77% of UK businesses are aware of fintech products and services and two-thirds (65%) have adopted at least one fintech application, with a fifth (19%) taking on four. These adopters reported saving (on average) over £5,500 a year as result of using the fintech products and services.
Interestingly, a tenth (11%) reported using bitcoins or other cryptocurrencies at some point in the past year in processing payments. Whilst the clear majority (89%) have not used cryptocurrencies, a fifth (21%) of these businesses expect these currencies to feature in their payment transactions over the next 12 months.
Businesses reported using fintech products and services for banking transactions (23%) and foreign exchange services (16%). Meanwhile, one in four (24%) reported using cloud-based software for their accountancy functions and a third (32%) used online lenders for business loans or invoice finance. Only 2% of businesses are using insurtech (insurance technology) services.
Bobby Lane, partner at accountancy firm SSH LLP, commented: “Most of our clients are now using cloud-based solutions and automating many of their routine processes. This means that I have more time to focus on advising my clients on strategic matters. Also, it’s now far easier for us to use fintech services because the ability to integrate with these new systems has opened up huge opportunities for improving processes.”
Business leaders are drawn to fintech because it saves time and money (56%) whilst a third (34%) were impressed by the user experience. Interestingly, a quarter (23%) said fintech’s were more transparent on fees and provided a better customer service.
Jerry Anderson, Managing Director at wedding rings company Allied Gold Ltd, commented: We’re a third-generation family business, I have adopted fintech across the business from our accounting to our banking services. The user experience and service is far superior to what is available on the high street.”
Anil Stocker, CEO and co-founder of MarketInvoice commented: “The expansion of tech-driven digital services has been remarkable over the past 5 years. We know that consumers have been adopting tech applications into all parts of their lives, but our research shows that now UK businesses are also becoming tech-savvy.”
“Fintech applications are revolutionising the way business is being done from how employees report their expenses to the way businesses report their financial performance. Entrepreneurs always seek out the best means to drive their businesses and clearly fintech products and services are becoming a stable part of this approach.”
It’s not only business processes that are benefitting from fintech adoption. Companies are using fintech to engage staff. 62% of businesses use fintech adoptions for staff to report expenses (i.e. Expensify) and for payslips automation. A further 23% are using online pre-paid cards (i.e. Revolut) in allocating budgets to teams.
1 Based on FSB statistics show there are 5.5m businesses in the UK, of which 1.3m are employing businesses. The £4.6b is achieved by multiplying 65% of 1.3m businesses by £5,500 (the average annual savings by adopting fintech services).
2 Results are from a MarketInvoice survey of 3,482 UK businesses conducted in August/September 2017. Respondents were manager, director and C-level post holders. The survey was conducted online and by e-mail.
(Source: MarketInvoice)
Richard Meirion-Williams, Head of Financial Services at BJSS discusses how banks can counteract the threat provided by Google, Apple, Facebook and Amazon (GAFA).
It wasn’t long ago that bank branches used to hold personal, trusted relationships with their local customers. However, since the rise of digital banking and the decline of the branch, relationships between bank provider and customer have weakened. While the financial institutions are under pressure to keep up with digital transformation, at the same time demand for a personalised customer experience is high on the banking agenda.
Google, Apple, Facebook and Amazon, the major technology power players, known as GAFA, are transforming the digital banking landscape as we know it. With a huge pool of customer data at their fingertips, GAFA’s move into financial services is simply a natural extension of their current offering. When you consider the vast amount of data that these tech giants can leverage across social media, mobile, customer purchase information and mapping data, GAFA has the ability to provide a highly personalised financial service experience.
For banks to remain central in the lives of consumers, they must provide consistent and fulfilling customer experiences across the digital and physical environment. It’s not just about having access to customers credit or debit accounts, but also a greater/wider insight into their individual customers.
