IBSi Blogs

Like it or not, at some point in your life you will buy an electric vehicle (EV). Perhaps it will be for yourself (a powerful Tesla Model X or a sensible Toyota Prius) or for your company (a Mercedes eSprinter for deliveries or a large Renault DZE for hauling heavy goods) but either way the EV revolution is coming and every watt of power that charges an EV will need to be paid for.

By Anthony Wicks, Key Account Manager, Self-Service GSV – Parking & EVC, Worldline

In the UK, the government is phasing out internal combustion engine (ICE) vehicles starting in 2030 – a deadline that the current administration brought ahead by 10 years. This, combined with a system of grants for electric vehicles and charging points, should drastically reduce vehicle emissions – a source of not just atmospheric CO2 that contributes to climate change, but nitrogen dioxide and fine particulate matter that has been claimed to cause some 40,000 deaths per year in the UK.

Consumers are getting on board too. There are nearly 500,000 EVs on the UK’s roads – a small fraction of the 38.8 million total, but five times what it was in 2015. The current European EV fleet stands at 2.3 million in 2020, however it is estimated to rise to 34 million in 2030. As charging infrastructure grows, as it becomes as common to see EV charging as it is petrol stations (the number of which have fallen by 35% since 2000), more people will buy EVs. Currently, they are a niche, with buyers purchasing them either out of environmental concerns or just for the cool factor, but they will become a standard choice for many drivers over the next decade.

Building a new infrastructure around fuel

Charging an EV is not like refuelling an ICE vehicle, it takes much longer. Currently, there are three categories of EV charger: slow, fast and ultra-fast (also known as rapid and ultra-rapid, and occasionally you may find it broken down into slow, fast, rapid and ultra-rapid). Slow chargers, the most common, use around 7kW and can typically fully charge an average EV car from empty in eight hours – these will typically be overnight chargers that people will have in their homes. A 50kW model can add 100 miles of range in around 35 minutes, and ultra-fast 150kW chargers are available that bring charging times down to a few minutes.

This means that the whole structure of charging a vehicle must change. It may become common to leave your car on charge in your garage overnight rather than ever visiting public charging stations if you are only using your vehicle for commuting and shopping. Drivers who must travel further afield might choose to charge in purpose-built charging areas with cafes and entertainment, much like service stations. We are increasingly finding that businesses that have little to do with fuel offer EV charging as an added extra – you can recharge your vehicle while shopping at a supermarket, or anywhere that there is parking.

It also means that payments must adapt to the way that people will be using chargers. Charging points will mostly be unattended, so ensuring that customers have a positive experience, that customers who need help can access it and that unscrupulous customers cannot commit fraud will be all down to the design and capabilities of charging points.

What EV charging operators need

For the reasons above, charging stations will be unlike any other piece of infrastructure that we use currently, somewhere between petrol pumps and vending machines, but in some ways not like either of these.

Consider the question of when the payment for charging is taken: if we use the model currently used on vending machines, where a customer taps or swipes their card, their details are taken, they make their order and the amount is deducted from their account, then there could be problems. If a customer taps their card, uses £100 of charging but does not have the funds to pay for that amount, what happens? If you use your card after you are done charging what would prevent somebody from simply driving away? If you pay upfront for £100 of electricity but have to abandon the charging process halfway through, how is the refund processed? If a customer pays by smartphone, which currently has a £100 limit, then what happens if they leave their car charging for £110? Will tourists be able to pay in their own currency? Then there are the payment methods that modern consumers have come to expect: app payments, ‘click and collect’, loyalty programmes (which will need to carry over from existing fuel loyalty programmes) and an omnichannel experience that keeps the same interface across multiple devices.

You can see how complicated EV charging can get, and this is before we have considered security protocols like PSD2 and 3D Secure or new banking rules like Open Banking. EV Payments tie together two pieces of what will become everyday life for billions of people: EVs and digital payments. Businesses need to get the payment system right because consumers who find the already long-winded process of charging an EV difficult can always switch to charging at home.

