Robert Douglas, Europe Planning Director at Workday Adaptive Planning, explains how effective digitalisaiton has been a lifeline for finance teams in the wake of the pandemic.

When the COVID-19 pandemic hit, chief financial officers (CFOs) around the world were thrust into uncharted territory. All previous plans went off the table, and businesses’ ability to make rapid and data-driven decisions in the face of uncertainty have been put to the test ever since. Agility took on a new meaning in the age of COVID.

In a recent survey, hundreds of CFOs around the world were asked to share what their priorities have been in the immediate response to the pandemic and how they will change over the next year. Predictably, cost containment and workforce planning has been front of mind for many in the short term. However, looking a year ahead, the implementation of digital transformation will be a growing priority.

As finance looks at how it can improve the way in which it can assist executives throughout the organisation with quick and confident decision-making, the implementation and use of sophisticated digital technologies will indeed play a key role. While finance has been slower than others at embracing digitalisation, COVID-19 has made the importance of it abundantly clear and is acting as a catalyst for much needed change.

The case for digital transformation

More than half (54%) of CFOs currently report that their organisation has implemented some aspect of digital transformation. This includes moving IT infrastructure to the cloud, automating nonstrategic tasks, establishing a ‘single source of truth’ through data optimisation, and using predictive analytics powered by artificial intelligence.

The benefits of making these changes are clear, with around three quarters of CFOs overseeing a digitally transformed finance team being confident in both their teams’ capacity to carry out all critical finance functions (79%) and the accuracy of their two-year P&L forecast (73%). Only around 40% of CFOs from less digitalised organisations say the same.

While finance has been slower than others at embracing digitalisation, COVID-19 has made the importance of it abundantly clear and is acting as a catalyst for much needed change.

Digital transformation also gives finance teams the agility needed to operate in the current climate. The strengthening of data accuracy and automation of much of the analysis means that teams can more easily lay out multiple future scenarios for the business and help executives devise strategies for how to adapt to them as early as possible. While not everything can be predicted or planned for, the time it takes to readjust to surprises is shortened. As important, it underscores the great divide between organisations that have embraced digital transformation and those that have not.

Why the lag?

In terms of what has slowed down digital transformation for many CFOs, the prioritisation of crisis management in the face of COVID-19 is just one piece of the puzzle—many would have been stalling anyway.

When asked what is hindering digital transformation in their businesses, the two leading roadblocks are lack of skills and internal resistance to change. While overcoming both of those obstacles might be challenging, the good news is that CFOs have it in their power to do so.

CFOs need to work closely with HR to determine how to acquire the necessary skills to use modern financial planning software and strike the optimal balance between recruiting new staff and reskilling current employees. At the same time, it is crucial for finance leaders to set a positive example, by experimenting with new technologies and empowering employees to proactively highlight areas of inefficiency or untapped value that can be improved by establishing news ways of working or investing in new solutions.

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The time is now

Transforming the finance function is not an easy task, but now more than ever it is necessary to both bolster productivity within finance and prepare the organisation for unforeseen challenges. Thankfully, almost all finance teams that have not digitally transformed their ways of working over the past year plan on doing so over the next. This will benefit their businesses and make the economy overall more robust in its response to crises.

The COVID-19 pandemic has forced a major shift in working practices across the globe, putting the impetus on companies to rapidly relocate staff to home offices and switch to remote working solutions. Nathan Howe, Director of Transformation Strategy at Zscaler, examines the unusual consequences that this has had for financial services.

The movement of all employees to home offices may be the most visible impact of the virus on organisations, but behind the scenes, and at the highest levels of organisations, there’s been a distinct reallocation of responsibility. Although an overused phrase at this point, these are unprecedented times, and have called for unprecedented actions from businesses to ensure business continuity.

Although these changes have spanned the breadth of managerial and executive levels, there’s one aspect I’d like to focus on: the increased role of the finance function in cybersecurity.

Unprepared for remote working

For many businesses, when the pandemic hit, they were unprepared for this scale of remote working. Companies that had already opted not only to host data and applications in multicloud environments, but also to adapt their security and remote access infrastructure to meet the needs of a modern mobile workforce, had the least difficulty coming to grips with the new situation. These were in the minority, however, and many sectors, including financial services, felt the pinch on their historic resistance to cloud adoption.

Companies operating in this more conventional way would, at best, probably have planned for no more than one-third of their staff to work from home on a temporary basis at any one time. In this unforeseen situation however, bottlenecks quickly developed as a result of a massive increase in data traffic. This flood of data pushed the traditional hardware or licence-based infrastructure for remote access to data and applications to its limits.

For many businesses, when the pandemic hit, they were unprepared for this scale of remote working.

As these companies placed their security technology at the perimeter of their system, all of the data traffic from the remote workers’ home offices had to be diverted through the data centre before they could access applications, which created a less-than-ideal foundation for a positive home-working experience.

Although one would imagine that all these issues would land on the desk of the IT team or the CTO, the reality of the situation was that, as the scale of the issues affected business productivity and continuity across entire organisations, they became a blockade to essential cash flow for businesses, quickly becoming a matter for finance.

Functionality vs. security

What we saw across the earliest period of lockdown was a cost-effective approach to cybersecurity that was driven by the finance function. During the search to identify the factor holding companies back from high-performance remote working, blame fell on the firewalls or remote access VPNs used as perimeter-based security infrastructures, or on the devices used by employees. Sacrificing these solutions would increase productivity and shore up the bottom line but penalise the organisation’s security posture.

Essentially companies were faced with a difficult choice between ensuring normal levels of productivity or providing secure remote access—albeit with frequent drops in the connection and with hardware being switched off at the bottleneck. Due to the sheer number of different devices used in the workplace, it was not always possible for companies to insist on compliance with standardised security policies across all devices.

