Both traditional and non-traditional financial institutions (FIs) are aware of the urgency to reimagine the banking experience. In the retail banking industry, there’s this mounting pressure to deliver services personalized for the consumer and to adopt an increasingly “branchless” framework. This essentially means catering to consumers demanding 24/7 availability and reliable, on-the-go banking services. With this, FIs are turning to the cloud in an effort to improve their capacity to provide convenient, efficient, and value-adding services.
In particular, moving to a cloud-based digital banking solution can significantly transform an FI’s front-end and back-end operations, allowing it to deliver highly beneficial services tailored around the consumer. To illustrate, here are some of the reasons why making that move is a wise decision that will deliver value to FIs as well as the lives of their customers:
Provides a Cost-Effective Modernization Solution
Cloud-based platforms operate on a subscription-based model, which means that the cloud service provider (CSP) handles the server and maintenance costs. FIs would only need to pay the subscription fee in line with a pay-per-use framework. Migrating software to the cloud also doesn’t require rewriting code, making the migration process easier for IT teams.
With cloud providers’ unique “as a service” billing model, FIs are allowed to pay for only what they need and cut unnecessary operational and maintenance costs, ultimately leading to significant savings in the long run.
Offers a Flexible Platform for Managing Traffic and Integrating Updates
Cloud platforms have an “elastic” quality that allows them to automatically scale up or down, depending on the demand for resources. This autoscaling element allows the distribution of workload in line with peak times such as end-of-the-month paydays.
Additionally, cloud platforms support a microservices architecture, which is the key to the smooth rollout of updates. A microservices infrastructure allows IT teams to rapidly make changes or integrate add-on features without affecting the whole enterprise. This can help FIs quickly roll out new products, implement software updates, and add in-app features.
Such on-trend features that a flexible cloud platform can support include peer-to-peer (P2P) payments via external channels and the bundling of products (i.e., insurance policies) based on user preferences. Some cloud-based banking solutions also support the integration of analytics-driven features such as budget planners, expense trackers, and credit risk-prediction tools that consumers can use to improve their financial management strategies.
Optimizes Staff Workload
Usually, legacy on-premises infrastructure requires groups of IT professionals to handle a myriad of tasks ranging from fixing bugs to rewriting code. By contrast, cloud platforms allow IT staff to automatically roll out updates, deploy procedures, and launch new and innovative projects that will highly benefit FIs and their customers.
Beyond the IT department, the rest of the enterprise can also benefit from the flexibility of the cloud. Because cloud technology eliminates disjointed data silos, employees can streamline internal communications as well as external collaborations with business partners.
On top of that, the highly accessible nature of cloud environments allows work to be done anytime, anywhere, and from any device. As such, employees can virtually collaborate with teammates and have more agency over their time through remote work.
Helps Ensure Business Continuity
Generally, CSPs take on the responsibility of directly managing their cloud-based solutions. This includes ensuring the availability of data backups in secure, geographically separated locations. Reputable cloud service providers also store data on impenetrable, security-compliant data centers and have power redundancies in place.
All these measures that are done by CSPs help FIs maintain business as usual even during emergencies or periods of troubleshooting. This also keeps customers happy, as they’ll still be able to access their much-needed banking services. All in all, this ensured business continuity will prevent FIs from losing revenue due to system downtimes.
Supports Fraud Detection Capabilities
Reputable cloud providers have their products rigorously tested by international regulators before such products go to market. By choosing to partner with a CSP that complies with the latest standards in data security, FIs can future-proof their systems as threats become more sophisticated in a data-driven world.
Cloud architectures have the capacity to support emerging capabilities like analytics, artificial intelligence, and machine learning, which are all useful tools for delivering real-time threat alerts in case of suspicious account activity. Moreover, some CSPs support next-level security and identity verification features such as selfie and video verification, touchscreen signatures, and other biometric techniques to level up Know Your Customer (KYC) processes.
Allows FIs to Serve Customers at Any Time of Day
Capabilities like analytics and AI are proven to be highly beneficial for automating tasks and speeding up banking processes for consumers. For one, most FIs use AI chatbots and helpdesks to assist customers in case human agents aren’t available to address their concerns. Automation can also help FIs roll out self-service features, which can be useful in account enrollment and loan applications.
All these innovations greatly improve the customer experience and make such FIs stand out from traditional ones that have yet to catch up.
Generates Insights to Improve Customer Experience
Speaking of improving customer experiences, such next-gen technologies can also be used to gain insights into consumer demands and behavior. Analytics tools can collate large volumes of consumer data to generate comprehensive reports that will help analysts and leadership teams identify system vulnerabilities, determine needs for software updates, and get ideas for game-changing products.
