As technology evolves and FinTech takes a grip on the financial services industry, today’s banks have a distinct opportunity to engage consumers through financial innovation that not only better supports savings, purchases and investments, but does so with positive sustainability credentials and a reduced environmental impact.

By Dan Harden, Director of Business Transformation, Paragon Customer Communications

Even over a decade since the severe financial crisis of 2007-08, the activities of banks and other financial services providers remain under a great level of scrutiny. And none more so than when it comes to their environmental impact and green credentials.

Just last year, the Banking on Climate Change 2020 report revealed that 35 of the world’s leading banks have provided $2.7 trillion to fossil fuel companies in the four years since the adoption of the Paris Agreement (2016-2019). This is equivalent to more than $1.5 billion for every day since the end of 2015, with no downward trend and no assessment of the carbon impact of that finance.

The formation of The Partnership for Carbon Accounting Financials (PCAF) – a global partnership of financial institutions committed to facilitating transparency and accountability of the financial industry to the Paris Agreement – and the launch of the first global standard to measure and report financed greenhouse gas (GHG) emissions associated with their loans and investments, was a signal of intent for the industry.

The spotlight on institutions, however, is no longer solely being pointed by local and international regulators, but also by a wider public including clients, employees and investors concerned about sustainability.

Deloitte’s Better Banking Survey recently revealed more than 60 per cent of some 1,250 British adults would leave their bank if they found out it was linked to environmental or social harm, even if it had the best financial offer available. Further, seven out of 10 people said they would be more likely to choose a bank that had a positive social and environmental impact.

All this combined means sustainability, responsibility, and the disclosure and reporting on carbon emissions are now very much a critical competitive advantage within the financial services sector.

Meeting the global standard for Green Finance

As banks seek to quell public and regulatory pressures, and improve their environmental credentials, technology has become a fundamental tool for delivering sustainable business operations. FinTech is already an innately sustainable alternative to the traditional banking, allowing consumers to manage their finances using digital technology, removing the reliance on paper-based transactions and even the need to travel.

Banks, for instance, are enhancing their low-carbon offering and reducing climate risk through intuitive technologies such as chatbots and virtual assistants, artificial intelligence and machine learning powered robo-advisors, as well as increasingly intuitive banking apps. Digital integration is being executed to bring together the platforms used for transactions, data management and customer interactions for a seamless and sustainable omnichannel delivery model.

Such platforms are not only allowing financial institutions to take the necessary technological steps towards sustainability, but also delivering better service for consumers and CX. Secure and almost always at hand, they make the process of carrying out financial transactions, accessing products, getting advice and financial updates far simpler, reducing the need to visit branches, or make calls.

Centralised Customer Communications Management (CCM)

Of course, before widespread technological change is adopted, banks must ensure they have the most effective and efficient CCM solutions in place.

Organisations are increasingly seeing the benefits of adopting a single, centralised, customer communications management deliver model – a “one platform” approach that underpins communications across all channels and technologies. By doing so, banks can ensure they have the delivery infrastructure to support a truly frictionless CX across a multitude of traditional and digital channels, while at the same time facilitating transformation at pace.

A consolidated perspective of communications can facilitate the analysis of lifecycle sustainability impacts, allowing financial organisations to choose supply chain partners that are committed to the same values including negative emissions, zero waste to landfill and creating an environmentally resilient future.

In a bid to deliver a roadmap to Net Positive Communications, banks are working with knowledgeable partners to help them implement the tools and technologies that will make net-zero emissions technologies deployable at significant scale, in turn, delivering on their long-term sustainability goals and aspirations.

The ever-changing expectations and demands of customers emanate from the experiences they are accustomed to in daily life. From having a paperless customer experience at an Apple Store to using Alexa to order household items are now common and have set experience benchmarks for banks and lenders.

By Ajay Vij, Head – UK, SVP – Industry Head, Financial Services, Infosys

The financial services industry is challenged by the expansion of disruptors inside and outside of the industry. Firms such as digital mortgage brokers, price comparison sites, and credit bureaus will combine to enable one-click product research, threatening to relegate banks to back-end product providers. Price comparison sites and personal finance management (PFM) apps will merge, combining a proven business model around product comparison with deep financial insight.

