On the back of Deutsche Bank’s recent ordeal, Finance Monthly gets the lowdown from Zac Cohen, General Manager at Trulioo, who discusses the steps banks and other financial institutions can take to strengthen their fight against money laundering.
Deutsche Bank recently made headlines after the German financial watchdog BaFin appointed an independent auditor to monitor the bank’s Anti Money Laundering (AML) compliance. This is the first time such an appointment has been implemented, highlighting the bank’s failure to meet due diligence requirements surrounding terrorist financing, money laundering and other illicit flows of capital.
As banks and financial organisations now operate in an increasingly global marketplace, they must grapple with the consequences of handling cross border transactions. Having lax Know Your Customer (KYC) procedures in place can be potentially crippling for banks worldwide, with fines being issued in the hundreds of millions if chinks in their anti-money laundering armour are uncovered.1 Yet despite over $20 billion being spent on compliance annually, only 1 per cent of illicit transactions are seized each year.2
Financial globalisation, still very much a reality despite shifting geo-political attitudes towards it, makes international money laundering practices a real force to be reckoned with. Indeed, international money laundering is becoming more widespread and this is, in part, down to the difficulties in maintaining full transparency when dealing with international clientele.
Banks and other financial institutions are legislatively obliged under Anti-Money Laundering rules to have full knowledge over their clients’ identities and the origins of their wealth. With money coming in from all corners of the globe, banks must be able to perform Know Your Customer (KYC) and Know Your Business (KYB) checks on a client base that may be moving money all around the world. In addition, establishing a “beneficial owner”, a derivative of KYC, must be a priority before financial transactions occur. The 4th Anti Money Laundering Directive (4AMLD) stipulates the necessity of ascertaining the beneficial owner of business customers, partners, suppliers and other business stakeholders. Some transactions, originating from unknown geographic localities, can be particularly difficult to verify.
The key to combatting this problem is leveraging the available technologies that can be implemented to help promote transparency. This is crucial as these technologies have the view to reducing the occurrence of fraudulent transactions passing through banks and financial institutions. Bad actors are becoming increasingly sophisticated in their techniques in directing fraudulent money through banks, employing techniques such as under- or over-invoicing, falsifying documents, and misrepresenting financial transactions. This increasing sophistication that coincides with the rise in global money laundering, up 12 per cent from the previous year.3
There are however, multiple technical advances that are available to help implement and streamline the process of checking and verifying ultimate beneficial owners and promoting transparency. Automated systems and artificial intelligence programmes can be used to scour company documents for a streamlined electronic ID verification sytems to verify personally identifiable information in conjunction with ID document verification and facial recognition technology to help paint a full picture of each beneficial owner of a business.
Putting this all together to create certainty and transparency about who you’re doing business with is crucial. Deutsche Bank have suffered severe reputational damage as a result of several anti-money laundering breaches that have reached the public’s attention over the last few years. The question remains, can banks implement the technology and processes they need with sufficient effectiveness to recover from this reputational strain?
1 https://www.reuters.com/article/us-deutsche-bank-moneylaundering-exclusi/exclusive-deutsche-bank-reports-show-chinks-in-money-laundering-armor-idUSKBN1KO0ZC
2 https://www.politico.eu/article/europe-money-laundering-is-losing-the-fight-against-dirty-money-europol-crime-rob-wainwright/
3 https://www.pwc.com/gx/en/services/advisory/forensics/economic-crime-survey.html
Banking apps are set to have the biggest impact on commercial banking within the next five years according to more than two thirds (68%) of commercial bankers, a study has revealed.
Banking apps are also predicted to become one of the most disruptive technologies during the same time period. Only cryptocurrencies (56%) and virtual assistants (48%) are expected to be greater disrupters, according to a study by Fraedom that polled 1000 decision-makers in commercial banks including senior managers, middle managers and shareholders.
The research also found that just under half (45%) of respondents listed digital wallets to have a substantial impact on the industry while nearly one third (32%) noted machine learning as having a future influence.
Kyle Ferguson, CEO, Fraedom, said: “The research highlights that the commercial banking world is beginning to shift towards a more consumer focused approach. Business executives are increasingly wanting a real-time view for their payments, just like they can in their personal lives. This trend is also mirrored by commercial banks who are planning to invest in the key technology areas to make consumerisation possible.”
