Firing line  

"You want to be complying, but do you actually want to be first?"

"You want to be complying, but do you actually want to be first?"

The biggest challenge currently facing the investment sector is the disintermediation of financial services, warns the partner of iBe TSE. 

Masha Cilliers, who has been working in the payments industry for more than two decades, notes that clients are increasingly making investment decisions themselves, cutting out the middleman and using financial advisers less. 

She says: “The investment sector has also been disintermediated in terms of you needed to [previously] have a financial adviser.”

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She adds: “Do you trust the posters you see on the tube, can you just do it through software?”

Ms Cilliers says there is more risk of individuals making wrong investment decisions due to this disintermediation.

She warns that the strong customer authentication rules – which are a requirement of PSD2, the EU Payment Services Directive – could cause further disruption to the financial services industry. 

SCA requires payment providers within the European Economic Area to ensure electronic payments are performed with multi-factor authentication to increase the security of electronic payments. 

“All in all, the drive of PSD2 is to make those financial interactions secure, but the balance between security creates customer friction.”

Ms Cilliers says consumers will see that banks will be writing to them and asking them more questions regarding PSD2, which officially came into effect in last month, but a number of countries, including the UK, have been granted additional time to prepare. 

The Financial Conduct Authority announced in August that companies in the e-commerce market could have until March 14 2021 to comply with SCA without the fear of punishment from the regulator, so long as there is evidence that companies have taken the necessary steps to comply with the plan. 

“What will happen is some firms will comply immediately, some won’t and consumers experiences will be different. Consumers will go to the ones where the experience is easier, thus punishing those who complied first,” Ms Cilliers says. 

“So the big challenge is: yes, you want to be complying, but do you actually want to be first?”

Ms Cilliers adds: “If you are first, you may be the one that upsets the customers the most, which is not where you want to get to.”

She says artificial intelligence has to be approached with caution because in some cases client queries can be easily answered, but in other cases consumers may want to talk to advisers or banks. 

She says: “Sometimes it is a query that a robot won’t understand and it creates more friction and frustration.

“In the financial sector, I have seen some really good [AI] implementation, where financial institutions up-sell certain products, depending on the questions.”

Ms Cilliers joined iBe TSE in July 2017. 

It is a financial services consultancy whose clients range from banks, payment schemes, payment processing companies, as well as small fintech start-ups and merchants. 

iBe TSE primarily provides advisory services on area of compliance.