By Philipp Pointner, Chief Product Officer of Jumio
Daily life for people around the world has changed in ways that would have been unthinkable a few months ago. Needless to say, the COVID-19 pandemic has had a huge impact on consumer attitudes, behaviours and purchasing habits, with many consumers forming new habits that will remain post-pandemic. Lockdown has truly changed the ways in which we interact on many levels, but also, the ways that we transact.
Prior to the pandemic, bank branches were already experiencing a steady decline across the UK. Between 2012 and 2019, the total number of bank and building society branches fell by 22%. We can safely assume that social distancing and government-mandated closures have exacerbated these figures further.
As a result, banks are forced to consider how they can securely allow their current and prospective customers to conduct the same kinds of activities remotely while keeping them safe from increasing digital fraud and cybersecurity threats.
Although traditional banks have increasingly begun to look at the ways in which they can digitise account onboarding processes, this is an area where digital native challenger banks have always excelled. On the flipside of the argument, despite challenger banks being renowned for faster sign-ups and seamless customer interfaces, security still remains a top concern, with the annual value of online banking fraud losses being estimated at £112 million in 2019.
It becomes crucial then that both traditional and challenger banks ensure that fraud detection measures – the chief factor behind poor customer experience – are secure but also streamlined. So, how can this be achieved?
Striking the right balance
Accounts that are less than a day old make up nearly half (48%) of all fraud value. Furthermore, Experian’s 2020 Global Identity and Fraud Report reveals that 57% of businesses report higher fraud losses associated with account opening and account takeover than other types of fraud.
It’s apparent that protecting and supporting customers during the account onboarding stage is critical. Accordingly, businesses must find ways to verify the true identity of a potential customer to ensure they are who they claim to be.
Usually prioritising fraud detection produces slower onboarding processes as there’s more hoops to jump through to attain identity assurance. This causes friction which kickstarts a domino effect beginning with negative user experience which leads to increased abandonment rates which culminates in disenfranchised prospects who aren’t afraid to take their business elsewhere. This last outcome is particularly important with nearly 40% of potential new accounts choosing to abandon the onboarding process because they find it too time-consuming and arduous. Many of these customers are then put off from returning and completing the process, resulting in a significant opportunity cost for financial institutions.
It’s imperative that banks find the optimal balance between quickly and securely onboarding legitimate customers without igniting this chain reaction. To achieve this balance, there are lessons traditional banks can learn from their challenger counterparts.
You can’t win if you don’t play
The sudden shift to the online world means many people have had no choice but to adopt digital banking. This poses the question as to how many of these digital consumers will actually decide to return to a branch location once pandemic-related restrictions are lifted.
Banks typically follow a common set of steps when onboarding new customers – although this does differ depending on whether it takes place at a physical branch or online. While banks are required to perform the necessary due diligence as part of their KYC and AML obligations, many of the onboarding steps required in-branch can in fact be automated, streamlined and simplified to deliver a much better customer experience.
By leveraging face-based biometrics for digital identity verification, banks are able to discover the sweet spot between customer experience and security. It begins in the account onboarding process where banks ask the new customer to take a photo of their government-issued ID (e.g., driver’s license, passport) via their smartphone or webcam, then take a corroborating selfie. This process utilises liveness detection to confirm that the online customer is physically present and not attempting to bypass the system using a deepfake video or a picture of a picture. The use of biometrics and AI can make an accurate verification decision in a matter of seconds which creates a customer-friendly experience … Bingo!
Taking onboarding processes a step further
As with the initial identity verification process, traditional banks cannot rely on outdated and complicated methods of ongoing authentication to build long-lasting relationships with its customers. This is where face-based biometrics can step in once again and come to the rescue.
