Nationwide Building Society and Amazon Web Services (AWS) have announced a new agreement aimed at driving digital service offerings for the high street lender.

Building on an existing partnership between the two organizations, Nationwide said the new deal will help deliver “more personalized experiences” for the its 17 million customers.

The move by Nationwide comes amidst a long-running digitization scheme at the building society. In 2024, for example, the company completed an overhaul of its IT infrastructure as part of a shift to Amazon EKS.

Similarly, just this month, the organization announced plans for a new AI-powered transaction analytics feature for consumers.

Looking ahead, Nationwide plans to further “consolidate” workloads on AWS, modernize services for customers, and equip staff with new AI tools and capabilities.

"As we continue our digital transformation, we need cloud technology that can support our ambition to deliver better customer experiences, while keeping safety and security at the forefront,” said Suresh Viswanathan, group chief operating officer at Nationwide.

“With AWS, we can better support our frontline colleagues to help improve member experience and deliver better outcomes for over 17 million customers."

Nationwide already uses AWS’ cloud-based contact center platform, Amazon Connect, when dealing with customer support enquiries. This gives customer support teams access to a range of AI-powered tools that help drive operational efficiency and staff productivity.

The building society has used Amazon Connect to underpin new customer services, including the recently-launched Call Checker tool. This helps customers establish whether they are speaking to a legitimate Nationwide worker to crack down on scam calls.

"By consolidating and modernizing their workloads on AWS, Nationwide can accelerate innovation, enhance operational resilience, and deliver the digital experiences their members expect—all while maintaining the security and compliance standards that are paramount in financial services,” said Alison Kay, VP and Managing Director of AWS UKI.

Nationwide targets AI, cloud training for staff

As part of the agreement, AWS revealed it will work closely with Nationwide to bolster workforce skill capabilities. This will include access to AWS training schemes to equip them with cloud and AI-related skills.

“This will support Nationwide’s ability to adopt AWS technologies for the benefit of its customers and colleagues,” the hyperscaler said in a statement.

Training schemes running parallel to digital transformation projects have become a recurring theme in announcements such as these.

As ITPro reported last week, Lloyds Banking Group has embarked on a company-wide AI training program as the company looks to integrate the technology across core operations.

The financial services provider said it plans to train 100% of its employees in AI skills by the end of this year alone, enabling staff to easily adopt these tools and improve customer service capabilities.

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Finance leaders have a poor opinion of the performance of CISOs, believing that they can't always communicate clearly and aren't fully aligned with business needs.

A new survey of 300 CISOs, directors of cybersecurity, CFOs, and finance leaders by threat-hunting firm Expel found less than half (46%) of security leaders think their finance counterparts are highly aligned with the security team’s priorities.

Finance leaders, though, are less convinced, with only 35% believing that their security counterparts are highly aligned with the finance team’s priorities.

These conflicting perceptions on both sides of the divide further exacerbate existing issues with alignment, the study noted.

Crucially, there's a similar pattern when it comes to risk tolerance and budget expectations. While 71% of surveyed security leaders say that security and finance teams are fully or very aligned, finance decision-makers are much less positive, with only 58% saying the same.

"While most finance decision-makers see security as business-critical, they demonstrate a lower level of assurance in some of their security teams’ abilities," the researchers said.

Only half of surveyed finance leaders said they were very confident that their security team can communicate business impact clearly or protect the organization from major cyber events, while only four-in-ten express full confidence in security’s ability to align with business strategy.

Security decision-makers, meanwhile, are suspicious that they're perceived negatively by finance, with 36% saying they're seen as a cost center and 35% as no more than an operational necessity.

"The real issue isn't that finance sees security as a cost center — it's that too many security leaders haven't learned to articulate value in terms finance understands," said Greg Notch, Expel chief security officer.

"Security leaders should spend their time showing how that cost translates to business protection. Finance teams make cost-benefit decisions all day long. They're not afraid of costs; they're afraid of costs they can't quantify or understand."

How cyber leaders can shake up communication

When reporting results to finance, surveyed security leaders typically prioritize metrics like business impact of actual security incidents at 18%, cost of control versus potential losses at 17%, security program maturity level at 16%, and risk reduction score at 15%.

However, researchers found these metrics don't align with what finance actually requires for making strategic decisions. In fact, program maturity level versus industry benchmarks is the second least popular metric among finance leaders.

"Instead of falling back on maturity metrics, leaders need to communicate in the language of risk, especially when justifying security spend," advised Notch.

The calculation, he said, means taking the percentage - or percentage range - of likelihood that the organization will experience a breach, and the cost of that breach.

From there, you can determine that an investment that costs $x will likely lower your percentage likelihood of breach by x%.

"Cybersecurity teams have to understand the KPIs that matter to the business and how their operations ladder up into those," he said.

"It’s all about cybersecurity teams being able to communicate how their impact is contributing to those KPIs in the language of the business — which is all about dollars and cents."

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HSBC has announced a multi-year partnership with French start-up Mistral AI designed to turbocharge the use of generative AI within the banking giant’s business.

The strategic deal will cover a wide range of use cases but, ultimately, aims to boost employee productivity through efficiency gains, enhance business processes, and transform the customer experience for HSBC’s millions of customers around the world.

HSBC will benefit from access to Mistral AI’s commercial models – both existing and yet-to-be-developed – and see teams from both sides work together in collaboration for the betterment of generative AI use cases in action.

HSBC said it is “continually assessing a wide range of large language models (LLMs) as part of its technology strategy.” It added that it saw an opportunity with the Mistral AI partnership to leverage the latter’s expertise to add value to existing internal tools. This includes an HSBC AI-powered platform that enables employees to be more productive in many ways, including:

• Aiding the analysis of complex or document-heavy processes, such as financing or lending.
• Faster development cycles, so the time to move from prototype, validation, and launch is accelerated.
• Supporting multiple tasks business-wide, such as helping client-facing teams create and deliver tailored comms at speed, facilitating the launch of hyper-personalized marketing campaigns, and identifying both risks and savings potential for the procurement teams.
• Translation services that assist with customer interactions across multiple languages.

Its latest ambitions will be made possible thanks to the combination of HSBC’s global financial expertise, coupled with the power of Mistral AI’s cutting-edge technology, the firm said in a blog post where it referred to its new partner as “an AI powerhouse.”

“Working with Mistral is an exciting step forward in HSBC’s technology strategy, enabling us to further enhance AI capabilities across the bank,” said Georges Elhedery, HSBC’s group CEO.

“The partnership will equip our colleagues with tools to help them innovate, simplify daily tasks, and free up time to deliver for our customers.”

Both firms were also keen to stress they are committed to responsibly using AI. As such, all work carried out as part of the partnership will be done so in accordance with the highest standards of AI data privacy, technology development, and transparency.

“We are proud to engage in this long-term partnership with HSBC. Our highly customisable, enterprise-grade frontier AI solutions will reinvent HSBC’s workflows and services while ensuring full ownership of data,” said Arthur Mensch, Mistral AI’s co-founder and CEO.

“Together, we will provide HSBC’s employees with high-end, AI-powered productivity tools and a new generation of banking services for millions of customers worldwide.”

AI focus is not a recent addition for HSBC. Indeed, the company has been working on machine learning and AI-related activities for around a decade, with more than 600 use cases already in operation.

Furthermore, more than 20,000 of its developers are embracing coding assistance, making coding efforts 15% more efficient.

The company now wants to build on these solid foundations, doing so at pace and scale. Examples of future focus areas include credit and lending process improvements, customer onboarding enhancements, and innovations that aid anti-money laundering checks and help fight fraud.

"Whilst some overestimate AI’s short-term impact, I believe many significantly underestimate its long-term potential,” said Stuart Riley, HSBC’s group CIO, on the firm’s web page detailing its AI strategy.

“At HSBC, we’re investing in foundational AI capabilities alongside our ongoing projects, which will enable us to accelerate and expand AI utilisation across the bank.

“These foundations are crucial as they allow for rapid AI deployment whilst maintaining the necessary safeguards for responsible usage. I anticipate that within the near future, every employee will be using AI in their daily activities.”

For decades, spreadsheets have been essential to the accounting world because of their flexibility, familiarity, and how deeply involved they are when it comes to daily workflows.

To this day, Microsoft Excel still retains bragging rights as the number one platform of choice when it comes to financial modeling, forecasting, and reporting across businesses of all sizes.

But whilst these tools remain flexible and familiar, the downside is that they are becoming increasingly unfit for a world that demands pace, structure, and smart automation.

The growing tussle between innovation and tradition will define the future of accounting. Despite 80% of businesses relying on Excel for essential processes, dated spreadsheets represent a critical bottleneck in the race towards finance functions that integrate AI seamlessly.

To bridge the divide, businesses must reevaluate their methods of utilising spreadsheets to create secure and scalable tools that can support the future of AI-driven finance.

How AI is affecting the reign of the spreadsheet

Spreadsheets have served as all-encompassing tools for daily tasks like financial modelling and forecasting. But, as companies grow and their workflows become more complex, these traditional spreadsheet models become harder to scale, audit, or integrate with modern data infrastructure.

Some spreadsheets lack formal organization, containing inconsistent data entry formats, hidden formulas, and manual overrides. Usually, there is a lack of documentation that explains how calculations are performed or what assumptions are integrated within the model. There is very little version control, and the files tend to be siloed on email threads or individual computers.

AI and machine learning systems rely on structured and high-quality data to function effectively, as well as a plethora of functions such as well-defined inputs and outputs, consistent formatting, clear documentation, and reliable access to the underlying logic. The problem here is that spreadsheets very rarely match up to these standards.

The lack of organization makes it hard for AI-based tools to connect with spreadsheets. As a result, finance departments end up spending more time cleaning up data and reformatting inputs as opposed to reaping the benefits of automation. Furthermore, the vague nature of spreadsheets poses various risks when it comes to compliance, governance, and auditability, factors that are all vital in the regulated world of accounting.

The AI storm threatening accountancy

The risks associated with companies continuing to use outdated spreadsheet models are incredibly high. Without structure and oversight, models become outdated, errors go unnoticed, and institutional knowledge is lost when core employees leave.

One of the biggest concerns for companies is data privacy and intellectual property (IP) protection. When proprietary models and sensitive financial data are introduced into external AI tools, the risk that this data could be exposed or shared with third parties is extremely high.

When spreadsheets that contain sensitive business data are left unprotected, they become a vulnerability instead of an asset, which then, in turn, becomes a major barrier to AI adoption. If organizations cannot control what data AI has access to, they risk compromising their internal processes and competitive edge.

Solving the AI integration puzzle

Instead of companies abandoning their spreadsheet models as a whole, a more practical solution to this is to modernize them. By updating their software, finance departments can transform traditional spreadsheet models into structured, controlled, and web-accessible applications. Companies can also retain institutional knowledge embedded in their existing tools while getting rid of the restrictions that currently prevent AI integration.

This includes spreadsheet logic within a web-based interface that carries out consistent input and output formats, automates validation, and manages access through user permissions. These web applications reflect the original functionality of the spreadsheet, but the difference is that more layers of control, documentation, and security are added, which are all essential for company use.

More importantly, this strategic approach enables a flawless interaction with AI-based tools. These web-based applications can get rid of the complications that accompany spreadsheet use by applying structured data, standardized formats, and transparent workflows. These factors create a setting where AI can be effectively used without manual intervention.

A secure financial future

Without a doubt, AI is transforming the face of accounting as we know it; however, the industry’s heavy reliance on spreadsheets, as it is, is becoming a liability. Rather than leaving spreadsheets behind, organizations should start to see them as a starting point that can be evolved with the right tools.

By transforming traditional spreadsheet models into secure and structured web applications, companies will be empowered to modernize their workflows without disruption. This will lead to a favorable outcome that includes a secure and scalable finance function that is truly AI-ready.

There comes a time in every organization’s journey when old systems and workflows must be modernized or replaced. In recent years, we’ve seen this play out with the widespread adoption of cloud systems.

For some, the willingness to adopt new tech comes naturally. Innovative startups, or businesses in fast-growth sectors such as SaaS, may have been cloud-first from the get-go. Launched with the help of entry-level cloud solutions, and now on the lookout for something more advanced, that can address more complex needs and serve larger, cross-functional teams.

For others, however, the prospect of modernizing systems is prompted by necessity rather than choice. This is something we see a lot with smaller, mid-market organizations. When we look at mid-market finance functions, specifically, this becomes even more common.

It’s estimated that there are around 100,000 mid-market organizations in the UK still reliant on legacy, on-premises finance systems. Many of these systems are now nearing end-of-support deadlines. Or have simply become too cumbersome for finance teams to keep using; unable to integrate with other cloud-based systems within the organization. Acting as mere ‘data repositories’, with time-consuming Excel sheets and data consolidation needed on both ends to make the month-end reports stack up.

So, why have mid-market finance directors been slower to embrace change? In most cases, it’s not denial or naivety. Ultimately, Finance directors know their systems are out of date and causing inefficiencies. But they are often paralyzed and unable to effect change.

We recently surveyed 1,000 mid-market finance decision-makers in the UK about this. While seven days to prepare and submit month-end accounts is widely accepted to be the best practice, our research found that the majority (55%) of businesses still cannot achieve this goal, and many say this is down to manual data entry and outdated finance systems.

Atychiphobia: fear of failure

In many cases, it’s because the term "implementation" itself evokes great fear, and mid-market finance directors often feel this the most. For finance directors used to plug-and-play entry-level solutions, there may be a lack of experience with implementation and a fear of the unknown.

For those used to ‘on-premises’ systems, implementing a new solution has long been perceived as an overwhelming challenge, traditionally linked to sky-high costs, disrupted operations, and a grueling process that stretches over months, if not years. A fear that is often grounded in experience for established finance directors, who will remember implementations from a decade ago that could have derailed the business with the amount of distraction it caused. Additionally, when we consider the history of ERP implementation, at the hands of Big Tech incumbents, this fear is understandable.

Imagine the same car arriving at a mechanic’s shop, time after time, in 10,000 parts. The first nine months are spent building the same rolling chassis before the mechanic can even think about customizing it to the customer’s needs. This is essentially what has happened to businesses in the past with ERP implementation. Only for these so-called ‘state-of-the-art’ systems to break or require ongoing repairs and patchwork once they were up and running.

Jonny Billington, UK sales lead at implementation consultancy Xplor Solutions, told me that understanding is needed when guiding customers through this process today.

“Some customers won’t be familiar with the implementation process, and there can be anxiety linked to it as a result, so there’s an education piece that’s really needed there,” he said.

“Then there will be others who perhaps have had bad experiences implementing systems in the past. Projects that took a lot of time, that overran, that were very challenging for them and their team. This not only reflects badly on the vendor and reseller but can often reflect badly on them as the finance director leading on this project.”

Taking the stress out of implementation

Tech resellers and implementation partners can play an important role in alleviating these concerns and making system upgrades an enjoyable, stress-free experience for SMEs. But the key to doing so lies in understanding where implementation hesitancy originates from.

