Below Mark Boulton, Insurance Sector Lead at Fujitsu UK&I, delves into the introduction of automation and AI in the insurance sphere, touching on the future prospects of the insurance sector throughout 2018.
Insurance has always been a grudge purchase, often seen as a necessity or safety net, but not something that immediate benefit is felt from.
It will have been frustrating for many, therefore, to see that car insurance premiums have risen by 11% on average in the last year alone, according to the Association of British Insurers (ABI).
Many of us may even start to question the value we’re getting for our insurance purchases in light of such news.
The price – which is the most important factor in choosing an insurance package (A New Pace of Change, Fujitsu) – is just one element, however. Compounding this situation is the fact that people often find insurers difficult to deal with, particularly when trying to make a claim.
It’s this group of factors that demonstrate the opportunity the insurance industry has to transform itself into a more value-driven service for customers.
At the heart of any change will be technology, and two of the leading areas here are Artificial Intelligence (AI) and automation. How is technology impacting insurance for the better? There are three main areas to consider - customer experience, assessments and risk mitigation.
Personalisation
Think of going through a process for a life insurance policy. Multiple in-depth questions to taken into account age, lifestyle, and health, with an existing model applied to the answers provided.
Such models have been used for decades at some companies, resulting in off-the-shelf packages for people that do not necessarily reflect them as individuals.
Technology is helping change this. Based on any assessment and wider data analytics, automation can quickly produce more personalised experiences for the customer. This might be a payment model that suits their lifestyle or financial situation or a more nuanced insurance package to reflect their needs.
Such personalisation sit at the heart of the transformation. We’ve seen this across other industries, and it is one crucial way insurers can start to move from transactional-based relationships to value-based relationships with their customers.
Convenience and speed
It’s not just adding value of course, it’s getting the basics right. Services like Amazon Prime and Netflix have totally transformed the expectations we have of all companies when it comes to speed and convenience. We want things served to us exactly how we want them, and quickly.
Insurers have certainly made progress in recent years – for example, it is standard now for policies to be quoted and purchased online. More interestingly, however, is the use of apps and chatbots.
These give a holiday maker who may have lost their camera easy access to their policy, but also the chance to ask questions to the chatbot. Powered by AI, we can expect chatbots to play an increasingly important role in the relationship between insurers and policy holders.
Given the often complex nature of insurance policies, chatbots can be a simple way for people to get the answers they need. No need to phone customer services or wait an hour in a call queue; just direct answers delivered instantaneously.
Of course, there is still progress to be made with chatbots, but these will only get better in the years to come.
Apps and chatbots are also interesting because they both rely on and deliver vast amounts of data. The more these are used, the more they can be refined to give people services that suit them better. They fuel the personalised services.
Working together
It’s all very well talking about the benefits and transformative powers of technology, but making these a reality is something many organisations are grappling with.
Something I’ve observed in the financial services industry is the existence of distinct groups of employees. On the one hand, there are those innovation-focused, digital savvy experts who want agility, speed and flexibility. On the other hand, there are those who want to focus on the central facets of their areas products - keeping those long-standing traditions working in good order for the customer.
These two groups are naturally at odds. They often speak in different terms, work in different ways, and approach problems completely differently. Imagine the kinds of conversations that might come up with discussing emerging trends like AI and automation. It’s not easy for them to get to the place they need to.
To be able to respond to the concerns being voiced by consumers, and to harness the business agility needed to respond to market trends, insurance businesses from the c-suite down need to make a culture shift. Driving change from the top is the only way to future proof the business in a digital world that has already changed the state of play for good. We simply cannot afford to rely on the same rules.
Find your digital path now
Our ‘Fit for Digital’ survey found 98% of insurers believed their organisation had been affected by digital. A further 72% said their sector would fundamentally change in the next four years.
Change is inevitable. And the technology that will enable that change - including AI and automation – is here today. Insurers must find the cultural harmony to embrace new digital services and products, without losing the heart of what they already do well.
The next few years will see some insurers thrive and others struggle. To be a thriver, it’s vital to the right digital path now.
Anticipation, scepticism and fear are holding more Brits than Americans back from embracing Artificial Intelligence (AI) in the workplace, according to a new study by CITE Research for SugarCRM.
The research on business executives in the US and UK reveals that that Brits are lagging behind when it comes to adopting Artificial Intelligence (AI) technologies into their work and personal lives. The survey reveals that 47% of Brits are currently using technology powered by AI in the workplace, compared with 55% of Americans. This trend transcends into people’s personal lives, with 62% of Brits and 64% of American’s using AI for non-work-related tasks, such as Amazon Alexa or Google Home.
The research also highlighted that when looking ahead, Brits are less open to embracing AI in the future. 69% of American respondents plan to deploy AI in the next two years, compared to 57% in the UK. Brits were twice as likely not to ever want to use AI, with one in five respondents (20%) opposing the technology, compared with 1 in 10 Americans.
Top concerns about AI on both sides of the Atlantic revolve around trusting the technology. More than half of respondents (52%) worry about data security, with 30% saying it is their top concern. Another 40% said they fear AI technology will make errors, and 41% fear losing control over the data. While 30% said they fear job loss because of AI, only 12% list it as their top concern.
When it came to the applications for AI in the world of work, US participants were more likely than Brits to say they would want AI to help with communication with customers (54% vs. 42% of Brits) or planning their day (46% vs. 35%). Automating data entry was the most popular task across the board for AI, with more than half (53%) believing it would help in their organisation, followed by gathering information on the internet (51%).
“The results of CITE Research’s survey reflect the industry's view on “the cloud” “big data” and other disruptive technologies over the years, said Clint Oram, CMO and co-founder at SugarCRM.
“You have a group that is ready to jump in with both feet and a group of naysayers who are absolutely against the technology. The rest of us are in the middle. Many have heard all the hype and are intrigued, but they would like some assurances that the positives will outweigh the negatives before they are ready to start spending money on AI tools.
