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AI and Super Apps to BNPL : How fintech can help the cost-of-living crisis

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By Anna Porra, European Strategy Director at Marqeta

 

As the cost-of-living continues to increase, financial wellbeing is becoming a more pressing concern for many consumers. But not all financial services offerings are designed with a consumer’s best interests in mind. Measures that allow for irresponsible lending and impose costly overdrafts or interest fees have, in the past, driven some cash-strapped consumers further and further into debt.

But the tides are turning, and many elements of the financial services industry are showing a genuine commitment to better supporting consumers in improving their financial health. The rise of Buy Now, Pay Later (BNPL) is a great example of this, offering consumers more lending options on goods and flexibility with repayment.

The financial services industry has much to offer those suffering from the cost-of-living crisis and is starting to take innovation increasingly seriously to better serve today’s consumers.

 

From dumb cards to smart cards

A lot of the innovation has already been driven by some tech-savvy challenger banks, who rightly identified that consumers may want more support in helping them to save and spend in a smarter way – popularising rounding-up features, pre-set spend controls and real-time notifications.

In the future, we may see such features become more widely available, but with a greater focus on personalisation. By understanding consumers, their behaviours and buyer journeys, banks may be able to offer more personalised and welcomed advice.

Control and visibility are key here. We might expect to see more fintechs move away from dumb cards to smart cards that know where money is being spent and can help to make real-time, risk-based recommendations and protect against unwise spending. The automation of digital payments through an AI smart wallet will potentially become more common. This will give consumers the control to set certain financial goals and then the smart wallet will help them reach those goals through automated controls.

Such controls may go beyond financial well-being. For example, micro-investing is helping consumers to save by “rounding up” payments to the nearest pound. We may also see wallets become increasingly personalised, adapting to a user’s risk appetite, ethical views and financial objectives.

 

Buy Now, Pay Later is changing the lending game

We are also starting to see the impact that Buy Now, Pay Later (BNPL) can have on financial wellbeing. Buy Now, Pay Later firms have helped make the lending space more accessible and convenient, enabling finance to be embedded into buyer journeys and helping consumers better manage their finances. The popularity of such services is enabling BNPL companies access to very rich data on customers, data that may help them to offer more targeted services that really make a difference for customers.

But being a BNPL company is often not the end game. BNPL provides companies with an in-depth understanding of certain consumer habits, spending and affordability – offering a smart jumping off point that may help them pivot into other banking services.

Take Zilch, for example, who has a BNPL programme that is connected to a card so you can decide at PoS whether to pay in instalments or with your own balance. Many of these players are already licensed banks, so it likely won’t be long until they disrupt the market further with smooth and personalised credit and banking offerings.

This diversification may also spread across different areas of lending. Already we are seeing BNPL break out of retail into other areas of spending, including larger expenditures such as vehicle repairs[1].

In industries like automotive – where financing with paper forms and sky-high APRs are common – BNPL may offer a more affordable and customer-friendly alternative. We’re seeing that there is appetite from consumers for BNPL to be extended to larger items as Marqeta’s own research found that 63% of consumers surveyed would be keen to see BNPL extended to one off purchases such as white goods.

As the products that offer BNPL options become more extensive and diverse, small businesses may consider using it as an option too, taking out relatively small business loans and repaying over instalments.

Surveyed consumers are also open to shaking-up the lending industry further with many interested in crypto, NFT and gaming loans according to our research. While these technologies are in their relative infancy, it demonstrates that lenders may be lagging behind consumer wants and needs. Ultimately, many consumers want things to be as simple as possible. Those consumers want everything in one place. While much has been spoken about having multiple fintech partners, the reality is many consumers want simplicity and to not to have to set up multiple accounts.

Many serious embedded finance players understand that it is about working to break the link between individual products – like BNPL – to building a one-stop-shop that allows them to own the customer relationship across multiple touchpoints through a ‘Super App’.  Within this app, there is the possibility for everything to be linked into one view giving banks and customers a much clearer picture of financial health and affordability.

 

 No one left behind

There is clearly an appetite from many consumers for innovation in financial services, and this is a great opportunity for companies to step up and modernise. But, alongside innovation consumers may benefit from greater financial education and inclusion.

