Bitglass recently released its 2019 Financial Breach Report: The Financial Matrix.

This year’s study found that only 6% of all breaches in 2019 were suffered by financial services firms. However, these breaches compromised significantly more records than those that occurred in other industries.

In total, more than 60% of all leaked records in 2019 were exposed by financial services organisations. This is at least partially due to the Capital One mega breach, which compromised more than 100 million records. Despite this outlier, average breaches in financial services companies still tend to be larger and more detrimental than other sectors’ breaches. Fortunately, they do occur less often.

“Given that organisations in the financial services industry are entrusted with highly valuable, personally identifiable information (PII), they represent an attractive target for cybercriminals,” said Anurag Kahol, CTO of Bitglass. “Hacking and malware are leading the charge against financial services and the costs associated with breaches are growing. Financial services organisations must get a handle on data breaches and adopt a proactive security strategy if they are to properly protect data from an evolving variety of threats.”

Hacking and Malware remain the primary cause of data breaches in financial services at 74.5% (up slightly from 73.5% in 2018). Insider Threats grew from 2.9% in 2018 to 5.5% today, while Accidental Disclosures increased from 14.7% to 18.2%.

The cost per average breached record in financial services ($210) has increased over the last few years and exceeds the per-breached-record cost of all other industries except healthcare ($429).

For mega breaches, which affect approximately 100M or more individuals, the cost per breached record in financial services is now $388 – up from $350 in 2018.

Many financial services organisations are still not taking proper steps to secure data in our modern cloud and BYOD environment. Consequently, they are suffering from recurring breaches. For example, Capital One and Discover each experienced their fourth significant data breach in 2019.

The top three breaches of financial services firms in 2019 were suffered by Capital One Financial Corporation (106 million individuals), Centerstone Insurance and Financial Services (111,589), and Nassau Educators Federal Credit Union (86,773).

Javier Meseguer has been appointed as General Manager Southern Europe. Based in Madrid, he will report to Steffen Schaack, Senior Vice President Global Business Development, and will oversee Drooms’ business expansion in real estate, corporate finance and M&A in Spain, Portugal and Italy.

Drooms has also expanded its UK sales team with the appointments of Ditte Nielsen as Senior Business Development Manager and Alessandra Azzena as Business Development Manager. They will report to Rosanna Woods, Managing Director of Drooms UK.

Alexandre Grellier, co-founder and CEO of Drooms, commented: “We continue to see a need for digitalisation among our customers. This not only means making documents available in digital formats but also by ensuring that entire work processes are digitalised. Our latest expansion is the logical next step in our support for customers around the world in this process. Our new offices in Madrid and Barcelona means we are ideally placed to tackle this need in southern Europe head on. As we see it, data protection and data transfer have no borders and we plan to continue our expansion globally in 2020”.

Steffen Schaack, Senior Vice President Global Business Development at Drooms, added: “Our new team members will strengthen our presence in their respective markets and develop further our relationships with customers. We are now widely recognised as the global, independent experts for secure data transfer and digitalisation.”

Javier Meseguer has 16 years’ experience in digital services and data rooms and has invaluable expertise in establishing sales networks. He previously worked as Director of Sales for Snowflake, a provider of cloud-based data rooms, as well as IntraLinks, SAS Institute and The MathWorks.

Prior to joining Drooms, Ditte Nielsen worked as Senior Account Manager at Merrill Corporation, a global SaaS provider for M&A. Alessandra Azzena arrives from Tableau Software, where she oversaw account management and sales in her role as Commercial Territory Manager.

Drooms has also appointed Dennis Kasch as Business Development Manager for the DACH region sales team, bringing its total number of employees across the European market to 170.

You can find our latest interview with Drooms specialists here.

According to Dominic Buch, Co-Founder and Managing Partner at Caple, in order to support that growth, many CFOs will be expected to examine and recommend suitable funding solutions.

Finding an appropriate form of finance is more complex than it used to be. For most of the twentieth century, business lending was based on the value of a company’s assets such as property, stock or invoices.

To help firms access funding, finance directors have therefore developed a good understanding of how lenders would assess their company’s physical assets.

However, today, companies are more likely to be investing in intangible assets such as data, software or a strong brand than tangible ones.

This investment in intangible assets has spurred growth and innovation. But using them as collateral to borrow against remains difficult. Although value is built in intangible assets, finance is raised against tangible ones.

Without a new approach to funding, finance directors, especially in asset-light sectors such as professional services, technology or media, may struggle to find suitable funding for their business.

The growth of the intangible economy

As most finance directors would recognise, companies now build and grow through investment in intangible assets, alongside a continued focus on human capital.

We can see this from the businesses that succeed today.

