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A SLEEPING DIGITAL GIANT WAKES? 4 KEY TRENDS ACCELERATING PAYMENTS TRANSFORMATION IN THE US

Lauren Jones, International Payments Ambassador, Icon Solutions

 

The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.

Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?

  1. Real-time payments – the stimulus for change  

Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.

Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.

Lauren Jones

This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.

Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.

  1. The kids are growing up

The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.

Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.

Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.

Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.

  1. Checkmate? Evolving corporate requirements

Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.

The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.

  1. Increasing competition

A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.

Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.

For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.

 

Taking customer propositions to the next level

Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.

By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation.

 

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Business

HOW TO SAVE MONEY WHEN DEVELOPING AN APP FOR YOUR COMPANY

Creating the perfect app for your company is vital in ensuring growth and success. In fact, with 3.8 billion people owning a smartphone, phone apps are steadily becoming the quickest and easiest way of connecting with a customer base. Not only does it boost overall customer recognition, but it also increases customer satisfaction. As 70% of buying experiences are influenced by how a customer feels, increasing satisfaction can be a good way to boost sales.

However, creating apps can be extremely expensive and complex to design, especially on a small budget. While they are extremely important for small businesses, many do not have the adequate income to spend on app design. But don’t worry! Our 6 hassle-free tips will allow you to have it all! The perfect app that doesn’t break the bank – it’s almost as if Christmas has come early.

 

Research Well

The perfect app won’t just appear out of thin air. In fact, the majority of successful apps would have taken years to create. So, before doing anything, it’s important to have a solid idea of what you want. This will also mean you won’t have to spend extra time explaining to a professional when it comes to building the app. And we all know, time is money. So, sit down with a big piece of paper and don’t stop writing till you have the ideal idea. Although creating an initial idea is already a big step, it’s also always beneficial to look at the market and check for similar apps. Small similarities can be good as it means the app code won’t have to be completely new, but you don’t want to be creating an exact replica! Try and stay as unique as possible.

 

Stay Simple

No one likes a fiddly app. Try and keep your app simple and focus on the overall goal. Is the app primarily for selling? Or is it for customer feedback? It’s always good to fully understand why you’re making the app before investing the time and money into the process. This idea should lead how the app will work and what features will need to be used. Going for something simple will usually cost less money, as it will take less time to develop the code and for the code to be tested. Just remember that there are often tweaks to be made after an initial version of the app is created, so making your design simple will ensure these stay to the minimum. Additionally, keeping the interface simple may also have a positive effect on customer experience – no one likes an app with too many features that it’s impossible to find what you’re actually looking for. Simplicity is a key way of keeping costs down, while also boosting overall customer satisfaction.

 

Try a Responsive Design

To put it simply, responsive design is a design that works on all devices. Be it the smallest of smartphones, to that 90-inch wall tv, your app should merge seamlessly from one to the other. Many companies wrongly opt for creating non-responsive apps, which means that they must design new interfaces for every different sized device! Not only is this time consuming, but it also means a lot of time with a professional creating lots of unessential code. Although the professional you choose may not mention this outright, you should always ask for them to make your app a responsive design. Most developers can do this quickly and easily, saving you both money and time. Don’t make this mistake – ask your developer from the get-go!

 

Use Automated Testing

Testing an app is one of the most lengthy and expensive parts of the process. But, as annoying as it may seem to test and re-test the same code, it’s something that just has to be done. You don’t want your app to suddenly have a meltdown just as a customer goes to make a big purchase. In fact, this part of the process is probably the most important, as it helps iron-out all the small issues to ensure that your app stays working at optimum for a longer period of time. As a result, this also means you will have to spend less money on app maintenance in the future.

While it does have to be done, there are easier and more robust ways than manual testing. We highly recommend using automated testing services from a company like Global App, which is a method of testing that uses specialist software to execute pre-scripted test cases. So, in essence, it tests the app by checking the code for thousands of potential bugs that could affect it in mere minutes. If this is something that interests you, you can read about the best practices here. This super simple site explains all the benefits to automation testing, and where and how you can apply it to your app. They also offer an easy online guide to ensure this step doesn’t get too overwhelming.

