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NO MOJO? THE UNLIKELY SOLUTION TO THE FINANCIAL INDUSTRY’S IMPENDING TALENT CRISIS

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Matthew O’Neill, Industry Managing Director, VMware EMEA

 

The financial services industry has lost its mojo. There was a time – in the not-too-distant past – where it was the place to work. But the industry that we know today is no longer the place young talent. Other sectors simply have surpassed the sector on the ‘cool’ factor.

There is a solution, and it comes from an unlikely source. The pandemic. It has forced companies, including those in the financial services industry, to change working practices.

But it’s going to require a more open-minded approach, which won’t be easy for an industry steeped in very traditional views and big on security and compliance. That said, opportunities like this don’t come around very often so I’ve outlined three reasons why the future of talent in financial organisations depends on them grasping it with both hands.

 

Timing is everything

Wind back the clock to before 2020 and it would’ve been inconceivable for most financial firms to embrace regular remote working outside of the occasional snow day or plumbing emergency. Presenteeism largely equaled work. It has taken something as dramatic as a global pandemic to force the financial services industry into changing this perception.

Investment in corporate real estate has been a key reason for this. Companies wanted to optimise the number of people consuming the buildings that they pay huge, fixed costs to build, rent, run and manage. But culture – across sectors – is arguable still the biggest problem. Being seen in the office was considered far more valuable than actual content output.

While the flaws in both reasonings for avoiding remote working were well known, it took the pandemic to show just how flawed they were. The challenge and opportunity now are for executives to look at how they can rethink the office environment to make it one that supports hybrid working models, as well as rethink culture through different ways of measuring success.

This is crucial if you want to attract the next generation of talent. For example, HSBC recently decided to scrap the entire executive floor of its London HQ to remove the divide between C-suite office managers and everyone else. They recognise the importance placed on flexibility and an inclusive culture by the younger generations and are looking at how they can introduce changes to make themselves more attractive to that talent.

 

Big Brother, no thank you.

Technology, of course, plays a key role here.

The adoption of video and collaboration platforms have now gone from a nice-to-have for executives to a mandatory need-to-have for all. Traders at Barclays, for example, have adopted messaging platform Symphony, which has bank-level compliance and security to keep in touch. Installed on company phones and employee’s computers it has become, a “pure and compliant” social network for traders. This is just one example of why distributed working is achievable. Made possible by the ability to manage security, all the way to today’s distributed edge, centrally.

So, they’ve done the work that enables people to do their jobs. Now they need to take it a step further and approach technology from the angle of what makes people the most productive. That doesn’t mean – as is a possible short-sighted remedy to not having line of sight of your employees – putting in place spyware or screen monitoring capabilities to track how much time employees are spending at their computer or counting the number of keystrokes.

That starts with a mindset shift – to look at the employee experience as a productivity measurement. As PWC outlines, that means looking comprehensively at the nature of work, the activities that different employees perform, and their output. Focus on what have they created or driven rather than how many hours they spent on the phone or in meetings.

To support that further, organisations should also consider how individuals can improve their productivity through new ways of working and the development of digital skills. Financial Services Skills Commission (FSSC) chief executive Claire Tunley recently stated that “investment in learning and developing is not keeping pace with the sector’s evolving needs”. By showing new talent that they offer better development opportunities or the ability to work in a way that suits them, they are going to appear much more on the pulse. And they can also better develop existing talent rather than always having to recruit from outside.

Which brings me nicely to my third point.

 

Choice not conformity

This is the industry’s opportunity to truly embrace difference. To start giving employees the right set of tools to do the job, in a way that they are exceptional at. To get the most from their people, play to their differences and strengths (or as René Carayol calls them, their Spikes) rather than trying to transform them to fit into a bell curve. A basic example is that some employees will want the latest version of Windows and some will want Mac OS. Organisations can make it the individual’s choice and give them a level of flexibility that makes them feel valued.