Airbnb is valued at $35bn because of its network and data, not because it owns apartments. Google has become a global behemoth because of its algorithms.

These companies are valued so highly because of their intangible assets, including the skills of the people that develop them.

The same is true of many smaller but growing businesses too. Service-based businesses contribute around 80% of UK GDP and more than £160bn in annual exports.

For instance, growing financial firms, technology companies and media businesses rely on intellectual property and brand to stand out from their competitors.

But because financial standards have not kept pace with these changes, finance directors may struggle to accurately value their asset and their business.

The challenge accessing capital

Intangible assets present a challenge to traditional lending models based around recoverable security such as property or machinery.

If a company with physical assets goes out of business, a bank can recover its money by selling those assets. Lending decisions can therefore be centred around the value of the assets, rather than the performance of the business.

Intangible assets are less transferable, they cannot easily be recovered and sold to a new owner.

As a result, businesses with intangible asset bases find it more difficult to access debt finance, regardless of the strength of its operations and the associated cash flows.

When asset-light service-based businesses sector are such a vital part of the UK economy, this puts a brake on growth.

How unsecured lending can help

Traditionalists will say equity funding through venture capital or private equity is the solution. Often that holds true.

However, as finance directors will know, third party investment, does not suit every sector, firm or business owner. It also dilutes ownership.

Instead, asset-light companies can now benefit from unsecured lending, based on an understanding of the future cash flows generated by the business, rather than the value of physical assets.

Working with external advisers such as an accountant or business advisor, finance directors often play an important role in helping their business access the right funding.

Both by identifying suitable lenders and in supporting the development of the forecasts and business plans central to a credit process based on future cash flows.

When expanding businesses are important for both jobs and growth, we need to do all we can to help fund them.

We need a new approach to lending where finance directors can help their firms access the right growth funding for them.

According to  Simon Hill, Head of Legal & Compliance at Certes Networks, this is mostly due to the fact that financial institutions are not only heavily regulated by data privacy requirements, but they are also under mounting pressure to be open to consumers and businesses about how they are protecting their data from potential breaches. 

Additionally, no bank or financial services organisation wants to face the consequences of a data breach. This is demonstrated by the fallout of numerous data breaches in the industry over the years - from Capital One in 2019, to Equifax in 2016 and Tesco Bank in 2017. In the case of the Capital One data breach, a hacker was able to gain access to 100 million Capital One credit card applications and accounts. This included 140,000 Social Security numbers, 1 million Canadian Social Insurance numbers and 80,000 bank account numbers. Additionally, an undisclosed number of people's names, addresses, credit scores, credit limits, balances and other information dating back to 2015 was involved, according to the bank and the US Department of Justice.

What’s more, the damages of these data breaches are not only reputational, but also financial. As a result of Equifax’s data breach, the organisation reached an agreement to pay at least $575 million and up to $700 million to compensate those whose personal data was exposed. In 2016 Tesco Bank was fined £16.4 million by the Financial Conduct Authority (FCA) over its "largely avoidable" cyber-attack that saw criminals steal over £2 million from 34 accounts. This clearly shows that these consequences can arise no matter how ‘large’ or ‘small’ a data breach may seem; companies that do not encrypt their data adequately enough to safeguard it will be penalised.

On top of this, the increasing expectations of consumers means that banks and financial institutions are trying to achieve a balancing act: how can they protect data privacy, while at the same time remaining transparent about how data is being protected? However, it doesn’t have to be a trade-off between meeting customer expectations and meeting cyber security compliance requirements. Banks and financial services organisations can utilise technology to the fullest extent while still protecting data and avoiding the unthinkable repercussions of a data breach.

The balancing act 

To achieve this balance, banks and financial services organisations need to take greater measures to control their security posture and assume the entire network is vulnerable to the possibility of a cyber-attack. Robust encryption and controlled security policies should be a central part of an organisation’s cyber security strategy. When stringent policies are generated and deployed, it enables greater insight into applications communicating in and across the networks. New tools are now available to enforce these policies, not only impacting the application’s workload and behaviour, but the overall success of the system access.

Conclusion 

Banks and financial services organisations should not have to worry about keeping data secure and protected when it is entirely possible to do so. Adopting new ways to look at how organisations define policies through micro-segmentation and separating workloads by regulations, is one example of how to keep data more secure. Also, ensuring policies define only those users who have a critical need to see the data limits network vulnerabilities. And lastly, a robust key management system that is automated whereby keys are rotated frequently, can also help to safeguard system access and strengthen the organisation’s security posture.

According to EveryCloud, cybercriminals netted $445 billion last year alone. What’s even more sobering is that 43% of cybercrimes target small businesses and their finances.