The financial services enterprises that are driving accelerated growth and success today are the ones who are finding fast lanes through technology, data, and processes to leverage and expand their ecosystems, and to sense, predict and respond to customer experience opportunities.

Customer experience makes or breaks organisations and plays a huge role in the success of their products and services.  Since eliminating friction from user interaction is a huge priority in an experience economy, businesses need to focus on organising their products, systems, and technology infrastructure around that goal. The best experiences in the market are built on a modern technology foundation that leverages Artificial Intelligence, Machine Learning, Big Data Analytics, etc., to create personalised products and contextual engagements so that the right proposition is made to the right customer at the right time. With products becoming commoditised, customer experience has emerged as the biggest source of competitive advantage.

Therefore, it is no surprise that experience transformation is a major goal in any digital transformation effort. In fact, for 87% of the respondents in the latest EFMA Infosys Finacle Innovation in Retail Banking survey, customer engagement is at the core of their transformation plans. But experience transformation is not merely the digitisation of manual processes; it is a design-led approach that puts the human user—customer, business partner, and employee—at the centre.  This can be done through bringing several elements together, from employee and customer experience to data intelligence and advanced analytics. And it’s not just the ‘glass’ or user interface that’s delivering the experience, but a living, breathing ecosystem of partners offering best-of-breed products, services and interactions to fulfil ever-increasing expectations.

Incumbents versus challengers

In a survey of millennials conducted a few years ago, 70% of the respondents said they would rather bank with Google than a traditional institution. Having earned the appreciation of customers for best fulfilling their expectations, digital players, such as big tech, FinTech, challenger banks, and neo banks, are now enjoying their trust as well—and attracting these notoriously fickle consumers in droves.

In response, traditional banks need to consider both the customer experience and customer journey, and the role technology will play in accelerating innovation of intuitive tools for customers. Equally important is accelerating the delivery of employee-facing digital tools and experiences. This will create a new digital agenda focused on transforming user experiences, so they become human-centric and deliver greater customer value and enable employees with new tools and capabilities.

Another thing to consider is the investment in resources. Even large financial services organisations don’t have full-fledged experience design departments. Most outline a broad vision of experience and leave the details to others, typically their outsourcing partners. Ideally, they should integrate experience into the core of their business as a part of day-to-day operations.

Next steps

Looking ahead, financial services companies have their task cut out in 2021. In 2020, the pandemic forced almost every organisation into digital overdrive; this year, they must build on that effort by accelerating experience transformation. That means digitising end-to-end journeys, processes, product offerings and interventions.

As FinTechs and other new entities come under increasing regulation, they are gaining the confidence of all customers. Incumbent firms must set out to reclaim the trust, and the customers, they have ceded to their rivals. But these changes to customer experience can only be carried out if there is a supportive environment—in other words, a culture of innovation, quick decision making, the right talent and a ‘digital first’ mindset.

Here, the support of a trusted technology partner can be crucial for driving change throughout the organisation. When identifying a partner, companies must look for expertise in designing human-centric customer journeys and experiences besides technology credentials in areas such as data intelligence, platforms, process optimisation, security and compliance. Together, the organisation and the right partner will be able to foster the right environment and resources to provide a winning customer experience.

Achieving excellence in omnichannel customer experience is both imperative and a huge source of competitive advantage in the world of digital banking. Here are four fronts that banks need to act on simultaneously to achieve a successful digital-first omnichannel banking.

By Puneet Chhahira, Global Head, Marketing & FinTech Engagements, Infosys Finacle

Digital is disruptive, pervasive, and transformative. The ubiquitous digitization of our world that has upended businesses and organizations across all industries has had a transformative impact on the financial services industry – reshaping the whole customer-experience ecosystem and legacy business models.

The crisis ushered in by the pandemic has further heightened the level of urgency for digital transformation, proving to be one of the positive outcomes of the pandemic. That said, banks are still moving at a slower pace than desirable. This is corroborated by the findings of the Infosys Finacle Efma ‘Innovation in Retail Banking’ 2020 report¹ – only 7 percent of the 700 banking executives interviewed believe that their organization has deployed digital transformation at scale and is reaping the desired results. The remaining 93% are at different stages, with the highest being 49%, confirming that the digital transformation is partially deployed and is delivering as expected.

