(Or the three stages of digital transformation)
According to a survey by The Economist, in 2015, banks have for the first time promoted the implementation of a digital strategy, to the highest priority on their agenda. However, according to a survey by Avaloq, 74 per cent also admit they have not yet defined a digital strategy or are only at the very early stages of doing so. At the same time, large banks such as BBVA are investing heavily in technology through the acquisition of software companies or digital banks, known as ‘fintechs’.
Fintechs leading innovation
Fintechs are widely regarded as the leaders of innovation in the banking industry over traditional financial services providers. They are primarily achieving this by offering clients a state-of-the-art digital experience and offer their services at a much cheaper price than their more traditional competitors. Many are also leveraging the untapped potential of technology to offer innovative products and services.
In wealth management, robo-advisors offer low-cost algorithmic-based investment management – for example, Wealthfront offers a tax-optimised direct indexing service at a management fee of 0.25 per cent of asset value. While Wealthfront has reached a milestone of two billion dollars of assets managed on the platform, Silicon Valley fintechs claim to manage a total of twenty billion dollars of assets, and this number is growing quickly.
However, many wealth managers still underestimate the risk of a disruptive change within the industry. Many believe fintechs only provide solutions that appeal to retail or mass affluent clients and claim they do not provide sophisticated investment solutions that are tailored to a client’s unique situation. There is also an argument that they do not offer the personalised client experience that wealthy clients still expect and can easily receive from a relationship manager.
The problem with disruptive digital shifts (an issue which has already been realised in other industries) is that the change is sudden and dramatic and happens when both the technology and the consumer are ready. Such transitions are also very difficult to predict as there are only minimal warning signs before they actually occur.
Despite this, the rapid growth of fintechs in the last two years and the surge in mobile technology adoption cannot be argued against, and these may be the early signs of an impending digital shift within the financial sector. It also can’t be denied that fintechs today clearly provide an alternative to part of, if not all services offered by banks and wealth managers.
Industry surveys now suggest client expectations in a digital experience with their finance provider are rising quickly, even for High Net Worth Individuals (HNWIs). For example, according to the 2014 Global HNW survey by Capgemeni, RBC Wealth Management and Scorpio Partnership, over 65 per cent of HNWIs are prepared to leave their wealth management firm if they fail to provide an integrated channel experience.
Clients today expect the service they get from their wealth manager to be integrated across all channels, from personal contacts, to phone, computer and mobile devices. What’s more, when they start a request from one channel, they want to be able to seamlessly continue and finish it on another, of their choice and at their convenience.
The three stages of digital transformation for traditional players
Mounting pressure from client expectations and new rival players in the industry mean many banks and wealth managers are prioritising the provision of a new digital experience for their clients. Yet, as other service industries have already experienced, this alone will not be sufficient to survive a digital revolution.
At Avaloq, we have identified three stages of digital transformation. While most banks and wealth managers have identified the first two, only a minority have identified and integrated the third stage within their digital strategy.
Stage One: enabling digital channels
The first stage within the journey to digital transformation is to enable multiple digital channels to sell products and serve clients. This stage is already being implemented by most financial service organisations today. Mobile or e-banking channels are typically independent from traditional client-facing channels and operate in a silo-mode, directly integrated into a core banking operating system.
One of the limitations that banks and wealth managers operating at this stage will face is that digital channels do not provide the same services as traditional channels. Another is the limited level of self-service on digital channels where too often, only simple transactions are possible online, such as payments or trading orders. It is also not always possible to execute more complex requests online such as on-boarding a new client, subscribing to a discretionary management service, or getting investment advice.
As a result, many clients, in particular younger generations, can become frustrated as they cannot understand why what has become a standard in other service industries, is not possible in the financial field.
However, perhaps the most concerning limitation is that client-facing employees have absolutely no transparency over their clients’ activities on digital channels. If a client has unsuccessfully tried to use mobile or web banking to execute a payment or initiate a trading order, the client will have to give a full explanation in order to get the help needed when meeting with an advisor or relationship manager.
