Matthew Glickman, VP of Customer Product Strategy, Financial Services at Snowflake, examines the benefits that the data cloud can bring to financial services.
In the wake of COVID-19, financial services have had to adapt almost overnight to the economic challenges presented by the pandemic. With cities across the world going into lockdown, consumers expect banking to deliver digital-first experiences that match their usual expectations. Digital innovation is very much at the heart of this transition. To navigate and thrive in the current climate, capitalising on the data cloud will enable fintechs to respond nimbly to customer demands and remain competitive.
According to an Accenture survey, over half of respondents in the retail banking industry believe cloud technologies have the biggest impact on improving operational efficiency, and 40% believe that it can also generate business value for the industry. The data cloud can provide the foundation on which companies can build a technology stack that delivers business agility and growth. Here are three ways financial services companies can benefit from harnessing the data cloud.
Personalising Customer Experiences
The cloud offers companies the opportunity to house all their various types of data in one secure place, enabling them to personalise services for customers. By using the data cloud, companies have a consolidated governed location for all types of data (for example, clickstream, transactional, and third-party) that can ingest data from new sources such as IoT devices. This enables organisations to gain a 360-degree view of customer behaviours and preferences from multiple inputs.
The cloud offers companies the opportunity to house all their various types of data in one secure place, enabling them to personalise services for customers.
A full customer view is fundamental for a successful personalisation strategy as it enables organisations to pinpoint high-value customers and ensure they have a good experience at every touchpoint. Without real-time visibility into customer interactions, providing the best possible customer experience just isn’t possible.
Over time, digital banking platforms will evolve to incorporate ML predictive models to drive even more personalised banking behaviours. This will only be achievable for organisations who successfully tap into the data cloud, as the success of ML models will require support from ever increasing volumes and access to datasets, both within and external to an organisation. The more an organisation can tap into customer personalisation, the better equipped they will be at customer retention and remaining competitive.
Boosting Data Visibility
To ensure fintechs can continue providing the best possible customer experiences, and adapt to any demands posed by the pandemic, having an acute awareness of all data available will be key for these insights. Adopting a cloud data platform that offers the direct and secure sharing of data without the complexity, cost, and risk associated with legacy data warehouses is one such solution. With simpler, enhanced data sharing, companies can quickly and easily add new data products, and get near real-time insights across the business ecosystem on how this is operating. Offering a standalone data product to data consumers can lead to substantial revenue. For example, financial companies that collect tick-by-tick stock market data can use a cloud data platform to create a data project that they can sell to hedge funds.
A cloud data platform can also reduce the manual effort and copying that is necessary with traditional data sharing tools. Instead of physically transferring data to external consumers, companies can provide read-only access to a segment of their information to any number of data consumers via SQL. By breaking through barriers between disparate data systems, companies will find new sources of revenue and opportunity.
Cross-Collaboration
The rise of digital-first banks, the increased availability of online services and the ongoing surge in mobile banking all represent the modern evolution of how customers now interact with their finances. To meet the demands of today’s customer, financial organisations will see big benefits in collaborating with other finservs through real-time access to data. For instance, if a customer is using a third party fintech to track their finances, a financial institution must share data with that fintech organisation so their customers can access their accounts.
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Last year, 65% of banks and 76% of credit unions said partnerships with fintech companies will be an important part of their business strategies in 2020. These numbers represent an increase from 49% and 60%, respectively, in 2019, showing a clear trend towards a more open banking landscape. Financial institutions that do not take steps to improve the accessibility of its data risk frustrating their customers or losing them to a more agile and collaborative financial institution.
Data collaboration can also help improve instances where investment banks may otherwise have been forced to hold excess capital. This is because aligning on risk exposures and liquidity is executed through nightly correspondances instead of what could be real-time data sharing through the cloud.
With fully governed, secure data sharing, companies can also easily determine who sees what and ensure all business units and business partners access a single and secure copy of their data. Not only does this enhance efficiency, but centralising data into a single source of truth, rather than in separate locations, will boost data security.
Data is the lifeblood of the financial services industry. By migrating to and capitalising on the data cloud, companies can build a future-proofed technology stack that delivers business agility, enhanced customer experiences and data sharing capabilities that ensure business continuity during this volatile economic period. Prioritising these digital-first experiences for customers will ensure financial organisations have the competitive edge that these times demand.
James Johnston, Regional VP at Cloudera, presents a case for greater utilisation of data by banks and financial services firms.
For those who master the art of delivering customer service in financial services, there are huge rewards — including 55% higher returns for customer-centric banks. However, the financial services market is highly saturated, and challenger banks, of which there are 102 in the UK alone, are rivalling legacy institutions when it comes to giving consumers choices. In fact, Starling Bank, which only opened its doors in 2014, came out on top as one of the brands in the UK excelling at customer experience. So, how can financial institutions improve customer experience and remain competitive? One word: data.
True innovation lies in data
Organisations in the financial sector need to use data and analytics to offer their customers the most relevant products and services proactively. Currently, they do this by looking at traditional data sources, such as account activity, loan requests and investments. This helps these companies to form a complete understanding of the customer and their needs. However, for some banks, it is often here where their data analytic capabilities come to a halt. And it needs to change, as it is leaving them with only half the picture.
Today, there is a wider range of data sources available to banks than ever before, fuelled by the increasing amount of data we are producing. For example, unstructured data sources, including clickstream data, location data, social media streams and chatbots can provide a wealth of actionable intelligence. But by only analysing legacy sources, key insights into customers are lost. True innovation comes with the ability to analyse new and old data sources simultaneously. By doing so, banks can complete the picture of their customers and comprehensively anticipate and predict their needs based on their customer profile.
Organisations in the financial sector need to use data and analytics to offer their customers the most relevant products and services proactively.
