Connect with us

Finance

GOOGLE CLOUD STUDY: CLOUD ADOPTION INCREASING IN FINANCIAL SERVICES, BUT MORE GUIDANCE NEEDED FROM REGULATORS

Published

on

By Zac Maufe, managing director, Google Cloud, Financial Services

 

The financial services industry is evolving at a rapid pace, with shifting consumer expectations, new technologies, and developing regulatory requirements. Financial services firms need the right technology to help them stay agile and prepare for the future.

The cloud is a key point of leverage for firms looking to improve performance across a broad range of activities. Moving to the public cloud can advance operational resiliency, improve staff productivity, increase regulatory compliance and enhance business model innovation.

However, there are a number of financial services companies that are still hesitant in their cloud journeys. The barriers to adoption vary, from the complexity of legacy systems, to trust and skills gaps, regulatory uncertainty, and fragmentation of compliance requirements. Although many companies have embraced the benefits of cloud technology, more robust cloud adoption—especially around core back-office functions—will require additional facilitation, including through regulatory harmonization and streamlining.

 

A new comprehensive study on cloud adoption in financial services

To better understand the challenges and opportunities of cloud adoption in financial services, Google Cloud commissioned Harris Poll to survey more than 1,300 leaders from the financial services industry across the United States, CanadaFranceGermanyUnited Kingdom, Hong KongJapanSingapore and Australia.

 

There were five noteworthy takeaways from the study:

  1. A vast majority of financial services companies are already using some form of public cloud. A large number of surveyed financial services companies (83%) report they are deploying cloud technology as part of their primary computing infrastructures. Of those using cloud technology, the most popular architecture of choice is hybrid cloud (38%), followed by single cloud (28%), and multicloud (17%). Notably, of respondents without a multicloud deployment, 88% reported they are considering adopting a multicloud strategy in the next 12 months.
  2. Financial services institutions in North America are leading in cloud adoption. Of the financial services companies who are implementing a cloud strategy, the highest levels of cloud workload adoption were reported in North America, with institutions in the U.S. (54%) and Canada (52%) leading the way. The lowest level of cloud adoption was reported in Japan (42%).
  3. As financial services companies continue to use the cloud, more core functionalities can and will be migrated. While many financial services companies have migrated substantial workloads to the cloud, the industry is far from full adoption when it comes to core, back-office workloads. Of financial services companies currently using a majority cloud strategy in the United States, for example, only half (54%) of their workloads are fully deployed in the cloud. Data and IT security (74%), regulatory reporting (57%), and fraud detection and prevention (57%) rank among the highest workload adoption. Core underwriting activity (40%) and data reconciliation (48%) ranked lowest. Across Europe, cloud usage for core activities like underwriting also scored low with the UK listing only 30% adoption.
  4. Among respondents, there is a very strong positive perception of the potential for cloud technology to assist in business operations and regulatory compliance. Nearly all respondents (>88%) agreed that cloud adoption can:
    1. help adapt to changing customer behaviors and expectations,
    2. enhance operational resilience,
    3. support the creation of innovative new products and services,
    4. enhance financial services institutions’ data security capabilities, and
    5. better connect siloed legacy software infrastructure within financial services institutions.
  5. Certain regulator-induced challenges, including the complexity of sectorial compliance frameworks and fragmentation, create hurdles to cloud adoption for financial services companies. While 88% of respondents had a positive view of current regulatory efforts to provide guidance and clarity for cloud implementation, the results showed that more needs to be done to facilitate adoption. Most respondents (84%) agree that regulatory reviews and approvals take too long because of regulatory fragmentation across regulatory bodies. And 78% say that regulatory uncertainty over the use of public cloud prevents their organizations from adopting cloud technologies that would otherwise provide benefit to them. Additionally, a third of all on-premises respondents (38%) say that the large investment of resources for the regulatory approval process is a reason why they’re not using cloud services.

“While many banks have already deployed hybrid cloud environments, others are still in various stages of planning and deploying,” said Jerry Silva, research vice president for IDC Financial Insights. “Clearly, hybrid infrastructure is a reality, and financial institutions must focus not only on leveraging the modern infrastructure model to gain efficiencies, resilience and agility, but also on taking the necessary steps to manage such environments, including the security and compliance of cloud services.”

 

Future recommendations for financial services regulators

Financial services firms should continue to maximize the potential of technology by migrating more core workloads to the cloud, as well as actively considering multicloud and hybrid-cloud strategies. Such strategies enhance resiliency of existing IT infrastructure and reduce concerns over vendor lock-in.

