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FIVE TOP TECH TRENDS SHAPING THE FUTURE OF CUSTOMER ENGAGEMENT

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Karen Wheeler, Vice President and Country Manager UK, at Affinion

 

In the financial services industry, churn rates are staggeringly high, with some companies as large as 25-30 per cent. Retaining customers is particularly challenging for organisations like credit card companies, insurance agencies, credit unions and banks that can’t offer fixed contracts. In the banking industry, there’s no shortage of options for customers who are no longer limited by location but can shop around online and choose whichever bank or organisation attracts their attention.

 

With growing competition from challenger banks, new technologies can help some of the traditional players enhance their customer experience and keep up with the disruptors. However, while 89 per cent of marketing decision makers believe that emerging technologies play a critical role in developing an engaging brand experience, they struggle to identify which ones to implement. Instead they are confused about whether the latest innovations will actually serve to increase customer engagement.

 

We believe there are five new tech trends which will help financial institutions to strengthen their customer engagement in 2019:

Karen Wheeler

  • Internet of Things (IoT) – this technology is a disruptive force across all organisations in all sectors. According to Gartner, by 2020 there will be 26 billion connected devices. Cisco predicts there will be 50 billion, Intel suggests 200 billion, while the IDC says 212 billion. Whichever is right – these are phenomenal numbers, and furthermore, in terms of business opportunities, we’re just scratching the surface. Only 0.06 per cent of all devices that could potentially leverage IoT are doing so, while of the businesses who are using IoT, 94 per cent have already seen a return on their investments.

 

So, what will this mean for the financial services industry? IoT technology makes it possible to connect with digital-savvy consumers in a relevant, contextual and meaningful way by linking up people, processes and things. IoT platforms provide immediate, actionable insights so businesses can respond to customer needs in real time, and also provide behavioural insights which can be used to create superior customer experiences in the future. For example, digital sensors can be placed in bank branches and ATMs to analyse consumer behaviour and report unexpected customer problems and service issues.

 

By using the data collected from sources like mobile apps, banks can launch better and more targeted service offerings. Some are now exploring how remote devices like Amazon’s Alexa and wearables can conduct more banking services, starting with simple actions like balance check and transaction history.

 

  • Automated financial analysis – self-learning algorithms can mine data, recognise patterns and use natural language processing, allowing them to discover significant insights, patterns and relationships across data. This can then be deployed to support any customer service channel – for example, helping live agents during calls or interacting with customers directly through chatbots on digital channels. This increased efficiency should improve the quality of the customer service experience.

 

  • Virtual engagement – virtual reality (VR) and augmented reality (AR) play an integral role in bringing products, solutions and services from digital platforms into the hands of customers. It can enhance the customer journey and buying process by offering consumers a more natural, immersive and connected experience.

 

The Commonwealth Bank of Australia and Halifax now offer “home finder” apps that use AR technology to allow users look at data on houses for sale as they pass them. Another example of the banking sector using AR technology is the National Bank of Oman which now allows customers to locate a nearby ATM or branch as well as find offers and deals while walking around a shopping mall or down the street anywhere in Oman.

 

  • Hyper-personalisation – The rate of data creation is ever increasing, in the last two years alone, 90 per cent of the data in the world was created. This vast amount of data provides huge opportunities for marketers to ensure every interaction is as personal and beneficial for the customer as possible. Financial organisations must go beyond simple details such as age, income, or balances, and show that they really understand their customers by personalising marketing to match past purchase behaviour, social interactions and lifestyle preferences. Rather than flooding customers with a barrage of poorly timed, irrelevant offers and messages, businesses are now readily using sophisticated algorithms and predictive models to analyse transaction data, behavioural insights, previous interactions and preferences to better market their products to customers when it matters most.

 

Monzo is a good example of a bank changing the personalisation game. The challenger analyses customer transaction data, enabling it to offer financial advice based on regular spending habits. If a customer’s energy bill increases, Monzo can suggest moving to a cheaper supplier or will identify other ways to save money to provide a real value-add for their customers.

 

  • Data security – more than ever before, organisations must show that they understand their responsibility to protect customers’ sensitive data, and the failure to do this would result in lost customers and revenue. As well as ensuring robust data security of their systems, businesses must also ensure that interactions with customers over digital channels are secure and trusted. As a consequence, many financial service companies are bringing in biometric security which uses the unique characteristics of a person, such as voice and retina pattern or fingerprint.