Given the complexity and variety of traditional and newer sources of data, financial service providers need to ensure they have the tools in place to support them on their data journey. Gaining full visibility on every piece of data flowing through their network, from a single toolset, regardless of where it resides or where it came from, is therefore critical. By implementing this level of visibility, data can be analysed, and the true value derived in real-time to the benefit of the customer. The ability to detect fraud is a perfect example of this. Suppose a bank can ingest and analyse data in the here and now. In that case, the business can identify patterns and trends that are indicative of fraud and alert the customer to this activity, before it becomes an issue.
Embracing a customer-centric approach
It’s clear that the way data is linked together, in a data lifecycle, is what enables organisations to derive intelligence through which exceptional customer experience is delivered. This is why focusing on developing a connected data lifecycle, which takes into account the holistic view of the entire data journey from edge to cloud, will become a cornerstone of success for banks who want to lead in their industry.
A connected data lifecycle will, however also help banks and other financial services organisations to can meet critical business goals, including:
Acquiring new customers
Segmentation allows businesses to analyse and profile their current customers. By leveraging techniques such as segmentation, companies can fine-tune their outreach and target prospective customers by taking insights and creating messaging that is tailored to target new customers.
Expanding existing business
With a complete picture of the customer, including every interaction they have with the organisation, banks can look for opportunities to offer new products and services proactively. When looking for opportunities to cross-sell, it is important that the salesperson has access to the customer’s entire profile, including previous searches and history, in order to offer the most relevant product. If the different data sets relating to the customer are sat in silos based on how they were ingested into the business, it can delay this process, and the customer may lose interest or look elsewhere.
With a complete picture of the customer, including every interaction they have with the organisation, banks can look for opportunities to offer new products and services proactively.
Driving customer loyalty and long-term retention
Using analytics-driven customer engagement tools, such as digital assistants, customer surveys and feedback analysis, financial institutions can gather this information, derive insights from it in real-time and then push the outcomes back to their customers. It is a quick and effective way to garner a deep understanding of customers’ needs and personalising offerings accordingly. In fact, continuous re-evaluation of the data could quite literally allow companies to give customers what they want, despite their ever-changing needs.
Putting data insights into practice
The focus on customer experience is a critical component to a financial services organisation retaining loyal customers and remaining competitive. Two premier businesses that have remained at the forefront of their industry because of their use of data are Rabobank and DBS.
In order to help its customers — including small businesses — become more self-sufficient and improve debt settlement, Rabobank needed access to a varied mix of high-quality, accurate and timely data, that they could feedback to customers on demand. To achieve this, Rabobank implemented technologies that can cope with heavy pressures on data processing and ingest large quantities of streaming data. This gave Rabobank the ability to rapidly process historic and real-time data together, helping its employees run faster queries. From customers’ loan repayment patterns to up-to-the-minute transaction records, Rabobank and its customers can now immediately access the valuable data needed to help them understand the status of their financial situation.
DBS, one of the leading banks in Asia, recognised that in order to deliver superior customer experience it had to become more data-driven. However, the company’s traditional technology stack for supporting advanced analytics was expensive to scale and not flexible enough to support this work. This led the bank to build a central data team and enterprise data hub that now enables staff to continually experiment and be at the forefront of innovation, to understand the customer experience more fully. DBS then used data and knowledge to apply human-centred design to its services. With the ability to more easily store and analyse billions of events in a modern data platform, DBS can answer questions before they’re asked, effectively engaging customers and proactively delivering a better service.
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Utilise data, remain competitive
Competition amongst financial institutions is fierce, and one negative experience is all it can take for a demanding, and changing, consumer to jump ship. To avoid this, financial services companies need to be guided by their data. The organisations that excel in the future will be the ones that are investing in the means to effectively ingest, analyse and derive value from data and put these insights into practice. After all, the data is there to be analysed and acted upon, so financial services organisations need to ensure they are getting the most out of it. If they don’t, they risk losing out to the more customer-centric competition.
Simon Shaw, Head of Financial Services and Insurance at Software AG, outlines three ways in which larger banks can – and must – make their business models more agile.
In the months since COVID-19 reared its ugly head and changed the way we live, there has been a noticeable uptick in conversations around digital transformation and embedding resilience. In the banking sector, the focus had been on the increased demand for online banking and questions around how banking monoliths will adapt.
The reality is that big banks can adapt – albeit slower than other industries. That’s not to say that change isn’t happening; banks have been transforming for years to align with changing customer needs. However, it’s a distinctly difficult and complex challenge. In fact, one of the primary challenges with digitalisation in banking is that moving quickly doesn’t happen easily. Of course, CFOs and financial leaders would love to quickly pivot their operations to meet changing needs and new requirements, but in their current state, most incumbent banks don’t yet have that capacity.
To achieve digitalisation, banks are grappling with many moving parts. From regulatory requirements, to safeguarding customer data, to overcoming silos – and that’s before we consider the sheer cost of it all. I have identified three ways for established banks to pivot more quickly and efficiently in today’s climate.
1. Go Hybrid or Go Home
A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation. Changes that may seem simple, or are simple in other sectors, can require full programme rewrites when applied in banking. The legacy systems on which most large banks are built are clunky and inflexible. Since these systems don’t run in real-time, they’ll never compete with the efficiency and analytic capabilities of challenger banks. Yet, despite that, these established systems actually hold the key to future success in banking – data.
The wealth of data contained within a heritage system has the potential to entirely transform the customer experience. However, to do so, banks must be able to access and integrate that data at speed.
A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation.
Hybrid cloud presents the best of both worlds; it combines the operational stability of on-premise solutions with the scalability, reduced cost and data accessibility of the cloud. Breaking up isn’t easy but, according to IBM, banks that are outperforming their competitors are 88% more likely to have incorporated hybrid cloud into their business model. For banks with decades of data in monolithic technology stacks, turning certain data and tasks over to the cloud can significantly lighten the load on their ecosystem to improve efficiencies.
2. Visualising Opportunities for Change
Digital transformation has changed banking expectations. Customers want speed and convenience and banks are competing to deliver. Excellence requires efficiency, but that can be difficult to achieve.
