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IDC Financial Insights Unveils 2017 Worldwide Financial Services Predictions

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IDC Financial Insights Unveils 2017 Worldwide Financial Services Predictions

By Marc DeCastro, Research Director, IDC Financial Insights

Despite the significant changes already witnessed in the financial services industry over the past 10 years, the changes from 2017 to 2020 will be unprecedented. The impact of a scaled-up digital transformation (DX) economy on our industry will see more enhanced customer experiences, a proliferation of next-generation security solutions, the expansion of cognitive and artificial intelligence (AI) technologies, and robotic and automated solutions aimed to improve efficiency and overall profitability. As part of this digital economy, new rules for competitive success will be built, there will be new roles for IT leaders, and fintech vendors will be presented with new requirements and challenges to the status quo.

Marc DeCastro

Marc DeCastro

At IDC Financial Insights, we recently published our IDC FutureScape, which is a planning tool for technology leaders and their line-of-business (LOB) counterparts to use in their IT strategic planning efforts. Developing a business strategy that takes into consideration the needs of IT initiatives as well as line of business is a delicate task. The predictions in this article can be used to help determine where best to invest based on the overall market and industry trends.

The challenges of the industry today continue to be shaped by trying to match fintech innovations while resources are scarce and regulatory burdens persist. In addition, the changing needs and expectations of both customers as well as employees creates an environment where banks must continue to innovate or they will find themselves in a situation where they need to rapidly invest to simply catch up with the competition. Here are the 10 predictions for the next one to three years.

Prediction 1: Behavioral Analytics Across Compliance, Fraud, and Cyber Detection/Prevention Will Be in Place in 15% of Banks in 2017 to Help Avoid Regulatory Fines and Sanctions

Prediction 2: By 2020, Blockchain/Distributed Ledger Technology Will Be Adopted by 20% of Trade Finance Globally

Prediction 3: By 2019, Cloud Adoption Will Reduce Infrastructure Spend by 25% Among Top-Tier Banks

Prediction 4: By 2018, There Will Be a 15% Increase in Worldwide Mobile Payments Using NFC, Reflecting Continued Uncertainty in Who Will “Own” the Device

Prediction 5: Disruptive Technologies Including Cognitive, Robotic Process Automation, and Blockchain Will Be in Use at 50% of Banks Worldwide by 2020, Accelerating Digital Transformation by 30%

Prediction 6: Investment in 3rd Platform and Innovation Accelerators Will Grow at Twice the Rate of Overall FSI IT Spend Through 2020 as Global IT Spending Surpasses Half a Trillion U.S. Dollars

Prediction 7: In an Effort to Boost Live Chat Customer Interactions, 20% of Banks Will Begin Proof-of-Concept Projects to Integrate Conversational Interfaces in Their Omni-Channel Strategy in 2017

Prediction 8: By 2018, Virtually Every Wealth Management and Capital Market Firm Will Have Built or Licensed a Robo-Advisor Platform or Leveraged Artificial Intelligence to Manage Funds

Prediction 9: By 2019, Usage-Based Insurance Enabled by Internet of Things Will Account for at Least 15% of the Global Vehicle Insurance Market and 10% of the Global Home Insurance Market

Prediction 10: While Widespread Adoption Will Be Slow, in 2017, Cognitive Technologies Will Be Deployed in 15% of Banks, Providing Consumers with “Voice Banking” on Numerous Devices

Our research has also developed seven drivers that both CIOs and their business partners should consider over the next 36 months as they are planning short term and longer term objectives. The list is not meant to be exhaustive nor is it meant to be final. IDC Financial Insights publishes a new list of drivers annually, and many are evolutionary. Last year’s drivers were instrumental in developing this list, just as this year’s drivers will be critical to the formulation of next year’s drivers.

Of the seven drivers, it became clear that some drivers had further reach within financial services than others. These drivers are more far reaching and thus are likely to have the most complexity and cost in implementation. A summary of key drivers below are in order from the number of times they were cited by the global analyst team as impacting the prediction.

Driver 1: Staying Relevant: New entrants and products are disrupting the financial industry.

Driver 2: Digital Transformation: Technology-centric transformation is altering business and society.

Driver 3: Everything, Everywhere: The rise of cognitive and computer-based intelligence.

