While the lockdown has normalised business via web conferencing tools, financial services are being curtailed as institutions are unable to transfer sensitive customer information along ordinary channels.
“In today’s times, making it easy to engage, collaborate and transact business is more than just firing up a conference. You’ve got two categories of communication tools that are preparing you to work remotely: basic ones such as Webex and Zoom, and specialty tools to allow you to do business,” says Andy Ambrose, co-founder and president of Liveoak, a software company that enables firms to conduct business virtually.
While businesses may use digital communication tools to hold meetings and communicate internally, banks, insurers and other financial institutions traditionally rely on face-to-face interactions with customers.
“It seems like there is a ‘hair on fire’ moment we’re in,” says Ambrose. “Especially the firms where the compliance has said under no circumstances can you do this type of stuff with Zoom. It is true that there has never before been this type of appetite to actually deploy technology that can solve this problem.”
The impact of remote working has been immense.
Financial institutions have had to cease new business as face to face meetings became impossible as the coronavirus spread. Tens of thousands of UK firms rely on manual ID checks to transact new business, the FT reported, which risks halting business entirely if they are unable to adapt to remote client authorisation.
Traditional communication channels do not meet regulatory compliance or satisfy customers’ security concerns. Firms are being confronted with a need to update their tech stack to allow them to do business anywhere, anytime. “We have heard estimates that the financial services industry has been forced to make five years of transformation progress in 30 to 45 days-time,” said a Liveoak spokesperson, via email.
Some regulators have adopted new policies to ease the business process. The UK’s Financial Conduct Authority (FCA) has loosened its restrictions on ID checks, now accepting remote identification tools.
“It’s been eye-opening for regulators,” says Ambrose, adding that regulators are now forced to accept the possibility of secure, remote business transactions.
Ambrose cites one large UK bank that has implemented Liveoak tools for its KYC procedures. In countries where the bank lacks physical branches, prospective customers previously have had to go to a UK embassy to start a banking relationship, leading to months of waiting time. The bank now uses Livoak to have a fully audited interview with a prospective customer in minutes. Ambrose says watchdogs have grown comfortable with this modern process.
“Historically there’s been regulatory friction to utilise these types of tools among traditional ways of how to do business face to face, and this most recent environment has been an awakening to that there absolutely is a way to do business remotely and also make it more secure,” he says.
Hurdles to change
Yet there remains a lack of education around the safety of remote processes. Research by cyber security provider Check Point found a 30 percent increase in weekly coronavirus related cyber attacks in May compared to April. There is also a psychological factor at play. Since the start of lockdown, Zoom has been under fire with hacking scandals. As awareness of the possibility of cyber threats is on the rise, firms may think twice about pursuing digital means, especially in high value transactions.
“Our tool has always been a solution that does not replace the human expert, but rather it augments the human expert and marries it into the technology that exists across the financial institutions,” says Ambrose. He says while individuals may not worry about opening a bank account online, customers looking to consolidate multiple accounts with a high value will be more careful.
Despite initial cybersecurity concerns, Ambrose believes the majority of firms are more worried about the size of tech spend and implementation burdens. He says many firms find themselves in “organisational paralysis.”
“We try to find the ones that break out of that group; somehow there’s new leadership that comes in and there’s a moment when an organisation says: ‘We’re going to do this and we’re going to take the risk.’ The risk of not changing the way you do business is a higher risk than any of the information security or regulatory risk that comes with it,” he says. “Do we want to lose business because we can’t change?”
Other firms suffer from lengthy procurement processes, which present another hurdle to implementation. More and more firms are shifting to lightweight implementation of new software to avoid a massive upfront spend, says Ambrose.