In a recently published report, S&P Global Ratings said it sees political risk and international investor sentiment toward the UK as the key risks facing UK banks in 2018 (see UK Banks: What's On The Cards For 2018). This isn't new--the UK banking system has operated against a constant backdrop of elevated political risk since 2014 and during that period, they have made good progress toward improving their balance sheets. Achieving stronger returns on equity has proved more elusive, however.
As the Brexit talks rumble on, we expect them and the related parliamentary processes to dominate the newswires. The UK's minority government increases political risk, especially as the UK is unused to operating with a minority government. Our sovereign rating on the UK has a negative outlook and our economists forecast relatively low GDP growth of 1.0% in 2018. Nevertheless, we anticipate that economic and industry trends will be stable for the UK banking sector.
We see some possibility of unsupported group credit profiles (UGCPs) being revised upward in 2018, if balance sheet strength further improves and earnings prospects accelerate, but it is hard to imagine wholesale sector upgrades, given the political backdrop. Unless the political and economic environment deteriorates more sharply than expected, or banking groups experience management mishaps, we consider the likelihood of lower UGCPs to be limited.
Uncertainties related to Brexit negotiations, specifically regarding transitional arrangements, are likely to weigh on business confidence, while inflation is set to outpace pay growth for most of 2018. We forecast that the economy will grow more slowly in 2018 than in 2017 as these factors weigh on business investment and private consumption. In our baseline forecast, we expect that economic growth will moderately accelerate in 2019 and 2020 while the UK transitions to its new relationship with the EU in 2021.
Only a rating committee may determine a rating action and this report does not constitute a rating action.
(Source: S&P Global)
Alan Arnett, the Director of The Exploration Habit, talks to Finance Monthly about helping leaders to stretch beyond their experience and really make a difference.
Innovation and change get interpreted in many different ways. What are the real situations your clients face that you provide hands-on help with?
I help people with a familiar challenge – how to keep the current business performing and improving, while also changing and innovating for the future. It’s a difficult balancing act. These days clients often have challenges around digital technologies, but situations can involve making anything new happen: strategies, products, services, JVs, M&As and more. The key thing I help with is getting the most impact and value from the activity. I find three things make a big difference:
How people approach risk and decision-making. People are used to managing in consistent ways, to plan the future and avoid risk. But too much consistency is itself a risk in a fast moving world. Managing risk needs a dynamic balance between enough structure to operate well, and agility to explore and learn what else is possible. I show people how to flex between both to make better progress.
How people handle differences. Under pressure, most of us don’t work as well as we think with people who see the world differently. Whether that’s internally across siloes, or externally with start-ups, suppliers, JVs, etc, there’s a lot of frustration and blame going around. I show people how to shift the conversations to speed up alignment.
How people show up. In the end, organisations are simply a lot of people trying to make a difference, and the pressures, risks and disagreements create stress. We tend to hold on to what has always worked before, and do it harder and faster. I show people how to build resilience and have more impact on the things that matter.
You say that ‘progress is not always about trying harder. It’s often about trying some new things.’ – do you have examples of when this has worked?
Two examples spring to mind. One was a company with successful business units who were disconnected and missing opportunities for cross-selling. I coached some leaders first, and then we got people working together on new projects. In the process, we uncovered new opportunities and grew sales considerably. Another was a global merger, where a friend and I created a 3-day workshop to accelerate the integration of multiple business teams by several months. Both examples are about getting people doing the new things quickly, and learning it feels OK, rather than hesitating.
If you had to point out 3 things a client looks for in your services, what would these be?
I think number one has to be that I’ve been in their position and faced similar challenges. I’ve been part of the more familiar ways of trying to make innovation and change happen, and I’ve kept exploring and experimenting with simpler, better ways I can share.
Second is that what I offer uses proven science and research, but I started life as a very practical engineer, so I’m slightly fixated on finding smart things you can do now to change your existing reality and move it quickly in a better direction, not some grand plan or strategy that won’t survive contact with a fast-moving world.
And finally I ground everything I do at the human level. Technology is making many things possible, business is moving quickly, and that takes its toll. I’ve had my own reasons to want to find ways to stay more grounded and resilient over the years, so I know the research and what it takes at a personal level. I think I’m lucky to get to share some short cuts with people.
Farida Gibbs, CEO of Gibbs Hybrid, discusses the pressures on banks to update their processes with new technology.
Following the first increase in interest rates in ten years, banks have been under extreme pressure to pass on profits to customers. This pressure comes from a growingly savvy customer base educated in its financial rights by easier access to online news and financial advice.
Technology is changing the nature of banking much more directly. Customers now interact with their banks far beyond the branch, through online banking on computers and mobile devices, communicating with chat bots as well as real personnel, and using a variety of apps to do this. They expect their financial services providers to keep up with the pace of this change.
In January 2018 the Second Payment Services Directive will come into play, meaning banks will have to share their data with other rival financial providers and aggregator sites, and allow third-party developers into the back-end of their processes, taking payments directly without the intercession of the bank – all with the consent of the customer, of course.
