DIGITALISATION: GETTING THE PRICE RIGHT

Published

4 years ago

10/02/2017

By Wei Ke, GianlucaCorradi and Joanna White

Context

Consumers are rapidly adopting digital solutions across a full spectrum of services, forcing established players, including Retail banks, to innovate traditional revenue models and pricing. This presents new challenges and opportunities for them.

Firstly, customer preferences and behaviours are changing. Interactions and transactions are moving away from branches to more “convenient” channels, with customer expectation that these services should remain “for free”. Online is increasing and mobile banking use has doubled in two and a half years^[1].

Simon-Kucher’s annual Global Pricing Survey found that banks remain one of the more sceptical about digitalisation than other industries and are struggling to monetise innovation^[2]. However, a multi-channel offering has now become vital. Today 10% of basic banking products are primarily sold digitally, however it is estimated that in 5 years this will increase to 70%, making digital the predominant channel^[3].

Secondly, banks are facing challenging times as retail margins remain under pressure. The “lower-for-longer” rate environment is squeezing profits, with BoE rates expected to stay below 0.5% until 2021^[4]. Costs are driven by a high fixed base of retail branches, as well as increasingly stringent regulatory requirements around capital and liquidity. The global pricing survey conducted by Simon-Kucher& Partners found that 41% of companies from the banking industry were unable to improve their margins in 2016³. All the while, banks must heavily invest in technologies for digital capabilities.

Finally, competition is fierce as new market entrants develop digitally-driven, transparent and convenient value propositions that attack profitable banking areas such as card payments. These entrants are nimble and are not impeded by clunky legacy systems that reside at traditional banks. 68% of banking executives surveyed believe that the growth of FinTech will completely redefine the market in the next five to ten years^[5]. Many FinTech firms attribute their success to delivering an outstanding service in areas often neglected by major banks.

Successful solutions for banks

Currently, banks are mainly approaching digitalisation from a cost saving standpoint, but are overlooking the opportunity to increase revenues offered by this tectonic shift in customer behaviour.

To compensate for margin pressures, adapt to customer habits and fend off competitors, banks must therefore construct a value-based monetisation strategy around digitalisation.

How can banks do such thing? Banks must understand the true value of a digital proposition and adapt their pricing, communication, engagement and product strategies:

