In the digital economy, trust is the new currency. Technology is changing the nature of trust – especially for banking and financial services as they strive to provide greater value and protection to customers, and deliver products to market quickly through machine learning, blockchain and pervasive encryption. Explore the rise of "digital trust” and its impact on business in an interview with global trust expert Rachel Botsman and IBM Industry Platform General Manager, Strategy & Market Development Shanker Ramamurthy. Rachel’s “digital trust” theory was named by TIME as one of the “10 Ideas That Will Change the World.”

People with mental health problems are three times as likely to face financial difficulties. As well as affecting our income, mental health problems can make it harder to manage money, control spending and stay on top of bills.

Tonight the MMHPI will launch a new report exploring how fintech solutions could empower people with mental health problems - allowing greater control in periods of poor mental health.

Hosted by Monzo and chaired by Ghela Boskovich, Head of Fintech and Regtech Partnerships at Startup Bootcamp, the panel includes;

Zander Brade, Product Designer at Monzo

Richard Morgans, Head of Digital Innovation Lab and fintech at TSB

Chris Fitch, Vulnerability Lead, Money Advice Trust & Research Fellow, Personal Finance Research Centre, University of Bristol

Katie Evans, Head of Research and Policy at Money and Mental Health

Kicking off July’s Game Changers section is an interview with David Taylor, the Founder, President and CEO of VersaBank. Here he tells us all about the exciting journey that building Canada’s first virtual, branchless bank has been thus far.

You founded VersaBank in 1993 – could you tell us a bit about this 24-year journey and what it has taught you?

 It certainly has been an exciting journey, filled with challenges and lessons. I thought that by applying emerging digital technology to banking, I could create a bank without branches with low overheads that could economically serve small niche markets that were not well-served by Canada’s large full-service banks. Considering this ‘branchless model’ didn’t exist at the time, I expected that I would have to educate regulators, the banking industry, customers and partners about how it would work and what the benefits would be.

I think the most discouraging lesson I learned was that banking regulators like the status quo and do not welcome new ideas, even if it means that some Canadians in niche markets would continue to suffer with only limited access to economical banking.

On converse, I think one of the most encouraging lessons I learned was that some large Canadian full-service banks recognized the important role that VersaBank could play in serving niche markets, which are perhaps too small or obscure for them, and have aided VersaBank in fulfilling its mission to serve these markets.

Developing and improving the software and systems to deliver ideally suited products to our niche markets is always an ongoing challenge, but as Terence Mann said in ‘Field of Dreams’, “If you build it he will come”. I found to my great satisfaction that if you truly endeavor to deliver ideally suited products, you will never have to look for customers. They will ‘come’.

Our niche markets are diverse and include: financing hospitals and schools in the remote Canadian arctic, developing customized web-based banking packages for the insolvency industry, providing back-end funding for the Fintech industry and point-of-sale financiers so that people can lease their hot water heaters, have cosmetic surgery, or lease equipment for their retail or business operations.

In many respects, we are the original FinTech, continuing to leverage the power of new technologies to reach our customers and serve their needs, but unlike the FinTechs of today, we’re also a Schedule 1 chartered bank with access to a huge source of funds, through an expansive network of more than 120 financial advisory and brokerage firms who deliver deposits to us digitally.

Finally, we have proven that you don’t need lax credit standards to attract borrowers. Convenient access, reasonably pricing and flexible terms will attract good quality borrowers. VersaBank has had no need for a collections department and has established one of the lowest loan loss histories in the industry. My hope was that by applying new technologies to banking, we could really make a difference to our customers’ lives. I think we have been able to do this and I look forward to continuing to grow our bank and to finding more innovative ways to serve my fellow Canadians.

Could you tell us a bit about your background prior to founding VersaBank?

 I was fortunate to be provided with a solid foundation in banking by working at two leading, but very different, banks. I started my banking career at a large full service Canadian bank, the Bank of Montreal, where I discovered a passion for the business. It was a terrific opportunity to learn the basics of banking and I spent eight years there, before moving to Barclays Bank of Canada. In Canada Barclays PLC employed a niche strategy. However, when, amidst a downturn Barclays decided that the country was a non-strategic market, I saw an opportunity to create a Canadian niche bank, which ultimately led to the formation of VersaBank.

What have been your biggest achievements to date?

 A couple of things immediately come to mind, which are at opposite ends of the VersaBank journey. They being: getting the digital bank started back in 1993 and successfully completing a very complex amalgamation transaction earlier this year. Both of these achievements were ‘firsts’.

I soon discovered that the banking regulators had no appetite to grant a bank license for a brand new bank with an untested model. So I decided to acquire an existing financial institution and transform it into my new model. I looked for the smallest financial institution I could find and discovered Pacific & Western Trust in Saskatoon, Saskatchewan. I met with the owner - Bill MacNeill at a restaurant and sketched out a plan on how I could transform Pacific & Western Trust on a napkin. When he asked if I was there to buy his trust company, I surprised him by suggesting instead that he ‘buys’ me to run and transform his trust company. I had extensive experience in the industry and was a banker and he was, in fact, a miner. He agreed to my suggestion and that opened the door for me to build Canada’s first virtual, branchless bank.