Solutions for the day after tomorrow

New payment solutions, such as Worldline’s Easy EV hardware and software, are designed to be the one-size-fits-all solution to the growing EV charging market, able to adapt to any EV hardware and any client business model across Western Europe. The systems are compatible with a huge range of payment types and should new payment methods emerge they can be rolled out easily.

The solution works with both end-to-end and standalone payment processing, with pre-authorisation and electronic receipts available as standard for users opting for end-to-end processing. What’s more, acquiring on an end-to-end solution is included for both a standalone version as well as the full end to end solution. This means that whichever solution EV charging providers opt for, in any country in Europe, they can be assured that they are getting a service that ensures that customers can pay for their charging.

Security is a major concern for any payment, especially at unattended electric charging stations, and the latest security standards are built in at the point of sale without adding extra steps for the customer. As is standard in modern payments, this security layer is designed to be as frictionless as possible.

We know that EVs are going to become standard soon, probably overtaking ICE vehicles several years before the 2030 deadline. Payment providers, charging station manufacturers and operators should work together to create payment experiences that make something that consumers will have to do several times a week into a joy instead of a burden.

Many banks turned to low-code automation to handle new government-backed lending programmes and the surge in demand that came with them. For the banks and financial institutions involved in processing stimulus loans, the volume of applications and complex administrative effort required has been potentially overwhelming.

By Herbert Schild, Industry Lead, Financial Services, Appian

By simplifying and automating loan processes, low-code can accelerate the time from loan application to disbursement, which could be a lifeline to businesses. Low-code automation technology allows financial institutions to create applications quickly and integrate them seamlessly into existing systems.

If a new lending scheme, regulatory or loan criteria change comes in, applications can be flexibly adapted at any time and at pace. Applications developed on a low-code automation platform can be deployed immediately and used across devices. Whether in the cloud, on-premise or as a hybrid, a low-code automation platform should comply with the highest security standards. This allows bankers and mortgage advisors to work on a loan at any time and from any location with data privacy and information security. The pandemic and associated lockdowns changed work culture as we know it. Enabling employees to work from home with sensitive data in a secure, flexible way has never been more important and it is the way of the future.

Robotic Process Automation (RPA) for routine, repetitive tasks

RPA or even digital loan applications are still relatively underused in the banking industry, despite available options and potential to add value. One can automate rules-based daily routines such as data entry and updates across systems, freeing employees from repetitive tasks so they can take on new and more strategic work. In addition, RPA reduces risk and human errors from manual data entry. Ultimately, data quality improves for faster and more accurate lending assessments.

In practice, banks also take an economic risk every time they add new customers. Complying with regulations like Customer Due Diligence (CDD), Know Your Customer (KYC) and Anti-Money Laundering (AML) screening is expensive and time-consuming. RPA speeds up the customer onboarding and compliance processes by automatically capturing, enhancing, and delivering precise data for faster loan qualification. This speeds up the application process, and leads to faster,more reliable approvals.

Risk management, Artificial Intelligence (AI) and Intelligent Document Processing (IDP)

The promise of AI remains alluring yet still seems out of reach for most practical technology implementations. However, the reality is within grasp. AI can support financial institutions in a variety of ways, including quick loan programmes, from processing applications to issuing funds. Intelligent AI systems can identify multiple applications from the same borrower or from a non-existent company, thus playing an important role in risk and fraud detection and prevention. Based on internal information from credit decisions and customer repayment behavior, as well as external data sources such as credit scores, AI can recognise patterns to assess new loan applications. Such information can help determine the creditworthiness of the potential new or existing customer for faster loan decision.

AI does more than provide value on risk management. Intelligent Document Processing (IDP) technology takes unstructured data in PDFs and other documents, converts them into structured data to help systems process them. Machine learning and AI technologies are combined and supplemented by employees, if necessary. This combination of people, technology and data enables lenders to concentrate on what’s important in issuing stimulus loans without being slowed down by tedious data entry and analysis.

When time is of the essence, low-code automation has the advantage

Governments have introduced various stimulus lending packages but many banks struggle with processing loan applications quickly enough to help keep businesses afloat during the pandemic. Processes that can’t keep up with change or require lots of manual intervention to adapt are substantial barriers. The adoption of a low-code automation platform has enabled credit institutions across the world to react quickly to change and advance digitisation.