“It’s interesting to see how attitudes differ across the Atlantic and that there is more reluctance from Brits in how AI can be used in their work. The technology offers the potential to reduce monotonous aspects of our working lives but there is a need to be realistic on its capabilities. It won’t replace people entirely and there is still a need for human interaction.”
In general, the survey showed that younger participants, those 34 or younger, were more excited and less fearful of AI. Younger participants were more likely to say their organisation will utilise it in the future (70%). Those 55 or older were more likely to worry about being overwhelmed with features they do not need (55% list this as a concern compared to 24% of those aged 18-54).
For the complete survey report, please visit here.
(Source: SugarCRM)
With just six months until GDPR hits Europe hard, Finance Monthly has heard from Nigel Edwards, SVP of Insurance Europe & Head of UK at EXL Service, on the threat GDPR poses to emerging technologies, fintech, regtech and so forth.
For insurers, the General Data Protection Regulation (GDPR) promises to be a difficult hurdle to overcome without the right strategic approach and expertise. Businesses in the insurance industry are some of the most vulnerable to being caught wrong-footed by the incoming GDPR rules because of the data rich environment they naturally operate in. The widespread use of third party administrators means that data flows can be difficult to control in a way that keeps firms compliant with the new regulation. Another question that is high up on the agenda for industry decision-makers is the effect that GDPR will have on future technology adoption.
In recent years, the insurance sector has undergone an unparalleled degree of technological disruption. Telematics technology, for example, has dramatically changed how insurers price policies by gathering data on individuals’ driving habits and behaviour. The use of social media analytics is making the claims process more straight forward and the use of technologies such as geo-location is creating better conditions for underwriters to evaluate pools of risk. One thing that these technologies have in common is their reliance on large amounts of collected customer data to function effectively. Will these techniques be hamstrung by the demands placed on companies under the GDPR regime?
Assessing the data ecosystem
For the most part, GDPR will not force insurers to curtail technology adoption, so long as precautionary steps are taken to better manage the data inputs and outputs on which new technologies rely. All of the existing InsurTech solutions that are on the market or close to arriving will remain options for brokers and underwriters to incorporate into their strategic spend - but only if the underlying infrastructure is in place to enable the rigorous management of client data.
Perhaps one of the most onerous demands placed on businesses due to GDPR is the so-called ‘right to be forgotten,’ which will grant EU residents the right in some places to request a full removal of their personal details from any company’s systems. For many insurance firms, of which a large proportion will have been trading since the start of the age of digitisation, large caches of over 30 years’ worth of client data have been accumulated. This is data which may not be in a single standardised format and spread across siloes in multiple locations – posing a considerable challenge when it comes to compliance to right to be forgotten guidelines.
Aligning with a long-term strategy
For new technologies to remain viable, steps must be taken to ensure that the core infrastructure upon which data is stored and transferred is responsive to frequent requests for deletion or transfer. This may result in the overhaul of legacy IT systems which are not fit for purpose and a more selective retention of customer information, as opposed to a policy which swallows up large pools of data indiscriminately.
Whilst this may entail some capital outlay, the decision to update legacy systems should be taken in the context of a new stance towards regulatory compliance. The GDPR is just one regulatory hurdle that must be overcome by insurers next year, but it can serve as a starting block for a more agile approach to data handling – especially for firms who have historically neglected the task. In the long term, laying the foundations for new technology adoption will not only facilitate better business agility but also a more intuitive approach when interacting with clients and their data.
For our Professional Excellence feature, this month we also reached out to John F. Rizzo - the President and Chief Operating Officer of Deem. He leads the vision and strategy of the company and encourages his team to be innovative rapidly. Here, he introduces us to Deem and tells us about the company’s love for innovation.
Could you explain the concept behind Deem?
Deem is driving to change the way business travel costs are controlled by designing a platform to ensure that employees spend as little as possible to achieve the results they need. This is in contrast to the travel market in general, which is dominated by one player who has grown complacent and focuses on controlling travel costs at the expense report stage, after the trip is complete and the capital has been spent. The world of corporate travel is eager for an alternative that listens and responds fast and is on the side of the traveler, the travel manager and the CFO - all of which are concerned about productivity and cost control. The timing is right for a company like Deem that is tech-smart, market-savvy and hungry.
Our approach is All Business. No Trip. That means that the most difficult part of any business trip is too often the trip itself and this is not what travelling is supposed to be like. Deem makes it painless for the traveler to get down to business without distraction, simpler for the travel manager and management company to keep track of all the moving parts, and easier for partners to get the information they need to stay competitive. The Deem Work Fource platform is designed for the entire business travel ecosystem, using machine learning, artificial intelligence and predictive analytics. Deem’s suite of tools range from a dynamic traveler booking platform, travel manager cost controls, travel agency service technology and supplier revenue opportunities, including the world’s largest car service affiliate network and operator solutions. We have more than 35,000 corporate customers in 61 countries, speaking 15+ languages - including the world’s largest travel management companies. Our headquarters is in San Francisco, but we have people located all around the globe.
What makes the company unique?
Deem is the only company in the corporate travel space that considers each of the constituents in corporate travel – the traveller, the travel manager, the travel management company and the supplier. Most companies focus on just one at the expense of others. The reason why this is important is because if travellers book off platform, costs run wild (studies have shown 15% more costs if booked off a platform), travellers have more hassles, which makes them less productive during the trip. This results in travel managers not being able to control costs and travel management companies not being able to service travellers when things aren’t going well on the trip (i.e. flight delays, overbooked hotels, etc.). At Deem, we create solutions that make life easier for the entire travel ecosystem, saving time, money and hassle.
What would you say are the company’s top priorities towards its clients?
Our main priority is to build dynamic and personalized solutions for the entire travel ecosystem and make every business trip painless. We have created a booking solution so intuitive that it makes the traditional travel and expense process obsolete – our artificial intelligence and machine learning systems do it all for you!
