Welcome to Finextra's live coverage from Day 2 of the SAP Financial Services Forum in London. The theme for this event is 'winning in the digital moment'. The agenda will examine how technologies such as AI, machine learning, analytics, blockchain, open APIs and the cloud can be best leveraged to deliver truly digitised financial services.
13.10: That concludes our live blog from the SAP Financial Services Forum 2017. Clearly the focus on customer experience is key for many of the financial institutions we have heard from over the course of the event. Understanding the new technologies that are available to simplify this relationship, and what the infrastructure looks like to be able to take advantage of such leaps forward, are critical.
13.08: In the Simplifying Finance stream, David McCarthy, Chief Financial Office at Atom Bank addressed how to use technology to tackle the frictions in banking.
Atom Bank’s approach is to provide customers with a self service app that meets their needs. Atom is the first mobile focused bank with a retail and SME product offering. will.i.am is a brand sponsor and spokesman to the bank given his social media following and association with new technology.
Frictions are experienced by both customers (imperfect information, cumbersome account opening and servicing) and shareholder (products port process for risk, clunky approach to compliance) and can be better balanced and managed.
The aim is to put control in the hand of the customer through delivery channels (currently apps), competitive pricing, self-service, easy account access and more through 24/7/365 support.
As a bank, McCarthy noted that you tend to work around five key decisions-pricing, capital allocation, risk appetite, resource and talent and funding. Using a mathematical focus and a data driven methodology you can better decision on the key issues. Technology is as enabler to optimise your decision making.
Increasingly the use of machine learning is important and Atom works with Durham University to achieve this. The aim is that this all brings friction free banking closer to customers and closer to shareholders.
13.01: The Simplifying IT stream earlier included a presentation on ‘Future proofing your business with AI’. This was delivered by Richard Harris, Head of International Operations at Feetzai; and Brendan Goode, Global Head of International Security Operations at Deutsche Bank.
Feetzai provide a layer of security using modern tools and AI to Tier 1 banks around the world. SAP invested in their expertise and offer their services on a SP platform.
Goode highlighted the way in which digitisation drives faster services and products to market but security protocols and policies have to keep pace. You should make decisions on security early in the process of new services and many areas in a bank need to be involved in this.
The advent of new technologies opens the market to new entrants without legacy overheads, improved customer experiences and more frictionless engagement. The technology is in place to capture data, store it in one place and be better informed about the customer needs through its interrogation. A challenge is to match the services to customers you offer with the best approach to managing security. Both have to be seamless.
Open Banking and GDPR means that data is spread out wider in the industry and this needs to be managed. How you validate who you are dealing with and manage security controls is a challenge. You set rules and processes for knowing who you share data with to meet data privacy requirements. There will be more focus on managing third party organisations.
Harris highlighted the point that data risk and transaction risk come together as money moves fast. This more open approach will lead to tighter security controls yet this leads to customer frustration if the process is not slick.
But clients have to be educated too. Often it might be clients who have weak controls and if their data is not secure it is a weak link in the overall bank to customer chain. Goode stated the importance of working with customers on this to understand the risks they inherit and we move more digitally.
Harris highlighted the focus on anomalies management and increasing this means taking various data stream and detecting fraud through machine learning. The better you capture all the data in real time the more effectively to detect unusual behaviour.
Biometrics and two factor authentication at the front end is important but equally so is data management to spot unexpected trends as transactions are initiated. Both are important.
12.55: That wraps things up for the customer experience stream. However, we have some highlights from both the Simplifying IT and Simplifying Finance streams to share with you.
12.52: A question from the audience asks about collaboration with fintechs. How do incumbent organisations identify and validate what the capabilities of fintechs are? Vaghela says that fintechs will survive or not survive, banks need to understand what their first goal is, and ensure that their collaboration is loosely coupled so it can be removed if required, and be flexible to plug and play.
12.50: With their loyalty programme, Tesco knows more about its customers than they do themselves, Lemon says. The ability to monetise this data has huge potential.
12.45: You need to understand your customer, not just what they did in the past but to be able to predict what they will do and need in the future, says Vaghela, This is all driven by data capabilities.
12.43: Banks do a thousand things moderately well, but the key is find what you do really well and focus on that, agree Vaghela and Lemon. Long adds that data capabilities are critical understanding this and to drive and improve customer service. At his organisation, data capability underpins digital capability.
12.41: PSD2 is a golden opportunity to be able to push change of your infrastructure. If you can do this, you will be able to react more quickly to customer expectations, notes Vaghela.
