Hong Kong is a highly banked, wealthy region which enjoys excellent digital and physical infrastructure. To hear about the financial hub’s payment evolution, we hear from leading ePayment technology and eCommerce management company Payment Asia which provides customised all-around payment strategies to more than 10,000 Asian and multinational companies.

We speak with Lance Lau, Head of Sales at the Hong Kong Team of Payment Asia. Established in 1999 in Hong Kong, Payment Asia has over 20 years’ experience in providing eCommerce payment solution services to local and international markets. Taking the lead in the ePayment technology and eCommerce management market in Asia, the company helps merchants to continue to grow in the wave of technological development.

Over the last two decades, Payment Asia has expanded its business from Southeast Asia to the international market, including the Philippines, Malaysia, Singapore, Australia, New Zealand, Mauritius, the United Kingdom and Canada.

Tell us a little bit about the current payments environment in Hong Kong?

The current payments environment has been very interesting as we’re witnessing a stage of transformation - from cash transactions to the digital era with traditional cashless payment such as credit and debit cards being replaced by eWallets, mobile payments, virtual banking and the future usage of cryptocurrencies.

What payments trends do you expect to see in Hong Kong in 2021? How is Payment Asia going to respond to these?

With the pandemic still affecting everyone across the globe, most merchants are finding ways to improve the purchase experience for their clients while also implementing the online/eCommerce elements to their business.

At Payment Asia, we have designed and self-developed a mobile payment application called PA Pay - specifically for merchants - which integrates multiple payment channels, including credit cards, debit cards, UnionPay and a variety of eWallets, and can be applied to POS or smartphone operating systems.

We offer various online payment solutions including Visa, Mastercard, UnionPay, Alipay and WeChat Pay, which integrate with online stores, H5 web pages and applets through API. We can also guide merchants and personal clients in the process of setting up international bank accounts (IBAN) for payment settlements and operate as an offshore virtual bank.

On top of payment processing solutions, Payment Asia’s services also cover online and offline eCommerce payment strategies, payment gateways integration, eCommerce management, artificial intelligence, big data and more.

Payment Asia’s mobile payment application - PA Pay which can be applied to POS or smartphone operating systems

What is Hong Kong’s current position in China’s payment evolution?

Over the last decade, China has been a pioneer in implementing ePayments, propelled by China UnionPay, Alibaba’s Alipay and Tencent’s WeChat Pay.

The FinTech industry is taking off amid a backdrop of growing consumption and the large, tech-savvy millennial generation. China’s FinTech Explosion explores the transformative potential of the country’s financial technology industry, covering subsectors such as digital payment systems, peer-to-peer lending and crowdfunding, credit card issuance and internet banks, blockchain finance and virtual currencies, and online insurance.

In 2014, the People’s Bank of China established the Digital Currency Institute of the People’s Bank of China where a specialist research team discusses technical and regulatory issues in relation to the development of Digital Currencies in China.

Since August 2020, the People’s Bank has been carrying out pilot trials of Digital Currency Electronic Payment (DCEP) in various cities across China. The estimate is that 30%-50% of cash will be replaced by the DCEP within two to three years.

Features and capabilities of DCEP:

• DCEP uses digital tokens and blockchain technology to represent a country’s official currency. DCEP differs from cryptocurrencies in that it has the status of legal tender and is centralised and regulated by a country’s monetary authority.
• DCEP is a digital version of the Renminbi (RMB).
• DCEP is a sovereign currency issued and backed by the People’s Bank of China and controlled by the Chinese Government which will be able to track the currency moving through its economy and monitor its usage.
• DCEP is said to be secure, have controllable anonymity and prevent counterfeiting. It also addresses the high costs of cash issuance and handling, and difficulties in tracking and fraud.
• Like cash, the DCEP cannot be refused as payment. The People’s Bank will exchange DCEP with commercial banks and payment operators, which can then distribute DCEP to their customers via eWallets.
• The use of DCEP will be convenient for the public and provide more efficiency in the financial system, helping China bring its unbanked population into the mainstream economy and accelerate the move to a cashless society.
• DCEP also helps to internationalise the RMB’s use in trade settlements and presents an attractive alternative to the established international funds-transfer system, SWIFT, with lower transaction fees.

On 4^th December 2020, Eddie Yue, Chief Executive of Hong Kong Monetary Authority (HKMA), announced that HKMA and the Institute are discussing the technical pilot testing of using DCEP for making cross-border payments and are making the corresponding technical preparations.