Stage Two: digitising all processes
The second stage of digital transformation is focused on digitising all processes to increase operational efficiency and provide an omni-channel experience. This materialises as a digital banking platform that fully integrates all client channels whether digital or traditional, and all front and back office processes. It ensures consistency and continuity of service across any channel, and means client advisors and branch employees are performing their daily tasks on a digital platform that is fully integrated to all client digital channels.
It is commonly called an omni-channel platform because the client can experience a continuous and integrated experience no matter what digital or traditional channel they are using. Client-facing employees not only have clear visibility of all client digital activity, but they can also interact and serve them remotely through digital channels as if they were face to face.
At this stage, digital channels are not just used as a means for informing clients and providing them with basic levels of self-service or interaction capabilities like at stage one. They are now used as a communication and collaboration tool between the client and the advisor, to increase the level of service offered on digital channels and build a closer relationship between the financial services provider and their clients.
Digitising all processes also means fully automating the full financial services value chain, in particular to maximise straight-through-processing transactions and digitise all client-facing processes such as client on-boarding or investment advisory. In many banks, these processes are still executed manually without the help of any digital tools and with a lack of automation and efficiency. Reaching this second stage of digital transformation will therefore enable significant gains in efficiency while also reducing costs. Yet this still might not be sufficient to survive a digital disruption.
Stage Three: transforming into a digital business
The third stage in the digital transformation journey is to turn the bank or wealth manager into a digital business. This requires a change of the business model by leveraging the full potential of technology to reshape products and services. Ultimately, it means that technology is used fully throughout the financial services value chain and to design, build and sell all products and services offered.
The world is experiencing a digital revolution and all industries are, or will be, undergoing significant change as a result. New behaviours are becoming the norm thanks to the daily use of social networks that have introduced new standards of transparency and social interaction. For example, an increasing number of people are now reluctant to trust a new service provider without checking its reputation, rating and pricing compared with alternative providers on various online communities.
It is highly possible that this change could lead to the financial industry undergoing a transition from a bank-centric model, where the bank is at the centre of a client’s financial life, to a customer-centric model, where the bank plays a reduced part of a client’s financial experience.
In a client-centric model, clients will still expect a number of services from their banks, in particular the custody of their assets. However, many will not rely solely on their bank or wealth manager to obtain information or advice on financial products and services; neither will they rely only on them to execute financial transactions.
Fintechs, which have experimented with new business models for banking and wealth management, are a key factor of this disruption. For example, fintechs offer a wide range of new services such as account aggregation across custodians, social finance platforms or platforms to compare, rate and rank investment advisors and banks.
They also offer innovative technology-based products or services. For example, in wealth management, fintechs offer HNWIs investment strategies that leverage the high potential of applied mathematics into their models. Algorithm-based strategies can now include risk and tax optimisation that has proven to perform better than basic ETF or expensive discretionary portfolio management mandates.
One of the most disruptive innovations would be to democratise the access to ad-hoc and tailor-made financial solutions that are currently only offered to wealthy or corporate clients. For example, it could be possible for clients to request the creation of ad-hoc structured products on demand, to hedge the risk on their assets.
Another example is the creation of new exchange marketplaces for investment assets that were once illiquid, such as commercial real-estate investment, art and gold or private equity, which can now be open to mass affluent and retail investors.
Do not ignore the digital financial marketplace
Most banks and wealth managers have identified the digital transformation as a necessity and a digital strategy has therefore become the key priority in their business planning. Yet only a few have truly integrated the change of paradigm that will be mandatory to succeed.
The focus of the digital transformation is usually placed on integrating new client-facing technology to provide a digital experience to clients. Many do not yet see the need to completely redefine their product and service offering with technology, or to open to new emerging financial marketplaces that offer access to alternative investment products and services.
However, in the wake of a digital disruption, the traditional business model may become obsolete. The industry must therefore be prepared to face a future in which clients relegate banks to a low-revenue and low-margin custodian service provider, if they fail to embrace the new digital era. Ultimately, the banks and wealth managers that succeed will have achieved a full transformation into a digital business.
