By Clayton Weir, Co-Founder, Product & Strategy, FISPAN
During the first two quarters of 2020, the pandemic has driven the rapid digitization of banking and business operations. But, in so much as it’s been a catalyst for this change, the pandemic has also put a magnifying glass over the economy and the ability of financial institutions and services to evolve, to not only meet, but predict, customer needs and wants.
According to Deloitte, Millennials and Generation Z now make up more than half the world’s population and, together, account for most of the global workforce. The oldest segment of the millennial generation are now entering their 40s and hold positions like CEO, CFO, and Directors of Finance, making them massively influential in the selection of their business banking or treasury banking partners. In fact, the World Fintech Report 2020 recently reported that 48% of Millennials are likely to switch banks in the next 12 months, in pursuit of easier-to-use digital services. While this need has been exacerbated by the pandemic and the rush toward digitization, as the digitally native Gen-Zs gear up to enter the workforce en masse, it remains clear; banks who forgo the integration of innovative, technology-driven, digital financial services will be overlooked by the tech-savvy DIY-ers of this next generation.
Entrepreneurship on the Rise
Just as the Global Financial Crisis of 2008 shaped the experiences and career paths of Millenials, the COVID-19 pandemic will alter the early careers, financial lives, and decisions of Generation Z professionals. According to a recent estimate, 54% percent of Gen-Zs plan to pursue entrepreneurship, while over 15% of people ages 18-24 have already actively engaged in starting a business in the US. Some of these individuals will be absorbed by the gig economy as it transforms the service industry, but many more will go on to be the entrepreneurs of tomorrow, and the high-net-worth retail customers and large business customers of the banks. Technology companies have long since recognized this pending shift and have adapted their services to begin capturing value from this kind of portfolio effect. Amazon, for example, makes it free and easy for new developers to build an app on Amazon Web Services (AWS); for every 100 apps built, one will become a massive cash generator for AWS over time.
Having the foresight to recognize the opportunity this next generation holds, and playing the long game with these young entrepreneurs will be vital for the longevity of financial institutions.The impacts of the global pandemic will only serve to accelerate the rise of entrepreneurship, as entrants to the job market face the reality of a job market experiencing record levels of unemployment.
Digital Experiences Matter. Small Business Banking Matters.
Consider the life experience of a Gen-Z person entering a professional role today; they may have worked at McDonalds in high school getting paid instantly on their debit card at the end of every shift worked, they may have driven for Uber in college getting paid at the end of every ride. Their babysitting jobs might have been paid via Zelle or Venmo at the door. Moving into a world where you get paid every two weeks, or you pay most of your vendors by mailing checks will seem foreign and byzantine by comparison. This generation is less worried about risk, less afraid of technology, and more focused on convenience than any other generation; these attitudes will drive their expectations for an effortless banking experience. Unfortunately, these expectations are also lightyears ahead of the tools that financial institutions offer to their corporate and small business clients today. This gap is one that my team is dedicated to closing as we focus our efforts on helping banks to better connect with their corporate clients to provide seamless, digitized business operations. By enabling banks to integrate directly into their clients’ ERP and accounting software, FISPAN allows banks to anticipate and surpass the needs of their business customers to deliver differentiated, personalized, customer-centric bank experiences built on a foundation of operational context and user habits.
Cornerstone advisors and Autobooks released research early this year highlighting the magnitude of the small business opportunity. American small businesses spend near $530 billion on accounting banking and payment services, and that likely doesn’t account for the growth in the overall segment or the creation of brand-new services for the bank. By focusing on small business service offerings, banks can grow existing and new small business deposits, and increase non-interest fee revenue.
What Can Banks Do?
The first step is simple; acknowledge that today’s financial services are under-serving and, in some cases, neglecting to account for the digital experiences and preferences of the Millennial and Gen-Z small and medium-sized enterprise (SME) and corporate clients in your portfolio. The pressure to adapt financial services to better serve incoming generations is not new but, in today’s economic climate, banks cannot afford to ignore the call for digital innovation and integrated services. Once you have reached this realization, then you can start to make a plan.
Next, use the right tool for the right job. Some tasks are best carried out at the branch, whereas others will be better suited to remote options, like mobile banking and leveraging the technology around us, including smart watches. Be diligent about not having every feature built into every platform but rather, the right features that work best in each context.
