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Banking

DECISIONING AT SCALE: WHY BANKS NEED TO RADICALLY CHANGE THEIR OPERATING MODELS NOW

Brian Holden, Global Director, Financial Services at SAS UK & Ireland

 

Twelve years ago, the banking industry suffered deep reputational damage in the wake of the 2008 global financial crisis. Bankers took the blame – in some cases deservedly – for large-scale economic problems that took a severe toll on many of society’s most vulnerable people. The crisis severely shook banks and financial institutions. Some, like Northern Rock, failed altogether. As a result, public trust in the banking sector has never fully recovered.

In 2020, we find ourselves faced with another global crisis – although this time, there’s no credible scapegoat for politicians or the media to blame. COVID-19 is nobody’s fault, but its impact on both society and the economy will be unprecedented. We will need to take tough decisions. But if banks succeed in supporting their customers through this difficult period, those customers will remember. This may, in fact, be the last and best hope for the banking sector to recover the trust and confidence that it lost in the last decade.

 

Reserves of strength

The good news is that banks are in a much stronger and sounder position today than they were in 2008. Regulations align better with economic reality, the capital provisions are greater, and the Bank of England intervened quickly to suspend all bonuses and dividends as soon as COVID-19 hit the UK. Customers are better protected too. And with the Financial Services Compensation Scheme (FSCS) effectively guaranteeing all retail deposits up to £85,000 (£170,000 for joint accounts), a bank run of the type that wrecked Northern Rock is very unlikely.

 

The worst is yet to come

However, there are difficult times ahead.  The government’s furlough scheme currently buffers banks. This has helped keep businesses afloat and employees paid. But these funds won’t last forever, and unless there’s an immediate bounceback after the lockdown, the worst of the crisis is surely yet to come. Not so much a “V-shaped recovery” – rather a “long tick.” When the money runs out, banks will have to start making difficult decisions, especially about lending.

What will make these decisions even more difficult is that the crisis has turned a lot of received wisdom about creditworthiness on its head. Who would have thought at the start of this year that airline pilots might be a credit risk, for example? In fact, many professions are likely to see significant reductions in business volumes and income over the coming months. And since many professionals are used to leading relatively credit-hungry lifestyles with large outgoings, the strain will soon start to show.

 

Struggling to scale

This is a problem because many banks currently take a bare-minimum approach to credit risk modelling. Most banks make day-to-day credit decisions using dated processes and data. They base them on a very broad segmentation of the customer base because when times were good, it didn’t seem worth the trouble to drill down to the individual level. Meanwhile, anomalies and unusually complex cases are referred to senior decision makers who use their experience to make the right calls manually, with expert judgment.

This approach simply won’t work in a situation where many more businesses and individuals are skating on thin ice, and a much larger proportion of decisions require sophisticated analysis. There just won’t be enough expertise to go around.

Until now, this hasn’t been an issue – after all, at high tide, most ships can sail serenely. But when the tide goes out, it’s the boats with the deepest draught that are the first to run aground. In the same way, it’s the banks with the most historical baggage that are in the greatest danger. If their legacy systems, siloed processes, organizational structures and change-resistant cultural norms make them unable or unwilling to adapt, they won’t have the agility to respond to the new reality.

In short, the UK’s largest banks need to act now. They need to put the right decisioning processes and infrastructures in place to support their human experts in making more tough decisions, faster and more accurately. And they also need that technology to guide a new generation of less-experienced decision makers, helping them make the right calls to help customers get back on an even keel.

 

Intelligent decisioning

The only option is for banks to level-up and simplify financial decisioning processes by adopting a more powerful, real-time and comprehensive approach to credit decisioning – one that will satisfy regulators and comply with all internal and external audit standards. A decisioning fabric.

At SAS, we’re helping banks around the world do just that. Our approach, which we call “intelligent decisioning,” enables decision makers to assess each individual case on its merits and take the right action to support each customer.

This ability to make responsible decisions and act effectively in real time is vital for banks to support vulnerable customers through the COVID-19 pandemic and to help rebuild “UK plc” in its aftermath. Moreover, in the longer term, intelligent decisioning will help bind banks and their customers closer together and demonstrate that banking is more than just another utility service, like electricity, water or gas. By getting closer to their customers and understanding their lives, needs and desires, banks can shift the perception of the value they offer and assume a role as trusted adviser and business partner. They will become an integral part of the fabric of the networked society.

 

A people business

This is important because one of the clearest lessons of the COVID-19 crisis is that banking is a people business. It isn’t just a matter of impersonal financial transactions; it’s central to people’s lives. There is an emotive power to financial decision making, especially when it can make or break a small business, save someone’s home from repossession, or just tide them over for a few months when money is tight.

That is a great responsibility, and it has serious consequences. Get it right and customers will remember; let them down and they will never forgive you. By empowering decision makers with fine-grained insight into each customer’s unique situation, banks have the potential to rescue cash-strapped businesses and help struggling households find their way back to financial security. By following this path, banks can win back the good reputation they lost in the aftermath of the 2008 financial crisis and play a central role in the UK’s recovery from the COVID-19 pandemic.

Banking

WHY BANKS NEED TO EMBRACE WELLBEING IN THE DIGITAL EXPERIENCE

Howard Pull, Head of Digital Transformation Strategy at MullenLowe Profero

 

The impact of the COVID-19 crisis on the economy has been huge. Over the past six months, youth unemployment figures have dropped, wages have stagnated and GDP has fallen by a record 20.4%. The drop in GDP is worse than the 2008 Financial Crisis, the Winter of Discontent and the Great Depression.

