From AI to IP, with GDPR and cybersecurity in the midst, Karl Roe, VP Services & Cloud Solutions at Nuvias, tells Finance Monthly what’s in store for organisations using the cloud in 2018.
The Rise of AI
2018 will see Artificial Intelligence (AI) drive a transformational change among organisations and impact on cloud use.
ICT isn’t getting any simpler, and businesses are being forced to move faster as their customers’ requirements become more demanding. This is driving innovation in areas like AI, but automation of past processes won’t be enough to keep up with the “need for speed” in business agility.
We will see lots more AI projects and initiatives in 2018; it will be the cornerstone of change in automation of ICT. Proactive, automated, non-human decisions are now a necessity. Are the robots coming? Yes, they are – but we still need to develop the Intellectual Property (IP) to drive them.
IP Will Be Key
With emerging technologies like AI becoming more prominent in 2018, organisations are demanding bespoke software and solutions that solve their specific business problems.
As a result, companies are increasingly working with cloud service providers to gain a competitive advantage – this includes using public cloud providers to power their IP-centric solutions. Investment in infrastructure development is diminishing, replaced by a need for specific business-driven solutions that require unique software to bring these solutions to life.
From Partnering to Strategic Alliances
IP is the key, but many end users don’t have the time, resources or in-house skills to create their own unique solution that gives them the business advantage they require.
As such, they are forging long term business relationships with technology service providers who understand their need for change, and develop specific IP or software which utilises public cloud services, embraces AI, and most importantly which solves a business or specific customer problem.
Public cloud providers also need these strategic partner alliances to ensure there is a shorter time to value in moving workloads to the cloud, and providing solutions that move beyond IaaS (Infrastructure-as-a-Service) to fully utilising PaaS (Platform- as-a-Service).
PaaS as the Basis for Digital Transformation
We are starting to see the SaaS (Software- as-a-Service) players now extending into PaaS in response to customer demand.
Customers that are using a SaaS kingpin like CRM want to extend that platform into other use cases and requirements. It’s been a long time coming but as the world moves to a cloud-first strategy, the complexity in integrated public clouds is driving companies to explore PaaS.
Secure Cloud Services & Cyber Security get Board Visibility
Cloud services have been a safe bet in the Boardroom in recent years, but now the question is, are they truly secure? Decisions to utilise cloud services have been a relatively easy Boardroom decision, due to their known cost and agility. But with more and more high-profile data breaches, questions are now being asked around cloud security at a Board level within businesses.
The damaging nature of cyber-attacks is now clearly in the line of sight of Board members. GDPR will also raise more questions at this level, making cyber security in the cloud a Board level priority.
More than nine in ten finance and accounting professionals (92%) are optimistic about increased automation in the profession, according to new research from Renaix.
The study, which questioned over 200 finance and accounting professionals, reveals that 81% are seeing their role impacted by emerging technologies, such as advanced data analytics (63%), cloud computing (42%), robotics (17%) and artificial intelligence (15%). This increases to more than nine in ten (94%) who believe these technologies will impact their role in the next five years.
Yet, despite the increasing role of technology, only 12% of those questioned believe their job will be completely automated within the next five years, with most seeing new tools as an opportunity rather than threat. Two thirds (69%) say automation will enable them to be more efficient, over half (59%) say it will allow them to add greater value to clients and 40% say it will reduce the amount of transactional work they’re involved in.
But that doesn’t mean there aren’t challenges, with more than half (59%) of respondents having to learn new skills to keep up with technological developments, with data analytics (54%), soft skills (54%) and working with new technologies (51%) coming top of the list.
Many are also worried about skills shortages over the coming years, particularly in data analytics (52%), STEM (science, technology, engineering and maths – 42%), and soft skills (31%). Furthermore, a quarter (25%) of those questioned say their employer still isn’t investing in upskilling the finance function to work with new technologies.
Paul Jarrett, Managing Director at Renaix, comments: “Emerging technologies are set to transform the finance and accounting sectors, with many professionals already feeling the impact on their day-to-day responsibilities. And it’s encouraging to see that, far from being intimidated or threatened by these new ways of working, the majority of professionals are excited and optimistic, believing automation will improve and expand their role in the coming years.
