The financial services sector has always recognised the importance of data. From assessing the risk of a loan to measuring the performance of an investment, having the right information is at the heart of the industry. Today, data from market reports, transactions and customers, is available in abundance and the question facing banks and insurers is how best to handle it all. How do we collect, store and manage it without expending enormous resources? How do we ensure that the quality is high and that we are complying with information regulations? And how do we use it most effectively to benefit our organisations, employees and customers?
To answer these questions, Ephesoft and the Financial Times gathered together a group of senior executives from financial services organisations at a FTLive seminar. Under the chairmanship of FT moderator Alan Livsey, Astrid Stange, COO of AXA, James Platt, COO of Aon and Kerem Tomak, Global Chief Analytics Officer of ING joined Ephesoft’s Senior VP Stephen Boals to discuss the challenges that are common across the sector. The panel was joined by a 500-strong audience of financial services professionals, who also contributed some of their own experiences via digital polls. 77 per cent of this audience stated they found it quite difficult to manage, analyse and use data in their own organisation. In this article, we outline some of the strategies discussed that are helping financial services organisations to tackle this problem.
Create a data culture
Our panellists agreed that managing data is no longer about a small group of elite analysts or engineers and that a “data culture”, as described by Astrid Stange, COO of AXA, is essential. The goal for financial services organisations should be to motivate employees and customers to share information, meticulously maintain it and use it purposefully. As James Platt, the COO of Aon, stated, “We can only win the data challenge if the entire organisation follows a common strategy. Inadequate or incorrect information can be found in many places because an individual employee has not realised how important high-quality data is for the success of a company.”
Make it easy
In practice, this means that you have to make it easy for your teams to put data into your IT systems. It’s essential that the information you are receiving is accurate, but by over-complicating your data capture technology so that only a few specialised individuals can use it, you are restricting your capacity. Information from customers, for example, will often arrive in a variety of different formats. A single insurance application may involve Excel files, PDF documents and emails, all of which have to be integrated into the insurance company’s systems in order to be assessed. The way you process these matters. Having teams of people manually reading documents and typing in the details is one solution, but it’s inefficient, slow and prone to error. On the other hand, spending thousands of pounds to programme a computer system to read one particular document that will then need completely re-programming to read a different document is also inefficient.
Choose software you can configure, not re-code
For this reason, as Kerem Tomak, Global Chief Analytics office at ING, explained, a “low code” solution, which can be reconfigured, is a good option. For global organisations, even more variations will exist. “Every location has different local requirements for customer documents –a simple credit application in Germany needs entirely different documents from the same application in Italy.” The documents themselves can also vary. Legal documents, for example, often contain patterns of imagery or watermarking that are unique to a particular jurisdiction. This can make OCR very difficult to apply, so you need to take this into account if you’re considering automation.
Create structure where none exists
When it comes to analysing data to put it to work, structure is essential. Information from any type of the document has to be stored in databases in order to assess risk or plan investments. Astrid Stange’s approach at AXA is to focus on standardisation, and an internationally uniform architecture, but acknowledges that this requires a great deal of work to achieve.
Stephen Boals of Ephesoft flagged up the additional challenge that 80 per cent of data in companies is currently “dark” – i.e. stored in a format that is not easily accessible, so a company may not even be aware that it exists. This applies particularly to the data that has been provided by customers but not introduced into a formal structure: “one application might have 100 other pieces of data in it that would be useful. How do you make it clean and available?”
Ultimately, every organisation has to strike a balance between capturing as much data as possible in a structured format and ensuring its overall quality. As James Platt concluded, “It’s not about perfection, but about creating a balance. A decision based on good, if not perfect, data, is still better than a decision without a data basis.”
Remember the customer experience
Financial services companies have a particular set of challenges. Astrid Stange commented that
AXA often issues contracts that are between 50 and 100 pages long, which can be confusing not only for the company’s customers but also for its employees. For this reason, AXA is integrating essential contractual information into its customer IT systems so that service agents can access it easily.