What challenges would you say you and the firm encounter on a regular basis?
At Deem, we are always pushing the pace of innovation. We’re trying to build technologies that don’t exist – there’s a certain level of resistance when you move at this speed.
Another challenge that we face is connected to helping CFO’s think differently about solving cost problems at the front end of the travel process; rather than at final expense report stage when it’s too late.
How are these challenges set to change, in conjunction with the advent of AI and machine learning and the potential future needs of clients?
Thus far, we have been actively incorporating AI into our products over the past year to bring that technology to market today. However, we will need to innovate faster and better, in order to stay ahead of our competitors.
What has been Deem’s biggest achievement in the past year or so?
Releasing our newest platform Deem Work Fource – a seamless travel management and booking platform, is definitely one of our major achievements.
We are also very proud of introducing Intelligent Attach for hotels and car service. This solution increases the likelihood of travelers booking a hotel or car service with their air. This helps significantly with compliance and duty of care (knowing where your employees are is more important in a world that’s increasingly affect by terrorism and upheaval on a global scale) and streamlines the traveler itinerary.
Can you tell us a bit about Deem’s Open Expense solution?
Deem’s Open Expense solution allows us to integrate seamlessly with any expense provider on the market, including ChromeRiver, and others. If a travel management company or corporation is looking for a best in breed solution to their travel management, this allows them to choose exactly the right provider in every case, rather than being forced into using a subpar travel tool that comes along with their expense provider creating travel that's more expensive and includes more hassle.
What’s your outlook for the future of the company?
We’re growing fast, signing new customers who are encouraging us to do more, launching new products and adding global reach. We are hugely optimistic about the future!
The World Economic Forum recently launched its Global Platform for Geostrategic Collaboration to bring together leading policy research institutions (think tanks) to engage the global public on geostrategic challenges in a multipolar world.
The platform aims to fill the urgent need for leaders and experts to understand the world through the eyes of their counterparts in other regions and find better ways to strengthen cooperation.
Within this mission, the forum’s platform will bring together insurers, tech firms and governments together to find ways to tackle risks from new technology such as drones and driverless cars.
Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland, had this to say:
“The impact that technology has on our life goes far beyond convenience and speed. With new capabilities come a whole new range of responsibilities, and it is time insurers rethink their approach towards new products, such as drones and driverless cars, and the risks they bring to the table. Assigning liability becomes more and more of a grey area as complex technologies emerge, blurring the lines between the decision-maker and the enabler.
“It is therefore paramount insurers understand these changes are transformational for the entire industry, and old rules cannot be applied to these emerging risks. The way we collect and share data, and the impact of IoT for instance has the potential to revolutionise the industry. It can also offer a great opportunity to scale up to those insurance providers who will seize the moment.
“This represents an important state of change. We will need to learn to co-exist with machines, and both the risk factor and future changes will have to accommodate this. Incorporating new technologies such as driverless cars will not happen overnight – a carefully thought out set of rules of integration needs to be in place. Of course, this will add risk and insurance complexity.
“Ultimately, new technologies represent a business change for the better; revolutionising not only the way in which an insurance organisation company works but the services they can provide to customers by embracing a future in a digital world.”
Jumping into a big company merger can be daunting, and while legal and financial steps take place, actual company operations, staff and systems are also a massive part of the merger. Here Ian Currie, Director of EMEA business development, Dell Boomi walks Finance Monthly through some key considerations to make in the internal merger process.
Merger and acquisition (M&A) activity is booming. One thing is for certain there are a number of considerations business leaders need to take before embarking on a merger or acquisition. In particular, in the current political and economic climate, it is critical for investors to analyse all aspects of the company in question – from its value to customers, its business model and growth plans, all the way through to its existing IT infrastructure.
Digital or die
In today’s digital age, ensuring that IT not only works, but enables and drives business performance has never been more important in a merger or acquisition. A slick, digital-first approach ultimately sets one company apart from the competition.
Failure to get digital right can have a disastrous impact for any company. New players in the industry have been designed with a ‘data-first’ approach and are agile and flexible enough to meet customer expectations. An inability for legacy businesses to digitally transform and adapt at speed - or at least faster than the competition - is, therefore, one of the main reasons businesses fail. In fact, two-thirds of executives predicting that 200 Fortune 500 companies will no longer exist in 10 years’ time due to digital disruption.
With this in mind, and as the world becomes increasingly reliant on the digital economy, it is clear that IT should not be an after-thought when considering an acquisition.
However, with some many apps across an organisation and with huge amounts of data sitting in various siloed systems, IT in M&A can be incredibly challenging. Coupling this with the size, scale and complexity of any takeover or merger, how can businesses ensure they are set up for success?
Merging not displacing
Following the completion of a merger, a company’s CEO will typically request the CIO to just ‘combine the IT systems’. This often involves a painfully long procedure in which all data, applications and systems are forced into the incumbents systems. By not necessarily taking into account the complexity and hurdles that must be overcome, these efforts often result in wasted time, lost efficiency and reduced performance.
What’s more, making this change also typically forces the acquired company to alter its business model, potentially altering the aspects of the business that made it such an attractive proposition in the first place. This mindset of one company, essentially, displacing another must change.
A merger shouldn’t be the prerequisite to changing how a business works - after all, they wouldn’t be making the acquisition if the business model needed change. Businesses, therefore, need to consider what each company can bring to the party. For example, while a firm can buy the incumbent’s immediate revenue, it cannot maintain and strengthen its existing customer relationships without real-time, accurate and intuitive business intelligence to ensure its communications with customers and prospects are contextually relevant.
By having a clear understanding of the digital landscape, executives can make smart decisions for new models of working, whereby IT can enhance operations rather than hindering them.
Integration is integral
Making an acquisition should enable firms to ‘buy’ immediate revenue and customer opportunities, but without the aid of business intelligence, companies may struggle to build on, or even, maintain customer relationships. After all, it is widely accepted that the easiest way to grow a company is to cross-sell and upsell to its existing customer base.
