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FIVE STEPS FINANCIAL SERVICES PROVIDERS SHOULD TAKE TO CREATE AN INCLUSIVE DIGITAL BANKING EXPERIENCE

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Rob McElroy, CEO Sopra Steria Financial Services

 

Before the pandemic financial services providers faced an uphill battle to drive digital adoption amongst their customers. But since Covid-19 paused all physical interactions such as face-to-face meetings, customers were left with no choice but to embrace the newly implemented digital solutions replacing them.

Understandably, most financial service providers adopted a ‘one-size-fits-all’ approach to the digital customer journey because of the urgency to provide services to their customers. However, for many customers, these digital solutions will not be fit for purpose in the long term since they do not take into consideration individual customer needs across different times/moments in their lives.

As we emerge from the pandemic, one of the biggest challenges facing the financial services sector is: how do they build a digital experience that is accessible, inclusive and responds to the personal circumstances of individual customers?

 

Understanding and identifying vulnerable customers

Some of the latest thinking to guide financial services firms strategy comes from the FCA. According to its Treating Customers Fairly report published in February, a staggering 27.7m adults in the UK displayed characteristics of financial vulnerability during the pandemic. The guidance here is that providers must consider whether a customer is in, or about to be a vulnerable situation and respond appropriately, ensuring that each customer has the opportunity of a good and fair outcome.

The difficulty in identifying whether a customer is in a vulnerable situation are the characteristics and/or reasons behind them. A specific situation could make one customer vulnerable, but not necessarily another. It is therefore important to not only understand the specifics of a situation but also the context surrounding the situation for each individual customer.

There are two ways organisations can work to build up an overview of a customer’s vulnerability characteristics in a digital environment:

  1. Asking them directly through the digital journey to self-identify whether they have personal circumstances which may indicate they have the characteristics of being in a vulnerable situation. Some characteristics can be more obvious than others, for example a recent death in the family or job loss will represent a life event which put the customer in a vulnerable situation.
  1. Data is another way to identify when a customer has characteristics of vulnerability and can also be used to predict future potential risk of harm. As an example, transactional data from open banking can provide insight into a customer’s spending patterns and warn them against late payments, or expensive overdrafts. At an aggregated view, data could identify a provider’s customer base with low-income households and therefore potentially at risk of suffering from poverty premiums.

Once providers have a deeper understanding of the individual characteristics surrounding their customer’s personal situation they can adapt their products and services to provide a suitable, fair and good outcome for each customer.

 

Five steps to build an inclusive experience

How can banks and building societies create this inclusive digital banking experience ready for the future? Here are five key considerations:

  1. Understanding customer diversity – providers need to take the time to really get to know their customers and identify how they interact with their services. It is no longer good enough to apply blanket personas across a specific age group or demographic. Each customer’s needs and personal preferences must be considered in isolation and in turn presented with a service that meets their specific circumstances.

 

  1. Supporting around the clock, through multiple channels – providers must be able to support and present the same information via in person, mobile, and online channels allowing customers to pick a support mechanism, format and time that suits them best. Banks should take a proactive, preventative approach and adopt the attitude that if the customer asks for information, it is probably too late.

 

  1. Designing for all – banks need to make sure products and services are open to all customers, regardless of age, disability, background, or intellect. This will ensure everyone can receive the same positive outcomes across any channel they choose to interact with.
  2. Improving accessibility – Digital has provided increased access to products, services and support to many customers, but at the same time introduced new ways to exclude others. For example, algorithms in digital journeys and online decisioning tools can lead to providers inadvertently excluding others from certain products or presenting higher lending terms. Financial service providers need to review their ethical principles and identify where potential biases may exist. The more banks understand about their individual customers, the more they can measure the impact of their accessibility polices, and will be able to uncover whether a product or service is truly accessible via digital, phone or in person channels.

 

  1. Collaborating with the SME/FinTech market – banks and building societies who are open to collaboration and building their eco-system of partners are able to present digital tools or micro-services to certain customer groups and offer a more rounded, specific service offering to meet their needs and engage at the appropriate level. This can avoid a one-size-fits-all approach and means that the service and product offering can evolve over time in parallel to the customer’s individual needs.

Looking forward

For much of the population, the pandemic has caused significant concern around personal health, emotional and financial well-being. Moving forward an incremental approach to improving accessibility to products and services combined with a supportive partner ecosystem should be adopted. This will enable customer experience to become better over time and consider the different digital adoption needs of individual customers.

Ultimately, those banks and building societies who take the time today to examine their customer base and think about how they can deliver true personalised customer journeys aligned to their digital banking ambitions will find they are well placed for the future.

