- New research commissioned by the Current Account Switch Service (CASS) reveals that consumer awareness of CASS has remained high, and attitudes towards CASS and the simplicity of the switching process are generally positive.
- The research suggests that the impact of the coronavirus pandemic on switching bank accounts has led to more people feeling financially vulnerable.
- The research also suggests that financially vulnerable people and some SMEs think switching could be risky. These people and businesses may benefit from more positive support on how to switch accounts.
- 76% of consumers consider cash rewards to be an important factor for switching accounts.
Financially vulnerable1 consumers would benefit from more targeted information and support to overcome negative associations with switching, according to Frontier Economics research commissioned by the Current Account Switch Service.
The study of 1,000 respondents across the UK is the first major study into consumer attitudes to bank accounts since the pandemic. It reveals new insights into the factors and behaviours that impacted current account switching in 2020. It uses Implicit Association Testing (IAT) methodology to help identify the attitudes of key CASS priority groups (financially vulnerable people, 18-24s and SMEs) and how their attitudes to switching may have changed during the Coronavirus pandemic.
The research found several factors have had an impact on switching volumes. The strongest driver for switching is the prospect of receiving some type of switching benefit. 76% of consumers would be motivated to switch for a reward, and 70% would be motivated by a cashback offer. Consumers are also motivated by better interest rates (68% of consumers) and by better product deals (57% of consumers). Ease of switching and the prospect of better customer service are also important considerations for 57% of consumers.
The IAT research results also show the considerations consumers make when switching accounts. Trust in the new bank is important to just over half of consumers, while only 39% of consumers consider a recommendation from family or friends to be important in the decision to switch.
In addition, a significant proportion of financially vulnerable customers could identify more barriers to switching than others. People who are financially vulnerable are 7% more likely to fear that they could be rejected by a bank and 5% are more likely to worry about getting the same overdraft facility than other customers. These figures were even higher for regular overdraft users who were 9% more worried about being rejected and 18% more worried about getting the same overdraft.
The IAT techniques used in the study suggest that some micro businesses and SME’s and some people working in the gig economy felt less positive about switching. The research suggested that financially vulnerable customers are also more likely than other groups to feel less positive, with the research suggesting they associate switching with words such as ‘confusing’ and ‘complicated’. 43% of those who undertook IAT polling associated the word ‘stressful’ with switching current accounts, while 56% associated switching with the words ‘time consuming’, and 52% ‘hard work’. These results could be referring to choosing between current accounts as awareness of CASS has remained high during the pandemic, and attitudes towards CASS and the simplicity of the switching process is positive.
Maha El Dimachki, Chief Payments Officer of Pay.UK, owner and operator of the Current Account Switch Service, said: “The long-term impact of the COVID-19 pandemic could potentially lead to sustained higher levels of financial vulnerability for some time. It is vital those who could benefit from switching have access to information that allows them to fully understand the process. That is why we are committed to continue to raise awareness among this group.
“Our research partnership with Frontier Economics has generated a number of findings for the switching ecosystem to consider. It suggests that the whole current account ecosystem has a role to play in ensuring people can switch if they want to, when they want to. The Current Account Switch Service is committed to collaborate with current account providers and consumer representatives to facilitate the work needed to review and refresh the switching service.
“At the Current Account Switch Service, we will use the findings of this research to engage with participants, regulators and consumer bodies to help the ecosystem continue to meet the needs of consumers and businesses, particularly those who will benefit the most from the switch service.”
To mark the launch of the research, CASS convened a panel of expert to discuss the issues. Chaired by Chris Pond (Chair, Financial Inclusion Commission and independent Director of the Current Account Switch Service), the panel included Jo Ainsley (Senior Service Lines Manager, Pay.UK), Dougie Belmore (Head of Payments, Virgin Money), Joe Lane (Principal Policy Manager, Citizens Advice) and Phil Sneade (Associate Director, Frontier Economics). The panel discussed the impact of COVID-19 on consumer vulnerability and confidence when switching, what the current account market can learn from these findings, what products and services consumers will want to have greater access to in the future and the role of CASS in this rapidly evolving ecosystem.
Since launch 2013, over 6.7 million accounts have been switched and more than 100 million payments have been successfully redirected by the service. Over the course of the pandemic, CASS has seen a significant drop in the number of switches that have been conducted, most notably between March and April 2020, at the peak of initial lockdowns. Though recently these numbers have bounced back, as seen through its quarterly dashboards and this trend is predicted to continue.
Is MiFID II still fit for purpose in a post-COVID financial landscape?
