IBSi Blogs

In Q2 of 2021, FinTech businesses secured more than $30.8 billion in funding, according to CB Insights. The continued investor interest, ever-rising valuations, and ongoing growth have the FinTech sector buzzing. As we look to the year ahead, investor interest will continue for FinTech but more narrowly focus on one growing niche: addressing the nation’s “bank deserts”.

by Steven Weinstein, CEO, Seismic Capital Company

Many of us have heard of the phrase “food deserts,” but “banking deserts” have not received the same level of attention. Banking deserts are especially prevalent in rural locations, where banks may be hesitant to build a branch due to the possibility of low-profit margins due to the reduced population size. As a result, many people in these areas frequently lack access to both cash and basic financial services – placing them in the “unbanked” or “underbanked” population.

FinTech startups are providing digital-first solutions that address a lack of physical bank locations to give access to financial services and cash to those who would otherwise not have adequate access.

Neobanks rise to the occasion, and FinTech startups embrace new players

The pandemic has made neobanks like Chime a lifeline for the nearly 30 million underbanked households in the country. Operating exclusively online without physical locations, these challenger banks are bringing savings accounts, credit cards, loans, and more to those without a branch bank location nearby. The pandemic has only fueled the growth of neobanks, as consumers were forced to bank online with indoor mandates in place over the last year. Chime’s latest funding round of $750 million, and valuation of $25 billion, only further solidifies the FinTech startups’ star status among investors.

An unlikely competitor to neobanks may be on the horizon, but with just as much focus to solve the lack of bank branch locations. National retailers Walgreens and Walmart recently announced their own plans to enter the banking sector. Each retailer announced efforts to launch a mobile-first banking option to be paired with physical locations in their stores. Partnering with fintech startups, each retailer will ensure a mobile-first solution is in place while their store locations nationwide address any concerns around in-person access. Leaning on their vast loyal customer base, the two brands have an opportunity to further provide options to those in the ‘banking deserts’.

Micro ATM’s bridge the gap to get fast cash

For some communities and areas across the US, access to cash is a constant problem. Many of these towns may even be devoid of ATMs on a fundamental level. Those who do have access to ATMs are frequently confronted with excessively lengthy lines or, even worse, empty machines. The transition to electronic payments is difficult, and tasks like obtaining cash, holding value, and sending remittances are frequently impossible.

We are undoubtedly all aware of the actual cash shortages that occurred in storefronts during the early stages of the nationwide lockdown. Nonetheless, many groups and areas across the country deal with a lack of cash on a daily basis. Many of these towns may even be devoid of ATMs on a fundamental level. Those who do have access to ATMs are frequently confronted with excessively lengthy lineups or, even worse, empty machines. Micro ATMs and digital-first solutions are being used by companies in the area to address this issue. Micro ATMs are a low-cost alternative to costly, stationary ATM services. These portable card-swiping devices, when used in conjunction with local agents, can provide critical cash withdrawal services to individuals who do not have access to a real bank or regular ATM. Beyond geographic considerations, solutions like this assist groups like the elderly who may be confined to their homes. Startups can make banking services more accessible by concentrating on mobile and digital solutions. 

Investors with a keen eye can seek startups that are developing new solutions for places that are in desperate need of these resources. We anticipate seeing a number of nascent FinTech firms in the next year emerge to create additional solutions for banking deserts and the underbanked population, and investors will be keeping a close eye on who is leading the charge.

Implementing a next-generation customer communications management (CCM) platform offers the potential to tackle compliance and CX issues at the same time, enhancing accurate and responsive regulatory change management and empowering optimised customer journeys and omnichannel interactions, irrespective of any limitations in legacy systems.

by Daniel Harden, Financial Services Transformation Director at Paragon Customer Communications

Compliance and CX are two of the most important challenges facing the banking sector today. Though seemingly separate, these trials are not unrelated; regulation is, after all, intended to improve CX. As financial institutions seek to tackle both simultaneously, innovative technology holds the key.