Process mining identifies optimisation opportunities and strives for excellence in process performance. As the name suggests, process mining delves into the detail of what occurs as a process is actioned, revealing patterns, anomalies and the root causes for inefficiencies. With greater insight into processes, banks are able to make informed decisions and tangible improvements to quality and performance. To compete with the challengers, established banks need to embed the ability to adapt to changing business requirements and make transformation routine. The first step to this is visualisation.
If hybrid cloud is the vehicle by which digitalisation is achieved, process mining is the check engine light.
3. The Building Blocks of Better Banking
One of the biggest challenges to transformation lies in evolving away from heritage applications. Transitioning from old to new is daunting and can come with a hefty price tag. Microservices enable banks to transform piece by piece and scale at a controlled rate.
Transformation in data-reliant and regulation-heavy sectors will never be a walk in a park, however, microservices start small by design. This returns much needed control to banks and ensures complex changes are developed and tested independently before being integrated into the banking ecosystem.
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To fundamentally change business operations, the very foundations of that organisation need to be redesigned. This applies across industry, which is why, between 2018 and 2023, the microservices market is predicted to nearly triple as more organisations shift their transformation up a gear.
Microservices embed agility and efficiency from the outset, making digitalisation a cultural and technological change. By returning control and enabling a customer-centric and scalable design, transformation can add big value to big banks.
Agility is essential, but moving a monolith isn’t easy
In banking, where archaic systems and rigidity have been governing organisational change for years, digital transformation really means reinvention and growth. While the end-goal is easily defined – agility, resilience, scalability, digitalisation, etc. – it’s difficult to know what’s needed to achieve it. When the dependencies, regulatory requirements and price of change are thrown into the mix, it’s no wonder that change takes time in the financial sector.
Hybrid cloud, process mining and microservices create the foundations for development by embedding transformation capabilities into the very core of a banks system. While financial institutes will always be subject to a high level of scrutiny, strategic solutions that bring order, visibility and an ability to compete with smaller and more agile banks are truly transformative.
Andy Campbell, global solution evangelist at FinancialForce, analyses current trends in the financial services industry and how firms can keep pace with customer demand.
In the digital age, the finance function of old is no longer sufficient. Whilst generating reports, budgets, and plans will still remain core to finance’s day-to-day activities, the modern business landscape moves quickly, and the finance team needs to be similarly agile to keep up.
Digital transformation across businesses and whole industries requires finance departments which can support new business models, plan for agility, create outcome-based versus product-based offerings, and identify new joint venture opportunities. In short, finance needs to move away from bean counting and work more closely with internal stakeholders and customers to provide innovative experiences and organisation-wide value.
This is a radical transformation of what has come before, and requires a similarly radical shift in long-established mindsets both within the finance department as well as the rest of the organisation. If this change in mindset can be achieved, finance teams can start to take advantage of the data analytics solutions now more widely available. With a new level of visibility offered through rich, timely data and advanced analytical tools, businesses are making changes to embrace new models. The finance function is having to increase its agility in order to deliver and support the overall business.
The COVID-19 pandemic has played a significant role in this transformation. It has shone a light on business inefficiencies, and as a result, has acted as a catalyst for digital transformation, speeding up digital initiatives. We have seen more change in the last six months than we have in the previous six years. Additionally, the focus on managing cash more effectively to ensure survival has meant that the transformation focus that was typically centred around the front office - the way we deal with our customers - has changed. We are now seeing a growing interest in transforming the back office.
The finance function is having to increase its agility in order to deliver and support the overall business.
This will not happen overnight, and there are five key shifts that a business needs to make to transition from the traditional finance department to a digital office of finance.
Shifting from financial-only proficiency to enterprise-wide know-how
Financial metrics will always be important, but the modern finance leader needs to broaden and develop an understanding of KPIs in other areas of the business too. They should have knowledge of both customer experience and satisfaction, in addition to conversion rate optimisation and employee retention to round out existing analysis. This presents a massive contrast to accounting teams from years gone by, with the modern finance leader having evolved into a major business stakeholder. The focus is no longer just on the finance element, but also on creating and continuously strengthening healthy customer relationships and customer lifetime value.
Shifting from monthly reporting, to real-time decision-making
Today, monthly closes or quarterly reviews are too slow. Decisions need to be made using real-time data every time. Accuracy and speed are paramount when it comes to making sure that a business is successful. Understanding what is involved in creating and delivering a new offering - and being able to course-correct to maximise profitability or customer satisfaction - can no longer wait until the end of the month or quarter. As such, a business must invest in business intelligence (BI) and artificial intelligence (AI) solutions, so as to quickly derive insights about how the business is performing, and to subsequently act on said insights.
Shifting from static forecasts to rolling forecasts
If finance departments are to switch to a weekly or even daily forecasting schedule they’ll need technology to support their endeavours. Modern forecasts must account for several different models, constantly shifting sets of variables and the use of new technology like AI. This requires organisations to build agility across a number of business risk scenarios, such as price wars, natural disasters, or the current COVID-19 pandemic.
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Shifting from financial analyst to business model strategist
For businesses to remain one step ahead of the competition, they need to be constantly searching for new revenue streams. This could be considering how to turn services into products (or vice versa), or creating new offers or bundles for customers and presenting them in a different and unique manner. Central to enabling these new approaches is real-time data, as it provides visibility into both what sells, and what deliveries the highest margin. From this, they can then pinpoint the top performers and double down on them.
Shifting focus from product to customer success
Many sectors of the economy have already transitioned to a services and subscription renewals model. With this change comes a renewed need for businesses to redouble their focus on customer experience. Finance leaders need full visibility over each and every account in order to enable smarter decision making. This means becoming more engaged with their customers, so as to ensure satisfaction and retention. Customer onboarding, service delivery, support, or other post-sales functions: finance leaders must get closer to all of them. Only then can those deep insights into customer behaviour, as well as service and product quality, be uncovered so as to make sure that the needs of the customer are fully met.
