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IT’S TIME SPECIALIST BUILDING SOCIETIES, LENDERS AND BANKS JOINED THE INSTANT ECONOMY

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By Andrew Dellow, Director of Strategic Accounts at Modulr, the payments platform.

Building societies, lenders and other specialist banks are losing the battle when it comes to providing their customers with better services. While they have the innovative know-how, experience and talent, they simply don’t have the resources, money or time to invest in their offering to play catch-up with their customers’ demands.

This is proving to be a real challenge for SMEs across the country, who need quick credit decision-making and equally as quick access to cash as they look to recover from a year of financial turmoil. In fact, the latest figures show almost half of UK small business owners had to seek financial support in 2020.

A google of ‘quick business loans’ reveals a crowded market, dominated online by alternative lenders. And while the pandemic has certainly pushed us all to find solutions online, there’s still great brand equity in local or niche lenders who demonstrate a human and deep understanding of a fellow local or niche business’ needs.

Harnessing the power of payments, building societies, banks and lenders can move faster to meet customer demand. By fixing issues related to reliability and slow, legacy infrastructure they can deliver greater connectivity to payments and remove inefficiencies standing in the way of supporting customers. But that is easier said than done.

Andrew Dellow

Map out the customer experience

Too many building societies and lenders still rely on manual processes when making, reviewing and reconciling payment flows. Not only are they error-prone and incur significant admin costs, they also don’t provide the real-time experience customers want or need. All of which is leading to intensified competition from alternative banking providers. Building societies and lenders need a robust, secure and flexible payments infrastructure to innovate and deliver new products.

It’s at this point that we should recognise the unique position many building societies and banks are in with their incredibly loyal business user base. There’s no suggestion regional building societies or banks should adopt an appified service or mimic challenger brands to appeal to a younger crowd (though it might help attract new customers and futureproof). Rather, whatever your target audience views as a convenient and easy service, could and should be supported by your back end infrastructure.

For instance, while the older generation continues to embrace digital services, a recent study by The Finance Foundation found that 86% of seniors still opt-out of digital banking because they “want people, not machines.” This means building societies and lenders need to ensure their payments are an enabler of their organisation’s growth – despite the service – not a barrier that holds them back.

But before doing any tinkering with back-end payments infrastructure, the customers’ journey needs to be mapped out. This means looking at the front end from the customer’s perspective, and understanding what payment processes they do and don’t like. Common issues that affect customer experience include inconsistent loyalty, limited personalised banking services and shifting security perceptions. Only once identified can a solution that resolves these exact issues and builds on an efficient payments process be created.

Locate and fix hidden payments inefficiencies

One of the biggest inefficiencies in payments is the agency model or distance of an organisation from critical payments infrastructure to settle funds. Without direct access – or direct control of flows – to payment schemes, building societies and lenders are reliant on (and dictated by) clearing banks to reconcile and settle all payments. This means they can’t easily integrate accounts and payments functionality into core banking systems to drive efficiency or scale at pace.

For lenders, these inefficiencies can seriously hamper the service they provide customers. A significant issue as many businesses currently need near real-time access to funds and financial information to survive. By reducing their reliance on legacy infrastructure, lenders can offer fair lending decisions, using real-time financial information to determine borrowing limits quickly and efficiently.

The butterfly effect of payments

Fixing these inefficiencies in the back end can make a world of difference to the front end customer experience. And not necessarily in a direct causal way either.

Consider a scenario where you move from batch-based Faster Payments to single, immediate Faster Payments for loan disbursements. A borrower would no longer receive an initial uncertain experience of not knowing where their money was. They would not have to phone up or wait impatiently to speak to your customer support team. A simple change in the back end – in this case, moving from batch-based – could spin up an instant notification. Not only does this provide the direct positive of a convenient and easy customer experience, but it also provides the indirect positive of saving resource on customer support.

This is one small example of the butterfly effect of payments. The macro impact of multiple butterfly effects increases innovation and delivers market-leading, real-time banking services to attract and retain customers.

Harness the power of modern payments infrastructure

Overall, building societies, lenders and tier two banks can make instant experiences, underpinned by a real-time payments infrastructure a reality and deliver new services to customers by integrating accounts and payment functionality into core banking systems.

This opens the door wide for future innovation. Banks and lenders could launch new services that, on the one hand, efficiently automate payment flows and operations, and on the other, embed innovative payment offerings into workflows and customer experiences, and even build new financial services to make their brand stickier. For any building society, lender or specialist bank that accepts or deals with payments, meeting today’s business customers’ expectations requires an agile infrastructure. It all begins with mapping your payment processes and how it feeds through from back end to front end.

