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During his 1962 State of the Union Address, John F. Kennedy declared: “The best time to repair the roof is when the sun is shining”. While the original philosophy behind the sentiment wasn’t intended for organisations, per se, it’s an apt quote when reflecting on FinTech developments in light of Covid-19. We are all aware that the pandemic has shut down our normal way of life.

by Ray Brash, CEO, PPS

Since the dot.com crash of 2001 and the financial crash of 2008, FinTech entrepreneurs have adopted a disruptive mindset in order to make headway, and survive, within financial services, launching innovative offerings such as mobile-only banks, with money management tools and personalised saving solutions. And it is this continued innovative approach that has enabled either FinTechs, or businesses using FinTech solutions and tools, to prevail during Covid-19. It is the companies that already had the agile architecture and payment platforms in place who have been in the best shape to adapt.

The organisations which had “repaired their roof while the sun was shining” – in that their digital operations were continuously innovating, pandemic or not – have been most effective in helping their customers and reacting to the demand. After all, if you have a clear vision of an agile roadmap that is able to constantly evolve, it makes it much easier to adapt, rather than restart.

FinTechs and challenger banks aren’t adapting on their own though. Rather, partnerships have never been more important. In fact, an outcome of Covid-19 is likely to be the continued acceleration of these partnerships that make the impossible, and even the improbable, possible.

UK supermarket chain Sainsbury’s was able to work with PPS’ team of experts to launch its Volunteer Shopper Card just a few days into the lockdown, enabling others to shop on behalf of vulnerable citizens. Sainsbury’s is seeing a whole range of digital vouchers coming into their own in the era of remote food distribution. Another traditional brick and mortar customer of PPS, Tesco, has experienced increased adoption of its Tesco Pay+ payment app which allows for QR code payments and gifting of money to dependants across the country for essential purchases in Tesco stores.

FinTech Tide, has adapted to help its small business customer base. Responding quickly to the UK government’s Bounce Back Loan Scheme and with financial support from PPS, Tide has adapted to become an accredited lender, lending from £2,000 to 25% of an SME’s annual turnover, up to a maximum of £50,000 for up to six years. And Coconut, an accounting and tax tool for self-employed people, launched online tools and carried out successful government lobbying initiatives to help support the small business community.

Digital banking app, Monese, has higher transaction volumes now than ever before, with a large portion of its customer base being key workers – many of whom will likely not have been eligible for a bank account with a traditional bank – but include the ‘heroes’ getting us through the pandemic.

Enhancements such as these highlight how, due to the economic disruption, financial inclusion has been pushed further up the global agenda, showing the importance of serving people who could have been left out of the financial system. And there is a possibility that the lasting legacy of Covid-19 may lead to greater financial inclusion initiatives, with FinTech continuing to play an important role through ongoing strategic partnerships with retailers, governments and financial institutions.

While the digitisation of financial services has been under way for decades, the pandemic has accelerated the timeline exponentially. But it is the companies that have best access to agile and adaptable platforms, through the right partners, that have been able to navigate the ongoing landscape most effectively.

Going forward into the ‘post-Covid’ world, it will be important for FinTech players to maintain their disruptive mindset in order to continue to lead, rather than follow the new normal. We saw this with the likes of Amazon after the ‘dot-com bubble’, and the many storms it has weathered over the years to become the world’s largest retailer. We will see similar performance in FinTech too, while things re-adjust. There will always be some casualties along the way, but ultimately, the FinTech powerhouses that are the most agile, with a ‘roof’ ready for any crisis, will succeed.

By Andrew Warren, Head of Banking & Financial Services, UK&I at Cognizant

In addition to responding to changing customer expectations, higher operating costs, new technology, and an evolving regulatory landscape, financial services organisations now also face the uniquely challenging business environment created by COVID-19. The economic consequences that are unfolding rapidly and unpredictably mean that banks must double-down on both their efficiency and customer experience agendas. In light of this, the need to modernise legacy banking platforms will gain sharper focus as banks emerge into the post-COVID-19 landscape, driven by the need to focus on value for customers and agility to change and shift operations quickly.