I also believe that the completion of our amalgamation in January 2017 was a key accomplishment. It was the first successful merger under the Canadian Bank Act and enabled us to significantly simplify the structure of the bank, while also realizing some significant financial benefits. It was a very complex transaction that required approvals from the shareholders of VersaBank, PWC Capital, the regulators and even the Canadian Minister of Finance. We secured an overwhelming approval from shareholders of the two companies and the other required approvals. It was a great accomplishment and was vitally important to the positioning of VersaBank for the future. We’ve created a unique state-of-the-art bank that is profitably providing banking services in niche markets throughout Canada.

Could you please tell us a bit more about the merger with PWC Capital and what it means for the future of VersaBank?

 This transaction was historic in the sense that it was the first merger to be successfully completed by a Schedule 1 bank (a domestic bank that accepts deposits) under the Canadian Bank Act. Previous attempts by other banks had been unsuccessful.

While that’s a fun fact, the merger for us was critical to our future success, as it ultimately was about creating a simplified structure for VersaBank and eliminating confusion that existed with its parent company, PWC Capital. Previously, there had been two publicly traded companies, VersaBank and its parent a financial holding company, PWC Capital. This created duplication and PWC Capital had been highly leveraged. In addition, potential investors often were confused about the differences between PWC Capital and the banking entity, Pacific & Western Bank of Canada (now VersaBank). This structure was inefficient and it impeded our ability to grow. We needed to change it.

What emerged out of this complex transaction is a growing, standalone, publicly traded, high-margin, branchless chartered bank that uses its software to reach key niche markets, traditionally underserved by the big Canadian banks. We have enormous growth potential.

You’ve also recently opened a new digital facility, which provides the infrastructure for VersaBank’s branchless model and complements Canada’s FinTech industry – how did the idea about the platform come about? What is your outlook for its future?

 Right from the founding of VersaBank, we believed that we would have a significant competitive advantage by designing, developing and maintaining state-of-the-art, custom banking software that helps to address customers’ specific and unique needs, while also minimizing the required investment in physical infrastructure and human resources. We’ve tended to focus on niche markets that are traditionally underserved by Canada’s big banks.

By following this approach, for example, we’ve become the bank of choice for Canada’s national consumer insolvency firms, by creating a banking package ideally tailored specifically to the unique needs of insolvency professionals. It’s highly efficient and very economical both for us and for our clients and has become a win-win for ourselves and our customers.

We recognized that there could be tremendous synergies if we brought some of our in-house teams under one roof, which has led to the establishment of our new digital facility, the VersaBank Innovation Centre of Excellence – the modern, new home of our in-house software development division and its eCommerce division. By bringing them together, we have enabled these teams to work side-by-side to encourage collaboration to improve our existing banking solutions and create new solutions for tomorrow.

The team already is working on some innovative new solutions that likely will hit the market in the next couple of years.

Is there anything else you would like to add?

Arguably, when first conceived, VersaBank was a little ahead of the times, but the times have now caught up and VersaBank is finally able to take full advantage of its systems and model to serve people across Canada without branches. Its products are in high demand and its margins lead the industry without the usual loan losses. Twenty years ago this would have been a dream, but today, the dream has become a reality.

Website: http://www.versabank.com/

By Adam Oldfield, Vice President Sales EMEA Financial Services at Unisys

The financial services market continues to evolve digitally to meet the rising expectations of customers, particularly in relation to their experience with digital and in-store services. Consumers expect banks to be accessible 24/7, from any location, and any device. As a result, security of access continues to be front of mind for everyone in the financial services industry, and the challenges that come with it.

 Multifactor authentication built into modern applications, the use of biometrics or analytics as well as artificial intelligence are all needed to be interwoven in the modern environment to keep security capabilities at a high – but why is cybersecurity such a pressing factor in the market over the last few months?

Legislative drivers

It is widely known about the multitude of financial, and reputational, incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation. The GDPR brings consistency to the current data protection laws across EU member states, and provides guidance on how customer data should be stored and how companies must respond in the event of a data breach.

It is widely known about the multitude of financial and reputational incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation.

The GDPR brings consistency to the current data protection laws across EU member states and provides guidance on how customer data should be stored, as well as how companies must respond in the event of a data breach. As we move towards the 2018 deadline a large proportion of companies including financial services, are still unsure on what they need to specifically do in order to be as compliant as possible.

Therefore, we are continuing to see the demand for cybersecurity advisory services, personnel as well as solutions at an all-time high - demanding higher and higher shares of annual and quarterly budgets within financial institutions.