In other words, aggregators and financial services providers will have access to customer’s data and be able to show them how best to spend their money, and which providers to entrust it with. Tech giants like Facebook and Amazon will be able to make payments directly, without the bank’s help.
With competition more clear and fluid, and money much easier to move around between providers, established banks will be greatly exposed to competition from FinTechs and new rival financial services companies.
A large number of new, agile FinTech challengers have emerged to challenge more established banks in recent years. Competing on grounds of personalised service, low rates, and the speed and convenience provided by taking the upmost advantage of new technology, these new providers threaten to take away the established customer bases of larger banks.
The key advantage banks have over these new challengers is their large, established customer bases. At the moment, these are relatively immobile, with customer account switching reaching a new low in September this year.[1]
But as regulations like PSD2 begin to take effect, banks will face mounting competition from FinTech challengers, as switching becomes easier and the reasons to change providers for a better deal will become clearer. Many banks currently rely on outdated legacy systems that cannot support the pace of change required by this.
To deal with this, an increasing number of banks are turning to cloud-migration programmes, shifting their existing processes from these legacy systems to the cloud. This gives them the agility and efficiency to stay up to speed with the constantly changing innovations in technology.
But to do this they need digital expertise, in order to ease this kind of transition in an informed way. This means that more banks are turning to partnerships with outside experts, to help them modernise in the most efficient way possible.
However, although one in three people in the UK use a mobile banking app, banks should not respond to this drive for modernisation by compromising on in-person service.[2] Many banks have seen the increased use of app-based banking as a sign to cut back on branches, with a record number of 762 closures this year in the UK.[3]
In fact, moving processes to the cloud offers the chance to free up staff to focus on more in-person services; the other key advantage established banks hold over their FinTech competitors. This presence of real staff lends credibility that FinTechs still lack. Forty-three per cent of customers who have used a FinTech service are worried about being defrauded, according to a study by Blumberg Capital.[4]
To future-proof their businesses, banks need to juggle the best of both worlds, making the most of their inherent advantages, whilst catching up with the speed and efficiency of tech-enabled FinTechs. A variety of established banks are now turning to outside consultants to help them do this, uploading their outdated processes to the cloud to provide a more streamlined, agile service that responds to customer’s changing demands. But in using this external expertise, they must not lose sight of what their own staff can offer. Cloud programmes allow traditional providers to get the best of both worlds: not only improving the agility and convenience of their offering, but allowing them to make the most of their personal staff.
[2] http://blumbergcapital.com/news_insights/lack-of-consumer-trust-is-more-than-a-fintech-nicality/
By Jan Hoffmeister, Managing Partner at Drooms
Q, the first cinema robot appeared in The Master Mystery in 1919. Ever since then we have seen fictional automatons of various shapes and sizes wreak havoc on the human race.
It’s perhaps not surprising that deep suspicion of the role of robots in business and their impact on the way we work has developed over time. But the truth is that robotics and artificial intelligence (AI) are set to introduce huge benefits to the finance sector in particular.
AI research was founded in a workshop at Dartmouth College in 1956 and those who attended became the leaders of AI research for decades. Their ambitious predictions for a machine that would be as intelligent as a human being attracted generous funding, which led to the development of a robot by the AI centre of Stanford Research Institute called ‘Shakey’ (1966-1972) controlled by a large computer.
By the early 1970s it was clear that AI was in trouble, largely because of hardware limitations. But the doubling of processing power every year under Moore’s Law meant that by 1996 IBM was able to build Deep Blue, a chess-playing computer that famously beat world champion Garry Kasparov.
Fast forward to 2014, and Google invested US$400 million in artificial intelligence start-up DeepMind. While the media discussion about AI has gravitated towards the idea that machines will replace humans and leave them with nothing to do, the fact is that AI is not about to automate most financial professions. Rather, it aims to complement human intelligence.
Recently, Google founded the People + AI Research Initiative (PAIR) to better explore these interactions with the support of researchers from MIT. The financial industry has also understood the potential hidden in the application of AI. Of the 5,000 FinTech start-ups identified by a 2016 report by Ernst & Young, a large number are set to bring intelligence to the banking world.
Fields where AI is particularly relevant include client servicing, trading, post-trade operations such as reconciliations, transaction reporting, tax operation and enterprise risk management.
A study released in 2017 by PwC points to a similar trend: ‘AI will gradually replace humans in some functions like personal assistants, digital labour, and machine learning. But challenges will persist because of bias, privacy, trust, lack of trained staff, and regulatory concerns. Augmented intelligence, in which machines assist humans, could be the near term answer.’ Future decision-making processes in banking, for instance, will be 34% informed by machine algorithms and 66% by human judgment.
A sub-field of AI is a particularly strong example of applications of augmented intelligence – Natural Language Processing. NLP is the development of systems capable of reading and understanding the languages that humans speak.
At the heart of this technology is the ability to interpret a large amount of so-called ‘unstructured data’ (i.e. data that cannot be read by machines yet, such as PDF files, images and audio material). The FinTech sector is leveraging this technology because it significantly improves customer interactions, and not only by implementing chatbots.
The finance industry is a knowledge-intensive sector and key tasks require the reading and understanding of large amounts of information that are only partly structured. NLP is making processes much easier, faster and more precise with less effort than ever from humans.
