By Giuliano Altamura, Business Unit Manager Financial Services, Fincons Group
Pivotal role of digital integration hubs in transforming the banking sector
Today’s banking customers have radically changed the way they interact with service and good providers across sectors; they have come to expect a much more tailored and interactive customer experience that however is not always standard in every sector. Reports show that around 60% of banking customers use digital channels and that 80% of all customer touchpoints are digital, yet the financial services sector as a whole has been struggling to keep up with the pace set by digital-native industries like e-commerce.
While banks could once expect most activity, from querying balance to making transfers and payments, to take place at the branch or over telephone banking, nowadays bank customers expect to be able to access and query information over a growing range of touchpoints: Instant Messaging (IM), apps, the telephone, the web, emails, text messages and so on. They also expect customer experience across these channels to be consistently fast, interactive and organic, and, at the end, nice.
More touchpoints also mean more data to process, both in terms of query volumes and incoming data. The frequency with which consumers interrogate systems from apps, online portals, telephone banking or other channels is higher than ever before with older customers also becoming confident that digital transactions, bank transfers and payments are safe as well as cheaper or indeed free of charge.
These demands require new modern front-end systems that are attractive, engaging and fast but that also critically provide independence for legacy systems that remain in control of data and business operations. Pressure on line-of-business IT, and in particular on legacy back-end systems that are often business-critical, should not increase as these new front ends are developed or they risk underperforming on their core operations. In addition to this, front end systems need to be available 24/7, while legacy technology requires machine time for core activities and cannot risk losing capacity.
But the banking sector is not just facing the need to modernise its customer experience, it is also facing the significant competition of challenger and neo-banks as well as the mandatory need to comply with new regulation, specifically the Payment Services Directive 2 (PSD2) and Open Banking standards. PSD2, or ‘The Revised Payments Directive’ was designed to increase competition in the EU electronic payments market, provide consumers with more choice, and define rules and regulations for payment services that improve security and efficiency. The Directive also serves as a move towards Open Banking and obliges banks to share some of their customer data with other players. Fears are that this will lead to unpredictable peak request periods on banks’ legacy systems causing unnecessary delays and lack of efficiency, a view confirmed by a recent Polish survey where 91% of banks reported they felt the need to standardise APIs in connection with PSD2.
Making some customer data accessible to third parties should provide a clearer and more comprehensive view of customer spending habits but will also make protecting customer data much more difficult. Use of AI may come to the rescue on this front by helping to identify suspicious and unusual transactions or authentication patterns in real-time and flagging them up for prevention of fraud and money laundering.
In addition to these market pressures the banking sector needs to grapple with introducing blockchain, distributed ledger technology, Big Data, IoT, Cloud computing, AI, Biometric technology and Augmented/Virtual reality into its systems. Integrating all these new technologies is going to exacerbate the pressure on systems caused by data volume.
To lighten the burden on legacy systems and improve access to data and analytics Application Programming Interfaces (APIs) and microservices architecture are being developed. This should enable banks to leverage new technologies and additional external and internal data without overhauling their back-end systems entirely. All these solutions, however, typically interface directly with back-end legacy systems where business critical information is stored. Not only is it important that historical data remains securely fenced off from any risk arising from providing third party access, but financial services businesses also need to protect their line-of-business systems from unpredictable peaks in data access queries that could be caused by third party or partner activity, for example.
So how can banks protect their back-end legacy systems while also leveraging powerful API integration? A new, more efficient architecture centred around Digital Integration Hubs is rapidly standing out as a solution. In this new design, APIs read data extracted from a ‘data lake’ which is continually updated in near-real time by the legacy systems with an optimally flexible and efficient ingestion procedure, rather than by calling data up from legacy systems directly. The opportunity to feed in data from trusted third parties (TTPs), the IoT or Big Data therefore remains unfettered.
Digital Integration Hubs differ from Data Management Platforms because the latter were based on a batch approach to gather data from legacy systems. Typically, data in the Data Warehouse (DWH) was usually updated on a daily rather than in real-time basis requiring hundreds of extraction and ETL procedures to pull out legacy data and feed the data warehouse. As a result, traditional DWHs are useful for Analytics & Reporting but are inadequate for customer-facing Front Ends.
Digital Integration Hubs are designed to help reduce complexity of the API service layers and to decouple them from system of record data and line-of-business environments. They thus enable the consolidation of historical as well as new and real-time data into a single repository with 24/7 availability of near real-time data that APIs interact with instead of the back-end. In case of peaks in inquiries, load is thus managed by the data hub with no impact on back end operations.
