Simon Cole, CEO at Automated Intelligence, a cloud-based data compliance and governance solutions provider to the financial services sector, warns FS firms must address the data issues flagged and created by the Covid-19 pandemic
When the pandemic started, organisations within the financial services sector were faced with three key questions. How do we do homeworking? How do we go remote? How do we manage this?
In trying to answer these questions, the business continuity measures taken by FS firms were not up to scratch. Mistakes that could have been avoided were made. To start off with, users had to be given the necessary equipment to make remote working happen and they had to have access to the infrastructure needed, such as broadband. Users also had to have access to the information and data needed to do their job. And this is where they started to run into trouble. While software applications like Zoom and Microsoft Teams made it possible to stay connected, the systems in place were not adequate to facilitate secure data management practices en masse.
These are the downsides that need to be addressed.
Where’s the governance?
Historically, firms operating in the financial sector have been slow to adopt cloud technology, preferring to store sensitive data on premise, in order to mitigate perceived risk. As such, through the lockdown, much of the data people need access to is not in the cloud, but is stored in applications or file servers.
Adding to the issue, the VPNs of many organisations don’t have the capacity to allow large numbers of users online. This lack of VPN availability has forced FS firms to allow users access to GDPR sensitive data multiple times, with little or no method of tracking in place.
In order to acquire the information they need to do their jobs while out of the office, employees have been copying, downloading and sharing files that now exist outside of the corporate firewall, without any governance or security considerations. Such data is now, for all intents and purposes, in the wild, making it harder to bring back under control. Teams working remotely don’t have the corporate governance and security protocols that they would have when working in the office.
So, being forced to work remotely, at short notice, has impacted compliance and governance in a very negative manner. The way data is being handled greatly increases the chance of a data breach occurring. It also flies in the face of FCA regulation, and in particular GDPR where personal data is being used. While the FCA might be a little more lax in light of the current challenges right now, this will change when data breaches start to occur and customers start asking questions. Poor choices now will not be a reasonable excuse to avoid future fines.
If this crisis has shown us one important thing, it’s that the slowness of financial services firms in adopting cloud technology, which made it significantly harder for them to access and use data, has hurt business continuity, security and privacy.
Better Data Practices
So, how can organisations take control of their data? For many this means deploying it to the cloud in a rapid manner, whilst retaining security and governance practices. It is possible for organisations to make data accessible if the technology is deployed correctly, allowing all the necessary controls to remain in place. Having the short-term decisions correctly in place and making them under an umbrella of good governance and accountability, ensures that you don’t suffer knee jerk reactions and risk losing control of data.
By keeping on top of your data as much as possible, you significantly reduce the opportunity for chaos to happen. That starts with making it available on a safe and secure platform. At a time like this, it is imperative that organisations have a good understanding of their data. Information asset registers should be kept up to date to track where their information is, where it’s being used and the purpose for which it’s being used.
For our clients, we are now using AI to help them assess and understand their data, flag any risks their data is posing to their organisation, and help them mitigate that risk. By implementing the right systems this can all be automated, and there is nothing stopping organisations from doing this with next to zero impact on their userbase.
Remote working is becoming the norm: It has been proven to work and organisations will start reflecting on how much office space and connectivity they really need. As such, organisations are being forced to act now and adapt their data governance and compliance practices to suit the ‘new normal’. Waiting until the pandemic passes is not an option.
CAN TECHNICAL INNOVATION HELP FINANCIAL SERVICES FIGHT BACK AGAINST FINANCIAL CRIME?
By Charlie Roberts, Head of Business Development, UK, Ireland & EU at IDnow
It’s no secret that the financial services sector is a top target among cyber criminals. In fact, according to a report from IBM, it retained its top spot as the most targeted sector in 2019.
The consequences of falling victim to an attack can be severe too. It can lead to financial losses and reputational damage as well as loss of customer confidence and therefore sales. One UK financial services firm, for example, was hit by a total loss of $87.9 million.
So, if we consider that the coronavirus crisis continues to drive increased online consumer activity, should financial services be more concerned? Simply put, yes.
We are seeing a significant increase in organisations taking their business online to reach their customers. Banks, for example, in adapting to COVID-19, are offering customers a more convenient way of opening an account given branch visiting restrictions. But while these services offer more choice and ease for customers, it also means that new account fraud is opening up and is becoming a major challenge for organisations to overcome.
Some cyber criminals are even trying to exploit the pandemic as an opportunity for financial crime by posing as trusted organisations like banks and even the World Health Organisation. According to Action Fraud, over £6.2 million has reportedly been lost by UK citizens to coronavirus-related scams. And this figure continues to rise week by week.
The role of innovation
The rise in financial crime shows just how much the financial services sector is in need of technological innovation. We’ve already seen great progress. About half of financial services and insurance firms globally already use Artificial Intelligence (AI), according to Forrester.
It has many use cases too. In a recent report published by The Alan Turing Institute, AI is largely being used for fraud detection and compliance. AI is beneficial because its algorithms can analyse millions of data points to detect fraudulent transactions which could otherwise go unnoticed by humans. What’s more, these AI-driven fraud detection systems can now actively learn and calibrate in response to new potential (or real) security threats.
The report also details some of the ways that financial services companies are exploring AI-based fraud prevention alternatives. It includes the use of AI to increase approvals for genuine transactions and the use of real-time and high volume data to help protect schemes, financial institutions and their customers from fraud and financial crime.