Start-ups such as MonkeyLearn are already leveraging NLP to automate business intelligence information, whereas leading Japanese asset manager Nomura Asset Management (NAM) are investing to understand whether this technology can improve the decision-making processes of portfolio management’s investors. Even providers of legal services are turning towards NLP, automated document analytics and law case reporting within due diligence processes.
Putting users at the heart of the software was our goal in developing the new virtual data room, Drooms NXG. Aware of the fact that the biggest issue for data room users was to keep up with time-consuming and demanding document analysis, the implementation of the most effective technology was required. As NLP enables the reading and understanding of language, we saw a huge opportunity to apply this new technology to the content of data room documentation.
Today, the data room of Drooms NXG can present information to users thanks to smart pre-set categories, suggested red flags, lists of documents by relevance and recommendations for smarter risk management. When users search their VDR for terms in order to find potential red flags chosen from the categories listed by Drooms NXG Findings Manager, the system returns a ‘Suggested Findings’ list which can be categorised as very low, medium or high level risk or opportunity. Professionals can add their own categories or edit existing keywords to make their searches as focused as possible. Individual calls to action can be assigned to each one; adding an individual note to highlight specific insight, incorporating a link to a document, page or even a paragraph or single word; or using a colour coding system by selecting one of the built-in colour tags. Similarly, we wanted to address language barriers between users. Now, documents can be instantly translated within the data room, thereby facilitating cross-border deals.
These solutions were not developed with the goal of replacing manpower with automated data analysis. On the contrary, our goal is to empower deal experts by developing intuitive tools that don’t feel like a burden, but make their decision-making more accurate and their business lives more successful.
According to McKinsey’s 2017 survey, early AI adopters that combine strong digital capability with proactive strategies have higher profit margins and expect the performance gap with other firms to widen in the next three years. Financial firms should no longer be concerned that the robots are coming, only that they harness the power of robotics and AI to improve the service that they provide to customers.
Website: https://drooms.com
Below Mark Boulton, Insurance Sector Lead at Fujitsu UK&I, delves into the introduction of automation and AI in the insurance sphere, touching on the future prospects of the insurance sector throughout 2018.
Insurance has always been a grudge purchase, often seen as a necessity or safety net, but not something that immediate benefit is felt from.
It will have been frustrating for many, therefore, to see that car insurance premiums have risen by 11% on average in the last year alone, according to the Association of British Insurers (ABI).
Many of us may even start to question the value we’re getting for our insurance purchases in light of such news.
The price – which is the most important factor in choosing an insurance package (A New Pace of Change, Fujitsu) – is just one element, however. Compounding this situation is the fact that people often find insurers difficult to deal with, particularly when trying to make a claim.
It’s this group of factors that demonstrate the opportunity the insurance industry has to transform itself into a more value-driven service for customers.
At the heart of any change will be technology, and two of the leading areas here are Artificial Intelligence (AI) and automation. How is technology impacting insurance for the better? There are three main areas to consider - customer experience, assessments and risk mitigation.
Personalisation
Think of going through a process for a life insurance policy. Multiple in-depth questions to taken into account age, lifestyle, and health, with an existing model applied to the answers provided.
Such models have been used for decades at some companies, resulting in off-the-shelf packages for people that do not necessarily reflect them as individuals.
Technology is helping change this. Based on any assessment and wider data analytics, automation can quickly produce more personalised experiences for the customer. This might be a payment model that suits their lifestyle or financial situation or a more nuanced insurance package to reflect their needs.
Such personalisation sit at the heart of the transformation. We’ve seen this across other industries, and it is one crucial way insurers can start to move from transactional-based relationships to value-based relationships with their customers.
Convenience and speed
It’s not just adding value of course, it’s getting the basics right. Services like Amazon Prime and Netflix have totally transformed the expectations we have of all companies when it comes to speed and convenience. We want things served to us exactly how we want them, and quickly.
Insurers have certainly made progress in recent years – for example, it is standard now for policies to be quoted and purchased online. More interestingly, however, is the use of apps and chatbots.
These give a holiday maker who may have lost their camera easy access to their policy, but also the chance to ask questions to the chatbot. Powered by AI, we can expect chatbots to play an increasingly important role in the relationship between insurers and policy holders.
Given the often complex nature of insurance policies, chatbots can be a simple way for people to get the answers they need. No need to phone customer services or wait an hour in a call queue; just direct answers delivered instantaneously.
Of course, there is still progress to be made with chatbots, but these will only get better in the years to come.
Apps and chatbots are also interesting because they both rely on and deliver vast amounts of data. The more these are used, the more they can be refined to give people services that suit them better. They fuel the personalised services.
Working together
It’s all very well talking about the benefits and transformative powers of technology, but making these a reality is something many organisations are grappling with.
Something I’ve observed in the financial services industry is the existence of distinct groups of employees. On the one hand, there are those innovation-focused, digital savvy experts who want agility, speed and flexibility. On the other hand, there are those who want to focus on the central facets of their areas products - keeping those long-standing traditions working in good order for the customer.
