By Young Pham, Chief Strategy Officer, CI&T
There’s a constant noise surrounding cryptocurrencies in recent months – and for good reason. Bitcoin, Ethereum, Dogecoin, even Britcoin have all been making waves – chopping and changing in a volatile landscape of inflation and Covid-hit economic recovery. Business giants like Elon Musk and even central banks like Bank of England have been throwing their hat into the ring on the future of this technology.
In this sea of opinions, there’s a clear divide between those who see cryptocurrencies as the future of DeFi and payments, and those who deem it far too risky business to deserve a place in the heavily regulated market that is mainstream finance.
So, how should financial institutions be preparing for this uncertain future, and should the post-Covid landscape involve the adoption of cryptocurrencies on a much larger scale? One thing is for sure – the potential of crypto shouldn’t go unnoticed.
Seeds of change
There’s no denying that cryptocurrency has come a long way since the early days, despite its volatility. What was first a speculative investment vehicle has decisively moved into more of a mainstream payment method used by many merchants and consumers. Regardless of what’s being tweeted, crypto has entered mainstream circulation and its share of the real estate is growing fast. By 2026, cryptocurrency market size is expected to grow to 2.2 billion, with a CAGR of 7.1%.
As with every nascent technology, of course, we are not yet seeing all of cryptocurrency’s potential. Yet the winds of change are blowing. Payments is one small aspect of what bitcoin and cryptocurrencies enable. With the unique ability of having programmatically financial instruments, the ecosystem of technology being built on top of that foundation is enabling diverse new use cases. Solutions like the Lightning Network on top of bitcoin for fast, small payments, or collateral-based loans for fast liquidity, start to create possibilities beyond the foundational aspects of bitcoin and other cryptos.
This could not have come at a better time. Following the pandemic, large retailers are increasingly determined to move to a 100% cashless model. For them, the cost of handling cash across thousands of different stores is an added expense that they want to divest. Moving to more digital payment structures, including the adoption of cryptocurrencies, is a path many will start to follow over the next year.
Yet there are also security benefits to consider as well. The cryptographic certainty of cryptocurrencies adds an extra security layer for financial institutions by eliminating forgery risk or counterparty risk that any other current financial instrument has today. Just as digital infrastructure, protocols and processes help financial institutions protect against scams and money laundering with assets, crypto could offer a more secure and scam-proof model.
However, the greatest benefit the likes of bitcoin can provide for international cooperation is by design: a fixed, known and pre-defined monetary policy. One with a financial instrument representation that can be transferred in a fully decentralised and permissionless way, where every international participant can join on an equal footing. It’s the only type of neutral financial instrument in existence where trustless cooperation can happen, opening up unprecedented new opportunities for international commerce.
Despite backlash against cryptocurrencies, they are inexorably gaining ground. If established financial institutions don’t find a way to incorporate this technology into their offerings, then someone else will and they stand the risk of losing control. The good news is that this is the perfect time to start. Covid-19 has forced many to challenge their current business paradigms and find better and more efficient ways of doing business. For cryptocurrencies and underlying blockchain technology, we’re on the cusp of a real gold rush.
The obvious path for financial institutions is to create financial instruments that are more and more based on bitcoin. Many start with offering custody services, or additional investment options either directly or through vehicles like Funds, Trusts or ETFs. A financial institution could even offer a credit system based on a collateralised bitcoin loan, which is then used to make the payment in the currency of choice.
Central banks, meanwhile, are looking at issuing a digital currency similar to cryptocurrencies as a way to enable fast changes in monetary policy and a better view of overall financial health and the usage of its currency. This approach is expected and we should see that happening across many jurisdictions over the next few years.
Yet, the biggest opportunity is to understand and envision how this new technology can open a completely new set of services to offer and monetise. This could be compared with the early days of the Internet, where some were looking at how to become Internet Service Providers – these are the banks and exchanges today looking at bitcoin as ISPs once looked at ‘access to the internet’. History showed us that the new business models created on top of the Internet were the ones with the most potential. It’s difficult to predict the form these ground-breaking new services will take, but once they arrive you can be certain we’ll wonder how we ever lived without them.
New world of commerce
For all the headlines about crypto’s volatility, it’s also quietly gaining a solid ground in payments and transactions. So much so that its underlying technology is inspiring massive changes in monetary policy. For that reason, the surge we’re seeing in different cryptos is no fad, and there will be wider ramifications which go far beyond just the payments landscape. Those financial institutions that explore its potential and adapt to crypto will be the drivers behind a whole new world of commerce.
