Do the Channel Islands dream of electric sheep?

The Channel Islands have been bigging up their digital capability for some time – but exactly how is that translating to success on the ground?
 
Silicon Valley has always dreamed of self-made micronations where entrepreneurs can flourish; a ‘techie island’ where elite libertarians can tinker and invent, free from heavy-handed government interference. The Channel Islands may not have realised tech entrepreneur Peter Thiel’s ‘libertarian utopia’ just yet, but it’s not through lack of trying. 

The islands have a developed economy, some of the fastest fibre in the world and the byte-size to beta any concept. Both governments have pledged to diversify their economies to shift their reliance on the finance sector, and both have committed to rolling out gigabit fibre broadband to every premises by next year. 

The States of Jersey’s Chief Executive, Charlie Parker, recently addressed the Chamber of Commerce with a digital roadmap for the island’s public services. And Guernsey’s Digital Greenhouse has released its Digital Strategy to drive economic growth through the digital sector. 

But, while everyone may well agree that digital is important, is all of this just clever rhetoric, or has there been tangible progress in the technology space?

Tony Moretta, CEO of Digital Jersey, certainly thinks it’s the latter. “Jersey has many digital assets,” he says. “We have an advanced telecoms infrastructure, with three 4G mobile networks providing some of the fastest mobile speeds in the world, and we have fast fibre gigabit broadband, setting us way ahead of 98 per cent of the developed world. When I speak to technologists off-island, they can scarcely believe it.”

With all this sophisticated infrastructure, it seems that more people within the UK tech industry need to be made aware of it. The focus, then, must be on marketing the island within target jurisdictions such as the City. But, aside from faster internet speeds, how can Jersey distinguish itself? 

“The fact of our small size means it’s relatively easy to get key decision makers around the table to change infrastructure and innovate quickly,” explains Moretta. “We have our own legal system, own government, own economy. This is very compelling to investors and tech companies in the City.

"Within one small room, we can sit down with leading representatives from both government and industry, three telcos, one water company, one electricity company and major financial firms. We’re agile enough to make things happen.”

Theory into practice

With the right infrastructure, government support and keen public interest, is local industry getting behind the digital transformation?

The finance sector represents approximately 13 per cent of the Channel Islands’ population and an intimidating chunk of their GVA. With a stampede of fintech unicorns shooting for the same private banking clients, it makes the islands’ digital transition particularly immediate. 

Ove Svejstrup, Associate Partner at EY Guernsey, played an integral part in creating EY’s ’Fintech in the Channel Islands’ survey, which set out to understand the thoughts of local businesses and gauge how the financial services sector has been responding to the evolving demands created by the emergence of fintech.

“We saw an incredibly enthusiastic response from across the entire financial sector in both islands” he says. “The industry as a whole was embracing digital transformation as something that drives business efficiency and they wanted to be involved. 

“The larger firms were particularly excited about the potential of the islands as a test-bed for innovation, where we can test out new financial technologies and roll out to other jurisdictions.” 

While fintech is undoubtedly intriguing, from the ground level it’s challenging to see its practical applications in the islands. Svejstrup, however, is enthusiastic about some of the latest developments within EY Guernsey.

“We’ve developed an audit platform called WAM Apps. This uses advanced analytics to extract data from our admin systems and streamline conversations with our asset management clients. It helps us to benchmark relevant findings, so we can implement this into strategy – and we’re already using WAM for tax and FATCA reporting.”

Digital identity

There have also been significant developments in the Know Your Customer (KYC) and Client Due Diligence (CDD) space. Aonghus Fraser, CEO at Atam ID Technologies, recently published a white paper on the case for a ‘digital identity’ platform in Jersey to verify a customer’s identity through the blockchain. 

He explains: “For any kind of identification process, you present your passport and it’s put in an in-tray to prove you are who you say you are. With digital ID, your passport photo can be cross-referenced with virtual images pulled from social media and online sources – and machine learning and AI can be used to verify the document itself.

"Digital verification can give us a greater level of confidence when analysing the risk profile of a client, so firms can swiftly approve low-risk transactions, such as a house purchase, which drives efficiency on every level. 

“Blockchain, or distributed ledger technology, gives us the means of doing that. It creates a tamper-proof decentralised network that mitigates against identity fraud and human error. A unique key can be shared between two parties to prove beyond any doubt that the ID was verified by a machine with a date and time stamp.”

This technology really pays dividends too. “Incredibly, Estonia estimates that they saved two per cent of their GDP with the introduction of digital signatures,” says Fraser. “That’s a staggering saving – equivalent to their annual defence budget.”