RPA, AI, IDP and data integrations on a low-code development platform, empowers change – fast. Banks and financial institutions can adapt to the circumstances and growing demand, as well as automating manual and complex processes to improve effectiveness, manage risk, increase customer and employee satisfaction. These are crucial to succeeding in today’s decentralised work environment.

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.

Across Europe, consumers have largely turned cashless during the pandemic, with contactless and online payments increasing exponentially. But with the high streets across Europe slowly entering into the new normal, will consumers demand a return to cash payments?

By Koen Vanpraet, Group CEO, PXP Financial

The COVID-19 Effect on European E-Commerce and Retail from PXP Financial surveyed consumers in six European countries, finding widely varying appetites towards a cashless society. For example, Poland is the most enthusiastic to ditch cash, while The Netherlands the least – and the UK is smack in the middle with its views on the matter.

In the research, 41% of consumers across the six countries – UK, Spain, Germany, The Netherlands, Poland and Italy – indicated that they would feel positive about a cashless society, while 31% would feel negative. Poland topped the tables of going cashless with 54% of respondents indicating positivity towards dropping cash. Italy followed on 49%, Spain next with 42% followed by the UK at 40%. The two least positive countries were Germany on 33% and the Netherlands on 31%.

A culture of cash

Despite the varying attitudes towards a cashless society, consumers across most of the countries showed enthusiastic uptake of cashless payments – contactless payments, e-wallets, mobile payments, and wearables among them. The notable exception was Germany. For most Germans, using cash isn’t just a personal preference; it’s a cultural value that they’ve grown up with and one tied closely to a national value with centuries-old roots.

But even here as the pandemic has pushed what would have been previously low-value cash transactions onto other payment types, a whopping 73% of German consumers said they had to change their favoured payment method – cash – during the pandemic. When asked what payment methods they tried as a result of the pandemic, Germans overwhelmingly favoured PayPal as their preferred non-cash payment form at 58%, followed by contactless at 48% and online banking at nearly 43%.

Looking at combined answers from all respondents, when asked what payment methods they had tried because of the pandemic, 48% of people have tried contactless. The highest uptake was in Poland at 70%, with Spain ranking the lowest at 27%. Respondents are now also more likely to spend money at retailers that offered contactless/contact-free payment options than before Covid-19, with 65% of all respondents saying yes. Again, Polish shoppers (80%) are more predisposed to contactless, given that it was one of the first countries in Europe to trial the technology.

Re-evaluating the value of cash

Other country-specific highlights in the report show some surprising trends. Italy is one of the most cash-heavy societies in Europe, but the arrival of Covid-19 has led to a rapid re-evaluation by consumers of their payment habits. In the PXP Financial survey, Italian respondents are mostly favourable about the prospect of a cashless society, with nearly 50% seeing it as positive, compared to 21% who viewed it negatively.

The irony of heavy cash usage in Italy is that it gave rise to the introduction of prepaid and contactless payment. Italy is one of the most advanced contactless countries in the world. These figures were reflected in the survey, with nearly 44% stating that they had tried contactless because of the pandemic. Over 63% said they had tried PayPal, while 38% had opted for online banking. Those who tried mobile payments for the first time amounted to just over 14%.

Meanwhile in Spain, although Spaniards are traditionally avid cash users, there are positive signs that things are changing in favour of non-cash methods. Compared to their European counterparts, it appears that Spanish shoppers wouldn’t be sad to see the end of cash. Around 42% believe a cashless society is a good thing, whereas 34% view it as a negative. This is evidenced by the fact that the popularity of payment cards in Spain (particularly credit cards) has surged in recent years, and in mid-2020, for the first time, card usage overtook cash.

At the dawn of a contactless society

Even before the pandemic, there were some European countries who were already deep into the development of a contactless society, with the UK already being entrenched in contactless payments.  But that doesn’t mean everyone was and around 52% of respondents said that they had been influenced to try out contactless payments as a result of the pandemic.