These two groups are naturally at odds. They often speak in different terms, work in different ways, and approach problems completely differently. Imagine the kinds of conversations that might come up with discussing emerging trends like AI and automation. It’s not easy for them to get to the place they need to.
To be able to respond to the concerns being voiced by consumers, and to harness the business agility needed to respond to market trends, insurance businesses from the c-suite down need to make a culture shift. Driving change from the top is the only way to future proof the business in a digital world that has already changed the state of play for good. We simply cannot afford to rely on the same rules.
Find your digital path now
Our ‘Fit for Digital’ survey found 98% of insurers believed their organisation had been affected by digital. A further 72% said their sector would fundamentally change in the next four years.
Change is inevitable. And the technology that will enable that change - including AI and automation – is here today. Insurers must find the cultural harmony to embrace new digital services and products, without losing the heart of what they already do well.
The next few years will see some insurers thrive and others struggle. To be a thriver, it’s vital to the right digital path now.
For our Professional Excellence feature, this month we also reached out to John F. Rizzo - the President and Chief Operating Officer of Deem. He leads the vision and strategy of the company and encourages his team to be innovative rapidly. Here, he introduces us to Deem and tells us about the company’s love for innovation.
Could you explain the concept behind Deem?
Deem is driving to change the way business travel costs are controlled by designing a platform to ensure that employees spend as little as possible to achieve the results they need. This is in contrast to the travel market in general, which is dominated by one player who has grown complacent and focuses on controlling travel costs at the expense report stage, after the trip is complete and the capital has been spent. The world of corporate travel is eager for an alternative that listens and responds fast and is on the side of the traveler, the travel manager and the CFO - all of which are concerned about productivity and cost control. The timing is right for a company like Deem that is tech-smart, market-savvy and hungry.
Our approach is All Business. No Trip. That means that the most difficult part of any business trip is too often the trip itself and this is not what travelling is supposed to be like. Deem makes it painless for the traveler to get down to business without distraction, simpler for the travel manager and management company to keep track of all the moving parts, and easier for partners to get the information they need to stay competitive. The Deem Work Fource platform is designed for the entire business travel ecosystem, using machine learning, artificial intelligence and predictive analytics. Deem’s suite of tools range from a dynamic traveler booking platform, travel manager cost controls, travel agency service technology and supplier revenue opportunities, including the world’s largest car service affiliate network and operator solutions. We have more than 35,000 corporate customers in 61 countries, speaking 15+ languages - including the world’s largest travel management companies. Our headquarters is in San Francisco, but we have people located all around the globe.
What makes the company unique?
Deem is the only company in the corporate travel space that considers each of the constituents in corporate travel – the traveller, the travel manager, the travel management company and the supplier. Most companies focus on just one at the expense of others. The reason why this is important is because if travellers book off platform, costs run wild (studies have shown 15% more costs if booked off a platform), travellers have more hassles, which makes them less productive during the trip. This results in travel managers not being able to control costs and travel management companies not being able to service travellers when things aren’t going well on the trip (i.e. flight delays, overbooked hotels, etc.). At Deem, we create solutions that make life easier for the entire travel ecosystem, saving time, money and hassle.
What would you say are the company’s top priorities towards its clients?
Our main priority is to build dynamic and personalized solutions for the entire travel ecosystem and make every business trip painless. We have created a booking solution so intuitive that it makes the traditional travel and expense process obsolete – our artificial intelligence and machine learning systems do it all for you!
What challenges would you say you and the firm encounter on a regular basis?
At Deem, we are always pushing the pace of innovation. We’re trying to build technologies that don’t exist – there’s a certain level of resistance when you move at this speed.
Another challenge that we face is connected to helping CFO’s think differently about solving cost problems at the front end of the travel process; rather than at final expense report stage when it’s too late.
How are these challenges set to change, in conjunction with the advent of AI and machine learning and the potential future needs of clients?
Thus far, we have been actively incorporating AI into our products over the past year to bring that technology to market today. However, we will need to innovate faster and better, in order to stay ahead of our competitors.
What has been Deem’s biggest achievement in the past year or so?
Releasing our newest platform Deem Work Fource – a seamless travel management and booking platform, is definitely one of our major achievements.
We are also very proud of introducing Intelligent Attach for hotels and car service. This solution increases the likelihood of travelers booking a hotel or car service with their air. This helps significantly with compliance and duty of care (knowing where your employees are is more important in a world that’s increasingly affect by terrorism and upheaval on a global scale) and streamlines the traveler itinerary.
Can you tell us a bit about Deem’s Open Expense solution?
Deem’s Open Expense solution allows us to integrate seamlessly with any expense provider on the market, including ChromeRiver, and others. If a travel management company or corporation is looking for a best in breed solution to their travel management, this allows them to choose exactly the right provider in every case, rather than being forced into using a subpar travel tool that comes along with their expense provider creating travel that's more expensive and includes more hassle.
What’s your outlook for the future of the company?
We’re growing fast, signing new customers who are encouraging us to do more, launching new products and adding global reach. We are hugely optimistic about the future!
Here Kevin Wilbur, Senior Vice President of AP Automation at Tungsten discusses with Finance Monthly the practicalities of implementing new technologies in supply chains.
