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If there were any doubts about the need for scaling digital transformation urgently in banking, the pandemic dispelled them all. So, our banking trends outlook for 2021 stays with the 2020 theme of “scaling digital transformation.”

As always, they are grouped into business and technology trends.

Business Trends 2021

Trend #1: Scaling Digital Business Innovation

Banks can look at scaling business innovation along the three axes of product, process and people.

Product innovation, from design and development to delivery and distribution, should be digitized and scaled, both in terms of time and reach. The innovation cycle has to be crashed to match that of new-age providers, and reach needs to be improved from the previous 2-3 percent success rate to meet the new benchmark of 10 percent; this means banks must target not only their own customers but also consumers who buy their products from fintechs, retailers and third parties. Clearly, legacy banking processes will need to be rewritten to align with new demands, such as a much shorter time to market. Everything from test launches to customer selection will be a candidate for digitization. Finally, digital business innovation should focus on improving the quality and productivity of remote workers through reskilling, redeployment and digital enablement.

Trend #2: Scaling digital engagement

In marketing, a moment of truth is that time when a customer or user interacts with a brand, product or service to form or change an impression about it. Companies famed for their customer experience, such as Apple, Amazon and Google, know how to capture the 4 moments of truth in a customer journey – at the exploratory (zero moment of truth), engagement (1st), experience (2nd) and renewal (3rd) stages. Banks should also enrich the interactions at each moment of truth to retain the loyalty and advocacy of their customers. In a multi-industry analysis1 by McKinsey, banking industry leads with a staggering 73% of customer interactions being digital – It’s now time for banks to optimize their channel strategies and shift their focus to digital infrastructure and beyond.

Trend #3: Scaling operational transformation

Incumbent banks, suffering 50 to 60 percent cost-income ratios, are fast losing ground to their digital rivals, whose CI ratios hover in the 20 to 30 percent range. Before they slide further, these banks must scale operational transformation at speed and scale, starting with shedding non-core assets, divesting non-core competencies such as data center, infrastructure and network management, and cutting capital expenditure by subscribing to cloud-based services.

Trend #4: Scaling work, workplace and workforce transformation

Covid-19 has turned the concept of work on its head. With branches scaling down and customers banking on digital channels, many kinds of in-person work need to be transformed or digitized. The workplace, which used to mean the branch or bank office, is now more likely the home of the customer or bank employee. So, the task in 2021, is to align the workplace context to digital delivery, and support an increasing number of transactions from “non workplace” locations. Even the workforce has changed beyond recognition. In 2021, we expect banks will expand their workforce of career bankers to include short-term and part-time employees, workers from the gig economy, and people from diverse backgrounds. They may also need to rebadge, reskill and repurpose existing employees, such as direct marketing staff, whose jobs may have gone digital or been automated.

Trend #5: Scaling risk management

The economic crises of the past, whether it was the Asian currency crisis, dotcom bust or sub-prime financial crisis, dried up banks’ liquidity. But in the recession fueled by the pandemic, banks are facing both liquidity and solvency risks together for the first time. While they have learned to deal with liquidity risk over the years, they will have to find ways to mitigate the large-scale solvency risk that is staring them in the face. One thing to do is to monitor it from more than just a financial perspective; banks should also watch out for risk of insolvency at the hands of departing customers, employees and shareholders in the new year.

Technology Trends 2021

Trend #1: Scaling a shift towards composable architecture

Banks can be viewed as a composite of smaller living organisms in the form of a deposit wing, lending business, trade finance operations, payments unit etc. that are contributing and thriving on their own. In 2021, the focus should be on leveraging their cumulative capabilities for bigger benefits. A composable architecture enables this by allowing the strengths of one element to be leveraged to benefit the others. Migration to a composable architecture can be accomplished in chunks, component by component, without disturbing the business of the bank. This architecture future-proofs the bank by enabling it to respond to future challenges – such as a pandemic – with agility, and making it highly scalable. It is also intelligent enough to optimize things, such as the channel mix, through self-learning and provision its own server, infrastructure and memory requirements automatically using artificial intelligence, machine learning and pattern analysis. We expect banks to invest in composable architecture and take transformation to the next level in 2021.