The threat landscape and impending legislation has meant cybersecurity has moved from a once discretionary spend to a mandatory one in recent months. Financial services organisations are rapidly restructuring teams, hiring new talent and most importantly seeking advisory services to manage the journey to compliance. Cybersecurity maturity levels held with each organisation in the market also fluctuate, meaning each company has a different set of requirements, goals and timeframes to abide by.

However, legislative drivers forcing financial institutions to treat customer data with the utmost care are not withheld to just the GDPR. The Payment Services Directive (PSD2) and the 2018 mandate set by the Competition and Markets Authority (CMA) are some of the key drivers to raising data protection and security requirements as well as market standards, having a particular impact at the decision making, forecasting and budgeting level.

These legislative drivers will continue to move security up to a boardroom discussion, with advisory services taking the front line of demand as well as budget. As we move towards 2018, the stopwatch is on for new entrants, as well as established players to restructure teams, align ecosystems and improve data management. They must also fine tune effective cyber breach response strategies to ensure the legislations and regulations put in place have a positive impact on their business and customers.

No organisation is immune

Many financial services organisations are aware of technological developments taking place throughout security, as well as the evolving security postures needed to combat threats and reduce routes to entry. Biometric authentication is an example of this that adds an additional layer of personalised security for data and account protection purposes. The plethora of high-profile attacks, such as Petya and Wannacry, highlight how no organisation or industry, including financial services, is immune.

The need for flexibility and responsiveness is paramount in this ever-changing landscape, not only legislatively but operationally, driving companies to pull together best in breed solutions to ensure capabilities match fluctuating threats. Legislatively the PSD2, for example, forces organisations to contract and conduct payments in a certain way, as well as effectively store and protect sensitive data. In comparison, the CMA 2018 mandate is forcing all financial services providers to offer customers the ability to manage their products, regardless of provider, via a single mobile application of their choice. Operationally, customers are demanding seamless payment and verification options with a 24/7 responsive service. A best in breed and reactive approach is capable of managing these demands, meaning flexible and intuitive ecosystems for application roll out can be the route to success, and gone are the days of using one provider for everything.

Peter Arrowsmith, Partner at Gill Jennings & Every discusses with Finance Monthly the implications of intellectual property in the FinTech world, how to best protect and how to go about the challenges involved.

Getting to grips with intellectual property (IP) can seem daunting for fledgling FinTech companies just pushing off the starting blocks. However, it’s a step that early-stage businesses, looking to disrupt the market with the latest innovation, cannot afford to overlook.

The IP needs of disruptive companies are different from those of the industry incumbent, but are no less important. Having a well-formed IP strategy is not only vital to protecting the technical innovation at the heart of many FinTechs’ disruptive aspirations, it also plays a critical role in helping startups prove themselves worthy of funding, as investors assess the company’s prospects and exactly what they are getting for their money. Moreover, for founders looking towards their eventual exit, a strong IP portfolio will go a long way towards making a company attractive to potential buyers.

What protection is available to FinTech companies?

FinTech companies will likely hold several types of IP that they can and should seek to protect. Trade marks, for example, provide vital security and protection for a company’s name and branding. In terms of protecting innovation itself, if it’s software-based one option is copyright for the relevant code. However, copyright is limited in that it only protects the specific expression of code that underpins a concept and creates an effect; it does nothing to prevent a competitor achieving the same effect using code that has been developed independently. Ultimately, if your innovation is based on a new technology or process, a patent is the best option for providing strong protection of innovation. With a lifetime of 20 years, it allows a company to safeguard their entire invention for the long-term while they gain a foothold in the market.

Patent challenges in FinTech

Securing a patent is often not as easy as FinTech companies would hope, because innovation in the industry is predominantly software-based. A quirk of UK patent law is that, while technical innovation is patentable, the 1977 Patents Act - the most up-to-date legislation - treated computer programs in the same way as works of literature, protectable only by copyright, rather than technical innovations in and of themselves. This old-fashioned definition throws up barriers against a whole host of inventions – from mobile banking apps to online payment methods and even cryptocurrencies, all of which are software-based.

In spite of this, the common claim that it is impossible to patent a software-based innovation is a misconception. The Patents Act states that computer programs and business methods are excluded only “as such”. This key phrase allows leeway in the patentability of solutions, including computer programs, if they can be shown to have a technical effect. With 10,000 European patent applications in computer technology filed in 2016 alone, it is clear that many software companies are successfully patenting their technology.

Securing a patent in FinTech

While a business method itself cannot be patented, by starting with the method and working backward through the technology that makes it possible, IP lawyers can often find a part of a process that can be. For example, the concept of a currency conversion app is non-technical and unlikely to be applicable for a patent, but an inventive use of biometric technology – such as iris scanning - within that app to confirm payment very well could be.

By patenting the underlying technology of the invention, organisations can prevent competitors from copying the innovative part of their business, thus giving “backdoor protection” for their overall idea. A good method for many disruptors is to submit a broad application for the concept, supplemented by a number of narrow applications that protect the technology that makes the concept possible.

