While the goals of these regulations are often described in detail, they frequently fail to outline just how the requirements must be met or the steps that need to be taken to achieve that compliance. Here Sarah Whipp, CMO and Head of Go to Market Strategy at Callsign, answers the question: Is regulatory ambiguity setting banks up for failure?

Take for example PSD2, which called for open APIs and the application of stronger authentication schemes but didn’t describe how best to meet these needs. With financial institutions in somewhat of a quandary, third party groups have noticed a gap in the market and stepped in to help, such as the Financial Data Exchange (FDX), The Berlin Group and the Open Bank project, who each put forth a different approach to meeting PSD2 compliance.

The three predominant authentication schemes that are currently being used are as follows:

• Redirect – whereby the consumer goes to a third party and when they reach the point where they provide consent, they get redirected to the holder of data, logging in via a page branded by their financial organisation
• Decoupled – when customers provide an approval via a different channel, separate to the one where they are dealing with the third party. For example, a push notification from their banking app if they are enabling access to their bank account
• Embedded – when the third-party processes the customer’s security creds and passes them on to the financial institution. This method won’t work with device-based authentication since underlying organisation won’t have visibility of device being used.

For international banks in particular, this presents a tricky challenge, as they must be able to not only offer each of the aforementioned authentication schemes, but all three of these for each of the third-party groups who’ve stepped in to bridge the gap with PSD2. As a result, these banks are tackling an extremely complex policy situation in which the 9 potential authentication methods are even further compounded depending on location or circumstance. In addition, for each jurisdiction these companies operate in, regulations will be interpreted differently, making a coordinated approach very difficult.

The issue lies not in the sheer number of potential authentication methods with no clear direction from the regulators, but the fact that many of these major, global banks are currently relying on the human policy manager – knowledge siloed to a few IT group team members – to comprehend these regulatory needs. Quite often these teams would have insider knowledge, almost like living and breathing black boxes. Of course, if one of these people leaves the company, they are also taking with them a huge amount of valuable information.

Instead, banks must move away from their home-grown policy managers, and evolve to a more sophisticated and transparent policy manager for which sectors across the organisation can have a say. It is not just the IT team that has to review internal policies at these and say they’re fine. Risk & Compliance right through to the Marketing function needs to ensure they are properly following protocol.

Challenger banks, those who have broken ground in the last decade or so and remain digital-first, are actually positioned much better to deal with these issues as much of their infrastructural practices are already grounded in flexible and agile practices. Thus, many banks facing these problems are established institutions, potentially embracing digital transformation in other areas of the organisation. To ensure they can remain competitive and compliant (regulations aren’t going away, they’re only getting stronger), they must also equip their policies for the future.

If these larger organisations don’t rise to the challenge they are in danger of dramatically harming the customer experience. They need to be able balance keeping their customers’ digital identities safe and as well as comply with regulations, while making sure users can get on without obstacles. By using the latest AI and machine learning, policy managers must adapt and learn in real time to achieve this goal. Implementing this technology, organisations can build multi-factor authentication journeys that are uniquely tailored to their own business, customers, products or services. Financial legislation is constantly being updated, so flexible technology will help them easily navigate any changes with relative ease.

On one hand there are the established, incumbent banks, including the UK’s four financial heavyweights – Lloyds, Barclays, HSBC, and RBS. On the other hand, there are the younger, more agile challenger banks: Monzo, Starling, Revolut and others. Needless to say, competition is fierce. Below Barney Taylor, Europe MD at Ensono, digs deeper.

Challengers have arrived quickly on the scene, specialising in areas not well-served by bigger banks at the time. Boasting speed, convenience, and excellent levels of customer satisfaction, challengers have seen particular success in the mobile banking market, with data from Fintech company Crealogix showing that 14% of UK bank customers now use at least one mobile-only challenger app.

How the incumbents are challenging the challengers

IT has been the linchpin of the challenger bank success story. Customers increasingly expect a seamless and ‘always on’ relationship with their banks, and challengers, built almost exclusively on digital foundations, have been able to deliver. Unsurprisingly, it is these digital foundations which traditional banks need to improve if they are to keep up with the shifting market.

Retail banks are generally attempting this by putting greater investment and development into mobile and online banking capabilities. HSBC, for example, recently launched its Connected Money app, allowing customers to easily access their account information from multiple providers within one central hub. RBS is even set to release its own digital lender called Bo in the near future.

This is a strategy that’s likely to pay off for many. However, retail banks have a larger asset right under their noses that’s typically overlooked and underestimated. It’s an asset that banks have been sitting on for decades: mainframe computers.

Mainframe: the trick up retail banks’ sleeves

Mainframe has been around since the late 1950s, when systems only had rudimentary interactive interfaces, punch cards, and paper to transfer data. Usage in the financial sector rapidly picked up in the 1960s, with Barclays among the first banks in the UK to adopt it, initially for account and card processing. In a world in which, arguably, the only constant is change, 50 years on the mainframe has adapted and thrived to become the most powerful computing power on the market, handling over 30 billion transactions per day (even more than Google).

In fact, IDC reports spending on mainframes reached $3.57 billion in 2017, with expectations that the market will still command $2.8 billion in spending annually by 2022. In particular, financial sector businesses have been noteworthy champions of the technology, with 92 of the world’s top 100 banks relying on mainframes today. And for good reason.