Our research identified some of the biggest fear factors:

1. Cost and disruption: when asked about the top barriers to upgrading finance systems, 23% of mid-market Finance directors said they felt it was too expensive to change, and 32% said Right to Use (RTU) licenses would make it too costly.
2. Resistance to change: more than a quarter (26%) said a lack of digital skills to use a new system was a key barrier, and 24% feared distraction from core day-to-day responsibilities.
3. High stakes for leaders: how a new system will reflect on finance directors plays a major role in implementation hesitancy. 42% said they feared losing their historical data and would therefore have to run two systems in parallel to access it. 20% simply weren’t convinced that the pain of change would be worth the potential backlash and disruption.

Dispelling myths

In most cases, these concerns can be easily overcome with a safe pair of hands. Resellers and implementation partners today are uniquely positioned to redefine the implementation process, leading with a clear set of processes, a well-planned project, and reassurance that – with solutions that are purpose-built for the mid-market – many of these fears are nothing more than urban myths.

In the case of costly RTU licenses, we now have cloud solutions with open application programming interfaces (APIs), that allow for the easy migration of historical data from other systems into read-only data archives.

The use of project management tools, shared by finance directors and the implementation partner, gives all parties full visibility of how a project is progressing against key deadlines. Providing ease of mind when all is going to plan, or highlighting what blockages need to be addressed, in real time.

Challenges with the adoption of new systems can be remedied with effective training and post-implementation support, tailored to suit the skills and knowledge levels of each customer’s finance team.

As Billington puts it: “For mid-market finance teams, budgets, time and workload are a challenge, and there are a lot of important deadlines and dates on top of this that they must consider for month-end reports and audits. It’s important to recommend solutions that are purpose-built for SMEs, that can often be implemented in as little as 15–20 days.

“Highlighting this efficiency from the offset is key to reducing anxiety and demonstrating that modern solutions have evolved, and can, in fact, be flexible, scalable, and pain-free.”

He continued: “For resellers, support doesn’t end with implementation, either. The adjustment period post-implementation should never be overlooked. Finance directors (and their teams) need reassurance, patience, and training to adjust to a new system.”

“Partners that stay involved in the months following implementation, offering training and troubleshooting issues, can deliver immense value and ensure the system upgrade is perceived as positive by everyone on the finance team. Again, alleviating stress and providing reassurance that the right move was made.”

Final words

For finance directors, a failed implementation isn’t typically viewed as a minor mistake. It can be feared as a career-defining failure. And it’s this fear of failure that’s keeping mid-market organizations anchored to their outdated, inefficient systems that likely no longer align with their growth requirements. For sectors such as education, nonprofit, and hospitality, where resources are already stretched thin, this fear can feel almost paralyzing.

One of the biggest motivators for change is a clear and compelling vision of how the new system will improve operations long-term. Tech partners can play an important role, not only in articulating the benefits of transitioning to a modern system. But also, in challenging negative perceptions of tech implementation – born out of past failures or a fear of the unknown.

The word “implementation” doesn’t have to be synonymous with stress and high stakes. By empathizing with customer concerns and framing change as incremental rather than disruptive, partners can help make the process feel less intimidating.

Financial services firms across Europe are contending with a sharp rise in third-party and fourth-party breaches, new research shows, with nearly every major financial institution across the region hit during the last year.

Breaches of these kinds increased by a quarter compared to the year prior, according to SecurityScorecard. Indeed, 96% experienced at least one third-party breach in the past year, and 97% at least one fourth-party breach.

Financial services firms in the UK reported the highest number of third-party breaches, followed by Germany and Switzerland, while Malta, Luxembourg, and Portugal had the lowest exposure and highest average cybersecurity grades.

On an individual basis, Switzerland has the most third-party breaches per institution, the study found, followed by the Netherlands and UK. Researchers noted that these findings highlight an increasingly complex vendor ecosystem alongside glaring gaps in risk oversight.

"A 25% surge in third-party breaches among Europe’s top financial institutions is more than a warning, it is a call to action," said Corian Kennedy, senior manager of threat insights and attribution at SecurityScorecard.

"Cyber threats are no longer confined to the perimeter. They are embedded deep within supply chains. Institutions must evolve from reactive to proactive defense strategies to meet the escalating challenge."

Only 7% of financial institutions suffered a direct breach, down from 8% the year before, with malware and insider threats remaining key culprits. However, even without direct breaches, supplier vulnerabilities impacted nearly all the institutions surveyed.

Incidents such as the MOVEit vulnerability, which led to over $65 billion in damages, show just how bad the effects of third-party breaches can be, researchers warned.

In Europe, notable cyber attacks over the last year included the breach of Zürcher Kantonalbank, which saw customer account balances and personal information exposed via its mobile app.

In the same month, Credit Suisse - now UBS - reported a cyber attack affecting 19,000 Indian employees, compromising a raft of sensitive personal data.

According to SecurityScorecard's data, just ten threat actor groups were responsible for 44% of global cyber incidents, with Cl0p, APT28, and Cobalt Group the main culprits in third-party exploitation.

Vendor dependency is a big problem

Crucially, the report from SecurityScorecard noted that a growing dependence on a small group of vendors continues to amplify risk.

Just 15 companies now represent 62% of the global tech market, researchers found, underlining the grave risks faced by organizations if just one were to be compromised.

As a result, the company called for a more harmonized approach to third-party risk governance across Europe, particularly in high-exposure jurisdictions which are all subject to regulation under the Digital Operational Resilience Act (DORA).

Organizations should continuously monitor third- and fourth-party vendor networks and improve application and network security capabilities, researchers said.

Efforts to strengthen DNS health, endpoint security, and patching cadence in high-risk environments were also highlighted by researchers.

Similarly, SecurityScorecard advised organizations to align with DORA requirements by integrating continuous, evidence-based oversight into procurement and vendor management, it said.

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HSBC has told UK staff they risk bonuses unless they return to the office as the financial services giant cracks down on hybrid working policies.

According to reports from Bloomberg, HSBC told employees that those who don't come into the office at least three days a week could end up earning less money due to reduced bonus payouts.

As part of the move, HSBC reportedly told workers it would make use of internal attendance data when making future decisions about compensation.

Notably, the company isn't shifting to a full return to the office. Instead, the bank aims to enforce existing hybrid work policies introduced 18 months ago.

These policies require staff to spend 60% of their time in the office, or at a customer’s office.

HSBC UK refused to comment on the reports when approached by ITPro.

The return to office battle continues

HSBC is by no means the first financial services firm to implement more robust hybrid working policies. Lloyds said at the beginning of the year that in-office attendance would come into play when deciding bonuses for some senior staff, according to reports at the time.

Tying attendance to work benefits does raise some problems for those taking a stricter approach, however. Last year, Dell Technologies warned staff that they risked missing out on promotions if they failed to come into the office at least three days a week.

The move was met with a fierce backlash from staff at the tech giant, and prompted a nosedive in workforce morale, according to an internal survey conducted in the wake of the policy change.

RTO crackdowns vary in severity

While RTO mandates at most other companies tend to require a minimum of around three days in the office, some have taken a harder stance on the matter.

Amazon ordered staff back for the full five days a week, even though it lacked office space for everyone, while JP Morgan has also required all staff to return to the office five days a week.

Others are seeking to encourage rather than force employees to come back to the office - with Google dangling potential perks and benefits for staff.

Back in 2023, Google reportedly offered discounts at its Mountain View hotel in a bewildering move to help staff "re-transition" back to the office and also offered free e-scooters.

Similarly, other companies have offered perks including free lunches, raffles to win prizes such as a car, or even allowing pets to join their owners at corporate headquarters.

While surveys suggest perks do help — Robin's Return to Office research showed 44% of staff polled saw catered lunches, wellness events, and guest speakers as a real draw.

Broadly speaking, bosses remain keen to encourage staff back into the office, but employees overwhelmingly favour flexible working, with three-quarters saying they would turn down work that didn't offer at least a hybrid option.

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• Google reveals stricter new measures in drawn-out crackdown on hybrid work
• 64% of hybrid business leaders want staff back in the office
• Considering an RTO policy? Think again. Firms with remote working options record better financial performance

It's been more than five years since regulations around open banking, which reflected the changing nature of how consumers engage with banking and payments in this modern age, came into force. Cash is no longer the dominant form of payment; just 6% of the UK population uses cash for most things or everything, according to statistics from the UK government, with most people's experience with payments now predominantly digital. As such, the concept of open banking has become more ingrained in the systems and platforms we use every day.

One key element of this is account information services (AIS) which ventures like NatWest's Payit™ have launched. Providers that offer AIS allow businesses, including large organisations across sectors including hospitality and retail, utilities, and insurance, to give their customers a much better experience while making payments. It’s a form of data sharing that uses the same guardrails as the open banking protocol to offer control, security, and transparency to make life easier for customers and provide a competitive edge in the sector.

Tapping into changing customer behaviour

With the rise of the internet in the early 2000s and changing user habits, the archaic methods of siloing data within the walled gardens of massive financial institutions appeared less and less sustainable. This is where the concept of open banking emerged.

Open banking, which was born from the rise of the internet and the ability to access banking systems online, allows financial data to be shared between institutions through application programming interfaces (APIs). Banks have traditionally kept customer financial data closed off, but open banking has allowed customers to share their financial information between different platforms securely, including payment providers.

Open banking offers greater transparency and control for account holders and has led to a boost in the number of services that can be provided. Now, at least one in seven in the UK use open banking, according to research from Open Banking published in March 2024 — which was up from one in nine in June 2023. The number of open banking payments reached a record high of 14.5 million in January 2024, which represented a year-on-year growth of 69%.

As customers engage more through these services online, they also want the ability to access their information quickly and efficiently, in a friction-free experience. Whether setting up a direct debit with an insurance company or checking their account — theyu would like the option to glance at and review their bank account information too, among other functions. This much smoother user experience is only possible, however, if businesses embrace AIS, which providers like Payit™ now offer. Licensed AIS providers (AISPs) offer businesses’ customers an end-to-end encrypted view of information to improve the customer journey. This is a key cog in the mission to create a landscape that truly and completely accepts the principles of open finance.

Payit's mission to create a better customer experience

With the launch of AIS in June 2024, available to business customers who bank with NatWest, Payit™ can allow customer attribute sharing immediately, starting with the name of the account holder, the account number and sort code. These data points will soon be joined by transactions and a transaction history for affordability calculations. It's suitable for companies that need a nominated bank account to show the source of funds, or those that want to make easy and repeated attended payments like topping up a utility account or making a loan overpayment. Ultimately, though, it's underpinned by a one-click experience for all — and removes barriers to ensure a smooth and friction-free customer experience.

Merchants that take up Payit™ for AIS will be able to populate information with a one-click experience, capture explicit customer consent, enable real-time information sharing from bank accounts, remove the need for any intermediary agencies, and improve data capture accuracy by eliminating any manual input. This is alongside a batch of benefits for end customers including sharing data immediately, viewing all consents in one place — which expire within 90 days — and built-in protections against identity fraud.

Payit's AIS service can also streamline the direct debit experience. Customers authenticate with their bank using their mobile banking app or online banking login — with the bank then providing data to Payit™. Payit™, in turn, shares this data with the organisation to create the direct debit instruction — holding the consent as proof of the customer's authority to trigger the instruction.

Large businesses that want to make the payments experience smoother and fuss-free for their customers will gain a competitive edge in the market by embracing systems such as AIS, which is being wrapped up and bundled with NatWest's Payit™ Pay Online capability. Payit™ products are secure with locked down end-to-end encryption, and will help your organisation keep pace with industry-leading standards thanks to its ability to embrace innovations and tap into the latest customer trends.

For more information on how AIS could help your business visit Payit™ by NatWest .

Eligibility criteria and fees apply. You must hold a business current account with the NatWest Group and you will need to sign up to full Payit™ terms and conditions. You will need to allocate technical resources to work with NatWest to integrate the solution. Fees are based on the volume and average value of e-commerce transactions. Speak to a NatWest Relationship Manager for further information.

The banking sector is one of the most innovative and forward-thinking industries around. It was one of the early adopters of cloud computing and artificial intelligence tools, but it is still ripe for further digital disruption.

There is also quite a visible change in the way AI is used in banking, with the classic, data-driven AI evolving to more advanced use cases with generative AI. As with most industries, AI in banking started with automation and data analytics, but it quickly expanded to sophisticated applications in risk management, fraud prevention, and bespoke customer service.

With generative AI, the banking sector is set for further transformation, including changes to the way we save, spend, and generate money.

Challenging tradition with AI

One major area of change in banking is challenger banks – more commonly referred to as ‘Neobanks’ in the US. These are fintech firms that offer online banking via apps or software, with famous mobile banking apps, like Monzo and Starling.

The ‘challenger’ label is quite apt as these types of banks are seen as disruptors, changing the way we think about banking. They tend to be more agile and faster than traditional banks, though most of them are in some way partnered with the traditional banks, many for insurance reasons.

However, these fintech firms are using modern cloud-based technologies and data analytics to entice customers with innovative financial products and quick response services. This is largely a result of being cloud-native, with services built using software and big data tools, like machine learning and advanced analytics. The effect of this for the customer is a much more convenient, seamless experience.

For long-established banks, being subject to stricter regulation than most sectors and reliance on infrastructure that’s now antiquated both present blockers to modernization. This has left an opening for the challenger banks to lead the way on digital transformation in the sector.

By harnessing AI, banks and challengers are starting to create a digital environment that appears uniquely tailored to each of their respective users, which in turn fosters a sense of familiarity and ease that lifts the overall banking experience. This paints a rather exciting picture of the future of banking. With the ground-breaking power of AI and the innovative minds within the sector, we may be on the verge of ever more radical change in the way we use our money.

Generative AI

It’s the nascent nature of generative AI that’s leading financial services companies to rethink their operating models to address the technology’s rapidly evolving capabilities, according to McKinsey.

The industry sees generative AI as a “game changer”, with that sentiment backed by a 2023 banking report from the consultancy, which predicts it will lift productivity by 3 to 5% and enable a drop in operating costs. It also estimates this drop to be between $200 billion and $300 billion.

Key business functions are transformed as AI collects and analyzes huge amounts of data and enables a deeper understanding of customers and their personalized services. AI also enables banks to secure and protect customer accounts, increase returns on investments, and personalize content.

The growing capabilities of AI and the ever-increasing amount of data available mean that financial firms need to implement AI strategies or risk being left behind by their competitors and challenger banks. Scaling AI across a financial organization will face challenges, such as data silos, industry regulations, and data protection. Outdated banking infrastructures also lack the accelerated computing platforms required to train, deploy, and manage AI models, so improving existing applications and enabling new use cases is key.

According to a recent McKinsey forum on gen AI, more than 90% of the banking organizations represented reported having set up a centralized gen AI function as a way to effectively allocate resources and manage operational risk.

The consultancy’s survey also shows that about 20% of the financial institutions studied use a highly centralized operating model archetype. However, these are mainly large institutions whose business units can muster sufficient resources for an autonomous generative AI approach.

Chatbots and fraud prevention

There are many good examples of how AI is being used currently in the banking sector to enhance customer interactions, such as Barclay's fraud detection service.

This system monitors payment transactions to identify and prevent potential fraudulent activities with a proactive approach that not only protects customers, but also builds confidence in the bank's security measures.

