By Andrew Griffin, SVP Industry & Investor Relations
Convergence between offline and online via banking, payments and commerce is inevitable.
While banks in the UK and around the world have traditionally and naturally been providers of financial services, that is changing as new organisations see opportunities and rapidly move in to create new customer acquisition and engagement channels via mobile.
For an increasing number of people, the mobile is a ‘must have’. Smartphone sales have for some time exceeded those of PCs, fuelled by a combination of relatively lower cost, increasing ‘smart’ computing power with geo-location capabilities and 24/7 ‘always with you, always on’ convenience. Nevertheless, on a planet with 7 billion-plus people and 6 billion phone subscriptions – both pre-paid and post-paid – only around one third have bank accounts. This means that for billions of people, their mobile, whether it’s a smartphone or more traditional handset, is the first tangible way in which they interact with financial services. Consumers have never had more power at the touch of a finger to find and engage with what they want, or in the words of internet thought leader Mary Meeker: The mega-trend of the 21st century is the empowerment of people via connected mobile devices.
With this empowerment in an increasingly digital age, more brands are vying to be custodians and vaults of where a consumer stores their money. Many of the new players emerging are disrupter or challenger brands that in a number of cases did not exist until recently. Among the new entrants seeking to secure a consumer’s confidence are businesses never associated with financial services, bank-grade security, payments standards or customer support.
What is often missed in discussions about how mobile is changing the way we bank and pay, is that the consumer ultimately does not really care about how all the connections between banks, mobile network operators and merchants gives them a compelling experience on their handset. They expect to be able to bank how they want, pay when they want and shop via their mobiles in a seamless, intuitive and secure way. This is an important point for businesses to recognise in the UK and elsewhere as they seek to benefit from the rewards of the exploding Mobile Money ecosystem.
More significantly, as the young of today become banking customers of tomorrow, the approach adopted to banking previously, irrespective of whether paper was preferred over plastic or chip and PIN codes, is not likely to be the future success template. There are generational shifts taking hold. For many parents and grandparents, the chequebook was a tangible symbol of their primary relationship with their bank, but that is changing, particularly as many children will never write a cheque. They move money, connect with friends, and explore brands digitally via the phone in their hands. What we are witnessing is a fundamental change in our relationships with not only banks and financial institutions but payment processors, merchants and handset manufacturers. New brands are emerging that are acting as ‘money vaults’ for consumers. They are not banks. Money is changing as we become more mobile.
Given such trends, financial services providers must ensure that they are leading the way in shaping the emergence of Mobile Money – where you bank, pay or shop via mobile. Financial service providers in the UK have such an important role to play and they must make sure that they are not losing ground in a sector which, many would argue, they ought naturally to own. This centres on defending and extending their role in the payments industry via an integrated, collaborative and networked approach to Mobile Money.
That there is a clear consumer appetite for such services is a certainty. Our business recently commissioned research with the Future Foundation which forecasts that by 2018 the majority of people in Britain, Spain and Germany will have a smartphone. The study also found that European smartphone shoppers are even more confident engaging in mobile commerce if they can do so using services provided by their bank.
More than half of those surveyed would trust sites endorsed by a bank, varying from 57% in the UK, 51% in Germany to 68% in Spain. Also among the findings, mobile shoppers say they are more open to buying higher value items if it can be done through a bank app. Tickets for travel such as flights and trains were the most popular items cited, at 65%, 47% and 45% among UK, Spanish and German consumers respectively. Tickets for services such as entertainment and sporting events were the second most popular items.
As Barry Clark, the author of the Future Foundation report wrote: “Banks have an opportunity to flex a number of unique strengths in mcommerce; from highly repetitive, information checking activities like balance checking through to a more advisory role in recommending brands and offering consumers promotions. Banks can act as a trusted advisor and as a secure route for payments.”