The study revealed that data analytics (55%) and enhanced mobility (41%) are two of the most likely areas of a commercial bank to receive investment within the next five years. Unsurprisingly updating security systems was most likely area to receive an investment boost, as cited by 65% of respondents.
The research also uncovered that almost half (45%) of financial services organisations believe that increased regulation will drive the adoption of new technologies, with 32% predicting it will lead to better customer engagement. In addition to this, nearly two thirds (60%) of commercial bankers believe that a more ‘consumer focused’ approach to engagement is the most important factor when strengthening relationships with SME customers.
“Regulations have transformed the commercial banking sector over the past few years, and while this appears to be restrictive approach, this research proves that banks are seeing regulation as an opportunity to adopt new technologies and improve customer engagement,” said Ferguson.
(Source: Fraedom)
The Bank of England (BoE) has released its latest data on mortgage lending this morning which reveals that new lending commitments are at their highest level since 2008 Q1.
BoE also reports that first time buyers increased their share of the market to 21.4% in Q2 2018 - a rise of 1.8% against the previous quarter. Despite the surge in lending, the mortgage market continues to be challenged by a combination of fierce competition from traditional and non-traditional players.
With the rise in the lending market, there is an ever-growing need for traditional lenders to offer innovative solutions that provide faster and more efficient end-to-end mortgage resolutions.
In the FCA’s Mortgages Market Interim Report 2018, the need for more customer-facing innovation in the mortgage market is being encouraged for traditional lenders. On average the loan procedure can take approximately 45 days and this can be exasperated if the loan requires additional underwriting.
Most of the time the lenders will underwrite applications manually, which risks inaccurate pre-approval. Traditional lenders are seeking out next generation technology solutions to compete with non-traditional players to better manage the entire mortgage lifecycle.
Across the assessment, valuation, offer and contract completion process, manual data-entry errors can be reduced using Optical Character Recognition technology (OCR) by attaining customer data from key documents automatically. These bots extract applicant’s personal details from know your customer (KYC) documents and automatically review the applicant’s credit history which will speed up the mortgage application lifecycle, thus reducing the probability of manual error.
Puneet Taneja, Head of Operation at Intelenet Global Services, comments: “Buying a property is an important chapter in anyone’s life - dragging out the process creates a great deal of stress, preventing customers from getting their dream home as quickly as possible. Rather than having to wait for days to find out whether an applicant is eligible for a mortgage, automating the checks required across the assessment, valuation, offer and contract completion process takes away the headache away from mortgage brokers so they are able to communicate to customers and give them offers in 30 minutes.
Puneet continues: “Using this AI & Automation based initiative which uses bot technology to gain business intelligence alleviates the pain of mortgage brokers getting applicants data to find out if they are eligible. Digitizing the home-buying process by intelligent reporting & dashboards reduce processing times by 40% and costs by 50%.”
(Source: Intelenet Global Services)
The financial crisis in 2008 has cast a long shadow. There has been growing pressure on the government to increase accountability and governance in the financial services industry through legislation and regulatory reforms. One such reform that is set to take effect later this year and eventually apply to much of the industry within a year is the extension of the Senior Managers and Certification Regime (SM&CR), which seeks to improve the accountability and responsibility of senior personnel. This week Finance Monthly hears from Alexander Edwards, a Senior Associate at Rosling King LLP, who discusses the details of the new regime and explains what action management should take moving forward.
This extension of the certification regime is being overseen by the Parliamentary Commission for Banking Standards (PCBS), which was set up to improve accountability and standards in the industry.
When the certification regime was originally being considered, the commission’s recommendations ranged from general observations on standards – it suggested that firms need to take more responsibility for employees being fit and proper to ensure better standards of conduct at all levels, to the far more specific – notably recommending a new accountability framework for senior management.
As a result of the PCBS recommendations, Parliament voted through legislation in December 2013 which resulted in the Financial Conduct Authority (FCA) applying the SM&CR to the banking sector. Parliament subsequently voted through further alterations to the legislation in May 2016, requiring the FCA to extend the regime to all firms authorised by virtue of the Financial Services and Markets Act 2000 (FSMA). Similar measures have been adopted in other sectors as a way of building trust, such as the Financial Reporting Council that now oversees the appointments of directors at the big audit firms.
