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How to make BNPL even better? Focus on these three areas

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By Nandan Sheth, CEO, Splitit

 

Nandan Sheth

Buy now pay later (BNPL) has remained a hot topic of conversation for a good reason. Consumers love interest-free installments and merchants like the increase in sales. BNPL accounted for 2.1% of global e-commerce sales in 2021. With over 50% of consumers saying they plan on using a BNPL service this year, there are no signs of slowing down. Yet, many businesses are now starting to feel the greater implications on their business and bottom line.

I have had many conversations with mid-market and enterprise merchants across the globe over the last couple of years. While the impact of BNPL has been generally positive, a few key issues have come to light that hamper the effectiveness of BNPL. If we can improve these three key areas, we can improve the experience while creating a more responsible option for consumers.

 

Removing the added friction at checkout

The high friction inherent in legacy BNPL delivers sub-optimal performance for both the consumer and the merchant. The friction is clear at three critical parts of the checkout process: payment choice, application or registration, and purchase approval. However, much of this friction can either be removed or significantly reduced.

The first friction consumers will face is navigating the growing myriad of payment options at checkout, from choosing between debit or credit card, a digital wallet or choosing between BNPL providers. Too many options create a choice overload that has negative consequences on sales. Studies have shown people become paralyzed by the possibilities and avoid choosing one altogether or deal with regrets once they’ve made a choice.

The next key point of friction is the lengthy application process. An application can create up to seven extra steps at checkout that can take the consumer away from the merchant’s website, collate personal details, or even submit customers to a credit check to see if they’re approved.

 

Improve the conversion funnel to optimize performance

One of the core benefits of BNPL is increasing checkout conversion rates – and it does. BNPL can increase conversion rates 20-30% and lift average ticket sales 30-50%. Yet, there are ways we can improve the BNPL conversion funnel.

The biggest area for improvement is in the approval process. Legacy BNPL providers have mediocre approval rates at best. The industry average for approval rates is around 40-50% and as low as 30% depending on the vertical and demographic. Nothing is more disheartening to the shopper than being declined at checkout. The negative impact can not only lead to a lost sale but can damage the shopper’s relationship with the merchant.

Improving approval rates will lead to a better customer experience and enhance the efficacy of BNPL. Several technological advancements are helping in this area. Artificial intelligence (AI) is one example which looks at several factors to make a better lending decision. AI decisioning engines can make faster, less risky approval decisions.

Another option is to unlock existing and approved credit lines. Consumers tend to shy away from using credit cards because of high interest rates. But at the same time, 45% of consumers pay off their credit card balance each month. Credit cards have a unique advantage over BNPL – there is no need for an application because the credit is already issued and available at any time.

Splitit is making it easier to unlock the credit the consumer already has on their current cards. Splitit breaks up larger purchases into smaller, interest-free monthly installment payments. This solution combats the declining conversion funnel, removes the tedious registration process giving customers a clear, simple way to pay over time.

 

Close the chasm between consumers, merchants and the payments ecosystem

BNPL has unintentionally created a chasm between consumers and merchants as well as the rest of the payments ecosystem. Closing these chasms will go a long way in delivering a better experience for the entire payments ecosystem.

Merchants are starting to feel disenfranchised from their customers by legacy BNPL and rightly so. Businesses focus significant expenses and resources to attract and turn prospects into customers. With BNPL, consumers are now working with an entirely different brand at the most critical part of the checkout process where consumers value trust and security the most.

When consumers use a legacy BNPL service or download their app, they receive emails, alerts and notifications from the BNPL service letting them know of upcoming deals and events and encouraging them to visit the app. For the consumer, it makes sense to follow the lead for the best deal. But for the original business, it can lead to a lost sale and a lost customer.

Merchants should look for a partner that can incorporate BNPL as seamlessly as possible in their existing checkout flow, ideally with a merchant-branded experience to help alleviate brand confusion and provide a more elegant experience for the consumer. They should seek a solution without a lengthy application process and with high approval rates for their target customer, adding zero friction to the checkout.

The rapid growth of BNPL is also creating a strain on other relationships in the payments ecosystem, most notably with financial institutions, card networks, card issuers and acquirers. The shift in transactions from credit or debit to a BNPL has trickle-down impacts across the entire ecosystem.

Why does this matter? Several recent surveys show consumers prefer and trust their relationships with their financial institutions or credit cards more than with third-party services and providers. One survey notes more than half (53%) of consumers would consider a BNPL service offered by a bank extremely appealing than 35% that prefer a pure-play BNPL. Another survey shows nearly 50% would prefer to use BNPL that uses their existing credit card.

Closing the chasm and creating more symbiotic relationships in the payments ecosystem delivers a better front-end and back-end experience, especially for merchants. This can be accomplished by providing a more agile and contemporary orchestration technology layer that brings all the constituents closer rather than driving them apart.

