’ll end up having more money to spend on yourself going forward. Whatever you do, just put the money that you do save to good use (remember, those lattes will soon add up!).

By making the five smart financial decisions listed above, your life will no doubt end up being a whole lot better.

The Which Group recently published a study [1]stating that the UK banking sector was hit by IT outages on a daily basis in the last nine months of 2018, with 302 reported failures. The major banks had suffered at least one incident apiece every two weeks. This is a highly concerning statistic that exposes the fact that bank outages and IT issues occur much more often than was previously thought[2]. And the impact can cause significant setbacks, financial and otherwise. In one recent example[3], a major bank suffered an outage with costs amounting to over £330 million.

Nick Coleman, Channel Director EMEA of Virtual Instruments, explains why this is happening and what the issues surrounding this trend are.

Regulatory pressure

Firstly, banks are now obliged to report any IT issues to the Financial Conduct Authority (FCA), (and, as in the case of Which, using this data to form their report), IT problems are much more visible. There is greater recognition than ever before on how much serious disruption can be caused by IT outages at financial services institutions for people and businesses. The FCA now regards IT system performance as more important than staff performance. So if a member of staff is signed off of work, it is considered normal business, but if an IT system fails to deliver, it is viewed as a violation. Under regulations enforced by the FCA in August 2018, banks and financial services have to report on how they recover from outages within three months and have been mandated with a maximum acceptable time for systems to be down. They are so reliant on IT systems, it is critical that they take the necessary steps to ensure the business can get back up and running as soon as possible after an outage.

Infrastructure complexity

Secondly, knowing the true root cause of problems before taking any action is key, but a lack of proper infrastructure visibility is preventing banks from effectively managing the situation. With the inherent complexity of today’s hybrid infrastructure brought about by new procurements layered over legacy systems that are not necessarily cohesive, interoperability issues often ensue. The knock-on effects of systems fighting for resources during busy periods can cause latency issues, in turn seriously affecting the performance of business-critical applications. Here, it is not a matter of if, but when.

Over the years, peoples’ perception as to the value of the IT infrastructure has eroded in the eyes of the business.

With digital transformation, IT systems are now beyond human comprehension and require automation and AI-powered IT operations management (AIOps[4]), also known as ‘algorithmic IT operations’, to run efficiently. Unfortunately, IT doesn’t have the investment or influence at board level that it should put the proper performance safeguards and assurances into place. The business insists that their customer-facing applications run as planned, but don’t really care who runs the IT infrastructure for them. They see the infrastructure as an overhead rather than a vital, profit-generating differentiator, giving a competitive advantage.

Lack of performance benchmarks in the cloud

Thirdly, the banking sector has been advised to embrace the cloud and is struggling to migrate applications, often written in the 1980s and 1990s, to a new platform. The cloud suppliers are reluctant to provide a service level agreement (SLA) on application performance, as they do not know the quality of application coding they will be hosting, so there is effectively no one fully accountable if problems occur. This means that at present, a bank can have its customer-facing applications slow down for an hour and as the cloud provider is not accountable, it is not in breach of contract.

For example, performance issues can impact upon banking applications for customer transactions, and if that capability goes down, not only will it be difficult for the IT team to locate the issue and get systems back up and running quickly, there are also implications for the business reputation to deal with following such an incident.

How can this imbalance be addressed?

Bringing insights and the value of IT back to the business

Over the years, peoples’ perception as to the value of the IT infrastructure has eroded in the eyes of the business. This type of thinking is not unique to IT. For example, years ago people used to care about the engine in their cars, but now they just expect it to work and are really irritated if it fails. The same goes for domestic automation: washing machines, dishwashers, stereo systems, etc. These are now just viewed as commodity items to be used and replaced with no emotion. The value of IT in general needs to be recognised and the way to do this is to report on exactly how it is helping the business, in language the business understands.

So how can IT be of more value to the business? Organisations must recognise that a shift in the perception of the importance of the application (which relates to the customer) is needed. As the organisation cares about application performance, and as IT supports the applications, IT should logically also show how well they are running, how cost-efficient they are compared to other suppliers, and how in-house IT has a better understanding of the company direction than any outsourced partner.

Organisations must recognise that a shift in the perception of the importance of the application (which relates to the customer) is needed.

