Banking is steeped in tradition – particularly when it comes to image. It is hard to think of a dress code that evokes a stronger stereotype than the Gordan Gekko red braces, pinstripe suit and shiny silver cufflinks.  But change is afoot, as a new wave of button-loosening fintech firms enter the market – and it is not just the dress code they are changing, it is also the old ways of working.

It is not wholly surprising that the wave of digitisation sweeping the industry has been met with a degree of caution by many senior figures. C-level execs find themselves leading new teams from a generation far more familiar with the technology, and it can be difficult to create a culture of digitisation from the top down.

Adapting to these digital changes and confronting them with efficient solutions across all lines of business is key to ensuring banks remain competitive. Bringing digital capabilities up to speed has become essential to a banks’ ability to adapt to the new market dynamic. However, the level of research and planning required to implement new services puts large banks at an immediate disadvantage. After all, the same rules don’t apply to smaller, younger, more technologically savvy companies without decades of technology debt to carry around. Moving too slow into digital may mean that the damage has already been done and the bank lost out on market share.

Integrated digitisation is necessary

Efforts to digitise can be seen across the industry – voice passwords, user-friendly apps and robo advisers are all positive steps. But for its full potential, digitisation needs to be incorporated throughout, not just in the customer facing channels. Integrating front-to-back technology frees up resources and streamlines business.  Scanning paper into a PDF, for example, is not “digital” as it perpetuates content that cannot be easily processed by computers. Encouraging clients to use smart forms and submitting electronic orders, on the other hand, is clearly a better way forward. On top of this, c-level execs need to ensure that they and their employees have an understanding of new technologies while also encouraging innovation in day-to-day activities so that fluidity becomes the norm, taking a leaf out of tech giants books.

A key issue remains as to what the most effective way is to implement digital transformation. Banks who retain a quarterly ‘water-fall’ release cycles find themselves quickly behind the curve. This is why an ‘agile’ approach to IT solutions delivery and change is essential, asking project and IT operations teams to carry out small but very frequent modifications in an iterative process. This calls for a change in the business operating model, bringing the relationship and level of involvement between business and IT much closer to each other.  It is a learning curve both ways and takes time to master.  Business needs to accept that daily work with agile IT teams is part of their job.  IT needs to learn to be much more business savvy.  This is a cultural change that needs to be supported accordingly.

Modern technology is like fintech workers are to banking attire, very different from 10 or 20 years ago when many, if not most, current banking platforms were designed.  The underlying database and application technologies, and the fundamental engineering behind them, have little to do with how firms such as Amazon, Google and Apple run their IT today.  Few IT departments are fully up-to-date on the latest engineering options that could be used to build systems in more efficient and fast ways. As a case in point, the databases and integration fabrics underlying “big data” platforms can be used for building business applications in addition to analytics.  All this requires mindset and skillset changes in IT. Going agile, without changing at least some of the technology platforms used to build and operate business applications, is akin to driving in the first gear only.  You can get going, but you will not get far fast.

The commercial card sector is growing strongly within a flourishing B2B payments market. Many banks recognise the opportunity that offering commercial cards to clients represents to grow revenues and enhance customer experience.  However, there is more potential in commercial card schemes than end-user convenience and provider banks need to understand this by enhancing the technology used to support these schemes.

Today, though, even larger institutions with far-reaching commercial card programmes often lack the necessary systems to analyse spend per account, recognise potential to grow revenues from specific programmes or detect customers that are growing faster.

There are many reasons why banks should consider implementing technology to drive up value for themselves and their customers by achieving smarter insights into their commercial card programmes.

Payment automation

Providers that can give customer decision-makers a dashboard view of where spend is happening and identify trends deliver transparency where it’s most required. Payment automation and the ability to capture all spend types makes financial tracking easier, helping find sources of non-compliant spend and enabling financial directors to act quickly.

Beyond this, banks also have the potential to leverage enhanced technology to underpin commercial card offerings and use that to drive important customer analytics.

Metrics to track performance

Key metrics for a bank to track to improve card delivery and performance in this area while also enhancing client engagement include spend per account (SPA), average transaction value (ATV), operational costs and profitability.

A higher SPA is likely to mean improved profitability and ROI for the issuer and greater client satisfaction with the product. Higher ATV scores generally result in greater profitability for the issuer. Moreover, tracking operational costs helps identify controllable costs which can be rapidly minimised without impacting service, while monitoring profitability helps pinpoint opportunities to extend the surplus of revenue over costs.

