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Time is money — how alternative payment methods are crucial to bringing the new omni-channel shopping experience in store

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Santander’s New Operating Platform from nCino Ensures Faster Loan Processing and an Optimal Experience for Business Banking Customers

Ronnie D’Arienzo, Chief Sales Officer at PPRO Group

While the phrase ‘time is money’ may seem clichéd, it is becoming increasingly relevant as technology-savvy but busy consumers turn to the Internet to make shopping faster and easier.

News reports show that the traditional high street shopping experience is dying, and with it traditional methods of payment. In the UK, the use of payment cards outstripped that of cash for the first time recently, but very soon even cards will be much less common[i]. Globally, alternative payment methods (APMs) are set to oust traditional forms; research suggests the use of e-wallets will soar from 18% in 2016 to 46% in 2021 and in the same period the use of many traditional payments, including cards, will fall2. In some countries, such as China, consumers are already showing great enthusiasm for cutting-edge payment methods, such as WeChat Pay and Alipay, and vendors who fail to offer these options now risk losing a large (and growing) market share.

These trends reflect a massive ongoing shift in purchasing behaviors and demand a change of similar proportions on the part of merchants and financial service providers. Modern consumers want an enjoyable shopping experience that combines value with convenience: it is common now to see shoppers in a retail store, with smartphones in hand, comparing prices in the shop with options online. Similarly, customers research products online before going into a store either to collect goods they have paid for online, or to examine goods they have seen online before purchasing.

As a result, many shoppers now have an ongoing relationship with merchants that spans several channels. Customers interact with brands through websites, in bricks and mortar premises and social media, which is fast becoming a popular channel for consumers to find and purchase products. It is very clear that online merchants are taking the number one spot due to UK consumers becoming more and more time poor, however for the high-street to make a comeback, those with physical stores must provide an omni-channel experience or risk losing out. But what does omni-channel that encompasses physical stores actually look like?

Omni-channel: more than mere choice of format

Ronnie D’Arienzo

Ronnie D’Arienzo

To offer a genuinely omni-channel experience, merchants must be able to engage with customers in a consistent manner across multiple channels, which include merchants’ online points of sale, bricks and mortar, and social media. And of course, merchants must provide a seamless experience across all of these touch points. In practice, that could mean that customers who saves various items in their favorites or shopping list online, or ‘liked’ a social post showcasing a particular product, could be greeted by name on entry to the bricks and mortar store (via the use of artificial intelligence and facial recognition) and swiftly sent offers to the relevant items, but also other product suggestions, for example. These could be paid for online instore using an e-wallet at a kiosk and collected or delivered straight to their front door as the customer prefers. The aim is to make life easier and the shopping experience convenient for the customer — avoiding tedious queues at all costs — and has the added benefit of freeing up staff and floor space to further enhance customer choice and service.

APMs facilitate omni-channel, international trade and security

Omni-channel engagement, and the accompanying need to provide payment at various points via APMs, has other benefits for merchants and customers alike. For example, the tokenization process (whereby sensitive data such as a credit card number or login is substituted with a non-sensitive identifier that can be mapped against it by the merchant) that is required for customers to engage with online merchants and to be recognised in-store, as well as that required to use e-wallets, can act in tandem with biometrics, PINs, etc. to recognize and authenticate the purchaser and provide a barrier to fraud. In a similar way, the analytics used to anticipate and serve customer needs have a role in financial profiling and thus in fraud prevention.

It is important to bear in mind that nations and regions already show marked differences in their preferred payment methods, and merchants — especially those operating across national borders — who fail to offer APMs are missing out on international sales. For example, any vendor who anticipates high value sales to China is taking a huge risk if they do not offer WeChat Pay and Alipay, since these are taken for granted in that market. For other markets, the provision of bank transfer or a choice of other APMs may be more important: there is considerable diversity worldwide. In Argentina, for example, customers like the option to pay in instalments, while Mexico, which has yet to show a huge appetite for e-commerce, remains loyal to the debit card[ii].

