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A 2020 ‘PERFECT VISION’ FOR THE FINANCIAL SERVICES SECTOR: WHAT WILL YOUR BANK DO FOR YOU?

By Doug Gross, CEO at NGDATA

 

It’s been an exciting year in the banking sector. Along with innovation being pushed along by the industry, there has also been the added pressure of regulatory change, such as the introduction of 2FA this September. In the past few years, much has been made of the potential for technologies such as blockchain, IoT and cryptocurrencies to revolutionise the industry. However, adoption and progress seem to have been slower than analyst estimates – with Accenture announcing we were close to AI critical mass back in September 2018. But could the moment finally be upon us? It seems like an ideal time to look to the future and imagine what the retail bank of the future may look like. Here are my predictions for the trends we’ll see emerging or continuing in 2020…

 

1. F*ck features – innovation must equal experience

As a range of industries increasingly move towards the ‘freemium’ model, banking is no exception. 2019 was certainly another year full of exclusive premium features. From metal banking cards released by N26 and Revolut, to a high street bank releasing a fingerprint biometric card. The challenge for the financial services sector in 2020 will be to see beyond their often-gimmicky appearance and branding, to truly understand underlying customer desires. What do consumers need and how can the bank fulfill that need? This could lead to an exciting new suite of services for customers, where the bank acts as a facilitator for a range of activities outside of hardcore banking. Think of the way you currently buy tickets for public transport or find offers for specific events – banks could make these interactions less painful and more enjoyable for customers. The key will be to move from a superficial to a deeper understanding of customers in order to build the services which will hit the right note with audiences.

 

2. Conversational fluency: time for bank brands to get chatty?

While marketing teams have been preoccupied with becoming omnichannel for several years now, the truth is that the consumer world is already miles ahead – becoming ‘channel neutral’. But there is nothing more jarring for the consumer than disjointed communications across channels, which belie banks’ compartmentalised approach to dealing with customers. In 2020, banks will bring down walls between the siloes of data generated by different channels and platforms. This will allow them to make the customer interactions seamless across branch, online, mobile and more. Going forward, the power to choose the channel of communication will be that of the consumer, not the bank – and they will be able to expect the same level of customer service whichever channel they choose.

 

3. The financial ecosystem: banks become data vaults

As customers, we’re becoming increasingly aware of the need to protect our data. Banks are the perfect candidates to become our ‘data vaults’, becoming the central guardian of our personal data and acting as a platform to manage it and handle data transactions. Data has been called the new currency, but in the new future we can expect banks to position themselves as a trusted advisor over data as they did traditional cash and credit. This will mean a significant rethink of their business models in order to capitalise on these opportunities.  So far, open banking legislation has led to the emergence of apps like Cake which run on this premise. But with the rising adoption of technologies like machine learning and AI, in the near future banks and other financial services providers will collaborate more on building new, relevant services and democratising the availability of on-demand expert financial advice and communications. This will be part of a wider trend in which your bank will now be able to offer you goal-oriented help, rather than just new products.

 

4. Profit v purpose

What marketers need to learn in 2020 is that there is indeed a business case for brand purpose in the financial services industry. Building brand loyalty in 2020 will have a foundation of authenticity and deep understanding of customers, where the customers and brands are telling stories together.

Research from Kantar Consulting has shown that consumers expect companies to exercise their influence over the world responsibly – and that when it becomes the foundation of everything a company does, that company will be more financially successful. Yes, banks offer practical services that are necessities of modern living, but likewise they need to have authentic motives in order to gain the trust of audiences who are now looking for brands across verticals to align with their own priorities and social interests.

The message to banks is clear: evolve or die. With an ever-growing number of competitors emerging from a variety of industries, from fintech to big tech, in 2020 the financial services sector will be challenged to truly show its worth to the customer by letting go of their traditional inflexible approach and focusing instead on growing their position as a trusted advisor to customers – irrespective of platform, channel, or industry.

 

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WHAT DOES 2020 LOOK LIKE FOR P2P LENDING?

By Roberts Lasovskis, Investment Platform Lead, TWINO

 

It’s a new year; time for resolutions and forward planning, positivity and drive. But the peer-to-peer industry would do well to engage in a bit of introspection as well; a look back to the year gone by, which serves as a more than useful reminder of what can happen in less propitious times, even for the well-intentioned.

2019 saw two major failures in the European peer-to-peer market, with both Lendy’s collapse in May and FundingSecure in October putting investor capital at risk. Between the two, a combined £240m of savers’ money was put at risk, leading to the inevitable questions of regulators. On top of the two lenders failing, the well-established Funding Circle came into difficulties with its new withdrawal processes raising investor concern. But in all three stories from last year is a sign of how peer-to-peer can succeed in 2020, providing last year’s lessons are learnt.

 

Roberts Lasovskis

Embracing regulation

There is one aspect of the two peer-to-peer collapses last year that stood out for much of the criticism from both media and investors. Both Lendy and FundingSecure came advertised as ‘approved by the FCA’, yet in collapse, both displayed structural faults and warning signs that should perhaps have been noticed earlier. Managing credit risk is an expensive learning process, but should be taken very seriously, and using as many data sources and as much testing as possible. Inevitably, these high-profile failures will cause a tightening of regulation across the industry, which should be welcomed.

The industry should embrace the ongoing development of its regulation – it is not something to just be tolerated and survived. Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers. This is an inevitable step for a maturing industry, and now is the time for peer-to-peer to ensure its regulations are fit for purpose, and that investor money is not put at unnecessary risk.

But regulation is about more than just stopping the high-profile failures and helping to build consumer trust in the sector. When implemented properly, regulation encourages the development of better products; companies are forced to innovate and adapt to meet the new challenges, eliminating the number of shortcuts or ‘easy options’ that are taken when developing a product for consumers. Ultimately, this creates safer and more sustainable returns for investors.