How is Payment Asia contributing to this?

Payment Asia has always delivered the advantage of being in Hong Kong to our merchants. We are now implementing blockchain technology to our payment platform and are actively developing an emerging cryptocurrency gateway. This can be seen as a baby step but is still an efficient and effective way to get merchants to warm-up and be ready for the new payment era.

At present, 36% of the SMEs in the United States accept Bitcoin (BTC), whereas Wikipedia, Microsoft, Expedia, AT&T, Burger King, KFC and Subway have also started accepting BTC. Our value proposition is to provide merchants with a familiar payment gateway experience while bridging the gap between digital and fiat currencies. Customers will be able to have this new option as their payment method while merchants will be protected on the cryptocurrency’s fluctuation.

Features of Payment Asia’s Crypto Gateway:

• Acceptance of major digital currencies (e.g., Bitcoin, Ethereum, Cardano, BCH, Stellar, USDT etc.) for online and offline payments.
• Instant locking of rate to minimise merchants’ risk.
• Withdrawal of funds in less than a business day.
• Payment to merchant’s suppliers in 200+ countries with digital currencies.

Payment Asia’s Crypto Gateway bridges the gap between digital and fiat currencies

What does the future hold for Hong Kong’s payments industry?

With its status as a key Asian financial hub, Hong Kong will always be an important part of the global payments industry.

Supporting this, Hong Kong's Stock Exchange raised $51 billion from 154 new listings in 2020.

Numbers like this make Hong Kong irresistible for many investors, according to Tara Joseph from the American Chamber of Commerce Hong Kong.

"The flow of money that comes in and out of Hong Kong on a daily basis, that goes into mainland China and comes out, is very hard to replicate," she said during an interview with BBC's Asia Business Report.

A city with attractive tax rates and a business-friendly environment is the natural successor to Hong Kong. Being the gate into the Chinese market, a lot of international businesses will still prefer Hong Kong as the processing hub for their B2B and B2C activities.

How can Payment Asia help merchants with digital transformation?

One of Payment Asia’s strengths is based on creating a landscape for merchants and businesses in order to generate traffic and convert this into sales through our payment technology.

As transactions are made, we are implementing big data for our merchants, through our secure system and a robust business intelligence system.

We use this data to create inbound and outbound digital marketing strategies for merchants, in order to increase their conversion rates.

In addition, we have also developed a chatbot platform that uses artificial intelligence to realise real-time conversations to strengthen the interaction between brands and consumers.

What’s on Payment Asia’s agenda for 2021?

With our extensive experience in the market, moving forward into the post-COVID world, we aim to redefine the benchmark of online/offline and mobile payments - not just in Hong Kong but on a global scale.

For more information on the work we do, you can follow our  blog on our official website: www.paymentasia.com.

For decades, financial services and risk have evolved hand-in-hand. As manual, paper-based processes have given way to digitisation, countless improvements in efficiency and effectiveness have been realised. Yet the best of times can also be the worst of times, as risks have multiplied at pace. It is incumbent on the financial services industry to continue to combat these ever-changing risks, using historical learnings as a foundation for new approaches, strategies and insights.  

The evolution of financial crime detection

In the early days of electronic transactions, risk management was basic. With no historic information on which to base them, rules used to identify suspicious and potentially fraudulent transactions were simple and often arbitrary. As knowledge was gained, these generic rules evolved to expert rules, based on the experience derived from the outcome of the simple rules.

Expert rules proved to be quite effective, helping to address situations such as proliferating check fraud. Indeed, some of these expert rule-based solutions are still useful today.

As time went on and the volume of electronic information related to financial services continued to increase, the industry began to leverage statistical inference to more effectively handle risk. Subsequently and most recently we have seen a shift to using machine learning and artificial intelligence (AI) for fraud detection purposes. While the use of these technologies for fraud detection may seem revolutionary to some, it’s actually no surprise given the industry’s propensity to quickly adapt the latest technologies to the fight against financial crime.

Taking a look at today

Modern banking has evolved into an always-on, omnichannel operation; whether opening an account, checking a balance or moving money with a mobile device, customers expect a frictionless, secure interaction.

The delivery of these modern banking experiences must be balanced against fraud that is fast-moving, automated, and perpetrated with sophisticated technology tools designed to bypass traditional controls.