Regulation is a significant challenge for the banking sector. In addition to new and ever more stringent compliance demands, regulators are increasingly taking enforcement action against non-compliant firms. In a clear signal of its determination to ensure compliance, between 2018 and 2020, the Financial Conduct Authority doubled the amount it spent on enforcement and tripled the amount it handed out in financial penalties to over £220 million. In 2019/20 alone, it issued 203 Final Notices and secured a similar number of enforcement outcomes.

Communicating regulatory change

A prominent feature of today’s regulations is about how banks inform customers of changes to their services and the timeliness of this communication. To ensure this is done in a compliant way and that the potential for customer harm is removed, organisations need effective governance and processes in place. Regulatory change management, therefore, must be both accurate and responsive; something that for many banks means rethinking and reengineering how regulatory change is managed.

Besides avoiding enforcement, banks that improve how they notify customers of regulatory change, and the promptness of communications can enhance CX. Today’s customers not only know their regulatory rights; they also expect excellent services. Banks that deliver on both improve the quality of the customer experience. In an era where switching banks is becoming as easy and incentivised as switching energy providers, this can help firms improve customer acquisition and loyalty.

The role of technology

The latest technologies offer banks new and effective ways to improve regulatory change management, with modern systems not merely cataloguing regulatory data, but using regulatory intelligence to streamline and automate processes so they are smarter, speedier and highly efficient.

A modern and intuitive tech stack, when managed correctly, can also form a cohesive eco-system architecture that unlocks the operational efficiencies and agility that make banks faster to market and more responsive to changing market dynamics and customer needs.

Unfortunately, the internal structure of some banking organisations and the legacy IT systems many still use can raise challenges when it comes to implementing these technologies. This is particularly the case where banks have compartmentalised compliance, marketing and operations departments, each with their own siloed systems and data, and individual corporate objectives.

The latest customer communications management (CCM) systems, however, provide a synergy of innovative technologies to overcomes these challenges. Able to unify data across different departmental siloes, they provide a ‘one platform’ approach that automates workflows for sign-off through departments without banks having to experience the disruption of structural change or the internal resistance that would arise from it.

In addition, these CCM platforms enable organisations to centrally manage both inbound and outbound customer interactions, allowing the mapping of customer journeys to ensure seamless interactions and consistent messaging, while helping to prevent vulnerable customers from falling through any gaps.

Modern CCM platforms are also advantageous for banks whose existing legacy systems hinder their adoption of newer, more advanced technologies. Rather than requiring a drawn-out and costly IT infrastructure upgrade, the latest CCM platforms have been designed to seamlessly integrate with legacy systems, making it far more cost-effective and much quicker to deploy digitally transformative solutions. Not only does this accelerate a bank’s ability to improve compliance; it also benefits everyday communications, such as marketing.

Indeed, with regard to both compliance and CX, the ability of the latest CCM platforms to offer personalised and omnichannel communications means messages can be delivered via the customer’s preferred channel. Adopting such a strategy not only provides a better customer experience; it also increases the likelihood that messages containing regulatory information will be read and, where required, acted upon.

Where they are not, for example, if an email isn’t opened, this will be tracked by the CCM platform which can be configured to send a printed letter, automatically, as a backup. The tracking data also enables banks to analyse communications in order to continually optimise processes and make them more effective.

In an era when compliance and customer experience are critical to banks, innovative communications technologies are proving to be highly beneficial. They enable organisations to improve regulatory change management, achieve compliance and deliver better CX without upheaval to internal structure or IT infrastructure. This is particularly true when firms have the support of an expert team with the sector expertise and technological solutions to fully optimise their operations.

Open banking is finally gaining momentum some 3 years after the Second Payments Services Directive (PSD2) came into force. Momentum is building thanks to a combination of trends – technological advancements, maturing bank-FinTech partnerships, and wider acceptance of digital since the onset of the pandemic.

by Andrew Lawson, SVP, EMEA at Zendesk

In February of this year, for the first time in a single calendar month, more than one million open banking payments were processed in the UK – compared to 300,000 for the whole of 2019, and 3.2 million throughout 2020.