 

These five digital trends have the potential to completely transform the customer experience if implemented thoughtfully. Innovative technology is only worth pursuing if it can provide a true value-add to the end-user and isn’t just a gimmick. To find out more about how technology is set to transform customer engagement in 2019, read our 5 Tech Trends Shaping the Future of Customer Engagement eBook here.

 

 

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Top 10

HERE’S HOW INSURANCE IS SET TO CHANGE

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By Adam Goldsmith, Insurance Specialist, SAS UK & Ireland

 

Making predictions about the state of any industry in the coming year is a nigh-on impossible task. But looking to the longer-term, the patterns we’re seeing in insurance firms, which have been inspired by the pandemic, have revealed in no uncertain terms that the industry is in flux. Change is here, and its impact will be felt for many years to come.

Woken up by the sharp jolt of the pandemic, insurance will experience dramatic change by 2025. But not all firms will adapt fast enough to the new insurance landscape or new expectations from customers. Those that pay attention to long-term predictions like the following could reap the rewards post-pandemic.

 

1. Knowing customers inside-out through their data will be non-negotiable

A typical Insurer today is set up in very traditional manner. There remains distinct, separate departments for the key functions: including assessing risk, acquisition, customer engagement, claims handling, customer protection and renewal.

Yet very few insurers have a truly joined-up view of a customer’s full journey with their organisation, let alone what can be done to optimise each interaction. What’s needed is the ability to understand each customer touchpoint as they traverse through their journey, as well as the ability to make decisions as to how best to engage them.

Insurers often cite legacy policy admin and claims systems as the biggest barrier standing in the way of this approach being adopted. By 2025, however, the most successful insurers will have broken those barriers down, gaining an unprecedented understanding of their customers’ needs and preferences, and the ability to offer pricing plans that are both fair and competitive.

 

2. Automation and algorithms will become the bedrock of all insurers

We’ve long heard of ‘digital transformation’ being a key objective for insurance executives. However, by 2025 it’s expected that successful insurers will have completed this transformation. Digitalisation will no longer be the differentiator, it will be the default. As a result, a new way to drive business advantage will have to emerge – and it will be centred on the use of algorithms to drive business decisions.

This is not a new concept. Gartner describes ‘algorithmic business’ as the ‘industrialised use of complex mathematical algorithms pivotal to driving improved business decisions or process automation for competitive differentiation’.

We’ve already seen some insurers start this journey in their claims function. Companies, including Aviva, have long automated decisions concerning whether a vehicle is deemed a total loss or not. However, the trend will become much more prevalent, with Gartner research predicting that, by 2023, over 33% of large organisations will have analysts practicing decision intelligence, such as decision modelling.

 

3. The customer will see positive change as they interact with their insurer

It’s clear by now that COVID-19 will fundamentally change how insurance is done – both in terms of how customers want to interact with insurers, and also how insurers need to adapt. While we hope this pandemic won’t be with us forever, it has opened the eyes of many executives to what is possible within the customer-facing parts of their organisation.

From my discussions with insurers, many have commented on how well employees and customers have adapted to the new normal. While there were initial logistical hurdles in virtualising contact centres, they’ve been impressed at how well staff have adapted under pressure to deliver what customers and shareholders expect. Many are likely to follow the approach of Lloyds in allowing staff to work remotely for the foreseeable future.

 

4. Prevention will be prioritised over payouts

Insurance has long been society’s safety-net, protecting us when something goes wrong in our lives. Yet, it would be to everyone’s benefit if risk could be avoided altogether. The use of telematics to assess the risk of younger drivers was the first big industry push here, but by 2025 we will see this becoming ubiquitous across many other products and customer demographics.

The recent example of Munich Re’s acquisition of IoT service provider Relayr will benefit manufacturers with a ‘pay as you use’ model. This will enable them to be more flexible and react faster to market changes. The IoT Observatory is also exploring new ways that data extracted from connected sensors and devices can help to transform risk assessment and empower insurers with data.

This is no small step for any traditional insurer. But it is one that puts a truly customer-centric lens on the service that insurers deliver. Data-driven risk prevention allows for significant product differentiation, taking insurers out of their comfort zone and enabling them to explore whole new opportunities.

 

5. Fraud prevention must shape up for a post-pandemic world

Come 2025, we will be living in a very different world with new risks that require novel insurance solutions to resolve.

