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DO MESSAGING APPS PUT THE FINANCIAL SERVICES INDUSTRY AT RISK?

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Ashley Friedlein, founder and CEO, Guild

 

Accelerated by the coronavirus pandemic, the use of messaging apps for professional communications has skyrocketed in recent months. Messaging apps have provided a lifeline to organisations, enabling them to support a remote workforce. However, consumer messaging apps have also seen an increase in adoption, and many will be using them for business, as well as personal use.

When using messaging apps in highly-regulated environments, organisations need to be aware of compliance issues in a financial regulatory capacity, while also adhering to laws relating to security, transparency, and data privacy, such as the General Data Protection Regulation (GDPR).

Not doing so puts banks and other regulated entities within financial services at risk of non-compliance, which can result in serious penalties.

In 2017, the UK’s Financial Conduct Authority (FCA) highlighted the risks of using WhatsApp. Guidance from the Securities and Exchange Commission (SEC) followed in December 2018 outlining its responsibility for monitoring electronic messaging, which included messaging apps.

Although regulators have been clear about the risks associated with using instant messaging apps, some financial firms seemingly failed to develop and implement robust guidelines around the use of these services for professional purposes.

Ashley Friedlein

Earlier this year, a senior credit trader at JP Morgan was suspended for communicating with colleagues via WhatsApp, with Jefferies, KPMG, and VTB Capital also finding themselves subject to investigations after employees were found to be using messaging apps as unofficial channels for communication.

Deutsche Bank took steps to ban all text messaging and communication apps to improve its compliance standards, with many others, including HSBC, Citi, and Wells Fargo following suit to move to a secure communications platform. However, while the financial industry is taking steps to prevent the usage of consumer messaging apps, some firms are failing despite the implications of not having a robust policy around the tools used to communicate within a bank or other regulated entity.

 

Data privacy and security

Data privacy laws such as the GDPR and CCPA make the use of consumer messaging apps in the workplace challenging for IT, HR, corporate governance and compliance teams. The financial and reputational cost of misuse in these ‘shadow communications’ channels can be significant.

WhatsApp, one of the most widely used consumer messaging apps, can result in organisations using the platform being non-compliant with the GDPR privacy regulation due to:

  • Lack of explicit consent – anyone can be added to a WhatsApp group without explicit consent. WhatsApp has added functionality to prevent specific users from doing this, but this is not enabled by default. Contacts can also upload data to WhatsApp/Facebook if they give access to their contacts/address book, even though those contacts have not given consent.
  • Lack of ability to delete information – after a certain time, content posted to WhatsApp cannot be removed.
  • Lack of ability to get your own data back (SAR – Subject Access Request) – WhatsApp cannot provide an individual with messages they have posted, only profile info.
  • Data being transferred outside the EU – it is not very clear where exactly WhatsApp/Facebook moves the data it collects.

The use of WhatsApp for business purposes potentially breaches GDPR in several ways.

Companies do not even know what groups exist in consumer messaging apps, let alone who is in them, or whether former employees or contractors may still have access, increasing the risk of data breaches and leakage of confidential information.

 

A lack of oversight and transparency
Consumer messaging apps like WhatsApp, Signal and Telegram have provided unofficial communication channels that are difficult to monitor, resulting in a total lack of visibility for employers and regulators alike.

Access to these unofficial communication channels presents a serious risk by creating opportunities for employees to take advantage of situations This includes conducting business under the radar in a way that benefits them, or their clients in a manner that is immoral, or even illegal. In some cases, sharing information about clients without intending to cause harm can still result in serious consequences.

Firms have a legal obligation to keep a record of conversations between themselves and their employees, clients, or stakeholders. If legal challenges arise, it may be necessary to provide a record of these conversations. Many consumer messaging apps store data locally rather than centrally in the cloud, making it more difficult to provide a complete record of conversations.

In addition, there are also legal obligations and a duty of care to protect employees and ensure adequate levels of oversight, governance and control. This includes protecting them from bullying, harassment, or inappropriate behaviours in the workplace. The lack of visibility and transparency around consumer messaging apps, including the ability to delete messages, makes it more difficult for HR departments and legal teams to address issues promptly, while inhibiting their ability to collect evidence.

Terms of service

WhatsApp is used by over 40% of UK workers for professional purposes. This appears to violate WhatsApp’s own terms of service, as the app is not intended for business use.

WhatsApp’s terms state:

“WhatsApp is committed to using the resources at its disposal–including legal action–to prevent abuse that violates our Terms of Service, such as automated or bulk messaging, or non-personal use.

“We make no representations or warranties that our Business Services meet the needs of entities regulated by laws and regulations with heightened confidentiality requirements for personal data, such as healthcare, financial, or legal services entities.”

