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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.


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.


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.

Karoline Gore explores some of the latest developments in fintech and what they mean for the security of online payments.

The current health crisis has ushered in a new era of digitalisation, with a recent McKinsey report showing that COVID-19 has sped up the adoption of digital technologies by several years. The share of digital or digitally enabled products, the report found, has been accelerated by an impressive seven years in a matter of months. This means that, for most companies, online security has become of the essence so as to avoid losses and maintain a sound reputation in their respective industries. These are just a few technologies that are enabling companies to breathe easier in the knowledge that neither their nor their customers’ sensitive data will be exposed.

Real Time Payments

Deloitte identifies ‘real-time payment’ as a key technology enabling consumers to enjoy faster settlement periods, notifications, and consolidated reporting. This technology is key in an era in which ubiquitous connectivity and the boom in the use of smart devices mean that many consumers are using their phones to pay merchants and friends. There are many ‘faster payment’ programs, reports Deloitte, including the Interbanking Electronic Payment System (SPEI), which clears low value transactions every 20 seconds throughout the working day, and ‘multiple batch’ clearing, which operates similarly to traditional systems but takes place various times a day. The ability of payers to receive quick notifications made quickly enables them to identify any fraudulent payments made.

Dynamic Security Codes for Credit Cards

Identity theft is something both sellers and buyers can experience during online transactions. However, there are key differences between gateways for payment and merchant accounts, along with the type of fraud experienced by each party in a sales transaction. Merchants can suffer cybersecurity issues when unwittingly contracting the services of fraudulent providers, while customers can experience identity theft if the payment gateway (the link between their bank and the merchant account) is weak. Dynamic security significantly boosts the safety of payment gateways through dynamic codes. The latter replaced static CVV2s on the back of cards via a tiny LCD that displays dCVVs changes periodically. App-based dCVV2s, meanwhile, remove the need for cards with batteries and LCD, which pose a greater cost for consumers.


Cloud-Based Payment Systems

Research firm Technavio predicts that global payment gateway systems are predicted to grow by $23.45 billion between 2020 and 2024. This can be attributed to cloud computing technologies being adopted in SMEs and the growing demand for cloud-based solutions to collect online payments. The cloud enables merchant services providers to rely on platform-as-a-service models.

The latter enable them to design, host, and release applications speedily, without having to run a personal server. As such, buyers can make payments through convenient mobile banking apps or by scanning QR codes. Cloud services allow for seamless integration between services like Apple Pay with electronic funds transfer at point of sale.

The boom in digitalisation and online sales models mean that greater security is key. The latter is being delivered by fintech innovations such as real time payments, dynamic security codes, and cloud-based payment systems. These technologies are working together to ensure security is quick, efficient, and informative in terms of real-time movements.

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.


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.

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

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

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

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

The case for digital transformation

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

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

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

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

Why the lag?

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

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

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


The time is now

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

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.


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.

Vince Graziani, CEO of IDEX Biometrics ASA, analyses the impact of this shift and what it means for those who rely on cash.

As lockdown eases and shops begin to reopen their doors, many retailers are encouraging customers to use contactless card payments or mobile apps to pay. This move has come as a result of the concerns around the virus staying on bank notes for around 48 hours, and therefore able to transfer via point-of-sale terminals and ATMs. In reaction to this, many of us have embraced touch-free payments to help improve hygiene in the payment process and reduce the risk of contamination.

Advancement in technology and the use of touch-free authentication allows consumers to make a transaction without having to touch a shared PoS to tap in a PIN number, sign for their purchase, or hand over cash. It is common when tapping a contactless card or using a mobile payment app and is an increasingly vital step in the process of making the payments industry safe in the world of coronavirus. However, there is a significant segment of society that still rely on cash who are unable to embrace touch-free payment authentication.

As we move more towards a more digital-focused society, government bodies are increasingly worried about the effects on vulnerable members of society. In particular, the elderly, those who remain un-banked, or those without a smartphone are still reliant on cash and could be left excluded in a digital-first payment ecosystem. In a post-COVID world, these same groups are those who could be most exposed to further viruses from cash circulation.

So, with touch-free payments important to improving hygiene, there is an important question to consider for those unable to access contactless payments: could digital exclusion be a barrier to a COVID-free society?

There is a significant segment of society that still rely on cash who are unable to embrace touch-free payment authentication.

