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Open Banking today: an opportunity, not a threat

Open Banking today: an opportunity, not a threat

By Paolo Spadafora, CEO Epiphany

Banks today are facing several challenges to become compliant with PSD2 regulation. The main goals of the second iteration of the EU’s Payment Services Directive (PSD2) are admirable: they intend to advance the security of the customers – and, as a consequence, to reduce fraud – by implementing a stronger customer authentication (SCA) for online purchases, in addition to establish a higher level of competition and drive innovation by opening up the payments market to new players, or third-party providers (TPPs), mainly via the application programming interfaces (APIs).

Paolo Spadafora

Paolo Spadafora

While the deadline has past, several countries are behind and have postponed because many banks were not ready yet. Other countries who met the deadline are experiencing pressure by Third Party Processors as exposed interfaces are superficial and do not allow TPPs to fulfil the requirements they have to implement their services.

It is therefore clear that the industry felt relieved when in June 2019 when the European Banking Authority (EBA) allowed national competent authorities (NCAs) to extend the deadlines for SCA implementation beyond September 14. The UK’s Financial Conduct Authority (FCA) was the first to announce plans to give more time. Other NCAs, including the Central Bank of Ireland and the Bank of Italy, were close behind.

Despite this further permission, at the moment, banks are going through three main challenges:

  1. Their outdated core banking systems slow down or completely impair a bank’s ability to deliver new services and/or products
  2. Regulation & Compliance requirements often have no technical specifications, and this makes them hard to fulfil
  3. Shifting from an independent mindset and model to an ecosystem mindset and model mindset is proving to be difficult.

Furthermore, “new” and “old” technology rarely work together and require Open Banking application programming interfaces (“APIs”). As a such, integrating these two poses a high degree of challenges and is both time and resource intensive.

Regulations are written by the legal professionals, but banks must translate these into functional & technical specifications, leaving room for misinterpretation and often re-work which inevitably cause delays. To reduce these risks additional effort is needed when teams are forced to adhere to more complex development process.

Many traditional banks today operate like the closed version of the Japanese economy in the 1600s, where Japan was a closed economy and society. This result in a stagnated economy and culture.

Banks take a more conservative approach and are generally concerned about external parties that can disrupt the way things are done, viewing change as big risk. This is why lenders see the PSD2 as a threat, rather than an opportunity. This risk-averse mindset causes them to take the “minimum viable compliance” approach, which does not and will not lead to open banking, nor will all of these factors have combined yield better experiences for banking clients.

In our point of view, a real collaboration between both third parties and customers is required in order to overcome these challenges, with the final goal to innovate and satisfy banking clients’ needs and preferences in a timely fashion. If this does not happen, banks will face disruption, disintermediation and- worst of all- complete irrelevance.

Lenders will greatly benefit by collaborating with multiple players and absolutely should leverage a network of contributors (TPP) in the design process to develop solutions to identified problems, as opposed to new products.

Open banking has 3 main players: banks (also known as ASPSPs), authorized TPPs and customers. The majority of ASPSPs have exposed API or data interfaces, however many differences exist across countries due to variations in the law transposition and lack in adopting standards for technical specifications.

Moreover, many banks customized their APIs even if they state they implement a standard.

This is an issue for the entire ecosystem to operate effectively and efficiently. More time and resources are needed to align different offerings across countries causing a deferral of Open Banking adoption for and by Consumers, and as such, a delay in securing a great customer experience. When consumers are not satisfied, further disruption emerges: an example is represented by BigTech taking their billions in capital and enormously trusting base and becoming banks themselves. This is where we are getting to, and what banks need to face: a third force of nature, the big tech.

Another important topic, unfortunately rarely discussed enough by the open banking community, is related to customer awareness. Open Banking is almost unknown to bank users: the EBA and connected institutions should force NCA to allocate resources to educate consumers and businesses, explaining the matter from all perspective and the benefits that it will bring to the entire community, and more, specifically choice and convenience.

We predict that if 2020 will be the year we see harmonization and tuning of the “PSD2 Infrastructure”, the end of 2020 or begin of 2021 will probably mark the beginning of Open Banking adoption.

Customers will start to see the benefits of Open Banking in the middle of 2020: personal finance management will manifest transparency, instant credit will improve customer experience to access credit, automated transaction reconciliation, better payment integration, and so on, will bring immediate benefits to SME boosting their performances.

Once this happens, banks will also see the results in terms of higher customer satisfaction and revenue.

Banks need to embrace open banking, including embracing of partnerships and new methods that accelerate innovation. Innovation fuels both growth and engaged customers. Open banking is a big change and many people don’t like changes; but change Is the reason we have evolved and still do.