Outmoded infrastructure monitoring methods

In terms of tackling the issue, traditional monitoring capabilities are falling short. The tools are commonly proprietary and simply not able to keep pace with digital transformation occurring today. The core of this recurring outage problem in the financial services industry is that IT teams are simply unable to holistically ‘see’ or create a map of their entire systems environment. Greater infrastructure transparency is required.

Currently, the applications themselves can be monitored using application performance monitoring (APM) tools, – but these only show the application performance outside the data centre with perhaps a bit of hypervisor information. It is a similar story from the switch providers and network monitors as they really only look at their own devices and lack context to other devices and to the applications themselves. The entire hybrid IT infrastructure supporting the application processing needs to be viewed live across the hypervisor, VM, server, network fabric and storage together.

The AIOps solution

AIOps-driven app-centric infrastructure management will be a significant part of the solution. Artificial intelligence applied to IT operations (AIOps) utilises AI and ML (machine learning) to help ensure application and infrastructure performance.

With this holistic approach, AI-based analytics are app-centric, with correlation capabilities that provide highly insightful and integrated views across siloes and end-to-end across the entire infrastructure. In this way, a shared context can be seen across all infrastructure management tools, so that the trends and behaviour of resources can be easily read and understood. With a visual representation of the current infrastructure, IT teams can be certain as to all of the dependencies and exactly which applications are utilising or competing for different infrastructure resources. Thus, potential problems can be avoided in advance, making a meaningful shift from reactive to proactive troubleshooting, saving millions in time, money, loss of business revenue and customer loyalty.

And this is not solely for on-premises; the cloud-based outsourced applications also need this level of scrutiny to ensure performance-based SLAs can be set and then met.

With the ability to assure the performance of their mission-critical applications, banks and financial services organisations place themselves in a position to successfully manage their digital transformation journey, whilst ensuring they meet business goals and most importantly, keep their customers happy.

[1] https://www.which.co.uk/news/2019/03/revealed-uk-banks-hit-by-major-it-glitches-every-day/

[2] https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/

[3] https://www.theguardian.com/business/2019/feb/01/tsb-computer-meltdown-bill-rises-to-330m

[4] “Artificial intelligence for IT operations (AIOps) platforms are software systems that combine big data and AI or machine learning functionality to enhance and partially replace a broad range of IT operations processes and tasks, including availability and performance monitoring, event correlation and analysis, IT service management, and automation.” Gartner – Market Guide for AIOps Platforms. (Published August 2017)

But it is the speed at which the technological advancements have reached that has forced traditionally slow-moving financial institutions to heavily invest to remain relevant to their consumers and remain competitive in the marketplace.

Personal

Banking is one of the oldest businesses in the world, going back centuries ago, in fact, the oldest bank in operation today is the Monte dei Paschi di Siena, founded in 1472. The first instance of a non-cash transaction came in the 20^th century, when charga-plates were first invented. Considered a predecessor to the credit card, department stores brought these out to select customers and each time a purchase was made, the plates would be pressed and inked onto a sales slip.

At the end of the sales cycle, customers were expected to pay what they were owed to the store, however due to their singular location use, it made them rather limiting, thus paving way for the credit card, where customers that had access to one could apply the same transactional process to multiple stores and stations, all in one place.

Contactless

The way in which we conduct our leisurely expenditure has changed that much that we can now pay for services on our watches, but it wasn’t always this easy. Just over a few decades ago, individuals were expected to physically travel to their nearest bank to pay their bills, and had no choice but to carry around loose change and cash on their person, a practice that is a dying art in today’s society, kept afloat by the reducing population born before technology.

Although the first instances of contactless cards came about in the mid-90’s, the very first contactless cards associated with banking were first brought into circulation by Barclaycard in 2008, with now more than £40 million being issued, despite there being an initial skepticism towards the unfamiliar use of this type of payment method.

Business

Due to the changes in the financial industry leaning heavily towards a more virtual experience, traditional brick and mortar banks where the older generation still go to, to sort out their finances. Banks are closing at a rate of 60 per month nationwide, with some villages, such as Llandysul closing all four of its banks along with a post office leaving it a ghost town.

The elderly residents of the small town were then forced into a 30-mile round trip in order to access her nearest banking services. With technology not for everyone, those that weren’t taught technology at a younger age or at all are feeling the effects most, almost feeling shut out, despite many banks offering day-to-day banking services through more than 11,000 post office branches, offering yet a lifeline for those struggling with the new business model of financial firms.