Trend #2: Scaling a shift towards public cloud

By limiting the entry of personnel into data centers and forcing operations to go remote, the pandemic eroded the traditional advantages of owned data centers. This drove businesses towards the cloud, which now held all the aces – scalability, agility, cost-efficiency etc. In 2021 we expect banks to discard on-premise thinking in favor of a cloud-first approach, going progressively from a private cloud to a virtual private cloud under public cloud infrastructure, and from there on to a hyper-cloud and finally, a poly-cloud environment. Another benefit of shifting to this environment is access to a huge community of developers for external innovation.

Trend #3: Scaling API-led possibilities

This year, banks increased their use of APIs for reasons other than regulatory compulsion. When customers flocked to digital providers during the pandemic, it exposed traditional banks’ shortcomings in customer experience, engagement and innovation. The banks realized that they needed API-first thinking while building new applications in order to consume external innovations as well as allow third-party developers to build innovations on top of their (the banks’) services. We expect they will continue on this path in 2021, with domain/ business/ function-oriented APIs.

Trend #4: Scaling value with data and artificial intelligence

While AI has figured prominently in the last two or three year-end predictions, 2021 is when banks will go from experimenting with AI to generating real business value from it. This is the first time they will earn value from AI across the front, middle and back office – by reducing fraud, increasing efficiency and productivity, refining understanding of customer behavior, or targeting products and promotions at the right customers. In the new year, banks will scale AI solutions beyond RPA use cases to improve the business, add revenues and lower costs.

Trend #5: Scaling distributed ledger technology

Like AI, distributed ledger technology will also emerge from the experimentation stage to deliver business value in the coming year. An important example of value creation is inter-organization automation. Being highly secure, transparent and cost-effective, DLT-based networks are ideally suited to carrying cross-border payments, for facilitating trade finance transactions including documentation, and even for issuing centralized digital currencies. We believe the technology promises all this and more in 2021, when not just banks but even regulators and government bodies will leverage it to digitize land records and individual identification information, or to carry out capital market transactions. In fact, a huge use case could be to use DLT to maintain Covid-19 vaccination and supply chain records around the world!

For more insights on the 10 trends that are reshaping banking in 2021, click here.

Source:
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-covid-19-recovery-will-be-digital-a-plan-for-the-first-90-days

As the last few days of 2020 played out, one looked back at the year with just a tinge of “good riddance” in the heart. After all, the year had begun with much promise; this was the year that ‘Vision 2020’ would come to fruition and all the ‘Trends for 2020’ would become everyday reality. Oh, 2020 had such a nice ring to it!

Little did we think that hoodies would become the hottest business attire of the year, or that we would learn a new term, “Social Distancing”, the inherent irony of the oxymoron notwithstanding. And we were signing off emails and calls with “Stay Safe”!

But dark clouds do indeed have silver linings. What 2020 did achieve is to bring digitalization of financial services delivery front and center and make it the #1 priority. After all, if customers can’t come to the bank, then the bank must go to the customer – even the non-Millennials.

2020 also heralded the era where we are all inextricably tethered to our devices and AI drives what we watch, who we date and indeed, how we engage with the world.

So, what does this all mean for lending and asset finance companies? How do they address the traditional challenges as well as the new ones brought on by the “new normal”? Most importantly, how do they survive in this age of Instant Gratification?

It’s about the Experience

Ownership of a product holds less meaning to today’s consumer than it did a decade ago. Having witnessed firsthand their parents struggle to come to grips with their assets losing equity during the global financial meltdown, they believe that things are momentary, whereas experiences are timeless. A product sold does not automatically translate into a happy customer; but a ‘wow’ experience at various moments of truth would almost certainly turn a customer into an advocate for the brand.