Firstly, mainframes, if properly modernised and maintained, provide the same fast and reliable banking experiences that have made challenger banks so successful.

Unlike server farms, mainframes can process thousands of transactions per second, and can support thousands of users and application programs concurrently accessing numerous resources. Today’s mainframes process a colossal 90% of the world’s credit card payments, with credit card giant Visa running 145,000 transactions every second on its mainframe infrastructure.

In the financial industry, where trust is everything, mainframe technology also reigns supreme with its air-tight data security. Mainframes have always been considered a secure form of storage, but new models of mainframe have gone one step further, introducing something call ‘pervasive encryption’. This allow users to encrypt data at the database, data set or disk level. If they so choose, users can encrypt all of their data.

While challenger banks have benefited from an inherently component-based technology infrastructure, which makes them agile, flexible, and fundamentally able to connect to mobile apps and other external ecosystems – new open source frameworks mean that the mainframe can achieve much the same, and can easily interact with cloud, mobile apps, and Internet of Things (IoT) devices.

Final thoughts

Challenger banks have benefited from simple, cloud-first infrastructures that provide speed and convenience, which has won them millions of customers as a result. However, traditional banks shouldn’t fall into the trap of simply mimicking the industry newcomers. Cloud has a lot to offer, but traditional banks shouldn’t disregard the mainframe computing power that they have at their disposal.

A modernised mainframe is a cost-effective workhorse and, far from dying out, it allows incumbent banks to compete toe to toe in areas that have thus far made challenger banks so successful. Modernisation allows workloads to be centralised and and streamlined, enabling even more agility.

The mainframe has a long history, but for enterprise, and for retail banks most of all, it’s still a technology of the here and now.

“Banks have responded to this new paradigm, digitising their processes by leveraging and making decisions based on data and analytics, and shifting their focus on consumer experiences that go beyond mobile and online”, says Rosanna Woods, UK Managing Director at Drooms. “They have realised that to remain competitive and maintain market share they need to be more strategic and technologically adept, recognising the need to invest in automation, core modernisation and digitisation.” Below, Rosanna tells us why a collaborative approach is the way forward.

 The changing landscape of investment banking

2019 is proving to be a momentous year for the global investment banking industry as it returns to normalcy in terms of profitability and capital adequacy. Global M&A activities, mainly by large US banks, are creating opportunities to expand overseas and acquire FinTech startups.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience. Although investments banks adhere to their conservative business model, digitisation has shifted power to investors, who favour partnering with banks that are digitally more advanced.

Opportunities amid regulatory challenges

In Europe, the introduction of wide-ranging regulations has also impacted the working environment for banks. For example, the Second Payment Services Directive (PSD2) has encouraged innovation and competition between incumbents and FinTechs, while implementation of the revised General Data Protection Regulation (GDPR) framework has given EU citizens comprehensive data protection, forcing banks to ensure the privacy of customers’ data.

While addressing the myriad requirements of these new and contradicting regulations makes data management more daunting for banks, the major challenge for most of them is that data is being managed in siloed and disparate systems, making it all the more difficult to understand clients’ needs and demands.

Today, most investment banks are enthusiastic about digital transformation initiatives to reduce costs and improve customer experience.

However, the good news is that more banks are recognising the capabilities of cognitive technologies in gathering intelligent insights on customers, compliance and operations making collaboration with FinTechs more attractive. Also, robotic process automation (RPA) is rapidly gaining popularity as it brings productivity benefits to the table.

Helpful technology

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

While much of the media attention towards AI has focused on its potential capacity to replace humans, at present it is seeing much more practical use in terms of complementing human intelligence. ‘Augmented’ intelligence involves machines assisting humans in their decision-making processes.

A sub-field of AI – Natural Language Processing (NLP) is a good example of augmented intelligence in practice. NLP systems are designed to read and interpret human languages. A key application of this in relation to banking is the analysis of substantial amounts of ‘unstructured data’, which is data that as yet cannot be ‘read’ by machines, such as PDF files, images and audio materials.

Banking is a data-intensive sector and many key tasks demand correct interpretation of partly structured data. Therefore, NLP has the potential to make processes much more efficient with less effort required from humans. As such, FinTechs have been quick to apply this technology because of its value in improving customer interactions, making collaboration with them attractive for most banks.

The advent of Artificial Intelligence (AI) has been particularly helpful for banks in processes including client servicing, trading, post-trade operations such as reconciliations, transactions reporting, tax operations and enterprise risk management.

Role in M&A

Technologies such as virtual data rooms (VDRs) come into their own for banks when used in M&A deals, helping to address many of the challenges such pursuits face even at the best of times. There are several key causes of failure, including politics around the deal, culture clashes among the personnel involved and, in particular, parties being unprepared for the due diligence phase. In this latter regard, M&A deals rarely fail because of a lack of knowledge. Rather, it is about how that knowledge is handled. Over half of deals fail because those parties involved are reluctant to confront issues head-on.

Buyers often proceed with deals despite the challenges because they feel obligated by the amounts of time and money involved. They should, however, be prepared to cut their losses if the risks outweigh the benefits. For example, allocating inadequate resources during the review stage cost Bank of America $50 billion in legal fees post its acquisition of Countrywide Financial in 2008, let alone the reputational damage it suffered for inheriting the past mistakes of the mortgage lender.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Authorised users, including those inside a company and their external stakeholders, are connected digitally and in a secure environment with real-time access to all relevant documentation, depending on users’ individual permission levels.

