By Jayne Zhang, Lead Digital Transformation and Commercialisation consultant, FPT Software
The financial services industry has been pivoting towards digital transformation for the last decade or so. The onset of COVID-19 pandemic has only heightened the importance of this transformation as the demand for digital solutions has rapidly grown. The rise of fintechs and brands has also fostered the maturing digital landscape and changed customer expectations.
As competition increases, it’s no longer enough to only offer financial products through digital channels. Surveys show that the main drivers for customer attrition are poor banking apps and a lack of digital services, so the financial services industry needs to embrace new strategies and technologies with a renewed focus on the customer context (experience and engagement) and provide enhanced digital experiences to retain and acquire new customers. Here are seven trend predictions for 2022 and beyond:
Increased investments in digital platforms, composable banking options and innovation
According to Forrester Research, in 2022, it’s predicted that a quarter of banks will increase their tech spending by 10% or more. Banks must invest in and build an infrastructure that facilitates their digital transformation and helps them provide an exceptional customer experience with digital intelligence and automated decisioning. This includes increased investment into the adoption of the micro-service and API layers that allow for seamless integration into digital platforms and ecosystems.
Creating a unified customer experience and journey
The digital experience is now the primary driver of customer attrition and it’s a major factor for consumers when it comes to choosing a bank. To stay competitive, banks need to deliver an attractive and comprehensive digital experience that works in parallel with their physical branch and call centre services. Business must look at the entire customer journey from end to end – from fast and seamless onboarding to real-time notifications with personal and relevant messaging, offering products relevant to the customer life cycle, well integrated self-service tools, enhanced security and fraud protection, and also offer insights for customers.
Increased focus on creating an AI structure which enables contextual and connected decision making
In order to leverage the digital decision platforms and logic that helps with decision making, there must be an increased focus on data-driven decision intelligence technologies, such as machine learning and AI. Many institutions are moving to a hybrid human and AI decision-making model to compose a full view of the customer, which enables customer life cycle management with intelligent, relevant and timely decisions. According to the International Data Corporation, global spending on AI systems is forecast to jump from $85.3 billion in 2021 to more than $204 billion in 2025. The compound annual growth rate (CAGR) for the 2021-2025 period will be 24.5%.
The power of data
To leverage the vast amount of data available, companies must be able to define, map, analyse, and use this data to create customised digital experiences with personal and relevant messaging and offers that customers want. Data responsibility will become increasingly important with the rise of data aggregation. Banks must balance the power of data with responsible AI, keeping in mind the importance of ethics, transparency, and security. Consumers are also more data aware with a maturing understanding of how their data could be exposed and used. This causes them to be more risk averse when it comes to giving out their data without a clear return. Banks will need to provide data value such as data insights for enhanced risk assessment or fraud protection, to empower customers with their own data, which in turn could give them better engagement and personalisation.
Financial wellness and education – humanising the digital experience and rethinking what it means to be customer-centric
A bank’s bottom line relies on the financial wellness of its customers, thus a focus on the financial health of customer should be a primary strategic goal. Having access to financial services does not necessarily mean they’re financially healthy. The younger generations may be more digitally savvy, but they aren’t financially savvy. What this means for banks is that there’s a renewed need to understand their customers’ life cycles, and their journey, be able to empathise with them, anticipate their needs, and deliver products/services to help them improve their financial wellbeing at the point of need – allowing their customers to feel financially secure. Studies show that putting their customers’ financial wellness at the centre will help banks grow profitable portfolios and increase long-term shareholder value.
Expand their line-up of sustainable finance products
Environmental, social and governance (ESG) considerations are gaining importance. Some regulators are proposing that climate reporting by banks be made mandatory. The ESG transition will need banks to balance business while embracing and implementing ESG-related policies and standards. Financial services firms will be keen to accelerate their speed to market for ESG products and services, such as green loans and mortgages, and checking accounts with sustainability and carbon-tracking features.
Open banking and embedded finance
With regulators in the EU and UK proposing measures to extend data sharing principles across financial and nonfinancial products, 2022 will see a growing number of banks experimenting and pivoting their business models toward a more open, collaborative platform approach. Leveraging this open-banking connectivity and focusing their efforts on delivering select capabilities as a service, powering the growth of embedded finance. This all goes back to the focus on the customer, and being able to provide financial products, features, services and education at the point of the customer need, and not through a separate journey.
Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study
Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute
Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.
The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.
Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.
THE RISE OF ESG
ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.
The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.
There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.