Another great example is the Bank of America’s AI-powered research analysis platform Glass. Glass combines market data and bank models, and uses machine learning techniques to identify industry trends to then predict client demands. The results offer individualized investment advice and also positions the bank as a pioneer in using AI for strategic financial insights.

AI-powered chatbots are stalwarts at most banking firms, providing instant responses to customers and round-the-clock assistance (also part of the reason you’re less likely to deal with a human).

One example of what a successful chatbot looks like also comes from Bank of America in the form of its AI chatbot, Erica. Launched in 2018, it provides 24-hour customer support, efficiently handling queries and transactions, leading to reduced waiting times and improved customer satisfaction and in July 2023, it surpassed 1.5 billion interactions.

Advancements in computer chips and the cloud have driven not only new AI capabilities, but also innovation in the financial sector. However, data and language models are also fundamentally improving the services we use for our money. Data is crucial in the age of AI and investing in both cloud and AI is seen as essential for the future success of financial institutions.

Southeast Asia is fast becoming a key growth market in the forex space, offering financial services providers the chance to capitalize on a rapidly-evolving landscape ripe with opportunity. 

Forex development in Southeast Asia was the topic of a recent white paper from Paysafe, which revealed that retail forex trading has been “increasing in recent years” amidst an accelerating period of digitization across a host of economies in the region. 

Singapore, for example, has firmly established itself as a “major player” in international forex, according to the white paper. It’s the third-largest forex hub globally, ranked after New York and London, with nearly $1 trillion of forex trades passing through the city state every single day. 

Several of the world’s largest financial institutions, including Barclays, Citigroup, HSBC, and JP Morgan, also house their regional forex trading teams in Singapore.

Other countries in the Association of Southeast Asian Nations (ASEAN), such as Indonesia, Malaysia, and Vietnam, boast large populations and growing economies. 

Indonesia, for example, has the fourth-largest population in the world at 276 million and its economy could become the fourth-largest in the world by 2045. 

Similarly, between 2002 and 2021, GDP per capita in Vietnam has increased 3.6 times, and the country is currently on-track to become a “high-income” economy by 2045. 

With a swelling population in the region and impressive economic growth across a host of ASEAN countries, forex brokers have a prime opportunity to capitalize on an as yet largely untapped market. 

Similarly, the region as a whole has an opportunity to position itself as a “crossroads” for Asian, Middle Eastern, and European financial trade routes, according to Paysafe. 

Serving the unbanked

A significant portion of Southeast Asia is unbanked, meaning a large percentage of the population has no direct access to financial services. While this may appear to be a challenge for financial services institutions breaking into the region, there is an opportunity for providers to support a traditionally underserved portion of the global population. 

Paysafe believes that financial services organizations can play a vital role to “break through financial exclusion” in Southeast Asia and, long-term, consolidate their position as a leading provider in the space by capitalizing on the current wave of early-stage growth. 

However, while opportunities abound for brokers in the region, the industry does still face sizable hurdles – not least of all in terms of technology uptake among the population and access to payments methods. 

There are promising signs on the horizon, according to recent studies. Research from Kearney, for example, found that the digital economy in SEA is growing at a rate of 17% annually. 

In addition, by 2030 the e-payments industry is expected to reach an estimated value of between $600 billion and $1 trillion. 

Alternative research from the World Economic Forum also shows that smartphone adoption in the region is surging, with smartphone usage in Singapore standing at 87%. 

Malaysia and Thailand are also experiencing a rapid increase in smartphone adoption, statistics show. 

While technology uptake among the population is promising, bridging the gap between this rate of adoption and appropriate payment methods is a key hurdle for providers. 

Payment methods represent a far more complex and challenging prospect for forex brokers seeking to serve the population across Southeast Asia.

Sizeable unbanked populations in countries such as Myanmar and Cambodia means that payments into forex platforms pose a significant challenge. 

A prevailing cultural trend of cash-based payments across the region also presents challenges and could inhibit uptake in the long-term. 

Michael Schaper, adjunct professor at the John Curtin Institute of Public Policy at Curtin University in Western Australia, suggested that many individuals in SEA are still reliant on cash for everyday transactions, even in areas where digital transactions are growing as well. 

Consequently, Paysafe’s white paper says, “forex brokers will require some form of bank transfer to their platform in order to begin trading”.

Digital wallets could be the key

Paysafe believes that digital wallets could be a “secret weapon” for forex brokers to ensure uptake among consumers for a number of reasons. 

Digital wallets such as Skrill or Netseller, the firm said, offer “much better rates, and in many cases, are easier to use” than relying on bank accounts to deposit to a forex broker account. 

Security is also a focal point within this discussion. Hesitancy among the population and concerns over security can be addressed by digital wallets. 

“Using digital wallets also adds an element of security, as it allows individuals to make payments without sharing bank details,” the paper reads. “With mistrust in forex brokers rife in many SEA countries, this is an attractive perk.”

The simplicity of using digital wallets also offers advantages when one considers long-standing financial literacy challenges that are rife across the region. 

By making forex transactions simple and easy to understand they can bridge the gap of financial inclusion.

Lingering macroeconomic concerns

Macroeconomic factors could play a key role moving forward for organizations entering the Southeast Asia forex market, Paysafe also believes. 

The US Federal Reserve is “very likely” to continue raising interest rates, which could pose immediate challenges, Paysafe warns. Similarly, the continued dominance of the US dollar means that the region is, at times, beholden to economic conditions in the West. 

“Another economic crash like the 2007 financial crisis could flatten the growing forex market in SEA,” Paysafe’s paper warns

Regulatory conditions are also an acute concern for organizations entering the space, or seeking to in the future. Sub-standard or non-existant regulatory safeguards in the region have resulted in consumers “losing a catastrophic amount of money trading”, according to Paysafe. 

“Further regulation is needed in the region for forex to lose its reputation in some parts as predatory and dangerous,” the white paper states. 

Despite significant hurdles, there is ample opportunity for organizations to capitalize on this developing marketplace, and those that act swiftly in Southeast Asia can establish themselves as leading brokers in the region as the industry matures. 

To find out more about forex prospects in South East Asia, click here.

Application security provider Checkmarx has detailed its findings on the first known open-source software (OSS) attacks targeting the banking sector.

During the first half of 2023, the firm said its supply chain research team detected several OSS attacks that showcased advanced techniques designed to exploit legitimate services - such as attaching malicious functionalities to specific components of the victim bank’s web assets.

They also deployed deception tactics such as creating fake LinkedIn profiles to feign credibility, as well as using customized command and control (C2) centers for each target.

The malicious open-source packages have since been reported on and removed by Checkmarx – but the company said it does predict a “persistent trend” of attacks against the banking sector’s supply chain to continue.

In the first attack detailed by Checkmarx, which occurred on 5 April and 7 April, a threat actor leveraged the NPM platform to upload packages that contained a preinstall script that executed its objective upon installation.

To appear more credible, the attacker created a spoofed LinkedIn profile page of someone posing as an employee of the victim bank. 

Researchers originally thought this may have been linked to legitimate penetration testing services commissioned by the bank, but the bank revealed that to not be the case and that it was unaware of the LinkedIn activity.

The attack itself was modeled on a multi-stage approach which began with running a script to identify the victim’s operating system – Windows, Linux, or macOS. 

Once identified, the script then decoded the relevant encrypted files in the NPM package which then downloaded a second-stage payload.

Checkmarx said that the Linux-specific encrypted file was not flagged as malicious by online virus scanner VirusTotal, allowing the attacker to “maintain a covert presence on the Linux systems” and increase its chances of success.

With the second-stage payload, the attacker utilized Azure’s CDN subdomains and bypassed traditional deny list methods before choosing a subdomain on Azure that incorporated the name of the targeted bank to add a layer of credibility.

The attacker used the Havoc Framework for this second stage, an advanced post-exploitation C2 framework that offers attackers tools to modify their strategy on the fly to overcome different challenges in the victim’s environment.

“Havoc’s ability to evade standard defenses, like Windows Defender, makes it a go-to option for threat actors, replacing legitimate toolkits such as Cobalt Strike, Sliver, and Brute Ratel,” Checkmarx said.

The second, unrelated, incident occurred in February 2023 at a separate bank. In this case, the threat actors uploaded a package to the NPM registry containing malicious code designed to blend into the website of the victim bank and lay dormant until triggered.

The attacker was found to have identified a unique element ID in the HTML of the login page and designed their code to latch onto a specific part of the login form, intercept the data, and transmit that to a remote location.

“Our rigorous scanning and tracking traced this element to a bank’s mobile login page, the prime target of this attack,” Checkmarx said.

Checkmarx said that due to the nature of modern threats, the traditional approach of relying on vulnerability scanning at the build level is “no longer adequate”.

With attacks predicted to continue, businesses have been advised to shift their strategies towards focusing on proactively securing every stage of the software development lifecycle.

The researchers at the security firm have been actively monitoring OSS attacks for some time. Earlier this year the firm alerted the industry to attacks on the PyPI repository. 

In April additional attacks on the NPM registry were also spotted by the team. They saw the JavaScript package manager flooded causing sporadic denial of service.

“We anticipate a steady escalation in targeted attacks, including on banks,” Checkmarx said. “The need of the hour is to stay vigilant, continuously evolve our defenses, and stay a step ahead of the threat actors.

“Checkmarx Supply chain research team is tracking those attacks and will update on any further developments.”

Globalcaja, one of Spain’s largest banking institutions, has fallen victim to a ransomware attack said to have been orchestrated by the Play ransomware group. 

The ransomware gang listed the bank as one of its latest victims on its leak site and claims to have gained access to both private and personal data, as well as client and employee documents. 

Passport information and confidential contracts were also noted among the list of data seized during the incident. 

Globacaja confirmed the attack in a statement on June 2nd, but insisted that it had not affected customer or client accounts. 

The bank added that it "activated security” protocols designed to mitigate the impact of a potential breach.

“From the very beginning, at Globalcaja we activated the security protocols created for this purpose, which led us to disable some office posts and temporarily limit the performance of some operations,” the company said. 

“We continue to work hard to finish normalizing the situation and are analyzing what happened, prioritizing security at all times.”

Globalcaja serves more than half a million customers across Spain and employs over 1,000 staff. At present, it is unclear whether Globalcaja has engaged with the group or paid ransom demands.

Martin Mackay, CRO at Versa Networks said the attack aligns with a long-standing trend of ransomware groups targeting financial institutions due to the volume of critical data they hold and process. 

“Whilst it’s unknown if Globalcaja has paid Play’s ransom demands, the most important thing in this situation is to not give in to any demands. Paying the ransom is no guarantee that stolen data will be returned or not leaked, and it only fuels further cybercriminal activity,” he said. 

“The finance sector is an attractive target for ransomware attacks because of the sheer volume of data and critical services managed by financial institutions. Targeting client information and threatening to leak data can not only result in financial damage, but also jeopardize the values and the reputation of the bank.”

Recurring attacks by Play ransomware

This marks the latest in a string of high-profile attacks conducted by the Play ransomware group, which rose to prominence in mid-2022. 

The group has previously claimed responsibility for a highly disruptive attack against Rackspace earlier this year that led to the exposure of sensitive data including passport information, confidential contracts, and student IDs. 

Play was also the group behind ransomware attacks on the German hotel chain, H-Hotels, and the State of New York (SUNY) Polytechnic college last year. 

The group has traditionally targeted organizations across Latin America, according to analysis from Avertium. However, it also has a track record of deploying attacks on companies operating in India, Hungary, the Netherlands, and Spain. 

HSBC has acquired Silicon Valley Bank UK for £1 in a historic last-minute deal that will provide a vital lifeline for UK startups.

The deal, facilitated by the Bank of England alongside HM Treasury, will see customer deposits secured and allow customers using the bank to access funds.

In a statement confirming the acquisition, Chancellor Jeremy Hunt said the deal was achieved without taxpayer support and will help restore confidence among startups across the country.

“Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customers' deposits are protected and can bank as normal, with no taxpayer support,” he said.

“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” Hunt added. “I said yesterday that we would look after our tech sector, and we have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence.”

More than 3,000 startups across the country use Silicon Valley Bank’s UK subsidiary. The rapid deterioration of the bank’s finances in recent days sparked widespread panic among firms on both sides of the Atlantic.

SVB's impending failure meant that affected startups would have been unable to pay invoices, distribute payroll funds, and likely face insolvency. An open letter signed by more than 200 startups described the collapse as an “existential threat to the UK tech sector” and called on authorities to provide a last-minute lifeline.

Industry stakeholders have welcomed the rescue deal as a positive move to prevent disruption of the burgeoning UK tech startup ecosystem. Dominic Hallas, executive director of Coadec, the Coalition for a Digital Economy, said the government deserves “huge credit” for facilitating the deal.

“From the very top, to HM Treasury who understood the challenge and gripped it, to the PRA, to the huge number of civil servants who have likely not slept since Friday. They saved hundreds of the UK’s most innovative companies today,” he tweeted.

Rob Cossins, CEO at AI-powered data startup Scribe, told IT Pro the acquisition is an “excellent outcome for the UK tech ecosystem”.

“Many UK technology companies were faced with existential risk, so I'm glad that all the relevant stakeholders appreciated the importance of protecting deposit-holders in the UK's most innovative sector,” he said. “Founders that were looking unable to pay wage bills this week are now protected and thousands of jobs have been saved."

What happened to Silicon Valley Bank?

Just one week ago, Silicon Valley Bank was among the largest banking institutions in the United States with a market value of more than $200 billion. By Friday, the bank was spiralling toward liquidation.

SVB was a preferred go-to institution for startups operating in both the US and UK tech sectors, holding cash used for payroll, invoicing, and assorted business expenses.

SVB’s popularity surged during the pandemic-fuelled startup boom, leading to a rapid influx of deposits that were subsequently invested by the bank. However, the bank invested heavily in US government bonds, including those backed by mortgages.

A steep increase in interest rates in recent months prompted bond values to dip, meaning that the value of the bank’s investment portfolio began to crash. SVB began offloading bonds at a loss, sparking concern among investors and customers alike.

Last week, SVB announced it planned to raise $1.75 billion in capital to compensate for the cashflow gap caused by bond-related losses, prompting a “run” on the bank.

Within a 48-hour period, SVB’s market value dipped rapidly, prompting emergency talks at the US Treasury and Exchequer.

The launch of the UK's new Centre for Finance, Innovation and Technology (CFIT) has been hailed as a landmark moment in the UK fintech industry as the government looks to bolster support for regional clusters.

Unveiled yesterday, the establishment of the CFIT acts on a key recommendation of the 2021 Kalifa Review into the state of the UK fintech industry.

The launch of the centre is backed by £5.5 million in funding from the Treasury and City of London Corporation. It will see the creation of a series of “innovation hubs” across the country aimed at supporting collections of startups in various areas of the country, known as regional clusters.

These hubs will play a key role in driving “national connectivity” across the fintech sector, according to the government, and provide businesses with vital assistance to support innovation and growth.

As part of the move, centres will be established in Scotland, Wales, Northern Ireland, and a host of English cities, including Leeds, Manchester, Birmingham, Bristol, and Newcastle.