Trust in business is more vital than ever today. At a very basic level, it underpins what is required to agree employment contracts, retain customers and grow a business. However, when it comes to monetary transactions for the exchange of goods and services, trust is even more crucial.
Unfortunately, even when payment terms have been set and assets exchanged, trust can often be undermined. A delayed payment from a buyer is something many suppliers will have experienced, resulting in unnecessary stress and a loss of confidence in the trading relationship. Equally, supplier challenges, where data security is compromised or orders are not fulfilled, can cause headaches for buyers.
Certain sectors face greater supplier risk than others, making it even more important to ensure they have a robust supply chain. Finance businesses in particular hold a vast amount of sensitive data, so the ramifications of poor supplier service can be significant.
Widespread supply chain failures
Worryingly, our research shows that 84% of businesses have suffered from supply chain failures such as these. The biggest supplier risks were found to be security (ensuring data security and privacy standards) and information risk (accuracy, timeliness, and security of information exchanged with suppliers).
These risks or failures can have a huge financial impact, with 30% of firms reporting a loss in revenue or business partners. In addition, 22% of buyers said they faced higher insurance premiums, damaged reputation, a loss of customer trust, and/or significant legal and regulatory fines as a consequence of supply chain failures.
Many of these breakdowns in the supply chain arise from poor supplier management processes. Regrettably suppliers are often managed on an ad hoc basis with no consistency and very little attempt made to track and monitor spend. In many supply chains the sheer volume of suppliers involved means that it can be hard to stay on top of each relationship, and with the added pressures of cyber fraud, siloed customer data, insufficient cash for investment, and legacy technology systems, there are often layers of overlapping bureaucracy and confusion.
Managing and monitoring
To manage suppliers effectively and efficiently, supplier-related processes should be measured. From there buyers are able to optimise processes, which in turn enables automation. However, only 23% of buyers in our study achieved this level of maturity, and just 12% had optimised processes.
Buyers who describe themselves as having good supplier relationships have taken the time to map supplier activity, to establish a clear onboarding process, and to define a strategy that not only makes supplier management a priority, but also establishes responsibility between themselves and the suppliers they work with. Optimised firms ensure compliance with regulations and corporate social responsibility (CSR) standards by constantly monitoring their suppliers.
Low process maturity, revealed in more than a third of businesses (35%), can lead to poor sourcing decisions, because buyers lack high-quality, up-to-date information about suppliers’ past performance when awarding new contracts.
Technology that transforms
The research, which was conducted by Forrester Consulting on behalf of Tungsten Network, concludes that for businesses to thrive, they need to be properly managed using modern tools and processes that establish accountability, reduce uncertainty, and foster trust. This in turn enables the exploration of mutual growth opportunities for both buyers and suppliers.
Increasingly sophisticated technology exists that can genuinely strengthen supply chain relationships. For example, through a secure e-invoicing platform such as Tungsten Network, buyers and suppliers can have clear visibility on whether an invoice has been received and approved, and when payment is due. This means businesses have a single source of truth for invoice status information, which is monitored in real time. It can also help remove manual processes around invoice validation and compliance. This is a good example of where technology is enabling growth across the board, through developing trust in business relationships.
Often networks such as this provide value-added services that can serve as a source of competitive advantage. For example, through analysis of the real-time data generated from end-to-end e-invoicing capabilities, decision makers can more effectively predict demand and manage disruptions. Buyers and suppliers of all sizes can also find each other more easily and can build capabilities that benefit them both. They can also experiment with managing cash in new ways, such as by negotiating more flexible payment options like dynamic discounting and invoice financing.
The winners in the digital age will be the companies that best use technology to win, serve, and retain customers, and to enhance relationships throughout the supply chain. Technology can enable buyers and suppliers to more effectively use their data and manage their interactions, removing friction from the supply chain and strengthening trust, to the mutual benefit of all.
Ashok Vaswani, the CEO of Barclays UK talks to Katina Hristova about championing digital skills for all and his outlook for the future.
Barclays has a history of innovation and continues to be a leader when it comes to technological innovation in banking services – tell us more about it.
Barclays has been at the centre of British finance for over 327 years, and in that time, the world has changed beyond recognition. However, the reason we have been able to consistently deliver game-changing innovations throughout all this disruption has been a relentless focus on our customers, their needs and aspirations, and being there for the moments that really matter.
We have 24 million customers in the UK; roughly one in two adults. For me, success isn’t about driving the business to get 25 million customers – it’s about becoming indispensable for the 24 million customers we already have, by continuously making their lives easier, offering greater convenience and delivering value for them.
If we can’t do that, we won’t be around for another 327 years, or even 10 years. In this era of disruption, businesses will become obsolete unless they serve a clear purpose. Our purpose is to help people go forward.
What have been Barclays’ biggest achievements in the past 12 months?
We have been at the forefront of reinventing banking through a focus on great technological innovation with a purpose. I think our biggest achievements have been transforming the business and its culture as well as creating Barclays UK; a business that is truly fit to meet customers' needs and expectations in the digital age.