However, progress is still slow. It’s slow among consumers: active open banking users in the UK reached 3m in January 2021, far lower than the projected 33m by 2022. And the same is true for businesses – only 2% of financial services firms have met all their open banking requirements to date, while 69% have met half or less. With almost 9 in 10 respondents (88%) believing open banking will increase the number of innovative banking services available to customers in the next 3 years, the future of financial services hinges on this potential being realised.

The two biggest challenges cited were time and effort needed to maintain and preserve the integrity of data as well as limited capability to accelerate the development of quality APIs and API-driven features to market.

The industry tends to point to the consumer or the C-suite within banks to explain the lack of adoption. The ones who are so often overlooked, are the developers within FinTechs. As the creators and integrators of innovative services, they are pivotal in making open banking ‘happen’ but are lacking the support to do so. The most progressive businesses in this space have identified a new financial services customer segment: the developer.

Thinking developer-first

Thankfully, many organisations in the industry are already rising to the challenge and adopting a developer-first approach.

One example is FinTech start-up TrueLayer, whose open banking platform allows engineers, innovators and enterprises to securely and efficiently access users’ bank accounts to share financial data, make instantaneous payments and validate their identity. The company puts developers – the users who actually integrate its solution within its clients’ companies – at the heart of the service it provides.

In practice, this means rethinking a financial services firm’s customer experience strategy.

Digital is critical

Digital transformation means stepping away from legacy tools and channels. But at the same time, financial services firms must adopt the communications styles that most closely fit their users. To that end, TrueLayer’s Head of Client Care, Chris Brogan, said: “It’s developers who are actually going to integrate with our product and by servicing them as best we can, it means the onboarding process is as easy as possible for our client.”

Automate and alleviate

Requests for data, clear documentation and easy access to sandbox environments need to be available in real-time to support accelerated development cycles and iterations.

Artificial intelligence is essential for speeding up response times, reducing operational costs and more easily deriving insight from data in a way that lends itself to the rapid, iterative ways of working developers favour.

Developing the future of financial services

In the open banking era, ‘build and they will come’ can’t be the way we think about developer engagement. Although we’ve made major strides, with more than 300 FinTechs joining the open banking ecosystem and an increasing API call volume, there is still further to go – and what got us here, won’t get us there. It’s not enough to create the APIs and launch a sandbox.

Realising its potential requires true collaboration which can only happen if leadership teams within finance prioritise open and efficient lines of communication with the developer community. FinTech developers need instant and convenient access to the right support if they are to deliver the new services upon which the future of this industry rests. Only then will we move towards the open, integrated future of finance this initiative set out to create.

In the payment world, the change wrought by the pandemic has been stark. More of us are using technology to make payments in alternative ways. This has happened even amongst demographics that aren’t thought to be technically adept, with ECOMMPAY data showing that one in five (21%) 45 to 54-year-olds have increased their digital wallet usage during the pandemic, while more than half (51%) of over 55s say they have used a digital wallet.

by Paul Marcantonio, Executive Director UK & Western Europe, ECOMMPAY

This new normal is the result of major digital transformation – we’re all used to working remotely, shopping online, and using apps to prove our health stats, and mostly enjoy the flexibility and convenience these changes bring.

However, the change has had the side effect of creating prime opportunities for scammers and fraudsters, with these digital environments exposing us all to fraudulent activity at an increased rate. To give you a sense of scale, the UK National Cyber Security Centre revealed that it had taken down more scams in the past year, than it had the previous three years combined.

The impacts of a scam on a business can be significant, causing great reputational and economic damage. So, how can you protect your business from future payment fraud?

