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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.

 

Business

FASTER REACTIVITY TO END-OF-LIFE DEADLINES IS KEY TO COMPLIANCE

Mat Clothier, CEO, Cloudhouse

 

Across global industries, the financial services sector is among the most regulated. Ensuring compliance is an increasingly complex undertaking, and firms have not been short of challenges presented by factors such as Brexit laws impacting on the flow of data between the UK and the EU. The introduction of GDPR in 2018 has also had wide-reaching implications in terms of data security and the resulting fines in the case of misuse of information or cyber-attack.

With financial services needing to adapt to a changing landscape, a rapidly emerging piece of the compliance puzzle is the need to address end-of-life systems and upcoming deadlines for end-of-support. This is particularly crucial in the case of server operating systems such as Windows Server 2012, with an end-of-life deadline currently set for 2023. But why is quick reactivity so crucial in this sector, and what do financial services firms need to consider moving forward?

 

Mat Clothier

The financial services landscape

Up-to-date operating systems such as Microsoft Windows can assist in providing a general safety net of underlying support, which can help financial services firms meet many regulations and provide the foundation for compliant apps. Persistence with an end-of-life system and failure to update or replace it can leave financial services firms falling foul of these requirements, leading to significant fines from non-compliance or a resulting data breach from a cyber-attack on a known vulnerable system.

The resulting loss of critical data can then have further implications for organisations in terms of inadvertently breaching established supplier agreements and obligations, plus the resulting inefficiencies from extended downtime. In the worst-case scenario, this can ultimately threaten the brand and long-term survival of the business.

With a range of risks that can pose serious challenges, the unique nature of the financial industry can be an additional roadblock to compliance. Strong market competition among financial services firms can lead many in the industry to focus on IT investment to differentiate the business in a crowded sector. While understandably necessary as a tactic to compete, this focus can lead to priorities shifting, resulting in failing to address end-of-life dates early enough.

Like many industries, the financial industry has also been forced to tackle the challenges that have come with its employees working from home due to the Covid-19 pandemic, making it easier for the updating of systems to be put on the backburner and upcoming end-of-life dates to be missed during an extended period of crisis.

 

Putting end-of-life at front-of-mind

Financial services firms need to identify upcoming end-of-life dates as soon possible, ideally up to three years in advance in many cases. The key from here is ensuring that well-thought through programme is set up and a pathway to compliance is then established, as it’s commonly the case that the last 20% of projects to update systems is the trickiest to navigate.

Financial services firms need to view these projects as ones driven by business decisions, not technology. What many need to also remember is that there’s no one-size-fits-all approach when it comes to addressing end-of-life. In the case of where a move to a new operating system is needed, some applications can be moved to a more modern platform, but others may struggle due to incompatibility. Tools and expertise can enable firms to determine which apps are likely to successfully make the switch and identify the ones that potentially won’t, and help plan for alternative solutions to be implemented to benefit the business.

There may be cases where fully replacing an end-of-life operating system is not viable for the business, potentially due to cost. The expertise and solutions of an external provider can allow the aging system to be protected and updated as best as possible to ensure it continues to meet the technology and regulatory requirements of the business. This means that organisations can avoid the back-to-front approach of investing heavily in completely replacing a system to a new version just so it can provide the same tools as it did before.

 

Keeping pace with technological change

 The pace of technological change means that patches, feature updates and version updates are an almost constant occurrence across industries. What is new today is legacy tomorrow, so it’s crucial for financial services firms to monitor their systems and ensure that they’re aware of changes in advance of when they happen.

Partnership with the right external expertise can help firms to keep a more comprehensive record of changes that have been made to systems, allowing greater visibility and clarity for regulators, preventing systems from gradually drifting away from their desired state as updates are made. Doing so can also allow firms to have greater clarity of system end-of-life dates, enabling them to remain in control of their compliance with financial regulations and avoid the potential risks of failing to act.

