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How businesses stand to lose more than they save with radical cost cutting

Source: Finance Derivative

Spokesperson: Benjamin Swails, Northern Europe General Manager

For years, my career was focussed on the next big conference, the customer meeting that required a flight and hotel stay, or the big customer dinner where the right bottle of wine really mattered. Since becoming the General Manager of Pleo’s Northern European business, my remit has expanded to understanding how much money we have coming in versus going out. Today, I’m asking whether my teams travel to travel, or because it’s necessary? What are we spending on the tools and applications required to do the job and what is the ROI? How many coffees is my team expensing every day? To some this might seem like overkill, but these details matter to me in 2024. And they should matter for you too.

That’s because, ahead of what’s expected to be a challenging year for UK business, a quarter of small and medium-sized enterprises (SMEs) are looking to reduce business spending in 2024. This is according to Pleo’s CFO Playbook for 2024, which polled over 500 UK financial decision makers. But, when it comes to where these spending cuts will manifest most strongly, 1 in 5 UK businesses are exploring reducing pay for remote workers – a decision that has the potential to impact 16% of full-time British workers. With just under half (41%) of businesses asking their teams to come into the office more, it’s obvious that business leaders are keen to bring back in-person collaboration and make the most of costly office rents. But is reducing pay for remote workers really the answer?

Before they sign off on spending decisions that can have potentially damaging ramifications for employee morale, businesses must first bring some clarity to their spending oversight and find the balance between a leaner business and one that still operates a flexible culture. This means having a tighter rein on spending – including deeper insights and fewer spending blind spots – to reduce the need for radical cost-cutting strategies. Because in 2024, details matter.

Why there is a need to reduce spending

The past few years have undoubtedly been a challenge for UK SMEs. In late 2023, for the first time in over a decade, more businesses were closing down than starting up. Fast forward and 2024 has kicked off with similar uncertainty. Encouraging EY forecasts expect the UK economy to grow 0.9% this year, up from the 0.7% growth projected in October’s Autumn Forecast – while GDP growth expectations for 2025 have been upgraded from 1.7% to 1.8%. But, less than a month on, the UK finds itself in a recession.

This has increased the pressure on organisations to reduce spending for the year ahead. However, only a third (34%) of UK businesses feel they’ve got an excellent grip on managing their spending, and just 28% feel they have strong visibility of their financial health and performance. Yet, curiously, almost 50% of UK businesses believe 2024 will be “easier” than 2023. Something that, in light of the challenges businesses face and the lack of significant investment into spending visibility and performance,  is hard not to interpret as wishful thinking. And businesses risk flying blind in their quest to cut costs without comprehensive spending oversight to navigate them.

Cost cutting shouldn’t be a Hail Mary

Let’s use the notion of reduced pay for remote workers as a case study for making spending decisions without spending oversight. Renewed calls for workers to return to the office is one thing, but this feels like more of a financial misfire that declares the contribution of remote workers less valuable. Pleo is currently thinking about the role of its own office space. But, what’s crucial is that we don’t plan on putting financial pressure on those who prefer to work from home. Instead, we’re thinking bigger and evaluating our office needs for all London-based staff. This ensures we can save money on rent, not people, before investing it into amenities our team wants.

Many of our employees are still working remotely and while, in a perfect world, I would love to see 80% of our team come into the office to help contribute to the culture that makes Pleo so special, we need to strike a balance of office requirement and productivity preferences, and keep our culture intact as we do so. Ultimately all of our employees need to feel valued.

As businesses strive to streamline their spending, the decisions made at the collective level are likely to impact individuals most – from work models and colleagues to pay and progression. And so before making such drastic spending cuts, businesses need to ask themselves how they can manage spending better. Not with broad strokes, but by looking at the detail. And this starts with more comprehensive spending oversight across multiple departments and activities.

Where to start with cost consolidation

Though streamlining costs might present some businesses with a significant shift, it is worth the effort. Better spend management offers an opportunity to truly unlock enhanced efficiency and resilience.

One area of opportunity that’s set to become more key in 2024 is addressing technology investments and tool consolidation. We know that digital transformation is well underway for many businesses, yet consolidating platforms and software is languishing towards the bottom of the priority list. Only 16% in the UK see it as a big ambition for 2024 – something they might want to reconsider considering the average worker is overburdened across 9 tools every day. Such ‘digital overwhelm’ is not only a concern for the workforce and productivity, but budget too.

Another opportunity for consolidation isn’t necessarily about cost, but mindset. Too often, businesses conceive of spend and expenses as two separate things. The former more likely to be high-value items such as office rent, ad spend and international business travel; the latter more likely to be smaller cost items like coffees, office supplies and local travel costs. In fact, despite only 19% of businesses thinking of expenses and spend as the same thing, only 27% of organisations had clear guidelines on what separates them – potentially opening up a black hole in terms of unaccounted outgoings.

