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SECURITY IN THE FINANCIAL SECTOR: WHAT NEXT?

Financial Sector

Stephan Fabel, Director of Product, Canonical

Over the last few years, there has been a growing realisation that privacy is the right of every citizen. Equally, it’s increasingly evident that you can’t enable privacy without having security in place. You only need to look at the volume of headlines reporting cyber-attacks in any given week or month to see that a number of companies have been irresponsible to date. No organisation is immune to today’s cyber threats, not least financial services companies which process and handle vast amounts of sensitive information. With this in mind, these businesses need to ensure they’re adopting the right technologies to protect themselves from this growing threat.

Encryption is one of the most notable security solutions in modern-day banking and fintech operations. Banks are well-known for using encryption for security reasons. Today, the biggest challenge lies in bringing this level of security to the wider industry. Finserv customers expect stringent levels of security coupled with easy deployment, flexibility, and agility, which often poses a challenge for IT teams. Yet there are solutions available to overcome this issue, with IBM providing one example. It is working alongside Canonical to provide its fintech customers with the technology to optimise data protection and privacy across both containers and multi-cloud infrastructures.

 

The arrival of containerisation

One such technology is the “secure service container”, developed specifically for container-based applications on IBM’s LinuxONE. It offers developers a mix of hardware and software, which enables them to derive the same quality of security that they would on Linux, and in any data centre – whether on-premise or in the cloud.

The next generations of finserv infrastructures are being built around Linux because it is easy to deploy, and gives a highly functional and easily automated stack. Industry giants such as Barclays have already built whole data centre infrastructures around Linux. Beyond providing easy access to innovations and software frameworks for IT departments, open source software also increases trust, which is essential for security compliance in the long term.

With close-sourced software, it is not possible to verify all background activities taking place, and in the case of a bug or an error, it is difficult to assess the reasons behind them, due to the fact that only the original developer has access to the backend. Whereas with open source, the community of developers is very quick to identify and fix bugs or errors.

Ultimately, containerisation can unlock new levels of security, cost savings and developer efficiency within the finserv sector. Most developers are not security experts, but are looking for cost efficiencies when deploying new systems and applications. With containers, they can move things to the cloud at the push of a button, and it will run as a virtual machine. Such capabilities offer advanced hardware security which developers have not traditionally been able to benefit from, restricting cyber criminals entry even if they have physical access to computers.

It’s no surprise then that banks and fintechs are already turning to this technology to protect themselves against increasingly common attack factors, including malware, ransomware and memory scraping.

 

Cryptography and blockchain

In the next 10-15 years, quantum computers will become sufficiently powerful to break all current cryptography keys, and it’s vital that the finance sector prepares for this development in advance. We are already seeing technology vendors populate their systems with such algorithms, moving from firmware into hardware. When quantum computers advance to the required level of power, businesses will need to decrypt all of their data, and re-encrypt it using new methods such as quantum cryptography.

Blockchain technology, alongside these new cryptography techniques, will also become one of the key security algorithms within the banking and financial industries. Ultimately, the aim is to enable the finserv organisations to operate, test and run analytics without data. The sector also benefits from the number of innovative new players within the space, all of whom will have built their IT infrastructures on non-monolithic systems, and are free of the shackles often caused by legacy systems.

 

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TIPS FOR BUSINESS EXPANSION

Alan Sutherland, CEO of Kind Consumer

 

Every successful business had a beginning.  Its founders usually looked for ways to gradually expand, attract new customers and increase monthly revenue.  From the outside looking in that type of success often feels as though it requires some form of magic or hidden formula.

So how do you drive success?  There are two which are fundamental to success.  On first glance they may seem obvious, but they are often neglected.

 

Do you have a strong team?

No matter how great your business or idea you will not drive it to its full potential without a strong team behind you.

The process of recruiting and finding the best talent is never easy.  You must over-invest time in the process as it is a fundamental investment and future growth driver.  Two principles I have learned over the years when looking at recruitment are, to surround yourself with people who are better than you and do not be afraid to recruit someone who could make you redundant.

If you can achieve these, the benefits are clear.  Better business results, stronger talent pool, and with capability future fit plus built-in succession planning.

 

Have you created a road map?

Strategy should not be complicated, as it is the set of choices you make to help you deliver your goals.  It is your roadmap.

In thirty plus years of corporate life I have reviewed many.  Countless textbooks have also been written on the subject, but there are some basic principles that I firmly believe work best.  Namely, the vision should be clear, motivating, and understood by all in the organisation.  In addition, it’s important to remember ‘less is more’.  Too often strategy papers can be voluminous and complex.  The best strategy work I have seen is on one piece of paper with clear, simple articulation of the choices you will do and equally what you will not do.  It is very empowering to tell a team what you are not going to do.

 

Alan Sutherland

Have you established a core market?

In any business, the “core” needs to be healthy before you divert any significant level of resource to expansion, there are thousands of examples where enthusiasm to grow has caused companies to fail.

As you evaluate expansion, having an array of ideas and opinions needs to be balanced with a clear brand that consumers feel they relate to.  Whilst adding new products or services is an organic part of company growth it needs to be tempered, so you do not drift too far from your core market.

Therefore, before ploughing resources into new markets, you do need to ensure that new product and services will be of value to existing (or new) customers.  You may need to ask some critical and challenging questions such as, is there a clear need for this?  Is it marketable?  Does it sit within the brand equity?  How much will consumers pay for it?

If you conclude that the demand is there, only then should you move onto executing that new idea because it will require a significant amount of investment of time, resources, and money.  If the market entry cost is potentially high, you should also evaluate a test & learn approach by launching in a limited way and, if early traction is good, then expand.