Future innovations

As the bracket of people who have grown up around technology widens, the demand for a contemporary banking service continues to encourage the banking industries to stay on their toes as far as the newest innovations go.

Pierre Vannineuse, CEO and Founder of Alternative Investment firm Alpha Blue Ocean, gives his comments about the future of banking services, saying: “Artificial intelligence is continuing to brew in the background and will no doubt feature prominently in the years to come. With many automated chatbots and virtual assistants already taking most of the customer service roles, we are bound to see a more prominent role of AI in how transactions are processed from all levels.”

Technology may have taken its time to get to where it is now, but the way in which it adapts and updates in the modern era has allowed it to quicken its own pace so that new processes spring up thick and fast. Technology has given us a sense of instant gratification, either in business or in leisure, we want things done now not in day or a week down the line.

Sources:

https://www.sysco-software.com/7-emerging-trends-that-are-changing-finance-1-evolving-cfo-role/

https://www.vox.com/ad/16554798/banking-technology-credit-debit-cards

https://transferwise.com/gb/blog/5-ways-technology-has-changed-banking

https://www.forbes.com/sites/forbesfinancecouncil/2016/08/30/five-major-changes-that-will-impact-the-finance-industry-in-the-next-two-years/#61cbe952ae3e

Here Sarah Jackson, Director at Equiniti Credit Services, reveals some surprising stats about millennials’ attitudes to credit and explores with Finance Monthly what it all means for lenders targeting this demographic.

According to Equiniti Credit Service’s latest UK research report ‘A three part harmony: how regulation, data and CX are evolving consumer attitudes to credit’, despite millennial borrowing increasing annually by a healthy 8%, three fifths of this age group will still only consider borrowing from a traditional, well-established lender, or one that they had dealt with before.

That’s weird

Right. Particularly when it’s clear that alternative lending is gaining traction across other age groups and showing strong overall growth of 15% in 2018. The same report revealed that some 62% of all UK consumers would consider alternative sources of credit (I.e. a non-bank, such as a retailer or car finance provider) the next time they apply for a loan. While consideration does not equal action, the figures about take-up also support the trend: over a quarter of consumers who borrowed over £1000 in the last year did, in fact, use an alternative lender over a traditional high street bank.

If both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

So, while non-traditional lenders are not yet competing with banks in loan volumes, they have certainly established themselves within the market. Which begs a question: if both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

Customer inexperience

The story, as usual, lies in the data. Although 70% of UK consumers are comfortable completing loan application processes digitally, this figure drops to 57% for millennials specifically. Considering this age group’s well documented digital literacy, this can only be chalked up to financial inexperience. Older generations have not only had more time to become comfortable with the credit processes involved with a loan application, but most have also had more opportunity. External factors play a big part here too. House prices are such that for many millennials, unlike previous generations, the prospect of buying a house and applying for a mortgage at a relatively young age doesn’t even feature on the radar. As such, this group has less exposure to credit processes.

Financial inexperience creates a need for more careful guidance and reassurance. This likely explains why over half (58%) of millennials would only consider borrowing from well-known or previously used lenders.

A helping hand

For lenders, this is both a problem and a huge opportunity. With many millennials now in their mid-thirties, their collective buying power is set to increase substantially over the next decade, making this an increasingly lucrative target market.

That this knowledge gap exists is a chance for the smartest non-traditional credit providers to differentiate themselves as genuine and credible sources of information and guidance for these nervy borrowers.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit. This notion is given further weight by the same report which indicates that one in seven applicants cite clarity of the product’s documentation as the most important factor when deciding between lenders. Persuasive and confidence inspiring UX goes far beyond origination – it must resonate throughout the entire loan lifecycle.

To successfully target millennials, this means balancing investment in a slick digital user interface and the development of clear and simple documentation. Since this group values one-to-one guidance, the contact centre will be a key battleground for business. Here, engaging a specialist outsourcing partner may well be the way to go. These providers are trained and skilled in supporting the kind of dialogue that younger generations need to confidently apply for credit.