The role of inventors/developers

However a product has been developed, it is likely that a team of developers or inventors has been involved. It is critical for all businesses, especially those where the invention has been developed by a team, to make sure that the company has proper rights to the invention. Usually this can be achieved by ensuring that all of the developers are employees of the business, or – if they are independent contractors – that their contract involves an assignment of IP rights. Investors performing due diligence on a company will often look at the ownership of IP first to make sure that the company actually owns what it claims as its core technology. While the inventors themselves should not have any rights to the invention, they are named as inventors in a patent application, and this can provide some much-deserved recognition, and can be a valuable addition to their CVs.

Where to start?

There is no single answer to the question of what a disruptive FinTech should be protecting first; the most important thing is to build an IP strategy around your business plan. Startups naturally don’t have the budget of the big banks, so they should think smartly about what they are trying to achieve, and what they need to protect to achieve it – typically, the core technologies that underpin the company, in the geographies that matter most. Filing a patent for every last idea the company has come up with is not cost-efficient or effective. Before you protect anything, ask yourself what purpose the protection will have for your business, and ensure you are getting the proper IP advice to guide you through your first steps.

It's war on cash: Credit card giant Visa plans to pay Britain's shops and restaurants to ditch coins and notes.
A credit card giant is planning to declare war on cash by offering to pay shops and restaurants in Britain to reject notes and coins.

Visa claims that preventing customers from paying in cash would make transactions more secure.

Any switch from coins and notes to credit and debit card payments or services such as Apple Pay would also be of huge benefit to Visa, which makes money from transaction fees.

But consumer groups warned last night that it would put millions of elderly people and others who rely on cash and cheques at a huge disadvantage.

Tory MP Jacob Rees-Mogg said the firm should be referred to the competition authorities if it tried the move. 'It is essentially the behaviour of a monopolist and I do not think it should happen,' he said.

'People should be entitled to settle their bills using legal tender. The most deprived in society who do not have bank accounts and the elderly will be most affected by this.'

Visa has already begun a trial in the US which offers $10,000 (£8,800) to retailers who are prepared to update their payment terminals.

However, they can only get the deal if they agree to stop accepting cash transactions. A similar trial is expected to be launched in the UK. Jack Forestell, Visa's head of global merchant solutions, told The Daily Telegraph the company had its sights on Britain. 'We very much hope to bring a similar initiative to the UK in the near future,' he said.

'The UK is a bit further ahead than the US in terms of contactless use and cashlessness, so the initiative may look different but watch this space.' But James Daley, director of consumer group Fairer Finance, accused Visa of 'bribing companies to stop using cash more quickly' to make more money.

Consumer champion Which? said cash was still 'widely used' by shoppers. It added: 'Businesses should be led by how their customers want to pay, and not by the incentives offered by card firms.'

And the Federation for Small Businesses said the proposal could make businesses unattractive to tourists who wanted to use cash and was 'impractical' for rural areas with slow broadband speeds.

Its chairman, Mike Cherry, said: 'The vast majority of our members recognise the importance of offering cashless payment options. However, many have high volumes of customers that still want to pay in cash.'

In 2015 the amount of payments made electronically in Britain surpassed the number using coins and notes for the first time. However, cash was still by far the most popular way of paying in pubs, clubs and newsagents. A Treasury spokesman last night stressed that the Government remained committed to cash.

He added: 'The UK leads the way in financial technology such as contactless and digital payments. It's important that consumers have choice in how to pay for goods and services, and paying cash remains a legitimate and useful way to pay.'

(Source: News Capital)

Are you planning to leave the bank and start FinTech company? Watch this video first

In the eyes of multinational financial institutions, fintech innovators have moved from game-changing competitors to crucial allies. Ben Butler, Corporate Partner at national law firm Bond Dickinson gives Finance Monthly a rundown of the current progress between financial services, banks and fintech start-ups.

Customer demands and developments in technology have forced banks to think and act in a new way. In an industry in flux, the benefits for small and large companies of collaboration and building on each other’s strengths are clear.

The difference between well-established financial organisations and their start-up counterparts in many ways couldn’t be starker. The former can struggle to be agile, weighed down by processes and legacy – but they are often bolstered by their size, brand recognition and access to finance. All of which is in much shorter supply for small fintech companies: designed to be nimble, with digital talent at their core, they are at the same time constrained by their youthfulness in the market.

In a period of change and disruption, fintech startups are now key players in the digital transformation strategies of the established giants – and the most innovative amongst them can prove to be valuable partners.

Our new economic study Close Encounters: The power of collaborative innovation found that large financial companies took part in 1,864 such deals with UK SMEs in the last four financial years. £31bn is known to have been invested in these deals between the 2013/14 and 2016/17 tax years. The financial services industry is far ahead of any other sector in the UK.

But what are the five key areas organisations should consider and discuss frankly when entering into such deals?

1. Motivation 

Beyond the fair arrangement on the financial settlement, it is important to think practically about how differing motivations might play out as the relationship develops. Is one side looking for a quick result, with the other more focused on the long-term benefits of the partnership? Or could it be a defensive move on the part of the larger player in an attempt to remove the product from the hands of competitors – in which case the future may not look so exciting for the SME?