At the end of the day, businesses just want to know how much they have coming in vs going out. Whether it’s an expense or spend, it’s all outgoing. And when 25% of decision makers say they use different platforms, this fractured view of company outgoings is allowing a lot to slip through the cracks.

The priority of pocket repair

There is no doubt that UK businesses face a challenging 12 months ahead. In order to focus on revenue growth and filling their pockets in the coming months, business leaders first need to check there aren’t any holes in them. This means ensuring their spending oversight is exhaustive and leaves no stone unturned – and no finance strategy half-baked.

This is how businesses can reduce business spending and, crucially, avoid doing so as part of a trade-off with working culture and productivity. Because without financial oversight and strategy, ill-conceived cost cutting will remain a bigger risk and could potentially end up costing business leaders in more ways than one.

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Business

Overcoming intricacies of premium processing in the insurance industry

Source: Finance Derivative

By Piers Williams, Global Insurance Manager at AutoRek

Complexity is an unavoidable reality for the intricate world of insurance. For program administrators, including brokers, managing general agents (MGAs) and managing general underwriters (MGUs), accurate management of insurance premium payments and complex workflows like bulk payments and diverse data sources is essential – there cannot be room for error. Unfortunately, poorly executed and complex processes can lead to costly mistakes. This is especially true for essential financial control processes that directly impact the performance of insurance businesses such as premium payment processes – also commonly known in corporate industries as account receivable and payable processes.

In particular, the traditional, manual management of insurance premium payments is what can often lead to unresolved outstanding debt and large balances of unallocated cash. When you combine this with the 30% growth in delegated/program businesses (over 30%+ in the last 3 years), using Excel sheets and the ever-increasing policy volumes, the approach becomes unsustainable and inefficient.

This article will outline the transformative benefits automation offers and the key actionable strategies that will enable program administrators to optimise the management of insurance premium payments for greater efficiency and effectiveness in their financial operations.

Embracing automation: the future of insurance

The future of insurance lies in automation – this is where premium payment processing comes in. Automation enables businesses not to erode margins through write-offs but accelerate cash flow and protect revenue. The primary goal is to accelerate premium reconciliation and allocation by implementing an automated straight-through process, minimising the need for human intervention to ensure that minutes – not hours – are spent on the reconciliation process.

By leveraging automated systems and advanced data integration, premium payment processing has the potential to offer a more streamlined, accurate and effective insurance ecosystem. Automation minimises the likelihood of human error and delays in transaction times; ensuring that precision is at the forefront of the financial processes. This shift towards automation addresses one of the key challenges faced by the insurance industry – eliminating inefficiencies which can lead to costly mistakes and unnecessary delays.

Producing scalability in a competitive market

Program administrators are confronted with a multitude of pain points in their day-to-day operations. Given that program administrators handle a significant amount of insurance policies across multiple binders/programs in the market, considerable admin effort is required to process a vast number of internal and external data sources as well as payments and policy data. As a result, program administrators risk losing valuable time and resources – giving them less time for value-added tasks, like resolving breaks, addressing downstream issues, and creating better partnerships with insurance partners.  

The impact of such operational inefficiencies can impact not only accounts receivable, collections and credit control processes but also business profitability, binder/program performance, competitiveness and reputation to name a few. Without the adoption of more advanced technologies like automation, program administrators are increasingly at threat of not being able to produce scalability in a competitive market.

Whilst automation offers huge efficiency upside for businesses there are also many benefits delivered by simply having a single premium data control platform. One of the most notable challenges with premium payment operations is the often-large numbers of internal and external data sources that must be managed and processed. This data needs to be continuously processed to ensure reporting is up to date and management has a comprehensive view of outstanding premiums, allocated premium and cash positions at any point in time. The management of this data, if not performed within a platform, presents a huge risk from a control perspective, as often premium payments will not be allocated for 30, 60 or 90 days, therefore needing a solution to keep track of all data automatically to ensure efficiency and control to ensure.

The opportunities premium payment platforms unlock not only when reconciling and allocation premium but also from a financial data control, consolidation and audit perspective, can be transformative. When this is further combined with the new reporting that is unlocked and streamlined operations using features like workflows leads to a drastically enhanced and often very different operating model. This model, however, enables businesses to work in near real-time, enhance relationships and most importantly remain competitive.

Identifying and addressing inefficient processes

Investing in modern technology like automation is often the first step in streamlining operations and eliminating inefficient processes. The goal is to encourage program administrators to focus less on manual administrative tasks that are time-consuming and instead, focus on key business decision making to improve financial gain – automating manual processes does exactly that.