However, with customer data in silos, organisations cannot keep track of what information their teams are putting in front of them and how the relationship is being maintained. Without this knowledge, relationships can be weakened or even finalised. With dedicated technology to integrate data, apps and systems quickly and efficiently, companies can quickly regain control, ensuring all the dots are joined up.
Integration solutions prove invaluable here. They provide a fast and flexible user experience, centralising the creation, maintenance and updating of integrations through simple drag-and-drop interfaces that eliminate the need for coding - bringing both sets of date, apps and systems together at speed and with ease.
Only by ensuring processes, applications and data can be integrated quickly and effectively can companies truly benefit from their newly merged firms. If the predictions are correct and more companies look to merge in the coming months, it will be critical for businesses to look to integration solution to join the dots and set themselves up for success.
77% of UK businesses are aware of fintech products and services and two-thirds (65%) have adopted at least one fintech application, with a fifth (19%) taking on four. These adopters reported saving (on average) over £5,500 a year as result of using the fintech products and services.
Interestingly, a tenth (11%) reported using bitcoins or other cryptocurrencies at some point in the past year in processing payments. Whilst the clear majority (89%) have not used cryptocurrencies, a fifth (21%) of these businesses expect these currencies to feature in their payment transactions over the next 12 months.
Businesses reported using fintech products and services for banking transactions (23%) and foreign exchange services (16%). Meanwhile, one in four (24%) reported using cloud-based software for their accountancy functions and a third (32%) used online lenders for business loans or invoice finance. Only 2% of businesses are using insurtech (insurance technology) services.
Bobby Lane, partner at accountancy firm SSH LLP, commented: “Most of our clients are now using cloud-based solutions and automating many of their routine processes. This means that I have more time to focus on advising my clients on strategic matters. Also, it’s now far easier for us to use fintech services because the ability to integrate with these new systems has opened up huge opportunities for improving processes.”
Business leaders are drawn to fintech because it saves time and money (56%) whilst a third (34%) were impressed by the user experience. Interestingly, a quarter (23%) said fintech’s were more transparent on fees and provided a better customer service.
Jerry Anderson, Managing Director at wedding rings company Allied Gold Ltd, commented: We’re a third-generation family business, I have adopted fintech across the business from our accounting to our banking services. The user experience and service is far superior to what is available on the high street.”
Anil Stocker, CEO and co-founder of MarketInvoice commented: “The expansion of tech-driven digital services has been remarkable over the past 5 years. We know that consumers have been adopting tech applications into all parts of their lives, but our research shows that now UK businesses are also becoming tech-savvy.”
“Fintech applications are revolutionising the way business is being done from how employees report their expenses to the way businesses report their financial performance. Entrepreneurs always seek out the best means to drive their businesses and clearly fintech products and services are becoming a stable part of this approach.”
It’s not only business processes that are benefitting from fintech adoption. Companies are using fintech to engage staff. 62% of businesses use fintech adoptions for staff to report expenses (i.e. Expensify) and for payslips automation. A further 23% are using online pre-paid cards (i.e. Revolut) in allocating budgets to teams.
1 Based on FSB statistics show there are 5.5m businesses in the UK, of which 1.3m are employing businesses. The £4.6b is achieved by multiplying 65% of 1.3m businesses by £5,500 (the average annual savings by adopting fintech services).
2 Results are from a MarketInvoice survey of 3,482 UK businesses conducted in August/September 2017. Respondents were manager, director and C-level post holders. The survey was conducted online and by e-mail.
(Source: MarketInvoice)
Richard Meirion-Williams, Head of Financial Services at BJSS discusses how banks can counteract the threat provided by Google, Apple, Facebook and Amazon (GAFA).
It wasn’t long ago that bank branches used to hold personal, trusted relationships with their local customers. However, since the rise of digital banking and the decline of the branch, relationships between bank provider and customer have weakened. While the financial institutions are under pressure to keep up with digital transformation, at the same time demand for a personalised customer experience is high on the banking agenda.
Google, Apple, Facebook and Amazon, the major technology power players, known as GAFA, are transforming the digital banking landscape as we know it. With a huge pool of customer data at their fingertips, GAFA’s move into financial services is simply a natural extension of their current offering. When you consider the vast amount of data that these tech giants can leverage across social media, mobile, customer purchase information and mapping data, GAFA has the ability to provide a highly personalised financial service experience.
For banks to remain central in the lives of consumers, they must provide consistent and fulfilling customer experiences across the digital and physical environment. It’s not just about having access to customers credit or debit accounts, but also a greater/wider insight into their individual customers.
But time is of the essence. Amazon, Apple, Google, Intuit and PayPal have already formed a coalition called Financial Innovation Now to enhance innovation in the financial industry to satisfy the customer need for convenience. The key for traditional financial providers is to act quickly and respond to emerging digital disruptors like GAFA. Banks need to focus on evolving their business models and developing new revenue streams.
4 steps to challenge the GAFA force
Client on-boarding: Banks need to maintain their competitive differentiation and make products available immediately. Recently banks have focused on improving the front-end process. But what about the back-end? By digitising the full spectrum banks can reap the rewards of full end-to-end capabilities. This will mean customers opening an account can get started up in minutes after completing an online application. Making changes to the digital process will also help improve the processes which co-exist in physical branches.
Personalised services and partnering for suppliers and customers: Customer centricity should be at the heart of every business. Banks need to create personalised services to deliver their products using an agile approach. This can be achieved either through the bank or a third-party.
To meet consumer demand for convenience and choice, banks should also look to offer customers “lifestyle” services that can adapt in real-time to fulfil the everyday needs of the banking user. Not only will this help multiply customer interactions but will also help generate new revenue streams.
Leverage Consumers data: Extrapolate customer insights from the vast amount of structured and unstructured customer data using Artificial Intelligence, NLP and cognitive computing. The customer financial information can be leveraged to create market intelligence and to generate new revenue streams.