The nature of such deals means that the players in the small organisation will inevitably be focused on making the most from their distinct offering, while the corporate will instead have an eye on delivering against the investment. The most successful alliances nevertheless bring two organisations together that are aiming for a shared outcome, and motivated by the desire for continued innovation.

2. Culture 

Corporates often struggle to marry the objective of maintaining process-driven behaviours while still encouraging innovative thinking. Working together with a more agile SME might create a greater strain on this, and both parties need to carefully consider what this balance will look like in the new partnership.

The smaller partner will also need to be sure they can cope with the tighter controls that might be demanded of them, and the stricter processes that will likely come from working within a more established structure. Founders are often key for deals, but they should know what their exit route options are, should they find themselves in a less dynamic and rewarding environment.

3. Brand 

In the wake of the financial crisis, maintaining trust is front and centre of mind for organisations when looking to maintain a positive brand. So it is perhaps unsurprising that one of the biggest concerns arising from such deals is the reputational threats they may bring with them. Both parties need to be upfront from the beginning about a potential need for conformity and a possible loss of independence for the SME as a result.

Attitude to risk can also differ greatly for start-ups, and this can sometimes be incompatible with the compliance restrictions faced by large organisations. Understanding these challenges, some small organisations choose to go through regulation in advance of approaching the banks.

4. Tax 

At times, objectives can conflict when it comes to optimising tax: the corporate may qualify for Research and Development tax relief from the deal, while the SME shareholders may each be entitled to Entrepreneurs' Relief. In these circumstances, it can be in the interests of the corporate to secure more equity; yet those in the SME may want to hold on to a large enough stake so that they are eligible as individuals for the other scheme. This can be extra challenging when there are lots of shareholders, as the equity has to be spread more thinly.

5. Exit

Our research highlighted the popularity of minority stake purchases, which accounted for 75% of deals in the industry – three times as many mergers and acquisitions (25%). This may reflect the challenges that can arise from M&As which involve fully integrating systems and processes. Or it may be a sign that financial services firms are becoming savvy to the short-term exit strategies that seem to be ‘of the moment’, and that they are looking for something new – such as the recent trend towards selling rather than listing.

For corporates looking to purchase future value as well as intellectual property, a full acquisition is a less attractive option as a long-term innovation strategy.

However, minority stake purchases won’t always be a suitable answer for the smaller party. To get around such opposing interests, entrepreneurs might want to ensure the earn out is structured around the long-term prospects of the organisation and the future leadership, or perhaps around innovation goals rather than revenue generation.

Technology is often remarked as evolutionary ammo, and the statement stands just the same for the growth of businesses. Finance Monthly below hears from Frédéric Dupont-Aldiolan, VP Professional Services at Sidetrade on the latest and upcoming innovations that have hit 2017 hard.

Artificial intelligence, robotics, machine learning and the Internet of Things: 2016 stood out as a year marked by technological development and significant advances in several fields, not least that of connected, driverless cars. Against this backdrop, a clear trend is appearing: the growing influence of robotic technology in daily life.

In 2017, we have seen more promising innovations, here is my review of the top five things we are seeing:

5. IoT, the Internet of Things

Star of the Consumer Electronic Show (CES), which took place in Las Vegas in January, and Viva Technology, which took place in Paris, the Internet of Things was thrust into the spotlight in 2016 and continues to bring increasingly intelligent connectivity to our daily lives. Smart devices, equipped with bar codes, RFID chips, beacons or sensors, are taking the lead and enabling companies to gain greater visibility over their transactions, staff and assets.

In 2016, information and technology research and advisory company Gartner estimated that there were 6.4 billion connected devices globally, an increase of 30% on 2015. By 2020, this figure is likely to have grown to 20.8 billion.

4. The explosion of Big Data

Network multiplication brings with it a proliferation of data generation, whose analysis, use and governance have become a burning issue. According to estimates by IDC, an international provider of market intelligence for information technology, by 2020, every connected person will generate 1.7MB of new data per second.

The concept of ‘perishable data’ has lost validity. In 2017, companies now have the capability to use data before it becomes obsolete. Devices connected via the Internet of Things will rapidly speed up data decoding and processing for actionable insight.

3. The ramp up of artificial intelligence and automatisation

Artificial intelligence has been one of the main talking points in technology over the last year. Encompassing areas such as machine learning, robotic intelligence, neural networks and cognitive computing, it’s now in daily use in numerous forms including facial and voice recognition, endowing velocity, variety and volume.

This year, artificial intelligence has taken on an increasing number of repetitive and automatable tasks, beginning with wider use of ‘chatbots’ with the capacity to give coherent, easily formulated responses. IDC pinpoints robotics driven by artificial intelligence as one of the six innovation accelerators destined to play a major role in the digitalisation of society and the opening up of new income streams. Indeed, Amazon and DHL are already making use of warehouse handling robots.