A VDR enhances the M&A process by increasing the power to collect, process and distribute information to the right parties with much greater security and accuracy. It digitises relevant documents, automates tasks and streamlines workflows.

Creating a database in which documents can be updated consistently gives asset owners full control and the ability to react to the latest market conditions, bringing assets to market quickly when the conditions are right, sometimes at short notice.

One of the strengths of the Drooms NXG VDR is its Findings Manager function. This improves the vendor due diligence both prior and during the sales process. It allows for the automatic pre-selection of documents and helps in the assessment of potential risks and opportunities within a transaction. This yields greater control, instils confidence in potential buyers and cuts disruption to existing business.

Blockchain first

Macro forces such as blockchain are also slowly revolutionising many areas of banking. For example, blockchain made it possible to automate approvals of contracts as well as protect the transfer of confidential data from hackers and fraudster whenever transactions are made. In 2018, Drooms became the first provider to move its VDR offering into the blockchain age, using this modern technology to enhance the security of transaction data archives. Up to that point, all data had been stored on physical data carriers following completion of a transaction. But now it can be stored on Drooms’ own servers with blockchain protection. As a result, the secured data cannot be lost, is non-manipulable and is accessible to all parties involved in a transaction at any time.

A new threat

As more financial institutions start to adopt technologies created by FinTechs, a likely threat is emerging. Tech giants such as the likes of Amazon, Alibaba, Apple and Google are attracting customers in the payments domain by offering alternative ways of managing finances. In the US, Amazon is already offering its customers the option to turn spare change into gift cards, and parents can also give children their allowances via a reloadable debit card for example. In India, customers pay delivery fees through a Cashload feature and store excess cash from previous purchases in their account, as well as deposit money for future orders.

With platform companies’ potential to exploit customer data and come up with innovative solutions to address customer pain points, there is a lingering risk of disintermediation for banks. Customers who feel that tech companies alone meet their banking needs may decide to switch to non-banking channels. And there is also the possibility that tech giants may provide banking services in the future, making services provided by banks non-exclusive. Although big techs pre-dominantly target the origination and payments domain of banking, a stronger foothold by platform companies could threaten the survival of many banks in the industry.

Towards modernisation

The various areas of the banking industry will undoubtedly continue to evolve at varying speeds. And as time progresses more banks will likely partner with innovative FinTechs to remain competitive and market relevant. Potential for creative and ground-breaking collaborations and advanced modernisation will also likely increase.

That said, as technology transforms the future of banking, so ought banks’ mindset towards cognitive technologies and collaboration with FinTechs. After all, technology is not a panacea and it is accompanied by many challenges as well as opportunities.

Machine learning and AI can have huge benefits to the financial department and could allow companies to create and tailor their models based on the data they have collated. This technology can dissect the data inputted and try to perceive the deviating patterns in this – a good example already prevalent in the financial industry is the analysis of payment behaviour in fraud detection. Machine learning is able to signal that someone is making payments from two completely different locations in a short period of time, which can indicate a fraudulent purchase. Though this is a common example of machine learning in finance, there are a huge amount of other significantly beneficial ways that AI and machine learning could be implemented – so, why are European firms not applying this as eagerly?

Well, there are a number of reasons as to why this could be the case, the most common being that there is simply a lack of know-how in this area. Accountants and finance professionals, of course, have extensive knowledge and expertise in the field of accounting standards, risk management, investment analyses and controlling, but not in the area of emerging technologies, machine learning or AI. Therefore, those in the finance department are not able to simply implement this technology and must look to external parties to help this transition – which can be timely and also a deterrent. But this is unjustified, as many CFOs could quickly master the basics of machine learning through training and not necessarily take on these roles themselves, but at least understand the technology.

Many CFOs could quickly master the basics of machine learning through training and not necessarily take on these roles themselves, but at least understand the technology.

Not only is there a lack of know-how, but there is also a lack of time for a CFO to implement this technology, or find a partner who is able to do so. A CFO’s job role usually focuses on value creation and protection, and transactional tasks too. Only once less time is spent on these is there the possibility for CFOs to focus on strategic tasks, such as implementing new technologies. CFOs tend to be extremely time-pressed individuals, until they free up time to focus on these strategic areas, or employ someone in the finance department to do so, it is likely that the option of applying these technologies will not be possible.

Infrastructure, company culture and the risk and governance surrounding implementing this technology can all have a profound effect on the possibility of companies doing so too. Not every company has the designated ICT infrastructure to store, analyse and structure data, and of course, the extra computing power and server capacity that are also required to do so. In a company where the financial department culture is not data-driven, it may be hard to convince the necessary actors of the importance of implementing data in financial practices; the management needs to support this area of focus. The risk and governance related to data issues is also a major concern for companies, whether it be related to security, GDPR or compliance, which means that many firms may be reluctant to pursue this avenue.

All these barriers that a CFO may be faced with when trying to implement data analysis and AI into their practices can, however, be overcome. Whether it is redistributing money to focus on technology in finance, employing external firms or internal actors with knowledge of the technology, or investing in software and infrastructure which can facilitate data analysis, these all are worthwhile tasks for a CFO to implement in order to benefit from this new technology.