As part of that, we have rolled out a number of technology solutions to make our customers’ lives much easier, such as instant cheque imaging and video banking. Barclays was also the first bank to introduce contactless cash; a completely new way for customers to withdraw their cash using their Android smartphone or their debit card’s contactless technology.
We have also launched automated valuations for home purchases, shaving days off the processing time. Mortgage Agreement in Principle has also been introduced into 338 branches, allowing customers to obtain a mortgage decision in less than 15 minutes.
New digital processes have also helped improve the on-boarding of Business customers, and the introduction of pre-approved credit limits for Business customers has reduced the time required for customers to request an unsecured loan of less than £25,000 from five days to a matter of minutes.
In addition, we have opened 12 Eagle Labs, sites where people can use new technologies such as 3D printers and laser-cutters and which help facilitate small business growth in local communities.
We have also demonstrated a strong commitment to using technology to enhance customer security; Barclays was the first bank to pioneer finger-vein technology in the UK, and we are working to tackle fraud through innovations like voice biometrics, which over 750,000 customers have now registered for.
How would you evaluate the impact that you’ve had on Barclays achieving all of this?
In creating Barclays UK, I have set out three mains goals for the business:
Barclays UK has already made significant progress in achieving these strategic aims, and we have done this by putting the customer at the heart of everything we do.
Our investment in technology sets us apart, putting us at the forefront of innovation in the banking sector, delivering products and services that improve people’s experience, enhance accessibility and offer quicker and more convenient choices for customers.
At the same time, we have been working to make sure that no one is left behind in the digital revolution.
Our Digital Eagles have so far helped to support over 100,000 customers to become more digitally confident through dedicated Tea and Teach Sessions in our local branches, as well as delivering Code Playground sessions to teach young people basic coding skills.
We’ve also introduced the Digital Driving License, a free app through which users can earn a City & Guilds digital skills qualification, boosting their digital skills and confidence.
In 2017, Barclays UK launched its latest campaign to promote digital safety, a major nationwide initiative to raise awareness of cybercrime and help people protect themselves from fraud and scams. Since the campaign launched in May, it has already helped 2.5m people take action to become more digitally safe.
We have also pioneered Beacon Technology, improving the level of in-branch service offered to customers with disabilities, as well as SignVideo, which allows deaf people who use British Sign Language instant access to an interpreter via the in-branch colleague iPads. Talking ATMs, supersize card readers and high-visibility debit cards have also been launched for the visually impaired.
In addition to championing accessibility, we want to ensure we are doing the right thing by society as a whole. As part of our commitment to helping people move forward in their lives, we run a number of skills and employability programmes, for example, the Barclays apprenticeship scheme, through which over 3,000 apprentices have already been offered employment. I also support the Armed Forces Transition, Employment and Resettlement (AFTER) programme, which provides work placements, employment opportunities, CV and interview coaching, and money management sessions, as well as funding for education and vocational courses for service leavers.
We also have the LifeSkills Programme, which provides schools with a range of free, curriculum-linked lesson plans, workshops and resources designed to help 11-19 years olds to develop the skills employers most seek. To date, over 4.3m young people have been reached through the LifeSkills programme via either in-school lessons or directly online.
I believe we are beginning to rebuild the trust and reputation of the banking industry, but I know we still have some way to go. However, by remaining committed to the strategy of putting customers and clients first, serving our economy and earning trust, I want to build a solid foundation on which we can grow. Barclays is creating a bank that is truly good for customers and clients, good for businesses and good for Britain.
As CEO of Barclays UK, how do you ensure you are directing the company in the correct direction? How do you advise your team to make the correct decisions for the company alongside your customers?
The thing I ask myself every time I make a decision is: “are we doing the right thing for the customer?”. I learned a lot from my Mum growing up, and one of the principles that has always stuck with me is that there is no substitute for integrity. Integrity isn’t just about what you write down as your mission statement, it’s also about how people behave when no-one is looking.
When it comes to my team, another thing that my Mum taught me is the importance of humility, that is to be ready to admit I don’t have all the answers, which is why I need many brilliant minds working to deliver our game-changing innovations.
I sincerely believe everyone needs to keep learning throughout their career. We can no longer rely on what we learnt at school to last a lifetime. I encourage everyone at Barclays to keep learning, particularly digital skills, and to develop an entrepreneurial mind-set.
What was your main motivation behind being the CEO of Barclays UK and what is the most rewarding aspect of your role?
The most rewarding thing about the role is the opportunity to work for millions of people.
In terms of how I got here, as a kid in Mumbai, my Mum wanted me to be a Doctor. When I said I didn’t want to do that, she actually took me to see my local bank manager to ask what he thought a good job would be.
I’ve since come to realise that the role of a bank manager is really at the centre of a community, and I have him to thank for the fact I became a Chartered Accountant. After that, I moved to Dubai aged 27 with $10 in my pocket, and met my wife there. That was the start of a fascinating journey working around the world.
What are your plans for the company for the rest of 2017 and beyond?
There are some exciting times ahead, with next year’s PSD2 and data protection regulation set to transform the shape of the digital economy. Barclays has all of the right ingredients to remain a leader in financial services, but we must be prepared and remain agile in order to take full advantage of the coming changes.
