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WHAT SORT OF BUSINESS DO YOU WANT TO BE?

By: Simon Axon, EMEA Financial Services Industry Consulting Director at Teradata

 

The COVID crisis has catapulted banking into its digital future. Many of the forced changes in customer behaviour and ways of working may well stick. The ‘New Normal’ could look a lot like today. Digital projects that have sat on the fringes, or been stuck as proofs of concept, have been rapidly industrialised and thrust into the limelight. So, do you cement this digital progress or quietly slip back to the old way of doing things?

Prior to the pandemic, many banks saw partnering with more agile tech firms as the best route to digitalisation. Last year 81% of banks felt collaboration was the route to digital transformation. Collaboration with Big Tech is not new, and many banks may be congratulating themselves for reaching thousands if not millions of new customers by providing the back-end systems to the sexy offers from Apple or Google. Indeed, they’d be right in claiming that they are providing the essential elements that make those services possible.

But if data is the asset, these decisions must be more beneficial to Big Tech than banks. Google’s project Cache leaves all the banking, compliance and risk to Citigroup, but allows it to mine customers’ financial data to provide “useful insights and budgeting tools.” The value of that data, and the insights that Google can derive from it is unlikely to accrue to Citigroup. If Amazon copies products from independent sellers using its marketplace, then should banks trust it, or any of the other Big Tech players, not to apply lessons learnt from their data?

Even presuming that Big Tech has no acquisitive aspirations over financial data, partnering can box banks into a low-margin corner. Mobile network providers fought this battle early in the century as agile, customer-friendly, data services (now largely owned by Big Tech) capitalised on their networks. The ‘Over the Top’ (OTT) services gained all the attention, customer loyalty and margin, whilst network operators were stuck running ‘dumb-pipes’ to deliver them. Growth in OTT put pressure on the networks, requiring investments for which they saw little financial return.

This could be a model for the bank of the future. Stuck on the manufacturing side of the business, running the rails for Big Tech’s transactions and eking out a few margin points on huge volumes of business.

I believe that banks have a much brighter future. But they must act fast to leverage their significant advantages to see off the threat from Big Tech. Financial services are driven by trust and although trust in technology firms seems to have weathered the tech-lash, banks lead in key areas. Research from Boston Consulting Group and Capgemini shows that 80 percent of people trust banks to manage their data.  And even among millennials and Generation Z – the most prolific users of digital services and devices – banks are still more trusted to give advice than technology firms. The present crisis has precipitated a flight to safety as businesses and consumers turn to established banks for security, support and assistance in times of trouble. Now is the time to capitalise.

A comprehensive connected view of all data is the foundation of The Bank of the Future. Understanding rapidly evolving customer behaviours, creating frictionless connected experiences, automating back-end processes and optimising risk and compliance requirements all demand a single orchestrated data platform.

But the decisions go beyond technology and touch on the role of the bank in digital society. McKinsey suggests that banks take time to pause and reflect on their purpose in the post-COVID world. I’d second that view but argue that they shouldn’t take too long! It is clear, from the most recent Edelman Trust Barometer, as well as numerous other indicators, that demonstrating how your business and services make the world a better place for everyone must be at the heart of your strategy. Only by effectively leveraging its data asset will a bank enable the analysis, understanding and engagement of all its stakeholders necessary to truly define its purpose. In a dog fight with Big Tech over customers and their data, banks need to be sure of what they are, and the benefit they bring to customers, shareholders and society.

There is no time to waste. Banks must start to build these foundations now to successfully defend against Big Tech, build trust and loyalty with customers and create purpose and growth for the Bank of the Future. To understand more about the role of data in creating the essential building blocks of the Bank of the Future, continue to follow this blog.

 

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Business

TOUCH-FREE AUTHENTICATION FOR ALL: WHY WE NEED A SAFER PAYMENT METHOD IN THE ‘NEW NORMAL’

David Orme, SVP, Sales & Marketing, IDEX Biometrics ASA

 

Ever since March, when the World Health Organization encouraged people to not use cash, coronavirus has made touch-free shopping a necessity for all consumers. However, as economies across the world begin to reopen, we are seeing in-person shopping and payment via touch-pads return. So, with payments beginning to return to ‘normal’, the global payments industry must now consider an important question: how can we protect consumers from the pandemic and potential future health crisis’ during the transaction process?