But time is of the essence. Amazon, Apple, Google, Intuit and PayPal have already formed a coalition called Financial Innovation Now to enhance innovation in the financial industry to satisfy the customer need for convenience. The key for traditional financial providers is to act quickly and respond to emerging digital disruptors like GAFA. Banks need to focus on evolving their business models and developing new revenue streams.
4 steps to challenge the GAFA force
Client on-boarding: Banks need to maintain their competitive differentiation and make products available immediately. Recently banks have focused on improving the front-end process. But what about the back-end? By digitising the full spectrum banks can reap the rewards of full end-to-end capabilities. This will mean customers opening an account can get started up in minutes after completing an online application. Making changes to the digital process will also help improve the processes which co-exist in physical branches.
Personalised services and partnering for suppliers and customers: Customer centricity should be at the heart of every business. Banks need to create personalised services to deliver their products using an agile approach. This can be achieved either through the bank or a third-party.
To meet consumer demand for convenience and choice, banks should also look to offer customers “lifestyle” services that can adapt in real-time to fulfil the everyday needs of the banking user. Not only will this help multiply customer interactions but will also help generate new revenue streams.
Leverage Consumers data: Extrapolate customer insights from the vast amount of structured and unstructured customer data using Artificial Intelligence, NLP and cognitive computing. The customer financial information can be leveraged to create market intelligence and to generate new revenue streams.
Create an ecosystem: Banks should take advantage of open environments and create new ecosystems. This could be offering external or white-labelling banking services through open APIs and new partnership models with innovative fintechs or working alongside GAFA. Banks need to develop new products and services on distributed ledgers for transactional access on a continual basis and receive data and events from third parties like Amazon or Apple who can distribute and integrate their products in a broader business environment.
This approach will help counter the GAFA threat and create greater cross and upselling opportunities, along with building customer acquisition, retention and cost optimisation, transforming the cost-to-income ratio from the current average of 63% to hopefully less than 50%*. It is critical for banks to think innovatively and act quickly, otherwise they will become a victim of the GAFA dominance which has already infiltrated other industries.
*Calculation made based on reviewing the published accounts of a number of banks.
A recent report form PwC concludes that UK investment in InsurTech in the second quarter of 2017 surpassed that of the previous three quarters, increasing to $290 million (£218m) in the first half of 2017, compared to $9.7 million (£7.3m) the year before.
Global investment in InsurTech by global insurance firms, reinsurance firms and venture capital companies surged 247% to $985 million.
Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland has this to say to Finance Monthly:
“This year has been phenomenal for the insurtech industry in the UK, and these latest figures reflect it. Increasingly, we see the market gaining momentum, and the amalgam of data made available is reshaping the industry in an unparalleled fashion. Investors are coming to much better understand the values that lie within a connected world, from more dynamic customer relationships to personalisation and need for tailor-made solutions.
“Fujitsu’s recent research looking into the UK’s digital landscape showed that nearly 40% of people want the UK to make faster digital progress. As such, insurers need to keep up with the rapidly changing dynamics and unlock the power of technologies.
“Although many insurance companies have digital on their radar, it is important for this industry to take advantage of digital innovation by not only creating savvy online apps and improving the digital elements on the consumer-facing side, but by also implementing digital throughout the business. This will help insurers not only save more, but also become more integrated and process efficient. The amount of deals and investment in the past year are a vote of confidence and now is time UK claims its role as a global insurtech hub.”
Ashok Vaswani, the CEO of Barclays UK talks to Katina Hristova about championing digital skills for all and his outlook for the future.
Barclays has a history of innovation and continues to be a leader when it comes to technological innovation in banking services – tell us more about it.
Barclays has been at the centre of British finance for over 327 years, and in that time, the world has changed beyond recognition. However, the reason we have been able to consistently deliver game-changing innovations throughout all this disruption has been a relentless focus on our customers, their needs and aspirations, and being there for the moments that really matter.
We have 24 million customers in the UK; roughly one in two adults. For me, success isn’t about driving the business to get 25 million customers – it’s about becoming indispensable for the 24 million customers we already have, by continuously making their lives easier, offering greater convenience and delivering value for them.