 

Banking

HOW TRADITIONAL INSURERS CAN USE TECHNOLOGY TO IMPROVE THEIR RELATIONSHIP WITH CUSTOMERS

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The customer experience with insurance is anomalous, in that one is only required to engage with their insurer if things are going wrong for them. To add value to the relationship, new technology and methods should be adopted, in turn driving loyalty and business growth, writes Oliver Werneyer, CEO and Co-founder of Imburse

Oliver Werneyer

Insurance is one of the oldest industries in the world and it is still, to this day, considered a grudge purchase. Looking back, insurance has a history of having a challenging relationship with its customers. According to an IBM study, in 2008, only 39% of consumers trusted the insurance industry. This percentage has stayed largely similar over the years, having reached only 42% in 2020. For any business with growth ambitions, good customer relationships are crucial.

I believe that now more than ever, the insurance industry not only needs to continue investing in improving relationships with customers, but to really think about new ways of doing so. At a basic level, the moment of truth for an insurance customer is when either they need to pay or are getting paid. Insurers can have the best policy wording, quick claims processes, apps and advisors, but if the experience to pay premiums or to receive a claim is bad, the customer immediately loses trust.

The pandemic has exposed this tenuous relationship between insurers and its customers. The need to move everything online and provide personalised services has exposed significant shortcomings in the service insurers provide. The industry has been too slow to adopt newer technologies and move engagements closer to the customer (self-service and empowered). This is largely due to the legacy systems and processes that insurers failed to modernise over previous years.

This means that the better-positioned incumbents have stronger customer relationships and benefit disproportionately from the pandemic, as they are able to win more new customers and convert customers from other insurers. They also benefit from significantly lower customer acquisition costs and much better growth, as illustrated in this McKinsey report. Even new entrants or InsurTechs are benefitting massively by focusing on improved customer experience and customer relationships.

However, it is never too late for insurers to build better relationships with customers. The main way to build a good relationship with a client is to make life easier, live up to promises and add value through the relationship with them. By working on these key elements, insurers can start building strong relationships with their customers, and, through the right partners, deliver this in a timely and non-disruptive manner.

 

Embedded Services

Insurance products often get a bad reputation because they cost money, but the benefits might only come much later, or never. Customers don’t get to experience a positive relationship with insurance products, either because they never claim and feel like they lost out, or they claim and they’re in a bad situation. By either embedding other services into the insurance experience to deliver a more transactional engagement, or embedding insurance products into general customer experiences such as online shopping or rewards, insurers can enrich customer relationships to generate value.

This way, insurers become a value-adding part of the customers’ everyday activities and not just a product that they have to pay for and may never get anything back from. One example is to embed micro-savings capabilities, often found in banking, into pension savings and insurance products. This can allow customers to save more for pension, attract younger customers and build a portfolio of fiscally disciplined customers.

 

Tailored journeys and personalisation

Customers have come to expect personalised journeys and engagements from product providers. Streaming services, social media, e-commerce or mobility services have shaped the customer expectations. Now, customers are also expecting personalisation for insurers.

Insurers need to invest very heavily in delivering personalisation and customisation to customers as they engage with their products. Failure to deliver this puts renewed strain on the value perceived by the customer and their relationship with the insurer. This applies not only to customer interfaces, but to aspects such as payments. Insurers should make it easy and pleasant for customers to pay and get paid. As the main moment of truth, payment experiences need to work optimally.

 

Perceived customer value metrics and delivery

The value customers derive from insurance products is, generally, monetary. Therefore, insurers must invest in product enhancement to increase its perceived value. Perceived value is not tied to a monetary value. By being able to choose between multiple payment options, such as a $300 pay-out to a bank account or a $320 Amazon voucher, the customer has a higher perceived value of the payment. This can be achieved by leveraging non-insurance products that can be purchased at a discounted price, exclusive access that the customer would otherwise not have or conversion into a form that is more useful to the customer.

Payments, for collection and pay-out, are at the core of delivering this value. An excellent payment experience immediately influences the customer to be positively inclined toward a product (PwC report). In order to offer this, insurers need to leverage multiple technologies and providers, offer any speed of transaction in any market, and deliver faster automation and better risk control. The key is to transform insurance products into transactional value-adds to customers’ lives and use this opportunity to continuously build on relationships with customers.

The main roadblock for insurers is still the operational implications of these activities and the costs that arise. In looking to build a better customer relationship, insurers need to look at partners that are operational enablers to deliver this. Partners that can solve the integration and speed-to-market problem so that insurers are enabled to deliver new capabilities, not bombard them with new ideas and no path to delivery.

Imburse, for instance, enables insurers to access all the global payment providers and technologies available in any market. Through a single connection, insurers can deploy any payment capability into any channel, for collection and pay-outs, without ever again needing to build a direct operational integration to the providers. This gives them full freedom to leverage payments as a key value driver and customer experience enhancer.