Price for value – The problem today is that banks see the cost advantages of digitalisation, e.g. lower in-branch servicing or reduced paper statements, and pass on the entire benefit to customers through a “cost-plus” approach. This results in lower prices that will ultimately cannibalise revenues as more customers shift to digital.The solution is for digitalisation to be priced for the value delivered in a smart and simple way. Value should be extracted by integrating prices for all value-add digital services. An example of this is Osper, a mobile banking app that allows younger people to manage money. They charge a £12 annual subscription fee for the provision of a prepaid debit card and a mobile banking app. Additional fees are charged for card replacements, mis-payments of annual fee, purchases abroad and ATM withdrawals^[6]. Here, features are priced separately to highlight the value delivered to customers. Monzo, a UK digital challenger bank also plans to use smart, targeted, mobile prompts to offer additional and convenient, chargeable products. This makes the point-of-purchase easy and “on-the-go”^[7]. Furthermore, if banks are worried that charging for digital can upset customers, a 2015 current account study by Simon-Kucher and Partners also found that customers are willing-to-pay for certain money management and peace-of-mind features1. The important thing is to choose the right pricing model – how you charge is a lot more important than how much!
Communicate the value – As previously outlined, UK customer expectation is for banking products and services e.g. current accounts, digital money management features to be provided for free. However it is critical that the value delivered through digital is communicated effectively to justify a price point, either now or in the future. Banks must be perceived as a solution provider instead of a product manufacturer. This will allow customers to focus on the value first, whilst creating comfort and transparency around price.What methods can banks use? By using a mix of behavioural techniques with a seamless digital interface, banks can guide customer decision-making, differentiate themselves away from competition and enhance initial uptake and cross-buying. A behavioural example includes the “endowment effect”^[8]. This found that when a customer is provided with an initial “all-in” product where features can be removed, versus a “basic” product where features can be added, the “all-in” option resulted in a higher number of features selected. Banks can use this to position a targeted customer solution with a price. Once willingness to pay has been measured, banks can provide a paid-for “all-in” digital solution, with the value of each feature clearly communicated. The customer can then customise their offer by removing unwanted features. This will result in higher digital revenues, as well as increasing the customer’s value perception of the offer.
Drive loyalty by engaging customers – Following on from the financial crisis, banks are still battling against customer distrust and disengagement, with strong competition existing to win over customers and establish a solid banking relationship. Current bank websites do not aid this problem, with many presenting complicated choice architecture, unappealing interfaces and confusing jargon. Although banks are making concerted efforts to improve, when compared with websites outside of banking they still have a long way to go. In addition, easy-to-use aggregators are commoditising banking products, further disintermediating the customer from the bank. Digital channels present a huge opportunity for banks to re-engage and delight customers and increase loyalty.In this respect, customer engagement can be achieved by understanding customer psychology. Gamification is one of the methods that banks can use. Not only does it drive customer engagement and loyalty, but it is also a way to organically transition customers away from the branch through increased mobile usage. An example of successfully executed gamification is Commonwealth Bank in Australia. They developed a property investing game to allow customers to “try before they buy”. This helped to educate customers on real-estate literacy and helped to generate a significant number of loans within one year of launch^[9].Furthermore, banks can use the digital platform to deepen customer relationships. The screenshot below highlights how a German regional bank has achieved this:This bank presents all customer needs in one place and rewards multiple product holdings to drive cross sales. Customers are incentivised and rewarded for completing the puzzle, while the three colours represent different levels (basic, middle and premium). This creates customer desire for a matching status and drives profitable product acquisition, whilst earning the loyalty of the customer. This increases the likelihood to capture all profitable financial needs throughout a customer’s life-cycle.
Expand the value proposition – In order to counteract the commoditisation of retail financial products banks must rethink of themselves as solution providers and “solvers of customers’ needs”. Nowadays customers face increased uncertainty about their future due to fast-paced technological and globalisation trends. Consequently, they have become more financially savvy and expect financial institutions to provide them the means for planning their future independently.In the recent years, the market has seen a proliferation of budgeting services, expenses aggregators and financial planning tools. In this respect, companies like Mint.com have been able to position themselves as leaders in this space far quicker than banks which are now slowly catching up with their roboadvisor solutions. Understanding customers’ needs beyond pure financial products, developing solutions accordingly and delivering them seamlessly through the digital channel will be key drivers of a successful monetisation strategy.

In summary

Digitalisation presents a huge opportunity for banks. However success is reliant on thoughtful consideration and execution. Pricing must be aligned to customer value and not costs, while communication must effectively focus on solutions and the value-delivered. Banks must also focus on strategies to engage customers and improve loyalty to really stand out from the ever-growing crowd. Finally, banks must to innovate their value proposition by stepping into their customers’ shoes and understanding their needs.

[1] Simon – Kucher& Partners – Current Account Study, 2015

[2] Simon – Kucher& Partners – Global Pricing Survey, 2016

[3] Citi GPS: Global Perspectives & Solutions, 2016

[4] Schroders/Bloomberg

[5] Simon – Kucher& Partners – Retail Banking Study, 2016

[6] Simon – Kucher& Partners desk research – Osper website

[7] Simon – Kucher& Partners desk research – Monzo website

[8] Levin et al. 2002

[9]Financialpost online

monetisation strategy

U.S. inauguration turns poet Amanda Gorman into best seller

Published

2 days ago

22/01/2021

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U.S. inauguration turns poet Amanda Gorman into best seller 1

WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.

Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.

“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.

Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.

While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.

“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”

Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.

“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.

“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”

The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.

“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.

A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.

She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.

Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.

“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.

Gorman’s books are both due out in September.

Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.

(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

Why brands harnessing the power of digital are winning in this evolving business landscape

Published

3 days ago

21/01/2021

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Why brands harnessing the power of digital are winning in this evolving business landscape 2

By Justin Pike, Founder and Chairman, MYPINPAD

Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.

As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.

As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?

Digital is an essential survival tool, and even more so in a COVID world

No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.

In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.

Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.

The challenges that rapid digital transformation brings to businesses

Justin Pike

Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.

Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.

The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.

As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.

But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.

A digital world post-COVID

Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.

There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.

Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.

Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.

Brexit responsible for food supply problems in Northern Ireland, Ireland says

Published

3 days ago

21/01/2021

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Brexit responsible for food supply problems in Northern Ireland, Ireland says 3

LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.

British ministers have sought to play down the disruption of Brexit in recent days.

“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.

The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.

(Reporting by Guy Faulconbridge; Editing by Tom Hogue)

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