A key focus of the CFIT will also include cultivating cross-sector collaboration to foster closer ties between finance, technology, academia, and government to address key growth barriers for the industry.

Charlotte Crosswell, chair of CFIT described the move as a “significant moment” for the UK fintech sector and one that will offer crucial support for “talented innovators and trailblazers in every corner of the country”.

“This organisation will enable us to come together as a sector to start breaking down barriers that the fintech sector is facing while creating a clear path for our homegrown fintech companies to achieve global scale, impact, and success,” she said.

A welcome move for UK fintech

Speaking to IT Pro, industry stakeholders have hailed the move as an overwhelmingly positive step from the government to accelerate growth in cities and regions outside of London.

Andy Thornley, head of financial services at techUK, said the launch of CFIT is “much welcome” and comes at an important crossroads for the industry.

“In being industry-led, but with the backing of both Treasury and the City of London Corporation, the body will have both the insight and influence needed to ensure that UK fintech fulfils its potential and continues to be an international success story,” he said.

Sarah Williams Gardener, CEO at FinTech Wales, said the cluster organisation is “looking forward to collaborating with Charlotte, Ez, and the team at CFIT to tackle the barriers our members tell us are holding back innovation and growth”.

“It’s imperative now that we bring together the best and brightest minds to ensure CFIT can be additive and focus on the wicked problems to drive growth and innovation,” she added.

Dima Kats, CEO at Clear Junction, told IT Pro that the CFIT launch represents a “strong and positive move from the UK government” that will provide “instrumental” to the future of British fintech.

“With this, there will be greater opportunity for new regional players outside of London, such as those in Leeds, to penetrate the fintech sector and lead to a more competitive landscape,” he said.

“The CFIT will enable the fintech industry to come together as a sector to break down regional barriers the sector is facing while also creating a clear path for a wider pool of fintech talent in the UK, to achieve global scale, impact, and success. This is a key moment for the sector,” he added.

Strong regional performance

Fintech clusters outside of the capital have performed well in recent years, with regional fintech experiencing a 237% increase in investment in 2021 as companies capitalised on rapid growth during the height of the pandemic.

However, in recent months economic conditions have soured and concerns have been raised over the UK’s ability to maintain its dominant position in European fintech.

UK fintechs secured $12.5 billion in investment in 2022 across more than 500 deals, placing it second only to the US in terms of fintech investment.

Yet despite this, late-stage fintech companies have encountered significant challenges as the flow of venture capital funding slowed due to investor hesitancy amidst a looming recession.

Chris Ford, head of government affairs at enterprise blockchain firm, R3, told IT Pro that given the increasingly competitive marketplace, the establishment of the CFIT and regional innovation hubs could be key to supporting future growth and maintaining UK fintech’s global position.

“It’s no secret that the UK is experiencing the heat from international competitors when it comes to retaining its status as a global hub for financial and technology, meaning the government is right to take a bold and ambitious approach in recreating the right environment for fintech to thrive,” he said.

Cloud service providers are now introducing industry-specific cloud offerings following the great switch to digital transformation, with the idea that businesses can purchase an entire cloud product but with the agility of a composable approach.

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The tech talent pool remains competitive and the finance industry is keen to poach tech workers that have been left without a job amid a doubling of industry-wide layoffs in the US.

John Talarico, global head of talent acquisition at Millennium Management - a major US investment management firm - said it has seen a surge in applications from tech workers during the second half of the year.

Like most other modern industries, the finance sector is underpinned by technology and Talarico said a huge number of engineering roles remain open for intelligent problem-solvers, in an interview with Bloomberg TV.

Tech firms have seen an increase in layoffs in the second half of 2022. There were around 59,000 tech layoffs in November 2022, a figure up from 23,000 in October and 10,000 in September, according to Bloomberg's data.

In 25 years of running technology acquisition programmes, Talarico said he has only seen a few market disruptions like the one that it’s going through currently.

Millenium has managed to hire 294 technologists this year and still has plenty of openings on the company’s career site. “It’s December 15 and my team is working on over 100 open positions, my team is not getting a break,” he said.

The firm is currently recruiting across all levels, from those beginning their career to senior global positions. It’s also across a range of competencies, from software or full-stack engineering, to security or cloud engineering.

In contrast to the private sector, Bloomberg data also highlighted that the government is struggling to attract tech employees, with part of the reason down to the salary it offers. The average private sector tech pays $109,400, big tech offers $138,800, while the federal government can only afford an average of $80,900.

Financial firms aren’t the only companies looking to poach tech talent, as small businesses were described as being in an unprecedented position by recruiting company Randstad in September 2022.

It said that employers in small and medium-sized businesses (SMBs) could use the current period to its advantage, with the ongoing cost of living crisis and tech companies facing a downturn. With bigger companies cutting back, smaller ones could hire strategically while the market is down, leading to important gains.

Over the past decade, financial technology has revolutionised the way businesses and consumers conduct and manage financial transactions, and data visualisation has played a big role in that revolution.

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Action Fraud, the UK's fraud and cyber crime reporting centre, has revealed a 32% increase in cryptocurrency fraud across the UK over the past year.

As reported in The Financial Times, Action Fraud stated that cryptocurrency scams have risen to £226 million ($273 million), representing a steep increase in such fraudulent activity across the period.

As the UK’s period of recession worsens, businesses and consumers may also see crypto as a route for quick returns on investments. In August, crypto bridge Binance claimed that rising inflation is driving people to invest in cryptocurrencies, citing examples of countries such as Argentina where many citizens have poured life savings into Bitcoin.

“Whenever times are tough, fraudsters always seek to prey on less experienced investors by promising huge returns," Hinesh Shah, forensic accountant at Pinsent Masons, told the Financial Times.

Businesses could fall victim to scams in which crypto investment in web3 tech, including metaverse technology, is encouraged and then made off with by fraudsters with no product delivered.

In October, the platform lost $586 million to a hacking attack, using a sophisticated method that allowed the threat actor to steal millions before Binance was able to detect any irregularity. Binance has been barred from operating in the UK since 2021, and the Financial Conduct Authority (FCA) has warned against investing money in non-FCA authorised crypto companies, as this will not be covered by its financial compensation or help from the financial ombudsman service in the case of fraud.

"Crypto fraud is best tackled, I think, by increasing public/investor understanding of cryptocurrency generally and what sort of scams are commonly being seen," Daniel Seely, financial services regulatory lawyer and crypto expert at Freeths, told IT Pro.

"People need to know what the warning signs are, and the types of things that they should be looking out for (e.g. any red flags). People should be very cautious about anyone who offers to invest in crypto for them, and of anyone who asks for details of any of their ‘crypto keys’ or other such information.

"In terms of what the FCA and regulators can do, unfortunately they only have limited powers given that they do not formally regulate crypto (save for money laundering purposes), however they do post regular warnings on their website about firms who they believe are operating illegally and of scams that are being seen. Consumers can subscribe for daily ‘warning lists’, which may help people identify fraudsters."

Cryptocurrencies have long been associated with fraud and a lack of transparency or security, with notable figures in the tech sector such as John McAfee having been charged with conspiracy to commit fraud following his promotion of crypto such as ‘Dogecoin’.

Despite this, the purported security benefits of the blockchain, as well as the potential for cryptographically-secured data to be used for speeding up internal transactions, have led to some arguing that it has a strong business case. Some of the sector’s largest firms continue to register their confidence in the technology, and in October, Google Cloud partnered with Coinbase to allow enterprise customers to pay for cloud services using a number of popular cryptocurrencies.

The FCA has stated its interest in crypto regulation, although this cannot be brought in by the regulatory body on its own. In 2021, the FCA warned those buying cryptocurrency that they “should be prepared to lose all their money”, citing the extreme volatility and risks of the system, and has entered into an agreement with Google that will ensure crypto companies seeking to advertise on Google’s search platform have first been given FCA certification.

Financial regulators and governments have become increasingly involved in the oversight of crypto, and are likely to increase their hold over the system that has long supported illegal activity through its general lack of centralised oversight. In September, the US government participated in the seizure of $30 million worth of cryptocurrency from North Korea backed threat group Lazarus, though this was just 10% of a $620 million stolen from gaming firm Sky Mavis.

Major national banks have successfully completed trials of a co-developed blockchain platform that could see a faster uptake of central bank digital currencies (CBDCs) across global commercial banks.

National banks that took part were the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates, Bank of International Settlements (BIS) revealed this week.

The banks custom-built the mBridge platform which was based on a new blockchain called the mBridge Ledger which aims to support real-time, cross-border payments and foreign exchange transactions using CBDCs.

As part of ongoing efforts, it's thought the success of the platform will help deliver faster, cheaper, and safer cross-border payments and settlements.

Many jurisdictions, in particular emerging and developing economies, are losing access to the international network of correspondent banking services, leaving many households and firms without sufficient or affordable access to the global financial system for payments, the BIS said.

The experiment was designed to operate across different jurisdictions and currencies, to explore the capabilities of distributed ledger technology, and the application of CBDC in cross-border payments between commercial banks.

Real corporate transactions were tested during the pilot. These centred around international trade and involved the central banks, selected commercial banks, and their customers. 20 banks in the four jurisdictions were able to conduct 164 payment and foreign exchange transactions totalling over $22 million over six weeks.

By enabling peer-to-peer technology and instant exchange of multiple CBDCs on a single network, Project mBridge aims to solve long-standing inefficiencies in cross-border payments and foster greater financial inclusion and innovation in international payments.

"Financial exclusion is not just a problem for individuals; it is also affecting economies," said Cecilia Skingsley, head of the BIS Innovation Hub. "This project makes important strides towards developing a platform that has the potential to foster more inclusive and efficient payments systems that will benefit those making and receiving payments in different currencies and jurisdictions as well as the overall functioning of the global financial system."

The BIS said it would continue to work on this and similar projects to explore the user requirements, technical specifications, and governance framework needed for interoperable CBDCs.

The mBridge project team will continue building the technology and testing it with a view to producing a product with enough features to be used by early adopters in the year ahead and a production-ready system thereafter

This isn’t the first time central banks have come together to trial CBDC technology. In September 2021, the reserve banks of Australia, Singapore, Malaysia, and South Africa partnered to test CBDC use for international settlements, hoping it would reduce the time and costs for these types of transactions. It aimed to develop a prototype shared platform for cross-border transactions using multiple CBDCs.

The UK has considered experimenting with CBDCs but a House of Lords committee said this year there was "no convincing case" for adopting a digital centralise currency that could risk financial instability.

Financial services organisations are facing a crucial moment. Niche financial categories, like peer-to-peer payments, have been completely disrupted by nimble SaaS entrants. FinTech startups are capturing the attention - and bank accounts - of a younger, more discerning audience.

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Multinational tech firm Block is facing claims that it mishandled a major data breach, and faces a class-action lawsuit over its response time and mitigations to the incident.

The plaintiffs argue that because of a four-month delay between the company learning about the data breach and notifying affected customers, Block is in violation of several pieces of consumer legislation. The complaint cites acts such as the California Customer Records Act, Illinois Consumer Fraud Act, and Texas Deceptive Trade Practices Act.

In December, Block learned that one of its former employees had downloaded information on users of the company’s mobile payment service app Cash App. Using the investment service that Cash App offers, the employee was able to access information such as customer names, brokerage account numbers, and trading activity for a specific day.

Around 8.2 million users were advised about the breach four months later in April, when the company made the matter public. The plaintiffs argue that this is an unacceptable amount of time for the company to have waited before acting, and that the information eventually provided did not properly explain the failure in its security.

“Defendants’ notice of the Data Breach was not just untimely but woefully deficient, failing to provide basic details, including but not limited to, how the unauthorized former employee was able to access its networks, whether the Private Information accessed was encrypted or otherwise protected, or how it learned of the Data Breach," the lawsuit contends.

“Even worse, Defendants failed to offer any credit or identity theft monitoring services for Plaintiffs and Class members."

The plaintiffs have also stressed that the breach exposes the security systems Block has in place as inadequate, and that failure to disclose this to its customers amounts to deceptive practice. Several acts of legislation are used to define deceptive practice, such as the Texas Deceptive Trade Practices Act which sets it out as “[r]epresenting that goods or services are of a particular standard, quality or grade, if they are of another”.

Block had stated in April that it spoke to law enforcement following the breach, but failed to provide a material explanation of how a former employee could still access sensitive information.

The plaintiffs argue that they incurred losses and harm to their privacy as a result of the breach, something that could have been avoided if Block had informed them of the breach immediately. This includes “lost time dedicated to the investigation of and attempt to recover the loss of funds and/or cure harm to their privacy”.

Cash App is a popular app for sending money, with an especially active userbase in the US, and over 70 million active customers worldwide in the period 2020-2021. In addition to operating Cash App, Block owns the company Square, which offers card payment hardware and software to businesses, and buy now pay later (BNPL) platform Afterpay, which it acquired in 2021.

IT Pro has approached Block for comment.

Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), has set out a broad strategy to embrace and mitigate against the benefits and risks of digital platforms.

In a speech to guests at Peterson Institute for International Economics, Rathi stated that cryptocurrencies are particularly concerning given their accessibility and cross-border capabilities, which casts into doubt the legitimacy of the platform,

Throughout May and June, the FCA held events that they call ‘CryptoSprints’, in which 184 industry participants were invited to give their views on what appropriate regulation for cryptocurrencies would look like.

The results showed there's appetite for such regulation, to be phased in over time although the FCA does not have the jurisdiction to bring this in on its own. At the US-UK Financial Innovation Partnership talks in London, the US and UK also discussed such regulation, and raised the idea of central bank digital currencies as an option going forward.

The FCA hopes that in engaging with the market so actively, they can mitigate against future threats to consumer interests posed by crypto, rather than simply react against individual outcomes of market instability.

Rathi also highlighted the changes to systems infrastructure the FCA has made, with the intention of improving fraud detection.

“Last year we moved some of our core systems to the cloud. This enabled us to transfer over 50,000 firms and tens of thousands of users to a new regulatory data platform. Using our data lake, we aim to more swiftly identify, connect and react to firm and market issues,” he stated.

The FCA has long expressed doubt over the viability of cryptocurrency platforms, having been investigating the issue since at least 2018. In 2021, the agency went as far as issuing a warning that “if consumers invest in these types of product, they should be prepared to lose all their money".

As part of its innovative approach to regulating the financial tech sector, the FCA has recently reached an agreement with Google requiring firms that want to advertise on its platform to first receive FCA certification.

Another key policy highlighted in the speech was the FCA’s environmental, social and governance (ESG) strategy, through which they aim to promote awareness of climate change, work with firms to manage sustainability risks, and support the wider market in moving to an economy that is sustainable.

In line with the UK net zero policy, the FCA is also working with international partners developing similar policies to ease worldwide economic transition away from carbon.

From electrical grids to the global positioning system, it’s easy to forget the dizzying array of complex systems that make the modern world function – at least, right up until the point when something stops working.

This is something that Russia learned the hard way in early March when, in response to the invasion of Ukraine, the US and Europe quickly agreed to cut it off from one of these critical systems: the Swift network that banks use to send money across borders.

In just a few keystrokes, it became significantly more difficult for money to transfer in and out of Russia, with the aim being it’d contribute to an economic collapse that might force Vladimir Putin to halt the aggression.