2. Location technology, the Holy Grail of customer satisfaction

Location technology has taken great strides over the last year or so, to the marked benefit of customer satisfaction in the hotel, health and manufacturing sectors. Customers can now receive geo-targeted offers on their smartphones, for example for promotions or reductions, depending on their physical location.

In 2017, RFID chips enable yet more accurate tracking of customers and enhancement of their buying experiences.

1. Virtual reality makes way for augmented reality

One of the biggest innovations recently has been virtual reality, and with it came much media coverage too. From Facebook to Sony, Google to Microsoft, big brands grasped this new technology to offer an outstanding user experience, through the merging of virtual and real imagery.

In 2017, these virtual devices have acquired an awareness of their environment and give users a real sense of immersion of the digital environment from within their own homes. The potential of augmented reality for business will be harnessed too in the coming months. Some companies, among them BMQ and Boeing, are already employing it to increase their retention and productivity rates, or to provide training to their workforces across worldwide subsidiaries.

Over the next few months, as we gear up for another round of product launches, we should expect to see advancements in these key areas of technological innovation. Within business, this technology should help to improve customer service by streamlining production and processes, saving time and money, as well as providing new and exciting ways to reach and engage with customers, helping to retain existing clients as well as bring in many new ones.

Levels of financial technology (FinTech) adoption among consumers has surged globally over the past 18 months and is poised to be embraced by the mainstream, according to the latest EY FinTech Adoption Index. An average of 33% digitally active consumers across the 20 markets in the EY study now use FinTech.

The study, based on 22,000 online interviews with digitally active consumers across 20 markets, shows that the emerging markets are driving much of this adoption with China, India, South Africa, Brazil and Mexico averaging 46%.

China and India in particular have seen the highest adoption rates of FinTech at 69% and 52%, respectively. FinTech firms in these countries are particularly successful at tapping into the tech-literate but financially under-served segments, according to the study.

The UK has also shown significant growth, with adoption rates now standing at 42%.

The EY FinTech Adoption Index evaluates services offered by FinTech organisations under five broad categories – money transfers and payments services, financial planning, savings and investments, borrowing and insurance. It reveals that money transfers and payments services are continuing to lead the FinTech charge with adoption standing at 50% in 2017, based on the consumers that were surveyed. 88% of respondents said they anticipate using FinTech for this purpose in the future. The new services that have contributed to this upsurge include online digital-only banks and mobile phone payment at checkout.

Insurance has also made huge gains, moving from being one of the least commonly used FinTech services in 2015 to the second most popular in 2017, now standing at 24%. According to the study, this has largely been due to the expansion into technologies such as telematics and wearables (helping companies to better predict claim probability) and in particular the inclusion and growth of premium comparison sites.

Imran Gulamhuseinwala, EY Global FinTech Leader, says: “FinTechs are clearly gaining widespread traction across global markets and have achieved the early stages of mass adoption in most countries. The EY FinTech Adoption Index finds, on average, one in three consumers already consume FinTech services on a regular basis. FinTechs, particularly in the payments and insurance space, have been very successful in building on what they do best – using technology in novel ways and having a laser-like focus on the customer. It really is now a critical time for traditional financial services companies. If they haven’t already, they need to urgently reassess their business models to ensure they are able to meet their customers’ rapidly changing needs. Disruption is no longer just a risk – it is an undisputable reality.”

According to the study, 40% of FinTech users regularly use on-demand services (e.g. food delivery), while 44% of FinTech users regularly participate in the sharing economy (e.g. car sharing). In contrast, only 11% of non-FinTech adopters use either of these services on a regular basis.

The demographic most likely to use FinTech are millennials – 25–34-year olds, followed by 35–44-year olds. The study revealed that people in this age range are comfortable with the technology and that they also require a wide range of financial services as they achieve milestones such as completing their education, gaining full-time employment, becoming homeowners and having children.

There is however also growing adoption among the older generations: 22% of digitally active 45–64-year olds and 15% of those over 65 said they regularly use FinTech services.

The study has also identified a new segment of users, the ‘super-user’. These individuals use five or more FinTech services and account for 13% of all consumers. ‘Super-users’ generally consider FinTech firms to be their primary providers of financial services.

The EY FinTech Adoption Index says that FinTech adoption is set to increase in all 20 markets covered by the study. Based on consumers’ intention of future use, FinTech adoption could increase to an average of 52% globally. The highest proportional increases of intended use among consumers is expected in South Africa, Mexico and Singapore.

Imran Gulamhuseinwala says: “There are those who believe that FinTechs struggle to translate the innovation and great customer experience that they create into real customer adoption. The EY FinTech Adoption Index suggests that thinking is now outdated.

“FinTechs are not only becoming significant players in the financial services industry, but are also shaping its future. Their new propositions are increasingly attractive to consumers and this trend is only set to continue as awareness grows, concerns are allayed and new advancements are made. Traditional firms, who sometimes struggle to deliver the same seamless and personalised user experiences, will undoubtedly need to step up their efforts to remain competitive. I think it’s likely that we will see greater collaboration between traditional firms and FinTechs in the future.”