“Finance and accounting organisations have a fantastic opportunity to drive forward digital transformation, empowering all employees to play their part in developing and implementing new ways of working. However, to do so effectively, employers need to ensure they are equipping the workforce with the right skills, as well as investing in bringing in the right talent. While there will always be a need for traditional finance and accounting skills, we’re seeing a significant rise in demand for a broader range of backgrounds, particularly those with STEM qualifications. Businesses therefore need to plan their talent needs effectively, to ensure they stay ahead of the game.”
(Source: Renaix)
Time to say goodbye to the gadgets and services that met their demise this year, including Windows Phone, the Kinect, 3D TVs, Apple's Shuffle and Nano, and AIM.
Despite the mobile channel being an increasingly lucrative one for fraudsters to exploit, efforts to implement watertight authentication are being stymied by a lack of clarity around which party is liable in the event of sensitive data being compromised by hackers. It is time that mobile network operators (MNOs) and banks made a concerted effort to clear up this confusion and enable a positive customer experience to come first.
According to Aspect Software, the battle against fraud is one that is still being fought fiercely, especially as cybercriminals become more savvy in the way they conduct their activities. According to the Information Security Media Group’s 2017 Faces of Fraud survey, 52% of businesses polled stated that today’s fraud schemes are too sophisticated and evolve too quickly for their organisation to keep pace. For the mobile channel in particular, incidents of ‘SIM Swap’ fraud – which sees criminals steal money from bank accounts by digitally duplicating SIM cards via social engineering – accounted for 11.5% of total mobile fraud in the past year, according to Aspect’s own figures, attained through its work with banks and MNOs over the last 12 months.
These figures underline the importance of multifactor authentication in getting the upper hand in the fight against fraudsters. However, many organisations remain bogged down in debates over liability, which is slowing down the pace of adoption and risking compromising the trust of their customers.
Keiron Dalton, Global Program Senior Director at Aspect Software’s digital identity division, said: “The issue of liability regarding fraud can be something of a minefield. When working with third-party authentication providers to secure the mobile channel for mobile or telephone banking, it can be a challenge to establish clear, consistent lines of accountability in this area. This lack of direction and transparency can hinder the adoption of high-quality authentication which, crucially, creates a greater risk of customer trust being damaged if a data breach strikes.”
Keiron believes that MNOs and payment services providers, including banks, need to work towards re-evaluating the relationship they have with third-party authentication providers, to a point where a clear understanding is reached on the subject of liability. For Keiron, this means firmly establishing the authentication provider as a partner who provides an essential service along with recommendations on how the company can further improve its security practices, while final liability rests with the company that holds the data.
He concluded: “It is vital that businesses do not lose sight of what is most important when it comes to fraud prevention: maintaining a positive customer experience. This can only be effectively delivered if the organisation in question maintains strong relationships with its authentication partners, and ensures that the boundaries regarding liability are clearly defined. Key to cultivating lasting customer trust is being able to confidently communicate what is being done to keep data safe. If these internal relationships can be effectively managed, this assertive outward persona will come to the fore naturally.”
(Source: Aspect)
Paul Taylor, Partner and UK Head of Cyber Security at KPMG discusses why a shift in thinking is needed in the way we think about the role of cyber in business risk planning.
In the race to improve efficiency, increase productivity and outstrip rivals, the adoption of new technologies is now a permanent characteristic of the business landscape. The prospect of rapid productivity gains and breakthrough opportunities is driving organisations to automate processes, connect systems and leverage new kinds of infrastructure before the competition can. However, the reliance on competiveness through technological adoption has blurred the boundaries between devices, systems and employees, creating new vulnerabilities that are increasingly exploited by cyber criminals and nation-state backed groups.
In today’s digital landscape, connected medical devices provide physicians with faster and more accurate patient diagnoses, whilst retrofitted smart sensors allow production equipment to automatically signal to other devices once a process is complete and when the next processes need to begin, speeding up manufacturing time and efficiency. At the other end of Industry 4.0, rail providers adopt real-time cab signalling and traffic management systems, which have the potential to add time to train pathways and avoid the need for extra lines of track by increasing capacity on existing lines. In the public sphere, vehicle manufacturers race to deploy driverless cars with the latest automated control systems and sensory equipment, designed to help identify safe navigation paths, obstacles and traffic light systems.
