The accounting world, which is sometimes perceived as mundane is about to be dramatically changed by artificial intelligence, the Internet of Things and the blockchain, says ANTON VAN HEERDEN, MD and Executive Vice-President, Africa & Middle East at Sage.
If you think that tech is done with transforming the way accountants work (and every sector for that matter), you’re in for a surprise. As an accountant by qualification, I see a very bright and exciting future.
The accounting world, which is sometimes perceived as mundane is about to be dramatically changed by artificial intelligence (AI), the Internet of Things and the blockchain. Yes, recently these technologies have been spoken about at a large scale, but the job of an accountant will change as much as the first computerised accounting packages did or the arrival of mobile and cloud computing.
Invisible accounting will be built on the back of these three powerful emerging technologies, as illustrated in Leading the Invisible Accounting Revolution, a new whitepaper from Sage and Ovum.
The exciting news is that these technologies will allow for us to focus on the things we care about most, such as working with clients or the business’s leadership on strategic financial plans. What each of these technologies will do is free us from more routine admin work, while ensuring that we can work more accurately and efficiently. They will also give us more real-time visibility into our financial performance.
Smart assistance on the go
We’re all becoming rather used to speaking to machines, for example, asking Siri on our iPhones for directions or Bixby on the new Samsung devices to seek out an answer to a trivia question. The interfaces to technology are becoming more natural and conversational as we use voice, gesture or touch to interact with computers rather than a mouse and keyboard.
In the background, AI technology crunches massive datasets to help us complete our personal tasks or our work. This technology doesn’t simply follow a set of programmed rules; it can also learn from our responses and its databases to improve its functionality and its usefulness over time. For now, consumers are the biggest users of such technology, but it is rapidly moving into the business world, too.
At Sage, we recently launched our conversational bot Pegg, which works with collaboration tools like Skype, Facebook Messenger and Slack. Rather than needing to navigate a bunch of fields on your accounting software, you can simply ask Pegg questions such as: “How much money did we make this month?” or “Does anyone owe me money?”
Imagine how useful that might be if one of your customers phone you for an invoice when you’re out-and-about, and you don’t have easy access to your computer. You can also note expenses, so you don’t forget to file the receipt for your parking when you’re out on a business visit. This sort of technology is going to rapidly evolve so that you will be able to ask your virtual accounting assistant a wide range of business questions, without needing to dive into tables and fields in an accounting package to get an answer.
As an accountant, I’m always excited to find a technology or process that reduces the ‘friction’ of administration. By friction, I mean the time and effort it takes to record transactions or complete tasks.
The Internet of Things – the many smart and connected devices in the workplace – will do a great deal to reduce friction. It can give us real-time information about assets and transactions so that we don’t need to record it after the fact. For example, a telematics device or GPS in a company car could automatically capture mileage information and upload it to the accounting solution, so drivers don’t need to report it in with their logbooks. Or we can track items as they move through the supply chain for an up-to-the-second view of sales and inventory on hand.
Blockchain with a touch of human
Further into the future, the blockchain has some exciting potential for accountants. The blockchain is a type of distributed ledger or decentralised database that keeps records of digital transactions. All participants have an identical copy of the transaction that can be accessed and viewed in the present, and all parties need to verify the authenticity of a set of transactions (a block) before a new block can be added to the existing chain.
Blockchain records cannot be altered, and every transaction is recorded and verified. As such, blockchain brings new levels of trust and transparency to transactions. When we bring blockchain and smart contacts together, we can automate many processes where we have used an independent third party (like an exchange, lawyer or clearing house) to verify transactions.
In future, companies big and small could use blockchain for invoicing, documentation, contracts, and payment processing, all done with high levels of automation and low levels of friction. We’ll spend less time on ledger entry and reconciliation in the book-keeping process. However, there will still be a need for a human touch as accountants and auditors need to ensure that local tax and other regulations are applied.
Going beyond cloud computing, which is now a given starting point for many organisations, the use of AI and other innovations will lead to Sage’s vision of invisible accounting by 2020. It is a seamless and automated accounting process that will enable us to think about business growth and strategy rather than recording invoices and doing bank recons.
VoD cuts the cord in SA
Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.
That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.
The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.
Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.
Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”
The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.
“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”
New data rules raise business trust challenges
When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.
The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.
GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.
The fundamentals of trust
GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.
The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.
This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.
What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.
The risk of compliance
Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.
A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.
A three-step plan of action
So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:
Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.
Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.
Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.