Financial institutions are compelled to innovate to keep up with a rapidly changing landscape and increasingly innovative criminals. Institutions are seeking new ideas, solutions and approaches through the use of data, analytics, machine learning, AI technologies and more.

Even the most advanced technology is not enough to effectively combat financial crime on its own.

Leveraging these techniques has become key to managing financial crime risk and to the operational management of financial crime alerts, allowing detection of financial crime to become more precise and less disruptive of legitimate transactions. This helps financial services providers to balance risk management obligations with the delivery of a better customer experience, which is critical in a highly competitive financial services world.

Embracing a new path going forward

Institutions have begun to embrace the reality that effectively tackling financial crime requires applying new approaches, strategies, and insights; further investing in technology and innovation; developing new skills, and fostering collaboration within their internal financial crime units as well as externally with technology vendors and regulators.

For enhanced financial crime risk management, many are moving to converge anti-money laundering (AML), fraud, and information security functions to some degree to take advantage of shared intelligence and economies of scale in the tools that they use. This includes forming partnerships across those functions, realigning technology and organisational restructuring.

As institutions seek new solutions, ample opportunities exist for innovative technology providers. With deep expertise in technology, data science, analytics and integration projects, providers can become valued and trusted partners offering sage advice as financial service providers navigate their transformation journey.

The solution to defeating financial crime lies in a combination of the right technology, trusted data, and human intelligence, along with greater collaboration. The financial services industry has really only scratched the surface of what can be achieved, and the next decade will see further developments in this movement. Increased automation, simplified operational processes, and more detailed and less costly analytics create great potential for enhanced transparency while maintaining or improving personal privacy and security of financial activity.

Financial crime technology continues to evolve. Yet even the most advanced technology is not enough to effectively combat financial crime on its own. The future of financial crime detection, prevention and mitigation will be built on new approaches to deployment, a commitment to internal and industry-wide collaboration, and the ongoing implementation of new ideas. Enabling a balance between people, process and technology is critical to maximising return on technology investment and delivering heightened security in an ever-changing world.

The financial sector has been especially keen to reap the benefits that Artificial Intelligence (AI) technology can provide, but there are still some fears that these innovations will cause huge job losses and remove the human role from businesses. Here Frank Abbenhuis, VP of Strategic Alliances at Axyon.AI, discusses the current AI landscape, touching on some the key steps ahead.

What is AI now?

Over the past 20 years, AI adoption has increased dramatically, due to some key shifts in the market. Firstly, technology has advanced hugely – not only in its ability to process large quantities of information in a fast, accurate manner but also in how inexpensive computing has become. The data that AI utilises has also become hugely prolific, with both individuals and businesses producing huge amounts of data on a daily basis. The result is not only cost effective and fast, but also incredibly accurate.

However, even with this foundation, AI would not be witnessing increased adoption if it were not practical for financial services. Through AI, financial institutions are now able to offer an improved customer experience, identify new sources of business growth, determine more effective models to follow, and develop broader aspects of the organisation: from enhanced productivity to better risk management.[1]

AI as a tool

This increased adoption of AI has inevitably caused concerns over job security, with fears that jobs will become automated as a result.[2] However, the reality is that AI has come at an ideal time to address the demands that banks are facing.

For example, the customer experience is now a key focus in building a business’ reputation. To remain competitive, companies need to move away from the ‘back office’ process-driven tasks and increase their client engagement strategies. As such, the more that AI can support these internal functions, the more that the business invests in building those vital client relationships.

Naturally, there are also concerns around how AI can be implemented. Fortunately, banks and other businesses in the financial sector often have enough historical data available to train an algorithm and run the task automatically. If this automated function is then combined with human oversight, the business can improve the quality of advice given to clients. In this way, AI no longer takes over a person’s role, but enhances their functionality in the business.

Making the most of data

Even with this progress, there are still certain areas in financial services where AI can be enhanced. For example, syndicated loans desks have a wealth of historical market data that is not leveraged to its full potential.

If AI were implemented here, algorithms could be used to analyse all previous deals and produce the likelihood of specific actions being taken. In this scenario, AI would not only be able to access which investors participated in every syndicated loan, but also the high-level structure of these loans – something that would be impossible for a single human mind to achieve.