Create an ecosystem: Banks should take advantage of open environments and create new ecosystems. This could be offering external or white-labelling banking services through open APIs and new partnership models with innovative fintechs or working alongside GAFA. Banks need to develop new products and services on distributed ledgers for transactional access on a continual basis and receive data and events from third parties like Amazon or Apple who can distribute and integrate their products in a broader business environment.
This approach will help counter the GAFA threat and create greater cross and upselling opportunities, along with building customer acquisition, retention and cost optimisation, transforming the cost-to-income ratio from the current average of 63% to hopefully less than 50%*. It is critical for banks to think innovatively and act quickly, otherwise they will become a victim of the GAFA dominance which has already infiltrated other industries.
*Calculation made based on reviewing the published accounts of a number of banks.
Google made several jokes about Apple and the new iPhone at its event to show the Pixel 2. They took aim at Apple's storage problems and its perceived aloofness.
Keith Bedell-Pearce, Chairman of 4D Data Centres, here looks at what’s hot in savings and investment FinTech and makes six forecasts for the future.
Financial technology, an ugly duckling with modest beginnings in the back offices of fund management and insurance companies, has now emerged as the black swan called FinTech.
Covering everything financial from pay-as-you-drive insurance (and, scarier, pay-how-you-drive) to crypto-currencies, FinTech is now one of the hottest properties for VCs from Silicon Valley to Shoreditch’s Tech City.
FinTech is not just a single disruptive technology but an entire range of digital processes that are set to transform the historically staid world of financial services.
There are three aspects of FinTech that promise to be disruptive game changers in the UK savings and investment market. Here’s an overview of what that market looks like:
Because of regulation that somewhat ironically came in on the heels of the deregulation of UK financial markets known as Big Bang 30 years ago, there are now high barriers to entry into the UK savings and investment market in terms of increasingly tough and rigorous regulation of the conduct of financial services businesses. This is coupled with equally rigorous capital adequacy requirements.
Big Bang brought about enormous change in how business in the City was done but in an area where God has always been on the side of the big battalions, after some innovation in the late 80s and early 90s, in the last 20 years there has been little real innovation. Product-driven marketing is still the rule in practice despite every provider protesting that the customer comes first. All this is now going to change.
Big players collaborate with FinTech start-ups
The first driver for change is the realisation of incumbent players that almost everything in their store cupboards is past its sell-by date. The nearly complete adoption of digital technology by everyone who has money to save and invest (and lots of people who don't but would like to) means that if the incumbents don't adopt a new approach, they will lose their share of the most profitable sector of the UK economy. The next generation of savers, today’s Millennials, don't have the money to save but when they do, they will expect to manage their money on a hand-held device and will naturally gravitate to the providers who will give them the app to do this.
Although they wouldn’t admit it publicly, many of the big players in the savings and investment market now recognise that they have neither the in-house culture nor the expertise to drive the revolution in the way they run their businesses required to continue to be a market leader in the FinTech digital age.
The answer for the more innovative of these big players is to enter into collaborative arrangements with FinTech start-ups and specialist FinTech consultancies that do have the vision of innovative, low operational cost, customer-focused offerings. Examples are BNP Paribas linking its own Luxembourg-based incubator with ecosystem players Partech Shaker and Paris-based NUMA. Deutsche Bank has a partnership with startupbootcamp FinTech in New York. This is a trend with growing momentum. There seems to be more start-up link-ups and partnerships involving product providers in continental Europe and the US than here in the UK even though many of the start-ups and specialist FinTech consultancies involved are based in the UK.
For the start-up, such partnerships offer a slice of the main action which would be out of reach because of a lack of capital and regulatory know-how.
Blockchain morphs into DLT
The second major driver for change is the almost universal attempts of the world's major banks to harness the huge potential of blockchain technology. Except they no longer call it “blockchain” (presumably because of its association with crypto-currencies) but the much more respectable name of “Distributed Ledger Technology” or “DLT”. Such is the interest in the revolutionary potential of DLT, a global consortium of major banks has been formed in what is called the R3 DLT initiative.
Leaving on one side bitcoin, the original key application for DLT in FinTech was seen as so-called “smart contracts” focused on the front end of transactions in securities markets but it soon became clear that DLT could have relevance to the entire delivery chain of both conventional banking and the savings and investment market. For example, slow and inefficient back office functionality could be replaced by DLT- based processes resulting in major reductions in cost. This applies to fund management businesses as well as banks.
The defining characteristic of DLT is its inherent security of its self-reconciling, immutable distributed databases which also counters targeted cyberattacks and fraud on centralised digital ledgers. Another plus point is it operates in near-real time.
As well as the R3 DLT initiative, most of the major banks in the developed economies have major DLT projects. Some are now moving from the proof of concept phase to practical implementation. Examples are Calastone, a global funds transaction network, with its first phase proof of concept completed in June 2017 and BBVA who claims “first real life implementation” of Ripple’s DLT system.
DLT has the potential to bring about a revolution in the savings and investment market and many other areas of commercial activity as significant as the invention of the world wide web.
Open API the engine of change
The third FinTech driver for change is the Linux-based open Application Programming Interface, generally known as “Open API”, which enables third-party access to banks’ customer data. For the banks, this could be an opportunity to monetise their customer data although there is resistance from some banks, particularly in the US, on the grounds of security and confidentiality.
The technology will enable potential customers to access third-party services within the banking ecosystem. There would also be an opportunity for banks to provide white label offerings to third-party product providers and distributors to access the banks’ customer data.
A UK Open Banking Working Group has been created to facilitate open API. The Treasury is apparently supportive of this innovation and said it would legislate “if necessary”. The working group states “Open Banking will mean reliable, personalised financial advice, tailored to your particular circumstances, delivered securely and confidentially”. At present, giving advice with these characteristics involves long (and therefore costly) fact-finds and this process in practice is a major barrier in the UK to the seamless delivery of online savings, investment and pensions products. If Open Banking delivers what it promises, the effect on both product design and delivery will be as far reaching as the impact of Big Bang on the City 30 years ago.