 

How can the financial service industry minimise risk when using messaging services?

The financial services industry requires a tailored approach to messaging in order to effectively minimise risk. Messaging apps are becoming increasingly ubiquitous, and do provide many benefits, such as increased productivity and collaboration. Excluding them from communications completely can close off channels that improve operational efficiency and build rapport between teams – something that has become even more important now that many employees are working from home.

Banks who have taken steps to ban all text messages and communication apps on work-issued devices in order to improve its compliance standards have sought alternatives, such as Symphony – a messaging service aimed at highly regulated financial firms. This enables banks to continue to communicate with clients in real time, while also maintaining thorough and rigorous standards of data security and privacy protection.

Security, transparency, and compliance are paramount in the financial services industry, yet it is easy for unregulated consumer messaging apps to go completely unnoticed. The sector must do more to acknowledge and address their use in order to adhere to these three fundamental principles.

Workplaces, working practises, and channels of communications have needed to change rapidly as a result of the COVID-19 pandemic. It’s critical that organisations address the issues and risks associated with messaging apps by implementing robust policies around workplace communication and seek out viable, compliant alternatives not only now, but as part of a long-term solution.

 

Written by Guild founder and CEO, Ashley Friedlein. Guild is a British, independent and ad-free messaging platform for professional groups, networks and communities.

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Business

TOP TIPS FOR BOOSTING YOUR CASH FLOW AND BUSINESS IN 2021

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By

Ian Gass, CEO at Agitate

 

Many small businesses are still dealing with the disruption caused by the pandemic. Improving financial performance is most likely to be at the top of agenda, and a good place to start is reviewing cash flow. No matter what the product or services a company provides or the size of the business, cash flow still remains king.

Research has shown that 38% of small business owners who have suffered cash flow problems have been left unable to pay debts. With 1 in 7 small business owners having been left unable to pay employees because of cash flow issues, this equates to a huge 2.2 million people in the UK not being paid on time.

 

The importance of positive cash flow

Profit has traditionally been seen as the most important measure of an organisation’s financial performance. However, the focus is increasingly shifting from the income statement to the balance of cash inflows and outflows. Prioritising profit levels reflect long term fiscal health, but it does not necessarily mean that a business can pay its bills on time and survive in the short term.

Ian Gass

Sudden drops in demand prove how keeping an efficient cash flow balance is essential, and can expose shortcomings of currently used solutions. When reviewing your cash flow, you need to look at ways to get more money coming in and better manage the money that is going out. Here are a few ways to improve cash flow management and see positive changes in a short period of time.

 

  1. Efficient forecast

It is important to be able to compare actual income and expenses with those that are in the pipeline, as it helps to determine which area of business is under performing or generating unnecessary costs. Start by looking at your projected income and expenses for the next three months, don’t wait until you receive a bill to realise there are not enough funds to cover it. An easy way to overcome this issue is a free cash flow template available online.

 

  1. Terms and Conditions review

Making sure that T&Cs are clear and comprehensive not only provides your business with a protective layer, but also makes customers understand when and how the payment is expected, and the process and penalties for late payments. That’s why regular checks and reviews of existing agreements prevents businesses from potential loses. It is also good to use reward tactics to encourage customers for prompt or early payment such as discounts or free shipping.

 

  1. Payment terms

Payment terms that are understandable and realistic is clear T&Cs in place. As it creates a contract with suppliers and obliges the organisation to pay on time, it is important to match these terms wider operation processes. For instance, if you have 14 days to pay your suppliers, but your customers get 30 days to pay you, a problem of late payments will be inevitable. To avoid damaging relationships with suppliers, you should consider an extension of the terms or reducing the credit period for your clients. It is worth taking deposits, asking for payment in advance or on receipt.

 

  1. Invoice management

Another method that can quicky improve cash flow is sending invoices promptly and ensuring they are accurate. Any mistakes will simply require queries to be resolved and it will take longer to receive payment. In addition, it is important to remain persistent at following up late payments and moving the money to the bank as soon as possible. Some clients will always need chasing and, without a follow up, they will hold on to the cash as long as possible.

 

  1. Payment options

Making it easy for clients to pay gives businesses the best chances of being paid quicker. While accepting card payments might be common place, there is a high risk of fraud. For example, in 2019 £620.6m was lost in card fraud in the UK. Also, it can be expensive to process and often leaves an organisation to wait days to receive the funds. Using a free bank-to-bank payment app means businesses can send payment requests from mobile phone straight to customers via email or messaging app (such as WhatsApp).