If banks are to remain strong and stable and make real progress with their efficiency and experience agendas, transformation is non-negotiable – but it can be risky and have high rates of failure. So how can banks pursue their transformation agenda, while addressing the very real risk that modernisation of legacy banking platforms presents?

Focusing on value

Banking transformation may have traditionally been the domain of the IT function, but the impact on current and future value means it should be on the agenda of a much wider set of senior executives. This includes the CIO and COO but should also be as far-reaching as the Chief Risk Officer, Chief Financial Officer, Chief Digital Officer, and Chief Experience Officer.

When we talk about value in the context of transformation it can mean multiple things. In monetary terms, transformation can reduce the total cost of a bank’s IT infrastructure, with legacy equipment 55 per cent more costly than cloud data. More importantly, however, transformation often results in moving from highly manual-orientated processes to more efficient, automated – and therefore accurate – processes. In turn, this can lead to more informed and tailored products and services, internal process efficiencies, enhanced cybersecurity, advanced analytics, and reduced risk, especially around fraud and malicious activity. These all add significant value to customers, as well as operational and regulatory imperatives.

Furthermore, viewing transformation through a value lens should tie it to a range of specific financial and accounting metrics that ultimately measure success. That includes both those that reflect the protection and extension of current value, as well as measuring the extent to which transformation will support the capture of future value. Financial services organisations have a huge opportunity to create greater value for customers from innovation in products and services. Changing market dynamics are creating a basis upon which banks and others in the industry can evolve their offerings and organisations.

In much the same way as we have already seen in retail, for example with Amazon and AliBaba, and media platforms, such as Facebook and Netflix, customers are adjusting to a new way of banking that is changing expectations. To keep up, banks need to increasingly provide easy-to-use digital-first services across their products, as well as introduce new tools to help customers manage their money in the 21st century. And there is no doubt that the fall-out from COVID-19 will likely further drive the degree and extent of digital adoption.

Traditionally, financial institutions take many different approaches to transformation, such as developing sleek new customer experiences to compete, or developing new platforms and partnering with FinTechs. But achieving success for more mature banks is more challenging given the obstacles presented by their legacy platforms. Comprising complex, customised systems, these are expensive to run and very costly to change.

Transformation: not if, but how

To truly transform operations and experience, many banks are now having to face up to the reality that they cannot move forward without banking platform transformation. That means they must – in one way or another – replace their historic systems with more modern, cost-effective, and flexible platforms. That is going to be essential to stand up the capabilities required to enable digital products and deliver the truly revolutionary experiences that customers demand.

Recognising the inevitability of change, many banks are now considering their options. Some have already started down the challenging path and hit bumps in the road. A very small number have successfully executed their ambition to create a platform for the future. All banks contemplating transformation should take lessons from both the successes and the mistakes. These will be critical to inform their plans.

Moving forward

There are a number of essential transformation steps to consider that will help realise value from investment as rapidly as possible, provide an appropriate level of delivery confidence, and manage exposure to the operational risk normally associated with such changes. These include:

1. Business strategy must inform every step of transformation – ensure that the approach to platform transformation is tightly aligned to the wider business strategy.
2. Design a strategy-aligned roadmap for delivery – a transformation roadmap should clearly set out the logical order in which business outcomes will be delivered. Here again, that needs to align with the value that the organisation is seeking to achieve, with incremental progress determined by business priorities. This involves making appropriate use of modern delivery methods, such as agile, and making sure that everything that is done satisfies and is frequently assessed against the relevant value criteria.
3. Assess technology selection against business value – organisations often undertake detailed and exhaustive market, functional and technical assessments when reviewing new products and suppliers. This often means either the technical assessment dominates proceedings and/or new technology platforms are selected without a clear line of sight to the value required. Poor product selection is a risk as a result, as well as a lack of understanding of how products should be deployed to inform the sequence of delivery required by the transformation roadmap.
4. Assess your readiness for change – unsurprisingly, given the sheer scale and velocity of change that business leaders must deal with, resistance to change is often a key reason given for the failure of banking transformation projects. However, it is crucial that the ability of the organisation to deliver and adopt the operational, technical, and cultural changes required to support transformation is comprehensively assessed and done early.

