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SURFING THE WAVES OF DIGITAL DISRUPTION IN THE OPEN BANKING REVOLUTION

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SURFING THE WAVES OF DIGITAL DISRUPTION IN THE OPEN BANKING REVOLUTION

By Pieter van Heck, Sales Engineering Manager, EMEA, Dynatrace

The clock is ticking. In just a few short months, banks across Europe will have to roll out a series of Application Programming Interfaces (APIs) prescribed under the EU’s Payment Service Directive II (PSD2) to encourage the growth of the digital single market. Ready or not, the banks will need to deliver APIs that open up customer transaction and account information to support services being offered by third-party providers; from merchants to lenders and even rival banks.

This shift will create a major advantage for consumers; fundamentally changing the way that they interact with their financial data and bank accounts to give them greater flexibility and choice. It will usher in a whole new wave of financial service providers, offering better, more personalised deals to consumers in a bid to win market share from the traditional banks. If they want to ride the waves of this digital disruption, rather than disappearing beneath the surface, banks will have to revaluate how they differentiate themselves in such a fast-paced, open-ended world.

Riding the crest of innovation

Whilst most banks are already well on the way to developing the APIs that PSD2 requires of them, they are still just in the early stages of implementation and have yet to explore their true potential. What’s more, many are treating it simply as a compliance project, rather than an opportunity for digital transformation. Instead of just viewing the creation of APIs as a box-ticking exercise, banks should be looking at how they can create new digital experiences and services using the data being exposed by others. For example, could they draw on customer account information from other banks to identify spending patterns that allow them to make a more targeted loan offering?

This new generation of services will add significant layers of complexity to an already complicated digital ecosystem. It will create a multitude of new IT dependencies, spanning internal applications and infrastructure, as well as those of the other service providers that lie upstream or downstream in the delivery chain. As a result, it will become increasingly difficult for banks to manage the quality of their customer experience; given the dependence upon factors that are outside of their own control. They will therefore need to ask themselves; what will happen when there is a problem with service performance; such as customer information not being displayed, or an application loading slowly? Who will the customer blame for the problem, and who will be responsible for fixing it?

Stay out of the water; the sharks are circling

As they ponder these questions, the banks will need to remember that there won’t be any margin for error in the era of open banking that PSD2 is ushering in. Fiercer competition will give consumers a multitude of choice that didn’t exist before, so the second that they become dissatisfied with a service, there’s a much greater risk they’ll simply switch to something that offers them a better experience. As such, it will be the survival of the fittest; those banks that offer the best performing services, the slickest APIs and the most seamless customer experiences will enjoy the biggest edge over their rivals.

It is therefore imperative for banks to maintain full control and visibility into the factors that impact digital performance in the open banking world. They need to be absolutely clear on where any problems that are affecting their digital services lie, and have full context around how those issues are impacting the customers that are using them. Without that insight, the banks will be hostage to fortune and could find themselves blamed for anything and everything that goes wrong, as the competition moves in for the kill.

Mastering the waves of digital disruption

To keep themselves out of the jaws of their competitors, banks need the ability to monitor the experience of every user and every transaction that crosses any layer of their digital ecosystem, regardless of who is delivering the end service to the customer. They need to maintain unimpaired visibility into the dependencies within the bank’s applications and the ways in which they interact with external services through APIs. They also need the ability to test whether those APIs remain available and performant, both internally and externally. Without that level of insight, it will be impossible for banks to pinpoint the root cause of digital performance problems, prove they aren’t at fault for issues with another service, or hold others to account when the fault lies elsewhere.

Given the hyper-complex, hyper-scale and hyper-dynamic nature of the digital ecosystems that will support open banking services, the task of achieving and maintaining that visibility and control will be impossible with accepted, manual approaches to digital performance management. The ability to automate monitoring processes and harness Artificial Intelligence capabilities (AI) to reduce the burden on IT teams will be critical to success. The good news is that if they master this complexity using those approaches, then banks will be in a much stronger position to truly reap the rewards that open banking has to offer. In doing so, they can create a lasting advantage that will see them through to the next big financial services revolution, and far into the future.

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Iron Mountain 2021 Outlook

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Iron Mountain 2021 Outlook 1

By Stuart Bernard, VP of Digital Solutions at Iron Mountain

The Covid-19 pandemic is continuing to rewrite the rules governing how we live and work; no crystal ball is needed to identify that general trend. However, what is perhaps less clear is how this reshaping of our traditional work/life patterns will play out in physical, day-to-day terms during 2021.

To fully understand the impact of the virus on employment practices requires an investigation of two evolving challenges: how and where we work. These interlinked issues are already having a profound influence on a wide range of business processes and they are continuing to fundamentally and irrevocably altering the world of employment for people around the world.

Cost reduction will top business priorities

For most businesses, the need to preserve cash will be a major concern over the coming 12 months. Uncertain trading conditions customarily tighten purse strings so we can expect some near-term cost reduction measure. An agile, flexible approach to office space offers an immediate monetary benefit, which in combination with a widespread acceptance of remote working, provides ample opportunities for downsizing real estate holdings. This will enable businesses to divert cash to crucial customer-facing operations, helping protect bottom line performance.