But what exactly is Swift, and what is the technology behind the global banking system?

Swift is essentially WhatsApp for Banks

The most important thing to know about Swift is that, surprisingly, it isn’t actually the system that transfers money at all. The name actually stands for the Society for Worldwide Interbank Financial Telecommunication, and it’s essentially a messaging platform used by banks to communicate transaction details across borders.

First established in 1973, the system today is used by more than 11,000 institutions including central banks, high street banks and countless financial services firms in more than 200 countries. According to Swift itself, more than 31 million “FIN” – financial messages – are sent every day, adding up to over 8.4 billion every year. According to the Financial Times, this accounts for about half of the world’s “high value” transactions.

From a technical perspective, shifting this sort of big data around is relatively trivial. Originally, Swift was a manual system that used Telex machines, but since the mid-2000s, the network has used the same IP-based networking as the rest of the internet, and the average message is scarcely longer than a tweet. For context, Twitter handles around 16 times as many messages – around 500 million – every day.

The contents of Swift messages is arguably more important than your tweet about what you had for breakfast, however.

How does Swift work?

The most common way money is transacted within a single currency is by using a separate real-time gross settlement (RTGS) system that transfers money between banks. These RTGS systems don’t send details on individual transactions, though, and transactions are typically aggregated together to send money in bulk. So, without Swift, the banks wouldn’t know what the money being received is actually for.

“The bank at the other end will use the instructions that have been sent by your bank, when it gets the money, to decide where to put it,” says Frances Coppola, a finance and economics writer and former banker. “The RTGS system is completely blind as to the origin of these payments, or who they're going to, they're just making a payment from one bank to another bank, that's all they do.”

The Swift messaging system is flexible too. Messages are sent as structured data and are carefully categorised by the type of transaction and type of message. “There are XML (hierarchical) standards which makes them a little complicated to the human eye, but this simplifies [automatic] processing, and the relationship of message items is clearly identified for subsequent processing,” says professor Alistair Milne, a financial economics specialist at Loughborough University.

Although, not all Swift messages are incomprehensible. “If anything goes wrong there's a message format that you can use in Swift to say, 'Oh, I can't send this because...',” says Coppola, highlighting that Swift is flexible enough to handle both free-form messages and structured error messages. “It's a very comprehensive set of messages that you can send with Swift, which covers all eventualities in payments.”

There is an obvious question to ask with all of this complexity: why isn’t sending money around the world easier? We live in a world in which live streaming is surging and where we can send 4K video at the blink of an eye. So why are the banks still using multiple complex systems to settle payments? Also, why do some banking systems only work at certain times of day?

“Replacing legacy [tech] is expensive,” says Milne, “but APIs and middleware can provide some solutions and have gone quite a long way. The messaging really is pretty much instant. The majority (95%) of international bank-to-bank payments reach the intended recipient within 24 hours.”

We’re still some way away from sending money around the world being as easy as sending a tweet, though. “Technology is no longer the constraint,” says Milne. “The real issue is the underlying business model.”

Cutting off Russia

“It’s certainly not up to banking staff to simply know not to send money to Russia,” says Milne. “Most payments are fully automated. There must be flags that lead to either messages being blocked or to manual intervention… before the message is processed.”

“A key will be the [Bank Identification] codes of the excluded Russian banks which can be used to generate a warning within the Swift systems.”

Though losing access to Swift makes it harder to send money to Russia, it doesn’t make it impossible. “Swift exclusion makes fully automated payment transmission to excluded banks difficult or impossible,” says Milne. “But if a stage of manual intervention is to be allowed, and if the different parties want to make it happen, then it's not so difficult to get around.”

He gives the example of how a British bank could conceivably use a bank in a country such as Kazakhstan as an intermediary – sending it a payment using Swift. Then the bank would communicate another way, such as through a phone call or even a WhatsApp message, to instruct the Kazakh bank to send the cash using Russia’s home-made Swift alternative called SPFS. This formats messages using the same structured data standard as Swift.

“If the parties to this chain are willing to play this game, and can conduct the relevant supporting transactions, then the payments get into Russia,” says Milne. “The bottom line is that Swift exclusion is pretty good at preventing the smaller payments of $10,000 or less, but for $100,000 or more there are plenty of workarounds.”

Can cryptocurrency serve as a workaround?

The idea behind economic sanctions is that they make it legally – possibly even logistically – impossible to trade with the sanctioned country. And for most of the 20th century they have prevented trade with places such as Cuba, or Saddam Hussein’s Iraq. In 2022, there could be another force that makes sanctions harder to enforce: crypto.

“There's been a bit of chatter about using Bitcoin to get round the sanctions… and it could,” says Coppola. “Russia's imposing soft capital controls, but people being what they are, they're going to find ways around them. And we've seen crypto used before for capital flight in places like Venezuela.”

Because cryptocurrencies such as Bitcoin don’t use the traditional financial system, or require governments or banks to function, it makes it much more difficult for authorities to control how money is used.

This isn’t just science fiction. In early February, a report published by the United Nations argued that North Korea had funded its nuclear missile programme to the tune of $2 billion by using cryptocurrency stolen in cyber attacks around the world. Similarly, early this year the central bank of Iran officially launched a programme to help businesses in the country make payments in crypto that evade sanctions.

Could Russia, now isolated in large part from the global economy, turn to cryptocurrencies such as Bitcoin too? “The first problem with Bitcoin is it's incredibly volatile,” says Coppola. “The second is it's actually incredibly slow, and then you have the problem of on-off ramps.”

By this, Coppola means the problem of still requiring crypto exchanges to convert Bitcoin into US dollars and other useful currencies – many exchanges don’t have many dollars on hand. She does envisage a way that Russia might get around this, though, by using so-called “stablecoins”, which function and act like crypto, but are algorithmically linked in value to traditional currencies such as the dollar. The UK, for example, announced it would introduce stablecoins, in April 2022.

“That will ensure the exchange rates, and it's actually a whole lot easier to use something that kind of looks like a dollar and behaves like a dollar,” she says. “And you can exchange it for actual dollars at some point at your leisure, rather than having to immediately get it out in case the whole thing crashes. So I think stablecoins are quite a considerable risk for the sanctions.”

Of course, it isn’t only Russia that knows this – the US and Europe do too. Which is why one consequence of the Ukraine invasion could turn out to be western governments further tightening the screws on crypto exchanges.

“I imagine that the US government will want to take steps to ensure that crypto exchanges and stablecoin issuers can't be used to evade sanctions,” says Coppola. “I'm expecting to see more regulation of crypto as a result of this.”

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This automatically-generated transcript is taken from the IT Pro Podcast episode ‘Solving SMB challenges through tech'. To listen to the full episode, click here. We apologise for any errors.

Hugh Armitage

Hi, I'm Hugh Armitage.

Adam Shepherd

And I'm Adam Shepherd.

Hugh

And you're listening to the IT Pro Podcast. This week we're taking a look at small businesses.

Adam

The life of a small business is full of challenges. But it's fair to say that the last several years have been more challenging than most, from Brexit to the pandemic SMBs have been forced to deal with a number of radical changes to the market as a whole, as well as the tools and processes they rely on to do business.

Hugh

This week, we're looking at how these changes have affected small businesses in the UK, and how technology has helped them to respond. We're joined by Aaron Harris, CTO of UK based cloud financial software platform Sage, to find out more about how its customers have reacted to the disruptions of the last several years, and how they can future proof their business to weather similar challenges to come.

Adam

Aaron, good to have you with us.

Aaron Harris

Great to be here. Thanks for inviting me.

Adam

So Sage has a strong focus on small business; to kick off with, can you tell us a little bit about how the UK SMB landscape has changed over the last three years?

Aaron

Yeah, and I think you you said it, the last three years have been seen accelerating change. I know this word is probably overused. But unprecedented. is a good word for it. Perfect storm might might be a good word for it. You know, the way, the way I talk about this, essentially, is that that technology was accelerating change for small businesses anyway. And COVID brought about an additional level of acceleration beyond what was already happening. So you know, there's a number of changes I think that we can talk about. The first one and obviously, the one where we're quite focused is just the acceleration of digital transformation. With with with COVID, businesses quickly had to to realise that if they couldn't use their business applications from home, if they weren't able to take orders from their customers digitally, if they weren't able to interact with their banks digitally, right, it became difficult to impossible for them to, you know, to to operate successfully and efficiently as a business. So So digital transformation for sure is, is you know, the biggest I think change that we see. But there's there's quite a bit more to it. The COVID also drove quite a change in the way we we hire retain, recruit, make happy work, colleagues, employees. There's a there's a huge labour shortage right now. And it's not quite clear how when, when all of this settles, what the the normal mode of work is going to be? How much of it's in-office, how much of it is work from home? How much do we expect our employees to work locally to the office versus how much do we allow them to work remotely? So we've got we've got digital transformation, we've got, you know, a tightening and sort of hard to predict labour market. And on top of that, we've got inflation, which, you know, nobody's got a crystal ball to say, you know, when when will inflation start to level? Is it still going up? Is it still going down? How does that affect my business? You know, should I raise my prices? So the punchline for all of that is that small businesses are expecting technology providers like Sage, to help them right to make sense of this and to to navigate through these times. So we saw, for example, that 44% of SMBs in the UK, expect to invest more in technology over the next 12 months than they have previously. So clearly, small businesses see technology as a big part of the solution to all this change.

Hugh

So Aaron, you've outlined some of these sort of key issues that we're dealing with, but um, can you dive a bit deeper into the consequences of, of those for SMEs?

Aaron

Sure, I guess it's it's helpful to start with digital transformation. And digital transformation is one of those, I think, very overused terms. It caught on, you know, six or seven years ago, people didn't really pay a lot of attention to what it really meant. And I think the big misunderstanding is that digital transformation is not simply moving from analogue technology to digital technology. It's not simply being able to move your technology from on premise to the cloud. It's it's really rethinking your your business model. It's, it's rethinking the key workflows of your business, as I mentioned, how do customers discover and buy my products? You know, how do I most effectively purchase from my suppliers? And how do I manage a supply chain, that that relies on digital workflows versus analogue workflows. So one of the big consequences, therefore, is the need to really rethink the business models that small and medium sized businesses operate against, and not just automate today's tasks, but actually, you know, automate complete, completely new digital workflows, right, that that reflect this more digital world. There's another element to this that we think is quite important, which is that as business processes become increasingly digital, it's quite disruptive to the work of humans. I use the word human there very specifically, because it's kind of the opposite of artificial intelligence, which is one of the technologies that's really enabling this transformation of workflows. And so there has to be this level of trust between, you know, small business owners, finance teams, accounting teams, that as they transition more and more of their work to technology, that technology is going to do the work in the right way. That where AI is being used to make decisions, it's making the right decisions. But it also means that we can use technology to support humans and what they're good at right? Things that AI will never be good at; leveraging human relationships, making decisions that require an understanding of a complex set of circumstances. They're having empathy and understanding the bigger picture that that decision is, may have beyond just the financial results of the business. So getting this psychology, right, this trust, if you will, between humans and technology, as as we accelerate this digital transformation is really, really important.

Adam

Yeah, that's a really good point, Aaron, and one of I think the most challenging aspects for small businesses is grappling with a lot of this new technology and trying to apply it to their business in a way that makes sense for them without having to essentially reinvent how they how they work on a kind of operational level, particularly, I think, for small businesses that don't necessarily have a huge amount of technical proficiency or expertise in the business already, that can sometimes be a challenge. So what are the kind of some of the main factors that can allow businesses to take advantage of these technologies without having to enormously invest in advanced kind of development operations or hiring a bunch more IT personnel?

Aaron

That's a great question. And actually, you know, I think the the burden the responsibility is on us, right? It's, it's on the providers of this technology. There's a there's an evolution that we're watching here, as we as we progress from computing era to computing era. If you remember the progression from the on premise, client, server, PC, desktop computing era to to the cloud. Part of the big transformation, there was that small and medium sized businesses no longer needed to worry about installing the software, setting up the servers, configuring the servers, managing the upgrade processes, so much of the responsibility that would have been the responsibility of these small and medium businesses, is handed over to the to the technology company, which which you know, requires a level of trust, for sure. We're moving into to another era that I think is marked by this this acceleration of digital transformation. That's that's changing business models. And we need to see that same progression. That progression, where less and less of the responsibility for managing the tech is the responsibility of the customer. And more and more of the responsibility lies with the vendor. Part of what makes this era of computing, I think, really different. Goes back to one of our principles at Sage for how we create technology leadership, and it's going to sound a bit ironic coming from a CTO. But the first principle of our strategy to become a technology to be a technology leader is that user experience, customer journey, is now more important than technology. Right? So in other words, the decision making process has to tie exactly to what are the needs? What's the journey? What's the experience of ultimately, the end customer and the users? If you get that right, technology will naturally follow. If you do it exceptionally well, the technology sort of recedes into the background.

Hugh

So Aaron, we've talked about these challenges that SMBs are facing, and how well equipped are UK small and medium businesses to meet them?

Aaron

Well, I think one of the things that really proved out during the COVID pandemic was that small businesses are remarkably resilient. It's, there's, there's a special entrepreneurial spirit that lives within small and medium businesses, especially small businesses, where they're, you know, there's always an entrepreneur who started this business, who is betting more than just their livelihood on this business, right, it becomes sort of essential to their, their personal outcomes in life, we've learned that small businesses are incredibly resilient. That's not to say that they're indestructible. You know, there's, there's much we have to do to protect small businesses. And we've seen support come from governments, right, we've seen advances in technology. So we can't just leave them on their own to survive. But I would say that small businesses are incredibly resilient and adaptable. I think that the pandemic changed some of our of our values, I think, and how we build business. Prior to the pandemic, this idea of, you know, lean manufacturing, lean supply chains, you know, never having any inventory on hand was was, you know, key to the way you build a profitable business. Well, now as we as we move into an era, it's not just COVID that's causing uncertainty, there's there's a lot of factors in the world, driving uncertainty, resilience becomes a really important objective in the way we design our businesses and design our workflows. And as I said, small businesses are well equipped. Governments play a role. So I think this is also really important. In this era of digital transformation, much of that digital transformation will be derived from AI, which which requires data inputs. So data flows in, you train machine learning models, that then automates human decision making, but also data just in a standardised way. So one of the things that has really impaired small businesses in the UK is their inability to access the credit markets. Right. So we know that small businesses are a bit disadvantaged versus larger businesses, because they don't have the same maturity of processes, they don't have the same maturity of being able to create a set of data that helps a creditor to make a credit decision. So governments have a lot that they can contribute to help small businesses to thrive. In this era, it's it's not just providing government support. It's not just programmes like like help to grow. It's also driving standards like open banking, open finance. And as much as the the, you know, the citizens of the United Kingdom probably are not thrilled about making tax digital. One of the things making tax digital does is it drives an accelerated digital transformation of these finance processes. And it creates a standard of uniformity. That allows for quicker decision making. So I've gotten a bit into, you know, our small businesses equipped, yes, but the answer is they are. But technology providers like Sage and and governments can't just rely on the fact that these companies are really, really resilient.

