By Kyle Ferguson, CEO Fraedom
In order to capitalise fully on the opportunities that lie within the rapidly-expanding commercial banking sector, banks need to get a much more comprehensive picture of and insight into their client’s purchasing patterns and trends.
By embracing client data in this way, banks can start to benefit from tracking parameters such as ‘Spend Per Account’ (SPA) and ‘Average Transaction Value’ (ATV) enabling them to create an in-depth ‘DNA’ of each client. This in turn enables them to start to identify potential commercial card opportunities and ultimately maximise the return on investment they can extract from them and to begin to identify and solve any underlying issues such as high delinquency rates.
Moving up a Level
Of course, banks already recognise that offering commercial cards to their clients is a valuable service. By making the payment process easier and offering added value such as improvements to working capital, CFOs can see the clear benefits. For banks, it means a larger share of expenditure flowing through their service rather than via invoicing and as a result, increased revenues.
There is more potential in commercial card schemes than simple end user convenience, however. Provider banks need to understand that by enhancing the technology used to support these schemes both from the end user and back end perspectives, they can help to drive up revenues.
Currently, many banks are falling short in this respect. Even larger institutions that may have commercial card programmes worth billions of pounds annually often do not have any systems in place to analyse overall spend per account and still less which of their customers are growing faster or future potential to grow revenues from specific programmes.
There are a raft of reasons why they should look at putting technology in place to get a sharper insight into their commercial card programmes and start driving up value for themselves and their customers.
Brand Trust and Customer Analytics
Transparency is always highly valued, yet in reality remains rare in the world of commercial finance. CFOs struggle to manage the constant stream of reporting from different sources that is time-consuming and sometimes contradictory.
Providers that can clearly dashboard spending so CFOs can see at-a-glance where spend is happening, identify trends and dial up or down approval controls deliver transparency and trust where it is most required. Payments automation and the ability to capture all spend types, not just card-based, makes financial tracking easier and more efficient, finding sources of non-compliant spend (leakage) and enabling financial directors to act quickly.
Even beyond this focus on the brand, banks have the potential to leverage enhanced technology to underpin their commercial card offerings and to use that to drive critically important customer analytics.
Key metrics for a bank to track in order to improve card delivery and performance in this area while also enhancing client engagement include spend per account, average transaction value, operational costs and profitability.
A higher SPA is likely to mean improved profitability and ROI for the issuer, greater client satisfaction with the product and better client references. Higher average transaction value (ATV) scores generally result in greater profitability for the issuer. Moreover, tracking operational costs helps identify controllable costs which can be rapidly minimised without impacting service levels while monitoring profitability helps to pinpoint immediate opportunities to extend the surplus of revenue over costs.
Added to this, the technology also offers the opportunity to track further metrics from delinquency rates which if kept low offer the potential to increase issuer profitability and end user ROI to client retention which if kept high will substantially reduce costs and increase the net present value of
accounts booked. Other key metrics which can be tracked to drive benefits for the bank and its clients alike include end user cardholder perception and client perception of the banking relationship.
Finding a Focus
Taken together, analysis of these metrics will help banks to understand where greater marketing effort is needed and also whether or not the products that the customer is currently using are fit for purpose. Beyond this, by being able to assess and segment the customer portfolio, marketers can prioritise products and manage incentives to keep growing their existing customer base and share of budget.
Technology in and of itself is not a sales point for any client or commercial card provider. However, the associated benefits from delivering convenience, analytics, speed and efficiency all combine to improve client retention and their overall share of wallet.
Great experiences are as important in the B2B environment as they are in B2C sectors. If a product is easy to use and provides added value, customers are far less tempted by change. Card owners see their costs of client acquisition fall and lifetime value increase. Payments technology has the ability to deliver strong revenue growth for issuers, even within the context of budgetary constraints.
European shares end higher on strong earnings, positive data
By Sagarika Jaisinghani and Ambar Warrick
(Reuters) – Euro zone shares rose on Friday, marking a third week of gains, as data showed factory activity in February jumped to a three-year high, while upbeat quarterly earnings boosted confidence in a broader economic recovery.
The euro zone index was up 0.9%, with strong earnings from companies such as Acciona and Hermes brewing some optimism over an eventual economic recovery.
The pan-European STOXX 600 index rose 0.5%, as regional factory activity was seen reaching a three-year high on strong demand for manufactured goods at home and overseas.
Another reading showed the euro zone’s current account surplus widened in December on a rise in trade surplus and a narrower deficit in secondary income.
Still, the STOXX 600 marked small gains for the week, having dropped for the past three sessions as investor concern grew over rising inflation and a rocky COVID-19 vaccine rollout.
But basic resources stocks outpaced their peers this week with a 7% jump, as improving industrial activity across the globe drove up commodity prices.
“This week’s slightly adverse price action has all the hallmarks of a loss of momentum temporarily and not a structural turn,” said Jeffrey Halley, senior market analyst at OANDA.
“There is not a major central bank in the world thinking about taking their foot off the monetary spigot, except perhaps China. (Markets) will remain awash in zero percent central bank money through all of 2021 (and) a lot of that will head to the equity market.”
