Sana Carlton, Managing Director,Banking and Finance Sector at Millward Brown
The financial services providers growing their value in the tough global market are not necessarily the ones telling consumers how trustworthy and relevant they are. They’re the brands putting the customer experience at the centre of everything they do.
Consumers have different expectations of financial brands today, and interact with them in new ways, in particular the millennial generation. Raised in a digital world, they’re open to making payments through social networks or buying a loan from a new name found on an online comparison site. They want convenience, but they also want a relationship with the company that provides their current account or payment service. This has made the brand experience – the way a provider delivers its services and engages its customers –as important as what it offers.
Millward Brown’s BrandZ research shows that growth in brand value is driven by consumer perceptions that a brand is innovating in ways that will improve their lives. Consumers need to feel and see the innovation in every aspect of the brand experience; regardless of whether they’re interacting with it on the high street, online or on a mobile device. When they do, this builds brand love. ‘Love’ isn’t a word traditionally used much in the context of finance, but providers need to start thinking in this way because this is what builds predisposition to buy the service or product.
So far, established banks and financial services providers are behind the curve on creating the convenient, secure, and straightforward experience consumers demand. It’s the disruptors – new challenger banks such as Mondo in the UK, fintech start-ups, and brands from other sectors such as Apple, Tesco and Amazon – that are blazing the trail.
They’re using technology to create meaningful functionality that appeals to and builds stronger relationships with target audiences. This could be by improving existing products, launching a savings account with a higher interest rate for instance, or providing new credit options such as micro lending.
The provision of innovative, seamless mobile banking services plays a critical part in enhancing the customer experience. Online and mobile platforms are shaking things up in this area, particularly with the simpler and more straightforward transactions that used to be handled by traditional banks.
PayPal, for instance, has made the purchase process as easy as it could possibly be by eliminating the need for shoppers to input their card or bank details.In Africa, which lacked a solid banking infrastructure, telecoms companies have stepped in to offer mobile payment services and savings products. Retailer Alibaba’s AliPay is now one of the main ways people make purchases in China, where the difficulty of transacting business at traditional banks has also inspired social media providers to get in on the act. Internet portal Tencent has made it possible to send money through its popular WeChat messaging platform, for example.
Mainstream banks should aim to get in first with digital services and utilities before they’re ‘picked off’ by fintech companies. Regulations and licensing requirements may create a high barrier to entry for now, but this won’t keep the challengers at bay forever. Banks have an opportunity to leverage the vast amounts of customer data they hold to create highly relevant new products and services that meet consumers’ evolving needs.
Big data, big advantage
Millennials, who are less receptive to marketing, expect to be approached in a relevant and non-intrusive manner.Successful providers of financial services are harnessing big data and social media to personalise marketing based on consumers’ lifestyle changes or recent search.They use data analytics to understand what customers are looking for, and engage them with appropriate products, deals and communications at just the right time.
Retail and ecommerce brands are perfectly placed to do this – they have the rich data, and they have the infrastructure already in place to respond, sending targeted messages and ads to consumers based on their life stage. If someone is buying baby clothes online, for example, they could be offered life insurance or a car loan, which are often purchased around the same time as the arrival of a new baby.
One mainstream bank that excels in this area is South Africa’s Absa Bank, currently a division of Barclays Africa. It is using historical transactional data to drive a predictive service that alerts customers when they’re at risk of overdrawing their account, based on their specific habits and payment obligations, and offers personalised options such as speaking to an advisor. In the pilot almost a third of alerts sent resulted in product applications, while 60% of customers took action to better manage their finances.
Cultivate brand identity
Consumers have a lot of banking choice. Brands that can create a point of differentiation and develop a distinct ‘character’ will stand out amongst their rivals. To appeal to and cultivate the younger customers that are the key to future growth, a financial services provider must demonstrate through the experience it delivers that it understands and shares young customers’ aspirations and values, as well as hiring younger talent that they can relate to.
Fintech start-ups, which have the latest technology at their fingertips and the agility to respond fast to changing needs, often have the upper hand here. They feel exciting and innovative to work for, whereas banks’ reputation problems can hinder their ability to win the war for talent.
Traditional banks should respond to the challenge by replacing outdated infrastructure, gaining technology and creative expertise through the acquisition of fintech companies, and initiating programmes that match millennial goals and values.J.P. Morgan, for instance, allows young workers to spend a portion of their time helping non-profit organisations. In the UK, Barclays has developed its online LifeSkills resource to help young people gain the practical knowledge needed for success in the workplace.
