Traditional companies are struggling to keep up
Today’s digital landscape frequently imposes new demands on financial institutions, with innovative technologies and new regulations such as PSD2 disrupting established processes. As physical banks and cash machines continue to disappear from our high streets, there is a growing shift towards customers using their mobile phones to conduct their banking activity. In fact, over two-thirds of British adults now use online banking[1], putting great pressure on traditional banks that are burdened with legacy IT systems. As 46% of bankers perceive this infrastructure to be the biggest barrier to the growth of commercial banks[2], the need to update the network is more urgent than ever before.
The challenger banks of today, born on the cloud, automatically inherit cost, performance, and efficiency benefits that traditional banks simply do not have. Without having to embrace the initial digital change, this new generation of mobile banks can be more nimble, hoisting technologies to personalise their services, and do so at a much lower cost. Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
The need to migrate to the cloud
Massive growth in data usage has made it increasingly difficult for organisations to store all their intelligence on in-house servers. Today’s financially-literate customers should not expect to have their personal information kept in physical computer systems. Instead, they expect instant access to their personal data anytime, anywhere, and in the most secure manner.
While some financial institutions are exploring cloud-based solutions, many remain hesitant in undertaking a full-scale migration. With such a complex transformation to undertake and outdated architecture to contend with, companies are encountering certain obstacles. Time and cost pressures, in particular, are leading to some firms to ‘cut corners’ when it comes to upgrading their infrastructure, causing severe disruption to customers. From October 2018 to October 2019, the UK’s Financial Conduct Authority (FCA) reported that major banks suffered 265 IT shutdowns, which prevented customers from making payments[3].
The financial services sector has also been shaken by a new wave of regulations aiming to better protect both customers and businesses. Since the General Data Protection Regulation (GDPR) has come into force, European Union citizens have been granted more control over their personal data. This means that organisations collecting data are obliged to do so legally and to protect it from misuse.
Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
Furthermore, with Payment Services Directive 2 (PSD2) fast-approaching, companies are obliged to implement Strong Customer Authentication (SCA) to mitigate the risk of payment fraud. A huge number of fraud cases – nearly 340,000cases - were reported in 2018[4], calling for a double layer of authorisation to make financial transactions over £28 more secure. It has therefore never been more important for institutions to properly execute a full-scale migration to the cloud to benefit from its innovative services, including biometrics.
Benefits of migration
The AWS marketplace, and similar service providers, offer an online platform through which customers can unlock a plethora of cloud and other digital applications. Making the transition via these networks, where the cloud is effectively brought to you, renders the process far more simple and frictionless.
Through AWS, financial firms can easily integrate the necessary biometric authentication platforms. Designed to verify the identification of employees and customers using multi-factor authentication, companies become far less susceptible to cyberattacks and data breaches. By adopting digital identification technologies, institutions can achieve regulatory compliance and offer a safer customer experience. It is not too late for traditional firms to transform themselves and compete.
The greater computing power of cloud-based software brings a host of other benefits to organisations and customers. Having data centralised through the cloud avoids the latency issues that come from having computing tasks handled from afar, and permits the on-demand availability of resources. This allows a more seamless digital experience to be created, to meet the evolving needs of customers. Simultaneously, businesses can gain cost and time efficiencies that translate into more effective workload management, increased flexibility and ultimately productivity.
If financial companies are to avoid falling behind today’s challenger banks, they must discontinue the use of legacy IT infrastructure, and fast. By utilising the resources that services such as the AWS marketplace have to offer, companies can efficiently embed the cloud into their operations, and deliver the best online experience expected of today’s educated customers. The migration will only ensure secure account entry using the latest biometrics, it will also achieve cost and time efficiencies that could well turn around profit margins.
[1] https://www.theguardian.com/business/2019/jul/01/mobile-banking-to-overtake-high-street-branch-visits-in-two-years
[2] https://www.instapay.today/insight/legacy-technology-in-banking-a-real-issue-or-is-it-just-perception/
[3] https://www.telegraph.co.uk/news/2019/11/27/major-banks-suffer-five-glitches-week-finds/
[4] https://www.paymentscardsandmobile.com/uk-fraud-report-2019/
Graham Parker is the CEO and Co-Founder of Gravity Supply Chain Solutions Ltd. Headquartered in Hong Kong, Gravity is a cloud-based SaaS "real-time" b2b, Supply Chain Visibility & Execution Platform. This month Finance Monthly speaks to Graham about the company’s beginnings, growth period and vision for the next few years.
How did the idea about Gravity come about?
Gravity came about borne out of frustration and an obvious gap in the market. Logistics and Supply Chain Physical processes had and continue to evolve extensively; however, there was no one system giving a real-time view. The bigger the supply chain, the more bolt-on systems were required and ultimately - spreadsheet reporting. Many proclaim to do this and do that, but the reality was they simply didn't, and certainly not across the entire critical path. Darren Palfrey (Co-Founder and COO) and I decided to address the problem and this is how we started Gravity.