The other factor facing all the traditional large financial services organisations is the need to compete with the new fintechs built with remote access in mind and offering their customers instant access to data regardless of their location and device. Bringing cloud technology to the forefront has therefore become imperative.
Getting everyone on the same side
In the end, the overarching message from all of our panellists came back to that “data culture” message. Achieving this is not easy, but regular training throughout the organisation is key, and focusing on developing the senior team to lead by example can help. Only with the right partnership between employees and technology will financial services organisations be able to reach their potential. Change management is critical to bringing employees together. As Astrid Stange concluded, “the efficient use of information depends on people.”
Why indirect tax continues to cause headaches for the finance, IT, and tax teams
By Roger Lindelauf, Director, SAP Centre of Excellence, Vertex Inc
Businesses across Europe continue to navigate a complex tax landscape as they attempt to automate their indirect tax determination and calculation requirements. However, many tax professionals use the limited functionality offered by their organisations’ ERP systems, or the in-house software developed by their IT departments to perform the task.
Unfortunately, these solutions are just not sophisticated enough to keep up with the frequent changes to the tax rules and regulations businesses are often subjected to across Europe.
Companies need to deliver accurate and timely finance reports to avoid being fined by tax authorities or being ear-marked for an audit. As a result, tax teams are under increasing pressure to make sure their calculations are right first time, every time. But with organisations typically reliant on the solutions available to them to automate the process, errors are all too frequent and leave businesses wide open to compliance failures.
To look in more depth at the raft of challenges experienced by tax, finance and IT professionals across Europe who use SAP to manage their indirect tax automation process, we recently surveyed their views. The research showed that one of the biggest challenges for 38% of our respondents, is managing tax requirements for multiple geographic jurisdictions, and for a 30%, it’s staying on top of legislative changes to tax and ensuring they’re applied effectively within the solution. And if the tax landscape wasn’t already complicated enough, 30% of respondents cited managing disruption caused by COVID-19 as an ongoing issue, closely followed by Brexit for 29%. Managing accounts payable (AP) determination was also highlighted as a painful task for 29%.
Another cause for concern flagged in the research is the lack of connection between the needs of the tax team and IT’s ability to understand and act upon these requirements using their tax automation solutions. Almost 30% of respondents admit that IT’s lack of knowledge in recognising how to keep up with the solution updates is a real issue. When asked about the limitations of their current indirect tax solutions, 41% agree that there are insufficient internal skills within the business to manage them effectively.
Joining forces for a future-proofed tax automation
The frustrations felt by tax and IT when it comes to tax automation are made abundantly clear in the research. Along with finance, tax and IT need to work together to find a better way to manage their indirect tax calculation and determination needs. They also need to agree on a future-proof solution capable of managing whatever changes are likely to be applied to tax rules and legislation further down the line.
When asked about their key requirements from a third-party indirect tax automation solution, tax and finance pointed to reliability, usability, and efficiency for integration as their key priorities. APIs are another future requirement to help build system implementation processes that are more streamlined and create scalability throughout all business and global operations.
Increasingly, we’re seeing more and more businesses across Europe turn to more sophisticated third-party tax automation solutions, accelerated by the adoption of SAP S/4HANA. There’s been a real shift towards organisations opting for a solution that integrates into SAP, improving accuracy for VAT applications on transactions, automatically.
Joining forces with key stakeholders is a crucial step to finding an approach that works successfully for all. However, with tax regulation complications showing no signs of diminishing any time soon, can businesses really afford to stay as they are and take a chance on tax compliance or is it time to invest in a new, more reliable, efficient, and future-proofed approach?
A study carried out by independent market research specialist Vanson Bourne. 420 finance, tax and IT decision makers were questioned across Europe.
Cryptoassets and the European Central Bank’s new “PISA” Framework
Alpay Soytürk, Chief Regulatory Officer Spectrum Markets
The European Central Bank has published a new oversight framework for electronic payment instruments, schemes and arrangements: “PISA”. In doing so it is further expanding its supervisory portfolio and entering into an area of significant public interest as the framework includes crypto-assets.