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I’ve seen for myself businesses making those security sacrifices. Essential security processes, such as SSL decryption, have been bypassed entirely to make remote working easier. These are quick and dirty fixes to increase connectivity and productivity, without addressing the broader issues around improving network architecture to facilitate better remote working standards. They may work in the short term, particularly given the speed in which connectivity had to be ensured at the beginning of lockdown. But in the long term, these “fixes” not only increase the risk to an individual business, but all businesses. Cybersecurity vendors use the data on threats collected from customers to improve their own solutions over time, so this function-over-security dynamic has a far broader risk element.

Switching the narrative

As many of us begin to return gradually to the office, the security posture for organisations needs to be restored. The bypassing of security in favour of business continuity was, for many organisations, a difficult but essential decision during the most tumultuous periods of lockdown. What I’d hope the finance function has learned from its time with its hands on the security wheel is that they need to invest in converting their emergency workarounds into practical approaches for the future. Employees have come to value the greater flexibility of being able to choose where they work and as yet may be unwilling to bid farewell to the option of remote working.

Emulating those businesses that, at the outset of the pandemic, had the multicloud security and remote access infrastructure already in place would be a good place to start. The new world of work requires an approach that combines connectivity, security, and performance without making dangerous sacrifices.

Keith Pearson, Head of Financial Services EMEA at ServiceNow, explains how banks can ride this wave of changes and emerge more resilient and productive than ever before.

At the start of this crisis, much of the banking industry was in a different position from many businesses. The 2008 recession spurred a need for improvements and, combined with the emergence of tech-savvy fintechs, the industry has seen a major shift as customer expectations have adapted. The pandemic has forced organisations to accelerate innovation already part-underway in the banking industry.

As banking experienced its first wave of transformation, institutions focused on customer engagement, uniting physical and digital channels for an improved customer experience. Banks invested heavily in front office digital technology, creating visually appealing mobile apps, engaging online banking experiences and technologies for bankers to personalise customer engagement.

However, this digital engagement layer is not enough. Regulations like PSD2 reinforce the necessity to remain compliant, adding additional pressure to the digital transformation process which in turn has been accelerated by COVID-19. Banking is therefore in the midst of its second wave of transformation, where financial institutions are creating and seeking out critical infrastructure to better connect underlying middle and back office operations with the front office, and ultimately, with customers.

A Disconnected Operation

Many financial organisations are still struggling because they have yet to streamline, automate and connect the underlying processes that are enabling customer experiences. Which poses the question: why is connecting operations so difficult?

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status. Around 80% of a middle office employee’s time is spent gathering data from systems to make a decision, with only 20% spent actually analysing and making the decision.

In most cases, multiple systems are still glued together by email and spreadsheets to track end-to-end status.

The disconnect negatively impacts customers. For many, experiences like opening a bank account or getting a mortgage involve clunky, manual processes riddled with paperwork and delays. When front and back office employees lack the ability to seamlessly work together, customers can be asked for the same data multiple times, elevating frustration.

Customers have little patience and can be inclined to publicly broadcast problems when left unresolved. In a world of social media and online reviews, this could be detrimental to a company’s reputation.

With digitally native, non-traditional financial services players gaining market traction by offering a seamless customer experience, maintaining satisfaction is crucial for traditional banks to ensure that customers don’t switch. Banks must focus on making it easy for customers to do business with them by offering faster cycle times with more streamlined operations.

The Fintech Effect

Fintechs and challenger banks like Starling have shown what connected operations can do, having been built with digitised processes from day one. Modern consumers expect round-the-clock service from their bank. As financial institutions look to the future, developing a model of operational resilience that is capable of withstanding unforeseen issues, like power outages or cyberattacks, is critical to minimising service disruption. Having connected internal communications between front and back office staff means customers can be notified about any problems, how they can be fixed and when they might be resolved, as well as receiving continuous progress updates instantaneously.

Automation can go a step beyond this. Today, customers expect companies to not only do more and do it faster but to prevent problems from arising in the first place. With connected operations and Customer Service Management (CSM), banks can proactively fix things before they happen and resolve issues fast, enabling frictionless customer service and replicating the ‘fintech effect’.

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What About Compliance?

In the European Union and the UK, PSD2 and the Open Banking initiative are giving more control to the customer over personal account data. Digital banks such as Fidor and lenders like Klarna are seeking to reinvent banking by offering customer-centric services. But the process of streamlining underlying operations is not simply about providing customers with a fintech-esque experience. More than 50% of a financial institution’s business processes are also impacted by regulation.

Financial services leaders are focusing on streamlining and taking cost out of business operations while also placing importance on resilience. Regulators are pushing banks to have a firmwide view of the risk to delivering their critical business services.

Banks must invest in digitising processes to intuitively embed risk and compliance policies, which are generally managed separately and often manually from the business process, leading to excessive compliance costs and risk of non-compliance. With the right workflow tools for monitoring and business continuity management, banks can minimise disruption by gaining access to real-time, actionable information about non-compliance and high risk areas, encompassing cybersecurity, data privacy and audit management.

Increasing openness of financial institutions to RegTech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation. Banks will increasingly move away from people and spreadsheets and toward regulatory solutions that provide a real-time view of compliance and provide an end-to-end audit trail for Heads of Compliance, Chief Risk Officers and regulators.

With a unified data environment aided by technology, financial institutions can drive a culture of risk management and compliance to improve business decisions.

Increasing openness of financial institutions to RegTech solutions, or managing regulatory processes in the industry through technology, will prove key during this second wave of transformation.

Riding the Wave

The banking industry is still in the midst of its second transformation, and the pandemic hasn’t made it any easier. But riding this wave and successfully digitising processes to connect back and front office employees will present a profound difference to customer service.

