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TAKING THE PULSE OF INDIA’S FINTECH MARKET AT FINNOVITI & TECHNOVITI 2020

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FINTECH

James Daniels, VP and APAC Director, FIME

 

Last month, FIME attended Banking Frontiers’ Finnoviti & Technoviti 2020 in India. This year’s theme ‘Experience Everywhere’ reflected the growing emphasis put on the user-experience in today’s evolving payments ecosystem.

Bringing together key stakeholders from across banking, fintech, payments and adjacent ecosystems, delegates discussed the modern challenges and trends of the Indian market. As well as providing a great opportunity to network, the show offered insightful panels and presentations that helped me take the pulse of fintech and payments innovation in India today.

 

Fintechs, fintechs everywhere

Exciting new fintechs were unavoidable. This is a reflection of India’s fintech market, which is one of the fastest growing in the world, set to be worth $31 billion this year.

Demonetization initiatives have helped increase bank penetration. Combine this with a population that loves mobile and a compelling customer experience, the stage is set for India’s fintech revolution. New solutions vary from digital wallets and P2P payments, to loans and billing services. The growth and appetite for innovation is staggering.

FINTECH

James Daniels

Interestingly, this influx of new players has come from India’s tech universities – not the financial world. While brimming with new ideas and tech expertise, some lack nuanced financial services knowledge. This is bringing some challenges.

On top of the need to navigate global industry regulations, India’s government and the Reserve Bank of India (RBI) have defined stringent mandates of their own. It’s important to remember that expertise does not always need to be internal. Partnerships with industry experts means fintechs don’t need to wait to get the knowledge they need. In turn, this frees up resources available to focus on innovation and time to market.

 

Plotting a path to financial inclusion

Financial inclusion remains a key priority, informing both bank and government strategies. One government initiative gaining traction is the National Common Mobility Card (NCMC) program. The initiative facilitates a seamless consumer experience across payments, transit ticketing and mobility services. Conceived by the Ministry of Housing and Urban Affairs at the Government of India, it aims to offer growing urban populations a seamless, multimodal travel card solution. This complements ongoing payments infrastructure migration to EMV®.

These onboarding efforts are also helping merchants accept new ways to pay too – something vital as digital payments look set to overtake cash by 2022. Software-based mobile POS (SoftPOS) solutions were prominent at the event and are increasingly popular among small merchants. These solutions use the NFC functionality of commercial off-the-shelf mobile devices to accept contactless card or mobile payments. This helps merchants to accept digital payments at a low cost and time investment.

 

All roads lead to open banking

While not an exclusively open banking event, the topic seemed to permeate many of the show’s discussions. As happened in Europe, the undefined role of fintechs and the rising demand for more valuable consumer services is pushing the adoption of open APIs to the top of the agenda.

While some banks are making progress in defining their own APIs, progress is limited. The lack of mandates or standardized requirements is often cited as the source of much of the delay, putting the pressure on banks to ensure the functionality, quality and security of solutions before going live.

Although its uncertain how India’s open banking ecosystem will evolve, many are looking to learnings from Europe. Much can be learned from open API standardization efforts such as STET and the Berlin Group. And from these efforts, Indian stakeholders can now rely on innovation tools that are tried and tested.

We were privileged to win a coveted Technoviti award for our automated API test tool, TrustAPI. The tool was presented to a panel of respected industry experts by FIME’s India Country Manager, Angaj Bhandari, and Head of Product Management, Reza Rahmani Fard. The solution received the award because of its success in enabling the quick and cost-effective launch of open APIs.

 

Real-time, real talk

Closely tied to open banking is the industry-wide push for ‘real-time’ or ‘instant’ payments. Once seen as separate topics, both are increasingly considered in tandem as part of the fundamental  modernization efforts of banks that are “changing customers’ relationships with their banks and the usage of financial services generally.” In the real-time game, India is already ahead with its Unified Payments Interface (UPI).

Built on the increasingly pertinent global financial services messaging standards, ISO 20022, UPI is an inter-bank platform that merges various banking services and features, facilitating a variety of ‘real-time’ payment services. And it’s a successful initiative too, with 1.3 billion transactions in February 2020 alone.

The combination of a successful ‘real-time’ payments platform with truly open APIs could be phenomenal. So much innovation in payments and financial services is coming out of India. I look forward to seeing how it transforms and leads these initiatives, both domestically and on the global stage.