Ensure your staff have the right training

Cybersecurity software has come a long way. Modern programs, if used correctly, now offer protections against most digital attacks. However, fraudsters have realised this and now target people through their machines, using ‘social engineering’ techniques to get them to share confidential information. More than 95% of security breaches can be attributed to  human error, so it’s imperative that your staff have training to minimise fraud risk.

Training should include using relevant examples to teach staff about how scams take place and discussing how to identify fraud. It is also imperative that businesses ensure their staff are well versed on the internal processes in place to deal with fraud. For example, if your business chooses to ask for ID before accepting payment, then you should make sure that your staff are trained to follow that process.

Use the latest data-driven technologies

We are all prone to human error so modern technology goes a long way in helping prevent payment fraud. Machine learning software monitors transactions in real time, using innovative algorithms to help companies spot fraud earlier by scanning for signs of impropriety – such as inconsistencies in payment data. This is backed up by research – security software which applies artificial intelligence scoring to inbound transactions boast an average fraud detection rate of 97%.

In addition, it is worth adding a multi-factor authentication (MFA) process. Studies have shown that using MFA can reduce the chances of an account being compromised by an automated attack by 99.9%. By using MFA, you drastically slash the odds that another individual can gain access to your finances.

Finally, encrypting your transactions and emails will stop individuals manipulating or editing documents. There will be no chance of a recipient altering the information for fraudulent use.

Partner with a trusted payment provider

Partnering with the right payment provider will add an extra layer to your fraud prevention strategy and help to grow your business. Trust and safety factors are key, and will lead to increased sales, as customers are more likely to go through with a transaction if they recognise the payment processor as a trustworthy one. The right data-driven payment solution for you should strike a balance between conversion and security, helping your business to grow without subjecting your customers to undue risk.

Be sure to check if your payment partner has industry-recognised safety and security credentials, and reviews or testimonials. Likewise, check their fraud prevention approach. Do they use the technology listed earlier? Do they include human moderation? This could signal whether anti-fraud is a priority or not.

Payment fraud is a scourge for many businesses, and changes in the way consumers work and spend in the post-Covid world could make it worse. However, there are many things that you can do to prevent your business from becoming a victim. By ensuring that your staff are properly trained, using a reputable payment partner and keeping up to date with technology, you’ll keep your business one step ahead of fraudsters.

Before Covid-19 emerged, the way employees viewed work was limited. With defined working hours and fixed office space, it was hard to imagine the drastic change that was coming. Today, more workplaces have adopted both hybrid and remote working, as employers learnt just how much could be done from home, or at least outside of an office.

by Joshua Bao, Co-founder, SUNRATE

This has resulted in a decrease in full-time workers, with employees taking on more freelance and flexible roles. Beyond remote working, the way the workplace may evolve and change are hard to predict, but what we do know is that it will impact the payments industry.

The changing workforce

Remote working existed prior to the pandemic but was not adopted as widely as it is now. Employers are currently offering remote and flexible working to stay competitive in the market, with studies showing that 70% of the workforce will be working remotely at least five days a month by 2025 – but this is not the only change.

Lockdown gave many a new approach to working. Around the world, many people started their own businesses, left their old roles and most interestingly, more became freelancers. A recent survey by freelancer platform UpWork found that in the U.S, 20% of current employees—10 million people—are considering doing freelance work. Not only are employees becoming more open to freelance work, but employers are, too, with the study also showing that nearly half (47%) of hiring managers are more likely to engage independent talent in the future.

How does this affect the payments industry?

From Bark and Toptal to Upwork and Fiverr, freelance marketplaces play a key role in connecting freelancers with businesses looking to hire. With more organisations based around the world employing freelancers, cross-border payments will be required at a much higher rate. Cross-border payment services will be needed more than ever to collect money from international clients and pay overseas freelancers.

The financial payments space must set itself up for the growing globalisation of the workforce, and as the world embraces flexible working and freelancing, this creates greater opportunities for platforms in the cross-border space to provide their services. This is especially important given the forecasted rise in the value of cross-border payments over the next six years – with research from the BCG predicting that the value of cross-border payments will increase from almost $150 trillion (2017) to over $250 trillion by 2027.

