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BANKING ON A GOOD CATCH BUT FISHING WITH THE WRONG TACKLE?

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Rob Green, Altus Consulting

 

Like myself, there many must be parents taking a deep breath having spent a frantic September packaging up and delivering their son or daughter to university. One of the tasks in helping their journey towards financial “independence” was to open a new bank account appropriate for, let’s face it, a challenging few years of net spend. Many banks offer tailored “Student Accounts” which combine practicality, such as generous overdraft terms, with tempting “perks” targeting the student demographic. But once the fish are hooked, my own experience shows that all aspects of the onboarding journey need to work to ensure the fish are safely netted.

As with all good “shopping around” tasks our journey began with a Google search, in this case for top-rated student bank accounts. My son’s priority was an account with the best freebie. Particularly appealing was a top-rated account with a cash gift and one-year prime membership account for a leading online fashion retailer. Dad being dad, I wanted the account most appropriate for supporting him financially over a 4 year course, i.e. one with excellent overdraft T&Cs, but unfortunately no freebies! In a rare turn of events, I was able to sway him to my point of view (probably the idea of a money tree that does eventually stop bearing fruit). For convenience, let’s call my option Bank A and my son’s Bank B.

My son started his online application to Bank A and reached a field that required his student UCAS code number. My son’s code denoted “offer accepted and entry grades achieved”. However, a real-time validation check by Bank A could not verify the UCAS code. Thinking this might be a temporary glitch he tried again later in the day, with the same result. “Can I try Bank B?” said my son. No. The offer from Bank A was a good one so we pushed on. In a call to Bank A’s help desk (the wait time being impressively short), my son was asked to email his UCAS offer, which he did immediately – the document was rejected as documentary proof!

“Can I just apply to Bank B?” said my son. Having given Bank A more than one opportunity in the on-line and manual journeys, I was happy to accede and face the inevitable “should have listened to me in the first place Dad”. Within ten minutes my son had successfully completed an online application with Bank B. This included the very same verification of UCAS code status as Bank A, this time with a positive outcome, and for Bank B, the fish had been safely netted.

In what should have been a straightforward digital onboarding journey Bank A has gone from a position of strength as an independently rated top student bank account, to channelling its potential customers into the arms of a competitor. But it is clear, no matter how good your product is, a customer must be able to buy it.

Did Bank A provide a technically robust on-boarding journey? Without knowing the exact reason for the failure to verify the UCAS code it is hard to say. If the verification is performed in real-time via a 3rd party API for example, why did it fail consistently for Bank A, but succeed for Bank B within such a short space of time since the last unsuccessful attempt with Bank A? If the failure was out of the control of Bank A, e.g., unavailability of the API for a period of time, was there an adequate retry period? Why did it also fail an hour later? Even worse, if the Bank A validation was being made against a static look up table of codes, how many other potential customers would be hitting the same problem giving up on the application, before the problem is fixed? Are there analytics in place to monitor incomplete journeys, with alerts firing at adequate intervals for information to reach those who can fix the problem as soon as possible?

Could Bank A have planned and handled this situation better? They would have known a UCAS API would have peak traffic during periods in September – it is a critical period for new business. With the glowing reviews of the product on offer, there would surely have been a predictable surge in applications. Had peak traffic been simulated in the testing cycle? Could the UCAS code have been checked at a later date? Is this how Bank B designed their online journey? Of concern too, would be that with a customer still engaged enough to phone the helpdesk, he still could not complete the application manually.  Inadequate testing of the end to end online journey potentially lost Bank A not just a current account customer, but quite possibly a lost opportunity to upsell savings, loans and mortgages equating to significant lifetime value to the bank.

Customer journeys have a beginning and end, and no matter how good they are in part they must deliver end to end. For Bank A the line was cast, the bait was taken, but after reeling in, the hook was empty.

 

Banking

HOW TRADITIONAL INSURERS CAN USE TECHNOLOGY TO IMPROVE THEIR RELATIONSHIP WITH CUSTOMERS

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The customer experience with insurance is anomalous, in that one is only required to engage with their insurer if things are going wrong for them. To add value to the relationship, new technology and methods should be adopted, in turn driving loyalty and business growth, writes Oliver Werneyer, CEO and Co-founder of Imburse

Oliver Werneyer

Insurance is one of the oldest industries in the world and it is still, to this day, considered a grudge purchase. Looking back, insurance has a history of having a challenging relationship with its customers. According to an IBM study, in 2008, only 39% of consumers trusted the insurance industry. This percentage has stayed largely similar over the years, having reached only 42% in 2020. For any business with growth ambitions, good customer relationships are crucial.

