By Russell Gammon, chief product officer at Arkk Solutions
The likes of Monzo, Starling and Revolut continue to disrupt the banking industry, with one in four UK adults under 37 now using a digital-only challenger bank.
Born out of a belief that traditional banking is broken, this new wave of fintech firms are providing customers with fast, digital, and intuitive experiences. With their services built natively on cloud technology, they are more responsive to changing market conditions and can easily roll out new features to attract and retain customers.
Many sectors are looking at the appeal of challenger banks in the search for similar success. But for me, it is the tax industry that should take the greatest inspiration – because there are so many parallels between the outdated systems of traditional banks and the clunky processes still used by many tax teams. But first, let’s look at precisely how challenger banks are embracing modern technology.
Banking in the cloud
Monzo’s website says that “for too long, banking has been obtuse, complex and opaque”. A key reason for this is that traditional banks tend to run on old, on-premise technology that’s difficult to update. It’s also hugely costly to maintain; banks typically spend 80% of their IT budgets on legacy technology maintenance.
In contrast, challenger banks have been built from the ground up on cloud technology. This means they can take advantage of transparent standards and avoid the hassle of in-house maintenance. They’re dispelling the ‘cloud is not secure’ myth, using mega vendors like Microsoft and Amazon to host critical services and confidential customer data. And by easily integrating cloud-based AI, they’re stopping fraudulent activity before customers even notice it.
Focusing on experience
Challenger banks have taken exception to the old, accepted ways of serving customers. For example, they’ve turned the lengthy process of opening a new account on its head. No visit to a physical branch. No paper forms to fill. No days left waiting for approval. New banks have replaced these with a digital sign-up process that takes less than five minutes, all done securely via the customer’s mobile phone.
But signup is just the start. Because challenger banks are inherently more agile than traditional banks, they can react to new techtrends and quickly introduce new services to keep up with their rivals.
The effort and investment they’ve made in radically transforming the user experience (inspired by other app-based leaders like Uber and Airbnb) has been a key success factor for challenger banks.
Transforming tax technology
So how can the rise of fintech be replicated in the realm of tax? Are we on the verge of a new era of ‘taxtech’?
Well, we’ve already seen tools like Xero and Quickbooks gain significant popularity among small- and medium-sized businesses thanks to their ease of use and ability to automate tax processes. But can this be achieved at a bigger corporate level? I certainly think so.
Similar to traditional banks, the technology used by larger tax departments is ripe for disruption. It has been dominated by a handful of vendors, who focus mainly on tax compliance, but also offer point solutions to niche problems like transfer pricing and capital allowances. This has left tax teams with multiple footprints of multiple products, all with different training and support requirements – rather than one toolfor one discrete task.
Furthermore, many existing solutions were built in the early 2000’s when the technology landscape was a lot different. Very little investment has been made since. Some vendors have built cloud components, but these are typically add-ons to their on-premise solution. They don’t support the cloud-first or cloud-only policies that most firms now follow as standard.
Automate for accuracy
Because vendors have been able to rest on their laurels in this uncompetitive tax technology market, innovations like automation, machine learning and AI have yet to make their way into the tax mainstream.
That’s a massive opportunity. Tax datasets are usually very large, with thousands of lines to be checked manually, using a sample or some logic.Machine learning can apply more detailed logic to all of those transactions and ensure that tax is calculated to the penny, whilst freeing tax professionals to use their time on more valuable (and fulfilling) tasks. For example, our Fix & Verify Solution uses machine learning functionality to speed up VAT submissions and give tax teams more confidence in the accuracy of their returns.
Build for function, but also beauty
Tax technology has always been built from a functional perspective, based on the tasks that tax professionals need to do. In fact, most developers have been required to complete a tax qualification to ensure they fully understand what’s needed.
What’s been overlooked is the user experience. Tax tools can be clunky and painful to use, lagging far behind others in the software world. But as with all other areas of work, tax teams are becoming less patient with poor technology experiences – they expect better, and will soon demand it.
So overall, I’ve little doubt that the next couple of years will bring a tectonic shift in taxtech. As more light is shone on the limits of legacy systems and processes, the taxtech market will quickly get up to speed with other industries. And we can definitely thank the challenger banks for that.
5 reasons to rebrand now
By David Langton, president of Langton Creative Group and co-author of Visual Marketing (Wiley Publishers).
- Ineffective Logo. How well does your name and image support your company’s mission? Organizations must change and evolve and sometimes that cool logo from the 80s no longer pulls its weight. Are you defending your logo just because it’s old? We often hear about how an old logo has equity with clients. But just because it is recognizable as your logo, doesn’t mean that this is how you should be known. What impression is the logo making on your behalf? Is it classic, or just old-fashioned? One healthcare client had an old logo with bad typography that was difficult to reproduce. But the CEO loved his logo and told me that the old company logo wasn’t going anywhere, “I expect that to be on my gravestone,” he told us. And that’s exactly where it should be.