In this pursuit to apply AI in the finance department, the CFO should continue to play an overarching role in the company, but also add advanced automation and machine learning to their list of tasks.  There is a need to have employees that excel not only at accounting and financial knowledge but also at the ability to work with new technologies, including AI. A data-driven finance department will better position itself as a strategic business partner.

In this pursuit to apply AI in the finance department, the CFO should continue to play an overarching role in the company, but also add advanced automation and machine learning to their list of tasks.

In fact, there are four concrete applications of AI that could be seen currently in the finance department. For example, these technologies have the ability to quickly evaluate potential investment opportunities, by scanning and consulting annual reports and management reports of the companies on the list of their potential investments. This can help companies to quickly understand possibilities of profit growth in these investments and allow them to come to a much quicker decision on their potential investments.

Machine learning and AI can also be implemented to analyse mass social media messages regarding the company’s practices, products or services or current prices. This will help companies gather mass opinions of them in a short space of time and give them the ability to understand how to better streamline their financial services and offerings in the future too.

This technology can also predict future business issues as well, by mapping the network and history of potential suppliers and collaborators. AI can provide a specific and sophisticated understanding of a company’s public image, which could help the company avoid aligning themselves with companies with the potential to have a negative image, and therefore save them money in the long-term by maintaining their positive brand image.

Every company looks to gain insight into the profitability of its customers, this AI technology can also help companies with predicting the potential reaction to new services and products that they are looking to offer. Therefore, companies are able to understand whether or not these will be financially worthwhile in the long-term, and whether customers will be likely to consume these.

New technologies such as AI and machine learning will have a profound impact on all business areas, including the finance department, and CFOs who look to embrace this as soon as possible will be one step ahead of their competitors. For the future of finance, it is important that the training of financial students and current employees includes a greater focus on technology - how to implement this and its impact on finance. This is something that education institutions like Vlerick Business School have adapted to, offering more and more technology-focused modules in their finance programmes and ensuring that the next generation of CFOs has a strong knowledge of both accounting & finance and technology.

A recent Deloitte survey of global chief procurement officers stated that 78% of procurement leaders saw cost reduction as their top business strategy. A survey by Scout RFP shows that 77% of financial respondents from companies with more than 1,000 employees said that procurement makes finance and the enterprise more effective, a clear sign that procurement and finance are a match made in heaven.

How can finance and procurement work alongside each other to drive greater business impact for the enterprise as a whole? By investing in the proper technology, teams can easily integrate sourcing into more areas of the business and at the same time increase spend under management. Technology, in turn, must add value to the overall process.

 Invest in the proper tools

When companies invest in tools that provide greater transparency and allow collaboration between people they can bridge the gap between finance and procurement teams. A solution that integrates real-time sourcing more closely with financial planning can provide better visibility into strategic projects and spend under management. In turn, finance and procurement teams can source smarter, plan better, and align business objectives. This way, businesses strategically plan for the future without ‘looking in the rear view mirror’.

Proper sourcing solutions provide complete visibility into funding for projects, execution terms, and data points on cost streams.

Proper sourcing solutions provide complete visibility into funding for projects, execution terms, and data points on cost streams. Not only will this prevent future financial surprises, but will create a clear F&A roadmap, benefiting the company’s overall cash position. When the enterprise has complete visibility into the procurement process — including the stakeholders and suppliers — it can lead to more competitive turnaround times and allow teams to deliver more benefits to the business, without losing sight of projects and timelines. Full visibility for executives allows them to understand where finance and procurement are spending — and creating greater business impact — and report alongside the overall company goals.

More importantly, teams feel more valued and part of the larger enterprise goals when business partners see the business impact generated from procurement and sourcing efforts. Collaboration is the key component that elevates the visibility needed for procurement and finance teams to drive results for the enterprise as a whole. Through collaboration, teams can communicate their goals clearly, understand benefits, conquer challenges, and truly partner with suppliers, making this a winning strategy for all parties involved.

Scale the business with more savings

Anaplan, a pioneer in Connected Planning, utilised these key e-sourcing features to scale their business. Traditionally, Anaplan’s procurement team was known as the firefighting team — constantly putting out fires to satisfy 700 employees in a dozen offices around the globe. The continuous stream of requests put the company’s ability to scale at risk and blocked legal, finance, and compliance teams from accessing critical projects they needed to evaluate. There was no visibility into the projects and a lack of collaboration across the board. With dozens of contracts in the queue at a time, the procurement team was dangerously close to losing context on key decisions.

Levi Strauss & Co. is another example of a company combining the powers of procurement and finance. Since implementing a sourcing platform, the finance and procurement teams have been able to not only see where they are saving but how they can categorise the savings to communicate better results to the business partners.

The company knew it needed to invest in the proper technology to increase the procurement team’s efficiency to support their growth and make it easy to communicate sourcing’s impact on the rest of the company. Within just one year of implementing an e-sourcing platform, Anaplan grew to more than 1,000 employees, generated more than $240 million in revenue, and has 20 offices in 13 countries supporting more than 1,000 customers. Procurement and sourcing are now connected with all functions of the organisation, including finance, risk, and planning. Anaplan now supports contracts for more than 50% of their global spend because they are able to collaboratively source for the future thanks to these new capabilities.