During the pandemic, touch-free payments began to gain international traction across the world, changing behaviour during the payment process. While previously, consumers were happy to key in a PIN, or even provide a signature for a purchase, they are now familiar with more convenient and safer touch-free methods, and they’re not likely to let them go.

In Europe, high street chains have rapidly shifted to contactless payments, often refusing to accept cash. Meanwhile in the USA, levels of contactless payments have rocketed since the pandemic, after a slow initial adoption of the service – US banks only adopted contactless cards in 2019 compared to 2007 in the UK. According to Visa, overall contactless usage in the USA has grown 150% year-on-year as of May 2020.

Even mega-retailer, Walmart, has recently introduced contactless options for in-store shopping and delivery to protect its customers during the pandemic – showing there is growing demand for a touch-free and convenient way to pay across the world. This has raised awareness of touch-free payments among consumers looking to reduce contact-based interactions and time spent at the checkout during the pandemic.

 

Mobile payments are growing

Mobile payments are growing, again showing the desire for touch-free authentication among consumers. According to Forbes, the US mobile payment market – currently only sixth in the world – has increased 41% and is worth more than $98 billion.

To respond to the growth of touch-free payments among small vendors, PayPal has launched a new QR code-based payment app that allows market stall holders or businesses without a PoS machine to accept payment through a code. This means even the smallest of merchants, from small stores and farmer’s markets to craft sales, can now go cash-free and use touch-free payments for everything.

Meanwhile, China has long been using QR code-based apps, such as WeChat Pay from tech giant TenCent and AliPay from Alibaba. The apps are so widely used that street vendors display QR codes for payments and together the two fintech giants control about 90% of China’s digital payments market.

 

But card is still king

At the same time, payment cards are still consumers preferred way to pay. Of course, we only need to look to Apple and Google, who recently have launched physical payment cards despite running mobile payment apps for further proof that payment cards are far from dead.

So why aren’t cards on their way out, given the growth of mobile payments?

We know that consumers still look to payment cards for security and a sense of familiarity while shopping. According to IDEX Biometrics’ research carried out in the UK, only 3% of consumers choose to use mobile payments, while nearly two-thirds (65%) state that carrying their debit card provides a sense of security. And when it comes to touch-free payments, only biometric payment cards can provide the most secure level of validation with an easy digital experience for shoppers.

Despite the popularity of WeChat as a payment app, China’s biggest card provider China UnionPay has recognised that its customers aren’t ready to give up on physical payment cards either. China UnionPay has recently certified the first biometric fingerprint card technology in the country as they look to the use of biometric technology in cards to provide an extra layer of security, with added convenience and hygiene during a payment transaction.

 

Secure touch-free card payments

Biometric fingerprint payment cards provide end-to-end encryption – securing the user’s card and data. A fingerprint biometric card allows the user to authenticate their ID by touching their finger to the card’s sensor while holding it over the contactless card machine. Therefore the shopper only has to hold their own card over the PoS system and the entire transaction process is free of public PIN pads or checkout counters – making it no different to how consumers currently use contactless payments cards. This touch-free payment technology provides the consumer with the convenience of contactless or a mobile payment but with far greater security, as the card is personally tied to the owner.

Biometric identification is already firmly incorporated into our everyday lives. Thanks to unlocking our phones and authenticating payment apps, we are increasingly using our fingerprint to verify our identity. Now that consumers are familiar with the technology, biometric identification in payment cards will become essential to help consumers navigate the shopping and transaction process safely, speedily and securely.

As our economy gradually reopens, financial services providers must protect consumers during the transaction process. In stores, on transport systems – even in stadiums – a fingerprint biometric payment card will provide touch-free payment authentication for all.