I believe that now more than ever, the insurance industry not only needs to continue investing in improving relationships with customers, but to really think about new ways of doing so. At a basic level, the moment of truth for an insurance customer is when either they need to pay or are getting paid. Insurers can have the best policy wording, quick claims processes, apps and advisors, but if the experience to pay premiums or to receive a claim is bad, the customer immediately loses trust.

The pandemic has exposed this tenuous relationship between insurers and its customers. The need to move everything online and provide personalised services has exposed significant shortcomings in the service insurers provide. The industry has been too slow to adopt newer technologies and move engagements closer to the customer (self-service and empowered). This is largely due to the legacy systems and processes that insurers failed to modernise over previous years.

This means that the better-positioned incumbents have stronger customer relationships and benefit disproportionately from the pandemic, as they are able to win more new customers and convert customers from other insurers. They also benefit from significantly lower customer acquisition costs and much better growth, as illustrated in this McKinsey report. Even new entrants or InsurTechs are benefitting massively by focusing on improved customer experience and customer relationships.

However, it is never too late for insurers to build better relationships with customers. The main way to build a good relationship with a client is to make life easier, live up to promises and add value through the relationship with them. By working on these key elements, insurers can start building strong relationships with their customers, and, through the right partners, deliver this in a timely and non-disruptive manner.

 

Embedded Services

Insurance products often get a bad reputation because they cost money, but the benefits might only come much later, or never. Customers don’t get to experience a positive relationship with insurance products, either because they never claim and feel like they lost out, or they claim and they’re in a bad situation. By either embedding other services into the insurance experience to deliver a more transactional engagement, or embedding insurance products into general customer experiences such as online shopping or rewards, insurers can enrich customer relationships to generate value.

This way, insurers become a value-adding part of the customers’ everyday activities and not just a product that they have to pay for and may never get anything back from. One example is to embed micro-savings capabilities, often found in banking, into pension savings and insurance products. This can allow customers to save more for pension, attract younger customers and build a portfolio of fiscally disciplined customers.

 

Tailored journeys and personalisation

Customers have come to expect personalised journeys and engagements from product providers. Streaming services, social media, e-commerce or mobility services have shaped the customer expectations. Now, customers are also expecting personalisation for insurers.

Insurers need to invest very heavily in delivering personalisation and customisation to customers as they engage with their products. Failure to deliver this puts renewed strain on the value perceived by the customer and their relationship with the insurer. This applies not only to customer interfaces, but to aspects such as payments. Insurers should make it easy and pleasant for customers to pay and get paid. As the main moment of truth, payment experiences need to work optimally.

 

Perceived customer value metrics and delivery

The value customers derive from insurance products is, generally, monetary. Therefore, insurers must invest in product enhancement to increase its perceived value. Perceived value is not tied to a monetary value. By being able to choose between multiple payment options, such as a $300 pay-out to a bank account or a $320 Amazon voucher, the customer has a higher perceived value of the payment. This can be achieved by leveraging non-insurance products that can be purchased at a discounted price, exclusive access that the customer would otherwise not have or conversion into a form that is more useful to the customer.

Payments, for collection and pay-out, are at the core of delivering this value. An excellent payment experience immediately influences the customer to be positively inclined toward a product (PwC report). In order to offer this, insurers need to leverage multiple technologies and providers, offer any speed of transaction in any market, and deliver faster automation and better risk control. The key is to transform insurance products into transactional value-adds to customers’ lives and use this opportunity to continuously build on relationships with customers.

The main roadblock for insurers is still the operational implications of these activities and the costs that arise. In looking to build a better customer relationship, insurers need to look at partners that are operational enablers to deliver this. Partners that can solve the integration and speed-to-market problem so that insurers are enabled to deliver new capabilities, not bombard them with new ideas and no path to delivery.

Imburse, for instance, enables insurers to access all the global payment providers and technologies available in any market. Through a single connection, insurers can deploy any payment capability into any channel, for collection and pay-outs, without ever again needing to build a direct operational integration to the providers. This gives them full freedom to leverage payments as a key value driver and customer experience enhancer.

Building a better relationship with insurance customers is key for the insurance industry to close the protection gap. Incumbents are in the prime position to look at Insurtech and Fintech partners to rapidly and significantly modernise, digitalise and transform their own capabilities to deliver major enhanced value to their customers.

