By Colin Dean is director of digital transformation (financial services and insurance) with Hyland.www.hyland.com
The technological revolution in finance means that, rather than being a once in a decade transformation, going digital has become a decade-long process. Against this backdrop, banking and insurance executives must change their strategic and mental approach, because carried out ad-nauseam the transformation mentality can be damaging.
Nevertheless, there is still a strong imperative to drive financial services down a data-rich and technologically efficient path. Indeed, many banks and insurers still have a digital deficit to overcome. However, for those organisations with a clear product and customer service strategy, digital optimisation is often a more appropriate approach than organisational transformation.
This is not to say that banks, wealth managers and insurers won’t undergo many transformative digital changes in the years to come – but rather that leaders need to build both an atmosphere and an infrastructure that ensures each change smoothly adds value to a greater strategic focus and is not overly disruptive to the organisation.
Transformation is Strategic
Digital transformation means a foundational change in how an organisation delivers value to its customers. Successful digital transformations do not begin with technology: Instead, the focus is on overhauling the organisation with a customer-focused goal in mind, such as building customer-centric new products and services.
Such an undertaking is high-risk for any organisation, more so in something as finely balanced, unpredictable yet also highly scrutinised and regulated as finance. Financial services have arguably already undergone a major digital transformation, but it took 20 years and was fraught experience for many companies.
Finance institutions may not welcome another revolution but the good news is, that they have yet to realise many of the advantages of the last one. Digital optimisation can ensure they do.
Digital Optimisation Offers Evolution and Efficiencies
Digital optimisation means ensuring that a company is using its technology effectively; is fully digital in terms of its functions and processes; and therefore able to leverage its data, human resource and brand into new platforms and formats, as the need arises. It involves ensuring an organisation is always prepared for change, without being driven by it.
Much of the current technology being considered by financial firms does not involve changing the fundamental product. Instead, fintech more often than not uses new methods to automate and improve current services; new consumer platforms must be integrated alongside old favourites, as new generations of customers are targeted, but the level of customer care must be upheld.
Digital optimisation has proven highly effective for this purpose as it uses technology to implement current strategies and make processes smoother; to improve current services rather than offer radically new ones – even if those services are being presented to the customer in an entirely new way. At the same time, it drives efficiencies and paves the way for new technologies to be adopted safely and smoothly.
Optimising People and Technology
Optimisation is underpinned by technology – because the ability to freely share and access data is crucial in a digitally optimised organisation – but it also revolves around people. By allowing people, processes and technology to function together seamlessly for the benefit of your customers, the optimisation process encourages an entrepreneurial atmosphere where staff try to use information and available tools to save time and deliver great service.
Data is at the core of this process, as all new digital innovations require a stream of fresh information to function effectively. This can be delivered through a single enterprise hub for data, where information gathered on many formats will be visible to authorised members of staff on a single screen. By providing users with easy, secure access to complete information – anytime, anywhere, on any device – an organisation can facilitate more responsive, meaningful interactions.
This is the final area of digital deficit that many financial services providers need to address. There has been understandable caution given the strengthening of regulations on data, but free-flowing information is crucial for the next generation of technologies. Their introduction should not be a true transformation, however, because it is important that humans remain in charge at a strategic level.
Freeing Data and People to Close the Digital Deficit
Optimisation is the key to extracting real value from technology investments to date, and to integrating tomorrow’s systems with a minimum of disruption and while maintaining strategic aims. By removing business silos, seamlessly integrating core or legacy systems, eradicating reliance on shadow systems and sharing data across the business, banks can maximise the value and savings available from existing IT infrastructure and investments, rather than replacing them. That’s the technological side, and data availability is at its core.
On the human side, by facilitating a greater entrepreneurial focus on the development of technology and uses, organisations are in a much stronger position to resolve the digitisation deficits in their operations, and will become highly agile in their ability to spot, and adapt to, new consumer trends.
Financial services companies that aim for optimisation to back a robust strategy aimed at the customer, may even find that the process is transformative.
Financial transformation is the new digital transformation
By Luke Fossett, ANZ Head of Sales for global recurring payments platform, GoCardless
The term ‘digital transformation’ has become somewhat synonymous with COVID-19. As teams and operations became decentralised, companies looked to quickly build their remote tech stacks, striving for ‘business as usual’ despite the circumstances.
But in the background of COVID’s chaos, different regions and industries experienced major changes, sparking a different breed of transformation beyond the digital spectrum.
Take Australia as an example. In July, the market saw the local arrival of Open Banking, as well as further detail into the regulated and planned transition away from the existing Direct Debit system to the central-backed New Payments Platform (NPP) and it’s Mandated Payment Service. With these changes comes the impetus for a wave of ‘financial transformation’; a term that describes the process of making financial operations, processes and outputs more efficient.
Despite its potential for broad interpretation, financial transformation has the potential to produce use-cases that drive value for the customer; from things like seamless payment experiences, to data-rich APIs and integrations, to managing real-time bank to bank payment and the automation of everything from customer acquisition to using data to retry a failed transaction on the date that gets the best success. These innovations are well within reach for enterprise organisations, however, to extract real value, business leaders need to plan their financial infrastructure in parallel with making digital investments.