Driver 4: Enterprise Architecture:Integrating innovation into the bank’s existing infrastructure.

Driver 5: Global Volatility: Competition, power, and risk play big roles.

Driver 6: New Nature of Risk:Innovating to defend against bad actors and comply with increasing regulatory compliance.

Driver 7: Platform Economy:The ecosystem battle for scale.

Some specific essential guidance includes:

  • When it comes to behavioral analytics, particularly as it relates to cyber detection and fraud prevention, find solutions that can reduce the number of false positives while aggregating across multiple data sources. To help with the ROI, reuse the data for cross sell and up sell opportunities.
  • Cloud adoption works best after you have developed methods that can measure the true business value. Over time, cloud adoption will continue to spur innovation and will become a key platform for delivery of IT services.
  • Developing solutions that focus on disruptive technologies – including cognitive, robotic process automation, and blockchain – will be key on differentiation amongst banks. However, the skill sets required for these disruptors is neither inexpensive or readily available, therefore leverage third party expertise in these areas.
  • Voice banking as a channel will be slow to catch on, however there are aspects within voice that can be used to create an improved user experience, particularly as it relates to improved security and authentication. The strategy for voice banking needs to begin early, while regulatory guidance will likely be ramped up in the coming months as there are still numerous questions around who owns the experience for natural voice banking solutions.

The predictions in our study are a culmination of the tenants of our research over the past few years. Innovation has reached the point of disruption for financial service firms of all sizes and geographic locations. To be successful, one must continue to search for the value associated with offering new services for their customers, transform the enterprise with innovative solutions, deploy the right mix of tools to minimize risk while meeting regulatory requirements, and protect the brand from internal and external threats.

About Marc DeCastro: An industry veteran, Marc provides extensive information technology expertise to assist IT managers with all facets of web-based technologies for online strategies within financial institutions, including home based banking, bill payment, check imaging, cash management services for corporate and legacy system data transformation.

Mr. DeCastro regularly contributes to the FinTech blogs in the IDC Financial Insights Community (http://idc-insights-community.com/financial). His Twitter handle is mdecastro.

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Using payments to streamline everyday transport

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Using payments to streamline everyday transport 1

By Venceslas Cartier, Global Head of Transportation & Smart Mobility at Ingenico Enterprise Retail

Once upon a time the only way to get from A to B on public transport was with cash – and likely a pre-paid ticket bought from a physical office. Nowadays, thanks to technological developments, options range from contactless and mobile payments, to in-app tickets and more. As payment methods advance, consumers and merchants are naturally moving towards Mobility as a Service (MaaS) systems, integrating various forms of transport services into a single mobility service, accessible on demand.

This move towards MaaS does not only streamline the consumer experience, it has other positive impacts too. Incentivising public transport use reduces environmental pollution, improves mental wellbeing by reducing travel-related stress, and aids productivity by freeing up time otherwise spent driving. With this in mind, let’s take a look at the current trends affecting the transport sector, as well as how payments can optimise transportation for both operators and consumers alike.

Optimising transport with payments

The payment process is integral to any service. A payment service provider (PSP) can provide a range of key benefits to operators by proving a gateway to the transportation open payment ecosystem, and ensuring they meet objectives in 3 key areas.

  1. Environmentally, by reducing the use of personal cars and alleviating pollution and congestion.
  2. Societally, making urban mobility more inclusive in terms of improving access to all areas and for all socioeconomic classes.
  3. Economically, by optimising investment in eco-structure and fostering financial transactions, therefore improving the wealth of the city.

Payments professionals’ expertise and technological solutions can make payments easy again for transport operators. They can provide a range of options so that the customer can choose which one is right for them, leveraging the capabilities of the mobility services’ infrastructure (contactless, mobile wallets, P2P, closed-loop, QR code, and blockchain).

Furthermore, they can help promote inclusion and sustainable urban development. For example, methods such as prepaid virtual cards, or mobility accounts linked to a prepaid account can reduce the risks of excluding the unbanked. The environmental impact per kilometre can also be reduced, along with the use of vehicles with lower emissions per person per kilometre.

Finally, PSPs can put merchants’ minds at ease, providing payment liability, allowing aggregation of all due amounts from all mobility service providers, and collecting payments in one single transaction from users while dispatching revenue between mobility service providers.