With the reach of freelance marketplaces growing, they must ensure the best processes are in place in order for funds to be transferred successfully – this is where cross-border payments services come in. Freelancing platforms must work with multinational payment service providers to help advise on overseas regulations and also provide fast payment speeds, payment tracking, strong security and transparent pricing. This will ensure the platforms pay and get paid efficiently.

What caused the workforce revolution?

These changes are important to note, but the catalyst of these must be understood too. A key cause of the change in the approach to working is technology. Digital communications platforms such as Zoom and WebEx have meant that staff are able to work collaboratively without being in the same room. Of course, many of these apps existed before, but with the emergence of Covid-19, the public put them to the test and became reliant on keeping in contact with colleagues. This created a “new normal”.

While major events such as a pandemic cannot be predicted, the payments space can now prepare for changes to the workforce. The increase of both remote and freelance work is likely to stay, and businesses should do what they can to prepare themselves for the modern and future ways of working.

The Covid-19 pandemic triggered an unprecedented macroeconomic shock that impacted the global financial system. The resulting market turmoil, together with significant spikes in volatility and trading activity, presented particular challenges to the design and the resilience of risk management in Financial Market Infrastructures (FMIs).

by Adrien Vanderlinden, Executive Director, Systemic Risk Office, DTCC

With the benefit of hindsight, FMIs around the world have successfully navigated this real-life test. That said, these events have also highlighted 5 focus areas for FMIs and their participants to proactively manage risk in a post-pandemic environment.

Risk model performance

First, it should be recognised that the market stress that emerged as the pandemic started to spread strained the ability of certain risk models that are based on historical data to produce reliable output. That said, models designed to function in ‘normal’ markets should not be discarded simply because they have limitations in extreme market circumstances. Instead, what this episode illustrates is a well-known fact that is not new by any standard: FMIs should have the requisite model performance monitoring, strategies, and governance in place to identify and address emerging model risk issues on an ongoing basis.

Margin procyclicality

Second, while margin procyclicality was already a topic of debate prior to the pandemic, the extreme market volatility we saw in March and April 2020 will likely make the issue much more prominent going forward. The most important goal for CCPs (central clearing counterparties) is to make sure that they collect enough margin to protect their members, underlying investors, and themselves in times of stress. It is also important to note that risk-based margining methodologies are naturally procyclical, as they tend to generate increased margin requirements during times of market volatility, which in itself is not inherently problematic. A potential mitigant is education so that FMI members are sufficiently prepared to anticipate the impact of volatility spikes and clearing activity changes on their margin requirements. As such, FMIs must further promote margin transparency through the continued availability of tools that allow their members to understand risk models and estimate margin requirements under a wide range of circumstances.

Sector-specific approach to managing credit risk

Third, FMIs need to take a more sector-specific approach to managing credit risk due to the significant divergence of pandemic recovery prospects across corporate sectors, geographies, and other variables. A key consideration is the extent to which banks and other financial institutions are exposed to sectors that have been particularly adversely impacted by the pandemic, such as travel and leisure. As a result, credit risk assessments need to include a sector-specific review, with a focus on firms with the greatest concentration of risk. In the banking sector, additional indicators of risk can be found by analysing stress test results, as well as reviewing macroeconomic and loan delinquency data released by various sources, such as the Federal Reserve and credit reporting agencies.

Continuous assessment of FMI members’ available liquidity

Fourth, given the spikes in volatility, trading volumes and margin calls, FMIs should continue to closely monitor clearing members’ financial resources, in particular available liquidity, on an ongoing basis, as this can change quickly in a crisis. Financial firms face trade-offs between maximizing profitability and ensuring they have access to sufficient financial resources in a crisis. While retaining surplus capital or maintaining sources of liquidity may appear suboptimal from a capital usage and profitability perspective, it can be crucial to surviving a crisis. FMIs must assess how their members balance these trade-offs and whether they have allocated sufficient resources for normal times, mildly stressful circumstances, and extreme events, such as the Covid-19 pandemic.