Flexible working will enable greater workforce diversity

However, there is an enduring need for companies to provide offices for their employees, if only to support face-to-face collaborations and ensure that there’s an opportunity for direct learning and training to support career development. For many people, a single place of employment will no longer be the norm – a flexible mix of home, remote and office-based work will be the new reality. However, knitting dispersed employees together into an integrated unit is problematic. Meeting the needs of a hybrid workforce will require the implementation of seamless digital workflows that are responsive and robust enough to ensure that staff can be productive and connected no matter their location.

An unintended benefit of operating a hybrid workforce is the increased level of flexibility it provides when recruiting staff. This has the potential to open up the talent pool beyond conventional geographic areas, boosting access to skills and experience from a wider area. Once again, in order to maximise the opportunities this provides, it will be necessary to assemble a robust digital network in order to bridge physical distances as well as potential cultural ones, depending on how widespread a workforce becomes.

Stuart Bernard

Stuart Bernard

Automated workflows will become critical

For 2021 it’s not just where businesses operate that’s going to change; the requirements of customers are likely to transform, too. This will be especially apparent when it comes to signing contracts and delivering services. Lockdowns and Covid-19 related restrictions on traditional in-person meetings are going to herald the demise of conventionally signed documents in many instances; they are also likely to change how records are shared and stored. An increasing reliance on digital workflows will require the parallel adoption of secure digital storage and handling. Specifically, Iron Mountain’s research reveals that IT support (49%), customer relationship management (36%) and overseeing team resourcing (34%) are the top three processes digitised in response to lockdown.

Nevertheless, efficiently storing existing physical documents or ensuring their safe destruction remain important functions that businesses should not neglect, even if they’re moving to predominantly digital workflows.

Importantly, digitising processes offers a range of benefits that will outlast the current global pandemic. According to our research sample there are four key benefits, which all deliver long-term value: increased productivity (the most popular response at 27%), time savings (20%), enhanced data quality (13%) and cost reductions (12%). Irrespective of trading conditions, there are all important developments that any forward-looking business will want to gain.

Protecting bottom line performance

How does all this work in practice? Well, a fully-searchable on-line repository will enable a company to quickly and cost-effectively access and archive documents, thanks to an array of enhanced search functions. During a period of intensified competition and pressure on bottom line performance this level of functionality delivers real-time benefits that not only meets the needs of a transforming business, it also adds value and consistency to customer services. Similarly, once in place, a properly designed digital workflow system will also be able to automate processes, allowing valuable time and budget to be preserved. What at first might look like a costly investment can quickly turn into a business driver by creating a unified and responsive platform for document and contract management with anytime, anywhere access.

Despite the changing employment patterns, 2021 will show that the physical office space will not cease to exist. Having said that, the way we remember it might change as hybrid working becomes more common place. The coming year will also reinforce the importance of enterprises being flexible and agile – those that cling onto outmoded ways of operating will lose their competitive advantage during a period of dramatic change. Importantly, in order to maximise their opportunities businesses will need to invest in the best available digital tools; adopting and adapting to a paper-free workflow aren’t optional: the next 12 months are going to transform how we create, transfer, share, store and action documents thanks to an increasing use of automated workflows.

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Jack Henry shares six areas of focus for financial institutions in 2021

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Jack Henry shares six areas of focus for financial institutions in 2021 2

Reflecting back on 2020, the community banking and credit union industries should be proud of how this unprecedented pandemic and resulting economic crisis was managed. It was a truly remarkable time in which organizations worked together to take care of their employees, serve and support our communities, and operate their businesses efficiently despite significant challenges.

Now in 2021, the financial services industry is focused on moving forward – and is well positioned to do so. The technology demands faced over the last year were tremendous, but they were not a surprise. Jack Henry has been steadily working toward building digital, user centric, and open technologies that allow community banks and credit unions to meet customer and member needs personally and at their time and location of choice. The company is constantly evaluating industry trends and developing the technology necessary to prepare financial institutions for continued success. Below are a few areas of focus in 2021:

  • The Paycheck Protection Program (PPP) continues. An additional $284 billion has been approved for PPP lending, including new loan eligibility and the option for qualifying businesses to receive a second loan. Preparing for the dissemination of these funds, all while managing the forgiveness process, is top of mind for many bankers. Community banks and credit unions can continue to benefit from participating in this program by gaining and strengthening small business customers as well as playing a significant role in extending loans to minority- and female-owned businesses. In fact, in addition to facilitating the majority of the small business PPP loans in 2020, community banks originated 72.6% of PPP loans made to non-white small business owners and 71.5% of PPP loans made to female small business owners.
  • Digital banking continues rapid acceleration. Digital banking adoption has reached record highs, and enhancing digital service is a top priority. The area is constantly evolving in speed, personalization and openness. The key to continued success is to stay focused on the needs of people, identify digital solutions that draw people in, engage them, and focus more on providing human-centered service in moments of need. Platforms should offer open infrastructure that makes it easy for institutions to embed their solutions of choice, preparing them for the future.
  • Payments platforms take center stage. It’s critical for financial institutions to broaden their payments options, moving toward an approach that provides end users with robust features combined with an excellent experience. An integrated payments infrastructure that provides frictionless, real-time experiences will be necessary to compete with big banks and fintechs. Financial institutions will partner with vendors that can help to build the right platform for their unique customer and member preferences.
  • Digital transformation in mortgage lending. Mortgages rates have dropped to record lows and the Federal Reserve has expressed no plans to change the rate environment until 2022 or beyond. Bankers must drive efficiency to compete. They need automation and seamless workflows that effectively measure credit risk and streamline previously manual processes. This empowers lenders to focus on building relationships and growing portfolios. Borrowers will benefit also from the added speed and connectivity with their lender.
  • Changes in the new administration. With the pending changes in Washington, a new administration will most likely swing the pendulum back toward an environment of stricter banking regulation. Economic recovery has also been identified as a top priority by the new administration. Banks and credit unions must have agile technology and processes in place to respond; outsourcing will help many with these adjustments.

Transparency and fairness in lending. Given the social environment in our country today, Jack Henry expects a real focus this year on diversity and inclusion in banking, especially around access to fair credit and lending costs. Many organizations, Jack Henry included, have taken a formal stance in supporting racial justice and equality. Working together to ensure that lending clients are treated equitably.

This year will continue to be about partnerships that are committed to doing the right thing and providing for local communities. Together, fintechs and financial institutions can develop joint strategies and modern technology that drive success, both today and tomorrow.

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Seven lessons from 2020

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Seven lessons from 2020 3

Rebeca Ehrnrooth, Equilibrium Capital and CEMS Alumni Association President

 

Attending a New Year’s luncheon on 31 December 2019, we played a game that involved predicting the world in 2020. Some of the questions included: would Uber become profitable? Would the three-decade bond rally finally come to an end? Would the US hit a recession?

Unlike any of our predictions based on a traditional approach to business and predicting, we now know that 2020 became the year where business, professional and personal plans were turned upside down, reshaped and put-on hold. The proverbial black swan had arrived.

As revealed in a new CEMS Guide to Leadership in a Post-COVID-19 World, to which I contributed, the COVID-19 pandemic has exposed deficiencies in the 20th Century vision of leadership, giving a rare opportunity to question the status quo.

So, what are the main lessons from 2020?

  1. Humans are enormously adaptive.  This is not an extinction scenario. The world is getting used to dealing with global human disaster which may become a recurring event. Life continues guided by new parameters.

  1. No sector or country is immune to rapid change. Just as the leveraged finance and equity markets ground to a halt during the Global Financial Crisis, we have seen a disruption in the financial markets (including M&A) in 2020, including a significant redistribution of wealth between sectors; think tech vs airlines and the hospitality industry. When a market is disrupted it has secondary and tertiary effects such as less work for accountants, lawyers, financiers etc.

 

  1. Location is not as important anymore. The belief that finance staff need to be based in one of the financial capitals to be effective has been forever altered. Pursuing a career in finance from anywhere is becoming possible. However, it’s likely that over time, financial controls and human interaction will move the work model back towards the traditional office approach, as work is a critical sanctuary for people. While working from home may allow more time for family, chores and sports, it is mainly effective for people who already have their internal and external networks. For junior employees it presents a notable challenge as they may be forced to spend their formative years without a chance to really build their networks.

 

  1. Change is likely to be lasting. The opportunity for alternative finance and tech focused providers is enormous and 2020 will accelerate this shift. For example, many retail banks are providing rather poor customer service, blaming the pandemic. Even the most loyal customers will be heading elsewhere. For recent graduates and current students this is a major shift; future winners and key employers may not be names we are used to seeing in the headlines.

 

  1. There will be a spotlight on leaders with visionary strategy and understanding of the operations. 2020 showed many politicians and business leaders behaving like they were playing a game of snakes and ladders, rather than executing a thought-out strategy. The next wave of thoughtful leadership is urgently required.

 

  1. Collaboration leads to success. The definition of a pandemic is an infectious disease prevalent worldwide. A global problem requires a collaborative solution rather than each country and industry on their own. Quoting Steven Riley, professor of infectious disease dynamics at Imperial College London: “Once you have the knowledge and you share the knowledge, then you are able to take measures to push transmission much lower”. This principle is transferable to management education. In a world more complex than ever, investing in a degree is hard currency. Combined with the full global alumni network, corporate partners and schools, CEMS is capital that doesn’t depreciate.

  1. Resilience has become a watch word. Saint-Exupéry’s quote resonates with me: “If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” We are in a new paradigm – so prepare for the next change. For COVID-19, while we hope that the vaccine will soon upon us, the broader long-term positive challenge remains.
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