This is a worrying statistic for small businesses. All businesses take a hit if their data is breached, but larger businesses usually have a recovery plan in place. It can be a lot more difficult for smaller businesses to recover because of the costs associated with recovery.

That brings us to the point of this post – how you can protect your business from an attack.

Start with a Recovery Plan

It might seem as though we’re putting the cart in front of the horse here. That said, it’s better to plan ahead with something like this. Have a solid plan in place:

•         You want to ensure every device your employees use is protected – especially if they use their personal devices to access your system.
•         Consider using a cloud-based solution to keep your system safe. These programs provide real-time online protection. Another advantage is that you’ll also normally have an email scanner included. This means that dodgy emails are quarantined before your employees get a chance to open them.
•         Do regular backups.
•         Consider insurance. This will ensure that you have the money to recover from an attack.
•         Work out a fast recovery strategy. Who do you contact first? How do you proceed step by step in the case of a breach?

Train Your Employees

Human error is the hacker’s best friend. They’re just waiting for you or someone on your staff to make a mistake. Security awareness training conducted on a regular basis is your best defense. This training teaches you about the different threats, how to guard against them, and gives you the best practices to follow to keep your business safe.

Final Notes

If you want to mount the best defense against cybercriminals, adopting a multi-pronged, proactive approach is the best way forward. Start by securing your systems today.

Most sectors are having to comply with said rules and conform to industry trends, thus evolving based on the limitations regulations have imposed on them. According to Aravind Srimoolanathan, Senior Research Analyst - Aerospace, Defence & Security at Frost & Sullivan, this is particularly applicable in the biometrics sector, as it progresses in line with regulation presenting increasing opportunities for biometrics to excel in a security driven data world.

The Swedish data protection authorities (DPA) recently levied the first fine of approximately $20,000 to a high school which ran trials of facial recognition technology among a group of students to monitor their attendance. The school authorities argue that the program had the consent of the students, though that did not soften the stance of the regulator. The European data protection board citing the ‘imbalance’ between the data subject and the controller of data. Canvassing the multiple opinions floating on the web¹, Frost & Sullivan notes multiple cases of violations reported in Bulgaria and Austria post the incident in Sweden. The regulatory breaches have led to similar fines levied by the respective local data protection agencies tasked to enforce GDPR. Have the flood gates opened? Will this drown the Biometric market? Probably not, but it does raise significant concerns which need to be assessed and responded, to continue bringing the associated benefits of Biometric technologies to business and security operations.

General Data Protection Regulation (GDPR) is designed for the protection of personal data. GDPR emphasises on a person’s right to protect their personal data, irrespective of whether the data are processed within or outside the EU. Any data that could be linked to a person is subsumed into the definition of “personal data”. The regulation comprises of several articles and clauses which require compliance by all forms of agency - public, private or individual, that processes personal and sensitive data of clients, companies or other individuals. The regulations not only addresses data protection and privacy of individual citizens of European Union (EU) and European Economic Area (EEA) but also data transfer outside EU and EEA.

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In summary- data is expected to be stored, managed, and shared in an individual-centric approach rather than a collateral approach.

The challenges in managing identity in the modern world through conventional methods such as ID cards and PINs/ passwords are failing to address efficiency, accuracy and security requirements. The exponential demand for biometric-based ID management and access control systems drives the need to overcome such challenges. Biometric technologies (yes, facial recognition is one of them) curtail unauthorised physical and cyber access preventing identity fraud, enhance public safety, and drive seamless and efficient processes ensuring higher safety, convenience, and profits.

The Sweden High School case indicates the extent of GDPR is not just limited to giant corporations such as British Airways but also smaller public and private entities ‘mishandling’ data and hence violating the dictates of the GDPR regulations.

Frost & Sullivan’s collation of perspectives and insights from across the industry indicates that biometric technologies will replace conventional methods of Identity and Access Management in the years to come, not a case of if but when. Continued enforcement of data regulations would drive proper use case definition and regulatory compliance, but for this the suppliers and operators of these technologies need to create compliant secure by design solutions and processes. The first step is ensuring secure operations of the systems, and second is to design robust and verifiable processes for the associated data generated. Thirdly, defining the application of harvested data within the ethos of GDPR and related governance.

In the short-term though, with a surge in biometric technologies adoption, Frost & Sullivan anticipates we will witness an uptick in number of GDPR violation cases, due to partial and/or improper understanding of data privacy regulations. Though there is a risk that the hefty fines may slow down the pace of widespread adoption of biometric technologies, Frost & Sullivan proposed three-step strategy will drive healthy demand. Organisations that are digitally transforming their businesses for enhanced process efficiencies as part of their digital strategy would need to realign strategies to comply with general data protection regulations.