Usage of online banking and PayPal was neck and neck at roughly 38% each. Meanwhile, mobile payments had caught the attention of 22% of UK consumers surveyed, while a further 6% said that they had tried wearable payment forms like watches and wristbands during the pandemic.

Poland is a technologically advanced market, with more dynamic payment method usage than in neighbouring Germany. Poland was one of the first European countries to pioneer contactless payments, evidenced by an overwhelming 80% of Polish respondents said they would now be more likely to spend money at a retailer that offered contactless payment options than before Covid.

Polish consumers overall have a positive view on having a cashless society, with 54% seeing it as a welcome prospect. On the other hand, 19% viewed the end of cash as a negative.

As a result of the pandemic, Polish consumers were more willing to try new payment methods compared to the other countries in the survey. Over 70% stated that they had tried contactless, while a significant 81% said they had opted for online banking. PayPal scored highly in Poland too, with 92% of respondents trying it for the first time during the pandemic.

The Netherlands already has one of the highest rates of non-cash payment method usage in Europe but is characterised by a few anomalies compared to other European markets.

Although non-cash payments are extremely popular, online banking and credit transfers, rather than debit cards, are favoured by Dutch consumers. Cards account for a lower proportion of retail sales compared to other European countries. Credit card usage in particular ranks much lower in the Netherlands when compared to the UK, for example.

But when it comes to getting rid of cash altogether, Dutch respondents are reluctant to wave goodbye to bank notes and coins. 38% of those surveyed view a cashless society negatively, compared to 31% who think going completely cashless is a positive thing.

Preparing for the ‘new normal’

The PXP Financial research shows how important having the widest possible choice of payment methods is for retailers.

Retailers and payment organisations need to work together to understand what their customers need in the new normal as the high streets across Europe open up once again. Together, retailers and payment organisations can develop solutions to ensure continued customer loyalty even as the face of retail changes in line with the widening array of payment methods. Added-value services like loyalty schemes, promotions, in-store rewards through QR codes are all valuable tools that retailers can use to offer their customers convenience, speedy footfall and payment security.

The research underscores the need for retailers to understand the direction of consumers’ attitudes towards where they shop, how they pay for the goods they are buying and what they require from retailers going forward. Covid’s new normal has accelerated the speed of direction and retailers must catch up with their customers.

The global pandemic has forced many customers to use digital touchpoints and services for the first time. However, a wide gap separates billions of consumers from the solutions stack that digital banking provides.

By Sathish Muthukrishnan, Chief Information, Data & Digital Officer, Ally Financial

Persuading consumers to make the leap takes patience and a personalised approach, but above all, it requires education. Here are three common myths about digital banking – debunked:

Myth #1: There is a lack of customer care in digital banking

Many people perceive in-person communication as the epitome of customer service. In numerous industries, it continues to serve both as a symbol of customer commitment and as a measuring stick by which consumers gauge an organisation’s authenticity and accountability. In banking, however, technology creates more of a bridge than it does a divide. Digital banks often provide 24-hour support and offer their customers a variety of communication channels – including mobile, computer, phone, and chat.

Receiving great customer service from an online-only institution may seem counterintuitive, but in its best form, digital banking can be anticipatory, seamless, and frictionless. The focus on technology that underpins digital banks means the customer experience is more consistent, efficient, and personalised than face-to-face service offers. In an era where bank customers are more transient than ever, the high retention rates of digital banks speak for themselves.

Myth #2: Digital banking creates a language barrier

Consumers who do not consider themselves digitally ‘fluent’ may assume that creating and maintaining an online account for digital banking services is too difficult. However, the fact that digital banks acquire most of their customers via an online-only journey means they are forced to create simple, easily understood processes.

Opening an account with a good digital bank generally takes no more than five minutes and, based on the information provided, customers may receive additional recommendations for personalised services, tools, and investments. Many customers are surprised to learn digital banking also operates on very little ‘fine print’ material – some use none – which provides a stark contrast to the pages full of legal disclaimers most traditional banks require customers to sign.

While digital banking may appear as a series of opaque obstacles, especially for digital non-natives, its functions and services are designed for maximum accessibility – no matter the customer’s background or technological adeptness.