This is just one example of how AI can enhance those in capital markets and asset management. The sheer amount of data that these sectors produce make them ideal for the predictive capabilities of AI. The only impact this level of automation will have on those working in these industries is smoother processes and improved output.

With all the fear that can surround new technologies in financial services, AI is set to only improve how people work in the sector. Through taking advantage of huge amounts of data, AI has the potential to streamline internal process and increase overall output – with the added benefit of improved accuracy and reliability.

[1] https://www.mckinsey.com/industries/financial-services/our-insights/analytics-in-banking-time-to-realize-the-value

[2] https://www.theguardian.com/money/2019/mar/25/automation-threatens-15-million-workers-britain-says-ons

As part of this month’s Expert Insight feature, Finance Monthly had the privilege to gather insights from Bob Dorsey, CEO & Managing Director at Ultimus Fund Solutions, one of the largest independent mutual fund service providers in the United States. 

Ultimus recently celebrated its 18th anniversary and I recently celebrated my 33rd anniversary in the mutual fund industry. Those milestones gave me an opportunity to reflect on how much the fund industry has changed in the new millennium, while also highlighting the trends for success.

The distribution models, investor expectations, and regulatory landscape are all markedly different today – influenced by regulatory scandals, the largest financial crisis in history and dramatic evolution of technology that has changed the way information is shared and people interact. Given the recent anniversaries this seems like the perfect time to look back on the events that have shaped the evolution of the industry, dig into the impact they have had on the mutual fund business and share some insights about what it takes for fund managers to succeed in this new environment.

Rise of the Mutual Fund Supermarket

In the late 90s fund distribution was completely different than it is today. There were many investors who would fill out paper applications and send checks directly to the funds. The funds were selling themselves largely to do-it-yourself investors in a much more fragmented model. But much like any industry, those inefficiencies created opportunities for innovation and platforms like Schwab, Fidelity and Pershing took advantage.

The platforms saw an opening to consolidate distribution through financial intermediaries instead of the direct to investor model. They began offering more and more services to fee-based registered investment advisors (RIAs) with the promise of being their back offices while offering access to thousands of funds through a single channel. The more services the platforms offered, the more RIAs got on board, and the distribution model and the balance of power in the fund business inexorably shifted.

The platforms soon became fund supermarkets, offering access to a seemingly unlimited number of investment choices, seizing control of the distribution channel and simultaneously changing the pricing structure along the way. The platforms fundamentally changed the way mutual funds are distributed. Funds rarely sell directly to investors anymore; they sell through intermediaries. Instead of buying funds, investors now buy advice or asset allocations models from RIAs.

Surviving in the New Distribution Dynamic

The new distribution dynamic has significant implications for funds, not the least of which is increased costs. As these platforms have become the norm, funds and/or fund managers must pay to gain access to investors. That has caused many fund managers to get out of the fund business altogether because they can’t afford the costs, but at the same time others have jumped in because they see a much simpler way to gain broad distribution.

For fund managers, the emergence of fund supermarkets has transformed distribution from a relationship sale to a strategic exercise. When a firm launches a fund it now must think about all the spheres of influence and consider every step in the process; from product design, pricing and positioning, channel selection and relationship building. That’s why many of the best wholesalers today are CFAs or investment professionals versus traditional sales professionals. They are no longer selling to individuals. They’re talking to financial professionals who want to speak to someone who can understand and articulate the difference between funds and strategies so they can make more informed decisions for their clients.

The most successful fund managers have figured out the complexities of the new landscape or work with someone who can help them navigate the nuances of the platforms to gain the distribution they need without breaking the bank.

The Technology Transformation

Technology is often seen as the great equalizer and in some ways technology advancements in the fund business have helped level the playing field among fund managers. Technologies like Fund/Serv have made automation widely accessible, allowing new levels of information sharing, order processing speed and documentation. Automated transactions have fundamentally changed the way transfer agents operate and e-delivery has dramatically changed the way we do business in general.

Technology has changed how we share and from where we get our information. Funds used to scramble to get the NAVs calculated by 5:30 pm because if they didn’t have it done by then they wouldn’t be published in the Wall Street Journal the next morning. Integrated technology solutions have made the daily NAV process easier, but perhaps a better indication of the impact of technology is that few people rely on the WSJ for that type of information.

For fund managers, technologies have delivered economies of scale that never existed in the pre-automation world. Unfortunately most of those economic benefits have been offset by the skyrocketing distribution costs mentioned earlier. They must continually look for new systems, new processes and new partners that will help them balance increasing investor demands, regulatory requirements and distribution needs with the need to keep costs as low as possible.