Even in small businesses where there are no full-fledged procurement departments, implementing spend management is still very important. To effectively implement this, you will need to collate, maintain, categorise, and evaluate spend data. The goal is often to regulate compliance and improve efficiency. Are you saddled with the responsibility of implementing spend management? Here are five effective ways you can do it:
Perform a Detailed Spend Analysis
To implement spend management effectively, the first thing you need to do is perform a comprehensive spend analysis. Through this, you will have a better understanding of what you are spending and where to make changes. The analysis will help you identify key suppliers and savings opportunities you can target. You will also be able to minimise risk and expense that come with non-compliant or underperforming vendors.
Streamline Payment Methods
A standard procurement department can easily track and manage all purchasing activity. In the absence of this, staying on top of all employee spend can be very challenging. A simple solution will be to streamline payment methods. Finding a way to feed all spend data automatically into one company bill will make things a lot easier, and it will also improve accuracy.
Define the Approval Process
In addition to streamlining payment methods, you need to define and clarify the approval process with everyone involved in procurement in your organisation. Every employee that can spend on behalf of the company must know who to approach for approval, and there must never be any form of conflict. When everyone understands the approval process and respects it, procurement will be less frustrating. Mistakes will be minimised, and no one will have to cut corners.
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Use E-Procurement Software
There are several spend management and e-procurement software that can help you implement the process. Some of these platforms can be integrated as an all-in-one solution or as individual platforms that will make your work easier and more accurate. With this software, you can effectively capture tail spend data and get the information in a comprehensive form in your dashboard. From the data you receive, it will be easier to make decisions and implement changes.
Invest In Education and Training
If you have a procurement department in your organisation, investing in education and training for every member will be beneficial in many ways. Even if you don’t have a standard procurement department, you can train everyone involved in procurement. This is even more important if you have integrated an e-procurement software. When every person on the team is well-trained and on the same page, implementing spend management becomes easier.
Endnote
Spend management is important to keep your business or organization profitable. Fortunately, you can improve the process by performing a comprehensive spend analysis, streamlining payment methods, and using a management software. For effective results, it is important that you do it right. Implementing the effective methods discussed above will help you achieve your objectives.
Neil Murphy, Global VP at ABBYY, examines the shifting role of CFOs and a new way in which they can bring effective transformation.
With the speed of digital transformation ever increasing, businesses and financial organisations are working hard to keep up. When they do, transformation often means expanding the responsibilities of those in charge – but it’s not all about the CIO, CTO, or even CEO. Nowadays, the Chief Financial Officer (CFO) is at the centre of this change. As such, the role of whole finance team will evolve, as they are placed at the strategic heart of the enterprise.
The CFO is in a unique position to bring intelligent solutions to the enterprise. Gartner predicted that by 2021, 85% of all customer interactions will be managed without a human. By introducing technology, businesses will be empowered to forecast how competitors will react, how customers will respond, and where risks will emerge. Nowhere is this level of competition more fierce than in banking and financial services (FS) – as such, the FS industry has become a battleground.
If they want to come out on top, finance teams will need to do more than just engage customers online. They need to strategise and map out their battle plan to attract and onboard new customers digitally, while creating a speedy and secure digital experience for existing ones. They need to invest in digitising their back-office systems and processes to enhance front-line interactions. Where better to gain a broad, accurate view of their organisation and processes than a ‘digital war room’?
Why a war room?
In many firms, including in banking and FS, the CFO and their team rely heavily on data that comes in from customer-facing operations, so they can link predictive analytics with customer behaviour. The sheer volume of data can be cumbersome, but with better management, financial institutions can anticipate the needs of customers, make banking easier, and pursue the right partnerships to increase capabilities and scale.
If they want to come out on top, finance teams will need to do more than just engage customers online.
Enter the digital war room. Here, CFOs can get visibility into every single process in their business as they actually behave. They can see variances, bottlenecks and delays, and put all this data to good use, mapping out how to better meet customer and business needs.
Process analytics can help to deliver insights from data that already exists within a financial organisation. With trends and customer needs constantly changing, it’s important that CFOs and banks stay ahead of the curve by capturing meaningful insights. In fact, 98% of banking and FS bosses agree that technologies (like process mining) would be helpful to their business. An example of this is delivering personalised services based on the customer profiles that banks have. They can use the data on customer preferences, buying history, demographics, and behaviour to better understand their needs.
A C-suite seat for process intelligence
Setting up your digital war room is only half the battle. The real challenge is about knowing which technologies to use in it. Whether it is account opening, loan applications, payment processing, or any of the thousands of other possible processes, the right technology is the missing link – a sure-fire way to win new customers and keep existing ones.
Attempting to automate your processes without first knowing which work well and which don’t is a losing battle – you’ll only make bad processes bad faster. This is where process intelligence comes in as a critical component of any digital war room. Right now, only 55% of banking and FS businesses we surveyed said they frequently use tech to assess business processes. This means almost half don’t have visibility of their data and can’t spot bottlenecks and blind spots in customer interactions – not to mention in their back-end processes. This might be causing more problems than the CFO realises – and could be the key to solving some age-old dilemmas.
Using the right technologies in the right setting is critical in helping finance teams nail the processes that trip them up. The war room can empower the CFO and its staff with oversight and control over the processes they work with every day. This means they can ensure that customer experience remain a priority – as this is critical for revenue generation – whilst making better business decisions than ever before.
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Digital transformation has blurred the lines between organisational change and technological. To keep up, CFOs will need not only to lead digital transformation efforts both big and small, but to quickly learn the strategic skills to create a war room – and win both the battle and the war.
Rich Vibert, co-founder and CEO of Metomic, takes a look at the changes the UK financial sector will soon see and how banks can best prepare for them.