Minutes of the European Central Bank’s January meeting, released on Thursday, showed policymakers expressed fresh concerns over the euro’s strength but appeared relaxed over the recent rise in government bond yields.
The bank’s relaxed stance was justified by the euro zone economy requiring continued monetary and fiscal support, as evidenced by a contraction in the bloc’s dominant services industry in February.
The STOXX 600 has rebounded more than 50% since crashing to multi-year lows in March 2020, with hopes of a global economic rebound this year sparking demand for sectors such as energy, mining, banks and industrial goods.
London’s FTSE 100 lagged regional bourses on Friday due to a slump in January retail sales and as the pound jumped to its highest against the dollar in nearly three years. [.L] [GBP/]
French carmaker Renault tumbled more than 4% after posting a record annual loss of 8 billion euros ($9.68 billion), while food group Danone and German insurer Allianz rose following upbeat trading forecasts.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)
ECB plans closer scrutiny of bank boards
FRANKFURT (Reuters) – The European Central Bank plans to increase scrutiny of bank board directors and will take look more closely at diversity within management bodies, ECB supervisor Edouard Fernandez-Bollo said on Friday.
The ECB already examines the suitability of board candidates in a so-called fit and proper assessment, but rules across the 19 euro zone members vary, so the quality of these checks can be inconsistent.
The ECB plans to ask banks to undertake a suitability assessment before making appointments, and they will put greater emphasis on the candidates’ previous positions and the bank’s specific needs, Fernandez-Bollo said in a speech.
The supervisor also plans more detailed rules on how it will reassess board members once new information emerges, particularly in case of breaches related to anti-money laundering and financing of terrorism, Fernandez-Bollo added.
Fernandez-Bollo did not talk about enforcing diversity quotas, but he argued that diversity, including diversity in gender, backgrounds and experiences, improves efficiency and was thus crucial.
“Supervisors will consider furthermore all of the diversity-related aspects that are most relevant to enhancing the individual and collective leadership of boards,” he said.
“Diversity within a management body is therefore crucial … there is a lot of room for improvement in this area in European banks,” he said.
(Reporting by Balazs Koranyi, editing by Larry King)
Where are we with Open Banking, and should we be going further?
By Mitchel Lenson, Non-Executive Chairman, Exizent
Open Banking has the power to revolutionise the way we manage our money, but most (65%) consumers are still not aware of it, while many financial institutions continue to treat it as an obligation rather than an opportunity.
For Open Banking to truly reach its potential, consumers need to have more trust in its benefits. However, this will only happen if banks and other financial institutions start to embrace it, rather than simply accept it.
Covid-19 has proven to banks that digital banking and open finance innovation is not simply a ‘nice to have’. It is vital for their own survival. With so many challenger banks now coming into the market, many of whom have entirely digital models and therefore invest heavily in technology, banks are starting to become aware that if they don’t embrace it, they’ll get left behind.
So, fuelled by a mixture of competition and Covid-19, banks are starting to realise that Open Banking is not about giving away valuable data, but it is about collaborating with third party fintechs to explore the endless opportunities data sharing can bring – to all sides.
By making open finance easier for developers, banks can not only save time and money by improving their own services but help create useful solutions that add real value for their customers.
Open Banking for all?
There is one, yet untapped area of consumer finance that could be immeasurably improved by Open Banking, and that is estate administration.
Recent research from Which? found that many executors contend with delays, errors and poor knowledge from their banks during the probate process. Our own research shows that most legal professionals admit the process does not work as it should, and the time it takes to complete probate is unacceptable.
Like the Which? survey, we found that the main issue is the administration involved, with most legal professionals saying that the time it takes for financial institutions to get back to them with the information they need is the main cause of delays.
Given that the system is not working for consumers, something clearly needs to be done. The good news is that the technology and data is already available – we just need to harness it to create a better system.
That is why we are developing the first ever platform to connect executors, legal professionals, and financial institutions to create a better, quicker, and more secure probate experience for everyone.
Our first release of the platform – a bespoke cloud-based solution to enable legal services firms to integrate directly with financial institutions making information gathering and processing more straightforward – was released in 2020. We are now building on that foundation to accelerate our development work with financial institutions to deliver additional value for all sides.
We also see huge potential in working with banks to utilise the digital financial infrastructure, powered by Open Banking, to improve things even further. But there is one, fairly sizeable issue – currently, Open Banking consent ceases at the point of death.
Is it time for legislative change?
Open Banking is not as open as is should be for those who can give consent, so we are certainly some way off from Open Banking for the deceased. However, the more that banks acknowledge Open Banking and its potential and are prepared to collaborate with third party fintechs to develop better experiences for consumers, the more likely we are to get to a point where we can tap into that potential to improve things for the bereaved.
Many of the problems – highlighted by Which? – that consumers face when managing someone’s estate could be reduced significantly if open finance continued to apply to the deceased.
Open Banking provides a huge opportunity to speed-up and reduce friction for loved ones faced at some of the hardest moments of their lives, and there is a strong argument here for the current position to be reviewed to enable better access to a deceased person’s assets.
With our current platform, we are showing how technology is playing an incredibly significant role in dealing with the complex, tangled process that is probate and the potential of open finance in radically enhancing what we are already doing cannot be understated.
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