The Increasing Importance of Operations

Fund managers trying to succeed in the mutual fund business today face increased competition from new managers entering the space, higher product complexity and confusion, and growing compliance requirements, all of which can lead to increased costs at a time when investors are demanding lower fees.

In this environment, operations have risen up the list of fund business priorities. Not that they weren’t important before, but now an institutional-quality infrastructure is a business imperative. It can mean the difference between the right distribution strategy and an inability to gain assets; it can deliver process efficiencies that drive down costs or reputational risk that can force a firm out of business.

The most successful fund firms understand the importance of operations but they also understand that they need to identify the right partner to help them succeed. Because a fund manager that is forced to be focused on fund operations most likely isn’t spending enough time minding their strategy or serving their shareholders – and that isn’t a recipe for success.

The Regulatory Revolution

To say the regulatory landscape has changed in the last 18 years would be an understatement. When we founded Ultimus there was no Patriot Act, Sarbanes-Oxley or Dodd-Frank, and no Department of Labor fiduciary rule guidance. These pieces of legislation and the DOL rules have changed the way funds do business and interact with clients in general.

The piece of legislation with perhaps the greatest impact on the fund manager’s business is the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank forced many alternative managers to register with the SEC, which opened the door for these managers to launch liquid alternatives funds. The DOL fiduciary rules have led to massive changes in fund share classes and payments to intermediaries. These legislative and regulatory events have resulted in the fund industry being a very different business than it was 18 years ago.

Thriving in the New Regulatory Normal

Creating a culture of compliance is critical to the success of fund managers in the new regulatory landscape. It’s not something they need to do simply in order to avoid fines or violations; it’s a business imperative -- investors expect fund managers to have functioning compliance programs in place. The challenge is achieving a culture of compliance without having compliance costs go through the roof. That’s even more important as increased demands for transparency among investors drives fee pressure.

Essentially fund managers must find a way to be as efficient as possible because they’re getting squeezed between downward fee pressure and rising distribution costs. That puts a whole new level of pressure on the operational component of the fund business. More and more fund managers look to outside experts to support them in developing and executing key aspects of their compliance programs and broader operational functions. While there is a willingness to outsource compliance functions, smart managers know they can never fully offload responsibility. Working in partnership with outside experts creates the best balance and leads to better cost and compliance outcomes, ultimately driving greater business results for funds.

The last 18 years have definitely been transformational in the mutual fund industry. Looking ahead, the industry evolution is certain to continue based on dynamic investor demands, emerging technology, and cautious regulators, but will you be ready for these changes?

Website: https://www.ultimusfundsolutions.com/

Below Sam Bennett, COO at Frontierpay, provides Finance Monthly with a brief overview on UK inflation over the past few weeks, looking at the current state of play, the evolution of optimism and the overall position of the pound among global currencies.

Mark Carney must have breathed a sigh of relief from his office in the Bank of England when the news reached him just a few short weeks ago that UK inflation had fallen to 2.6%; contradicting market expectations that it would remain at, or even rise above May’s figure of 2.9%

The rate at which inflation rose over the last year had been better than predicted, after hitting what was already a 20-month high in June 2016, when the UK voted to leave the European Union. The CPI’s unexpected drop in July, which came largely as a result of lower oil prices reducing the cost of petrol and diesel, was therefore very welcome.

While the fall in inflation was quickly hailed as good news by many businesses and everyday consumers, sterling’s position in the currency market was hit hard, with a slowdown of the domestic economy creating significant downward pressure.

The 0.3% fall led to an immediate drop in the value of the pound, which landed at €1.12 against the single currency and shed more than a cent against the dollar. As sterling continued to feel investor pressure in the following days, the pound fell another 1% against the euro and found itself sitting below $1.30.

Today, a little over three weeks since the fall in inflation was first announced, the state of play for the pound isn’t looking any more encouraging than it was in those first few troublesome days.

Despite German industrial production falling unexpectedly, an event which we might have expected to provide some relief, sterling has not only remained under pressure, but has actually slipped further against the euro and dollar. Even with the most recent data from the Eurozone being weaker than many analysts predicted, potential investors are still wrestling with the uncertainty of the UK’s weak UK inflation data.