Mel Newton, Head of Financial Services People Consulting at KPMG UK put this perfectly, “flexibility is more than just allowing people to work from home on the occasional Friday. What the future workforce wants is personal choice”.

To compete for the best talent, personal choice and flexibility is what financial services firms will have to deliver. These need to be embraced, even in the most established of firms.

 

The draconian days are over

Rethinking working practices in financial services is long overdue. While not everyone is on board, there are far more who are embracing the opportunity for change. As Claire Tunley said, “the skills issue is bigger than any one firm” and it will get worse if organisations don’t start thinking about their people differently. They are technologically ready to do so but it’s going to need a different culture and the courage to leave tradition behind.

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Financial Stability Board Gives Full Support to Wide LEI Use in Global Payments

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Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation

The strongest recommendation yet by the Financial Stability Board (FSB) that the LEI should be used more widely in payments will catalyze increased global LEI adoption. The most immediate intention is in facilitating cross-border payments. GLEIF explains why this makes it the perfect time for financial institutions to become Validation Agents within the Global LEI System.

The Financial Stability Board (FSB) has put its full weight behind a landmark recommendation that the LEI should be widely adopted across the global payments ecosystem. In July 2022, the FSB published a report encouraging global standards-setting bodies and international organizations with authority in the financial, banking, and payments space to drive forward LEI references in their work. The report also recommends guidance and further outreach on the use of the LEI as a standardized identifier for sanctions lists and as the primary means of identification for legal entity customers or beneficiaries, with specific reference to customer due diligence and wire transfers.

A primary near-term goal of the FSB’s most recent report, published as part of the G20 Roadmap for Enhancing Cross-Border Payments, is to stimulate LEI to use initially in cross-border payment transactions. By helping to make these transactions faster, cheaper, more transparent, and more inclusive, while maintaining their safety and security, the LEI has been deemed by the FSB to support the goals of the G20 roadmap.

As a result, banks and financial institutions will now be compelled to move quickly to incorporate the LEI as an integral component of their cross-border payments infrastructure, since there are huge benefits in doing so. In addition to supporting lower costs and enhanced transaction speed and transparency, the LEI can also facilitate straight-through processing (STP) and sanctions screening, while easing compliance with Know-Your-Customer (KYC) due diligence.

Additionally, the report recommends that standards bodies (e.g., BCBS, CPMI, IOSCO, FATF) and international organizations (IMF, OECD, World Bank) should consider how the LEI may be used as a standardized identifier for sanctions lists or as the primary means of identification of legal entity customers or beneficiaries. This demonstrates the broader ecosystem needed to support cross-border payments evolution – an ecosystem based on a single global identifier for legal entities that can be used to facilitate compliance checks across various resources.

With this in mind, banks and financial institutions who may soon need to ensure their legal entity clients possess an LEI to engage in certain payment transactions, cross-border or other, should feel motivated to leverage the benefits of becoming a Validation Agent within the Global LEI System. The advantages are two-fold: enhanced customer service, through a simpler, faster, and more convenient LEI issuance process for customers; and huge efficiencies in client onboarding and lifecycle management for the bank or financial institution. It really is a win-win scenario.

 

The wider impact of LEI adoption in cross-border payments

While the FSB’s report is intended to promote LEI use in cross-border transactions, both the strength and far-reaching scope of its recommendations are likely to be a catalyst for the LEI to be more broadly implemented across many other payment scenarios too. After all, if banks and financial institutions need to equip customers with an LEI to participate in cross-border transactions, then it’s a logical next step for participants in the payments ecosystem to leverage and optimize those LEIs to drive efficiencies across their other payment operations, and to bring enhanced transparency and trust benefits for customers.

There is already a healthy pipeline of active consultations and commitments by financial regulators aimed at recommending or mandating LEI use more broadly within the global payments space.

