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MAKING REWARDS WORK HARDER FOR YOUR RETAIL BANK

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James Berry

 James Berry, e-commerce director at Collinson Latitude

The digital revolution is transforming the way in which consumers interact with brands, and the retail banking sector is no exception to this. Over the past decade, the retail banking experience has evolved to deliver a more connected experience and these services have driven competitive differentiation for banks. Particularly for newer more agile entrants, like First Direct.

However, online banking, mobile banking and remote account management are now more often considered a necessity rather than a benefit for the ‘connected customer’ who expects a personalised service from their bank 24 hours a day, seven days a week.

So, the question is, as ‘connected’ banking becomes the norm, how can banks continue to differentiate themselves from the competition and maintain customer loyalty – whilst also keeping the business happy by protecting the bottom line?

James Berry, e-commerce director from reward and ancillary revenue programme provider Collinson Latitude shares his top tips for developing intelligent and personalised customer reward and redemption programmes for retail banks.

Understanding the potential of existing customers

Defining customer loyalty in the retail banking sector is difficult. Last year, a Santander report found that 58% of consumers keep the same current account for more than 10 years, while one in six keep the same account for more than 30 years – so does this make them brand loyal?

The simple answer is no. While at first glance these figures look promising, research has found that a high percentage of these ‘loyal’ customers will stay with a bank: out of habit (they have always been a customer of the bank); out of fear (they have a lot of money invested in the bank and switching is considered high risk); or because they are worried about the associated hassle of moving banks.

James Berry

James Berry

With the cost of keeping an existing customer at around 10% of the cost of acquiring a new customer, we believe that banks are missing a trick when it comes to unlocking the value (and financial gain) from their existing customer base.  By creating a reward and redemption programme that translates just one of these ‘loyal detractors’ –  staying with a bank out of habit/fear – into a ‘loyal promoter’, banks can gain £5,850 more profitability from that customer over their lifetime.

With more and more ‘new entrants’ like traditional retailers such as Marks and Spencer swooping in to offer value-add financial services to customers, how can high street banks keep up?

Step 1: By using big data for big benefit

Making sense of big data in an intelligent manner has transformed the meaning of ‘knowing your customer’ and when used effectively, big data enables organisations to understand consumer preference and predict consumer behaviour.

Data has, of course, always been an important part of any loyalty/reward program strategy, but big data allows you to profile customers, understand which ones are profitable and crucially, deliver programmes that are relevant and attainable for each and every individual. Reward programmes that are built on intelligent and responsive technology platforms aid this process by offering a 24/7 view on member behavior. This continuous insight means that the personal touch, is much more than just a one off as programmes can be continuously tweaked to make them more relevant and engaging to specific individuals.

Step 2: By tailoring rewards

Once you’ve generated all this insight, the next step is creating a portfolio of rewards that match the diversity and profile of your customer base. There is also now an ever increasing variance in terms of online savviness – from the novice, through to the digital native, giving ever more opportunities to tailor your programme, or, ever more opportunities to get it wrong.

It’s not just about selecting the right content and rewards for your members, it’s also about ensuring your customers can engage and make transactions in an environment and at a time that suits them.

Step 3: By creating beneficial partnerships

To achieve the breadth of rewards required for a relevant and engaging rewards programme, you need to create a supplier and partner base of retailers/ merchants that can support the different needs of your customers.

The good news is that the retailers and merchants want to participate, and why wouldn’t they?

  • Partners get access to often huge bases of customers, with huge opportunities to generate revenue and customer data
  • Members get a broader selection of relevant goods/ services and receive relevant, timely and exclusive offers
  • Banks/financial service organisations get happy and engaged customers and crucially – direct ROI on their loyalty programmes

Step 4: By driving long-term engagement

So now you’ve established your network of retail and merchant partners – you know exactly what your member base want and you’re seeing large numbers of customers transacting with your programme. It would be very easy to rest on your laurels, as after all, you now have engaged and happy customers. But it’s important not to let this huge investment go to waste.

The key to this is regular communication, in fact our research shows that when a programme member has completed their first initial transaction, they then become up to seven times more profitable to your business. If you’ve got the data insight right from the very beginning, and have put the right content in place, your communication will be timely, relevant and personalised and ultimately, add more revenue to your bottom line.

About Collinson Latitude

At Collinson Latitude, we unlock the value of your customer relationships by blending a unique combination of e-commerce expertise, content delivery and technology solutions.

