It may be home to several UNESCO World Heritage sites but the hosting of this year’s ACT annual conference in Liverpool was all about tomorrow; financing tomorrow to be more precise. Treasury Today reports from the city’s ACC venue.
The average bystander might not expect too much excitement from a delegation of predominantly grey-suited men and women – but never judge a book by its cover, they say. When one panellist at this year’s annual ACT event cites ISIS as having a respected model of financial management and another tells businesses to stop pretending to have a social conscience and start doing some good, you know you’re onto something worthwhile.
Of course, it was not all controversy and finger-pointing but the unexpected ‘ISIS’ remark by Tom Keatinge, Director for the Centre for Financial Crime and Security within the Royal United Services Institute, raised more than a few eyebrows. Quizzed about his favourite business leaders, he replied that he was “impressed by the way Islamic State has run its business”. Keatinge added quickly that he was impressed how any operation can manage its finances under stress (something which ISIS, as public enemy number one, clearly does very well).
The ‘Any Questions’ style panel of which Keatinge was a part was led by consummate BBC journalist, Mishal Husain. She provoked more fun from Katinka Barysch, Director of Political Relations for Allianz SE who, when asked about the relevance of corporate social responsibility, pointed out that businesses should by now be reversing the old-school model of profit first and conscience second and start “actually doing some good”. There are banks, Barysch noted, that having withdrawn support for some of the needier elements of society, continue to facilitate business with rogue elements.
Whilst some corporates do not worry too much about their public persona, Claire Emes, CIO for opinion pollsters, Ipsos Mori, argued that they still cannot do what they want. The regulators are watching ever-closer – as the rise of BEPS attests. Indeed, for Peter Montagnon, Associate Director at the Institute of Business Ethics, tax is the single biggest issue to undermine corporate trust. “Organisations are given a franchise by society and this can be taken away,” he stated. For this reason, “most do align with what society wants”.
In other, less opinion-driven sessions, the assembled treasury delegation faced up to its quest to dominate – or at least gain some foothold in – tomorrow’s competitive landscape. The unpredictable mix of brilliant sunshine and oppressive cloud formations dominating the Liverpool skies for much of the three-day event served as a suitable backdrop for discussions on the current run of corporate life.
Indeed, amidst the rather ugly spectre of EU upheaval (a poll of delegates held on the first day showed an 85% to 15% split in favour of the UK remaining), myriad banking regulations, tax concerns, capital structuring and cyber security issues, there is optimism for a more settled and profitable future for those receptive to a well-configured technological regime. As with this year’s Treasury Today Adam Smith Awards, the power of the treasury community to tweak the nose of adversity with ever-more intelligent solutions was as much in evidence in Liverpool as was the aversion to loud noises and strong light the morning after the traditional Thursday evening gala knees-up at the city’s gothic-styled Cathedral.
“Digital by default” is the aim of the Gov.UK Verify programme that took centre stage in the Innovation in Identity track. Its proponent here, David Rennie, Verify’s Head of Industrial Engagement, argued that digital identity is “fundamental to trust” in the online world and that the more confidence customers have, the greater the volume of business is generated.
In partnership with a number of UK companies, the global Open Identity Exchange (OIX) and security technology experts such as IdenTrust, Verify aims at both decentralising the authentication and verification of personal identity documents (via banks, government agencies and other trusted businesses) and centralising access to that verification as a single source of ID. The individual’s “privacy, consent and control” is very much at the heart of it all, explained Rennie, keen to distance it from the much-maligned (in the UK) identity card scheme.
Verify means that personal data can be streamed from multiple sources to a single point of verification (with biometrics planned as a key sign-on aspect) but only with its owner’s consent. The bank, for example, uses the customer’s driving licence as identification but the government data base (the DVLA) verifies that the driving licence is for that individual; this spreads the risk and marks the difference between identity and entitlement.
Collaboration is the key here, explained Rennie. This was a theme taken up by Sarah Munro, Barclays’ Head of Digital Identity, who posed the notion that a solution such as Verify could give people and companies better access to their data. Businesses could manage their own bank accounts (especially around account opening and closing, KYC and mandate management), and improve their relationships with online customers who can supply required personal data immediately rather than giving up on online transactions in sheer frustration at having to prove their identity yet again (the rate of online shopping cart abandonment is around 68%). Acceptance by the wider market will be the only test of such a solution and for Rennie this will only be achieved when Verify becomes “useable in five different contexts”.