Developing an inclusive digital payment system 

Those who are digitally-excluded have limited or no access to digital tech that can make life more convenient, such as a smartphone or payment apps. According to the ONS, 9% of UK adults, or almost 5 million people, don’t have access to the internet, while in the USA, FCC data suggests around 42 million Americans lack broadband internet. As a result online banking would be inaccessible to many. In the UK, the government-commissioned Access to Cash review found that 17% of the population – over 8 million adults – would struggle to cope in a cashless society.

Exclusion from the digital world can lead to lower skills and confidence, but it can also lead to social exclusion and wider economic problems. As payment technology continues to advance, the use of basic IT devices could become essential to access goods and services. While touch-free digital payments offer many benefits, not everyone is ready to embrace a fully digital society just yet. But in our new normal, we must also consider the need to remove the concerns around transmission of the virus on cash.

Therefore it is important to be more innovative in our approach to payments and ensure that governments and banks work together to develop new digital payment technology in a more inclusive way, to bridge the digital exclusion gap.

Failure to do so will see those without access to digital services and payment options locked out from everyday services that so many of us take for granted and forced to continue using cash. Meanwhile more digitally-included members of society are able to avoid touching paper notes and coins or ATMs amid the threat of the virus. With more and more banking services moving online the need for simple and secure access to these digital services is more important than ever before.

The importance of biometric technology to support digital inclusion 

In The Access to Cash review, the commission highlights biometrics in digital payments as an innovative technology that will make payments even easier in the future, which will support the pace of change towards a cashless society.

Biometrics are likely to be key to revolutionising digital inclusion in the coming years. As people get used to using fingerprints and faces to identify themselves, biometrics will become a more familiar and accepted touch-free way to validate transactions. Now, fingerprint biometric sensors can be incorporated into smart payment cards providing a speedier, personal and more secure means for consumers to authenticate payments.


During a transaction, a consumer only needs to touch their finger to the sensor on their own payment card, and then hold it over the contactless card sensor. This will allow them to authenticate a payment of any amount, without a payment limit. By extending biometrics to payment cards, authentication will no longer rely on what you know, or what you can remember, but who you are. This is valuable for those who struggle with PINs as well as in countries with lower literacy levels or less reliable identification systems.

The use of fingerprint biometrics in smart cards are also an affordable way to ensure touch-free authentication in the payment process while effectively banishing the concerns people currently have about the implications of devices being lost or stolen. For those that don’t have access to a smartphone, they will still be able to bank and pay for goods securely and in a touch-free way without a large upfront cost.

Providing cost-effective touch-free payment methods for all

We must recognise that whilst tackling digital exclusion remains complicated, the latest advancements in biometric fingerprint technology are leading the way to a more inclusive payment method.

With the rise of digital and mobile payments, a cashless society is fast approaching, and it’s becoming increasingly important for government bodies to work alongside payment method providers and banks to ensure an inclusive future for everyone.  Providing access to cost-effective touch-free payment methods, such as biometric payment cards, can help to not only reduce the risk posed by a second wave of COVID, but also help to protect people from the spread of viruses in the future.

The financial services (FS) sector is under more pressure than ever. Juggling the effects of the pandemic, technological disruption and high customer expectations, coupled with maintaining business continuity, has been a difficult balancing act – and yet these factors are critical to FS. Neil Murphy, Global VP at ABBYY, explores how this has led some teams to butt up against the long-held rules and processes of the sector.

In order to see success, banks and FS firms need to take a long, hard look at how their business really works. This means getting visibility into business processes as they actually behave, identifying variances in them, and discovering how they can better meet customer and business needs.

With the world under unprecedented pressure, finding out how best to manage rules and processes can alleviate the strain and set your business on the path to success. Our recent research found that almost half (46%) of banking and FS workers and 30% of insurance staff rigorously follow the rules – giving the industry a good head start in coping with what’s thrown at them.

But is following the rules always the best route? And what happens when employees break the rules?

Rules – there to be followed?

Banking and financial services staff are working harder than ever before to help customers, keep businesses afloat, and also digitally transform. In such a process-driven industry, honing the many rules and processes could be the key to survival in this economy.

Our recent research found that almost half (46%) of banking and FS workers and 30% of insurance staff rigorously follow the rules – giving the industry a good head start in coping with what’s thrown at them.

At this point in time, it’s vital that banks and FS teams check in on their processes often to see where issues lie, which processes are most problematic, and which are ripe for automating. Following the rules is the cornerstone of achieving the potential of digital transformation, according to a McKinsey study which found that half of the value from digital transformation can be realised from as few as 10-20 end-to-end processes.