With headlines focused on the UK's plans to breach parts of the Brexit agreement, many key business discussions have fallen by the wayside. But, this begs the question: how are banks going to be protecting customer data? And, what data protection regulation is in place to govern this process as GDPR becomes inapplicable?
These are difficult questions to answer and require banks to unpick complex regulation and governmental disputes, before they can even start to implement the tools that will protect their customers.
Securing data privacy
Recent reports show that there’s room for improvement when it comes to the banks’ ability to secure data privacy. According to a Bitglass study, 62% of the data breached last year came from financial services, and with the increased risk brought by COVID-19, the prospect of what could happen to data collected and managed by banks is worrying. Furthermore, back in March, a report by Accenture showed that one-third of financial services organisations didn’t have the technical or personal resources to address privacy risks related to customer data. If these firms haven’t addressed this gap yet, they will simply not be prepared for Brexit and the risk that a potential last-minute change in regulations will pose.
Post-Brexit data protection: what is at stake
After investing two years of work to become compliant with the General Data Protection Regulation (GDPR), banks are understandably unwilling to start again. At present, once we are out of the EU, UK organisations will need to comply with regulation that is yet to exist. Thankfully, there is a large chance that the UK will incorporate GDPR principles into its own law, but uncertainty and confusion still remains. And should new local measures be implemented, banks will need to move quickly to become compliant.
After investing two years of work to become compliant with the General Data Protection Regulation (GDPR), banks are understandably unwilling to start again.
When it comes to data transfers with other European countries the rules will become stricter, adding extra layers of complexity for financial institutions.
As we stand, the UK government has already declared its willingness to reach an adequacy agreement, to maintain a free flow of data between the two regions. However, given the turbulent relationship with the EU, the agreement on such a deal is by no means a given.
Financial organisations also need to prepare for the possibility of a no-deal Brexit, with speculation that this could see companies sending their data to the EU next year and simply not getting it back. For businesses which heavily rely on constant transfers of sensitive data such as bank accounts and income, this is simply not acceptable. Unpicking the mess will require the investment of time and funds that many businesses can ill-afford.
The biggest loser: your customers' data privacy
While a potential headache for financial institutions, the UK’s lack of reassurance when it comes to post-Brexit data protection is even more detrimental to its own citizens. The government’s current track record for safeguarding people’s data leaves much to be desired. The recent admission that the UK track and trace system wasn’t GDPR compliant is just one example that has eroded citizens’ trust. The systematic disregard for data privacy has not gone unnoticed either. 75% of consumers report being concerned with the safety of the information they share with organisations, according to IDEX Biometrics. This has to be addressed if banks are going to survive and ensure that that customer trust is maintained.
A change in mindset
While the future of data regulation in this country remains in flux, we know that privacy and data protection is top of mind for consumers. To maintain the trust and loyalty of their customers, financial services organisations must think ahead and be prepared for any outcome, specifically at a technical level. But many organisations will be concerned about where to begin and how to navigate this journey.
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Thankfully, financial institutions can tackle this challenge without exorbitant costs but they will need a change of mindset. They must put customer data at the centre of their strategy and embrace technology that will help them put privacy first.
But this means having a clear understanding of what is happening to customer data at all times. There are simple mechanisms that can be put in place to deliver this level of control and visibility. These include automating compliance and embedding data protection rules into the IT infrastructure. Solutions such as these can be cost effective and have the potential to save thousands of hours in auditing and developing data management processes. What’s more, they will give businesses the right foundation for protecting data, whatever the regulatory outcome of Brexit.
While the future of data protection rules in the UK are still being negotiated, the financial services firms that embrace a privacy-first approach starting now will be better prepared for any outcome in the Brexit negotiations.
Going forward, collaboration with the EU is vital to prevent a scenario where data transfers are blocked. We need to work closely with our European counterparts to create a data privacy framework that's protective of UK citizens without being restrictive to our businesses. Only time will tell, but with the respect and protection of our data is in the hands of governments and businesses, data privacy can no longer be treated as an afterthought. If banks act now, and protect against the inevitable, the ultimate benefit will be earning their most important asset: their customers’ trust.
Having both been incorporated in 2018, Prevail Partners and Intelligent Sanctuary are relative newcomers to the financial services sector – but the teams behind them certainly aren’t. Their new partnership combines military and international crime agency asset tracing, due diligence, fraud and money-laundering capability that could set a new standard in the civilian market.
Rather than limiting investigations to scouring social media or publicly available records, the partners utilise investigative tradecraft and cyber forensics, supplemented with fintech-based data collection tools, to pursue evidential trails across international borders. Intelligent Sanctuary CEO Jonathan Benton and Prevail Partners CEO Damian Huntingford discussed this unconventional approach to due diligence and asset tracing during an interview with Finance Monthly.
Both chief executives came from high-ranking jobs in what they called their ‘previous lives’. Jonathan is a former senior police officer and Head of the UK’s International Corruption Unit, while Damian is a former Special Mission Unit Commanding Officer and OBE recipient. Both are able to draw upon more than 20 years of experience in their fields, and their teams are just as capable; Prevail Partners staff have backgrounds in UK Special Forces, and Intelligent Sanctuary team members have each spent more than a decade in financial investigation or litigation.
It is this unique kind of professionalism that has set the partners apart from the traditional firms and made them less prone to misconduct, according to Jonathan. “There's been parliamentary enquiries into the way investigators conduct themselves in the private sector,” he said. “There's been untold cases overturned because of the way people have conducted themselves. But I was a former senior police officer. Damian's a former senior military officer. And we have genuinely operated at the top of our game and have reputations and understand risk and how reputation can be lost -- not just for us but our client as well. And therefore, there is a very strong core value about what we do and how we do it.”
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For the two firms, the partnership was a natural fit. Both company heads knew of each other as highly regarded professionals in their past careers, and the character of both organisations blended effectively. “We both know from our previous careers that there's often a difference between what might be legally permissable and what you're actually comfortable doing,” Damian said. “I think, as leaders, that’s something we’ve wrestled with numerous times at the pointy end.”