It is worth looking at the certification regime in greater detail and understanding what exactly the FCA has been saying about it to fully appreciate its implications. In its 2018/2019 business plan the FCA mentioned that the new rules, concerning the extension of the SM&CR to all FSMA firms in 2018/2019, were due to be published in the summer of this year.
In the FCA’s business plan, they highlighted that they were working on finalising the rules for the extension of the certification regime to all FSMA regulated firms, with a view to reflecting the FCA’s intention to tailor the regime to “reflect the different risks, impact and complexity of firms in a clear, simple and proportionate way.” Considering that the SM&CR is due to be extended to cover c.47,000 firms, that is no easy task.
There are three primary groups who will be regulated by the SM&CR: Solo-regulated firms, insurers and banks.
Solo-regulated firms
For solo-regulated firms (regulated by the FCA only) the SM&CR will replace the Approved Persons Regime. In July 2018, the FCA released feedback and near-final rules, along with a guide on the SM&CR for FCA solo-regulated firms. The aim appears to be, as it was from the beginning, to address and limit the lack of accountability of senior management which can subsequently drive poor conduct. The result: making senior management more responsible for their actions and conduct. The guide is designed to help firms which are moving across to the certification regime.
Insurers
For insurers the SM&CR will replace the Approved Persons Regime and the PRA's Senior Insurance Managers Regime. The Treasury has confirmed that the certification regime will start to apply to insurers on the 10th December 2018.
Banks
The SM&CR already applies to UK banks, building societies, credit unions, branches of foreign banks operating in the UK and the largest investment firms regulated by the PRA and the FCA.
So as we can see the certification regime has gone from covering banks, building societies, credit unions and PRA-designated investment firms, to covering all FCA solo-regulated firms.
It is worth noting that the extension of the certification regime will affect not only firms authorised and regulated by FSMA and the FCA but also EEA and third-country branches and insurers. Although the FCA has noted that the final rules in relation to the extension of the SM&CR are subject to change, particularly following any Handbook changes which follow the UK’s exit from the European Union.
To ensure that the new regime is proportionate and flexible enough to accommodate different business models, the FCA are introducing 3 different tiers of application:
Core Regime – this will apply to the majority of FCA solo-regulated firms;
Enhanced Regime – additional rules which will apply to c. 350 FCA solo-regulated firms, applying additional rules due to the size, complexity and potential impact on consumers of the firm;
Limited Scope Regime - applies to firms with a limited application of the approved persons regime e.g. limited permission consumer credit firms.
In response to the FCA’s consultation, respondents have requested further clarification in relation to the extension of the rules. Following receipt of responses, the FCA has confirmed that they will make some minor changes to the proposed rules. For example, they will lengthen the time period from 6 to 12 months for firms to implement the Enhanced Tier, once they meet the relevant criteria.
So what are the key conclusions firms should draw and actions they should take from the consultation?
Firstly, all firms which are regulated and authorised under FSMA and the FCA should be considering and reviewing the rules and functions of their personnel at this stage, to consider how the extension of the regime will affect them.
The date for implementation is set as 9 December 2019 (and 10 December 2018 for insurance firms), so firms should be looking at their own operations and consider transitional provisions at this early stage to ensure they are adequately prepared for the change. Particularly in the run up to Brexit, firms should also be re-reviewing their systems and operations to ensure that any changes to the Handbook are implemented as appropriate.
From a practical point of view, introducing the certification regime into firms in which it does not currently apply is likely to cross the borders of many departments, from Legal to Compliance to HR, so whilst December 2019 may seem far off now, experience has shown us that this will involve a broad spectrum of individuals and departments to successfully and smoothly transition to the SM&CR.
As brands think about targeting the student market, it would be very tempting to stereotype and develop marketing that is all about partying and watching daytime TV. This approach is doomed to fail because the student demographic is actually much more diverse and discerning.
According to Creative Orchestra, less than 60% of students are under 21, almost 40% study part-time and half of those are aged 30-50. In the UK, there are almost half a million students from overseas, and the number is growing.