What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.
TECHNOLOGY MULTIPLIES TRUST
Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.
The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.
It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.
THE PULL OF PERSONALISATION
How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.
Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.
So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).
When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.
TRUST IN THE FUTURE
As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.
How to Build Your Credit Up Safely
by Taylor McKnight, Author for Compare Credit
What Is Credit?
Credit is money owed by a person that allows them to pay off debts at a lower interest rate. Most banks use your credit score to determine how much they should lend you. Any business loan or mortgage requires that you have a good credit history. However, if someone has poor credit(www.comparecredit.com/credit-cards/credit-range/poor/), they may struggle to pay back these loans, resulting in higher interest payments, making it more difficult than ever to repay the debt. Lenders are aware of this issue and keep a close eye on your credit rating to ensure that no negative information gets reported. This could prevent you from getting another loan in the future. It is important to note that having a bad credit score does not mean you have had a bankruptcy or other kinds of defaults. Many people often face this problem because of unpaid bills or late payment fees. However, this does not mean that you cannot repair your credit – it simply means that all parties involved must work together to solve the problem.
How to build your credit safely
Building your credit score is a major concern for most people, especially if they plan to purchase something as big as a home or car. A good credit score will help one get better rates in the future and make it easier to finance their next venture. Here are some things you should know to improve your credit to be used for the best possible purposes.
1. Keep paying down your balances every month: One of the biggest mistakes that could hurt your credit score is not paying your balance down each month. People who don’t pay their credit card down within the agreed-upon time typically have high-interest rates and expensive monthly costs.
2. Pay your bills on time: The same goes for making payments on a bill. Not paying it within the specified timeframe will result in negative information being added to your report, further lowering your credit score. Ensure that your bank statements are accurate and that all accounts are up to date.
3. Become an authorized user: Some companies will allow customers to become authorized users after meeting certain requirements. Take a look at the terms and conditions before applying for this option. These programs usually give access to one particular service, such as checking or ATM transactions, but are helpful when you need additional coverage.
4. Set up automatic credit card payments: There are several ways to set up auto payment options on your credit cards, including sending them directly to your checking account via email or the phone. In addition, you may want to consider enrolling in online banking services that automatically make payments from your checking account into your credit card accounts.
Other tips when it comes to credit
1. Learn how to manage debt responsibly. This is true for both personal and business debts. Many people tend to spend more than they earn, especially during rapid growth and expansion. If you find yourself facing difficult circumstances, you can seek assistance by talking to friends and family members, getting professional advice, or using online budgeting tools.
2. Don’t skip any repayments. This rule applies specifically to late payments. You need to continue making regular payments, even if you’re behind by a few days or weeks. Once you miss a payment, you’ll start accumulating late payments that negatively impact your score.
3. Try consolidating your loans. Consolidation involves combining multiple small loans from various sources into one large loan, thereby lowering the total interest cost of the loan and reducing the risk associated with it.
4. Be wise with your credit report. One huge mistake most people make is neglecting to pay their bills on time or paying only the minimum due balance each month. As a result, bad information remains on their reports, impacting their scores. All outstanding balances must be paid off completely. Otherwise, negative items that remain on your report can keep you from achieving the best borrowing potential.
5. Get your questions answered. If you have any questions regarding your credit, ask for answers now rather than waiting until you’re experiencing trouble. With a little research, you should be able to learn enough to begin repairing your damaged credit report.
What to look out for that can harm your credit
1. Not checking your credit report: Most people use their credit cards frequently but fail to check their credit reports periodically. Checking at least every 12 months can give you valuable insight into whether or not there are errors on your credit.
2. Paying your bills late: Late payments can lead to hard inquiries affecting your score, which means it appears that you’ve applied for more credit elsewhere. Make sure you never miss a bill.
3 You Close Old or Inactive Credit Cards: If your close old cards, they may show up on your credit report for some time. Closing accounts can impact your score by causing “hard inquiries” that appear on your credit report. Before closing them, look for inactive or closed card accounts on your credit report.
4. You Have Negative Records: Many people think they’re protected because they haven’t had past credit problems. However, many factors may cause a “bad” rating to linger. A single application for a credit product with a low limit may count towards a negative review.
5. There Are Errors on Your Report: Mistakes such as missing debt or inflated balances can damage your credit report. Find out how much money you owe and what types of products you purchased, then try to dispute those entries on your credit report. Ensure you correct any information that needs to be corrected. Failing to do so could hurt your chances of getting approved for future credit.
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