Peter Ku, VP and Chief Financial Strategist for Informatica, outlines the challenges posed by the transition and how firms can turn them into opportunities.
The London Interbank Offered Rate (LIBOR) underpins some $240 trillion in financial contracts, and with just 11 months to go until the move to risk free rates, Sterling Over Night Indexed Average (SONIA), financial services firms are under pressure to finalise this complex change programme.
Widely considered one of the biggest transformation programmes undertaken by modern financial services firms, the shift away from LIBOR is a complex business challenge which impacts teams across the business. Failure to adequately prepare represents significant operational risk. Why? Because at the heart of it all is data – what is it, where is it, how is it connected, governed, and made available to the business. Board level committees, cross-functional teams and significant resources have been dedicated to managing this intensive and – at times – painful process. However, it’s not all imposition; there are meaningful upsides to having trusted, governed and relevant data, shifting it from tool to strategic business asset.
The Road Ahead
The Bank of England recently published an updated 2021 Roadmap, outlining key milestones that need to be met in order to prepare for the LIBOR transition. It suggests that by the end of Q1 2021, organisations will have completed the identification of all legacy LIBOR contracts. For banks that have hundreds of systems – each with thousands of indexes – locating and tracking the lineage of this data across all systems is a mammoth task.
After completing the LIBOR data inventory, firms can begin conducting an impact analysis on all existing LIBOR contracts. This is a crucial, in-depth exercise covering a number of areas. What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk? Data quality is paramount to being able to perform accurate analysis and in turn manage risk. It’s important to keep in mind that a change of a single data point will impact multiple systems and, in most cases, hundreds of reports. Therefore, having confidence that the data is accurate and trusted is essential. Finance and accounting teams will need to update risk and valuation models once the risk exposure is identified. These include valuation models, pricing future revenue streams and how those impact daily, monthly and annual reporting.
What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk?
Alongside this work, legal and compliance teams will be working to review and replace fall back language in LIBOR contracts which expire in 2022 and beyond. The roadmap published by the Bank of England working group suggests that firms complete these conversions by the end of September 2021. The success of this maps back to the data inventory, and whether teams are able to determine which systems service which contracts, and adequately address corrupt data.
The singular thread through it all, whether it be those managed by legal and compliance, finance and accounting, or risk management, is a dependency on data that is good for use. Unfortunately, many organisations today still struggle with data quality. There are instances where the correct data just isn’t available, or it’s unclear where the data is located or how it is connected to other indexes. This is a continuous work in progress but the conversion from LIBOR to SONIA is undoubtably driving improvements in the automation and scale of existing data governance projects.
Operationalising Data Governance
The LIBOR transition may be a landmark one, but it certainly won’t be the last challenge for the financial sector, which will continue to face increasing market pressures fuelled by rapidly emerging technologies, global interconnectedness, changing economic and jurisdictional factors, and consumer demands. It is the adoption of cloud-based technologies and steady foundation of intelligent data governance that will deliver sustainability, resilience and efficiency moving forward.
As Chief Data Officers round out these gargantuan programmes, a continued focus on two core areas will accelerate the shift of data governance from an IT-centric discipline to a core business function that empowers all within the organisation to be more data-driven.
First, there needs to be a continued focus on resolving data quality issues. Data quality management should be proactive, measured, monitored, and communicated across all data stakeholders from data engineers, analysts, stewards to executive business decision makers. This will ensure data quality management is transparent, predictable and measurable.
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Secondly, users need to leverage tools and technologies to make data governance processes more automated and agile. AI-driven data governance solutions can operationalise data governance by decentralising data stewardship and enabling self-service stewardship to reduce the cost to the business, while still allowing data governance to scale.
Data is the new currency of financial services firms. Forward-thinking organisations will view the overhaul required to move away from LIBOR as a stepping stone to turn data management challenges into opportunities.
Ilia Sotnikov, VP of Product Management at Netwrix, looks at the state of cybersecurity in financial services and the external factors that drive it forward in 2021.
The past year has required financial teams and organisations to review many of their technical processes, especially as employees were forced to work remotely almost overnight. Research shows that 30% of financial organisations feel they are now at greater cybersecurity risk now than they were pre-pandemic. The majority (64%) are concerned about both more frequent cyberattacks and the security gaps caused by remote work – but despite this increased concern about malicious activity, the most reported incidents for financial firms involved human errors.
As a result, 2021 will certainly see financial organisations reassessing their data security policies to be fit for purpose in a post-pandemic digital world. However, given the wide range of financial services emerging, financial organisations today are on very different security maturity levels. Some have consistent ongoing risk management, established processes and dedicated IT security teams. Others just expect IT operations to handle security as part-time assignment. Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.
External pressures for financial services
The good news is that moving into 2021, these organisations will be driven to increase security maturity by external factors: cyber insurance and privacy regulations. With 2021 bringing both new privacy laws and stricter enforcement of existing regulations to minimise the risk of incurring steep fines for compliance failures, businesses will turn to cyber insurance.
The bad news is those policies will come with their own security standards and requirements, such as regular risk assessment and effective detection and response capabilities.
Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.
In 2020, many privacy-related bills were pushed down in priority due to more urgent tasks related to global pandemic. However, this isn’t an issue that will go away. Any British or European businesses that deal with local or international markets have to comply with GDPR – and with Twitter’s recent fine of approximately €500,000 for failing to promptly declare and properly document a data breach marking the first cross-border GDPR ruling, there will be a renewed vigour in the finance industry to ensure compliance. Furthermore, payments-related legislation such as PCI-DSS and PSD2 will face further strains given that a huge consequence of the pandemic has catalysing the move of payments becoming cashless.