Biometric technologies are gaining infamous popularity with the data breaches, privacy concerns and unethical commercialisation of the associated data. GDPR, the Achilles heel as it may prove to be for the Biometric market, does not necessarily need to be – instead, the principles of GDPR can itself become the value proposition of the future biometric technologies.

1 http://www.enforcementtracker.com/

2 https://www.infosecurity-magazine.com/news/gdpr-spurs-700-increase-data/

In short, this means that in order to continue to be seen as a value-added service or department, finance professionals must evolve to keep up with ever-changing technologies.

Laura Timms product strategy manager at MHR Analytics explores  with Finance Monthly some of the biggest changes we can expect to see in the role over the coming years.

1. From mathematician to business consultant

Traditionally, finance professionals had to rely on historical, internal data to draw insights.

Not only was this data limited in scope, but it failed to give a full perspective of how decisions today would impact the future.

Now, the introduction of predictive analytics has helped moved finance professional’s analysis from asking “why did it happen?” to exploring “what will happen next?”.

Access to in-depth insights will enable finance professionals to track customer data in real-time and evolve from simply keeping of records, to carrying out in-depth analysis of the data.

Gone are the days of working discretely behind the scenes as the “number cruncher” of the business. The future of the role will increasingly see finance professionals using value-added analytics to position themselves as a strategic voice within a business.

Their unique visibility of the holistic position of the business will allow them to analyse and interpret anomalies and trends. This information can then be passed to the internal stakeholders to help them to make value-added decisions.

2. Remote working

The introduction of Cloud computing has taken the reigns off the finance professional.

Previously bound to the place of work or client’s offices, Cloud will work to exchange the cubicle lifestyle for more flexible working, with such roles able to be carried out anywhere.

The enhanced security of Cloud systems will allow finance professionals to unlock and share insights wherever they are, without having to worry about the traditional repercussions associated with handling sensitive data outside of the confines of the office.

Plus, a rise in businesses opting for a single online system, with all data in one place, creates simplicity without the need for multiple bulky applications.

Soon finance professionals will be able to share their analysis with their team at a click of a button and have a real-time view of what’s going on in their business whether they’re at home or on the go.

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3. Use of non-financial data

Financial data has long been the cornerstone of the finance professional’s work. It was from this data that patterns were spotted, reports were created and recommendations were made.

But the truth is that financial data alone only tells part of the story. As other types of data become more widely available, this will be increasingly used to further enrich financial insights.

Customer behaviour patterns can be used to detect fraud and suspicious activity, and supplier data can be used to anticipate shipment information so that this can be considered when creating forecasts. Finance professionals can even use internal data such as employee performance metrics to identify the ROI that each employee provides to the organisation, so that they can make recommendations accordingly.

Implementing such data into the review process works to improve top-line revenue and injects further value to financial insights. Research by FSN on planning, budgeting, and forecasting backs this up, with findings revealing that CFOs that make good use of non-financial data are able to forecast with 90-95% accuracy.

4. Highest ever standard of service

The rise of data analytics is facilitating an augmented workplace. In simple terms, we’ll see a rise in tasks that previously had to be completed by people, instead being carried out by machines.

Augmented analytics will allow much of the tedious administrative duties that have long been central to the finance professional’s role to be traded in for a more efficient way of working.

It will work to process data, bring it into context and lead in getting answers from it; giving more time for people to generate deeper insights for the business.

This technology will leverage finance professionals’ expertise, enabling them to focus on providing a higher quality service than ever. This will raise the bar in the industry, with businesses and clients alike recognising the direct impact that such roles have on their bottom-line.

5. Emergence of data-driven roles

The augmentation of traditional roles will see the emergence of data-driven alternatives to traditional bookkeeping and accounting roles.

As data becomes more and more central to the finance professional’s role, and as organisations become increasingly reliant on finance professional’s insights to drive their business strategy, the mutualistic relationship between finance and data will become ever more apparent.

In the near future, all finance professionals will be expected to have some knowledge of data analytics. But leading up to this, we’ll see the emergence of data science hybrid roles that will form out of businesses’ demand for data-savvy specialists.

This means seeking extra training to become proficient in data analytics sooner rather than later will help finance professionals stand out from the crowd and solidify their knowledge before this becomes a necessity.

