Get Smart: Self-service, smart cities and asset finance
Chris Wilkinson of Siemens Financial Services looks at citizen self-service and its contribution to a 'smart' environment with the help of asset finance.
Several UK cities are looking to initiate 'smart' projects and developments to improve the efficiency of local services, enhance sustainability and attract business and talent, as well as develop their competitiveness.
With continued pressure on public budgets, a number of cities are now approaching smart transformation through a series of smaller smart projects (a few thousand to a few million euros) - which offer highly dependable return on investment (RoI), often to the extent of being self-financing - generating savings that effectively pay for the investment.
An example of one such smart project is the implementation of citizen self-service. In 2014, the number of mobile devices topped 7.22bn across the globe, overtaking the number of people. As populations are becoming increasingly digitalised, it has become possible to deliver many public services through self-service facilities made available online. Self-service allows customers to access information and perform routine tasks, such as the management and payment of taxes and benefits, over the internet without requiring any interaction with a representative of the council or local authority.
According to one report, Hammersmith & Fulham's online self-service portal has saved the council £1.15m annually, with 70 per cent of households registered. Similarly, in the London Borough of Barking & Dagenham, 100 per cent of benefit claims are now made digitally, reducing processing time by 30 days and saving £617,000 annually. Local government budgets continue to be squeezed and self-service technology can help local authorities deliver services more cost-effectively.
Self-service technology effectively replaces manual call handling, in-person appointments, postal communications and so on with automated online services. Therefore, the RoI is often rapid and highly dependable.
Public sector budgets, however, are often insufficient to implement the technology in the first place. Since 2010, councils have faced a 40 per cent cut in funding from central government and authorities are therefore looking to other forms of finance to help them invest in new equipment, including technology to enable self-service.
The reality is that cities need to access a blend of public and private sector finance to accelerate their smart initiatives in a timely way and benefit from the resulting savings, efficiency, quality and citizen service improvements as quickly as possible. A diverse range of funding sources allows a city to make the full range of desired technology investments - using a combination of public and private sector finance - in a timely fashion. Different financiers can be sourced for the different types of technology investment. The sooner the smart investments are implemented, the quicker the savings (or revenues, or inward investments) begin to accrue.
Research from Siemens Financial Services (SFS) investigated nine such assets - including self-service - and calculated how much asset finance a typical city could potentially access from private sector financiers. The research shows that there is €6.2bn (£5.2bn) accessible private sector funding potential for the development of UK smart cities. This calculation demonstrates the level to which asset finance can contribute to improving citizen health, making public services more efficient and effective, attracting business and talent for economic growth, promoting and freeing hard-pressed public sector capital for more visionary and experimental smart city initiatives.
Asset finance options are widely available, simple and quick to arrange. They also offer high transparency for cost-benefit monitoring and analysis. Such financing techniques spread the cost over an agreed financing period, with monthly finance payments arranged to align with expected benefits gained over time from new/retrofitted equipment. This removes the need for a large initial outlay, thereby increasing the funds available for other expenditures. In other words, asset finance allows cities access to the latest technologies, without having to commit scarce capital or use traditional lines of credit. Financing arrangements can also cover other costs such as installation, maintenance and service, as well as providing the flexibility to upgrade technology in line with developments.
Councils hoping to upgrade their technology solutions could consider the benefits of a specialist financier, who has a deep understanding of both the challenges and requirements of public sector financing. Unlike traditional, generalist financiers who might lack comprehensive technical knowledge to fully evaluate the impact a potential investment can bring to the council, specialist financiers understand the technology and its practical application in the public sector.
Citizen self-service is just one example of a small-scale smart city development. It can help to reduce councils' cost of delivering certain services by replacing helpline staff and postal communications with online platforms. The budget has to be available to implement the system in the first place, however. As their public funding continues to be cut, many councils are recognising the important role that the private sector can play to help them fulfil their 'smart' ambitions.
Chris Wilkinson is head of sales for healthcare and public sector for Siemens Financial Services in the UK.