The main reason why banks are interested in connecting with students is that while they may not have much cash initially, over time they usually become more financially secure and interested in additional products and services such as credit cards, loans and mortgages.
Genuine concern for customers
Despite the dangers of generalising, there are some traits which marketers should be aware of. As a whole, students tend to have a strong sense of social responsibility. When asked, 74% believe that ethics are very important and 65% believe that it’s very important to be environmentally friendly. These beliefs affect the purchasing habits and demands of future students but it is important that brands don’t make claims they can’t substantiate. Students know the difference between genuine claims and spin and are increasingly drawn to ethical financial institutions.
Building a reputation as a brand that truly cares will get cut through with this demographic. Customer Thermometer research highlights that people want to connect with a brand that shows it cares about them. This is heightened for student consumers who are usually financially stretched and may feel more vulnerable, living away from home and making independent, financial decisions for the first time. Sensing that a bank understands the pressures they face and is always ready to help, rather than hinder or scold, can go a long way in forging a strong customer relationship.
In addition, our ‘Connected Customer’ research shows found that a long-term relationship happens when companies become a meaningful part of a customer’s everyday life. Making their life easier and delivering what is promised both contribute to finding a place in their emotions. When students sense that “this company helps me when things go wrong”, they begin to move along the engagement journey from interest to loyalty. There’s a real opportunity for banks to show genuine understanding and flexibility towards students and as a result to win a customer for life.
As well as supporting students when things go wrong or finances are tight, banks should also be thinking, what additional services and products can we offer that will enhance their life? This is because there is a direct correlation between the number of additional products held, such as overdrafts, loans and insurance, and higher levels of engagement.
The personal touch
Finally, banks should use the reams of rich customer data, aggregated across multiple touch points, to target students with hyper-relevant and engaging messages at opportune moments.
Banks must profile and target properly, taking time to understand their audience, rather than lumping all students in the same category. Students will not tolerate being bombarded with unsolicited messages. Less is more and they appreciate creative, clever and entertaining campaigns that are personal to them. The good news is that sophisticated data-driven marketing is totally attainable now, so long as the data is clean.
The student market is highly lucrative and if banks get their marketing and customer experience right, they could win an advocate for life. To win the affections of students, brands must provide a meaningful and personalised solution with products and services that really add value. Any bank that does this will soon discover they have an army of loyal brand advocates who are engaged and bring long-lasting financial rewards.
Karen Wheeler is the Vice President and Country Manager UK at Affinion
A new breed of ‘challenger banks’ has risen up around traditional institutions in the last few years. This catch-all phrase doesn’t capture the breadth of different offerings that have emerged, from mobile only banks such as Atom and Starling, to digital contenders looking to capture even more of the value chain by exploring links between online banking and social networks – Fidor is a great example. With a digital-first mentality, the competitive ace that these technology businesses have to play is their agility. Unencumbered by legacy systems, they are quick to add innovative new products and services, often encouraging open collaboration with customers – as Monzo has done – to develop the product and offering.
These FinTech companies are incredibly nimble, though hanging on to this advantage will depend on how smart they can be as they scale. With a continued focus on innovation and a clear target customer value proposition – whether that’s migrants, freelancers, Millennials or students – there will be some tough decisions to make about which technology to keep in-house, and which to outsource. Will they choose to trade on the value of their proprietary systems? Or take the view that the value lies? in the front-end, and outsource the remainder?
One of the key challenges that traditional banks face is simply understanding the infrastructure that lies under the hood. Systems have been developed over so many years, by so many IT architects, for so many use cases and do not forget all the mergers and acquisitions, that it has become very difficult to untangle the technology wires that link business areas across Operations, Product, Customers and Channels.
The advent of Open Banking has thrown down both a lifeline and an intimidating gauntlet for large banks. A lifeline, assuming they have the opportunity to innovate, drawing on the advantages of trust and large existing customer bases to fend off digital rivals with new appealing product offerings. A challenge, in that they must now open up their systems to third parties, which brings both a competitive threat and a logistical challenge.
No such worry for nimbler challengers. Not only do they have the benefit of operating on new, lean tech stacks, but they have been born into a mentality of collaboration, and business model evolution. High Street Banks, by contrast, haven’t been tested in this regard historically, and are jostling to keep pace.