The fact is that BNPL is here to stay. Its rapid growth is a testament to the need and desire for the service. Installment payments allow customers to pay for products or services in a way that works for them. Whilst, businesses can give their customers greater financial control, which cannot be undervalued. By working on improving these three key areas, we can create a more robust and future-proof BNPL option that benefits the entire payments ecosystem.

 

 

 

 

 

Banking

The importance of Customer Experience (CX) for retail banks today

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By James Isaacs, President, Cyara

 

Today’s retail banks face considerable challenges. Open banking initiatives –  that make it easier for customers to switch accounts – and increased competition from emerging fintech brands, are making it harder for them to attract and retain customers. This challenge is particularly acute for traditional banks which are seeking to attract younger people, who are drawn to the range of innovative services offered by digital-first emerging ‘neo’-banks.

To stay competitive, traditional banks must improve the customer experience  they offer account holders. They also must look for more efficient ways of working, so they can service all customers in a consistent way, regardless of which banking channel they use – whether it’s banking online, at a physical bank branch, through a contact centre, using a mobile app, or (most often) using a combination of all these channels.

The challenge of consistency

The argument for an omnichannel strategy is compelling. Fuelled by the pandemic, demand for digital banking services has grown. McKinsey suggests that 71% of European banking clients prefer multi-channel interactions, whilst 25% express a desire for a fully digitally-enabled private banking journey with remote human assistance when needed.

The delivery of such systems, however, is not without its challenges. Embracing omnichannel often means transitioning to a cloud-based infrastructure – away from the legacy on-premise systems prevalent in banks. Even when this hurdle is overcome, delivering banking services through multiple channels requires a significant investment of time and resources. Due to these common barriers, many banking CX projects fail to get off the ground.

James Isaacs

At the other end of the scale, there are the banks who have sought to implement numerous channels to cater for every possible customer demand, with varying degrees of success. The key to the delivery of a stellar CX is consistency – ensuring that every stride a customer takes in their journey is seamless, irrespective of the path or the channel they choose to take. The chance of ensuring a consistent service across all these channels is negatively impacted if organisations attempt to simultaneously deploy services to mobiles, website, in-person channels, messenger, chatbots, contact centres, alongside the adoption of newer open banking services.

Selectiveness is key

Organisations looking to optimise CX through the adoption of an omnichannel strategy are therefore advised to be more selective in their approach – adopting one or two new channels or approaches before expanding their omnichannel offering further.

An ideal starting point for retail banks is to look at automation within the customer journey. When applied correctly, automation can be used to help improve customer service in a way that also delivers efficiency gains.

The power of automation

Automation can have a significant impact on the CX delivered within retail banking, which saves valuable time for the customer and enhances the customer journey. Most customers getting in touch with their banks have fairly routine queries, such as a change of address, so the need to speak to an advisor is often unnecessary.

Automated customer-facing support solutions, such as chatbots, offer a faster way for customers to self-serve and secure the answers that they need to certain problems without having to phone an agent. Chatbots are programmed through a knowledge bank that can easily be updated with new information, enabling customers to source the information they need quickly and easily. Chatbots can also be used to direct customers to an agent if they are unable to resolve the issue.

For those customers who do still need to speak to an agent, there are Interactive Voice Response (IVR) systems, which capture information from a customer when they call into the contact centre. IVRs help customers complete simple tasks themselves and route them automatically to the right department. This directly reduces average call handling time (AHT) for agents and the length of time that a customer is on the phone.

The importance of automated CX testing

Yet, offering omnichannel and automated journeys is not enough to satisfy customers. These journeys must be flawless if they are to deliver a seamless customer experience. Forward-thinking organisations understand that the only way to assure perfect execution is through adopting automated testing that places a spotlight on the omnichannel customer journey from the customer’s perspective.

Automated testing can be enabled by leveraging an intuitive testing solution that develops test cases based on existing customer journeys. Retail banks can use automated testing to track various paths through IVRs, chatbots and then base test scripts on those journeys to ensure their flow or functionality is as it should be. Using this strategy, financial organisations can create thousands of automated test cases that cover the full swathe of customer journeys, shortening testing operations to a fraction of the time of equivalent manual tests.

While automated testing provides easily measurable benefits, certain alerts flagged by automated testing are more critical than others. Distinguishing a true failure that requires immediate action as opposed to failures that can be addressed in time is essential to achieving the true return on investment (ROI) of test automation. In doing so, banks can ensure that the customer journey remains smooth, and the CX delivered remains outstanding.

The path to good CX is paved with automated testing

Delivering omnichannel services for banking is key to satisfying customer demand. However, whether it is the delivery of a chatbot, IVR or an open banking model, retail banks are well advised to stagger the roll-out to ensure the delivery of a consistent service to customers. Automation plays a critical role here – both in the delivery of omnichannel services to customers, but also ensuring its ongoing success through rigorous, frequent and automated testing.