 

Avoid Push Notifications

It’s important to avoid unnecessary expenses such as push notifications. These pop up like text messages or mobile alerts for your customers. While many apps may have this feature, they actually sap up a lot of money and, in the end, aren’t worth it. Why do they use up so much money? Well, not only do these require more intricate coding, which will take longer, but they also need a lot of maintenance. As they’re constantly sending and receiving information, they can often end up failing and causing more problems in the app. Additionally, push notifications can clog up the general operating of your app and make it look messy. Many customers may prefer a more clean, simple look, as it shows professionalism and indicates ease of use.

The most important tip for creating your app is to stay focused. Make sure you build a design that is in line with the apps purpose. While many developers may try and sell you additional fancy add-ons, don’t be swayed. Sticking to a simple, easy design will ensure your money stays right where you want it… safe in your bank!

 

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Business

BACK TO SCHOOL – CEOS NEED TO LEARN A NEW LANGUAGE, FAST!

By Simon Axon, Financial Services Industry Consulting practice lead in EMEA, Teradata

 

Chief Executive Officers of banks know all about change. Leading responses to new challenges, new opportunities, new regulation and new markets is all in a day’s work. But the existential challenge posed by Big Tech requires a totally new set of skills. It is an entirely different beast that inhabits a totally new environment and speaks its own language. CEOs now need to learn the language of data to survive in the emerging digital world.

Learning a new language later in life is hard. CEOs need to fully commit to accomplish it. Becoming data literate means mastering the basics of vocabulary and grammar. Gartner defines data literacy as the ability to read, write and communicate data in context, including an understanding of data sources and constructs, analytical methods and techniques applied — and the ability to describe the use case, application and resulting value.” Extending the language analogy: the building blocks are an understanding of logical data models – the basic vocabulary; meta data providing rules and information about data is the grammar.  Learning needs to go beyond parroting a few key phrases and acronyms. To really communicate in this new language CEOs must not only be data literate – but data cognitive. Language shapes thinking, and to succeed, today’s CEOs need to think data like digital natives.

Simon Axon

As anyone who has learned a language will recognise – practise makes perfect. This means rolling up your sleeves and getting into the data ‘lab’. Run some queries, experiment with data to test theories and learn how data can, and should, inform all aspects of business management. It is daunting, and different functions are fiercely protective of their data. But that’s one of the big cultural shifts the CEO needs to lead. Data is more valuable when it is used across the business. Developing safe and secure ways to combine, refine and analyse data at an enterprise level is fundamental to competing with Big Tech. The Chief Data Officer can help. Spend time with them and use them as a teaching-resource to get more familiar with what can and cannot be done with your data.

As you practise you will build confidence and move from school-level conversations to business-class data fluency. Spending more time looking at and working with data and you will begin to recognise ‘quality’ data, identify attributes and flag anomalies. This will build confidence and essential trust in data. Last year KPMG found just 35% of CEOs trusted the data in their organisations. This shocking stat undoubtedly stems from a data skills deficit among CEOs themselves. If they don’t know what to ask for, and can’t recognise what they get, they won’t trust it. To stretch our linguistic analogy, if you are not confident in the language then you’ll be anxious ordering food in a restaurant!

Ultimately, no one expects the CEO to personally implement data-analytics programmes across the business. But unless they have the confidence and the skills to accurately communicate what’s needed, to sit at the head of the table and ask the right questions about the menu, then the organisation is unlikely to put the right emphasis on the data strategy.

In How Google Works, former Google Chairman Eric Schmidt outlines how every meeting revolved around data – it is simply how Big Tech works. Banks need to adopt the same approach. Exploiting data in all scenarios must become second-nature. By modelling the use of data across the business – dissolving silos rather than sticking to narrow data sets that reinforce them, the CEO can define a powerful data culture. Operationalizing data strategy will, just like using language skills, stop data literacy from becoming rusty.

Entering any new market requires investment in understanding the language, culture and business environment. In the Big Tech world, data is the lingua franca informing every decision. Bank CEOs need to learn from them and invest in building their knowledge to become data fluent. There are no short cuts. Throwing money, bodies and tech at the problem will not get you there.

 

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