Business

HOW WILL DIGITAL TRANSFORMATION EFFECT JOBS SKILLED IN TECH

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Maria Paola Resta, HR Manager at Auriga

 

The world of technology is constantly evolving, and digital skills are also rapidly changing over the years. The interaction with the end customer is becoming more and more digital since the pandemic, therefore tech jobs, particularly in the banking industry, may need professionals to “humanise” the interfaces used by customers.

 

Tech jobs on the rise

Tech talent is growing, particularly in the Artificial Intelligence (predictive, customer profiling, etc.) sector, and technical skills regarding augmented reality, the user experience, and interface design are also on the rise. The outbreak of the pandemic has led to an unprecedented acceleration in the digitisation of processes, therefore jobs that specifically require knowledge of digital skills has increased in order to meet the needs of customers. Tech jobs remain focused on specialised areas of tech, however as the technology industry is in constant flux, some areas might be in more of a demand in comparison to others.

 

How remote working will affect the tech talent pool

The increase of remote working has already impacted the tech skills business, as the day-to-day working environment now exists in the digital realm. Tech skills are needed now more than ever, and employers have a huge role to play in helping people to continue their personal development while continuing home working. They need to focus on their personal development in order to build the workforce they need for tomorrow’s world.

 

Skills beneficial to the banking industry

There has been a massive shortage of skilled candidates in digital and technology disciplines. IT and financial companies need to upskill existing staff to fill these exciting new roles. In an age of high-frequency change, learning is truly for a lifetime.

In the debate about tomorrow’s skills in the banking sector, the rising value of each employee has often been overlooked. People are a valuable asset as machines take on the more robotic processes, and uniquely human skills come to the fore. How we develop these skills becomes a critical question for employers and workers alike. It will be many years before schools and universities nurture students well versed in these skills.

 

More tech talent required for business digital transformation

The process of digital transformation has already started with some businesses as a modernization process. This has undoubtedly accelerated strongly following the COVID-19 pandemic which forced everyone to overcome situations of technological immaturity and to radically review flows, work processes and models of consolidated business. Digitisation has entered even more pervasively into working life, becoming an essential and permanent condition, and making it necessary to acquire skills that are best suited to the new digital paradigms.

It’s inevitable that companies looking for ways to counteract the effects of the pandemic on their operations will ask their technology function to bear part of the burden. However, they must be strategic about any shifts made to the tech workforce. To ensure that vital digital services remain up and running, organizations must do everything possible to protect mission-critical talent. By showing their support now, companies can create goodwill that will carry over to when better times return.

Another of the direct consequences of remotisation is the emergence of new demands for soft skills suitable for managing collaborations and partnerships as well as specific technological talents that are increasingly specialized to support the new needs of businesses.

 

Tech skills that companies can use for their benefit

The movement towards technological areas are becoming increasingly crucial. Companies must necessarily equip themselves with professionals experienced in cybersecurity and train their people on the adoption of new operating models to protect all internal workflows from possible cyberattacks. In parallel, the need to acquire skills in the cloud, artificial intelligence, automation and user experience fields is growing exponentially in order to adequately support the changes in progress and allow work processes to be increasingly safe, intelligent and functional as well as suitable for supporting the new business models developed by companies following the pandemic.

 

How tech skills will support remote working

Soft skills are essential as they allow remote management and collaboration in virtual environments, but the importance of digital skills is growing. All HR departments are engaged in planning and finalizing training and learning projects whose main topic is information and communication technologies. The high complexity and technological vastness necessarily imply a high level of know-how and specialization in order to guarantee an optimal performance in the production and line areas, unlike the managerial or corporate areas where a disciplinary transversality of skills is generally privileged to allow a global overview.

Businesses have to work in order to build the right talent into the organization as a long-term plan during and after the pandemic, and this might be possible by applying AI, automation, and other exponential technologies to make workflows more intelligent. All of this affords a new opportunity to build better businesses and a better world. It starts with enabling a diverse workforce to perform optimally, and building trust and confidence among employees will be critical. How they are treated now will have an outsize impact on perceptions and value in the future.