 

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Business

PUTTING TECHNOLOGY AND EMPATHY AT THE HEART OF SMB LOAN SERVICING

Luis Huerta, Vice President and Intelligent Automation Practice Head, Europe at Firstsource

By the end of March 2021, over one and a half million small and medium-sized businesses (SMB) had borrowed through the Bounce Back Loan Scheme (BBLS) – amounting to a staggering £46million. This means 29 accredited BBLS lenders have thousands of new customers to service, as well as a sizable level of debt to collect.

Even when lockdowns lift, the pandemic crisis has been predicted to result in lasting damage to the UK economy. With SMB borrowers finding themselves in highly unpredictable and stressful circumstances, lenders servicing BBLS face a unique challenge – keeping large numbers of anxious customers appeased through uncertain times. To ensure healthy customer relationships, financial providers will need to focus on adequately addressing borrowers’ needs. This is where technology can help. 

Creating room for empathy with AI technology
Because sensitive conversations tend to take longer, lenders are using technology solutions such as robotics and artificial intelligence (AI), as well as integrating digital channels, to support these interactions.

The latest conversational AI can now process and deliver human language more naturally, follow up on queries, and execute transactions than would otherwise need to be handled by an operator. By deploying AI, lenders can fully automate these routine transactional contacts. This frees up staff to focus on the more complex and sensitive interactions, where human touch is key.

Simplifying processes with automation

With more unique BBLS customers to service there will naturally be an increased pressure on resources. Yet recruiting and training additional staff to address this is not the most efficient or cost-effective solution. Here robotic process automation (RPA) can be used to automate repetitive time-consuming tasks.

By leveraging attended automation technologies, organisations can again lessen the burden on operators. For example, automation can be used to create clean, simplified, user-centric interfaces that pull in data from a plethora of disparate applications. These seamless, modern interfaces help agents process transactions and customer enquiries faster whilst bots deal with the complexities of logging-in and navigating various applications and screens in the backend. This approach improves customer services as well as helping to increase job satisfaction. Moreover with fewer screens to manage, onboarding and training time is also dramatically reduced.

Optimising customer communications with analytics

To deliver outstanding services, lenders need to reflect SMBs’ needs through tailored communications. Applying AI and advanced analytics to customer data can support these efforts. For instance, analysing customer attributes such as age, location and service interaction patterns enables organisations to identify and deploy personalised communication across preferred channels. Machine learning-powered forecasting algorithms can also be used to predict ebbs and flows in customer call and chat volumes numbers, helping lenders forecast resourcing needs appropriately.

Importantly, digital channels also offer a less intrusive contact approach to traditional voice calls. By using web-portals, mobile apps, emails and text, lenders can provide customers with the information they need, when they need it, using the channel they prefer. This approach reduces call volumes and lessens the burden on operatives.

Using digital to spot and reduce fraud
At the start of BBLS roll-out banks saw an onslaught of fraudulent activity through false applications and phishing, this is still the case for many financial lenders. Here AI can also play a pivotal role. AI technologies can be used to detect and prevent fraud by drawing correlation between dozens of data points such as physical location IP addresses, web and app behaviour, etc.

For example, one major UK bank saw business accounts becoming fraud targets following the BBLS rollout. To combat social engineering attempts, the bank brought in Firstsource. Following thorough data analysis, they introduced more ID checks, red flags awareness training and updated questioning to detect possible scams. This resulted in the bank being able to identify more potential victims of fraud faster – leading to a 62% reduction in fraud losses in just four months and a positive uplift in quality assurance performance.

A golden opportunity

With the UK emerging from lockdown, we can hope that the economic outlook is about to improve for the SMB community. However, when it comes to BBLS repayments, these customers will still need empathy and guidance from lenders as they navigate the return to ‘normality’. By using tech to remove pressure from customer services, free up agents and drive strategic engagement, lenders will advance customer satisfaction and increase potential growth.

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