After a period of immense innovation in the challenger bank sector, the next phase will be a tale of expansion and consolidation – a battle that some will weather more successfully than others. Some have argued that those with in-house back-end tech will experience initial pain in scaling, due to the larger tech code base and infrastructure they must maintain. Others might counter that this will be offset by lower long-term operating costs per customer, and possibly greater flexibility in product development – which could make all the difference in the quest for customer wallets, hearts, and loyalty.
Operational management and innovation do not always sit comfortably next to each other, but young banks have a golden window of opportunity to future-proof their model. Smart, proactive, risk-based decisions will ensure that scale does not hamper the agility that propelled them into the spotlight in the first instance.
It’s more fun to count soaring customer numbers and glamorous media headlines, though, in my view, the winners will be those that take the time to unpick and monitor the systems that underpin their ability to create dynamic, responsive solutions. In this instance, good things will come to those who refuse to wait.
Hans Tesslaar, Executive Director at banking architecture network BIAN
Personal identification numbers (PINs) are everywhere. These numeric versions of the password have been at the heart of data security for decades, but time moves on and according to Dave Orme, SVP at IDEX Biometrics, it is becoming evident that the PIN is no longer fit for purpose. It is too insecure and leaving consumers exposed to fraud.
Why bin the PIN?
In a world that is increasingly reliant on technology to complete even the most security-sensitive tasks, PIN usage is ludicrously insecure. People do silly things with their PINs; they write them down, share them and use predictable number combinations that can easily be discovered via social media or other means. And this is entirely understandable: PINs must be both memorable and obscure, unforgettable to the owner but difficult for others to work out. Previous research has shown that when people were asked about their bank card usage, more than half (53%) shared their PIN with another person, 34% of those who used a PIN for more than one application used the same PIN for all of them and more than a third (34%) of respondents used their banking PIN for unrelated purposes, such as voicemail codes and internet passwords, as well. In the same study, not only survey respondents but also leaked and aggregated PIN data from other sources revealed that the use of dates as PINs is astonishingly common1.
But if the PIN has had its day, what are we going to replace it with?
Biometrics
Biometrics may seem to be the obvious response to this problem: fingerprint sensors, iris recognition and voice recognition have already been trialled in various contexts, including financial services. In fact, wherever security is absolutely crucial, you are almost certain to find a biometric sensor — passports, government ID and telephone banking are all applications in which biometric authentication has proven highly successful.
For biometric authentication to work, there has to be a correct (reference) version of the voice, iris or fingerprint stored, and this requires a sensor. The search for a flexible, lightweight, but resilient, fingerprint sensor that is also straightforward for the general public to use, has been the holy grail of payment card security for quite some time.
It is one thing to build a sensor into a smartphone or door lock, but quite another to attach it to a flexible plastic payment card. A major advantage of fingerprint sensors for payment cards is that the security data is much more difficult to hack.
Not only are fingerprints very difficult to forge, once registered they are only recorded on the card and not kept in a central data repository in the way that PINs often are - making them inaccessible to anyone who is not physically present with the card.
Your newly flexible friend
Fortunately, the impossible has now been achieved. The level of technology that has been developed behind the sensor makes it simple for the user to enrol their fingerprint at home, and once that is done they can use the card over existing secure payment infrastructures.
Once it is registered and in use, it can recognise prints from wet or dry fingers and knows the difference between the fingerprint and image ‘noise’ (smears, smudging etc.) that is often found alongside fingerprints. The result is a very flexible, durable sensor that provides fast and accurate authentication.
The PIN is dead, long live the sensor
Trials of payment cards using fingerprint sensor technology are now complete or under way in multiple markets, including the US, Mexico, Cyprus, Japan, the Middle East and South Africa. Financial giants including Visa and Mastercard have already expressed their commitment to biometric cards with fingerprint sensors, and some are set to begin roll-out from the latter half of 2018. Mastercard, in particular, has specified remote enrolment as a ‘must have’ on its biometric cards, not only for user convenience but also as means to ensure that biometrics replace the PIN swiftly, easily and in large volumes2.
