I am a relative newbie to the cybersecurity world, having spent the majority of my career focused within FinTech (payments and banking). The cybersecurity industry is a fascinating one, and very much key to the strategic priorities of CIO’s and security teams. This is magnified even further given the recent spate of attacks we’ve seen in the last few years.
I have written and contributed to a number of articles around AI, and it’s the use of AI algorithms where we’re starting to see this shift with cyber attacks and it’s an obvious evolution.
Could AI be used as a cyber weapon?
It’s an intriguing thought. It’s also not beyond the realms of possibility, the debate goes on but these algorithms could use their intelligence to learn about businesses. Cyber attacks will be become more and more sophisticated, utilisation of AI and deep learning technologies will become the norm. The traditional cybersecurity methods available today won’t know how to cope with new attacks carried out by so-called smart machines.
How would we try and prevent this? If it were to happen how would we cope?
The majority of cyber attacks today are targeted at specific groups, companies or individuals, usually for extortion purposes or just plain annoyance. The latter of these two is usually to prove a point to enterprises – specifically tier one MNC’s. They are typically autonomous in nature, usually they build up steady control of data before consuming networks and endpoints. The numbers have soared in recent years, a trend I expect to continue with more sophistication as we move through time.
How will attacks become more sophisticated?
The term “deep learning’ has worked its way into the business world over the last several years. It’s used broadly in conversation which is focused on AI, data and analytics in particular. However, it’s an approach to AI which has gotten most of the attention and has shown great promise, specifically in developing autonomous self-learning systems which are revolutionising my industries.
Autonomous cyber attacks could evolve to be able to self-learn, meaning that they’re beyond anyone’s control, they will have their own decision making capabilities and be buried deep within networks. With all of this in mind, the damage will be slow, painful and these attacks will be difficult to trace.
We have to be mindful of the power of new technologies we’re adopting to help improve efficiencies, operational tasks and customer experience. You only have to look at the number of AI assistant’s that are available, these could easily be taken over by malicious users. Cyber attacks, warfare will always sadly be part of our everyday lives but the level of sophistication being employed by these individuals/groups carrying out these attacks is scary.
I don’y have an answer as to how this could be tackled (if at all?) but certainly it’s food for thought.
Digital transformation is nothing new, in fact it’s probably one of the most talked about subjects I have ever come across, there are differing opinions on what the priorities are. I have been involved in a number of digital transformation projects myself, and I can see where some of the challenges are, esp. in the targeted larger organisations that are trying to make a change from traditional models.
It’s not an easy task considering the complexities involved, investment and pressure to execute it in the right way. In addition, there are also very strict timelines given the challenge from other companies doing the same thing, dependent on the on the industry /verticals.
The Biggest Hurdle
If I were to ask you what digital transformation means, I am sure the response will be; we need to invest in digital products; we need to invest in digital platforms; look at ways in optimising our back-end processes to save cost and improve efficiencies etc.
In some ways, that’s correct, all of the above play an integral part of the transformation journey, all are very important and require a specific skill set, experience and partnerhsips to be excuted in the right way. However, there is crucially more to it than just that in my opinion.
What underpins the success of digital transformation are not only toolkits, technology and the right resources but an understanding and education of what it actually means. The biggest hurdle we as humans have is a lack of understanding on a subject and the fear it brings to not only ourselves but peers and other colleagues. This results in confusion, frustration, a lack of progress and endless amounts of wastage (time/resources) in trying to get there. I’ve seen it from my own eyes and to some extent felt some of the emotions myself trying to get people to understand what it actually means – I live in hope I will succeed.
I am not a digital transformation expert by any means, I’ve not been part of huge projects, but crucially I like to play an important role in zeroing in on education, behaviour and culture. I consider these to be the make-or-break issues and not many people are too willing to go down those roads of discussion – possibly out of fear or an area of unknowns. Sometimes it’s easy to talk about technology rather than focus on the impact of change on people.
It’s about people and process
The fact is that any transformation project brings about a change, this means how a company is run, the types of processes they use, products and so forth. The impact of change will affect people, it has to if the drivers are to improve efficiencies, processes and reduction in operational costs.