Too many consumers still don’t understand the lending process or what their options are, and this may often lead to more debt. Financial organisations will benefit from cutting back on the jargon when speaking to customers, and communicate in a clear and precise way, otherwise a knowledge gap may prevail. Similarly, the impetus to provide consumers education on relatively new products, such as BNPL, should lie with financial organisations. Financial services need to ensure in this time of need that they’re not only offering more personalised and diverse services, but that they’re properly educating consumers on how different options can help them to save money.

 

 

 

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How FS organisations can utilise data to boost customer experience

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Charles Southwood, Regional VP and GM – Northern Europe and Africa at Denodo

We’ve all heard the age-old adage “the customer is always right”. It insinuates that, in any sector, the needs and desires of those buying a brand’s product or services should be paramount. However, today’s customer has new standards and it is becoming harder than ever for businesses to meet and exceed them.

This is certainly the case in the financial services (FS) sector where getting customer experience right used to be relatively simple. The human touch was traditionally delivered as a bi-product of in-store, transactional interactions. Perhaps, as a result of this, few people ever considered changing their provider and the traditional, established banks ruled the space.

However, with the dawn of online banking and the introduction of new, exciting challenger banks as well as the UK’s unique Current Account Switching Service, the balance of power between the consumer and the bank is changing. Consumers no longer feel locked in. If their needs aren’t being met, they aren’t afraid to look elsewhere and switch their allegiance to other companies. In other words, loyalty is far from guaranteed and customer acquisition is only half the battle.

Retention relies upon delivering strong, unique customer experiences that beat down the competition. In order to achieve this, FS organisations will need to be able to leverage data. Its insights could be the differentiator that enables them to stand out. The positive news is that, in our online world, there is a constant stream of data being produced. However, having access to all this data doesn’t necessarily mean that a brand knows how to effectively analyse and utilise it.

Ensuring data provides insight

The rapid growth in digital technologies and services across the sector has left many FS organisations juggling an unimaginable amount of data. This data is both complex and much of it is lacking in quality. Structured, semi-structured and unstructured, it is stored in many different places – whether that’s in data lakes, on premise or in multi-cloud environments. Before FS organisations can even think about using it to inform customer experience strategies, they need to be able to find it and understand it.

This is where modern technologies – such as data virtualization – can help. Through a single, logical view data virtualization boosts visibility and real-time availability of all data across an organisation.  Unlike traditional extract, transform and load (ETL) solutions, it does not move and copy data. Instead it leaves it in the source systems. In other words, instead of just replicating data, data virtualization reveals an integrated view to those trying to find it.

For FS organisations this provides several important benefits. For example, it helps when data sovereignty issues arise and the movement and replication of data outside certain countries is illegal. Data virtualization solutions can also assist in terms of financial reporting by fetching data in real time from underlying source systems – applying the necessary security and obfuscation whilst delivering the performance, the agility and the accuracy needed through the seamless connection of data.

FS organisations that adopt data virtualization, are likely to see an improvement in the overall performance and efficiencies of their business operations. Overheads will be reduced, as will the length of project times. Above all, data virtualization will rapidly strengthen the customer experience by supporting business leaders to think strategically and make decisions based on real-time insights. But don’t just take my word for it.

The proof is in the pudding: How Landsbankinn is delivering on the CX promise

Landsbankinn is just one of the many financial services institutions that has already successfully embraced data virtualization and its benefits. Despite being the largest financial institution in Iceland – with around 40% of the retail and 33% of the corporate banking market share – Landsbankinn used to face several issues when it came to data sharing and analytics.

Over 45 siloed data sources – including Oracle databases, data warehouses and APIs from internal and external sources – made finding and accessing the right data at the right time extremely difficult. Without real-time data to fuel informed decision making, customer experience and operational efficiency were suffering. As a result, Landsbankinn was in need of a data overhaul to streamline and integrate its infrastructure.

To bring together its complex data landscape and collect data in real-time, Landsbankinn implemented the Denodo Platform – a data integration and data management solution built on data virtualization – to build a logical data warehouse. As a result, the team can now aggregate data from multiple data sources, transform that data based on the applied business rules, and then make it available to consuming applications. Ultimately, this means that, throughout the organisation, the data can be utilised by a wealth of employees, even those who are not particularly IT savvy. It also means that the business leaders can use data insights to make well-versed decisions and provide a plethora of services to Landsbankinn customers both quickly and efficiently.

