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.

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Technology

COMPETING IN A DIGITAL WORLD – SMES FIND THEIR FEET

– Stefano, Product Manager

Digital transformation is different for small and medium-sized companies. Or is it? In this article, we take a look at the current state of digital in SMEs and look ahead to see what is in store.

“Changes in business operations, and in the way customers are served, driven by digital technologies.”

That is a compact definition of digital transformation. And the digital technologies in question? They range from IoT (internet of things, or connected devices like smart sensors), to Robotic Process Automation and AI, to cloud computing.

SME rate of digitisation

Whether your business employs ten people or 10,000, the ingredients for digital transformation are the same. So how are small and medium-sized companies faring? Are they even interested in digitisation? Research¹ says they are, and UK SMEs are doing better than many of their European counterparts, with high scores for adoption rates of cloud computing, Big Data and AI. To put this statement into perspective, 58% of companies have adopted cloud computing, but only 27% use some sort of AI-based technology.

Still, only 40% of SMEs report that digitisation is a top priority. An important fact, as the European SME survey 2019¹shows a correlation between prioritising digitisation and investment. Those companies that say getting digital is a top priority invest more than companies that give digitisation a lower priority. The companies that prioritise digital also expected to export more than companies who see digitisation as less critical.

Naturally, as SMEs are a very heterogeneous group, there are differences in the area of digitisation as well. Some sectors are further along than others. Roughly speaking, finance & accounting firms, manufacturing companies, and the logistics sector are a step or two ahead of firms in the construction business and the legal profession².

The big gain

So, what is it that drives digital transformation? What do SMEs stand to gain?

The short answer is a competitive edge, or even just remaining competitive (enough). Digital transformation is not an option; it is a must. The 24/7 economy demands fast service and quick supplies, and that goes for B2B markets just as much as for B2C. Digitisation enables companies to satisfy such demands.

The predictive capability of AI can reduce downtimes, for example – it will know in advance when machinery is likely to break down and can schedule preventive maintenance accordingly. Another example is increased productivity through the use of RPA or software robots. With RPA, a company can automate routine jobs like checking invoices relatively quickly and cheaply, freeing up human capital for other tasks.

The digital future

To look ahead, we also need to take a look at some constraints SMEs face with regards to digital transformation. The main issues UK firms face in this respect are around cybersecurity and the lack of skilled workers. In other countries around Europe, insufficient IT infrastructures also ranks high on the list of concerns.

Dealing with cybersecurity risks and especially ransomware attacks, is a significant worry for companies, as they are costly, difficult to prevent and have the potential to damage their reputation. Financial constraints are also a leading problem firms face when trying to skill up. Salaries for highly skilled IT talent have risen to a level that is prohibitive for many. At the same time, it is also hard for SMEs to attract and retain people, as candidates consider them as less attractive in terms of opportunities for growth.

According to Hays², most employers say the lack of skills of existing staff prevents them from taking full advantage of the opportunities digital technologies provide. They are turning to solutions to train their employees and outsourcing work.

Nonetheless, digital transformation also provides plenty of opportunities. Look at fintech. Not what you were expecting, perhaps, but the rise of fintech has undoubtedly been advantageous for SMEs. Where SMEs have traditionally been caught in the middle between large corporations and consumers, as far as banking services were concerned, fintech is now providing smaller companies with choices that were not available before. A survey by EY³ shows that, in the UK, 18% of SMEs have adopted fintech services. These services include banking, payments and financing.

SMEs have taken essential steps, but they have some way to go as well. What lies ahead seemed brighter in January 2020 than it is now, just a few months later. Still valid for any company setting out on the digital transformation path, though, is that investing in people – skills, communication and culture – is crucial. Although the survey done by Hays found that many employees feel that ‘going digital’ is not a bad thing, the human factor does seem to be a stumbling block for many SME’s. One possible solution is for organisations to cooperate in creating training programmes and offer employees a challenging, cross-company career path.