References: 

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Deloitte-Analytics/dttl-analytics-us-da-3minFinanceAnalytics.pdf

https://www.accaglobal.com/uk/en/member/member/accounting-business/2016/02/insights/data-analytics.html

https://blog.kenan-flagler.unc.edu/macwp-why-does-should-data-analytics-matter-to-accountants/

https://www.ey.com/en_gl/digital/how-analytics-can-help-transform-cfos-from-accountants-to-strate

https://www.accaglobal.com/ie/en/member/discover/events/global/e-learning/leadership-and-management/data-analytics-cpd-skills.html

https://careers.accaglobal.com/careers-advice/returners-to-work/finding-flexible-work/what-exactly-is-flexible-working.html

https://www.forbes.com/sites/workday/2017/08/23/why-non-financial-data-is-a-cfo-game-changer/#3a26278450b4

However, not all crime is conducted directly online. Some people are tricked into giving away details over the phone or are told to use their banking app to transfer money into a safe account. This multi-channel approach means that at every touchpoint, an organization must be aware that their customers could be at risk; they need to put systems and processes in place to mitigate cybercrime. 

According to a report by McAfee, the European economy is one of the worst affected areas in the world. The statistics suggest that 0.84% of Europe's GDP is affected. Looking at the UK specifically, it is estimated that the cost of cyber-crime to the UK economy is £27bn – and it is growing.

GDPR and Customer Data Breaches

One of the latest and most high-profile risks that have come to people's attention over the past 18 months are customer data breaches. Customers are increasingly aware that organizations hold a lot of their personal data and they want to be sure that it is safe. The General Data Protection Regulation was brought into place to ensure that organizations are acting responsibly when it comes to processing and storing customer data.

The financial impact of not following these guidelines, or for not having the correct systems in place, has been significant. Just months after the new regulation came into place, British Airways were one of the first companies to fall foul when 500,000 pieces of customer data were stolen, which resulted in them receiving a £183m fine.

The Financial Fallout of Cyber Crime

Before any cyber-crime has taken place, there is a significant cost to businesses that need to purchase software, implement new processes and training, and even employ new cybersecurity teams to deal with threats. For global organizations, there may also be a need to hire consultants to advise on what they need to do to keep themselves and their customers safe.

One of the consequences of cybercrime that will affect every business is the direct costs. This could be money lost by the business or by consumers. It could also be the loss of reputation to a brand. If a bank suffers a cyberattack and customers lose money, they are likely to lose confidence, which can have a huge knock-on impact on business performance and profits.

Following on from an attack, there may also be payments that need to be made. On top of losing money in an attack a business, may also need to pay out compensation, fines, and legal costs. Depending on the type and severity of the attack and the data that was lost, this can amount to millions of pounds, as demonstrated by the British Airways case.

By utilising high-quality and targeted data, you can be able to connect with more of the right individuals, getting more leads and reducing costs during the process. On the contrary, utilising the wrong data can result in dire consequences for your entire organisation other than your marketing campaign failing to gain traction.

As such, picking the right B2B data provider is imperative. You need to be sure that the partner you will be working with has the credentials and ability to provide the results you are after. Whether you want phone numbers, postal addresses, email addresses or a combination of all, you will only have peace of mind if you trust that your data provider really cares about your company.

That being said, here are important things to look at when picking a business data provider in the UK.

Verifiable Sources of Data

Can the provider tell you just how they garnered the data that they're selling? Also, have their sources been thoroughly inspected? If the answer is no, that should be a red flag. If you have proof that the business data is from a credible source, you'll want to check how often it's updated. Business data is constantly evolving and decays pretty fast. As such, the data needs to be cleaned and refreshed on a regular basis or you won't get the results you're after.

Proper Accreditations

Your business data provider needs to be registered with the Data Protection Act and the Information Commissioner's Office (ICO). Ideally, it is worth looking for a data provider that's registered with the Direct Marketing Association. This is a network of over 1000 firms that provides the best practice guidelines and legal updates. Each member is expected to collect data in an ethical manner.

While undertaking this process, it is a good idea to review the business data provider's own site in a more general manner. Do they have contact information like postal address and phone number? An unscrupulous provider may hide being their site, selling you data and then going missing thereafter.

Thorough and Targeted Data Records

What you deem as targeted and thorough will certainly depend on your specific needs. Regardless, it's best to have detailed information than the opposite. For instance, are you just given employees names, or are you told more about their roles? Also, can that data be paired up? For example, a postal address linked to an email address?

The best business data providers in UK will work closely with your to source data that best match your marketing and business goals. They will conduct penetration analysis or profiling which involves analysing your clients and looking for what they have in common as well as what drives them. This information is then used to get similar prospects from their database and thus help boost your sales.

Guarantees in Deliverability

It is also important that your business to business data provider can verify that your marketing message will reach the individuals you are targeting most of the time. Of course, a 100% deliverability guarantee is impossible as there are numerous variables that can impact the outcome. However, your business data provider should be able to show that your emails and direct mails will reach the intended prospects and that your phone calls will be answered by the right individuals majority of the time.

Business data is imperative in reaching prospects and boosting sales in this day and age. You want to ensure you are on the right side if you're going to use a business data provider. Use the tips above to ascertain such.