A balancing act to compliance and security
This renewed focus on privacy laws require financial organisations to pay more attention to what data they have on hands, how they handle this data, and who is accessing it and why. Failing to document this or to follow documented policies can result in significant fines in case of consumer complaints or a data breach. This may force finance firms to adopt security and data governance practices they did not have in place this year.
The other driving factor for financial firms to revamp their data security measures is cyber insurance. The cyber insurance market is growing rapidly at an impressive 26% CAGR. This growth is fueled by the surge in cyberattacks and businesses seeking to offset their risks, and executives and board members recognising potential breaches or ransomware threats as business risks.
Finance companies are more likely to turn to insurance as an option to deal with the potential cost of these new risks. However, cyber insurance is not a “pay-and-forget” thing. To lower the risks that their customers will be breached, cyber insurance carriers are requiring them to comply with their own security standards, such as regular risk assessment and effective detection and response capabilities. This way, cyber insurance carriers contribute to the growth of security solutions that provide such functionalities. Finally, they force companies to cover security fundamentals and regularly reevaluate their IT risk programs and carrier’s policy changes to ensure adequate coverage, as insurance is not a panacea for a weak or inconsistent security programme.
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The long view
It's safe to say that in the coming year, insurance and legislation will drive mass adoption on fundamental security practices for finance firms and teams. However, given the particular data pressures they face, financial services will be faced with a balancing act of meeting insurance criteria as well as complying with the regulatory standards themselves. While this may throw up some data management challenges, in the long run, it will certainly prove beneficial in helping financial services improve their cyber security posture.
Whether you are a new startup or you are an established business in your niche, taking the right approach to your small business accounting is crucial for the success of your enterprise moving forward. With the right financial data at your disposal, you can make better-informed decisions about the future of your business, assess your performance and adapt to changing trends with ease.
Failing to maintain proper financial records can cause your business all sorts of problems down the line. From delaying the receipt of payments to cash flow problems and issues with filing your taxes, poor financial management can quickly spell disaster for small businesses. To ensure that you stay in control of your business finances, it’s important that you adopt the right accounting habits this year to set your small business up for success in 2021.
Let’s take a closer look at five accounting habits you should adopt in 2021 to help you to stay in control of your business finances.
Maintain Proper Records
One of the most important accounting habits that any business owner can adopt is keeping good records. Keeping meticulous records will ensure that you keep track of all of your income expenses, that you get paid on time and that you have the financial information you need when reporting time rolls around. Having access to up-to-date and accurate financial data will also allow you to make better-informed business decisions going forward.
Seek Professional Advice
Business owners wear many hats, contributing to many aspects of the business. When it comes to managing your finances, you need to ensure that you have the right advice to help you keep your business on track. Seeking out professional financial advice will help you to gain a better understanding of your accounts and implement systems that will help you to manage your finances more efficiently.
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Invest In The Right Tools
Modern cloud-based accounting programs can help you to manage your business accounts and meet your reporting obligations with ease. These powerful accounting solutions are capable of automating many of your financial recording and reporting tasks, giving you more time to focus on the daily tasks associated with running your business. Choosing the right accounting software to meet the needs of your business will allow you to manage your business accounting with more precision and confidence.
Remain Tax Compliant
As a business owner, you need to ensure that you meet your tax reporting obligations to the ATO. At the beginning of the financial year, be sure to enter all of your report due dates into a calendar or other organiser so you know what reports are required and when they are due. Taking an organised approach towards your business tax reporting obligations will ensure that you avoid incurring any penalties or fines which could hinder your business at tax time.
Monitor Your Expenses
Having a clear understanding of your business expenses is essential in planning for the future needs of your business. Being able to identify where you are overspending or where you are investing with little return will help you to make changes as required. Whether you will need to reduce your spending, seek financing or generate more income, monitoring your expenses closely is key in maintaining your profitability and having adequate cash flow to allow you to operate optimally.
Take The Right Approach To Your Business Accounting In 2021 And Beyond
Managing your business finances is a constant struggle for many business owners. With a new year beginning, now is the time to reassess your accounting habits and make positive changes going forward. Take the right approach to your business accounting in 2021 and adopt new accounting habits that will allow you to stay in control of your business finances and on track toward your financial targets.
Kris Sharma, Finance Sector Lead at Canonical - the publisher of Ubuntu - offers Finance Monthly his thoughts on APIs and how firms are already using them to enhance their services.
Cloud computing, big data analytics, artificial intelligence (AI), machine learning (ML), distributed ledger technology and process robotics are all playing a key role in reimagining financial services for a digital world. A growing number of financial institutions are drawing plans to adopt these technologies at scale as part of their digital transformation initiatives to accelerate financial data processing, deliver mass personalisation and increase operational efficiencies.
Most organisations currently deploy a complicated mix of technologies, legacy software platforms, applications, and processes to serve customers and business partners. On their digital journey, financial firms will have to integrate data, processes and business functionality from legacy systems of record to this set of new technologies. Many businesses have tried to adopt various transformation approaches such as re-platforming and re-hosting, direct integration between applications, rip and replace, and deploying middleware technology to deal with legacy systems and their integration with new technologies. But each of these approaches have their own drawbacks and can limit the adoption of new solutions within the constraints of legacy technology debt.
An evolutionary approach to digital finance, however, will unify information and data without the need to merge operational systems. Application programming interfaces, or APIs, can overcome the challenges involved with adopting new technologies and more innovative solutions while integrating with legacy run-the-business applications.
Where APIs become a core piece of the puzzle
APIs are increasingly playing a central role in digital finance. They essentially bind different parts of the financial value chain together, even though the underlying components may be based on different systems, technology, or supplied by different vendors. Using APIs, financial firms can securely share digital assets while masking backend complexity, integrating software applications and focusing on maximising their proprietary strengths by sharing data, systems, and functionality with customers, partners and developers. This in turn drives digital transformation without a complete overhaul of existing infrastructure.