The bank of the future will be frictionless, digital, cloud-enabled, and efficient; interwoven into the fabric of people’s lives. It will continue to be compliant and controlled but will deliver those outcomes differently, with risk management digitally embedded within its operations.

Demonstrating the operational resilience of its key services will not only drive customer confidence but will also provide a greater indicator of control to regulators and the market, adjusting overall risk ratings and freeing up capital reserves to drive more revenue and increase profitability.

The institutions that will thrive in this increasingly digital and connected world are the ones that are actively transforming themselves and the way they do business now, by taking lessons from fintechs, following regulations and paving the way in defining the future of financial services.

What are the things keeping senior finance managers and executives awake at night? The COVID-19 pandemic and resulting lockdown have put many finance departments under even greater pressure than before. Mark Vivian, CEO at Claremont, describes to Finance Monthly how the growing demand for financial services can be met using cloud technology.

Organisations are under pressure to grow revenues and cut costs. Businesses need to be more agile than ever before in order to survive and thrive in today’s economy. There’s also the latest finance regulation (e.g. IFRS16) that needs to be adhered to, or legislative changes that need to be made (e.g. HMRC’s Furlough Scheme).

It’s important that the day-to-day running of the finance department can keep going too: invoices continue to be raised, and cash collected. Supplier invoices processed and paid. Employees paid correctly and on time.

Choosing the Right Finance System

When choosing the right finance system, there are number of important considerations businesses need to take into account. This will be largely centred around functionality and whether businesses can find a finance system that is part of a wider set of integrated business applications, such as HR, Payroll, and CRM. Oracle’s E-Business Suite is a great example of this.

As part of their functionality consideration, businesses will also need to consider their specific use cases. For example, is the requirement to have a finance system capable of supporting global organisations working in multiple territories, with multi-currencies and multi-languages, and also local country legislation?

Organisations also need to consider whether they are happy to adopt largely standard “best practice” business processes, which usually necessitates business change, or whether to use customisation to the standard product so that it reflects the way your business works.

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Ground to Cloud

Lots of organisations that we work with have a “Cloud First” strategy, and have “Ground to Cloud” initiatives, moving their key business systems from their own data centres into the cloud. “Cloud” is a ubiquitous term, but it has a number of different meanings. When we are considering choosing the best finance system, there are typically two main choices:  cloud-based applications and infrastructure cloud.

Choosing a suite of cloud-based financial applications offers businesses the benefit of streamlining their IT environment and business processes; procured as SaaS, typically over a 3-year duration.

Choosing infrastructure cloud on the other hand allows you to move your on-premise applications from physical hardware to a cloud platform, replacing the typical arrangement of leasing hardware with the rental of infrastructure cloud. It has lots of benefits, not least the fact that under the old model, IT departments had to predict future business activity for the next 5 years and size up and purchase hardware for the next 5 years on that basis.

A move to cloud infrastructure provides a much more flexible arrangement, where compute and storage resources can be flexed up and down in tune with the organisation’s requirements, either in the long term, or perhaps on a seasonal basis if your business volume requires it.

Partnering with a Managed Services Provider

Whichever model you choose to use for your finance applications and services, it’s vital to use it correctly and get the most out of your investment. Using a complex piece of software is a bit like running a Formula 1 car. It requires a team of expert engineers, with differing specialities, working on it in order to optimise it and make it perform at its best. This is where partnering with a managed service provider (MSP) can make a big difference.

Whichever model you choose to use for your finance applications and services, it’s vital to use it correctly and get the most out of your investment.

A managed service provider can work alongside your internal finance and IT teams to do this:

• Firstly, they’ll provide “fix on fail” support through an Incident Management process, and this will typically be against a Service Level Agreement (SLA) for both responding to and resolving the Incidents.
• Next is Problem Management; getting to the root causes of Incidents that are encountered and resolving them so that they don’t reoccur.
• An MSP will also help you with Change Management, dealing with all of those modifications that will come up over time as your business changes, or you have to comply with changing legislation.
• Finally, a good MSP will be proactive, and make suggestions for how you can optimise your financial applications, perhaps utilising new functionality to improve efficiency and save money.

We saw a great example of helping a Managed Services customer with critical and urgent Change work earlier in the year, when The National Trust came to us wanting to take advantage of the government furlough initiative during the COVID-19 pandemic to support their staff and protect their organisations as their sites began to close. We were able to configure their payroll solution to meet their requirements within a very short space of time.

The end product was deployed rapidly, automatically calculating the rebate amount for each employee, gave each employee a professional standard of notification, and required minimal payroll intervention. The first payroll runs of the month began on the 16th April and by the 25th April the National Trust had successfully processed over 14,000 employees through their payrolls.

Bringing it Together

The pace of change is increasing, putting finance departments under greater pressure than before and COVID-19 has presented an extra challenge over recent months. Many organisations are using Oracle E-Business software to run their finance and procurements processes. There are options to replace this with cloud-based applications, or to redeploy it on cloud infrastructure to help meet business drivers. Working with the right Managed Services provider can help you to optimise your existing software and help you to deliver real business benefit.

Andrew Beatty, Head of Global Next Generation Banking at FIS, shares his thoughts on the inevitable evolution of building societies with Finance Monthly.

Building societies have grown with the communities they service. They have been in an area for decades and sometimes centuries, giving them a strong sense of place and knowledge of the needs of the communities they serve. This has been vital to their durability, and this knowledge is very much still valued by customers.

But it’s not enough in today’s digital world. Consumers demands are increasing. Personal, tailored services, such as what customers receive through Amazon and Netflix, in conjunction with seamless digital experience offering spread across all channels the likes of which we see from Google and Facebook is now expected from banks.