Education and understanding of ‘why’ this is happening is important, what it ‘means’ needs to be articulated ‘how’ it will be executed needs to be made clear. The introduction of new technology to support digital transformational change must take into account a change in behaviours to see the overall value. Internal structures are likely to change with the use of new tools and there will also need to be a focus on training.
Gaining trust and to see a change in behaviour is crucial, people need to understand the real reasons for a digital transformation, to actually believe in it and engage in actions and behaviours support it.
The world has gone chatbot crazy, certainly there is still a lot of focus on ‘virtual assistants’, as some people like to refer to them as. They are essentially used to mimic human speech where a human would be required via a messaging interface. As someone who closely works within the financial services industry, automation is certainly one of the priorities in large companies, esp. within the banking world.
It’s fair to say that the advent of chatbots has fuelled the drive in Artificial Intelligence (AI) as a whole in other areas. I have had conversations with a number of people across the financial services industry, there is a balance of those who are in favour of chatbots and those who are not. I came across some very good prototypes early on, they were quite basic but have evolved over time. Some organisations have already begun to or have rolled out services.
The Financial Brand have summarised a list of banking chatbots already in service – click here for more details.
Customers are the key to success
This seems an obvious thing to say I know, but the lines can be blurred if services don’t meet the need of the customer. After all, why invest so much time and resource when you’re not meeting or fulfilling your objective? It seems mad but believe me, it’s quite common place in industry. Chatbots should be fully focused on the customer experience, this means that they should be intuitive, naturally evolve and learn to become better with its responses. Above all else there should be a clear set of customer service objectives which can be measured by the company.
Conversable have an interesting proposition, their platform makes it possible for employees to write and modify responses for their bots and push automated responses live, without needing to know how to code. The console allows a user to deliver answers quickly, easily, and correctly, to their customers.
Take a look at Conversable’s chatbot building process here.
I really like the way they have broken down the process into six simple steps:
Design the conversation
Build the conversation
The good, the bad and the ugly chatbots
There are some obvious pitfalls companies face when reacting to innovative services, a lot of it is just a lack of understanding of their objectives and implementation of the technology. I’ll try and explain what I mean by those two areas because this could be the difference between success and failure.
Don’t be lead by what others are doing but think about areas where you need to improve and what pain points you are experiencing. The driver here is to think about improving efficiencies, service as a whole and how you’re best positioned to deal with customer experience.
Don’t look at chatbots as quick fix to your problems, so you can avoid customers and just focus on your revenues.
Holding onto customers has now become one of the biggest challenges across many industries.
Half-baked chatbot product
If you’re not clear on objectives the consequence will be a half-baked product or one which is overloaded with functionality which tries to cover all bases. This will no doubt compromise the quality of the customer experience, and as we know this is the main objective. You can see how this will end I am sure, the consequences could be disastrous given the competitive nature of our current digital world.
The other direct driver is the perception of chatbots and their use based on the plethora of services which are currently out there. The more half-baked bots out there in industry only compounds people’s perception. As someone who focuses on product as a day job, this annoys the hell out of me.
The current customer crop, segmented into millennials, generation Z and the up and coming generation alpha have little time for bad products. If it doesn’t work first time or the experience is poor, it’s quite literally toast and the recovery from that isn’t worth thinking about.
It really boils down to some simple thinking and the following steps.
Be clear on your objectives, have a concise business case in place, understand the customer journey intimately and have the courage to make changes where applicable. There’s no excuse not to put the customer first and focus on the customer experience, regardless of AI and machine learning technology being in place.
There has been a lot written over the past few years about the so-called impact that GAFA (Google, Apple, Facebook & Amazon) will have on banking world in the future. These large tech companies are so intertwined with our lives that it stands to reason that they should look at making a play into banking. Moreover, they have invested significant amounts of money themselves into financial services, typically focused on payments, mobile wallets etc.
The challenges and opportunities
With the advent of Open Banking upon us given what has transpired in Europe with PSD2, it may not seem so far fetched after all. The whole premise of Open Banking is to designed to encourage collaboration, innovation and most importantly, competition in the marketplace. Could GAFA realistically be the ones to build upon the opportunities that PSD2 has to offer? Could they ultimately cause the mass disruption in the industry that many have talked about now for a while?