The unrelenting pursuit of better, faster and more efficient ways of deploying and creating technology has driven innovation in our businesses and across our economy, ensuring the UK is a world leader in a multitude of industries. Yet this position at the top of the leader board has to an extent come at the cost of security. The current nature of cyberspace means it is far easier and simpler for malicious actors to carry out vulnerability-based attacks over targeted hacking campaigns. Taking full advantage of the constantly evolving technological landscape, hostile individuals and criminal groups invest their time researching digital infrastructures and devices in order to design attack software that exploits vulnerabilities and weak points.
This kind of exploit-based hacking was seen when criminals took advantage of an overlooked vulnerability in Sony’s computer systems, which gave them full access to the company’s wider network. The alleged group behind the attack crippled the company network before they released sensitive corporate data, including four unreleased films, business plans, contracts and the personal emails of senior staff – having a huge impact on the business. Such attacks are not only restricted to large company networks. Advances in the UK’s rail signalling system to upgrade to a ‘connected network’ have also been shown to be vulnerable to hackers who could use software to tell a train that it’s speeding up when it is slowing down or even give a false location. These fears were almost realised last year when it was revealed the UK rail network had been compromised in four major ‘exploratory’ cyber-attacks. In Finland, hackers hit a building management system with a distributed denial of service (DDoS) attack that left residents with no central heating and in 2015, Chrysler was forced to recall 1.4 million cars after security researchers revealed that the vehicle’s internet-connected entertainment system could be hacked. To add the icing on top, at last year’s cyber security contest DEF CON, contestants found 47 vulnerabilities in 23 IoT devices, including smart door locks, refrigerators, and solar panel arrays.
Whether it’s increased connectivity, automating systems or upgrading networks, organisations – both public and private – are finding themselves dependent on new technological capabilities long before they have even begun to consider how they are leaving them open to cyber-attacks.
Many businesses are taking steps to begin to deploy things like RegTech (Regulatory Technology) as part of preparation for regulations such as GDPR and MiFiD II, possibly taking this more seriously due to the fact that the cost of non-compliance is clear and outlined, however the impact and cost of a cyber hack could be just as bad, so there needs to be a shift in thinking – a cyber hack is not just a cyber hack, it’s a risk to the whole business.
The impact that these kinds of attacks can include lost revenue, losses to intellectual property and customer loyalty and reputational damage. The practice of innovation at the expense of security cannot therefore be maintained, and leaders need to start to think of a lack of security for what it really is – a risk to the whole business.
As outlined in a recent white paper on cyber security business risk by information security professionals body (ISC)2 titled, ‘What Every Business Leader Should Know About Cyber Risk’ organisations must ultimately incorporate cyber into the wider risk plan of the business. Within this, key operational dependencies that are being overhauled, upgraded or introduced must be identified and any critical technology that needs protection must be prioritised. This could be your organisation’s server network, the website upon which your customer’s financial trades take place or even individual devices. Bringing the CISO into risk evaluation discussions should also be made compulsory going forward.
Technological transformation is an inherent part of the world in which businesses operate, but in order to mitigate the threat, accepting cyber security as a business risk is paramount. Cyber attacks are only going to increase and businesses are offering hackers an open door by failing to incorporate cyber security within the risk register. If the uptake in new capabilities by businesses is to be maintained securely, then cyber security must come become a deciding factor in the implementation of any technology.
Robo-advisers are a great example of how automation is spreading like wildfire. But how safe and reliable are robo-advisers? Below Simon Bottle, COO of non-advised white label, FinchTech, talks to Finance Monthly about when and when not to trust a robo-adviser, giving some great context for investors.
The rise of robo-advisers should come as no surprise – the FSA created an environment for them to flourish post Retail Distribution Review (RDR) – but is robo-advice the right route to take? While these platforms are not brand new (with the introduction of bank robo and niche robo we’re in fact already in the ‘Robo 2.0’ phase) there are still concerns regarding their reliability and robustness. Investors need to assess the pros and cons carefully.
Reasons not to trust a robo-adviser
A potentially major issue with robo-advisers is their lack of uniformity. There is no standardised design or programming rulebook, which means that three different platforms might categorise the same investor with varying suitability levels: one platform’s cautious could be another’s adventurous. This could cause serious problems. If someone risk-averse is incorrectly categorised as an aggressive investor, they could lose a lot more than they can afford.
It all boils down to algorithmic definitions of risk. The FCA is paying attention, but regulation is still evolving.
