By James Adie, VP of Sales, EMEA, Ephesoft
As a financial services organisation, signing up a new customer involves a great deal of paperwork. In order to meet anti-money laundering (AML) and know your customer (KYC) regulations, the onboarding procedure generally involves the customer presenting proof of identity, evidence of address and proof of earnings. The range of documents required can include passports, driving licences, utility bills, bank statements and payslips. These documents are usually scanned, stored as images, and linked to a customer record by some kind of reference number.
Aside from the sheer amount of manual labour involved in checking and cross-referencing these electronic documents, a vast amount of valuable data is going to waste. Every document contains information that has the potential to be a major asset if only it were stored in an accessible database. Marketers from all sectors routinely use software to analyse structured data and to draw valuable insights from details such as age, region, income range and spending habits. Financial services companies are collecting all of these details during the customer onboarding process, yet they are stored only within scanned images of individual documents. These “flat” image files, occupying storage space and accessed rarely, are next to useless. As stated by IDC in a recent report, “Data, in the absence of meaning and context, is worthless and costly.”
Extracting the value from an everyday document
To address this, we need technology that can identify and extract the unstructured data from a “flat” image of a document and turn it into something useful. Some financial services businesses are beginning to use data capture technology that uses Artificial Intelligence (AI) in order to process the documents presented by new customers. This type of software can extract the relevant information from a digital image no matter what the format. It learns to identify specific fields on different types of documents, such as the account number on a bank statement or the name and address on a utility bill and can be trained to recognise all of the documentation required for a particular product, whether that’s a mortgage application, a loan or a new bank account.
Having identified a document and the important fields within it, the next step is to add meaning to this information by putting it in context. At its most basic level, for example, the name and address on a utility bill can be cross checked against the name on the application form, but far more is possible. When a document comes in to support a mortgage application, for example, it should be possible to link it not only to a customer’s account details, but also potentially to an individual’s credit record, to the history of the house being purchased, or even the insurance details of the property.
By extracting this information and adding context to it, financial services organisations are transforming a stack of flat images into a three-dimensional treasure trove of accessible data.
Levelling the playing field
AI-based technology is opening up a wealth of new marketing opportunities. For years, the likes of Facebook and Google have been gathering data from their customers and using this to target them more accurately. In retail, we now take it for granted that the brand offering us a new pair of shoes or a tracksuit for our dog will already know that we like brogues and own a Labrador. It’s time for financial services to achieve a similar level of customer understanding. Until we can fully analyse transactional financial data we won’t have access to the huge volumes of information that retailers have at their disposal, but ensuring that a customer’s credit record is assessed in the context of their other accounts is a good start. We certainly need to move beyond the current situation, where a lender will often struggle even to recognise a mortgage applicant as an existing customer.
Using AI-based data extraction technology in the onboarding process goes far further than the practical issues of efficiency and time-saving. It’s true that processing time can be slashed, customer service improved and compliance made more effective, but in the long term, it’s the improved understanding of the customer that will help financial services organisations to grow their businesses. We are seeing a raft of fintech startups including rapidly growing brands such as Revolut and Monzo, coming into the market armed with an understanding of the importance of customer data, so the established banks and insurance companies need to move fast.
Most financial services companies are aware of the challenges that onboarding brings, and many of them are looking to automation as a solution. The good news is that it’s possible to simultaneously solve a problem and create an opportunity. You can cut your administrative costs, improve your customer service and make compliance simpler – and at the same time start building the data structure that will build your business.
FINANCIAL INCLUSION WITHIN DIGITAL PAYMENTS
NICK FISHER, GENERAL MANAGER, SALES AND MARKETING UK, JCB INTERNATIONAL (EUROPE) LTD.
The shift towards an economy that removes physical cash has long been on the horizon in many regions. Sweden is an example of a country rapidly heading this way. Two years ago, just 1% of Sweden’s GDP was circulating in cash compared to 11% in the Eurozone, and research by the Swedish Retail and Wholesale Council showed half of the nation’s retailers saying that they probably would not accept cash after 2025.
In 2019 in the UK, cash payments decreased by 15%, although physical money was still the second most frequently used method comprising of 23% of all payments. The Financial Inclusion Commission in the UK states that there are over 1 million people that do not have a bank account, and the World Bank estimates that there are some 1.7 billion adults globally that still lack access to a bank account.