The ideal solution should help realise all the above benefits and not just a portion. It should be speed and data agnostic as well as cloud-ready if not based and provide intuitive ‘Google-like’ search functions. Flexible end-to-end solutions are ideal to help insurers fall into step with the digitalisation of consumer and intermediary expectations without putting their systems at risk. Although slower off the mark than other more digital sectors like retail or travel, the banking sector is ready to embrace the benefits of customer experience improvement, compliance and operational efficiency. To do this, the sector need to ensure that its historical systems are protected both from cyber criminals as well as inefficiency. Data integration hubs stand out as the solution designed to provide a reliable connection between back-end system integration and new technologies that does not put systems at risk.
To find out more, please download the latest whitepaper from Fincons Group here: https://bit.ly/38iJx10
 Mckinsey & Company, The balancing act: Omnichannel excellence in retail banking, January 2019, https://www.mckinsey.com/industries/financial-services/our-insights/the-balancing-act-omnichannel-excellence-in-retail-banking#
 KPMG, PSD2 and Open Banking, March 2019
THE CO-BRAND CREDIT CARD MARKET – SINK OR SWIM
By Chris Vinnicombe, VP Financial Services at Acxiom
The co-brand credit card market is the result of the partnerships between many of the world’s largest credit card issuers and consumer goods businesses like airlines, hotels, and retailers. By leveraging existing technology investments in digital, data, and analytics, the co-brand credit card market has attracted affluent consumers over the years. Indeed, it has remained a powerful component of retail loyalty programmes and strategies that generate revenue not only for the issuer, but for retail partners as well.
The market today
Historically, rewards have been critical to retaining and attracting consumers. However, businesses are increasingly finding that this benefit alone is not enough. In today’s world of data, one-size-fits-all loyalty programmes show little customer intimacy, since they don’t pay attention to individual attitudes, behaviours, and expectations.
Co-branded credit cards have faced competitor pressure to sweeten the rewards pot to draw customer traffic and differentiate their card programmes. Above that when consumers around the world are used to relevant adverts, offers and suggestions, the market increasingly seems out of touch when the offers don’t hit the mark.
It is now time for credit card companies to take a hard look at their proposition to determine which offerings consumers still value and to create benefits that are digital first, easy to use and truly relevant to how they live.
Increasing cardholder engagement
Today, engagement has become a significant part of this challenge. Cardholder engagement is critical in the market since it measures who has an active relationship with their card, rather than those where it sits unused at the bottom of a draw.
One of the issues is that many cardholders feel they are of little interest to the card issuer after starting the relationship. When offerings remain the same and don’t reflect consumer lifestyle changes, it leads to a decline in spend and balance activity.
For example, if a person is consistently purchasing long-haul, luxury summer holidays on their card and receiving a reward of discounts on Christmas staycations it just won’t be claimed. Ultimately, if the user isn’t likely to claim a reward it defeats the whole point of user offerings in the first place and will lead to a decay in the relationship over time.
To change this dynamic, card issuers need to focus on becoming far more customer-centric, addressing pain points, fulfilling desires and engaging with the consumer as an individual. Whether they are frequent travellers, trend setters, have an affinity to luxury products, cash back collectors, etc. Keeping up with interests and offering tailored rewards will create a more personalised experiences for customers and increase loyalty.
Customer experience – reach for the skies
A key example of this is the airline sector. Co-branded credit cards play an important role for airlines and their card issuers, each of which benefit from credit card engagement and purchasing behaviour. The cards also play an integral role in frequent flyer programmes, helping drive flyer loyalty.
Nowadays, airline customer interactions can come through many channels like customer service centres, online travel agencies, websites, and more which can create a complex ecosystem of customer data. The co-brand card partners see significant transaction data that identifies travel activity and purchasing patterns that are strong triggers for airline marketing programmes. All these interactions generate crucial information on passenger needs and preferences that enable up-sell/cross-sell, pricing and preferred experiences (i.e. early boarding or flight update notifications).
For the co-brand credit card market to work, partners need to work together seamlessly. Sharing customer information is vital to the interwoven marketing capabilities needed to be successful.
It all starts with the data foundation. A shared space for data to be safe provides a privacy-compliant environment that allows marketers and partners to connect different types of data while protecting and governing its use. This is the bread and butter for people-based marketing that enables partners to engage consumers across today’s highly fragmented landscape of channels and devices.
These data safe havens provide the ability to ingest customer records from partners, as well as core campaign and engagement logs used where businesses can measure and analyse success. This data can also be enhanced by third-party sources (demographic data, propensity models) to enrich the view of the consumer and create new insights to support new audience creation for marketing programmes.
However, organising, managing, and deriving insights from large sets of consumer data is complicated. To overcome this, companies should rely on connectivity solutions that integrate data to provide a single view of the customer. These identity resolution services resolve first-, second-, and third-party data, exposure and transaction data to represent real people in a privacy-compliant way.
