Insurance providers have found themselves at the forefront of the Covid-19 pandemic, but whilst the level of disruption we’ve seen at the hands of the Coronavirus is unprecedented, a quick look at the history of the sector raises the question as to whether it could have been better prepared.

by Vijayamohan Keshav, Senior Principal Business Consultant, Expleo 

The SARS pandemic of the early 2000s should have been a wakeup call to all businesses about the importance of agility. After this event, insurance companies should have taken steps to future-proof themselves, as they did their claims ,by automating vital processes, updating their digital channels, and building a digitally savvy workforce.

Instead, concerns around time, costs and potentially just a general underestimation of upcoming challenges, meant many took a slow and steady approach to digitisation. So, when the Coronavirus hit, up to 70% of providers were still relying primarily on legacy applications – applications that just weren’t prepared to deal with the unprecedented wave of activity associated with a pandemic.

Post this pandemic, insurance providers must put the lessons they learn into action and put automation at the heart of their operations. As Lloyd’s of London announces an expected pay out of between £2.5 and £3.5 bn, their biggest pay out since 9/11, we examine how technology will help bring the industry back on its feet.

Focus on what counts

Whilst costs will inevitably need to be cut over the next few years to make room for more capital, Covid-19 has focused the industry’s attention on what matters when it comes to digital innovation. Far from hindering technological progress, we can expect more investment, with insurers focusing their resources on priority areas.

Blockchain, for instance, is likely to take a backseat in the list of immediate priorities, but automating production processes – whether that be underwriting, claims or complaints – is a no-brainer. There have been far too many delays and mistakes made in recent weeks for this not to become a sector standard. We can expect investments in AI and machine learning to be primarily in the areas of intelligent process automation.

Implementing more robust security measures, meanwhile, is paramount. This has been low on the priority list for investment so far, but with hackers on high alert and remote working becoming the norm rather than the exception, every provider needs to make sure its infrastructure is infallible. For an industry centred around processing money and data – particularly personal data – there can be disastrous repercussions if there is a failure to implement cutting-edge security at the enterprise level.

Earn back trust through innovation

Insurance providers are built upon security, trust and their ability to deliver upon that trust at critical times of need. The performance and customer usability elements of insurance businesses will come under more pressure than ever.

These usability elements include enhancing the customer experience when using digital channels, making claims processes clearer, or providing additional customer service channels through more contemporary routes, like social media – all of which can be enabled by technology.

The critical need for quality covers both back and front-end processes and the clearest path to delivering this is through a quality assurance process that primarily uses automation tools to save insurers critical time and money whilst dramatically minimising risk.

Transformation, consolidation, and regulation

As part of the industry-wide digital transformation process and potentially as a result of the Covid-19 crisis, we can expect a higher rate of mergers and acquisitions over the coming years. Insurers of all shapes and sizes will look to digitally native firms, or InsurTechs to help them grow, scale up or simply survive. We’ll also see a similar chain of events occur within the InsurTech community too, with bigger players acquiring smaller players and key technologies and approaches coming to the fore.

Whether you consider the need for innovation in reaction to Covid-19, or in terms of market competition and disruption, there are few upsides to be found for insurers sticking to legacy systems and ways of serving customers.

More change to come

With entire economies crippled by the virus, for the first time in many years, the insurance industry has had to be proactive in adapting to change. And while it may have been borne out of necessity, we should see this change in pace as an opportunity for the sector to make some much-needed improvements as long as it never takes its eye off security, performance and the quality of delivery.

The road ahead will not be easy – especially with the adjustment to remote working, and accompanying challenges around security and productivity. But if insurance providers can make sure to address and update these crucial aspects of their businesses, and embrace an automation-first mindset, they have a good chance of emerging stronger.

By Simon Moss, CEO of Symphony AyasdiAI

During the Great Recession, enterprise technology businesses did relatively well, including those that served a banking and funds sector that took a direct hit.