Hugh

Do you think government policies going in the right direction in general?

Aaron

I think so. It's it's a bit of a mixed bag. So governments often don't get it right the first time. Their intentions are almost always good. What I'm starting to see is is that governments are learning and pivoting a bit in their efforts. So where governments help is in driving that standardisation, where they help is in supporting small businesses and their efforts to to digitally transform. So in general, governments are helping. One of the things that is I can't see the future yet on is that the geopolitics in the world are actually not driving globalisation, they're driving more local, local approaches to data, local approaches to privacy, to sort of the digital processes. And a big challenge in the future that may offset some of the progress that governments like the UK Government are making is unfortunately, the sort of de globalisation, right, the idea that governments want to control where data resides. Governments have different regulations around data ownership rights, and data privacy rights, governments will have different thoughts and requirements around the approach to digitising processes like invoicing and filing taxes. So mixed bag, but I think generally as governments drive standardisation, as they support digital transformation, they are moving things in the right direction.

Adam

So Aaron, you mentioned earlier the importance of being able to access credit for SMBs and to easily access the kind of information that they need to get that credit. How much has the growing need for digital transformation affected SMBs' investment roadmaps, if you're like, how much extra investments are they having to make in their technology stack compared to what it would have been, say, three to five years ago?

Aaron

Yeah, that's a great question. And I'm going to get I'm gonna get on one of my favourite soap boxes to answer that question. So going back to this progression of technology from the desktop era, to the cloud era, now to the digital era, you know, more and more of the responsibility for managing the technology shifted to to the vendor. What's also happening in this progression is changing business models. So we know that with software as a service, which was the dominant approach to to selling software in the cloud era, we went from perpetual licence as a business model to subscriptions. As a business model, it had, among other things, a nice impact on democratising the access to technology, it meant that company like Salesforce, for example, and even - I should, I should use Sage in these example - Sage, right, in the in the creation of these cloud native SaaS products, when you go to a subscription model, the the way you monetize the value shifts such that you can expand access, right, it's less expensive for small business to pay because they have fewer licences. They require fewer licences, it's more expensive for larger companies, because they need more licences. Well, now what's happening with the digitization of finance and accounting workflows, is we're starting to see activity based pricing or consumption based pricing, becoming a very popular way to to support commercial business models. So it's not just as a small business that I only need, you know, one licence or two licences, because I only have one person in finance, I don't need licences anymore as a way to pay for the value I receive, I pay for value as I use the software. So as I transact over digital networks, as I make payments, as I file my taxes, and so this sliding scale of how customers pay for technology becomes even closer to the growth and the scale of the business. This is something that we've got a lot of work to do, not just with with sage, but other technology providers to enabling this sort of a business model. But But that's what's going to enable even the smallest businesses to access solutions that a couple decades ago, only the largest corporations could access. And I would also I guess, go back to what I said before, that in this era of digital transformation, technology follows design. So if we're designing the software to be easy to implement, not only for medium and large businesses, but for small businesses, you also take away a lot of that upfront risk and cost associated with the implementation of the software. So it's all about this evolution of business model. It's all about this evolution of of experience design and customer journey design.

Hugh

What other technologies can help SMBs overcome these challenges?

Aaron

Well, I've mentioned AI, and I can talk about AI all day long. So you know, we can have a great conversation about AI. The technology that that we are really investing in right now is what we call the digital network. So the the idea behind the digital network is that as business workflows digitally transform, it means that software must be designed now not only for the business that sort of executes those workflows, but also for all of the participants in the workflow. So if I have a workflow associated with the way that I pay my suppliers, it's not sufficient to design the software just for me as as the buyer of those services, it's got to span the relationship between me and my supplier. Same thing with customers, right? So if the way I invoice is digital, how does my customer access their invoice digitally? How do they pay that invoice digitally? So the idea of the digital network is that it creates a global map of all of these business relationships. And that enables us to create digital services that digitise the workflows that span those relationships. What it also does is it enables us to sort of aggregate the data that's flowing across the business ecosystem, to enable us to do much more powerful machine learning. So the example is, you know, we know that it's actually pretty high proportion, I think it's over one full percent of the invoices that run through one of our products in the UK, are from Amazon business; it's a staggering amount. So if if we were to build an AI capability for our customers, that spots potential fraud, so imagine somebody fakes an Amazon invoice, changes the remittance information and manages to get that to a small business; if I'm constrained to learn only from the interactions with Amazon for that one business, my models aren't going to be very smart, right? Models are only as smart as the data they used to train them. So a network allows us to aggregate all these data flows, to do much more intelligent to create much more intelligent AI capabilities. And you can apply it across all kinds of things, you can apply it to, to, you know, predicting fulfilment times, across suppliers. Now, I want to be very, very clear here, that all of this depends on our having a trusted relationship with our customers. We recognise fundamentally that we don't own the data, our customers own the data. And so long as they trust us to leverage that data in a way that helps them to be more successful, we're going to maintain that trust, right, as long as we're clear on the principles that we operate by, will maintain that trust. But it's an incredibly powerful concept. Once you create these networks for both data and connectivity. These networks also support things like blockchain, they that's a more conducive way of doing crypto transactions, one of the things that we're really excited about is the opportunity to create smart transactions or smart contracts sorry, on a network so that you know when an invoice is issued by a customer, as soon as that the the order is fulfilled, the payment is automatically executed. The accounting treatment of all of these activities are automatically created. So this network architecture becomes the foundation to unlock AI ML, to unlock blockchain related capabilities, to unlock crypto and smart contracts. So that's, you can hopefully you can tell from the way that I'm talking that I'm quite passionate about this. This is the next big evolution, getting all of this connected into networks is what's going to unlock the next generation of innovation.

Adam

So we've we've talked a fair amount about some of the technologies that are being implemented, kind of, if you like behind the scenes, in terms of some of the services that SMBs are using, kind of in the course of their day to day business. But what about the technologies that are being if you'd like more proactively deployed in terms of some of the things that SMBs will be looking to expand into as they grow? Particularly when you're starting with a kind of very, very small operation, as you start to scale, what are the first things that should be on a small businesses shopping list in terms of really maximising the benefit that they can get out of their investment in technology?

Aaron

So again, great question. Traditionally, as a small business grows, there's only a handful of events, or milestones that trigger that small business to make their first investment in technology. One is simply their ability to accurately and efficiently invoice their customers. Another event would be if if you have a heavy dependence on supply chain or on subcontractors or consultants, your ability to manage those relationships and to, again, accurately and efficiently pay your suppliers. It could be that you have compliance requirements that you've experienced before, you've scaled to the point where you need technology to automate your supplier relationships and your customer relationships. But it tends to be one of these events that triggers that sort of first investment in technology. I think there are a few new areas in in this digital, you know, this era of digital transformation. One of those is, you know, digital go to market capabilities. So how do I market, sell and get paid for my services is going to be, you know, I think for many companies a very early milestone that they reach, because, you know, starting a brick and mortar store, starting a brick and mortar business is just you know, it's going to be less and less pervasive in the future. And I think we're starting to see some more disruption in the space that may trigger small businesses to adopt technology sooner. And I want to sort of caveat this by saying we're in the extreme high point of the hype cycle here. But the metaverse, you know, there, there will be small businesses who decide that actually a storefront that exists in a Metaverse because I know who my customers are. My product is more more conducive to being sold in the metaverse or it creates, you know, a unique experience in the metaverse. Small businesses may choose to adopt technology simply so that they can create a storefront in the metaverse.

Adam

I just want to pick up on that because that's something that that we've heard a lot about, as you mentioned, there's a lot of hype around the metaverse at the moment. Do you think that the metaverse is going to be something that, you know, a significant proportion of small businesses are going to be able to extract value from?

Aaron

So I don't have a crystal ball. It's hard to say how this is going to play out. But But one thing I do have a lot of conviction. And this I know I keep going back to this but but it's sort of you know, it gets back to the disruption that each progression of technology era introduces. With, you know, the advent of the cloud, we create a completely new ways to buy and sell products with the Internet. Right. Amazon exists because of the disruption of the cloud and it became a new commercial model, and a new way to buy things. I believe that there will equally be as much disruption in the way we buy and sell products and services with the metaverse. You know, it's sort of this blending of the physical and the digital world where you've got the ability to do the transaction with all the benefits of digital workflows. But you also get the benefit some of the benefits of of the physical nature of having a much richer interaction with the products that you're evaluating, much richer interactions with with the store that's behind the products where you can converse in the metaverse so I believe, very firmly that we will see markets emerge in the metaverse that are as disruptive as the markets that emerged in the cloud. What I can't see yet is how it's going to emerge. Will will Facebook, you know succeed in in their vision to be the metaverse company? Will there be multiple metaverses? Will be there some other Metaverse that wins? It's hard to say yet. So I'm not suggesting that small businesses need to get on their horse and get out there and spend lots of money. What I'm suggesting is that it's coming and as we start to see how it starts to shake out, I think it'll become an important event in a small businesses growth. Deciding now's the time to start, you know, a digital sales approach, digital customer interactions, digital support, digital services through the metaverse.

Hugh

How can small businesses best prepare themselves to handle future disruptions?

Aaron

So I think it goes back to this this notion that we're shifting our business models away from you know, lean efficient, maximise every penny of profits to workflows that are more agile, if you will, more more adaptable; workflows that are that are more resilient to change. I think small businesses are going to have to embrace this idea that there's multiple channels for small businesses to sell their products now. And they've got to have the ability to quickly pivot between them as circumstances changes. Small businesses need to embrace that the workforce is changing. You know, gig workers are going to be a huge part of this economy. So being able to adapt the jobs, the tasks within our business, to line up with the right style of worker, whether it's a full time salaried employee, all the way to to a gig worker that has is very it's variable. It's more agile. I think that's that's really important. And I'm not just saying this, because I'm, I'm representing Sage. But implementing technologies is going to be super critical. Let me give you an example on this whole work workforce concept. I didn't mention this as part of the answer. It's not just that the labour market is tighter now. It's that the it's very difficult to predict because it's not just businesses that are sort of in this this era of instability. It's humankind, right. So when we when we set out to use AI to build some capabilities for our HR customers, our human resources customers, we thought that what small businesses would want was AI that would predict when an employee would churn. And I think that's really representative of the era that we're leaving, where you had very stable workforces. And you know, what you needed to do is to be able to plan appropriately. What we learned was that actually small businesses wanted AI to help them with their short term staffing. Could could we use AI to predict absenteeism among their staff? Can we use AI to predict availability of staff, as we have to dynamically adjust schedules and capacity on a on a very short cycle? So adopting technology, you know, like what we've built with AI that predicts absenteeism will be pretty critical, I think, to enabling agile businesses that that ultimately are going to succeed in this this era of digital transformation.

Adam

Well, on that note, I'm afraid we're going to have to leave this week's discussion there, but I'd like to thank Sage's CTO, Aaron Harris for joining us.

Aaron

Thanks for having me, it was a real pleasure to talk with you both.

Hugh

You can find links to all the topics we've spoken about today in the show notes and even more on our website at itpro.co.uk.

Adam

You can also follow us on social media as well as subscribe to our daily newsletter.

Hugh

Don't forget to subscribe to the IT Pro Podcast wherever you find podcasts. And if you're enjoying the show, leave us a rating and review.

Adam

We'll be back next week with more analysis from the world of it but until then, goodbye!

Hugh

Bye.

Running a small business has always been a demanding task, but recent circumstances - from the coronavirus pandemic to the advent of Brexit - have come together to make it more challenging than ever before. An increasing number of SMBs, however, are turning to technologies such as cloud and AI to help address these issues.

This week, we’re joined by Aaron Harris, CTO for UK-based cloud financial software firm Sage, to talk about the state of the UK’s small-business market, the role technology plays in keeping it as resilient as possible, and how SMBs can make the most effective use of their IT.

Highlights

“There has to be this level of trust between small business owners, finance teams, accounting teams, that as they transition more and more of their work to technology, that technology is going to do the work in the right way. That where AI is being used to make decisions, it's making the right decisions.”

“The technology that we are really investing in right now is what we call the digital network. So the idea behind the digital network is that as business workflows digitally transform, it means that software must be designed now not only for the business that executes those workflows, but also for all of the participants in the workflow.”

“Small businesses are expecting technology providers like Sage to help them to make sense of this and to navigate through these times. So we saw, for example, that 44% of SMBs in the UK expect to invest more in technology over the next 12 months than they have previously. So clearly, small businesses see technology as a big part of the solution to all this change.”

Read the full transcript here.

Footnotes

• Five reasons why digital transformation is essential for business growth
• Are we hurtling towards digital transformation burnout?
• The key pillars of a digital transformation strategy
• Even cutting-edge firms need digital transformation
• What are digital workflow solutions?
• How AI can help – and hinder – the supply chain crisis
• What is ethical AI?
• What does it take to launch a successful Fintech startup?
• The metaverse is a waste of time, effort and processing power
• Into the metaverse: Everything we learned from our virtual tour

Subscribe

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Checkout.com has announced plans to acquire French identity verification provider Ubble, in a deal expected to close before the end of 2022.

Since launching in 2012, the London-headquartered cloud payments platform has grown to house 1,700 staff members in 19 offices around the world, striking deals with the likes of Apple Pay, Google Pay, PayPal, Alipay, while also expanding to cover bank transfers, SEPA direct debits, as well as cash payments.

Ubble’s services will allow Checkout.com to reduce the financial risk associated with e-commerce transactions amid the rising threat of online scams and identity fraud.

Its identity verification technology will make it easier to ensure merchants and fintechs are compliant with local regulations as well as confirm whether customers are who they claim to be.

It will also expand Checkout.com’s current suite of financial products, allowing it to stay ahead of potential changes in EU and global regulations.

Checkout.com chief product officer Meron Colbeci said that personal identity security is “becoming a growing need for e-commerce and crypto merchants, digital wallets, and other fintechs”.

One notable Checkout.com customer is fintech firm Wise, which last year debuted on the London Stock Exchange as the “largest-ever tech listing”. Other fintech clients include Klarna, Revolut, and MoneyGram.

According to Colbeci, expanding Checkout.com’s security and fraud detection capabilities will allow the company to “reduce the time, cost and friction” experienced by e-commerce merchants when deploying existing identity verification solutions.

This will allow them to “offer their end consumers a simple and compelling experience, which lends itself to increased conversion rates and faster growth”, he said, adding that Checkout.com was impressed with Ubble’s ability to "rapidly drive machine-learning innovation in a complex and challenging space, and their market-leading engineering talent”.

The deal is likely to help Ubble expand to the US market; a new area of focus for Checkout.com, which originally launched as an EMEA-based company.

The announcement of the planned acquisition comes four months after Checkout.com raised $1 billion in a Series D funding round, raising its valuation to $40 billion (£32.8bn).

Neither companies disclosed any financial details relating to the acquisition.

Mass sell-offs of stock this week have driven the NASDAQ to the lowest it has been in nearly two years.

Many of the biggest names in technology experienced large drops this week, contributing to a landmark 5% overall drop for the US stock market.

Amazon, Asana, Meta, and Netflix were among the companies with the biggest drops in stock price, down 7.5%, 11.3%, 6.77%, and 7.69% respectively.