12.37: PSD2 is seeing some banks do the minimum to comply, while others are seeing this as an opportunity to change and are investing heavilty in this, says Lemon. Trying to resist this change is a mistake and you will struggle to stay relevant in the future, he says. Long adds that the questions banks are asking around this transformation needs to be underpinned by high quality data.
12.35: Collaboration depends on what you want from it, Vaghela says. Some banks will do it just to see what is new, whereas others will use it to genuinely improve the customer experience. Banks cannot be for everyone, it is important to understand what is core and focus on that, then choose the best partners on the market to plug in for additional services, he notes.
12.32: Have banks learned to work with fintech startups? Lemon says it is getting there, but it is not yet fully realised. PSD2 will be a driver to this accelerating even faster. Today this collaboration is greater with the startup/challenger banks than with traditional banks.
12.28: While Margaris stays on stage, we substitute in a new panel, made up of Chris Long, Head of BI and Data at Leeds Building Society; Stephen Lemon, Co-founder and VP, Business Development at Currencycloud; and Bhavesh Vaghela, Digital Product Owner with TSB. Their focus is on 'Making fintech integration and APIs work in practice'.
12.26: The need to drive your customer base to automated digital processes is critical from a cost perspective, Rieker says. Van Niekerk adds that he had not anticipated the 5x increase in mobile usage that was driven by including the in the Vitality app. You need to have an integrated view in the product design.
12.22: An audeince member asks what the approach organisations take to become customer centric. It is design-centric thinking, says Van Niekerk. In a medical case, you need someone with medical experience, as an example. He also says that having the voice of the customer in the room as well is essential to avoid any technology bias, for example.
12.18: Rieker says the urgency from customers around digital transformation has never been higher. Banks are fully aware that this has to be a priority, and they are going about it in the right way by being open to many different partners on the journey. Van Niekerk says that investing in platforms and networks that you can bundle together in different use cases is supporting this urgency.
12.15: Modi says that companies may have their breakfast eaten by competitors, but this should push them to improve to compete in the survival of the fittest. Customers want the best solutions for them, they are not too concerned with being brand loyal, so organisations need to see things from the customer perspective when innovating.
12.10: It is very beneficial to have an enterprise view of digital transformation, says Rieker. Banks are already complicated enough, they should not add to this complexity. Should they start from scratch? No, Rieker says that you can leverage existing investments, but be ready to open up to APIs.Data management is also essential - the way that banks are dealing with data today is not good enough for the digital environment, he says.
12.08: Van Niekerk agrees with the words from Davis earlier, that platforms are key, particularly in the health insurance industry. His company uses a platform of expertise that is ripe for digitalisation. Aggregating device data is important. Agility is also vital, says Van Niekerk. Every member of the team needs to have a common language around innovation.
12.05: Moving into the digital age, companies need to change their outlook, but are they ready to change? Modi suggests they are. All companies are being disrupted, which is making them focus on the customer experience - not only to attract new customers, but to retain the loyal existing customers that organisations have.
12.00: Next up we’ve got a panel discussion, featuring Joe Van Niekerk, CIO at Discovery Vitality; Rahul Modi, Managing Director of Adarsh Credit Cooperative Society; and Falk Rieker, Global VP Banking at SAP. Our moderator is Spiros Margaris, Founder & VC of Margaris Advisory.
11.58: Power is also critical in this journey. As older companies move to a more fluid digital organisation, power is being redistributed around the organisation where it is needed, says Davis. The dynamics around talent are shifting as data opens up, such as Dundee being the hub for gaming technology. Banks need to understand where geographically to plug in parts of their business, nearer the coalface where they can have impact. Davis says companies need to rethink power to unlock value.
11.55: Platforms are layers of software that collect data. Davis uses LinkedIn as an example, it collects data on you and other people who have worked with you, and then uses an algorythm that can suggest possible job opportunities. Platforms are growing all around us, particularly when you look at the IoT. They are also becoming intelligent - collecting layers of data around every area of our lives.
11.49: Davis relays a poll of business leaders that shows they are finding the shift to digital difficult. There is a lack of clear digital strategy, things are moving too slowly, and companies are employing the wrong leadership executive, according to the survey. However, Davis says he is energised by some of the presentations and conversations at this event that things are starting to move in the right direction in financial services.