It should be pointed out that there is still some relative positivity in the investor community, thanks largely to robust global growth rates. Equity markets are sitting at fresh highs, with global indices rising, on average by 23% this year so far. Cause, therefore, for some optimism.

For the time being, however, the UK continues to look like the perceived weaker cousin, in comparison to the other major global currencies. We’ve seen several attempts to gain ground against the euro and the dollar pushed back, and live prices have settled at levels of around €1.10 and $1.30. As lower inflation numbers continue to weigh heavily on the pound, a rapid turnaround isn’t looking very likely.

GTR spoke to insurers and brokers at the annual conference of the Association of Trade Finance in the Americas (ATFA) on how the insurance market has evolved in the US since the financial crisis.

The first individual that we had the privilege of interviewing for our March Executive Insight section is Rex Briggs – the founder and CEO of the NYC-based Marketing Evolution, which brings together advanced analytics and cloud-based software to support message exposure at the person-level, across all media, and in-campaign. Their software represents a new generation of analytics using big data and artificial intelligence. Within the last year, Marketing Evolution has been named “a leader” by the independent research firm Forrester in their latest global “Measurement and Optimization Wave” report, won the “Gold Medal” from the Advertising Research Foundation, and has been the subject of a Best Practice report by the CEB Marketing Leadership Council. Their software increases profits by analysing advertising effectiveness of each and every message in near real-time. Here Rex tells us more about Marketing Evolution’s recent accomplishments and sheds some light on the way that the company operates.

As an award-winning marketing ROI researcher who has been helping Fortune 500 marketers improve marketing ROI by applying analytics for more than two decades – how has the sector evolved over the past 20 years?

Marketers talk about getting the right message to the right person at the right time at the right price, but until very recently, it been more talk than reality. Now, with the latest generation of analytic technology, we’ve made a major breakthrough. Today, every single message to nearly every single person can be analysed and optimized by our software.

We affectionately call the software the ROI Brain because it uses Artificial Intelligence (AI) to find patterns. The patterns the ROI Brain is searching for are which messages are influencing which people. The ROI Brain does this analysis at a scale and speed that is breath-taking. Most marketers are blown away when they see the ROI Brain in action. The biggest change in the past twenty years is the one-two punch of Big Data and AI. The implications to business are as far-reaching as the impact of the Internet.

You’ve written a couple bestselling books. Your most recent book was about how software and algorithms are changing marketing. Can you explain how Big Data and AI can be used to improve marketing results and what you are doing to educate business leaders? 

When you hear the terms Big Data and AI, is it a little intimidating? I want to demystify the terms Big Data and AI by giving business people a look under the hood to see the specific data and analytics at work. At Marketing Evolution, we connect data from every media exposure, online and offline, to sales data, brand perception data, social data, digital profile data, location data and more. By connecting all this data at the person level, we can see which exposures to advertisements contribute to a sale.

This level of analysis wasn’t possible a few years ago. Most marketers and finance leaders aren’t aware of how this technology has advanced recently, or how it can improve their business. Therefore, we see a huge education need. We run a no cost private executive briefing onsite at Fortune 500 companies. We speak at a lot of conferences and do webinars to demonstrate Big Data and AI. Of course, we hope to meet like-minded marketers and finance leaders that want to become our customers, but the broader goal is education. Businesses spend over half a trillion dollars a year on advertising globally. Marketing and finance people are looking for advances in data analysis to help them improve the productivity of their spending, and reduce waste. We want business people to know what savvy marketers are doing today with Big Data and AI to improve business results.

Your company, Marketing Evolution, has been called a new generation of marketing analytics. How is what you are doing different from what came before?  

The old ways of measuring advertising use brand tracking surveys and econometric mix models. These old tools provided a high-level view of how advertising increased sales overall, or improved brand awareness and preference. These tools were innovations in the 1970s, and grew in popularity in the 80s and 90s.

The old analysis was pretty superficial in its recommendations – only giving a marketer a budget recommendation, a high-level guidance of how much to put in TV versus digital, versus price promotion, and a few tactical suggestions such as the best TV dayparts to advertise on. These reports were backward looking. They came along with the caveat that differences in message quality may change the results. The reality is that one message might work five times better for a certain group of people than another message. The concept of the right message to the right people is well-understood, but the old analytic systems did nothing to help a marketer measure which message was working with which people while the campaign was live.