Trump vs. China

Back in 1930, the US introduced the Smoot-Hawley Tariff Act, which raised their already high tariffs, triggering a currency war and, as economists argue, exacerbating the Great Depression. With President Donald Trump’s threat to put 10% tariffs on the remaining $300 billion of Chinese imports that aren’t subject to his existing levies, sending markets tumbling from Asia to Europe, the question on everyone’s lips is: Is history about to repeat itself?

In August, in a bid to hit back against Trump’s administration, Beijing allowed the Chinese yuan to plummet past the symbolically important $7 mark. Economists suggest that this currency manipulation is China’s attempt to display dominance and gain the upper hand in the trade war between the two countries as devaluating its currency could help counteract the effects of US’s long list of tariffs on Chinese goods.

As protectionist actions escalate and US-China relations continue deteriorating, investors and markets have been growing increasingly concerned even though Trump has delayed the imposition of his new tariffs until December. A full-blown trade war wouldn’t be good news to anyone and could seriously weaken the global economy, as the IMF has warned, making the world “poorer and more dangerous place”. Both sides are expected to experience losses in economic welfare, while countries on the sidelines could experience collateral damage. Furthermore, if tariffs remain in place, losses in economic output would be permanent, as distorted price signals would prevent the specialisation that maximises global productivity. The one thing that’s certain, no matter how things pan out, is that there will be no winners in this war.

Economists suggest that this currency manipulation is China’s attempt to display dominance and gain the upper hand in the trade war between the two countries as devaluating its currency could help counteract the effects of US’s long list of tariffs on Chinese goods.

Cyberattacks & data fraud

Millions, if not billions, of people’s data has been affected by numerous data breaches in the past couple of years, whilst cyberattacks on both public and private businesses and institutions are becoming a more and more frequent occurrence. With the deepening integration of digital technologies into every aspect of our lives and the dependency we have on them, cybercrime is one of the greatest threats to every company in the world.

Cyberattacks are rapidly increasing in size, sophistication and cost, as cybercrime and data breaches can trigger extensive losses. In 2016, Cybersecurity Ventures predicted that cybercrime will cost the world $6 trillion annually by 2021, up from $3 trillion in 2015. According to them, ”this represents the greatest transfer of economic wealth in history, risks the incentives for innovation and investment, and will be more profitable than the global trade of all major illegal drugs combined”.

 Emerging Markets crisis

Since the early 1990s, emerging markets have been a key part of investors’ portfolios, as they have been offering strong returns and faster growth. However, global trade tensions, a stronger US dollar and rising interest rates have hit emerging markets hard. Still far from catching up with the developed world, many supposedly emerging markets are developing at a slower pace, which combined with the threat of a global trade war and higher borrowing costs on the rise, has made investors pull in their horns. Emerging markets are the ones feeling the strain and financial panic has been gripping some of the world’s developing economies.

With political instability, external imbalances and poor policymaking which has led to full-blown currency crises in the two nations, Turkey and Argentina have been at the centre of an emerging market sell-off last year. But they are not the only emerging economies faced with a currency crisis – according to the EIU, some economies which are already in the danger zone and could suffer from the same currency volatility include Brazil, Mexico and South Africa.

Still far from catching up with the developed world, many supposedly emerging markets are developing at a slower pace, which combined with the threat of a global trade war and higher borrowing costs on the rise, has made investors pull in their horns.

If the currency crises in Turkey and Argentina continue and develop into banking crises, analysts predict that investors could abandon emerging markets across the globe. “Market sentiment remains fragile, and pressure on emerging markets as a group could re-emerge if market risk appetite deteriorates further than we currently expect”, the EIU explains.

 Climate crisis

In recent months, the media is constantly flooded with reports on the horrifying environmental risks that the climate crisis the Earth is in the midst of poses, but we’re also only starting to come to grips with the potential economic effects that may come with it.

Despite the significant degrees of uncertainty, results of numerous analyses and research vary widely. A US government report from November 2018 raised the prospect that a warmer planet could mean a big hit to GDP. The Stern Review, presented to the British Government in 2006, suggests that this could happen because of climate-related costs such as dealing with increased extreme weather events and stresses to low-lying areas due to sea level rises. These could include the following scenarios:

• Decrease in agricultural areas crop yields due to hotter weather and draught.
• Rebuilding roads that have been destroyed by flooding caused by rising seas and more frequent hurricanes.
• Having to build more efficient power grids because the existing ones are not able to withstand extreme weather conditions.

Due to climate change, low-lying, flood-prone areas are currently at a high risk of becoming uninhabitable, or at least uninsurable. Numerous industries across numerous locations could cease to exist and the map of global agriculture is expected to shift. In an attempt to adapt, people might begin moving to areas which will be affected by a warmer climate in a more favourable way.