To be chosen by the customera financial provider’s brand experience also needs to be relevant and consistent at a local level. Smaller local challengers are successfully taking market share from mainstream banks by providing the functionality and value that consumers seek. Proximity to their target audiences means they understand the market better, and can respond more quickly and in highly meaningful ways.
Identifying and embracing a local cause isan effective way of connecting with consumers. In response to increased urbanisation and poor public transport in Brazil, for example, the bank Itaú launched an integrated bicycle hire system that is available across the big cities, making everyday life easier for people who live there.Global financial brands must keep a close eye on local competitors; those that don’t will be left behind.
Currently, traditional financial services players are losing the battle for consumers’ love, and this has had an impact on their brand value: global banks lost 11% of their combined value over the last year, according to BrandZ data, and regional banks 12%.
Banks can hardly be blamed for their lack of agility. They’re under a great deal more scrutiny than their fintech, ecommerce, telecoms, retail and social media rivals, and are bogged down in a branch-based structure. Legacy infrastructure makes it difficult to take the technical leaps necessary to meet customers’ needs. Rather than feeling threatened, however, mainstream banks should grasp the opportunity to improve the customer experience by increasing their attention to brand building, and fully harnessing the customer data they hold.
Many are already making successful strides in the right direction. In the UK, Santander has successfully fought back against start-ups with a strategy that involves offering very relevant discounts to persuade people to switch accounts. RBC, Canada’s largest bank, has responded well to the disruptor challenge with the instruction of mobile banking services, including mobile wallets, that are used by two million customers each month.
Improving the brand experience is worth the effort. Alongside rebuilding trust and relevance with consumers, strong brands that people love deliver better value to shareholders. They’re also more resilient, able to sustain their value and reputation in the face of sector turbulence – whether that involves a crisis, disruption or a change in consumer behaviour. That’s something which should be a priority for every bank.
Robinhood plans confidential IPO filing as soon as March – Bloomberg News
(Reuters) – Online brokerage Robinhood, at the centre of this year’s retail trading frenzy, is planning to file confidentially for an initial public offering as soon as March, Bloomberg News reported late on Friday, citing sources.
The California-based brokerage has held talks in the past week with underwriters about moving forward with a filing within weeks, Bloomberg said.
Robinhood did not immediately respond to a request for comment.
Reuters reported last year that Robinhood has picked Goldman Sachs Group Inc to lead preparations for an initial public offering which could value it at more than $20 billion.
Robinhood was at the heart of a mania that gripped retail investors in late January following calls on Reddit thread WallStreetBets to trade certain stocks that were being heavily shorted by hedge funds.
The online brokerage tapped around $3.4 billion in funding after its finances were strained due to the massive trading in shares of companies such as GameStop Corp.
(Reporting by Ann Maria Shibu in Bengaluru; editing by Richard Pullin)
Analysis: How idled car factories super-charged a push for U.S. chip subsidies
By Stephen Nellis
(Reuters) – When President Joe Biden on Wednesday stood at a lectern holding a microchip and pledged to support $37 billion in federal subsidies for American semiconductor manufacturing, it marked a political breakthrough that happened much more quickly than industry insiders had expected.
For years, chip industry executives and U.S. government officials have been concerned about the slow drift of costly chip factories to Taiwan and Korea. While major American companies such as Qualcomm Inc and Nvidia Corp dominate their fields, they depend on factories abroad to build the chips they design.
As tensions with China heated up last year, U.S. lawmakers authorized manufacturing subsidies as part of an annual military spending bill due to concerns that depending on foreign factories for advanced chips posed national security risks. Yet funding for the subsidies was not guaranteed.
Then came the auto-chip crunch. Ford Motor Co said a lack of chips could slash a fifth of its first-quarter production and General Motors Co cut output across North America.
“It brings home very clearly the message that the semiconductor is really a critical component in a lot of the end products we take for granted,” said Mike Rosa, head of strategic and technical marketing for a group within semiconductor manufacturing toolmaker Applied Materials Inc that sells tools to automotive chip factories.
Within weeks, automakers joined chip companies calling for chip factory subsidies, and U.S. Senate Majority Leader Chuck Schumer and President Biden both pledged to fight for funding.
Industry backers now aim to be part of a package of legislation to counter China that Schumer hopes to bring to the Senate floor this spring. Still, all agree it will do little to solve the immediate auto-chip problem.
Headlines about idled car plants resonated with the public that had shrugged off abstract warnings in the past, said Jim Lewis, a senior fellow at the Center for Strategic and International Studies. Lawmakers, already worried that a promised infrastructure bill will not materialize this year, decided to push for quick solution.
“Nobody wants to be seen as soft on China. No one wants to tell the Ford workers in their district, ‘Sorry, can’t help,'” Lewis said. “It was one of those moments where everything aligned.”
