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Why the fintech cloud is lined with silver

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Adam Binks, SysGroup CEO

Adam Binks, CEO, SysGroup 

Historically, financial institutions and the cloud had a very simple relationship, which was the absence of one altogether. At its conception, the connected, third-party concept of the cloud appeared to be at odds with the principles of financial security and, therefore, the two were viewed as incompatible.

On face value, the logic follows and even the most progressive IT head will have been hesitant to put it to the test. But dig a little deeper and it becomes apparent that the cloud is not inherently less secure than an on-premise ecosystem. Yes, cloud providers and on-premise setups should be judged on their individual merits, but, on the whole, the cloud now offers financial institutions more peace-of-mind and opportunity than an on-premise ecosystem can.

Confidence

The reason for this, in short, is that cloud technology has matured, been proven and become broadly accepted. As cloud technologies have become more a part of the fabric of our connected world, organisations have become more comfortable with them. No-one would suggest that cloud services can’t be hacked, but nor would they about poorly patched on-premise ecosystems.

To some extent, getting to this point has simply been a matter of time. The years have shown that, if properly implemented, there’s no reason the cloud can’t form part of an effective and secure IT system for financial organisations. The cloud has become acceptable because time has shown it to be so.

In addition, though, cloud technologies are more robust and reliable today than ever before. Years of honing cloud services in the face of security concerns have led cloud providers to address precisely those issues.

Resource

Now consider how the expertise and experience of cloud providers stack up against those of internal IT departments at financial organisations. It should be obvious that years of each typically working with a range of clients in different industries has generally given cloud providers a broader and deeper understanding of the security issues at play.

Of course, the financial industry has its own specific areas that must be addressed – like PCI-DSS compliance and increased protection for sensitive personal data – but there’s no reason a cloud provider with expertise in these areas can’t address them any better than an on-premise department. In fact, I’d argue that the best approach is a partnership approach, in which financial organisations can draw upon the specialist skills of cloud providers to design, deploy and manage ecosystems that are informed by their own depth-of-knowledge of the industry.

Fundamentally, it boils down to this: if data is better protected by or working with a third-party cloud provider rather than just internally, then it should be.

Scale

Perhaps the biggest limitation of an on-premise ecosystem is the potential – or more accurately the lack thereof – for scaling activity. Assuming financial organisations can be confident that cloud security can be as good if not better than on-premise security, the next question is what opportunity each offers with the data that is held.

Here, something becomes apparent very quickly. It is no longer just data that is proliferating at a huge rate, but the extent to which we’re seeking to extract value from it. The analysis of data creates more data in itself and that needs server space that cloud providers can bring online for financial organisations in a way that can’t be done on-premise.The ability to pay for more cloud space as and when it is required rather than having to plan ahead for on-premise deployments absolutely fits with the need for this more agile approach.

An organisation’s data and what is done with it is a major part of any competitive advantage that can be forged in today’s digital world. Anything that limits that puts an organisation at risk of falling behind its competitors.

Flexibility

In a similar way, on-premise departments with potentially proprietary solutions for security are limited by the pace at which they can adapt to an ever-changing competitive environment. As new security risks, trends and opportunities come to light, cloud providers – with more varied expertise, perhaps more varied technology to draw on in-house and more scope for fast scaling – can accommodate them more quickly.

Organisations that can adapt more quickly have an inherent competitive advantage. What’s more, as the pace of technological change quickens, that advantage becomes more pronounced.

Broad as the brush-strokes may sound, scale and flexibility are borne out as the driving reasons behind many financial organisations as they choose to move to the cloud. This was certainly the case with the reinsurance software specialist Sequel Business Solutions, whose existing sub-contracted, on-site IT resource was found to be limiting its opportunity for growth. Its decision to move to the cloud freed up its own IT staff to focus on more strategic work and delivered a more adaptable IT function.

Financial organisations must consider whether the perceived benefits of an on-premise ecosystem outweigh those that can be offered by third-party cloud providers. If, ultimately, the only downside of the cloud is the public perception of third-party involvement, then, really, it’s a matter of changing that perception. As with other industries, financial organisations will come around to the idea that the cloud isn’t no longer just the right option, but increasingly the only reasonable, cost-effective and reliable option.