Google parent company Alphabet and Microsoft were down more than 4% each by market close on Thursday. E-commerce platforms Shopify, Ebay, and Etsy also posted double-digit drops.

None of the tech companies have shown signs of rebounding as of Friday morning, as investor confidence in tech is said to be waning.

Investors started selling off US tech stocks last year and the trend came to a head in the first days of 2022 as the NASDAQ again dropped 3.3% to a then-landmark low, its worst day since February 2021, the Financial Times reported.

Technology and cloud stocks became popular throughout the pandemic due to the rising demand for remote solutions and an increased demand for technology to keep a remote workforce operational.

A combination of factors, including the prospect of growing interest rates, rising levels of inflation, and the war in Ukraine, have seen investors instead turn towards sectors such as energy, utilities, and financial services – three industries that appear better protected from economic threats.

Tech companies reported challenging quarters for Q1 2022, with some, such as Meta and Apple, saying they are imposing cross-company hiring freezes following mixed earnings reports.

“We regularly re-evaluate our talent pipeline according to our business needs and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly," said Meta spokesperson Andrea Beasley to CNN a week after reporting its slowest growth in years.

Amazon’s most recent report indicated growth in AWS, its cloud business, and consumer units, but operating cash flow and operating income were two of the standout metrics that posted substantial decreases.

The e-commerce giant also said it is “no longer chasing physical or staffing capacity” after announcing its most recent quarterly earnings. Instead, the company is “squarely focused on improving productivity and cost efficiencies” throughout its fulfilment network, though these “may take some time” to materialise.

The adoption of Bitcoin as legal tender by the Central African Republic (CAR) has been met with sustainability concerns from experts, with the expectation that other countries will soon follow.

Announcing the news on Wednesday, the CAR will adopt Bitcoin as an accepted alternative currency, alongside the country’s Central African Franc (CFA), thanks to a new law approved by president Faustin Archange Touadera.

CAR becomes only the second country to adopt a cryptocurrency as nationally accepted currency, behind El Salvador, which formally adopted Bitcoin last year.

The CAR “is the first country in Africa to adopt bitcoin as legal tender," said Obed Namsio, Touadera’s chief of staff, in a statement issued to media.

"This move places the Central African Republic on the map of the world's boldest and most visionary countries,” he added.

Technology and fintech experts have raised the issue that Bitcoin requires a large amount of energy in order mine new currency and its proof-of-work blockchain is not an environmentally-friendly operational model.

“The news that the Central African Republic (CAR) has become the second country to accept Bitcoin as legal tender is a worrying one for the environment,” said Joe Baguley, VP & CTO EMEA at VMware.

“It is a timely reminder of the fundamental mistake the founders of bitcoin made by building the cryptocurrency on a proof-of-work blockchain, which consumes an incredible amount of energy.”

The United Nations (UN) categorises CAR as one of the least developed countries in the world and has assembled the Minusca peacekeeping operation to help aid the humanitarian crisis that has been unfolding in the region for many years.

Access to cryptocurrency, including Bitcoin, requires access to the internet and a device capable of handling a cryptocurrency wallet, such as a computer or smartphone. With just 4% of people in CAR having internet access, the situation has raised questions about the long-term viability of the cryptocurrency alongside the CFA.

Wider commentary has also focused on the potential of cryptocurrency-related crime, but one expert told IT Pro that CAR is unlikely to be the last country to adopt Bitcoin as legal tender.

“We can expect an increasing number of countries to follow the example of El Salvador and now the Central African Republic and adopt Bitcoin as legal tender,” said Nigel Green, CEO at deVere Group.

“I expect Bitcoin will be adopted as legal tender in at least one more African and one Central or Latin American country before the end of the year.

“In Africa, we believe Tanzania could be one of those countries. Its central bank said last year it was working on a presidential directive to prepare for cryptocurrencies. In Latin and Central America, it could potentially be Paraguay or Mexico next.”

El Slavador leads the way

El Salvador became the first country in the world to adopt Bitcoin as legal tender in September 2021, with president Nayib Bukele being well-known for his bullish stance on the cryptocurrency.

However, the move was met with a mixed response. Just days after the adoption became official, thousands of Salvadorans marched the streets protesting the move, setting fire to Bitcoin ATMs.

Many Salvadoran citizens thought the move to adopt Bitcoin was a political ploy to divert attention from Bukele’s scrutinised policies and research showed fewer than 5% of citizens fully understood the technology.

Critics at the time also drew attention to the official cryptocurrency wallet’s app permissions requesting access to a user’s microphone and contacts, permissions not typically required by such an app.

Addressing environmental concerns, Bukele announced plans to build a ‘Bitcoin City’ at the foot of a volcano in November 2021, saying energy harvested by the rapture in land could power the nation’s use of the technology, and the proposed city itself.

The International Monetary Fund (IMF) also urged the country to remove Bitcoin’s legal status at the start of 2022, citing risks to market integrity and financial stability.

US fintech firm Finastra has announced a collaboration with Microsoft to help small and medium-sized businesses (SMBs) access loans.

The SMBs will be able to unlock these new financing options through their Dynamics 365 accounts, which will also be used by the lender for review.

Microsoft suggests that SMBs operate in "a sector severely underserved when it comes to accessing finance" and its partnership with Finestra aims to improve access in a "seamless and frictionless" manner. Dynamics 365 is a key part of the plans, as SMBs will be able to use information already stored in their accounts to apply for loans. This includes accounts receivable and payable records, which could speed up the time between lending decisions and payment, according to Microsoft.

"We are proud to further expand our relationship with Finastra to drive new value for small and medium enterprises, the backbone of job creation in the world's economy," said Bill Borden, corporate vice president of worldwide financial services at Microsoft. "By embedding secure access to key financial services in the context of Microsoft Dynamics 365, our SMB customers will have a faster path to the financing options and critical capital they need to thrive."

Finastra is an American-based fintech firm that has more than 8,000 financial institutions in its network and it operates in 130 countries around the world. The collaboration with Microsoft will launch in the summer, "initially" in North America, and will be integrated with open APIs through the company's FusionFabric.cloud platform.

The new lending proposition on Microsoft Dynamics 365 "reinforces" Finastra's leadership in open and embedded finance, according to the company's chief revenue officer for banking as a service, Angus Ross. What's more, Ross believes It demonstrates the benefits that embedded and contextual finance can bring to the industry and the communities within it.

Cyber security incidents targeting UK financial services providers increased by 52% in 2021, according to reports filed to the Financial Conduct Authority (FCA) and analysed by Picus Security.

An FOI filed by the cyber security company found that the majority (65%) of the incidents reported to the FCA were cyber attacks, with one in five involving ransomware and almost a third (31.9%) being classed as data breaches.

Picus Security found March 2021 to be the biggest month for cyber security incidents involving financial services providers, with 21 cyber incident reports filed – more than double the 2021 monthly average and triple the number of incidents reported in March 2020.

According to Picus Labs researchers, the significant spike could have been caused by the Hafnium hacking group, which at the time were found to be exploiting the highly-publicised Microsoft Exchange Server vulnerabilities. The FCA, which regulates the activity of more than 50,000 financial services providers, was not immediately available to comment on the increase in cases.

Suleyman Ozarslan, co-founder of Picus Security and VP of Picus Labs, described the significant increase in cyber incident reports as “a concerning trend” that “should serve as an important reminder to all firms about the need to make ongoing improvements in all areas of security”.

“Financial services firms are amongst the best prepared and most highly capable organisations at detecting and responding to cyber incidents. Yet, despite investing heavily in security and data protection, it’s clear that many continue to experience challenges in these areas,” he said.

The financial sector was one of the many industries which experienced a rapid shift to remote working due to lockdown restrictions, becoming dependent on online communication which has long been a popular target for cyber criminals.

According to Ozarslan, financial services providers “had to contend with being a target of Advanced Persistent Threats and ransomware operators, as well as manage the risks of critical vulnerabilities in widely used systems such as Microsoft Exchange Server”.

“Only by challenging their defensive capabilities on a continuous basis can firms hope to measure their threat readiness more accurately and swiftly close the gaps needed to take their operational resilience to the next level,” he added.

In 2019, the FCA mistakenly published the personal information of approximately 1,600 people who had filed complaints against it, including names and contact details, on its website.

IBM has signed a three-year agreement with HSBC to develop quantum computing applications for the finance industry.

As part of the deal, HSBC will join IBM’s Quantum Accelerator program, allowing it access to the firm’s premium quantum computing systems, which includes the recently announced 127-qubit processor Eagle.

"By investing in quantum computing we are innovating for the future, to make banking easier for our customers,” said Colin Bell, HSBC Europe CEO.

“This technology has the potential to transform how we run areas of the bank by addressing challenges which classical computers may never be able to solve, alone. Our work with IBM, a leading provider of quantum computing, is essential to harnessing this potentially game-changing technology for financial services,” added Bell.

In addition to optimizing pricing and services, HSBC will leverage quantum computing to identify and combat fraudulent activity, and further its net zero goals.

The bank also intends to upskill its employees through internal training programs and besides recruiting quantum computing researchers to build a dedicated quantum research capability within its innovation team.

"Financial institutions and organizations around the world are eagerly awaiting real-world applications of quantum computing and exploring industry applications for quantum computing should be a key tenet of any enterprise strategy today," said Dr. Darío Gil, senior vice president and director of IBM Research.

"We are excited to team with HSBC to explore applications of quantum technology to their business operations and help turn their aspirations into reality."

Financial institutions are looking to evolve digitally, as many other organisations have in recent years across all sectors, however the monolithic infrastructure - in lending and banking specifically - is complex and inflexible, with manual processes proving slow and insecure.

Financial services therefore need to invest in modernising their legacy infrastructure and adopt a move to the cloud to become more dynamic and more secure in today's climate.

Learn how IBM is enabling banks to digitally transform their lending process -- on their own terms -- to deliver better customer experiences.

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As businesses have learned how to recover from one of the biggest global disruptions, being prepared for any impact on operations is wise moving forward, with finance as a cornerstone of an organisation’s disaster response strategy.

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SAP has introduced a mobile app that lets managers swap aging spreadsheets for up-to-date data on budgets and spending.

SAP RealSpend pulls data from core financial reporting systems, giving that information straight to line managers via the HANA Cloud Platform, allowing them to get clear and quick insight into their companies’ spending.

One customer, sugar refining firm ASR Group International, is using the new app in conjunction with SAP’s revamped Business Suite, S/4 HANA.

ASR’s chief financial officer, Greg Smith, said: “Every company has to manage expenses to be successful. SAP RealSpend enables our company to employ expense management in a real-time environment — all enabled by our adoption of SAP HANA and SAP S/4HANA Finance.”

Cost centre managers can use the tool to analyse past spends and future spends, and forecast budgets by factoring in expected costs of divisions like sales, marketing, travel, hiring and infrastructure.

Thack Brown, SAP’s general manager and global head of line of business finance, said: “This app uses the cloud to innovate on top of our finance core and provides line managers and others with budget accountability the tools they need to make sound spending management a real-time activity across the entire enterprise.”

RealSpend marks the creation of one of the first SAP apps to connect directly to S/4 HANA’s finance solution in real-time, without having to replicate data, according to SAP.

It also works with other data from SAP products and third-party products, said SAP.

Cloud Pro's news editor Joe Curtis is on site SAP Sapphire all week. Follow him on Twitter for live updates from the show

Creatio, a global software company that provides a low-code platform for process management and CRM, has announced it’s partnered with digital solutions provider PositiveEdge Solutions.

Creatio’s low-code platform automates lending processes and consolidates front-, middle-, and back-office processes to boost customer engagement with targeted offers at the right time, on the right channel.

PositiveEdge Solutions and Creatio’s new partnership will enable financial institutions to leverage artificial intelligence (AI) and machine learning (ML) technologies to tackle areas where legacy systems are too complex and expensive to serve the needs of banking, financial services, and insurance (BFSI) clients.

“Banks and Insurance companies in India have to differentiate themselves in the highly competitive market they operate in, and by using Creatio’s lead scoring model, these organizations can focus on the hottest leads, and streamline workflows with the next best offer option,” said Amit Kumar Singh, chief operating officer at PositiveEdge Solutions.

“With this unique offering from Creatio called churn prediction, FIs and Banks can avoid customer loss to competitors. We are very confident of a successful partnership with Creatio as we bring their innovative solutions to the large Indian marketplace.”

Creatio’s low-code platform also features robust CRM and business process management (BPM) tools to help organizations accelerate sales and marketing operations.

Creatio’s other interesting features include custom tools for seamless integration with third-party applications; visual analytics to detect bottlenecks and optimize processes; pre-built connectors and ready-to-use apps; and customizable dashboards.

“In today’s highly competitive business environment, more and more companies demand for intelligent solutions for CRM and business process management to help them streamline customer-facing processes and gain a genuine competitive advantage to boost profits and more effectively engage their customers,” said Alex Donchuk, global channel director at Creatio.

“With a strategic alliance of PositiveEdge Solutions and Creatio, more businesses worldwide will have an opportunity to benefit from the top-notch intelligent tools designed to streamline, orchestrate and accelerate key business processes.”

A number of US banks are starting to use cameras with AI software to analyze customer preferences, monitor their workers and watch for homeless people sleeping near their ATMs, according to Reuters.

Still, many banking executives are treading cautiously, worried that heavier computer surveillance could spark public backlash.

Previously unreported trials at JPMorgan Chase and City National Bank of Florida, along with earlier rollouts at various banks including Wells Fargo, shows financial services organizations see potential in AI tools, such as facial recognition software.

JPMorgan Chase is testing the technology at Chase Bank branches in Ohio, according to Reuters. Meanwhile, City National plans to start facial recognition trials to ID customers at teller machines and employees at bank branches.

Chase developed its AI camera system using components from Google, IBM Watson and Amazon Web Services. Its cameras aim to monitor banking transaction times, how many customers leave because of long lines, and what activities occupy workers.

Some banks use video analytics software to keep watch on their banks’ exteriors, including watching for homeless people setting up camp under the overhangs for drive-thru ATMs.

This will allow staff to activate a siren or strobe light to drive them off, which helped some banks increase ATM usage and reduce vandalism, said Brian Karas, vice president of sales at Airship Industries, which develops video management and analytics software.

Smartphones that unlock with face scans paved the way for all this, said Bobby Dominguez, chief information security officer at City National.

“We’re already leveraging facial recognition on mobile. Why not leverage it in the real world?” he told Reuters. “We’re getting off to an early start on technology already used in other parts of the world and that is rapidly coming to the American banking network.”

However, the US is not “other parts of the world,” and some banking execs are wary of a backlash and civil liberties complaints. For example, Portland, Oregon, recently banned public-facing businesses like stores, restaurants and hotels, from using facial recognition technology.

Rite Aid found itself in hot water over facial recognition software and shut down its facial recognition cameras in 200 stores last year after it was found using it mainly in lower-income minority neighborhoods. Rite Aid’s facial recognition tech was from a company with links to the Chinese government, compounding its issues.

Security researchers have discovered problems in the web applications deployed by the top ten credit unions in the US.