A US government report from November 2018 raised the prospect that a warmer planet could mean a big hit to GDP.

All in all, the economic implications of the greatest environmental threat humanity has ever faced range from massive shifts in geography, demographics and technology – with each one affecting the other.

Brexit

Fears that the UK could be on the brink of its first recession in 10 years have been growing after figures showed a 0.2% contraction in the country’s economy between April and June 2019. A weakening global economy and high levels of uncertainty mean the UK’s economic activity was already lagging, but the potential of a no-deal Brexit and the general uncertainty surrounding the UK’s departure from the EU, running down on stock built up before the original 29^th March departure date, falling foreign investment and car plant shutdowns have resulted in its GDP decreasing by 0.2% in Q2. This is the first fall in quarterly GDP the country has seen in six and a half years and as the new deadline (31^st October) approaches, economists are concerned that it could lead to a second successive quarter of negative growth – which is the dictionary definition of recession.

And whilst the implications of Brexit are mainly expected to be felt in the country itself, the whole Brexit process displays the risks that can come from economic and political fragmentation, illustrating what awaits in an increasingly fractured global economy, e.g. less efficient economic interactions, complicated cross-border financial flows and less resilience and agility. As Mohamed El-Erian explains: “in this context, costly self-insurance will come to replace some of the current system’s pooled-insurance mechanisms. And it will be much harder to maintain global norms and standards, let alone pursue international policy harmonisation and coordination”. Additionally, he goes on to note that tax and regulatory arbitrage are likely to become more common, whilst economy policymaking could become a tool for addressing national security concerns.

“Lastly, there will also be a change in how countries seek to structure their economies”, El-Erian continues. “In the past, Britain and other countries prided themselves as “small open economies” that could leverage their domestic advantages through shrewd and efficient links with Europe and the rest of the world. But now, being a large and relatively closed economy might start to seem more attractive. And for countries that do not have that option – such as smaller economies in east Asia – tightly knit regional blocs might provide a serviceable alternative.”

It seems only yesterday the Competition and Markets Authority (CMA) decreed that larger banks’ long-standing customer relationships impeded competition and innovation.

Open Banking has opened the door for third parties to access bank held account data as well as giving the ability to initiate payments from a customer’s bank. Features designed to allow new services to be delivered giving users enhanced financial services along with new, safe and secure ways to pay.

 Soon these opportunities will be reflected in the rest of Europe as all banks ready themselves for a September go-live date. So what can Europe learn from Open Banking in the UK?

State of the UK

It’s well versed that Open Banking has been slow to take off in the UK. Indeed, by the time the implementation date arrived only four of the UK's nine biggest banks were ready. Nonetheless, we are now seeing some signs of impressive applications powered by Open Banking setting the standard for Europe.

The biggest challenge in the UK was that the concept and technologies used were new, resulting in a number of iterations being required to deliver products that meet market needs.

A key differentiator in the UK has been the Government introducing the Open Banking Implementation Entity that sets and polices progress.

PwC has estimated £7.2 billion in revenue will be created by Open Banking by 2022.

The European Landscape

The European landscape looks quite different. With no equivalent regulatory or policing body and no specific government drive, we are anticipating considerable variation of standards from bank to bank. Lack of consistency in how Open Banking is deployed will slow adoption as the development of new services becomes more complex and users do not receive a common experience.

To address this there are groups such as STET in France and the Berlin Group working to define standards for implementing Open Banking. There is also pressure from various banking trade bodies such as DDK in Germany pushing for commonality in standards.

The development of standards by such groups will help to create consistency, yet it still begs the question as to who will enforce regulation and uphold financial institutions to the specified due dates?

Cooperation between the banks

Naturally, the scale of this European go-live is not as straightforward as the UK’s due to the number of banks involved. Yet, it has the potential to unlock financial services and technological innovations that could position Europe as one of the leading financial regions when it comes to Open Banking.

Indeed, PwC has estimated £7.2 billion in revenue will be created by Open Banking by 2022. European banks need to view this as an opportunity to enhance banking capabilities and deliver for increasingly tech-savvy consumers both within and cross country borders.

One lesson to be learnt from the UK is that embracing Open Banking allows banks and financial institutions to innovate and deliver exceptional services to their customers.

Embracing Open Banking

And what about the wider world? In Europe, there are two aspects of Open Banking, one covering access to data and the other dealing with payments. Adoption around the rest of the world is developing at a pace, with many countries either already living with viable applications or in the process of introducing legislation. Differing areas are focusing on specific aspects of Open Banking, for instance, Australia looks more to the data usage whereas India already has a successful payment infrastructure based on these principals.