Likewise, the insurance industry is constantly evolving so the adoption of premium payment processing will be crucial in remaining competitive in a shifting market dynamic. With this in mind, legacy systems, once the backbone of insurance operations, must go. These systems are outdated and unable to meet the demands of a data-driven, regulated market, leading businesses to embrace digital transformation and no longer depend on inefficient processes.

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Business

Who’s Scared of Embedded Payments?

Source: Finance Derivative

Johannes Kolbeinsson, CEO at PAYSTRAX

Embedded payments have been swiftly integrated into the e-commerce ecosystem, showcasing their transformative potential in reshaping how we make transactions. There is a bright future for embedded payments, but we must emphasise the significant untapped potential within the space as it currently stands, as the user experience still isn’t quite seamless, and third-party payment processors still present a fraud risk to companies. 

A Rapidly Expanding Market

The growth of embedded payments is undeniable. Driven by the rise of digital wallets and one-click checkout systems, the global market for embedded finance as a whole is projected to grow from $92 billion to $228 billion between 2024 and 2028. Recent shifts in consumer behaviour, especially toward frictionless digital experiences, have been accelerating the adoption of these solutions across sectors. Embedded payments offer that seamless one system approach, not only quickly processing payments on app, but building a one app relationship with consumers that develops brand loyalty.

This trend directly mirrors the business strategies of the major players in the tech world. Companies such as Apple, with its mobile wallet and credit card ventures, and Shopify, combining e-commerce with embedded payments, have demonstrated that blending payments directly into platforms can drive user engagement and boost conversions. The logic is plain and simple: by keeping consumers within the app, businesses streamline the purchasing process, increasing the likelihood of finalising transactions, and building brand and customer loyalty.

The Embedded Payments Boom

Embedded payments have become the latest hot topic in fintech. In fact, just a few years ago, in 2020, embedded finance payments were generating around $16 billion in revenue. Looking ahead to next year, forecasts suggest that number will skyrocket to over $140 billion. The success of platforms like Uber with one-click payments and the buy-now-pay-later (BNPL) models from companies like Klarna are clear indicators of this shift. Consumers increasingly seek ease and convenience, and embedded payments are meeting those demands head-on.

However, for all the excitement, embedded payments still face challenges in adoption. Fraud prevention, authentication, and user experience remain key barriers that need to be addressed on an industry wide level to truly deliver the seamless, instant payments these systems promise consumers.

Addressing the Friction

While the promise of embedded payments is enticing, friction remains. One of the most critical challenges for businesses adopting embedded payments is ensuring robust risk management. Creating an online experience that feels as secure as an in-store transaction should be a top priority, especially as financial fraud becomes more prevalent.

Currently, many companies are jumping into embedded payments without fully understanding the complexities involved. The lack of in-house expertise in building the necessary infrastructure across digital services, transaction processing, and enablement layers can lead to implementation issues and security vulnerabilities. Businesses need to conduct proper due diligence to avoid potential pitfalls, as hasty implementations can compromise both functionality and security.

User experience is another key factor in determining the success of embedded payments. Historically, we’ve seen how PayPal revolutionised online payments with its email-and-password system, setting a new standard. Embedded payments, while advanced, are still evolving to achieve a truly frictionless experience. Authentication processes frequently occur outside of the platform or app, and the range of payment options can be limited. To fully realise the potential of embedded payments, businesses must balance security, usability, and convenience.

Trust and Security Concerns

Security and trust are paramount when it comes to anything finance related, and these are areas where embedded payments must improve to gain widespread consumer adoption. With growing concerns about data privacy and the rise in online fraud (40% of all reported crime in the UK last year were fraud), it’s clear that consumers need reassurance before embracing embedded payments.

While embedded payment systems offer unparalleled convenience, their inherent vulnerabilities could make them a prime target for cybercriminals. The lack of standardisation and regulation in the sector, coupled with a general shortage of expertise that comes with a new industry, poses significant risks for users. Nevertheless, history suggests that consumers are willing to trust new technologies over time. Just a decade ago, saving card details online was met with hesitation; today, it’s commonplace. Similarly, as security concerns are addressed, embedded payments will likely gain traction as consumer trust grows.

The Path Ahead for Embedded Payments

Despite the array of payment methods available today, the potential for embedded payments to dominate the future of finance is undeniable. Their speed, ease, and ability to facilitate in-app purchases with a simple click make them an attractive option for both consumers and businesses.

Yet, for embedded payments to live up to their promise, key challenges remain. User experience and authentication are the primary obstacles. Truly embedded payments should enable users to complete transactions within the app, without being redirected elsewhere for authentication. As instant payments become the norm, any requirement to leave an app to verify a purchase could deter adoption. Addressing these issues will be critical to the future success of embedded payments as they continue to evolve and reshape the digital landscape.