For lenders, this means an opportunity to transform the overall journey from a transaction to a lifecycle, by converting every interaction with the customer into a memorable experience. Interactivity, intuitiveness and customization are the topmost criteria for most customers today. Since the origination process is the first touch point to the customer, lending institutions need offer a personalized origination experience taking into account customer relationship as a whole rather than one product or service at a time.

The need of the hour is for a robust servicing platform backed by futuristic technology. Do away with the lengthy processes and cumbersome offline protocols. There is a need to accept, process and decision credit applications in a paperless mode, with a single data entry process. Lending and leasing institutions should be able to provide seamless channel integration to ensure an application can be started and closed on different channels of customer choice.

It’s about ‘Here’ and ‘Now’

“If my ride can arrive at my doorstep in 5 minutes; if my food can be delivered in 30 minutes; and if my e-commerce transaction can be fulfilled on the same day, all of this with the click of a button, then surely I don’t need to wait for days to get a loan or go to a branch…”

If that sounds familiar, it’s because traditional lenders haven’t embraced technology like their peers in other industries have. Uber wasn’t built in a day, but today ‘Uberization’ personifies Instant Gratification. Waiting is not appreciated and instant servicing is the greatest differentiator.

Lending platforms need to talk the language of their consumers. This means that from credit decisioning to the processing and fulfilment of the application, the entire procedure needs to be lightening quick – at least quicker than the closest competition. This is only possible if the underlying technology facilitates fast processing with smart business insights and real time reciprocation of consumer choices. And this should all be done in a manner that the consumer still sees things as if they were just one touch away.

It’s about “Know me, Empower me”

Traditional lending practices have placed credit history above all else, which means that entire segments of potential customers have fallen outside the net due to a lack of proper credit history. Compare that to today’s FinTechs who have aggressively used any and all available data to not only create a whole new segment of customers, but also poach them from the existing lenders.

Consider this: Many FinTech lending platforms assess borrowers not just on their available credit history, but also by looking at other credentials, such as the pedigree of their educational qualifications, and leveraging Machine Learning to analyze purchase and payment transactions and in some cases also the reviews that customers of businesses leave on social media like Yelp or TripAdvisor.

The right use of customer information should occur at the right time and this is only possible with digitalization of processes. Lenders not only need to offer the right mix of products and services at the right time, but also keep the customers informed about the entire process on their channels of choice while making the process interactive. This should be topped with the best prices based on the customer relationship and previous records. Digital technologies can also facilitate the minimization of delinquencies through better business intelligence and insights from consumer data gathered over the course of the relationship with the lender.

Any kind of negotiation, resolution or pay back can happen with the proper bucketing of customer data. This can potentially change a process that is perceived as painful and uncomfortable by many to a memorable brand experience that can increase the net promoter score for lenders.

It’s about Servitization

Servitization is the delivery of a service component as an added value, when providing products, and is a growing trend in Asset Financing. It has the potential to radically alter the way manufacturers go to market. In some servitization models, the customer owns the product and takes advantage of related services; in other models, the product itself is provided as a service. The servitization trend capitalizes on consumers’ growing comfort with subscription or ‘as-a-service’ offerings and buyers are beginning to expect the same experience in their B2B interactions.

With servitization, manufacturers can deliver the high-quality, personalized experience that customers want, with a complete service offering – from product selection to installation, maintenance, upgrades, insurance, and consulting. By improving the customer experience, manufacturers foster longer relationships with customers, increasing profitability, and customer loyalty.

To capitalize on the servitization trend, asset manufacturers need a lending and leasing system that can accommodate flexible terms, such as pricing per mile or hour, or a combination of traditional rental and usage fees. Internet of Things (IoT) is a crucial enabling technology underpinning the rise of servitization. IoT enables products to automatically communicate data about product usage, location, condition, and performance between all parties’ systems and devices, facilitating usage-based payments and superior customer service, from managing and planning maintenance to upgrade opportunities.

Servitization also enables customers to enter into a flexible lease based upon actual use of the product. If customers use the equipment for less than the contracted timeframe, they pay less. If they use the equipment more, they spend more or return the equipment at a predetermined product lifecycle threshold. This is a win-win for both customers and manufacturers as the customer only pays for what is used and the manufacturer doesn’t have to recoup a depreciated asset.

