By Julius Abensur, Industry Director — Finance, Relay42
Technology has infiltrated and changed the course of evolution across all sorts of different industries, but the effects are significant within banking and financial services. While the likes of online banking and contactless payments have revolutionised how we pay for goods and manage our own money, ‘challenger’ banks like Monzo and Atom are redefining the very concept of the banking experience.
All of this we are witnessing today could barely have been imaginable just a decade ago, when many of us wouldn’t have thought twice about sticking with the same bank and using the same accounts for the rest of our lives. But times are changing, and so banks now work harder to keep their account holders from splintering their services and loyalty.
However, it is becoming more difficult for banks to offer traditional customer rewards, particularly with the current Bank of England base interest rate of just 0.5%, meaning that customers have little interest in putting their savings into banks. This means banks are having to think more creatively when it comes to delivering value and generating loyalty among their customers.
The other side of the coin
With all of this in mind, there is no doubt that PSD2 is set to transform the European financial sector. This is set to be introduced in 2018 and has been created to ensure safer payments, all while better protecting customers that purchase goods online by making cross-border European payment services more secure. It’s also designed to promote the development and use of innovative online and mobile payments. The result of all this will be a more effective and transparent payment ecosystem that delivers a far enhanced customer experience.
Despite this, the general reaction to the introduction of PSD2 has been a rather negative one. However, perhaps banks should take a look at the other side of the coin and think about how this could signal a potential for positive change. As Jonathan Hill, the Commissioner responsible for the Financial Stability, Financial Services and Capital Markets Union said: “This legislation is a step towards a digital single market; [that] will benefit customers and businesses, and help the economy grow.”
Keeping up with the times
With many of the traditional banks having to deal with a combination of technologies, some of which are old, but are still mission-critical solutions, it could be that technology itself is to blame for the less-than-favourable reaction to PSD2. These difficult-to-manage infrastructures have led to the same banks taking a siloed approach to managing their data, and this has stopped them from delivering the seamless customer journey that the consumer of today is expecting.
What many don’t realise, however, is that they don’t require a complete technological overhaul in order to achieve compliance with PSD2. Instead, they need something that sits as an extra layer on their existing infrastructure and makes it simpler to orchestrate relevant marketing outreach based on this unified landscape.
While the technical solution is simpler than many envisage, banks may require specialist guidance when it comes to best utilising their data and applications to provide a truly optimised customer journey. This is particularly important as customers become increasingly savvy to the way businesses use their data. Ultimately they are happy for organisations to hold and use their data for marketing purposes, but only if they are receiving tangible benefits — whether this comes in the form of highly personalised content or relevant promotions and offers.
This is where PSD2 can help. It will reassure customers that their banks will always play by the rules, and, by complying, the banks themselves will have an opportunity to realise tremendous value in terms of how they engage with their customers.
Loyalty through personalisation
If a consumer chooses to provide consent for a bank to use their data, there needs to be a clear benefit in them doing so. The effective use of spend data to provide offers on purchases that consumers are actually interested in, for example, can give banks the upper hand in the race for loyalty. For several years, supermarkets such as Tesco and Waitrose have used this technique successfully through their loyalty card schemes.
American Express is an example of a business that has realised the value of personalisation derived from the use of customer data. Its card-linked offers for dining, entertainment, shopping or travel can be directly applied when a customer makes a qualifying purchase without the need for printing codes. This robust method of leveraging customer spending patterns ensures that American Express customers receive card-linked offers centred around the goods and services they actually want to spend their money on. In turn, this builds deeper customer relationships that are differentiated by relevance, personalisation and lifestyle appeal.
Catalyst and enabler
If banks want to succeed in their attempts to adopt a more customer-centric approach to marketing, while also remaining agile and relevant to shifting consumer demands, they must see PSD2 as the catalyst and technology as the enabler. Only a few months ago we heard the news that card payments fees are set to vanish in much the same way that mobile phone roaming charges have, and this is forcing banks to change their business models quickly.
As the needs of customers continue to evolve and the world we live in becomes more focused around outcomes, banks will need to continue innovating and offering services that are in-line with this new environment. This may differ for each bank: one might offer their customers exclusive concert tickets at discounted prices, while others might devise personalised banking offers based on the certain needs of individuals.
PSD2 is a much-needed breath of fresh air within the banking industry — one that will rebuild trust between banks and their consumers while steering banks towards a more customer-centric future. A large part of complying with PSD2 will involve utilising orchestration technology to connect the dots and deliver innovative, personalised customer journeys across multiple channels. This will in turn bring fresh engagement opportunities and potentials for new revenue streams.
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
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