Imburse is an advanced universal payment connector that enables businesses to gain cost-effective access to complete global payments technology, regardless of the service provider. To learn more, please visit www.imbursepayments.com.

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Banking

UNCHARTED TERRITORY: HOW OPEN BANKING CAN HELP BANKS NAVIGATE COVID CHALLENGES

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Opinion from Rafa Plantier, Head of UK and Ireland at Tink

The last year has propelled banks, businesses and consumers alike into uncharted territory. Changes which would normally have spanned years were compressed into months. Financial institutions who had already embarked on the path of digital transformation had to accelerate their plans, and customers of all walks of life had to become acquainted with using digital services almost exclusively.

Rafa Plantier

According to our recent research report ‘Open banking in the post-pandemic world’, 41% of European financial executives believe the shift from digital-sometimes to digital-first during the Covid-19 pandemic will be permanent for the financial services industry.

There are two sides to this coin: it’s indisputable that industry and economies have been weakened as a result of Covid-19. A drop in revenues and profits, regulatory challenges, new disruptive market entrants, and low interest rates, all mean that banks are poised in a delicate position. However, open banking represents a significant opportunity for banks transitioning from analogue to digital, and from closed to open. Here are three ways open banking can benefit financial institutions in the post-pandemic world.

 

Putting innovation in the fast-lane

Covid-19 led to a rapid, unforeseen change in consumer behaviour that meant digital innovation became a need-right-now rather than a nice-to-have. Over the last year, financial institutions had to innovate in real time to ensure business continuity and serve their customers as their needs changed swiftly.

The sense of urgency is palpable across the industry. Over two thirds (65%) of financial services executives surveyed agreed that it’s necessary for banks to increase their speed of innovation as a result of the pandemic, and 74% of financial executives believe the pandemic has increased the need to enhance digital services.

Open banking technology can act as a catalyst to innovation and digitalisation. It can enable access to tools and capabilities which are scalable across geographies, lines of business and customer segments. For example, by using techniques such as recycling code or toggling different data-driven services, banks can short-circuit the time to market for their own digital services.

 

Unlocking commercial opportunities

Legacy revenue streams have recently faced downward pressure and profit lines have begun to diminish for banks. Banks now need to ensure their digital ventures are competitive enough to survive in an increasingly crowded digital marketplace.

Open banking technology helps improve customer value and engagement — crucial as seven in 10 (70%) financial executives believe that the pandemic has increased focus on the customer experience.

It also provides the opportunity for banks to identify customer needs and deliver a personalised proposition shaped to each individual. For example, through account information services, banks can create bespoke user experiences which keep customers coming back. In addition to this, financial institutions can use personal finance management technology to engage with and create value for the customer — giving them invaluable insights to boost their financial health and identify risk areas.

 

Empowering operational efficiencies

Historically in banking, customers were required to transfer several onboarding documents — from proof of address to citizenship status. Not only was this a drain on the customer, but at the other end banks had to manually review and assess the documents provided.

Open banking can expedite everything from customer onboarding and due diligence to risk assessment processes. It simplifies the process for the customer as well as increasing operational efficiencies on the bank’s end, by allowing them to quickly retrieve customer information through connections to their primary bank.

Now customer data can be fetched in real-time and in a machine-readable format, financial institutions can onboard quickly and with significantly lower risk. With 68% of financial executives believing there has been a renewed focus on profitability since the pandemic, lowering costs and enabling efficiencies wherever possible will be make or break for some institutions.

The good news is that the benefits offered by open banking are now also coming to business accounts. At Tink, we are already live with this in the UK and Sweden — enabling companies to leverage business account data to create the same seamless services and enhanced user experiences for business and individual account holders alike. And in a world where customers are actively consenting to access their financial information to get better services, requesting that consent to enable open banking payments and transfers is a natural next step

 

The industry is just at the start of the open banking journey

The appetite for leveraging open banking technology is accelerating, as it climbs even higher on the agenda of executives. Over two thirds (68%) of financial executives surveyed across Europe say that their interest in open banking has been piqued by the pandemic as they recognised its potential to lower risk, anticipate financial distress, increase sales, and enhance customer experience.

As the dust settles, one thing has become clear – open banking has emerged as a vital enabler of gaining a competitive advantage for financial institutions, by improving the customer experience in a post-pandemic world.

To learn more, read Tink’s open banking report ‘Open banking in a post-pandemic world’, here.

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