In the longer term, customer expectations are no longer confined to one industry – we are being judged not against other banks, but against the best in class from across our customers’ favourite brands. Is Barclays a bank, an information business or a technology company? We’re all three. But we will never lose that central focus on the customer, and that’s how we will thrive in a truly connected world.
Retail banks have an opportunity to differentiate with new offerings and control their own disruption. Find out how: http://cs.co/90018tx9R
People with mental health problems are three times as likely to face financial difficulties. As well as affecting our income, mental health problems can make it harder to manage money, control spending and stay on top of bills.
Tonight the MMHPI will launch a new report exploring how fintech solutions could empower people with mental health problems - allowing greater control in periods of poor mental health.
Hosted by Monzo and chaired by Ghela Boskovich, Head of Fintech and Regtech Partnerships at Startup Bootcamp, the panel includes;
Zander Brade, Product Designer at Monzo
Richard Morgans, Head of Digital Innovation Lab and fintech at TSB
Chris Fitch, Vulnerability Lead, Money Advice Trust & Research Fellow, Personal Finance Research Centre, University of Bristol
Katie Evans, Head of Research and Policy at Money and Mental Health
By Rob Brown, Associate Vice President at Cognizant’s Centre for the Future of Work
Chatbots are gaining in popularity in a number of industries as an important customer service tool, with financial services and insurance particularly keen to roll them out: Crédit Agricole Assurance has Marc, and Bank of America recently announced it was introducing Erica. Barclays, Société Générale, USAA, BBVA, and Capital One have all also begun investigating the technology.
The rise of chatbots is being driven by several converging trends: the popularity of messaging apps, the explosion of the app ecosystem, advancements in artificial intelligence (AI) and cognitive technologies, conversational user interfaces and a wider reach of automation. Their adoption is accelerating so quickly that Oracle believes that 80% of brands will be using them by 2020. But will the current hype be sustainable over time without a stronger business rationale and better short-term results?
We live in an age of instant gratification, and this certainly applies to exchange of information – the core mission of financial services. So why are customers confronted with long wait-times on hold, being transferred department-to-department, or having to wait through a list of phone prompts? In the context of chatbots, it is actually not about “the robot” at all, it is all about how easy the end-user finds it to use, and simply whether it works or not. To get it right, businesses should start preparing for the coming bot age now if they have not begun to already. This means peeking into the future and designing bots to respond to today’s customer needs, such as personalisation, context, meaning, first contact resolution, management, as well as bot-human interaction and interface design.
Here are four areas chatbots will evolve.
Chatbots will be the vanguard of these efforts, and success will hinge upon their ability to become useful, maybe even indispensable, to human beings. Automation has its limits — and there are some things that robots just cannot do. That is where a blended model of automation augmenting people in their daily lives, conversations, and information requirements can provide extraordinary outcomes. By connecting conversations with meaning, context and intelligence, and providing people with relevant information in real-time and after absences, chatbots will provide as higher quality service and outcomes.
For companies in financial services, in addition to other industries, it requires striking a balance between speed, specialisation, and personalisation provided by chatbots and the ability to cater to human sensibilities and expectations. After all, the main goal is to support users and to make their lives easier.
Kicking off July’s Game Changers section is an interview with David Taylor, the Founder, President and CEO of VersaBank. Here he tells us all about the exciting journey that building Canada’s first virtual, branchless bank has been thus far.
You founded VersaBank in 1993 – could you tell us a bit about this 24-year journey and what it has taught you?
It certainly has been an exciting journey, filled with challenges and lessons. I thought that by applying emerging digital technology to banking, I could create a bank without branches with low overheads that could economically serve small niche markets that were not well-served by Canada’s large full-service banks. Considering this ‘branchless model’ didn’t exist at the time, I expected that I would have to educate regulators, the banking industry, customers and partners about how it would work and what the benefits would be.
I think the most discouraging lesson I learned was that banking regulators like the status quo and do not welcome new ideas, even if it means that some Canadians in niche markets would continue to suffer with only limited access to economical banking.
On converse, I think one of the most encouraging lessons I learned was that some large Canadian full-service banks recognized the important role that VersaBank could play in serving niche markets, which are perhaps too small or obscure for them, and have aided VersaBank in fulfilling its mission to serve these markets.
Developing and improving the software and systems to deliver ideally suited products to our niche markets is always an ongoing challenge, but as Terence Mann said in ‘Field of Dreams’, “If you build it he will come”. I found to my great satisfaction that if you truly endeavor to deliver ideally suited products, you will never have to look for customers. They will ‘come’.
Our niche markets are diverse and include: financing hospitals and schools in the remote Canadian arctic, developing customized web-based banking packages for the insolvency industry, providing back-end funding for the Fintech industry and point-of-sale financiers so that people can lease their hot water heaters, have cosmetic surgery, or lease equipment for their retail or business operations.
In many respects, we are the original FinTech, continuing to leverage the power of new technologies to reach our customers and serve their needs, but unlike the FinTechs of today, we’re also a Schedule 1 chartered bank with access to a huge source of funds, through an expansive network of more than 120 financial advisory and brokerage firms who deliver deposits to us digitally.
