Patrick Lastennet, Director of Enterprise, Interxion
As we delve deeper into the age of the internet our businesses and industries continue to be disrupted by new innovations brought about by technology investment and digital transformation. Financial services has not been immune to these effects. Increasingly players in this sector are turning to new technology to position themselves as leaders in particular niches that competitors aren’t occupying, and so better serving their own corners of the market.
In some ways this investment is democratising the market, making the sector a more level playing field than it has been for years, if not decades.
However, digital transformation initiatives do not come cheaply. In many cases these projects are major undertakings that are central to the organisation’s long-term business strategy. It is therefore crucial to get the strategy right, execute the project well, and select the partners who can help you do that quickly, efficiently, and at a reasonable cost.
The role of tech in financial services
As technology has evolved over the years, so too has the delivery mechanism for that innovation. We’ve gone through several waves of centralisation and decentralisation, but many financial services business are now realising that in order to grow and thrive they need to move away from on premises infrastructure environments in their office buildings and embrace the benefits of external IT provision.
Smaller hedge funds in particular are finding that aggressive low-latency strategies are no longer yielding the same kind of returns they used to and new approaches are needed. They are becoming increasingly reliant on being smarter, not just faster, to deliver a competitive service to customers.
To become smarter, they are bringing in more data and more diverse data, and in-house IT systems can no longer keep up. To maintain optimal levels of performance, these financial services businesses are turning to colocated data centres. By partnering with them, they can add the high performance compute capacity and GPUs they need to glean better insights from increasing volumes of data, while maintaining close proximity and connectivity to cloud providers to spin up capacity for more elastic workloads.
While in the past it may have been viable to simply tinker around with IT infrastructure that you kept on the premises, in the fast-moving world of today this is simply too complex and costly for most. Unreliable power supply, expensive FTTP tail circuits, and poor security all pose risks to the business. A new model, incorporating colocation, needs to be adopted.
As such financial institutions are working ever closer with their data centre partners to design and configure the best environments to run the calculations and workloads that now power their business, enabling them to differentiate themselves, grow, and thrive in the market.
Where data centres come in
Data centre services providers can help firms ascertain the right combination of public and private cloud infrastructure needed to run an organisation’s workloads, maintaining the strong security and compliance regulators demand, without running up huge bills or locking themselves in to a single vendors’ ecosystem. In fact, an off premises model in a data centre can be up to 80% cheaper than the equivalent on-premises solution.
They can also help companies connect different parts of their IT ecosystem to deliver new innovation more efficiently. For example, with latency much less of a determining factor in FS success than it used to be, many firms are turning to the data they own and have access to tell them new things about the operating landscape. Looking at historic data and using predictive analytics to map what might happen in the future is certainly being applied widely already. But firms are also looking to a myriad of alternative data sets, using any intelligence they can get their hands on to spot correlations and causations of movements in the market to help them deliver better outcomes for their customers.
Predicative analytics and the kind of complex computation needed to glean intelligence from these data sets will often mean turning to AI techniques such as machine learning. But financial institutions don’t have the technology to design and run calculations or simulations like this in house. That capability will more often than not, sit in the cloud or in a hyperscale data centre in a location where energy is cheap and therefore the costs of spinning up lots of servers running specialised chipsets optimised for AI workloads are relatively low.
But that’s not the end of the story. Once these complex models are designed, built, and trained using large data sets in these hyperscale data centres, real world data needs to be fed in to the model and insights sent to the systems and decision-makers that can utilitise them for commercial gain.
Working with a colocation partner can provide a space to run these models much closer to the office, exchanges and liquidity venues where trades occur, enabling financial services firms to react much quicker than if their data was being sent half way around the world and back for computation.
Critical factors for success
Selecting the right data centre partner can be critical to the success of these digital transformation initiatives and the longer term futures of these firms. In a major financial services hub like London, for example, City firms will prefer their servers to be housed in a data centre that’s close to their offices in case they need physical access. They will want that data centre to be highly connected through a wide range of global carriers. They will also want that data centre to be close by and connected to the key trading locations that they operate from.
These factors combined allow financial services firms to not only operate effectively today, but in working collaboratively with their data centre services provider and other parts of their IT ecosystem, invest in the technology and digital transformation initiatives that will see their businesses thrive tomorrow.
DIGITAL FINANCE: UNLOCKING NEW CAPITAL IN DISRUPTED MARKETS
Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises the ability they need to improve cash flow and revenue through better use of data and improved analytics-driven visibility.
Businesses everywhere are scrambling to recover lost revenues and protect cash flow. But as countries globally grapple with a dreaded second wave of the pandemic, imposing far more stringent localised lockdowns and new restrictions, it is set to be the hardest winter in living memory for many sectors.