The research also points to steps that regulators could take to provide additional clarity and guidance, such as aligning regulatory reviews across agencies to avoid fragmentation; developing regulatory “safe harbors” for cloud adopters based on adherence to accepted standards and best practices; training regulatory staff on emerging tech; and advancing data reporting requirements via cloud and related technologies.

In the past few years, many regulators across the globe have taken a robust approach to rationalizing rules and guidance to cloud adoption in the financial sector, which has helped significantly stimulate adoption. But further assurances and harmonization of best practices around supervision is needed to advance risk-based and secure digital innovation.

At Google Cloud, we’re committed to working with financial services customers and regulators to provide them with controls and assurances on risk management, data locality, transparency, and compliance. We are constantly engaging with regulators to share information, respond to their considerations and concerns, and address questions in the interest of transparency and building trust.

 

Research methodology

The survey was conducted online by the Harris Poll on behalf of Google Cloud, from December 7, 2020, to January 4, 2021, among 1,363 senior executives in France (n=113), Germany (n=178), the UK (n=192), Hong Kong (n=99), Indonesia (n=100), Japan (n=142), Singapore (n=71), Australia (n=134), Canada (134), and the United States (n=200) who are employed full-time, part-time, or self-employed whose main functional role is in risk/compliance or IT at a company in the banking, finance, or financial services industry with a title of director level or higher. The data in each country were weighted by the number of employees to bring them into line with actual company size proportions in the population. A global post-weight was applied to ensure equal weight of each country in the global total.

 

Finance

Why Financial Services must ‘Change its Change’ to deliver results

Published

on

By

By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp 

You can almost hear the collective sigh of relief from financial service providers following their business operations being pushed to the limits during the pandemic. But as the industry creates its new roadmap for the future, we must take care not to lose sight of the massive gains we realised, albeit inadvertently, as a result of COVID. While pain and challenge grabbed the headlines, this was also a time of unparalleled development – where financial service brands rapidly adopted a renewed sense of purpose and delivered urgent, game-changing business transformations.  

Since then, we’ve seen a slowdown in momentum – despite there being more pressure to optimise operational resilience, cost and service. In parallel, members of the public still rank financial services 15th out of 16 industries in terms of public trust, according to the 2022 Edelman Trust Barometer. That’s despite a slight increase of 3% from last year. 

It’s no secret that the financial services industry is grappling with a ‘perfect storm’ of political, environmental, social, technological, legal, and economic (PESTLE) challenges. All that, alongside managing pressure from shareholders to reduce the costs of service, improve revenue and delivery, and protect people and organizations from risks. 

But there is another, harder reality – it’s time for some brands to face a few home truths regarding their response. The global financial services sector makes up around 20-25% of the global economy – we have the people, brains, passion, and power to proactively steer and redesign the global industry around challenges. So, by definition, we must accept some level of responsibility for the business pains we are now facing.  

Creating great customer experiences, digitisation, responding to stricter regulation – these themes are nothing new. Over decades, scores of banks and insurers have responded to PESTLE challenges by implementing ambitious change programmes. And while there’s absolutely nothing wrong with aiming high, the problem comes when brands are unwilling to consider better ways of working than delivering big batch, inflexible, four-year plans. It can take months just to scope out the work, design a change, or run some trials. By the time brands implement these plans, everything has changed – they’ve got a new political situation, interest rates have gone up and they’re already behind the curve.  

That way of working isn’t right for customers either. A key way for financial service firms to build trust with customers is to solve their problems when things go wrong. But research shows that 25% of customers couldn’t get their problem solved completely on the first contact – be it poor customer journeys, poorly-designed apps/tech, or failing automation.  

These glitches could be viewed as being at odds with requirements of the FCA’s new Consumer Duty. It requires financial service companies to “deliver good outcomes for retail customers” and to compete “vigorously in the interests of customers, in line with its mission to better protect customers.

The financial services industry is working hard to deliver customer experiences – bringing in new products and services, available easily through apps, and supported with ever-increasing due diligence requirements. And so change itself is not a problem – it’s the methodology that is. We cannot solve this by either tinkering around the edges or preparing wholly unwieldy plans. We must ‘change the change’, stop ‘analysis paralysis’, and take a more agile view in order to be more responsive – especially amid the looming recession – when financial services are grappling for talent in an employees’ market. 

Retail and fintech: beacons for future innovation?  

It’s widely acknowledged that fintech is leading the way in enabling rapid change and delivering milestones at pace. In parallel, we take lessons learned from the ‘best in class’ innovation emerging from retail, which has optimised customer journeys to a different level. 