FIME India has supported the market for more than 15 years, combining our global payments experience with local knowledge to enable new and innovative secure payment experiences for India. It has extensive experience in the EMV space, working actively with global and regional payment schemes including India’s RuPay scheme. To find out how we can support your digital transformation, contact us.

 

*EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC

Finance

Why financial services is stepping into a new era

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by James Mingard, Head of Retail & Finance at Maintel

 

When comparing industries, financial services has arguably fallen behind when it comes to digital transformation. The sector has found it especially challenging to move from more traditional, legacy ways of working. But, with challenger banks and changing customer expectations, the tables have turned. According to a  recent research report from Maintel, in partnership with RingCentral, the financial services sector is leading the way when it comes to implementing digitalisation plans. In fact, 35% of those surveyed within the sector claim to have fully implemented their digitisation plans, compared to just 26% in other industries.

 

Evolving Technology

As such, banking technology is innovating at a significant rate, with everything from start-ups offering online-only credit cards to TSB opening a 100-seat tech centre in Scotland. There is little doubt that the sector understands the need to be digital-first, but there is room for improvement. Over half of respondents said they have seen an increased demand for digital communication from customers because of the pandemic, but the channels on offer fall behind other industries.

Over half (55%) of other industries communicate with customers through Twitter, compared to just 30% in the financial services sector. We might not want to discuss our mortgage over Instagram or to tweet about how much money is in an ISA. However, there is a real opportunity for the financial sector to add to its offering and grow its digital communication channels. By giving customers more options, it will help improve customer experience and let the end-user reap the benefits of digital transformation strategies. Balancing the expectation for digital-first interactions while ensuring a high-quality customer experience is central to creating an efficient, yet personal service.

 

Collaboration is the future

The contact centre of the future should represent an integrated approach to unified communications. It should bring business experts and agents together, across every channel to deliver real-time customer experiences in a cloud-based, collaborative engagement model. For financial services, this once seemed a pipe dream but advancements in digital transformation mean that the sector can in fact set the standard for other industries.

From a productivity point of view, team collaboration can also be enhanced using innovative communication technology. This helps to improve an employee’s workplace experience by providing instant access to essential information and allows them to work effectively from any location. Flexibility has not always been associated with the financial sector, but by giving employees better technology and more autonomy, naturally, this has a knock-on impact on the experience that customers receive and helps to foster long term loyalty.

 

Customer comes first

Banks used to be built on life-long custom. Many people would be with the same bank from their first current account through to the day they passed away but the volume of competition, variety of offers and new customer deals mean that today’s consumers are fickler than ever.  To really stand out, financial services providers need to make sure that everything from communication strategies through to software has the customer at its heart. And technology is key.

Indeed, customer experience, customer  and technology insights were the top three benefits of digitisation within the sector, according to Maintel and RingCentral’s 2021 report, It’s therefore clear that a customer and user experienced focused approach is key to success in the financial sector.

 

Click here to read the research report in full – How to translate unified communications and digitalisation into better customer experience.  For further information find out more :- https://www.maintel.co.uk/industries/financial-services/driving-financial-services-digital-transformation/

 

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FINANCIAL MARKETS IN 2022: INFLATION, ENERGY PRICES, AND THE CONTRASTING PERFORMANCE OF STOCKS

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Bob Jenkins, Head of Research, Refinitiv Lipper

 

Anyone hoping for a reprieve from the chaos and uncertainty of the last couple of years is likely to be disappointed. The pandemic will continue to have an impact on global economies, both directly (such as ongoing lockdowns and restrictions to combat the disease) and the exhaust effects we’ve seen in areas such as the production of goods, supply chain challenges, labour shortages and rising energy prices.

At the same time, the digital disruption of the financial world continues apace, with assets once overhyped becoming increasingly mainstream.

To make specific predictions in such an environment might seem like a fool’s errand, yet it is possible to discern some themes that will shape the course of financial markets in the coming year.