If we can’t do that, we won’t be around for another 327 years, or even 10 years. In this era of disruption, businesses will become obsolete unless they serve a clear purpose. Our purpose is to help people go forward.
What have been Barclays’ biggest achievements in the past 12 months?
We have been at the forefront of reinventing banking through a focus on great technological innovation with a purpose. I think our biggest achievements have been transforming the business and its culture as well as creating Barclays UK; a business that is truly fit to meet customers' needs and expectations in the digital age.
As part of that, we have rolled out a number of technology solutions to make our customers’ lives much easier, such as instant cheque imaging and video banking. Barclays was also the first bank to introduce contactless cash; a completely new way for customers to withdraw their cash using their Android smartphone or their debit card’s contactless technology.
We have also launched automated valuations for home purchases, shaving days off the processing time. Mortgage Agreement in Principle has also been introduced into 338 branches, allowing customers to obtain a mortgage decision in less than 15 minutes.
New digital processes have also helped improve the on-boarding of Business customers, and the introduction of pre-approved credit limits for Business customers has reduced the time required for customers to request an unsecured loan of less than £25,000 from five days to a matter of minutes.
In addition, we have opened 12 Eagle Labs, sites where people can use new technologies such as 3D printers and laser-cutters and which help facilitate small business growth in local communities.
We have also demonstrated a strong commitment to using technology to enhance customer security; Barclays was the first bank to pioneer finger-vein technology in the UK, and we are working to tackle fraud through innovations like voice biometrics, which over 750,000 customers have now registered for.
How would you evaluate the impact that you’ve had on Barclays achieving all of this?
In creating Barclays UK, I have set out three mains goals for the business:
- Continually demonstrating how we are putting customers first by providing value and making their lives easier.
- Demonstrating our commitment to supporting the UK economy.
- Fundamentally rebuilding trust in Barclays and reinstate pride in our profession by putting customers at the heart of everything we do.
Barclays UK has already made significant progress in achieving these strategic aims, and we have done this by putting the customer at the heart of everything we do.
Our investment in technology sets us apart, putting us at the forefront of innovation in the banking sector, delivering products and services that improve people’s experience, enhance accessibility and offer quicker and more convenient choices for customers.
At the same time, we have been working to make sure that no one is left behind in the digital revolution.
Our Digital Eagles have so far helped to support over 100,000 customers to become more digitally confident through dedicated Tea and Teach Sessions in our local branches, as well as delivering Code Playground sessions to teach young people basic coding skills.
We’ve also introduced the Digital Driving License, a free app through which users can earn a City & Guilds digital skills qualification, boosting their digital skills and confidence.
In 2017, Barclays UK launched its latest campaign to promote digital safety, a major nationwide initiative to raise awareness of cybercrime and help people protect themselves from fraud and scams. Since the campaign launched in May, it has already helped 2.5m people take action to become more digitally safe.
We have also pioneered Beacon Technology, improving the level of in-branch service offered to customers with disabilities, as well as SignVideo, which allows deaf people who use British Sign Language instant access to an interpreter via the in-branch colleague iPads. Talking ATMs, supersize card readers and high-visibility debit cards have also been launched for the visually impaired.
In addition to championing accessibility, we want to ensure we are doing the right thing by society as a whole. As part of our commitment to helping people move forward in their lives, we run a number of skills and employability programmes, for example, the Barclays apprenticeship scheme, through which over 3,000 apprentices have already been offered employment. I also support the Armed Forces Transition, Employment and Resettlement (AFTER) programme, which provides work placements, employment opportunities, CV and interview coaching, and money management sessions, as well as funding for education and vocational courses for service leavers.
We also have the LifeSkills Programme, which provides schools with a range of free, curriculum-linked lesson plans, workshops and resources designed to help 11-19 years olds to develop the skills employers most seek. To date, over 4.3m young people have been reached through the LifeSkills programme via either in-school lessons or directly online.