Take The Very Group for example – the company created a Customer Closeness Center (CCC) – an environment they can use to identify and test improvements to CX, customer journeys, and user experiences in a real customer environment, in real time. This involved gathering insights which inform key business changes and rolling out digital technologies such as chatbots. The Very Group also improved voice and email services on the front line, upgraded complaints management, and are delivering significant transformation of back office. 

This transformation led to a 33% year-on-year reduction in average contacts, reduced cost by over £5 million in contact reductions alone, and achieved a 73% First Contact Resolution rate. It also achieved a 35% score on Net Promoter, based on customers who made contact using the telephone, which is more than 20% better than the industry average. It was effort, not luck, that saw them win several CX and innovation awards – particularly the way in which the group implemented change; linked up technology, data, process, and people; and tested and continuously improved the solution daily and weekly.  

Changing the change brings happier customers, better employee engagement, and improved resilience and overall profitability. And there’s nothing stopping the rest of the financial services industry from becoming the next globally-leading industry for transforming operations and delivering integrated customer experience.  

Continue Reading

Finance

Mini-Budget 2022:

Published

on

By

Tax giveaway is a boost for business, but will it drive growth or fuel inflation?

 

Chancellor Kwasi Kwarteng has announced a comprehensive wave of tax cuts and other incentives for individuals and businesses, as well as confirming some of the announcements made earlier this week.  The measures are part of a new Growth Plan, which is aiming to boost economic growth. However, only time will tell if they will curb inflation and temper recession concerns.

Richard Godmon, tax partner at accountancy firm, Menzies LLP, said:

“With another fiscal statement to follow, this mini-Budget is a defining moment for the new Government and tax cuts are firmly back on the agenda.

“The biggest surprise was the decision to simplify Income Tax by moving to a single higher rate of tax for high earners of 40%, with effect from April next year. This will encourage a spirit of entrepreneurialism by incentivising work and putting money back into the economy. The flip side is that the Government might also be hoping that the move increases the tax take, as it could help to draw people back to the UK who may have previously chosen to live and work elsewhere, while encouraging others to stay put.

“The reduction in dividend tax rates and the abolition of the additional rate of tax from April 2023 means that business owners will need to consider carefully the timing of dividend payments over the next few months.”

Up to 40 new Investment Zones

The Chancellor also outlined plans to create up to 40 new ‘investment zones’ in England, with the potential for more in Wales, Scotland and Northern Ireland. Businesses in these zones will benefit from wide-ranging tax breaks including 100% tax relief on investments in plant and machinery, and no National Insurance Contributions will be payable on the first £50,000 earned by new employees.

Richard Godmon, tax partner at Menzies LLP, said: “The new Investment Zones are reminiscent of the former Enterprise Zones, but they will provide a much more favourable tax environment for businesses and they promise to become a magnet for inward investment. There are currently 38 areas in England on the list for consideration and we look forward to finding out which ones will be selected.”

Incentivising business investment and Corporation Tax rise ‘cancelled’

The limit of the Annual Investment Allowance (AIA) will not revert to £200,000 as planned in April next year, it will now permanently stay at £1 million.

Richard Godmon, tax partner at Menzies LLP, said:

“Capital allowances are highly valued by businesses and they will be pleased that this one in particularly is going to stick at £1 million and that this is no longer being described as a temporary measure, but is to be made permanent.

“The decision to cancel the planned increase in Corporation Tax (due to tax effect next April) will be a relief to many small and medium-sized businesses who have been concerned that this increase would erode profits further and make it even more challenging to remain viable.”

Incentivising entrepreneurial investment

The Chancellor highlighted plans to increase the cap on investments that can be made under the Seed Enterprise Investment Scheme (SEIS) from £150,000 to £250,000. Individuals making investments in start-ups up have had the limit doubled to £200,000, with the 50% income tax relief remining the same. The Government also gave its commitment to continuing to back the Enterprise Investment Scheme (EIS).

“These announcements send a signal to entrepreneurial investors that tax should not be a barrier and the Chancellor wants to expand incentives in this area,” added Richard Godmon, tax partner at Menzies LLP.

Stamp Duty Land Tax

The threshold at which Stamp Duty Land Tax (SDLT) becomes payable on residential property purchases in the UK has been raised to £250,000, double its previous level in a bid to boost the property market. In addition, first-time buyers will not have to pay SDLT on property purchases up to a value of £425,000 (up from £300,000). Both measures will take effect from today.

Richard Godmon, tax partner at Menzies LLP, said:

“The decision to raise the SDLT threshold is designed to build consumer confidence and boost the housing market generally. For property developers it will fuel activity by creating demand, particularly from first-time buyers, and help to free up finance to front-end development projects.”

