Connect with us

Business

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

Published

on

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.

 

 

 

Business

How can businesses boost employee experience for finance professionals?

Published

on

By

By Martin Schirmer, President, Enterprise Service Management, IFS

Over the course of the last year, The Great Resignation has seriously impacted organisations across the globe. Staff are quitting in huge numbers, leaving companies unprepared and struggling to fulfil their workloads. In fact, mass departures are happening at all levels of the labour market, as employees attempt to adapt to the hybrid working model and growing socio-economic uncertainty.

In light of this, optimising the employee experience (EX) to attract and retain talent has become a top priority for employers. Organisations have come to understand the necessity of taking immediate steps to drive employee engagement and reshape workplace culture.

The financial services (FS) industry is no exception to this trend. From increasing employee burnout to growing career dissatisfaction, the pandemic has exacerbated the need for transformation across finance teams. This is exemplified by recent data from Spendesk, which found that approximately 40% of finance professionals are willing to leave their roles or already have concrete plans to do so.

Organisations looking to get ahead of the competition must put in extra efforts to retain their existing workforce. The fact is that employee expectations and requirements have irreversibly changed, with more workforces becoming increasingly distributed. Today’s hyper-connected workforce values flexibility and simplicity, and it is organisations which offer these experiences that will succeed in the long term.

As part of this process, finance companies must look towards the power of technology to create seamless user experiences across devices. From automating workflows to improving overall efficiencies, Enterprise Service Management (ESM) can help organisations to boost user satisfaction and go that extra mile for their employees.

How poor EXs are driving finance teams to quit

With over 40% of employees spending a significant proportion of their time carrying out mundane, manual tasks, it is not surprising that poor EXs are having a detrimental impact on job satisfaction. Finance teams in particular have been slower to digitise core processes, leading to a heavy reliance on manual tasks. This not only increases the amount of time spent on each task, but also impacts the engagement levels of finance professionals who cannot focus on more strategic aspects of their roles.

As a result of the pandemic, flexibility has also moved to the forefront of finance teams’ desires. Given the fast-paced nature of this industry, the conversation surrounding work-life balance has increased rapidly. Failure to offer flexible working policies, coupled with a lack of technology to facilitate this flexibility, has led to poor EXs across the board.

Most notably, the overarching move to omnichannel, digital-first approaches has dramatically reset both customer and employee needs. Finance is the third-slowest running corporate function behind legal and IT. Operating in a competitive environment, 73% of finance operations are facing pressures to speed up, improve efficiency, and prioritise automation.

Mitigating the problem using technology

ESM, an offshoot of IT Service management (ITSM), is the cornerstone of smart digital transformation for organisations. It can help finance teams to streamline and automate routine processes, such as monitoring the status of service requests, approving expenses, sending invoices, and tracking payments. In turn, this will free up employees’ time, reducing the burden of manual tasks and enabling them to focus on the more strategic tasks.

Another advantage ESM can offer finance teams is the ability to adapt to each department’s minimum requirements for data privacy. Accounting, for example, needs additional layers of compliance built into the system.

ESM can also facilitate cross-departmental collaboration, helping finance professionals to communicate with the wider business and perform tasks more effectively.  Organisations can use ESM to incorporate all internal services into a single platform, offering employees a well-rounded view of the business and promoting a sense of community across all levels of an organisation. This will boost productivity, whilst enhancing visibility and control.

Ultimately, the current job landscape has brought with it a new set of challenges. Organisations in the FS industry looking to navigate the storm and retain top talent must refocus their efforts on bolstering the EX. Embracing a new era of technological innovation that empowers employees and boosts engagement is a critical step in this process.

 

Continue Reading

Business

CBDCs: the key to transform cross-border payments

Published

on

By

Dr. Ruth Wandhöfer, Board Director at RTGS.global

 

If you work in finance, you’ll have been hearing a lot about central bank digital currencies (CBDCs) and the moves different markets are making towards using, regulating and evaluating the viability of moving to an economy based on digital currency.