Added to this, the technology has the potential to track further metrics. These include delinquency rates, which, if low, offer the potential to increase issuer profitability and end user ROI and also client retention, which, if high, will reduce costs and increase the net present value of accounts booked. Other key metrics include end user cardholder perception and client perception of the banking relationship.

Grow your customer base

Taken together, analysis of these metrics will help banks understand where greater marketing effort is needed and whether the products that the customer is using are fit for purpose. Beyond this, by being able to segment the customer portfolio, marketers can prioritise products and manage incentives to keep growing their existing customer base and share of budget.

Technology alone is not a sales point for any client or commercial card provider. However, the associated benefits from delivering convenience, analytics, speed and efficiency combine to improve client retention and their overall share of wallet.

Great experiences are key in the B2B environment. If a product is easy-to-use and provides added value, customers are less tempted by change. Card owners see their costs of client acquisition fall and lifetime value increase. Payments technology can deliver strong revenue growth for issuers, even within the context of budgetary constraints.

by Kyle Ferguson, CEO at Fraedom

Entitled. Lazy. Narcissistic. Me, me, me. If you threw those descriptors at anyone  on the conference circuit in finance today they’d know exactly what you were talking about. “Millennials”, the tagline that’s a gift that keeps on giving for speakers and strategists. Banks “need” to target Millennials, they say. Give them selfie-pay, give them emoji-themed UIs, give them “bae” and “fleek” and watch them flock to your brand.

What banks and those who perpetuate this gross misunderstanding need to realise is that it’s not just wrong, it’s downright counterproductive. Many times, I’ve sat in a conference hall full of middle-aged bankers and technologists and watched as they tell me what I want. Yes, I am a Millennial but I’m also an individual. Just like not every baby boomer is to blame for the crash of the global economy, not every Millennial loves to take selfies and eat avocado on toast.

Not all snowflakes

As explained by the exceptionally concise Adam Conover, the easiest way to connect with a Millennial is to treat them like every other customer. If you respect their needs, talk to them as if they’re intelligent, well-rounded people and offer them services they desire, you’re going to get on great.

“But,” you may say, holding up the results of yet another survey into the wants and needs of the 18-35 age bracket, “Millennials want rewards, cashback, mobile-first services and convenience.” Why shouldn’t you give them those things?

The answer to that is “of course you should” but why target just Millennials? Those needs are cross-generational. In the UK, 69% of 18-24 year-olds use mobile banking, but 44% of 45-54 year-olds and 30% of 55-64 year-olds also use their mobile to do banking. Customer priorities across all age groups are ease of use (46%), speed (46%) and layout and design (41%).

Banks feel like they need to change their ways to entice young people to their side, worried by the high rate of attrition, but don’t realise that “Millennials” are just as loyal to banks that offer them the services they require. In the US, young people have a higher wallet share with their primary bank than any other generation. When a bank or credit union is found to engage with those users, they experience a boost of 25% or more in wallet share.

Not-so big spenders

The myth of the butterfly-minded young person, flitting from bank to bank spending money on games consoles, mobile phones and Starbucks needs to be addressed, too. 70% of “Millennials” are already saving for their retirement. According to FICO, they’re are also more likely than to have a home equity loan or line of credit, a credit card, financial planning or advisory services or a home mortgage loan.

While research from “The Millennial Mind” (urgh) says that 1 in 3 young people are considering switching their banks, more than half say that their bank isn’t offering anything better than the competition. Another half are looking for technology start-ups to overhaul the industry. Why is that the case? Banks have traditionally never taken a human-first approach to customer interaction.

Technology firms are offer personalised services that interact with their clients at every opportunity. Those in the age bracket of 35 and below are one of the most diverse segments of the global market. In the US, 42% of them identify as non-white, 15% are first-generation immigrants and the population identifying as Hispanic has tripled.

Banks need to re-engineer the way they operate to deliver mobile, personalised and targeted services to all segments of the market. Reducing the needs of one of the largest target demographics to “give them apps, give them selfies, give them shiny things” is a folly. Trying to lump them under one moniker and sell to them as a group, as opposed to a collection of individuals, is a road to failure.

As the ATM is turning 50 this year, it is at the centre of a massive overhaul of the retail banking landscape. Banks have to completely rethink the way in which they interact with their customers while the digital revolution is taking hold of the sector. The speed at which this change is happening is breath-taking: Data company CACI predicts that the total number of mobile app log-ins by banking customers are going to increase from 427 million in 2015 to 2.3 billion in 2020, while the number of bank branch visits is expected to almost half to 268 million per year over the same period.

With the banking revolution right under way, most ATMs today are still based on a ‘cash and dash’ model with limited additional functionality. However, with the right software strategy, they have the potential to become a cornerstone for the omni-channel banking world as the last remaining touchpoints for banks in the majority of local communities.