Constantly evolving, omnichannel banking in the digital age means that banking must be accessible on all the channels of discovery and value delivery, including mobile, internet, chat, voice banking, and smartwatch. The next step is to embed financial services so deeply within customers’ lifestyles that they are virtually invisible; examples include integrating peer-to-peer payments within social channels, consumer loans within e-commerce sites, or “buy now pay later” features. A roadmap for getting there could possibly look like this:

1. Reimagining the business model:

The vertically integrated pipeline business model in financial services – bank manufacturing its products, matchmaking products with its customers, and distributing through its channels – is breaking apart and giving way to distributed platform-business models. There is tremendous evolution happening across this linear value chain. Let us look at each of these layers individually.

Today, some of the most progressive banks globally are platform businesses that aggregate a wide range of financial and non-financial products from various providers. They are transforming their product portfolios by:

• Creating game-changing joint products with other banks/FinTechs/digital giants – Apple partnered with Marcus by Goldman Sachs (and Mastercard) to launch Apple Card
• Embedding non-financial lifestyle products into their journey such as hotel, flight, cab, event bookings, movie ticketing, among others
• Collaborating with third parties in delivering competing products such as higher interest-paying deposits or a unique lending proposition- Paytm has joined forces with IndusInd Bank offering high value fixed deposits and with ICICI Bank to offer digital loans.

On the channels’ front, banks look to offer aggregated products and services not just through their own channels but also through API-led distribution on third-party channels, apps, non-bank channels such as smart home automation devices.

Given the fragmentation happening across these layers, a bank can choose to focus on a platform-business model in one of the three ways:

1. Be a banking manufacturer that makes best-in-class products that it sells through various self-owned and third-party channels. For example, bank leveraging third party channels to sell their credit products
2. Be a banking marketplace that offers a combination of self and third-party products. For example, Starling bank from the UK offers a marketplace providing services from best-of-breed partners in the area of accounting software, wealth management services, pension accounts, among others.
3. Offer banking on a platform by providing products and services to Neo-banks to set up new businesses. For example, Telefonica Deutschland, a mobile telecommunications company, launched O2 banking – a mobile-only bank account built on German bank Fidor’s platform. It enables transactions through mobile, offers small instant loans and better mobile data plans.

 

2. Reimagine customer experience for the open banking world

Customers today are spoilt for choice. They are highly demanding, impatient, and would not hesitate to switch from their preferred brand after just one bad experience. The rapidly unfolding digital trends have further pushed the envelope on customer engagement: in the past 20 years, banking transactions have gone from 50 percent in-branch to 95 percent digital self-service channels. Customers are unwaveringly shifting to platforms owned third-party channels of the open economy. In India, for instance, over 85% of the open payments transactions (UPI-based payments) are recorded by non-banking players like Google Pay, Phone Pe, and Paytm.

Another emerging trend is embedding banking into the primary journeys of the customer. For example, a car financing journey will commence not when the customer needs a loan but when the customer is considering buying or upgrading a car. For instance, DBS participates in the customers’ primary journey by operating successful marketplaces for used cars, property, travel, and utilities. This also extends to business banking, where leading banks are integrating their services through popular ERP solutions.

Finally, on the roadmap to customer-centricity, leveraging modern technologies such as AI, mobile, open-APIs, augmented and virtual reality will play a determining role in delivering experiences that are a lot more personalized, contextual, and outcome-oriented that customers will prefer.

 

3. Turning Data into Competitive Advantage

Data is the key. It is driving the success of both Big Tech and FinTechs in spaces traditionally occupied by banks. For example, Google’s foray into autonomous cars is driven by their success with maps. Banks need to move from traditional interest and fee income models to data-led monetization models – lest other digital platforms do the same and eat the market share. They must look beyond segment-based offerings and pricing to customer-specific offerings and pricing. For instance, loans can move from uniform lending rates to individual pricing.

They must leverage the power of big data and advanced analytics to anticipate customer behavior and requirements and use these insights and other data, such as location and payment preferences, to push contextual, personalized offers at scale.

 

4. Drive ubiquitous automation to reset the industry benchmarks

Automation is a critical competitive strength. Digitisation has radically altered the cost-efficiency in banking. Simply compare the cost-income ratios of the top 1,000 banks, 50 percent on average, with the 40 percent of digitally advanced banks and 30 percent of digital-only banks to understand the cost pressures the incumbents are facing. In a world where digitization has become the default, incumbent financial institutions would thus need to double down on their automation journeys to reset the benchmark – operate at a higher level of efficiency, increase the ability to price well, and ability to drive sustenance.