Impact of remote working on operational risk

Finally, FMIs must consider that remote work can create new operational risks that need to be managed on an ongoing basis. FMIs successfully transitioned their workforces during the early stages of the pandemic without material impact to services thanks to well-planned risk management strategies, as well as significant pre-pandemic investments in business continuity planning and supporting technological capabilities. An extended remote work environment and the development of return-to-office plans that may involve a change in staffing models will require developing and implementing new capabilities that support the identification, monitoring and managing of associated risks. Further, the growth of remote work in the future may create additional cyber security vulnerabilities that must be monitored and integrated into existing cyber risk management frameworks. FMIs will also need to evaluate strategies and controls to mitigate the operational risks created by a potential outage related to a critical third party.

The impact of the pandemic on financial markets created a real-life stress test for risk models as margins surged amid spikes in volatility. FMIs around the world clearly met this challenge, helping to safeguard global financial stability. While their robust financial risk management frameworks and BCP strategies proved effective, FMIs will need to continue to bolster efforts in these five areas to be prepared for the next market disruption or crisis.

Over the past 12 months, retail merchants have had to contend with high street closures, furlough schemes and in-store mandates such as face coverings and social distancing. New consumer trends have also emerged, and existing ones have been turbocharged.

By Kirsty Morris, Managing Director of Barclaycard Payments

To help merchants, and their payments and finance providers in the UK prioritise business planning, Barclaycard Payments has pulled together its top 10 ‘lockdown legacies’ set to outlast Covid-19 restrictions. They are:

1. Growth in home deliveries: Consumers have been receiving an average of two extra retail deliveries per month since March 2020 (7 parcels now versus 5 before March 2020). Over half expect to receive the same amount, or even more, in the future.
2. Click & Collect boom: Around one in three (30%) consumers say they have used ‘Click and Collect’ more frequently since the start of the pandemic. Of those, 90% say they’ll continue to do so in the long-term.
3. Rising rate of returns: In the last 12 months, over half (51%) of Brits have returned items that they have bought online, compared to 47% in the same period in 2019 and 46% in 2016.
4. “Come to me” retail: Since the start of the pandemic, one in 10 (9%) consumers have used “come to me” retail, where a concierge-style service delivers clothing to customers’ homes and waits while they try it on, so that they can immediately return any items they don’t want. Meanwhile, a third (34%) of shoppers said they would be more inclined to buy from a brand offering “come to me” retail as an option.
5. Mobile payments soaring: Barclays consumer debit data reveals that Apple Pay grew rapidly in 2020 compared to 2019, in particular in Leisure & Entertainment, where online debit transactions increased by 70%.
6. Staying local: Almost two thirds (64%) of Brits are choosing to shop closer to home. Barclaycard Payments data shows shoppers spent an extra 63.3% in February 2021 at food and drink specialist stores such as butchers, bakers and greengrocers compared to last year.
7. More mindful spending: Nearly three quarters of people (71%) now think more carefully about how they spend their money and, of those, nine in ten (92%) say they’ll continue to do so even after lockdown lifts.
8. Online grocery shopping surge: Online grocery shopping has seen consistent growth over the past 12 months, with Barclaycard data revealing a 115.2% year-on-year increase in February 2021. 57% of Brits say they’ll continue to buy at least some of their groceries online even after all restrictions end.
9. Dine-at-home experiences: In an attempt to recreate the restaurant experience at home, 10% of Brits tried a DIY meal kit for the first-time during lockdown. Around a quarter (24%) of these people will continue purchasing these services after hospitality venues reopen.
10. Investing in infrastructure: Barclaycard Payments’ research with retail merchants shows that small and medium sized businesses are responding to this new landscape, with nearly three in ten (29%) planning to invest in new equipment and technology in 2021, and (13%) viewing technology as the top opportunity for growth over the next year.

