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THE TECH “RENAISSANCE” OF THE FINANCE INDUSTRY – AND WHAT IT MEANS FOR RISK AND OPERATIONAL RESILIENCE

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Stewart Griffiths is Co-Founder and CEO of Albany Group

 

Not unlike most industries, the finance sector went into something of a tailspin on the wings of the pandemic. While many scientists subsequently said that we could and indeed should have seen it coming, that was an outlier rather than a mainstream view: the possibility was far from “priced into” the market.

This has led to rocketing short term costs, with Lloyds of London expected to pay out up to £6.2bn – an unprecedented figure – but the fallout can also be viewed as an opportunity in disguise. A catalyst for necessary and, in some cases, long overdue change.

The pandemic laid bare a number of structural inefficiencies within the industry, that called for a drastic and considered response. The verdict has been fairly unanimous: the industry has had to ramp up its digitisation efforts, and become more efficient and resilient in the face of rare, disruptive events.

This is overwhelmingly reflected across different sectors. The share of digital or digitally enabled products in companies’ portfolios has leapt forward by seven years, according to a recent McKinsey survey. The reported jump was in fact nearly twice as large for the financial services sector – a testament that the pandemic has sped up digitalisation.

 

Stewart Griffiths

A gradual shift in mindset

Covid-19 has jolted the industry in the right direction by bringing the benefits of technology into sharp relief. It has also reached pockets of the market, which were not always necessarily as open or adaptive to technological change, and demonstrated the limits of a resistant mindset.

Part of this reluctance rests on a perception that technology will be disruptive when applied to certain areas including regulatory compliance, governance and supply chain management. Conversely, where service offerings and internal operations are concerned, the industry has had no qualms in fully embracing the power of technology. This is confirmed by research from Deloitte which found that automating manual processes (77%) remains the definitive area that companies want to strengthen with the aid of technology. Alternatively, consider the use of chatbots in banking, which could result in operational cost savings of up to $7.3 billion globally by 2023.

Other business-critical areas, however, are still being viewed as too complicated or risky for technology to tackle. This robs companies of the opportunity to streamline workflows and processes and strengthen their reporting and compliance credentials, among other things, as long as technology is seen as “off-limits.” It can also compound the challenge of meeting increasingly stringent regulation and compliance obligations.

 

Navigating complex supply chains

The supply chains for financial services companies are extensive, and often involve a number of organisations across multiple jurisdictions. As the complexity grows, so too does the data and the sheer administrative burden that falls on teams that are saddled with emails, spreadsheets, and an onslaught of information.

Technology can help ease that burden. It is estimated that automation alone can reduce the cost of a claim journey, for example, by as much as 30%. With everything managed through a single portal, teams can gain better oversight of third parties, analyse data and automate workflows. We recently implemented such a solution with QBE, creating a bespoke portal using Conect™, our ground-breaking regulatory technology. This served to enhance workflows; reduce operational costs; enable better oversight of suppliers; streamline communication, and ultimately claim management.

 

Getting ahead of the compliance and regulation curve

Assessing risk conduct levels is one the most pervasive challenges facing the financial services industry. Compliance has expanded over the last few years, and so too has the proliferation of data. There is also no reason to assume that this trend will slow down. If anything, the opposite is true, and data burdens are growing, while regulation is becoming increasingly stringent. In 2019, the FCA issued a record number of fines, while the pandemic has brought renewed levels of public interest in ESG in the finance industry, particularly among listed companies. This translates into more pressure for companies to meet complex and demanding compliance obligations.

For instance, taking a closer look at the insurance industry, companies here also need to appropriately assess the rules and determine where they are affected. This can include the delegation of activities such as underwriting or claims handling to third parties which is often not viewed as outsourcing. Regulations, however, still apply and if not adhered to, can result in hefty fines.

The right technological solution can enable financial and professional services companies to gain control and oversight and optimise their risk management. Deploying regulatory software can do just that. It is a proactive, efficient, and responsive way of minimising risks and preventing possible fallout. Risk-based regulatory technology is designed to bring genuine simplicity and oversight to supply chain management. This can serve to embed automated compliance right into the DNA of a business, minimising the possibility of human error, costs and other risks.

 

A tech-driven future for the financial services industry

The pandemic has demonstrated that no industry can afford to be reactive – at the whims of external change, in a constant struggle to keep up. The financial sector is no different, and the sooner it fully embraces a strategic and proactive mindset when it comes to technology, the sooner it will begin to remove the endemic inefficiencies that hold back some of its areas. Far from imposing an additional burden, embracing technology will allow organisations to save in costs, gain in efficiency, and future proof their businesses. Putting in place the right solution and infrastructure to manage risk and supply chains, will also enable businesses to stay abreast of regulation, compliance and increasing data volumes.

