Near field communication (NFC) mobile payments are presenting banks with both an opportunity and a conundrum. Inexperienced as they are in the mobile space, banks are being challenged by digital players – such as Google, PayPal and Apple – for dominance in the mobile payments ecosystem. In this article, David Worthington Principal Consultant Payment & Chip Technology at Bell ID, discusses how banks can get ahead by seizing the mobile opportunity and managing their services internally.
As an introduction, conceptually a trusted service manager (TSM) acts as a middle-man; coordinating the technical and business relationships of multiple stakeholders – mobile network operators (MNOs) and service providers such as banks, ticketing agencies and other issuing authorities – to deliver and maintain services on mobile devices. The mobile NFC ecosystem already recognises the need for multiple TSMs to communicate with one another. Different players in this ecosystem require different TSM functionality in order to support their individual business focuses, be it as a mobile network operator (MNO), handset provider, a third party broker or as a service provider (SP) directly connecting to the ecosystem.
In the mobile NFC ecosystem there are both Root-TSMs – responsible for managing access and allocation of space and privileges on secure elements (SE) e.g. for an MNO – and SP-TSMs which provide application content to load on to the SE. In most markets this results in each TSM participating in multiple relationships with other TSMs. Service providers such as banks and transit operators can either implement their own SP-TSM capability or outsource to a third party SP-TSM.
The Banking Role
There are many reasons why banks are fundamental to the convergence of the mobile payments and services landscape, and why they should seriously consider becoming their own SP TSM.
1) Management of relationships and customer engagement
Finance is a highly competitive industry, so banks need to be in control of their relationships with partners and consumers in order to keep ahead of their competitors (traditional and emerging).
Not only do banks need to be in direct control of who they are working with, when and on what terms, but they also want to benefit from the data which consumers feedback. This level of information can assist product development in bringing new services to market which truly meet the needs of their existing and prospective customers. When a bank outsources its TSM services it can be confined to the role of payments processor, with little or no control over third party mobile product development and timescales. The bank is then limited to whatever customer market intelligence data it is willing to buy, and can be supplied by its TSM.
2) Flexibility, scalability and time to market
Being in full control of the system allows banks to adjust aspects of the offering immediately and efficiently, rather than having to liaise with their third party TSM provider and negotiate a renewed service level agreement. The ability to do this significantly reduces product time to market, allowing banks to react to the market and keep both partners and customers happy. New partnerships and products represent new revenue streams for banks. This increased income allows banks to invest in new service offerings, expanding their value proposition for new and existing customers – a cyclical growth process that is beneficial for all parties.
3) Simple IT integration and ownership
Where a bank already has, or plans to have, both a card business and mobile/internet banking services it doesn’t necessarily make sense to outsource the bridging activities for mobile NFC payments. Acting as its own SP TSM allows banks to simply integrate the new mobile technology with their own legacy systems and manage everything as one entity, streamlining processes and potentially reducing the resources required. Using an outsourced model could mean that additional, external (mobile) systems are running in parallel with existing internal (card) systems.
Security is at the core of any banking activity – the need to protect data in secure locations is fundamental. Replicating card/account information to be held and processed outside this remit would therefore need careful and assured management, as it involves additional costs and certification. Acting as its own SP TSM allows a bank to align the mobile technology with its existing proven security processes and add precautions to safeguard the information associated with its new mobile platform.
By managing their own mobile payment services, banks have the opportunity to quickly and easily expand and enrich their mobile offering. This is especially relevant for supporting affinity, cobranding and other relationships (such as retailer acquiring). For example, providing mobile loyalty and reward schemes may be important to both the partner relationship and the bank customer’s satisfaction and retention. This can also off-set the cost of infrastructure implementation and offer an additional source of revenue to the programme.
The TSM ecosystem is an increasingly complex space and will become even more intricate as new players join the fray and begin offering innovative services. Becoming an SP TSM will help banks to react quickly and efficiently to market and customer requirements: increasing the speed at which they can respond to potential partnerships and new revenue streams.
It is also important for banks to ensure that any solution they put in place is founded on robust industry standards to ensure that the technology is secure, interoperable and scalable. For example, EMVCo – the EMV standards body jointly owned by American Express, JCB, MasterCard and Visa, GlobalPlatform – the organisation which standardises the management of applications on secure chip technology, and GSMA – the organisation which represents the interests of mobile operators worldwide – all define standards for the mobile payments ecosystem. It is therefore important to use a neutral and flexible platform that will accommodate the changing needs of the banking business and any future regulatory updates.
UBX appoints new Chief Investment Officer
In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).
As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.
Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.
Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.
“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.
Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”
It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak
Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic
A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.
A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.
The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).
The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive
The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.
Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”
The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.
As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.
From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.
Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/
Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.
“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”
New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery
· Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs
· Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success
· Allica Bank has launched a programme of free workshops to expand on the findings and support business owners
Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.
The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were:
Rule 1: SMEs should regularly train staff
Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.
Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy.
Rule 2: SMEs need to focus on innovation and technology
Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities.
Rule 3: Small business must have a formal, long-term vision
Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision.
Rule 4: SMEs should broaden their customer reach and find new markets
Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success.
Rule 5: SMEs need to develop reinvestment plans
22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%).
Rule 6: SMEs should engage with local business organisations and networks
Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs).
Chris Weller, Chief Commercial Officer, Allica Bank, said:
“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.
“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.
“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.
“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”
The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.
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