Myth #3: Digital banking is less secure

Digital banks operate under the same regulations as traditional physical banks. Good digital banks also incorporate security into the design of all their operations and processes and continually build on security features to protect customers’ deposits, transactions, and personal data.

At a minimum, digital banking provides the same level of monitoring and safeguarding as traditional banks. But many of them leverage technology to add even more layers of protection to customer data. Executives are aware that trust is a major factor in converting consumers to digital banks and go the extra mile to ensure their organizations offer market-leading security.

The Bottom Line

Digital banks are typically more sustainable and less fragile than traditional banks. The people-first mindset that the best in digital banking embody is exactly why they are so convenient, easy to use, hyper-secure, and available around the clock. The value retained by eliminating physical infrastructure is passed on to customers – and increasingly, those consumers are taking note.

In most ways, digital banking represents smarter business – maximum value is delivered to customers at lower operating costs.

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.

In this article, Rajashekara V. Maiya, Vice President and Head, Business Consulting Group, Infosys Finacle, speaks about four key trends in the era of digital transformation that are changing the nature of loans, borrowers and lenders.

The size of a nation’s lending portfolio is closely linked to its economic growth and development. Take South East Asia as an example where the countries that have high GDP growth also have high loan-to-GDP ratios. All these countries have a robust lending market supplying affordable, hassle-free financing to corporate, SME and retail borrowers, creating consumption-driven growth momentum.

But this was not always the case. China in 1975, Thailand in the 1980s and Malaysia in the 1990s were all struggling to grow their GDP. But then they went through a retail boom, when per capita income crossed a threshold US$ 1000 to stoke the aspirations of the people for a better lifestyle, better housing, better transportation etc., which created a demand for retail financing. Today, the world is in a different yet similar situation, with the pandemic denting economic health globally. One way to reclaim growth is to fuel consumption, and one way of fueling consumption is by boosting retail lending.

Currently, there is ample scope to increase the loan-to-GDP ratio in many parts of the world. This is especially the case in developing countries, which need to bring their substantial underbanked population within the ambit of formal banking. However, that would stress the infrastructure of their banking technology landscape beyond tolerable levels. The only solution is to transform the retail lending landscape, across the formal banking industry as well as the informal, unorganized sector. This includes lending processes and banking workflows, as well as the associated technology infrastructure.

The other important thing to consider are the broad trends that are sweeping retail lending across the globe. We can categorize these as changes in the nature of loans, of borrowers, and of lenders.

A loan that is no longer that

The biggest trend here is that the loan has become incidental, almost invisible, in the consumption journey. Customers don’t want loans per se; they are only a means to fulfil a primary expressed need, for a car, for a college education, for a home and so forth. Therefore, banks’ conversations with customers should be about helping them achieve their primary desires rather than pushing a lending product. The product-centric approach to lending is now outdated, and has been replaced by a customer-centric or even customer-specific mindset of helping customers fulfil their unique desires while offering the best financing option in their particular context.

A customer who is demanding but debt-friendly

Today’s retail borrower is very different from the one of even a few years ago. There is no patience for spending hours in a branch gathering information and filling out forms.  As a product of the digital age, this borrower expects financing to be delivered to him or her, on a digital device of choice. A key expectation is that the loan application and onboarding process will be digital. Another is that the terms of lending will be a balance of borrowers’ rights as well as their obligations.

Many trends have gone into shaping this customer. Ample choice is one of them. For instance, a customer buying a car can get an attractive loan from a non-bank financing company or from the financing arm of the automobile manufacturer itself. The customer embarks on a redefined journey where a bank has no role to play. Another influencing factor is demography: more than 70 percent of the global population is below the age of 30 and almost everyone is digitally connected. Far from being debt-averse like generations past, these young customers demand deferred payment options such as credit card payments, monthly installments and the popular “buy now pay later” facility from Amazon.

