by Richard Dutton, account director, Symatrix
With companies across the UK switching to remote working since the pandemic took hold, issues around the robustness and security of IT have come to the fore. There are few areas of the economy more cognisant of this than financial firms and few areas of business operations that need to be more closely guarded than payroll. For many organisations, the value passed through payroll makes it their largest monthly outgoing. Clearly, finance teams and directors are focused on ensuring money paid to employees is paid accurately and securely.
So what are the main threats to secure and accurate payroll processes when managed by a remote workforce and how can financial organisations mitigate these risks?
Scoping the Challenge
Those financial organisations that run on-premise applications have struggled with the lockdown most. With people sent home, the challenge has been how to access their payroll engine remotely in a secure and reliable fashion.
Having reliable, secure access to the payroll system via a virtual private network (VPN) is critically important for any business. Financial firms need a resilient, secure system in place to guard against hackers. But organisations may find that when they send employees home, their VPN is unable to manage. The business may have ‘sized’ the VPN for 350 people, so when 3,500 start trying to use it at the same time, it simply can’t cope. From the context of payroll, that presents a problem as it means the payroll team is unable to access their on-premise system, and the business risks unacceptable delays to payments or teams finding ‘work-around solutions’ to their connectivity challenges that have insufficient security built in.
Another key area of risk is around data security and confidentiality. Every organisation has a duty of care on data. They are governed by GDPR. Moreover, regulators like the Financial Conduct Authority (FCA) are applying strict guidelines and controls on the financial industry and financial organisations generally are far more risk-averse, in part because of the structure and the governance applied by the financial industry.
In this context, compliance with the ISO27001 standard can help to ensure best practice and high standards in payroll. However, many internal payroll departments are not covered by this standard. This puts the emphasis on the employees to ensure compliance and if they are working from home, it may be difficult to know whether the approach is fully secure. And that in turn could put those businesses at risk.
Finding a Solution
These are the challenges but what are the solutions? Organisations are hugely advantaged if they have already moved to cloud solutions. Where an organisation has moved to the cloud, they can typically access a cloud system that has a strong infrastructure of security and governance. If they have a cloud system in place they can avoid many of the security risks they might otherwise face.
Cloud is the enabler here then but the way businesses set their organisation up within the cloud to deliver great payroll services is even more important. Many organisations, after all, have cloud payroll engines but if they are fed by another HR system, the data will originate in that system and that can cause connectivity and efficiency problems. In contrast, a single cloud-based HR and payroll system removes the requirement for the transfer of data from HR to payroll and takes away the need for manual interventions.
You can see, all across the traditional payroll outsource sector, clients that have needed to create little cottage industries of administration to manage the impact of a HR application feeding a separate payroll application. These cottage industries are very expensive; add little true value and can result in businesses incurring multiple millions of pounds in costs.
Organisations will, of course, also need to have stringent processes in place to ensure the confidentiality and integrity of their data. For many, adherence to the ISO27001 standard will be the answer. ISO27001 can give finance firms reassurance that the way they operate with regard to security, data confidentiality and operational processes is excellent and robust. It is a mature and strong governance model able to give firms the comfort and confidence that their processes including payroll are being managed correctly.
Combining HR and payroll
In summary, cloud brings many benefits in this context but a single cloud HR and payroll system is better and more secure because it removes human intervention and therefore much of the risk to the process. If financial businesses don’t have one HR payroll solution and their whole HR pay benefits cycle is made up of data coming from multiple systems then that is a bigger risk to them.
The key point is that a single HR payroll system delivered in the cloud, is a driver for increased security better control and less risk. It is interesting to note that the current period of lockdown has also been one of the busiest for financial processes and activities. It will have been stressful for every payroll team but for financial services businesses operating in the cloud, with a joint HR and payroll system, that process is likely to have been just a little less concerning.
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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