Sources

¹KFW Going digital – the challenges facing European SMEs | European SME survey 2019

https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Studien-und-Materialien/PDF-Dateien-Paper-and-Proceedings-(EN)/European-SME-Survey-2019.pdf

²Hayes What workers want

https://www.hays.co.uk/documents/34684/4771753/What+Workers+Want+2019.pdf/7d7c1264-6df5-c2cf-2c7c-581b9a5b01dd

³ EY Fintech is a world of choice for small and medium-sized enterprises

https://www.ey.com/en_gl/banking-capital-markets/how-fintechs-are-a-world-of-choice-for-small-and-medium-sized-enterprises

Finance

AI: CUSTOMER FACING EMPLOYEES’ BEST FRIEND IN THE FINANCIAL SERVICES INDUSTRY

By Ryan Lester, Senior Director, Customer Experience Technologies at LogMeIn

We’ve all heard the old saying “money talks.” Well when it comes to customer loyalty and retention, good customer experience talks much louder, with 30% of customers leaving a brand and never returning due to a bad experience.

The truth is, there are a lot of companies with similar products and services, but that doesn’t mean that differentiation is impossible. So, what’s the solution? For financial services, large and small, customer experience is becoming the key competitive differentiator and the best way to deliver an impactful experience is to empower customer-facing employees to do their best work. Artificial intelligence (AI) is enabling these employees to create remarkably better customer experiences, resulting in customer loyalty, advocacy, and overall growth.

For financial institutions that have been considering new strategies for improving the quality and efficiency of their customer experience, here are a few ways AI can enable them to deliver the “human factor” that good customer experience demands whilst ensuring customer facing employees can provide a more positive experience for customers.

Increase employee productivity

How much of employees’ time is spent searching for answers to questions? Do they ever have to put customers on hold or even step away to get additional help? AI helps provide front-line employees real-time guidance so they can spend less time looking for information and more time solving problems. An AI-powered chatbot, for example, can be listening in the background of a conversation helping point employees to the right data, solutions, and processes to resolve customer issues faster than ever before.

Deliver a consistent customer experience

When banking customers engage with their financial institutions, they measure the speed and accuracy of the service through two criteria. First, how quickly can the system access their account and deliver the correct information? Is it faster than a human could type it in and share it? And second, if they eventually do need to be connected to a live customer support agent, is their information captured and passed along accurately? AI technology takes those general queries off the customer support team’s plate, providing a quick, accurate, and effective response. If a query needs a more in-depth response, AI can hand it off to support staff to address.

Not only this but leveraging a centralised, AI-powered knowledge solution ensures every employee has access to the same, updated information, so no matter who the customer speaks to, they can be assured that employee responses are both consistent and accurate across the board.

Accelerating employee training and onboarding

Like any industry, employee turnover is inevitable and can be costly. But, not training new employees correctly or in a timely manner could be much more costly. When it comes to financial services there is a lot to learn, whether it is something simple like the process for checking an account balance to all the nuances associated with mortgage loans. AI can support on-the-job training by helping new employees answer questions confidently, correctly, and much quicker than they could before.

Improving employee satisfaction

Today’s banking customer has all kinds of new ideas about their banking experience. “The Amazon Effect” has successfully raised consumer expectations to the extent that a consistent, personal, and relevant experience is the new normal. As a customer, how many times have you been told “I’m sorry, I don’t know the answer?” Customers want solutions to their problems and employees want to be able to deliver those solutions as efficiently and effectively as possible. AI assisting in the background helps minimise those negative moments – making employees job easier, less stressful, and overall more enjoyable.

Identify knowledge gaps

Do you know all the questions employees are getting asked? Do you know what’s easily answered and what’s not? Real-time insights allow knowledge managers to keep up to date on frequently asked questions and gaps in current resources. This allows them to strategically improve or add content where needed.

Augmenting customer service

Whether talking with an AI chatbot or a personable customer service team member, the modern banking customer has high expectations for convenience, speed, and security. Which means that the technology you choose to deploy and how you deploy it is now just as important as who you hire and how you train them.

Today’s AI solutions won’t replace customer service agents or get in the way of the human factors that drive the customer experience. On the contrary, they augment it, allowing the business to do more without adding human resources. The higher the quality of a AI chatbot solution, the better it will be at taking the routine requests off the plate of customer service agents—giving them more time to provide a personalized and positive experience for customers.