How we as female entrepreneurs can inspire and educate the next generation of female leaders
By Vaishali Shah, serial entrepreneur.
There is tremendous enthusiasm and aspiration amongst the next generation of women who are passionate about being successful in their chosen career, whether it’s running their own business or rising to the top in the company they choose to work in. It is up to those of us who are already in the shoes they want to fill to be the role models and help them along the way. They need our support and guidance and access to tools and resources.
The Alison Rose Review of Female Entrepreneurship found that only 39% of women felt they had the capabilities to start a business compared to 55% of men because they did not fully believe in their entrepreneurial skills. The Review also found that only 30% of women said they already knew an entrepreneur compared to 38% of men.
Here are some ideas and suggestions of how those of us who are successful women in business can help and support the next generation of leaders:
Mentoring – connecting the leaders of the future with experienced and established entrepreneurs and leaders in their industry who know the steps and have already overcome the challenges. Meeting on a regular basis (in person or via video technology), answering questions, offering resources and helping them to define their vision clearly while pointing out opportunities would be extremely beneficial.
Female only networks – most events, especially in the financial and banking sector, are attended by a majority of men. This can be a bit daunting for women who tend to feel isolated. Unfortunately, there are very few female-only business networking groups. We need many more. Women have a different networking style than men. A female only network can give members a safe place to network, build confidence and relationships, while sharing some of the challenges they are facing and ask for guidance and support.
Panel discussions – invite successful female entrepreneurs and leaders from different industries to share their journeys to success. Their challenges, how they overcame them, what kept them going and any nuggets that could inspire the leaders-in-waiting. This could be run around International Women’s Day in March, for example.
Workshops/seminars – offer a seminar or workshop on topics that give valuable information on various aspects of running a business for entrepreneurs. In the workplace, have a system in place for ongoing training, development and engagement. Providing support, tools and resources will help to develop female talent. Make the workshops free or low cost so there is no barrier to entry. Help them to formulate a clear vision and a strong ‘why’ for their vision. This vision and ‘why’ will carry them through the tough times and be an important reminder and motivation to stay the course.
Recommendations – emphasise the importance and benefit of continual learning. Suggest podcasts, webinars or books to listen to or read. Being open to others’ experiences and ideas will help to educate and inspire them. People who achieve great success have a thirst for knowledge and are eager to learn from others.
Confidence and encouragement – give the next generation of leaders a sense of their own value and the value they bring to their market by the products and services they offer. They fill a need – they bring value. Help them understand that setbacks are a part of any business, but they should not be considered failures, rather, as gaining experience. Using setbacks as stepping stones towards their goal is what differentiates those who achieve great success from those who let setbacks define who they are, thus diminishing their chances of success.
Time for them – running or working in a fast-paced business can be all consuming, demanding and overwhelming at times, especially if they’re ambitious and want to get ahead. Teach women in business the importance of taking time out for themselves every day and to celebrate even the smallest success. Taking time out may seem counter intuitive, however it gives the mind time to relax and be open to inspiration and creativity and therefore being more productive.
Dame Karren Brady says – “If you have passion, drive and an entrepreneurial spirit, being female shouldn’t prevent you from getting where you want to be, and sometimes we must have the determination not to let it”.
Whether the next generation of female leaders are students about to embark on their business career, already running their own business or those in employment, we who have the experience and knowledge can play a crucial role in their climbing the ladder of success.
The 2020 Outbound Email Data Breach Report Finds Growing Email Volumes and Stressed Employees are Causing Rising Breach Risk
Research by Egress reveals organisations suffer outbound email data breaches approximately every 12 working hours
Egress, the leading provider of human layer data security solutions, today released their 2020 Outbound Email Data Breach Report, which highlights the true scale of data security risks related to email use. 93% of IT leaders surveyed said that their organisation had suffered data breaches through outbound email in the last 12 months. On average, the survey found, an email data breach happens approximately every 12 working hours.*
Rising outbound email volumes due to COVID-19-related remote working and the digitisation of manual processes are also contributing to escalating risk. 94% of respondents reported an increase in email traffic since the onset of COVID-19 and 70% believe that working remotely increases the risk of sensitive data being put at risk from outbound email data breaches.