I believe we are beginning to rebuild the trust and reputation of the banking industry, but I know we still have some way to go. However, by remaining committed to the strategy of putting customers and clients first, serving our economy and earning trust, I want to build a solid foundation on which we can grow. Barclays is creating a bank that is truly good for customers and clients, good for businesses and good for Britain.
As CEO of Barclays UK, how do you ensure you are directing the company in the correct direction? How do you advise your team to make the correct decisions for the company alongside your customers?
The thing I ask myself every time I make a decision is: “are we doing the right thing for the customer?”. I learned a lot from my Mum growing up, and one of the principles that has always stuck with me is that there is no substitute for integrity. Integrity isn’t just about what you write down as your mission statement, it’s also about how people behave when no-one is looking.
When it comes to my team, another thing that my Mum taught me is the importance of humility, that is to be ready to admit I don’t have all the answers, which is why I need many brilliant minds working to deliver our game-changing innovations.
I sincerely believe everyone needs to keep learning throughout their career. We can no longer rely on what we learnt at school to last a lifetime. I encourage everyone at Barclays to keep learning, particularly digital skills, and to develop an entrepreneurial mind-set.
What was your main motivation behind being the CEO of Barclays UK and what is the most rewarding aspect of your role?
The most rewarding thing about the role is the opportunity to work for millions of people.
In terms of how I got here, as a kid in Mumbai, my Mum wanted me to be a Doctor. When I said I didn’t want to do that, she actually took me to see my local bank manager to ask what he thought a good job would be.
I’ve since come to realise that the role of a bank manager is really at the centre of a community, and I have him to thank for the fact I became a Chartered Accountant. After that, I moved to Dubai aged 27 with $10 in my pocket, and met my wife there. That was the start of a fascinating journey working around the world.
What are your plans for the company for the rest of 2017 and beyond?
There are some exciting times ahead, with next year’s PSD2 and data protection regulation set to transform the shape of the digital economy. Barclays has all of the right ingredients to remain a leader in financial services, but we must be prepared and remain agile in order to take full advantage of the coming changes.
In the longer term, customer expectations are no longer confined to one industry – we are being judged not against other banks, but against the best in class from across our customers’ favourite brands. Is Barclays a bank, an information business or a technology company? We’re all three. But we will never lose that central focus on the customer, and that’s how we will thrive in a truly connected world.
By Adam Oldfield, Vice President Sales EMEA Financial Services at Unisys
The financial services market continues to evolve digitally to meet the rising expectations of customers, particularly in relation to their experience with digital and in-store services. Consumers expect banks to be accessible 24/7, from any location, and any device. As a result, security of access continues to be front of mind for everyone in the financial services industry, and the challenges that come with it.
Multifactor authentication built into modern applications, the use of biometrics or analytics as well as artificial intelligence are all needed to be interwoven in the modern environment to keep security capabilities at a high – but why is cybersecurity such a pressing factor in the market over the last few months?
Legislative drivers
It is widely known about the multitude of financial, and reputational, incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation. The GDPR brings consistency to the current data protection laws across EU member states, and provides guidance on how customer data should be stored and how companies must respond in the event of a data breach.
It is widely known about the multitude of financial and reputational incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation.
The GDPR brings consistency to the current data protection laws across EU member states and provides guidance on how customer data should be stored, as well as how companies must respond in the event of a data breach. As we move towards the 2018 deadline a large proportion of companies including financial services, are still unsure on what they need to specifically do in order to be as compliant as possible.
Therefore, we are continuing to see the demand for cybersecurity advisory services, personnel as well as solutions at an all-time high - demanding higher and higher shares of annual and quarterly budgets within financial institutions.
The threat landscape and impending legislation has meant cybersecurity has moved from a once discretionary spend to a mandatory one in recent months. Financial services organisations are rapidly restructuring teams, hiring new talent and most importantly seeking advisory services to manage the journey to compliance. Cybersecurity maturity levels held with each organisation in the market also fluctuate, meaning each company has a different set of requirements, goals and timeframes to abide by.