We are already seeing progress in the research, piloting and introduction of CBDCs into the financial system. The Banque de France for example, recently launched its second phase of CBDC experiments in line with the “triple digital revolution” unfolding in the financial sector. The infrastructures of financial markets and fintechs, however, are not prepared to accommodate their security, stability, and viability.

This could be an issue in the not too distant future. Each year, global corporates move nearly $23.5 trillion between countries, equivalent to about 25% of global GDP. This requires them to use wholesale cross-border payment processes, which remain suboptimal from a cost, speed, and transparency perspective. In fact, the G20 cross-border payments programme considers improving access to domestic payment systems that settle in central bank money, as one of the key components in facilitating increased speed and reducing the costs of cross-border payments.

The current state of cross-border payments

International transactions based on fiat are currently slow, expensive, and highly risky due to today’s disconnected financial infrastructure, messaging, and liquidity. Wholesale cross-border payment settlement can take 48 hours or longer, which is not practical in today’s digital world. Even if not every market moves to CBDCs, in an increasingly digital era, cross-border settlements between central banks will unavoidably involve dealing with CBDCs. So, not only will we have different currencies, we’ll have different technical forms of currency being exchanged – digital and fiat – as markets adopt CBDCs at different rates, adding another layer of complexity to cross-border settlements.

While there is much anticipation about the opportunities CBDCs can bring, the adoption of this technology will only be widespread if payment and settlement capabilities are overhauled to allow for new innovations in currencies.  This need for transformation represents an opportunity to redesign existing infrastructure to support cross-border CBDC transactions.

The current cross-border payments system involves correspondent banks in different jurisdictions using commercial bank money. Uncommitted credit lines used in cross-border transactions are a potential risk for any bank that relies on credit provided by a foreign correspondent bank. Interestingly, there is no single global payment and settlement system, only a complicated network of interbank relationships operating on mutual trust. While trust has allowed financial systems to function smoothly, when it begins to fail, as it did during the 2008 financial crisis, the result can be catastrophic.

Following the crisis, the Bank for International Settlements (BIS) implemented the Basel III agreement, which required banks to maintain additional capital against correspondent banking account exposures. These risk-weighted assets impose a costly capital charge on positions held by banks at other banks under correspondent arrangements. While this framework helps combat risk, it neglects to address the inherent problems in traditional correspondent banking that contribute to these risks.

Making the case for CBDCs

CBDCs can offer an improvement in settlement risks and are certainly thought to have potential benefits by the BIS. If implemented correctly, wholesale CBDCs can indeed accelerate interbank transactions while eliminating settlement risk. They can also encourage a more efficient and straightforward method of executing cross-border payments by reducing the number of intermediaries.

It is likely the evolution towards CBDCs will initially see the financial market supplement rather than replace existing payment instruments with new types of digital currency. CBDCs will coexist with current forms of money in a wholesale context, and their payment rails will also work alongside the existing payment systems. In simple terms, CBDCs will need to be linked to the broader capital markets ecosystem and applications such as securities settlement, funding, and liquidity.

If built with an innovation-first mindset, the future of banking infrastructure should provide full interoperability and convertibility between fiat, CBDCs, and any other type of digital money used in wholesale payments.

The future of CBDCs

To unlock the full potential of CBDCs, a ‘corridor network’ will need to be formed. This involves combining multiple wholesale CDBCs into a single, interoperable network under common governance agreed upon by all central banks involved. The legal framework of this platform would then allow for payment versus payment (PvP) or, where applicable, delivery versus payment settlement.

Practical wholesale CBDCs appear to be on the horizon, either as a supplement to existing financial systems or as part of a transition to a digital, cashless world. Looking ahead, central banks would benefit from collaborating with fintechs that provide innovative cloud native technology to enable seamless wholesale cross-border payments without interfering with the flow of funds. If wholesale CBDCs are to become a reality, fintechs must be prepared to accommodate them.

