UK financial services businesses are believed to need more data skills to succeed in a progressive digital landscape. The lack of data-specific skills for business strategies is hindering UK finance companies’ plans to meet customer demands for more personalised services.

Recent studies by data and analytics business Cynozure suggest there is an overall lack of understanding of the real value of data at the senior level within the UK financial industry. A survey of senior finance executives indicated that 27% of respondents lacked the necessary skills to utilise data properly. Over 30% stated that there was a data skills shortage across their entire business.

One of the main challenges facing the finance industry is determining the return on investment with data investments. Over 50% of people surveyed stated that this represented the main barrier to launching more data plans in their organisation. Jason Foster, the CEO of Cynozure, explained that the study suggested an opportunity for finance companies in the UK to adapt their data strategies and harness the benefits of data. Used in the right manner, data offers a range of benefits in the financial services industry, particularly when many people demand more personalised financial support to alleviate the cost-of-living pressures. Over 90% of respondents agreed that data findings would be critical to supporting customers as the cost-of-living crisis intensifies.

According to a study by open banking tech supplier Tink, over 35% of people struggling financially would consider changing banking providers if they could access custom financial support. None of this will be achievable if the necessary skills aren’t in place to create data-focused solutions.

Conventional banks must improve their use of data if the automation of personalised banking is to progress and compete with other, more digitally-focused tech rivals. Challenger banks are implementing new data strategies, creating personalised financial services for customers. For example, Zopa Bank has created a customer experience that rivals a similar service provided by Netflix or retail giant Amazon. Both businesses depend on sophisticated technology, but the customer portal remains simple and accessible. Implementing machine learning processes has enabled Zopa to create a similar interface used in leading businesses and determine the habits of customers and other users.

The lack of data skills isn’t just a finance industry concern. According to a survey by data consultancy Carruthers and Jackson, 64% of data leaders worldwide believe that nearly all employees in their business lack data experience. The study also indicated that only 1 in 5 people were confident with their data literacy skills, and over 70% felt overwhelmed when working with data.

As this year starts to accelerate, finance leaders are reconsidering their growing list of priorities, which likely focuses heavily on increasing efficiency and data protection. According to a recent survey of UK finance leaders, the key priorities for finance teams over the coming year include cybersecurity (44%), Cloud and SaaS technologies (42%) and big data analytics (29%). 

Automation software business Yooz explains that finance leaders prioritise cyber, cloud and big data because, in this digital age, these are the three core sections for effective and secure financial management. All three provide businesses with improved financial visibility but they enable the ability to manage and store large volumes of critical data, working as a security basepoint for business and client information. The mistaken release of sensitive details, the consequential damage to reputation and the need for excessive paperwork can be avoided by implementing these processes. Here are some of the focus investment areas for finance teams in 2023 and why now is the time to prioritise them.

Cybersecurity Cyber-attacks are a growing concern for all businesses in every industry. Victims of cybercrime in the last year include major organisations such as Microsoft, the Red Cross and Cambridge Water, all representing a considerable increase in cyber attacks since the previous year. A recent study suggested that in the UK, over 80% of companies had experienced at least one cyber-attack, compared to 71% in the previous year. In the same study, data suggested that UK businesses had the 5th lowest investment in IT security, standing at a little over 11% of their total IT budgets.

Considering that human errors are often the typical cause of cybersecurity breaches, with over 80% of data breaches involving a human aspect, finance teams must be prepared on the range of cybersecurity risks and the most appropriate processes to eliminate them. To effectively tackle cyberattacks, finance teams should ensure cybersecurity measures become part of their daily activities, implementing continuous security monitoring using automation. Automation can provide the best safety net for detecting and preventing cyberattacks in finance, enabling quicker detection of fraud compared to the average person. Being capable of authenticating documents and automatically detecting invoice fraud and other forged materials holds significant value for companies, particularly those dealing with customer data.

Cloud/SaaS technologies

It wasn’t long ago that finance solutions were launched onsite, but with the rise of remote and hybrid working environments, cloud and SaaS technologies have become a pivotal part of digital business.