And finally, it’s about keeping it Simple

Interactivity, intuitiveness and customization are the topmost criteria for most customers today. This means an intuitive process with data based underwriting and centralized documentation of customer details. On top of it, all of these features need to reflect in a truly user-friendly user interface.

Digital ways of consumption of products and services are clearly here to stay and it is only going to get more sophisticated in future. As automation becomes imminent across lending products, a digital platform becomes an obvious choice for the aspiring leaders in the industry and a sturdy lending and leasing engine with a modern architecture, complete with support for IoT and the flexibility to adapt products to a subscription-based offering can go a long way in this context.

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An article by Vijay Kasturi, Head of Sales & Business Development – Western Europe at Profinch Solutions

By Adam Matuszewski, Head Equity Products, The Swiss Stock Exchange, SIX

Throughout 2020, European MTFs were unable to trade Swiss stocks – because the EU had denied the Swiss Stock Exchange equivalence in mid-2019. So, when the COVID-19 pandemic caused highly volatile stock price movements that lasted for several weeks, the Swiss market felt the full brunt of trading in Swiss shares, setting us up for an extraordinary 2020.

Despite the uncertainty, fair and orderly trading was ensured at all times within the Swiss ecosystem while managing to keep spreads tighter and recover more quickly than many European markets. Investors of any size and provenance could swiftly adjust their positions in Swiss shares based on their strategies, ultimately minimising the damage for the economy as a whole. This reliability and resilience allow financial market participants to be optimistic, should volumes surge again during a potentially sudden and vehement recovery in 2021.

An unpredictable 2020
Stock exchanges have traditionally been subject to – and designed to handle – fluctuation depending on external variables, but 2020 took this to new heights. COVID-19, international panic around geopolitics, and general uncertainty in global markets hit Switzerland like we hadn’t seen since January 2015, when the Franc was de-pegged from the Euro. Six years ago, the shock only lasted a day, whereas the impact from the pandemic has lasted months, albeit including unprecedented volume spikes in March.

Last year, some exchanges have tried to sit out the storm by closing their market and suspending trading. However, when they re-opened, all the temporary closure brought was further uncertainty in a time when investors were looking for open markets able to cope with crises. We saw this in the Philippines when the PSE closed for two days only to be followed by stock prices tumbling 30 per cent immediately after reopening. This is why scalable infrastructure has become increasingly important; it allows for a more seamless response to unforeseen circumstances, and is one of the reasons why ensuring functional market infrastructure continues to be a key focus for us in the coming year.

Lessons learnt
Besides offering the Swiss Financial Centre a chance to prove its stability and resilience, the extraordinary circumstances caused by the pandemic against the backdrop of non-equivalence also provided a unique opportunity to investigate the impact of liquidity consolidation on the market quality. Ever since the Market in Financial Instruments Directive (MiFID) entered into force in 2007, liquidity in equity trading was fragmented across several trading venues; now the effects of liquidity consolidation could actually be assessed on key areas such as trading activity, order book quality and prices. The results clearly show that spreads have been largely unaffected, and depth of liquidity has actually improved. Further, trading became more efficient as evidenced by lowered Order-to-Trade ratios and less ghost liquidity spread across venues.

So, despite the undeniable benefits of competition introduced with MiFID I and MiFID II, what has been clearly confirmed by our research last year is that liquidity consolidated in one place tends to be more resilient to volatility shocks than liquidity that is fragmented over several venues; and obviously, search costs are reduced to zero. Based on these facts, I think we should embrace a new debate on market structure that addresses the question how much competition is beneficial for the market and at where we might reach the tipping point where its downsides outweigh the benefits.

This debate about the future of trading should include the perspective of exchanges and all market participants, including the buy-side, mid-tier and smaller market participants.