Managing coronavirus

Venceslas Cartier

Venceslas Cartier

COVID-19’s disruption to the travel industry cannot be overlooked. In fact, research suggests that public transit ridership is down 70% across the globe since the onset of the virus, longer distance travel has seen reductions of up to 90%, and payment by cash has seen a 60% drop.

Being realistic, these behavioural shifts are unlikely to revert anytime soon, so it’s important for merchants to keep this in mind when thinking about payment methods. More than 70% of consumers and travellers say they are likely to avoid the use of cash over the next six months. As a result, more than 40 countries have already raised their contactless payment threshold, further helping consumers to avoid contact with frequently touched pin pads.

However, the pandemic has only accelerated the way things were heading already and highlighted the benefits. Within the context of the pandemic, transportation needs to reinvent itself and adapt its processes to suit the shift in commuter habits that we’ve already seen and will continue to see in the future.

Other trends to keep an eye on

Contactless has been steadily growing on the transport scene, as have mobile payments and in-app purchases. In fact, the recent move to mobile and online ticketing is the most promising method so far, having seen significant growth in the last few years and having been accelerated by COVID-19 as discussed above. Once consumers move to these easy, convenient, and seamless methods, it’s rare that they revert – so it’s a good idea for operators to think how they can cater to these preferences.

Speed and convenience are a must for busy travellers – but not at the expense of data security. Finding the right payments partner is therefore crucial so operators can safeguard their customers’ personal data, while also keeping on top of other security regulations/features such as P2P encryption, PCI certification, and tokenisation.

Next steps for operators

Public transport is essential for many peoples’ everyday lives – COVID-19 or no COVID-19. As such, mobility service providers can make a great difference to their service and operations by implementing the right solutions.

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Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime

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Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime 2

By Dhanum Nursigadoo, ComplyAdvantage

With the summer drawing to a close, many countries who rely significantly on warm weather tourism will be assessing the impact of Covid-19. Being a small island in the middle of the Mediterranean you would expect Malta to be taking a significant economical hit – just like we are seeing in other popular European holiday destinations – but this doesn’t take into account the strength of the Maltese economy.

Emerging from the eurozone crisis with one of the most dynamic economies strategically positioned between three continents, Malta has had one of the lowest unemployment rates in the EU and has recently seen its GDP growth expand year-on-year.  But perhaps the most important aspect of the Maltese economy has been its attraction for foreign businesses with only a 5% tax on profits. It is no secret that Malta is a tax haven, probably one of the most effective tax havens in the world.

But you can’t pick and choose who takes shelter, and it’s no secret that money launderers have been taking advantage of the regulatory landscape in this archipelago.

The conditions of a tax haven suit criminal enterprises, who can take advantage of the opaque environment and blend their illegal activities with the same operations enjoyed by high net worth individuals and corporations who are looking to reduce their tax bill. And last year Malta’s keenness for secrecy and avoidance resulted in a damning report by Moneyval – the Council of Europe’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) body – which found that while the nation had made some efforts to curb money laundering there was still much to be desired in order to bring the tax haven up to standard. Overall, they were of the opinion that Malta viewed combating money laundering as a non-priority and this resulted in branding Malta with low to partial ratings for 30 out of the 40 Financial Action Task Force (FATF) recommendations.

The findings of the report were stated to have the potential to “create within the wider public the perception that there may exist a culture of inactivity or impunity”. This follows on from a series of international high-profile stories regarding Malta and financial crime. Most shocking was the murder of journalist Daphne Caruana Galizia – who investigated corruption and money laundering in her native country – and was killed by a car-bomb three years ago leading to international outrage and condemnation.

Now Malta is in a race against time to turn their reputation around or they will suffer genuine consequences. The FATF have threatened to place Malta on a “greylist” of high-risk jurisdictions unless they have shown a genuine commitment to combatting financial crime and implemented the recommendations of the Moneyval report. If they fail, this would make Malta the first EU country to make the list and join others such as Panama, Syria and Zimbabwe.

The pandemic has actually given Malta more time to meet these obligations, and it has been widely reported that an initial summer deadline has now been moved to October due to the widespread disruption.