Building societies need to evolve, but they need to do it in the right way. Building societies needn’t rip everything up and start again in the pursuit of reinvention. When e-readers were invented, authors didn’t stop writing; a Nobel prize winner retains that distinction in hardback or Kindle. Instead, building societies need to adjust their businesses to maintain relevance.

While every building society is different, but here are four investments no society can afford to ignore.

Digital capabilities

Worldpay research shows that 73% of consumer banking interactions are now digital, a figure that has only been rising during lockdown. Providing customers with a frictionless, on-demand experience across multiple channels is imperative. Focus on getting the right mix of personalisation, agility and operational and financial efficiency.

Building societies have grown with the communities they service.

Platforms that are built to leverage artificial intelligence and machine learning give building societies the ability to deliver the kind of personalisation that reinforces their established brand image. Systems that are built to accommodate open application programming interfaces, or APIs, and that use mass enablement for new product features and service rollouts will make adding new innovations later both cost-efficient and operationally feasible.

The cloud

In banking, trust and security are synonymous, and investing in or partnering with companies that have invested in the cloud is an important strategic decision.

When executed properly, a private cloud infrastructure delivers greater resiliency, enables faster software enhancements and ensures data security. Other benefits include significant decreases in infrastructure issues, improved online response times, enhanced batch processing times and the ability to swiftly respond to disasters and disruptions.

Data

It used to be that only the largest financial institutions could afford good data. But now the ability to access, filter and focus on real-time data is within reach for building societies as well.

In addition to adding even greater personalisation to digital and mobile banking tools, building societies can make further use of data to drive cost efficiencies, growth initiatives and service improvement efforts, as they deliver that differentiated customer experience they were built on. For building societies workers who fear they can’t harness an influx of data: don’t let the flood of information incite “analysis paralysis.” Start with a focus on your key goals. Then, ramp up other functionalities as you gain more confidence and skill. Data is a tool for creating an even better bank.

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Regulatory compliance 

To quote Spider-Man, “with great power comes great responsibility”. This rings as true as ever for building societies who, with increasingly stringent regulatory compliance burdens on their plates, need to make sure all the benefits incurred with increased data are analysed and harvested both legally and ethically.

It also demands that building societies put in safeguards as part of their fiduciary duty. Do your due diligence and make sure whatever method you choose, be that technological or hiring additional staff members, accounts for the ever-shifting regulatory environment and can ensure adaptability.

On your marks

Building societies need not despair at their technological deficiencies. After all, it’s far easier for a building society to catch up on five years of technical innovation than it is for a neobank to catch up on fifty years of hard-earned customer loyalty.  Get in the driver’s seat, set the GPS for transformation, and start your digital journey.

So why did blockchain adoption take so long compared to other new technologies such as cloud and AI? The slow adoption in highly regulated, complex markets such as the financial services industry shouldn’t come as a surprise. Blockchain is suited for complex, collaborative, multi-party, and critical application use-cases. This is another big reason why blockchain adoption has taken much longer than some predicted, as Rob Coole, VP of Cloud Technologies at IPC, explains below.

Next-generation blockchain

Next-generation blockchain organisations are leading the way showing how the technology can be used intelligently for the world we live in today. For example, R3, an enterprise software company, is working with an ecosystem of over 200 financial institutions, regulators, trade associations, professional services and technology companies to develop Corda, a Blockchain platform designed specifically for businesses to deliver two interoperable and fully compatible distributions of the platform that addresses issues such as transactional certainty, data privacy, and scalability limitations.

Gartner predicts that blockchain will be fully scalable by 2023. IPC’s sense of the future of blockchain, particularly in the enterprise space, is just as positive. We are seeing customers truly learning about the practical reasons to deploy, leading to more investment in time and money in blockchain.

Importance of complementary partnerships

Both application service providers and subscribers should partner with service and product providers at an operational level integration to be ahead in the blockchain curve.  Real value is provided with the integration and support from the hyper-scale platform community such as Microsoft Azure and AWS together with open industry platforms, such as IPC’s Connexus Hub, that creates end-to-end solutions that solve business problems. The importance here is APIs. We believe in a API partner integration approach which gives institutions the ability to easily access data, provide insights and inspire innovation for the market need.

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Service providers, like IPC, can play a critical role here by supporting operationalisation in the systems-oriented context. Such providers are a natural connector embedding connectivity to key market participants. IPC, for example, enables access to all asset classes with over 2,000 sell-side firms, 4,000 buy-side firm and 75+ exchanges in its vast, diverse ecosystem.

What’s next?

COVID-19 has provided a ‘new normal’ that is impacting every aspect of our lives. Though this pandemic is devastating from a health, societal and economic perspective, blockchain may help the global economy rebound. The World Economic Forum believes technology such as blockchain “will benefit all countries currently impacted by COVID-19”, as it provides an efficient approach to reduce trade cost on a global scale.

Digital initiatives such as blockchain is non-partisan and open to all which allows users to act quickly at low cost with low barriers for innovation - all valuable factors in supporting the economy in an economic downturn. So, although blockchain adoption was slow in its early stage, 2020 seems to be the year blockchain comes of age.

Not only will it make you more efficient once life returns to normal, but it will also help to save you money which can be used to reinvest in staff and other areas of your business. These are some of the reasons why COVID-19 is the perfect opportunity to reorganise your finances and the ways in which you can do so. 

Work with specialist accountants

When dealing with finances, specialists can offer targeted advice that offers greater results. But particularly during these uncertain times, gaining professional advice and guidance is key, so now is a great time to work with accountants or financial specialists who really understand the nuances of your industry. 