Outlook for 2021
When looking back at 2020, it makes it hard to predict with accuracy what’s to come in 2021, as the past year has shown that anything can happen. But despite all the new uncertainties that Brexit might bring, it could end one – by reigniting competition for market share in Swiss stocks in 2021, even if the equivalence status of the Swiss Stock Exchange will not be reinstated by the EU. The reason is simple: most MTFs where Swiss shares could be traded are located in the UK, so we expect the market will start finding its new balance between liquidity on the primary exchange and alternative trading platforms.

Ultimately, we hope to see a return to normality within the trading ecosystem, and more healthy competition for stock exchanges. We know 2020 has been a difficult year. However, opportunities await, and we’re optimistic for the future developments in Swiss and European equities for the years ahead.

Adam Matuszewski
Head Equity Products
The Swiss Stock Exchange, SIX

By Ted Sausen, Subject Matter Expert, NICE Actimize

On September 20, 2020, just four days after the Financial Crimes Enforcement Network (FinCEN) issued a much-anticipated Advance Notice of Proposed Rulemaking, the financial industry was shaken and their stock prices saw significant declines when the markets opened on Monday. So what caused this? Buzzfeed News in cooperation with the International Consortium of Investigative Journalists (ICIJ) released what is now being tagged the FinCEN files. These files and summarized reports describe over 200,000 transactions with a total over $2 trillion USD that has been reported to FinCEN as being suspicious in nature from the time periods 1999 to 2017. Buzzfeed obtained over 2,100 Suspicious Activity Reports (SARs) and over 2,600 confidential documents financial institutions had filed with FinCEN over that span of time.

Similar such leaks have occurred previously, such as the Panama Papers in 2016 where over 11 million documents containing personal financial information on over 200,000 entities that belonged to a Panamanian law firm. This was followed up a year and a half later by the Paradise Papers in 2017. This leak contained even more documents and contained the names of more than 120,000 persons and entities. There are three factors that make the FinCEN Files leak significantly different than those mentioned. First, they are highly confidential documents leaked from a government agency. Secondly, they weren’t leaked from a single source. The leaked documents came from nearly 90 financial institutions facilitating financial transactions in more than 150 countries. Lastly, some high-profile names were released in this leak; however, the focus of this leak centred more around the transactions themselves and the financial institutions involved, not necessarily the names of individuals involved.

FinCEN files and the impact

What does this mean for financial institutions? As mentioned above, many experienced a negative impact to their stocks. The next biggest impact is their reputation. Leaders of the highlighted institutions do not enjoy having potential shortcomings in their operations be exposed, nor do customers of those institutions appreciate seeing the institution managing their funds being published adversely in the media.

Where did the financial institutions go wrong? Based on the information, it is actually hard to say where they went wrong, or even ‘if’ they went wrong. Financial institutions are obligated to monitor transactional activity, both inbound and outbound, for suspicious or unusual behaviour, especially those that could appear to be illicit activities related to money laundering. If such behaviour is identified, the financial institution is required to complete a Suspicious Activity Report, or a SAR, and file it with FinCEN. The SAR contains all relevant information such as the parties involved, transaction(s), account(s), and details describing why the activity is deemed to be suspicious. In some cases, financial institutions will file a SAR if there is no direct suspicion; however, there also was not a logical explanation found either.

So what deems certain activities to be suspicious and how do financial institutions detect them? Most financial institutions have sophisticated solutions in place that monitor transactions over a period of time and determine typical behavioural patterns for that client, and that client compared to their peers. If any activity falls disproportionately beyond those norms, the financial institution is notified, and an investigation is conducted. Because of the nature of this detection, incorporating multiple transactions, and comparing it to historical “norms”, it is very difficult to stop a transaction related to money laundering real-time. It is not uncommon for a transaction or series of transactions to occur and later be identified as suspicious, and a SAR is filed after the transaction has been completed.