The package includes matching funds for state and local chip-plant subsidies, a provision likely to heat up competition among states including Texas and Arizona to host big new chip plants that can cost as much as $20 billion.
The subsidies could benefit a factory in Arizona proposed by Taiwan Semiconductor Manufacturing Co and one in Texas eyed by Samsung Electronics Co Ltd, even though those factories would be geared toward high-end chips for smartphones and laptops, rather than simpler auto chips. And those factories would not come on line until 2023 or 2024, according to plans disclosed by the companies, the world’s two largest chip manufacturers.
In the longer term, a raft of U.S. companies are also poised to benefit. Any chipmakers that build factories will source many tools from American companies such as Applied, Lam Research Corp and KLA Corp.
Intel Corp, Micron Technology Inc and GlobalFoundries – which already have U.S. factory networks – will also likely benefit.
Smaller, specialty chip factories also could benefit.
“The recent chip shortage in the automotive industry has highlighted the need to strengthen the microelectronics supply chain in the U.S.,” said Thomas Sonderman, chief executive of SkyWater Technology, a Minnesota-based chipmaker that makes automotive and defense chips. “We believe that SkyWater is uniquely positioned due to our differentiated business model and status as a U.S.- owned and U.S.- operated pure play semiconductor contract manufacturer.”
Even with subsidies, the U.S. companies still must compete with low-cost Asian vendors over the long run, and the immediate auto chip troubles will probably persist.
Surya Iyer, a vice president at Minnesota-based Polar Semiconductor, which makes chips for automakers, said his factory is booked beyond capacity and has started to speed some orders up while slowing others down, to meet automakers’ needs as best it can.
“We are expecting this level of demand to continue at least for the next 12 months, maybe even longer,” he said.
(This story has been refiled to add attribution to quote in paragraph 9, add dropped words in paragraphs 10 and 17)
(Reporting by Stephen Nellis and Hyunjoo Jin in San Francisco and Alexandra Alper in Washington. Editing by Jonathan Weber and David Gregorio)
Atlantia disappointed with CDP bid for unit, continues talks
By Francesca Landini and Stephen Jewkes
MILAN (Reuters) – Italy’s Atlantia said on Friday an offer by a consortium of investors led by state lender CDP for its 88% stake in Autostrade per l’Italia fell short of the mark and asked its top managers to see if the bid could be sweetened.
“The offer falls below expectations,” the Italian infrastructure group said in a statement, adding it had mandated the chief executive and the chairman to assess “the potential for the necessary substantial improvements” to the bid.
Italian state lender CDP, together with co-investors Macquarie and Blackstone, has presented a proposal valuing all of Autostrade per l’Italia at 9.1 billion euros ($11 billion).
The consortium also requested Atlantia guarantee up to 700 million euros in potential damage claims and another roughly 800 million euros for a pending legal case, making the bid less attractive than previously expected.
One source said the consortium estimated overall pending legal claims against Autostrade at 3 billion to 4 billion euros, adding the 700 million euro cap did not mean the amount would be detracted from the offer price from the start.
Earlier on Friday Atlantia’s minority investors TCI and Spinecap had called on Atlantia’s board to reject the offer, saying it undervalued the asset.
“No deal is better than a bad deal, especially a bad deal and a wrong price,” TCI Advisory Services partner Jonathan Amouyal said in a emailed comment to Reuters.
TCI, which holds an indirect stake of around 10% in Atlantia, repeated that the value for 100% of Autostrade should be no less than 12.5 billion euros.
The board will hold a further meeting in order to take a final decision on the offer in due time, Atlantia said.
The negotiations between Atlantia and the CDP-led consortium are part of an effort to end a political dispute over Autostrade’s motorway concession triggered by the collapse of a motorway bridge run by the unit.
(GRAPHIC – Atlantia share performance: https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqggjdpx/image-1614331237501.png)
The bid expires on March 16, but the deadline could be extended in case Atlantia calls an extraordinary shareholders meeting (EGM) on the issue, according to one source with knowledge of the matter.
Shares in the group ended down 0,7%, after recovering some losses, as investors waited for the decision of the board.
Atlantia, which is controlled by the Benetton family, owns 88% of Autostrade, with Germany’s Allianz and funds DIF, EDF Invest and China’s Silk Road Fund holding the rest.
The group also kept open an alternative plan to demerge and sell its stake in Autostrade per l’Italia unit and called an EGM on March 29 to extend to end-July a deadline for offers for the demerged stake.
(Additional reporting by Stefano Bernabei, editing by Louise Heavens and Steve Orlofsky)
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