By Martin Taylor, Deputy CEO and co-founder at Content Guru
January 2nd, 2021 was the third anniversary of the implementation of MiFID II, a legislative framework instituted by the European Union (EU) to regulate financial markets in the bloc and improve protections for investors. This second iteration of the Markets in Financial Instruments Directive includes a range of binding obligations for financial traders, including the need to record and store any/all external communications that could result in a trade, for a minimum of five years.
MiFID II is a complex piece of legislation to put it mildly and compliance requires a great deal of time and effort. Despite this, its ‘real-world’ value currently remains subject to debate. While the EU Regulator recently stated that rules around investment research and analysis had been a success, it has previously conceded aspects of MiFID II targeting marketing data costs have been less so. In a wider sense, industry professionals affected by the new legislation have extremely mixed feelings about its benefits and detriments, both to their work as individuals and to the financial sector as a whole.
However, one thing that is clear is the imposition of financial penalties associated with non-compliance to MiFID II is likely to increase significantly in the near future. Under the original MiFID legislation, many high-profile organisations, including Goldman Sachs International, received fines running into tens of millions of pounds for failing to report transactions in an accurate and timely fashion. Conversely, less than €2 million in fines were handed out under MiFID II in the whole of 2019. Many industry commentators attribute this low figure to a grace period for the new legislation, with the Financial Conduct Authority (FCA) giving firms some wiggle room as they acclimatise to it. But as this period ends, fines and penalties are expected to skyrocket.
Applying pre-COVID legislation in a post-COVID landscape
Of course, to say the financial landscape has changed somewhat in the last twelve months is a bit of an understatement, which makes adherence to MiFID II even harder than it was previously. In particular, the massive shift to home working has rapidly accelerated the adoption of new innovations and technologies aimed at making remote collaboration more effective, but not necessarily MiFID II compliant.
Organisations with well-established processes and methodologies have been forced to rapidly rethink their strategies. In many cases, the speed at which they’ve been able to achieve this has been extremely impressive, but it’s come at the expense of compliance. After all, MiFID II is applicable to any communication that may result in a trade. In a lockdown environment, where finance professionals are collaborating and screen sharing to make decisions, they are still operating under the compliance rules set out and their interactions should be recorded and stored. But how many organisations have actually put processes in place to meet these obligations as part of the ‘new normal’?
As the rollout of multiple COVID vaccines gets underway around the world, there’s growing hope of a return to more traditional working environments in the not-too-distant future. But with the popularity of home working leading to many organisations saying it’ll become a permanent fixture, where does that leave MiFID II compliance?
A complex compliance challenge
For compliance officers looking to shore up their organisation’s post-COVID remote work environment against MiFID II breaches, there are numerous concerns. For example, how can they ensure every pertinent conversation across numerous digital platforms, being used by hundreds of traders, is correctly managed and recorded? The issue can be broken down into two main categories. The first is the management of tools and services in question, and the second is management of the data being shared across them.
Technical complexity requires a proactive, technology-led response. Disjointed, reactive compliance is becoming increasingly unfeasible, given the depth and breadth of tools now being used. For instance, if trading professionals use Microsoft Teams, but their client prefers Skype, how can compliance officers ensure that each and every recording is properly maintained, regardless of which platform is used each time? The answer may lie in unified solutions, which provide a central platform to take advantage of these best-of-breed technologies and provides resources such as search-and-replay, e-discovery and end-to-end trade reconstruction across a diverse technical ecosystem. Unified solutions may allow firms to develop cost effective, enterprise-wide compliance and data management policies that are fit for purpose in the post-COVID landscape.
Effective data management and analytics will play pivotal role
One thing becoming increasingly clear is that the ability to manage and analyse datasets in their entirety, rather than relying on random manual sampling, will play a pivotal role in eliminating dangerous reporting gaps. Today’s analytics solutions and advanced speech-to-text technologies have already proven invaluable over the last ten months of restrictions and will continue to set the benchmark going forward. Tools such as universal search not only give compliance officers the visibility they need to do their jobs properly, they also help maintain effective standards across all relevant stakeholders.
However, such solutions have requirements of their own, particularly when it comes to robust data and storage. Firms must ensure that their systems utilise compliant data storage, that has sufficient capacity to retain all types of electronic communications data, including uncompressed stereo voice recordings, for at least five years after they are recorded, as stipulated by MiFID II.
The ability to comply with legislation such as MiFID II remains a key priority for every business within its scope. However, adhering to pre-COVID legislation in a post-COVID landscape is a lot easier said than done for many. Whether the creation of MiFID III will ultimately be required remains to be seen. Until then, it’s clear that successful compliance will rely on the effective implementation of technology-led solutions capable of overcoming the new barriers created by such a fundamental shift in work practices over the last 12 months.