Already, their methods have been exceptionally effective. Between them, the two companies have traced, frozen or secured over $8 billion of misappropriated funds from business leaders and heads of state alike.
Damian credited the success of their ventures to their already-existing network of international connections and their ability to ‘command the cyberspace’. “That can involve, for us, other techniques around social media monitoring, and on occasion in the right instance there could be components of human intelligence, and even a physical dimension to that, providing it's appropriate to that particular jurisdiction,” he explained.
This multi-source intelligence has allowed Prevail Partners to pursue the fraudulent activities of a litany of high-profile individuals – among them Jan Marsalek, former COO of now-collapsed fintech firm Wirecard, who came to the company’s attention while conducting an enhanced due diligence investigation into the firm on behalf of a FTSE 250 company. “There were several red flags raised on that individual,” Damian said, “specifically pertaining to financial and reputational risk around him and his association with Wirecard.”
Through their investigations, Prevail Partners uncovered several transactions made by Marsalek using an avatar in the video game Second Life, which has in the past been used as a tool for financial fraud. This prompted a follow-up investigation, which uncovered further transactions between Marsalek and individuals in Russia, China and other nations that raised yet more flags. Though Prevail Partners’ warnings were not ultimately heeded, they were aware of Wirecard’s dubious financial activities long before news of its fraudulent operation emerged and Marsalek went into hiding.
“We both know from our previous careers that there's often a difference between what might be legally permissable and what you're actually comfortable doing.”
Fintech executives are far from the only subjects of Prevail Partners’ and Intelligent Sanctuary’s investigative work. Their teams have also tracked former Libyan Prime Minister Gaddafi’s looting of his state’s wealth, leading to $2 billion worth of funds being frozen through sanctions, and identified a global network of illicit assets in excess of $1 billion used by former Egyptian President Mubarak and his confidants. Dismantling complex financial fraud is a challenging and morally rewarding endeavour, which both CEOs identified as a key motivator in their decision to re-establish themselves in the private sector.
“My old world was about chasing down corruption and trying to uncover the pernicious side of it and recover the money that is laundered through the UK,” Jonathan said. “Well, we can still do the same thing through the private sector. In fact, I'd go as far to say in many ways probably more efficiently, because civil litigation is swifter, it can provide opportunity for early settlement, it's not conviction-based – requiring the conviction first and then recovery. So it's also about the ability to still do good, but in a commercial space.”
With both companies’ capabilities now working in tandem, we can expect to see Prevail Partners and Intelligent Sanctuary continuing to set new standards in asset tracing and due diligence going forward.
Many start-up businesses are short on cash, and there is a temptation to try and save money by missing out costs which are deemed non-essential in terms of the day-to-day operation of the business. In reality, legal protection and a sound financial strategy could be the difference between a short-lived project and a long-term success.
Here are 7 ways to ensure your start-up business is legally protected.
1. Structure your business
When you go to register your business with the state, you will need to choose a business structure and the choice you make will decide how much you pay in taxes as well as your personal liability. Your options are: Sole Proprietorship, Partnership, Limited Liability Company (LLC), Corporation, or S Corporation. While your choice will be dependent on many factors, many businesses become an LLC as this separates your personal assets (home, vehicle, savings) from your business assets. You will also need to apply for a tax ID number and ensure you have the appropriate permits and licenses.
2. Get insurance
Although you might think or hope that you will never need it, every business should take out commercial liability insurance. This protects your business financially if your company is sued by a third party such as a customer or vendor. General liability insurance does not cover things that happen to you, your employees, or commercial premises. Additional insurance policies you may want to consider include professional liability insurance (which covers costs incurred because of errors in your work), commercial auto insurance which covers damage to commercial vehicles and property, and workers’ compensation insurance.
General liability insurance does not cover things that happen to you, your employees, or commercial premises.
3. Contracts for employees
Whether you will be taking on employees soon, or in the future, you need to ensure that you are compliant with the law, your responsibilities as an employer, and employee rights. This is a complex topic, so be sure to consult with a legal professional to ensure you have covered all areas including health and safety, code of conduct, discrimination, working hours, etc. If your employees will be working on premises, you also need to ensure that you are providing a safe work environment with all the necessary risk assessments, equipment, and precautions.
4. Working with outside suppliers
If you will be outsourcing aspects of your business to another company, you need to ensure that you cannot be held liable for their actions. For example, if they are not fair to their employees in terms of health and safety, pay, or ethical working practices, you may become tarnished by association.
It is also essential that you read the fine print of any contracts you sign with suppliers, question any points which you are not comfortable with, and do not be afraid to negotiate.
5. Protect your intellectual property
An original business idea may need to be protected by trademark or copyright to prevent another company from taking advantage of your creativity, but this can be complex, so it is best to get advice from an intellectual property lawyer.
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6. Pay your taxes
While keeping track of income and expenditure might be simple in the beginning, as your business grows it will be easy to lose track and make mistakes. A professional bookkeeper will be able to advise you not only on what receipts you need to keep and what taxes you need to pay, but they can also complete your tax returns and ensure you take advantage of any tax benefits you can claim.
7. Cybersecurity
Whether you are running your business from one computer, several computers, or a combination of devices, all your technology needs to be protected against cyberattacks. You not only need to secure your sensitive data and financial information, but the law is increasingly strict regarding businesses which are not protecting customer and employee data adequately.
Steve Cox, Chief Evangelist at IRIS Software Group, explains how tech can be a lifeline for accountants looking to support businesses through the coming months.
Today’s accountants face a litany of challenges, not least navigating through the COVID-19 crisis and increasingly murky Brexit waters - all while keeping up-to-date with the requisite compliance and legislation changes. Though we now have a much clearer idea of what to expect, unlike in the first months of the pandemic, it’s an understatement to say that a huge degree of uncertainty hangs over businesses - and life in general.