Also, technology is impressive, but it is by no means fool-proof – take Long Term Capital Management (LTCM) as an example. Just two decades ago, this high-profile fund, built by economics Nobel prize winning founders and reliant on systematic and algorithmic analysis, failed amid much hype.
Financial algorithms have become more sophisticated over time but many are yet to demonstrate how well they can weather extreme and unexpected market events.
When you can trust a robo-adviser
The RDR left a gap in the financial advice market that robo-advice platforms could potentially fill. Consumers with smaller amounts, unable to afford IFA fees, now have a way to access advice and if the company that owns the robo defaults, the FSCS covers the first £50,000.
The most important question a retail investor needs to ask however, is not whether they can trust the robo, but whether they can trust themselves. If users are tempted by higher rates of return associated with a more adventurous portfolio selection, then they may be shocked when the market dips and their investment plummets with it. It’s imperative users don’t engineer responses. Their lack of experience means that often they don’t understand that the greater the risk, the more volatile the portfolio.
A ‘non-advised’ digital portfolio service that is managed by battle hardened humans, rather than a machine, presents potential investors with an alternative approach which goes some way to mitigate derailment by black swan events – however, risks are still involved. How far an investor chooses to stick their neck out is their prerogative.
Or, wait…
Robo-advisers are advancing rapidly. A June 2017 report by FAMR states, “…there are approximately 100 ‘robo-models’ either already launched or in development across a broad spectrum of services”. As this new wave of robo-advisers gains ground, we’ll see niche platforms enter the market, that may be better suited to a retail investor’s demographic, beliefs and interests, or investment amount.
High street banks want their share of the pie too – ahead of plans to launch its very own robo-advice platform, NatWest unveiled a service earlier this year that allows its customers to access investment funds online through the bank. HSBC followed suit and now offers online investment advice for its customers with small savings pots.
However, the question remains, how do you get consumers to trust algorithms with their life savings? Even bigger ‘trusted’ players like UBS are struggling to find investors who are price sensitive enough to entrust investments to a cheaper robo (Juerg Zeltner, the head of UBS’s wealth management division exclaiming recently: “This is a big learning ... the real question is how do you scale it to more?”).
The answer to this trust question has been marketing – advertise heavily and spend millions on promotion. This is fine for well-funded start-ups like Moneyfarm (who recently posted an operational loss of £6.4milliom, £2million of which went on marketing) as long as the capital investment tap isn’t turned off, but as more players, both big and small, enter the market, investment could flow away from established robo-advisers, towards new entrants instead.
Either way, increased competition will push margins down and likely make it cheaper for investors. Potentially a watershed moment worth waiting for if you’re looking for the best possible wealth management deal.
Research carried out by Altodigital has revealed that two third (66%) of SMB IT executives admit that that they have significant IT challenges within their business. In comparison, an overwhelming 97% of those IT bosses working in larger organisations indicated having ongoing issues, suggesting very different attitudes to technology between small and larger firms.
The research also explored the differing priorities of these two business types and found that ‘maintaining existing IT infrastructure’ was a top priority for 40% of corporates while 32% unsurprisingly outlining ‘security and compliance’ as a top concern. It was also interesting to note that 25% of respondents listed ‘finding skilled staff’ as a big worry.
In terms of SMB organisations, 26% of IT executives listed ‘security and compliance’ as a major concern while budgetary constraints was close behind with 23%, something that was scarcely acknowledged by corporate respondents.
The poll organised by the office technology solutions provider, Altodigital was formed of two individual studies, one that polled 100 IT decision makers from corporate UK companies with over 500 employees while the second survey included firms with less than 500 employees.
Alistair Millar, Group Marketing Manager at Altodigital said: “It is worrying that such a high proportion of SMB IT Executives feel they do not have any IT issues, because it is likely that they are missing a trick, especially when the issue or security and compliance is something that requires continual upgrades in technology.”
The survey also indicated cultural differences when it came to technology, with 58% of SMBs revealing that they simply didn’t see the need for a bring your own devices policy whereas 72% corporates listed it as a major concern. These contrasting opinions were also clear when it came to discussing print policies, an overwhelming 78% of SMB IT managers admitted that they had no policy in place while 57% of corporates said that they review their print strategy every year or less.
Within these results, a quarter of respondents in large firms said that their printing plan was reviewed more frequently than every six months and 15% reported once a year.