This Customer Experience Exchange for Banking, Financial Services & Insurance (BFSI) is an outstanding opportunity for you to learn lessons from the most successful financial institutions in the field. In just two days out of the office you’ll save months and potentially years of strategy heartache. You'll hear from leaders from across North America talk about their winning strategies in Financial Services, Banking and Insurance.

To ensure the Exchange offers the highest degree of relevancy, only senior executives responsible for strategic customer experience development and investment are invited to attend. This exclusive format allows you to connect with those peers whose insights you respect most – through exceptional networking, business meetings and strategic information sharing sessions.

For more information visit the Customer Experience Exchange for Banking, Financial Services & Insurance website

Here's the story of how the country's largest bank got to where it is today.

Biographer of J.P. Morgan Jean Strouse, longtime bank analyst Mike Mayo and CNBC banking reporter Hugh Son help tell the story. You’ll learn about how Aaron Burr and Alexander Hamilton are part of the bank’s history, along with the first ATM, and the company’s position moving forward into the future of digital banking.

Below Gemma Platt, Managing Executive for Vigilant Software, discusses with Finance Monthly how we can restore consumer trust in the age of disruptive banking using better compliance measures.

Atom Bank launched publicly in April 2016 and secured total funding of more than £200 million by the following year, specialising in savings accounts and mortgages. In April 2017, online bank Monzo had its UK banking licence restriction lifted, allowing it to offer current accounts for the first time. Tandem, Starling Bank, Loot and Revolut are more digitally led financial services brands that didn’t exist a handful of years ago.

Changing consumer behaviour

Meanwhile, research by Accenture has shown that customers’ physical interactions with traditional banks are decreasing; from 2015 to 2018, the number of consumers who visit branches at least once a month dropped from 52% to 32%. Over the same period, the number of consumers who use ATMs at least once a month dropped from 82% to 62% – a decline of nearly a quarter.

In many ways, these shifts are unsurprising. We live in an increasingly connected world. As mobile devices become more powerful, and the networks connecting them faster, banks can offer better functionality to customers anytime, anywhere. If the goal is to put customers first, to tailor services to suit them and to work with their daily patterns, digital technology is a great enabler.

However, just as the digital era is disrupting the ways in which consumers engage with their banks, it is also disrupting the trust those consumers have in their banks.

Wavering trust levels

Trust, as all financial organisations know, is the foundation of their relationship with customers. When trust fails, so do banks.

According to Accenture, consumer trust in banks has been rising steadily, and is now at its highest point since 2012. It seems likely that, following the 2008 global financial crisis and subsequent recession, consumer relationships with their banks have stabilised.

However, at the same time, consumer concerns about cyber security and online fraud are on the increase. PwC research in 2017 suggested that a massive 85% of consumers would not do business with a company if they had concerns about its security practices, and 71% said that they found companies’ privacy rules difficult to understand. This was before the introduction of the GDPR (General Data Protection Regulation), which has shifted the issue of personal data protection into mainstream consciousness.

Similarly, the Ping Identity 2018 Consumer Survey: Attitudes and Behaviour in a Post-Breach Era, which surveyed more than 3,000 consumers in the UK, US, France and Germany, found that one in five of them had fallen victim to a corporate data breach, and just over a third of those had suffered financial loss as a result. Unsurprisingly, the survey also found that 49% of consumers would not engage a service or application that had suffered a recent breach.

Where banks are digitally led, two areas of trust collide. Customers might have more faith that their banks are reliable, well run and unlikely to collapse, but are simultaneously more fearful of the wealth of risks and threats in the online world, from the theft of their personal data to viruses and malware that can attack their personal devices.

Where banks are digitally led, two areas of trust collide. Customers might have more faith that their banks are reliable, well run and unlikely to collapse, but are simultaneously more fearful of the wealth of risks and threats in the online world, from the theft of their personal data to viruses and malware that can attack their personal devices.

Furthermore, research into the security posture of banks and other financial services organisations suggests that consumers may be right. When the Economist Intelligence Unit surveyed more than 400 C-suite executives at major banks around the world last year, it found that just under half of respondents believed that a cyberattack would cause “at least one systemic bank failure in the next two years as the digital transformation of the banking industry continues to automate the sector”.

In other words, as banks rely on digital technology more and more, whether to offer customer-friendly mobile apps; to automate manual processes to streamline management and reduce costs; or to take advantage of new innovations such as AI, Cloud computing and the Internet of Things, they expose themselves to ever greater levels of cyber risk.