The study, independently conducted by Arlington Research on behalf of Egress, interviewed 538 senior managers responsible for IT security in the UK and US across vertical sectors including financial services, healthcare, banking and legal.
Key insights from respondents include:
· 93% had experienced data breaches via outbound email in the past 12 months
· Organisations reported at least an average of 180 incidents per year when sensitive data was put at risk, equating to approximately one every 12 working hours
· The most common breach types were replying to spear-phishing emails (80%); emails sent to the wrong recipients (80%); incorrect file attachments (80%)
· 62% rely on people-led reporting to identify outbound email data breaches
· 94% of surveyed organisations have seen outbound email volume increase during COVID-19. 68% say they have seen increases of between 26 and 75%
· 70% believe that remote working raises the risk of sensitive data being put at risk from outbound email data breaches
When asked to identify the root cause of their organisation’s most serious breach incident in the past year, the most common factor was “an employee being tired or stressed”. The second most cited factor was “remote working”. In terms of the impact of the most serious breach incident, on an individual-level, employees received a formal warning in 46% of incidents, were fired in 27% and legal action was brought against them in 28%. At an organisational-level, 33% said it had caused financial damage and more than one-quarter said it had led to an investigation by a regulatory body.
Traditional email security tools are not solving this problem
The research also found that 16% of those surveyed had no technology in place to protect data shared by outbound email. Where technology was deployed, its adoption was patchy: 38% have Data Loss Prevention (DLP) tools in place, while 44% have message level encryption and 45% have password protection for sensitive documents. However, the study also found that, in one-third of the most serious breaches suffered, employees had not made use of the technology provided to prevent the breach.
Egress CEO Tony Pepper comments: “Unfortunately, legacy email security tools and the native controls within email environments, such as Outlook for Microsoft 365, are unable to mitigate the outbound email security risks that modern organisations face today. They rely on static rules or user-led decisions and are unable to learn from individual employees’ behaviour patterns. This means they can’t detect any abnormal changes that put data at risk – such as Outlook autocomplete suggesting the wrong recipient and a tired employee adding them to an email.”
“This problem is only going to get worse with increased remote working and higher email volumes creating prime conditions for outbound email data breaches of a type that traditional DLP tools simply cannot handle. Instead, organisations need intelligent technologies, like machine learning, to create a contextual understanding of individual users that spots errors such as wrong recipients, incorrect file attachments or responses to phishing emails, and alerts the user before they make a mistake.”
Organisations still cannot paint a full picture of the risks, relying on people-led reporting to identify email breaches, despite severe repercussions
When an outbound email data breach happens, IT leaders were most likely to find out about it from employees. 20% said they would be alerted by the email recipient, 18% felt another employee would report it, while 24% said the employee who sent the email would disclose their error. However, given the penalties that respondents said were in place for employees who cause a breach, it is not guaranteed that they will be keen to own up, especially if the incident is serious. 46% said that the employee who caused a breach was given a formal warning, while legal action was taken in 28% of cases. In 27% of serious breach cases, respondents said the employee responsible was fired.
Tony Pepper comments: “Relying on tired, stressed employees to notice a mistake and then report themselves or a colleague when a breach happens is unrealistic, especially given the repercussions they will face. With all the factors at play in people-led data breach reporting, we often find organisations are experiencing 10 times the number of incidents than their aware of. It’s imperative that we build a culture where workers are supported and protected against outbound email breach risk with technology that adapts to the pressures they face and stops them from making simple mistakes in the first place. As workers get used to more regular remote working and reliance on email continues to grow, organisations need to step up to safeguard both employees and data from rising breach risk.”