There was talk that they would look into applying for banking licences enabling them to become a bank in their own right but that never materialised. PSD2 in Europe certainly presents an opportunity for these tech behemoths to really start to look at what they can bring to the party, along with other players looking to gain an advantage. It would certainly make sense for GAFA to offer tailored financial services products based on their users as alternative service offering to the banking world.
It would seem Amazon are likely to make the first move here, certainly it would appear they have already begun the process according to a recent article in the Wall Street Journal.
Amazon is in talks with big banks including JPMorgan Chase & Co. about building a checking-account-like product the online retailer could offer its customers.
What’s happening now?
Today GAFA have started to really make a play into financial services generally, Facebook have already implemented P2P payments into their messenger app, Apple will allow their users to send money to each other using iMessage. Amazon have even delved into the SME lending space, a key FinTech area which is gaining a lot of momentum across different regions presently.
The rise of FinTech has really emphasised the focus on the consumer, so much so, that customer and user experience are at the forefront. The digital consumer today has grown up in a world which demands more from their service providers, one which can understand their needs and wants and present them with the services they desire. GAFA has a distinct advantage when it comes to consumer engagement, in fact they’re the masters that other industries want to try and learn from. The banking world certainly needs to take note of how GAFA interacts with its consumers and learn to really understand the data they hold on their consumers to provide better engagement models.
It starts from the very beginning of the consumer journey, removing the friction that exists when someone tries to sign up for a new product, on-boarding, KYC and the registration process in general. It doesn’t stop there either, interaction with a consumer once they’re on-boarded is the key – how do you do this? You learn to build a profile on your consumer through the data you hold.
I am pretty lousy at making predications if truth be told but I would wager that GAFA will make some form of play into the banking world. They’re unlikely to become a fully fledged bank but I believe they will offer tailored services based on their users and through partnerships with other financial institutions. Then again I could be completely wrong, but I am pretty confident that this is how it will play out.
I am not an expert or an authority in the area of regulation and more specifically, RegTech solutions but I understand the importance of what RegTech can bring to the work being undertaken by FinTech start-ups and banks. I traditionally tend to focus on what’s happening within the FinTech and banking industry, but I take an interest in other areas and felt I wanted to share my thoughts on RegTech’s importance and evolution.
I first stumbled across the term RegTech as a buzzword back in late 2015 whilst working in Singapore during a FinTech meet-up event. Regulation in the financial services industry has been around a long time but the focus on this as an area has really developed pace for a while now. There are plenty of start-ups who are developing some quite clever solutions and working exclusively with a number of the global banks.
Why RegTech? It’s been well documented and also from the many meetings I have been part of that that a wider collaborative approach between banks, startups and now the regulators is driving what happens with regards to development, adaptation and adoption. Regulation as we know can be a complex beast and not for the faint-hearted, so the development of new solutions which target complex regulations with a view of reducing cost, specifically for banks is a welcome thing.
CB Insights have put together a great definition of RegTech:
RegTech typically covers a number of key areas, these include customer on-boarding or KYC, regulatory reporting, transaction monitoring and risk management. The objective here isn’t purely about automation, although that’s an important part, it’s about the packaging and accessibility of this data and a presented view which is easy to understand.
The Evolution of RegTech
We know how quickly things can change and what’s interesting as far as RegTech is concerned, we’re now in the evolution from phase 1 to phase 2 and the impact for the future and beyond.
Not surprisingly, one of the biggest beneficiaries of the RegTech revolution has been global regulatory bodies. In phase RegTech 1.0, most regulators chose to observe, sometimes closely, the potential of technology startups. Some launched sandboxes, some launched accelerators. However, RegTech 2.0 will see the emergence of a new breed of “SupTech” startups that will work alongside regulators in meeting challenges.
The Burnmark and Alvarez & Marsal: RegTech 2.0 Report nicely summarises RegTech 1.0 and 2.0 – I found this very useful reading and thought I’d include it here.
