by Matthijs Aler, CEO of Ohpen
Ushered in by the pandemic, a wave of hyper-digitisation and new opportunities has swept across the fintech industry over the past year. And it’s not about to stop.
With another period of hybrid working and continued COVID-19 changes lying ahead, consumer and business circumstances are becoming more complex than ever. These increasingly unique needs call for modern IT to solve each individual case. This is where fintech alliances are set to really make their mark next year by supercharging customised financial products, services and the time it takes to put them in market.
What does this technology actually look like, and how will it make its impact in 2022?
More predictive analytics, fewer linear business models
With the pandemic’s impact set to keep rippling through consumers’ personal finances next year, advanced predictive analytics will be a crucial part of credit and arrears management strategies. Working on both macro and micro levels, AI will continue to find patterns in complex data, and pick up trigger points across consumers’ financial behaviour – for example spotting credit problems before they escalate.
With algorithmic trust growing across business, financial advisors will look to AI to predict exactly which accounts and clients may need monthly interest and loan repayment support. In fact, this trend will continue well beyond 2022, as digitising the credit space becomes
increasingly important. Data-driven tech will supersede traditional linear business models when it comes to supporting today’s growing gig economy and flexible work situations. We are set to see financial institutions become one-to-one support networks, using data to build tailored experiences for every single customer.
DIY finance 2.0
But AI doesn’t stop there. This power of AI-led prediction will eventually be handed directly to the consumer, too. In fact, we are about to see unprecedented levels of data, information and guidance built into consumer omnichannel experiences.
Financial institutions have already stepped up their digital offering for consumers – but 2022 will see heightened consumer autonomy across personal finance management. Recognising the benefits for all parties, in a pandemic age of helping customers help themselves, the savviest banks and financial services providers will offer up more predictive analytics directly to consumers across digital channels that are powered from modern cloud core-banking platforms. This will empower consumers to better control their bills, debts, cash and loans autonomously, lowering credit risks for the financial services providers involved. Likewise, as data becomes more structured, explainable and aggregated – financial institutions will finally have a 360-view of their customers, enabling them to open up a new world of tailored propositions.
The Human vs Machine paradox
This evolving tech saga will enter yet a new chapter in 2022. For certain financial processes such as insurance and some investment propositions, robo-advisors and background automation are set to become more prominent across the board.
Across other complex products such as mortgages, robots are unlikely to replace humans any time soon. However, the hybrid balance is set to shift significantly. Across mortgage and loan origination and underwriting processes, robo-advisors will increasingly pull together the data across these functions at speed to arm customer facing advisors. This will certainly push human consultation further towards the end of processes, yet paradoxically get the customer to reach it much quicker, sparing them of dozens of online forms in the process.
Friendly, professional advice will forever remain the most vital link in the financial chain, yet this move from 50/50 robo-human to 75/25 will better leverage the power of human analysis, locking in consumer confidence from start to finish.
2022: Continuing the digital trajectory…
Fintech can potentially unlock more time and customisation for business and individuals alike from next year. Consumers stand on the brink of more digitally-enabled financial autonomy, while financial institutions and advisors can speed up their manual processes and focus on the things that matter most.
To do this right, though, fintechs must enter 2022 armed with the right back-in banking technology to enable true digital experiences that empower their customers’ financial lives.
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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