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Making Connectivity A Key Part of Cloud Strategy for Finance

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Making Connectivity A Key Part of Cloud Strategy for Finance 1

By Eric Troyer, CMO at Megaport

Finance organisations across the board are facing unprecedented disruption, with new technology entering the industry and consumer demands constantly evolving. Firms are trying to adapt to the rise of digital-first and the insatiable hunger of customers for increased speed and new types of services.

Leaders in the finance industry see cloud adoption as vital for multiple reasons. For example, they can leverage the cloud to speed up processing, eliminate data silos, surface deeper insights, and lower infrastructure and operating costs. As Peter Williams, global head of financial services technology, at Amazon Web Services, argues: “Taking advantage of virtually unlimited data storage and compute power to mine their core data allows financial institutions to make better trading, investment, and policy underwriting decisions. Analysing patterns across exabytes of data used to require significant investment and time, but cloud services that automate machine learning (ML) algorithms are improving how quickly organisations can innovate for their customers.”

Many financial organisations have long realised the importance of the cloud, however adoption has picked up steam in the last 12 months, and this only looks to be accelerating. Eighty-four per cent of fintechs, 82 per cent of corporate banks, 74 per cent of retail banks and 79 per cent of intermediaries globally plan to move mission-critical workloads into public cloud infrastructure by the end of this year, according to Ovum and ACI Worldwide.

It isn’t necessarily surprising that the finance industry is now fully embracing the cloud and understanding the innovative benefits it provides, but are they taking a step back to make sure the infrastructure is in place to support these goals? Are they thinking about how to actually make the cloud work for them?

Connecting the tightly-knit financial services ecosystems

The global professional services firm EY argues, “The benefits of cloud technology can’t be contested. It’s less expensive, easier to use, and in many ways, safer than private data centres. In addition to its benefits, cloud technology helps solve some of the most pressing concerns of financial institutions.” It goes without saying that the cloud is going to play a vital role in how the finance sector develops for years to come. However, that comes with pressure to get it right now.

For example, a stockbroker may use data to influence their decisions to purchase or sell, but they need to have access to this information quickly, then marry it with intelligence on their customer (their appetite for risk, etc.), and then be able to seamlessly make the purchase or sale. Having access to the data and partners that solves just one part of this equation isn’t helpful; it all has to be linked up.

This all requires speed, but, more importantly, it relies on a tightknit ecosystem for its success. Therefore, high performing cloud connectivity must be at the heart of any cloud strategy for finance organisations, so that they can tie these ecosystems together and move data quickly and securely. Despite this being a critical ingredient to success, many businesses have focused on what cloud service provider they will use or what application they want to run without considering how they will actually connect it all together.

While many CTOs focus on their cloud strategy, what really needs to be refined is their connectivity strategy.

Cloud connectivity — elastic is fantastic

When it comes to networks and connectivity, many finance organisations would have traditionally utilised a Multiprotocol Label Switching (MPLS) network. However, when private MPLS networks were first deployed, accessing cloud providers may not have been top of mind. Today, this is a critical factor in the deployment.

To support the enterprise costs of deploying a large-scale MPLS network, an organisation most likely entered into a long-term contract, not necessarily planning for how cloud could affect that decision in the future and the challenges of being locked into their existing topology. Adding multiple clouds and managing connectivity on an existing MPLS platform is typically slow, costly, and complex. This is the last thing financial organisations want when trying to boost speed and flexibility.

Eric Troyer

Eric Troyer

This is where Software Defined Networks (SDN) and virtual routing services come into their own. They can solve the cloud connectivity problem without requiring financial organisations to rip and replace MPLS networks and manage the expense that comes with that.

Working with an SDN to connect to the cloud helps reduce complexity of IT infrastructure and costs. More importantly, for financial services, SDN can reduce downtime as it helps to virtualise most of the physical networking devices, making it easy to perform an upgrade for one piece rather than needing to do it for several devices.

Virtual routing services, meanwhile, are a great option to solve the complexities and costs that come with connecting an MPLS network to the public cloud. Essentially, it is a way of easily and virtually routing an existing MPLS network to the cloud via an SDN.