 

  1. Global inflation gets stubborn: Inflation is not transitory, and we are seeing a foundation for higher prices being put in place thanks to the supply chain and labour issues previously mentioned. In major developed markets, I think we’ll see stubborn inflation regardless of whether Covid remains a pandemic or begins to enter an endemic phase. The situation is slightly more positive in the US; while inflation will remain at a 3.5-4.5% range, a reduction in supply chain bottlenecks, increasing labour force and improved unemployment rates will serve to reduce the impact of primary inflation forces. We should bear in mind that households are estimated to have around $2 trillion in savings, which will maintain consumption levels and keep up the pressure on labour and supply chains.
  2. Rates will rise: Rates are likely to rise, with discussions in several major economies indicating a tapered end to the period of low rates we’ve seen since the 2008 financial crisis. This will probably be achieved in fits and starts as central banks navigate virus outbreaks and any resulting economic shocks. For instance, both the Fed and the Bank of England have indicated there will be hikes, but it is likely that they will rely on tapering at first to slow stimulus while also trying to navigate sentiment swings and volatility arising from waves of infections and/or new variants.
  3. China to lead economic growth, but not by much: China’s growth is likely to be around the 4-5% mark, with the US just slightly behind at 3.5-4%, off its 6% pace from the first part of 2021. The European Union and United Kingdom will likely trail the US, even if they have been exhibiting similar economic issues, while emerging markets could be hit by a combination of the Fed tightening up and challenges dealing with Omicron and other COVID waves.
  4. Higher energy prices are here to stay: Multiple forces will provide support to higher energy prices: supply chain issues, political posturing, demand for heating/cooling due to climate change, but Covid will occasionally step in to disrupt and counteract these forces. Even carbon neutral efforts could cause overall energy prices to rise in the near term as energy producers shift to renewables, with many of these alternative sources remaining expensive. Oil will stay in the $70-$80 range, with the occasional dip towards $60 as intermittent Covid concerns influence energy consumption in the travel sector.
  5. Underperforming stocks with a positive finish: In general, slower growth and lower rates help Growth and Tech stocks while faster growth and higher rates benefit Value and Cyclicals and I believe the economy will tend to lean towards the latter scenario. That said, growth and value leadership will change hands throughout the course of the year as the economy reacts to Covid waves and switches between lockdown and reopening. I suspect Value and Cyclicals will outperform Growth and Tech at the margin, but the dominate capitalization size of the latter two will pull down overall stock market returns. Of course, as with consumers, there is a lot of money being held back at the moment. Businesses have significant cash reserves and self-directed traders continue to shovel money into markets, which, when combined, can help buoy stocks.
  6. Flattening the bond yield curve: I think we will see some retrenchment as a result of rising rate programs by central banks that will largely result in negative to flat returns across core fixed income. Any selling in longer term bonds in reaction to either economic or central bank activity will be mostly offset by buying due to the global desire for yield, thus keeping a lid on longer term rates. Rising short term rates in this environment will serve to flatten the yield curve. High yield bonds could provide for pockets of opportunity as they are potentially tied to cyclical areas of the economy that could show leadership.
  7. The contrasting futures of ESG and digital assets: In the coming year I think we’ll see digital and tokenized assets become almost as popular as Environmental, Social and Governance (ESG). However, whereas ESG is a permanent shift that will eventually encompass the evaluation of all mutual funds, digital currencies still look a little more niche. We could well see them proliferate over the next few years, potentially even becoming a new quasi-asset class, but they will remain a satellite allocation in risk tolerant portfolio strategies. They are unlikely to achieve the status of being included in mainstream portfolios such as defined contribution retirement plans where assets can flow in large, consistent amounts – unlike ESGs, which could well reach that point in the coming years.
  8. A more defined ESG: It is looking increasingly likely that ESG funds will begin to splinter into more thematic offerings as investors eschew the combined “ESG” mandates in favour of more targeted strategies that enable them to better assess stocks aligned with fund objectives. This will also help avoid those securities jumping on the ESG bandwagon.
  9. The continued rise of the Big Five: Of course, in an era of unpredictability, there are always going to be trends or themes that run counter to accepted wisdom. Despite the aforementioned attempts of central banks to raise rates, the Big Five stocks (Microsoft, Alphabet, Apple, Amazon and Nvidia) will continue to show leaderships. While technically falling into the camp of richly valued Growth, these stocks have begun to also acquire a status as a safe haven, with generally strong earnings demonstrating a consistency and dependability that attracts investors. They also populate immense amounts of passive and retirement plan assets under management, equating to steady flows into them in almost any economic environment.

 

All this plays out against a backdrop of our changing stance on COVID. While there are some commonalities in how different regions tackle the pandemic, the continued uneven nature of our global responses makes it hard to determine what state we will be in this time next year. If most major economies can move to an endemic setting, then we should have the tools in place to make ‘living with Covid’ a reality. However, the continued emergence of other variants will cause volatility, and with it a predictable jostling of market leadership. Perhaps the only predictions anyone can truly make is that life will continue to be unpredictable for some time to come.

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