“Once you have your plan in place, you need to make sure that it is financially viable, to make sure that you are realising a profit,” says OS Accounting, a chartered accountancy firm that specialises in working with SMEs. “Any banking or financing house will expect to see realistic and well-considered financial budgets and forecasts and translating an idea into facts and figures needs experience."

Make it easier for customers to pay

No sale is complete without your customers paying you for your service or product. But with an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options. 

From PayPal to Amazon Pay and Apple Pay, there are various options to choose from that will make it easier for your customers to pay you to keep your business taking an income. 

With an increased need for contactless payments in light of the pandemic, it’s vital that businesses adopt and embrace cash-free payment options. 

Go digital

It’s much easier to keep track of all of your financial documents if the business is digitised. While lockdown forces us all to adopt more downtime, there’s time to make the switch to a more digital way of working. 

Not only does it make accessing these documents easier when working remotely, but it also provides a safer form of storage as leaving hard copies in filing cabinets makes it easy for data to be stolen. There are many online tools and software options that will help you digitise your business, particularly where finances are concerned. However, make sure that all of your documents are backed up with a cloud-based service so that you can be sure they are secure. 

Do the things you’ve been putting off

Now is the time to make use of more time and do the things you’ve intended to do for months but haven’t had the time. Use the lockdown to take stock of how your business is operating and make the necessary changes – this might include separating personal and business finances more efficiently by opening a separate bank account or tracking and auditing your expenses.

Whatever financial tasks that have been sitting on your to-do list for a while can now be ticked off to make the best use of your downtime. 

Have regular finance meetings

COVID-19 offers a chance for a fresh start in numerous ways, but particularly where processes and systems are concerned, so get into new habits that will help streamline your business processes for the future. One way to do this is to hold regular weekly finance meetings so you can regularly keep track of income, outgoings and expenses. 

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Money is tight for some SMEs and may be fluctuating more than usual during the pandemic, so it’s a great time to gain an understanding of where your money is going. By having this knowledge, you’ll be able to avoid the liabilities that can bring many businesses down in order to keep it running productively and profitably. 

Final thoughts

Businesses across a host of industries have found themselves in unchartered territory since the COVID-19 pandemic began, but it has hit SMEs harder in many cases. By making use of this time to reorganise the financial aspects of your business, you can hit the ground running once life returns to normal and ensure that your business continues to turn a profit throughout.

The COVID-19 pandemic has not just had a devastating impact on health and society, it has dominated economic and business matters unlike anything we’ve seen in peacetime history, and, across the globe, schools, companies, charities and self-employed professionals are still adjusting to a brand new remote working contingency plan.

Fortunately, as a society, we are extremely well-equipped to adapt to remote working with a turnaround time of just a few days. This was proven by the sheer quantity of businesses, many of whom care for thousands of employees, who just a few weeks ago managed to transform their entire internal structure to a digital environment. Not only is this an inspiring example of human  collaboration at a time of crisis but also a true testament to the power of the technology at our disposal.

In fact, remote working has proven itself so effective for some organisations, that it has gone beyond a short term contingency plan; it’s starting to look like remote, or at least flexible working, will be incorporated in the long term for thousands of office-based workers. Clement Desportes De La Fosse, Co-founder and Chief Operating and Financial Officer at Spearvest, shares his thoughts on how the finance sector will be forever changed by the pandemic.

Although it may sound premature to think about a post COVID-19 world, a majority of industry operations are sure to change forever, and, none more so than in the financial sector. For many years, traditional banks and financial institutions have been associated with outdated infrastructure and slow legacy IT systems, which are a burden for financial professionals and consumers alike. In fact, a recent study in 2019 revealed that UK banks were hit by ‘at least one’ online banking outage every day across a nine month period.

Today, the demand for banking and financial services has never been higher: emergency loans, government payment schemes and personal finance management are required for people to survive. What’s more, visiting a branch in person is no longer an option, and therefore financial institutions are forced to invest in capable IT infrastructure and relevant automation, regulation, and finance technology to deal with influx of demand.

For many years, traditional banks and financial institutions have been associated with outdated infrastructure and slow legacy IT systems, which are a burden for financial professionals and consumers alike.

Whilst it could be argued that this much-need update was inevitable, the pandemic has certainly forced many banks’ hands in enforcing this change, and means our financial institutions will emerge from the crisis with a much more capable IT infrastructure. The following areas are where banks are, or should be investing, in the coming weeks, months and years, with insight into how exactly these cutting-edge technologies are impacting the financial services sector for the better.

Artificial Intelligence

Artificial Intelligence (AI) has been a growing trend in finance in the past decade, primarily being used to address key pressure points, reduce costs and mitigate risks. However, the demand for digital banking services as a result of COVID-19 will likely push the sector in the direction of developing and incorporating sophisticated automation and customer service AI.

We’re a few years off the mass adoption of robotics technology of this nature, but it’s safe to say the COVID-19 threat has highlighted the pressing need for more automation and better service technology.

Public Cloud

The shift toward cloud-based computing has already been significant, with most financial institution operating cloud-based Software-as-a-Service (SaaS) applications for business processes, such as HR, accounting, admin solutions and even security analytics and know-your-customer verification.

However, advancements being made in cloud technologies and increasing demand for SaaS applications for remote workers means that soon we could see core services in the financial sector, such as consumer payments, credit scoring and billing, to become stored and managed in cloud-based SaaS solutions.

RegTech

Much like the increasing demand for AI and Cloud-based SaaS applications, regulatory technology (RegTech), can do important work in ensuring financial work remains regulated and legal. The right RegTech, such as automated customer onboarding technology, can also save a firm a lot of time, freeing-up much-needed time to focus on the work that can not be completed by software or a robot.