Levi Strauss & Co. is another example of a company combining the powers of procurement and finance. Since implementing a sourcing platform, the finance and procurement teams have been able to not only see where they are saving but how they can categorise the savings to communicate better results to the business partners.

When companies utilise comprehensive sourcing tools, they can empower procurement and finance teams to drive company performance, source smarter, plan better, and align business objectives, ultimately leading to greater business impact and financial success.

That’s according to a new in-depth study, commissioned by Asset Control and executed by independent research firm OnePoll.

Also playing to the focus on expertise, 48% of the sample overall referenced ‘a third party has productised industry knowledge that we can benefit from’, among their main drivers for adopting standard products and services instead of internally solving business data challenges. In line with this focus, by far the biggest consideration respondents had when costing an external technology solution was ‘the availability of skills in the market for the approach chosen,’ cited by 49% of respondents in total.

Cost was also a big issue driving the uptake of third-party technology solutions. 48% of the survey sample ranked the fact that an outsourced solution ‘was more cost-effective’ among their top reasons for using it.

Martijn Groot, VP Marketing and Strategy, Asset Control said: “Financial services businesses are often attracted into adopting an outsourced approach by a straightforward drive to cut costs, coupled with a desire to tap into broader industry knowledge and expertise.

“Adopting third-party solutions typically allows firms to reduce costs through improved time to market and post-project continuity,” he added. “And the opportunity to take advantage of the breadth of expertise and understanding that a third-party provider can deliver gives them peace of mind and allows the internal IT team to focus more on business enablement which typically involves optimal deployment, integration and change management.”     

The benefits of an external third-party provider approach were further highlighted when respondents were asked where they looked first for data management solutions. The most popular answer was ‘externally bundled with complete services offering (e.g. hosting, IT ops, business ops) as part of business processes outsourcing deal’ (28%), followed by ‘externally bundled with tech services offering (e.g. hosting, IT operations) as part of IT outsourcing deal’ (21%). ‘In-house with internal IT’ trailed well behind, with only 17% of the survey sample referencing it.

According to Groot: “The answers show that rather than just following the data and having to install and maintain it, businesses are increasingly looking for a much broader managed data services offering, which allows them to access the skills and expertise of a specialist provider.

“Firms today also increasingly want to tap into the benefits of a full services model,” he continued. “They are looking to join forces with a hosting, applications management or IT operations approach and often that is in a bid to achieve faster cycle time, reduced and more predictable cost of change and a demonstrably faster ROI into the bargain.”

(Source: Asset Control)

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

The most obvious example of this is the criteria you need to meet in order to get a mortgage. Although there are certain assumed standards, each lender has its own criteria. As a consumer, that leaves you in a precarious position of shooting in the dark when submitting mortgage applications.

Things don’t get any better when you look at the data surrounding mortgage rates. Although all stats can be twisted to suit a specific agenda, there are times when consumers won’t know what to believe. For example, if you compare the headlines from the Financial Times and UK Finance in May 2019, both had a different take on the current lending status.

Same Data, Different Conclusions

While lobbying group UK Finance focused on approval rates being up by 6% year-on-year and 2% between February and March, the Financial Times had a different spin. For reporter Imogen Tew, the Bank of England’s Money and Credit report stood out because approvals had dropped by 4.5% between February and March. Even comparing just two news stories, you can see how the market is confusing at times.

Fortunately, as it often does, technology is capable of cutting through the unnecessary and picking out the relevant. On a basic level, mortgage calculators are an easy way for prospective borrowers to see how much they can get. However, with these calculators using generic data and broad assumptions, the answers are nothing more than a guide. Building on this technology, mortgage brokers offer sophisticated calculators that help determine the best products for a single user.

Using AI-style technology, free-to-use online mortgage broker Trussle matches borrowers and lenders. Unlike generic calculators, the software compares personal details against 12,000 mortgage deals. From there, daily market comparisons are carried out to ensure the user is given recommendations that are based on the latest market conditions. Indeed, it’s this dynamism that counters the complex and volatile nature of the mortgage industry. While it may not necessarily make mortgages any less complex, using tools like this can help simplify the application process.

Streamlining the Mortgage Business

In conjunction with a desire in recent years to streamline the industry, developers have also adjusted their focus to lender technology. Indeed, as the market has become more competitive, lenders with the most user-friendly systems are likely to win favour with the general public. Latching onto this trend, Fiserv launched Mortgage Momentum in February 2019. Described as an “end-to-end” system, Mortgage Momentum is designed to improve the lending experience.

Part of the software’s appeal is that it makes the lending process easier: by simplifying the overall process, the product is able to make borrowing more attractive. In other words, by making it easier for consumers, the lender has the ability to generate more business. What’s more, the product also uses machine learning to understand the market’s shifting dynamics. Using these insights, lenders can refine their products to meet the latest economic and consumer demands.

Mortgages will never be an easy topic to master. Changing interest rates, market forces and economic stability will always ensure a level of uncertainty. However, with modern technology, things are easier to grasp than they’ve been before. Indeed, thanks to calculators, brokers and advanced lending software, borrowers are shooting at slightly lighter targets than they once were.