In an ever-shifting landscape, this involves adopting user configurable technology in a truly no-code environment. This way, businesses can focus on what matters most to their stakeholders and their futures.

 

Business

HOW MERCHANTS CAN IMPROVE THE ONLINE PAYMENTS EXPERIENCE

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By Alan Irwin, Senior Director of Product at Global Payments UK

 

The dramatic increase in online shopping over the past 18 months has encouraged many businesses to invest in developing their omnichannel shopping experiences. The reasons vary – some are keen to capitalise on the trend of older shoppers migrating towards ecommerce and some are trying to make up for loss of sales in brick-and-mortar stores during the pandemic. It is also true that many businesses are shifting their models to sell direct to consumers to avoid high marketplace fees and are therefore building their ecommerce channels for the first time.

The checkout experience is arguably the most important and delicate part of the ecommerce transaction, as it can make the difference between a happy customer likely to return, and a shopping cart abandoned out of frustration and confusion. A survey from March 2020 suggested that 88% of online shopping orders were abandoned, i.e. not converted into a purchase. A seamless, customer-centric online payment experience is therefore critically important in ensuring completed transactions. But with so many payment providers available, what should businesses be looking for when trying to keep friction to a minimum?

 

Keep clicks to a minimum

Less touchscreen interaction equals less abandonment. Adapting the payment page to fit any device and supporting popular mobile digital wallets like Google Pay ensures a seamless, stress- and hassle-free checkout experience for the customer and keeps clicks to a minimum. Friction can present itself in the most minor features – for example, when the customer is navigating the payment form, the appropriate keypad should be shown to the customer when required. It’s much easier to enter a card number using the dial pad instead of switching between QWERTY keypad layouts.

Simplifying online forms with autofill and tokenisation also significantly reduces friction at checkout and shortens necessary time taken. Ensuring checkout forms are tagged correctly for “autofill” is a great way to offer customers a single-click to input the payment, shipping, and billing data that they have stored in their browser profile. Similarly offering a guest checkout option will help convert customers who are in a hurry or looking for a one-off purchase. This can also be achieved by offering to store the payment details (called ‘tokenisation’) for express repeat and one-click purchases.

 

Make it easy to understand

A tailored payments approach can increase both domestic and international global sales. By offering a checkout experience in the customer’s language, the option to pay in their currency of choice, and use their preferred method of payment (whether it’s PayPal, Alipay or card), businesses can build loyalty quickly and put customers at ease. It is equally important for merchants to ensure they always display simple direction and information about next steps to instil confidence and prevent customer drop-off. The customer should be informed of what is happening at every stage in the process, for example, whether they will proceed to SCA (Secure Customer Authentication) next or go straight through to completion.

In addition, validating forms in real-time means merchants can highlight potential errors to the customer early on, and payment providers should provide this functionality. This could be an invalid expiry date, an incorrect digit in the card number or incorrect CVV number based on card type. When issues are only flagged at the end of the process, this forces the customer to go back through the steps to figure out the error. Real-time signposting of problems removes this potential friction and reduces the potential for a declined transaction.

 

Ensure seamless security

Merchants should work with a payment partner who offers the right blend of security and compliance management without it coming at a cost to the end-to-end checkout experience for the user. Instilling trust and security in your checkout flow while utilising the right solutions to drive seamless authentication flows will increase customer confidence and help prevent drop-off.

The greatest level of security and control comes from either utilising hosted payment fields that the
merchant can natively integrate into their checkout flow, or a hosted payment page where they can
manage the look and feel. Showcasing your brand on the checkout page with trust signals and logos also adds to building trust with the customer.

Staying ahead of regulations is also important. Secure Customer Authentication (SCA) will soon be mandatory in the UK for all eligible digital transactions, and this doesn’t have to be a friction-full process. Tools like Transaction Risk Analysis (TRA) and Exemption Optimisation Service (EOS) can quickly score transactions and drive exemptions where there is the right blend of transaction risk.

 

The devil is in the details

These three rules for successful ecommerce checkout experiences may seem straightforward, but it is important to apply them at a micro level. It can take only one minor point of friction to cause a customer to abandon their cart, and this will inevitably be replicated across other similar customers. It is critical to identify friction points early on and anticipate customer needs throughout the process. Discussing these points and any opportunities to improve customer checkout experience with your ecommerce team and payment provider is an important first step towards ensuring your entire shopping experience remains competitively seamless and loyalty is won. It may be that your payment provider cannot address them, in which case it could be time to move on in order to stay competitive.