During the initial selfie-taking process, a 3D face map is generated to ensure the person behind the ID is the person creating the account. This face map contains over 100 times more liveness data than a 2D photo to accurately and reliably verify the customer. Instances where future authentication is required – such as resetting a password or attempting to make a wire transfer – the customer is simply required to take a new selfie. This creates a fresh 3D face map that is instantly compared to the one associated to the account. Within seconds, the user’s digital identity is unlocked and the transaction is authorised knowing that the person making the request is the legitimate account owner.
Action starts now
More than ever this holistic approach is required as a result of opportunist fraudsters taking advantage of an extreme global shift to digital. Although the past few years has seen digital account opening at the top of the list of technologies banks intend to add or replace, the current crisis highlights the need for digital transformation, and the need for speed.
Now is the time for challenger and traditional brick-and-mortar banks to invest in the user experience and digital processes from initial account creation to account management to transaction processing. To ensure this success, banks of all stripes must first be equipped to deal with the increased demand. Harnessing the power of face-based biometrics and AI is the best way to deliver smooth digital onboarding and ongoing authentication to stamp out fraud.
As Winston Churchill famously said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
Younger generations drive UK alternative payment method adoption for online transactions
- 42% of Millennials and 35% of Generation Z feel confident using alternative payment methods, or have used them previously
- 81% of consumers agree security of their data and money is the most important aspect when choosing a payment method
UK London, 11th August 2020 – As the migration away from traditional payment methods in the UK accelerates, younger generations are leading the adoption of alternative payment methods (APMs) such as bank transfers and e-wallets, reveals a new study from PPRO. According to the findings, 42% of Millennials (born between 1980-1993) and 35% of Generation Z (born between 1994-2001) feel confident using, or have used, these methods of payment before.
In the UK, any payment method other than credit or debit cards is viewed as an alternative payment method (APM). However, across the globe, these forms of payment are considered local payment methods (LPMs) due to their broad adoption. In fact, there are over 450 significant local payment methods currently available worldwide, which account for more than 70% of global e-commerce transactions.
Ongoing COVID-19 restrictions have seen a surge in e-commerce in recent months, with many consumers forced to shop online for everyday goods. As a result, UK consumers have been more inclined to try a range of digital payment methods to enable a convenient transaction experience. Currently, 89% of UK consumers are confident using PayPal, whilst a further 31% express the same confidence in using mobile wallets such as Apple Pay or Google Pay. This form of payment is particularly high for younger generations, with 68% of Generation Z stating they use mobile wallet technology.
For younger generations, seeing a buzz about new payment methods in the news and on social media has been a key driving force for local payment adoption, 31% of Generation Z consider this the biggest motivation to try new payment methods. For Millennials, 37% said that merchant acceptance is their main driver.
For the overall UK population, however, security was ranked the top adoption driver, even above reputable brand image, with over half (59%) of UK consumers stating security is the most important influence on their usage of new payment methods. This highlights the growing need for online merchants, Payment Service Providers and FinTechs to address consumer perceptions around trust and assure the security of payment methods at checkout.
“Local payment methods, such as direct bank transfers and pay later schemes, are considered new ways to pay in the UK. However, for online merchants that sell to consumers across borders, these local methods are the norm and must be offered at the check out to reach international consumers,” comments James Booth, VP Head of Partnerships, EMEA at PPRO.
“Traditionally, the UK and US alike have stuck to using credit and debit card payments for online transactions. However, for merchants, local payment methods (LPMs) are much more secure in comparison to card payments, due to chargebacks and being prone to digital theft and fraud. LPMs, such as bank transfers, are more secure and a lot cheaper for merchants to process,” adds Booth.
Teaching children about wealth management and why there has never been a better time
By Annabel Bosman is Managing Director and Head of Relationship Management at RBC Wealth Management
As we approach the end of week sixteen in lockdown, I am breathing a sigh of relief at having successfully navigated another week of juggling work and client commitments with the increasing demands of my children – age six and nine.
My day job is to lead RBC Wealth Management International’s relationship management efforts in the British Isles, but my toughest challenge right now is educating and entertaining my new junior co-workers each day.