One of the largest looming threats is insurance fraud. Analysis from the Insurance Fraud Bureau shows that fraudulent claims rose by 5% in 2019, and there are concerns the current economic climate could see this rise even further. In the aftermath of the 2008 Financial Crisis insurance fraud rose by 17%, and there’s no guarantee this won’t happen again on the back of growing practices like crash for cash fraud and ghost broking.

Putting in place an effective defence mechanism to intelligently detect, prevent and investigate potentially fraudulent claims will be an essential requirement by 2025. A soft defence is a liability while those that take fraud detection seriously will drive a more profitable outcome. This is especially true when it was announced recently that close to 20% of each policy premium is goes to cover the cost of fraud.

Insurers must be holding a finger to the wind during this unusual time, as many of the themes and patterns emerging now will shape the industry going forward. Insurers must figure out how to adapt their decision-making processes now, to take on an unpredictable and exciting future in insurance.

 

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Banking

BRAND CONFIDENCE: HOW HAS OPEN BANKING EVOLVED AND DO CUSTOMERS TRUST IT?

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By Geoff Boudin, Director at Revive Management

 

The open banking industry is growing by 24% year-on-year, and is expected to be worth more than £31 billion by 2026. The implementation of the 2018 Payment Services Directive known as PSD2, was intended to boost competition in the name of open banking. The directive, which set out to make payments more secure, by requiring banks to share the data of customers who authorise it with third parties. This allows customers to share their financial information with authorised service providers such as budgeting apps and other third-party money management tools. It was initially called for by the Competition and Markets Authority (CMA) to level the financial playing field and empower consumers by giving them more ownership over their financial data.  So, two years on, what impact is open banking having on consumers? Do they trust it? If so, how can brands build on this trust to offer more a more personalised yet non-intrusive experience that delivers the data to further improve their service offering.

 

What difference has open banking made?

Prior to PSD2, which came into force on 13 January 2018, banks had full authority and jurisdiction over their customers’ financial data. The idea of a bank giving up some of that data to a third party for the benefit of their customers was unheard of. This closed ecosystem, however, runs against the drive towards digital openness, connectivity and convenience. Our digital worlds were opening up and data was becoming democratised, and banks were being left behind. Challenger banks such as Monzo and Atom, which embraced innovative new apps and features, had been making headway for years, and there was a sense that third-party customer-focused innovation was rumbling away under the surface. However, that innovation was stifled until PSD2 laid a path for it, requiring banks to open up access to customers’ data at their behest.

It’s thanks to PS2D and open banking that customers are now able to connect their bank account to a third-party app that can help them better manage their money or sign up to a platform that allows them to access all of their accounts and credit facilities in one place. This allows customers to control their finances as never before.

 

Driving innovation

Empowering and improving the customer experience is one great achievement of open banking. Another is the innovation it has prompted across the entire financial sector. Even traditional banks like HSBC prepared for PSD2 by rolling out its own ‘Connected Money’ app, which allowed its customers to view data from all of their bank accounts – as well as mortgages, loans and credit cards – all in one place. This value-add to the customer experience probably wouldn’t have seen the light of day if not for the competition spurred by PSD2 and open banking. Many other banks and financial services providers have followed suit, offering new customer-centric features based around convenience, visibility and control.

Open banking is a huge step forward in the financial world. So why do some still liken it to a sleeping giant? What’s holding it back?

 

Managing trust and data security

More than 2.5 million consumers in the UK are now happy to connect their accounts to trusted third parties in exchange for some value-added benefit. That’s up from 1.5 million in 2020, no doubt driven by the competitive innovation brought about by PS2D. However, open banking adoption across the rest of Europe seems to have been much slower, and even growth here in the UK is beginning to plateau. While some might blame this on Brexit-induced regulatory changes, such as UK firms no longer being able to use the EU’s certification standards to share customer data after June 2021, there is much more at play.

A Europe-wide survey by thinktank ING polled 13 countries – including the UK – and found that only around 30% of consumers were happy for companies to share their data even after they had given consent. What’s more, only 35% of those polled had even heard of open banking capabilities. This points to issues surrounding data security, trust and awareness – all hurdles that can be overcome by banks, financial services providers and fintech innovators.

To make the most of open banking, banks will have to innovate and forge fintech partnerships with companies using their data sets. That will enable them to enhance existing products and leverage new fintech products being created with their data which will, in turn, benefit their customers.

This process of innovation has already largely begun, but if brands are to take full advantage of all that open banking has to offer, they still need to bridge the trust gap with consumers. We see consumer education, especially in the field of security, as having a key role to play in building confidence and consequently optimising uptake of open banking.

 

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