FSS and India Post Payments Bank AePS Partnership Advances Financial Inclusion in India
New Delhi, January 12th,2020: FSS (Financial Software and Systems), a leading global payment processor and provider of integrated payment products, today announced partnering with India Post Payments Bank (IPPB) to promote financial inclusion among underserved and unbanked segments. As part of the collaboration, IPPB will use FSS’ Aadhaar Enabled Payment System (AePS) to deliver interoperable and affordable doorstep banking services to customers across India.
FSS’ AePS solution combines the low-cost structure of a branchless business model, digital distribution, and micro-targeting that lowers acquisition costs and improves reach. This strategic partnership offers significant opportunities to bring millions of unbanked customers into the financial mainstream. Currently, there are nearly 410 million Jan Dhan accounts in India. A primary reason for low usage of banking and payment services is the challenge of accessibility in rural areas and the cost of maintaining active accounts — including transaction and transport— outweigh the benefits. In rural and peri-urban areas, the average time to reach a banking access point potentially ranges between 1.5 and 5 hours, compared with the average of 30 minutes in urban areas.
Leveraging its vast network of over 136,000 post offices, and 300,000 postal workers, IPPB has been setup with the vision to build the most accessible, affordable, and trusted bank for the common man in India to deliver banking at the customer’s doorstep. With the launch of AePS services, IPPB now has the ability to serve all customer segments, including nearly 410 million Jan Dhan account holders, giving a fresh impetus to the inclusion of customers facing accessibility challenges in the traditional banking ecosystem.
Speaking on the tie-up, Mr.Krishnan Srinivasan, Global Chief Revenue Officer, FSS said, “We are proud to be IPPB’s technology partner in this monumental nation-building exercise. The collaboration is evidence of FSS’ deep payments technology expertise and commitment to bringing viable, market-leading innovations that promote financial deepening. FSS’ AePS solution combined with IPPB’s expansive last mile distribution reach empowers citizens of the country with a range of digital payment products and advance India’s vision towards less-cash economy.”
“Through the vast reach of Department of Posts network along with the advent of the interoperable payment systems to drive adoption, IPPB is uniquely positioned to offer a range of products and services to fulfil the financial needs of the unbanked and the underbanked at the last mile. Having launched AePS services, the Bank has become the single largest platform in the country for providing interoperable banking services to customers of any bank. The strategic partnership with FSS provides us with an opportunity to expand the portfolio of financial services and improve customer experience whilst maintaining operational efficiency, thus building a digitally inclusive society,” said Mr. J. Venkatramu, MD & CEO, India Post Payments Bank.
The infrastructure created by IPPB addresses the accessibility challenges faced by customers in the traditional banking ecosystem. It fulfils the Government’s objective of having an interoperable banking access point within 5 KM of any household and creating alternate accessibility for customers of any bank.
The operation of FSS’ AePS solution is based on agents performing transactions on behalf of customers using a tablet, micro-ATM or a POS device. The system is device agnostic and can accept transactions originating from any terminal. Customers of any bank can access their Aadhaar-linked bank account by simply using their fingerprint for cash withdrawal, balance enquiry and transfer of funds into an operating IPPB account, right at their doorstep. FSS’ AePS exposes APIs to third parties to develop an expansive services ecosystem and extend a broad suite of financial products and tools including micro-insurance, micro-savings, micro-finance, mutual fund investments, enabling the bank to further services adoption among low and moderate-income consumers.
FSS (Financial Software and Systems) is a leader in payments technology and transaction processing. FSS offers an integrated portfolio of software products, hosted payment services and software solutions built over 29+ years of experience. FSS, end-to-end payments products suite, powers retail delivery channels including ATM, POS, Internet and Mobile as well as critical back-end functions including cards management, reconciliation, settlement, merchant management and device monitoring. Headquartered in India, FSS services leading global banks, financial institutions, processors, central regulators and governments across North America, UK/Europe, Middle East, Africa and APAC. For more information visit www.fsstech.com.
About India Post Payments Bank
India Post Payments Bank (IPPB) has been established under the Department of Posts, Ministry of Communication with 100% equity owned by Government of India. IPPB was launched by the Hon’ble Prime Minister Shri Narendra Modi on September 1, 2018. The bank has been set up with the vision to build the most accessible, affordable and trusted bank for the common man in India. The fundamental mandate of IPPB is to remove barriers for the unbanked & underbanked and reach the last mile leveraging a network comprising 155,000 post offices (135,000 in rural areas) and 300,000 postal employees.
IPPB’s reach and its operating model is built on the key pillars of India Stack – enabling Paperless, Cashless and Presence-less banking in a simple and secure manner at the customers’ doorstep, through a CBS-integrated smartphone and biometric device. Leveraging frugal innovation and with a high focus on ease of banking for the masses, IPPB delivers simple and affordable banking solutions through intuitive interfaces available in 13 languages.