While my children’s school has done a great job at setting up daily tasks and learning activities, there is only so much ‘teaching’ they can take from me without World War III breaking out. So instead of rigidly sticking to the school curriculum each day, I have taken the opportunity to educate my young children about a topic that is often not discussed enough in school — money.
What I do for a living has become a central discussion in our co-working space — also known as the dining table. I have found that investment concepts can be grasped quite well by young children and this has led to some interesting conversations about which businesses are doing well in the current situation, and those that are not. Children are often more logical than adults, and in my house, this logic is helping them grasp the basics of an investment philosophy. As a result, I have even passed conversations around stock markets off as maths classes!
For young children like my own, helping them learn the basics of managing money is something that will hopefully set them up well in life. There are some great tools to help them do this – we use GoHenry, which provides children with a pre-paid card to learn about budgeting. Likewise, encouraging conversations around how they spend virtual money whilst gaming on apps like Roblox can give some really important lessons around how you look after the money you have earned – and how if something seems to be too good to be true, it probably is.
The most important thing is not to underestimate your children. Whether it is the application of a “mummy-tax” when they want chocolate or applying interest rates (albeit nominal!) if they want to borrow money, teaching our children the basics around money is something we can all do.
Incorporating new lessons
The first step is to identify the best way to approach teaching these topics in a way they will understand. Resources such as the Usborne Money for Beginners are really helpful to start conversations. There are also several YouTube clips and even TikTok channels dedicated to helping children think about money. I tend to think about what is important to them and use that as a catalyst to start conversations; for example, it could be how they can monetise their love of the gaming app Roblox.
Ending the taboo
Any conversation that leads to a greater awareness around financial discipline and security has to be a positive, no matter what the age – and there are certainly parallels with my experience and that of my clients. There seems to have been a shift in HNW and UHNW families’ willingness to talk about money. Whereas previously it was seen as very un-British to speak about money, the pandemic has meant that a more open conversation is taking place.
Whatever our financial position, we often bury our heads in the sand when it comes to money, and don’t always have a clear financial plan, but when we start to put down on paper what’s going in and out, we immediately start to feel more in control, thus becoming more engaged. It can be uncomfortable to have that conversation with your family, but we regularly speak with our clients about all manner of sensitive subjects including putting wills in place, inheritance and protecting loved ones. Naturally, this is also bringing conversations to the fore around succession planning, legacy, philanthropy and even one’s own mortality. When times are good, it’s easy to not have these thoughts at the forefront of your mind, but in challenging times like these, it highlights how essential it is to talk. And just as with my children, there are plenty of apps and websites that can help you take the first steps.
Varying generational approaches
There is no one way to educate your children about money — what worked for one generation will not necessarily work for the next. Different generations have had to address the different approaches they might take in thinking about money and try to reach a common language to agree on common goals. Whilst many of us grew up with physical pocket money from our parents after completing household chores, today’s young children rarely even touch money, they receive their allowance on an app.
A 2019 study commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit found that seven in ten younger affluent respondents think that their beliefs about wealth are very different to those of their parents; with a similar percentage, 78%, believing that wealth is less easily attained or preserved today. Early, open and continuous dialogue can only help confront obstacles head on and smooth the path ahead.
These talks also allow HNW individuals and their families to talk about how they can address their non-financial goals, such as fighting climate change or supporting social agendas – something that the younger generation is acutely focussed on. Indeed, more recent social events have led to an ongoing and overdue debate around what privilege looks like and how society needs to change.
With the summer holidays fast approaching, the struggle to keep children occupied will continue, but without the pressure of the school curriculum. This is an opportunity to continue discussions with children about where money comes from and where its value lies.
I have found it tremendously empowering to talk to my children about money and getting back to basics — it may not be school learning, but it is real life learning. And as I say to my clients, the initial step to start a conversation is always the hardest.