What tech brings to the table

While digital transformation is nothing new to most banks and financial institutions, now more than ever, they must rely on technology. It will help them conduct better business, comply with regulations, connect with customers, and deal with an ongoing flood of emergency business issues.

Getting your processes in order before automating them is a crucial step to avoiding failure. Yet many banking and FS staff claim that processes are too complex or there are too many to follow.

This is where technology comes in, and encouragingly leaders are open to helping their staff using technologies that can lighten the burden. According to our research, almost all banking and FS bosses think process mining technologies would be helpful to their business (98%), as did 89% of insurance bosses. These technologies can free up time for finance staff, enabling them to work on more pressing business matters that require the human touch.

Bending the rules 

Rigorous rule-keeping is a trait the financial industry needs to uphold, in order to comply with stringent industry regulations. But there is a flipside.


Key to a bank or financial institution’s success, especially in this digital age, is how they adapt and respond to customer needs. This means that even in a process-driven industry like financial services, employees occasionally break the rules. Sometimes, they have good reason: the most common reason to break the rules is to provide good customer service, which is more critical than ever before. Our research found that 62% of insurance bosses have confidence that their employees break rules so they can meet the needs of customers, and 50% of banking and FS bosses agree.

Relationship-building services like customer care, supplier management, or simply supporting colleagues and staff, can go a long way in benefiting a business and boosting morale. Being willing to bend the rules when it’s better for customers illustrates that rather than financial services staff being solely process-driven, they are driven even more by customer satisfaction.

So where do we start?

Unfortunately, customers are used to delays and layers of processes when it comes to banking. But it doesn’t have to be that way. To better serve customers, while also ensuring staff aren’t straying too far from the rulebook, the FS industry needs to be able to identify the bottlenecks and blind spots in every engagement. They also need the ability to analyse and discover processes using all the data they have.

Process intelligence technologies offer a deep understanding and real-time monitoring of processes. It helps you drill down into the details, explain why processes don’t work and how to fix them, and provides the tools to solve problems a business didn’t even know existed.

Say a customer loses their debit card. They shouldn’t need to go through the time-consuming process of calling various support teams, keying in endless numbers, and being put on hold, only for their account to be frozen as a precaution. By having every process mapped out and every piece of data available on an analytics dashboard, staff are given the knowledge of where customer service bottlenecks lie and why delays happen, so they can resolve issues much more quickly and securely.

Process intelligence technologies offer a deep understanding and real-time monitoring of processes.

But it’s not only useful for directly customer-facing interactions. Take anti-money laundering and anti-fraud compliance efforts. At a time when fraud is more prevalent than ever, nailing the processes that catch odd customer behaviour patterns in your data, and being able to action them automatically, means customers’ accounts are safer and more secure, even with less staff in the office and more fraudsters in the system.

Looking ahead 

A clear understanding of your business’ processes will identify inefficiencies that may be impacting the customer experience – that you would never have known about otherwise. Empowering your staff with the tools to analyse less-structured processes, identify opportunities for improvement, and increase both the speed and accuracy of executing said processes, will reap many rewards.

Not only will it ensure businesses are getting the most out of their huge investment in digital transformation – it will also ensure customers are getting the best possible service. Right now, there’s nothing more vital than that.

Martin Landless, Vice President for Europe at LogRhythm, explains how financial services can keep pace with outside threats.

It is more than possible to remain at the forefront of the digitalisation of the industry and to keep secure, but to do so relies upon focusing on a confluence of people, process and technology. Through this holistic focus, a culture of cybersecurity can be created that protects the important institutions through which it is fostered.

Simply put, cybersecurity is now an integral element of financial services. After all, assets and interactions have moved online. However, in the face of a cyberattack, a company can be subject to a costly halting of operations, a colossal hit to consumer confidence and a General Data Protection Regulation (GDPR) fine from which it might never recover. This is especially true throughout the COVID-19 pandemic, where, according to the National Cyber Security Centre (NCSC), cyberattacks are reaching fever pitch.

A mature security organisation

By their very nature given the sensitivity of the data they manage, financial services organisations must have a mature security operation in place to deal with the threat actors they attract. The maturity of a security operation can be measured by two important variables: mean time to detect (MTTD) threats and MTTR (mean time to respond) to them.

Reducing MTTD and MTTR is crucial and can be achieved through technological solutions which allow for the automation of workflows; this frees up the vital time of security teams to focus their attention where it is most needed. This is especially important in an industry facing a stark skills shortage, with the UK Government finding that 48% of businesses have a cybersecurity skills gap in 2020. Visibility is another salient variable, as cybersecurity teams must be able to immediately see shifts in behaviour in the network to recognise imminent threats as they arise.