Another major consideration for IT leaders is whether their organisation can quickly adapt to peaks and troughs in demand. Increasing bandwidth when needed can be critical to quickly adapting to changes in the stock market, for example. Therefore, financial organisations should ensure that connectivity to the cloud is elastic —  where bandwidth can be turned up or down in an instant This flexibility ensures that core business operations don’t fall down if there are peaks in demand and, equally as important, IT leaders are not paying for unused bandwidth that they don’t need.

Architecting a future-proof cloud infrastructure

There is no question that cloud technology will continue to change the way financial organisations operate. The task for CTOs now is to make sure they can easily get to the cloud, and they can quickly connect the tight-knit ecosystems they rely upon for success. The question CTOs at finance organisations should be asking themselves, therefore, is not what innovation can the cloud drive, but rather how do I make the most of it?  They can expect that connectivity will be a big part of the answer.

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The (U)X Factor: The software bringing biometric payment cards to market

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The (U)X Factor: The software bringing biometric payment cards to market 2

By Jonas Nilsson, Product Manager at Fingerprints

With over 20 bank trials in progress and a second commercial roll-out imminent in France with BNP Paribas, contactless biometric payment cards are steadily but surely making their way to our wallets, marking what has been called the ‘biggest development in card technology in recent years’.

Innovation cannot stand still now, though. Key learnings and insights from the trials, combined with expertise from mobile biometric systems, are driving more optimized products. As you’d expect, security and privacy are always front of mind but a seamless user experience (UX) is just as important for any new technology to achieve widespread consumer adoption.

Our research found that 64% of consumers identified a low rejection rate and ergonomics as key priorities for adopting the new technology. To succeed, biometric payment cards must not only improve the security of contactless, but deliver the same seamless UX too.

Getting these aspects right has been a balancing act of hardware and software innovation. Let’s have a look at the innovation that’s taking the biometric payment card from trial to the hands of consumers.

POS SOS

Time and time again, research shows that consumers and retailers alike want to avoid friction at the point-of-sale (POS) that might cause frustration, embarrassment or – most critically for retailers – dropouts.

As with any payment technology, a potential source of friction lies in the interaction with the traditional payment acceptance terminal itself. R&D has zoomed in on this to ensure transaction speeds remain as slick as traditional contactless. By optimizing the power consumption of biometric sensors in payment cards, the sensor and on-card matching process can all be powered from the payment terminal in the same way contactless cards are. The ultra-low power sensor is always on ‘standby’, meaning it is ready to go at a ‘tap’ on the terminal. Care has also been taken to ensure the cards are compliant with 100% of current payment terminals power levels, greatly reducing the possibility of friction.

Reducing rejections

Given these concerns about friction, it’s unsurprising that 64% of consumers in our research emphasized avoiding false rejections, where the correct fingerprint “doesn’t work” or isn’t read, as a point of hesitation.

While security is measured by the False Acceptance Rate (FAR) – where the wrong user is authenticated – convenience can be measured by the False Rejection Rate (FRR). This rate has historically been relatively low, but is in a constant balancing act with the FAR, with greater security provisions usually meaning a slight trade-off in convenience.

However, further refinements to the hardware which captures the fingerprint image, and the algorithm which process it, have succeeded in reducing false rejections even further. Drawing on improved image quality and more efficient internal software, the sensor can now read and authenticate the fingerprint source from more angles than ever. Even better, these improvements have also reduced the False Acceptance Rate (FAR), making authentications even more secure at the same time.

Real-time, all the time

A key measure of UX in payments is speed – especially when it comes to contactless. To be able to compete, biometric payment cards must deliver the same less-than-a-second authentication as unauthenticated contactless.

The challenge, of course, is that security must remain a priority – but imposing too much latency with new protection and anti-spoofing provisions is a threat to convenient response times, and ultimately, the UX.

Once again, further innovation has been crucial here. Thanks to refined sensor technology, the latest biometric sensors are able to increase transaction speeds by some 30% compared to earlier trials.

Ready to rock and enroll!

First thing’s first, when users receive their new payment card, they want to enroll quickly and securely. A laborious enrollment process risks curbing enthusiasm for the tech and ultimately, its adoption.

The good news is that enrollment is in fact very similar to the authentication process. It benefits directly from the same refinements to image capture and quality which are reducing rejection rates and speeding up transactions. Now, with improved image quality, capture and processing, enrollment can be done at any angle – quicker than ever before.

