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ADAPT OR LOSE – THE BANKING OF 2030

BANKING

By Frank Zhou, CEO & Founder of Zeux

 

Fintech, the world over, is rapidly expanding with the global value of fintech deals last year coming in at $53.3 billion. It’s no news that this continued growth can – at least, in part – be attributed to a shift in the financial industry’s mindset to allow and facilitate the integration of digital tools, such as online banking and mobile apps, to help improve the customer experience. But the rate of integration and adoption differs vastly, from continent to continent. So what makes a mindset towards innovation choose ‘caution’ over ‘audacity’ when it comes to the world of fintech, and how are these different approaches shaping the future of the financial landscape? Frank Zhou, CEO and founder of Zeux, shares his insight on the future of banking.

 

Asia is wearing the fintech crown

Financial innovation and the adoption of fintech in Europe has been slow compared to Asia who has been more open to moving away from traditional banking methods. China is the largest alternative lending market holding around 90% of market share, with the US coming in second place.  Together, they dominate 95% of the market. Although the UK is ranked third, the market share is only expected to peak at a value of $4.8bn this year compared to China’s $265.7bn.

BANKING

Frank Zhou

At the head of the pack, Chinese investors are similarly quick to put their weight behind fintech start-ups as they seek to improve the operations of their banks and financial institutions. This forward-thinking approach has brought about the adoption of new-gen technology such as AI and Machine Learning to solve serious finance-relevant issues such as assessing risk and identifying fraud.

The US has demonstrated strong commitment towards adopting new digital technology as well. According to Ryan Battles, EY’s Banking and Capital Markets Lead for the Americas, “banking is finally starting to catch the wave that began with Apple and Amazon raising consumer expectations”.

 

Europe is only catching up with the Silicon Valley mentality

Europe’s fragmented nature – shaped so by its multi-languages, laws and cultures – pushes boundaries in the way of large scale business decisions. And rather than tackle the international markets, an often go-to European approach is to concentrate on developing business within Europe itself.

The Silicon Valley approach of ‘blitzscaling’, a phrase coined by LinkedIn Co-Founder Reid Hoffman, involves scaling at all costs including “doing things that don’t scale” and making deliberate choices without having all of the information—sacrificing efficiency for speed. There are clear risks involved by adopting this method of favouring quick growth on a global scale, but the results can be ground-breaking: think PayPal.

Europe may not have the tech titans that the US or Asia boast, despite having a strong industrial base, but in a ‘hare and tortoise’ style setting, has the potential to become the global fintech frontrunner, because where Europe can truy flex its muscle is in its regulatory prowess when it comes to AI. As with the rollout of GDPR in 2018, Europe wants to be identified as not just a true regulatory superpower but also as a tech superpower. The latest European initiative is to regulate AI through an ‘ecosystem of excellence’ and an ‘ecosystem of trust’. This new legislation will focus on AI applications that are deemed as high risk. Because as we know, Europe is, on the whole, risk averse.

At the same time, the UK itself continues to attract by far the largest share of fintech investment in Europe, with 83% of all European 2019  fintech investment, states Augmentum Fintech.

 

Bright future for the UK: Embracing the power of crypto

With the latest figures predicting traditional British banks could lose a further £8bn of revenue in the next five years, it’s no wonder there’s been an – albeit slow – shift to adopt tech-powered solutions in order to compete against trailblazer challengers such as Monzo and Revolut. Among the line-up of traditional banks that are rolling out new products are Santander and RBS, both of which are evolving the way they facilitate payments and transfers of funds.

Aside from these relatively ‘standard’ innovation developments around payment technology – that are more evolutionary than revolutionary – what else could help the financial sector catch up to its industry counterparts and drive real change? Does crypto really have a place? And how safe is it?

The US is embracing cryptocurrency as a safe digital currency because it trusts the technology behind it. Blockchain technology is an advanced way of logging and protecting data, which is difficult to manipulate or hack. It has the potential to improve security, productivity and customer experience when adopted by businesses in the financial sector. In spite of the bad press it receives, blockchain technology has been recognised as an emerging technology that could transform the banking sector due to the ability to improve trust, provide transparency and potentially lower costs, reduce transaction times and improve cash flow.