After all time is money, and the value consumers place on convenience is encouraging the rapid adoption of APMs in the UK as technology drives huge change in purchasing behaviours. The transition to APMs has clear benefits for purchasers and vendors alike, in terms of convenience, choice and security, but the key to gaining commercial advantage lies in prompt adoption and a genuinely omni-channel approach to sales and service. If merchants can make the use of APMs quick and easy for their customers, with clear signposting and user-friendly interface, the likelihood is that UK shoppers will take to APMs with alacrity.

[i]The Guardian, UK debit card transactions overtake cash for the first timehttps://www.theguardian.com/business/2018/jun/18/uk-debit-cards-transactions-overtake-cash-for-the-first-time

[ii]Worldpay, Global Payments Report 2017https://worldpay.globalpaymentsreport.com/wp-content/uploads/reports/GPR-English-2017.pdf

Finance

Former Bank of England Governor Carney joins board of digital payments company Stripe

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Former Bank of England Governor Carney joins board of digital payments company Stripe 1

By Kanishka Singh

(Reuters) – Mark Carney, former head of the UK and Canadian central banks, has joined the board of U.S. digital payments company Stripe Inc, days after the company was reported to be planning a primary funding round valuing it at over $100 billion.

“Regulated in multiple jurisdictions and partnering with several dozen financial institutions around the world, Stripe will benefit from Mark Carney’s extensive experience of global financial systems and governance”, the company said on Sunday, confirming a report by the Sunday Times newspaper.

Forbes magazine had reported on Wednesday that investors were valuing Stripe at a $115 billion valuation in secondary-market transactions.

A senior Stripe executive told Reuters in December that the company plans to expand across Asia, including in Southeast Asia, Japan, China and India.

The company offers products that allow merchants to accept digital payments from customers and a range of business banking services.

Stripe raised $600 million in April in an extension of a Series G round and was valued back then at $36 billion.

Consumer-facing fintechs have seen a boost to their businesses during the COVID-19 pandemic, as people have been staying at home to avoid catching the virus and have increasingly been managing their finances online.

Carney, who headed the Bank of England and the Bank of Canada, had a 13-year career at Wall Street bank Goldman Sachs Group Inc in its London, Tokyo, New York and Toronto offices.

He is the United Nations special envoy on climate action and finance.

(Reporting by Kanishka Singh in Bengaluru; Editing by William Mallard)

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The potential of Open Finance and the digitisation of tax records

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The potential of Open Finance and the digitisation of tax records 2

By Sudesh Sud, Founder of APARI 

The world is undergoing huge changes at the moment. Between coronavirus pushing the economy to the limit and a group of Redditors challenging the financial market hegemony, people are questioning the role of established institutions. If finance doesn’t work to enable the economy, businesses or individuals, then who is it for?

Before the digital revolution, financial experts were seen as a necessity. They knew how things worked, what everything meant, could provide good advice and were employed to sit at the heart of the action. Now, trading can be done by anyone online through established platforms, with a wealth of information available to hand.

Yet, as the 2008 financial crisis proved, established financial institutions have made themselves too big to fail. Simply tearing down the existing financial system would leave many ordinary people, along with businesses and government treasuries, in ruin.

However, as legendary futurologist, Buckminster Fuller, once said: “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

Traditional banking models are already being upended by technology. Through Open Banking, challenger banks are able to connect services digitally, cutting inefficiencies and costs while speeding up transactions. Now, Open Finance is seeking to build on this model to connect financial services via technology, potentially making the existing financial model obsolete.

Just as Open Banking led to greater democratisation of money, Open Finance has the potential to transfer power back to individuals. Not only would this benefit society as a whole, but it would help minimise the boom-bust cycles that cripple entire economies. No individual would be too big to fail, and bailing people out would cost far less, having minimal impact on the economy overall.

With more information available to them, Open Finance businesses will be able to use technology to make better decisions instantly. Many people struggle to get onto the housing ladder due to a poor credit score, for example, yet they have been paying rent every month of their adult lives. Why, then, can they not access mortgages? A company called Credit Ladder is addressing this through Open Banking, reporting rent payments via challenger banks like Starling to credit agencies, helping good renters to access mortgages.