Thanks to the advantages of cloud technologies, accounts payable teams are capable of being reactive, productive and agile. Access to cloud and SaaS solutions enables finance teams to work whenever, which has benefitted retention rates and made business more appealing. Furthermore, cloud and SaaS solutions provide better security, compared to traditional on-premise options and provide total visibility of digital payments within a single platform. By using secure credentials, employees can interact with company data and other software to complete tasks remotely without undertaking manual updates.

Something particularly important at present is how cloud systems can support businesses with uncertainties and potentially disruptive events. With some degree of unknown, it’s vital to invest in adaptable systems that can scale. Systems delivered via the cloud equip businesses with high-performance solutions without investing in costly alternatives.

Big Data and Analytics

Finance teams are particularly data-intensive, which means there is an opportunity to process, analyse and leverage data in various ways. Big data analytics can assist finance teams with identifying fraudulent activities and offer preventative measures because the data available can be used to measure unusual financial activity. Additionally, big data analytics can support businesses in assessing risks and implementing steps to control them. Both historical and real-time data offer valuable insights into customers, businesses and transaction companies. Equipped with big data analytics, finance leaders are discovering new opportunities to enhance predictive modelling, better forecasting, and making informed decisions on large data sets.

Focus on maintaining the bottom line 

This year brings new priorities, and finance leaders must focus on smart investments that improve security, productivity and longevity. Finance leaders must ensure smart digital investments convert into wins for their businesses. Focusing on measures that support transformation, increase digital capabilities within their teams and support a drive for better forecasting and harnessing data will deliver success.

As operating processes become more challenging, CFOs are exploring beyond traditional metrics to determine and highlight the key strengths of their businesses to current and potential investors.

Finance leaders are facing a range of new challenges this year. Inflation is rising rapidly, interest rates have increased faster than anticipated, and several major economies face a period of deep recession. The Office for Budget Responsibility has suggested we may experience the biggest decline in living standards in the UK for nearly sixty years.

With rising economic pressures, many CFOs have prioritised ways to grow their business over the next few years. According to research by Gartner, most CFOs are preparing for a decline in revenue and increased costs over the short term. A study by Deloitte indicates that a little over 90% of UK finance chiefs expect a drop in their operating margins over the next year. Taking this into account, many finance leaders are exploring specific metrics that can determine the health of their company, even if the top-line growth is struggling.

According to Edmund Reese, the CFO of fintech company Broadrisge, there are three specific areas to focus on during a downturn. The first is client retention, which could involve adapting payment terms to alleviate economic difficulties. The second is capital strength, which focuses on liquidity maintenance, especially if cash flow is a long-term concern. The third factor focuses on the accounting ratio, typically referred to as operating leverage, which concerns the cost structure of a business. If the revenues of a company with a high operating leverage, i.e. large fixed outgoings relative to variable costs, increase, that typically has more benefit on profit margins. But, if the revenue declines, the same high leverage can be challenging because the company has limited ability to reduce its cost base.

Reese explains that you need to create a plan with scenarios and determine what triggers to use at the right time. Reacting to situations as they appear may result in an inappropriate response.

Focusing on productivity and growth

Some businesses will continue focusing on the same targets despite the broader economic conditions. Scott Bogard, CFO of Exacta Land Surveyors, explains that his company is very focused on productivity, ensuring its workforce is carefully managed and continues to provide as many opportunities as possible to enhance productivity.

In a period of recession, businesses must recognise that the processes they did yesterday won’t necessarily be the right choice for today. Economic downturns often provide opportunities for more established companies to increase market share if smaller competitors lose business. This is another metric that displays business strength, even if revenues are staying relatively flat. Bogard believes that with strong liquidity, their company can capitalise on the market share, on winning new clients to replace existing clients that may be doing less business in the future.

CFOs face increased pressure to provide guidance on business performance, which can be challenging with the uncertainties surrounding the existing economic conditions. Matt Benaron, the Co-Founder of VantagePoint Consulting, explains that many CFOs struggle to forecast for the next year with so many likely changes predicted for the near future. Finance leaders who will prosper during this period will be those that have invested in technologies to enable them to predict scenarios and outcomes. Having solutions to allow leaders to understand their options will likely create better financial results.

