By, Doug Brown, senior vice president and general manager of NCR Digital Banking
Banks and credit unions face new threats, opportunities and pressures that challenge their operating models and business strategies. NCR, a leading technology company for the banking industry, today shared commentary on trends and activities are having the most significant impact in the digital banking landscape and trends to watch out for in 2020.
The rising presence of digital banks accelerated by challenger neobanks and technology players. Banks and credit unions continue to face a more competitive landscape in the increasingly critical battle for deposits. Not only are they competing against large institutions, but now they must also contend with many newcomers attempting to disrupt the financial services space. The challengers include neobanks like Chime focused on millennials, fintechs like Kabbage focused on business liquidity and even major tech companies such as Apple Card or Google Checking.
In 2020, more banks and credit unions will deploy digital brands to help attract new customers and members and expand their current geographic reach. Because digital is now the preferred touchpoint for many consumers, this method can be an effective way to gain deposits and grow – if done correctly. Institutions must ensure their digital experience is convenient, intuitive and delivers a significant value add.
Drive to better serve the needs of small businesses and the gig economy. Small businesses represent a traditionally underserved segment by traditional financial institutions. Most financial institutions don’t offer a solution built specifically for small business owners, forcing them to conduct their banking with modified versions of commercial offerings too complicated for their operations or inadequate retail solutions lacking the financial tools they need. This is a significant opportunity for banks and credit unions, as small businesses become large businesses and better serving these organizations now can lead to increased revenue opportunities down the line.
The gig economy is undoubtedly on the rise. The Bureau of Labor Statistics reported last year that more than 35% of the U.S. workforce are gig workers, and that number is expected to rise to 43% by 2020. Like small businesses, this presents an unprecedented opportunity for financial institutions to attract new relationships and expand existing ones, providing customers with the tools and guidance necessary to manage both their personal and business financial health.
However, small businesses and gig workers will not simply wait around for banks and credit unions to start offering relevant tools. Fintechs and nontraditional competitors like Uber Money have identified the notable revenue opportunities and are aggressively marketing to these segments. Traditional institutions must quickly deliver the digitally optimized experience small business owners and gig workers want with the robust functionality they need, or risk losing these relationships.
Unification of siloed channels through digital transformation. Banks and credit unions have historically operated in siloes, creating complexities and added expense in the back office and inconsistent high-friction customer experiences. Legacy technology has prevented institutions from quickly introducing innovations, making it nearly impossible for banks to keep up with new competitors like fintechs and challenger banks.
The recent trend toward digital first represents a major shift in thinking. Technology now has the power to ‘de-channel’ silos within a bank or credit union. As competition for new account relationships intensifies, the customer or member experience will supersede channel supremacy.
In 2020, we will see more institutions working to simplify and streamline channels by leveraging tools such as API layers to connect customer and member profiles across previously separate channels, ultimately reducing costs and complexity and enabling a more complete, consistent banking experience. This approach will allow banks and credit unions to effectively merge the digital and physical experience, providing a personalized, consistent experience that they expect, regardless of touchpoint.
The customer experience battleground. The industry has been talking about the customer experience for years, but this year’s introduction of services such as the Apple Card and Uber Money has made it more critical than ever before. The quality of the experience is now the new battleground for customers and members. For example, the Apple Card allows customers to apply within minutes and requires very little data entry, creating an exceptionally simple, easy and quick customer experience. This is now the standard against which all banks and credit unions will be measured against in 2020 and beyond.
However, banks and credit unions still have the coveted trust equity that Apple and other alternative providers lack when it comes to consumers’ finances. CareerBuilder recently reported that 78% of Americans live paycheck to paycheck; consumers can’t afford to take risks when it comes to their financial health. That’s why institutions have a real opportunity to win market share over these nontraditional competitors, but they simply won’t be able to do it with subpar digital experiences.
The increasing significance of the customer experience is one reason we’ve seen so many regional bank mergers this year. Banks are realizing the power and importance of scale, and how moves like these mergers of equals create opportunities to invest more time, money and resources in innovative services and experiences for their customers.
UK’s Co-op Bank cuts losses despite pandemic hit
LONDON (Reuters) – Britain’s Co-op Bank cut its annual losses in 2020 despite a 22 million pound hit from expected loan defaults due to the coronavirus pandemic.
The bank on Thursday reported pretax losses of 103.7 million pounds, down from 152.1 million pounds the previous year.