These are already some implemented examples of open API such as (perhaps not surprisingly) Silicon Valley Bank’s open banking platform “Banking as a Service” and the German online bank, Fidor. There are a lot more known to be in the pipeline and for once, this a technology where Europe might have the edge on the US.
Six forecasts for the future
Our forecasts about the impact of FinTech on the savings and investment market are:
- Core savings products for asset accumulation and income streaming will continue to evolve slowly until Open ABI goes mainstream.
- Platforms will continue to play key role in selection of products and client retention with DLT progressively, enhancing speed and security.
- Advice is key bottleneck in digital delivery; chatbots and robo-advice is likely to appeal to Millennials but they are not yet in the savings groove. Once they are in the groove, the killer app will be on a hand-held device.
- Technological innovation with most front-end impact will be Open ABI but full implementation is probably at least 5 years away.
- Open ABI once implemented will be a major catalyst for savings’ product innovation.
- DLT will have very significant impact on back office costs, security and customer experience and be at a bank or fund manager near to you soon.
One final bit of advice, for those who are involved in savings and investments products, marketing or distribution, now is the time to start networking with the FinTech geeks. They hold the key to the future of this fundamentally important part of the UK economy.
Ethos Group is one of the largest independent, privately owned and fastest growing Unified Communications businesses in the UK. Headquartered in the City of London, the specialist provider of managed print, telecommunications and IT operates in 26 countries, partnering with the leading document and telecommunications solutions providers.
Paul Norris, the owner and Chairman of the Ethos Group of Companies, spoke to Katina Hristova about the Group’s recent achievements and the adventure that running Ethos has been thus far.
What has been happening with Ethos since we last spoke in October 2016? Are there any exciting projects or achievements that you’d like to share with us?
We'd just acquired LGS when we last spoke. Since then, we've successfully integrated that business and its services into Ethos and have substantially increased our digital content management and ITS capabilities, enhancing our knowledge and share of business within advertising, creative arts and media. LGS are the best business in that space bar none - we came second to them enough times to know that. We successfully combined LGS' skills in the creative and studio space with our own EMEA MPS capabilities - traditionally our core market - which was the main reason for the acquisition and a direct consequence of this was winning a global advertising brands' MPS business and bringing another several hundred devices under management within months of the acquisition. Our combined approach actually informed and changed the clients' terms of reference and neither Ethos, nor LGS, would have won this piece of business in its own right before the acquisition. So LGS has been a real success.
In June this year, we acquired RDT Office Solutions Group Limited (“RDT”), another successful and well-established MPS business with a substantial client base, predominantly in London and Europe, which further expanded our UK and EMEA Managed Print business and brought additional services and skills into portfolio.
This was Ethos’ third major managed print acquisition within 12 months, taking our annualised print business revenues and EBITDA to around £38m and £8m respectively. This year's annualised EBITDA should be c. £10m and we will take our annual contracted annuity and EBITDA to c. £25m and £14m by the end of next year.
We made a number of structural changes to the Board and Senior Management Team, appointing a new Group CFO, and ensuring we were completely fit for purpose as a larger organisation. We're a dynamic business but it has run traditionally along clear functional lines. My own role has changed from Group Managing Director to Group Chairman, predominantly so that I can focus on strategic development and growth and Barry Matthews, who has been with me since the beginning, has moved very successfully into the role of Ethos' Managing Director.
We've been very busy and the structural changes and improvements in particular have been a real success. It's an incredibly strong SMT.
Ethos was established in 1992 and is now one of the largest independent communication solutions companies in the UK – can you tell us a bit about the company’s journey? What are some of the key challenges that you’ve been faced with? What is the motivation that has kept you going?
Ethos’ core business was originally providing Managed Print Services, but over 25 years, it has evolved and expanded considerably and we now provide our clients with a full range of managed services across their entire communications infrastructure, including: Print Solution Services & Support; Production Print; Creative Arts; Telecommunications, ITS and UC solutions; Content Management; Audio, Video & Collaboration and Security & Compliance.
The challenge has been the fun part, the technological advancements have been enormous and have been driven by - and have in turn driven - clients' requirements and expectations, keeping ahead of those, so that we can always provide our clients with the best independent contemporary advice, has meant that we've had to continually recruit and retain the best people, skills and talent - everybody says this of course, but it's a very strong team at Ethos.
Quite simply we've always challenged ourselves to constantly change and develop in order to retain our status as a market leader. Being independent and brand agnostic has helped us to genuinely fulfil clients bespoke requirements, that's one of the reasons why our client retention rate is so high; our clients trust us to give them 'best' unbiased advice and, as we've grown and diversified and added products and services to the portfolio, they've trusted us to provide additional services to them.
Doing things as well as one can and being recognised for that and working with an incredible team of talented people who take pride in doing everything to the best of their abilities is the ongoing motivation. I always tried to recruit people who were better and brighter than me. Looking around, I think I managed that!
What does a typical day look like for you as Ethos’ Group Chairman? What daily challenges do you encounter and how do you overcome them?
If there was a typical day, I'd give up. I get to think a lot more now; I'm not saying that's necessarily a good thing, but the Board runs the business day-to-day - and does so very well - so I get to concentrate on bigger and potentially more rewarding stuff; enhancements in portfolio, scoping additional services, collaboration and evaluating potential opportunities - some of these come off and get adopted, some don't. I'm also progressively spending less time in the document business and more time in the telecoms business, so that's a 'newer' challenge which I'm enjoying. But the challenges are the same for any businessman; growing the business in every way and making money in a competitive and changing environment, whilst delivering quality and value to your clients and retaining your own quality people - and your principles. As a technology business, it's amplified because technology has changed more rapidly in the last five years than it has in the last fifty - and that will be the case in the next five - so we need to continually innovate and ensure we are absolutely on the pulse. I'm very fortunate to have some incredible technical people on board to do that.