A lender who has raised the bar

Some years ago, “lender” usually meant a commercial bank. Today, the definition includes a plethora of providers, from Fintech companies to retail businesses to even social networks, offering financing in different forms and flavors. Amazon is a standout example, with a loan portfolio in excess of US$ 10 billion spread across its gigantic merchant base. Amazon’s lending process is not just completely digital, it takes all of 3 clicks to boot! What’s more, the company offers attractive rates, with full transparency and no hidden costs.

Traditional banks are at serious risk of being left out of the new lending paradigm. To stay relevant, they need to reimagine their customer journeys to match the benchmarks being set by the likes of Amazon. At a minimum that would mean designing a lending process that is digital from end-to-end, where origination, eligibility checks, approval and servicing can be completed within a few clicks. Secondly, banks should rely less on agents and brokers to sell their loans, replacing them with a digital alternative, such as a mobile app.

One more trend that is changing the face of banking – and consequently impacting lending – is the platform business model. The platform is front and center in digital loan processing. It is also enabling lenders to participate in the primary journeys of customers by creating online marketplaces for non-banking products and services. DBS Bank, with its highly successful platforms for used cars, travel, real estate and utilities, is a great example. The bank makes no mention of its banking products in these marketplaces; however, once a customer has fulfilled a primary need, for a new utility connection, for example, the platform offers an option to use a DBS Bank account to set up a standing payment instruction.

A word on the pandemic

By accelerating digitization in every sphere, including lending, the pandemic opened the doors to simpler, transparent, cost-effective loans. In the latest EFMA Infosys Finacle Innovation in Retail Banking Study, financial institutions cited that the highest levels of innovation success were seen in the lending¹. But could it also set off another trend, one where banks participate in improving the health of their customer communities? Just like insurance companies, which tap digital information about customers’ driving habits or lifestyle, to determine premium, could banks link the terms of lending to customers’ vaccination status by accessing their digital records subject to consent? It remains to be seen.

References:

https://www.edgeverve.com/finacle/efma-innovation-in-retail-banking/

Over the past 12 months, retail merchants have had to contend with high street closures, furlough schemes and in-store mandates such as face coverings and social distancing. New consumer trends have also emerged, and existing ones have been turbocharged.

By Kirsty Morris, Managing Director of Barclaycard Payments

To help merchants, and their payments and finance providers in the UK prioritise business planning, Barclaycard Payments has pulled together its top 10 ‘lockdown legacies’ set to outlast Covid-19 restrictions. They are:

1. Growth in home deliveries: Consumers have been receiving an average of two extra retail deliveries per month since March 2020 (7 parcels now versus 5 before March 2020). Over half expect to receive the same amount, or even more, in the future.
2. Click & Collect boom: Around one in three (30%) consumers say they have used ‘Click and Collect’ more frequently since the start of the pandemic. Of those, 90% say they’ll continue to do so in the long-term.
3. Rising rate of returns: In the last 12 months, over half (51%) of Brits have returned items that they have bought online, compared to 47% in the same period in 2019 and 46% in 2016.
4. “Come to me” retail: Since the start of the pandemic, one in 10 (9%) consumers have used “come to me” retail, where a concierge-style service delivers clothing to customers’ homes and waits while they try it on, so that they can immediately return any items they don’t want. Meanwhile, a third (34%) of shoppers said they would be more inclined to buy from a brand offering “come to me” retail as an option.
5. Mobile payments soaring: Barclays consumer debit data reveals that Apple Pay grew rapidly in 2020 compared to 2019, in particular in Leisure & Entertainment, where online debit transactions increased by 70%.
6. Staying local: Almost two thirds (64%) of Brits are choosing to shop closer to home. Barclaycard Payments data shows shoppers spent an extra 63.3% in February 2021 at food and drink specialist stores such as butchers, bakers and greengrocers compared to last year.
7. More mindful spending: Nearly three quarters of people (71%) now think more carefully about how they spend their money and, of those, nine in ten (92%) say they’ll continue to do so even after lockdown lifts.
8. Online grocery shopping surge: Online grocery shopping has seen consistent growth over the past 12 months, with Barclaycard data revealing a 115.2% year-on-year increase in February 2021. 57% of Brits say they’ll continue to buy at least some of their groceries online even after all restrictions end.
9. Dine-at-home experiences: In an attempt to recreate the restaurant experience at home, 10% of Brits tried a DIY meal kit for the first-time during lockdown. Around a quarter (24%) of these people will continue purchasing these services after hospitality venues reopen.
10. Investing in infrastructure: Barclaycard Payments’ research with retail merchants shows that small and medium sized businesses are responding to this new landscape, with nearly three in ten (29%) planning to invest in new equipment and technology in 2021, and (13%) viewing technology as the top opportunity for growth over the next year.