There are new competitive threats. Blockchain and smart contracts are changing the way people procure financial services. At the same time, client expectations are continually rising, a process accelerated by the arrival of new digitally-orientated competitors.

Recruitment is also a challenge, as skills shortages take their toll on the ability of businesses to grow and innovate.

Then there are compliance obligations, which are getting tougher. GDPR and PSD2 will continue to have major effects on financial services, which spend an estimated £5 billion each year on compliance.

Cybersecurity is another pressing concern. Financial services are a prime target for hackers, with large banks of sensitive and lucrative data that can be stolen and sold on.

All of this is happening against a backdrop of economic uncertainty, driven by issues including Brexit, which are forcing financial firms to reconsider where and how they work.

In response, forward-looking firms are reviewing and reshaping established working practices and structures, assisted by technologies that allow for greater flexibility, responsiveness, efficiency and service levels.

New ways of working

Establishing new ways of working depends on equipping key personnel with the tools to be agile, productive and compliant, regardless of where they are working.

CDW is working with Microsoft to demonstrate the potential of the Microsoft Surface family in the professional services sector. Let’s look at how the key capabilities of Microsoft Surface come into play at different levels of the organisation.

Out in the field, employees including insurance adjusters and wealth advisors benefit from having the latest productivity and collaboration tools built into a device that enables online connectivity even without Wi-Fi. The Microsoft Surface Go, with advanced LTE capabilities and scope for the insertion of a SIM card, empowers these professionals to work without compromise. They can deliver enhanced customer experiences with on-the-spot insight.

Back at the office, colleagues including corporate legal associates and solicitors could use the Microsoft Surface Pro 6, to draft complex documents, work with colleagues via Teams, bring up information via PixelSense touchscreens and run full-featured desktop and mobile apps.

However, making a case for IT investment requires robust ROI projections that are notoriously difficult to calculate.

What’s the payback?

To establish a robust business case for its Surface devices and associated software, Microsoft commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI).

The objective was to examine the potential ROI enterprises may realise by implementing Microsoft 365 Enterprise on Microsoft Surface devices. To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed and surveyed hundreds of customers with experience using Microsoft 365 on Microsoft Surface devices.

In the report, ‘Maximizing Your ROI From Microsoft 365 Enterprise

With Microsoft Surface’ [i], Forrester concluded that organisations using Microsoft Surface devices powered by Microsoft 365 Enterprise have the following three-year financial impact:

• $21.06 million in benefits versus costs of $9.93 million, resulting in a net present value (NPV) of $11.13 million and an ROI of 112%.[ii]
• Payback period of 16 months.

Forrester reported: “To rapidly innovate, better serve customers, and engage workers, organisations across the globe are using technology-driven solutions that improve information sharing, enhance teamwork, accelerate decision making and drive process efficiencies. Organisations are leveraging modern devices with next-generation capabilities, including voice recognition, digital pens, and touchscreens, to further empower their digitally-driven workforces. This strategy is working: 62% of information workers agree that using these next-generation technologies help to make them more productive in their jobs.”

Quantified benefits

The following risk-adjusted quantified benefits are representative of those experienced by the companies surveyed and interviewed:

• Employees more than doubled the communication, information sharing, and business workflow productivity gains seen from using Microsoft 365 Enterprise without Surface. Workers realised nearly five hours in weekly productivity gains using Microsoft 365 on Surface.
• Using the combined creative capabilities of Surface and Microsoft 365, including Pen, Touch, Dial, 3D in PowerPoint, collaboration features in Skype and Microsoft Teams, organisations streamlined creative tasks, saving creative workers 27 minutes per day.
• Enhanced teamwork capabilities using Microsoft 365 Enterprise powered Surface devices saved employees over three hours per week.
• Using Microsoft 365 Enterprise with Microsoft Surface, business leaders reduced decision-making time by nearly 21% versus 18% for leaders using Microsoft 365 Enterprise on other devices.
• Organisations reduced product development overhead costs by 11%. They accelerated time-to-market and reduced product development costs through better task prioritisation, research and development (R&D) collaboration, and improved data management and analytics capabilities using Microsoft 365 on Surface.
• The mobility benefits of Surface combined with secure remote access features of Microsoft 365 Enterprise saved mobile workers over four hours per week.
• IT saved two and a half hours per application provisioning request and over 25 minutes configuring each device. The combined device, application, and security configuration and provisioning synergies of Microsoft Surface, Windows AutoPilot, Windows 10, and EMS improved IT and user productivity.
• The stability of Surface resulted in fewer incidents of crashing, while the number of password reset-focused help desk tickets were nearly eliminated using the self-service capabilities from EMS to administer password resets. Help desk calls for password resets were reduced by over 86%, while device and application performance-related tickets were reduced by 15%.
• Security breach remediation costs were reduced by 80% and the number of annual breaches was reduced by 50%. Using two-factor authentication, Advanced Threat Analytics and Surface Enterprise Management Mode (SEMM), organisations cut the volume of breaches experienced annually in half.
• The organisations reduced several third-party technology costs, devices, infrastructure and IT support requirements using Microsoft 365 powered Surface devices.