11.43: Now it is time for the breakout stream to begin. The topic is 'Real-time, relevance and revenues - How to win with personalised customer experiences, integrated in the customer’s value chain, in real-time - profitably'. First up is a presentation from Euan Davis, Associate Vice President of Cognizant Technology Solutions. He is looking at defining the opportunities from a an instrumented world. He begins by referencing Deep Knowledge Ventures, a company that has just elected a robot to its board. It has an equal vote to the other board members, highlighting the power of data anaylsis capable from new technology.
11.15: There's now going to be a short break. When we return, we will be focussing on the Simplifying Customer Experience stream.
11.11: The IFRS17 requirements need any implementation programme to result in a flexible and fast system, says Ferrari. With data processing and storage, data for one year and all companies takes around two days to complete. Using the CDS-views, this is only takes 15 minutes. These are real results, notes Ferrari, not just simulations.
11.06: The new technologies recommended to the client are to ensure data availability, which is a key requirement for IFRS17. By using CDS technology, data is processed in-memory, which significantly reduces the runtime of financial close, according to Kleehause. Data can be directly delivered to consolidation, and it is available almost in real-time for the reporting layer of the organisation.
11.01: For its client, EY ended up recommending SAP for their finance function, including a new subledger, S/4HANA for the general ledger, and new implementations of SAP solutions in reporting and analytics, and consolidation.
10.57: Implementation will have a significant impact on the existing systems, says Ferrari. Additional data requirements to support the new measurement, presentation and disclosures will require changes in source systems actuarial systems, general ledger and the consolidation system.
10.53: IFRS17 implementation has many challenges. Do you do the minimum compliance required, or spend to create an efficient finance function. Understanding the commercial impact is key, as is understanding the data that is being analysed. Across data and systems, Ferrari says that the implementation creates high to medium complexity.
10.50: There are three key drivers for IFRS17, Ferrari says, standardisation, system and data architecture, and process performance, including data analytics.
10.45: Now it is time for a keynote presentation that will provide a case study of IFRS17. This is being given by Michele Ferrari, Partner, and Alexander Kleehause, Senior Manager, both from EY, and will look at how innovation can be leveraged to improve finance performance.
10.44: There is a responsibility to create customer experiences that enable technological change, says Goodall. With deep loyalty comes deep trust. Banks have the trust, and combining that with the fintech capabilities is a powerful propositions. Desmet looks at a couple of areas, the first of which is the customers. They want to pay, to borrow, and to save. This will not change. Secondly, if you look at the industry sector, payment flows and associated profits are leaving the traditional banking world. There will also be a separation between the 'winners and losers', he says there is a technology arms race taking place and open banking will really highlight this. Finally, regulators will step in to focus on stability in the time of crisis, which will further boost the winners, he notes.
10.39: Resilience, agility and optionality are critical for banks to be successful going forward, notes Turunen. For insurance organisations, the structure of risk is changing, Winter says. The severity of risk and claims can go up substantially as technology evolves. While disaster likelihood can be reduced by technology, disaster will still occassionally happen and when it does the claims will go up accordingly. Delivery method of insurance policies will be far more targetted, however, creating efficiencies and making it more affordable.
10.33: What will financial services look like in five years? Through a technology lens, there are a few universal truths - it is faster, more ubiquitous and it is also converging, says Hanley. Customer demands and expectations will change according to this - deep personalisation and instant gratification will become the norm. Banking will become unbundled and rebundled. The need for banking services won't go away, but who is providing these services? The winners here will be those that think through the paradigm from a customer perspective, he adds.
10.29: Banks need to enhance their data capabilities, when you compare what they are doing today compared to organisations such as, for example, Bloomberg, Desmet notes. But the investment required to bring bank data capabilities up to scratch is eye watering.
10.25: The dominant amount of technology spend is going on cloud, says Hetherington. What direction is this investment going in? Winter says that mobile phone data is very powerful. For example, when it comes to tracking driving data, their sensors are very precise. For insurers, this data is even richer than a widget that is specifically used for driving a car, as these will only tell you about the car rather than the people in the car. Then there is the information from the tire manufacturer which can tell you who has been sitting in the car and when. You need technology that is flexible enough to work directly with existing partners and new startups as well.
10.18: The technology part is the easy part as there are so many solutions and players working in the space, notes Goodall. However, nobody tries to make solutions that are cumbersome for the customer, but sometimes the build model will result in this. For fintechs, scale is hard to achieve and so working with banks is appealing. How to successfully integrate in a way that is completely customer focussed is a big challenge that many face today however.