IR35 Changes

Richard Godmon, tax partner at Menzies LLP, said:

“The repealing of the 2017 and 2021 IR35 changes will be hugely welcomed as it will remove an administrative burden, risk and cost, enabling businesses to devote resources to furthering their growth strategies.

“It is important to recognise that IR35 has not been abolished and the result of the changes is that the risk and compliance costs are being returned to the individuals and their personal service companies.  HMRC will no doubt redirect their focus towards the contractors, which will bring challenges and make enforcement more difficult.”

Continue Reading

Magazine

Trending

Business8 hours ago

Solving the Future of Decarbonisation in Real-Time

Jamil  Ahmed, Distinguished Engineer at Solace   The energy sector has faced many disruptions and challenges in recent years, from...

Banking15 hours ago

Resilient technology is the most important factor for successful online banking services

By James McCarthy, Director of Solutions Engineering, NS1   More than 90 percent of people in the UK use online...

Technology15 hours ago

Why anti-spoofing fingerprint technology is essential for the continued growth of digital payments

Anthony Eaton, CTO, IDEX Biometrics   The digital payments revolution is being driven by consumer demand for ever increasing convenience....

Finance15 hours ago

Why Financial Services must ‘Change its Change’ to deliver results

By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp  You can almost hear the collective sigh of relief from financial...

News16 hours ago

Real-time payments are here to stay and with good reason 

Real-time Payment (RtP) models are here to stay for the foreseeable future alongside traditional payment schemes. But as businesses increasingly...

Business16 hours ago

Criminal Minds: Account Opening Fraud Tactics put to the Test

By Raj Dasgupta, Director, Global Advisory, BioCatch   The last two years have created a perfect storm for account opening...

Business4 days ago

Know Your Business (KYB): Exceeding KYC

Victor Fredung, CEO at Shufti Pro   Money laundering costs the UK more than £100 billion pounds a year, according...

Finance1 week ago

Mini-Budget 2022:

Tax giveaway is a boost for business, but will it drive growth or fuel inflation?   Chancellor Kwasi Kwarteng has...

Finance1 week ago

A zero trust environment is critical for financial services

Boris Bialek, Managing Director of Industry Solutions at MongoDB Not long ago security professionals were still focused on protecting their...

Banking1 week ago

Digital Banking – a hedge against uncertainty?

Ankit Shah, Head of Digital Banking, Apex Group   The story of the 2020’s thus far is one of crisis....

News2 weeks ago

Union Bank of India goes live with RuPay Credit Card on UPI with Kiya.ai as a technology partner

Nitesh Ranjan, ED Union Bank of India with Rajesh Mirjankar, Managing Director & CEO, Kiya.ai at the launch   Kiya.ai,...

Finance2 weeks ago

Anyone Can Become an R&D Tax Expert with the Right Foundations

Ian Cashin is a Customer Success Manager at Fintech company and R&D tax software provider WhisperClaims   For accounting firms,...

Business2 weeks ago

Addressing the ongoing global pilot shortage issue

By Bhanu Choudhrie, Founder of Alpha Aviation   The Covid-19 pandemic brought the aviation industry to a halt, causing vast...

Business2 weeks ago

How exporters can mitigate risks and operate smoothly in stormy, post-Brexit waters

By Morgan Terigi is Co-Founder and CEO of Incomlend   The past few years have presented a series of hurdles...

Business2 weeks ago

From employees to customers, workforce management can benefit the entire banking ecosystem

Michael Cupps, SVP of Marketing of ActiveOps explores the significant impact workforce management can have on the employees and customers...

Business2 weeks ago

Redefining the human touch with digital transformation

Simon Kearsley, CEO of bluQube   It may not be a new phrase, but digital transformation is still inducing anxiety...

Finance2 weeks ago

CFOs – the forgotten ally in the fight against ransomware

Justin Vaughan-Brown, VP Market Insight at Deep Instinct   Ransomware attacks have nearly doubled in the past couple of years....

Technology2 weeks ago

7 cost benefits of cloud accounting software

By Paul Sparkes, Commercial Director of iplicit, an award-winning accounting software developer   Is your accounting software having a laugh...

Business2 weeks ago

How does Identity Access & Privileged Access Management help in PCI DSS Compliance?

Narendra Sahoo is a director of VISTA InfoSec. Introduction The Payment Card Industry Data Security Standard also commonly referred to...

Finance2 weeks ago

Listed private debt deserves a closer look from investors

By Michel Degosciu, Managing Partner, LPX AG Over the past few years, the private debt asset class is attracting serious...

Trending