Application programming interfaces, or APIs, can overcome the challenges involved with adopting new technologies and more innovative solutions while integrating with legacy run-the-business applications.
Since APIs are self-contained, they can be readily deployed and leveraged for innovation at speed, enabling financial institutions to introduce and integrate new features. When powered by the cloud, firms can develop, test and launch new services to customers quickly and cost-effectively, fuelling business growth. For example, insurance firms can make more timely offers by cross-selling home, auto and life policies. Financial institutions can leverage APIs to connect sources and use cloud computing to handle massive amounts of data, as well as AI and ML services live in the cloud, thereby analysing all this data faster and cheaper than they can on-premises.
Who is successfully using APIs?
Challenger bank Starling was designed and built completely on AWS cloud to deliver and scale infrastructure on demand. Additionally, by building a bank with open APIs from day one, Starling is natively compliant with the European Union’s Payment Services Directive (PSD2) directive.
According to ProgrammableWeb research, financial services is ranked highly in the fastest growing API categories, given the rise in digital forms of payment, an ever-increasing customer demand for connected solutions, and open banking initiatives. APIs are at the heart of the PSD2, the UK’s open banking mandate, as well as the Bank of Japan and the Monetary Authority of Singapore’s open banking initiatives.
Finastra’s Open Banking and collaboration: State of the nation survey 2020 finds that “86% of global banks surveyed are looking to use open APIs to enable Open Banking capabilities in the next 12 months”.
As APIs attract an ecosystem of developers, a financial API provider can encourage participation to fill go-to-market gaps and extend its services and data to new markets and use cases. Barclays is fostering collaboration and generation of new ideas through secure, innovative APIs. The Barclays API exchange has built an API library that is available for use by third parties to develop and test new products. Barclays and third-party developers work together to create, develop and test new product ideas before releasing them to the regular API catalogue. Similarly, Starling Bank provides a marketplace that enables developers to build their own products and integrations using its API.
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Unleashing the potential
There is an opportunity for financial firms to leverage the power of APIs by bringing them together with digital technologies to broaden the possibilities for innovation and expand customer experiences. Financial institutions need to reimagine APIs as product offerings that will drive business expansion and increase revenues.
The future of digital finance will be driven by organisations building digital business models, redefining their API strategies and bringing new customer propositions to life using modern web architectures, best-in-class technologies and new ecosystems.
Rob May, Managing Director and founder of ramsac, looks at some emerging trends in cybercrime and how firms can best defend themselves.
Security, for financial clients, has had to adapt to many forms in the last decade. The most recent, and urgent, line of defence has come in response to the unexpected, novel threat of a global pandemic. But as more clients onboard their operations to digital platforms, that risk grows and becomes ever complicated. Remote operations, for example, opens a place of business to both insider attacks and outside ones.
While the financial service industry has always been one of the “most-breached sectors” (accounting for 35% of all data breaches), cyberattacks have become even more widespread and sophisticated during the global pandemic. This is, arguably, because operations have had to quickly onboard their business digitally. And, with new digital models, there are troubled spots, or weaknesses.
With more financial companies seeking to create new digital customer experiences, investing in a wealth of technology innovations, and working remotely, this could result in a new wave of extreme cyberattack scenarios leaving companies vulnerable to serious data breaches or worse.
To gain deeper insights and help guide financial companies in their decision-making when it comes to cybersecurity, we’ve rounded-up the emerging cyber threats, how they could evolve in the future, and solutions to address them during these challenging times.
Be Watchful of Malware
Cyber-risk management should be watchful and vigilant of the most common cyber-risks. Malware will breach systems and ransom, corrupt, or steal data. Even though it’s common, over the years, several US states and counties (including Texas) have observed a growing intelligence about how these attacks are delivered. One scenario noticed several malicious ransomware attacks at once, effectively a multiparty attack, reaching across jurisdictional boundaries to result in the first cybercrime event of its kind.
Cyber-risk management should be watchful and vigilant of the most common cyber-risks.
The solution, a suitable line of cyber-defence, would include early planning and preventive measures for multiparty attacks and disruptive threats. Oftentimes awareness is a helpful starting point. But defence and security measures alike need to anticipate more complicated, organized cybercrime as it becomes increasingly sophisticated.
For those in finance, a defence plan could include trial simulations to measure internal response times and mock scenarios to help security teams shape their reactions for real future attacks. Likewise, building cross-sector peers and contacts, can be helpful in organising a defence to a larger cyber-risk.
Misinformation Can Deceive
This has been one of the largest threats throughout COVID-19 and has rallied a shared, collective attempt to cull the flow of misinformation online. Many known bodies, including NASDAQ, have predicted a possible spike in market manipulation on the heels of COVID-19, where attention is split between a global pandemic response and economic recovery.
Misinformation can conflate what seems like harmless advice on stock investments, but is actually driving malicious activity. These disruptive attacks tend to prey on market volatility and flagging economic confidence. In the past, these attacks have been known to use fraudulence as sleight of hand to conflate stock values.
A reasoned solution to this issue would require financial firms to conduct extra due diligence and caution when navigating the market and instructing their clients on financial manoeuvres. As surface information could be corrupted, extra research and investigation can steer financial decisions away from malicious foul play.
Data Manipulations Are Disruptive
Traditionally, data was duplicated or destroyed. Whilst this was harmful to firms, the next evolutionary stage of cyber-crime, since the latter half of 2019, has moved onto data manipulation. There have been scenarios where data hacks can be twisted to manipulate or encrypt it. This has led to increased scrutiny for cloud security, which has known vulnerabilities.