Having this omnichannel view of the consumer can then be utilised to support consumer targeting, personalisation, and measurement bettering the offering to the user and maintaining relevance in the customer’s wallet.
Ultimately, data is helping the co-brand credit card market to stay relevant to consumers today. It is no longer enough to offer one-size-fits-all rewards to card users as competition in the industry hots up. Increasing customer loyalty and engagement is name of the game and using data from across both partners is helping firms to be more competitive, responsive and personalised than ever to drive new business uptake while keeping existing customers coming back for more.
FOUR WAYS OPEN BANKING AND AI WILL REVOLUTIONISE ACCOUNTANCY
Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent
It’s been just over two years since the term Open Banking became a tangible reality in the UK. Since then, the nine largest banks and building societies in Great Britain and Northern Ireland have signed up to take part in the initiative, meaning they must allow regulated businesses to access their customers’ financial data, as long as the customer has provided permission.
Open Banking was imposed by the Competition and Markets Authority to spur competition between banks and make customers’ banking information more accessible to third parties. And this phenomenon has already been transformative for accountancy, providing third-party financial service providers standard ways to access consumer banking transactions, and other data from financial institutions – a seamless alternative to the teetering piles of paperwork traditionally associated with accounting. Paired with other new innovative technologies, including artificial intelligence (AI), Open Banking has the power to change the day-to-day lives of accountants and more broadly, the world of finance.
This article examines the fundamental ways Open Banking and AI can and are already being utilised by accountants.
Real Time Insights
Through the use of Open Banking, accountants can have real-time access to their clients’ most up-to-date banking data every single day. This means no more chasing clients for the necessary information that you need to do your usual day-to-day work. This also benefits your clients, as they can continue with their daily workload knowing that their bank transactions are being shared with you directly, accurately and automatically. Suddenly their do-list looks a bit shorter!
Traditionally, accountants have had to deal with an enormous amount of paperwork, including invoices, expense receipts, bank statements and other important documents. Combined across the profession, this amounts to mountains of paper that have to be analysed and filed. One of the greatest benefits of technology and digital accounting is that it alleviates the stress of keeping important information in physical files. As well as less mess in the office, this means invoices, expenses, receipts can be kept in one place – online. This enables accountants to be more efficient on a day-to-day basis as they are able to easily find documentation by simply typing in what they are looking for to search for it.
Luckily for accountants, and also for the environment, Open Banking and cloud software platforms ensure that important data can transfer seamlessly and safely between your bank and your financial accounts. Already, cloud accounting software makes it possible to have one tidy dashboard that gives an overview of the business in its entirety. As well as being the guardian of files, using technology to set up a bank feed will allow accountants to track incomings and outgoings, link invoices and payments and view interactive charts of all their clients’ accounts.
Working from anywhere
The last five years have seen the progression to flexible working increase significantly. Millennials in particular have a desire to work out of the office. A survey conducted with over 19,000 working Millennials across 25 countries revealed their top five priorities when looking for a job, with 79% stating flexible working was a must. Further analysis from BBC 5 Live revealed a 74% jump in the number of people working from home between 2008 and 2018.
As well as the natural increase in the number of people working remotely, accountancy is one of the many professions being affected by the current turbulence being caused by the Covid-19 virus. This month, the government announced everyone should work from home if they can. Now, more than ever, people are away from the traditional office space and working instead from the confines of their own home, with technology acting as the glue that in many cases is keeping their business together. For accountants this means remote access to financial data is an absolute essential.
Add consultancy to the equation
With more efficient processes and easier methods of making and tracking transactions, technology and Open Banking will ultimately free up a whole lot of time for the accountants. Clearing up the calendar will make room for new kinds of work and enable accountants to spend more time on consultancy and value-added services, where previously these may have been perceived as a bonus service or from the client-side, a service at a much larger additional cost.
As well as consultancy, these technologies will have other, less direct impacts on the client-side. For example instead of needing a shoebox full of receipts, Open Banking and AI will lead to more confident and self-managed clients. If a client is keeping accurate books themselves, then the accountant no longer has to do all of the numerical admin. Rather, the value add lies in providing higher-level insights around the numbers and offering useful advice such as “it is time to put your prices up, as your profits are lower this year“.
Ultimately, AI and Open Banking are opening the gateway to a more efficient and effective accountancy industry. While benefiting the clients by making new space for consultancy and added value services, new technology ultimately streamlines an accountants’ entire job. Because they are constantly dealing with stacks of financial information, the consequences of misplacement of one document or inefficiently tracking systems hold higher stakes than usual. Luckily there is no need for accountants to grapple with old-school methodology anymore as AI and Open Banking are already readily available and at their fingertips.
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