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Embracing eCommerce: what retailers will face in 2023 

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Financial Services Is Stepping Into A New Era

by T.R Newcomb, VP, Strategy and Corporate Development, Riskified  

 

2022 has been a tumultuous year, with rising interest rates, inflation running at its highest level in decades, and the lingering effects of the pandemic all combining to produce economic uncertainty and a cost-of-living crisis in the UK.

Many consumers fear that a recession is looming, and consequently have cut back their spending. A report by VoucherCodes indicated that most regions in the UK saw a decline in spending in the run-up to Christmas – traditionally a vitally important shopping period for retailers – with spending down 1.3% compared to the year before.

In this context of higher costs and lower consumer demand, 2023 could prove to be a make-or-break moment for retailers operating on slim margins. Many will rely on eCommerce to produce a growing proportion of their revenues. Given this increasing importance of eCommerce channels, what behaviours and changes should online retailers anticipate in the coming months? Here are three trends that we at Riskified predict will impact the industry:

Policy abuse set to skyrocket 

Policy abuse, which happens when a consumer exploits (intentionally or otherwise) a retailer’s terms and conditions, has gained significant traction over the past few years. Not only is it getting more common, but it’s also costing online retailers millions of pounds, and will continue to be a top priority for them to address in 2023.

T.R Newcomb

Policy abuse takes many forms. For example, it occurs when customers misuse promotion codes, falsely report a mis-delivered item, or return used or worn items. These behaviours impact all areas of a retailer’s business – from legal to customer service to shipping and logistics.

As we enter 2023, the ongoing economic downturn is forcing consumers to think critically about every pound they spend and every pound they save. We can anticipate, therefore, that consumers are likely to continue finding and abusing loopholes in retailers’ policies to try and save money.

Fighting policy abuse is extremely complex without the right tools in place, and online retailers must balance the customer experience with managing financial losses. If a customer makes dozens of purchases but is suspected of committing policy abuse on only one item, some retailers may choose to overlook the instance rather than risk losing a loyal customer. Sophisticated fraud prevention solutions can analyse data from various customer interaction channels to uncover patterns of behaviour and help retailers identify when policies are being abused and which customers are abusing them.

If retailers don’t pay attention to these consumers’ behaviours and adapt accordingly to manage and prevent policy abuse, bottom lines can be severely impacted throughout 2023.

Brands must double down on personalising the customer experience

In a competitive eCommerce environment, you’ll be hard pressed to find a retailer that isn’t currently hard at work looking for ways to increase and maintain customer loyalty. Securing ongoing loyalty will be of paramount importance in 2023, especially as economic uncertainty continues to sap consumer demand. Consumers who receive an excellent shopping experience are far more likely to keep returning – which is where personalisation comes in.

Much is already written about the value of personalising the early stages of the customer experience – from retargeting adverts to providing customised content and more relevant product recommendations. But there are other areas of the eCommerce shopping experience, like checkout and post-purchase, that also afford compelling opportunities to retailers willing to explore this space.

Personalisation allows retailers to customise every touchpoint throughout the shopping experience, maximising loyalty and retention. This holistic, end-to-end approach must also encompass the customer experience post-purchase, including ongoing customer support and a seamless process for requesting returns and refunds. Retailers can take this a step further and tailor their return policy decisions to block abusers while providing greater leniency to loyal customers as a reward.

The key to winning in 2023 will be embracing creativity and moving away from a one-size-fits all approach at every stage of the purchase experience.

Retailers must navigate PSD2 issues

While the EU’s second Payment Services Directive (otherwise known as PSD2) was launched in late 2015, the deadline for full compliance only finally came into effect in March 2022 in the UK, following several delays. The regulation has meant that much has changed in the online payment space, especially around the strong authentication requirements of transactions.

Over the last year, card issuers have introduced the new 3D Secure (3DS) 2 protocol which aims to manage both risk and the customer experience during a PSD2-compliant authentication process, with the ultimate goal of improving successful approval rates.

One major change to expect in 2023 will be the advent of new authentication technologies, including delegated authentication for merchants. Retailers who qualify will be able to perform authentication through their own platforms, which has the potential to boost revenues through improved customer experience, a lower rate of cart abandonment, and an increase in transaction approval rates.

Unfortunately, it is likely that only enterprises or larger retailers will have the capacity to offer delegated authentication. Smaller and mid-sized merchants will continue to struggle with regular solutions; for them, leveraging exemptions through the usage of Transaction Risk Analysis (TRA) will still be the most effective solution. However, retailers relying on TRA will be hampered by the fact that there remains large unevenness across the EU market regarding the usage and acceptance of exemptions. Issuers in the UK are leading the way here, but issuers in southern Europe are much less aligned in accepting exemptions.

Retailers in 2023 may still be busy adapting to the rules of PSD2, resolving any 3DS-related technical issues and looking for the best ways to leverage exemptions, but they must also pay attention to the conversation around the next evolution of these regulations: PSD3.

