Tim Blok, CTO, Onguard
The finance industry has been hugely impacted by Covid-19, not least due to the move to remote working. Despite the recent promising vaccine news, 2021 looks set to bring continued uncertainty beyond the pandemic, with other external factors such as Brexit set to make an impact in the new year. It’s therefore of no surprise that a raft of pressures are on finance professionals, with a challenging and transformational year in the industry ahead. The need to adapt to new technologies such as automation and artificial intelligence (AI) has taken on a new significance, along with a renewed focus on solution-driven technology. But exactly how crucial will these new technologies be in 2021?
Automation and AI
The Covid-19 pandemic has shaken the foundations of office-based working, and the mass move towards a remote workforce has been keenly felt in the finance industry. With many finance professionals having now adapted to working from home, it is expected that many will look to continue to do so in some capacity in 2021. With a smaller workforce in the office, this potential shift places more strain on applications, software, and solutions, so it is crucial for financial institutions to look to automate more processes where possible, while also remaining conscious of ensuring these systems maintain high levels of security.
Being cost conscious and efficient will also help feed into more automated processes, and a greater level of control over cash flow management. People are generally the largest costs to a company, and utilising automation in the right way can ensure that finance professionals provide the most efficient value to the organisation. Efficiency is an aspect that will only become more prominent due to the economic effects of the pandemic that will last into 2021.
AI and machine learning are rapidly integrating into our everyday lives, influencing our decisions both in and out of the workplace. However, when considering how best to implement these technologies, financial organisations need to carefully consider issues around transparency, particularly in how AI comes to a conclusion. In 2021, an increased focus will sit with uncovering and defining the ethical aspect of AI deployments, and it is likely that new regulations will be implemented in the coming years in order to clarify this.
Internal and external communication
Along with key technological developments that will help finance professionals perform their roles remotely, a key focus for 2021 will be on the development of collaborative tools to facilitate employee communication. With Brexit on the horizon, bringing with it changes to data regulations and security, it will be even more crucial for finance professionals to maintain clear communication to ensure everyone is up-to-date. With 2020’s shift to remote working shining a spotlight on organisational culture, for those who collaborate across the globe it’s likely that next year will bring renewed focus on the concept of communication etiquette, such as suitable times to contact employees in different time zones. An ethical and considered approach to communication will prove vital next year.
Many finance professionals have become accustomed to video conferencing technology to arrange meetings with customers during the Covid-19 pandemic, and a personal and customer first approach will be even more important in 2021, especially with many people now more isolated than ever. Technology will also play a key role here with new applications such as application programming interfaces to help better serve customers.
While many applications such as support tools have made the shift to the cloud, a so far underused application has been cloud-based programmes that allow for real-time collaboration, whether it be internally between finance professionals or communicating with customers. Driven by the shift to remote working, we’ll see these evolve more quickly, and there is certainly scope for these kind of programmes to be more widely adopted by organisations in 2021, providing the basis for work to be completed with the input of all parties in a live environment.
At the heart of the predicted changes in the finance industry is the realisation of the potential of technology. Expect to see more centralisation of solution-driven technology in 2021, with a focus on what tangible benefits automation and AI can provide to the industry. Technological innovations have advanced to the point where they can take responsibility for the day-to-day demands of traditional entry-level roles in financial institutions. This development will enable the finance professional to take on the role of overseeing a process, without the need to initiate the granular aspects of a project.
Technology will not only play a role in applications used by finance professionals, but provide the basis for effective remote working, and organisations will need to ensure their digital infrastructure is set up adequately to help facilitate this working arrangement into 2021. With technology able to assist in every aspect of how a finance professional will work next year, it’s crucial that the industry harnesses and nurtures its potential in the coming months.
2021 FINANCE SPEND PREDICTIONS
by Andrew Foster, VP Consulting EMEA, AppZen
As we enter a new year filled with ongoing change and uncertainty, a few things are still clear. Though digital transformation has long been a familiar story told across the finance sector, businesses are recognising the need to adopt new technologies as a matter of urgency. As a result, 2021 will see a huge shift towards embracing technologies that transform finance procedures.