However, legislative drivers forcing financial institutions to treat customer data with the utmost care are not withheld to just the GDPR. The Payment Services Directive (PSD2) and the 2018 mandate set by the Competition and Markets Authority (CMA) are some of the key drivers to raising data protection and security requirements as well as market standards, having a particular impact at the decision making, forecasting and budgeting level.
These legislative drivers will continue to move security up to a boardroom discussion, with advisory services taking the front line of demand as well as budget. As we move towards 2018, the stopwatch is on for new entrants, as well as established players to restructure teams, align ecosystems and improve data management. They must also fine tune effective cyber breach response strategies to ensure the legislations and regulations put in place have a positive impact on their business and customers.
No organisation is immune
Many financial services organisations are aware of technological developments taking place throughout security, as well as the evolving security postures needed to combat threats and reduce routes to entry. Biometric authentication is an example of this that adds an additional layer of personalised security for data and account protection purposes. The plethora of high-profile attacks, such as Petya and Wannacry, highlight how no organisation or industry, including financial services, is immune.
The need for flexibility and responsiveness is paramount in this ever-changing landscape, not only legislatively but operationally, driving companies to pull together best in breed solutions to ensure capabilities match fluctuating threats. Legislatively the PSD2, for example, forces organisations to contract and conduct payments in a certain way, as well as effectively store and protect sensitive data. In comparison, the CMA 2018 mandate is forcing all financial services providers to offer customers the ability to manage their products, regardless of provider, via a single mobile application of their choice. Operationally, customers are demanding seamless payment and verification options with a 24/7 responsive service. A best in breed and reactive approach is capable of managing these demands, meaning flexible and intuitive ecosystems for application roll out can be the route to success, and gone are the days of using one provider for everything.
Oracle and the MIT Technology Review recently released a new study that highlights the importance of collaboration between finance and human resources (HR) teams with a unified cloud. The study, Finance and HR: The Cloud’s New Power Partnership, outlines how a holistic view into finance and HR information, delivered via cloud technology, empowers organizations to better manage continuous change.
Based on a global survey of 700 C-level executives and finance, HR, and IT managers, the study found that a shared finance and HR cloud system is a critical component of successful cloud transformation initiatives. Among the benefits of integrating enterprise resource planning (ERP) and human capital management (HCM) systems is easier tracking and forecasting of employee costs for budgeting purposes. Additionally, integrated HCM and ERP cloud systems improve collaboration between departments, with 37 percent of respondents noting that they use the cloud to improve the way data is shared.
The report also reveals the human factors behind a successful cloud implementation, with employees’ ability to adapt to change standing out as critical. Among organizations that have fully deployed the cloud, almost half (46 percent) say they have seen their ability to reshape or resize the organization improve significantly – as do 47 percent of C-level respondents.
The productivity benefits have also been significant. Nearly one-third of respondents (31 percent) say they spend less time doing manual work within their department as a result of moving to the cloud and that the automation of processes has freed up time to work toward larger strategic priorities.
“As finance and HR increasingly lead strategic organizational transformation, ROI comes not only with financial savings for the organization, but also from the new insights and visibility into the business HR and finance gain with the cloud. People are at the heart of any company’s success and this is why we are seeing finance and HR executives lead cloud transformation initiatives,” said Dee Houchen, Senior Director of ERP Solutions at Oracle. “In addition, improved collaboration between departments enables organizations to manage the changes ahead and sets the blueprint for the rest of the organization’s cloud shift.”
The survey also reveals there is a blurring of lines between functions and individual roles as the cloud increasingly ties back office systems together:
- Increased Collaboration: 46 percent of finance and HR professionals say a full cloud deployment has led to significantly improved collaboration between departments, and nearly half expect a significant improvement in the next two years.