Technologies such as RPA, cognitive automation, API, blockchain, cloud, etc., will help drive automation and operate at a much efficient level. With enhanced cognitive technologies, banks will be able to progress into an environment where processes with machines and software at either end would bring up the possibility of autonomous banking. Customer service will almost entirely move towards self-service channels supported by smart assistants, where required, or we will witness an era of near-zero back-office where smart machines manage the entire processes. Think of automated banking tasks driven by google assistant. Or self-driving cars paying for fuel themselves. This will enable the delivery of smarter services.

 

Endnote:

Achieving excellence in omnichannel customer experience is both imperative and a huge source of competitive advantage in the world of digital banking. Banks need to act on all four fronts in parallel to achieve a successful digital-first omnichannel banking.

Sources:

1. EFMA, Infosys Finacle: Innovation in Retail Banking 2020 – https://www.edgeverve.com/finacle/efma-innovation-in-retail-banking/

By Guy Warren, CEO, ITRS Group

On February 20th 2020, the markets began to react to Covid-19, as one country after another was plunged into lockdown. On the 11th March, the World Health Organization declared the outbreak a pandemic and by March 23rd the S&P had lost 34 per cent of its value.

Fast forward twelve months and the trading landscape has changed forever – but not necessarily as a consequence of the virus. Instead, the retail trading revolt of Reddit users has been the true catalyst to change the game entirely. Even more so than a global pandemic.

Until now, retail trading has tended to shadow the market, rather than move it significantly one way or another. That luxury was previously reserved for institutional investors or hedge funds. Yet, following the successful coordination of a large group of traders the power dynamic has shifted, and the ability to move the market is now accessible to all. And although the democratisation of investments is welcomed, the activity exposed the vulnerability of global market infrastructure, while also exposing the weaknesses of individual firms trading systems. Reddit users placed significant stress on trading structures as volumes surged, resulting in multiple outages across high profile retail portals. Systems should be ready for anything, yet just short of a year since the markets collapsed, those who have been preparing for the unexpected are still being floored by the unimaginable.

Over the next twelve months, the power of the retail investor will grow. Lockdown has left people with more money and fewer places to spend it – alongside a growing awareness of investing. And while experts are still unsure of exactly how the market will react to this new phenomenon, firms must get a handle on the exact volume their systems can take.

To begin future-proofing themselves, firms must first understand their present headroom. All systems have a limit of how many trades they can do per minute, yet many firms do not know what the limit is, let alone how to address potential points of failure. Now is the time to end the trial-and-error approach to capacity and get a handle on the exact volume their systems can house today.

Capacity planning tools are essential, helping firms to not just calculate their headroom, but identify where potential pinch points exist within their IT systems. Modelling and stress testing also play a crucial role in the capacity planning of systems. The right software tool allows you to stress test ‘worst-case’ scenarios, which then enables firms to put in place plans to deal with this. By using machine learning and modelling scenarios that haven’t happened yet, firms can better predict what their systems can and cannot withstand. Companies need to avoid taking a stab in the dark regarding how much capacity their system can hold. They can use predictive scenario models such as ITRS’ ‘forward-thinking’ solution to model a variety of worst-case scenarios.

Uncertainty is the order of the day, whether you’re an individual or a business. Yet, if the last twelve months has taught financial services anything, it’s to be prepared for the unexpected. By utilising the right IT software, firms can gain vital insight into their IT estates and prepare themselves for the unimaginable.

Guy Warren
CEO
ITRS Group

Many of us use physical biometric authentication every day when we log into our mobile devices. It relies on innate human characteristics such as fingerprints or iris patterns. But what are behavioural biometrics?

By Abdeslam Alaoui Smaili, CEO, HPS

The pandemic has accelerated the global journey towards cashlessness and digitalisation. The transition away from cash and towards digital payments has brought with it many benefits, including greater financial inclusion in developing countries, since those who were previously unbanked now have greater access to merchants and services through the use of mobile money.