10.14: Turunen comments that open banking is an opportunity to create better customer experience. There is an opportunity to collaborate in the industry to create services. Innovation can be boosted by collaboration between institutions, rather than working alone in siloes, he says. This can also shorten the time to market. Even if new players come into the industry, banks can still be a trusted advisor for customers.
10.12: Desmet thinks that open banking is the final step to banks becoming like a consumer goods company - if a customer does not like a product they will not come back for it next time. The two or three banks that can perfect the customer experience following open banking will have a great advantage.
10.07: Following introductions, Hetherington kicks off on the topic of open banking. Customers can take control of their own data, so what impact does that have on the business model of banks? Hanley notes that banking is becoming more customer focussed. He talks about the bank needed to be much better connected to customers through a digital interface. He believes that putting customers at the at the heart of what they doing. Hanley says banks need to be technically able and culturally willing to change and grow. Speed is also a much more important vector to be talked about within an institution - more important than the direction of travel, even.
10.00: Next up is our first panel discussion of the morning, titled ‘Providing Value-added Services and Staying Relevant as Boundaries Break Down. Lots of good contributors for this one: Kevin Hanley, Director of Innovation at RBS; Dr. Marcus Winter, Head of Reinsurance Development for Munich Re; Jarkko Turunen, Head of Open Banking with Nordea; Driek Desmet, Senior Partner at McKinsey & Company; and Brad Goodall, Chief Operations Officer with 10x Banking. Keeping order is Rob Hetherington, Global General Manager, Financial Services Industries for SAP.
9.59: Incumbent banks need to assess their business models in order to stay relevant and compete with new banks. You need to identify what your core is, as well as who is eating your lunch, Vaswani comments.
9.47: In a Q&A, Vaswani says that if you get something right with a millennial, they will come with you. He is keen on having a diverse workforce, representing the communities that the bank is trying to serve. Once you attract one or two, you will attract more.
9.54: The physicality of cash has gone in the mobile world, meaning that banks are becoming data orientated companies. Customers need to trust banks with their data in the same way they trust them with their money. The rules of virtual safety have not been written yet - what you should publish on social media or send in emails, Vaswani says that it is up to everyone pushing the digital world ahead to think about digital safety.
9.49: Collaboration in the fintech world is a must. Barclays has created fintech accelerators at a number of sites around the world, Vaswani says. The bank has also gone beyond fintech, creating Eagle Labs. Vaswani describes this as a place where the community can get rejuvenated, using new technologies to foster innovative solutions.
9.45: When a technology develops, such as the internet, companies tend to take their existing business model and apply it to the new technology. But the power exists where you can take and create a new business model. You have the power to do things differently. Barclays has been thinking about how to create a platform for connected value, Vaswani says. His bank has some sort of relationship with about half of the population of the UK. How do you connect large corproates with clients that are valuable to them? Barclays has created Blue to address this.
9.40: For a graduate, Vaswani says that moving forward means controlling finances, getting a downpayment for a mortgage, and developing a good credit rating to get the mortgage in the first place. For a retired person, moving forward may mean financial independence. When it is impossible to stay independent, banks need to make it very simple for that person to enable a trusted friend to take over that account. Moving forward makes sense to any organisation, comments Vaswani.
9.36: Every thing that you do is touched by finance, Vaswani says. We are also living very connected lives due to the pace of technological change and our addiction to our phones. This is a fundamental change. Fully connected finance is a way to service this new world. It is about individually looking at a customer and taking them where they want to go tomorrow.
9.32: Vaswani says that Barclays has gone through 327 years of change, which makes change hardwired into the bank's DNA. He says the bank has always prospered when it has created a very clear purpose. Every company should deal with a societal problem - if it is not doing that, he questions why that company should exist.
9.27: Our opening keynote presentation today is from Ashok Vaswani, Chief Executive Officer from Barclays UK. The topic he will be addressing is The Future of Banking: Fintech at Scale.
9.20: Our host Laurence Leyden, EMEA General Manager, Financial Services at SAP, takes to the stage to give offer the audience a warm welcome. Recapping yesterday's events, he notes that some feedback asked about SAP's involvement with some of the speakers from Day 1. SAP has worked with Singularity to deliver executive digital exchange events to deliver a roadmap for the future of financial services, for example.
9.05: Good morning and welcome to live coverage from the second day of the SAP Financial Services Forum. It is another sunny summer's day in London, and the attendees are finishing off their breakfasts and heading to the main plenary room. We will be underway in around 10 minutes.