As demand swells, consumer trust and engagement will rise further beyond mobile banking into payments and commerce. The UK financial services industry has a rich heritage in this space and an opportunity to demonstrate how Mobile Money should and can work. At the forefront of this, must be bank-grade security and services via enabling technology platforms that are secure, ubiquitous and easy to use. While some operators will and do experiment with closed-loop approaches – requiring customers to have a particular handset, predetermined bank account or access to a specific network for example – that does not help the UKs financial services industry protect and promote its position. Models which do not support an open ecosystem approach often struggle to get key stakeholders fundamental to their business model on board. A collaborative network approach is so much more conducive to creating value for all.
At the heart of this, we are talking about people’s money. The mobile channel has created new opportunities. Now is the time for banks to strengthen their hand in the mobile space and cement their position in the growing ecosystems in and beyond the UK.
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The Future Foundation’s report ‘M-Commerce: What consumers want from financial institutions’ can be downloaded via the following link:
Monitise is a world leader in Mobile Money – banking, paying and buying with a mobile device. Leading banks, payments companies, retailers and mobile networks utilise Monitise’s technology platforms and services to securely connect people with their money. Already over 23 million consumers benefit from Monitise’s patented technology to ‘bank anywhere’, ‘pay anyone’ and ‘buy anything’ accounting for over $40 billion of payments, purchases and transfers annually.
In January, 2013, CGI and Monitise formed an alliance to offer reliable and proven Mobile Money solutions to banking and payments companies using Monitise’s technology platform.
More information is available at www.monitise.com
UKRSIBBANK, part of BNP Paribas Group, announces a strategic partnership with financial wellbeing startup Dreams, to enhance the digital user experience of its 2 million customers in Ukraine
- The technology powering popular consumer app, Dreams – which has helped 460,000 users save over 440M EUR – will be made available to UKRSIBBANK’s users in Ukraine.
- Through the integration of the Dreams platform within UKRSIBBANK’s own digital tools, customers of the bank can set and achieve money-saving goals, track and improve their financial lives.
Dreams (https://www.getdreams.com/en/b2b/), the Stockholm-born fintech empowering millennials to save and feel better about their money, today announces a strategic partnership with Ukrainian commercial bank UKRSIBBANK, a subsidiary of French international bank BNP Paribas Group.
This partnership follows the announcement earlier this year of Dreams’ first enterprise partnership with banking software provider Silverlake Symmetri, and the recent unveiling of a new department in Stockholm dedicated to the development of Dreams’ B2B partnerships. The announcement marks an expansion of the company’s business model as it consolidates its B2B offering and evolves its services as a provider of white label solutions for financial institutions.
Through the integration within UKRSIBBANK’s own digital tools of the Dreams Platform – which is rooted in scientific principles – customers can set and achieve money-saving goals through clever, automated saving features, in addition to nudges and saving hacks.
The Dreams Platform will be included as part of UKRSIBBANK’s digital banking offering for its 2 million+ customers, and is set to grant millions of potential consumers across Ukraine access to products which will help keep their finances on track and improve their financial lives.
The rise in digital self-help tools has long been anticipated by Dreams and forward-thinking financial institutions. The current global economic uncertainty brought about by the COVID-19 pandemic has also placed significant strains on people’s finances, and the demand for better personal finance tools has only accelerated. The partnership with Dreams is welcomed by UKRSIBBANK which is currently striving to equip its customers with the best possible banking solutions whilst helping them achieve a more sustainable lifestyle.
Dreams is firmly established as an authority in its industry, having launched its consumer-facing app in its native Sweden in 2016 and Norway in 2018 – where it has already achieved a 16% market share of all 20-39 year olds.
Henrik Rosvall, CEO and founder of Dreams, comments: “It’s a true honour to be partnering with UKRSIBBANK and BNP Paribas Group, and we’re incredibly excited to be introducing the Dreams solution to UKRSIBBANK’s customers and the wider Ukrainian market.
“Dreams and UKRSIBBANK can now lead the charge, with BNP Paribas Group’s corporate strategy having shifted in recent years to focus on guiding customers towards responsible consumption and sustainable personal finance management. I’m confident that our mission of helping millennials save more and feel better about their money makes us the ideal partners.