Co-op Bank has been labouring to turn around its finances since its near-collapse and rescue by a group of U.S. hedge funds in 2017.
Talks between the bank’s backers and potential buyer investment firm Cerberus collapsed in December without agreement.
“We will have (takeover) interest coming into our shareholders… I think it’s a fact for this bank with the shareholders we have,” Co-op Bank chief executive Nick Slape said.
“I’m just focused on running the bank and getting us profitable. These are distractions that happen every now and again.”
The lender expects to return to “sustainable profitability” from 2021 onwards, despite underlying losses tripling to 64 million pounds last year as the pandemic crunched the lender’s income.
Slape said growth in mortgage lending to take advantage of a housebuying boom and lower costs would help the bank to achieve its target.
Co-op Bank cut around 350 jobs and closed 18 branches last year to reduce costs.
The bank’s core capital buffer – a key measure of financial resilience – was 19.2%.
The lender also said it would link part of executive pay to environmental and social targets from 2022 onwards.
(Reporting by Iain Withers; Editing by Rachel Armstrong and Jane Merriman)
StanChart profit falls 57% as COVID-19 inflates bad loans
By Alun John and Lawrence White
HONG KONG/LONDON (Reuters) – Standard Chartered PLC (StanChart) on Thursday posted a 57% fall in annual profit, missing analyst estimates, on higher credit impairments due to the COVID-19 pandemic.
StanChart, which earns the bulk of its revenue in Asia, posted a pretax profit of $1.61 billion. That compared with $3.71 billion in 2019 and the $1.85 billion average of analyst forecasts compiled by the bank.
Credit impairments last year more than doubled compared with a year earlier to $2.3 billion because of the pandemic, the bank said, but noted the majority of these took place in the first half of the year.
The London-headquartered lender said it would return capital to investors via a 9 cents per share dividend and $254 million buyback, with the total payout being the maximum permitted under temporary ‘guardrails’ set by the Bank of England.
The central bank last year told Britain’s largest lenders to suspend dividend payments and share buybacks for 2020 to help them maintain capital buffers against an expected hit to loan books from the pandemic.
“Having now resumed it, we expect to be able to increase the full-year dividend per share over time as we execute our strategy and progress towards a 10% return on tangible equity,” Jose Vinals, Standard Chartered’s chairman, said in the exchange filing.
The bank said its return on tangible equity, a key profit metric, would climb from 3% to 7% by 2023.
It also said overall income in 2021 is likely to be similar to 2020’s because of the impact of global interest rate cuts.
(Reporting by Lawrence White and Alun John; Editing by Christopher Cushing)
Reasons Why You Should Be Opening an Offshore Savings Account Today
No one has to convince you that savings accounts are a bad idea. As a safe investment, this approach is hard to beat. It also has the benefit of allowing you to set aside funds for all sorts of purposes while you earn a little interest.
While this can be done with a domestic account, there are compelling reasons to consider opening an offshore savings account. How can you eventually use those funds, and why would it be better to house them in an offshore setting? Here are some ideas to consider.
1. Setting Aside Funding for a Short-Term Goal
You have a specific financial goal that you want to reach in five or ten years. It could be saving the money for a down payment on a home or possibly buying real estate. Any such goal requires dedicating a part of your income to reach it. Placing funds in an interest-bearing account in the interim is a good option. That’s where an offshore savings account comes in handy.
The temptation to withdraw money from an offshore account is less likely. While doing so would be easy, it’s not unusual for people to turn toward the balances in their domestic accounts before pulling money from offshore ones. The result is that you’re more likely to consistently make progress toward building the funds needed to reach your goals successfully.
2. Creating a Contingency Fund
No matter what your life circumstances happen to be, it’s a safe bet that you’ll need emergency funds at some point. Think of what it would mean to have six months to a year’s worth of cash to carry you over if your company went out of business or if you lost your job. Even if it took some time to find another full-time position, the money in a contingency fund allows you to maintain a reasonable standard of living while you’re in search of opportunities.
Using an offshore account to house your contingency fund works well because you are less likely to withdraw funds until the need is significant. By opting to set up recurring funds transfers from a domestic account to your offshore account, you can add to those emergency funds without having to give the process much thought. When the day comes when you need the money, it will be easy to transfer the funds back to a domestic account or use the debit card supplied by your offshore bank.