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Before onboarding new digital solutions for your business, ensure it can be securely bridged. New technologies can be helpful in expanding a business’s productivity, but this should be approached cautiously.
There are a range of emergent threats that result from cyber-risks. The best, more reasoned, solution is to prepare for cybercrime by having a prepared line of defence and the right security tools. The booming of digital businesses, and those migrating online, creates a greater urgency than ever to prepare security to handle a new universe of threats.
Tim Wakeford, VP for Financials Product Strategy at Workday, offers his insight to CFOs looking to lead their business back to strength.
After a year where organisations were forced to continuously change plans and rethink their approach to business recovery, the future is finally looking less turbulent, with a potential COVID-19 vaccine on the way. One fundamental transformation 2020 brought to businesses, however, will continue informing the next year. Leaders will be looking to the CFO for insights on the business and guidance to decide their next move.
If the early stages of the pandemic have taught us anything, it is that companies need good quality data to make faster decisions. The question is, what data-driven insights do CFOs have to provide companies to deliver the best response to persistent change?
It could be argued that all data is valuable. Nonetheless, CFOs must focus on three particular data-led insights to steer businesses to recovery. They need to provide visibility into working capital, empower other leaders with data, and manage investor expectations with scenario planning. In doing so, they will be in a strong position for success in 2021 and be able to guide the business through any challenges the future may bring.
Gain greater visibility into working capital
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures. This is because many businesses have seen revenues plunge during the pandemic, which had a negative impact on cash flow. In fact, 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions and facing the reality that they will need to become more agile in managing inventory. The disruption of the second wave is heightening financial pressures and will likely mean that CFOs have to reassess their budgets again and again. Without a real time view of working capital, moments of disruption can lead executives to make decisions in a panic. This could result in significant inventory spend with non-preferential suppliers, which in turn reduces the potential for savings from contractual discounts, and is common during turbulent times. Having a 360-degree view of the organisation’s working capital, however, can provide a better handle on spend management, optimising costs and overall efficiency. This will help leaders avoid risks that can set them back, and help them to accelerate recovery.
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures.
Empower the organisation to make data-driven decisions
Getting the right data-led insights into the business to guide decisions can be challenging during a constant state of change. However data-driven insights are absolutely key in empowering decision-making — even during the best of times. Providing the right data, to the right people at the right time, can only be done by breaking down the data silos still present in many companies. A global Workday study revealed that out-of-date information and siloed teams are the biggest barriers to agile decision making. On the other hand, 80% of technology leaders from more agile companies stated that employees have access to timely and relevant data without gatekeepers blocking access to such information.
The challenge is that, as many businesses have grown and evolved they have accumulated different technologies — systems that are often placed together and lack smooth integration or a single pane view of what is happening in the organisation. CFOs whose businesses have reporting scattered across different data sources will find that it is much slower and harder to monitor performance, identify variances, and surface risk. This is why CFOs and finance teams have to consider investing in overhauling their technology stacks. Our customer Equiniti, for example, found that having all HR and financial data in the same cloud helped identify challenges and respective solutions with much more agility and confidence during the pandemic. This way, they were able to fix gaps quicker, without slowing their recovery plans.
Manage investor expectations with scenario planning
The uncertainty and volatility created by the pandemic has led to markets swinging back and forth. In turn, this creates pressure from investor communities and has served to highlight one of the biggest challenges organisations face — determining the long-term future of a business. In the current state of constant change, CFOs and their teams cannot underestimate the importance of taking a strategic approach to investor relations. Besides sharing earnings reports, it’s the CFO and its team’s role to offer constant reassurance to stakeholders by communicating how management teams are dealing with the crisis.
Therefore, when talking to investors, leaders have three choices: withdraw, revise, or reaffirm guidance. A recent Deloitte report revealed that more than half of CFOs from public companies have chosen to withdraw from providing guidance. Although understandable, this could signal that leaders are unsure of their company’s prospects and have a downward impact on stocks.
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When faced with this lack of clarity, finance leaders must stay ahead of the curve and give invaluable insights to investors by undertaking scenario planning. Many of our customers are basing their entire recovery plans on multiple pictures of their budget using what-if scenarios, and it’s proven equally important for investor insights. CFOs can build scenarios to better understand what the future may look like in areas of particular interest to investors, such as covenants. Deploying these types of forward-looking processes will help businesses prove their stability, ensuring sustained recovery and emphasising their long-term objectives with clear metrics.
The strategic role of the CFO for business recovery
The pandemic has shifted the role of the financial office for good. Everyone – from HR and commercial teams to investors – are now looking to the CFO for guidance and to spearhead the business through upcoming disruption. Armed with the right insights, plans and tools, the CFO will be able to lead their organisation to a swift recovery and prepare the business to thrive, whatever the future holds.
With consumers these days growing extremely comfortable with digital channels and online buying experiences, B2B marketers are evaluating how their strategies fit into this new world.
Perhaps the most jarring aspect of this behavioral change has been reduced reliance on analyst research reports. A 2020 report by TrustRadius indicates that just 21% of B2B buyers rely on analyst reports.
Gartner's Magic Quadrant reports are an eagerly awaited and prestigious release every year. However, with the reduced reliance on research reports and increased trust placed on peer review platforms, are Gartner's reports even relevant anymore? The truth is that there isn't a clear yes or no answer.
Examining the facts through three key aspects of the B2B buyer's decision journey is instructive.
The Buyer's Journey
Business buyer journeys are getting more complex. Blog posts and other content assets are important first touchpoints, but company websites, social media conversations, product mentions, trade shows, video and audio content and sponsorships all play a major role in grabbing a consumer's attention at first.