As we head into the autumn, there are signs that Malta has begun to take action. The Malta Financial Services Authority (MFSA) has created and established an empowered AML now headed up by Anthony Eddington, formerly of the UK’s Financial Conduct Authority and who has previous experience of tackling anti-financial crime at Deutsche Bank. This team has already begun working closely with international experts, specifically partners in the US through the US embassy in Malta and the United States Commodities Futures Trading Commission (CFTC). In May this collaboration led to 25 new cases focused on money laundering in particular, and with plans to increase standard inspections and on-site investigations into businesses in Malta, it appears there is a change to the country’s priorities.

Importantly, the report highlighted a problem for countries that choose to become tax havens. In some cases it was not that the Maltese authorities deliberately turned a blind-eye, but simply that they did not have the necessary knowledge to effectively tackle financial crime in the first place. Law enforcement appeared unable to even recognise when crime was occurring.

But this blurring of financial compliance will not help businesses if Malta does indeed become “greylisted” this year. While not as devastating as being blacklisted (the two occupants of this list are Iran and North Korea) there are significant detrimental effects to being put on the FATF greylist. Although this signals that the country is committed to developing AML/CFT plans (unlike the blacklist) it still sends out a warning signal to the world that this is a high-risk area, with the country in question subject to increased monitoring and potential sanctions from the IMF and the World Bank. Make no mistake, being put on the greylist will be catastrophic for Malta’s economy.

It remains to be seen how the work to avoid such a calamity will affect Malta’s tax haven status. Perhaps with an increased fight against financial crime there will be less ability to defend one of Europe’s most competitive tax regimes. But if Malta does not show they are genuinely committed to tackling this problem, then the pandemic disruption to the island’s tourism may be minor in comparison to the grey clouds that now approach their shores.

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How will the UK prepare a supply chain for the distribution of the Covid-19 vaccines?

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How will the UK prepare a supply chain for the distribution of the Covid-19 vaccines? 3

By Don Marshall, Marketing role at Exporta.

The challenge of mobilising a supply chain for the introduction of a global and nationwide vaccine will be enormously complex. The process will be costly, and it’s likely the figures will stretch to the hundreds of millions for both the production of the vaccine itself and its distribution across the UK. We must prepare and plan a supply chain strategy to ensure it reaches those most in need in a timely and safe manner.

The task of immunising a whole population is something that has never been planned or likely imagined by anyone within a standard supply chain. A supply chain that goes directly from the manufacturer to the end consumer, or user/ patient in this case, is complex and goes beyond the scope of any single logistics company. It would have to be conceived and delivered via a large joint effort and collaboration between multiple organisations. Effectively distributing the vaccine will depend on the source of manufacture, its storage requirements, and protection of the vaccines from manufacture through to patient administration.

The majority of vaccines require storage within a specific temperature range and need to be handled safely and in hygienic conditions. Depending on where the vaccines are manufactured, the transport legs will vary; if they are coming from overseas, air freight will increase cost and complexity. In addition to supplying the vaccine, syringes, needles and containers also need to be taken into account when preparing the supply chain.

Securing the specific types of boxes or containers i.e. the lidded containers normally used for transporting pharmaceutical products will mean acquiring them from all available stockists and manufacturers. Delivery vehicles would then need to be considered, with temperature-control factored in. The medical supply chain can inform their approach to distribution by assessing data from previous supply chains, and how large quantities of vaccines have been sent out in the past. Collating successful vaccine delivery examples from other parts of the world would be advantageous here, the more we can do to prepare for a logistical challenge of this magnitude, the better.

The distribution of this COVID vaccine will be unique in its scale and for that reason, additional supply chains will need to be mobilised. Apart from medical supply chains, those best suited for this type of transportation are the fresh/frozen food industries and supermarkets. I would mobilise these businesses to assist with the vaccine’s distribution wherever possible and use their car parks and facilities for the temporary medical centres needed to administer the vaccine to the public.

Using the food industry and supermarket networks would leave the current pharmaceutical supply chains intact for health services, pharmacies and the NHS. It would protect those vital services and continue to serve communities across the UK. Inevitably, it would place a short term strain on food supply chains, but these are supply chains that are well-equipped and versed in coping with excess demand i.e. the spike endured from the brief spell of public panic buying at the start of the crisis. With adequate resourcing and planning, I believe the UK supply chain can and will handle this challenge.

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