The next generation
“We are all nodes on the network,” stated James Marshall, Head of Treasury at Virgin Media. With controlled storage and authentication of data, every individual could in theory sell personal details to companies, as they see fit. The value of such information is huge which is why cybercriminals make such an effort to steal it. However, the adoption of tools such as Verify and the notion of taking control of personal data is entering “uncharted territory”. Building a “retrofitted” system to exploit this world of possibilities is not feasible, argued Marshall. “This is about starting from the ground up.”
This is not going to be easy. In the session on Digital Innovation, John Lyons, Head of Strategy, Design and Change at RBS, acknowledged that although “the march of technology is relentless”, there is a clear clash of interests for corporates in the WCM space. Here, he said, the ideal is for “digitised receipts and carrier pigeon payments”. However, he contended that companies need to be both “technically able and culturally willing” to adopt new tools in order to be able to take advantage of all opportunities. This requires business leaders to “absorb the world around them” and to “embrace a new cultural commitment” that requires “less command and control and more co-operation”. In another straw-poll, around 56% of delegates claimed they were part of an active innovation agenda but only 10% believed they were well prepared to serve customers digitally (55% were just ‘okay’).
Blockchain (renamed ‘the B-word’ for this event due to its ubiquity) is an inevitability. Start-ups engaged in this technology have already received investment in the order of $12bn and, states Lyons, despite the naysayers, “it will come: the advantages are profound”. In what form and where, we do not yet know, but the feeling is that trade finance looks like leading the way.
Meanwhile, in the payments space, a more immediate technological impact is demonstrated by the Uber taxi-booking service. It offers the perfect example of a customer payment experience said Lyons. With everything happening in the background, he said of the experience, “there isn’t one”. Customers simply do not need to do anything. This leads him to believe that one day the kind of open APIs used in this scenario could be embedded in a TMS, where the latter sets the rules around currency, for example, and the rest is done automatically.
In the B2B space, the adoption of digital Business Intelligence is the fastest growing trend for Virgin Media’s Marshall. Within the scope of this, he said treasury is helping to shape digital innovation, especially in customer billing and supplier cycle management. But he too felt that “innovation on the customer side must have privacy at the heart of it”. As did James Kelly, Group Treasurer of AB Ports, who warned that data management has “probably not seen as much investment in fraud as there should have been”. As such, many breaches are still based on “relatively old-style con tricks”. Nonetheless, as technology enables closer integration and interaction, Kelly predicts that “a much more holistic way of managing data” is on its way, to which Simon Myers, Head of Digital at RBS suggested “all this will happen at the inflexion point where digital natives [those born into the digital culture] start demanding it”.
Into the (Silicon) Valley
For Wells Fargo, based on the doorstep of Silicon Valley, employing renegade (he wore jeans and an open shirt!) thought leader, Steve Ellis, as its EVP and Head of the Innovation Group, is clearly an advantage in terms of tackling fraud and cybercrime. The bank claims one of the lowest attack rates in the business. Whilst he believes that putting the customer in charge of their own data is vital and that the rules of access to that data by organisations must be bound by privacy and opt-ins, identification will always be “the first step to everything you want to do with customers”. But he notes that if “a group of bad guys” is determined, it will get in: to this end, all organisations “have to up their monitoring”.
The weakest link is always human behaviour, and business processes need to be subject to rigorous checks and even real-time pattern analysis to help defeat those ‘bad guys’. With the advance of the Internet of Things, where everything with an IP address is potentially connected to everything else (from a fridge and car to a bank and building) every organisation “must now get to know all the doorways in”.
Whilst Ellis believes that the distributed ledger concept of blockchain may have some security answers, he urged delegates to consider that the one thing “we could all do better” is working together on cybercrime. “A bunch of banks getting together and talking about privacy and cybercrime is more important than a bunch of banks talking about blockchain.”
What should be clear by now, said Ellis, is that the digital age is unstoppable. “We are not going back.” He continued: “Getting in front of it, and even leading the way, is essential because if we don’t, we will have a problem and the bad guys will figure it out.” And as we know, some of the bad guys have a well-thought-of means of managing their own finances.