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Finance

COVID-19 WILL DRIVE FINTECH ADOPTION – BUT AT WHAT COST?

By Ian Bradbury, CTO – Financial Services at Fujitsu UK

 

Even before the impact of Covid-19, the financial services landscape had been changing. The shift away from legacy systems in favour of innovative, agile systems continued to change the customer experience. It completely changed expectations as well – smooth, convenient and easy-to-use interfaces are now an expectation in almost every part of our lives.

The proof is there for us to all see – three quarters (75%) of global consumers now use a money transfer and payments fintech service. What Covid-19 has done is change not only how everyone purchases basic daily goods like groceries but also other non-essential services and items. The desire for businesses to become ‘cash-free’ to curb the virus spreading has played its part.

 

Ian Bradbury

Safety becomes the top priority

In our report last year, we found that 77% of British consumers only bank with “traditional” high street banks – with just one in ten consumers using a challenger bank only. But thanks to the pandemic, this is now changing.

Covid-19 has forced all organisations and consumers to operate with a digital-first mindset. Payment companies are experiencing a particular resurgence because they not only provide convenience but can be used as a safe way to pay for items; the increase in the value of contactless payments to safeguard people was a smart digital tweak.

The reality facing all governments now is a ‘new normal’ where the impact of the coronavirus lasts for years. And while this could be the final push that fintechs need, one other likely outcome is that this leads to a lack of support for older and more vulnerable consumers in society who traditionally find it harder to access and use modern-day electronic payment services.

 

The forgotten customer

Last month, Age UK shared an open letter to the FCA asking for better guidance to banks and building societies on how they can support their older customers. And traditional financial organisations can learn from digital banks that model their services on ease and availability to consumers. Digital player Starling offers a 24/7 in-app chat and, more specifically in relation to Covid-19, various resources to support savings accounts, prevent fraud and even provide tips on how to work from home effectively. It shows us that the benefits of a cashless society are too strong to ignore yet thought must be given to consumers of all ages, backgrounds and experiences.

Now more than ever, one of the likely outcomes of Covid-19 in the long term will be a falling reliance on traditional methods of payment. This will mean a move away from cash to chip and pin, as well as an increase in apps.

Innovation shouldn’t stop, far from it. But the financial sector – regulators, companies and governments alike – must work together to understand that different customers and businesses want different things, and they need to be flexible and adaptive enough to support this.

 

Innovation requires balance

In theory, it’s likely that, as consumers age, today’s generation will become more comfortable in relying on digital services and using physical money less. Yet until that point is reached there is no guarantee that cash will disappear completely from our society. Only by education – and therefore understanding – will consumers of all ages become more comfortable in using digital apps and payment services.

Everyone from traditional banks like NatWest RBS to digital entrants Monzo need to look at how innovation can drive a positive conversation in the financial services sector, especially as the world starts to recover and remerge from the coronavirus pandemic.

In an increasingly crowded market, organisations that can put the customer at the very heart of everything will triumph. Technology can enable change, but it is not the be all and end all. Ultimately, it’s down to the business itself to deliver services to all of society that improves the quality of life. Only then will financial institutes gain the support of the public in the short- and long-term.

 

Finance

DIGITAL FINANCE: UNLOCKING NEW CAPITAL IN DISRUPTED MARKETS

Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises the ability they need to improve cash flow and revenue through better use of data and improved analytics-driven visibility.  

Businesses everywhere are scrambling to recover lost revenues and protect cash flow. But as countries globally grapple with a dreaded second wave of the pandemic, imposing far more stringent localised lockdowns and new restrictions, it is set to be the hardest winter in living memory for many sectors.

The likelihood of winter peaks, so often the saviour of sectors such as travel and hospitality, benefitting businesses is diminishing rapidly. While many have pivoted to a greater or lesser degree, few have been able to offset the impact of falling revenues on cash flow. Even retail, riding an e-commerce boom in many regions, is finding itself in choppy waters, with 17 percent of consumers switching brands due to the economic pressures and changing priorities caused by the pandemic.

As one McKinsey article notes, “With some companies losing up to 75 percent of their revenues in a single quarter, cash isn’t just king – it’s now critical for survival”. Where then do businesses find new sources of cash to sustain their operations through the coming months?