FinCEN files: who’s at fault?
Going back to my original question, was there any wrongdoing? In this case, they were doing exactly what they were required to do. When suspicion was identified, SARs were filed. There are two things that are important to note. Suspicion does not equate to guilt, and individual financial institutions have a very limited view as to the overall flow of funds. They have visibility of where funds are coming from, or where they are going to; however, they don’t have an overall picture of the original source, or the final destination. The area where financial institutions may have fault is if multiple suspicions or probable guilt is found, but they fail to take appropriate action. According to Buzzfeed News, instances of transactions to or from sanctioned parties occurred, and known suspicious activity was allowed to continue after it was discovered.

Moving forward
How do we do better? First and foremost, FinCEN needs to identify the source of the leak and fix it immediately. This is very sensitive data. Even within a financial institution, this information is only exposed to individuals with a high-level clearance on a need-to-know basis. This leak may result in relationship strains with some of the banks’ customers. Some people already have a fear of being watched or tracked, and releasing publicly that all these reports are being filed from financial institutions to the federal government won’t make that any better – especially if their financial institution was highlighted as one of those filing the most reports. Next, there has been more discussion around real-time AML. Many experts are still working on defining what that truly means, especially when some activities deal with multiple transactions over a period of time; however, there is definitely a place for certain money laundering transactions to be held in real-time.

Lastly, the ability to share information between financial institutions more easily will go a long way in fighting financial crime overall. For those of you who are AML professionals, you may be thinking we already have such a mechanism in place with 314b. However, the feedback I have received is that it does not do an adequate job. It’s voluntary and getting responses to requests can be a challenge. Financial institutions need a consortium to effectively communicate with each other while being able to exchange critical data needed for financial institutions to see the complete picture of financial transactions and all associated activities. That, combined with some type of feedback loop from law enforcement indicating which SARs are “useful” versus which are either “inadequate” or “unnecessary” will allow institutions to focus on those where criminal activity is really occurring.

We will continue to post updates as we learn more.

Ted Sausen
Subject Matter Expert
NICE Actimize

By Pim Koorn, Product Director, Business Banking at Backbase

With the fourth quarter quickly approaching, banks are increasingly tasked with the difficult project of evaluating how to best support their small and medium-sized enterprise (SME) customers, all of whom are working diligently to re-emerge from 2020’s challenges and adapt to the new normal that is taking shape.

Responding to today’s current demands means that flexibility, innovation and personalisation are key requirements of any technology partner. Banks are considering how to best provide the customisable solutions their clients need in today’s current environment. SMEs are increasingly seeking partners that can provide the specific working tools that meet their fluctuating requirements. No one SME is alike. Whether they are reaching for new digital invoicing tools or seeking real-time onboarding solutions, banking partners that can best support their customers at every turn in their digital journey will remain a trusted partner during the collective recovery period.

The coronavirus pandemic has also put a newfound strain on how SMEs are managing their day-to-day operations and has significantly shaped the way SMEs are looking at their technology. In a PwC study from April of 469 SMEs on how banks can help businesses manage the rocky waves of the pandemic, the majority of respondents noted that the ability of a banking partner to tailor its support was critical to retaining the SME as a client. More than half of respondents (61 per cent) said personalised customer experience was core to the banking relationship.

These survey results underscore how a customer-centric focus, instead of a product-centric one, is the key to banks being able to optimise client relationships. Banks are already working to better understand their SME customers’ specific ways of working, but being able to efficiently cater to these needs lies in embracing technology and innovation.

By digitising paper-based banking processes, SME’s will be able to reallocate their limited time toward more important business-critical tasks. SMEs spend 74 per cent of revenue on non-core activities like bookkeeping and legal and 26 per cent on core activities that make them money, according to McKinsey. Implementing slick and user-friendly platforms can help banks remove friction and provide a more seamless experience for their clients, creating the efficiencies these businesses require.

Another way banks can help support SME clients is by prioritising optimisation. Digital-first banking platforms help solve some of the day-to-day hurdles that SMEs currently face, with solutions such as digital onboarding, digitised loan applications and digital customer signing processes. By empowering SMEs with the digital tools they need to reduce processing times from days into minutes, banks can make themselves indispensable as value-add technology partners.