Finally, we have proven that you don’t need lax credit standards to attract borrowers. Convenient access, reasonably pricing and flexible terms will attract good quality borrowers. VersaBank has had no need for a collections department and has established one of the lowest loan loss histories in the industry. My hope was that by applying new technologies to banking, we could really make a difference to our customers’ lives. I think we have been able to do this and I look forward to continuing to grow our bank and to finding more innovative ways to serve my fellow Canadians.
Could you tell us a bit about your background prior to founding VersaBank?
I was fortunate to be provided with a solid foundation in banking by working at two leading, but very different, banks. I started my banking career at a large full service Canadian bank, the Bank of Montreal, where I discovered a passion for the business. It was a terrific opportunity to learn the basics of banking and I spent eight years there, before moving to Barclays Bank of Canada. In Canada Barclays PLC employed a niche strategy. However, when, amidst a downturn Barclays decided that the country was a non-strategic market, I saw an opportunity to create a Canadian niche bank, which ultimately led to the formation of VersaBank.
What have been your biggest achievements to date?
A couple of things immediately come to mind, which are at opposite ends of the VersaBank journey. They being: getting the digital bank started back in 1993 and successfully completing a very complex amalgamation transaction earlier this year. Both of these achievements were ‘firsts’.
I soon discovered that the banking regulators had no appetite to grant a bank license for a brand new bank with an untested model. So I decided to acquire an existing financial institution and transform it into my new model. I looked for the smallest financial institution I could find and discovered Pacific & Western Trust in Saskatoon, Saskatchewan. I met with the owner - Bill MacNeill at a restaurant and sketched out a plan on how I could transform Pacific & Western Trust on a napkin. When he asked if I was there to buy his trust company, I surprised him by suggesting instead that he ‘buys’ me to run and transform his trust company. I had extensive experience in the industry and was a banker and he was, in fact, a miner. He agreed to my suggestion and that opened the door for me to build Canada’s first virtual, branchless bank.
I also believe that the completion of our amalgamation in January 2017 was a key accomplishment. It was the first successful merger under the Canadian Bank Act and enabled us to significantly simplify the structure of the bank, while also realizing some significant financial benefits. It was a very complex transaction that required approvals from the shareholders of VersaBank, PWC Capital, the regulators and even the Canadian Minister of Finance. We secured an overwhelming approval from shareholders of the two companies and the other required approvals. It was a great accomplishment and was vitally important to the positioning of VersaBank for the future. We’ve created a unique state-of-the-art bank that is profitably providing banking services in niche markets throughout Canada.
Could you please tell us a bit more about the merger with PWC Capital and what it means for the future of VersaBank?
This transaction was historic in the sense that it was the first merger to be successfully completed by a Schedule 1 bank (a domestic bank that accepts deposits) under the Canadian Bank Act. Previous attempts by other banks had been unsuccessful.
While that’s a fun fact, the merger for us was critical to our future success, as it ultimately was about creating a simplified structure for VersaBank and eliminating confusion that existed with its parent company, PWC Capital. Previously, there had been two publicly traded companies, VersaBank and its parent a financial holding company, PWC Capital. This created duplication and PWC Capital had been highly leveraged. In addition, potential investors often were confused about the differences between PWC Capital and the banking entity, Pacific & Western Bank of Canada (now VersaBank). This structure was inefficient and it impeded our ability to grow. We needed to change it.
What emerged out of this complex transaction is a growing, standalone, publicly traded, high-margin, branchless chartered bank that uses its software to reach key niche markets, traditionally underserved by the big Canadian banks. We have enormous growth potential.
You’ve also recently opened a new digital facility, which provides the infrastructure for VersaBank’s branchless model and complements Canada’s FinTech industry – how did the idea about the platform come about? What is your outlook for its future?
Right from the founding of VersaBank, we believed that we would have a significant competitive advantage by designing, developing and maintaining state-of-the-art, custom banking software that helps to address customers’ specific and unique needs, while also minimizing the required investment in physical infrastructure and human resources. We’ve tended to focus on niche markets that are traditionally underserved by Canada’s big banks.
By following this approach, for example, we’ve become the bank of choice for Canada’s national consumer insolvency firms, by creating a banking package ideally tailored specifically to the unique needs of insolvency professionals. It’s highly efficient and very economical both for us and for our clients and has become a win-win for ourselves and our customers.
We recognized that there could be tremendous synergies if we brought some of our in-house teams under one roof, which has led to the establishment of our new digital facility, the VersaBank Innovation Centre of Excellence – the modern, new home of our in-house software development division and its eCommerce division. By bringing them together, we have enabled these teams to work side-by-side to encourage collaboration to improve our existing banking solutions and create new solutions for tomorrow.
The team already is working on some innovative new solutions that likely will hit the market in the next couple of years.
Is there anything else you would like to add?
Arguably, when first conceived, VersaBank was a little ahead of the times, but the times have now caught up and VersaBank is finally able to take full advantage of its systems and model to serve people across Canada without branches. Its products are in high demand and its margins lead the industry without the usual loan losses. Twenty years ago this would have been a dream, but today, the dream has become a reality.
Website: http://www.versabank.com/