The likelihood of winter peaks, so often the saviour of sectors such as travel and hospitality, benefitting businesses is diminishing rapidly. While many have pivoted to a greater or lesser degree, few have been able to offset the impact of falling revenues on cash flow. Even retail, riding an e-commerce boom in many regions, is finding itself in choppy waters, with 17 percent of consumers switching brands due to the economic pressures and changing priorities caused by the pandemic.
As one McKinsey article notes, “With some companies losing up to 75 percent of their revenues in a single quarter, cash isn’t just king – it’s now critical for survival”. Where then do businesses find new sources of cash to sustain their operations through the coming months?
Tapping Overlooked Cash Opportunities
For many, the answer could depend on whether they have digitally transformed their finance department. Why? Because many organisations are sitting on unidentified opportunities, funds that could be vital in shoring up businesses over the next few months or plugging the gap between operating costs and government bailouts. Yet those that have been slow to start their digital transformation journey are at a disadvantage;. At the same time, it is possible to identify these hidden seams in an analogue organisation, the process is time-consuming, manually intensive and, without the right digital tools, prone to human error.
Where deploying digital tools helps is by bringing speed, automation and reliable data to the fore. Connecting them with digital finance and accounting systems can give businesses clear insights into how money is being spent, where wastage is occurring, and where opportunities for optimisation exist.
It might be something as simple as automating the accuracy checking, issuing and chasing of invoices and late payments. This could reduce errors and invoice disputes and ultimately lead to faster payments. Accuracy and organisation are also important in billing – better records enable faster billing for work completed, and in turn, should deliver quicker payments.
It could also be around having the ability to review the supply chain and procurement data and identify where a supplier is subsidising a larger customer’s product line through drawn-out payment terms, or where a variety of vendors are on different terms across the business. Using that data and overall knowledge of the business to negotiate better terms that work for both supplier and customer can create new opportunities. It could even be to identify late-paying customers, determine the reason for late payments, and use that intelligence to develop products or financing solutions that continue to support those customers (and improve loyalty) without increasing the burden on the balance sheet.
Generating Reliable Insights for Faster Decision-making
To do any of these manually would take months, generating data slowly that would quickly go out of date. But digital finance departments have evidence they can trust to inform business decision-making. That’s because old, manual processes built around Order-to-Cash lack the flexibility and agility that businesses require in today’s markets. The fact is that even before the global pandemic crisis, the pace of digitisation across all sectors was demanding new approaches to finance and book balance.
The opportunities are significant – from cognitive credit and improved forecasting accuracy to enhanced customer analytics. All use similar tools, based on artificial intelligence and quality, trusted data. Cognitive credit can be deployed to quickly make decisions on whether to advance or restrict credit, based on individual company positions and available data. Doing so enables businesses to either capitalise on opportunities (for instance, agreeing credit for a supplier that has run out but is a supportive and integral partner) or avoid risk (in the cases where a business might be in administration).
With more accurate forecasts, businesses can better manage their currency purchases and deposits, selling currency that is not required or buying more where predictions identify an upcoming demand.
It is the same with customer analytics – with a greater understanding of customer needs, businesses can make decisions based on the right mix of the product (and how it meets demand) and supply chain suitability (such as production costs and location in relation to customers).
In many ways, the events of the past year have accelerated the process. In doing so, the problem is the pandemic has also accelerated the speed at which failure to act can lead to obsolescence. Therefore, it is vital that businesses, and more particularly their finance and accounting departments, kick start their digital transformation. This will enable them to deploy the tools and analytics that is needed to capture data, generate insights and drive fast, accurate decision-making to uncover previously untapped sources of cash and reverse revenue degradation.
The Importance of Digitally Enabled Finance Teams
Forward-thinking CFOs have already begun the process of digitising their departments, but for those that have been slow to start, now is the time to push forward. It is only through digital tools and analytics that finance leaders can identify both the internal and external opportunities to recover revenue and improve cash flow. Whether that’s releasing working capital, minimising revenue loss and accelerating revenue recovery, reducing total cost of ownership or enhancing customer retention – only digitally enabled finance teams will be in a position to capitalise and, ultimately, bolster business performance during what will be a trading period like no other.
About the author: Krishnan Raghunathan
Krishnan Raghunathan is the head of Finance & Accounting (F&A) practice and operations at WNS. He also leads the international delivery locations in China, Costa Rica, Spain, Sri Lanka, Romania, The Philippines, Poland and USA.
Prior to this, Krishnan was Chief Capability Officer for WNS, in that role he headed Horizontal practices across Finance & Accounting, Customer Interaction Services and Research & Analytics, Transformation & Process Excellence, Program Management (Transitions) and Solutions development.