(Source: EY)

John Orlando is the Executive Vice President and CFO of Centage Corporation - a leading provider of automated budgeting and planning software solutions. With his previous experience concentrated on Financial Planning and Analysis, John has now been with Centage for over 13 years. Here he introduces Finance Monthly to the company and the services that it offers and discusses the relationship between business decisions and technology.

Could you tell us about the Company’s ethics and priorities toward its clients?

 Centage has been providing budgeting and planning software solutions for over 15 years. We understand that the most important aspect of your job is to develop accurate and timely budgets and forecasts that help you drive the growth and profitability for your company. Everything we do at Centage, from a client perspective; product technology, functionality; through to training, services and support, is dedicated to making the client experience unique. That is our number one priority.

Tell us more about the Budgeting and Forecasting services that Centage offers.

Budget Maestro by Centage is an easy-to-use, scalable, cloud-based budgeting and forecasting solution that eliminates the time-consuming and error-prone activities associated with using spreadsheets. It is designed for small to mid-market companies to support a comprehensive Smart Budgets approach to corporate planning. Its built-in financial and business logic allows users to quickly create and update their budgets and forecasts and never worry about formulas, functions, links or any custom programming. It is the only solution in the market that offers synchronized P&L, balance sheet and automatically generated cash flow reporting. Today, Budget Maestro serves more than 9,000 users worldwide.

How has Centage developed into the company that it is today?

 The company was created because the founders saw a need for a budgeting and forecasting solution that was more automated than what existed in the marketplace at the time. We respected the people and the processes that go into creating accurate and timely budgets and forecasts and thought there was a better way. We understood that giving financial professionals a tool that had all the financial and operational logic pre-built was crucial. This went against the traditional formula-based applications that were in existence. Additionally, Centage developed a full set of synchronized financial statements that included a Pro Forma Income Statement, Balance Sheet and Cash Flow that were automatically generated.

The CFO role in general is important to any company because it brings operational and financial discipline to the organization. I am involved with and required to be familiar with every facet of the organization from financial accounting to operations to human resources, etc. I believe these responsibilities, along with my experience in the FP&A arena building many budgets and forecasts over the course of 25+ years, has helped Centage to build the best budgeting and forecasting application that we could.

What is the role that technology plays in transforming data for better business decisions?

 Technology and business decisions are inexorably linked. All the advances in business over the past 50 years have been related to technology. It has given us the ability to take massive amounts of information from accounting systems, CRM systems and operational systems, condense them in one place and give businesses the ability to instantly review the information for trends and make informed decisions in a much shorter timeframe with little need for manual intervention.

In the case of a CRM system such as Salesforce.com, once you start to use the application it is difficult to fathom how you would have run your sales organization any other way. There are too many pieces of information to keep track of and too many data points could be missed.

Centage similarly has used technology to make our product, Budget Maestro robust and agile by eliminating all the mundane work associated with preparing budgets and forecasts. We specialize in building out all of the financial and operational finance logic so that the client, as the user, only needs to concentrate on building a set of good business assumptions. Our reporting solution, Analytics Maestro, gives our clients the ability to take the data in Budget Maestro or their resident accounting system, and manipulate and analyze the data very quickly, so that more informed business decisions can be made.

What do you anticipate for the sector in the near future?

One thing that has become clear over the past 2-3 years is that budgeting and forecasting is moving from the realm of isolated 12-month timeframes and annual budgets and forecasts, to more of a rolling budget / forecast approach that takes into account anywhere from 18- 36 month timeframes. This allows the user to plan for a much longer horizon.
Secondly, customers have been asking for budgeting and forecasting systems to reach out to other sub
ledger systems such as Salesforce, Payroll etc., to gather information, eliminating the need to manually intervene in the data gathering process.

Visit us at www.centage.com , follow us on Twitter, or visit the Centage Blog for the latest insights on budgeting and forecasting strategies.

Email: jorlando@centage.com

Phone: (508) 948-0024

By Sylvain Thieullent, CEO of Horizon Software

It feels like the financial services are in a constant state of rapid evolution as regulators, leaders, active participants and vendors strive to move the industry forward. For the FinTech sector, this could be a golden age, with every challenge creating an opportunity. If the current trajectory continues, it’s a golden age that could last for some time, says Sylvain Thieullent, CEO of Horizon Software.

 The financial services thrive on change. Change drives innovation, and in turn, innovation finds faster, more efficient ways of doing things. Over the last decade, FinTech has become an independent sector in its own right, increasing the pace of innovation across the entire industry.

 Competition, regulatory requirements and the calibre of the teams involved are three key elements in the industry’s constant state of flux. An array of secondary factors are also adding to the mix, combining to deliver an impressive level of innovation.