Fingerprints at the ready

As the market stands on the cusp of major commercial rollouts, the momentum behind biometric payment cards seems unstoppable. Convenience, safety and security are making a compelling case to banks and consumers alike.

Still, it’s important to remember that continual advances in the tech are fundamental to take the cards to the consumer. Fine-tuning and further optimization of sensor technology and accompanying software and algorithms has smoothed out any remaining concerns to maintain the all-important UX appeal.

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Embracing digital automation without compromising on customer experience

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Embracing digital automation without compromising on customer experience 3

By Mang-Git NG, CEO & Founder of Anvil

Community banks have always prided themselves on their ability to serve their local community with an unmatched level of customer service. My family has experienced this first hand when my parents immigrated to the United States as graduate students with no credit history and very little income. When no national bank would open an account for them, the local community bank provided the banking services my parents needed to help them find their feet.

You can expect to be anonymous at a large bank but as a community bank customer, you expect a more personal connection with your banker—after all, you live in the same community.

While the ability to nurture personal relationships remains a critical differentiator, community banks face a number of ever-evolving external pressures, from the scale of large incumbents to evolving customer expectations, threatening the ability to grow their customer base and even retain existing ones. It can be especially frustrating as a long-standing customer to be asked for your basic personal information over and over again on bank forms when your relationship goes far deeper than that.

Automation and customer experience are no longer a trade-off

Small business owners are increasingly willing to pay more for products and services that make their lives easier. This trend favoring convenience is likely to accelerate with the rise of Gen Z given their preference for mobile-first instant messaging apps. With this in mind, the need to transform products and services with digital technology adoption is a top priority for many banks. In a recent KPMG survey, 72% of bank CEOs said they were prioritizing investment in new technology, and 58% even said they have begun using artificial intelligence (AI).

However, community bank leaders have faced a dilemma in the past. The adoption of automation technology often meant compromising on customer experience. We’ve all dealt with frustratingly unhelpful chatbots that are ill-equipped to handle complex queries or advice that often come up in financial services.

Fortunately, automation technology has progressed beyond simple chatbots and now offers smarter ways to authenticate users without adding more friction, predictive analytics are helping bank employees make more strategic product recommendations that match a customer’s needs, and workflow automation is enabling banks to improve customers’ account opening process while also dramatically reducing the overhead of processing applications.

Combining these digital tools with a human touch to create personalized automation, and applying each in the right way, will help community banks stand apart from large banks, keep existing customers happy, and attract new ones.

Mang-Git NG

Mang-Git NG

Automation and profitability go hand in hand

In 2018, fraud against bank deposit accounts amounted to $25.1 billion, including $2.8 billion in losses. Intelligent fraud detection can help minimize such losses, thus impacting the bottom line. Banks that embrace security and fraud detection technologies have a significant advantage over their peers.

Similarly, automation to help streamline existing processes can prove invaluable. Every year, paper and PDF-based processes cost banks billions of dollars. Adopting paperwork automation technology leads to faster processing times for routine, repetitive processes like account openings and loan applications, resulting in greater efficiency and reduced costs. The use of dynamic forms with built-in validation also eliminates human error and the need for manual checks.

As an added benefit, automating away mundane processes like data entry allows community banks to invest time and human capital in what they do best: getting to know their customers and developing personal relationships.

Finally, process automation can enable banks to unlock growth. As an example, Minnesota’s Sunrise Banks adopted paperwork automation technology earlier this year to increase their ability to process Paycheck Protection Program loans from 85 to almost 500 per day, thereby allowing them to extend their lending capabilities beyond their existing customer base.

Thoughtful automation is crucial for survival

Embracing new automation technologies that allow community banks to match customer expectations while improving profitability is the key to long-term sustainable growth and success. A majority of bank CEOs recognize this and believe that, without agility, they would likely face bankruptcy.

While poorly applied automation technology can be an expensive way to create a bad customer experience, it is undeniable that meeting evolving customer expectations demands thoughtful application of such technologies. To avoid automation for the sake of automation, community banks should evaluate solutions based on their ability to improve the customer experience and the bank’s bottom line.

Ultimately, bank leaders should think about their top challenges and how automation can be a part of the solution, consider if the organization is ready for an investment in both time and money, and if they have the infrastructure in place to support thoughtful automation.

Sources

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