Every business is currently looking for ways to streamline their operations. But banks that operate within legacy systems run the risk of not meeting the expectations of modern SME owners. By offering digital-first platforms, banks can provide SMEs with the underlying technology infrastructure that helps take the stress out of their finances. Providing access to secure and seamless mobile money management tools, banks can make SME’s lives easier – from bill payments to invoicing, and payroll to card management.

Lastly, banks that integrate new processes around transparency and real-time data will be better placed to cement themselves as long-term partners. Accessible, actionable data is how SMEs stay up to date, and leveraging real-time liquidity management tools that are backed by reporting and analytics are key to the financial health of these businesses.

With Q4 upon us, banks are understandably focused on how to best support their clients during this pivotal time. And as SMEs turn to technology to help them navigate these challenging times, banks can put their best foot forward by continuing to prioritise digital-first, customer-first services.

Pim Koorn
Product Director, Business Banking
Backbase

by George Brostoff, CEO & Co-Founder, SensibleVision

The launch of the Samsung S20 phone (and the release of the new Apple phone that’s expected to come out in the fall) have once again brought facial recognition back into the public eye.

It’s one of those technologies that we all just take for granted, but how does it actually work not only for phones but for devices such as door locks, security cameras, or even automobiles? And are the common perceptions of facial recognition even accurate? Let’s look at some of the myths and facts:

Myth #1: Facial recognition is racially biased.

Fact: There has been a lot of news coverage about how facial-recognition systems only work for people with lighter skin, and some have concluded the technology is racially biased. This is has been partially fostered by what turned out to be a controversial art project collaboration between a Microsoft researcher and an American artist.

Perceived issues with racial profiling and AI are often the result of the lack of diversity in the database that occurs when developers prioritize creating a large database over a more varied one. Lighting can also play a part, as evidenced by research of Joy Buolamani. The MIT Media Lab researcher found that some cameras had difficulty interpreting the composition of facial features on individuals with darker skin tones, leading to inconsistent results. However, there are currently facial recognition solutions available that provide consistent results, regardless of the subject’s complexion, as developers learn how to work with a variety of faces and lighting conditions.

Myth #2: Facial recognition can be easily hacked.

Fact: While many implementations have proven to be insecure and can easily be hacked by photos, masks, or videos, this is not inherent to face recognition as a concept, but to the vendor’s technology and approach. Simply put, bad technology doesn’t work very well, but good systems do.

Facial recognition technology is rapidly improving to the point that many systems can detect minor changes in appearance, such as glasses, facial hair, makeup, and even partial obstructions. Advances such as “active liveness detection,” where a user executes an action such as squinting, blinking, or making a face, can render it far more difficult for hackers to spoof a facial recognition system; combined with “passive liveness detection,” which employs internal algorithms to detect imposters, it’s no easy feat for hackers to successfully bypass facial recognition systems.

In some instances, storing biometric information, such as face templates, locally and subsequently sharing that information only with authorized devices, may be more secure and less susceptible to hackers (albeit potentially less convenient) than storing that info centrally on the cloud. If vendors are cognizant of potential issues and implement preventative security measures accordingly, facial recognition technology is no easier to hack than other, comparable systems.

Myth #3: Facial recognition will always be a fringe technology because people are worried about their privacy.

Fact: While face recognition privacy is a hot topic in the news, hundreds of millions of people use it daily to access their phones and interact with other devices. Where transparency, speed and high security is desired, almost nothing can provide the same level of convenience and accuracy.

Facial recognition tech is already far more ubiquitous than one might think. While some jurisdictions, such as the city of San Francisco, have placed a ban on agencies such as law enforcement and transport authorities from employing facial recognition tech, it’s exploding in industries and fields as diverse as retail, road safety, home security, and even agriculture, where farmers are using it to identify and track animals, help mitigate the spread of herd-killing diseases unintentionally transmitted by workers, and measure an animal’s vital health information.

While the general public is often wary of the implementation of facial recognition tech by sectors such as law enforcement and the military, its unmatched expedience, precision, and practicality mean that people are increasingly open to incorporating such technology into their daily lives.