Three primary elements

At every level, the industry is driven by competition. Leadership teams recognise that if they don’t keep bringing prices down, their competitors will quickly find ways to undercut them. While loyalty and relationships will always be very important for the market, price is a major consideration. This creates a constant appetite for quicker, more efficient ways of doing things.

The second element is regulatory expectations. Just as technology is changing what we can do, it is also making it easier to regulate. Trades are being tracked with a level of granularity that would have been inconceivable a decade ago, and because regulations are coming from multiple jurisdictions, institutions are expected to report on different things in different ways (as well as the same things in different ways). Making sure that the regulators are satisfied is a major catalyst for change and innovation.

The third element is the calibre of the people involved in the financial services. The downsizing of the banking industry over the last ten years has meant that a number of highly-skilled and very experienced people have found themselves free to pursue some fascinating ideas. In some cases, they’ve joined FinTech ventures and turned their attention to some of the deeper structural issues in the sector that are perhaps too specialised for major institutions. This is leading to a string of innovative solutions to challenges.

As a result, financial centres around the world are buzzing with new ideas, some of which have the potential to coalesce into very interesting products and services over the next five years.

Changing emphasis

There are also a number of secondary factors in play.

The first of these is a move towards FinTech vendors as hubs of innovation. The rising importance of regulation and compliance has come at the same time as the downsizing of banks. A decade ago, banks could keep all the talent they needed and look in-house whenever they had a conundrum to solve. Now, all but the largest institutions need to look elsewhere.

Until recently one of the tried and tested routes for successful firms to grow was through leading institutions setting up a division, strategy or technology, nurturing it for a few years (while enjoying first-mover advantage) and then setting it free to operate independently, or selling the division for a decent return.

Coupled with the downsizing, this model is likely to become less common over the next few years as fewer financial institutions will have the depth of resource to support it. As a result, there will be more fledgling start-ups looking for support earlier in their development, which could encourage them to be nimbler and more innovative in responding to potentially more risk-averse clients.

Shifting politics

Another ingredient in FinTech’s cauldron of innovation is politics. Brexit could lead to major changes in the global financial markets, and even though London has long enjoyed an enviable position as the world’s centre for many aspects of financial services, the current level of uncertainty could see its primacy eroded. This could be another catalyst that helps some innovative initiatives move forward as businesses reassess their strategies.

Ultimately, irrespective of the choices of the British public and the subsequent political manoeuvring, uncertainty creates opportunity. London has a heritage of financial innovation that spans centuries, but other centres have been keen to challenge its preeminent position for almost as long.

At the same time as Britain enters a period of internal debate and financial institutions look at their positions to ensure that they are ready for a variety of outcomes, the French electorate, for example, has delivered a government with a modernising agenda. The interplay between London and Paris, those most traditional of frenemies, could be a source of innovation and new thinking over the next five years.

Other financial centres will also be clamouring for attention throughout this process. The growing importance and confidence of Australasia and Latin America, as well as the changing outlook in the US, could well create evolutionary pressure to innovate.

These changes are taking place as the importance of physical borders and location are coming to mean less. Financial services are exceptionally international, and regardless of the changes in individual countries, market participants will continue to focus on getting the quickest, most cost-effective solution that most closely matches their risk profile and meets the regulatory requirements of the countries where they are based and their clients are active.

Enhanced flexibility

But innovation means flexibility as institutions are less likely to fall into the trap of building a comprehensive in-house system that only a handful of people know how to keep working. This is not only a vast improvement from an operational perspective, it also means that regulation and compliance requests are far more easily met, and there is a far wider variety of environments in which to test models and strategies.

A further benefit of flexibility comes in the form of market participants and vendors understanding each other better, effectively reducing the risk that a system will be developed that doesn’t quite do what the traders want.

As ever, there’s risk. Some of the initiatives across the world are destined to wither and die because they are not built on sustainable business models. Businesses are going to need to evolve their strategies and possibly their focus to become sustainable. This is a route that many innovative industries follow as they grow to maturity, but institutions need to be aware of what they are exposed.

Incumbent bias

The barriers to entry as a nascent game-changer are very high, which poses yet another challenge. Incumbents have the advantage of existing relationships and proven track-records which will always weigh heavily in their favour.

Regulators are also rightly risk-averse, a stance which again favours market incumbents. With the current regulatory environment going through a process of rapid evolution, there are significant sanctions accompanying non-compliance which could make potential clients more reticent about embracing innovation.

That said, regulatory changes could help level the playing field from a data reporting perspective, again creating the conditions where innovation can thrive. The implementation process could be highly challenging for many organisations, but they could provide a shared foundation that supports innovation in the longer term.

Living in interesting times

The FinTech sector exists to help the financial services innovate and keep moving forward. Even though the last five years have been a golden age for FinTech, it is difficult to predict what the next five will bring.

The array of fascinating challenges ahead, the deep well of expertise, technology that keeps enhancing and regulators that keep changing what’s expected, all suggest that the outlook is positive.

Website: https://www.hsoftware.com/