HOW MERCHANTS CAN IMPROVE THE ONLINE PAYMENTS EXPERIENCE
By Alan Irwin, Senior Director of Product at Global Payments UK
The dramatic increase in online shopping over the past 18 months has encouraged many businesses to invest in developing their omnichannel shopping experiences. The reasons vary – some are keen to capitalise on the trend of older shoppers migrating towards ecommerce and some are trying to make up for loss of sales in brick-and-mortar stores during the pandemic. It is also true that many businesses are shifting their models to sell direct to consumers to avoid high marketplace fees and are therefore building their ecommerce channels for the first time.
The checkout experience is arguably the most important and delicate part of the ecommerce transaction, as it can make the difference between a happy customer likely to return, and a shopping cart abandoned out of frustration and confusion. A survey from March 2020 suggested that 88% of online shopping orders were abandoned, i.e. not converted into a purchase. A seamless, customer-centric online payment experience is therefore critically important in ensuring completed transactions. But with so many payment providers available, what should businesses be looking for when trying to keep friction to a minimum?
Keep clicks to a minimum
Less touchscreen interaction equals less abandonment. Adapting the payment page to fit any device and supporting popular mobile digital wallets like Google Pay ensures a seamless, stress- and hassle-free checkout experience for the customer and keeps clicks to a minimum. Friction can present itself in the most minor features – for example, when the customer is navigating the payment form, the appropriate keypad should be shown to the customer when required. It’s much easier to enter a card number using the dial pad instead of switching between QWERTY keypad layouts.
Simplifying online forms with autofill and tokenisation also significantly reduces friction at checkout and shortens necessary time taken. Ensuring checkout forms are tagged correctly for “autofill” is a great way to offer customers a single-click to input the payment, shipping, and billing data that they have stored in their browser profile. Similarly offering a guest checkout option will help convert customers who are in a hurry or looking for a one-off purchase. This can also be achieved by offering to store the payment details (called ‘tokenisation’) for express repeat and one-click purchases.
Make it easy to understand
A tailored payments approach can increase both domestic and international global sales. By offering a checkout experience in the customer’s language, the option to pay in their currency of choice, and use their preferred method of payment (whether it’s PayPal, Alipay or card), businesses can build loyalty quickly and put customers at ease. It is equally important for merchants to ensure they always display simple direction and information about next steps to instil confidence and prevent customer drop-off. The customer should be informed of what is happening at every stage in the process, for example, whether they will proceed to SCA (Secure Customer Authentication) next or go straight through to completion.
In addition, validating forms in real-time means merchants can highlight potential errors to the customer early on, and payment providers should provide this functionality. This could be an invalid expiry date, an incorrect digit in the card number or incorrect CVV number based on card type. When issues are only flagged at the end of the process, this forces the customer to go back through the steps to figure out the error. Real-time signposting of problems removes this potential friction and reduces the potential for a declined transaction.
Ensure seamless security
Merchants should work with a payment partner who offers the right blend of security and compliance management without it coming at a cost to the end-to-end checkout experience for the user. Instilling trust and security in your checkout flow while utilising the right solutions to drive seamless authentication flows will increase customer confidence and help prevent drop-off.
The greatest level of security and control comes from either utilising hosted payment fields that the
merchant can natively integrate into their checkout flow, or a hosted payment page where they can
manage the look and feel. Showcasing your brand on the checkout page with trust signals and logos also adds to building trust with the customer.
Staying ahead of regulations is also important. Secure Customer Authentication (SCA) will soon be mandatory in the UK for all eligible digital transactions, and this doesn’t have to be a friction-full process. Tools like Transaction Risk Analysis (TRA) and Exemption Optimisation Service (EOS) can quickly score transactions and drive exemptions where there is the right blend of transaction risk.
The devil is in the details
These three rules for successful ecommerce checkout experiences may seem straightforward, but it is important to apply them at a micro level. It can take only one minor point of friction to cause a customer to abandon their cart, and this will inevitably be replicated across other similar customers. It is critical to identify friction points early on and anticipate customer needs throughout the process. Discussing these points and any opportunities to improve customer checkout experience with your ecommerce team and payment provider is an important first step towards ensuring your entire shopping experience remains competitively seamless and loyalty is won. It may be that your payment provider cannot address them, in which case it could be time to move on in order to stay competitive.
NAVIGATING FINANCIAL SERVICES IN 2021: LOW-CODE TO THE RESCUE
Nick Ford, Chief Technology Evangelist, Mendix
Financial services are the poster child of great digital transformation: today, Britons can pay from their watches, check their balance directly from their phone at any time and even automate trading. This level of innovation isn’t only about customers: traders are able to operate faster than ever before thanks to better predictive analysis and forecasting tools, and finance teams are able to collaborate from anywhere in the world.