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Big Data

Customer intelligence facilitated by big data and consumer behaviour is an incredibly important tool which can be used for extremely accurate decision making, risk-assessments and revenue and profitability forecasts, to name just a few use-case example.

Some modern financial institutions and start-ups have been using big data and analytics technology for a number of years, and those more ‘traditional’ which may have neglected this cutting-edge technology are depriving their customers of top tier financial advice and insight at a time when they are in need of it most.

Security

Cyber attacks, money laundering and hackers have always threatened the financial services to a large extent. However, with entire workforces online, operating in a remote, sometime unsecure environment, the cyber-threat facing consumers has never been larger.

Thus, cyber-security has, and should, be invested in heavily by financial institutions looking to protect their own client, employee and company sensitive information. At the same time, safe internet and banking practice should be implemented and taught to all members of the general public to ensure they do not give away sensitive information such as payment details.

Fast forward, five years from now, we will look at the pandemic as a trigger that enabled us to spend our time more efficiently, and digital technology and the cloud will be key in facilitating this positive change.

Michelle Shelton, Product Planning Director at MHR, explores how crisis management can be improved through automated solutions.

In any business, people are your biggest asset and your biggest cost.

It is why amid the turmoil of the coronavirus lockdown, business continuity has rightly focused on providing full support to millions of employees working from home.

The danger is that functions such as payroll and HR find themselves overlooked or overburdened. There’s often an assumption that these departments run on rails no matter what happens.

When almost everyone works from home, however, payroll and HR can be overwhelmed by the volume of queries about pay, expenses, bonuses, commissions, and the limitless range of concerns employees have about sickness pay, curtailment of earnings, family matters, and so on. This is compounded by changes in government legislation or rules about furlough or holidays that need to be considered. What is the right response from a technology perspective?

Cloud-Based Applications Are Proving Their Worth

It is imperative, therefore, that payroll and HR staff have access to the applications they use daily, so basic functions remain operational and they continue communicating across the business. But many organisations have found, to their cost, that remote working is not just a matter of lifting and shifting from the office to the home. A survey of companies with more than 1,000 employees last year found 52% were still using spreadsheets for payroll admin and more than a third were using paper timesheets. This is almost impossible to run effectively with a remote workforce. Businesses that have bespoke payroll systems operating from on-premises servers are suffering almost as badly, because these vital applications are now inaccessible.

The plain fact is that for many company payroll and HR departments there will be no alternative to the adoption of new, cloud-based applications that boost collaboration and streamline efficiency.

Implementation is swift. A major software and outsourcing provider with 650 employees has been able to shift to full remote working in three days, transacting more than 50 payroll functions quickly and seamlessly.

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Saving Thousands of Hours

A good example, from more normal times, is Swinton Insurance, which has 4,000 employees across the UK. It saved 132 working days through automation of absence authorisation and the introduction of digital payslips, having previously depended on spreadsheets. All the difficulties of employee queries and the confusion about the combination of pay and benefits were resolved through adoption of a cloud platform. The company’s HR department made the transition from a highly transactional unit to one helping drive up performance across the business.

Chatbots and Voicebots Offer Employees Instant Answers

Payroll and HR should also consider deploying chatbots and virtual assistant-type voicebots to help relieve them of the time-consuming burden of repetitive queries about pay and employment matters when employees are stuck at home. Within 24 hours it is possible to have a chatbot capable of answering 50 common queries. A more advanced cloud-based platform will offer these technologies. Employees can even upload receipts with a quick smartphone photograph, automating the administration of expenses claims and making the whole process much easier.

Cloud computing is one of the most transformative digital technologies across all industries. Cloud services benefit businesses in so many ways, from the flexibility to scale server environments against demand in real-time, to disaster recovery, automatic updates, reduced cost, increased collaboration, global access, and even improved data security. Numerous financial institutions around the world are already reaping the benefits of cloud infrastructure to fit their technology needs today and help them scale up or down in the future as economies evolve. According to research by the Culture of Innovation Index, 92 per cent of corporate banks are already utilising cloud or planning to make further investments in the technology in the next year.

The Bank of England is the latest financial institution to announce it has opened bidding for a cloud partner to support its migration to the cloud. Craig Tavares, Head of Cloud at Aptum, explains the significance of the Bank's decision to Finance Monthly.

As the UK’s central bank seeks to move to a public cloud platform, IT decision makers are likely to encounter hurdles along the way. Figuring out the right partner will be half the battle for the Bank of England; it can be very difficult to identify and map out the broader migration and ongoing cloud infrastructure strategy.

The central bank’s cloud computing approach reflects an evolution in the way financial organisations are viewing data and the applications creating this data. The industry wide shift to viewing data as an infrastructural asset could have precipitated the Bank of England’s own move to the cloud. As such, the organisation should consider these four areas to determine their cloud strategy and partner -- performance, security, scalability and resiliency.

Figuring out the right partner will be half the battle for the Bank of England.

Performance

Traditionally, financial institutions are known for their risk aversion and have been hesitant to undertake digital transformation due to their reliance on legacy systems. Fraedom recently found that 46 per cent of bankers see this challenge as the biggest barrier to the growth of commercial banks. But due to issues surrounding compliance, moving completely away from legacy systems isn’t always an option. This is no different for the Bank of England which is looking to move to a public cloud platform in order to enhance the overall performance of customer payment systems in the new digital age.

Legacy IT systems can prove to be a challenge for financial organisations looking to move applications to the cloud. Outdated processes often lead to system failures, leaving customers unable to access services, resulting in increased customer loss. However, with public cloud it is crucial to find the right combination of cloud services by defining the proper metrics for application performance and storage of critical data.