With the right deployments, financial transformation can reap significant rewards from a customer and internal operations perspective – so here’s why business leaders should be paying attention:
Value speaks volumes to the C-suite
Financial transformation benefits enterprise organisations as well as small and medium-sized businesses (SMEs) that need to create efficiencies as they scale, but translating its value is not always easy.
Payments are a complex part of any business, impacting many different consumer-facing and internal functions. Yet the role of ‘payments specialist’ is a rarity in most organisations.
Responsibility for financial transformation often falls – and gets lost – somewhere between the Chiefs of Technology, Information and Finance. That’s why leaning on platform providers and payments experts as early as possible, is key to understanding your customers and capabilities, before you implement and invest.
Outsourcing financial transformation initiatives is a much easier sell to enterprise decision-makers than redirecting IT resources to new DevOps projects. Credible payment providers, and the specialised knowledge that comes with good ones, are in most cases a more cost-effective solution than employing a full-time expert. Translating the value of financial transformation to achieve buy-in from the C-level boils down to maximising efficiency and return on investment (ROI).
A simple solution is using automation for tasks like streamlining processes, such as collecting payments on time without human contact. Find the sweet spot between how you want your customers to pay, and how they prefer to pay; then offer those options, while making sure they can be done with little to no touch internally.
‘Best-in-class’ platform providers typically describe innovative fintech companies, who, as opposed to generalist banks, are deemed specialists in niche elements of financial services.
Again, using the example of Australasia, there are nearly 5,000 active fintechs, and it’s a market that legacy-laden big banks are tapping into. For example, Australia’s largest bank, the Commonwealth Bank of Australia, recently partnered with venture capital firm Square Peg, and AI-focused capital fund Zetta Ventures Partner; pouring $AUD28 million into new financial technology that delivers better digital banking services to its customers.
Fintech-led transformation doesn’t only have to benefit the customer; it can offer significant value for financial teams too.
In an enterprise environment, choosing the right technology allows for slick front end payments, but the true value comes in optimising financial management behind the scenes.
Take the rising consumer demand for subscription services as a use-case. According to Zuora’s Subscription Impact Report, 50 per cent of all subscription companies are growing just as fast as they were before the pandemic, while 18 per cent are actually seeing subscriber growth rates accelerate. With this trend comes a rise in companies looking to invest in recurring billing platforms that make it easy to accept regular payments, however, finding a low-touch platform that offers the financial infrastructure to support subscription-based payments will generate much greater ROI. There is no point blowing budgets on a ‘rip and replace’ billing platform if internally, finance teams still have to revert to a manual process of uploading payment files in a spreadsheet.
The future is financially transformed
The Reserve Bank of Australia’s latest Consumer Payment Behaviour survey shows that in 2007, cash was used for 69 per cent of all transactions, while last year it accounted for just 27 per cent. Additionally, over 50 per cent of Australian businesses prefer bank-to-bank payments, known as Direct Debit, over credit cards as a way to collect payments.
Payment preferences are rapidly evolving, and keeping up with consumer payment trends is key to staying competitive. To be effective, however, you need to have the infrastructure to support and accept diverse payment methods.
‘Payments as a Service’ (PaaS) is a phrase used to describe platform providers that connect multiple payment systems, enabling companies to offer several payment options while replacing outdated practices like paper-based Direct Debit.
In 2020, the most successful enterprises are utilising PaaS providers, built for self-serve and high rates of conversion. Take Bulb, for example; the UK-based energy company allows users to sign-up, switch energy providers and lock-in their payment preferences, all in under two minutes. Better yet, the process requires almost no people management.
Taking a visionary lens on financial transformation means building greater payment efficiencies for both the customer and the enterprise. Additionally, the specialist and agile nature of fintech platforms puts the organisations who use them on the cutting-edge of innovation, future-proofing operations in a fast-moving market without significant investments in research and development.
Best-in-class platform providers are driving financial transformation change; helping business navigate and plan so they are prepared for today, and for what’s coming.
RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA
with host, Alex Ford, VP Product and Marketing, Encompass, and guests, Dr Henry Balani, Head of Delivery, Encompass; Pawneet Abramowski, Chief Compliance Officer
Today, financial institutions deal with increasingly complex transactions and regulations that are continually changing. For the financial services industry, the cost of regulatory obligations has dramatically increased in recent years and, as a result, there has been a strong demand for more efficient reporting and compliance systems to better control risks and reduce compliance costs.
The complexity of regulation has made it more difficult for compliance and legal teams to manage risk. Also, the rise in large monetary fines, the impact of reputational damage, personal liability and even prison sentences have all played a factor. However, it remains essential that RegTech and AI is not seen as the only answer to addressing all financial crime risk, but rather a tool that, if used properly, can create more efficiency in the management of money laundering, bribery, corruption and fraud.
This month’s insightful and thought-provoking RegTech 20:20 podcast, from Encompass Corporation, delves into these topics from a US perspective, as guests, Dr Henry Balani, Head of Delivery, Encompass, and Pawneet Abramowski, Chief Compliance Officer. Pawneet has more than 17 years of combined experience in both public and private sectors with a focus on compliance and Henry has experience supporting innovative technology solutions that address issues of financial crime and money laundering. He advises technology firms as a Non-Executive/Board Director.