  • Last year, the European Commission (EC) officially recognized the value of the LEI as a unique mechanism capable of supporting transparency in AML and countering the financing of terrorism (CFT) efforts. It issued two legislative proposals that call for the LEI to be used in certain customer identification and verification scenarios where available.
  • The EC also launched a separate initiative last year to identify obstacles to the creation of efficient pan-European instant payments solutions. As part of its consultation strategy, the EC issued a survey for the purpose of exploring the potential for the LEI to support the screening of instant payment transactions against sanction and watch lists.
  • The Bank of England (BoE) affirmed its position to support wider uptake of the LEI and will introduce the LEI into ISO 20022 standard for CHAPS payment messages on an ‘optional to send’ basis in February 2023. While the BoE encourages all CHAPS Direct Participants to start using LEIs as early as possible, it will not become mandatory until spring 2024, at which time the BoE will begin mandating LEIs to be used in certain circumstances, with a vision to widen out the requirement to all participants over time. In particular, the BoE will mandate the use of the LEI where the payment involves a transfer of funds between financial institutions. The BoE will also monitor the use of the LEI for all transactions, with a view to assessing whether the mandatory requirement to include LEI data should be extended to all CHAPS payments.
  • In order to further the use of LEI in cross-border transactions and facilitate cross-border trade and investment, the Chinese Cross-border Interbank Payment System (CIPS) designed an innovative product “CIPS Connector”, which provides an integrated “one-step” service for a variety of cross-border RMB transactions between banks and enterprises. Every CIPS Connector user is assigned with an LEI, which is used for activating the tool as well as a mandatory business element in their business transaction.
  • In January 2021, and in a move that was the first of its kind, the Reserve Bank of India issued a mandate for the LEI in all payment transactions totaling ₹ 50 crore and more undertaken by entities for Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).

 

Why the LEI in payments?

The LEI is considered an important tool in payments as it is designed for identifying unique parties to each transaction. It meets a fundamental requirement in payment processing – precise identification of the payer and payee. No other current identifier in payments offers this. International Bank Account Numbers (IBANs) for example are used for uniquely identifying payer/payee accounts, while Business Identifier Codes (BICs) are used for routing the payments to the relevant divisions/sub-divisions of financial institutions.

Today’s highly digitized payment networks require faster, cheaper, and more secure transactions. When the LEI is added as a data attribute in the payment messages, any originator or beneficiary legal entity can be instantly and automatically identified.

 

Become a Validation Agent

When viewed collectively, these developments show that LEI advocacy has never been stronger in the payments space. This signals that the LEI could be the widely implemented trust tool of choice for payments in the near future. With that in mind, GLEIF urges banks, and financial institutions to consider taking a proactive approach to supporting voluntary customer adoption of the LEI and getting ahead of recommendations or mandates in the payments space.

Becoming a Validation Agent in the Global LEI System is now the obvious choice. In addition to easing the process of LEI implementation further down the line by making LEI issuance more convenient and accessible for customers, becoming a Validation Agent can deliver some significant advantages for financial institutions themselves. By utilizing ‘business-as-usual’ onboarding processes to obtain LEIs for clients, financial institutions can improve customer experience, facilitate digital transformation, and reduce client lifecycle management costs.

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On-demand pay: why payroll needs a modern approach

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Byline:  Paul Bartlett, CEO, CloudPay

 

While the world of work has evolved drastically over the last decade, payroll has arguably fallen behind the curve. In fact, how businesses view employee pay today is outdated and fails to meet the expectations of the modern workforce which, with the UK’s critical skills short labour market, could prove detrimental. People now expect on-demand services in their personal lives, from their shopping experience to their access to entertainment, and this need for a ‘consumerised’ experience has filtered into many business practices. But payroll has yet to catch up.

Financial technology is certainly gaining prominence across the globe as it gradually replaces traditional financial services such as banking, payments and electronic commerce. In fact, a recent fintech market report shows that the global financial technology remit is expected to reach a market value of approximately $324 billion by 2026, growing at an annual rate of around 25.18% over the 2022-2027 forecast period. So, soon enough, payroll will be expected to keep pace with the rest of the fintech field.

