Technology

HOW TO KEEP DIGITAL TRANSFORMATION ON TRACK AFTER THE PANDEMIC

Ashley Coker, CEO and founder, Slate

Introduction

The global coronavirus health emergency has made it abundantly clear how dependent we are on digital services for business continuity and social cohesion. When physical contact must be minimised, digital businesses are in a better position to rapidly adapt and continue their services and respond to customers’ needs.

This is perhaps why Chancellor, Rishi Sunak, was prompted to delay the introduction of IR35 Off-Payroll working rules to the UK private sector until April 2021, as part of his package of measures to support British businesses through the COVID-19 crisis.

While some businesses expressed relief at the delayed introduction of IR35 rules in the private sector, many financial enterprises had already terminated contracts with IT contractors in preparation for the original deadline, with the risk of digital transformation programmes stalling.

What is IR35?

Inland Revenue legislation 35 (IR35) is a tax law designed to prevent individuals from using intermediaries, such as their own limited company, in order to avoid paying their fair share of tax and national insurance contributions (NICs). By setting up a limited company, some people were able to leave their employment in a bank on a Friday and return to the same job on a Monday as an IT contractor, with no change in their role, duties, or place of employment. HMRC wants to put a stop to this.

However, with an estimated 170,000 contractors working through their own personal service companies, HMRC has not had the resource to address cases individually and decided to put the onus on the organisations that hire contractors.

From April 2021, the responsibility for assessing whether a contractor is genuinely self-employed (outside of IR35) will fall on every medium and large private sector organisation with a turnover of over £10.2 million, a balance sheet of £5.1 million, and more than 50 employees. This means that every contract will have to be reassessed to decide whether an individual’s work falls inside or outside IR35. Contractors must be provided with a Status Determination Statement (SDS) for each contract that they undertake, confirming the organisation’s assessment of their status for IR35 purposes.”

How has the financial sector prepared for IR35?

To avoid the time and resource required to scrutinise thousands of contractor contracts, many financial services organisations took a blanket decision which deems that all contractors are working inside IR35. Several prominent organisations have taken this route and terminated all contracts with contractors who bill for their services via limited companies.

Being deemed to be working inside IR35 has the effect of making hiring organisations liable for paying contractors’ income tax and National Insurance contributions at source, as though they were employees, without contractors benefiting from the sick pay and holiday pay benefits of the organisations’ employees. Tax experts have calculated that working inside IR35 will reduce contractors’ incomes by approximately 25 per cent. This makes projects less attractive to IT contractors who might be working on delivering digital change.

How does IR35 affect Digital Transformation?

Prior to the IR35 deadline extension, HSBC, Lloyds bank and Barclays bank were reported to have taken a uniform decision to classify all contractors as working within IR35. It was also reported that Deutsche Bank risked losing 50 out of 53 contractors working in its London-based change management team after taking the decision to cease working with contractors via personal service companies and asking them to join the payroll of a recruitment outsourcing agency used by the bank.

If IT contractors stop working with their financial service industry clients, to avoid falling foul of IR35 after April 2021, this could have a devastating impact on digital transformation projects that depend on the specialist skills of external contractors.

A number of contractors have reported that they plan to seek employment overseas after IR35 comes into force in the private sector, so that they can carry on enjoying the flexibility, job satisfaction and remuneration of working off-payroll. This could result in a brain drain for many sectors, such as banking, which relies heavily on the skills of external IT contractors to deliver digital transformation.

Fast track to digital delivery:

While IR35 could pose serious challenges for digital change programmes in the UK financial services sector after April 2021, some CIOs we have spoken to see the contract renewal phase as an opportunity to clear the decks, refocus and keep their best people on the pitch.

Our experience of providing corporates with highly-skilled software engineers who are born problem-solvers, who work in small, capped teams on a 5 in 50 model, has shown that they are often fundamental to getting stalled digital change programmes back on track. These developers work alongside enterprise IT teams, on a Seed, Scale, Succeed process, bringing fresh coding skills and transforming project thinking into product thinking, with continuous delivery of digital service iterations. They are technology specialists who relish the challenge of working on high profile digital journeys, but who do not wish to work as corporate employees and are therefore hard for financial services organisations to hire.

We now have another twelve months to prepare for IR35. In the meantime, as financial services organisations adapt to the demands of the pandemic, this is the time for small, agile teams of problem-solvers to shine.

Up Next

CAN TECHNOLOGICAL INNOVATIONS HELP IN HANDLING PANDEMICS?

Don't Miss

IN CONSUMER BIOMETRICS WE TRUST: AUTHENTICATION FOR THE DATA PRIVACY AGE

Finance

FUTURE-PROOFING FOR THE FINTECH INDUSTRY WITH NETWORK INNOVATION

Alan Hayward, Sales & Marketing Manager at SEH Technology

As the years pass, it is becoming far more difficult to determine what the next decade will entail in relation to technology innovation, due to the speed of digital transformation. This means it is important for organisations to future-proof their processes in the best ways possible. Network management and innovation is key to this, particularly for the FinTech industry due to the ever-rising data traffic in that sector.

Financial technology is used to describe new tech that seeks to improve and automate the delivery and use of financial services. Essentially, FinTech has the ability to help companies, business owners and consumers better manage their financial operations and processes, meaning it’s vital to focus on future-proofing the industry to ensure guaranteed success across businesses.

Evolving technology is one of the primary causes for the shifts taking place in financial services across the whole industry. Emerging FinTech developments create opportunities which result in a rising demand for network capacity. As well as this, there are many other factors which play a part in fuelling this increased demand such as increased competition, innovative services, regulatory requirements and new technology. It’s vital that FinTech organisations innovate their networks to be sure they are staying ahead of the game.

