Vineet Vijh, senior engagement director, Unisys
Retail banking is changing through many external forces. The on-going global financial crisis has impacted the regulation surrounding the banking industry, but there are other factors changing the environment banks find themselves operating in. One of the key catalysts for change is mobile technology, which represents the biggest opportunity to retail banking since the advent of the credit card four decades ago. This new dynamic is redefining the relationship between the bank and its customers.
The traditional view of a bank is as a transactional medium. Banks are where people save, retrieve and borrow money. Despite considerable investments by European banks in developing their branches into ‘financial services supermarkets’ this view still remains the case today. Smartphones, tablets and other mobile devices bring with them many ways for banks to at last tackle this perception, enabling them to embed themselves far more deeply within their customers’ lives.
The move to mobile banking is being touted heavily by market analysts. According to Gartner, worldwide mobile payment transaction values will surpass $171.5 billion in 2012 and Sandy Shen, research director at Gartner, has said: “We expect global mobile transaction volume and value to average 42 percent annual growth between 2011 and 2016 and we are forecasting a market worth of $617 billion with 448 million users by 2016.” These predictions represent a paradigm shift in the retail banking model and a potential opportunity for disruptive and highly innovative players to meet the needs of the technology-savvy consumers who rely on their mobile devices for many facets of their day-to-day life.
Over the next few years we think there are three key areas in retail banking which will be transformed by mobile devices, these are: payments; products and customer service.
Payments are the most obvious aspect of a bank’s operations that can be streamlined and enhanced by mobile devices. While many banks in Europe have hesitated to roll out m-payments, other parts of the world have moved more quickly. Mobile payments are an accepted way of life for some consumers in Japan and Nordic Europe. Closer to home, Barclays Bank in the UK offers person-to-person mobile payments through its Pingit app, with many more mobile payments services being highlighted in the media, such as Square, founded by Twitter co-founder Jack Dorsey.
The adoption of the m-payments, to date, has not been held up by lack of payment enabled handsets but by the perceived value of just a simple payment or money transfer function – they compete with many other methods that are already available. What changes things now is the smartphone’s ability to integrate the payment function into other applications; it is this which will make banks more relevant to the everyday lives of consumers. Phones will be used interchangeably with a credit or debit card, reducing the potential for fraud, while enabling banks to add real value to the shopping experience – for example flashing up real-time balance updates on the smartphone’s screen, or offering services like extended warranties or damage insurance at the point of purchase.
The benefits of being able to interact with customers via their phones, based on their location, aren’t just limited to payments. Mobility makes a whole range of new service paradigms possible. Consider home-buying: offering customers the ability to source a preliminary mortgage quote and book an appointment with an advisor from the property they are viewing would be a tremendous help to them, and a powerful way of capturing mortgage business from current account customers. Smartphones’ location-awareness could also mean property particulars are sent automatically to branch advisors, making the sale easier still.
Location-awareness has also proven itself valuable for products where eligibility, costs and conditions can vary geographically. In the USA, Unisys has developed a location-aware mobile application for a loan provider, which can automatically provide a tailored quote based on the customer’s location. A manual address check is still needed, but the system enables the company to provide quotes immediately, starting the sales process without delay. Insurance and leasing are other product areas which stand to gain considerably from this unique feature of mobile devices.
Handheld devices won’t just have an impact on how banks deliver and market services to consumers – they can also drive big changes in the ways banks organise and manage their own staff. A European bank Unisys works with has recently issued branch staff with tablet devices so they can strike up conversations with customers visiting the branch, answer simple questions about products, and very quickly and easily schedule a meeting with an advisor should they wish to find out more. We provided a simple app which links directly to the bank’s CRM and scheduling systems – so even if the meeting gets postponed, staff can still follow up on the customer’s interest.
Less of a security risk than you think
With every new technology, the theory goes, come new risks and challenges. While prevailing wisdom suggests mobile handsets are far less secure than more conventional means of banking, the truth is they can bring far greater security, providing they are integrated properly. The wrong approach would be to attempt to re-purpose their online banking security system, for mobile banking, or to develop a completely new and different security system solely for mobile apps. Banks need to evaluate their security systems holistically and redesign the system to be common for all channels or modes of communication with the customer. This includes harnessing mobile devices’ capabilities to protect customers and minimise fraud.
Location awareness could be a boon for fraud management. Key indicators of fraud, such as two transactions occurring in very different places, can be easily investigated and, by checking customer location data, rectified with minimal inconvenience. Similarly, mobile devices could enable banks to implement biometrics almost universally, in a way which customers will welcome – using voice and even facial recognition to authenticate transactions and digitally ‘sign’ documents like direct debit mandates. In this way, the smartphone could begin to replace the aging and increasingly risk-prone systems of PIN codes and personal details which have been the mainstay of authentication in banks for decades.
We think the opportunities and changes brought about by the innovations we have outlined here will together be far more significant than the advent of online banking fifteen years ago. Indeed, the m-commerce paradigm has been successfully adopted by leading businesses in other industries, particularly retail, where customers have responded particularly positively to the advent of mobile shopping. In this sense, the mobility model is well proven. Where banks in particular stand to benefit from mobile technology is in fraud control, authentication, and supporting sales of complex financial products. Clearly, security is the key to progress, and banks must carefully evaluate their systems and procedures here. However, the potential to transform relationships with customers, exploit cross-selling opportunities, and improve security and fraud detection, is a heady cocktail for European bank executives smarting from four years of intense public scrutiny and depressed margins. The commercial opportunities for mobile banking are enormous.
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.
Luigi Wewege is the Senior Vice President, and Head of Private Banking of award-winning 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 innovation trends shaping the banking and financial services industry on Twitter: @luigiwewege
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Former BOJ executive calls for ‘genuine’ review of central bank stimulus
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)
Metro Bank expects defaults to rise as COVID-19 support measures fade out
(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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