The PISA framework will cover crypto-asset-related services but only to the extent they are relevant to the task of promoting the smooth operation of payment systems, which is as central an element of the ECB’s mandate as the definition and implementation of monetary policy, foreign exchange operations or the management of the euro area’s foreign currency reserves.
As an example of the scope of crypto-payments subject to the PISA framework, the ECB has highlighted the acceptance of crypto-assets by merchants within a card payment scheme and the option to send, receive or pay with crypto-assets via an electronic wallet. There seems to be a clear focus on payment tokens that does not include utility tokens, security tokens, Initial Coin Offerings or Security Token Offerings.
Out of scope
PISA excludes services where the transfer of value has only an investment focus. It also excludes services for which the transfer of value is executed solely in banknotes and coins, paper cheques, paper-based bills of exchange, promissory notes or similar. Paper-based vouchers or cash card issuance are also not in scope. The latter refers to cards that are issued for the purpose of depositing funds on it at the disposal of the receiver of a payment.
In other words, PISA focuses on all mechanisms that are based on electronic payment instruments with a general purpose, i.e., whose value transfer function is not limited to a single type of payment recipient or specific use, including instant payments and payment mechanisms in the B2B-sector, plus the usage of electronic payment instruments to place or withdraw cash.
The ECB defines electronic payment instruments as (sets of) personalised devices, software or procedures agreed between the end user and the payment service provider to request the execution of an electronic transfer. In practice, this covers payment cards, credit transfers, direct debits, e-money transfers and digital payment tokens.
Consequently, there are overlaps with the PSD2 rather than with the MiCA or the DLT Pilot Regime proposals. As such, the ECB is expanding the scope of definitions to take into consideration the technological progress of recent years.
For the ECB, all representations of value backed by claims or assets denominated or redeemable in euros are in scope as well as other digital assets that are accepted under the rules of a scheme for payment purposes or to discharge payment obligations in euros.
Oversight and enforcement
The ECB maintains a Crypto-Assets Task Force, and it was this body’s analysis that led to the conviction that there are potentially material financial stability risks, and risks to the safety and efficiency of the payment system as a whole, should payments via stablecoins remain unregulated.
Following a 2020 public consultation, this finally led to the establishment of the PISA framework. However the ECB lacks the infrastructure to perform all the relevant surveillance and enforcement tasks to ensure the very highest levels of governance.
Consequently, for oversight purposes, i.e. the collection and assessment of information and implementation measures, the ECB assigns primary oversight responsibility to the national central banks within the Eurosystem.
The ECB has explained that, in this assignment, it emphasises proximity to the entity subject to oversight (e.g., the country of incorporation, national laws attributing specific oversight responsibilities to central banks concerned, subject to any Treaty-based requirements).
“Schemes” and “Arrangements”
PISA aims at the governance bodies of so-called “schemes” and “arrangements”, ensuring they behave in compliance with the ECB’s oversight expectations.
A scheme is defined as “a set of formal, standardised and common rules enabling the transfer of value between end users by means of electronic payment instruments”, managed by a governance body – while in practice, the governance body and the payment services provider are identical. Examples of schemes are card payment schemes, e-money schemes, digital payment token schemes, credit transfer schemes and direct debit schemes.
The ECB defines an “arrangement” as “a set of operational functionalities which support the end users of multiple payment service providers in the use of electronic payment instruments”. An example of an arrangement is an electronic wallet. The definitions, which are cryptic in the most literal sense, are designed to cover the entirety of the relevant area which would be difficult with classic categorisations where a service is provided organisationally and physically decentralised.
Looking to 2022
PISA was approved by the ECB’s Governing Council on 15 November 2021 and becomes applicable as of 15 November 2022 for schemes that are already subject to oversight by a national central bank within the Eurosystem. New schemes and arrangements have to abide by the PISA rules within one year after being informed that they fall within its scope.
 Directive (EU) 2015/2366, the “Payment Services Directive (PSD2)”
 Regulation on “Markets in Crypto-assets”
 Regulation on a “pilot regime for market infrastructures based on distributed ledger technology (DLT pilot regime”)
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