- This extends to IT as well. 52 percent of C-level respondents said the relationship between IT, HR and finance is even better than expected following their cloud implementation
- Cross-Corporate Intermingling: With the new roles of HR and finance professionals requiring them to work more closely with data and the cloud, 43 percent of businesses plan to bring IT people into these departments to help employees take advantage of new technologies.
- New Skillsets: Desired skills respondents want to improve upon include:
- Time management, with 40 percent saying this is currently an issue
- Active learning
- Problem solving, mathematical reasoning and analytical skills
- The IT function also changes. Post-deployment, 56 percent of C-level respondents report that IT has significantly improved when it comes to producing innovations.
Andy Campbell, HCM Strategy Director at Oracle added: “As organizations navigate technological changes, it’s critical for the C-suite to empower its employees to evolve their individual business acumen. Many businesses understand this and it’s encouraging to see 42 percent planning to provide their teams with management skills training to help them break out of their traditional back-office roles. The learnings from the move of finance and HR to the cloud will ultimately spread across the organization as, together, they conceptualize the shape of the next disruption.”
(Source: Oracle)
There are just six months left until Open Banking phase two begins, when customers will be able to digitally access and securely share their bank transaction data to get the most from their finances.
The initiative will encourage financial service providers to offer high quality, targeted services and in turn boost competition.
Roger Vincent, Head of Banking and Innovation at Equifax, comments: “The banking industry is set for a huge customer-centric shake-up with the implementation of Open Banking phase two in January 2018. This exciting development will dramatically change the customer banking experience, helping consumers and businesses to use their financial transaction data to access products more easily and better understand their finances.
“The initiative kicked off earlier this year with stage one, where the ‘CMA9’ (nine banks mandated by the Competition and Markets Authority) provided improved access to information such as ATM locations and product listings. The second stage is the real game changer, with bank transaction data made available digitally for consumers and businesses to share securely, and only with their agreed consent, via open application program interfaces (APIs). Through the open APIs the data can be used by authorised third parties to build new high quality and targeted services, including new digital offerings, facilitating a more competitive environment.
“The ability for transaction data to be used for automated creditworthiness and affordability assessments, fraud detection and product accessibility is endless. Customers will be able to control how their financial data is shared digitally and provide a deeper picture of the way they manage their money. This could mean a quicker, more secure and fully digital mortgage application process or faster access to finance for a new business venture. For those currently underserved by the market, for example young people or the self-employed, it could mean the start of a journey to better financial health.
“Over the next six months, banks need to embrace the move towards a more transparent banking world. To do this successfully, preparations must focus on meeting the long-term practical benefits of consumer empowered data sharing rather than approaching this change as a tick-box compliance activity.”
(Source: Equifax)
CFOs and their teams have long been dedicated to supplying and analysing the data their companies need to make solid, fact-based decisions. However, finance departments have historically been constrained by basic forecasting techniques. Here Jean-Cyril Schütterlé, VP Product & Data science at Sidetrade, explains to Finance Monthly that CFO decision making, spending and innovating is more of an art that we’re led to believe.
The underlying data collection process is often time consuming and error-prone, and the result frequently lacks depth, scope and quality. Not only is the underlying data unsatisfactory, but its processing is suboptimal. All of these approximate figures end up being copied from spreadsheet to spreadsheet and undergo many manual transformations.
This approach has many shortcomings:
- Regardless of the quality of the forecasting process, if the data is not detailed, sufficient, relevant and up-to-date, the result will be inadequate.
- Making the assumption that “all other things will remain equal” is an over-simplification. No lessons are learned from previous errors
Digitisation now gives access to more granular and diverse data about present conditions or past situations and their outcomes. Any data set that may help describe, explain, predict or even determine a company’s positioning can now be stored, updated and processed.
This 360° view provides an opportunity to discover correlations between the collected data and the figures tracked by finance executives in their modelling activity. But this trend line methodology is insufficient in itself to derive valuable knowledge from data diversity.