Business

Return to work: Flexibility, preparation and communication are key

Return to work: Flexibility, preparation and communication are key 1

By Matt Weston, Managing Director, Robert Half UK

As lockdown restrictions ease for the foreseeable future, conversations across the business world are starting to turn to how employers can safely and seamlessly prepare for their workforce to return to the office.

Research from Robert Half has found that over half (54%) of employees are worried about working in close proximity to their colleagues, while a similar proportion are eager to return to the office due to loneliness working from home (45%) or concerns about missing out on career opportunities (30%).

Unsurprisingly, after everything companies and their employees have done to successfully adapt their operations and working practices to social distancing rules over the last few months, immediately returning to the old ways of working will likely neither be sensible or practical. With safety being the key priority for the ‘new normal’ of office life – communication, flexibility and preparation should be the main focus areas for employers.

With this in mind, what are the challenges and opportunities that employees anticipate as they prepare for the return to work, beyond government and industry supplied health and safety best practice? Furthermore, how can employers best support their staff during this period?

Keep people at the heart of change

It is important to recognise that your workforce has been working through an intense period of uncertainty and change for months, which can be incredibly unsettling. On top of this, working for weeks in isolation without the usual physical interactions with team members could be potentially detrimental to employee engagement and mental wellbeing.

Having adjusted to keep staff connected with one another from a distance with virtual team building exercises, video calls and daily check-ins, as teams begin working in hybrid models with some in the office and others remote, staff engagement will need to adapt again.

Managing people with greater sensitivity and maintaining positivity throughout will be crucial. To help instil a sense of normality and engagement, encourage maximum collaboration between individuals (in accordance with social distancing rules), and make sure teams feel part of company goals and opportunities through regular meetings and communication – no matter their location.

Continuing to invest in technology and offering flexibility will also be important to ensuring that people can continue to work remotely or on-site, either in accordance with their own wishes or as part of your staggered return-to-office plan.

Communicate, communicate, communicate (and listen)

Reassuring staff that they are able to safely return to the office will require continuous communication. From expectations of the physical office, to expectations of how to operate within hybrid teams, these new expectations and new workplace requirements should be communicated to all staff clearly to avoid confusion.

Regular email updates, updates on the company’s intranet and social media channels, as well as frequent town hall meetings (either online or in a smaller setting) could be key elements of an effective communications approach.

Also, consider a feedback channel to allow staff within the team to offer thoughts on their experience of returning to the office and any suggestions on improving the process. Whether on a company-wide basis or a team-by-team approach, schedule regular check-ins to engage with employees’ questions and concerns.

Maintaining open communication channels with your team will be essential for keeping up employee morale and ensuring clarity. For example, if some employees aren’t comfortable with coming to the office every day, then they should have plenty of opportunities to voice their concerns and have them dealt with promptly, respectfully and fairly.

Staggered return-to-office planning

Depending on the size of business and density of office space, maintaining home working arrangements across teams on an alternating basis could make it easier to implement safe social distancing. This involves select teams working remotely while others work on-site on any given day.

An alternating approach to remote working might also reduce the risk of staff feeling pressured or overwhelmed by an immediate return to the office five-days-a-week. After all, some families might be juggling temporary disruptions to childcare arrangements and public transport systems will likely become crowded again. So, a transitionary period will help everyone adjust to post-lockdown office working.

Finally, if you have developed your technology infrastructure to facilitate remote working, you would do well to continue to leverage these new capabilities as in all probability, a mixture of remote and at-office work will be needed for some time.

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Business

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy  

Contis enters RBS Capability and Innovation Fund bid seeking £35 million for disruptive SME growth strategy   2

Leading payments provider, Contis, has applied for two grants from the RBS & BCR Alternative Remedies Package, totalling £35 million.  

Unlike most applicants who will deploy funds through a single brand, Contis is taking a completely different approach. The funding will be used to drive fintech innovation in the UK by developing an off the shelf, B2B electronic and card payment technology platform for SMEs. With Contis’ powerful tech stack and regulated status, this will empower hundreds of fintechs to support the SME market with groundbreaking technologies, payments and lending capabilities. Contis today services over 800,000 consumer accounts, 14,500 business accounts and processes £4bn in transactions per year, demonstrating a proven track record.   

UK businesses are facing a challenging economic environment with the impacts of Covid-19 and Brexit. As large corporations and entire sectors are affected, SMEs will play a vital role in the recovery. Contis’ approach is completely disruptive, offering three channels to maximise support for SMEs and sole traders, through three unique brands, all powered by APIs from Contis’ modular and configurable engine. 