At the beginning of the year, even the Bank of England announced that it would consider adopting a bitcoin style digital currency as part of a global group of central banks. And that’s a big step.

Major financial markets around the world are still ahead of European and British banks when it comes to fintech innovation. AI and blockchain technologies are still in their relative infancies, and the pace of change and innovation is only going to gather even more momentum. Those who have made the smart decision to adopt, will reap the benefits that are to come. So, it’s more important than ever for the cautious approach that the British banking industry has demonstrated for so long to be replaced with a new, fresh hunger to harness digital technologies. Not only to guarantee growth, but also to remain competitive in a global market.

Innovation breeds innovation, it breaks through traditional models, and brings new opportunities to the table. The UK’s banks need to be smart with their next move and pull up a chair.

Banking

THE ART OF BIOMETRIC PAYMENT CARDS: WHY BANKS NEED TO GET DESIGN-SAVVY

Lina Andolf-Orup, Senior Director at Fingerprints

 

Biometric payment cards have ticked several important boxes in the last year. The technology has achieved certification from major payment networks, costs have reduced, and manufacturing has become simpler, and the first commercial launches have begun.

But as more banks move to offer this technology to their customers, it is important to consider design. The look and feel of any new technology is central to its success among consumers, but it can be commonly overlooked or an afterthought. In fact, when asked about biometric payment cards, 30%1 of consumers cited design as important, while just 15%2 of banks we spoke to had it on their agenda.

But why is it so important? And what considerations have already been made to ensure this technology offers not only a technical edge, but a desirable addition to a bank’s offering.

 

A makeover on the cards

Even before the pandemic, the physical bank branch was dying out as consumers moved to digital, on-demand services. As such, the payment card is one of the few remaining physical relationships customers have with their bank.

Mobile-centric challenger banks have captured the attention of consumers with design and user-experience (UX) at the heart of their strategy. Beautiful cards alongside sleek mobile apps are helping them build bigger brands, with the traditional card reimagined by the likes of Monzo with its bright coral card, Starling with its sleek, minimalist front and vertical orientation, and Klarna with its card delivered to you in a fluffy ‘fur-lined’ envelope. Other banks have even launched ‘design-your-own’ options.

Lina Andolf-Orup

For traditional banks, there’s huge opportunity to strengthen relationships and build customer loyalty, especially when launching a new technology. The opportunity to strengthen brand is key, which is just one of the reasons the latest generation of fingerprint sensor for cards is even smaller, meaning more space to play with on-card, and hence more space for banks to build their brand.

 

Defining design

For banks, there’s a business case for a wide scope of consumer segments with biometric payment cards – from millennials and gen Z, to business, more premium, or older customers. While unsurprisingly younger demographics rated the card design’s importance highest, 1 in 4 over 50s also noted it as significant factor.

So, any design needs to appeal to a broad audience, but what exactly do consumers want to see from their biometric payment card? We sought feedback from consumers to help decide our latest sensor design and the responses made interesting reading.

‘Modern’ and ‘personal’ were the highest rated design traits across all age groups and geographies, with Europeans especially favouring a ‘modern’ design. It makes sense – the excitement of getting the latest technology would undoubtedly be dimmed if it looked just like any old bank card. Interestingly, the Chinese market ranked a techy feel as important too, with over 50% marking it as a preference.

We also wanted to see how different designs made consumers feel. Here there was some variance but undeniably, responses show that consumers felt that having the biometric sensor in the card was something to be excited about and to show off. Crucially, consumers also responded that it was easy to understand how to use the sensor from the design. Which leads me to another important aspect…

 

“Cool card, now what?”

How a technology feels and the UX it delivers is closely intertwined with design. On this point, our research also found a gap between banks and consumer opinion. Nearly half of consumers cited usability, how the card feels, and knowing where to place their finger as a priority, while just 1 in 3 banks saw it as a concern.

Consumers are quick to feel frustrated and abandon new technologies if they are too complex or difficult to use. Poor design can easily lead to poor UX, compromising successful onboarding and adoption even after significant investment.

The enrollment process is another vital aspect. Our consumer research and trial feedback has shown just how important this initial ‘meeting’ with your new payment card is. Enrolling your fingerprint needs to be intuitive and uncomplicated as a minimum. To truly make biometric payment cards a success, consumers need to feel engaged and excited from the get-go, as well as trust that their new card is going to work from first tap in store.

