Navigating the digital future through crisis to recovery

13 Jul 2020

Open Banking Expo Magazine caught up with Lana Abdullayeva, non-executive advisor to PAY.UK, independent speaker and director at Lloyds Banking Group, on what her predictions are for the future in these uncertain times.

“The past is written, we are here to shape the future…”

Since the beginning of 2020 I have participated in the series of debates and pan-industry panels about the future of digital financial services and its evolution. The journey of face to face events and the live streaming of in-person interviews has gradually moved to a world of virtual web conferences as the threat of the global pandemic rapidly increases.

In the current exceptional circumstances, this article continues the thought-provoking discussion of the digital future and its critical role through the crisis and towards the recovery.

My personal experience of growing up behind the Iron Curtain and witnessing it collapse from within, allows me to reflect and look at the current circumstances with a little wisdom from experiences of the past.

For those outside the Iron Curtain, the collapse of the Soviet Empire is mostly associated with more freedom and transparency. Though it definitely did bring a fresh air of new opportunities, it also broke all the existing economic relationships of that part of the world and created significant political turbulence and economic instability.

Being in the epicentre of rebuilding the new world taught me one main thing – it is never too early to start planning for the recovery.

Let’s bring it back home to the UK now and reflect on our current environment.

As the tech revolution has rippled across industries in the past few years, we have seen the revolutionary potential for disruption. This changed both regulatory and customer expectations, gave easier access to both massive volumes and different types of data, along with the potential to completely transform the industry landscape. Increased data literacy has shifted the value exchange from the competition for the amount of data collected, to the analysis of the data and information it delivers as a result.

In 2018, European banks entered a new era as they were tasked with delivering safe and secure account access to regulated third parties. The UK’s Competition and Markets Authority (CMA)’s Retail Banking Market Investigation Order 2017 set up the Open Banking Implementation Entity (OBIE) to deliver Open Banking.

Since then, we have seen an unprecedented level of collaboration amongst banks, fintechs, regulators and consumer representatives to make Open Banking a reality. Open Banking started to transform the banking world. This introduced the potential to pave the way for Open Finance, which would include more financial products and services beyond just payment accounts.

As per the 2019 estimates, there were circa 5.9m SMEs in the UK. There is an engine of growth, employing up to 60% of the private sector workforce and contributing to nearly 50% of UK GDP. Support and funding of SMEs remains a critical factor to drive the evolution of the market and economy, with technology and data increasingly playing a significant role in this.

A new ecosystem with greater access and additional data helps SMEs to find better finance options for them to thrive.

The UK government announced an independent review of the UK fintech sector with a view to enhance investment and support, foster growth, innovation and competitiveness in the industry. Fintech has been the UK’s top performing sector for a few years now, contributing more than £130bn to the economy annually.

Disruptive ideas and radical technological advances are shaping our market and our lives – ever more powerfully and in ever expanding ways. Many people are afraid of what the future might bring.

Given the current uncertainty, of course it is very difficult to quantify the impact of the pandemic crisis or model the recovery path yet. However the future is something we have the ability to actively influence and shape. Let’s explore the opportunities and the challenges we are facing.

The FS system of the past was built based on the distribution of localised physical assets and for the past few decades we have been successfully automating it. So, from the horses we gradually moved to cars, trains and then faster trains.

The traditional thinking starts with defining the process, promptly followed by building teams, utilising existing tools and deploying various technology solutions – all operating within the familiar hierarchy of organisational pyramid structures. The organisational structures are tagged onto the firm’s business model and strategy, rather than being explicitly designed to maximise effectiveness both of customer experience and risk management.

This approach leads to an array of point solutions to achieve individual objectives and semi-manual operational checks. Tech solutions are quite fragmented and aim to automate processes within established structures. As a result, they achieve incremental efficiency improvement but do not support neither holistic and proactive governance nor an effective and sustainable control environment.

This impairs productivity and can impact customer relationships, presenting an obstacle to a sustainable growth.

The technology revolution and open data brings us to the new era of creating planes, adopting new concepts and navigating different trajectory.

It is not about the age of the company, nor is it about its size or value of its assets. It’s about how outward looking they are, how curious they are and whether they think their role is to create the future or to cope with it.

In the growing world of virtual assets and global distribution, it is important to consider and deploy new methods. We have opportunity to leverage technology and data to simplify and provide access to products, as well as to enhance customer experience. This will not be achieved by automating structures of the past, we have to look for fresh ideas and designs.

Forward-looking businesses are pushing towards a digital and customer centric model, with data and analytics shaping vision and strategy. This places data and technology at the core of enabling organisational strategy and governance, driving informed risk direction from the top rather than accessorising existing processes. Thus, business strategy and risk management are designed and executed in tandem, so as to avoid common issues of customer friction and poor outcomes on either sustainable growth or risk objectives.

The first weeks of the pandemic stress however clearly indicated that we continue to rely on the traditional industry players, core services and tested structures in the times of severe crisis. We are also increasingly learning the value of technology, connectivity and digital distribution in a wider sense.

Pace of change, technology revolution and increased data literacy over the past years, have already introduced new requirements and high expectations of flexibility, transferrable skills and dynamic learning abilities. These are definitely proving to be critically important during these challenging weeks of the current crisis.

The evolving world will continue to challenge us for a need of open collaboration, agile working and effective prioritisation; courage facing unknown and uncertain territories; focusing on solving old and new problems with brave decisions and innovative solutions; exercising diversity of thoughts and creativity of thinking; learning from the past and experimenting for the future; sharing infectious energy and positivity with each other to drive the world forward.

A more inclusive ecosystem and modern market infrastructures will galvanise the emergence and co-existence of new business models and increased cross-industry connectivity. This gives a rising potential to develop novel partnerships and create innovative and competitive products and services for the benefits of end users, consumers and businesses alike.