There aren't really daily challenges now, but when there is a challenge I think: 'who can I delegate that to?' Seriously, there should be someone capable of dealing with the vast majority of things that come up.
What's your best and worst business decision and why?
My worst and best business decision was setting up the telecoms business.
I knew absolutely nothing about it - had I known anything remotely close to what I know now, I'd have never done it. Consequently, I kissed a lot of expensive frogs and wasted a lot of time and money, but, because I'm pretty strong-willed, I carried on and eventually met a great guy - Matt Hill, who is now the Managing Director of that business. With his industry and specialist knowledge, ability and contacts, and our business skills and resources, the company has become a great success, it's won lots of large scale and very valuable business, more than its fair share of awards, it operates in as many countries as the document business and employs some incredibly bright people. The business is starting to do very well indeed and I've no hesitation in saying that within four years, it will be the same size as the document business. It will yet prove to be the most profitable thing I've ever done.
How do you ensure you are directing the Group in the right direction?
You can't ensure it, you just do your best and, to be honest, you make a lot of it up as you go along. I read a lot of what other people say they do, but frankly, anyone who’s telling the truth and runs a business at any level for long enough will tell you that a great deal of it is intuitive - and it should be, that's the bit you're there for. I do take it seriously, I consider the consequences of what I do, I consult the Board and SMT whenever it's appropriate and I always ask 'is it the best we can do?', 'can we do it better?', 'can we do it better than anyone else?', 'can you think of a way to do it better?'. It's my job to say 'we're going over that hill' but it's a team of people who make it happen. The skill (hope) is that there's something worth going over the hill for.
What was the best advice anyone ever gave you, and did you follow it?
Winston Churchill's: "Never, never, never give up" can't be beaten. I also remember my first boss telling me: 'Always leave something for the other guy'. If you squeeze everything from the other person, he/she is hardly likely to have your interests at heart. It was good advice.
Where does Ethos stand internationally and what are the company’s goals moving forward?
Whilst the majority of Ethos’ combined customers are headquartered in the UK, we now operate, at scale and in both the document and telecoms business, in 26 countries. This is EMEA-centric admittedly, but our coverage is expanding rapidly. We manage all of our overseas clients ourselves, so there's a direct relationship with them, if it goes wrong, we fix it.
Being a communications business means we have no excuse for being unable to seamlessly provide services cross-border, so we provide the same SLA to a client in Frankfurt say, as we do in EC2.
The engagement is different for the document business, compared to the telecoms business - far more can be done remotely with the latter - and, of course, much of the portfolio is specifically geared to remote communications, work process and improvements anyway.
Culture aside, I see no difference whatsoever in relation to a client’s physical location, our job is to provide a managed service to an agreed performance level regardless of the end point.
What motivates you most about working within the Unified Communications industry?
Change, diversity and connectivity. I'd hate to be in a static environment and the UC industry is anything but static. I'm not a technical person, so I view it all as a user - Does it work? ; What’s the benefit and improvement? ; Together with 'Can we make money from selling it?’ These are the same questions I ask when we review new products or services.
The landscape is so diverse, there's so much there that corralling it into a manageable, deliverable and interconnected suite of products and services, which are capable of - and make cohesive sense in - deploying under a single managed agreement, is an exciting challenge and you do very often see businesses get it wrong. We want to enlighten and enable our clients, not baffle them.
It also always feels 'young', like there's something new and exciting just about to happen. Whilst no business is recession proof and there have been tough challenges for over the last several years, the industry is very resilient - being largely annuity-based clearly helps - but it's innovative and precipitates change in perceptions and needs, which drive desires and behaviours – something that you really need when you're trying to sell things.
If I hadn't fallen into it by chance, I'd claim it was an inspired choice.
Given the speed and complexity at which the communication needs of your clients are changing, is there anything that's particularly on your agenda at the moment?
A lot. Compliance and security are increasingly becoming a first point of engagement with clients within both the document and telecoms business. We're headquartered in the City of London, so we're well used to working with clients in relation to their regulatory considerations. We also advise clients in relation to document security and telecoms aspects of MiFID II and GDPR process requirements, we work with clients in relation to high-speed low-cost encrypted data and content storage requirements in innovative ways. Distributed working practices and international trade continue to drive technology requirements and, as businesses are no longer constrained by geographical or physical barriers, we have to reflect that in our services, capabilities and knowledge base. An example of this is our Multi-net offering, enabling clients to access all UK networks from a single SIM/ phone.
We were one of the first businesses to go to market with a hosted telephony offering and we're now layering that with additional hosted applications and services. Where it's an applicable and appropriate solution, cloud based technologies, in particular contact centre, work force optimisation tools, compliant call recording, audio/ video and collaboration tools, as well as cloud based data storage, are continuing to build momentum. The move towards digitalisation continues and drives requirements around process efficiency, compliance and security. Our clients’ key challenges in the next 12-18 months will include the planned introduction of GDPR. You can't open your eyes without seeing that or being offered advice on it, but at Ethos we understand that technology alone can’t meet all of the proposed requirements and we’re working with clients to address their processes, procedures and the technology required to meet the challenge. We also provide government grade encrypted storage and software solutions that enable our clients to respond to and manage potentially non-compliant activity efficiently and effectively. Data growth, security and collaboration are key drivers in many businesses and this continues to influence our direction and focus. We've added complimentary technology to address these challenges. Our focus on our clients’ data, documents and content being in securing it, securing access to it, managing it and distributing it. It can appear a crowded space so we adopt and develop innovative technologies that solve multiple challenges. We don’t want to offer the same things as our competitors - we want to offer something better, different, while remaining agile in our approach and backing that up with the highest quality service and support.
How do you see the future for your competitors?