Anant Kale, Co-Founder and CEO, AppZen, shares his finance predictions for 2021:
The year of accelerated digital transformation
The current pandemic forced companies of all sizes, across nearly every industry, to virtualise their workforce, almost overnight. But in the coming year, finance leaders will be turning their attention to wider digitalisation efforts.
Kale explains, “Last year, the focus was on how to quickly keep up with changing business needs, with CIOs focusing on business continuity in a remote work environment—conferencing and collaboration tools, network upgrades, and so on. As we finally caught our breath, this next year will bring even deeper transformation. Rethinking and reimagining business processes in an AI-first world will keep enterprises agile, efficient, compliant and allow them to scale without relying on adding huge headcounts, which will be critical to the bottom line.”
Consequently, more CFOs will be driving the push for AI-powered programmes to be implemented into finance operations to accelerate digital transformation, streamlining operations across the entire enterprise and ensuring business resilience.
Expanding digital transformation – beyond the basics
Over the past year, the drive to enable remote working across the whole organisation has meant the deployment of a wide variety of technologies. Yet, most of these solutions are not in areas that directly increase the finance department’s efficiency. This year, finance leaders will be prioritising two specific functions that are prime for disruption and enhancement – AI-based invoice processing and expense auditing.
“Increasingly, AP invoice processing decisions will be made in the autonomous zone, where intelligent systems can independently make decisions that don’t require human second guessing or manual review,” said Kale. “With autonomous AP, systems that are capable of evaluating all aspects of invoice entry, matching, accounting approvals and even risk and compliance, AP teams will be able to move from operations to more strategic AP concerns.”
AppZen’s recent survey of top CFOs and finance executives confirms the need for deeper transformation in 2021. Currently, 59 per cent respondents report they still haven’t automated ingestion and extraction of data from invoices. Unsurprisingly then, a notable 43.5 per cent of organisations still take seven or more days on average to process an invoice. Organisations with more proficient automated processes only take 2.9 days to process an invoice on average — a considerable difference that supports the need for increased automation and AI uptake among modern finance teams.
Adapting for expenses in the 2021 work-world
CFOs will need to budget for different types of business expenses in light of the new environment. With an evolving workforce that includes remote, on-site and hybrid workers, they need to rethink their strategies and plan scenarios in ways they’ve never had to do before.
To this point, Kale comments, “Business travel will come back in some form later this year, but more importantly, the nature of expenses that have traditionally been associated with travel and entertainment (T&E) will change. Instituting routine audits and implementing clear expense policies will be critical to avoid fraud and abuse or unreliable financial data, which cost businesses nearly $3B dollars a year—and that was before the pandemic.”
As the spend environment becomes more complex, spend visibility is more vital now than ever. Finance leaders need to have the right tools in place to identify these new types of expenses – such as the number of video conferencing licences acquired, home office equipment, and productivity software – and properly assess spend priorities.
Flexibility is also crucial. In a rapidly-evolving environment, a one-size-fits-all policy isn’t up to standard. “How enterprises create and allocate budgets has been completely disrupted and what worked in the past won’t work in 2021,” declares Kale. “We’ve gone from a relatively certain, predictable way of carrying out business operations to a time where only the unpredictable seems certain, which requires agility, speed, and scale to ensure longevity and continuity.”
Despite challenging times, finance leaders are showing optimism for 2021. This year will require adaptability in the face of evolving global economic conditions in order to meet not only wider company needs, but those of employees as well. Embracing new technologies will continue to transform operations across every level of an organisation and enable business leaders to drive both productivity and profitability despite the uncertainty ahead.
THE LOYALTY-TRUST PARADOX AT THE HEART OF FINANCIAL SERVICES AND HOW TO OVERCOME IT
By Andrew Warren, Head of Banking & Financial Services, UK&I at Cognizant
There has long been a paradox at the heart of the financial sector – customer loyalty remains high despite overall trust in the banking system being very low. In any other sector, low trust would lead customers looking for services elsewhere. Generally, however, the major banks have been able to retain their clients despite, rather than because of, trust.
This customer loyalty does not always pay, with research suggesting consumers could be overpaying by £2.9bn in areas such as mobile, broadband, home insurance, as well as, notably, mortgages and savings. Whether the result of customer lethargy, lack of awareness of the possible cost savings or low expectations of the service banks provide, this has encouraged complacency in the banking sector.