So, exciting times ahead. But if the digital transition is to be realised, the islands need people who are both trained to use and make sense of the data. 

Tony Moretta agrees. “We recently released our Digital Skills Strategy, which addresses any shortfall in skills and sets out our plans to attract talent from around the world. We also undertook a detailed analysis with Exeter Business School to assess the quality of digital education in the island. We strongly believe that to create a digitally enabled workforce we need to prioritise teaching digital skills in schools.”

“We’ve also been running a coding programme for three years to help people of all ages to retrain and enter the digital sector,” Moretta continues. “It’s been a huge success – we have a 90 per cent success rate and have seen graduates enter blue-chip companies or even launch their own start-ups.” 

The digital skills deficit is also a chief concern for the Channel Islands’ finance sector, as EY’s fintech survey highlighted. “Local firms were concerned about a lack of island resources with appropriate skills,” says Ove Svejstrup. “We need to get more data out on fintech in the islands, so companies can do a cost/benefit analysis and plan ahead through training and capital investment.” 

Aonghus Fraser underlines the scale of the problem if the islands don’t act now. “We need to re-educate school leavers to not just plump for a job in finance,” he says. "Cambridge University recently published a research project on the BBC website called ‘When is my job going to be automated?’. It looked at low-skilled administrative jobs and calculated the automation risk based on technology trends.

"One in particular stood out for me – legal secretaries have an automation risk of 98 per cent by 2040. This role is roughly the equivalent of our ubiquitous fund administrators, who could be rendered obsolete in the next 20 years.”

Government support

Across the pond in Guernsey is the Digital Greenhouse. The initiative is part of the States of Guernsey’s Economic Development Department and works to implement digital strategy in partnership with industry. 

Digital Greenhouse is brokering partnerships within higher education and industry to create a slipstream for digitally enabled graduates. Fresh initiatives such as KPMG’s Digital Degree Apprenticeship scheme bore fruit last year, with a BSc student at Exeter joining the Channel Islands’ Digital Team.   

A 2018 PwC report in Guernsey highlighted the need for a fintech environment and the regulation to underpin it, which forms a key part of Digital Greenhouse’s newly released ‘Digital Strategy’. 

This isn’t just hot air, Guernsey is incubating Barclays Eagle Labs to implement fintech solutions. It also spearheaded a recent cyber security project with Northern Trust. 

Lucy Witham, Economic Development Head of Digital in Guernsey, explains the organisation’s key role in accelerating the islands’ skills economy: “One of the things we’re looking at is overhauling the Guernsey school curriculum to make computing skills a compulsory subject of study right up to Year 11. This is about digital empowerment and developing strong pathways to digital career opportunities post-16.”

The States of Guernsey is heavily invested. Chief Information Officer Colin Baudains outlined his plans, at an April IoD Breakfast Seminar, for all Guernsey households to have 5G before the UK.

With all this public funding – £9 million in eGov spending in Jersey – the islands need to balance the books. Sony’s recent high-profile collaboration with JT to test its Internet of Things capabilities was a significant coup for Jersey.  

Tony Moretta explains how it came about. “We teamed up with JT and Digital Catapult, our London counterpart, on an off-island PR campaign to highlight our high-speed connectivity. Sony saw that and recognised the potential of Jersey as a test-bed for IoT. Incredibly, Sony had never tested their IoT tech anywhere outside Japan and they chose Jersey. 

“With success stories like these, our local IT resource was massively up-skilled, with access to next generation training and technology. It’s a win-win, as this creates more activity in our economy and upgrades us as a digital society.” 

Future facing

Right now, the market is active and healthy, but with an eye on the future, what’s the digital forecast for the Channel Islands? “The islands need to carve their own niche and build technical expertise in specific areas.,” says Ove Svejstrup.  

“I’ve learned from my time in Guernsey that this is a tight-knit community that works well together. The decision chain is short enough to move fast and get things done and we have world-class connectivity. This creates fertile ground for investment, as businesses need this infrastructure before private capital is invested.” 

Whether a sandbox, test-bed or ‘walled garden’, it’s safe to say that both government and private industry are speaking the same digital language and doing their utmost to sell the islands as the location where tech solutions can be tinkered with before being shared with the world. Time will tell whether this leads to long-term investment from the big players. 

Aonghus Fraser neatly frames the options: “We can either fight against the digital transition and ultimately get left behind, or we can embrace it. We can create an automated, seamless experience for business with a digitally skilled population supported by world-class infrastructure. This is how we attract outside investors. The responsibility can’t just lie with government and the private sector; it’s also down to islanders to upskill – because your island needs you.”