The impact of COVID-19 paired with and the demands that financial services organisations face from all directions, make change an inevitable necessity for the most. The approach to delivering a successful banking transformation, underpinned by a modernised platform, will vary dramatically from bank to bank. However, above all, businesses need to ensure that value drives every aspect of change explicitly linking transformation strategy and investment with the realisation of value.

Andrew Warren
Head of Banking & Financial Services, UK&I at Cognizant

By Garreth Dorree, Head Of Operations, Paysafe Group

As the battle to contain the global outbreak of COVID-19 continues, millions of people around the world stay at home to assist society’s effort to ‘flatten the curve’. One consequence of this is that consumers are increasingly choosing to shop online.

But even in times of global crisis, cybercriminals are on the lookout for ways to exploit unsuspecting targets. In fact, Action Fraud reported a 400% increase in COVID-19 related fraud in the UK between 1 February 2020 and 18 March 2020.

Most of these incidents include online shopping scams where people order protective masks, hand sanitizers, and other products that never arrive. However, scammers are increasingly preying on people’s fear and anxiety; the past few months have also seen an increase in phishing attacks, fake websites, and incidents of shipping fraud.

It’s too soon to tell how the pandemic will impact the world of business payment operations, but experts agree that the threat of increased fraudulent activity to businesses is likely to increase also.

 An ounce of prevention is worth a pound of cure

 Small businesses have already been severely impacted by COVID-19, so the effect of further damage such as fraudsters making payments using stolen or fake credit cards is even more catastrophic. For those that are able to offer online shopping services, it’s never been more important to secure your checkout and protect your business and your customers from falling victim to cybercrime and online fraudsters.

Sticking to the healthcare theme, it’s clear that prevention is better than cure when it comes to cybersecurity. However, 70% of online small-to-medium-sized businesses currently struggle to find a balance between improving security measures and their other primary objective at the checkout; making the online customer journey as quick and easy as possible.

This is according to recent research by Paysafe. The research also found that security is the top priority when selecting a payment service provider. 81% of online merchants believe that it’s the responsibility of their payment service provider to protect them from fraud, and a further 59% cited security as a critical factor to consider when deciding which service providers to partner with, ahead of reliability (49%) and cost (47%).

Fraud also remains a serious issue for all businesses. Over a third (36%) saw credit cards as the most vulnerable method of payment.

 The benefits of migrating to 3DS2

One of the best ways to keep your business and customers safe is to migrate to 3DS2 immediately. 3DS2 is the long-awaited upgrade of 3D Secure Authentication, the EMV verification protocol for processing card payments online securely. The new and improved 3DS2 builds on this and now enables mobile support and biometric validation. Most importantly it streamlines and secures the checkout experience for the customer, resulting in less cart abandonment, a better conversion rate, and much more robust security for e-commerce businesses.

Avoiding a dramatic increase in card declines is a key reason for merchants to integrate a 3DS2 solution into their checkouts, but there are also additional benefits to merchants and consumers that should persuade businesses to implement 3DS2 as soon as possible.

For example, unlike the current 3DS authentication, 3DS2 is optimized across all eCommerce devices including mobile. This is critical as, according to our research, more Millennials (79%) and Gen Z (72%) consumers shop regularly via their smartphone than any other device including a laptop or desktop computer.

3DS2 also improves customer experience by giving consumers more choice over how they authenticate payments. In addition, passive sharing of more than 100 data points (10x the current volume) for each transaction enables issuers to perform a better risk analysis, which results in significant improvements in fraud prevention without compromising a consumer’s checkout experience.

In this time of crisis, two of the greatest hurdles to overcome for eCommerce businesses are satisfying consumer demand for greater flexibility in the way they pay, and offering a slicker, more seamless checkout experience while giving the customer peace of mind that the payment is secure.

As a result, merchants need a payment service provider that can be adaptable and mindful of the bigger picture of solutions as the market evolves. While the pandemic will pass, it offers lessons for dealing with other global events in the future. Now is the time to take steps to safeguard your business against fraud and future proof your checkout in order to remain competitive with industry leaders and retail giants. Integrating PSD2 into your checkout as soon as possible means your business and your customers have the best chance of being protected from being a victim of fraud during these uncertain times.