With the emergence of real-time confirmation and settlement, merchants have greater visibility and view on liquidity. This greater transparency is also helping governments to develop better-regulated tax systems and to more easily identify fraud and financial crime.

In order to combat the heightened risk of fraud that comes with the increased use of digital payments, it is vital to adopt rigorous digital authentication and security measures to protect consumers – and biometric measures can help to bridge this gap.

It is estimated that nearly 90% of smartphones around the world will have a form of biometric capability by 2024, according to research by Juniper. It also forecasts that $2.5 trillion in mobile payments will be facilitated by biometric data by 2024.

But what are behavioural biometrics?

In the payments world, behavioural biometrics, also called DNA mapping, are used to prove the identity of the user, authenticate the user and prevent fraud. For instance, mobile and online experiences built with behavioural DNA mapping can ensure a seamless and secure customer experience by analysing multiple data sets including the way a user holds their phone (in their left hand or right hand), the sizing of their hand, the way they swipe, navigate, or even the way they turn on the mobile.

Today’s behavioural biometric platforms can collect more than 2,000 parameters from a mobile device by leveraging artificial intelligence (AI) and machine learning (ML) techniques. The collected data is used to create and train a customised security model for each user in order to secure his account and differentiate him from impersonators and robots. The trained models are polled to give an optimal prediction in real-time while the user is logging in, and as result the fraud detection can be accomplished without impacting the login performance.

The perfect match for payments

Since behavioural biometrics offer a frictionless authentication method, it is ideal for digital transactions. It does not exert any change into the user experience which keeps the effort required on the part of the consumer to a minimum.

Behavioural biometrics have strong fraud detection capabilities: it is possible to distinguish a real user from an impostor by recognising normal user behaviour and fraudulent behaviour in real time. For example, if you somebody was to steal your phone and try to log into your phone, your mobile wallet or your online banking applications, an efficient behavioural biometrics solution will be able to block the user, even if the password used is the correct one – simply because the way the thief used your phone would be different to the way that you use it.

It can also be used to detect fraudulent activity online and to help distinguish a robot to a human user by analysing several elements. For example, how is the text being typed? How long does it take the user to fill in each field? How does the user navigate the website? Do they usually scroll this fast? Are they taking longer than usual to answer their memorable information?

Behavioural biometrics continues to strike the right balance demanded by the payments landscape. The authentication is invisible, but mobile and online payments remain secured. As more businesses, governments and countries begin to digitalise in response to the Covid-19 crisis, the demand for behavioural biometrics technology and its ability to protect consumers looks set to grow.

Financial services businesses have bold ambitions to cater to today’s digital natives and deliver better service and usability for customers overall. But could better customer service come at a security cost?

By Michael Down, Principal Solutions Architect, Elastic

Improvements to customer service can increase security risk by expanding the attack vector of the business and introducing evermore security vulnerabilities that can be exploited by cybercriminals.

I see many firms at the edge of the new digital transformation era that are hampered by their security provisions, which either do not scale or are not flexible enough to meet the growing demands of the business. Security can never be an afterthought. In a tightly regulated industry where security is a critical element of every bank’s function, it’s imperative that every bank gets it right from the outset.

Large global banks with distributed departments in markets worldwide that are looking for ways to solve the security problem can’t just throw more security personnel at the issue. That just increases OPEX and in many cases does not actually increase the overall security of the bank.

Businesses must continually weigh up risk and cost. They want to know the risk and cost of deploying new technology that will enable new services. It’s the same for security. Today’s businesses have less free capital to invest and need to grapple with how they use existing systems better and unlock more value with new investments. That comes from better use of data.

Businesses need to start using data and algorithmic thinking to solve security problems. Collect and analyse the data available to them in real-time, using machine learning to create an automated response, and not as isolated departments but as a holistic organisation to strengthen trends and pattern monitoring.

By making better use of existing data and systems, the cost issue that plagues so many banks is more easily solved. What’s more, the time to value investments is improved through increased understanding of how they work and creating baselines that mean anomalies are easier to spot and act upon. It’s a smarter approach to security that means banks shouldn’t be afraid to make investments and prepare for the future.

Elastic is a search company built on a free and open heritage. Anyone can use Elastic products and solutions to get started quickly and frictionlessly. Elastic offers three solutions for enterprise search, observability, and security, built on one technology stack that can be deployed anywhere.