If our trends highlight one thing, it’s that fast, convenient and secure shopping is no longer just a consumer preference, it is a now a universal expectation.

For merchants, this means there is a need to create better customer-focused experiences, particularly when it comes to e-commerce and payments. Technology has a huge part to play in this: for instance, payment gateways, such as Barclaycard’s own Smartpay platform, often support one-click purchases and allow buyers to pay for retail purchases with a number of different methods in a smooth, safe and seamless way.

Never in recent history have we seen the convergence of two super trends on the scale of blockchain and cryptocurrencies, and artificial intelligence (AI). The adoption of cryptocurrencies has exploded.  There are now 70 million cryptocurrency wallets, which starts to approach about 1% of the global population.  The massive influx of new users and new money has led to significant interest and support from major financial investors and institutions alike.

By Janet Adams, Consultant, International Compliance Association

Combine the developments in cryptocurrencies with the increasing use of AI and Robotics Process Automation (RPA) and it creates an interesting dynamic.  Forbes predicted: “2021 is the year when AI will go mainstream,” while a report by McKinsey stated: “Banks need to deploy AI at scale, to remain relevant and to become AI-first institutions.”

The impact of the pandemic

Covid-19 has also played its part. Previously, public perception of AI and RPA in the western world was tinged with a concern for robots stealing people’s jobs.  Now, the general public can increasingly see how technology can help keep people safe.  With Covid-19 the unimaginable happened.  Although it has resulted in catastrophic consequences, such a moment of change has also opened the door to the emergence of new technologies and business models.

Put cryptocurrencies and AI together and, as we head into the next decade, the results could be astonishing.  These seismic shifts are underpinned by enablers including cloud computing, big data, payments innovation, plus increased competition from the likes of Amazon, Apple and Google which are all entering the financial services space.  This environment is set against a backdrop of a shift in customer expectation with millennials, disillusioned with old banking structures and open to embracing new ways of managing finance and payment transactions.

Centralised finance will need to find ways to compete and thrive; for example by collaborating with decentralised finance, and working together to evolve a new world economic structure to provide better products for the societies we serve.  It is now an imperative that banks learn how to deploy AI safely and effectively, with appropriate skills and frameworks in place to maximise AI’s benefits while minimising its risks.

Regulation and ethics

However, regulation needs to keep pace and evolve to meet these changing requirements.  In 2020, I reviewed the guidance from around the world from all government and public bodies.  At the time there were in the region of 22 published speeches on the subject of risk management of AI.

My aim was to identify the requirement for safe and ethical implementation of AI in banking and how it could become compliant and ensure fair outcomes for customers, while serving market integrity.  The model I proposed at the 2020 IEEE International Conference on Fuzzy Systems inextricably links accountability and explainability as the key for successful AI implementation in financial services.  These overarching principles need to be underpinned by the right governance and compliance.

To establish risk and governance frameworks effectively, for safe and ethical implementation of AI, transparency of algorithms (and how they are used) is also important.  Human autonomy and respect in the way we ensure we are not using AI to nudge people to limit choices and reduce human self-agency is necessary.

Robustness and operational resilience of technology is critical for success, and AI implementations must be accurate and able to supply reliable results.  Fairness, reliability and accessibility is also important to ensure we are inclusive in our implementations.

From an ethical perspective, our AI implementations must benefit society as a whole and be in-line with organisational and personal principles and values to retain the authenticity of our work.

The education is there.  We all need to learn, change, adapt and grow to be part of this new movement.

The International Compliance Association (ICA) is the leading professional body for the global regulatory and financial crime compliance community, and provides support, training and qualifications to compliance professionals.