Specialize around verticals. There are many great examples in the market of vertical-specific B2B banks. Some interesting examples include:
- Shopify Balance
- Brex Business Card issued by Emigrant Bank
- Stripe Capital Loans issued by Celtic Bank
Think about where businesses live digitally. Organizations today tend to use a number of different software-as-a-service (SAAS) tools to run their businesses. Each of those will typically have its own partner ecosystem and will provide an opportunity for banks to participate and engage. Research the ones where your businesses live with the same care you might take when approaching the opening of a new branch location.
Partnerships are critical. You cannot do it alone and that is where partnerships with your legacy vendors and financial technology partners come in handy. These will likely compliment the segment or business application that you might not have even thought of. Financial technology acts as your expert in each segment, is your trusted partner, and can take on the technology burden for you for a fraction of the cost and time it would take to try to take this on in-house.
Lastly, experiment, fail fast and grow. You can’t know what works without trying it first, that’s how innovation works and will be the key to not only retaining, but attracting the wave of Gen-Z corporate clients and entrepreneurs.
NextGen Communications – the future of customer experience
By Andrew Beatty, Head of Global Next Generation Banking at FIS
As software development increasingly resembles push updates in services, how can financial institutions best take advantage of their investments? The answer is leveraging today’s technologies to empower institutions to elevate their customer experience with personalised and integrated communications.
Long a staple of the British market, digital banks are expanding worldwide. The pandemic played to the strengths of these organisations. With branches closed or restricted, the accessibility and flexibility of these banks were major assets.
To better understand just why digital banks succeed, we need to look at their operating models. Using Software as a Service (SaaS) and Platform as a Service (PaaS) operating models rather than more traditional and slower alternatives allows them to supercharge development.
These new technologies can elevate customer experience (CX), with a specific focus on customer communications – an area often neglected in favour of purely aesthetic upgrades to flashy-looking front-end systems.
Every minute of every day, institutions globally generate 18 million texts, 188 million emails, 511,000 tweets, 232 VoIP calls and use 4.4 million GB of internet data. This colossal amount makes it difficult to provide a consistent experience that meets ever-higher customer expectations across all communication interactions and devices. Banks need to be accessible and provide a seamless experience through any and all of the channels their customers prefer, be that Native App Push, email, SMS, print, social media, Call Centre or bots.
FIs typically lack an integrated experience. What’s needed is enabled by a consistent data schema and workflow foundation that elevates the communications experience. Customers may not know to specifically request these, but they will notice their absence. Fundamental to these capabilities are application programming interfaces (APIs) that enable banks to pick and choose best-of-breed technologies, allowing banks to focus on improving the CX and increasing Operational Efficiency and Governance.
Banks succeed on the backs of loyal customers. What inspires loyalty in customers is a banking relationship that includes both listening and speaking. Research shows that 63% of customers would consider switching banking providers if communications don’t meet their expectations. For customers who said that their banks did not proactively offer them personalised services, the customer satisfaction experience rate fell to 39%.
Research shows that more than 70% of CX leaders struggle to design projects that increase customer loyalty. Contrast this number with 75% of enterprises aiming to beat their competitors by offering the best digital consumer experience, and we can gain a sense of just how crucial communications are; a seamless CX is more important than ever to meet these goals.
These last few months have been a testing ground for banks old and new. Every email, every statement about actions taken during the pandemic is a chance to prove (or disprove) that a bank has a robust, customised communication solution. Integration across all interactions is critical.
Questions to ask
Here are six questions executives who want to improve CX at their banks need to ask when evaluating infrastructure improvements:
- How will capabilities evolve without requiring extensive development to support new data schemas, workflow, communication types and new channels?
- Will the new solution allow accelerated change management (business user-enabled) of all communications to meet internal and external demand, or will we be handcuffed to an internal or external software release for these updates?
- Will our middle/back office and call centre benefit from this solution by having the capability to send ad-hoc communications from a previously approved library?
- Will we have end-to-end tracking of all our as-delivered communications for all stakeholders (call centre, back office, etc.)?
- How is delivery remediation handled? (e., failed email delivery to SMS)
- Are all required delivery methods supported in one centralised platform?
Consider these questions before embarking on a major project. This should help ensure the selected solution results in improved Customer Experience, superior Operational Efficiency, and better Governance for your financial institution.
FIs must take advantage of emerging technologies and investment in core technologies by considering service options for all key elements of their CX. A robust data integration and workflow layer along with API integrations allow the different components of technology infrastructure to have seamless real-time integrations with third-party Customer Communication Management technologies. This can accelerate existing digital transformation initiatives and take full advantage of a modern core transformation investment – putting technology to work for FIs and their customers.