With the biometric card revolution now well under way, it’s time to say farewell to the PIN and look forward to an upsurge in biometric payment card adoption in the very near future.
1 Bonneau J, Preibusch S and Anderson R. A birthday present every eleven wallets? The security of customer-chosen banking PINs: https://www.cl.cam.ac.uk/~rja14/Papers/BPA12-FC-banking_pin_security.pdf
2 Mastercard announces remote enrolment on biometric credit cards: https://mobileidworld.com/mastercard-remote-enrollment-biometric-credit-cards-905021/
The Rothschild banking family was at one point the richest family on Earth and, unsurprisingly, today it is one of the most popular subjects of conspiracy theories. But just how much of what you might read online is true?
The Rothschild family came from Frankfurt, where the house they had lived in for generations was marked with the sign of the Red Shield (Roth + Schild). Like many Jewish families at the time, the Rothschilds were involved in finance, specifically currency exchange and collectible coins.
That was the business of the Rothschild patriarch: Mayer Rothschild. His success in this business attracted many wealthy customers, including Wilhelm, the future ruler of Hesse. Mayer managed Wilhelm's fortune and successfully protected it from Napoleon's invasion, for which he was greatly rewarded. Mayer had 5 sons, which he spread throughout Europe. Each established his own family and banking business in the five great European capitals at the time: London, Paris, Frankfurt, Vienna and Naples.
Throughout the 19th century the five brothers and (eventually) their heirs cooperated in numerous financing projects, lending money to governments and the nobility. By the end of the 19th century the wealth of just the French branch was the equivalent of $500 million today.
The 20th century, however, wasn't kind to the Rothschilds. The Naples and Frankfurt branches became effectively extinct when their last patriarchs produced no male heirs. A more sinister fate befell the branches in Vienna and Paris, who had the vast majority of their wealth confiscated in the course of the Second World War.
Only the branch in London survived intact, and today it is still a powerful force in Britain. At present the wealth of the Rothschilds is hidden in a series of shell companies originating in Switzerland. It is unclear exactly how rich they are, but by all visible measures they appear to have lost the majority of their richest during the 20th century.
Thus, ironically, one of the most popular subjects of conspiracy theories today has instead been on the decline for well over a century. Under the kind patronage of Nagabhushanam Peddi, Dan Supernault, Samuel Patterson, James Gallagher & Brett Gmoser.
Barclay’s ex-boss Anthony Jenkins recently said that technology could replace more than 50% of banking jobs. Finance Monthly heard from Ian Bradbury, CTO Financial Services, Fujitsu UK & Ireland, who shared his thoughts.
With the number of banking branches declining, the financial services sector is undeniably undergoing significant change, driven in no small part by the increasing adoption and implementation of emerging technologies. This of course has led to concerns of job displacement, and when we asked both the public and businesses which jobs most likely won’t exist in their current form 10 years from now, bank tellers was the top answer. One of the technologies said to disrupt the sector increasingly is Artificial Intelligence (AI), and in fact we found that seven-in-10 financial sector leaders believe technology such as AI will enable them to overcome many of the socioeconomic issues they are facing today.
The use of AI in financial services is nothing new. Trading businesses have used algorithms for many years, but what is new is the widening range of applications to which AI is being used for. The technology will not only replace existing manual processes, it will create new ways of doing things, which will add new value for businesses and their customers. For example, given the drive towards efficiency and agility, we can expect a lot of jobs to be created in the areas of automation, with more people employed to develop and implement AI-based automation solutions. It’s important to remember however that whilst some roles will disappear, many will surface in their place - 80% of jobs that will exist in the next decade haven’t even been invented yet.
It is the responsibility of us as a nation, from banks, government, to the companies creating these new technologies to ensure that we are equipping people with the right skills to manage this digital transformation that both the banking sector, as well as many others are currently and will be going through for the foreseeable future.
There is a rush to improve speed, convenience and user experience in financial interactions, but at what cost to security?
While for the most part bankers are positive about their ability to improve their financial performance in 2018 and beyond, evolving risks – particularly cyber risk – are no doubt preoccupying their thoughts. A recent report by professional services firm, EY, puts cybersecurity as the number one priority for banks in the coming year, and it comes as no surprise, especially with Britain’s National Cyber Crime Unit data showing 68% of large UK businesses across sectors were subject to a cybersecurity attack or breach in the past 12 months.