Financial organisations that want to remain frontrunners in the market will stand out against the competition by delivering stellar digital and in-person experiences for customers. To assure high-quality CX, walk in the shoes of your customers, testing their customer journey in each and every scenario to confirm there are no cracks in the road. Of course, there may be bumps along the way, but when those are addressed in a timely manner, retail banks will continue to attract and retain customers for the long haul.

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Business

Why do Traders Need a Managed Service Partner?

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Jeff Mezger, Vice President of Product Management, Financial Markets, TNS

 

Does your financial institution have the understanding, resources, talent and bandwidth to execute an effective data center strategy in-house? If not, it needs to, as behind every transaction is a labyrinth of algorithms and networking infrastructure technology that converge in one location: the data center.

For most, the answer will be ‘no’. There will not be the resource or skill in-house to keep ahead of the maze of technical and logistical options to execute the fastest and most profitable trades. Trading success requires accessing extremely powerful servers, with the best data lines and connections close to where the trade is physically taking place. Processing close to the source of the input data provides the lowest possible latency between input and response – and speed matters. Milliseconds can mean the loss or gain of millions of dollars.

 

Latency Matters

Low latency is vital for algorithmic trading. Many factors affect latency, especially hardware location and network connections. Trade execution speed is critical in maximizing profit and loss, and a competitive advantage comes from having the best communication links to hardware in the best location.

TNS’ ultra-low latency Layer 1 technology for exchange direct access inside the data center was the first architecture of its kind to be offered and deployed globally and remains the most advanced solution in the market. It eradicates the need for multiple switches by using a simple, single-hop architecture to deliver direct exchange connectivity in as little as 5 to 85 nanoseconds – impressive when you consider that the human eye takes 400 nanoseconds to blink!

So, acknowledging that speed and colocation are vital for executing a trading strategy, what can firms do to underpin trading success? Many will outsource operations to a specialist managed hosting, colocation and connectivity service provider.

 

In-house vs. DIY

A recent independent report Colocation of Financial Markets Trading Infrastructure’, identifies the pros and cons of in-house management (a “DIY” approach) versus a managed service model. The report found that managed service providers offer beneficial value-added services for capital markets clients. Advantages include cost savings, trade efficiency, and simplified access to data and network infrastructure support, enabling trading firms to focus on their core business competencies. Industry analyst firm, Celent, which authored the report, interviewed trading firms and data and trading technology providers and found that the key decision criteria when deciding to engage a managed service provider included:

  • Consultation and expert advice on the ideal configuration of hardware, network connectivity, location, data feeds and network bandwidth.
  • Agility and flexibility to take advantage of ever-changing investment opportunities by rapidly and easily deploying trading strategies in new markets.
  • Access to high-end network services, leveraging high-speed solutions, including ultra-low latency, in-data center Layer 1 connectivity to link to trading venues, new customers and other service providers.
  • Operational efficiency and future proofing, with access to the latest technology, and highly experienced staff in all global jurisdictions who help to navigate cultural, linguistic, and regulatory obstacles.

 

Challenges

Managed Service Providers offering remote data center space and connectivity are on a quest to deliver a uniform global experience to ensure trading in, for example, Singapore or Tokyo is the same as trading in London or New York. They are also constantly investing in technology and new locations. For TNS, this means responding to customer requests to deliver a service in any location, most recently announcing a managed hosting and colocation offering in Madrid.

On rare occasions, perhaps instigated by political or economic events, firms may need to move from their existing data center location, as seen recently when key exchange, Euronext, relocated its primary data center and related colocation services from Basildon in the UK to the Aruba Global data center IT3 in Bergamo Italy. Such a physical move is a big undertaking and firms need differentiated support and solutions to ensure that they can seamlessly move and trade continuously, regardless of their size, requirements and the exchange location.

So far, TNS has moved nearly 20 existing and new customers to Bergamo, providing traders with uninterrupted, seamless trading. Our customers have been able to focus on their core business while we have managed the global supply chain issues to ensure a smooth migration. With suppliers quoting lead times of a year for some equipment, our buying power compared to smaller firms or those attempting to DIY a move, has proved invaluable in ensuring a smooth transition.

 

Future-Proof

Firms need to future-proof their trading infrastructure by working with a provider that has experience in managing access to vast amounts of raw market data, can support multicast requirements and is able to offer scalable solutions to accommodate the demands of ever-expanding bandwidth. As traders diversify their portfolios, their market data needs can place excessive network capacity pressures on their infrastructure, sometimes running into tens of gigabits. Seek a provider that can easily accommodate these requirements and handle data bursts during high activity periods, such as those seen on many recent occasions due to market volatility caused by political and economic events.

 

 

 

 

 

 

 

 

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