5 reasons to rebrand now
By David Langton, president of Langton Creative Group and co-author of Visual Marketing (Wiley Publishers).
- Ineffective Logo. How well does your name and image support your company’s mission? Organizations must change and evolve and sometimes that cool logo from the 80s no longer pulls its weight. Are you defending your logo just because it’s old? We often hear about how an old logo has equity with clients. But just because it is recognizable as your logo, doesn’t mean that this is how you should be known. What impression is the logo making on your behalf? Is it classic, or just old-fashioned? One healthcare client had an old logo with bad typography that was difficult to reproduce. But the CEO loved his logo and told me that the old company logo wasn’t going anywhere, “I expect that to be on my gravestone,” he told us. And that’s exactly where it should be.
- Non-descript.Is your company or service getting lost in the shuffle? If your logo looks just like everyone else’s logo, then it’s not doing its job. You must distinguish who you are in your marketplace. What are the special attributes that make your company, product of service the right solution? Find that spark of novelty that makes you special. The FedEx logo is famous for its hidden “arrow” that implies forward-motion. (They’re ones who move your packages quickly.) The UPS logo is a golden shield. (They’ll protect your packages.) AT&T has a globe. (They want to be seen as world-wide, more than just an American telephone and telegraph company.) Designer Tom Geismar says, “Symbols don’t make clear what you do; it makes it clear who you are.”
- Leadership Change.Whenever the top management at a company changes there is an opportunity to inject new energy into your messaging and redefine your mission. Capture the vision of their leadership. How does your brand reflect their goals for the new year? When General Re acquired New England Asset Management (NEAM) the new company name became “GR-NEAM.” When a new leadership team took over they decided to reclaim the “NEAM” name since it was easier to say and it gave them an opportunity to promote their new vision for the organization.
- Mergers/Acquisitions. Newly combined companies usually are in a state of chaos. Inside and outside the company people are searching for what the newly combined company will be about. This is the time to reevaluate how your brand presents who you are and what your values and strengths are in the new combined company. A report in Harvard Business Review states, “Because a merger’s success relies in part on preserving positive feelings among customers and employees, it’s smart to pursue a branding strategy that explicitly seeks to transfer equity from both merging companies to the new one.” When United and Continental Airlines merged they kept the Continental logo and aligned it with the United Name. Companies that use this “fusion” method actually exceeded their market return by 3%.
- Technology.Is your field changing while you are being left behind? This is an important time for companies to re-evaluate how their brand is presented in the marketplace. An upstart may be perceived as quicker and more technological than an established player. Can you show how important your experience and know-how is for tackling the challenges in your industry? Domino’s Pizza keeps reinventing itself with new tech to stay ahead of newly emerging rivals like UberEats who use apps to deliver food. Fast Company shows how as early as 1973 Domino’s was introducing a 30-minute guaranteed delivery then continued to reinvest in tech that utilizes voice recognition, GPS tracking and artificial intelligence to keep on top of tech revolution. Successful companies develop tech solutions that keep them ahead of the competition and then make sure their brand communications reflect their inventiveness.
Be the brand you ought to be.
Keep in mind that even if your brand experiences any of these telltale signs, don’t embark on a rebrand without making sure your business can back up the brand promise. The key to effective branding is that you must be what your brand says you are. If you are rebranding to be more technological, then you must become more tech-savvy. Just rebranding yourself without improving your services and really redefining who you are is not going to be effective in the long run.
The key to a successful rebrand is in identifying a core story that expresses the brand’s connection to its audience. Why are you important in the eyes of your target customers? And how do you tell that story? The re-brand launch is just as important as the logo artwork and the naming of the organization.
More than regulation – how PSD2 will be a key driving force for an Open Banking future
By Ralf Ohlhausen Executive Advisor, at PPRO
Whilst initially seen as simply a regulation exercise, the second Payment Service Directive, also known as PSD2, has been a key driving force behind Open Banking, an initiative that presents a hopeful vision for the future of the financial services sector. Thanks to the advancement of technology, the payments industry is currently seeing disruption to legacy banking systems, and a move towards a world of Open Data. With Open Banking, third-party providers (TPPs) can offer customers a wealth of new and automated services beyond their standard bank offerings, such as what products to buy or even advice on who to bank with.