Trustworthiness is the most important factor that consumers look to evaluate throughout their journey.
To this end, TrustRadius's report mentions that buyers use a company's website and product pages to determine how trustworthy they are. Furthermore, 87% of buyers want a self-service journey and do not want sales rep or marketing interference.
Trustworthiness is the most important factor that consumers look to evaluate throughout their journey.
This means that marketers have to adopt a soft-touch approach while maintaining consistent messaging throughout your channels.
Research reports and analyst mentions might not entirely help establish trust in a consumer's mind, but they do provide social proof. When a brand lands a favourable mention in one of Gartner's Magic Quadrant reports, the result is instant validation that the company is a major player in their space. Your company's categorisation in its quadrant quickly helps establish your specialty and nature in a consumer's mind.
However, increasingly, business buyers are looking beyond these factors. A company that doesn't allow consumers to self-service their journey through product trials is going to find itself out in the cold. An analyst mention isn't going to do the trick all by itself. You need to provide as much value and information as possible before you ever meet their clients face to face.
Credibility and Reviews
TrustPilot's report singles out product reviews and review content as the most important part of a B2B consumer's buying decision. It also highlights a disconnect between what companies focus on and what consumers want.
Most companies focus on their product's score instead of conversations around actual value and customer delight.
This is an important distinction to make. Secondary social conversation sites such as Twitter, Reddit and Quora offer tons of review content that users routinely review. These sites don't offer scores and can be ignored by B2B vendors. Review content performs the same function as a customer referral does, and this is why these secondary social websites are so powerful.
TrustRaidus's data highlights customer referrals as the most effective marketing tactic followed by personalized messages, online events and SEO. On the surface, it seems as if analyst reports have no major role to play in any of it. However, analyst mentions can augment many of these tactics. For example, a backlink from a high authority analyst website will boost your domain's authority considerably.
Sponsoring a research firm's online thought leadership event is an instant way to get your brand in front of thousands of potential clients. While it doesn't convey credibility all by itself, it helps your company occupy mind space and is one block in a larger picture.
It prompts consumers to conduct further research into you, and as long as you back it up with marketing that provides value, you'll engage and delight consumers.
Impartially Assess Industry Impact
Technology trends change quickly, and buyers often find themselves overwhelmed when tasked with keeping pace. Choosing a product that is behind its industry's direction could prove highly problematic, especially given that more sophisticated tech tools often involve extended onboarding processes and contractual lock-ins.
Gartner's MQR paints a quick picture for consumers that they can then use to conduct further research.
Gartner's report classifies companies as leaders, visionaries, niche players, and challengers. Buyers can choose their preferred vendors based on the challenges they're facing. For example, an enterprise that needs an end to end solution might be better served by a leader instead of a niche player. However, if their need is concentrated, a niche player might be a better fit.
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Analyst reports also offer insight into the trends an industry can expect moving forward. Whether consumers choose to listen to them or not, the fact is that these reports play a critical role in determining which trends consumers pay attention to.
Positioning your product per these trends, with the characteristics of its relevant quadrant will raise your company's profile.
A Rounded Approach
The key as always is to adopt a well-rounded approach that supports your consumer's needs throughout their journey. Focusing solely on analyst reports, no matter how prestigious they are, is not a good strategy moving forward. Seek to provide value throughout the journey and avoid a PR-like approach at all costs.
Business software producer Salesforce.cmo agreed on Tuesday to purchase work-focused chat service Slack for $27.7 billion in one of the biggest tech mergers in recent years.
Marc Benioff, CEO of Salesforce, hailed the deal as a “match made in heaven.”
“Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world,” he said in a statement. “I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes.”
Stewart Butterfield, co-founder and CEO of Slack, also welcomed the acquisition: “Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going.”
News that a potential purchasing agreement could be struck between the two companies emerged days ago, though details of the deal were not known until this week.
Aside from being the largest purchase Salesforce has ever made, the deal also represents a significant merger in the tech field as a whole, comparable with Microsoft’s $27 billion purchase of LinkedIn in 2016 and exceeded only by IBM’s $34 billion acquisition of Red Hat in 2018. Further, it provides Salesforce with the ability to integrate Slack with its Customer 360 product, creating new avenues for sales and marketing with Slack’s expanding customer base.
It also marks a new development in an ongoing feud with Microsoft, which has been competing with Slack using the Teams app included in Office 365. Teams utilises a number of the same features as Slack’s six-year-old application, and in July Slack filed a complaint in the European Union accusing Microsoft of illegally bundling Teams with its Office 365 suite in order to block its removal by customers who may prefer using Slack.
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Microsoft’s software have also competed with several of Salesforce’s flagship products, having introduced a line of B2B tools aimed at helping other companies manage their relationships with customers.
Wedbush Securities analyst Dan Ives called the Slack acquisition a “now or never” purchase for the Salesforce CEO. “For Benioff, this is all about Microsoft,” he said.
Matthew Glickman, VP of Customer Product Strategy, Financial Services at Snowflake, examines the benefits that the data cloud can bring to financial services.
In the wake of COVID-19, financial services have had to adapt almost overnight to the economic challenges presented by the pandemic. With cities across the world going into lockdown, consumers expect banking to deliver digital-first experiences that match their usual expectations. Digital innovation is very much at the heart of this transition. To navigate and thrive in the current climate, capitalising on the data cloud will enable fintechs to respond nimbly to customer demands and remain competitive.
According to an Accenture survey, over half of respondents in the retail banking industry believe cloud technologies have the biggest impact on improving operational efficiency, and 40% believe that it can also generate business value for the industry. The data cloud can provide the foundation on which companies can build a technology stack that delivers business agility and growth. Here are three ways financial services companies can benefit from harnessing the data cloud.