It’s perhaps no wonder that, outside of the technology sector, the financial services industry is the biggest spender on AI services according to The Bank of the Future report from Citi. But there is still some way to go in using technology to combat financial crime.
The identity verification era
Arguably, identity verification is one of the most important processes that technology can help transform – especially as the current crisis continues to drive increased online customer behaviour. In fact, AI and video based identity verification software can provide financial services organisations with a fast, seamless and secure onboarding process that increases conversion rates and customer satisfaction while providing the highest level of security.
Demand for this software in the UK’s financial services sector has already more than doubled since the start of the year, as growth in scams linked to COVID-19 continue to rise.
It’s this technology that will become critical in validating a person’s identity quickly and confidently while limiting the increased risk of fraud for both businesses and consumers.
IDnow’s AutoIdent is one software solution that has this year been experiencing high demand from the financial services industry. Its AI technology can use the camera on a customer’s smartphone to recognise the country and type of ID document without the need for user input. The technology then captures the machine-readable part of the ID document as well as non-machine-readable areas, such as address fields, before automatically checking the optical security features of the ID documents, such as holograms.
With the subsequent biometric video check of the person and “liveness detection”, the identification process is completed for the customer within just a few steps. The system can then decide if the identification is valid, with a reliability that meets compliance requirements.
The threat of financial crime is not going away any time soon and so there is no better way than to fight back with innovation. With the right technology investment, such as in AI identity products, the sector will be in a stronger position to support businesses who have a duty of care to protect their customers from risk of fraud while ensuring they remain resilient during this pandemic.
COULD COVID-19 BE THE CATALYST FOR DIGITAL TRANSFORMATION IN FINANCE?
By Simon Bull, Sales Operations & Business Development Manager at Aqilla
We are all now living in a new ‘normal’ where working from home is no longer a luxurious ‘perk’ of the job, but an essential. In the case of many organisations, the transition to flexible, remote working was successful, albeit slightly bumpy. But there is one department that has found it more challenging to transition to the required standards of remote working – the finance department.
The finance department often gets left behind when it comes to digital transformation largely because it is so heavily regulated. And because of this, one of the biggest problems the finance teams face is that it’s sensitive data will likely be stored on a hardware server on office premises. If you look at how organisations update their software as they grow, it’s usually the finance department lagging far behind, or sometimes forgotten about altogether. This is because finance has complex requirements that can lead to the attitude of: if it ain’t broke, why fix it?
Up until now, most finance teams have overcome the challenges this situation presents, but with the repercussions of the pandemic still very much in play, the complications that go hand-in-hand with on-premise technology have been more noticeable than usual. As a result, COVID-19 is becoming a catalyst for a digital transformation in finance, or more specifically moving finance and accounting software away from traditional on-premise solutions to built-for-cloud services. But what are the advantages of this approach, and what should finance teams be looking for in a built-for-cloud solution?
Cost: The Software-as-a-Service (SaaS) approach that is the basis of many of today’s cloud computing businesses generally offers customers a convenient monthly pay-as-you-go model. Given that all that users need to access the software is a desktop, laptop or smart device and internet connectivity, they can also save money on the server hardware that has previously sat in the corner of the office. Hint: compare pricing from several potential providers to make sure there are no unexpected extras before signing up.
- Service: Good cloud-based providers offer extremely strong levels of customer support and service. It should be very easy to get help quickly and conveniently, and they should be in a position to offer advice, identify problems and fix errors without undue delay. Hint: ask for references from existing customers or look for online reviews to assess their service and support capabilities. Also, carefully check their Service Level Agreement (SLA) to clearly understand where their commitments begin and end.
- Security: Established cloud providers offer high levels of security, data protection and backup services as part of their ‘as-a-Service’ package. Customers benefit from the protection afforded by security specialists whose job it is to prevent breaches and keep data completely secure. Hint: Check their security policies and consider talking to existing customers about their security track record.
- Compliance: Cloud providers specialising in the finance industry should have compliance at the heart of their product set. Hint: Check with potential providers about their levels of compliance and certification, particularly if you have specialised requirements.
- Ease of use: today’s built-for-cloud software services are built for purpose, with many offering a high degree of bespoke capabilities so every user can tailor it to their precise needs. This is in contrast to traditional software packages that can be far less flexible, forcing the user to work in a particular way that might not be ideal. Hint: ask potential providers for an online demonstration to check the way the services work meet your needs.
- Performance: In the early days of cloud computing, finance software was too basic for many professionals to consider. Today, there are many entry-level services, while others offer a comprehensive range of capabilities to precisely fit the needs of professional finance departments. Hint: evaluate the range of capabilities offered by a cloud provider, which should include areas such as: extensive analysis, proper periodic management and business calendars, multi-currency, multilingual and multi-company operation, full VAT handling International coding, tax and language flexibility, automatic reconciliation / bank integration, built-in key performance measurement, advanced search, selection and drill-down, document and image scanning. Hint: compare the features of different providers in advance – if anything important is missing, look elsewhere.
- Regular updates: Software developers find it much easier to update and improve their services when they are delivered online, and can more effectively keep up with finance best practice and changes to rules and regulations. Many also encourage users to suggest improvements or new features which are then provided to customers at no extra cost. Hint: ask providers about how often they update their software and whether you can suggest improvements.
For many businesses, these are compelling reasons to adopt cloud-based finance software services, even in normal circumstances. But considered in the context of the current remote working environment, built-for-cloud finance software can help departments to adapt and capitalise on working from home and match the levels of digital transformation seen across many other key business functions.
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