While the furlough scheme and other government measures have provided some much-needed financial support, the prevailing social and economic conditions have made money worries increasingly common. According to a recent survey from MullenLowe Profero, during the pandemic 40% of 18-25-year-olds are afraid to look at their bank account, with a further 40% stating that thinking about their money has a negative impact on their own personal wellbeing.

In response to these rising financial concerns from account holders, it is clear that banks need to help people – especially young people – feel more confident in managing their money. In particular, banks need to provide more educational support to their customers about how they can make the right financial decisions. This means designing tools and support services to enable more people to effectively manage their finances.

With 60% of consumers aged 18-25 believing that banks should help them have the capacity to absorb a financial shock, financial institutions also need to adapt their products and services to meet the needs of more uncertain account holders.

Adapting services, however, is easier said than done. The pandemic has radically shaped consumer behaviours and therefore the old rules no longer apply. For example, while consumers in the past may have preferred to discuss financial matters in person at a bank branch, risk of infection and the widespread use of digital tools has meant that the majority of young people want banks to provide wellbeing services online.

Digital experiences are also important to the future success of any bank. According to MullenLowe Profero’s report, digital experience is now the number one reason why young people choose a bank. Therefore, it is clear that banks during the pandemic and beyond need to reevaluate their operations and shape their personal wellbeing strategies around digital tools.

 

Community and Global Wellbeing

MullenLowe Profero’s report into financial wellbeing found that young people weren’t just concerned with their own personal wellbeing. They were also concerned about the importance of community and global wellbeing too. In fact, over half of 18-25-year-olds agree that the events of the last few months have made them seek out brands that do better for the world, with another 50% stating that the importance of a local community has increased during the pandemic.

Community wellbeing is concerned with the importance of local areas and the businesses and organisations that are based within them, whereas global wellbeing is concerned about the entire world. For banks, showing support for areas local to their branches and customers as well as issues affecting the globe such as the climate crisis is important to maintaining the trust and support of account holders.

Focussing banks on concerns around community and global wellbeing requires banks to assess their impact on the wider world. In other words, it forces banks to check who they support and where their money could be better placed. For example, young people want to be recognised for their positive behaviours. 56% of 18-25-year-olds want rewards and benefits for purchasing ethical and sustainable products and services.

The findings of the report found that young people across the board want financial institutions to reflect their values and to help them manage their finances. With COVID-19 continuing to wreak havoc on our day to day lives, banks can provide much-needed support by offering educational help as well as creating products and services that actively manage an account holder’s finances. They can also step in and provide support to the wider community and world by taking measures to reward ethical and sustainable behaviours.

 

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Banking

IMPROVING THE BANKING EXPERIENCE THROUGH INFORMATIVE AND ENGAGING VISUAL COMMUNICATIONS

Javier Lopez, General Manager Vertical Solutions, OKI Europe Ltd

 

Banks play an integral role in daily life. However, everyday opportunities such as attracting new customers into branches to open an account, or promoting new offers and services to existing customers, can be lengthy, expensive and cumbersome processes – especially when tailoring communications to the specific requirements of each branch, or differing customer needs.

Quickly creating and adapting in-branch visual communications to communicate and educate cost effectively while remaining on brand can be a challenge, especially for banks that have networks of branches and print their visual communications centrally or use third-party suppliers.

 

Building trust through signage

Visual communications can help build trust and satisfaction between you and your customers.  The ability to create and print personalised communications on demand can not only instil confidence in your brand, it can also offer the flexibility to quickly adapt to financial trends and fluctuations in interest rates. This is particularly important in today’s volatile market, so that you can keep your customers informed while remaining competitive.

Javier Lopez

Printing in-branch and on-demand is an immediate and cost-effective way for banks to communicate with customers. With the right printer on-site, branch staff can easily create and print signage and customer communications as well as everyday documentation to a professional quality as and when needed. This saves on the cost of third-party suppliers and eliminates lead times for essential signage.

The ability to print a comprehensive range of collaterals in-house including freestanding and hanging banners, posters, self-adhesive floor and window stickers, as well as personalised leaflets and direct mailers, can help keep customers informed about the latest services and offers. It can also be used to remind both customers and staff to adhere to social distancing guidelines. Furthermore, the same printer can be used for day-to-day documents such as personalised mortgage or loan offers.

 

A message that sticks

As the world adjusts to a new normality, OKI Europe Ltd recognises the challenges banks face when encouraging social distancing and has teamed up with Floralabels to offer free* social distancing media and artwork to create self-adhesive floor stickers that can be printed quickly and easily from an A3 colour printer such as the C800 Series.  Floor stickers can help ensure customers maintain safe distances while queuing at counters, kiosks and ATMs. The free stickers include self-adhesive floor circles (285 x 285mm) and rectangular floor banners in two sizes (215 x 900mm and 297 x 1,320 mm) with various designs and messaging options to choose from.

 

Achieving ROI with a do-it-all device

When it comes to printing in-branch, implementing a printer with unrivalled media flexibility will provide the best return-on-investment. Not only will the bank be saving on printing and delivery time and costs, it will also save on storage space or potential wastage as well as offering the flexibility to be more reactive to market trends in a timely manner.

OKI’s multi award-winning C800 Series A3 colour printer is designed to take up a minimal footprint and will supply everything from 1.3m metre hanging and freestanding banners to posters, self-adhesive floor stickers, window stickers, leaflets, flyers and much more on a diverse range of materials. Featuring OKI’s pioneering digital LED technology, the C800 Series delivers professional quality results, at high speed and on-demand.

Banks are vital to helping people and businesses prosper, supporting economic growth. Investing in cost-effective do-it-all devices that enable the fast rollout of eye-catching, professional quality collateral will help banks and their customers thrive.

 

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