1.       Canvas for Business 

Contis is a super-vendor in the world of fintech, offering payments through proven banking rails and card scheme capabilities including issuing pre-paid, debit and virtual cards. They’re linked to digital delivery like Apple Pay and Google Pay, and a trusted tech stack that boasts 99.99% uptime.  

With funding from the Capability and Innovation Fund (CIF), Contis’ technology and regulated services will be made available to the whole fintech community, enabling them to provide dedicated SME accounts with the latest leading-edge capabilities delivered via Contis’ wholly owned, secure, cloud-based technology and apps. Contis’ solution has a firm eye on the need for SMEs to compete internationally, particularly after Brexit, and offers FX integration as standard.  

Canvas for Business will increase competition by providing fintechs serving the SME market with technology that outstrips the big banks. Contis will also provide credit referencing capabilities and empower fintechs to lend to their SME client base through Contis’ own credit licence. Without the constraints of legacy systems, it will enable simple connectivity to accounting and payments solutions, as well as to unlimited future innovations.  

2.       Engage for Business 

Over 150 Credit Unions currently use Contis’ Engage service and technology, and hold an estimated £400 million in undeployed cash reserves. Developed with CIF funding, Engage for Business will enable Credit Unions to launch business accounts and payments products for the first time, and allow excess funds to be redeployed in the SME sector through business support loans. This will revolutionise access to funding for sole traders and small businesses. 

3.       Freedom for Business 

With CIF funding, Contis will also offer large scale SMEs a direct-to-market solution where Contis holds the relationship and provides a bespoke offer to meet the business’ exact needs. 

Contis’ application to the Capability and Innovation Fund is focused on creating the widest possible impact for UK SMEs by fulfilling their accounts & payments needs and driving innovation in SME financial services. 

Through the grant, Contis will empower over 200 fintechs and Credit Unions to provide credit, simplify payments integration into everyday business needs, offer digital credit referencing, provide budgeting tools to SMEs, enable automated payments, give predictive insight on cash flow, provide rewards to SMEs on spending, and much more. 

Peter Cox, Founder and Executive Chairman of Contis said: “Our mission is to democratise payments and financial services for all SMEs, so they’re spoilt for choice with innovative and affordable solutions that meet their exact needs. Our approach, based upon proven technologies, will broaden and disrupt the services available to SMEs far beyond the capabilities of existing providers such as the big banks.  

“By driving competition and innovation, while improving the availability of funding, our approach will increase the services on offer to SMEs and make them more affordable, therefore becoming easier for every entrepreneurial person with vision to run their own businesses.” 

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Business

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver

Four years of digital transformation in four weeks: UK lockdown puts pressure on brands to digitally deliver 3

Nearly a third (32%) of consumers would switch providers if a brand’s website is unavailable for more than 24 hours

A study released today reveals the scale of omni-channel pressure brands now faced as a result of the Covid-19 pandemic, as consumers flock to apps and websites to as the priority destination to transact with brands.

The UK has experienced a huge leap in use of online services thanks to lockdown, with the public appearing to have less concern for the availability of a brand’s physical location. Research by Sungard Availability Services (Sungard AS) uncovers a “window of availability” that UK businesses now have before consumer loyalty changes:

  • If a brand’s website is down for 24 hours – 32 percent of consumers would switch provider
  • If a brand’s app is down for 24 hours – 28 percent of consumers would switch provider
  • If a physical store is closed for 24 hours – 20 percent of consumers would switch provider

The results by industry paint an interesting picture of the availability timeframes brands are expected to adhere to:

  • For online retailers, excluding grocery retailers – 23 percent of consumers would switch provider if they could not access online services for 12 hours, rising to over a third (34 percent) after 24 hours
  • For financial services and entertainment streaming platforms – 21 percent of consumers would switch provider after 12 hours, rising to 33 percent after 24 hours
  • In the case of online grocery shopping – 20 percent would switch provider after 12 hours, rising to one third 33 percent after 24 hours

The findings also highlight that as digital reliance increases, so will consumer expectations towards availability in the future. Over the coming two years, a third (33 percent) of consumers expect online financial services to always be available, rising to 35 percent for streaming services.

“UK consumers have become reliant on the constant availability of online services, and lockdown has only served to heighten this,” comments Chris Huggett, SVP, EMEA at Sungard AS. “What used to be a choice between physical and digital has now firmly accelerated into digital environments across various industries. As online worlds continue to outpace bricks and mortar as the face of businesses, ensuring constant availability and clear communications on downtime will be key for brands to build trust and loyalty.

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