If our trends highlight one thing, it’s that fast, convenient and secure shopping is no longer just a consumer preference, it is a now a universal expectation.

For merchants, this means there is a need to create better customer-focused experiences, particularly when it comes to e-commerce and payments. Technology has a huge part to play in this: for instance, payment gateways, such as Barclaycard’s own Smartpay platform, often support one-click purchases and allow buyers to pay for retail purchases with a number of different methods in a smooth, safe and seamless way.

Never in recent history have we seen the convergence of two super trends on the scale of blockchain and cryptocurrencies, and artificial intelligence (AI). The adoption of cryptocurrencies has exploded.  There are now 70 million cryptocurrency wallets, which starts to approach about 1% of the global population.  The massive influx of new users and new money has led to significant interest and support from major financial investors and institutions alike.

By Janet Adams, Consultant, International Compliance Association

Combine the developments in cryptocurrencies with the increasing use of AI and Robotics Process Automation (RPA) and it creates an interesting dynamic.  Forbes predicted: “2021 is the year when AI will go mainstream,” while a report by McKinsey stated: “Banks need to deploy AI at scale, to remain relevant and to become AI-first institutions.”

The impact of the pandemic

Covid-19 has also played its part. Previously, public perception of AI and RPA in the western world was tinged with a concern for robots stealing people’s jobs.  Now, the general public can increasingly see how technology can help keep people safe.  With Covid-19 the unimaginable happened.  Although it has resulted in catastrophic consequences, such a moment of change has also opened the door to the emergence of new technologies and business models.

Put cryptocurrencies and AI together and, as we head into the next decade, the results could be astonishing.  These seismic shifts are underpinned by enablers including cloud computing, big data, payments innovation, plus increased competition from the likes of Amazon, Apple and Google which are all entering the financial services space.  This environment is set against a backdrop of a shift in customer expectation with millennials, disillusioned with old banking structures and open to embracing new ways of managing finance and payment transactions.

Centralised finance will need to find ways to compete and thrive; for example by collaborating with decentralised finance, and working together to evolve a new world economic structure to provide better products for the societies we serve.  It is now an imperative that banks learn how to deploy AI safely and effectively, with appropriate skills and frameworks in place to maximise AI’s benefits while minimising its risks.

Regulation and ethics

However, regulation needs to keep pace and evolve to meet these changing requirements.  In 2020, I reviewed the guidance from around the world from all government and public bodies.  At the time there were in the region of 22 published speeches on the subject of risk management of AI.

My aim was to identify the requirement for safe and ethical implementation of AI in banking and how it could become compliant and ensure fair outcomes for customers, while serving market integrity.  The model I proposed at the 2020 IEEE International Conference on Fuzzy Systems inextricably links accountability and explainability as the key for successful AI implementation in financial services.  These overarching principles need to be underpinned by the right governance and compliance.

To establish risk and governance frameworks effectively, for safe and ethical implementation of AI, transparency of algorithms (and how they are used) is also important.  Human autonomy and respect in the way we ensure we are not using AI to nudge people to limit choices and reduce human self-agency is necessary.

Robustness and operational resilience of technology is critical for success, and AI implementations must be accurate and able to supply reliable results.  Fairness, reliability and accessibility is also important to ensure we are inclusive in our implementations.

From an ethical perspective, our AI implementations must benefit society as a whole and be in-line with organisational and personal principles and values to retain the authenticity of our work.

The education is there.  We all need to learn, change, adapt and grow to be part of this new movement.

The International Compliance Association (ICA) is the leading professional body for the global regulatory and financial crime compliance community, and provides support, training and qualifications to compliance professionals. 

As digital communications improvements made the work from home revolution inevitable, some employers were ahead of the curve in allowing employees to work remotely, while many clung to mandatory office attendance. Then Covid-19 swept the globe and suddenly everyone who could work remotely did so by necessity.