How helpful is it to get a report that comes out weeks after the campaign is over, giving a rear-view mirror view, and warning that the road ahead is likely to be different because you are running different advertisements?

Not helpful at all is what most marketers say.

Enter Big Data, software and algorithms. Advertising ROI analysis used to take months. With automation in our software, results come in while the campaign is still live. In the past, ROI analysis wasn’t very detailed. Now, we can take the ROI analysis all the way down to each and every impression that is delivered to each and every person. The biggest wildcard in advertising performance is the message itself. Now, real-time analysis of which messages are influencing which people lets a marketer adjust the message targeting and media mix in real-time. The software does the work, and eliminates wasted time and money. The problem is, most marketers and finance people are still using the old analysis systems. They aren’t aware of how Big Data and AI have changed marketing ROI analysis. That means a lot of marketers are missing out.

You mention waste in advertising. The Association of National Advertisers (ANA) released a report after an eight-month investigation that found advertising agencies systemically padding their profits by using non-transparent practices such as taking rebates from media companies and not disclosing them to clients. Does your software help address these issues of agency transparency?

The ANA report was a bombshell in the advertising industry. Every senior marketer and finance leader should take a read so they can protect themselves. In light of the revelations in the ANA report, we looked at this situation and said, “There has to be a better way.”

We developed a two-track approach. One track is to take our technology directly to the marketer. With our software, marketers can build their own media plans, or check the media plans their agency has proposed to them. This gives marketers and finance total visibility and control.

The second track is to certify advertising agencies to use our technology to ensure transparency. The agency builds the media plan in our software. The agency adds their expert human judgement on top of the data driven plans generated by our software. Any changes the agency makes are logged in our software so there is an audit trail. Our software creates complete transparency, and works directly with auditors.

As we started working with select advertising agencies, we saw that many of the people we met want to do right by their marketing clients. However, their approach to media planning and buying is manual, inefficent and messy – it isn’t a shock that there are problems. These agencies like the automation and labour savings from using our software. For example, if the software detects that rainy weather decreases sales by 10%, the ROI Brain automatically reads the weather forecast for the next week, and makes adjustment to media based on the weather patterns. If the software detects that one of the advertisements is working better with women who like exercising, the software has detailed profiling of every media placement, and will automatically adjust the message targeting accordingly. Can you imagine how labour intensive it would be to make all these changes manually? Agencies old approaches to media planning and buying simply aren’t fast enough to gain the benefits of real-time marketing ROI analysis.

The better agencies respect marketer’s right to have direct visibility into media planning, buying and optimization. They love the automation. There are some agencies that don’t like the power our software gives to marketers – but I can tell you, marketers love it.

You mention that better agencies respect the right of marketers to use your software to have direct visibility. What differentiates the good actors from the bad actors in the agency world?

If you are wondering how to spot a potential bad situation with an advertising agency, a tell-tale sign is if the agency is trying to sell you on having them do their own attribution or marketing mix models. The dirty little secret about the old generation of mix and attribution models used by agencies is the extent of human decision-making and interpretation in the models. This leaves room to manipulate the model recommendations. The new generation of analytics we apply is much more detailed and therefore removes the risk of an agency steering dollars toward media where the agency is getting rebates or so called kickbacks.

Other signs of a problem with the agency include a resistance to sharing all their buying data in a consistent machine-readable format with an independent measurement company or auditor. Or, contracts that give the agency ownership of the marketer’s data.

The ANA report gave us a renewed sense of purpose around giving marketers and finance the right tools for independent ROI measurement. Checks and balances are important. The old saying, strong fences make good neighbours applies to the marketer/agency relationship. A good agency can be an amazing partner for marketers to achieve their business goals – but it is important to have some well-defined boundaries and independent review. I think it is a good sign for the industry that several agencies have asked to be trained and certified on our software.

You’ve won several new retail customers in the past year based on your use of location analysis. Can you tell us more about location analysis?

Our analysis is at the person-level. That means we factor in how close a person lives to a store, their local weather, the options to purchase from a competitor, even the specific billboards the person will pass on their commute to work.

Our customers wanted to measure the effect of advertising down to the specific store. When we worked with Walmart, we learned that the top three deciles of most profitable customers could largely be explained by how close they lived to Walmart. Perhaps that’s not surprising, because the old saying about retails is, “What is the three most important factors in retail? Location. Location. Location.”