He has more than 27 years of experience across Finance & Accounting, Business Process Management, Sales Solutions and Capability functions including 7 years in Accounting practice.
Before joining WNS in 2013, Krishnan led several challenging roles at Genpact, supporting strategic deals and consultative selling. In addition, Krishnan was also the business leader for a number of industry verticals at Genpact, including hospitality, transportation, logistics, media and professional services
Krishnan is a Chartered Accountant, a Certified Six Sigma Green Belt and a trained Six Sigma Black Belt
NAVIGATING SUDDEN DIGITAL ACCELERATION – HOW MERCHANTS CAN KEEP UP IN A NEW AGE OF PAYMENT INNOVATION
James Booth, VP Head of Partnerships, EMEA at PPRO
Recent months have brought momentous change for businesses across the globe. Needless to say, the pandemic has had a colossal impact on the retail sector in particular. For certain industries, the crisis has catapulted society further into the digital world; technology that was predicted to be adopted over the coming years is now on track to be embraced in mere months.
However, local lockdowns for example in the UK continue to force shoppers away from brick-and-mortar stores and onto online platforms to purchase a range of goods. As a result, we are seeing new user groups embracing e-commerce and digital payment methods at a much faster rate than anyone ever thought possible. These new consumer habits are taking root and are likely to become preferences that persist long after the pandemic.
As we continue to hurtle into a new digital era, there’s an unprecedented urgency for merchants to be proactive – offering a range of new payment offerings. As digital payments increase, offering preferred payment methods can unlock a whole new world of opportunities. The retailers seeing exponential growth are the ones who have tailored and localised their payments offering to a global audience.
The pandemic has propelled demand for Local Payment Methods
Today, consumers have an even greater desire and need for frictionless shopping experiences. Social distancing is facilitating the surge in e-commerce, increasing demand for digital payment methods over traditional cash and card payments.
Before the pandemic, the world was already on route to becoming a digital-first society. Some regions were ahead of others; for instance, from the PPRO Payment Almanac, 56% of online transactions in China were already conducted via e-wallets, compared to 25% in the UK. However, now we are seeing increased demand for these types of payments across the globe.
Catering for a new online customer
Whilst typically the global digital payment revolution had been led by Gen Z and Millennials, elderly consumers are set to drive the e-commerce market post-crisis. In fact, a recent study by Mintel revealed that 43% of those aged 65 and older have shopped more online since the start of the crisis. This is a stark contrast from back in May 2019 when just 16% of the same age group shopped online at least once a week.
Ongoing consumer needs for increased convenience and safety during the pandemic, have sparked a shift towards online shopping and away from brick-and-mortar. For example, groceries have seen a meteoric rise in online ordering; according to PPRO’s cross-border engine, online purchases of food and beverages are up 285% since the start of the pandemic.
With new curbside and buy online pick-up in store (BOPIS) programs, the typical cash and card payment methods will be harder to maintain. Now, merchants must offer e-commerce, and implement digital payment options at checkout. Recent data shows up to 80% of shoppers across Europe’s three largest markets (UK, Germany and France) will now make at least half of their purchases online.
We are also seeing the rise and popularity of pay-later apps like Klarna and Afterpay (Branded ClearPay in the UK) to help offer relief from the economic impacts of the virus. Just last month, Klarna was crowned one of Europe’s biggest private owned financial technology providers – with nine million consumers in Britain having used the service, and 90 million users worldwide.
Shoppers need flexible payment options. For merchants, extending many different payment options that cater to different consumer groups can provide diversification and enable growth.
Get ahead, or get left behind
This sudden digital acceleration puts merchants at a crucial crossroads. Embracing new innovations in payment methods has the power to open brands up to a wealth of new customers, whilst satisfying the changing needs of their existing customer pool. On the other hand, failure to offer a variety of digital payment methods can severely limit brands – therefore impacting future growth and success.
As businesses continue to navigate the ongoing ramifications of the pandemic, merchants will eventually face a digital arms race to create the best possible online experience. Those who understand this and make the checkout experience a top priority will succeed, and those who stick to their guns will be left behind. The failure to meet customer preferences during the payment process means many customers will abandon baskets at the very last hurdle. In fact, a study by PPRO 44% of UK shoppers abandon a purchase if their favorite payment method isn’t available.
While recent events have put huge strain on both global economies and consumers, it has also birthed a new age of payment innovation. New offerings such as the rise of Facebook owned, WhatsApp payment features or PayPal and Venmo enabled QR code checkout are showcasing the acceleration of this trend. Financial technology is helping to keep humans connected and provide access to the goods and services they need. Digital adoption will only proliferate, so merchants must act now to get ahead of the curve.
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