- Non-descript.Is your company or service getting lost in the shuffle? If your logo looks just like everyone else’s logo, then it’s not doing its job. You must distinguish who you are in your marketplace. What are the special attributes that make your company, product of service the right solution? Find that spark of novelty that makes you special. The FedEx logo is famous for its hidden “arrow” that implies forward-motion. (They’re ones who move your packages quickly.) The UPS logo is a golden shield. (They’ll protect your packages.) AT&T has a globe. (They want to be seen as world-wide, more than just an American telephone and telegraph company.) Designer Tom Geismar says, “Symbols don’t make clear what you do; it makes it clear who you are.”
- Leadership Change.Whenever the top management at a company changes there is an opportunity to inject new energy into your messaging and redefine your mission. Capture the vision of their leadership. How does your brand reflect their goals for the new year? When General Re acquired New England Asset Management (NEAM) the new company name became “GR-NEAM.” When a new leadership team took over they decided to reclaim the “NEAM” name since it was easier to say and it gave them an opportunity to promote their new vision for the organization.
- Mergers/Acquisitions. Newly combined companies usually are in a state of chaos. Inside and outside the company people are searching for what the newly combined company will be about. This is the time to reevaluate how your brand presents who you are and what your values and strengths are in the new combined company. A report in Harvard Business Review states, “Because a merger’s success relies in part on preserving positive feelings among customers and employees, it’s smart to pursue a branding strategy that explicitly seeks to transfer equity from both merging companies to the new one.” When United and Continental Airlines merged they kept the Continental logo and aligned it with the United Name. Companies that use this “fusion” method actually exceeded their market return by 3%.
- Technology.Is your field changing while you are being left behind? This is an important time for companies to re-evaluate how their brand is presented in the marketplace. An upstart may be perceived as quicker and more technological than an established player. Can you show how important your experience and know-how is for tackling the challenges in your industry? Domino’s Pizza keeps reinventing itself with new tech to stay ahead of newly emerging rivals like UberEats who use apps to deliver food. Fast Company shows how as early as 1973 Domino’s was introducing a 30-minute guaranteed delivery then continued to reinvest in tech that utilizes voice recognition, GPS tracking and artificial intelligence to keep on top of tech revolution. Successful companies develop tech solutions that keep them ahead of the competition and then make sure their brand communications reflect their inventiveness.
Be the brand you ought to be.
Keep in mind that even if your brand experiences any of these telltale signs, don’t embark on a rebrand without making sure your business can back up the brand promise. The key to effective branding is that you must be what your brand says you are. If you are rebranding to be more technological, then you must become more tech-savvy. Just rebranding yourself without improving your services and really redefining who you are is not going to be effective in the long run.
The key to a successful rebrand is in identifying a core story that expresses the brand’s connection to its audience. Why are you important in the eyes of your target customers? And how do you tell that story? The re-brand launch is just as important as the logo artwork and the naming of the organization.
More than regulation – how PSD2 will be a key driving force for an Open Banking future
By Ralf Ohlhausen Executive Advisor, at PPRO
Whilst initially seen as simply a regulation exercise, the second Payment Service Directive, also known as PSD2, has been a key driving force behind Open Banking, an initiative that presents a hopeful vision for the future of the financial services sector. Thanks to the advancement of technology, the payments industry is currently seeing disruption to legacy banking systems, and a move towards a world of Open Data. With Open Banking, third-party providers (TPPs) can offer customers a wealth of new and automated services beyond their standard bank offerings, such as what products to buy or even advice on who to bank with.
PSD2 has been created to ensure that banks create mechanisms to enable third-party providers (TPPs) to work securely, reliably and rapidly with the bank’s services and data on behalf of and with the consent of their customers. PSD2 requires EU member banks to give authorised, i.e. licensed TPPs, access to customers’ accounts either via Application Programme Interfaces (APIs) or their user interfaces. It also mandates the use of Strong Customer Authentication (SCA), which requires multiple factors of authentication from a customer to initiate electronic payments and grant access to transaction data.
Despite the progress of PSD2, however, there are still challenges to overcome to achieve widespread adoption and to meet Open Banking objectives. So, what are the current roadblocks that European banks and financial services need to overcome to make Open Banking a beneficial reality for all?
Delays to API development
A crucial factor standing in the way of the acceleration towards Open Banking has been the delay to API development. These APIs are the technology that TPPs rely on to migrate their services and customer base to remain PSD2 compliant.