In the coming years, as innovations like AI-driven fraud detection and biometric authentication become more integrated, the potential for embedded payments to achieve a truly seamless experience will grow. This could be the defining shift that cements embedded payments as the default mode of financial transactions in our increasingly digital world.

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Business

The need for speed: Why fintechs must supercharge background checks to stay competitive

Source: Finance Derivative

By Luke Shipley, Chief Executive Officer and co-founder at Zinc

In the fast-paced world of finance, and particularly where finance and technology intersect, hiring candidates with the right skills is crucial for staying ahead of the competition. For fintech firms, conducting fast yet thorough background checks is key to balancing regulatory compliance with the need for speed.

However, financial regulations in the UK demand rigorous oversight to safeguard consumer data, prevent fraud, and maintain financial stability. As part of these regulations, fintech companies must conduct thorough background checks to ensure new hires align with compliance standards, mitigating risks to both the company and its customers. These checks involve verifying critical information such as financial history, credit reports, criminal records and employment history, which are essential for determining the suitability of candidates handling sensitive financial data. These checks are both time-consuming and resource-intensive, slowing down the hiring process.

Fintech firms can sustain rapid growth and meet regulatory obligations without sacrificing operational efficiency by streamlining this crucial part of the hiring process with the right tools. This also enables HR teams to focus on creating a positive experience for new hires, rather than burdening them with additional administrative tasks. Implementing efficient systems that reduce these checks from weeks to days allows companies to swiftly onboard talent, maintain customer trust, and stay competitive.

Challenges of traditional background checks

Traditional background checks in the fintech industry are complex and time-consuming due to the stringent regulatory requirements that financial organisations must follow. Verifying candidates’ financial history, running credit reports, conducting Disclosure and Barring Service (DBS) checks, and confirming employment history for the past several years are all critical tasks. These checks are not only meticulous but also require coordination with external agencies, which often slows down the process.

Manual handling of these background checks can extend the hiring timeline by weeks or even months, creating operational inefficiencies for fintech companies that need to scale quickly in a competitive industry. Prolonged hiring cycles can also lead to delays in onboarding vital talent, putting added pressure on already stretched teams.

For HR departments, managing these extensive checks manually places a heavy administrative burden. The time spent gathering documentation, verifying information, and coordinating with third parties diverts HR professionals from focusing on more strategic initiatives, such as talent acquisition and improving the candidate experience. As a result, the manual process not only hinders recruitment efficiency but also affects the company’s ability to attract top talent in a timely manner.

Role of technology in streamlining background checks

Here, technology plays a crucial role as it revolutionises the background check process in fintech by reducing manual interventions and simplifying time-consuming tasks. Automated platform systems now handle complex steps like identity verification, credit checks, and employment history validations far more efficiently than traditional methods. These technologies not only speed up the process but also provide one centralised place for employee documentation and improve accuracy by reducing the risk of human error in verifying critical information.

Automation also allows fintech companies to complete thorough background checks in a fraction of the time, continuing to ensure global compliance without delaying the hiring process. HR teams are freed from the burden of manual data gathering by automating repetitive tasks and reminder emails so they can focus on higher-value activities, such as candidate engagement and talent strategy.

Moreover, integrating background check platforms with existing HR systems streamlines recruitment workflows. This integration ensures a seamless transfer of data, and provides real-time updates on the status of each candidate’s background check. The result is a faster, more efficient hiring process that allows fintech firms to onboard new employees quickly, creating a positive reflection of their brand at every stage of the onboarding process.

Improved candidate experience

Technology in recruitment not only benefits HR teams but also significantly enhances the candidate experience. Automated systems cut down lengthy waiting periods, helping candidates move through the hiring process more swiftly.

From digital applications to real-time status updates, candidates enjoy a seamless, transparent process, which minimises stress and uncertainty. This streamlined approach improves communication and ensures that candidates are informed at every stage of their check progress, fostering trust and keeping them engaged. Additionally, modern tools like AI-driven assessments or automated interview scheduling save time, allowing candidates to focus on showcasing their skills rather than dealing with logistical hassles. Fintech companies can improve their overall employer branding by providing a more efficient and organised hiring process, attracting top talent who appreciate a modern and tech-forward experience.

It is why speeding up background checks is crucial for fintech companies aiming to stay competitive. By leveraging modern technology, these companies can benefit from greater efficiency, regulatory adherence, and an enhanced candidate experience. Fintech firms should embrace tech-driven solutions to balance speed and regulatory requirements, ensuring a smooth, transparent, and efficient hiring process.

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