Once you have revised your existing offering, you need to engage with these new consumers to increase brand recognition.  If your business is not online, add this to your to-do-list because in today’s era, convenience is key.

A website is the shop window to your brand and, done well, can allow you to build up a direct one-on-one relationship with your customers.  If it was already an important criterion before, the impact of Covid-19 will make it indispensable.

With social media and the abundance of mobile technology, it is not difficult nor expensive to drive traffic to your site, so you need to ensure the site is engaging, easy to navigate, informative with a call to action to purchase.  Loyal customers who return to your site are worth their weight in gold!

 

Do you have a healthy working capital?

Finally, a healthy working capital is essential not just for growth but for the day-to-day operations of running a business.  Even as you start to see your business develop, you must keep a scarcity mindset with cash and make sure you have some reserves for when something goes wrong. This has caused thousands of start-ups to fail as they hit unexpected turbulence and had no contingency in place.

In today’s global economy, there is a lot of uncertainty so there has never been a more important time to maximise liquidity to meet short term obligations and avoid going bust.  Not to mention, flexibility is key when a business is looking to expand and without enough working capital a business can lose this flexibility.

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BITCOIN COMES OF AGE

Katharine Wooller, Managing Director, UK and Eire, Dacxi

 

The Bitcoin halving event, which occurred on the 11th May, has been a watershed moment for the industry.   It has been a deafening theme for crypto narrative in recent months, and more recently has caught the eye of professional investors and conventional media alike, with some predicting it will be the catalyst for a substantial boom.   It appears bitcoin, finally, has a hard-won place in the mainstream.

 

Halving: In a nutshell

Bitcoin has a key feature; there are a fixed amount available, and, crucially it has a pre-programmed supply reduction built in.  The miners, who maintain the bitcoin network, validate transactions and add them to the blockchain when they are verified.  They do this at considerable electrical and computing cost and thus are paid in bitcoin. Periodically, the reward for doing so halves.  In the past this supply reduction, which previously occurred in 2012 and 2016, has coincided with a strong run-up in its price.

 

All grown-up

Bitcoin has now been in existence more than ten years and has survived the doubters, the scammers, the hackers, government attempts to quash it, and along the way it has given rise to new innovations using the blockchain technology that underpins it.  To overstate this amazing “survive and thrive feat” as well as the innovation it represents would be difficult.  Bitcoin, conceptually, has exceeded expectations.  Alas the 5,000+ crypto currencies that have sprung up alongside it include the good, the bad, and so very ugly.  Nearly all of these should fall away as Bitcoin dominates; at time of writing it is 67% of daily traded volumes.  Understandably, there is a very short list of 3 what we call blue-chip coins (LTC, BTC, ETH) that the institutional investors have shown interest in.

 

Solving some our largest problems

There is a clear appeal of digital currencies to the cashless internet economy based, including 24/7 price transparency that is available, cross border usage, divisibility to many decimal places, as well as third party oversight and controls. Bitcoin has been on a roller coaster ride over the last two years and has held its value throughout the current dramas and even increased in value as governments have stimulated their economies on a massive scale via printing cash endlessly to avert a market meltdown.  This is likely to create a massive inflationary environment into the future and sets the stage for Bitcoin to make its next move upwards after stocks and real estate prepare to reset valuations and attractiveness.

 

A new gold?

A lot of the dialogue around bitcoin talks about an improved version of gold, as a medium to convey value.  Improved by virtue of the technology being quicker, and cheaper to both store and move. Indeed, a recent transaction of $1.1bn worth of bitcoin, by bitfinex, cost $84.  Unsurprisingly this has caught the imagination of the financial infrastructure industry.  Some market commentators postulate a 10x increase in prices in the next 12 months, based on a few % of the global appetite for gold switching to crypto, with bitcoin being the heir apparent.

 

Diversification: Now

For the industry as a whole, it is great news that bitcoin is now demonstrably decoupled from traditional markets.    It is apparent that the price of Bitcoin is outside the traditional assets’ ecosystem, and the market is determined by a new set of criteria.  Bitcoin now has the crucial “social proof” that it cannot be altered by external forces, no matter how powerful, bringing much joy to the libertarians and retail investors alike.  Indeed, google searches for ‘bitcoin halving’ hit an all-time high in the late April, suggesting firm interest from newbies.  Further, the quality of exchanges available to both retail and institutional investors has improved substantially in recent years, providing a much-needed ease of entry into the market.

 

Professional Investors

Indeed, leviathan investors, such as Paul Tudor Jones, coming out in praise of bitcoin, as a viable hedge against inflation, saw bitcoin enter – unexpectedly – stage left to a much broader financial audience.  Bitcoin is viewed as what gold was in the 1970s, thus driving increasing interest from his fellow baby boomer cohort. Indeed, Dacxi, a digital exchange focusing on educating retail investors, saw some of its busiest weeks in the run up to halving.  The addition of global pandemic and imminent worldwide recession has been the perfect storm for the world to crave safe new assets.  Crypto is firmly out of the niche and into the zeitgeist.

 

What’s next

In my opinion, crypto has reached critical mass in terms of adoption. There’s no going back.  I was delighted to wake up in London on the 12th May and see the BBC reporting on halving – it doesn’t get much more mainstream than that!

As digital currencies become the increasingly dominant technology, anyone with an interest in markets and investing would be well placed to educate themselves on this seemingly unstoppable asset class.  With the recent momentum gained from the halving, crypto is likely to be a broader theme of daily life for decades to come.

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