Personalising Customer Experiences
The cloud offers companies the opportunity to house all their various types of data in one secure place, enabling them to personalise services for customers. By using the data cloud, companies have a consolidated governed location for all types of data (for example, clickstream, transactional, and third-party) that can ingest data from new sources such as IoT devices. This enables organisations to gain a 360-degree view of customer behaviours and preferences from multiple inputs.
The cloud offers companies the opportunity to house all their various types of data in one secure place, enabling them to personalise services for customers.
A full customer view is fundamental for a successful personalisation strategy as it enables organisations to pinpoint high-value customers and ensure they have a good experience at every touchpoint. Without real-time visibility into customer interactions, providing the best possible customer experience just isn’t possible.
Over time, digital banking platforms will evolve to incorporate ML predictive models to drive even more personalised banking behaviours. This will only be achievable for organisations who successfully tap into the data cloud, as the success of ML models will require support from ever increasing volumes and access to datasets, both within and external to an organisation. The more an organisation can tap into customer personalisation, the better equipped they will be at customer retention and remaining competitive.
Boosting Data Visibility
To ensure fintechs can continue providing the best possible customer experiences, and adapt to any demands posed by the pandemic, having an acute awareness of all data available will be key for these insights. Adopting a cloud data platform that offers the direct and secure sharing of data without the complexity, cost, and risk associated with legacy data warehouses is one such solution. With simpler, enhanced data sharing, companies can quickly and easily add new data products, and get near real-time insights across the business ecosystem on how this is operating. Offering a standalone data product to data consumers can lead to substantial revenue. For example, financial companies that collect tick-by-tick stock market data can use a cloud data platform to create a data project that they can sell to hedge funds.
A cloud data platform can also reduce the manual effort and copying that is necessary with traditional data sharing tools. Instead of physically transferring data to external consumers, companies can provide read-only access to a segment of their information to any number of data consumers via SQL. By breaking through barriers between disparate data systems, companies will find new sources of revenue and opportunity.
Cross-Collaboration
The rise of digital-first banks, the increased availability of online services and the ongoing surge in mobile banking all represent the modern evolution of how customers now interact with their finances. To meet the demands of today’s customer, financial organisations will see big benefits in collaborating with other finservs through real-time access to data. For instance, if a customer is using a third party fintech to track their finances, a financial institution must share data with that fintech organisation so their customers can access their accounts.
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Last year, 65% of banks and 76% of credit unions said partnerships with fintech companies will be an important part of their business strategies in 2020. These numbers represent an increase from 49% and 60%, respectively, in 2019, showing a clear trend towards a more open banking landscape. Financial institutions that do not take steps to improve the accessibility of its data risk frustrating their customers or losing them to a more agile and collaborative financial institution.
Data collaboration can also help improve instances where investment banks may otherwise have been forced to hold excess capital. This is because aligning on risk exposures and liquidity is executed through nightly correspondances instead of what could be real-time data sharing through the cloud.
With fully governed, secure data sharing, companies can also easily determine who sees what and ensure all business units and business partners access a single and secure copy of their data. Not only does this enhance efficiency, but centralising data into a single source of truth, rather than in separate locations, will boost data security.
Data is the lifeblood of the financial services industry. By migrating to and capitalising on the data cloud, companies can build a future-proofed technology stack that delivers business agility, enhanced customer experiences and data sharing capabilities that ensure business continuity during this volatile economic period. Prioritising these digital-first experiences for customers will ensure financial organisations have the competitive edge that these times demand.
James Johnston, Regional VP at Cloudera, presents a case for greater utilisation of data by banks and financial services firms.
For those who master the art of delivering customer service in financial services, there are huge rewards — including 55% higher returns for customer-centric banks. However, the financial services market is highly saturated, and challenger banks, of which there are 102 in the UK alone, are rivalling legacy institutions when it comes to giving consumers choices. In fact, Starling Bank, which only opened its doors in 2014, came out on top as one of the brands in the UK excelling at customer experience. So, how can financial institutions improve customer experience and remain competitive? One word: data.
True innovation lies in data
Organisations in the financial sector need to use data and analytics to offer their customers the most relevant products and services proactively. Currently, they do this by looking at traditional data sources, such as account activity, loan requests and investments. This helps these companies to form a complete understanding of the customer and their needs. However, for some banks, it is often here where their data analytic capabilities come to a halt. And it needs to change, as it is leaving them with only half the picture.
Today, there is a wider range of data sources available to banks than ever before, fuelled by the increasing amount of data we are producing. For example, unstructured data sources, including clickstream data, location data, social media streams and chatbots can provide a wealth of actionable intelligence. But by only analysing legacy sources, key insights into customers are lost. True innovation comes with the ability to analyse new and old data sources simultaneously. By doing so, banks can complete the picture of their customers and comprehensively anticipate and predict their needs based on their customer profile.
Organisations in the financial sector need to use data and analytics to offer their customers the most relevant products and services proactively.
Given the complexity and variety of traditional and newer sources of data, financial service providers need to ensure they have the tools in place to support them on their data journey. Gaining full visibility on every piece of data flowing through their network, from a single toolset, regardless of where it resides or where it came from, is therefore critical. By implementing this level of visibility, data can be analysed, and the true value derived in real-time to the benefit of the customer. The ability to detect fraud is a perfect example of this. Suppose a bank can ingest and analyse data in the here and now. In that case, the business can identify patterns and trends that are indicative of fraud and alert the customer to this activity, before it becomes an issue.
Embracing a customer-centric approach
It’s clear that the way data is linked together, in a data lifecycle, is what enables organisations to derive intelligence through which exceptional customer experience is delivered. This is why focusing on developing a connected data lifecycle, which takes into account the holistic view of the entire data journey from edge to cloud, will become a cornerstone of success for banks who want to lead in their industry.