 

Continue Reading

Magazine

Trending

Business3 days ago

How can businesses boost employee experience for finance professionals?

By Martin Schirmer, President, Enterprise Service Management, IFS Over the course of the last year, The Great Resignation has seriously...

Business4 days ago

CBDCs: the key to transform cross-border payments

Dr. Ruth Wandhöfer, Board Director at RTGS.global   If you work in finance, you’ll have been hearing a lot about...

Business4 days ago

Green growth: The unstoppable rise of climate technology investment

With the investment community focusing more and more on renewable technologies, investor interest is at an all-time high. Ian Thomas,...

Business4 days ago

Bolstering know your customer processes as regulation tightens

Nick Payne, banking services, customer advisory, SAS UK & Ireland, discusses how new technologies allow financial services companies to develop rigorous KYC...

Finance4 days ago

The penny has dropped – the finance sector needs Data Governance-as-a-Service

By Michael Queenan, Co-Founder and CEO at Nephos Technologies   In our data-driven world, the amount of data is growing...

Business4 days ago

Seven tips for financial services brands using mail

By Cameron Russell, Head of Marketing at Marketreach   Customer experience (CX) is a powerful differentiator for modern brands. If...

Top 104 days ago

Turn the data landfill into an insight goldmine

Andrew Watson, CTO, MHR Today, businesses have access to a wealth of data, with vast amounts of information created daily....

Business4 days ago

A Culture of Cyber Security Throughout Financial Services Organisations

Michael Cantor, CIO, Park Place Technologies Financial Services organisations have long been a top target for cyber-attacks given both the...

Business6 days ago

Financial Stability Board Gives Full Support to Wide LEI Use in Global Payments

Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation The strongest recommendation yet by the Financial...

Business6 days ago

On-demand pay: why payroll needs a modern approach

Byline:  Paul Bartlett, CEO, CloudPay   While the world of work has evolved drastically over the last decade, payroll has...

Business6 days ago

 ‘What should real estate investors be doing now – has the market hit rock bottom or is now the time to buy?’

Following many years of housing prices soaring and competition steadily increasing, real estate growth has finally started to slow, likely...

Business7 days ago

Expert Guide for Email Marketing to Improving Your Conversion Rates

If you talk about email marketing campaigns, it would seem like an old-fashioned advertising style. But it is still an...

Banking1 week ago

Augmented automated underwriting and the evolution of the life insurance market

By Alby van Wyk, Chief Commercial Officer at Munich Re Automation Solutions   It’s almost inevitable. Spend your working life...

Banking1 week ago

ESG in the finance and banking industry – are you ready?

By Julian Moffett, CTO BFSI, EDB   Environmental, Social and Governance (ESG) has soared towards the top of banking, financial...

Top 102 weeks ago

An Entrepreneur’s Guide to Investing in Bitcoin

Marcus de Maria, Founder and Chairman of Investment Mastery.   Over recent years, Bitcoin has been steadily growing in popularity...

Business2 weeks ago

Overcoming macroeconomic challenges

By Mike Chambers, formerly CEO of Bacs and a consultant at Access PaySuite.   For businesses offering a subscription-based service, the...

Banking2 weeks ago

How unlocking the potential of tokenised markets can help banks keep pace with the digital economy

Giulia Secco is the Strategic Partnership & Ecosystem Manager at Fnality International.   In the aftermath of the 2008 financial...

Banking2 weeks ago

The role of Artificial intelligence in compliance at banks

Sujata Dasgupta, Global Head – Financial Crime Compliance Advisory, Tata Consultancy Services   There’s not a financial institution across the...

Technology2 weeks ago

Scaling securely in the automation-first era

By Brandon Traffanstedt, Sr. Director, Field Technology Office at CyberArk   Robotic process automation (RPA) has been one of the...

Business2 weeks ago

Putting technology to work on entrepreneur fund-raising

By Simon Glass, CEO, Qodeo   Human relationships are behind the most successful venture capital deals. The chemistry between an...

Trending