“It is very surprising to see that a large majority of SMBs fail to have a print policy in place because managed print services are widely known to provide benefits for both small and large enterprises. SMBs must consider what services might help improve business efficiency and productivity on a regular basis, this point is clearly understood by large corporations who regularly review operations such as their print strategy on a regular basis,” added Millar.
(Source: AltoDigital)
With the introduction of blockchain technology and the implementation of the token economy, Gary McKay, CEO and founder of APPII, believes the 4th industrial revolution is about to take place, potentially in the coming year.
The industrial advances being brought about by artificial intelligence (AI), robotics, the Internet of Things (IoT) and blockchain technology will outstrip the industrial transformation of the last two centuries. It’s not an exaggeration to say that we are on the edge of the next great industrial revolution – Industry 4.0.
While the third and most recent industrial revolution reshaped our lives through digital transformation and social media, this next logical step will address the issues of complexity that still exist. Today, there are a myriad of processes that are still done manually – wasting time and money through inefficiencies and fraud. Industry 4.0 will see these processes automated and undertaken by digital systems, ultimately moving towards a decentralised worldview, where value is shared across systems rather than being accumulated at the centre by large organisations.
One of the main technological drivers behind this coming revolution will be blockchain, cryptocurrency, and tokens. In fact, they are already beginning to disrupt a number of industries, paving the way for Industry 4.0 today.
Paving the way for Industry 4.0 today
In the finance sector, blockchain technology, cryptocurrency and AI have been instrumental in dragging the archaic industry into the 21st century. Processes that historically involved long, time-consuming human administration and processing are now streamlined, freeing up much needed time to focus on more complex cognitive tasks. For example, financial companies are now harnessing blockchain technology to process loan applications. Rather than relying on a third-party broker service to verify an individual’s identity and credit history, loan advisors can now refer to blockchains to access verified data on credit and debit histories – reducing the time and cost it takes to approve loans.
While there has understandably been a significant amount of investment from financial companies in blockchain technology which has dominated the headlines, blockchain has the potential to disrupt virtually every other third-party broker industry; from real estate, the legal profession and insurance to recruitment, art and antiquities. As such, blockchain and the cryptocurrencies and tokens that it supports, are beginning to pave the way for disruption across every single industry – ultimately becoming the keystone for Industry 4.0.
Turning investment on its head with ICOs
In the last year alone, more than $2billion has been raised towards blockchain projects via Initial Coin Offerings (ICOs) or Token Sales. Unsurprisingly, initial investment rounds and ICO funding were directed towards blockchain platforms that offered services to the finance industry. However, as the potential disruptive power of blockchain, cryptocurrency and tokens have become more apparent, capital has started to move towards platforms harnessing the technology outside the world of finance. In particular, the big players in highly competitive markets are looking to blockchain start-up platforms to give them an edge over competitors. For example, Technojobs, one of the UK’s leading recruitment jobsites, has invested in our platform, which offers blockchain-verified CVs for the first time.
Blockchain technology is fundamentally changing the way investment is made, paving the way for how we will raise and invest in companies following the fourth industrial revolution. As a means of transferring value in a decentralised way, blockchain platforms have introduced cryptocurrency and tokens, as a substitute for traditional currency like British pounds or American dollars. Since Bitcoin’s creation in 2009, over 900 different cryptocurrencies and tokens have been created.
These cryptocurrencies and tokens can be used as an exchange for value within the platform that provides them. As such, new blockchain start-ups are choosing to raise capital for developing their platforms through ICOs and Token Sales instead of following the more traditional routes of fundraising through VCs and seed funding. The ultimate aim of ICOs is to create a token model economy on the blockchain platforms that fundamentally changes the industry the start-up is trying to disrupt. Underpinned by blockchain, ICOs are predicted to have a genuinely profound impact on every sector worldwide.
This intrinsically new way of raising capital will not only become the foundation for Industry 4.0 - as a novel concept it will drive capital towards the start-ups developing platforms in these new technologies much more quickly than through traditional methods. For example, in the recruitment sector tokens could be used as a reward for organisations who verify data on CVs, or alternatively as a reward from organisations to candidates for allowing them to view their verified profiles. Ultimately this will create a mutually beneficial environment where organisations can use tokens collected from verifying CV data to view individuals’ verified CVs.