 

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Business

THE BASICS OF BUSINESS FINANCE

When you’re starting your business, you’ve got a lot to be thinking about. You need to find affordable suppliers, market your business effectively, bring in paying customers, and perhaps even hire staff to get your fabulous idea off the ground.

Although they’re not the most exciting of these topics to think about, your business finances and how to best manage them should be at the top of your list. Get them right from day one and you can worry less about those smaller details and focus on making your business a success. Get them wrong, and you could be creating unnecessary stress and worry that could potentially harm your business.

With this in mind, here’s a useful introductory guide to business finance that can help you navigate the basics.

 

Find the right business bank account

Choosing a business bank account is a key decision that could either save or cost your business money. It will help you keep your personal and business finances separate, budget effectively, manage your accounts and complete your tax returns more easily, even if you’re just a sole trader. You may also be able to access financial support that has been specially tailored to your business needs.

However, business banks offer different services and charge different fees compared to your personal bank account. That’s why it’s worth finding out which account would be best for your business needs.

According to leading small business advisors Informi, “The high street banks (Barclays, HSBC, Lloyds, NatWest) have all upped their game in order to keep up with the digital-only offering of the so-called challenger banks (Monzo, Starling, Tide Business).”

 

Keep track of everything

Whenever your business spends money or earns money, you should make sure you’re making a note of it and keeping the information somewhere safe.

Getting organised early will simplify your bookkeeping and accounting process, form great business habits and help you stay financially in the black. Depending on your business structure, this may also be a legal requirement.

This should include, but not be limited to:

  • Incoming and outgoings
  • Invoices sent (including invoice dates, numbers and full client information)
  • Inventory details including dates purchased, stock numbers, purchase prices, dates sold, and sale prices.

 

Understand your tax obligations

Starting a brand-new business is an exciting time and the last thing you want to think about is taxes. However, you also don’t want to be hit with a large, unexpected tax bill at the end of the year. That’s why you should always be clear what your obligations will be and budget for it accordingly.

What you need to pay depends on whether you’ve registered as a sole trader or as a limited business:

Sole traders (self-employed): You’re liable to pay tax on all your income after your personal allowance is deducted. You’ll also need to pay your own national insurance contributions.

Limited companies: You’ll need to pay corporation tax and make employers’ national insurance contributions. Any employees must pay tax and national insurance on their income via a PAYE scheme. If you’re hiring freelancers, they may need to take care of their own tax.

This needn’t be confusing if you’ve kept financial records from the beginning and you’re clear on what you need to pay. For more information on UK government business taxes, visit their website.

 

Consider whether you need finance

Paying for your new equipment, premises, advertising, wages and other overheads can soon add up when you’re in the initial stages of starting your business.

If you don’t already have enough funding, you could get extra support from the government or bank. This may be in the form of a loan or grant such as the UK government StartUp loan.

However, be careful about taking on too much debt, especially during these unpredictable times of the coronavirus. Consider how much you can repay and make your decision accordingly.

 

Summary

Take care of your business finance basics and it will be much easier to start and sustain your new business during these challenging times.

Make sure that you choose the best bank for your needs, keep detailed records, understand your tax obligations and consider whether you need extra finance to help get your business off the ground.

But most of all, have fun! This is the start of an exciting new era in your life.

 

Sources
‘Choosing the best business bank account’https://informi.co.uk/business-administration/choosing-best-business-bank-account

‘6 Small Business Finance Basics You Must Understand’https://smallbiztrends.com/https://smallbiztrends.com/2016/01/small-business-finance-basics.html
‘Business finance and support’https://www.gov.uk/https://www.gov.uk/browse/business/finance-support·
‘Apply for a Start Up Loan for your business’https://www.gov.uk/https://www.gov.uk/apply-start-up-loan
‘Business tax’ – https://www.gov.uk/https://www.gov.uk/browse/business/business-tax
 ‘Finance Your Startup Business’ https://www.startupdonut.co.uk/https://www.startupdonut.co.uk/financing-a-business/start-up-funding/finance-your-start-up-business

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