PSD2 has been created to ensure that banks create mechanisms to enable third-party providers (TPPs) to work securely, reliably and rapidly with the bank’s services and data on behalf of and with the consent of their customers. PSD2 requires EU member banks to give authorised, i.e. licensed TPPs, access to customers’ accounts either via Application Programme Interfaces (APIs) or their user interfaces. It also mandates the use of Strong Customer Authentication (SCA), which requires multiple factors of authentication from a customer to initiate electronic payments and grant access to transaction data.
Despite the progress of PSD2, however, there are still challenges to overcome to achieve widespread adoption and to meet Open Banking objectives. So, what are the current roadblocks that European banks and financial services need to overcome to make Open Banking a beneficial reality for all?
Delays to API development
A crucial factor standing in the way of the acceleration towards Open Banking has been the delay to API development. These APIs are the technology that TPPs rely on to migrate their services and customer base to remain PSD2 compliant.
One of the contributing factors was that the RTS, which apply to PSD2, left room for too many different interpretations. This ambiguity caused banks to slip behind and delay the creation of their APIs. This delay hindered European TPPs in migrating their services without losing their customer base, particularly outside the UK, where there has been no regulatory extension and where the API framework is the least advanced.
A lack of awareness
Levels of awareness of the new regulations and changes to how customers access bank accounts and make online payments are very low among consumers and merchants. This leads to confusion and distrust of the authentication process in advance of the SCA roll-out. Moreover, because the majority of customers don’t know about Open Banking yet, they aren’t aware of the benefits. Without customer awareness and demand it may be very hard for TPPs to generate interest and uptake for their products.
Recently some regulators and banks, such as the Central Bank of Ireland, have made decent efforts to raise awareness of the changes with PSD2 campaigns. But it isn’t reaching the general public. When it does, it’s often because of scaremongering or fear, uncertainty and doubts around data security fuelled by incumbents to protect their business. This also isn’t the right way to approach the issue as it will lead to people being more afraid, rather than aware. Instead, it is the role of payment service providers to educate their customers about Open Banking requests or opportunities, to ensure the public are aware of the changes to payment authentication procedures when SCA comes into play and are empowered to move their data.
TPPs have a real vested interest in getting customers on board with Open Banking. They should build on their customer relationships to grow trust and raise levels of education around the changes. When customers sign up for a new service, TPPs need to tell them explicitly what to expect before they have to do it, plus what explicit consent is required to access their account information in exchange for value-added services.
Outweighing the challenges with opportunities
Although the introduction of the PSD2 regulation hasn’t been seamless for the banking and fintech industry, it is set to offer many benefits and advantages for the end-customer, and the financial industry. In fact, the regulation will create an integrated and frictionless European payments system, that will provide the customer with more choice, control and security over their finances than ever before.
One of PSD2’s primary goals is to provide greater protection against fraud for banking customers, who may have previously been open to risk through weak authentication and unregulated data-sharing practices. The new rules insist on enhanced security requirements, including the use of Strong Customer Authentication (SCA) to protect customers while making electronic payments.
Furthermore, TPPs unencumbered by legacy technology have long been able to innovate faster than traditional banks. Now, this regulation will provide regulated and secure access to customer data, allowing them to develop products even more quickly. The new regulation also promotes technology on a European level and encourages fintechs to do what they do best: innovate.
It’s also important to not forget that PSD2 regulation increases market competition allowing customers to choose a wider range of suppliers for their banking and payment services without having to switch their bank for that. The decoupling of banking services from the underlying account infrastructure will make it easier for customers to opt for the banking services that best fit their needs. It also increases the number of financial providers, services and products which customers will be able to choose from.
The future of Open Banking
The financial services landscape is becoming a firmly consumer-centric environment. Across the UK and Europe, we’ll continue to see the rollout of technologies that put control in the hands of consumers. Open Banking will be pivotal in its role, opening up new avenues and opportunities for both banks and payment service providers (PSPs).
Thanks to Open Banking, the ability to share data securely in the retail banking sector has led to a sophisticated ecosystem where the customer is in charge of their payments and choice of banking services. Over the next decade, we should expect to see the same level of transformation in our digital services and data sharing, leading to a complete rebalance of services where customers will be able to actively own their data and use it the way they like.
Europe is currently leading the Open Banking race, so the successful implementation of PSD2 and SCA is extremely important to maintain the lead and build a future with Open Finance and Open Data as well.
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