You will benefit from increased customer engagement which drives increased revenue. Your customers will benefit from access to a wider choice of products and services.

Our track-record shows that we build successful long-term partnerships with our clients who include many leading global brands. These relationships are founded on strong, mutually beneficial performance-based commercial modelling that drives both financial targets and engagement levels.

Banking

Former BOJ executive calls for ‘genuine’ review of central bank stimulus

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Former BOJ executive calls for 'genuine' review of central bank stimulus 1

By Leika Kihara and Takahiko Wada

TOKYO (Reuters) – The Bank of Japan must abandon the view it can influence public perceptions with monetary policy and conduct a “genuine” review that takes a harder look at the rising cost of prolonged easing, said former central bank deputy governor Hirohide Yamaguchi.

The BOJ will conduct a review next month to make its monetary policy tools more sustainable, nodding to criticism its policy is crushing bond yields, drying up market liquidity and distorting stock prices.

But Yamaguchi, who was deputy governor when the BOJ first began buying exchange-traded funds (ETF) in 2010, said the costs of the bank’s stimulus programme have become too large to mitigate in the review in March.

“It’s unlikely the BOJ can come up with an outcome that has a substantial impact on the economy and markets,” he told Reuters in an interview on Monday.

“The review will probably be just a show of gesture that it’s doing ‘something’ to address the cost,” said Yamaguchi, who retains strong influence on incumbent policymakers.

Under its yield curve control (YCC) framework, the BOJ guides short-term interest rates towards -0.1% and 10-year bond yields to around 0%. It also buys risky assets such as ETFs to fire up inflation.

Ideas floated in the BOJ, which could be discussed at the review, include allowing the 10-year bond yield to deviate more from its 0% target, and making its ETF buying nimble so it can slow buying when stocks are booming.

Tolerating bigger yield swings, however, could undermine the feasibility of YCC by highlighting the limits of the BOJ’s control over the yield curve, Yamaguchi said.

“It’s hard to control long-term interest rates within a tight range for a long period of time,” he said, calling for an overhaul of YCC – something the BOJ rules out as an option.

Yamaguchi also called for halting the BOJ’s ETF purchases, as the bank could “end up using monetary policy to prop up stock prices” if the programme continues.

“At the very least, the BOJ must end as soon as it can the current situation where its ETF holdings keep accumulating.”

When the BOJ began buying ETFs in 2010, it used a pool of funds to ensure purchases remain at a manageable level, said Yamaguchi, who was involved in the decision.

That cautious approach was replaced by Governor Haruhiko Kuroda, Yamaguchi said, after he took over as head of the BOJ in 2013. Kuroda ramped up purchases dramatically with his “bazooka” stimulus deployed that year under a pledge to deploy all available means in a single blow. Eight years on, inflation remains distant from the BOJ’s 2% target.

“It’s impossible for the BOJ to guide public perceptions at its will,” Yamaguchi said. “It’s time now for the BOJ to conduct a ‘genuine’ policy review and use the findings to modify its policy framework.”

(Reporting by Leika Kihara and Takahiko Wada; Editing by Ana Nicolaci da Costa)

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Banking

Metro Bank expects defaults to rise as COVID-19 support measures fade out

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Metro Bank expects defaults to rise as COVID-19 support measures fade out 2

(Reuters) – Metro Bank posted a much bigger annual loss on Wednesday and said it expects defaults to rise through the year in line with its provisions as government support measures set in place due to the COVID-19 crisis are wound down.

The mid-sized company, part of a breed of challenger banks set up to take on the dominance of bigger and more conventional lenders in Britain, said underlying pretax loss was 271.8 million pounds ($385.58 million) for the 12 months ended Dec. 31 compared to 11.7 million pounds a year earlier.

“The pandemic has clearly impacted performance, leading to significant expected credit losses, but our transformation strategy is firmly on track and we have accelerated initiatives to shift our asset mix, bringing higher yield and improving net interest margin, as evidenced in the second half,” Chief Executive Officer Daniel Frumkin said.

Metro, which relieved some of the pressure on its capital levels last year by selling one of its portfolios to NatWest, estimated impact from the coronavirus pandemic to be 124 million pounds.

The bank, whose net interest margin fell to 1.22% from 1.51% in a low interest rate environment, said provisions to cover loan losses amounted to 126.7 million pounds at 2020-end, compared with 11.7 million pounds a year earlier.

The company said the increase in expected credit losses was driven by deteriorating macro-economic scenarios that have increased the probability of defaults.