This could, however, change as our post-pandemic reality begins to bite. People may have used the extra time from the lack of a commute to do some research and shop around for better alternatives, as well as harbouring frustrations over a perceived lack of support in recent months. Coupled with the possibility of a period of negative interest rates, we could soon be heading towards a perfect storm, where both retail giants and small local businesses start to question the value their banks actually provide.
Digital native challengers are shifting the landscape
One viable reason for the supposed loyalty consumers have towards the major banks has been the lack of real alternatives. With all of the traditional high street institutions offering services that were largely interchangeable, switching services seemed more effort than was really worth it when perceived benefits were so minimal. However, this changed with the arrival in recent years of challenger banks such as Monzo, Starling and Revolut, which continue to grow in popularity due to ease of use and better customer experience from sign-up through to their intuitive apps.
The primary advantage of the big banks is their liquidity, historical reputations and longstanding customer base. However, the agility and user-friendliness of the challengers is shifting the landscape, and the continued reliance on legacy systems leaves the traditional players struggling to surpass, or in most cases match, the innovative services and products fintechs are able to bring to the market.
Customer expectations setting a new standard
As personalisation and smooth technological integration in other sectors, such as retail, raises expectations of similar offerings across all service industries, this could soon become a key battleground for banks.
With the challengers currently looking better equipped to respond to these consumer needs, here are some of the steps banks can take to modernise their offerings and retain customers’ loyalty:
- Embracing human science – the financial sector has long favoured data science in its behavioural analysis. Almost anyone can understand basic data; it is how semiotic algorithms can be used alongside this that will reveal real insights that can be used simply to help understand people better, their fears, their hopes and their aspirations.
- Adapting to modern trends – the lockdown has, by necessity, modified and in some cases accelerated, many of the established habits of both individuals and businesses. These range from an increased adoption of cashless payments, to remote working, the propensity for saving vs investing, attitudes towards fraud and risk appetite, and loyalty. As a result, some customer journeys, which had become the cornerstone of banks’ or lenders’ strategies, will now need to be adapted. For example, products, pricing and customer treatment strategies will need to be updated, and the entire value-chain of customer touchpoints should be digitally enabled. Financial institutions will now need to ensure speed and quality of their response to this change.
- Using innovation to level the playing field – the systemic advantage the big banks have over more agile challengers is in liquidity access. It is an advantage that potentially will be scrutinised in the COVID-19 enquiries we can expect to see in the near future, particularly around the provision of the various governmental support schemes and loans for which these big banks initially had responsibility. As that advantage then reduces, the need for real innovation grows. This means building business models and deploying technology that can deliver value and differentiation. For example, the major banks have more channels than their digital-only counterparts and, therefore, more data to draw on. The result is a better focus on customer journeys, with modern cloud-based data management platforms central to this. The quantity and detail of data can play in banks’ favour, allowing constant ongoing improvements to customer communications and simplifying self-service options in an increasingly remote world. It is important that banks continue to ensure they are thinking outside the box and keeping pace with other industries that are innovating in their response to the pandemic.
- Personalising the process – technology is already helping to speed up processes and improve self-service banking operations, particularly with predictive and smart decision-making through AI and ML. The advanced use of chatbots is an example, along with increasing tailored content and interfaces in apps and on digital platforms. However, the end goal is personalisation across the whole customer journey, not only through technology but also call centre operatives who still form a critical role in trouble shooting and need an up to date view of the customer in order to be able to do their job. Technology can also help analyse how these human interactions can then become more personalised.
The major banks retain a crucial position in UK society for the support and confidence they offer their customers. However, as in so many other sectors, the coronavirus pandemic could come to be seen as a watershed moment in their evolution. With the challengers continuing to gain momentum, banks certainly cannot afford to stand still. It is the ability to have a data- and technology-driven approach, as outlined here, that can help them retain their dominance and justify customer loyalty now lockdown is beginning to lift. Should they fail to do so, we may find ourselves in a very different landscape than we do today. By focusing on the steps above, banks will start to level out the playing field.
2021 FINANCE SPEND PREDICTIONS
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