Last year, we collaborated with UX-specialist BlockZero to create an ‘out of the box’ creative enrollment concept with a companion mobile app, but banks have options to offer to their cardholders, including enrolling via a mobile app, with a powered sleeve, or in-branch. Banks need to carefully consider their customer base to select what option best fits, as undoubtedly the preferred way to enroll will differ between markets and demographics. From our research it’s clear however that both consumers and banks want a simple and secure self-enrollment option and a rich first touch-point with these new cards.

 

Looking good

From our research, we shaped our new sensor design to be one that struck the perfect balance between modern, personal, and techy, while gesturing to our branding. After all, design savvy cards need a good-looking sensor, too!

 

Too often, design and UX is shoe-horned in after the fact but for consumers, it is a priority. Already at an early stage we thought about the actual aesthetic design of the new sensor, and not just the technology and performance. For banks rolling out this exciting technology, factoring in ergonomics and design from the start guarantees their customers – and prospective customers – have something they can be proud of, use, trust and maybe even talk about.

Learn more about launching biometric payment cards.  

Fingerprints research in collaboration with Kantar, Dec 2019, 1,200 consumers across France, UK, China

Fingerprints in collaboration with PayTech, 2019. 25 card issuer/banks in 7 countries

 

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Banking

ORGANISATIONAL ALIGNMENT KEY TO MAXIMISING POTENTIAL OF OPEN BANKING

  • Lack of internal alignment risks holding financial institutions back from realising open banking potential
  • 70% of C-level executives recognise the open banking opportunity but just 45% of product owners feel the same
  • Majority of respondents (59%) across financial institutions are confident they have the talent available to make the most of open banking, but only 43% of product owners feel they have the necessary resource

New data from open banking platform Tink has today revealed that whilst there is overall positive thinking about open banking within European financial institutions, a lack of internal alignment risks holding them back from realising its full potential.

The findings reveal notable differences in how the open banking opportunity is perceived throughout financial institutions, and diverging views on open banking capabilities and skills across different parts of the business. This organisational divide reflects the sheer size and scale of the task banks are facing to transform their operations to become open banking ready and meet new customer needs.

According to the new data, over two-thirds (70%) of the C-suite see the opportunity that open banking presents right across their organisation. They also believe it provides good value for money with a similar percentage (67%) believing the benefits outweigh the potential costs.

However, whilst senior teams may be buying into open banking, the research paints a more varied picture across other parts of the business. Most channel owners (63%), responsible for the online, mobile or developer interfaces, recognise the open banking opportunity across their organisation. In contrast, less than half (45%) of product owners feel the same way.

 

 

Differing views on skills and resourcing requirements may go some way to explaining the levels of buy in for open banking across the business. The majority of respondents in financial institutions are positive about having the talent available within the organisation to execute on open banking objectives (59% on average).

Those who work in IT are the most confident (65%) they have the skills to deliver on open banking, followed by groups working with management (61%) and digital or mobile banking channels (60%). However, only 43% of product owners are confident their team has the required resources to capitalise on open banking.

This might explain a lack of agreement on whether products and services being offered to customers are taking full advantage of the organisation’s open banking capabilities. The overwhelming majority of those within the IT department (67%) said they believe open banking capabilities are being leveraged in this way. This is in stark contrast to under a third (32%) of executives in the digital and mobile banking department who feel the same.

 

Rafael Plantier, UK and Ireland Country Manager at Tink, said: Whilst fast-growing challengers in the industry continue to make moves, banks remain in the best position to offer integrated open banking services. As custodians of money and providers of financial services they already have a solid foundation of customers that trust them and are therefore willing to share data.

“However, we should not underestimate the enormity of the task that financial institutions face in transforming their operations to become open banking ready. It is to be expected that there are differing levels of buy in for open banking across the organisation, and pockets of the business that may lag behind in embracing the opportunity.

“As those in the C-suite evolve their open banking strategy, there is opportunity to fill possible knowledge or culture gaps to ensure alignment. Whether it be through strategic fintech partnerships, acquisitions or internal re-alignment, banks can ensure they are well placed in the race to create the best possible customer experience from open banking.”

 

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