In recent years, customer retention has become the key to successfully growing a business. This cannot happen without an effective customer experience strategy. The ability to convert data into insight is priceless in an economic landscape where the line between a business thriving, surviving and failing is so thin. Those operating in financial services must harness modern technologies – like data virtualization – to stay at the top of their game and ahead of the competition.

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The Evolution of SoftPoS in 2023

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By Brad Hyett, CEO of phos

Contactless payments and digital wallets have surged in popularity in recent years. Part of this stems from the digital boom that occurred during COVID-19 but it’s also thanks to the ease of use that contactless offers customers. This has helped accelerate Software Point of Sale or ‘SoftPoS’ adoption amongst SMEs and enterprise retailers, with a total of 6 million merchants taking advantage of the technology in 2022 according to Juniper Research.

SoftPoS or ‘Tap to Pay’ technology – is a software solution that allows vendors to turn their phones or mobile devices into contactless payment points. This has made life for small businesses easier, as they no longer have to fork out large sums of money for traditional Point of Sale (POS) terminals, i.e. card readers, or ‘make do’ with outdated payment software.

In light of Apple’s announcement to allow third-party SoftPoS providers to deploy their technology on iPhone last year, adoption is expected to increase further. By 2027, it’s forecast that there will be up to 34.5 million merchants by 2027 – nearly a 500% increase from today. With more payment giants like Paypal and Venmo announcing they will support contactless transactions through their iOS apps in the months ahead, what else is in store for SoftPoS in 2023?

Apple’s role in market consolidation within SoftPoS

Apple’s move to integrate the technology with iOS devices will expand SoftPoS’ usability across mobile operating systems – significantly boosting the size of the addressable market for vendors. For the first time, Apple users will be able to offer Tap-to-Pay solutions which have traditionally been limited to Android devices only.

This will ultimately bring greater awareness and adoption of SoftPoS as we see increased familiarity with Tap-to-Pay solutions among businesses and consumers alike – as they’re no longer bound by the constraints of the type of phone they use.

While the SoftPoS on iPhone rollout currently only applies to the US market, it’s fair to assume this will expand internationally at some point – aiding the normalisation of ‘Tap to Pay’ solutions en masse in the months and years ahead.

The next wave of solopreneurs

The events of the last year will also continue to have a ripple effect over the next 12 months. For example, we’ve seen the tech industry undergo mass layoffs due to a challenging economic environment and rising global inflation.

With large numbers of highly skilled talent out of work, the phenomenon of solo entrepreneurship is likely to see an uplift – as it did during the pandemic – over the next 12 months. Born in a digital-native environment, individuals from this released workforce can now set up their own businesses and run them on mobile devices, as opposed to legacy infrastructures.

This could prove another sizable opportunity for SoftPoS vendors in the coming year, as we predict to see more small businesses sprout as a result of ongoing redundancies.

The growing importance of SoftPoS orchestration

As the market rapidly develops, so too does the choice and ease of onboarding. Financial institutions and retail technology providers can now use a SoftPoS orchestrator to help them deploy Tap-to-Pay solutions quickly and easily for their merchant customers, instead of having to create their own mobile solutions. This saves them time and money – both crucial resources for any business and especially in a challenging economy.

Partnering with a SoftPoS orchestrator is a cost-effective way of providing mobile payment solutions without having to worry about waiting on new software and security updates. With an orchestrator, this is done automatically – making this a much lighter lift with no requirement for technological know-how.

As SoftPos orchestrators are acquirer agnostic, this means they can help businesses provide a SoftPos solution to their own retail customers, regardless of the existing acquirer that they’re already using.

An additional benefit here is that a wider pool of merchants are able to benefit from the technology – growing the overall size of the SoftPoS market. Orchestrators, then, have the ability to drive wider adoption of the technology globally, reaching a bigger audience of end users and advancing the mobile payments industry in emerging markets across the world.

Conclusion

The increased popularity of digital and contactless payment options has driven exponential growth in the SoftPoS market in recent years. The next 12 months will see the technology enter the mainstream, as Apple starts to allow more third-party SoftPoS providers to deploy their solutions on iPhones.

The timing coincides with several emerging opportunities for the technology, including a potential uptick in the number of solopreneurs and mobile-first businesses. This combination of factors will see more financial institutions and legacy technology players work with SoftPoS orchestrators to bring Tap-to-Pay solutions to market in 2023 if they want to stay ahead of the competition and keep up with ever evolving customer demands.

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