What have you managed to achieve with the company so far?
Gravity is now moving from a beta to full execution status with a number of successful POC's and fully deployed clients on board. We now have/are moving towards having contracts with some very large logistics providers, FMCG & CPG clients and Manufacturing companies, some of which are significant within their industry. We have an aggressive but achievable growth period, sustainable by the work we have put into building out a robust and scalable backend over the past three years. In essence, we are good to go, "concept to commerce" and the adoption rate is growing.
What are the key challenges that you’ve been faced with in the past 12 months?
Managing people’s expectations and keeping true to our core values. For example, when you initially start, everyone wants a little something extra. The danger is that you try to please everybody, all of the time. The challenge is not that you won't build these elements, it's just keeping the development teams focused and build to scope. Being able to say ‘no, not at this point’, however this is or will be planned into the next phase of development. From start-up, through scaling into Beta and execution, you have to remain focused. We also have a very loyal and keen investor base, who have been very patient and supportive, however, we are mindful that the business needs to move forward in line with our forecasts and projections. To date, we have raised circa US$8.5m and have hit/excelled every milestone along the way, including our MRR projections.
What is your vision for Gravity? Where do you see the firm in 3 years?
We intend to dominate the supply chain visibility space. We are a supply chain tech company providing "real-time" solutions for the supply chain industry built by supply chain users and industry experts. Gravity will push the boundaries and expectations for supply chain executives, the overall opportunity is endless and we will certainly evolve into for more than just the SCM visibility sector. We have a strong vision, growth plan and roadmap, plus a lot of future ideas will come from our clients as they evolve and use the platform.
Tell us a bit about your role within the company – what are your main responsibilities?
I'm focusing primarily on growth, customer adoption and business partnerships/collaboration. I also lead the BOD's and represent the interests of our investor base. We are a lean but fast growing team, and individually we all kind of jump in and help out where required. What we are good at is airing ideas, opinions and suggestions relating to product or approach. Key to this is the people, so making sure there is a good balance and allowing them to be creative, at the end of the day it's all about execution, experience and usability so I ensure we remain focused on the team and the business.
For more information, please email: hello@gravitysupplychain.com
Avalara EMEA, a leading provider of cloud-based transactional tax compliance automation for businesses of all sizes, held its second annual VAT Automation Summit, sponsored by Brewer Morris. The summit brings together leading indirect tax professionals to discuss topics affecting the industry, including EU VAT fraud and the future of tax compliance automation. A central theme of the summit is focused on the need for businesses to adopt tax automation solutions to combat fraud and ensure greater compliance. This topic is timely, due to recent news released by the European Commission regarding the ‘VAT Gap’, or the staggering €160 billion in lost EU VAT revenues in 2014. .
“Moving to real-time tax reporting will help to increase transparency in the VAT system and can prepare businesses for tax authorities’ demands for more, live data,” said summit speaker Richard Asquith, vice president of Global Indirect Tax, Avalara EMEA. “VAT automation systems are a valuable solution for managing complex VAT processes, such as cross-border sales for businesses trading in countries with different regimes or regulatory requirements.”
In addition to the EU VAT Gap, the summit is addressing major developments shaping domestic and international trade, including the UK’s initiative to streamline the tax reporting process through its 2020 ‘Making Tax Digital’ initiative. Through this new system, HM Revenue & Customs aims to eliminate the tax return over the next five years. Instead, businesses will be required to track tax compliance digitally and update HMRC at least quarterly via a digital account. The goal of this proposal is to create a more efficient tax reporting process; with further regulatory change on the horizon, such as Brexit, its implementation is paramount.
Across the globe, countries such as China, India, Egypt and the Gulf Cooperation Council (GCC) states, are placing increased emphasis on VAT collections or introducing new regimes. These new systems lead to further changes in international VAT requirements, and thus further complexity.
New regulations and the need to mitigate fraud present a prime opportunity for tax automation services that help businesses to comply with country VAT rates and eliminate errors which are costing firms millions in tax penalties.
Blockchain technology
While VAT automation services offer a more immediate solution to address these recent trends, a longer term opportunity for accountants lies in blockchain technology. This public ledger system records and validates each and every transaction. Entries are registered and cryptographically sealed, making them nearly impossible to falsify or destroy.
“Blockchain technology has massive implications for tax professionals,” said Kid Misso, Senior Director of Solution Consulting, Avalara EMEA. “The fact that it is a validated agreement between two or more parties means it cannot be repudiated or invalidated. The indelibility, speed, and synchronization of this technology can lead to greater accuracy and transparency, helping to reduce the likelihood of fraud in the future.”
For more information on Avalara and video from the 2016 VAT Automation Summit, please visit www.vatlive.com.