By Adam Glick, Chief Information Security Officer, Rocket Software

This posed a serious challenge for IT teams within the financial services industry. Historically a group prone to err on the side of caution due to the sensitivity of their data and the regulations they are mandated to follow, financial institutions scrambled to figure out how to keep the security of their systems and data intact while providing access to employees who work from home almost overnight. While telecommuting presents many challenges in terms of company culture and adaptation, it is the technological hurdle of ensuring data security as workforces migrate from the office that created the greatest risk for financial companies.

Thankfully, the modern-day terminal emulator allows remote employees to access their company mainframes no matter where they may be working that day. Replacing the remote terminals of the late ‘90s, emulators recreate the terminal interface on the user’s desktop, browser, or mobile device. But this utility and versatility is exactly why security is so vital in a work from home environment. If an employee can access the mainframe from any location, their access is only as secure as their local network. A user-friendly, feature-rich platform that is being constantly updated provides far better security than outdated emulators that aren’t kept up to date with security patches.

A Cohesive Response

Cohesion is the primary hurdle to maintaining security and continuity among a geographically widespread workforce. Without a consistent and reliable work experience for all users, controlling a company’s flow of information becomes a Tower of Babel nightmare. Security and IT professionals have no way of policing and perfecting data pipelines if every employee is using his or her own system to work from home and interface with sensitive information. If a chain is only as strong as its weakest link, a fiscal record is only as secure as its least protected remote worker’s computer. Without a reliable and uniform system through which employees can process data, this creates a chain with so many weak points that no IT department could possibly watch them all.

For a terminal emulator to guarantee the security of our financial institutions’ data, it must be just as protected at every employee’s home as it is at headquarters. Maintaining compliance with security innovations and cryptographic protocols from across the industry is therefore critical. Ideally, the IT teams setting up these security measures should be able to do so quickly and easily with a scalable, intuitive, and user-friendly system.

Ease of Use is Key

Usability is vital when choosing a terminal emulator. This translates not only into more efficient workflows and fewer lost hours, but also to a more secure operation for the institution and its employees who work from home. The easier a system is to use at the individual level, the less likely that individual is to make an error that creates a security risk. A great emulator is also highly configurable, allowing individuals to set their own environment to maximize comfort and efficiency while their supervisors or administrators can set permissions, host sessions, create new sessions, and manage multiple sessions. User authentication management is also vital to keeping data safe, and a terminal emulator should have multiple authentication fail-safes available for leaders to choose from.

Ongoing Updates

Teams have been tasked with keeping up with chaotic times, including both hectic world events and the unstoppable march of technology. If financial institutions are now responsible for reacting to the Covid crisis and its promised future of remote and hybrid workforces, the people who develop the software they rely on should be just as diligent and devoted to the solutions they provide.

New security threats emerge every day, so a terminal emulator that is regularly updated to keep up with potential security risks will benefit organisations the most. Futureproofing must also be a priority, both for leaders anticipating the next wave of change in employment management, and for software manufacturers looking to present the ideal product to security-conscious consumers.

Spreading the Solution

Even after the pandemic has been brought under control, many companies will adopt a more flexible schedule, allowing employees to work from home several days a week. To prepare for this shift, it is vital to ensure the security of our financial systems by investing in modern terminal emulation software. These systems must be customisable and easy to use to minimise learning curves and potential user error. They must also be supported by constant and forward-looking upgrades that include cutting-edge security measures to protect sensitive data. With the right technology, financial institutions have the ability to support their employees and ensure the security of valuable data—no matter where in the world their workforces happen to be.

Adam Glick is a vice president and chief of information security at Rocket Software, a Boston area-based technology company that helps organisations in the IBM ecosystem build solutions that meet today’s needs while extending the value of their technology investments for the future. Before joining Rocket Software, he served as VP of cyber risk at Brown Brothers Harriman and as head of information technology at Century Bank before that. He is also an adjunct professor at Boston College, where he teaches graduate courses in cyber security.