Our survey of 13 major ATM operators, representing over 250,000 ATMs in 30 countries, shows that the industry is held back by IT challenges, with the largest one being the continuous change in operating systems. Every time a painful operating system change has been concluded successfully, the next one is already looming on the horizon. Software changes are a challenge in and of themselves, but if they also require changes to the core of the ATM IT hardware – the PC –, the costs for what is basically just a compliance initiative can be very high. The industry’s second biggest nut to crack is change management, as rolling out new functions requires long development times and complex integration with the existing, ageing host systems. Finally, with the sophistication of large scale attacks on the rise, security, especially around malware, is a pressing issue that the sector is currently trying to solve.

The fact of the matter is that the ATM industry needs to re-think the underlying architecture of its systems if it wants the ATM to stay relevant in a modern banking world. The answer to this problem can only be to move away from PC-based hardware to a cloud based model, which would give the ATM technology that is out there the breathing space to innovate at the same speed as other channels such as mobile banking.

In a cloud model, the role of the PC-core is reduced to manage the user interface, while the cloud controls the cash dispenser. This provides a higher level of security as the nerve centre is taken out of the ATM and placed within a safe distance. What is more, ATM functionalities could be based on an ‘app’ approach, which would speed-up product development and allow banks and ATM operators to add more features at lower costs.

Rethinking the system architecture under these premises will allow the ATM to develop its full potential rather than continuing to be a simple ‘cash and dash’ facility. Moving to the cloud would be a natural (and potentially vital) development for the ATM industry and the financial services sector as a whole. The first step in this direction would be for operators to agree and implement a standard API, which would provide a set of protocols for building software applications, specifying how software components should interact.

Cloud technology is high on the agenda of the next industry event ATM and Cash Innovation Europe and there are various other initiatives among the industry that are already well under way; all of which shows us that the cloud is the direction of travel for the ATM of the future.

Eric de Putter,

Managing Partner

Payment Redesign

From both a business and a vendors’ perspective, the term ‘client reporting’ is increasingly inappropriate and lacks the necessary ambition to be effective in today’s investment management world. This situation is partially as a result of the terminology that the function uses and the perceived lack of added value within the client reporting process.

Essentially, many of the reporting solutions on the market today are largely designed to solve existing problems, such as the automation, control and governance of the current client reporting and sales information. For almost every firm within investment management though, be they institutional asset managers, retail asset managers, wealth managers and even private banks, the focus should no longer be about client reporting; the emphasis has shifted to improving the client experience: ‘going digital’, using technology to improve the business model and enhance the client interactions with the investment manager.

Client reporting is one facet of an ever-evolving requirement and firms need to stretch their vision and ambition accordingly. In the current operational structure within most investment management firms, one of the areas of the business that is closest to client needs and demands is the Client Reporting team.

Artificial constraints

Due to the fact that this area of the business calls itself ‘Client Reporting’, however, I believe it has become bound by the artificial constraints and limitations associated with the label. In fact, the reporting function is well positioned to expand its role and even place itself at the middle of this process of managing the entire client experience.

In recent times the client reporting label has often been replaced by ‘client communications’, but this is equally problematic since it is not really clear what this term entails – it is so broad as to be meaningless. The reality is that many of the existing vendors and business areas are still providing the same data sets in a relatively uninspiring and restrictive manner. To some extent this is due to the fact that their user community is focused on the production of the current reporting requirements, and managers of Client Reporting departments are rarely focused on future needs and market changes. It is clear to me though that the winds of change are starting to turn.

As we digitise our lives and businesses pell-mell, we are going to have to find answers to some awkward philosophical questions that don’t bother many of us at the moment. Such as – who will the final central bank be – an actual banker or a government bureaucrat? Can do without counterfeiters? And why can’t I choose to make that $120,000 car purchase in good-old soiled bank notes taken from my lifetime’s savings under my mattress?

A friend of mine inherited a small house from his uncle. He sold it and immediately his bank – with which he had had an otherwise happy 30-year relationship – froze his account and demanded to know where the large sum of money in his account was from. He refused to tell them on privacy grounds. They hounded him so much he took all of his funds (and his company’s money) out of this High Street bank and opened an account with Coutts, bankers to HRH. They assured him they would never ask where he got his money from – that would be a vulgar impertinence. #

Born in the USA

It was the USA which started downsizing the face values of dollars in the 1970s as it waged its first war on drugs. Every subsequent war on anything from drugs to Furbies is presaged with a warning on the need to stamp out money laundering and the denominations on our notes get smaller and smaller.