On the job with Microsoft Surface

With advanced devices such as the Surface Laptop 2, Surface Go or Surface Pro 6, running Microsoft 365, finance professionals can:

• Take photos and notes, using the integrated Surface Pen and OneNote, uploaded directly and securely to OneDrive.
• Stay up to date with the latest market trends, through an HD PixelSense touch display.
• Give compelling presentations with Surface Pen and PowerPoint.
• Answer client questions on the spot via seamless Microsoft 365 integration.
• Run powerful financial and analytics applications thanks to 7^th generation Intel® Core™ processors.
• Share ideas from colleagues and clients in real time, negotiate tasks and agree on fees, using Office co-authoring, OneDrive document sharing, the Surface Pen, and Skype for Business.
• Draft complex contracts on a specially-designed keyboard.
• Stay connected and access essential resources with built-in long-term evolution (LTE) and Wi-Fi connectivity.
• Work with legacy apps that run smoothly on Windows 10.
• Get management approval and digital signatures, regardless of location.

To help IT leaders in financial and legal services exploit the advantages of the Surface family, CDW provides a range of wrap-around services that add value in important areas. An extensive range of maintenance and support services are offered by CDW, underpinned by tailored SLAs and delivered by accredited engineers with demonstrable technical expertise. Design services, including the build of a main image, are also available alongside pre-delivery asset-tagging, deployment support and delivery.

Download the free guide to Digital Empowerment in Legal & Financial Services: https://bit.ly/2PuRDvQ

 Or you can learn more by calling 020 7791 6000

Website: https://www.uk.cdw.com/

[i] https://info.microsoft.com/ww-landing-Forrester-TEI-Surface-M365-Full-Report-Whitepaper.html?lcid=en

[ii] The financial results calculated in the benefits and costs sections of the study were used to determine the ROI, NPV, and payback period for the composite organisation’s investment in Microsoft 365 powered Surface devices. Forrester assumed a yearly discount rate of 10% for this analysis.

Financial technology is rapidly progressing, so fast that people are forgetting the world economic crisis that happened 10 years ago. With the evolution of financial technology, new services and better options are being created for consumers all over the world. Digital technology has created a much better user experience for users all over the world, and sky’s the limit indeed. This is what you can expect from financial technology five years from now.

More digital engagement

It wasn’t too long ago that, for every financial service you needed, a trip to the bank was a given to get that service. With the advent of technology and the age of digitization, those days are no more. You can literally pay every single bill of yours and transfer money to people across the world with a mobile application at your disposal at any time and any place, and the evolution of these services is rapid and continuous. The digitization of financial affairs means a much better user experience, which reflects positively on revenues and sales numbers. People love slacking around and still getting things done, and in the future, there’s no telling how much more comfortable technology will make banking for users.

More services

As more technologies emerge and newer doors open, more services are being created to cater to people’s every financial need using financial technologies. For instance, you can now get an advance on that inheritance of yours that’s been taking ages to get processed in the courts. In this article you can learn about their conditions and how it works if you want to get an advance on your inheritance with minimal effort and quite an easy digitized process. This financial service, and many others, helps plenty of people who might be in a tight spot and in urgent need of cash, but are unable to access any due to the lengthy process.

Newer technologies

The quest to find newer technologies to facilitate and make things better for users is non-stop. For instance, banks now in some countries are operating hybrid clouds and cloud computing to address issues of security, compliance, and data protection. Hybrid clouds also offer reduced costs and a much better operational efficiency, making them truly the future of banking services. You even have artificial intelligence (AI) been implemented in some places, hopefully to an extent that in the future it can help in back office operations, customer service, and much more!

Is it a good thing or a bad thing?

An optimist will find the current advancements being made in financial technology truly remarkable, for they have the potential to create a better and more comfortable user experience for mankind and actually help people in need of such advancements. On the other hand, there are some who might worry about the digitization of something as critical as financial services, and dread the reliance on machines to manage our finances. While both opinions have their pros and cons, one can’t deny the fact that technology is moving at an exceptionally rapid rate, and it’s quite exciting to view what’s next in store.

To put this into perspective, the U.S. banking system alone held an estimated $17.4 trillion in assets at the end of 2017, whilst it also generated a staggering net income of $164.8 billion.

Banks are set to become more profitable in the future too, with advanced technology such as artificial intelligence (AI) expected to introduce more than $1 trillion in savings by the year 2030. This highlights the impact that technology is continuing to have on banking, with this relationship growing increasingly intertwined with every passing year.

In this article, we’ll explore this further whilst asking how the most recent innovations are impacting on banking in the digital age.

1. It has Ushered in the Age of Digital and Mobile Banking

Whereas banking used to require standing in queues and liaising with tellers, most transactions are now completed through digital means. In fact, an estimated four out of every 10 UK customers now bank using a mobile app, and this number is set to increase incrementally in the years to come.

So, whether you want to make an instant payment, transfer funds or open a brand new account with a service provider such as Think Money, the quickest and most efficient way of doing this is through digital means.

Technology is also making digital banking increasingly secure, with methods such as 2-step authentication having transformed the space in recent times.

We’re also seeing a significant rise in the use of biometric security methods, including advanced techniques such as fingertip authentication and facial recognition. These options provide the ideal compromise between high security and a seamless customer experience, and this something that remains at the very heart of banking in the digital age.

2. It’s Using AI to Improve the Customer Experience

We touched earlier on AI, and how this will enable banks to make considerable savings and become more profitable in the future.