Banks and funds that survived cut costs to balance their books as demand cratered, but CIOs felt they couldn’t scrimp on software subscriptions lest they fall behind in increasingly competitive markets where survival meant claiming more of a shrinking pie.

Some in the enterprise tech industry think that dynamic will happen again. Despite recent positive earnings from big tech companies, they’re almost certainly wrong. Now it’s the other way around.

The world is in the midst of what is shaping up to be potentially the worst economic crisis in a generation. It might not feel like it yet because almost everyone has been in a state of denial called lockdown. Sooner or later, though, we’ll open our eyes and see who’s not wearing a swimsuit now that the tide has gone out.

To wit, as Gavin Baker at Atreides Management has written, companies under duress are taking a second look at existing software contracts. Companies spend half their IT budgets on software. A responsible leader can’t keep it off the chopping block.

A false sense of security has lulled many tech and AI firms into thinking they can get away with marketing their technology in the abstract, leaving it to the customer to figure out the best use case. That approach might have worked in a world where customers had the time and money to indulge in exploration.

Customers are nervous. They’ve got more challenges at a time when revenue is a question mark. Our task is to listen and respond with real, easily understandable and, perhaps most importantly, immediate solutions that directly address their needs this week.

Customers today don’t want to know how or why a technology works. They want to know how soon they will see that it is making a measurable difference. For instance, let’s take a look at banks right now.

Banks Swimming In Uncharted Waters

The government’s $4 trillion of stimulus spending in the face of the pandemic is a bonanza for fraudsters. The politicians want to flood the zone with cash overnight. Bankers, however, are on the hook for sifting applicants to figure out who deserves the money and who is seeking to exploit the overwhelmed system for ill-gotten gain.

Thieves have plenty of stolen identities in their little black books. Shell companies abound. Under pressure to shovel out the loans quickly to forestall economic oblivion but wary of regulators eager to blame them for the pitfalls of the government’s haste, the bankers must figure out how to identify good customers from bad.

The moment seems perfect for AI. But humility is a better first response. Most machine learning today is fighting yesterday’s fraudsters. It might catch the amateurs. The professionals, meanwhile, have already been camping in their victims’ networks using sophisticated tools that represent a new generation of graft that’s likely more sweeping than those we’ve stopped in the past.

Commercial banks don’t want more layers of protection that consume their attention, either. They’re already flooded with calls and facing staffing shortages while dealing with swamped government agencies and poorly designed, malfunctioning websites.

The objective, non-biased, hypothesis-free analyses afforded by the right kind of artificial intelligence has a better shot at making banks’ challenges simpler. Auditable machine learning could, for example, provide regulators with not just what fraudsters were uncovered, but why and how.

But do bankers want to hear about topologies and the difference between supervised and unsupervised machine learning? Certainly not. They’re racing too fast for a lecture. They can’t waste time asking if they can really integrate new software into their workflows.

Bubble Bursting

As bankers face a crisis in oversight, generational changes are also afoot. Millennials in particular are poised to begin inheriting trillions in the coming decades. Many of them feel little or no affinity with traditional banks. They expect far more tech-oriented options. To satisfy them, banks are going to need to cut costs in their old systems in order to develop new platforms.

We estimate those cost cuts will comprise around 40 per cent of current spending on technology. Those changes come in addition to the coronavirus pandemic and its aftereffects.

The frothy market for software led to high valuations in recent years. Inexpensive debt helped, too. Look around now. Once-confident AI companies that are having a hard time convincing investors and customers of the value of their product in the new environment. Now customers are facing monumental risks while seeking to lower overhead. That’s a tough climate for the less-than-fit.

AI companies who can quickly demonstrate to jittery chief risk officers and chief financial officers that they can filter out the cheaters, chiselers and scam artists quickly and decisively will not only survive but prosper. That’s the prize we’re chasing. It won’t just come to us.

Simon Moss is CEO of Symphony AyasdiAI, an artificial intelligence software company serving financial services and other industries.