Simply put, cybersecurity is now an integral element of financial services.

However, although technological innovation in the security response is a foundation of an effective culture of cybersecurity, this alone will not guarantee safety from attack.

Communication with the board

It is upon the CISO and their security teams to make sure cybersecurity takes important precedence in the minds of all who work at an organisation – after all, it takes one employee falling victim to a phishing email to compromise a business. At the board level, CISOs must ensure that executives understand the challenges security teams encounter as an organisation navigates business dynamics.

As with all things, communication is vital in this pursuit. An aspect of this is in quantifying to the board the benefits and return on investment an effective security posture can entail. One method that a CISO can use to create a high trust environment is through partnering a member of the board with the security team.

This partner can articulate perspective to the team from a purely business standpoint, allowing the team to produce intelligence to the overall board that exhibits the business value of the security operation centre’s (SOC’s) methods and goals. This collaborative approach will encourage the understanding security teams have for business goals and the board’s understanding of security necessity.

Security through business growth

One common event that may be viewed in a different manner by the board and security teams is when an organisation encounters business growth. Although such growth may represent that a business is in robust health, it also facilitates multiple avenues through which a company can come under cyberattack.


For a start, cybercriminals keep close watch of business news and will be aware of a company’s raised profile. In the event of new staff, through partnerships or increased employment, security teams must make sure each new employee is vetted and safely added to the system. In the case of acquisitions, security teams too must effectively monitor new structures that are added to the network, and third-party connections with whom they are not yet familiar. Indeed, a Gartner study earlier this year identified third-party cybersecurity risk as a key concern for half of legal and compliance leaders.

Key to this issue is the question of security budgets, and it is here board-level support is important. Traditional security budgets are often determined in advance and follow two common pricing models used by security vendors. These are the user-based model and capacity-based model; in the face of growth, both are fixed, and may leave security teams making difficult decisions as to where they safeguard their organisations.

Executives should instead employ a subscription-based model that offers the guarantee of scalable security at a determined rate; this will greatly alleviate the stress felt by security teams in what often should be an exciting time for an entire organisation.

Changing security budgets to better facilitate the work of SOCs represents a culture of cybersecurity being put into practice. Technological solutions are provided based on an understanding between security teams and the board on what is needed, allowing for better performance in MTTR and MTTD.

The future lies in cybersecurity

As Covid-19 has forced unprecedented circumstances and a wave of cybercrime upon security teams, it is as incumbent as ever for a culture of cybersecurity to be fostered within financial services organisations. Simply refusing increased digitalisation as a means for security will see companies become obsolete in important areas such as customer experience, where their competitors will be innovating. Instead, a holistic approach encompassing people, process and technology will be vital to forging a secure path forward in the financial services industry.

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

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

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

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

A Disconnected Operation

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

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

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

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

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

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

The Fintech Effect

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

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


What About Compliance?

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

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

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

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

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

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

Riding the Wave

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

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

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

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

 Carl Slabicki, Head of Strategic Payment Solutions, BNY Mellon Treasury Services, explores the changing climate of US payments.

For a long time, banks in the US have competed primarily on price and service rather than as providers of payments solutions. But the payments and cash management space is now changing. New developments to existing payment rails, combined with the advent of new real-time solutions and overlay services are emerging, and organisations that are able to quickly adapt to the evolving payments landscape will be well placed to gain a significant market advantage.

As we enter this period of unprecedented disruption in the marketplace, the importance of expediting the journey from paper to digital transactions for payers and receivers is becoming increasingly clear; payments are faster, more streamlined and feature enhanced capabilities around validation, security and risk mitigation.

Certainly, in the current challenging environment, the continued investment in and implementation of digital solutions continues to highlight the timeliness of this initiative. Remote working has put a spotlight on the channels we choose to make payments, with the payments industry leaning more and more on a digital environment to stay connected and continue conducting efficient and timely business. So what changes are occurring, and how can organisations and their clients reap the rewards?

The payment system evolution

For over 45 years, the ACH network had been the core next-day batch settlements system in the US. But during its long tenure, the underlying ACH system – which is governed by the National Automated Clearing House Association (Nacha) – has continued to modernise and grow, with the latest figures showing an increase in transaction volumes of 8.1% year-on-year in Q4 2019. This growth has been driven by the increasing payment convenience brought about, in part, by the introduction of Same Day ACH (SDA), which from March 2020 has increased its transaction limit from US$25,000 to US$100,000 to help open up additional use cases for the market.