It’s a mounting problem, and the financial services industry needs to fight back. We’ve picked out the four key ways of countering the continuing threat to banks’ cybersecurity – and it’s a case of fighting cyber with cyber.
- Artificial intelligence
Like it is in retail and manufacturing, for example, artificial intelligence (AI) and advanced analytics will play a key role in banking moving forwards.
And the financial services industry is looking to this technology to play a major part in the prevention of cyber attacks, reducing conduct risk and improving monitoring to prevent financial crime. Mitigating such external and internal threats is critical to both business continuity and limiting operating losses, and so AI shouldn’t be overlooked as a key tool in reaching this goal.
- Electronic identification
In order to meet the regulatory technical standards, which will be enforced in September 2019 as part of the European Union’s PSD2 payments legislation, the number of transactions requiring two-factor authentication will rise in the coming months.
What has been deemed by the industry as “Strong Customer Authentication” will be required, and this should result in payments and account access relying on customers providing and using a combination of the following: something they know, like a password; something they have, like a phone or card; and something they are, such as a fingerprint.
More factors equals more security is the industry theory here.
- Biometrics
Which leads us neatly on to point three: biometrics. This push for two-factor authentication and new electronic identification will pave the way for more biometrics use. With some of the largest players in card payments, including Mastercard, investing heavily in such solutions, we expect others to start to follow suit.
As Ajay Bhalla, President for global enterprise risk and security at Mastercard puts it: “The use of passwords to authenticate someone is woefully outdated, with consumers forgetting them and retailers facing abandoned shopping baskets.
“In payments technology this is something we’re closing in on as we move from cash to card, password to thumbprint, and beyond to innovative technologies, such as AI.”
- Blockchain
According to the EY research report, 20-40% of financial service providers are investing in Blockchain now and are planning to increase investment, while approximately the same percentage are investing now but planning to reduce expenditure.
Either way, it shows that Blockchain is very much on the agenda for banks. The main attraction of Blockchain is that it creates an indelible audit trail which is distributed across multiple servers, so there’s no single weak link for cyber attackers to target. This provides banks with unparalleled transparency and increases trust.
Blockchain also has the potential to make a complex global financial system less complicated and reduce the number of middlemen involved in the transferring of money.
So, that’s the technology on offer, but what are the next steps?
Unless banks collaborate more with their peers, or improve their use of the wider ecosystem, the required investment in advanced technologies to address issues of growing cybercrime will be substantial and could strain their ability improve financial performance and grow their businesses.
And, as bank leadership teams focus on investing in the relevant people and technology – and it is the combination of both that’s crucial here – to enhance cybersecurity, they may struggle to find the right skill sets or the right methods for integrating cyber experts into their organisations.
Raising their knowledge of the technology available to help stem the tidal wave of cyber threats is a key requirement for banks, if they don’t want to end up washed up on the shore as a result of their defences being breached.
Few would argue that artificial intelligence (AI) is making a considerable impact on many elements of Financial Services (FS), it’s computing power and automation helping to improve the overall customer experience and to extract incredible insight from big data held by FS companies. Below Dr. Dorian Selz, Co-Founder and CEO of Squirro, delves into a discussion about the keys augmented intelligence may carry in driving the future of FS.
As with many emerging technologies it was slow to hit the business mainstream, but that too is changing. Squirro recently conducted research into tier one banks’ use of AI, and it revealed that 83% have evaluated AI and more than two-thirds are already using it.
But for some people in finance, the words ‘artificial intelligence’ can signify fear just as much as they can opportunity. For all the potential of AI, there is a perception that jobs might be threatened as machines take over roles previously carried out by humans.
The idea that AI might facilitate a wholesale replacement of humans is fanciful at best. But perhaps it is time to talk about augmented intelligence instead, a technology intended to enhance human intelligence and one that is central to the future success of the financial services sector.
A human / machine collaboration
If artificial intelligence is the creation of intelligent machines that work and react like humans, augmented intelligence is essentially people and machines working together. This is a partnership that will see the augmentation and extension of human decision making, addressing specific challenges within FS and helping to deliver new and smarter services to customers that will encourage loyalty and improve the bottom line.