Mixed. Unfortunately, some will cease to be relevant and some will do very well. I gambled several years ago, when I set up the telecoms business, that the future of communications businesses would be the provision of all communications resources; documents, voice and data, by one service provider, eventually on a single managed service agreement, that sounds great, except if you make that your pitch then every part of it needs to be excellent. You can't excel at one part and then try and engage with the client with another that's substandard, far from making the relationship more valuable and stickier - you'll ruin it and lose the lot. But being able to consult, independently advise, and deliver different technologies at the highest level, with one single point of contact and, ideally, on a single managed agreement is our objective. We're not there yet, but we're materially there with some clients, some of whom are very large Pan-European businesses, so it's possible and I genuinely think - caveated heavily as to ability - it's what clients will want.
Looking to 2018 and beyond, what is your vision for the future of Ethos? What do you hope to accomplish?
By the end of next year, Ethos' document business will be the most profitable independent business in the UK industry, easily the most proportionately profitable, so that's a 'mark' I suppose. It must, at very least, mean that we run the business well. But that's almost by default as we're growing well organically and by acquisition. What I'd like is to continue to intelligently expand our portfolio and to offer more to our existing and new clients.
However, we're very careful about what we bring into our portfolio - it has to be the best of its type and it has to add real value to us and to our clients. The problem with technology businesses is that everyone is passionate about their own offering, especially when there's an element of IP involved. Unfortunately, you can be as passionate as you want about something but, if it's rubbish, then no one is going to buy it or, if they do, they won't thank you for it and they won't deal with you again. This is why we're guarded about what gets in.
Additionally, I'd also like to further expand our client base outside the UK. That's something we're working on now and there will be further collaborations with like-minded businesses, where we can integrate services and technologies. Our ITS capability is growing at a terrific rate, which is bringing enormous new opportunities. We also have a couple of acquisitions on the horizon.
I've a particular interest in telecoms now - there's an incredible opportunity for growth and value, especially by acquisition. In fact, the opportunities for acquisition are enhanced because of the more diverse nature of that industry, and that really excites me, as does the technology that's coming along. Enhancing everything that we do and reducing cost, you'd have to be very bad indeed not to be able to capitalise on that.
Website: http://www.ethos.co.uk/
By Paresh Davdra, Co-founder & CEO of RationalFX & Xendpay
The rise of FinTech has significantly altered the financial industry in the last decade. The disruptive nature of FinTech stems from the fact that its unique selling point is the use of innovative technology to enhance the lives of its customers. From mobile payments to crowdfunding platforms to new e-commerce systems, FinTech companies reflect the needs of a new generation of consumers who are looking for an easy to use service whether they are at home or on the move. It is perhaps not surprising then to note the incredible opportunity that exists for FinTech companies that allows them to pursue more than profit, and look to social responsibility as a key part of their model.
The importance of social responsibility for FinTech is intimately connected to the relationship between their audience – a new generation spanning millennials in their twenties and early thirties, and the students that will succeed them- aligned with their social conscience. This is a generation that has grown up with an awareness of issues for sustainability, social responsibility and the desire to make consumer decisions based on values. As a result, it is essential for FinTech companies to align themselves with their socially responsible audience.
This commitment to social responsibility is often reflected in the way that FinTech companies are able to do business. One sector in which this is most clear is in the payments industry. Payments have become instantaneous with the advancement of technologies; with industries such as online international payments having been able to emerge with the growth of FinTech. Whilst the business and consumer application has been a clear success with the proliferation of companies within the sector, a socially responsible aspect has also appeared through the way remittances are sent.
Remittances and the transfer of money between communities across the world has benefitted immensely from the FinTech revolution, with the number of remittances to developing countries growing by 51% to $445billion between 2007 and 2016.[1] It is clear that the availability of improved financial technology has contributed a great deal to this, with accessible mobile wallets and payment systems, such as allowing families in developing countries to receive funds from their loved ones faster than ever.
For the companies that offer these services, a sense of social responsibility is essential for the running of the business – they need to have an awareness of the needs and resources of communities in the developing countries they are serving. That is why apps will often be low cost and offer simplified functionality, designed to run on phones without access to super-fast connectivity. Furthermore, socially responsible FinTech has enabled the democratisation of remittances, allowing users to lessen the financial impact of heavy taxation in place when using money transfer services in certain countries or unreliable methods of transfer, and ensure that as much money as possible reaches its intended recipient. Some payment companies have even built their business model around the concept of responsibility and sustainability, waiving mandatory fees or commission to make sure communities benefit the most from transfers.
Xendpay is one such FinTech company, which has used its socially responsible ethos to offer families free money transfers around the pay-day period. By eliminating extraneous fees and commissions that are typically part of the service that high street agents offer, FinTech companies such as XendPay are directly impacting on the development of these societies – with more money available for the recipients of remittances, there is more money available to go back into the economy of a developing nation, rather than into private hands.
Social responsibility has become a symbol of the disruptive power of FinTech, at a time when traditional banking systems are slower to innovate. It is how an industry of imaginative FinTech companies operating within remote and developing communities have been able to evolve and provide customers with a service that works for them. Recent developments have even seen FinTech companies expand beyond simply providing mobile apps for customers, as socially responsible and ethical investing are increasingly an important aspect for modern business.
Traditional businesses looking to emulate the disruptive success of FinTech should look to the value-based ethos of the companies as a template. The FinTech industry has many examples of the future of business – ethical initiatives with a strong sense of social responsibility to the customers and communities they serve. FinTech companies have been able to capture the lucrative millennial market not only because they offer convenient and accessible services, but because of the key role that social responsibility plays in their corporate identity.
FinTech businesses realise the power that strong values have to play in bringing them closer to their audience and that they have a responsibility to align themselves with charitable and good causes, social development and issues that both the business and their customers are passionate about. This is an ethos that businesses across all sectors can learn from.
Websites:
[1] Sending Money Home: Contributing to the SDGs, one family at a time, IFAD, 2017