Some of the earliest RegTech startups launched are now in the process of obtaining late-stage VC rounds or existing through acquisitions. The space has clearly matured over the last couple of years and attracted
a lot of attention from banks, vendors, service firms and regulators.
Why RegTech? We believe that this sub-segment
of the wider FinTech landscape is approaching an inflexion point with regards to how regulators, banks and startups will pursue its further development, adaptation and adoption. From 2010 to 2016, RegTech established a solid foundation within the FinTech ecosystem coming up with solutions that targeted complex new regulations, litigation and regulatory remediation areas faced by banks and overall reduction of costs of compliance.
We call this phase RegTech 1.0.
We estimate that over 300 RegTech firms were launched up till 2016. Banks, just after the economic crisis, were facing huge compliance costs, a new set of regulations, the proliferation of startups in financial services and the need to innovate quickly. Regulators were also looking for ways to support a more efficient implementation of regulations and supported the technological innovations by RegTechs.
Most RegTech firms launched in this period dealt with upcoming regulations like PSD2 (Open Banking), MIFID II, 4MLD and GDPR. The vast majority of the solutions were delivered utilising models around SaaS and Open APIs.
They also handled data in a way that was never seen before. Data collection, monitoring, analysing and reporting in the space evolved into an entirely new industry. This was primarily driven by developments in big data technologies and the wider FinTech ecosystem.
RegTech 2.0 are expected to collaborate more, with banks, regulators and domain experts, to demonstrate their offerings’ success far more quickly.
Also, as offerings in the next phase evolve from niche propositions to broader compliance propositions, they are in far more need of active support from regulators and industry consultants.
The market of regulators and central banks around the world are also struggling with the data deluge and supervision of new entrants in the banking industry. The entire lifecycle of policymaking, enforcement and supervision is ripe for disruption with the use of advanced technology. Startups would need to be patient in handling the bureaucracy of state-run organizations and even longer sales cycles. Startups would also need to improve their knowledge of regulators’ underlying objectives and demonstrate unambiguously how their solutions can help the regulators do a better job than the status quo.
Equipped with past learning’s and strong support from regulators and governments across the world, RegTech 2.0 is at an inflexion point for a new era of efficient and effective compliance powered by technology.
The Future & Beyond
RegTech solutions developed by startups will help banks and other FI’s automate compliance tasks, reduce operational risks and protect themselves against reputational damage and potential market fines. I believe in the long term that a lot of these organisations can clearly see the opportunities that will exist through the regulatory change agendas which are in place. Ultimately though, their success will be measured as to how these RegTech solutions can be maximised and will have a greater chance of succeeding in what appears to be a challenging environment.
In the long term, those organisations that can see the opportunities that exist through the regulatory change agenda and use their RegTech solutions to maximise these will have a greater chance of succeeding in this ever-changing and challenging marketplace.
Kunal is a thought leader in the space of FinTech, advisor to the large Indian Bank YES BANK where he advises on the potential of FinTech, a mentor for Blockchain start-ups in India and Singapore, and board member of the Blockchain Foundation of India.
“The biggest use cases for me are digital identity and KYC [Know Your Customer]. KYC is still a huge problem globally and there isn’t one solution, which can systematically deal with the problems countries, regions and organizations have put in place over the decades.”
Ask anyone with knowledge about Blockchain and they will tell you about all the potential problems it can help us solve.
OK, I buy the benefits so why aren’t we seeing faster adoption?
So, with all the hype around Blockchain, all the potential benefits, and everyone showing so much interest in the technology why aren’t we seeing faster adoption? Kunal has a few perspectives to share on this.
“Trust to a certain degree and education, which the general population lack when it comes to these new types of digital-based services.”
However, even if the wider population understood what Blockchain was all about then there are still many barriers which Kunal helps me list.
How to handle the massive data storage requirements when storing billions of transactions on Blockchain based networks?
Regulation. When is it going to come and how will it affect what is feasible with Blockchain?
Many senior managers in the corporate world are still clueless about Blockchain and many still associate it with Bitcoin only so how are these leaders going to leverage Blockchain for efficiencies and creation of new business models?
Interoperability between organizations i.e. you might be able to use Blockchain for back-office efficiency gains but how will companies work together on Blockchain based platforms?