Creating an engaging email marketing campaign that avoids the junk folder
By David Wharram, CEO of Coast Digital
With more than 280 billion emails sent every day, email marketing is a tried and tested marketing method with a multitude of benefits. In addition to resonating with those looking to save on their marketing spend, email marketing generates significant ROI for businesses. Statistics have shown that email marketing significantly outperforms social media when trying to reach customers, while also proving more cost-effective. Additionally, Mckinsey found that email marketing is 40 times more successful at gaining customers than Twitter and Facebook combined.
As business owners digest these facts – low cost, high return – it can be tempting to plan a barrage of untargeted marketing emails to both prospective and existing customers. Yet, this “spray and pray” approach may not generate as many sales leads as you’d hope. In fact, this method often tends to deter prospective customers and impact the relationship with existing clients, resulting in your emails consistently making their way into the junk folder. The key to a successful email marketing campaign is investing in the right tools to plan, automate, track, and analyse your outreach.
Like other marketing channels, email marketing takes effective planning and the right strategy to make it work. Rather than trying to sell a product or service from the outset, you need to engage with the customer and build trust with them first. To do this, you need to consider who the customer is, how to reach them and what information they are likely to want. For example, returning customers will be much more receptive to an email presenting discounts and timed offers. However, new or prospective customers would most likely prefer to familiarise themselves with your businesses first in order to understand how your product or service will benefit them.
Not only do you need to identify different audiences and identify how to engage them, but you should also consider the frequency of communication. Too often, and your emails could appear as spam. Too irregular and there’s a risk the customer might forget about you or turn to a competitor.
A crucial part of planning the overall strategy is considering the ideal outcome. Whether this is to attract new customers, send product or service updates, or retain customers through offers and discounts, the objective will determine the scope of the entire campaign.
The results of a well thought out email marketing strategy can drive brand awareness, boost lead generation and increase revenue. The results of a poorly planned strategy often lead to disgruntled recipients and a high number of unsubscribes.
Keep content relevant, personal and useful
In addition to planning the overall strategy of your campaign, you need to consider the content you will push out to your audience. From our experience, this will largely depend on which goals have been determined during the planning process.
It’s essential to ensure you’re providing something of value. While you want to make sure that your email marketing campaigns generate ROI, you also need to make the recipients feel that they’re not always being sold to. The key to this is by building a level of trust with the audience, which can be achieved by providing relevant advice and insights, or by asking for feedback.
Additionally, audiences are more receptive to content that is personal to them. It’s easy to spot a generic email that has been created to cover all bases for an entire mailing list. Therefore, making the emails more personalised to recipients tends to strengthen the overall campaign.
According to recent research by Econsultancy, personalisation remains a top priority for marketers as 67% of those asked said that was the main focus for improving their campaigns. Also, a study by Salesforce found that 84% of consumers prefer to be treated like a person not a number. That’s why taking the time to make content more relevant to the receiver could make or break the campaign.
Evaluate and evolve
Once your initial outreach has been complete, you need to take the time to reflect on your efforts. One aspect of the planning process should include setting clear metrics and KPIs so that you can be clear on whether these were met or not. There are several metrics that businesses should consider when it comes to the success of their campaign – including clickthrough rate, conversion rate, bounce rate and email forwarding rate. Each KPI will depend on the overall goal. Companies need to invest in the right tools and resources to evaluate email marketing campaigns, especially if this is new territory. Measuring the success of your outreach will enable you to determine what worked well, what needs refining or what needs to be completely overhauled. What’s more, if the initial campaign didn’t generate the outcome you were hoping, don’t be deterred from using email marketing altogether and instead use it as an opportunity to learn and improve.
Email marketing remains one of the most effective methods to engage with your audience on an ongoing basis. However, far too many businesses try to run before they walk and could be spamming their customers with irrelevant, uninteresting content. To ensure your outreach is successful, you need to effectively plan your outreach – considering your audience and delivering helpful and engaging content to them will help your emails avoid the dreaded junk folder.
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