A connected data lifecycle will, however also help banks and other financial services organisations to can meet critical business goals, including:
Acquiring new customers
Segmentation allows businesses to analyse and profile their current customers. By leveraging techniques such as segmentation, companies can fine-tune their outreach and target prospective customers by taking insights and creating messaging that is tailored to target new customers.
Expanding existing business
With a complete picture of the customer, including every interaction they have with the organisation, banks can look for opportunities to offer new products and services proactively. When looking for opportunities to cross-sell, it is important that the salesperson has access to the customer’s entire profile, including previous searches and history, in order to offer the most relevant product. If the different data sets relating to the customer are sat in silos based on how they were ingested into the business, it can delay this process, and the customer may lose interest or look elsewhere.
With a complete picture of the customer, including every interaction they have with the organisation, banks can look for opportunities to offer new products and services proactively.
Driving customer loyalty and long-term retention
Using analytics-driven customer engagement tools, such as digital assistants, customer surveys and feedback analysis, financial institutions can gather this information, derive insights from it in real-time and then push the outcomes back to their customers. It is a quick and effective way to garner a deep understanding of customers’ needs and personalising offerings accordingly. In fact, continuous re-evaluation of the data could quite literally allow companies to give customers what they want, despite their ever-changing needs.
Putting data insights into practice
The focus on customer experience is a critical component to a financial services organisation retaining loyal customers and remaining competitive. Two premier businesses that have remained at the forefront of their industry because of their use of data are Rabobank and DBS.
In order to help its customers — including small businesses — become more self-sufficient and improve debt settlement, Rabobank needed access to a varied mix of high-quality, accurate and timely data, that they could feedback to customers on demand. To achieve this, Rabobank implemented technologies that can cope with heavy pressures on data processing and ingest large quantities of streaming data. This gave Rabobank the ability to rapidly process historic and real-time data together, helping its employees run faster queries. From customers’ loan repayment patterns to up-to-the-minute transaction records, Rabobank and its customers can now immediately access the valuable data needed to help them understand the status of their financial situation.
DBS, one of the leading banks in Asia, recognised that in order to deliver superior customer experience it had to become more data-driven. However, the company’s traditional technology stack for supporting advanced analytics was expensive to scale and not flexible enough to support this work. This led the bank to build a central data team and enterprise data hub that now enables staff to continually experiment and be at the forefront of innovation, to understand the customer experience more fully. DBS then used data and knowledge to apply human-centred design to its services. With the ability to more easily store and analyse billions of events in a modern data platform, DBS can answer questions before they’re asked, effectively engaging customers and proactively delivering a better service.
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Utilise data, remain competitive
Competition amongst financial institutions is fierce, and one negative experience is all it can take for a demanding, and changing, consumer to jump ship. To avoid this, financial services companies need to be guided by their data. The organisations that excel in the future will be the ones that are investing in the means to effectively ingest, analyse and derive value from data and put these insights into practice. After all, the data is there to be analysed and acted upon, so financial services organisations need to ensure they are getting the most out of it. If they don’t, they risk losing out to the more customer-centric competition.
Simon Shaw, Head of Financial Services and Insurance at Software AG, outlines three ways in which larger banks can – and must – make their business models more agile.
In the months since COVID-19 reared its ugly head and changed the way we live, there has been a noticeable uptick in conversations around digital transformation and embedding resilience. In the banking sector, the focus had been on the increased demand for online banking and questions around how banking monoliths will adapt.
The reality is that big banks can adapt – albeit slower than other industries. That’s not to say that change isn’t happening; banks have been transforming for years to align with changing customer needs. However, it’s a distinctly difficult and complex challenge. In fact, one of the primary challenges with digitalisation in banking is that moving quickly doesn’t happen easily. Of course, CFOs and financial leaders would love to quickly pivot their operations to meet changing needs and new requirements, but in their current state, most incumbent banks don’t yet have that capacity.
To achieve digitalisation, banks are grappling with many moving parts. From regulatory requirements, to safeguarding customer data, to overcoming silos – and that’s before we consider the sheer cost of it all. I have identified three ways for established banks to pivot more quickly and efficiently in today’s climate.
1. Go Hybrid or Go Home
A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation. Changes that may seem simple, or are simple in other sectors, can require full programme rewrites when applied in banking. The legacy systems on which most large banks are built are clunky and inflexible. Since these systems don’t run in real-time, they’ll never compete with the efficiency and analytic capabilities of challenger banks. Yet, despite that, these established systems actually hold the key to future success in banking – data.
The wealth of data contained within a heritage system has the potential to entirely transform the customer experience. However, to do so, banks must be able to access and integrate that data at speed.
A significant challenge in the digitalisation of big banks is that their ecosystems simply weren’t designed to enable quick transformation.
Hybrid cloud presents the best of both worlds; it combines the operational stability of on-premise solutions with the scalability, reduced cost and data accessibility of the cloud. Breaking up isn’t easy but, according to IBM, banks that are outperforming their competitors are 88% more likely to have incorporated hybrid cloud into their business model. For banks with decades of data in monolithic technology stacks, turning certain data and tasks over to the cloud can significantly lighten the load on their ecosystem to improve efficiencies.
2. Visualising Opportunities for Change
Digital transformation has changed banking expectations. Customers want speed and convenience and banks are competing to deliver. Excellence requires efficiency, but that can be difficult to achieve.
Process mining identifies optimisation opportunities and strives for excellence in process performance. As the name suggests, process mining delves into the detail of what occurs as a process is actioned, revealing patterns, anomalies and the root causes for inefficiencies. With greater insight into processes, banks are able to make informed decisions and tangible improvements to quality and performance. To compete with the challengers, established banks need to embed the ability to adapt to changing business requirements and make transformation routine. The first step to this is visualisation.