One of the contributing factors was that the RTS, which apply to PSD2, left room for too many different interpretations. This ambiguity caused banks to slip behind and delay the creation of their APIs. This delay hindered European TPPs in migrating their services without losing their customer base, particularly outside the UK, where there has been no regulatory extension and where the API framework is the least advanced.
A lack of awareness
Levels of awareness of the new regulations and changes to how customers access bank accounts and make online payments are very low among consumers and merchants. This leads to confusion and distrust of the authentication process in advance of the SCA roll-out. Moreover, because the majority of customers don’t know about Open Banking yet, they aren’t aware of the benefits. Without customer awareness and demand it may be very hard for TPPs to generate interest and uptake for their products.
Recently some regulators and banks, such as the Central Bank of Ireland, have made decent efforts to raise awareness of the changes with PSD2 campaigns. But it isn’t reaching the general public. When it does, it’s often because of scaremongering or fear, uncertainty and doubts around data security fuelled by incumbents to protect their business. This also isn’t the right way to approach the issue as it will lead to people being more afraid, rather than aware. Instead, it is the role of payment service providers to educate their customers about Open Banking requests or opportunities, to ensure the public are aware of the changes to payment authentication procedures when SCA comes into play and are empowered to move their data.
TPPs have a real vested interest in getting customers on board with Open Banking. They should build on their customer relationships to grow trust and raise levels of education around the changes. When customers sign up for a new service, TPPs need to tell them explicitly what to expect before they have to do it, plus what explicit consent is required to access their account information in exchange for value-added services.
Outweighing the challenges with opportunities
Although the introduction of the PSD2 regulation hasn’t been seamless for the banking and fintech industry, it is set to offer many benefits and advantages for the end-customer, and the financial industry. In fact, the regulation will create an integrated and frictionless European payments system, that will provide the customer with more choice, control and security over their finances than ever before.
One of PSD2’s primary goals is to provide greater protection against fraud for banking customers, who may have previously been open to risk through weak authentication and unregulated data-sharing practices. The new rules insist on enhanced security requirements, including the use of Strong Customer Authentication (SCA) to protect customers while making electronic payments.
Furthermore, TPPs unencumbered by legacy technology have long been able to innovate faster than traditional banks. Now, this regulation will provide regulated and secure access to customer data, allowing them to develop products even more quickly. The new regulation also promotes technology on a European level and encourages fintechs to do what they do best: innovate.
It’s also important to not forget that PSD2 regulation increases market competition allowing customers to choose a wider range of suppliers for their banking and payment services without having to switch their bank for that. The decoupling of banking services from the underlying account infrastructure will make it easier for customers to opt for the banking services that best fit their needs. It also increases the number of financial providers, services and products which customers will be able to choose from.
The future of Open Banking
The financial services landscape is becoming a firmly consumer-centric environment. Across the UK and Europe, we’ll continue to see the rollout of technologies that put control in the hands of consumers. Open Banking will be pivotal in its role, opening up new avenues and opportunities for both banks and payment service providers (PSPs).
Thanks to Open Banking, the ability to share data securely in the retail banking sector has led to a sophisticated ecosystem where the customer is in charge of their payments and choice of banking services. Over the next decade, we should expect to see the same level of transformation in our digital services and data sharing, leading to a complete rebalance of services where customers will be able to actively own their data and use it the way they like.
Europe is currently leading the Open Banking race, so the successful implementation of PSD2 and SCA is extremely important to maintain the lead and build a future with Open Finance and Open Data as well.
Martin Lewis financial education textbook rolled out to 700 schools across the UK
The first ever financial education textbook to hit Northern Ireland, Scotland and Wales will be rolled out over the next 15 months
Today, Young Money announces the launch of the first ever financial education textbook to hit schools in Northern Ireland, Scotland and Wales. Over 45,000 books will be sent free to schools over the next 14 months, as well as an accompanying teacher’s guide (available digitally). The textbook will also be available as a free PDF download to anyone who wants it.
This launch follows the successful roll-out of the textbook in England. In November 2018 340,000 copies of the very first financial education textbook in the UK, ‘Your Money Matters’, were delivered into English secondary schools. This was funded by Martin Lewis, the Money Saving Expert, with a personal donation of £325,000 to the financial education charity Young Money to develop and distribute this milestone resource and accompanying teacher’s guide.
Aimed at supporting the financial capability of those aged 15 to 16, the reality is that the textbook has been used across multiple year groups and within a wide range of subject areas.
Since being delivered into every state-funded secondary school in England, the Money and Pensions Service funded an evaluation of the impact that Your Money Matters has had:
- 89% of teachers said that Your Money Matters would improve the quality of financial education in their schools.