Legacy IT systems will need to co-exist with new or refactored cloud-based applications. Because of this, the bank will need to consider different strategies using hybrid cloud and multi-cloud architectures to align performance and cost. And when it comes to time-to-revenue or time-to-value the bank will be looking at traditional IT methodologies while leveraging cloud native approaches. The cloud native approach will lead to adopting DevOps as a new culture and Continuous Integration and Continuous Delivery or Deployment (CI/CD) as a process. These practices automate the processes between software development and operational teams which as a result will allow the bank to deliver new features to customers in a quicker, more efficient manner.

Depending on the hybrid IT architecture being used and whether the approach is traditional IT or cloud native, there will be different ways to ensure the best application and data lake or data warehouse performance. In order to do this, the bank will need to partner with a technology expert who will be able to offer guidance on the different levels of technology stacks required during the cloud migration.

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Security

Central banks have traditionally kept close control of their IT systems and long expressed concern over the security of their customers’ information and financial transactions. As such, migrating to a public cloud platform and handing over to a cloud partner could heighten these worries. Global banks are expected to adhere to strict regulations to reduce the number of security issues within the financial sector and all new technology implementations must be compliant.

As complex regulatory requirements – such as the Markets in Financial Instruments Directive (MiFID) and Anti-Money Laundering rules (AML) - continue to cause a barrier to cloud adoption in the financial sector, the Bank of England should consider a partner that is able to adapt to high regulatory demands. As such, a three-way partnership should form between the Bank of England, cloud consultants and cloud service providers. This particularly applies if the UK central bank were to take on a multi-cloud approach – leveraging Amazon, Azure or both. This way, the three can be aligned and acknowledge the journey the bank has taken so far as well as the future of the financial organisation from a regulatory standpoint.

Adopting a partnership approach decreases the risk of security breaches which often cause client relationships to disintegrate.  In the past, security was treated like a vendor-customer relationship rather than an important partnership from day 1. Data is a major focal point in this discussion -   how the bank is protecting customer data or how they are managing financial data. Cooperation between partners ensures the configuration of every cloud service being used has the right security measures integrated into it from the start observing compliance requirements like GDRP, data sovereignty and data loss prevention.

Adopting a partnership approach decreases the risk of security breaches which often cause client relationships to disintegrate.

Scalability and Resiliency

With a growing abundance of data, The Bank of England will need a cloud platform that will allow them to scale up or down accordingly. Fuelling the growth of the bank’s data are its applications, which also need special scaling and resiliency considerations just like the data itself.

Keep in mind, cloud is not an all or nothing discussion. Not every application the Bank of England has needs to go to the hyperscale public cloud. For example, it may start with a progression to private cloud and then to a public cloud vendor agnostic framework based on the scaling and resiliency needs. The financial institution should understand which applications are best suited for the cloud at this time and which will be migrated at a future point. They should ensure that cloud is an enabler and not a detractor. It’s important to understand the cloud journey is an ever-changing process of evaluating business goals, operational efficiencies and adopting the right technologies to meet these outcomes at the right point in time based on ROI.

The UK central bank should consider moving to a container-based environment and cloud platform services (but as mentioned, in a hybrid cloud architecture), technologies that will enable an efficient process of building and releasing complex applications with the right scale in/out and uptime capabilities. The bank may incorporate Site Reliability Engineering (SRE). SRE is a discipline that leverages aspects of software engineering and applies them to infrastructure and operations challenges. The key goals of SRE are to create scalable and highly reliable software systems.

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The Bank of England has come to recognise the significant impact cloud can have on the business and the benefits cloud technology will bring to their customers. Banks will become leaders in setting the bar for other organisations and industries when it comes to moving to the cloud. However, when it comes to choosing the right collaborator, The Bank of England should seek a cloud partner who is able to meet their business objectives, understands both traditional IT and cloud native approaches, along with hybrid multi-cloud and the data challenge which includes performance, security, scalability and resiliency.  Working with the right Managed Service Provider (MSP) partner can provide them with the necessary expertise and developing solutions that bridge the gap from where they are today, to where they want to go.

Below, Danny Phillips, Zscaler's Senior Manager of Systems Engineers, discusses the importance of cloud technology and its implications for older entities in finance.

In the financial sector, bigger has always meant better. In fact, if a financial institution is suitably large, it is deemed so vital that, as the popular terms suggests, it is “too big to fail”. This situation has provided two key benefits for large players in the financial sector: the potential cushioning from government when things go wrong, and a tacit understanding that they’re essentially untouchable when smaller competitors enter the marketplace.

This all held true for some time, and newcomers in the space have generally carved themselves a niche, remained relatively small, and never really threatened the incumbents. As such, it can be argued that complacency has permeated the halls and boardrooms of some of the biggest players in the finance sector.

There are, however, signs of change across the sector. Whilst the financial institutions of old aren’t likely to shutter their doors anytime soon, recent technological innovation is shifting the balance of power considerably. It’s not the only technology playing its part in this equation, but cloud IT is the driving force behind disruptive industry newcomers, providing the agility they need to launch products and services faster, push forward better customer experiences and target new markets more precisely.

Lowering the Barriers to the Finance Sector

There have always been barriers to entry to the financial services sector. Chief amongst them has been the tight regulatory landscape, which ensures that smaller players can’t operate without first having the required licences (PSD2, PCI etc.). Although regulation is a necessity, a potential drawback is that it’s yet another barrier for smaller outfits to traverse.

There are efforts, however, to clear a path for smaller businesses. The success of Open Banking has allowed third parties to develop services around financial institutions, with plans to extend this beyond the retail banking sector and encompass products in the general insurance, cash savings and mortgage markets, under a new model called 'open finance'.

This has opened the door to smaller fintech companies to create a host of consumer-focused products, including money saving and credit-building apps. This has been significant because, when considered in conjunction with cloud, it’s arguably putting larger financial institutions, particularly banks, at a competitive disadvantage.