 

Transparency is key

One of the major lessons the past year has taught us is the importance of transparency, particularly when communicating with investors. But whether it’s investors, borrowers or other industry partners, transparency and clear communication are key to rebuilding trust in the P2P sector, and even as specifically as in individual products or companies. Take Funding Circle as an example. It is undoubtedly one of the most successful businesses in the sector, and yet has been suffering a recent crisis in trust, which has been largely caused by customers not fully understanding what procedural changes are going to mean for their money.

The changes in question are not necessarily the full problem. The model is no less safe, and the business is no less high-profile. Nor do investors automatically object to the idea of a delay before they can access their money (look at fixed-term savings accounts for example). As with all peer to peer lending platforms, it is simply a question of understanding risk – customers misinterpreted the changes as a sign that their money was under threat and understandably rushed to protect it.

 

The customer is king

Fintech exploded as a sector in the wake of the 2008 financial crash, as a reaction to bad practices in the financial services industry. The industry was created with a promise of ‘customer-first’ products; solutions to fix the shortcomings in finance and financial services, and to pivot them back to a consumer-focus. From product development to marketing and communications, peer-to-peer must remember where it came from and ensure that the customer always comes first.

This is particularly important should another economic downturn materialise, as many are predicting within the next couple of years. Fintech businesses emerged as the success stories from the last downturn by creating solutions that focused on their customers. They should do so again.

For all the perceived problems in the P2P sector, the fundamental market for the products have not changed; investors who want to generate good returns still need to be connected with those seeking convenient loans. By remembering where it came from, and the problems it set out to solve, the sector can still thrive in 2020, even if the predicted economic downturn does transpire. To avoid the pitfalls other providers have fallen into, peer-to-peer must embrace regulation, communicate with transparency and focus on leveraging their expertise to provide trustworthy customer-centric solutions.

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WHAT ARE THE PAYMENTS TRENDS FOR 2020?

By Sunil Dixit, VP of Product, Adyen

 

There are some big changes in store in 2020, some obvious, some less so. In the payments landscape, it’s all about user convenience and customer experience, whether that’s through increased security for card users, or new ways to pay. Fragmented payments systems and services, from online to in-store, will move towards a unified centralised payment stack. We think there are a few trends to watch in 2020.

 

Network Tokenisation

Ecommerce is continuing to expand and it’s supporting the rise of the subscription economy and innovative platform business models. With more sensitive card data than ever being shared to complete payment at the checkout, protective steps must be taken to secure this information by all parties. To combat the rise in fraud, tokenisation will become an increasingly common way to protect payment details. In the first half of the year 140,344 fraud attacks were recorded by RSA’s Fraud and Risk Intelligence (FRI) team. That represents 32 attacks every hour and is an increase from 86,344 in the last six months of 2018. So, what is tokenisation, and how can it help?

Tokenisation is used to safeguard a card’s payment card number (PAN) by replacing it with a worthless, unique string of numbers – a token. Payment tokens are generated per card, per merchant. This means that the customer’s sensitive PAN is substituted by a token and not transmitted during the transaction, making the payment more secure. The beauty of network tokenisation is that it helps protect businesses and customers from the financial hits of data theft. Even if hackers manage to steal tokenised data, they cannot use the stolen tokens to pay online since they are unable to link the token to payment information stored securely by the payment partner. Furthermore, network tokens are always up-to-date. If your payment card changes after a loss or theft, the token can still be used to pay, ensuring you can continue to enjoy streaming services without disruption.

 

Strong Customer Authentication (SCA)

The implementation of the second Payment Services Directive (PSD2) will continue to roll out across Europe in the new year, with certain transactions requiring authentication for purchase. 3DS 2.0 uses the full capabilities of mobile devices to create a more secure way to identify the customer, without adding friction to their checkout experience.

Some banks are expected to launch SCA in a gradual fashion over the course of 2020, with others not going live until the end of this year. This is due to the European Banking Authority announcing a delay in the deadline of PSD2 enforcement to 31st Dec 2020. There is still a lot of ambiguity for merchants looking to ensure they are able to support the new directive. With the possibility of EU regulators enforcing PSD2 at different times, businesses will need technology that can dynamically apply SCA to ensure payments aren’t declined due to SCA not being active.

 

Biometrics take centre stage

2019 saw the first biometric fingerprint credit card issued by a UK bank – expect 2020 to see more of this kind of payment innovation. With smartphones unlocking themselves through facial recognition and fingerprint scanning, biometric security is already ingrained into most of our lives. As payment providers look to increase security, both in response to PSD2 regulations and the increasing sophistication of fraud tactics, biometrics data is going to become an incredibly important tool for purchases. Beyond the UK and Europe, Australian and Brazilian banks are getting on board with 3DS 2.0, ahead of the decommissioning of 3DS 1.0 over the coming years.

Transactions through 3D Secure 2 already incorporate biometric authentication such as fingerprint and voice recognition or facial scans into the process. Even better, 3DS 2.0 can use data collected in checkout to authenticate a transaction without intervention from the customer. This creates an improved customer experience for mobile transactions that require strong authentication.

Expect to see your personal features becoming a more secure way to pay as banks and merchants look to step up their fight against fraudsters.

The payments landscape moves fast to support on-the-go customers carrying smart mobile devices. Self-service kiosks in quick service restaurants, endless aisle inventory in retail, apps that can be a hotel key card as well as a mode of booking and paying for an overnight stay. All these experiences offer exciting possibilities for improving customers’ lives and provide unprecedented levels of data and insights for businesses. Make sure your payments stack is ready for 2020 to deliver the experiences your customers deserve.

 

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