And then we haven’t even mentioned the technology barrier of limited transaction speed and high energy consumption for performing the necessary cryptography to the make the Blockchain network work.
So, I should just give up on Blockchain?
The short answer is “no, of course not”. Anyone distrusting the pace of how technology can improve would be foolish as we seen countless times throughout history. There’s a high likelihood that the same thing will happen to Blockchain or a similar Distributed Ledger Technology (DLT). Here’s Kunal’s take on it.
“There is definitely awareness but as I had previously mentioned, a lack of understanding and education is a still a problem. Therefore, it’s implementation will take longer to push through even though it’s an obvious consideration.”
Besides the fact that technology is likely to catch up and obliterate the current concerns and challenges then we continue to see more and more serious moves by large corporates in the Blockchain space. The announcement of a joint venture between Maersk and IBM is one of the latest ones. Kunal also sees quite a bit of adoption around him.
“KYC – the benefits that bring to bring on new customers for digital banking and insurance products. Given that’s an area of focus for me, I can happily say that those specific point solutions which have tackled this problem have proven to be successful.”
Kunal goes on to add further about adoption and use cases.
“The use of specific applications, protocols are already being worked on, specifically on private-based Blockchain that I know some banks in India especially have put together.”
We probably just have to acknowledge that Blockchain is still very much in an innovation phase where we’re only now starting to see early adopters pop up. That puts us still some time out from the critical mass needed to push the use of Blockchain into mass adoption. That and the fact that the technology is still not ready. However, this only means that we should all continue to realize the potential of Blockchain from our own perspectives. If you work in the finance function you should prepare yourself for what’s coming and how it will change the way transactions occur and are verified.
What’s your take on all of this? Will we ever see mass adoption of Blockchain? Will a similar technology outcompete Blockchain even before we really get started? These are indeed interesting times and if Blockchain indeed will be as transformative as the Internet then I can’t wait to see what will happen in the coming years and then I have no doubt that we will see mass adoption of Blockchain.
This was the fifth article in the series about Blockchain for the finance function. You can read previous articles in the series a below and continue further down for even more articles about the latest trends in the finance function. Finally, you should join Blockchain For Finance Professionals where we will continue to discuss this topic. You can also join Finance Business Partner Forum for further insights about happens in the finance function.
Anders Liu-Lindbergis the Global Finance PMO for Maersk where my main goal is to create a world-class finance function! I am working on the transformation of Finance and business daily. Formerly I’ve been a Senior Finance Business Partner for Maersk LineEurope Region. I have participated in several transformation processes amongst others helpingMaersk Drillingto goBeyond Budgetingand transformed a finance team fromBean-counters to Business Partners. I would love the chance to collaborate with you on your own transformation processes to create great finance functions. Don’t be shy! Let’s get in touch and start helping each other.
I have read a lot about the payments bank scene in India as I find the approach taken by the companies award licences an interesting one. Financial inclusion has always been a key driver for most companies as it provides the greatest of opportunities, not only in India but across other developing payments markets.
For those unaware of what a payments bank is – the idea behind these new-age banks is revolutionary – to provide financial services to the remotest corners of the country, something that the traditional banking model has failed to do.
The article below written by Beena Parmar (Moneycontrol News) crucially highlights quotes from senior figures from these payments banks and where the subsequent challenges and opportunities lie ahead.
AP Singh, CEO of India Post Payments Bank said: “Getting customers is easy but getting them to transact is difficult… At present, we have Rs 10,000 in our payments bank account.”
All the players concluded that they would require to build scale of business before looking for profitability.
They are looking at unconventional revenue streams including data monetisation, cross-selling of financial products, forming credit access platforms and creating alternate merchant payment models to get around the constraint of not being able to lend.
My verdict on payments banks
Creativity and product innovation is crucial, as such, customer on-boarding, UI/UX and quality of service and fees/costs are going to be deciding factors.
They can succeed as long as they are with allied financial products and a strong distribution network provided they avoid falling into the trap of misselling.
Interesting times ahead given the vast competition from the traditional banking players and FinTech companies alike.
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