If hybrid cloud is the vehicle by which digitalisation is achieved, process mining is the check engine light.
3. The Building Blocks of Better Banking
One of the biggest challenges to transformation lies in evolving away from heritage applications. Transitioning from old to new is daunting and can come with a hefty price tag. Microservices enable banks to transform piece by piece and scale at a controlled rate.
Transformation in data-reliant and regulation-heavy sectors will never be a walk in a park, however, microservices start small by design. This returns much needed control to banks and ensures complex changes are developed and tested independently before being integrated into the banking ecosystem.
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To fundamentally change business operations, the very foundations of that organisation need to be redesigned. This applies across industry, which is why, between 2018 and 2023, the microservices market is predicted to nearly triple as more organisations shift their transformation up a gear.
Microservices embed agility and efficiency from the outset, making digitalisation a cultural and technological change. By returning control and enabling a customer-centric and scalable design, transformation can add big value to big banks.
Agility is essential, but moving a monolith isn’t easy
In banking, where archaic systems and rigidity have been governing organisational change for years, digital transformation really means reinvention and growth. While the end-goal is easily defined – agility, resilience, scalability, digitalisation, etc. – it’s difficult to know what’s needed to achieve it. When the dependencies, regulatory requirements and price of change are thrown into the mix, it’s no wonder that change takes time in the financial sector.
Hybrid cloud, process mining and microservices create the foundations for development by embedding transformation capabilities into the very core of a banks system. While financial institutes will always be subject to a high level of scrutiny, strategic solutions that bring order, visibility and an ability to compete with smaller and more agile banks are truly transformative.
Andy Campbell, global solution evangelist at FinancialForce, analyses current trends in the financial services industry and how firms can keep pace with customer demand.
In the digital age, the finance function of old is no longer sufficient. Whilst generating reports, budgets, and plans will still remain core to finance’s day-to-day activities, the modern business landscape moves quickly, and the finance team needs to be similarly agile to keep up.
Digital transformation across businesses and whole industries requires finance departments which can support new business models, plan for agility, create outcome-based versus product-based offerings, and identify new joint venture opportunities. In short, finance needs to move away from bean counting and work more closely with internal stakeholders and customers to provide innovative experiences and organisation-wide value.
This is a radical transformation of what has come before, and requires a similarly radical shift in long-established mindsets both within the finance department as well as the rest of the organisation. If this change in mindset can be achieved, finance teams can start to take advantage of the data analytics solutions now more widely available. With a new level of visibility offered through rich, timely data and advanced analytical tools, businesses are making changes to embrace new models. The finance function is having to increase its agility in order to deliver and support the overall business.
The COVID-19 pandemic has played a significant role in this transformation. It has shone a light on business inefficiencies, and as a result, has acted as a catalyst for digital transformation, speeding up digital initiatives. We have seen more change in the last six months than we have in the previous six years. Additionally, the focus on managing cash more effectively to ensure survival has meant that the transformation focus that was typically centred around the front office - the way we deal with our customers - has changed. We are now seeing a growing interest in transforming the back office.
The finance function is having to increase its agility in order to deliver and support the overall business.
This will not happen overnight, and there are five key shifts that a business needs to make to transition from the traditional finance department to a digital office of finance.
Shifting from financial-only proficiency to enterprise-wide know-how
Financial metrics will always be important, but the modern finance leader needs to broaden and develop an understanding of KPIs in other areas of the business too. They should have knowledge of both customer experience and satisfaction, in addition to conversion rate optimisation and employee retention to round out existing analysis. This presents a massive contrast to accounting teams from years gone by, with the modern finance leader having evolved into a major business stakeholder. The focus is no longer just on the finance element, but also on creating and continuously strengthening healthy customer relationships and customer lifetime value.
Shifting from monthly reporting, to real-time decision-making
Today, monthly closes or quarterly reviews are too slow. Decisions need to be made using real-time data every time. Accuracy and speed are paramount when it comes to making sure that a business is successful. Understanding what is involved in creating and delivering a new offering - and being able to course-correct to maximise profitability or customer satisfaction - can no longer wait until the end of the month or quarter. As such, a business must invest in business intelligence (BI) and artificial intelligence (AI) solutions, so as to quickly derive insights about how the business is performing, and to subsequently act on said insights.
Shifting from static forecasts to rolling forecasts
If finance departments are to switch to a weekly or even daily forecasting schedule they’ll need technology to support their endeavours. Modern forecasts must account for several different models, constantly shifting sets of variables and the use of new technology like AI. This requires organisations to build agility across a number of business risk scenarios, such as price wars, natural disasters, or the current COVID-19 pandemic.
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Shifting from financial analyst to business model strategist
For businesses to remain one step ahead of the competition, they need to be constantly searching for new revenue streams. This could be considering how to turn services into products (or vice versa), or creating new offers or bundles for customers and presenting them in a different and unique manner. Central to enabling these new approaches is real-time data, as it provides visibility into both what sells, and what deliveries the highest margin. From this, they can then pinpoint the top performers and double down on them.
Shifting focus from product to customer success
Many sectors of the economy have already transitioned to a services and subscription renewals model. With this change comes a renewed need for businesses to redouble their focus on customer experience. Finance leaders need full visibility over each and every account in order to enable smarter decision making. This means becoming more engaged with their customers, so as to ensure satisfaction and retention. Customer onboarding, service delivery, support, or other post-sales functions: finance leaders must get closer to all of them. Only then can those deep insights into customer behaviour, as well as service and product quality, be uncovered so as to make sure that the needs of the customer are fully met.