As we enter this period of unprecedented disruption in the marketplace, the importance of expediting the journey from paper to digital transactions for payers and receivers is becoming increasingly clear.

To meet that growing need, new payment rails are being introduced to replace legacy capabilities. For example, RTP® – the US’s real-time payments network – launched by The Clearing House in 2017, is providing real-time gross settlement on a 24/7/365 operating model. This is providing clients with greater speed, efficiency, convenience and transparency. What’s more, in a move that will further bolster the growth of faster payments in the US, the Federal Reserve has announced its intention to launch its real-time payments system, known as the FedNowSM Service, in 2023 or 2024.

Improving security

Sitting right at the centre of the evolving US payments landscape is the move towards pre-validation services – foundational tools that are addressing security concerns that surround the entire payment process. Regardless of the payment channel being used – whether it’s ACH, Wire, RTP or other – the question remains: how do you know the payment or account data you have been provided for a transaction is correct and legitimate?

Indeed, the advent of new technologies that have enabled faster and more efficient payments sits at the intersection of another trend, namely the sophistication of fraud in the payment space. And, as people have settled into working from home environments, such security concerns have been further accentuated. The need to positively verify that an individual is authorised to transact on a paying or receiving account is, as a result, also becoming increasingly important.

It is for this reason that market leading banks are turning their attention to delivering solutions that enable real-time pre-validation – meaning the confirmation that a payee is the legitimate party occurs prior to a payment being sent. These solutions leverage a national shared database, such as the one maintained by fraud management and prevention service provider Early Warning Services, to validate the routing and account number, and verify the owner on the account, before the payment is sent. This increases security and risk mitigation, reduces fraud losses, and helps reduce the costs and processes associated with checks and other legacy payment systems.

Digitalising paper

Elsewhere, a host of overlay services are coming to the fore to address historical market challenges. For example, the migration from checks to electronic payments remains a significant pain point for cash managers. Though accepting and processing checks comes with a heightened risk of fraud and an array of manual processes, they continue to remain necessary as many businesses do not have the information required, or the technology interface needed, to send or request a payment digitally.


To address these issues, directories that allow payees to securely register their payment details and identities electronically are emerging, such as Zelle® in the US. Owned by a consortium of banks, the Zelle directory allows users to register identifiers, such as an email address or mobile phone number – referred to as “tokens” – which, following a thorough authentication process, can then be used to send and request electronic payments. Banks will then pull that authenticated token from the directory to find out the beneficiary’s bank, before using ACH or the card network to settle the payment. Going forward, Zelle, with the support of some of its member banks, including BNY Mellon, is working with The Clearing House to add RTP as an additional settlement mechanism. It is hoped that these capabilities will be implemented within the next year.

And while Zelle represents an effective way to securely send electronic payments to consumers and small businesses, there is also a demand for this in the business to business or vendor payments space. They too want to reduce the time and effort it takes to collect supplier banking account information, validate and keep it updated, as well as ultimately reduce or eliminate paper checks. This is increasingly achieved through settlement networks such as Paymode-X®, the largest business to business vendor payment network in the US, with over 400,000 members, processing over $200 billion in payments annually. It allows clients to convert vendor payments from paper (check) to ACH with electronic remittance, with the potential to earn revenue share on payables.

Adapting to the “new norm”

With the emergence of real-time payments, updated legacy rails and a new layer of overlay services, the US payments space is transitioning to an entirely new payments culture. Developments are moving quickly, with many banks looking to outsource their solutions to a trusted provider that already has the technology available – enabling them to swiftly go to market for a fraction of the cost.

As banks look to transform in this way, it is vital that they are able to provide clients with the options and capabilities they need to enable their businesses to run effectively and efficiently in the new faster payments environment. There is not a single, optimal channel that can solve every issue and meet all requirements – making it crucial that banks have a variety of tools in their arsenal, ready for instant deployment. The opportunity to provide improved, digital services to organizations, with greater levels of security, ease and efficiency has arrived. By working together to achieve ubiquity and interoperability, banks are developing the modern tools necessary for delivering a truly optimised payments experience.

The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute Treasury Services advice, or any other business or legal advice, and it should not be relied upon as such.

Jan van Vonno, Research Director at Tink, looks more deeply into the trends currently altering Europe's financial sector.