Yet, the old approaches of attribution and mix modelling couldn’t tell a marketer when and where to activate a mobile geo-fence offer, or to buy a specific billboard, or which TV placement will disproportionately reach people that live close to your stores, or any of the other decisions that are location specific. Our new generation of analysis, which is location aware, showed the specific incremental contribution of geo-targeted mobile advertising, and every other form of advertising. Walmart shared the results publicly, and showed how we helped increase their ROI using our Big Data analysis. This location analysis capability has been a winner and was a factor in several retailers becoming customers in the last year.

It was announced that you’ve teamed up with Joel Rubinson, the former Chief Research Officer for the Advertising Research Foundation. He says he wants to disrupt the New Product Forecasting industry. Can you tell us more?

Joel is an expert in new product forecasting. When he read about our person-level analysis, he had an epiphany. The old generation of new product forecasting that is still used by many companies today isn’t linked to detailed media planning software. He saw an opportunity to re-invent new product forecasting.

The product, MoreCastR, has an eight factor scoring system to identify the people with the highest propensity to try a new product. It scores everyone in the country with a look-alike model and then concentrates the advertising on these people. This approach dramatically reduces wasted impressions on people unlikely to try the product. It boosts sales results by ensuring those most likely to try the product have sufficient level of advertising exposure. A leading consumer package goods company has successfully completed the beta test. We will unveil the capability at our customer roundtable in Los Angeles, in April.

Tell us more about the customer roundtable. What do you hope to accomplish at the event?

I have a passion for making marketers smarter and giving them a competitive edge. The roundtable will feature many of our customers sharing their success stories, and what they hope to accomplish in the future with our software. It is a great opportunity for our customers to share ideas and network with one another. Several of our data and technology partners will present how marketers can use their capabilities to get more value from the ROI Brain.

In addition to the customer roundtable in Los Angeles, we are hosting a European tour designed to bring some of the best content from the roundtable to Europe. We are doing two-hour briefing sessions for marketers upon request. Both events are free education events because we love to share what is possible with marketers. We hope the events will open up business people’s minds and inspire marketers to evolve faster than their competitors.

What do you find most enjoyable about your work and why?

I enjoy onboarding new customers. Most marketers hear what we are doing, and it sounds difficult. But, in reality, we have automated so much of the data and analysis that it takes less than six weeks for a marketer to get up and running. There is something about that moment when a marketing team gets around the table together, and realizes that it is actually easier to benefit from the new generation of analytics than it was for them to use the older approaches. I get a lot of satisfaction from helping marketers take this step into the future. I enjoy the bond that forms between our team at Marketing Evolution and our customer’s team. I’ve made lifelong friends through our work with our customers. I appreciate the opportunity to help marketers to evolve.

You successfully grew Marketing Evolution for more than a decade without any outside capital. What made you decide to go from bootstrapping the business to taking Venture Capital now?

I love the fact that over the last decade, our growth was entirely fuelled by providing great software and analytics to major marketers all over the world. According to Pacific Crest, less than 5 % of SaaS businesses achieve our scale without Venture Capital or significant debt. We have over 50 enterprise customers, including marquee brands like Amgen, Best Buy, Citibank, Timberland, Warner Brothers and more. We grew entirely by word of mouth from one CMO to another. It is a great way to grow, but here’s the thing: Most marketers have not heard of Marketing Evolution – and therefore these marketers are missing out.

I want to see marketing evolve to be more data-driven. I want to see waste and inefficiency removed from the advertising system. I want transparency for marketers. I want to see marketing become more personally relevant to consumers. We are using additional capital to get the word out so more marketers can benefit from Big Data and AI.

We’ve been approached by a lot of VCs, but it wasn’t until I met Mark Gorenberg, founder of Zetta partners, that I found the right fit. He understood how AI is changing business. He was the first investor in Omniture, DOMO, and Inside Sales – each achieved phenomenal growth and over a billion-dollar valuation. With Mark’s help, we are applying the same playbook that’s helped propel his other investments to great success.

What lies on the horizon for you and Marketing Evolution in 2017?

We have lots of hiring to do. We are recruiting for a VP of Talent & Recruiting, a Chief Revenue Officer, a Chief Marketing Officer, and building out our sales team. We’ve got a great product team and product – we will continue to advance it. We are opening EMEA operations with a team in London. We want every major advertiser to know about Marketing Evolution and how we are changing marketing analytics.