The finance industry has collaborated over the years to develop various credit products for affluent communities. These customers are considered a lower risk. However, institutions should continue to prioritise the advancement of services to serve an audience which remains – ‘unbanked’. Research by EY showed that financial inclusion could improve GDP by up to 14% in more rural, developing economies like India, and by 30% in frontier markets like Kenya. While the positive reasons for fully embracing digital payments and eliminating physical cash are plentiful, including lower payment processing costs for the retailer and customer convenience, physical cash provides the ‘unbanked’ with the ability to function day-to-day with a legal tender.
To establish digital solutions for the unbanked, payment players should adopt an inclusive mindset. The race towards a digital cash society will naturally get closer to the finish line with the passing of each generation, but governments could lend a hand to the unbanked by encouraging financial institutions to sponsor organisations that provide legal quasi digital cash products. In my opinion, the financial industry has an important part to play in developing low cost solutions to support the unbanked with authentication tools – such as biometrics and risk tools to manage real-time credit risk reporting with anywhere accessibility.
In both developing and developed countries, QR codes can play a superhero role as they offer simple, low-cost ways of processing payments on basic mobile phones. In June last year, we collaborated with FIS to enable cross-border QR codes in the APAC region. The ‘Worldpay from FIS 2020 Global Payments Report’ found that digital wallets, at the time, accounted for 58 % of regional ecommerce purchases and were expected to reach almost 70 % percent by 2023.
In developed regions, we are issued with a formal identification when we are born, no matter our circumstances, and this comes in the form of a birth certificate or, later in life, a passport. This does not always happen in developing countries as resources are often limited. Yet, advances in biometric technologies, such as fingerprint or palm vein may offer a solution to the requirement for proof of identity to open a bank account or to create a mobile wallet. Biometric organisations, payment leaders and innovators, such as Google Pay and Apple Pay, have partnered to make this a reality, despite the initial cost implications for development.
In summary, understanding the reasons for why some prefer physical cash, and others prefer digital cash, provides holistic learnings to achieve a society that ultimately uses digital cash only. Empathy is paramount for building customer-centric commerce. For me, at least, a world without physical cash cannot be considered responsible, or fair, until everyone can be accommodated.
THE EFFECTS OF JOB HOPPING ON YOUR RETIREMENT OUTCOME
By Neli Mbara, Certified Financial Planner at Alexander Forbes
Job hopping – defined as spending less than two years in one position – is a very controversial subject. It can be an easy path to a higher salary but can also be a red flag to prospective employers, not to mention your future financial goals if you are cashing in your retirement fund every time you make a move.
When changing jobs, whether it be once a year or once every decade, one has to make decisions regarding career growth and retirement plans which affect one’s long term financial plans. One of these decisions is ‘what to do with my retirement fund?’
For many people, the first thing that comes to mind is using their pension money to pay off their debt. Alexander Forbes Member Watch statistics show that 91% of members do not preserve their retirement savings when changing jobs. As we are living in times where most household income is used to finance debt, most people use job hopping to gain access to their retirement funds, and use this money to pay off debt. However, a quick fix and instant gratification comes at a price, which in this case could be a delay in your retirement plan.
Your retirement savings are simply for that, your retirement, to pay you an income once you stop working.
Early access of your retirement fund can result in:
- Not having enough money at retirement – this is simply because most of us are already not saving enough for retirement
- Robbing yourself off the compound interest you could have potentially earned from the investment.
- Never making make up for the lost benefit
- Creating a bad habit that will delay you from achieving your retirement plan and desired income at retirement
It is easy to cash in your money from a retirement fund at resignation but it is much harder to make up for the lost benefit (capital cashed in plus interest). Calculations show that for you to make up the lost benefit depending on your retirement age and investment time horizon, you will likely need to invest more than double your contributions towards a retirement fund.
Since only 6% of the South African population are reported to have accumulated enough to retire comfortably, without having to sacrifice their standard of living, you will most likely have to invest much more towards your retirement fund to make up for the lost savings.
Therefore, leaving your retirement fund invested and preserved in a preservation fund is the recommended option when changing jobs, as this keeps you committed to your retirement plan.
Changing jobs is a life-changing event, and it is therefore important that you seek advice from a professional financial adviser who will guide you in your retirement planning ensuring that your retirement needs are taken care of, by providing solutions that help you to ensure your financial wellbeing.
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