Convenience and ease have become the new normal for consumers and the demand for better, more personalised digital experiences in the financial industry has skyrocketed. Thanks to PSD2 and the UK's Retail Banking Market Investigation Order, Europe has been leading the way with its open banking initiatives — representing the beginning of a journey to democratise money management, empowering everyone to access the right products and services to meet their financial needs.

Over the last few months, Tink has been reporting on the attitudes and sentiment of Europe’s financial institutions towards open banking, with our research revealing that 61% of financial executives feel more positive towards open banking than last year.

This is extremely encouraging — particularly considering the current climate we find ourselves in. With COVID-19 accelerating the shift toward digital channels, we expect this positivity to continue to grow as more financial institutions concentrate on the digital transformation of products and services.

However, our research also revealed that 46% of financial executives aren’t confident that the benefits of open banking are widely understood within their organisations. So clearly the industry has more work to do. To reap the full rewards of open banking, it’s essential for financial institutions to remain nimble, open-minded and strategic in their approach. Here are three things they can focus on.

Thanks to PSD2 and the UK's Retail Banking Market Investigation Order, Europe has been leading the way with its open banking initiatives.

Create a clear open banking strategy

Adoption of open banking starts with the belief that it will create value. Once financial institutions embrace this, the next step is to implement a clear and detailed open banking strategy which can be translated into concrete business objectives.

To do this, they need to embrace change — educating people at all levels of their organisation on the benefits of open banking and incorporating it into the product, service and technology roadmaps of their business. Thankfully, 59% of respondents indicate that they already have a clear strategy in place, while 58% view open banking as an opportunity.

It is important that financial institutions also look to embrace the role of a TPP — consuming APIs to enhance their current products and operations and leveraging the available data to improve customer acquisition, accelerate onboarding, increase conversion, lower risk, and improve customer satisfaction rates. A great example of a company that is doing just this, is Nordea — who are going beyond PSD2 and aggregating all their data (e.g. investment, savings etc). In addition to this, they have successfully created a business-to-developer (B2D) open banking strategy to produce APIs and create better solutions for their customers.

It’s important to note that while some financial institutions approach open banking as a long-term strategic play, there are also a growing number who see the opportunity for short-term, quick-win value creation. There is no right or wrong way to approach this as both offer their own rewards. Ultimately, the most likely scenario is that financial institutions’ open banking journeys will begin with more elementary open banking use cases, eventually evolving into more sophisticated use cases over time.


Allocate budget (no matter how large) wisely

While the positive shift in attitudes is a solid indication of the importance of open banking, it doesn’t fully reflect the significance of the movement. The real proof is in increasing budgets that are being invested in open banking initiatives across Europe as the industry mindset moves from compliance to value creation. According to our data, open banking investment budgets for European financial institutions are typically between €50-€100 million, with 63% saying open banking budgets have grown since last year, with annual spending rising by between 20%-29%.

Of course, not all financial institution decision-makers have access to this level of budget. The key here is to focus on the low-hanging fruit and taking advantage of open banking by operating as a TPP. In doing so, executives can experiment with elementary use cases with clear outcomes before proceeding on to more advanced and exploratory use cases. In addition to this, creating an open banking scorecard can help measure the impact of investments and set clear parameters that help to navigate the open banking journey.

While the positive shift in attitudes is a solid indication of the importance of open banking, it doesn’t fully reflect the significance of the movement.

Forge fintech partnerships

What became clear through our research is that the general confidence in open banking isn’t purely reflected by the understanding of the opportunity it offers, the strategy, or the sum of investments. It’s also indicated by the number of partnerships that financial institutions have formed with fintechs to help accelerate innovation and realise their objectives. 69% have increased their number of fintech partnerships in 2019, while the majority of executives are also working with more than one partner.

Such partnerships are invaluable, as they can provide financial institutions with the technology, expertise and vision to drive open banking value creation — creating both short and long term value for financial institutions and, in turn, for their customers. One thing to keep in mind, however, is that in order for partnerships to truly work, fintechs must be able to navigate the complicated procurement process and onboarding requirements that many larger banks have in place.

What it boils down to, is this: 2020 will be the year of value creation as the industry starts accepting there is considerable money to be made in open banking. The winners will be the banks that place a relentless focus on building clear strategies, using existing budgets wisely and prioritising fintech partnerships. This, in turn, will lead to a host of new use cases springing up across the customer journey — with institutions leveraging open banking data to improve customer acquisition, accelerate onboarding, increase conversion, lower risk, and improve customer satisfaction rates.

A huge opportunity lies ahead; the benefits of open banking are now ripe for the picking.

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