Cloud IT is the driving force behind disruptive industry newcomers, providing the agility they need to launch products and services faster, push forward better customer experiences and target new markets more precisely.

Cloud-Enabled Agility

Cloud is enabling new businesses to be set up without the burden of the physical infrastructure so intertwined with the older, larger industry players. For new entrants, any part of the business can be picked off the shelf. Salesforce for your CRM system or Workday for your HR, all paid for monthly or quarterly. Computing functionality can be purchased as-a-service and can even be paid for in increments as small as a CPU cycle. All that’s needed to enter a market is a great idea, a laptop, an internet connection and a credit card.

Bringing the conversation back to banking in particular, we’re already seeing the benefits disruptive new players are reaping. The likes of Monzo, Revolut and Starling Bank, are releasing new features and functions nearly every month (often based on customer feedback), enriching the customer experience and generating positive word of mouth. They’re able to do so because of their lean and agile structures, unburdened by a reliance on physical hardware, paperwork or branches. Currently, high-street banks are struggling to compete at this level.

Why the Bigger Financial Institutions Aren’t Embracing Cloud

Imitation is the sincerest form of flattery, so why aren’t larger financial institutions just doing the same as these smaller competitors to ward off the competition before it gets too big? A 2019 research paper from 451 Research revealed that financial services companies are behind other business in deploying cloud as a central part of IT operations. Around 70 per cent said their cloud projects were only at the initial, or trial and testing, stage.

There are a number of reasons why this might be the case, namely legacy IT debt, unfinished upgrades and compliance. Obviously, like any business, financial institutions are under pressure to use what they have already paid for before moving on to the next generation of infrastructure. Established businesses have to plan migrations, with business as usual taking priority.

In my experience, what we see instead is a one foot in, one foot out hybridised attempt at cloud adoption from larger financial institutions. Newer applications will be running in the cloud, but the majority will remain housed within the main datacentre. The end result is virtual machines running in the cloud with permanent connections between the corporate network and the cloud provider. So, when someone wants to access this application remotely, they have to dial back into the office on a VPN to get to the cloud instead of connecting to the cloud directly.

This dilutes the benefits of the cloud, and isn’t really a true step forward.

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Thinking to the Future

If plans to open the financial services sector up to new businesses continue along this trajectory, we’re going to be seeing a far more varied industry landscape than we’re seeing today. If larger institutions are still playing catch-up on cloud, by the time they make it there the conversation will have moved on.

Financial services institutions therefore have a doubly difficult route ahead of them. As well as accepting the sunk costs of now outdated infrastructure and upgrading to a cloud-first mindset, they also have to keep an eye on the future. For my money, what they need to be thinking on is how to leverage 5G for competitive advantage, and how to do so in-step with their smaller competitors.

As the use of 5G becomes more widespread in the 2020s, local area networks (LANs) are set to disappear. We currently look to Wi-Fi to access the internet, but when every PC or mobile phone is equipped with ultrafast 5G, the use of Wi-Fi becomes an outdated notion. The traffic from 5G devices will connect the right people to the right applications—through a digital services exchange—and this will deliver faster, more secure, and more reliable access to apps and services.

The promised low latency, high data capacity and reliability of 5G networks has a host of applications in financial services, and creates a new platform for the delivery of services on mobile. For banking, reliable video conferencing sessions with mortgage brokers, or financial advisors, without having to travel to their nearest branch could be commonplace, rather than a seldom used novelty. Real-time data streams from customers, perhaps in conjunction with a machine learning platform, could aggregate a customer’s behavioural data in real time, enabling contextual financial recommendations.

If larger institutions are still playing catch-up on cloud, by the time they make it there the conversation will have moved on.

5G will not be solely a benefit to a bank’s customers though. Its impact will be felt so broadly that banks need also to think about how their own employees will utilise 5G. It’s highly likely that, as 5G becomes the norm, expectations for quick and hassle-free access to applications will climb. When applications are hosted in the cloud, fast internet access is more important than ever. If a user’s device has faster internet access than the corporate network, those users are likely to continue using their superior mobile access, as opposed accessing the internet via the corporate network. It’s a matter of human nature to take the path of least resistance.

However, security may not be top of mind for these users as they access work applications while away from the corporate headquarters. Protecting an on-premises network infrastructure will become less relevant and financial organisations will have to adapt to secure the “edge” once more: in this case, the individual user on their mobile device. Banks and other financial institutions will have to be able to respond to the effects of evolving user behaviour introduced by 5G.

In many ways, financial institutions are facing an uphill struggle to make back the ground they’ve already lost by dragging their feet on cloud adoption, both in terms of fulfilling the needs and expectations of their customers as well as their staff.

Ultimately, for end consumers, these newer, faster and more convenient financial services are inevitably coming our way. Whether they’re brought to us by one of the big four, by a challenger like Monzo or Starling, or even by Google or Apple, is still to be decided.

Money is a sensitive subject when it comes to the legal world. This is why governments are having a difficult time adjusting their policies to allow the utilization of emerging technologies to enhance traditional financial services. Add to that the boundless possibilities and unexplored scenarios of the results of adopting these technologies, then you have more people opposing the idea instead of championing them.

For instance, many proponents have shown the superiority of using blockchain technology in carrying out cheaper and more secure financial transactions through cryptocurrencies. But until today, most governments still don’t know how to respond to the growing market.

The challenge now lies with traditional finance companies who can only benefit from using these technologies for more efficient systematized operations. If these organizations can adopt these tech while assuring the authorities about the consistent quality and security of the service, they can help speed up the changes in the existing guidelines and policies.

This infographic by Prototype discusses the various technologies that are disrupting the financial industry.