While it is still very early days for Open Finance, there seems to be an endless raft of possibilities to benefit individuals, businesses and national economies. Faster, more secure, and less risky access to credit can help grow the economy, transforming finance from something that benefits a few wealthy capitalists to something that enables growth in the real economy.

So how else could Open Finance benefit society?

Using Tax Information

Every working adult pays income tax. Some of us via self-assessment while others are enrolled in PAYE. Regardless, we all have tax records with a wealth of financial information that has been verified, at least in part, by HMRC.

This centralised repository of financial information could be put to better use, such as allowing credit reference agencies to better understand an individual’s risk profile or helping to prove income as part of a mortgage application. Unfortunately, HMRC is a black hole of information ‒ its sheer size and power sucks information in, but nothing comes back out again.

However, by Making Tax Digital (MTD), HMRC are effectively allowing individuals to keep validated tax records on the software of their choice. Software providers may then be able to use this information to enable certain aspects of Open Finance. The information doesn’t need to be protected by HMRC, it is the individual’s choice and responsibility over how to use their own information.

As MTD software develops, we will see it connected to Open Banking, allowing self-assessed taxpayers to connect their business account directly to the software, effectively getting their tax return completed for them by an AI program. They would simply check the details, add any adjustments, and click submit. HMRC would then validate the records, providing assurance for any financial institutions using that financial information.

More Growth, Lower Risk

With access to complete and validated financial information, lenders would be able to more quickly and accurately assess individual risk when considering a loan or mortgage application. This would greatly speed up the process of applying for a loan, whether for a business venture or property purchase, for example.

Take residential landlords, for example. They may own a few properties already, with equity coming out of their ears. If that landlord wants to obtain another property, they would need to get their accountant to assemble their financial information, complete a SA302, and send everything off to their mortgage advisors who would then validate the information before submitting the mortgage application.

The application can then take months to approve, slowing down the process and potentially leading to missed opportunities. Since property sales usually occur in a chain (the owner of the property you are purchasing is usually purchasing another property, and so on), these inefficiencies slow the process down for everyone and can have major impacts.

If, however, mortgage applicants could simply share validated financial/tax records, mortgage providers could use that information to make quick decisions with reduced risk. What’s more, applicants could share only relevant, high-level information, rather than expose their entire financial history.

Individual Risk Management

Currently, individuals can manage their credit score/risk profile via third party providers like Experian, Equifax and TransUnion. These credit reporting agencies use limited information, such as credit cards, store cards and loans to assess risk. Individuals need to understand what factors each agency uses in order to ‘game’ the system.

For example, someone who has always been careful with their money, kept to a strict budget and never taken out a loan or credit card will have a far worse credit rating than someone who regularly uses debt to finance their lifestyle. So, even though they may have amassed a good deal of savings, they cannot get a good deal on a loan or mortgage.

With Open Finance, these individuals would be able to quickly prove their earnings, spending, and savings, decreasing their risk profile in line with reality. Rather than crude measures of creditworthiness, financial institutions would be able to use accurate and validated information to make quick decisions based on realistic risk. This both transfers more power to individuals and contributes to faster growth while reducing overall risk.

As a centralised repository for validated financial information, MTD providers will be in a unique position to develop a two-sided marketplace for finance, allowing credit providers to match products to individuals’ risk profiles. When a customer needs a loan, credit card or mortgage, they can simply browse products for which they have already been approved, applying and receiving finance instantly.

Empowering PAYE Taxpayers

Currently, PAYE taxpayers have little, if any, visibility or control over their tax contributions. They will see the amount paid in tax and national insurance, but to claim any allowances requires them to submit a self-assessment tax return. For most PAYE taxpayers, this simply doesn’t seem worthwhile.

Yet, self-employed taxpayers can claim for things like travel to their place of work, a proportion of living expenses when working from home, even their lunch. These things are necessary for productive work yet, for PAYE taxpayers, come out of their already taxed income. Meanwhile, businesses tend to make use of every tax allowance available to them.