Reese also believes it’s important for CFOs to manage people’s expectations across the entire business with how to manage the downturn. Every recession is different, so we must recognise that some solutions from the past won’t necessarily work today. We must adapt and be willing to apply new metrics if the business has had to change plans due to unforeseen market changes.

Businesses may begin exploring non-traditional metrics to monitor success, particularly those within the environmental, social and governance fields (ESG). Many investors are closely following these types of metrics. As more investors adopt ESG frameworks for risk and opportunity assessment, this will drive new metrics of business success and profitability.

Technology can create other non-traditional metrics, allowing companies to gain new information, such as data on the efficiency of a supply chain. It is really about utilising the data finance leaders have access to. By exploring more granular data, CFOs can identify trends that influence decision-making and create insights that may help with performance in a way that traditional reporting cannot do.

Data privacy, AI and crypto are becoming critical parts of regulation this year. As technology progresses, the demand for regulation increases at a similar pace. Governments have tried to maintain pace with the rise of new tech and other platforms, attempting to protect customers, drive competition and deliver safe areas for consumers. In the last year, cyber attacks impacted big and small businesses. As we move into 2023, it’s clear businesses must protect themselves against potential cyberattacks, and inevitable that the rising focus on data protection and security will transform into stricter regulations.

In a recent interview with Verdict, several industry experts voiced their opinion on the coming year. Seth Batey, data protection officer of data movement platform Fivetran, explained that companies seeking the potential of big data must prioritise evolving data privacy changes and regulations. Ignoring this will impact profitability and potentially damage the entire business. Batey believes a new era of data privacy reform is upon us.

For 2023 we will likely see more combined security options between leading cloud providers and other security software options as more executives ask IT leaders about their security systems and regulations. The tech industry is experiencing considerable growth, but this year we will see additional legislation which impacts AI businesses significantly. In the short term, it may have a detrimental impact on AI, but in the long term, uptake will likely increase due to higher customer confidence in products and solutions. The new legislation will reduce the accountability placed on businesses developing AI technologies.

Data centres will experience a rise in regulations this year as the world continues to manage rising energy and water consumption and the constant challenge of climate change. Increased pressure to meet customer demands has forced governments across all levels to focus on data centres and their excessive consumption of these resources. Data centres are estimated to account for nearly 3% of global electricity consumption and predicted to reach 4% by 2030. An average hyper scale data facility consumes between 20-50MW each year, the equivalent power required for 37,000 properties. This year we will see a rise in data privacy regulations and security and the implementation of new measures to manage the negative impacts of technology on our planet.

More and more personal information is being collected and stored by tech businesses. Industry experts anticipate governments worldwide to implement stricter regulations to protect customer data. As AI integrates further into the industry, governments will introduce new measures to ensure the accountability and transparency of new systems, requiring businesses to explain their AI processes and support them with a human-based process for selected decisions. More regulations will emerge as new technologies emerge to manage the negative impacts of technology, such as the impact on jobs. Industry experts predict a rise in measures to increase retraining and re-employment of people impacted by automation.

Security continues to be a top priority for IT professionals this year, despite the ongoing political volatility driving escalating energy prices and spiralling costs for IT products and services. The current geopolitical conditions will likely encourage further cyberattacks on all businesses. The IT industry must continue investing heavily in cyber resilience, including adding more defensive capabilities.

We have already witnessed a change in data privacy with some leading technology companies worldwide. The EU digital agenda represents a new era of privacy and antitrust laws. Improved regulation will make it easier for regulators to manage data privacy rules.

In 2023, we will likely witness tighter tech regulations around ESG reporting. Businesses can follow these measures if they have accurate and consistent data for ESG reporting. Data represent one of the most critical factors for delivering insights and measuring metrics related to ESG. With data assets being vital to achieving net-zero, businesses will need to create a platform of data integrity to ensure strategic decisions are based on assured ESG data. Businesses must invest in tech that combines data integration, data governance and quality. 

Now, more than ever, organisations need trusted data to enable confidence in decision-making, setting structured targets and measuring the progress of green plans. By developing a data integrity strategy, businesses can rest assured they are making critical decisions based on information they can trust.