From accountants to advisors: changing roles and expectations
By Chris Downing, Director for Accountants & Bookkeepers at Sage
The line between strategic advisor and traditional accountant is blurring. Over the last year, 82% of accountants said their clients were demanding a wider service offering, including business and technology implementation advice. In the current climate this transition has only been accelerated.
Clients increasingly expect their accountants to take a more active role in change management and predicting their cashflow months into an uncertain future. This is enabling businesses to tackle the challenges of day-to-day operations, while keeping an eye on what the post-COVID world will look like, and the support they will need to return to strength.
To solve these new and complex, expectations accountants must develop a different way of working. They will be required to increasingly supplement the traditional, compliance and reporting aspects of their work with business advice and consultancy. To do this, accountants need the ability to move quickly and efficiently, with a firm grounding in technology and data control.
Get straight to the point
The priorities of yesterday are very different to the goals of today. Where businesses once focused on driving growth and efficiency, the objective for many now is continuity – understanding what government support is available and for how long. In the current climate, speed of delivery and client care are top of the agenda.
But the way accountants go about this is very important. Rules are changing every day – the definition of an ‘essential business’, government support and bank loan programmes are constantly in flux. In normal times, an accountant’s role is to ensure their clients are aware of and reactant to these changes. Yet, how much value does this create for them in the ‘now’?
To be valuable, new information must be delivered quickly but it should also be succinct. It isn’t useful for clients to be bombarded with email updates, or reports running into hundreds of pages, trying to explain the week’s changes. With so much present noise, it’s the accountant’s task to break through the information overload and provide the client with crucial resource only.
To understand client pain points and get to the heart of what they really need, a running dialogue is essential. Building individual client relationships will unlock the potential to deliver tailored experiences that meet their business demands. Armed with this insight, accountants can then distil complex information into digestible chunks.
A more entrepreneurial spirit
Sharing insight is only the start. The other half of the story relies on consultancy. In the Covid-19 environment, the routine aspects of an accountant’s work are being supplemented with the transformative changes they can make for clients. Cashflow projections for the next six months are crucial, but even more so is the advice an accountant can offer on improving the financial outlook of a business.
To provide this balance, accountants should embrace a more entrepreneurial way of thinking. Not only advising on how clients can meet current challenges, but also how they can innovate to drive new revenue streams in the future. Part of this means being willing to step outside of their comfort zone. Many firms are already investing in the skills and technologies they need to service novel demands – like advising on relevant accounting and finance technologies.
While many businesses remain closed to the public, even as lockdown eases, they have increased capacity and flexibility to shift operations towards what will be most effective and profitable. Clients will be open to changing their business focus to meet demand spikes in other areas as they do not have to account for a disruption to customer service. For example, many distillers shifted production from beverages to hand sanitiser while bars and restaurants were closed.
With their contextual understanding of client finances, accountants are uniquely placed to advise their clients on change and guide them through the transformation process. Though this requires a more innovative model of accounting, and one that is willing to embrace the latest technologies.
Truth in the cloud
Business advice needs to be backed by data, especially for accountants engaging directly with the CFO. Scenarios need to be modelled, analysed, tracked and compared over time to arrive at the most effective proposal for the client. This is outside the wheelhouse of traditional accounting, but it’s becoming necessary in an industry heavily disrupted by new technologies.
To keep up with the ever-growing need for rapidly available data and analytics capabilities, more and more accountants are turning to the cloud to consolidate and use their data estate, while automating the time-consuming tasks of data management. Indeed, the majority (91%) of accountants have said new technology has delivered fresh value to their business in the last year, whether it increases productivity or frees up more time to focus on client needs.
Against the backdrop of coronavirus and technological disruption, a new breed of accountant is quickly emerging. Innovation is possible for those who stay ahead of client expectations and are aware of their needs, embrace an entrepreneurial mindset and adopt the latest cloud and automation technologies. In this way, an accountant becomes an integral part of their client’s business.
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