 

Maria Paola Resta, HR Manager at Auriga

Maria Paola Resta has been a HR Manager at Auriga since 2018. Her role includes the coordination and overseeing of the group’s HR initiatives. She has a background in occupational and organizational psychology, and has been working in the human resources profession for 15 years. Her role focusses on talent acquisition, people development, training and employee relations. In the last 10 years she has worked in the HR departments of important companies that specialise in Information Technology, and her roles have increased in responsibility as she has progressed throughout her career.

 

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Banking

TO ENABLE BETTER LENDING FOR PEOPLE AND BUSINESSES, WE HAVE TO LOOK TO OPEN BANKING

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By Iain McDougall, CCO of Yapily

 

A recent FCA study found over 14 million people were grappling with financial issues at the end of 2020, representing more than a quarter of the UK adult population. The picture is similarly tough for SMEs, too, which have been impacted hugely by lockdowns, loss of earnings and more; it’s estimated the pandemic will cost SMEs an extra £173,000 in debt per year.

This is resulting in a lack of lending options for both consumers and businesses, as well as expensive or high interest loans, or worse, rejection from lenders all together. This in turn is driving unaffordable lending, and penning consumers and businesses in an ongoing and irresolvable debt cycle – at a time when they need the most support.

One of the biggest causes of this lies in lenders relying on credit scores and credit bureau data to inform their decisions, which simply aren’t accurate enough to truly get the full picture of a borrower’s financial situation.

The case for using Open Banking data in lending decisions has never been stronger.

Data accessed through Open Banking permits lenders to retrieve accurate information about the borrower’s financial history. This can provide more accurate assessments, and therefore enable fairer lending decisions.

 

Credit scores aren’t helping consumers

Take NHS workers as an example. Despite working tirelessly throughout the pandemic, NHS workers make up a sizable portion of the UK adult population currently struggling with debt.

Iain McDougall

An independent report from the University of Edinburgh Business School, in partnership with Salad Projects, found NHS workers are heavily reliant on long-term overdrafts and high-cost credit, where APR is as high as 1,333%. Almost all (93%) respondents said they use one or more types of credit or loan, compared with 75% in the wider UK population (according to the Financial Lives Survey). More than half (58%) use up to three loan providers and 68% use up to four loan providers.

This situation is the result of relying solely on credit scores. While these are the near-universally accepted method of determining credit terms, each credit reference agency has a different method for calculating a credit score. They rely solely on financial history, whether they’ve previously defaulted, or failed to get credit, and not a consumer’s actual financial position, whether they’ve recently got a pay rise or new income, to see how likely it is they will pay back any money borrowed. This can mean, no matter if a consumer’s financial position has changed, they can’t get a better loan because of a previous discrepancy.

 

The challenges facing SMEs

These issues are not just limited to consumers. SMEs, particularly those in the hardest hit industries like hospitality and travel, have struggled to access credit throughout the pandemic.

While many may have been thriving pre-pandemic, their lack of ability to turn a profit during lockdowns, meant they needed extra support. In an effort to keep these industries alive, we saw numerous government backed loan schemes launched, such as the Bounce Back Loan Scheme, to help struggling businesses survive. In total, these schemes have provided almost £180 billion worth of lending to date, supporting over a quarter of businesses in the UK.

However, the soaring demand from businesses in need of these vital funds meant lenders were unable to keep up and many businesses did not receive support quickly enough. What’s more, providers may register these types of loans with credit reference agencies, which means companies that previously had strong credit ratings may see their credit scores negatively affected by any delayed or missed repayments.

This is why it’s vital for lenders to get lending limits right the first time round, so SMEs can avoid potentially adding to their already growing list of debt and thrive in a post-pandemic world.

 

Enhancing lending with Open Banking 

Using Open Banking can add a much-needed layer of trust and loan personalisation for businesses and individuals. By basing credit decisioning on real-time financial data, lenders will be able to create a more accurate picture of their financial situation; and so make fairer credit offers.

Through adopting Open Banking principles, lenders will be able to onboard new customers and grant loans more efficiently, providing businesses with the cashflow required to maintain their workforce and support the economy.

With the borrowers’ consent, it will also give lenders oversight into how the economy is recovering, and enable them to monitor the rate at which the individual or business can expect the loan to be repaid. Meaning they can step in and provide extra support if and when required.

Open Banking provides what credit scores alone simply cannot – real-time insight into an individual’s or a businesses financial position right now, not three to six months ago. By leveraging the data that is readily available to them, lenders could achieve far better and more responsible outcomes. This will reduce the risk of loan default – for both businesses and individuals – and lead to more responsible lending decisions that can help people and businesses bounce back after what has been a difficult year.

 

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