“Our financial wellbeing platform – which is built upon behavioural science and personal finance management principles – will provide the perfect tool for UKRSIBBANK to help its customers make better financial choices and become more sustainable in the way they handle their finances. This partnership will also help UKRSIBBANK safeguard the loyalty of its customers and futureproof its digital banking offering against a growing number of challenger banks and fintechs.”
Konstantin Lezhnin, Head of Retail at UKRSIBBANK BNP Paribas Group, comments: “I believe that banks have a role to improve their customers’ lives. Planning and saving for important life events improves our quality of life by reducing stress levels, and we wish to make our customers feel more confident and in-control of their lives.
“UKRSIBBANK has always applied innovative ways to assist our customers in financial planning, so we are very happy to now be working with Dreams, the best European player in behavioural savings. They have an extremely solid track record in Sweden and Norway based on scientific research, so we are confident that this partnership will work positively for our customers in Ukraine. This also demonstrates our strategy to cooperate with startups and innovative companies that seek ways to expand their operations.”
Three times as many SMEs are satisfied than dissatisfied with COVID-19 support from their bank or building society
- More SMEs are satisfied (38%) than dissatisfied (13%) with their COVID-19 banking support
- Decline in SMEs using personal current accounts for business banking as more seek access to the Government-backed lending scheme
- Fewer SMEs believe nearby branches are important when choosing a bank or building society
- 15% of SMEs use mobile or online banking more often than before the COVID-19 pandemic
- When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account
Three times as many SMEs have been satisfied than dissatisfied with the COVID-19 support available from their bank or building society, according to YouGov research commissioned by the Current Account Switch Service.
Overall, four in ten SMEs (38%) were satisfied with the support they received from their business current account provider since the pandemic began. This contrasts with one in ten SMEs (13%) who were dissatisfied. In general, more than half of SMEs (55%) are satisfied with their current business bank account, compared to 8% who are dissatisfied. However, inertia remains a problem as half of SMEs (50%) said they would not look to switch business accounts even if they were dissatisfied with their current bank or building society.
When SMEs do look to switch, low or no charges for business banking remains the most important factor (47%) in selecting a new account. Advanced digital features (35%), good interest rates (34%), and a personal connection through a relationship manager (33%) also mattered.
The SME banking research was conducted both in February and in September 2020. It also reveals that since the start of the pandemic, the proportion of SMEs using business current accounts has increased from 69% in February to 74% in September as firms are required to have a business account to receive access to the Government-backed lending schemes.
However, one in five SMEs (20%) still use a personal current account for their business banking needs, despite the risk that tax liabilities get confused, and calculations are made incorrectly. These businesses are also missing out on a range of business-only banking benefits such as integrated accounting software or invoicing tools offered by different providers.
In addition, the research shows the importance of branches to SMEs has declined over the seven months. When asked in February, more than a fifth of SMEs (22%) said the availability of nearby bank branches was important when selecting their bank or building society, compared to 17% in September. However, the Post Office could be fulfilling the role of branches in some areas.
The declining importance of nearby branches was most noticeable in the North East region where 35% of SMEs believed branches were important in February, falling to 18% in September. The importance of nearby branches also varies between industries. One in ten IT companies (11%) said nearby branches were an important factor compared to nearly three in ten (29%) leisure and hospitality businesses.
While branches are less important, digital banking use has increased for some SMEs. Several firms have started to use online banking for the first time as 15% of SMEs say they use mobile or online banking more often than before the social distancing measures were introduced.
Maha El Dimachki, Chief Payments Officer of Pay.UK, owner and operator of the Current Account Switch Service, said: “Across the country, banks and building societies have been working hard in difficult circumstances to meet customer needs. Thanks to that work, small and medium-sized enterprises are more likely to say they are satisfied than dissatisfied with the support they received from their business account provider since the pandemic started. But lockdown has changed small business behaviour dramatically, in a way that points to significant changes to their banking needs both now and in future.
“It’s encouraging to see many small businesses are generally satisfied with their business bank accounts. However, even when businesses are unhappy with their bank, some don’t consider switching as an option, despite the many benefits available. We’ll continue to raise awareness of the benefits of switching among small businesses to help them get the most from their bank account.”