By Rajashekhara V Maiya – VP, Global Head-Business Consulting at Finacle-Infosys

With Covid 19, there is no longer a need to push the case for a digital-only proposition, which has in a matter of weeks become the definition of next-normal banking. Thus far, traditional banks digitized to overcome challenges and keep up with competition; going forward, they will have to be digital by design.

Because of the speed with which digital-only banking is setting in, a study of the U.S. market doubts that all the bank branches that closed will open post lockdown. After all, why would customers risk a trip to the branch when they can bank safely from home? With fewer customers walking in, and social distancing norms limiting capacity, branch banking will cease to be efficient.

In the next-normal, two scenarios will emerge; one for each type of bank. Traditional institutions with a brick and mortar setup will look to build a digital-only proposition from scratch, likely as a separate subsidiary or legal entity. As the number of remote workers goes up, incumbent banks will start dipping into the gig economy for part-time and short-term employees (even in their branches), just like we predicted in our 2020 Banking Trends Report. The middle and back offices may turn fully remote, given that the concept of the office as a physical place is fast unraveling. All these developments will force traditional banks to turn digital-only, or at least digital-predominantly.

On the other hand, neo/challenger banks that were born digital will try to expand their limited offerings to a complete products and services menu, because they will now have to serve all, and not just digital-native, customers. Where challenger banks forced traditional institutions to digitize to remain competitive in the past, in the next-normal, digitized incumbents will drive their new rivals to become full-fledged providers to match their scale of offerings.

Banks evolving their digital-only propositions should pay attention to the following:

• Prepare their entire people, product, process and technology landscape for the next-normal. This means enabling people for remote working; digitizing products from end-to-end, or from origination to closure; transforming processes to run straight through with no manual intervention or hand-off; and employing technologies that can digitize the bank fast and scale it even faster.

The last is of critical importance. Recently, when the U.S. government issued benefit checks worth US$ 200-300 billion, 6 banks broke down because their systems couldn’t handle the transaction volume. For banks in advanced economies with a mass of legacy systems, the expected spurt in volume in non-branch channels is a source of concern. They need to act quickly to transform their entire landscape to avoid going down.

• Build perseverance and resilience. The industry must prepare for a twofold challenge in the next-normal. Banks short on liquidity will find it hard to pay up should customers decide to withdraw their deposits en masse. Other banks may have liquidity, but find that their assets are worthless because borrowers cannot repay their loans, and there are no buyers for their collateral. It will be a long, hard road out of this liquidity-solvency crisis, taking several years. Banks will need to plan, not just for the next couple of quarters, but for 10-20 years. They have to dig deep to be resilient in the short-term and enduring in the long. The next few years should be spent in strengthening the organization’s systems – through automation, AI and other digital technologies – and policies, in readiness for when the customers return.

• If there is a silver lining to the crisis, it is that it will force banking to be reimagined completely into a digital-only proposition; everything from customer interactions, employee transactions, risk management and cybersecurity to the way the target operating model, and front-middle-back office are run, will change substantially. If banks take all the decisions they need beforehand, the transformation will last them a long time, minimizing the need for frequent change.

• To cope with this crisis, the banking industry will need to consider its impact on other industries as well. Since the scale of Covid 19 is so much bigger than that of the 2008 Financial Crisis, measures, such as government bailout and quantitative easing to relieve banks, are out. In addition to attending to their own problems, banks must also consider the needs of clients, who are equally, if not more, impacted. While designing their digital-only capabilities, they need to consider how that might impact businesses that have also been forced into a similar situation (think of entirely automated assembly lines, retail outlets with zero employees, airlines without ticketing staff and so on). For example, can their digital-only proposition include a contactless commerce solution suitable to all industries and enterprises?

• Almost certainly banks will face new laws in the wake of the pandemic. This could be overwhelming for an industry that is already grappling with regulations around open banking, cybersecurity, consumer protection etc. However they can make it easier for themselves by planning for a foundation layer in their digital-only proposition to cater to existing and emerging compliance expectations.