($1 = 0.7049 pounds)

(Reporting by Muvija M in Bengaluru; Editing by Vinay Dwivedi)

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Banking

As We Get Back to the Future of Work, Banks Must Embrace WhatsApp

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Smarshop-ed –Banks need to embrace whatsApp

By Shaun Hurst, Technical Director, Smarsh

If you had told me a year ago that the world’s major financial services companies would all be operating almost entirely with a remote workforce, I would have broken out in a cold sweat.

Straight away my mind would have jumped to the severity of the compliance issues that such a move would involve. Then I’d worry about the magnitude of the investment that banks would need to make in innovative collaboration tools – a move they had put off for so long. For nights on end, I would have tossed and turned thinking about the creaking legacy archives so many banks still held onto, already struggling to keep pace with the exponential rise in data flowing in and out of modern businesses every nano-second.

What a difference a year makes.

Coming in to 2021, banks are light years ahead of where they were at the turn of the decade. The vast majority have implemented the technology they need to enable their workforce to compliantly use the collaboration tools. Most have either moved their archives to the public cloud or have seriously sped up their plans to do so. And the ‘Future of Work’ is no longer a buzz word. It is now a reality. We will never go back to a situation where employees are only able to work in a physical office.

But there is work still to be done. There is a valuable lesson that banks need to learn from 2020: embrace technology, do not fear it. Fear of compliance issues was one of the main reasons that so many had put off fully adopting the collaboration tools that are now the lifeblood of their businesses. What they need to do now is expand their newfound wisdom and embrace all communications platforms that enable employees to stay connected and work effectively, wherever they are.

WhatsApp and Financial Services Regulations

This is most evident with WhatsApp. Many people working in the financial services industry already know that the end-to-end encryption messaging tool is ubiquitous and widely used to keep in touch with colleagues, clients, and contacts. But while company policies largely prohibit the use of WhatsApp, financial regulators have stayed away from an outright ban. Instead, they have issued guidance requiring companies to ensure that the instant messaging tools used by their employees are supervised and in compliance with already existing record-keeping rules such as MiFID II.

In 2019, the FCA stated that firms need to “take reasonable steps to prevent an employee or contractor from making, sending, or receiving relevant telephone conversations and electronic communications on privately-owned equipment which the firm is unable to record or copy.” Similarly, the SEC issued guidance in late 2018 reminding companies of their responsibility to monitor electronic messaging and encouraged them to “stay abreast of evolving technology.”

Ensuring that these guidelines are adhered to has been complicated by the fact that many companies have brought in outright or partial bans on unmonitored instant messaging tools, while also adopting bring-your-own-device (BYOD) policies. Largely implemented to cut costs, these BYOD policies mean businesses are now less able to police which communications apps and platforms their employees are using. This means that they have now lost the oversight they need to ensure that employees are adhering to the bans.

Despite a mountain of anecdotal and judicial evidence that employees in the financial services industry have turned to WhatsApp even more since the outbreak of the pandemic, banks are still failing to adopt the compliance tools they need to ensure their employees are acting legally.

Legal Issues with WhatsApp

In 2020, there were several legal and disciplinary cases that centred upon the misuse of WhatsApp within banks.

In April, Bloomberg reported that a dozen traders at one investment bank were punished for using WhatsApp at work – one was fired and the others had their bonuses cut. In October, two senior executives working in the commodity sector quit after accusations that they had broken their company’s rules on instant messaging platforms.

While one banker was acquitted over a legal case with the FCA in which he was accused of purposefully obstructing an investigation by deleting WhatsApp messages, the UK regulator stated it would ‘take action whenever evidence we need is tampered with or destroyed.’ A clear message to banks that they will be expected to provide accurate accounts of any messages sent by their employees over WhatsApp.

The Solution: Capturing and Supervising WhatsApp Communications

The compliance challenges of the increased use of WhatsApp have been widely played out in the financial media in recent years, with multiple firms being handed significant fines due to their communications-monitoring oversights. This doesn’t have to be the case.

As I said before: We will never go back to a situation where employees are only able to work in a physical office. Companies working in regulated industries, and especially financial services companies, must embrace the tools that they know are in wide use by their employees.

Very few banks have introduced the monitoring solutions they would need to adequately manage the use of WhatsApp or other encrypted messaging tools by its employees. But encrypted messaging tools like WhatsApp and WeChat can be captured, monitored, and supervised. Firms simply need to invest in the technology in order to do so.

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