The Next Evolution in Banking
By Young Pham, Chief Strategy Officer at CI&T
Everything we know about banking is about to change. A new industry around the sharing of financial data is primed to give birth to a host of new consumer services, all thanks to Application Programming Interface (API) technology. Already known for being the safest place for money, there are opportunities for banks to expand that relationship to other aspects of the customer relationship. Banks will no longer simply be just a place to deposit and withdraw your cash, but a one-stop-shop for a range of data-sensitive services.
The passing of GDPR and the Payment Services Directive (PSD2) were the first steps in this process of banks modernising how they handled their customer data. However, incumbent institutions have so far not engaged enthusiastically. Rather, it was only after growing pressure from fintech challengers and government regulation that they were forced to open up and share their data. This should not be treated as a regulatory challenge, but rather a way to grasp the unique opportunities that banks have to reposition themselves as the most trusted resource for their customers.
It is hard to overestimate the breadth of possibilities arising from open banking, should banks choose to take advantage of this evolution. While the public rarely holds bankers in high regard, it still puts a high level of trust in banking institutions. People are more willing to hand over their sensitive data than they would be to almost any other private entity. Furthermore, banks have a unique perspective into their customers’ behaviours, needs and desires. Spending habits, income streams and risk appetites are just a few examples of the data that no other institution can tap in to.
There is certainly appetite to expand offerings. In our recent study of business banking customers, over 68% of respondents indicated that they were open to their financial institution providing digital non-banking services. This includes services such as tax support, managing payroll, or invoicing to help them with their day-to-day businesses.
More banks should consider how open banking can maximise their digital capabilities and create a greater range of services for customers to enjoy. Such offerings could be tailored according to each bank and their particular customer audience. For instance, banks could offer everyday services for most users, such as insurance for individuals or business management tools for business accounts. Alternatively, banks could offer more exclusive and specialised services for high net worth individuals to meet their specific needs, such as art appraisal and investment management.
The idea that a firm can expand its offering into new verticals is hardly new. Many of the world’s largest tech companies, such as Apple and Amazon, already offer diverse products including hardware, software, entertainment and cloud services. They are able to do this thanks to the vast quantities of data they have gathered, which provide invaluable insights into consumer behaviour and demand. Banks are in prime position to follow the example of these top tier tech companies thanks to their monopoly on key financial data.
Disruptors vs incumbents
The business model described above is already being adopted by numerous challenger banks. These firms have led the innovative charge thus far, thanks largely to their agility afforded by their smaller size. Indeed, some fintech banks already provide a range of non-banking services to their customers. Revolut, for instance, offers users several types of travel insurance as well as access to airport lounges as part of its premium service for a monthly subscription.
These offerings are not a sign that the challenger banks are about to topple the large incumbents. Rather, these disruptors have always flagged the gaps in the market that larger institutions have been too slow to fill. It is now up to the established banks to learn from their example.
While challenger banks may have a first-mover advantage for these services, the incumbents have two key advantages: capital and credibility. Firstly, the top banks have enough cash to fund this overhaul of their business models. While the challengers have been able to afford to do so in recent years, they lack the reserves to tide them over during economic downturns such as the current pandemic.
Secondly, even though challenger banks are perceived as more convenient and are less vilified than traditional banks, the public still trusts the latter. Many of these large banks can point to their extended histories and long-term investment success – accolades young challengers simply cannot match. In short, people don’t have to like their bank to trust them with their cash and their data. These two advantages strongly suggest that large banks are better positioned to take advantage of the open banking business model in the long term, despite being slower to adopt and adapt.
All this opportunity is within reach. We already have the technical capabilities for data sharing, and the regulatory framework is not insurmountable. Rather, the key for this evolution of the sector lies in banks’ appetite for risk and willingness to reinvent their business model.
Banks need to take a leap of faith and leave behind the business paradigm to which they’ve become accustomed. They should embrace transparency, run towards regulation and take advantage of opportunities to invest in these areas or collaborate with outside technology firms. Only then will banks be able to make the most of their data assets, creating value for the customer and further strengthening the relationship.
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