A token-based economy will fundamentally turn the existing model in recruitment on its head. The traditional means of exchanging value, heavily weighted in companies’ favour, will be democratised, shifting the distribution of benefit in business models to the edge (i.e. to candidates and employers) instead of accumulating in the middle.
It would be remiss to not acknowledge that cryptocurrency and ICOs have come under fire in recent times, with crypto-sceptics highlighting the risks associated with a young and, at times, volatile market. While the global crypto market has been subject to short spikes, sophisticated investors should be looking at this new technology with long-term value in mind.
We are already staring at the upcoming horizon of Industry 4.0, and investment and development in blockchain technology and cryptocurrencies will bring this new revolution about in record time. Moving towards decentralised autonomous networks will streamline all aspects of life, freeing up precious time and capital to focus on the more complex, cognitive tasks that we have little time to dedicate towards when caught up in lengthy manual processes. Harnessing blockchain to create a token economy will fundamentally underpin the new world post Industry 4.0, and we are only beginning to see the tip of the ice berg when it comes to benefits.
When adopting new payment methodologies, banks must strike a challenging balance between ease of use and access and the need to put in place stringent levels of security. With technology evolving at ever-increasing rates, it’s increasingly difficult to keep on top of that challenge. Below Finance Monthly hears from Russell Bennett, chief technology officer at Fraedom, on this challenging balance.
Banks first need to put in place an expert team with the time, resource and capability to stay ahead of the technological curve. This includes reviewing, and, where relevant, leveraging the security used on other systems and devices that support access into banking systems. Such a team will, for example, need to look at the latest apps and smartphone devices, where fingerprint authentication is now the norm and rapidly giving way to the latest facial recognition functionality.
Indeed, it is likely that future authentication techniques used on state-of-the-art mobile devices will drive ease-of-use further, again without compromising security, while individual apps are increasingly able to make seamless use of that main device functionality.
This opens up great potential for banks to start working closely with software companies to develop their own capabilities that leverage these types of security checks. If they focus on a partnership-driven approach, banks will be better able to make active use of biometric and multifactor authentication controls, effectively provided by the leading consumer technology companies that are investing billions in latest, greatest smartphones.
Opportunities for Corporate Cards
This struggle to find a balance between security and convenience is however, not just about how the banks interact directly with their retail customers. We are witnessing it increasingly impacting the wider banking ecosystem, including across the commercial banking sector. The ability for business users to strike a better balance between convenience and security in the way they use bank-provided corporate cards is a case in point.
We have already seen that consumer payment methods using biometric authentication are becoming increasingly mainstream – and that provides an opportunity for banks. Extending this functionality into the corporate card arena has the potential to make the commercial payments process more seamless and secure. Mobile wallets, sometime known as e-wallets, that defer to the individual’s personal attributes to make secure payments on these cards, whether authenticated by phone or by selfie, offer one route forward. There are still challenges ahead before the above becomes a commercial reality though.
First, these wallets currently relate largely to in-person, point of sale payments. For larger, corporate card use cases such as settling invoices in the thousands, the most common medium remains online or over the phone.
Second, there are issues around tethering the card both to the employee’s phone and the employee. The 2016 Gartner Personal Technologies Study, which polled 9,592 respondents in the US, the UK and Australia revealed that most smartphones used in the workplace were personally owned devices. Only 23 percent of employees surveyed were given corporate-issued smartphones.
Yet the benefits of e-wallet-based cards in terms of convenience and speed and ease of use, and the potential that they give the businesses offering them to establish competitive edge are such that they have great future potential.
One approach is to build a bridge to the fully e-wallet based card: a hybrid solution that serves to meet a current market need and effectively paves the way for these kinds of cards to become ubiquitous. There are grounds for optimism here with innovations continuing to emerge bringing us closer to the elusive convenience/security balance. MasterCard has been trialling a convenient yet secure alternative to the biometric phone option. From 2018, it expects to be able to issue standard-sized credit cards with the thumbprint scanner embedded in the card itself. The card, being thus separated from the user’s personal equipment, can remain in the business domain. There is also the opportunity to scan several fingerprints to the same card so businesses don’t need to issue multiple cards.