In May 2022, the EU Commission opened consultations into revisions for PSD2, and there is a big opportunity for industry representatives to shape this debate. There is a possibility for the whole scope of the regulation to be widened to include emerging trends and new payment methods, such as embedded finance and cryptocurrencies, as well as protect against new types of fraud.

While PSD3 is likely to be years away, it is a reminder that retailers need to look through short-term economic uncertainty and focus on their long-term growth and survival. Adapting to the changing landscape is a never-ending process and is key for retailers to be agile and maintain growth.

Business

Accounting Automation in the Future

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Accounting automation is the process of streamlining repetitive tasks in financial processes. For example, some processes like invoicing are time-consuming and repetitive. Automation can reduce manual labor and save businesses both time and money. Also, it helps improve accuracy, reduces errors, and provides more accurate financial reporting.

Accounting automation in the future will be increasingly important for businesses to stay competitive. But every new change comes with both advantages and challenges. Let’s dive in to get ready for this future trend.

 

Potential Future Benefits of Accounting Automation

Increased Efficiency and Cost Savings

Accounting automation is a great way to increase efficiency and cost savings. For example, AI bookkeeping uses advanced algorithms to automate many accounting tasks. So, companies can track expenses, prepare financial reports, and more using AI.

It reduces the time needed for manual entry. So, businesses can spend fewer labor hours on tedious processes. They can increase efficiency by freeing up resources for more strategic work. It also helps reduce errors and inconsistencies associated with manual processes. So, the cost of compliance is lower because of greater accuracy.

 

Improved Accuracy and Reliability

Accounting automation can improve accuracy and reliability in accounting processes. For example, Automating bank reconciliation is less prone to errors from human mistakes or miscalculations. You can automate the process to identify discrepancies between the bank statement and accounting records. It helps to ensure that financial reports remain accurate and reliable. So businesses can take corrective action faster than processing data manually.

 

Streamlined Business Processes

Streamlined business processes involve eliminating unnecessary steps, reducing paperwork, and automating repetitive tasks. This allows businesses to focus on higher-value activities, such as developing new products, improving customer service, and developing strategic plans for the future.

 

Making a Better Decision

Accounting automation can enhance decision-making in 3 ways.

1. It enables businesses to access real-time information from multiple systems. So they can identify trends for better decision-making.
2. Automated accounting also helps with forecasting, budgeting, and auditing tasks. It enables businesses to be more proactive in their decision-making processes.
3. Also, automated accounting tools can integrate with enterprise resource planning (ERP) systems. They can manage data across the enterprise and make concise decisions that are favorable to the company as a whole.

 

Increase Customer Satisfaction

Accounting automation can help businesses increase customer satisfaction by streamlining their processes and providing a more efficient customer experience. For example:
4. Automated accounting systems can automate tedious manual tasks such as invoicing, data entry, and payroll processing. This allows businesses to focus on other aspects of their operations that are more important for customer service.
5. Automated accounting systems can also provide customers with more accurate and timely financial information. The information can help them make better decisions about their finances.
6. Also, accounting automation enables businesses to respond quickly to customer inquiries. It helps reduce wait times and improve the overall customer experience. So, you can build better relationships with their customers.

 

Improved Accessibility

Accounting automation takes place online or comes with cloud-based solutions. So, you can access your information and do your job from anywhere instead of being confined to one spot.

 

Challenges to Implementing Accounting Automation in the Future

Cost of Technology Infrastructure Upgrades

Automating an accounting system often requires businesses to invest in new hardware and software, such as servers and other associated equipment. These upgrades come with a hefty price tag that may be difficult for small businesses to afford.

There are also extra costs, such as installation fees, setup charges, software licensing fees, cloud storage costs, and maintenance fees.

 

Training Requirements for Staff Members

Accounting automation involves using advanced technology to automate certain processes. So, it creates a need for trained staff members who can handle the new technology. Training requirements vary depending on the type of software used.

Some common training includes record-keeping procedures, software applications, and troubleshooting skills.

 

Regulatory Compliance Issues

Accounting automation can be a time-saver, but it also requires firms to be aware of the applicable rules and regulations. Companies must ensure that their automated systems are compliant with relevant laws and regulations such as Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and other applicable accounting standards.

Besides, they must also comply with legal requirements related to taxes, financial statements, and other reporting obligations.

So, businesses must consider the complexities of regulatory compliance when automating accounting.

 

Security and Data Protection Concerns

As businesses move their accounting processes to the cloud, they are exposed to a wide range of potential security risks. Data breaches can cause significant damage to the business’s financial and reputational integrity. Besides, the complexity of automated accounting systems can make it difficult to identify and detect suspicious activities or errors in the system.