For the process of discovery to take place, this newly-found data trove needs to be mined with Machine Learning technology.
To put it simply, Machine Learning is the automated search for correlations or patterns within vast amounts of data. Once a statistically significant correlation is identified with a high degree of certainty, it may be applied to new data to predict an outcome.
Let’s take a simple example. Assume you are the CFO of a company selling goods to other businesses and you want to anticipate customer payment behaviour to prevent delays and accelerate total inbound cash flow.
The traditional approach would be to look at past transactions and payment experiences with every significant customer and infer a probable payment date for each.
But if you look closer at your data, you may find that your customer payment behaviours are not consistent across time, that your historical view is missing essential explanatory information about the customer’s behaviour that may or may not be specific to their relationship with your company. You end up shooting in the dark.
Wouldn’t your cash-in forecasts be much better if you had also correlated the actual time your customers took to pay you in the past, with detailed information about those transactions?
In theory, you cannot be sure that this model will perform well until you have run a Machine Learning algorithm on your own data, looking for predictive rules that relate each payment behaviour to the detailed information of the corresponding transaction or you have tested the predictive power of those rules on a set of examples.
In fact, the forecast is likely to be much more accurate than with the traditional methodology, provided that the data you fed the algorithm with were representative of your entire customer base.
That leads us to another question: can I find all this information about my past transactions while making sure they are representative?
Unfortunately, most of this information may not be readily available internally, either because you’ve never collected it or it is not flowing through your existing Order-to-Cash process. For instance, it is unlikely you know whether your customers pay their other suppliers late or not.
But SaaS platforms can capture most of this information for you and Machine Learning software will then be able to discover the predictive rules and apply them to your own invoices to forecast their likely payment dates.
But this is just a start. If inbound cash flows can be accurately deduced, so can other key metrics, such as revenue, provided the data is available. CFOs are the ultimate source of truth in an organisation. They manage skilled resources who translate facts into numbers and confer them credibility. They are therefore the best equipped to tap from as many diverse data sources as available, leveraging the power of Data Science to accurately forecast what comes next and thus gain marketing insight and competitive advantage for their company.
Thus, with their augmented capabilities, CFOs are now poised to be the digital pilots of today’s new data-driven organisations.
What is the disruption gap? How does technology and communication affect your end of year figures? How can you oversee all processes without a digital transformation? This week, Finance Monthly heard from Matt Fisher, VP of Marketing at Snow Software, who gives us all the answers and then some.
With digital transformation becoming ever more crucial to business success, the way organisations procure IT is changing. “In 2016, just 17% of IT spending is controlled outside of the IT organization. That represents a significant decline from 38% in 2012. By 2020, Gartner predicts that large enterprises with a strong digital business focus or aspiration will see business unit IT increase to 50% of enterprise IT spending.” [1] Technology budgets are moving away from a central technology department towards being the responsibility of the business unit using it. From HR procuring its own payroll software to business development choosing the best sales programme, a visibility gap is forming between what exists in the technology estate and what CIOs can measure. This gap is called the disruption gap.
However, the CIO is not the only C-suite member the disruption gap will affect. If not handled correctly, it could prove troublesome for the CFO too. The reasons for this are three-fold:
Digital transformation
Digital transformation is now key for any CFO tasked with ensuring their business is future proof. It is defined as the application of digital technologies to fundamentally change and update all aspects of business and society. The benefits of digital transformation include lower costs and improved accountability with the replacement of physical or analogue processes and interaction with digital equivalents to save time. By empowering business units to identify their own digital needs, organisations will be able to maintain agility and competitive advantage. Crucially for CFOs, this also means the ability to make one thing: profit.
Losing financial control
While the role of the CIO is changing with digital transformation, a key role of the CFO remains the same: to guard against over-spend. However, with IT budgets moving towards individual teams, a gap is forming between the knowledge of how much a budget is and what it is being spent on. Gartner [2] estimates that “by 2019, annual spending on enterprise software licenses will decrease by 30% as a result of software license optimization.”. This is with IT controlling 83 per cent of the spend. Imagine what it will be like when 50 per cent of IT spend rests not with a handful of budget holders, but potentially hundreds.