Improving the personal touch – much of FS – particularly corporate FS such as investment banking and real estate - is still heavily based on personal relationships. Account handlers speak to their clients and are expected to know about that client’s industry and be able to present them with strong opportunities for investment and growth.
That’s no a small undertaking, but augmented intelligence makes it much more straight forward. Augmented intelligence-based platforms are powerful at gathering data (both structured and unstructured) from across disparate and siloed systems and presenting that data in a form that gives account handlers a complete 360-degree view of each and every customer.
Because it can factor it so many disparate sources of data, users are then incredibly well-informed on what is happening in an industry that will affect that client, and what the opportunities are. They can retain the personal touch that is still so important in FS, but can now do so more informed than ever when speaking to clients
Deeper insight – the insight delivered by augmented intelligence is far deeper than what has previously been available to FS organisations. Because it is capable of managing and analysing so much data, the insight extracted from that data and then presented to the user is deeper and greater than anything previously possible.
Impact on the bottom line – the data insight generated by augmented intelligence can help FS firms greatly with their lead generation, not only identifying opportunities for clients but recommending the best product or solution for them.
Augmented intelligence solutions will look at data on competitors, partners and markets and identify catalysts that provide additional upsell or cross-sell opportunities to existing clients, and fresh approaches to prospective clients. In a competitive FS world, this is of the highest value.
The past decade has been a challenging one for FS organisations, with stiff competition from agile startups offering new and more effective services and a superior overall experience. Yet the emergence of augmented intelligence is a lifeline for the industry. It enables greater customer understanding and means FS providers can re-establish their market position, and augmented intelligence will be a key technology in FS for years to come.
All directors and owners of a company should be aware of the declaration of solvency - particularly if considering solvent liquidation. The declaration of solvency must be submitted before claiming entrepreneurs relief through members voluntary liquidation (MVL). Business Rescue Experts, licensed insolvency practitioners and specialists in MVLs, are sharing what is involved in solvent liquidation.
What is the declaration of solvency?
The declaration of solvency is prepared before solvent liquidation - providing information on the company’s finances up to five weeks before the winding up resolution - and is split into three different parts:
- Statement of assets and liabilities of the company
- The sworn declaration of solvency by directors
- The endorsement of the proposed liquidator
What is the statement of assets and liabilities?
As mentioned above, this is the first part of your declaration. This statement, in simple terms, represents the company’s financial information ahead of the solvent liquidation. It’s important that all available information is included to avoid a false statement. All assets must be listed, as well as liabilities, and it must also set out the costs of the procedure and any interest returns due to creditors. Similarly, you must outline the returns available for the shareholder once the capital distribution becomes available.
Sworn declaration of solvency
Unlike the statement of affairs - sworn by a statement of truth - the declaration of solvency must be done so by a solicitor or notary. There will be costs involved, typically around £10 per swear. The wording is also critical to the declaration and must comply with insolvency legislation.
The proposed liquidator
The proposed liquidator of the case will present the declaration of solvency to the shareholders of the company. From there, resolutions can be made for the business to enter solvent liquidation, and the liquidator will also endorse the document. This will then be made public and placed on record at Companies House.
Once the procedure begins, the assets of company will be realised to pay off the remaining creditors. The balance will then go to the shareholders by way of capital distribution. Any eligible shareholders can also claim entrepreneurs relief.
What if I provide false information?
A false declaration of solvency is a serious threat to the future of your company. It’s important to note that you cannot be suffering from the early signs of insolvency before opting for this procedure, so you must seek advice at the earliest possible opportunity. An insolvent company is one where liabilities exceed the assets, and, therefore, your business is not suitable for solvent liquidation.
If your company is found to be insolvent, your company could be placed into creditors voluntary liquidation (CVL). Similarly, an MVL could become a CVL if creditors come forward with outstanding debts that have not been paid and submit claims against your business. If this does happen, there is also a chance that you - as a director - could face criminal charges. While you could face disqualification, for a period of up to 15 years, imprisonment is also an option in the most severe cases.
Ultimately, you must always ensure your company is solvent and there are no creditors to worry about. If not, you must seek advice from insolvency practitioners immediately.