To ensure data is kept secure, businesses must have strong measures in place to protect against unauthorized access, encryption, and regular backups of data.

Furthermore, companies must train their staff on the proper use of the system. It helps staff to know how to protect confidential information from being accessed or misused by unauthorized personnel.

Businesses may also need an experienced IT team to monitor and maintain the system to keep up with any changes or updates for optimal performance.

 

Final thoughts

Accounting automation has come a long way in the past few decades. It is likely to continue to advance in the future. As technology continues to evolve, more businesses will likely begin taking advantage of automation in their accounting processes. So, businesses should be aware of the potential challenges and prepare to stay competitive.

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Banking

How banks can help customers during the cost of living crisis

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 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree

 

Surging energy and food prices are significantly driving up household expenditure, which means living standards in the UK will fall to 2.2% this year, according to the Office for Budget Responsibility. This is the biggest drop in any single financial year since the records began in 1956-57.

It’s a tough situation for many consumers who are still struggling with financial hardship following redundancies and pay freezes from the pandemic. According to TSB’s Money Confidence Barometer, 82% of people have experienced an increase in the day-to-day cost of living. This resulted in almost a quarter of them using their savings, while one in five changed their usual spending habits and behaviours.

As the financial situation worsens, consumers are increasingly relying on their banks for help and support. But, while banks can’t control inflation, energy or food prices, they can play a more supportive role by adapting their services to offer stronger customer service, better tools for financial management and be more flexible with loan repayments.

 

Strengthen customer service with intuitive AI solutions

Since the pandemic, consumers have changed the way they bank, using more mobile apps for primary banking rather than going into physical branches. This provided an opportunity for banks to accelerate their investment in digital services including automation and offer customers more support during the cost of living crisis.

Lavanya Kaul

Effective tools include AI-powered chatbots which respond intelligently to customer enquiries to quickly help troubleshoot problems and provide useful advice. But to be successful, you need to ensure you strike the right balance between an efficient and convenient process and creating a personalised experience. Customers need to feel like you understand and care about their problems and are here to help, rather than just fobbing them off with a monosyllabic bot. To avoid this, banks need to embrace intuitive AI solutions to ensure that empathy comes across in all automated interactions with customers. While doing that, messaging is key. In times of stress, we don’t function as well and financial struggles are a huge stressor. The clearer the message and the simpler the instructions, the better.

Financial education, when combined with technology solutions such as open banking, can offer more long-term solutions for people to navigate their finances. This can help put more information into the hands of the consumer to help them grasp their financial situation better. Some banks have cracked this with innovative solutions like HSBC’s Financial fitness score tool that can analyse your money habits and signpost you towards ways to improve your financial health. This may include joining one of the financial education webinars run by the bank or having a ‘financial health check’ with a member of staff.

 

Launch money management features & apps

Introducing money management features and apps to increase the visibility of a customer’s financial situation, empowers them with the information they need to make smarter choices.

TSB offers Spend & Save and Spend & Save Plus current accounts which include a savings pot that enables customers to put extra money aside when they can and an auto-balancer feature that automatically transfers money from the savings pot into their current account if their balance falls below a certain level. This allows them to start building up savings and protects them from unnecessary overdraft charges.

Personal financial management (PFM) apps also help customers get a better understanding of their finances. These connect with a customer’s bank account and enable them to keep a close eye on their spending habits and track upcoming bill payments. An example is Prism, a PFM app which allows customers to manage bill payments by sending them reminders about due dates. It also provides a summary of their income, account balance and monthly expenses at a glance, therefore consolidating all their financial information in one place and saving time on bill payments.

Lloyd’s Banking Group and HSBC launched a subscription management tool for all customers on mobile, allowing them to see and cancel recurring card payments for things like TV subscription services. HSBC says that during the first quarter of the year, it led to customers dumping around 200,000 subscriptions.

 

Introduce payment holidays

While improved customer service and financial management tools are important support tactics, they might not be enough for more vulnerable customers. For example, those who are about to default on mortgage payments or loans due to redundancy or periods of ill health need banks to do more, like offering payment holidays. Banks relaxed the rules for payment holidays during the pandemic, so they should consider doing it again to help more vulnerable customers through the crisis. Customers need to understand that they are not alone when experiencing financial difficulties and that help is available

 

Ride out the crisis together

As inflation reaches a 30-year high, customers are now more reliant than ever on banks for guidance and support. But to provide the right level of service, they need to move away from their traditional ways and behave more like technology companies by embracing automated solutions to create the right products and services for customers. Then layer on top of that the need for more personalised and empathetic customer interactions, as well as consider additional support for more vulnerable customers.

While we don’t know how long the cost of living crisis will last, what we do know is that the pressure on household finances is likely to get worse before it gets better. Therefore, banks need to step up, be the supportive partner and do whatever they can to help customers. After all, the only way we can ride out the crisis is by supporting each other and working together.

 

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