Encompass Corporation aims to demystify RegTech for listeners and understand what practitioners and experts are doing to overcome organisational challenges. This time,
Pawneet discusses how the US is at the forefront of the utilisation of technology, while also reflecting on the long history of money laundering and financial crime there, saying that “the birth of RegTech in the last 5-7 years has been really prominent in the United States”.
Henry, having had more than 25 years’ of financial services industry experience, speaks about how so many transactions worldwide are cleared in a US bank and how the US dollar is a powerful weapon, especially when money laundering comes into play.
When asked about her thoughts on technology assistance, Pawneet suggests that organisations are having to continuously evolve their programme and controls, telling the audience: “I think that’s where this desire for having technology assist in making things more efficient and operationally effective”.
Henry gives listeners an insight into regulatory penalties being a driver in changing behaviour, suggesting that this type of enforcement is a successful method.
“…as we see the increasing use of these penalties, organisations are noticing the reputational damage as embarrassing. We have seen a lot of these companies coming to RegTech firms asking for solutions to help them identify these potential challenges and issues”
Later on in the podcast, he goes on to speak about the challenges for regulated banks in the US. Breaking down the latest data and survey figures, Henry insists that the US has huge workforces in this organisation of growth. “To be a compliance professional, you are certainly in huge demand.”
Technology advancement is increasing at a rapid rate in the US. Regulated firms have a challenge not only to stay ahead of criminals, but there is often a rush to introduce new technology and continue to improve the experience of customers. Regulated bodies in the US, especially banks, have long been reinventing and adapting their compliance programmes to meet both their legal and community obligations and, as Pawneet explains, “it feels like a constant regulatory revolving door as a compliance professional”.
More expert commentary, RegTech conversation and industry insight can be found in the full episode of RegTech 20:20. You can listen here https://www.encompasscorporation.com/regtech2020-podcast/, and across all major podcast players
86% of UK businesses face barriers developing digital skills in procurement
A shortage of digitally savvy talent, and a lack of training for technical and soft skills, hinder digital procurement initiative
Research from Ivalua, a leading provider of global spend management cloud solutions, has shown that a majority of UK businesses (86%) face significant barriers developing digital skills in procurement. The findings reveal that a shortage of digitally savvy talent (31%), a lack of training for technical and soft skills (28%) and a lack of understanding of the skills required (13%), are some of the main barriers preventing UK business from developing the digital skills they need. Additionally, over half (55%) of UK businesses say that digital skills in procurement are less advanced compared to other departments
The research, conducted by Vanson Bourne on behalf of Ivalua, surveyed 200 UK-based procurement, supply chain and finance professionals about the true nature of digital skills within procurement, and the challenges businesses looking to digitally transform will face. More than eight-in-ten (84%) UK businesses believe that the skill set required of procurement professionals has shifted from procurement-first to digital-first. The study also highlighted that most respondents believe that greater digitalisation (84%) and better digital skills (83%) in procurement would have enabled UK businesses to mitigate the impact of the COVID-19 outbreak more effectively.
“Over the last decade, the role of procurement has transformed from one of cost-cutter to a vital ally that can help inform and enable a business’s strategy. The global COVID-19 pandemic accelerated this trend even further, reinforcing the importance of procurement as businesses adapt to the new normal,” commented Alex Saric, smart procurement expert at Ivalua. “However, for too long, procurement has been seen as a digital laggard, with technology adoption trailing behind other departments. In order to keep its seat at the table in strategic discussions, procurement must ensure it has people with the right skills in-house, as well as easy to use technologies, or risk being unable to offer significant strategic value.”
Challenges in hiring digital skills in procurement
As part of ongoing digital transformation efforts in procurement, the report found that UK businesses have started to introduce new technologies such as data analytics (55%), cloud-based platforms (53%), automation (35%) and AI/machine learning (30%) in the last 12 months.
But when it comes to deploying these technologies, UK businesses are finding it difficult to complement them with the digital skills required. The study found that 88% find it challenging to hire the right digital skills to work with technologies such as AI, cloud-based platforms or data analytics, while 76% say they are concerned that existing procurement teams will struggle to work with new technologies. Developing digital skills is vital for businesses, as 91% of respondents say that improving digital skills can make procurement more strategic, while 94% say it will help them gain a competitive advantage.
“In a rapidly evolving business environment, digital skills are essential for procurement teams to analyse and mitigate risk, identify new opportunities and collaborate with suppliers. However, procurement teams are struggling to both attract digital talent and upskill existing teams, which puts them at risk of falling behind competitors, losing market share, and struggling to identify risk and opportunities ahead of time,” comments Saric.
“To address the digital skills gap in procurement, UK businesses need to ensure they are focusing on adopting tools that are easy to use and improve access to actionable insights. By making procurement smarter, businesses are giving teams the tools and skills needed to thrive in the new normal, allowing the business to react and proactively address the shifting sands of a post-COVID world.”
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