The sudden shift to remote working caused chaos among businesses. Some were not prepared for the immediate digital transition, with many struggling to continue business as usual looking to their accountants to guide them through the uncertainty. Accountancy firms have reacted well to this increase in client demands, and while much advice has been given about compliance, the opportunity to change and become better advisors has been cathartic for the industry. But this begs a new challenge.
Reactive advisory was a necessity when we went into lockdown - no one was prepared for a global pandemic - yet accountants were quick to react to the necessary changes, getting their firms running in the cloud with hosting in the early parts of lockdown. But as we head into the next normal, firms need to be proactive. They need to utilise technology and act on the lessons learnt from the pandemic; delivering the strategic, digital-first advisory service businesses now need.
The changing role of technology in accounting
While no silver bullet, technology has, and will continue to play, a central and evolving role in helping accountants support businesses through these uncertain times and throughout the next normal.
Lockdown proved to be difficult for maintaining human interaction between accountants and their clients - something that’s critical in developing a trusting relationship. But harnessing technology meant accountants could carry on as usual, offering first-class digitally powered advisory - approaching problems or opportunities with digital solutions, using tools such as video conferencing. This meant they could continue building relationships with both new and existing clients.
Technology has, and will continue to play, a central and evolving role in helping accountants support businesses through these uncertain times and throughout the next normal.
COVID-19 has unveiled the accountants who have chosen to embrace new, innovative methods of interacting. Those who are proactively utilising digital assets, and interacting in new ways, are noticing that they are interacting far more with their clients than prior to lockdown - calls would have been over the phone rather than video, and meetings may have been cancelled due to lack of convenience.
What’s more, technology has helped accountants understand ‘the perfect marriage’ between human interaction and valuable data. Using data, accountants can compare client history, by accessing real-time information online. This in turn creates a wealth of business understanding, delivering both short and long-term value to all their clients. But, as the role of technology evolves in the accounting world, so too is mandated financial and administrative processes.
Making Tax Digital (MTD) is part of the government’s plans to make it easier for individuals and businesses to manage their records digitally and subsequently their taxes. While at first glance a minefield for many, MTD is a prime example of how harnessing technology can help accountants and their clients automate compliance. That said, compliance is also the traditional safe zone. With the extension of VAT-registered businesses, mandated to keep VAT records in digital form from April 2022, it is far easier to rely on traditional assurance and compliance services, than to invest in a digital-first advisory.
A digital-first advisory
Our world is transforming into digital-first - businesses have been taken online, with many processes automated to manage the new working style. Further, MTD is a clear example of the UK government now jumping on the digital-first bandwagon.
The government’s plans for an economic recovery - the Bounce Back Loan Scheme (BBLS), the Furlough scheme, Kickstart for young people and even the Eat Out to Help out - caused a stir for how businesses manage their funds. And while all designed to speed up our economic recovery, someone has to pay for the billions of pounds spent so far - the Eat Out to Help Out scheme for example has driven UK inflation to a five-year low.
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To pay for this added sum, the UK will most likely see a new tax legislation come into play, so that we can eventually pay off the debt the government has lumped on our economy - with higher rate players paying more. However, with this increase of tax burden, processes need to be streamlined. And this is where MTD steps in.
MTD helps businesses and accountants manage finances efficiently - which right now is vital for survival. Businesses can pay their taxes online - saving time and improving overall business productivity. In turn, businesses now need to work with their accountants and look at their wider business strategy so that it resonates with the new digital compliance. This includes addressing business needs, as well as how they work, employee capacity and all financial outgoings - all of which can be successfully managed through a digital-first advisory approach.
Addressing human business needs
Accountants improve the lives of their clients by addressing human business needs. They are the engines behind their clients’ businesses, and by using technology, can remove cumbersome and time-consuming financial management. However, while accountants have been quick at reacting to addressing these needs, they now need to be proactive and act as a business’s tour guide as we enter the next normal.
The pandemic has created a snapshot of what businesses now need, especially those who relied on old, mandated accounting solutions. Using technology to catch real-time data, accountants can paint a picture of exactly what their clients want and need now and for the future. As experts in their field and the latest legislation changes, accountants are best placed to advise clients on how to navigate these increasingly complex times.
However, every superhero needs a sidekick, and as we enter the next normal, technology will firmly cement itself at accountants’ side. Through automating everyday tasks and processes, accountants will be able to proactively unlock powerful insights into their clients’ businesses; enabling them to move from bean-counter to hero consultant, help clients remain compliant and drive business growth.
Karoline Gore shares her thoughts on the evolution of fintech in insurance with Finance Monthly.
The lockdown restrictions imposed in the UK this year have seen the adoption of fintech increase exponentially, according to a survey commissioned by AltFi. The insurance sector has been faced with strong competition in recent times as a number of other industries have started to offer financial solutions that can rival traditional insurance. Not only is the healthcare industry offering ‘medical memberships’ that eliminate the need for insurance, but banks are also quicker at providing loans to help remedy financial damages. It is for these reasons, among others, that operators within the insurance sector have to ensure that they have an advantage over their competition. With the aid of fintech, this goal becomes significantly easier to achieve.
Apps and digital platforms appeal to a younger clientele
As of 2018, Millennials enjoyed a greater spending power than Baby Boomers. Tapping into this segment of the market can be very fruitful as Millennials can provide business for a significantly longer period of time than older generations. Fintech can make insurance offerings increasingly appealing to a younger, more tech-focused client base. Smartphone applications can be designed with businesses, their clients, or both in mind and can streamline traditional insurance processes considerably. Popular features of mobile applications include a policy overview section, premium calculator, and payment processing area. Many apps as well as dedicated websites also provide clients with a range of relevant reviews. If you are looking at taking out car or home appliance insurance, for instance, reviews can cover aspects such as premiums, service fees, and even cancellation policies.