‘Always on’ compliance

Digital banks – whether challenger brands that have entirely bypassed physical premises, or traditional institutions that have branched out into highly functional apps and websites – are ‘always on’. And this is precisely how they need to see their approach to cyber security and compliance.

Traditional approaches to regulatory compliance – whether with frameworks for best practice such as ISO 27001 or legal requirements such as the GDPR – tend to involve organisations undergoing a single period of reviewing, updating their tools and processes accordingly, and creating a record for audit purposes. This is repeated perhaps once a year to demonstrate that compliance is being maintained.

However, in a dynamic, digitally driven world, compliance needs to be dynamic and digitally driven too. This means undertaking compliance checks more frequently and maintaining online dashboards that offer a real-time snapshot of the current compliance posture and are automatically updated when elements of the organisation’s digital infrastructure are changed. Banks have embraced digital technology to offer their customers something new; the next step is to use digital portals, dashboards and compliance management tools to ensure a next-generation approach to building trust.

Philip Hammond says that the UK fintech industry is currently worth £7 billion, employing more than 60,000 people. These massive, tech-driven disruptions are proof that fintech has finally emerged as a mainstream industry. Not only that, but these changes have also created numerous new trends that will benefit both businesses and consumers. Here are some to watch out for this year that will affect the financial industry:

Voice technology will grow in banking

Consumers can already operate a handful of things by voice, including music, TV, GPS, and even home security. Currently, banking is slowly catching up in order to improve customer service and prevent fraud. HSBC have reportedly saved £300 million in fraud through voice biometrics. Customers repeat a phrase after giving the bank their details over the phone in order to provide an extra level of security. Expect more banks to follow suit this year and for voice biometrics to become even more widely used.

Faster payment processing

Bloomberg reports that customers can expect banks to speed up checkout lines through a wider adoption of contactless cards. Payment Relationship Management CEO Peter Gordon said large banks do not want to be displaced so they’ll do what they can to be more efficient. In Singapore, they opened their first real-time and round-the-clock payment system called FAST. Singapore Minister for Education Ong Ye Kung talked about it at the launch of SGQR, Singapore’s single and standardised QR code for e-payment. "We will allow non-bank players to have direct access to FAST. This is to enable their e-wallets to bring greater convenience to consumers," he said. Expect e-wallets to become more widely used this year.

Blockchain-powered freelance market

The global recession along with the advancements in technology has led businesses to embrace alternative work arrangements particularly for freelancing, which is becoming increasing popular in the finance industry. In fact, the world’s first blockchain-powered freelance market has already been launched in the UK. The Fintech Times highlights how the marketplace gives employers instant access to a talent pool of freelancers. Work and skills are continuously validated and recorded, and the platform allows freelancers to create smart contracts, which ensures they get paid on time. This brings transparency and fairness to the gig economy. And Yoss explains how the current state of freelance recruitment now includes “highly rigorous skills validation and qualification tests,” as the demand for specialists in areas such as AI increases. The blockchain platform will allow companies to find freelancers based on the quality of their work rather than the quantity, which will benefit both businesses and those looking for jobs.

Alternative Finance for SMEs

Resesarch by American Express found that 30% of SMEs find it difficult to access the finance they need, despite the fact that 68% think cash flow is important to their business. In the UK an increasing number of SMEs are moving away from traditional financial avenues like bank loans. This has led to a 13% increase in the use of peer-to-peer lending in the past 12-months. Peer-to-peer collaboration is a much more streamlined way for SMEs to access financial support. For instance, micro-lenders mainly operate online, which helps reduce overhead costs and takes out the middleman.

Chatbots and robots

Apart from speeding up transaction times, fintech is also revolutionising customer service through chatbots and AI. Today’s chatbots are already able to not only understand what the customer needs but also the entire context of the conversation. This will help reduce the amount of time customers spend waiting for answers or on being hold. The technology will also mean that banking apps will become the primary form of communication between customers and their banks in the future. This will reduce costs and allow for a more streamlined service.

The finance industry is not only opening doors to faster transactions and better customer service, but it’s also creating more opportunities to work in a fast-evolving and lucrative industry. Chris Renardson points out that if anyone wants to make it in the industry, it takes more than technical and numerical know-how. So follow the above trends to stay ahead of the competition.