IPPB is committed to provide a fillip to a less cash economy and contribute to the vision of Digital India. India will prosper when every citizen will have equal opportunity to become financially secure and empowered. Our motto stands true – Every customer is important; every transaction is significant and every deposit is valuable.
Be Future-Ready: The Case for Payments as a Service (Paas)
By Barry Tarrant, Director, Product Solutions, Fiserv
Over the years, financial institutions have faced a myriad of changes in regulations, technology and customer expectations. Banks are now having to deal with the competing demands of maintenance and compliance on the one hand, and the need to innovate and deliver value-added services on the other. The balance of effort is increasingly consumed by the former with the share of investment in innovation and value generation being squeezed.
COVID-19 has changed customer behaviour, which will accelerate the need for more digital innovation, adding further to the demand on technology resources that are already stretched to the limit. While future investment plans may remain uncertain, banks need to consider several factors for their technology strategy, such as efficiency, where to invest and how to reduce capital expenditure.
It is apparent that the traditional approach to implementing and updating technology is no longer sustainable in the long-term.
The true cost of outdated technology
Maintaining technology has always been a challenge. What makes it more important now than ever is that innovation expectations have become far greater and exist on multiple simultaneous fronts. Today, there is more demand for product innovation, alongside the need to deliver consistently across multiple channels. On top of this, banks are facing structural changes, such as the convergence of payments.
Faced with this combination of imperatives, many banks are finding that continuing to maintain their payments technology in-house is no longer the most viable option.
Banks that persist with existing in-house infrastructures are in many cases spending large sums just to keep up, with little left for innovation. This can put them at a distinct disadvantage in today’s digital environment, where challenger banks and fintechs are fully embracing tools like the cloud to optimise operations while delivering truly transformational customer experiences.
Maintaining technology can be quite costly, and leveraging shared payment innovation can result in notable cost savings. Additionally, there are savings to be had in the areas of capital costs, opportunity costs, regulatory or payment scheme compliance costs, and the inevitable one-off costs from technology or infrastructure upgrades.
And as the options available for customers to initiate payments across card and non-card payment rails increase, this will drive a convergence of the technology that supports the processing of those payments, further increasing the demand for change.
In this environment, migrating to an alternative technology strategy, such as PaaS, can be a strategic and cost-effective decision.
One solution to mitigate the risks and costs associated with maintaining technology is to outsource payments activity to a PaaS provider. The most obvious advantage here is cost reduction. However, there are many other positive and significant financial benefits that can be realised in terms of reduced capital expenses and the associated effects on balance sheet and free cash flow. This is particularly important in the current environment as capital investment comes under even more scrutiny.
Running a robust platform is a PaaS provider’s primary business, whereas for a bank it is just one of the many areas in which it has to invest. A PaaS provider is compelled to continually reinvest to ensure their technology never stands still long enough to become outdated, while also recruiting high-calibre personnel to support and advance it.
Geographical scale can also add value and increase opportunities for innovation. A PaaS provider with clients around the world sees and delivers innovation globally, which can be redeployed elsewhere rapidly and at a lower cost than custom development. Also, a global processing network can serve as a worldwide payments intelligence network, detecting trends, such as new payment types, consumer payment behaviour and cyberthreats.
One further consideration is how payments have become increasingly commoditised in recent years. As traditional revenue streams from payments have declined, it makes even less financial sense to retain payment processing in-house. By adopting PaaS and benefiting from the associated cost savings, retained payment margins can be maximised, simultaneously freeing up resources that can be diverted to innovation and value-added activities, such as enhancing customer experience and building the franchise.
Debunking the myths
Despite the compelling business case for banks to adopt PaaS, some remain reluctant to do so because of various myths. One example is the belief that outsourcing data is inherently risky. The reality is, in fact, the opposite. PaaS providers have the scale, resources and procedures to address and invest in key priorities – for example, cybersecurity. Keeping things in-house can actually create greater data security risk if resource constraints are an issue.
Budgetary considerations aside, experience and specialist tools are also major points of difference here. A typical bank IT manager might experience two or three major transition projects in their entire career. In contrast, teams at a PaaS provider collectively will have experience successfully delivering many major transformation projects, and will have also developed a whole range of specialised implementation adapters and toolkits that are continually enhanced and expanded.
Be more agile and tactical
When technology becomes outdated it can easily go from an asset to a liability. While COVID-19 has emphasised this reality for some, truly appreciating it requires a comprehensive assessment of existing technology and its long-term impact on business. Outsourcing through PaaS has a wealth of benefits that can radically transform this situation. Financial institutions can become more agile and tactical so they can continue to innovate and provide services that customers demand while differentiating themselves from the competition.
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