While we embrace all this innovation, it’s easy to forget that the reality of the sector is incredibly complex. The radical changes induced by COVID-19 have highlighted how challenging maintaining innovation today really is, while putting more pressure on IT teams to accelerate the digital transformation of the sector even further.
On top of this, the sector is one of the most affected by Brexit. Mendix’s Navigating the UK Landscape research found that businesses in the financial services sector have serious concerns about the impact of Brexit on their industry. Many believe that Brexit has damaged the reputation of the UK as a centre of finance (67%) – as well as creating functional challenges for businesses in the country.
Many financial services organisations are turning to technology, and specifically low-code, to deal with these challenges. This piece will look at how firms in the sector can use low-code to navigate the new world.
A sea of challenges
Financial services are complex: there are thousands of products to choose from, from savings to investment and mortgages. These services are then managed by lots of different companies, creating an additional level of complexity: banks, fintechs, brokers, wealth management specialists, government bodies… the list goes on. To add yet another layer, there’s a network of regulations, which change over time, forcing IT leaders to constantly keep on top of the latest evolution in the sector. Knowing these is only the first step: every time new laws are implemented, the sector needs to adjust to them, and that can mean anything from revising security protocols to radically changing the way information is processed, transmitted or audited.
This may already look complicated, but the real complexity starts underneath, in the realms of processes that the IT manages to keep the company operating as normal. It would be fair to say that the mission of financial IT leaders is often underrated: they deal with antiquated systems dating back decades, inadequate data management processes and minute security and compliance considerations every day, simply to keep the business afloat. Add to this the need to get all staff to work remotely during the lockdown, and the already time-poor IT leaders are now completely swamped.
Brexit also makes things difficult for financial services organisations. Two thirds anticipate costly and complicated processes for crossborder payments and investments, while 59% believe it will be harder to attract foreign investments. Ultimately, 61% admit they will no longer be able to support some of their customers because of the transition.
Tech as a raft
While the sector is mired down with complex processes and inadequate tools, it also needs to deal with a major challenge: fierce competition for tech-savvy customers. Now, all banks, investment firms and wealth management companies are investing in tech to help them cope with new customer demands for easier access to their capital and increased transparency. Two thirds have deployed digital projects to make the business more flexible as a result of Brexit, with data management (62%) and digital processes (62%) particular focal points.
And this is not just about pleasing digitally minded customers: it’s also about improving productivity and operational efficiency, harnessing data, and solving compliance challenges. This balancing act between priorities is gathering pace and spreading across the business: today, IT teams must deliver innovation that’s fast, reliable and secure, and that supports many divisions — all at once. It’s a big challenge, but it’s one that IT leaders are willing to tackle head on: two thirds of IT leaders believe the value of digital transformation initiatives outweighs their inherent risk. Yet, IT leaders know that rushing would be a mistake: although IT teams face high demand for their support, most would not prioritise speed over caution, even if they could innovate faster. This measured pace ensures that financial organisations are delivering the right solutions at the right time, reducing the risk of service disruption and security challenges.
Low-code to the rescue
To manage all these priorities, the IT team needs to look beyond its own team to create revenue-generating services that truly answer the clients’ needs – and it needs to empower all developers with the right tools to do so. This improves collaboration between IT and customer-facing staff to design services that suit the needs of the customer base, while reducing the pressure of an already-stretched IT team. Enter low-code: most leaders (58%) say that low-code has enabled the development of new applications to support their companies post-Brexit.
One example of this is a Financial Institution, which perceived its digital user experience lacking and engaged low-code to install a new user experience for its portal, consumer and wholesale digital services. It was able to do this in just eight months, providing numerous benefits to stakeholders.
Low-code software development provides a simple solution to address these constraints and challenges: based on a visual approach for building applications using drag-and-drop components, it enables non-technical staff to participate in creating business applications, even if they have little to no coding experience. Working separately or in close collaboration, professional developers and business-side “citizen developers” can create, iterate, and release applications in a fraction of the time it takes with traditional methods, all under the watchful governance of IT to ensure their applications comply with enterprise standards and architecture.
A low-code approach allows for flexible, iterative app development for many use cases in the financial services sector, including legacy application upgrades to comply with new regulations, apps supporting smart banking or portfolio management, and mortgage application management. With low-code, the financial services industry has the right tools to untangle its complex processes, simplify its evolution and focus on its core mission: keeping the economy thriving.
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