Machine learning improves data utilisation
Machine learning, which is classified as a type of AI, is another form of fintech which is greatly transforming the insurance industry as we know it. In essence, it is a technology that makes it possible for a machine to ‘learn and adapt’ over a period of time. Typically, insurance operators collect substantial amounts of data on an ongoing basis. Unfortunately, only approximately 10% of the data collected is adequately utilised, rendering it almost useless to the business. Thanks to machine learning, insurance companies can put the collected data to better use. It can be used in a number of ways including fraud detection, risk modelling, underwriting, and demand modelling.
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Niche products become more prevalent
Apart from smartphone applications and machine learning, there is a range of other emerging fintech solutions such as telematics, big data, and comparators that are influencing insurance in numerous ways. Thanks to these technologies, insurance companies are becoming more adept at offering niche products (that more traditional insurers won’t touch) to their clients. A good example of this is London-based Bought by Mary, who made it possible for clients with underlying medical conditions such as cancer to obtain travel insurance. Similarly, a partnership between a leading worship centre insurer in the USA and another entity resulted in the creation of an insurance product that made provision for the protection against frozen pipe leaks in low-tenure buildings.
Fintech has had a great impact on the insurance industry. Apart from improving customer service, fintech can also aid in new customer acquisition while saving the company a significant amount of money.
Kris Sharma, Finance Sector Lead at Canonical, explores the value of open source technologies in steering financial services through times of disruption.
In a post-Brexit world, the industry is facing regulatory uncertainty at a whole different scale, with banking executives having to understand the implications of different scenarios, including no-deal. To reduce the risk of significant disruption, financial services firms require the right technology infrastructure to be agile and responsive to potential changes.
The role of open source
Historically, banks have been hesitant to adopt open source software. But over the course of the last few years, that thinking has begun to change. Organisations like the Open Bank Project and Fintech Open Source Foundation (FINOS) have come about with the aim of pioneering open source adoption by highlighting the benefits of collaboration within the sector. Recent acquisitions of open source companies by large and established corporate technology vendors signal that the technology is maturing into mainstream enterprise play. Banking leaders are adopting open innovation strategies to lower costs and reduce time-to-market for products and services.
Banks must prepare to rapidly implement changes to IT systems in order to comply with new regulations, which may be a costly task if firms are solely relying on traditional commercial applications. Changes to proprietary software and application platforms at short notice often have hidden costs for existing contractual arrangements due to complex licensing. Open source technology and platforms could play a crucial role in helping financial institutions manage the consequences of Brexit and the COVID-19 crisis for their IT and digital functions.
Open source software gives customers the ability to spin up instances far more quickly and respond to rapidly changing scenarios effectively. Container technology has brought about a step-change in virtualisation technology, providing almost equivalent levels of resource isolation as a traditional hypervisor. This in turn offers considerable opportunities to improve agility, efficiency, speed, and manageability within IT environments. In a survey conducted by 451 Research, almost a third of financial services firms see containers and container management as a priority they plan to begin using within the next year.
Open source software gives customers the ability to spin up instances far more quickly and respond to rapidly changing scenarios effectively.
Containerisation also enables rapid deployment and updating of applications. Kubernetes, or K8s for short, is an open-source container-orchestration system for deploying, monitoring and managing apps and services across clouds. It was originally designed by Google and is now maintained by the Cloud Native Computing Foundation (CNCF). Kubernetes is a shining example of open source, developed by a major tech company, but now maintained by the community for all, including financial institutions, to adopt.
The data dilemma
The use cases for data and analytics in financial services are endless and offer tangible solutions to the consequences of uncertainty. Massive data assets mean that financial institutions can more accurately gauge the risk of offering a loan to a customer. Banks are already using data analytics to improve efficiency and increase productivity, and going forward, will be able to use their data to train machine learning algorithms that can automate many of their processes.
For data analytics initiatives, banks now have the option of leveraging the best of open source technologies. Databases today can deliver insights and handle any new sources of data. With models flexible enough for rich modern data, a distributed architecture built for cloud scale, and a robust ecosystem of tools, open source platforms can help banks break free from data silos and enable them to scale their innovation.
Open source databases can be deployed and integrated in the environment of choice, whether public or private cloud, on-premise or containers, based on business requirements. These database platforms can be cost-effective; projects can begin as prototypes and develop quickly into production deployments. As a result of political uncertainty, financial firms will need to be much more agile. And with no vendor lock-in, they will be able to choose the provider that is best for them at any point in time, enabling this agility while avoiding expensive licensing.
As with any application running at scale, production databases and analytics applications require constant monitoring and maintenance. Engaging enterprise support for open source production databases minimises risk for business and can optimise internal efficiency.
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Additionally, AI solutions have the potential to transform how banks deal with regulatory compliance issues, financial fraud and cybercrime. However, banks need to get better at using customer data for greater personalisation, enabling them to offer products and services tailored to individual consumers in real time. As yet, most financial institutions are unsure whether a post-Brexit world will focus on gaining more overseas or UK-based customers. With a data-driven approach, banks can see where the opportunities lie and how best to harness them. The opportunities are vast and, on the journey to deliver cognitive banking, financial institutions have only just scratched the surface of data analytics. But as the consequences of COVID-19 continue and Brexit uncertainty once again moves up the agenda, moving to data-first will become less of a choice and more of a necessity.
The number of data sets and the diversity of data is increasing across financial services, making data integration tasks ever more complex. The cloud offers a huge opportunity to synchronise the enterprise, breaking down operational and data silos across risk, finance, regulatory, customer support and more. Once massive data sets are combined in one place, the organisation can apply advanced analytics for integrated insights.
Uncertainty on the road ahead
Open source technology today is an agile and responsive alternative to traditional technology systems that provides financial institutions with the ability to deal with uncertainty and adapt to a range of potential outcomes.
In these unpredictable times, banking executives need to achieve agility and responsiveness while at the same time ensuring that IT systems are robust, reliable and managed effectively. And with the option to leverage the best of open source technologies, financial institutions can face whatever challenges lie ahead.