This imbalance could be rectified with Open Finance connected to tax software. As MTD becomes a validated system for self-assessed taxpayers, a new version could be developed for PAYE taxpayers, putting them in control of their tax and finances. Not only would they be able to benefit from Open Finance in the same way as self-assessed taxpayers, but they will also be able to claim for reasonable allowances. What’s more, HMRC/the Treasury/the government would be able to hold employers accountable for pay disparities and unreasonable tax avoidance.

Open Finance, then, has the power to speed up and reduce the cost of obtaining and providing finance. It would make the finance system fairer and most transparent while distributing financial power, and help to avoid the creation of too big to fail financial institutions and the boom-bust cycle that has become unfortunate features of modern capitalism.

Ultimately, Open Finance has the potential to help the UK and other nations recover from the seemingly unending series of crises that have plagued the early 21st century by allowing people to access finance quicker in order to grow their business and personal finances while reducing risk, inefficiencies, and costs.

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Three ways payment orchestration improves financial reconciliation

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Knowing the best alternative payment methods

By Brian Coburn, CEO or Bridge,

When Luca Pacioli, the 15th century Venetian monk, invented double-entry account keeping, managing financial reconciliations had its own unique challenges. The father of modern accounting didn’t have to deal with glitches in his book-keeping app but he did have to write with feather-based quills by candlelight. Five hundred years later the challenges are different but no less onerous.

As in the 15th century, solid financial reporting is at the heart of every successful high-transaction business. As Pacioli no doubt knew, up-to-date, well-documented accounting ensures good operational health and makes it easier to grow. And that’s never been more important.

While it might not be feather quills by moonlight, today’s environment of multiple customer channels can be time-consuming and labour intensive, with various payment methods and financial reconciliations from multiple data sources.

Understanding cash inflow through online transactions is a critical element of financial reporting. However, when these involve multiple payment processors and payment methods and a complex system of disjointed silos of payment data, this can become a cumbersome and arduous manual task.

Common issues in this fragmented payments landscape include working across different formats, managing different data owners and access as well as inconsistent process timings. The result is often increased inaccuracy and inefficiency. Procuring multiple tools and software can end up being uncost-effective and unwieldy. Though the current digital transformation is an exciting time for retailers, staying on top of the ever-changing payment options can be an overwhelming burden for many business owners.

Introducing payment orchestration presents a single, accessible, creative and accurate source of transactional data, crucial for today’s complex challenges around financial reconciliations.

Simplicity

Today, commerce is 24/7, so being able to access and analyse real-time information is vital to managing business controls. Many organisations have looked to automate these processes with account reconciliation software.

However, one key challenge is the sheer volume of transactions and the need to capture data from a variety of different sources. Payment orchestration enables transactions to be carried out by multiple payment processors and payment methods with simple and flexible plugins, centrally monitored and routed in the most optimum way.

It allows users to add or remove providers easily, knowing the complexity (detecting outages and automatically rerouting payments) is being handled by a trusted specialist partner via an intelligent platform.

Bringing disparate sources of online transaction data into one place simplifies how enterprises access and operate with multiple payment processors and payment methods. This makes it easier for businesses to remain agile.

Speed

For organisations that still depend on manual, spreadsheet driven processes, the mechanics of reconciliation can be extremely time consuming.

A payment orchestration layer creates the opportunity to automate processes and reduce manual intervention. By bringing multiple payment processors and payment methods into an integrated service layer with intelligent routing capabilities, the impact of individual outages or failed payments can be mitigated to ensure optimum payment success rates, saving crucial revenue.

Accuracy

Naturally, significant manual work brings with it the added risk of human error. The speed with which business moves today demands accurate accounting processes. Checking for error takes up valuable time that could be spent focusing on business growth.

Payment orchestration can improve accuracy and reduce the opportunity for error. Providing a holistic and central source of real-time transactional data, payment orchestration can offer improved transparency and greater visibility of financial data.

With all transactional data captured in one source, payment orchestration can present a data source to feed other applications – such as automated reconciliation tools and fraud management – automating business processes in a seamless way across the enterprise. Good practice like this will, of course, enable a consistent approach to fraud management across all channels and payment services.

Multiple payment choices can be onerous but, today, not adopting them at all is unwise. The key to success, and good financial reconciliation, is being able to streamline and manage them.

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