Myth #4: Facial recognition doesn’t work well in low-light situations.

Fact: Ironically, Some facial recognition technologies actually work better with less light! This may sound counterintuitive, but with the right technologies the darkest night or even the brightest sunlight need not reduce the accuracy or performance.

Low light conditions shouldn’t be a barrier to the functionality of 3D imaging. Problems with elements such as accuracy and depth manifest when infrared oversaturation occurs – such as when users whip out phones or other devices in full sun or near highly reflective surfaces. These options tend to test well in the lab, but not so well on the beach or next to plate glass windows. Fortunately, many developers have taken note of this and managed to work around the problem to ensure that the technology functions in a range of settings and locations – be they a cave at midnight or a desert at high noon.

Myth #5: Facial recognition is only for high-end devices.

Fact: Cameras are being included in most everyday devices. And the computing power to accurately process those images is already present.

This means facial recognition technology is only likely to increase in popularity – and decrease in cost. You’ll find it embedded not just in law enforcement security tech but in products as common as door locks and restaurant payment systems, as well as in health care screening devices and programs and in retail stores. You may be surprised to learn that your phone, laptop, or tablet already feature facial recognition software, or the capacity to incorporate it. Essentially, if a device has a camera, it’s probably capable of employing some kind of facial recognition technology – if it doesn’t already.

By Brian Coburn, CEO at Bridge

The ability of COVID-19 to dramatically change consumer buying behaviour continues to challenge the e-commerce world.

Lockdown restrictions, customer anxiety over physical spaces, and increased screen time across all demographics has created an e-commerce boom of unprecedented proportions. Online operations have been tested to the limits and even the most traditional businesses have found themselves forced to pivot and innovate to find new ways of engaging customers. For many retailers, e-commerce has gone from a secondary channel to becoming the primary connection to customers, which makes a strong, resilient online payment structure even more critical than ever to capture every possible transaction opportunity.

Amidst the chaos, many fledgling payment trends have accelerated and previously niche innovations have received a boost.

Consumers have been prompted to try out new or alternative mechanisms such as mobile wallets, payment services, person-to-person transactions and order-ahead apps as they adapt to the new, socially distanced ‘normal’. As much as we all want to see the back of this pandemic, it is unlikely we will see a full retreat from online retail and many of the new payment provisions that have swiftly gained popularity.

Now the ball is in the e-commerce court to catch up and keep customers spending online. It demands a reliable mechanism to minimise cart abandonment and incomplete transactions, the ability to take payments in more varied, innovative and flexible ways, and processes for collecting data to understand what has worked – or not – and why.

None of this is simple or straightforward. In fact, a relatively new term ‘payment orchestration’ is likening the need for management and integration of the many active parts and processes involved in transactions to the task of conducting an orchestral performance. It reflects the challenge of accommodating a growing array of customer payment preferences while also navigating the increasingly complex and fragmented integrations associated with needing to connect to different payment services.

In times of uncertainty, we look for what we can control. The same mentality is apparently behind the rush to stockpile toilet rolls in the early days of the pandemic. But through the lens of e-commerce, control – and resilience – are exactly what businesses need to shore up. With payment orchestration, vendors regain ownership of their payment platform and it puts the complexities of dealing with multiple payment service providers back under their control. E-commerce vendors can then achieve a much clearer, consolidated view of the whole payments infrastructure and support the speed, convenience, personalisation and trust that customers want from online retail.

In the ‘new normal’, these will be the most important influences on the ways in which people choose to shop and engage online and, ultimately, pivotal in the success of e-commerce operations.

Brian Coburn
CEO
Bridge

Bridge is a new payment orchestration layer for e-commerce enterprises that want to unlock the potential of existing and new digital payment services. Bridge has been created to put payment control in the hands of the merchant. Its single integration layer delivers more control over payment service providers, consolidates internal reporting, builds resilience and enhances the ability to test new payment innovations and opportunities at speed.