Researchers at Outpost24 analyzed the top US credit unions’ web application attack surface to evaluate their security. They found 1,224 publicly exposed web applications running over 107 domains, with 10% running on old components containing known vulnerabilities.

Outpost24 selected its US Credit Unions list based on a Segmint list of the Largest US Credit Unions by Assets. Researchers examined each union’s public-facing web security environments against the seven most common attack vectors hackers use during reconnaissance to ascertain a risk score between one and 100. The risk score comprised security mechanisms, page creation methods, degree of distribution, authentication, input vectors, active contents, and cookies.

The research found that the top three attack vectors against the US credit unions targeted active content technologies, followed by authentication and page creation methods.

“It’s no big surprise to see Active Content Technologies (ACT) as the biggest scorer. As soon as an application runs scripts, the attack surface could increase if a website has been developed using multiple active content technologies, some more vulnerable than others, to build and create their applications”, said Nicolas Renard and Stephane Konarkowski, security consultant at Outpost24.

Researchers said that, overall, the attack surface score for the top ten credit unions was 16.39 out of 58.24. However, research showed the worst offender from the top ten returned a disproportionately higher attack surface score of 34.08, outweighing everyone else on the list and showing a great disparity in the security posture between credit unions.

However, this score was significantly lower when compared to US retailers, which scored 48.3. According to the researchers, this is likely because of the highly regulated business model credit unions operate in that requires them to demonstrate a standard level of security hygiene to protect the company assets and customer data against cyber criminals.

Researchers also examined the components used to develop the web applications and discovered there were, on average, 17 open port 80 among the credit unions. They said this can be dangerous when the service listening on the port is misconfigured, unpatched, vulnerable to exploits, or has poor network security rules.

Researchers said it is essential for security teams to identify open ports and close unused ones or install firewalls on hosts to monitor and filter port traffic to “prevent any security issues from creeping in.”

A year and a half after announcing the project, IBM is launching what it says is the world's first financial services-ready public cloud platform.

Developed in collaboration with Bank of America, the “IBM Cloud for Financial Services” will set a compliance framework for vendors and software providers, the company said.

“The IBM Cloud for Financial Services is designed to help to reduce risk for financial institutions, their partners and FinTechs, and innovate quickly with built-in controls that are adhered to by the entire ecosystem,” IBM said in its announcement. “IBM has built a cloud environment capable of supporting the needs of the financial services industry for their mission-critical workload and data protection, with our compliance capabilities and industry-leading security.”

With the general availability of IBM Cloud for Financial Services, the financial services industry can build applications with Red Hat OpenShift, migrate virtual machine workloads, and establish compliance profiles across their workloads, the company said. Financial services institutions can use the IBM Cloud’s built-in security and compliance controls for both cloud-native and VMware workloads.

“Together with some of the world’s largest banks and leaders in regulatory compliance, we are driving a change in cloud adoption for highly regulated industries, aiming to improve the security and compliance posture for the industry,” said Howard Boville, Head of IBM Hybrid Cloud Platform.

“With a focus on data security delivered with IBM’s confidential computing and sophisticated encryption capabilities, we aim to reduce risk in the supply chain for banks, insurers and other financial services industry players, and at the same time accelerating the time by which they can drive and consume innovation,” Boville added.

To protect data across cloud-native and VMware workloads, IBM Cloud for Financial Services uses the tech giant’s fourth-generation confidential computing capabilities and “Keep Your Own Key” workload isolation encryption. This gives enterprises technology-backed control of their encryption keys so clients are the only ones who can control access to their data.

This same hardware-based assurance enables confidential computing, meaning that financial institutions can process critical data in a secured enclave within a shared cloud environment.

Welcome to the IT Pro Panel Profile, where we talk to the CIOs, experts and IT leaders that make up the IT Pro Panel, and discover their top tech, pet peeves and IT inspirations.

The UK’s fintech sector is one of the most dynamic and fast-moving industries in the country, and Yolt is one of the companies riding that wave. Initially established as a venture of banking giant ING, the app allows users to save and manage their money, as well as offering an enterprise-level open banking platform through its Yolt Technology Services arm.

Ensuring the stability, security performance of these services is Yolt CTO Roderick Simons, who has spearheaded projects including the company’s move to the cloud, the development of AI-driven services to add value to business clients, and the addition of new payment card services for retail banking customers.

Roderick Simons

CTO, Yolt

Describe your role in 20 words or fewer.

I’m the chief technology officer of the Yolt app and Yolt Technology Services.

What was your first computer?

My first computer was a PC with a 16MHz i386 CPU. I remember the days of having to run memmaker or manually changing the config.sys file in order to free up memory before starting a new program.

What do you like most about working in IT?

The most rewarding aspect for me is getting to build software with great teams that customers like to use. I still remember the first moment when I saw someone opening an app I helped to develop.

If you could magically get rid of one piece of technology forever, what would it be, and why?

I’d eliminate notifications or badges that keep popping up and that draw away our attention when we’re trying to get into a good flow.

What future tech innovations are you most excited about?

There’s two areas I'm excited about; firstly, I follow the developments that AI can bring in different areas with great interest, from helping companies make better-informed lending decisions, to using AI to better predict the cause of a software issue.

Secondly, due to DevOps and continuous delivery, we have seen an increase in the speed of delivery. Supporting tools are needed to allow the teams to remain in control. Therefore, I like the development of tools that enable the continuous compliance of IT assets by checking against a predefined list of acceptable configurations, or by using more advanced methods to detect irregular patterns in an IT landscape.

Who’s your biggest inspiration in the world of tech?

I think both Elon Musk and Bill Gates are having a big effect on tech in the wider world, both in the past and in the future. It shows the impact a single person can have, which is truly inspiring.

If you're a senior IT decision-maker and you'd like to apply to be part of the IT Pro Panel, please email panel@itpro.co.uk.

Security researchers have discovered a major mobile banking fraud operation that stole millions of dollars from financial institutions in Europe and the US before being intercepted and halted.

According to a report by IBM Trusteer, cyber criminals used an infrastructure of mobile device emulators to set up thousands of spoofed devices and access thousands of compromised bank accounts.

“In each instance, a set of mobile device identifiers was used to spoof an actual account holder’s device, likely ones that were previously infected by malware or collected via phishing pages,” said researchers.

Shachar Gritzman, mobile malware researcher at IBM said the gang used automation, scripting, and potentially access to a mobile malware botnet or phishing logs to initiate and finalize fraudulent transactions at scale.

“In this automatic process, they are likely able to script the assessment of account balances of the compromised users and automate large numbers of fraudulent money transfers being careful to keep them under amounts that trigger further review by the bank,” Gritzman said.

In some cases, hackers used over 20 emulators in the spoofing of well over 16,000 compromised devices.

“The attackers use these emulators to repeatedly access thousands of customer accounts and end up stealing millions of dollars in a matter of just a few days in each case. After one spree, the attackers shut down the operation, wipe traces, and prepare for the next attack,” said Gritzman.

Gritzman said to defend against future attacks on mobile devices, users should avoid jailbreaking or rooting any devices, ensure all system updates and app updates take place on time, and obtain apps directly from official app stores.

Tom Davison, technical director – international at Lookout, told ITPro that this attack demonstrates the extraordinary lengths that today's well-funded and professional cyber criminal groups will go to when the end justifies the means.

“Mobile devices present a multiplier effect as they become the mainstream platform for online banking. Consumer users need to protect themselves by understanding that mobile devices are not immune. It really is important to keep them updated, but also to verify the safety of installed apps and the validity of links being clicked,” Davison said.

“For the banks, the challenge comes from the huge range of devices being used to access their services which are not under their control. These may be insecure or already compromised. Customer education helps, but it is also critical to employ run-time application security to spot infected customer devices and block the opportunity for fraud."

Banking is changing; the financial services industry is no more immune to digital transformation than any other sector, and new technologies like cloud platforms, APIs and continuous integration have allowed new challengers to emerge and old incumbents to revitalise their practices.

One company that’s helping transform money management is Yolt, an ING-backed startup that has recently added current accounts and contactless cards to its offering. In this week’s episode, we speak to Yolt CTO Roderick Simons to discuss the engineering challenges of this expansion, how the API economy has accelerated Yolt’s business, and why the future of banking is in the cloud.

Footnotes

• The future of business banking now
• What are biometrics?
• Only skin deep: The state of biometric security
• Fintech sector voices concern over future funding
• Banks and fintech firms using tech firms to fight deepfake fraud
• Remote working: Are you ready for the new normal?
• How do I best support my remote workers?
• What is DevOps?
• The IT Pro Podcast: DevOps for fun and profit
• What is open banking and why does it matter to your business?
• What Open Banking means for the security of our money
• The API economy: What your business needs to know

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HubSpot, a customer relationship management (CRM) platform, announced its financial results for the third quarter of 2020.

The company’s total Q3 revenue was $228.4 million, up 32% compared to Q3 2019. Subscription revenue was also up 32% over the same time frame at $221.1 million. Professional services and other revenue was down 12% to $7.3 million.

HubSpot had a 6.8% loss in generally accepted accounting principles (GAAP) operating margin, which is an improvement over its 8.1% loss in 2019. Its non-GAAP Q3 operating margin was 7.2% versus 6.1% in Q3 2019. HubSpot had a GAAP operating loss of $15.5 million versus $14.1 million loss for Q3 2019, and its non-GAAP operating income was $16.5 million versus $10.5 million for Q3 2019.

The company had a GAAP net loss of $22.5 million or 49 cents per basic and diluted share against $15 million loss or 35 cents per basic and diluted share in Q3 2019. Its non-GAAP net income was $13.6 million 30 cents per basic and 28 cents per diluted share against $12.3 million or 29 cents per basic and 26 cents per diluted share in Q3 2019.

HubSpot’s cash, cash equivalents and investments balance was $1.228 billion as of September 30. In the Q3, it generated $38.7 million of operating cash flow against $19.7 million during Q3 2019. It also showed $25.3 million of free cash flow against $6.7 million in Q3 2019.

HubSpot added 95,634 total customers as of September 30, which is up 39% year over year. Its total average subscription revenue per customer was $9,669 during this time, which is down 3% year over year.

"We're happy that the tailwinds continued to strengthen last quarter for HubSpot," said Brian Halligan, CEO at HubSpot. "The year is not over, but I believe the growth we've seen in the third quarter is both a sign of the ongoing digital transformation of the mid-market and a reflection of newly heightened expectations when it comes to how easy CRM platforms need to be to match rapidly changing times."

Looking ahead to Q4 2020, total revenue is expected to between $235 million and $237 million. Non-GAAP operating income should be between $13 million to $15 million, and non-GAAP net income per common share should be 21 cents to 23 cents, assuming 49.6 million weighted average diluted shares outstanding.

HubSpot estimates its total 2020 revenue will be between $866 million and $868 million. Non-GAAP Q4 operating income is projected to be between $63.5 million and $65.5 million.

Today, Finxact announced it’s adding two new fintech companies, Unqork and TransferWise, to its Finxact Marketplace. The Finxact Marketplace is a network of innovative fintech companies that provide banks with core banking options, including cloud technology, to help them keep up with today’s fast-changing banking industry.

TransferWise, a $5 billion fintech company, uses API to improve the way banks move money around the globe.

Abid Mumtaz, Global Head of TransferWise for Banks, said, "I'm excited to announce TransferWise's partnership with Finxact, a company that similarly values transparency. TransferWise ultimately wants to ensure that everyone has access to fast, cheap, and transparent international money exchange, and this partnership with Finxact is the next step in achieving this mission."

Unqork is a no-code platform that improves quality while lowering the cost of mission-critical application development. The company received a $2 billion valuation following a recent capital raise.

"Unqork's no-code platform was designed to support mission-critical applications in regulated industries like financial services, so joining the Finxact Marketplace makes perfect sense," said Brian Karimi-Pashaki, Director, Technology Partnerships & Marketplace, Unqork. "It's now easier than ever for Finxact customers to get started building the bank of the future with Unqork and, as a result, we are going to drive a lot of value in the industry."

Workday, a leading provider of enterprise cloud applications for finance, HR and planning, has announced the release of its new Workday Accounting Center and machine-learning-driven predictive forecasts for Workday Adaptive Planning.

“We continue to deliver on our vision for the changing world of finance by expanding data management, self-service analyses, and machine learning-fueled processes to help finance leaders better navigate continuous disruption and change,” said Barbara Larson, general manager at Workday Financial Management.

Workday Accounting Center enables customers to manage operational and financial data from multiple sources with a single point of control enterprisewide.

By enriching operational data with meaningful and strategic attributes, organizations can turn data into accounting and insights faster, eliminating the need for finance teams to rely solely on information technology (IT) to maintain accounting rules.

For example, with Workday Accounting Center, not only can an insurance company create accounting entries for operational transactions, but it can also report and analyze those transactions with full drill-down and visibility into the source transactions.

The predictive forecasting embedded in Workday Adaptive Planning’s analytics engine helps estimate likely outcomes for revenue, expenses and other critical business variables using machine learning. The forecasts are derived based on a wide array of data points aggregated from across the enterprise, including sales, HR, marketing and operational data.

The machine learning algorithms also detect anomalies and automatically flag potential issues so organizations can make informed decisions.

Key advances for customers in the office of the CFO include:

• Embedded ad hoc analysis on real-time data using Discovery Boards
• Ability to publish plans from Workday Adaptive Planning directly to Workday Financial Management and vice versa.

"CFOs and CIOs recognize that they must embrace new digital technologies in order to manage the ever-increasing volume and sources of data required today," said R "Ray" Wang, founder and principal analyst, Constellation Research, Inc.

"And because it's so challenging to move off of legacy systems, leading companies recognize that they need a solution that can scale and evolve over the next decade and beyond. Intelligent data, machine learning, and a robust ecosystem are critical factors for companies when choosing their next partner for financial management systems."

Fintech company Oracle Financial Services announced a new cloud service to help midsize banks fight money laundering and other financial criminal endeavors. The new product, called Oracle Financial Crime and Compliance Management Cloud Service, is a suite of cloud-based anti-money-laundering (AML) applications designed specifically to help midsize banks combat illegal activity.

Oracle has worked with big banks for two decades to help them find solutions to battle money laundering and other financial crimes. Now, this new suite powers the full AML lifecycle for smaller banks. This allows the institutions to streamline their compliance activities and costs, and identify suspicious customer behavior to stop criminal activity.

"With criminals getting increasingly sophisticated, mid-sized banks struggle to keep pace with the complexity and cost of fighting financial crime," said Sonny Singh, executive vice president and general manager at Oracle Financial Services. "We're leveling the playing field by bringing the same modern crime detection and reporting capabilities afforded to larger institutions to mid-sized banks in a package that suits their unique requirements and cost structures."

The AML application suite delivers the following capabilities:

• An extensive catalog of regulator-accepted AML scenarios developed over years of working with the largest, most complex banks
• Built-in tools for custom scenario design, analysis, threshold simulation and tuning
• A centralized, 360-degree view of customers and events
• Out-of-the-box regulatory reporting templates to help comply with requirements across key global jurisdictions
• The ability to easily scale and configure to support new products

Oracle Financial Crime and Compliance Management Cloud Service are available immediately in North America and Western Europe, with more regions coming soon.