In that case, the consumer will receive a message with all the information they need to make the payment instantly. They click the secure ‘Paylink’, which directs them to their online banking app and all the relevant information is displayed such as your name, the amount to be paid and a reference. The transaction needs then authorising with their bank and the money moves instantly from their account to yours.

 

  1. Cost reduction

If there is too much money going out that a company can’t afford, business owners need to think of ways to reduce those expenses. There are a few questions to help understand where money can easily be dislocated:

Is there software or equipment that you are paying for that you don’t use? Can overhead costs such as utilities and administrative expenses be reduced? Are card transaction fees putting an unnecessary pressure on cash balance? If so, it can be eliminated with a bank-to-bank payment app.

Although profit might be seen as the ultimate goal for companies of all shapes and sizes, sustaining positive cash flow provides vital foundations on which a company can grow. By using the right tools, business owners can not only get paid faster and more securely, but also improve customer experience, reducing the transaction to a quick QR scan. Making a few smart changes to the existing balance sheet can have a big impact and future-proof an organisation in no time.

 

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Business

BRIDGING THE DIGITAL EMPLOYEE EXPERIENCE GAP

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By

Matthew Sturman, senior technical consultant, AppLearn

 

While the financial sector was arguably some way along the digital transformation curve before the pandemic, embracing innovative solutions to enhance customer experience and security, the last 12 months have required a step change like no other for employees.

Overnight, teams were operating remotely, using an array of new business applications from communications tools to support systems. Business critical processes which may have been stagnant for some time due to a risk adverse culture, quickly evolved with a need for greater agility.

In a post-pandemic world, it’s crucial that financial leaders don’t become complacent about the employee experience; KMPG put employees at the top of their list for financial institutions six considerations in dealing with the impact of COVID-19. Organisations have rapidly undergone transformation to facilitate home working while maintaining operations, however the proliferation of technology has also highlighted a critical digital employee experience gap. Addressing this will be key to embedding digital strategies which enable and support employees in the long-term.

 

Matthew Sturman

The overwhelmed employee

Even before the pandemic, research from Okta detailed how the number of worker applications deployed by organisations had increased by 68% over the past four years.

You only need to look at how employees access IT support to realise just how complex this picture has got for employees. Every technology application – from risk and complicance to payroll software– has a different route to access support, with employees having to navigate chatbots, online knowledge bases, resource hubs or the helpdesk. The result? Context-switching. Time spent flitting between different applications or windows to complete tasks, taking employees out of the flow of work. Studies have shown that switching contexts has a dramatic impact on time lost mentally re-focussing between tasks, in addition to time wasted navigating to try and find support.

In fact, research from McKinsey has found that workers spend up to 20% of their working week searching for information or support on tasks. This issue has only been compounded further with employees working from home, and not knowing where to go for timely support.

 

Prioritising the user

Over time, these small interruptions can add up to a significant impact on an organisation’s performance – and lead to user frustration, as well as decreased motivation amongst employees.

Historically, financial services businesses have taken a customer-first approach to investing in user experience – prioritising external customer service and communication over the internal employee experience. However, most employees are also users of this technology, and expect the same smooth transitions and consumer grade experience when using their work devices or software. When their digital experience is seamless, employees can focus on their role without interruption.

In a recent report, KPMG said organisations should create an ecosystem of tools and technologies that work together to enable experiences that help people work better. Any shifts in technologies should consider the combined impact of features and integration. It’s this sentiment financial leaders must embrace to truly empower digital workers.

 

Bridging the employee experience gap

According to a recent report from analyst firm Constellation Research which looked at the impact on the pandemic on the digital workplace, organisations have a historic opportunity to transform the employee experience.

It encourages organisations to adopt an ‘employee experience platform’ (EXP) model that connects disparate digital tools into a more cohesive digital workplace. This model is made up of disruptive technologies that bring together siloed applications and software.

Technologies such as digital adoption platforms (DAPs), machine learning, ‘people analytics’ tools and on-demand talent sourcing have been highlighted by Constellation as key components to the EXP. DAPs, for example, help solve the issue of disparate IT estates by overlaying software applications and providing a consistent support experience across multiple applications. This can take the form of step-by-step guides to navigate the user through new digital tasks and workflows, through to ensuring knowledge articles and chatbots are seamlessly available when required and provided in context of the individual requiring it and the task they are performing. Crucially, this keeps employees in the flow of work and avoids wasted time switching between applications and searching for support.

 

Looking ahead

It’s been an immense year of change for financial leaders, organisations, and importantly employees. As we move out of the pandemic, getting this next phase right will be absolutely key. For many businesses, this will be about moving from survival to thriving in a digital world.

The steps are simple. Identify the experience gaps, explore disruptive tools and technologies that bridge them, but most importantly, create an employee experience that enables and empowers them to do their job better.

 

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