Of course, part of value of bringing cards into the wallet environment is ultimately the ability to replace plastic with virtual cards. The e-wallet is both a natural step away from physical plastic and another example of the delicate balancing act between consumerisation of technology and security impacting banking and the commercial payments sector today. There are clearly challenges ahead both for banks and their commercial customers in striking the right balance but with technology continuing to advance, e-wallets being a case in point, and the financial sector showing a growing focus on these areas, we are getting ever closer to equilibrium.
Here discussing the increased adoption of connected devices and sensors in banking and how IoT enables banks to respond in real-time to customer needs, is Neil Bramley, B2B Client Solutions Business Unit Director at Toshiba Northern Europe.
Internet of Things (IoT) technology is on the rise both at home and in the workplace, and will soon significantly impact and empower the way we live and work. To date, such solutions have arguably made a bigger splash in the consumer landscape than B2B, with connected fridges, cars and thermostats all resonating with the public. As consumers awareness of IoT grows, so too does their expectation that it will blend into their everyday consumer experience. No business is seeing this effect more than those in the financial industry as more IoT technology incorporates payment capabilities.
The case for financial organisations to introduce IoT into their internal infrastructure and consumer facing technology capabilities is gaining in strength, with solutions providers continuing to innovate and push the boundaries of what such technologies can achieve. The whole concept of IoT is that it can be anything organisations want and need it to be – all it takes is the right app or piece of code to be built around it. At this stage in its adoption, many IT managers in financial organisations don’t necessarily understand the potential of IoT. Given the personal, and often sensitive, nature of the data these organisations manage a fear of data and network security persists, particularly in the wake of recent global cyber-attacks. However, such concerns aren’t projected to hold the market back for long, with IDC research predicting that global spending on IoT technologies is forecast to reach nearly $1.4 trillion by 2021.
The scope of IoT solutions is evolving to fuel this demand. Whereas stationary M2M (machine to machine) solutions, such as sensors, kick-started the connected device market and remain popular, mobile IoT solutions provide vast opportunities across numerous sectors – helping to improve workflows, enhance interactions with staff and customers, and even improve the safety of workers. Key to this development is the introduction of peripherals to the workplace, which can be partnered with mobile gateway solutions to ensure cross-machine collaboration.
One natural example lies within banking. The increased adoption of connected devices and sensors will bring increasingly rich data to banks about their customers, allowing them to provide more personalised products and services, even enabling them to respond in real-time to customer needs. As connected technology becomes imbedded in our environments, and the connected home and smart city market matures, banks could provide real-time spending advice. For example if you have overspent on your budget that month your bank might suggest you avoid your usual Friday lunchtime treat.
Elsewhere, peripherals like smart glasses (wearable display technology) can ensure a hands-free solution to workers across a range of roles. Augmented Reality could give insurance sales teams a in-depth view of customers homes geographical locations and provide them with a better analysis of potential risks in order to give them a better deal, or provide a hands free look at a customers financial history enabling the creation of bespoke products and services.
Beyond devices themselves, operating systems will also play a crucial role in the progression of IoT in the financial services world. Currently the focus is very much on writing software for iOS and Android – a smartphone-onus which again signifies the advanced stage of the consumer market. Yet the natural progression is for solutions providers to expand their focus to incorporate Windows 10 – this will serve as a catalyst in creating a greater number of solutions designed for professional use, which in turn will inspire more financial organisations to turn their attention to developing IoT coding and apps to address different business needs.
It is only a matter of time until IoT becomes a major enabler for organisations across the finance industry – with such game-changing potential, it’s important for IT managers to get ahead of the curve to understand how these technologies can empower their business.
Farida Gibbs, CEO of Gibbs Hybrid, discusses the pressures on banks to update their processes with new technology.
Following the first increase in interest rates in ten years, banks have been under extreme pressure to pass on profits to customers. This pressure comes from a growingly savvy customer base educated in its financial rights by easier access to online news and financial advice.
Technology is changing the nature of banking much more directly. Customers now interact with their banks far beyond the branch, through online banking on computers and mobile devices, communicating with chat bots as well as real personnel, and using a variety of apps to do this. They expect their financial services providers to keep up with the pace of this change.
In January 2018 the Second Payment Services Directive will come into play, meaning banks will have to share their data with other rival financial providers and aggregator sites, and allow third-party developers into the back-end of their processes, taking payments directly without the intercession of the bank – all with the consent of the customer, of course.
In other words, aggregators and financial services providers will have access to customer’s data and be able to show them how best to spend their money, and which providers to entrust it with. Tech giants like Facebook and Amazon will be able to make payments directly, without the bank’s help.