The Covid crisis will put many weak banks out of business. This is therefore the time to build resilience and endurance by strengthening the P&L and Balance Sheet. In the next-normal, digital-only banking will not only concern customer-facing processes, but also apply to banking operations from end-to-end. Digital will be so entrenched that for the first time the viability of a bank could depend on how much revenue and profit it makes from its digital-only proposition.

By

C M Grover, MD, IBSFINtech

Outlook for the Corporates of the After-COVID-19 Era

Clear sky, empty streets, people locked down in their houses, economy sliding down – does it sound like a doomsday & an intoxicating movie with extraordinary twist and turns?  Unfortunately, this is what the world is going through right now. We are experiencing a pandemic that is redefining the world, Before-COVID-19, and After-COVID-19; more popularly being known as the BC & AC Era of the 20^th Century!

This pandemic is severely impacting communities, ecosystems, economy, markets, supply chain of all essential and non-essential commodities across the world.  While the corporates are focusing on protecting their employees, understanding the risk in their businesses, and taking major steps in managing the disruptions that have been caused due to COVID-19, the business continuity and liquidity crunch remain at the forefront of worries for the leadership.

With enhanced focus on Liquidity, Corporates are struggling to keep the business alive amidst the country-wide lockdown. Top it all, we have the plummeting markets with such high volatility that could give the leadership a panic attack.

There is a new normal at the outset, and many organizations have already started accommodating to this new normal and are utilizing this downtime to prepare themselves for the After-COVID-19 Era.

It is not just about working from home, the After-COVID-19 Era is going to transform how we do business, borders will dissolve as businesses become adaptive to digital transformation and seamlessly connected across the globe. Technology will lead the way and pave the path for success for those who adopt technology at a faster pace. When looking at the current scenario, when every organization has opted for work from home, technology has become an imperative need for business continuity.

The Learnings from this Crisis

The most critical aspect for businesses today is that this is not the time to panic. As we get accustomed to this new normal, things will fall in place and business will get back to usual. Though it will take time to recuperate from the adverse effects so far on the economy, but it will rebound with a stronger belief in the fundamentals driving the business value.

Moreover, this is the time to empathize and support the ecosystem. It is critical to stay connected with your clients, employees, partners, and vendors. This is the time to fortify trust and security amongst fellow human beings which will percolate automatically to the businesses and the global economy.

The biggest learning to imbibe from these challenging times, especially for the leadership, is to adapt to technology and drive the success of the business through digitization and automation. These two words, if understood and implemented suitably in the corporates today, will transform the way businesses are run in the “After COVID-19 Era”.

Are you still running the critical operations manually?

Especially focusing on the financial aspect of the corporates, the CFOs are struggling today with the cashflow crunch and getting clear visibility on the liquidity position of the organization for the months to come. Many CxO’s are still dependent on archaic solutions for critical functions.  In such times, the manual dependency of critical functions such as Cash & Liquidity, Treasury, Risk, and Trade Finance management further impacts the business continuity. How do we expect a CFO to take critical decisions with stale information and no data integrity? Therefore, the value of digitization and automation amplifies, playing a critical role in ensuring business continuity.

Your Business Continuity Plan has to be built on technology initiatives at the heart to sustain and succeed through the After-COVID-19 Era.

COVID-19 – An Opportunity in disguise?

With every crisis, comes an opportunity. With Covid-19, the opportunity has been presented to press the RESET button and re-align the resources towards adoption of technology to drive digitization and automation of each and every function of the corporate. Treasury, Risk & Trade Finance Management is a critical function, requires much more dedicated focus from the CxOs to adapt the digitalization of operations.

While on the other hand, corporates who decided to stay ahead of the curve and deployed a comprehensive Risk Management Solution without waiting for a life-altering pandemic, had better sleep at night even in these tumultuous times.