Despite the local and regional nuances affecting markets yet to go live with Open Banking, one lesson to be learnt from the UK is that embracing Open Banking allows banks and financial institutions to innovate and deliver exceptional services to their customers. Open Banking requires banks to cooperate with others to deliver the desired objectives of innovation to meet the ever-changing needs of customers.

Then, and only then, will we witness an explosion of new products and services for consumers throughout Europe and realise the true benefits of Open Banking.

When you think about it, banking customers are leaving a trail of data when they conduct financial transactions – deposit activity, recurring payments, purchasing behaviours, borrowing activities and even when they just shop for financial services. All customer interactions – whether it is a point of sale, a tap on the screen, or a keystroke – generate insights on purchasing behaviour, clicks, searches, likes, posts and other valuable information.

Data usage has made an important difference in the changing landscape within financial services and the emergence of FinTech companies. Here in the UK, regulatory changes like PSD2 have created a new era of Open Banking where bank customer data will begin to flow amongst financial services providers. With this, the operating model for the traditional financial services companies is changing.

There are new entrant FinTech companies which have shown the ability to access and make sense of data in new and creative ways. Some of these start-ups are giving incumbents a run for their money not because they’re generating or accessing more data, but because they’re looking at it differently and using it in new ways. When FinTech companies get clarity about the use of data, make sense of it, organise and cleanse it, combine traditional and non-traditional sources, they can out-manoeuvre and out-innovate the incumbents.

There are three Vs which are fundamental to the management of data: volume, variety, and velocity.

There are three Vs which are fundamental to the management of data: volume, variety, and velocity. Given the increasingly competitive environment, evolving customer expectations, and regulatory constraints, financial services providers are seeking new ways to leverage data and technology to gain efficiency and a competitive advantage. The adoption of Big Data and new data management strategies is redefining the competitive landscape of financial services and companies that don’t have a strategy run the risk of losing market share.

To address this situation, financial services companies are investing in new and modern data management strategies that address both enterprise data and their Big Data assets. This new data environment must act at the speed of business, offering real-time insights that are created using massive volumes of data. New data-driven innovations include analytical tools such as machine learning and predictive analytics. These capabilities connect and leverage data across their entire enterprise and outside partners.

With all the changes taking place, there are many challenges and opportunities. Based on our experience working with many of the largest global financial services companies, we have observed a lot of focus and investment in these three following areas:

1. Creation of a Unified Financial Services Data Model.

This represents a standardised, multipurpose data model that creates a single, consistent view of the customer. This modern data environment is a business-driven data model that should serve all analytical requirements. It should also support all business domains such as marketing, risk management, product, customer experience, compliance, regulatory reporting, finance, and other functional areas.

It is critical that this environment is extensible and supports ongoing change. The activation of data that is stored must provide simple access for analytical applications as marketing, customer experience management, risk and other functions must respond in a real-time manner to create the desired customer experience or prevent fraud from occurring.

There are many other capabilities that can be delivered from this Unified Data environment. It is a foundational capability to address the rapid explosion of data, channels, devices, and applications.

2. While data collection is important, collecting more data is not always the answer. Ingesting the best sources and continuously testing them for accuracy and predictive capabilities is critical. New alternative sources of data are being created every day. While some of these sources can create some unique value, other sources may only add complexity to data management and cost without the desired return.

Deep mining of data can help predict needs and enable a much-improved customer experience. Improving the quality and accuracy of data that is collected, stored in the cloud, processed and analysed by artificial intelligence and deployed is important when creating new targeted offers and enhancing a customer experience.

Diligence in the areas of consumer privacy and security is and will continue to be paramount.

3. Diligence in the areas of consumer privacy and security is and will continue to be paramount. Consumer understanding of how their data is used often lags behind the pace of innovation, inspiring new demands from government agencies and consumer advocacy groups around the world. These factors compound the liability every financial services company faces when managing and activating consumer data.

Data security and privacy is an important issue and historically has been a strong point of differentiation for financial services companies, especially in light of the continued discussion around how Facebook and other social media companies manage data. There is and will always be an expectation that financial services companies remain a trusted guardian of data.

As financial services leaders realise that more trusted, connected and intelligent data contributes to their competitive position and survival, they now see data as an essential asset. This asset also requires investment to unlock value. Data should not be looked at as a driver of costs, but an important asset that will pay off handsomely for tomorrow’s financial services leaders.

About Scott Woepke

Scott Woepke is Head of Financial Services Strategy at global data, marketing and technology company Acxiom, where he leads a global team. He has over 30 years of hands-on experience in many facets of marketing, distribution, product, and technology strategy in the financial services and FinTech industries. His work includes working with many of the world’s largest financial services companies across retail/consumer banking, credit cards, investment services and payments.

 Website: https://www.acxiom.co.uk/