Lack of visibility
With software spend disseminated throughout an organisation, it will become increasingly difficult for IT teams to establish a clear view over what software is deployed where and how many licenses are needed compared to those held.
This loss of visibility will, in turn, increase the likelihood of unexpected and unbudgeted costs hitting the financial team, either through unplanned technology acquisitions or financial penalties issued by software and infrastructure providers for over-use of applications and cloud resources.
On the flip side, by empowering IT teams to achieve 100% visibility of all IT consumption across all platforms, the finance and IT teams can collaborate to identify significant cost and efficiency savings which can have a tangible impact on the organisation’s bottom line.
Either way, it’s in the CFO’s best interest to find a way to manage the disruption gap now and avoid unnecessary costs later.
Take action today
Bridging the disruption gap has to be a high priority for IT and finance leaders. As leading industry analyst firm Gartner[1] advises: “the focus of the software asset management discipline needs to shift from compliance to cost containment, as reduced customer bargaining power produces escalating prices at SaaS contract renewal.”
To achieve this visibility, IT teams need specialist solutions that provide full visibility of software and hardware assets (both on the network and in the cloud, physical and virtual) and how they are being used. Traditional IT Asset Management and Systems Management tools will not suffice. These teams need access to the latest breed of inventory and optimization technologies designed for organizations heavily invested in Digital Transformation.
[1] Gartner, Metrics and Planning Assumptions Required to Drive Business Unit IT Strategies. Published: 21 April 2016, Kurt Potter, Stewart Buchanan
[2] Gartner, Cut Software Spending Safely With SAM. Published: 16 March 2016 ID: G00301780
Analyst(s): Hank Marquis, Gary Spivak, Victoria Barber
[3] Gartner, Software Asset Management Reaches a Tipping Point: SaaS Cost Management Eclipses License Compliance, 06 January 2017 ID: G00315121, Stephen White | Victoria Barber
Peter Kirk, Managing Director, Accenture Financial Services
Banks must concentrate on harnessing a range of digital technologies or risk losing customers to a new wave of competitors, according to a new report by the BBA and Accenture.
Called Digital Disruption, the report features interviews with leading experts from banks setting out their vision of the future and raises questions for regulators about when a non-banking firm should be overseen in a similar way to a bank.
It urges regulators to ensure that all organisations offering banking services are regulated in the same way to give consumers certainty that they are properly protected wherever they choose to bank. Policymakers must also be minded to the threat posed to financial stability from providers of banking services not covered by existing regulation. The report argues that regulators have to take care not to hamper either innovation or competition.
Peter Kirk, a Managing Director in Accenture's Financial Services operating group and co-author of the report, said: “The traditional model of banking is under threat from new competitors and is subject to increasing amounts of regulation. Paradoxically, the digital revolution is opening up new opportunities for the banking industry. Digital is enabling banks to provide much better, more personalised services to customers and at the same time cut costs dramatically.
“The UK banking sector has made some good progress in grasping the opportunity that digital has created, but the pace of change will only accelerate and amplify the disruption.”
The new report sets out six recommendations:
Anticipation: Innovative entrants are developing lucrative products and services. In order to remain relevant, banks must look ahead to spot those parts of their business models more vulnerable to these entrants.
Speed: In order to meet rising customer expectations, banks need to increase the speed of innovation.
Branch evolution: The role of the branch needs to evolve towards offering seamless customer services.
Harness data: Exploring customer appetite for banks to use the data available to them could open a new channel of communications between banks and their customers.
Invest: In the digital age, customers expect transactions on their current accounts to be virtually instantaneous. So banks need to continue investing in their IT platforms to meet customer expectations and avoid IT outages.
Culture: Change the internal culture to one which is more agile and innovative.