AI is also having a considerable impact from a consumer perspective, however, especially in terms of the banking experience that they enjoy.

Take the use of chatbots, for example, which can enhance the onboarding process when positioned as helpdesk agents. More specifically, they can answer the most basic and commonly asked questions and anticipate popular requests, enabling customers to resolve their queries as quickly as possible.

AI can also afford bankers a more detailed look at their customers’ behaviours and financial history, making it easier for them to provide real-time insights and offers that offer considerable value.

3. It’s Improved Data Protection in the Banking Sector

In the first half of 2015, it’s estimated that around 400 data breaches took place in the U.S. alone.

This number has fallen in recent times, as banks have identified the core issues that compromise customer details and introduced measures to provide more robust data protection.

Aforementioned biometric and 2-step authentication techniques have helped to secure users’ passwords, for example, whilst phishing scams and malware are also being combatted by 128-bit encryption and higher.

As a customer, you can also take advantage of secure wireless connections to safely access your bank accounts in the modern age, negating the risk posed by public networks and unsecured Wi-Fi hotspots.

Here Ramesh Ramani, Cognizant Head of Banking & Financial Services, argues that for banks to remain relevant in a context of regulatory pressure and intense competition, during an era when experience is overtaking trust as a key differentiator, they have three options: become a multiservice provider; go beyond banking to become part of people’s lives; or find a niche segment.

So what are the Steps to unlocking future banking growth?

Today, banks are no longer just competing with each other. The BigTech firms are nipping at their heels, trying to gain market share within the financial services industry. For example, both Google and Facebook have already secured e-money licences. And, according to Crunchbase, there are now over 12,000 fintechs operating globally, with new entrants such as N26, the branchless digital bank offering a paperless sign-up process that can be completed on a smartphone, with identification verified by a video or selfie, which is building a large customer base rapidly. As digital banks such as Monzo report less than one-tenth the cost of servicing a retail account compared to a large traditional bank, these fintechs, built on technology from the outset, are undoubtedly luring away previously loyal customers and revenue through their ability to offer a more digital customer experience.

Trust is no longer the holy grail and experience has taken over

Customer experience has now become the most important differentiator. Where trust was once hailed as the holy grail for banking institutions with customers sticking with their bank for long periods – indeed, sometimes their entire lives – this is no longer the case. Trust and legacy are diminishing over time as younger consumers, brought up in a world surrounded by the BigTechs, increasingly look for speed and convenience. There are, however, notable instances of big-name banks being early adopters, using technology to streamline their operations, improve customer experience and enhance their offering. For example, in Spain, BBVA has developed an app feature called Bconomy, which helps customers set goals, save money and track their progress. The app makes suggestions about how to save money and compares prices on things like utilities and groceries. Idea Bank in Poland makes its products available on the go with branches and co-working spaces on commuter trains. These Idea Bank cars feature desks and conference spaces, plus free office supplies, Wi-Fi and coffee.

It is clear that banks are aware they need to change their strategy to remain relevant. To survive in the evolving banking landscape, banking institutions have three options:

1. Become a “multiservice provider” – as profit margins decrease with new entrants coming into the market, banks must consider partnering with the new digital players to ensure they remain an important element of the banking ecosystem. If it is done right, an ecosystem with fintechs need not cause them to lose or dilute their relationships with customers – nor come at the expense of their bottom line. Many fintechs are now offering flexible partnership options that include white-labelling services. And, if done correctly, a partnership with a fintech can bring multiple benefits. For example, ING and Santander have white-labelled Kabbage’s automated SME lending platform and integrated it into their product portfolios.
2. Go beyond banking to become part of people’s lives – banks should transform their customer experience, and one way is to make themselves integral to their customer’s lives. For example, besides supplying a mortgage to a family that has just moved into the area, a bank could become their hub for the move, offering them advice on the best schools for their children as well as providing information on local amenities.
3. Find a niche segment – banks today are trying to be everything to everyone, which is causing their innovation to stall. Those identifying a market niche will have the best chance of survival in the digital era. We are already seeing examples of household names in the banking world, such as Credit Suisse and Barclays becoming more selective about areas they want to be in to differentiate themselves.

New regulations continue to shake up the landscape

Even as little as three years ago, one could argue that banks still held some form of advantage over new players due to the vast amounts of customer data they held, giving them unrivalled access to consumer spending patterns. However, with new regulations, such as Open Banking, forcing financial institutions to make their data available, this data ceases to give them the competitive advantage it once did.

However, these regulations are certainly improving the landscape. For consumers, it means they can more easily pick and choose banks for different purposes by managing all accounts and payments in one centralised place. For example, taking advantage of the UK's new Open Banking environment, ING Bank has developed Yolt, a free mobile app which allows users to centralise their finances and manage their money with different banks for different financial services in one place. And, in theory, this improved access to payment information and spending data will lead to better banking products that offer more efficient service to consumers.

As the use and implementation of technology continues to change the banking landscape, we can expect a dramatic change in the sector within the next five years. A decade ago, many investment banking leaders thought it was ridiculous to suggest that software would run and complete their research analysis whilst today, many are almost entirely reliant on automation and AI to provide thorough and fast analysis. The question is, which banks will recognise and take advantage of the market changes ahead? Only time will tell.