 

Tapping Overlooked Cash Opportunities

Krishnan Raghunathan

For many, the answer could depend on whether they have digitally transformed their finance department. Why? Because many organisations are sitting on unidentified opportunities, funds that could be vital in shoring up businesses over the next few months or plugging the gap between operating costs and government bailouts. Yet those that have been slow to start their digital transformation journey are at a disadvantage;. At the same time, it is possible to identify these hidden seams in an analogue organisation, the process is time-consuming, manually intensive and, without the right digital tools, prone to human error.

Where deploying digital tools helps is by bringing speed, automation and reliable data to the fore. Connecting them with digital finance and accounting systems can give businesses clear insights into how money is being spent, where wastage is occurring, and where opportunities for optimisation exist.

It might be something as simple as automating the accuracy checking, issuing and chasing of invoices and late payments. This could reduce errors and invoice disputes and ultimately lead to faster payments. Accuracy and organisation are also important in billing – better records enable faster billing for work completed, and in turn, should deliver quicker payments.

It could also be around having the ability to review the supply chain and procurement data and identify where a supplier is subsidising a larger customer’s product line through drawn-out payment terms, or where a variety of vendors are on different terms across the business. Using that data and overall knowledge of the business to negotiate better terms that work for both supplier and customer can create new opportunities. It could even be to identify late-paying customers, determine the reason for late payments, and use that intelligence to develop products or financing solutions that continue to support those customers (and improve loyalty) without increasing the burden on the balance sheet.

 

Generating Reliable Insights for Faster Decision-making

To do any of these manually would take months, generating data slowly that would quickly go out of date. But digital finance departments have evidence they can trust to inform business decision-making. That’s because old, manual processes built around Order-to-Cash lack the flexibility and agility that businesses require in today’s markets. The fact is that even before the global pandemic crisis, the pace of digitisation across all sectors was demanding new approaches to finance and book balance.

The opportunities are significant – from cognitive credit and improved forecasting accuracy to enhanced customer analytics. All use similar tools, based on artificial intelligence and quality, trusted data. Cognitive credit can be deployed to quickly make decisions on whether to advance or restrict credit, based on individual company positions and available data. Doing so enables businesses to either capitalise on opportunities (for instance, agreeing credit for a supplier that has run out but is a supportive and integral partner) or avoid risk (in the cases where a business might be in administration).

With more accurate forecasts, businesses can better manage their currency purchases and deposits, selling currency that is not required or buying more where predictions identify an upcoming demand.

It is the same with customer analytics – with a greater understanding of customer needs, businesses can make decisions based on the right mix of the product (and how it meets demand) and supply chain suitability (such as production costs and location in relation to customers).

In many ways, the events of the past year have accelerated the process. In doing so, the problem is the pandemic has also accelerated the speed at which failure to act can lead to obsolescence. Therefore, it is vital that businesses, and more particularly their finance and accounting departments, kick start their digital transformation. This will enable them to deploy the tools and analytics that is needed to capture data, generate insights and drive fast, accurate decision-making to uncover previously untapped sources of cash and reverse revenue degradation.

 

The Importance of Digitally Enabled Finance Teams

Forward-thinking CFOs have already begun the process of digitising their departments, but for those that have been slow to start, now is the time to push forward. It is only through digital tools and analytics that finance leaders can identify both the internal and external opportunities to recover revenue and improve cash flow. Whether that’s releasing working capital, minimising revenue loss and accelerating revenue recovery, reducing total cost of ownership or enhancing customer retention – only digitally enabled finance teams will be in a position to capitalise and, ultimately, bolster business performance during what will be a trading period like no other.

 

 

About the author: Krishnan Raghunathan

Krishnan Raghunathan is the head of Finance & Accounting (F&A) practice and operations at WNS. He also leads the international delivery locations in China, Costa Rica,  Spain, Sri Lanka, Romania, The Philippines, Poland and USA.

Prior to this, Krishnan was Chief Capability Officer for WNS, in that role he headed Horizontal practices across Finance & Accounting, Customer Interaction Services and Research & Analytics, Transformation & Process Excellence, Program Management (Transitions) and Solutions development.

He has more than 27 years of experience across Finance & Accounting, Business Process Management, Sales Solutions and Capability functions including 7 years in Accounting practice.