Maximizing the Cloud to Deliver Value
Besides helping FIs keep up with current tech trends, cloud migration also plays a role in mitigating everyday risks. From minor nuisances like transaction delays to devastating scenarios like theft, these risks can overburden legacy in-house banking systems that are often inflexible and incompatible with other platforms.
But while digital banking on the cloud is certainly built to prevent such problems, it still takes sufficient planning and strategizing to figure out how to best make this platform work for industry- and company-specific operations.
At the end of the day, cloud technology already has the potential to improve banking institutions’ processes and market posture. What’s important is that these institutions have the savviness to make sound decisions and the right cloud partner to make the most of the technology’s potential.
Digital Banking – a hedge against uncertainty?
Ankit Shah, Head of Digital Banking, Apex Group
The story of the 2020’s thus far is one of crisis. First the world was plunged into a global pandemic which saw the locking down of people and economies across the world. Now we deal with the inevitable economic consequences as currencies devalue and inflation bites. This has been compounded by Russia’s invasion of Ukraine and subsequent energy politics.
And the outlook remains uncertain. Tensions continue to build between China and Taiwan and inflationary conditions are forecast to continue well into 2023. This uncertainty is impacting everyone, and every sector. And finance is no exception with effects being felt everywhere from commodity and FX markets to global supply chains.
But it’s not all doom and gloom. Rollercoaster markets and an ever-evolving geopolitical situation have made 2022 a tricky year far, but, despite the challenges, digital banking has proven resilient. In fact, the adoption of digital banking services has continued to grow over the last few years, and is predicted to continue.
So, what are the forces driving this resilience?
In an increasingly digital world and economy, digital banking comes with some advantages baked in, which have seen the sector continue to succeed despite the tumult in the wider world. In fact, the crises which have shaped the decade so far may even have been to the advantage of digital banking. Just as during the pandemic, technologies which could facilitate remote working saw a huge uptick in users, so to digital banking is well suited to a world where both people, and institutions demand the convenience that online banking services offer.
And while uptake of digital banking services is widespread amongst retail consumers, a trend likely to continue as digital first generations like Gen Z become an ever-greater proportion of the consumer market, uptake amongst corporate and institutional customers has been slower. This is largely down to a lack of fintech businesses serving the more complex needs of the institutional market, but, in a post-Covid world of hybrid working business, corporate clients are looking for the same ease of use and geographic freedom in their banking that is enjoyed by retail consumers.
This is not just a pipe dream – with the recent roll out of Apex Group’s Digital Banking services, institutions can enjoy the kind of multi-currency, cloud-based banking solutions, with 24/7 account access that many of us take for granted when it comes to our personal banking.
One significant difference between retail and business accounts however, for banking service providers, is the relative levels of compliance which are needed. While compliance is crucial in the delivery of all financial services, running compliance on multi-million pound transactions between international businesses brings with it a level of complexity that an individual buying goods and services online doesn’t.
For digital banking services providers, this situation is further compounded by guidance earlier this year from HM Treasury – against the backdrop of the Russia-Ukraine conflict- requiring enhanced levels of compliance and due diligence when it comes to doing business with “a high-risk third country or in relation to any relevant transaction where either of the parties to the transaction is established in a high-risk third country or with a sanctioned individual.”
So, can digital banks meet these standards while also providing institutions with the kind of easily accessible, mobile service which retail customers enjoy?
The answer is yes and again, once initial hurdles are overcome, digital banking brings with it features which give it the edge over traditional banking services. Paperless processes, for example, mean greater transparency and allow for better and more efficient use of data. This means AI can be employed to search documents, as well as provide verification. It also means compliance processes, often notoriously complicated, become easier to track. Indeed, digitising time intensive manual process means the risk of human error in the compliance process is reduced.
Digital banking can also better integrate transaction monitoring tools, helping businesses identify fraud and irregularity more quickly. This can be hugely important, especially in the times of heightened risk we find ourselves in, where falling foul of a sanctions regime could have significant legal, financial and reputational consequences.
Our world is increasingly globalised, and so is business. For corporate and institutional banking customers, being able to operate seamlessly across borders is key to the operation of their business.
This brings with it challenges, which are again compounded by difficult geopolitical and economic circumstances. In recent weeks for example, we’ve seen significant flux on FX markets which can have real consequences for businesses or institutional investors who are buying and selling assets in multiple currencies and jurisdictions. The ability to move quickly then, and transact in a currency of choice, is vital. Advanced digital banking platforms can help – offering automated money market fund sweeps in multiple core currencies to help their clients optimise their investment returns and effectively manage liquidity.
Control admin uncertainty
In times of uncertainty, digital banking can provide additional comfort via customisable multi-level payment approvals to enhance control of what is being paid out of business accounts, with custom limits available for different users or members of a team. Transparency and accountability are also essential, with corporate clients requiring fully integrated digital reporting and statements and instant visibility with transaction cost and balances updated in real-time.