Building a better relationship with insurance customers is key for the insurance industry to close the protection gap. Incumbents are in the prime position to look at Insurtech and Fintech partners to rapidly and significantly modernise, digitalise and transform their own capabilities to deliver major enhanced value to their customers.

Imburse is an advanced universal payment connector that enables businesses to gain cost-effective access to complete global payments technology, regardless of the service provider. To learn more, please visit www.imbursepayments.com.

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Banking

UNCHARTED TERRITORY: HOW OPEN BANKING CAN HELP BANKS NAVIGATE COVID CHALLENGES

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Opinion from Rafa Plantier, Head of UK and Ireland at Tink

The last year has propelled banks, businesses and consumers alike into uncharted territory. Changes which would normally have spanned years were compressed into months. Financial institutions who had already embarked on the path of digital transformation had to accelerate their plans, and customers of all walks of life had to become acquainted with using digital services almost exclusively.

Rafa Plantier

According to our recent research report ‘Open banking in the post-pandemic world’, 41% of European financial executives believe the shift from digital-sometimes to digital-first during the Covid-19 pandemic will be permanent for the financial services industry.

There are two sides to this coin: it’s indisputable that industry and economies have been weakened as a result of Covid-19. A drop in revenues and profits, regulatory challenges, new disruptive market entrants, and low interest rates, all mean that banks are poised in a delicate position. However, open banking represents a significant opportunity for banks transitioning from analogue to digital, and from closed to open. Here are three ways open banking can benefit financial institutions in the post-pandemic world.

 

Putting innovation in the fast-lane

Covid-19 led to a rapid, unforeseen change in consumer behaviour that meant digital innovation became a need-right-now rather than a nice-to-have. Over the last year, financial institutions had to innovate in real time to ensure business continuity and serve their customers as their needs changed swiftly.

The sense of urgency is palpable across the industry. Over two thirds (65%) of financial services executives surveyed agreed that it’s necessary for banks to increase their speed of innovation as a result of the pandemic, and 74% of financial executives believe the pandemic has increased the need to enhance digital services.

Open banking technology can act as a catalyst to innovation and digitalisation. It can enable access to tools and capabilities which are scalable across geographies, lines of business and customer segments. For example, by using techniques such as recycling code or toggling different data-driven services, banks can short-circuit the time to market for their own digital services.

 

Unlocking commercial opportunities

Legacy revenue streams have recently faced downward pressure and profit lines have begun to diminish for banks. Banks now need to ensure their digital ventures are competitive enough to survive in an increasingly crowded digital marketplace.

Open banking technology helps improve customer value and engagement — crucial as seven in 10 (70%) financial executives believe that the pandemic has increased focus on the customer experience.

It also provides the opportunity for banks to identify customer needs and deliver a personalised proposition shaped to each individual. For example, through account information services, banks can create bespoke user experiences which keep customers coming back. In addition to this, financial institutions can use personal finance management technology to engage with and create value for the customer — giving them invaluable insights to boost their financial health and identify risk areas.

 

Empowering operational efficiencies

Historically in banking, customers were required to transfer several onboarding documents — from proof of address to citizenship status. Not only was this a drain on the customer, but at the other end banks had to manually review and assess the documents provided.

Open banking can expedite everything from customer onboarding and due diligence to risk assessment processes. It simplifies the process for the customer as well as increasing operational efficiencies on the bank’s end, by allowing them to quickly retrieve customer information through connections to their primary bank.

Now customer data can be fetched in real-time and in a machine-readable format, financial institutions can onboard quickly and with significantly lower risk. With 68% of financial executives believing there has been a renewed focus on profitability since the pandemic, lowering costs and enabling efficiencies wherever possible will be make or break for some institutions.

The good news is that the benefits offered by open banking are now also coming to business accounts. At Tink, we are already live with this in the UK and Sweden — enabling companies to leverage business account data to create the same seamless services and enhanced user experiences for business and individual account holders alike. And in a world where customers are actively consenting to access their financial information to get better services, requesting that consent to enable open banking payments and transfers is a natural next step

 

The industry is just at the start of the open banking journey

The appetite for leveraging open banking technology is accelerating, as it climbs even higher on the agenda of executives. Over two thirds (68%) of financial executives surveyed across Europe say that their interest in open banking has been piqued by the pandemic as they recognised its potential to lower risk, anticipate financial distress, increase sales, and enhance customer experience.

As the dust settles, one thing has become clear – open banking has emerged as a vital enabler of gaining a competitive advantage for financial institutions, by improving the customer experience in a post-pandemic world.

To learn more, read Tink’s open banking report ‘Open banking in a post-pandemic world’, here.

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