Before joining WNS in 2013, Krishnan led several challenging roles at Genpact, supporting strategic deals and consultative selling. In addition, Krishnan was also the business leader for a number of industry verticals at Genpact, including hospitality, transportation, logistics, media and professional services

Krishnan is a Chartered Accountant, a Certified Six Sigma Green Belt and a trained Six Sigma Black Belt

 

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Business

NAVIGATING SUDDEN DIGITAL ACCELERATION – HOW MERCHANTS CAN KEEP UP IN A NEW AGE OF PAYMENT INNOVATION

James Booth, VP Head of Partnerships, EMEA at PPRO

 

Recent months have brought momentous change for businesses across the globe. Needless to say, the pandemic has had a colossal impact on the retail sector in particular. For certain industries, the crisis has catapulted society further into the digital world; technology that was predicted to be adopted  over the coming years is now on track to be embraced in mere months.

However, local lockdowns for example in the UK continue to force shoppers away from brick-and-mortar stores and onto online platforms to purchase a range of goods. As a result, we are seeing new user groups embracing e-commerce and digital payment methods at a much faster rate than anyone ever thought possible. These new consumer habits are taking root and are likely to become preferences that persist long after the pandemic.

As we continue to hurtle into a new digital era, there’s an unprecedented urgency for merchants to be proactive – offering a range of new payment offerings. As digital payments increase, offering  preferred payment methods can unlock a whole new world of opportunities. The retailers seeing exponential growth are the ones who have tailored and localised their payments offering to a global audience.

 

The pandemic has propelled demand for Local Payment Methods

Today, consumers have an even greater desire and need for frictionless shopping experiences. Social distancing is facilitating the surge in e-commerce, increasing demand for digital payment methods over traditional cash and card payments.

Before the pandemic, the world was already on route to becoming a digital-first society. Some regions were ahead of others; for instance, from the PPRO Payment Almanac, 56% of online transactions in China were already conducted via e-wallets, compared to 25% in the UK. However, now we are seeing increased demand for these types of payments across the globe.

 

Catering for a new online customer

Whilst typically the global digital payment revolution had been led by Gen Z and Millennials, elderly consumers are set to drive the e-commerce market post-crisis. In fact, a recent study by Mintel revealed that 43% of those aged 65 and older have shopped more online since the start of the crisis. This is a stark contrast from back in May 2019 when just 16% of the same age group shopped online at least once a week.

Ongoing consumer needs for increased convenience and safety during the pandemic, have sparked a shift towards online shopping and away from brick-and-mortar. For example, groceries have seen a meteoric rise in online ordering; according to PPRO’s cross-border engine, online purchases of food and beverages are up 285% since the start of the pandemic.

With new curbside and buy online pick-up in store (BOPIS) programs, the typical cash and card payment methods will be harder to maintain. Now, merchants must offer e-commerce, and implement digital payment options at checkout. Recent data shows up to 80% of shoppers across Europe’s three largest markets (UK, Germany and France) will now make at least half of their purchases online.

We are also seeing the rise and popularity of pay-later apps like Klarna and Afterpay (Branded ClearPay in the UK) to help offer relief from the economic impacts of the virus. Just last month, Klarna was crowned one of Europe’s biggest private owned financial technology providers – with nine million consumers in Britain having used the service, and 90 million users worldwide.

Shoppers need flexible payment options. For merchants, extending many different payment options that cater to different consumer groups can provide diversification and enable growth.

 

Get ahead, or get left behind

This sudden digital acceleration puts merchants at a crucial crossroads. Embracing new innovations in payment methods has the power to open brands up to a wealth of new customers, whilst satisfying the changing needs of their existing customer pool. On the other hand, failure to offer a variety of digital payment methods can severely limit brands – therefore impacting future growth and success.

As businesses continue to navigate the ongoing ramifications of the pandemic, merchants will eventually face a digital arms race to create the best possible online experience. Those who understand this and make the checkout experience a top priority will succeed, and those who stick to their guns will be left behind. The failure to meet customer preferences during the payment process means many customers will abandon baskets at the very last hurdle. In fact, a study by PPRO 44% of UK shoppers abandon a purchase if their favorite payment method isn’t available.

While recent events have put huge strain on both global economies and consumers, it has also birthed a new age of payment innovation. New offerings such as the rise of Facebook owned, WhatsApp payment features or PayPal and Venmo enabled QR code checkout are showcasing the acceleration of this trend. Financial technology is helping to keep humans connected and provide access to the goods and services they need. Digital adoption will only proliferate, so merchants must act now to get ahead of the curve.

 

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