 

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Finance

NAVIGATING FINANCIAL SERVICES IN 2021: LOW-CODE TO THE RESCUE

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Nick Ford, Chief Technology Evangelist, Mendix

 

Financial services are the poster child of great digital transformation: today, Britons can pay from their watches, check their balance directly from their phone at any time and even automate trading. This level of innovation isn’t only about customers: traders are able to operate faster than ever before thanks to better predictive analysis and forecasting tools, and finance teams are able to collaborate from anywhere in the world.

While we embrace all this innovation, it’s easy to forget that the reality of the sector is incredibly complex. The radical changes induced by COVID-19 have highlighted how challenging maintaining innovation today really is, while putting more pressure on IT teams to accelerate the digital transformation of the sector even further.

On top of this, the sector is one of the most affected by Brexit. Mendix’s Navigating the UK Landscape research found that businesses in the financial services sector have serious concerns about the impact of Brexit on their industry. Many believe that Brexit has damaged the reputation of the UK as a centre of finance (67%) – as well as creating functional challenges for businesses in the country.

Many financial services organisations are turning to technology, and specifically low-code, to deal with these challenges. This piece will look at how firms in the sector can use low-code to navigate the new world.

 

A sea of challenges

Financial services are complex: there are thousands of products to choose from, from savings to investment and mortgages. These services are then managed by lots of different companies, creating an additional level of complexity: banks, fintechs, brokers, wealth management specialists, government bodies… the list goes on. To add yet another layer, there’s a network of regulations, which change over time, forcing IT leaders to constantly keep on top of the latest evolution in the sector. Knowing these is only the first step: every time new laws are implemented, the sector needs to adjust to them, and that can mean anything from revising security protocols to radically changing the way information is processed, transmitted or audited.

This may already look complicated, but the real complexity starts underneath, in the realms of processes that the IT manages to keep the company operating as normal. It would be fair to say that the mission of financial IT leaders is often underrated: they deal with antiquated systems dating back decades, inadequate data management processes and minute security and compliance considerations every day, simply to keep the business afloat. Add to this the need to get all staff to work remotely during the lockdown, and the already time-poor IT leaders are now completely swamped.

Brexit also makes things difficult for financial services organisations. Two thirds anticipate costly and complicated processes for crossborder payments and investments, while 59% believe it will be harder to attract foreign investments. Ultimately, 61% admit they will no longer be able to support some of their customers because of the transition.

 

Tech as a raft

While the sector is mired down with complex processes and inadequate tools, it also needs to deal with a major challenge: fierce competition for tech-savvy customers. Now, all banks, investment firms and wealth management companies are investing in tech to help them cope with new customer demands for easier access to their capital and increased transparency. Two thirds have deployed digital projects to make the business more flexible as a result of Brexit, with data management (62%) and digital processes (62%) particular focal points.

And this is not just about pleasing digitally minded customers: it’s also about improving productivity and operational efficiency, harnessing data, and solving compliance challenges. This balancing act between priorities is gathering pace and spreading across the business: today, IT teams must deliver innovation that’s fast, reliable and secure, and that supports many divisions — all at once. It’s a big challenge, but it’s one that IT leaders are willing to tackle head on: two thirds of IT leaders believe the value of digital transformation initiatives outweighs their inherent risk. Yet, IT leaders know that rushing would be a mistake: although IT teams face high demand for their support, most would not prioritise speed over caution, even if they could innovate faster. This measured pace ensures that financial organisations are delivering the right solutions at the right time, reducing the risk of service disruption and security challenges.

 

Low-code to the rescue

To manage all these priorities, the IT team needs to look beyond its own team to create revenue-generating services that truly answer the clients’ needs – and it needs to empower all developers with the right tools to do so. This improves collaboration between IT and customer-facing staff to design services that suit the needs of the customer base, while reducing the pressure of an already-stretched IT team. Enter low-code: most leaders (58%) say that low-code has enabled the development of new applications to support their companies post-Brexit.

One example of this is a Financial Institution, which perceived its digital user experience lacking and engaged low-code to install a new user experience for its portal, consumer and wholesale digital services. It was able to do this in just eight months, providing numerous benefits to stakeholders.

Low-code software development provides a simple solution to address these constraints and challenges: based on a visual approach for building applications using drag-and-drop components, it enables non-technical staff to participate in creating business applications, even if they have little to no coding experience. Working separately or in close collaboration, professional developers and business-side “citizen developers” can create, iterate, and release applications in a fraction of the time it takes with traditional methods, all under the watchful governance of IT to ensure their applications comply with enterprise standards and architecture.

A low-code approach allows for flexible, iterative app development for many use cases in the financial services sector, including legacy application upgrades to comply with new regulations, apps supporting smart banking or portfolio management, and mortgage application management. With low-code, the financial services industry has the right tools to untangle its complex processes, simplify its evolution and focus on its core mission: keeping the economy thriving.

 

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