- 88% of teachers said the textbook would increase their confidence to deliver financial education.
Subject Head at a Community school, said:
‘Excellent resource! Much needed for youngsters. We are very grateful to have received the textbooks and received excellent feedback from students. One student told me that our Financial Capability lessons changed the way her parents look at finances and motivated them to change the way they deal with money as a family.’
A Year 12 student, commented:
‘It’s so broad as well – if you want a general outline it is perfect for that. I actually brought one home so I could look through the university stuff. My older brother wanted to know about a work pension… I said ‘I have this textbook’ so he looked at that. He found it useful – it had the general information that he needed.’
Following the success that Your Money Matters has received in England, the Money and Pensions Service and Martin Lewis are splitting the cost of the £368,000 project, funding Young Money to develop versions of the textbook for Northern Ireland, Scotland and Wales. State-funded secondary schools in each nation will receive both printed and digital copies of their textbook over the next 14 months:
Northern Ireland – January 2021 (12,000 copies in total)
Scotland – March 2021 (21,500 copies in total)
Wales – September 2021 (12,500 copies in total)
What is in the textbook?
The educational textbook contains facts and information as well as interactive activities and questions for the students to apply their knowledge. The chapters are as follows:
1. Savings – ways to save, interest, money and mental health
2. Making the most of your money – budgeting, keeping track of your budget, ways to pay, value for money, spending
3. Borrowing – debt, APR, borrowing products, unmanageable debt
4. After school, the world of work – student finance, apprenticeships, earnings, tax, pensions, benefits
5. Risk and reward – investments, gambling, insurance
6. Security and fraud – identify theft, online fraud, money mules
Whilst the key financial topics will remain largely the same, a review in each nation, consisting of focus groups with teachers and devolved government representatives for education, is being conducted to identify the amendments required. This will ensure that the textbook in each nation maps to the respective education curriculum as well as taking into account the specific needs and financial legislation in each country.
Once complete, up to 75 copies will be delivered for free into every secondary school in each nation.
Why do we need the textbook?
Financial education is part of the national curriculum for every nation in the UK. Whilst integrated into each curriculum in different ways, it is an important part of secondary school education. Various pieces of research have identified that teachers’ confidence in delivering financial education is relatively low – there is little training provided to support this – and the degree to which young people receive financial education in school is hugely variable.
The textbook addresses this by covering key financial information in a relevant and engaging way for students. To accompany the textbook there will be an online teacher’s guide which will support teachers in each nation to use the textbook to enrich their own financial education provision in a variety of ways.
There is a strong need to help young people understand financial matters. For example, fewer than three in ten 14 to 17-year-olds plan ahead for how they’ll buy things they need, and one in ten 16 to 17-year-olds have no bank account at all. Gaining knowledge and confidence in financial issues is crucial to leading to better decisions now and in later life.
Martin Lewis, founder of MoneySavingExpert (though donating in a personal capacity) comments:
“The pandemic has shown the lack of personal financial resilience and preparedness of the UK as a whole. Not all of that can be fixed by improving financial education, but a chunk of it can. Of course, we need to educate people of all ages, yet young people are professionals at learning, so if you want to break the cycle of debt and bad decisions, they’re the best place to start.
I was one of those at the forefront of the campaign to get financial education on the national curriculum in 2014, and we celebrated then thinking the job was done. We were wrong. Schools have struggled with resources and there’s been little teacher training. Something else was needed to make it easy for schools and teachers. So even though I questioned whether it’s right that a private individual should fund a textbook, no one else would do it, so I put pragmatics over politics and did it in 2018.
I’m delighted that now we’ve proved the success of that book in England. The Money and Pensions Service has agreed to team up to provide this much-needed resource for the rest of the UK’s nations – adding a rightful sense of officialdom to the whole project.”
Sharon Davies, CEO at Young Money and Young Enterprise comments:
“We are thrilled that Young Money is able to develop the Your Money Matters textbook for every UK nation. Financial education is critically important for all young people, and it is fantastic that the difference this has already made within England can now be extended to Northern Ireland, Scotland and Wales. We look forward to working with our partners in each of these nations over the next year.”
Sarah Porretta, Strategy and Insights Director at the Money and Pensions Service comments:
“We know that learning about money when we’re young can have a direct impact on the ability to manage money later in life. However, too many young people are entering adulthood without being prepared for the money-related challenges that lie ahead.
The launch of the Your Money Matters textbook in Northern Ireland, Wales and Scotland is a vital step towards more teachers having the confidence, skills and knowledge to teach financial education. As part of our UK Strategy for Financial Wellbeing, we want to see a further 2 million children and young people getting a meaningful financial education so that they become adults able to make the most of their money and pensions.”
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