(Disclaimer: The views and opinion presented in this article is that of the authors and not necessarily expresses the views of IBS Intelligence)

Digital transformation is having an undeniable impact on reshaping the finance sector as a modern industry. Banks are looking to emerging technologies in order to evolve and become more agile, especially in a world of demanding customers, new innovations, such as mobile payments, and increasing regulatory demands. Cloud adoption of RegTech is at the very heart of this digital evolution.

by Matthew Glickman, VP of Customer and Product Strategy at Snowflake Inc. 

While the industry has traditionally been slow to embrace innovation there are signs that even some of the more traditional, high street banks are placing cloud technology at the forefront of their business strategy. Research from the Bank of England revealed the UK’s 30 largest banks have adopted nearly 2,000 cloud-based applications between them.

However, there still remains an air of caution within the finance sector when it comes to moving to the cloud, stemming from concerns over financial regulation. Nearly half of UK firms cite complex regulatory requirements as a key barrier to adopting new technologies, such as the cloud. To maximise the full potential of embracing cloud technology, financial companies must look to the possibilities afforded to them by RegTech.

Streamlining the regulatory process

Whilst cloud computing is modernising the whole financial services sector and paving the way for innovation, its impact on regulatory technology will be particularly striking. The cloud will streamline the way financial regulators currently regulate other companies. Historically, banks have struggled to produce the metrics requested by regulators which has slowed down the regulatory process and even induced hefty fines.

Regulators will now have a unique opportunity, through a cloud-based, secure data exchange, to access a company’s data and run their own reporting. By utilising a cloud data exchange, financial regulators can integrate disparate systems to communicate in real-time. This creates a seamless flow of information by transforming data from multiple systems into the same ‘language’. Using RegTech, rgulators can therefore instantly view and analyse all relevant metrics, such as financial transactions, sales orders and stock levels. It also allows regulators to measure system risk entirely in real time.

Automating financial compliance

The ever-changing landscape of regulatory compliance is also driving financial organisations to utilise cloud-based regulatory technology and leave behind antiquated legacy solutions. New regulations are being consistently introduced and the JWG, a financial think tank, estimates that over 300 million pages of regulatory documents will be published by 2020. In addition, new directives and laws have been introduced, such as GDPR, which are holding companies to account and ensuring they take strict responsibility for their data.

By adopting RegTech solutions, financial companies can monitor the current state of compliance against upcoming regulations, as well as real-time compliance. A cloud-based RegTech solution will enable banks and regulators to build platforms that will make use of artificial intelligence and machine learning. This creates an end-to-end automated solution that provides an automated interpretation of financial compliance. Data can also be routinely monitored allowing companies to rapidly identify risks and potential areas of non-compliance.

The complex and changing landscape of data compliance, coupled with the rapid increase in data volumes, has meant that adopting a cloud-based RegTech solution is simply too hard to overlook. It is therefore no surprise that the RegTech industry has been growing exponentially over the last few years and is due to be worth $12.3 billion by 2023, up from its market value of $4.3 billion in 2019.

Coping in a data-driven era

The modernisation of the RegTech industry, through cloud computing, is characteristic of the whole fintech sector. The scalability that the cloud offers will also enable the industry to keep up with the dramatic rise in data. In a data-driven era, the financial services sector is arguably the most data-intensive sector in the global economy. Financial organisations produce huge amounts of data everyday with each monetary transaction and payment adding to their vast data sets.

A cloud-based data warehouse can be scaled up or down depending on usage. Should a bank need to expand geographically to accommodate a merger or acquisition then scaling up their data storage is seamlessly handled through the cloud. Furthermore, certain cloud solutions decouple storage from compute, so organisations only need to pay for when they are using a service.

Given the tangible benefits of cloud adoption, it is hardly surprising the worldwide public cloud services market is forecast to grow 17% in 2020.The financial industry is finally starting to leave behind its legacy systems and embrace a future of modernisation, made possible through the cloud.

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)