Even though the US Federal Reserve has devalued the dollar over 80% since 1969, it still will not issue notes larger than $100 – in a country which once boasted a $10,000 note. This makes it very difficult to use cash for large transactions, which forces people to use electronic payment methods. And that is its purpose – to track all of our transactions and allow Google and Facebook to make wads of cash selling our data.

But it is not the mighty USA which is winning the mad dash towards a cashless society – it is a little Nordic country called Sweden. Sweden is now famous for more than alcoholic CEOs* and Abba.

Sweden’s supply of physical currency has dropped over 50% in six years. Many Swedish banks no longer carry cash. Virtually all Swedes pay for newspapers, sweets, and coffee electronically. Homeless street vendors use mobile card readers.

And this is where it gets interesting. An increasing number of government restrictions are making sure that the Swedes are happy to be cashless. The excuses from the bureaucrats are familiar… fighting terrorism, money laundering, making criminal transactions more difficult, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

Renting the vaults that make you poor

The other sting in the tail is negative interest rates – where the user of the bank has to pay for the privilege of depositing money in the bank – surely the most perverse upending of the movement of market forces by technology. With cash, you can decide to leave your stash under the mattress. As Denmark, Sweden and Switzerland all have negative interest rates and are all in the advance guard in the use of digital currencies that should worry us.

If there is a Nordic push towards stimulating spending by making it punitive to save, then I’m worried even more. I want the choice to do with my money what I want, and I don’t want every penny I spend being logged and making money for the Google’s of the world as tiny bites in the big data picture.

Full digitisation of currency would put the counterfeiters out of business but only on the surface. It would mean that only the hugely rich and the hugely powerful can create or take away our money.  Or print it.

* Ingvar Feodor Kamprad ex-CEO of IKEA and self-confessed alcoholic. Stood down as CEO in 2013.

Many see the money transfer sector as a market that is more than ripe for technological disruption. While it is true that customer demand for digital options to transfer money is on the rise, we need to understand what a truly customer-centric approach to channel strategy looks like. After all, we are aiming to reach as large a range of consumers across the globe as possible. The world-wide rise in financial inclusion and the subsequent changes in how people manage their money plays an integral part in finding the right balance when it comes to our channels.

Technology is necessary, but not sufficient in its own right

Operating with a singular and one-sided channel strategy is no longer a sustainable option in a world where consumers have grown accustomed to an increasingly customer-centric financial services sector. While digital solutions are an integral component for success in the cross-border payments industry, they are not enough to act on their own. A sustainable channel strategy must look beyond technology to deliver the widest range of choice for customers because offering more flexibility allows you to reach the largest possible amount of customers.

The right response to increasing financial inclusion

Despite the fact that money transfer businesses have traditionally been seen as competitors to the banking sector, a key focus for a sustainable and forward-looking strategy should be the development of strong relationships with financial institutions. This is because a growing banking sector across the world means that financial institutions will play an increasingly crucial role in letting people receive and access their money.

Between 2011 and 2014, over 700m people in the world received access to a bank account for the first time. While the current number of ‘unbanked’ people across the world is still estimated to be around 2bn, the World Bank and its partners are working towards reducing this number considerably by 2020: the target is to add another 1bn bank account holders by 2020. For markets like India and China, where currently almost a third of the world’s unbanked population is located, this rise in access to accounts is going to have a significant impact in the way that people handle their money and make use of financial services. In the money transfer sector, we can be certain that the demand for transfers directly into bank accounts will rise steadily over the next few years as a result.

Partnerships with banks as the way forward

Money transfer businesses which have a direct agreement in place with banks are best positioned to take full advantage of the rapidly increasing financial inclusion, because these relationships have an immediate impact on the user experience of our customers. Without a direct agreement in place, money that is transferred to banks disappears into the abyss of the international systems of inter-bank payments for several days. Usually, with a large number of middle-men in the picture, it is hard to predict exactly how long a transfer is going to take, or what amount of money will exactly arrive in the recipient’s bank account due to different exchange rates and fees applied by financial institutions along the way.

Developing direct relationships with banks makes transferring money overseas easier for the business as well as the customer. Money transfer businesses must consider taking advantage of the potential explosion in financial inclusion by going beyond a singular, technology-driven strategy, to a truly multi-channel approach that embraces technology, as well as alternative avenues that customers might use to transfer their money. By partnering with banks, money transfer businesses can complement their sophisticated digital solutions and make their channel strategy more sustainable. After all, we must remember that we are first and foremost a financial service – in other words, we must not forget the ‘Fin’ in FinTech.

Nick Day is founder and CEO of London-based money transfer business Small World FS