You may ask, what does an ideal Risk management solution offer? An ideal solution would be that covers the entire landscape of risks for the Corporate, Compliance, Financial as well as the Operational; and enables single-point of truth for critical decision making. CxO’s and treasury heads when evaluating for a comprehensive Risk Management solution should start looking for a holistic solution that enables digitization & automation of the Cash & Liquidity, Risk, Treasury & Trade Finance function of the corporate.

Turn this crisis into opportunity and drive the digital transformation of your organization. Prepare yourself for the After-COVID-19 Era, start brainstorming on the Business Continuity Plan that is driven by the power of technology.

(Disclaimer: The views and opinions expressed in this article on Coronavirus (COVID19) are those of the author and do not necessarily reflect the views of  IBS Intelligence. IBSFINtech is an end-to-end risk mitigation solution provider for BFSI and several other sectors)

By Tom Albright, CFO, and COO of Bittrex Global

Bitcoin can protect investors against inflation

As the initial market panic that followed Coronavirus around the world begins to clear, investors are starting to look forward to the challenges that lie ahead. It’s clear, that once the immediate medical crisis subsides, we will be facing an economic situation almost without precedent. The GDPs of every major economy will crater in the current quarter. Although many are hopeful that the recovery will come in the next quarter, there is potential for long-term recession.

As the world emerges from the medical crisis, industries that have been shut down will be left surveying widespread damage, some of it permanent. Consumers will be split between the fortunate ones that have been able to work and others whose incomes have suffered badly during the shutdown. Meanwhile, central banks are printing trillions in the new currency as they desperately roll out programs to jumpstart the economy and prop up ailing industries. This unprecedented increase in the balance sheets of central banks will have major repercussions for the world economy in general and for asset prices in particular.

Accordingly, investors are looking to assets that can provide a hedge against rising prices and the destructive impact of inflation. That much is clear from the price of gold, up over 11% year-to-date at the time of writing, while the S&P 500 is nursing a loss of over 12% even after the recent Fed inspired rally. We can expect that gold will continue to prove a popular option to protect against inflation.

But this time gold will not be the only save haven from the storm. In the inflationary period to come, we can expect Bitcoin to truly earn its moniker as ‘digital gold’, a store of value while cash is eroded and more bond yields turn negative. Bitcoin offers an inflation hedge for one obvious reason: unlike fiat currencies, the supply is limited. Only 21 million Bitcoins can be mined in total. There is no digital central bank that can debase the value by flooding the market. The decentralized nature means that the decisions of a few power-brokers cannot fundamentally alter the value of people’s holdings.

The idea of cryptocurrency as a store of value may seem counterintuitive when it remains a volatile asset class. But compare that to a commodity such as oil, whose price has been sent crashing by vanishing demand and a resulting supply glut, to the point where storage is beginning to run out – and many short-dated contracts have entered negative territory.

Volatility and risk, often conflated, are not the same thing. Despite the often choppy price movements, digital assets have more than held their own against the market during the ongoing economic storm as the variable supply-side and political interference are two problems that cryptocurrencies do not have to deal with, making them a potentially less vulnerable investment in times of turmoil.

Bitcoin is down a mere 4% year-to-date (and up 22% from a year ago), and Ethereum is up by a third. The early signs are that investors are turning to cryptocurrencies both as a key tool of diversification and a hedge against uncertainties to come. That is reinforced by data from the crypto asset manager Grayscale: in Q1 it saw inflows north of $500 million, more than doubling its previous best quarter. Almost a third of that capital came from new investors, most of the institutions. There is every indication that inflationary fears will add to the tailwinds that were already powering new investment in cryptocurrency, among them institutional involvement and improving regulation.

No asset class will ever be fully trusted until it can demonstrate its performance and sustainability during a crisis. For digital assets, which emerged out of the embers of the last financial crisis, the storm that is now engulfing global markets is set to mark a coming-of-age.

(Disclaimer: The views expressed here are those of the author’s and Bittrex and do not necessarily represent or reflect the views of  IBS Intelligence)