For some, the perception remains that digital banking is the upstart industry trying to offer the services that the traditional banking industry has built itself upon. Increasingly however, the reality is that the pressure is on traditional banks to try and stake a claim to some of the territory being taken by digital first financial services.
With a whole range of features built in which make them well suited to business in a digital world, digital banking is on a growth trajectory. Until now, much of the focus has been upon the roll-out of services to retail consumers, but with features such as automated compliance, effortless international transactions and powerful AI coming as standard for many digital banks, the digital offering to the corporate world looks increasingly attractive.
Security vs online payment convenience: which one is tipping the scales for customers?
Chirag Patel, President of Digital Wallets at Paysafe.
While keeping their payment details safe is a top priority for customers when shopping online, they’re not willing to jump through endless hoops or accept poor user experiences as the inevitable price of greater security.
Online payment security has been top of mind for merchants since the very first internet purchase: a copy of Sting’s ‘Ten Summoner’s Tales’ CD. Even though payment technology has become more sophisticated over time, the eCommerce explosion has brought about an ongoing battle between increasing security and ensuring convenience.
Customers are ever more aware about the risks of online shopping and concerned about their financial details falling into the wrong hands. Simultaneously, demand for a good user experience has also risen steadily. But greater security typically introduces friction into the checkout process, which continues to be one of the leading causes of cart abandonment.
In our latest Lost In Transaction report, we surveyed 11,000 consumers in 10 countries across Europe and the Americas regarding the balance between security and convenience in online payments.
Here are the key take-aways for online merchants moving forward.
How concerned are consumers about online fraud?
According to our research, customers continue to grow increasingly worried about online fraud.
59% of respondents are more concerned about it today than they were 12 months ago. Not feeling comfortable sharing financial details online has increased from 49% in 2021, to 70% in 2022.
More to the point, our research shows that, when they have a choice, 44% of respondents will invariably pay with the method they perceive as safest while only 21% will choose the most convenient payment method, and even fewer (14%) will choose the fastest one.
These findings aren’t surprising considering that fraud has become more frequent and more serious during the COVID-19 pandemic. For example, in 2021 the average US fraud victim lost $500 and the average UK victim lost £806.
However, what merchants need to keep in mind is that, even though security typically dictates the choice of payment method, there’s a limit to how much friction customers are prepared to tolerate. And our research suggests this limit is close to being reached, with 42% of customers reporting that they would prefer more payment security but only 19% open to accepting whatever measures are necessary for increased protection against fraud. The other 23% would only accept a minimal increase in inconvenience.
A fine line to walk
If you’re a merchant, the situation is positive but challenging to navigate.
Fortunately, 44% of consumers think merchants are getting the balance between security and convenience right — up from 26% in 2021 – and trust is also high. 53% think online payments are more secure than they were twelve months ago. And 64% of respondents are more likely to shop from merchants who already have their payment details on file, compared to 54% in 2021.
The challenge is that security risks are ever evolving. Cybercriminals are constantly refining their techniques, which means measures that are highly effective today can become inadequate tomorrow. And regulation is constantly developing, at times at odds with consumer sentiment. The introduction of Strong
Customer Authentication rules, for instance, sparked fears that the deliberate friction they required would hurt sales, which, admittedly, has had less of a negative impact than anticipated.
Consequently, while security enhancements are inevitable if merchants are to continue meeting high standards, there’s margin for error now that more consumers are reaching the limits of their tolerance for friction.
For every new security measure they introduce, merchants must be increasingly mindful of the impact on the streamlined payment experience customers expect.
Finding a common ground: boosting security with trust and technology
While maintaining – or even improving – the current balance between security and convenience might seem impossibly tricky, payment technology has evolved to a point where it’s doable.
With embedded payments, for instance, the consumer pays through a user-friendly interface at the point of need. And because financial details are stored securely in tokenized format, there’s no need to share them every time you make a purchase.
eCash is another such solution that enables customers to buy online quickly, securely, and privately.
A unique barcode is generated at the checkout which customers can then get scanned at one of one million points of sale in 55+ countries to pay in cash. Which means they can buy online without having to share or even store any financial details.
This presents a great opportunity for merchants to take advantage of the high levels of trust these payment solutions enjoy. While our research shows that there’s still a significant knowledge gap, particularly in embedded payments, consumers are becoming more open to both technologies. So now is the time to explain the benefits clearly to customers and, more importantly, address concerns.
Online payment security is crucial, but not at all costs
Keeping their financial details safe is the most important element of the payment process for most customers. But while fraud protection may be winning the battle against convenience hands down, merchants need to carefully navigate the process of increasing security without adding too much inconvenience.
As critical as it is for merchants to protect customers’ data, a zero-fraud strategy would also likely cause way more friction than most customers are prepared to tolerate. A smooth, seamless payment experience remains as important as ever.
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