Paul Bartlett

A shift in mindset

Ultimately, most employees are consumers and our digitalised world means that consumers are able to instantly access almost anything through an app. Getting to your next destination and accessing a range of takeaways has never been easier with Uber and same day deliveries through Amazon have meant that shopping online has grown in popularity. In an era where instant results are the norm, it should come as little surprise that individuals are now asking why they should wait to access wages they’ve already earnt. With technology making it so easy to consume, why should they wait for payday to get paid for the work they’ve done?

It’s also important to consider how the world of work itself has changed. The pandemic has led to a general consensus that it’s ok to question norms in society, and workers are now expecting more from their employers, including how and where they work. As we all know, mass remote working wasn’t commonplace before the pandemic, but now the benefits that businesses and employees have experienced have resulted in new ways of working, with some countries even making the work from home option a legal right. Eventually, the same could be said for how people get paid as greater flexibility and a better work-life balance rises in demand.

Pay on-demand

In line with the progression of the working world, employees are increasingly beginning to question how and when they get paid. For staff in the UK, the cost-of-living crisis has increased the desire for more flexibility around access to pay. Businesses themselves are also questioning how age-old processes can be improved and we’re seeing more firms seeking to update legacy systems and processes, which has led to demand for digital payment capabilities for employee pay.

However, there’s a fundamental question about paying employees in arrears – why should employees effectively loan money to their employer until payday? It’s now possible to allow employees to effectively choose their own payday (or paydays) with on-demand access to earned wages via a mobile app. Progressive employers, such as Nando’s, are offering this pay on-demand facility as a low-cost, high-value benefit to employees, giving them control and flexibility over how and when they receive their salary.

Nando’s Singapore

In the case of Nando’s Singapore, a brand that revolves around its people, the firm recognised that its payroll system needed to be updated. The main business challenges centred around a highly competitive jobs market, with many more vacancies than people available to work in the country, making it tough to recruit front-line staff. This, coupled with the difficulties of retaining talent when competing with the gig economy, a segment of the workforce known for paying workers frequently, was presenting a significant challenge for the firm. Furthermore, monthly pay cycles were necessitated by Singapore’s requirement for employees to have a monthly payslip to qualify for access to government benefits and the 80% government-owned housing market.

The combination of these challenges and the delicate balance of the need for monthly pay vs. pay flexibility led Nando’s Singapore to look for a more flexible solution. The solution? Pay on demand options for staff. So, what does this change and what does it mean for the firm and its workers?

When a pay on demand solution is in place, Nando’s employees will receive their monthly payslips as usual. There are also no adjustments to existing payroll processes and finance reporting, which means no extra administrative burden on the payroll team. What will change, though, is that Nando’s staff will no longer have to wait until the end-of-month payday to receive wages they’ve already worked for. Pay on demand and pay to card gives employees more control of managing their own cashflow, allowing them to instantly access their earned wages when they need them, via a mobile app rather than requesting pay advances from their employer.

Overall, the decision to seek an earned wage access solution will mean that staff will have flexible pay, supporting Nando’s recruitment and retention efforts while also delivering an enhanced employee value proposition. As Moji Neshat, General Manager at Nando’s Singapore explained, “We know unexpected bills and short-term cashflow challenges can create a lot of stress for our teams. With CloudPay NOW all our team members will be able to access their wages the very next day after working, removing that stressful wait until payday.”

Moving forwards

Sophisticated technology is playing a role in making tedious or labour-intensive processes quicker and easier in our everyday lives, and it can – and should – have the same impact for payroll. The likes of pay on demand may appear on the surface to be complex to manage, but can in fact streamline processes.

When we think back to when online payments were first introduced, there were understandable concerns around the change – but very few of us today could imagine life without mobile banking, and the ease and speed it brings to making and receiving payments. Why shouldn’t payroll follow the same path?

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