With competition more clear and fluid, and money much easier to move around between providers, established banks will be greatly exposed to competition from FinTechs and new rival financial services companies.
A large number of new, agile FinTech challengers have emerged to challenge more established banks in recent years. Competing on grounds of personalised service, low rates, and the speed and convenience provided by taking the upmost advantage of new technology, these new providers threaten to take away the established customer bases of larger banks.
The key advantage banks have over these new challengers is their large, established customer bases. At the moment, these are relatively immobile, with customer account switching reaching a new low in September this year.
But as regulations like PSD2 begin to take effect, banks will face mounting competition from FinTech challengers, as switching becomes easier and the reasons to change providers for a better deal will become clearer. Many banks currently rely on outdated legacy systems that cannot support the pace of change required by this.
To deal with this, an increasing number of banks are turning to cloud-migration programmes, shifting their existing processes from these legacy systems to the cloud. This gives them the agility and efficiency to stay up to speed with the constantly changing innovations in technology.
But to do this they need digital expertise, in order to ease this kind of transition in an informed way. This means that more banks are turning to partnerships with outside experts, to help them modernise in the most efficient way possible.
However, although one in three people in the UK use a mobile banking app, banks should not respond to this drive for modernisation by compromising on in-person service. Many banks have seen the increased use of app-based banking as a sign to cut back on branches, with a record number of 762 closures this year in the UK.
In fact, moving processes to the cloud offers the chance to free up staff to focus on more in-person services; the other key advantage established banks hold over their FinTech competitors. This presence of real staff lends credibility that FinTechs still lack. Forty-three per cent of customers who have used a FinTech service are worried about being defrauded, according to a study by Blumberg Capital.
To future-proof their businesses, banks need to juggle the best of both worlds, making the most of their inherent advantages, whilst catching up with the speed and efficiency of tech-enabled FinTechs. A variety of established banks are now turning to outside consultants to help them do this, uploading their outdated processes to the cloud to provide a more streamlined, agile service that responds to customer’s changing demands. But in using this external expertise, they must not lose sight of what their own staff can offer. Cloud programmes allow traditional providers to get the best of both worlds: not only improving the agility and convenience of their offering, but allowing them to make the most of their personal staff.
Here below MHA MacIntyre Hudson Partner, Jason Mitchell outlines the impact of the Autumn Budget for the UK’s tech sector.
Philip Hammond says a new UK high-tech business is founded every hour. He wants this changed to one every half hour in an attempt to lift the gloom over the country’s prime growth sector and support jobs of the future.
To achieve a new dawn for tech start-ups, there first needs to be an environment conducive to growth. The tech sector is reliant on access to the right talent and this has proved a real bottleneck over the past five years.
I welcome the chancellor’s vision to create skills through the biggest increase in science and innovation funding in schools for decades. There will be a training fund for maths teachers, a £600 "maths premium" for schools linked to the number of pupils taking the subject, and proposals for new maths schools. It was also positive to hear the promise of increased funding of innovation in universities, including commitment to replace European funding if necessary.
Today’s workforce also needs to be reskilled. There was mention of a new National Centre for Computing & initiatives for digital skills retraining, which clearly harks back to recommendations put forward by techUK.
The government also needed to help finance growth. It plans to unlock over £20 billion of patient capital investment to finance growth in innovative firms over 10 years through a new £2.5bn investment fund. This doubles the annual allowance for people investing in knowledge-intensive companies through Enterprise Investment Schemes (EIS) and backing overseas investment in UK venture capital through the Department for International Trade.
The planned increase in research and development expenditure credits (“RDEC”) for large companies is also great. Mr Hammond has promised to allocate a further £2.3 billion for investment in R&D and will increase RDEC from 11% to 12%. The next step, it appears, is to make everyone aware of it! Many companies currently miss out on the scheme.
He’s also proposing to introduce measures in 2019 to apply withholding tax on royalties and similar payments to “low tax jurisdictions”. It will be interesting to see these proposals set out in detail and how they will interact with existing double tax treaties. This will have a significant impact on cross border tax structuring even where significant substance, activity and risk is undertaken to support such payments from a transfer pricing perspective.
The world is "on the brink of a technological revolution" exclaimed Mr Hammond, and the UK needs to be at the forefront.