The importance of innovating your network

Innovation in itself is very important and is at the centre of any successful business. Staying innovative and changing with economic and industrial trends helps organisations to effectively meet business growth goals, increase productivity and profitability, and respond well to industry disruptors. Upgrading your network and its capabilities is one of the key methods you can adopt to be sure to do this.

As industries change and companies grow, the technology that each company has implemented must change with it. Many organisations may find that they are in a position where much more data needs to be managed than it has in the past, or new manufacturing equipment has been implemented and data management processes have to change. Innovating your network can help solve these problems and can create much more streamlined processes with regards to managing and controlling data.

Changes in the FinTech industry

When the COVID-19 pandemic first hit, the majority of businesses struggled to adjust to changes in the marketplace and had to work extra hard to stay afloat in their selective industries. There were a small handful of businesses which showed an upward trend and those in the FinTech industry were some of them. It’s vital that these businesses keep up the momentum as we move back to a sense of normality, even as digitisation takes over.

The financial sector is undergoing profound shifts with many insurers, retailers and global banks choosing to go digital, something which is extremely necessary in this day and age. Many FinTech organisations are considering a move to the cloud because of the immense role it can play in driving large amounts of data into the network. Smaller businesses and start-ups can take a more relaxed attitude towards adopting new networking technology but large, established banks don’t have that luxury and must act fast if they wish to stay relevant in the changing market.

Another area that FinTech businesses must be aware of is the limitation of bandwidth in the network. To be able to grow on demand, businesses must have already implemented an effective, reliable networking system which is compatible with the changes that a company is choosing to make.

Upgrading for the future

For a small number of FinTech organisations, little appears to have changed in recent years. A small sized bank may have connections in a number of centres but to optimise this opportunity, businesses must invest in networking innovation to keep the company connected and to prepare for the future.

Production processes and organisations are constantly changing with new products, services and business models emerging in industries across the whole world, not just FinTech industries. It’s important to upgrade and innovate your network to allow your company to stay relevant and reduce the risk of it falling behind and becoming outdated with its processes as we enter the next decade of technological change.

Network innovation is the way forward for many industries, due to the capacity for the technology to adapt to changes in a company’s needs and goals. FinTech, as well as many other industries, should constantly consider how to prepare for the future, particularly during a time where business trends can change so quickly. Developing your network can not only provide a stronger sense of security and reliability for your company and its employees, but will also prepare you for problems which may arise in years to come.

Technology

THE FINTECH REVOLUTION: BALANCING INNOVATION AND SECURITY

By Altaz Valani, Director of Insights Research at Security Compass.

At a time of significant disruption for the financial services industry, a sector forecasted to be worth $300bn by 2022, organisations are facing important decisions when it comes to digital transformation.

Among ever growing customer expectations and the need to comply with changes in the regulatory landscape, fintech companies are under increasing pressure to ensure innovation is properly implemented.

Failure to do so comes with a significant cost; that of security breaches and exposure to new vulnerabilities. From AI and biometric authentication to Robotic Process Automation, the growing adoption of technology among the financial services industry is intensifying the volume of customer data at risk.

Internal and external threats

To mange this risk carries both internal and external challenges for fintechs. Internally, the main challenges are centred around cyber skills, knowledge and expertise; externally, coordination with regulation is demanding.

Balancing an ever-increasing appetite for innovation and growth with robust security and risk management processes is absolutely crucial. Cyber threats continue to grow and diversify, and every new digital product and service carries an ever-evolving array of security risks.

Solving the cloud puzzle

Historically, due to the perceived value of the information held, the financial services industry is one of the primary targets for data breaches. This is why many financial services organisations have turned to the cloud as a solution for their IT infrastructure.

However, migrating to the cloud increases the attack surface of applications. That is why the importance of meeting security and compliance requirements cannot be overlooked in the rush for deploying new apps directly in the cloud or developing analytics-as-a-service or automation-as-a-service capabilities.

Strategically aligning digital delivery and security is one of the most complex challenges facing financial service businesses, and so many are turning their attention to Balanced Development Automation (BDA).

BDA: Aligning DevOps with security

To ensure success and competitive edge in the long run, fintechs need to create synergies between their DevOps, security, and business teams. This is where BDA comes in because it aligns DevOps with security, ensuring the latter is “baked” into the software development process. It acts as a guide through every step of software development, ensuring that security checks are built into the process from the beginning, and ultimately enabling DevOps teams to deliver secure products.

Consider it a three-step process:

1) Security should equip the development team with awareness of what is required from a security controls perspective. The same goes for risk and compliance. Developers need to know from the outset what these parameters are and factor them into their work from the get-go.

2) The next stage is examination of security metrics based on existing controls and emerging risks. The result of this might be the creation of new controls, but they have to be developed with an understanding of impact based on cost and business exposure. Ultimately, it is a business decision to determine the right risk threshold.

3) The third and final stage of the BDA process lies with governance at an audit and board level. Metrics collected from the first two stages are rolled into this and KPIs measured at this level are based on core business concerns around compliance, resilience, reputation, cost, and so on.

Balancing innovation with security

Ultimately, the success or failure of the fintechs of today can hinge on how they balance the adoption of new technologies with maintaining the privacy of their customers and the security of their customers’ data. This is a delicate balance, and one which requires action from the very start to identify and address risks.

Building security into applications from the very beginning of the software development lifecycle enables financial services companies to align security, compliance and risk priorities with business needs. This is ultimately a recipe for success.