3. Building Assets for Retirement
As many people learned during the last recession, employer-provided pension funds may or may not be around by the time you retire. If the investments made with the retirement contributions tank, there goes all or at least most of the money you planned on using to live after leaving the workforce. Establishing your resources for retirement, and diversifying them, protect your financial future.
An offshore savings account can be one of those solutions. A time deposit account lets you build more reserves for retirement. Since the account is not tied to your employment status or to the investments used to shore up your pension fund, it will be there when you need it.
4. Growing an Education Fund for the Kids
Perhaps the plan is not so much about investing in your financial future. Education for your children may be what’s driving you right now. Knowing how much a college education costs these days, you realize that now is the time to start saving. Even if the kids can secure scholarships that cover much of the expense, there will still be costs that need attention.
An offshore savings account provides an excellent means of setting aside funds for education. Let the balances roll over from year to year and earn more interest. Take advantage of offshore accounts that provide higher rates of interest when the balances exceed specific amounts. This strategy will make funding college a lot simpler.
5. Building Reserves for Purchasing a Vacation Property
You’re reaching a point in your life when having a second property to use for vacations sounds appealing. Now is the time to start setting aside funds that will aid in the purchase. An offshore account can be the means of growing the balance a little faster. The result is that when you’re ready to buy that second property, there will be considerably less that needs financing.
This solution also makes the process of transferring funds for purchasing international real estate easier. For example, you decide to buy a vacation home in the same country where your offshore account is based. Your bank can make withdrawing the funds and remitting the money to the seller much simpler.
6. Protecting Some Assets Just in Case
You don’t have to work in a high-profile field to be sued. What would you do if things didn’t go your way? The court could order most of your domestic assets seized to settle the judgment. How would you get by then?
Here’s something that you may not know about the money in offshore accounts – domestic courts can’t order a seizure of the account balances. Even if a lawsuit means every asset you have at home is taken away, there is still the money in your offshore savings account to help you rebuild. It may also be the way that you keep a roof over your head and food on the table while you decide how to go about rebuilding.
7. Taking Advantage of Higher Interest Rates
If you compare the interest rates offered in many international settings with what you can command at home, the difference is immediately evident. It’s possible to open an offshore savings account with a relatively low balance and gradually add to the balance. Over time, you reach a balance level that allows you to earn some of the best rates found around the globe.
When the plan is to place money in an account to accrue interest for over many years, an offshore savings account is the way to go. Once the day arrives when you want to use those funds, the balance will be noticeably more than if you had invested the same proportion in a domestic account. Think of how good you’ll feel knowing that your money was able to grow simply because you chose the right offshore location for the account.
8. Enjoying Peace of Mind
At times, it seems increasingly difficult to find peace of mind in today’s tumultuous world. With money placed in an offshore savings account, it’s possible to secure a little bit of tranquility even when everything else is upside down.
By establishing an account in a politically stable country, offers excellent returns in the form of interest, and is protected from any domestic court action, you know there will be assets to draw on no matter what. That’s a good feeling.
Get Help Setting Up an Offshore Savings Account
These are just a few reasons why opening an offshore savings account is a smart financial move. There is no better time to start than now, and an excellent offshore location to choose is Belize.
Caye International Bank, located on Ambergris Caye island in Belize, Central America has helped thousands of people establish offshore financial accounts. We can help you, too, in determining which offshore accounts work best based on your goals. You’ll find that setting up an account is a lot simpler than you anticipated.
This is a Sponsored Feature.
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition.
You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
Daimler Trucks says zero-emission vehicles will cost thousands of jobs
BERLIN (Reuters) – Daimler Trucks’ shift to zero-emission vehicles will lead to thousands of job losses at the company’s German...
Bleak budget outlook leaves Merkel’s conservatives no choice on debt
BERLIN (Reuters) – Germany’s bleak budget outlook is pushing Chancellor Angela Merkel’s conservatives towards supporting another suspension of national rules...
Sky’s concerns about O2-Virgin Media merger in UK addressed, says O2 CEO
By Paul Sandle LONDON (Reuters) – Sky’s concerns about a planned merger between British mobile operator O2 and Virgin Media...
UK eager to restart U.S. talks on tariff removal
LONDON (Reuters) – British trade minister Liz Truss said on Thursday she would urgently seek a meeting with U.S. Trade...
Commodity prices boost Anglo American in 2020 after COVID-19 hit
By Zandi Shabalala LONDON (Reuters) – Anglo American beat forecasts with a small fall in 2020 earnings and boosted its...