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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.

Banking

Are SaaS platforms challenging banks for a piece of the payments pie?

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4 common myths about the role of open source in financial services

Attributed to: Ralph Dangelmaier, Global CEO of BlueSnap

 

The finance industry is at a tipping point with software firms on the brink of becoming banks. This may seem like a farfetched idea, but now that software platforms come equipped with payment capabilities, their SME customers may want to receive more financial products from these platforms.

This is part of the wider trend of ‘embedded finance’ – when companies which aren’t banks incorporate financial services such as lending, insurance, and payments into their product.

Software firms are particularly leveraging ‘embedded payments’ – where the ability to accept and process payments comes with the software itself. Think of a school consolidating all the payments a parent would make for their children – tuition, books, extracurricular activities – in one software platform. This trend has exploded in popularity because there’s a desire among companies, and their customers, for everything from products to payments to happen under one roof.

With the market value of embedded payments expected to reach £2.08 trillion by 2026 and customers becoming increasingly married to their software, let’s look at how we ended up at this turning point in payments.

How chasing convenience puts money in platforms’ hands

Ralph Dangelmaier

The growth of embedded payments is propelled by the need for ease, trust, and convenience. As platforms are selling payments hand-in-hand with their software, customers don’t need to integrate with additional service providers just to accept payments. And they’re already bought into using the platform for its other functions.

Not only is this kind of back-end reconciliation easy and convenient but it helps software platforms generate revenue too. That’s because software companies that embed payments become Payment Facilitators (a.k.a PayFacs) – allowing them to monetize transactions that happen within their platform.

By selling payments, software firms can see up to a fivefold increase in value per client. Rather than depending on software subscriptions alone, these platforms now receive a cut of every transaction that’s facilitated using their software too. This provides them and the businesses they serve with a mutual incentive – shared profits.

Software platforms are passionate about helping their customers create the most easy-to-use experience to drive a higher volume of transactions. Of course, there are many ways to launch new revenue streams, but why leave money sitting on the table when all you have to do is become convenience-obsessed?

Why finance teams want software and payments in one  

As a payment expert who’s worked in a bank’s back office, I know how important a financial software stack can be. In its highest form, it can steer a business’ entire financial strategy.

Often these stacks are well curated, but the biggest drawback is the manual collection of data across platforms. Trying to build a financial picture of a business using your ERP, CRM, human resource and billing system can involve hours of laborious data entry.

For everyday finance teams, this isn’t an efficient use of time. They need to be able to pull data swiftly to advise their executives on financial strategies. CFOs are also under pressure to choose the right software stack to streamline processes and ensure payments ROI.

That’s why payment technology that removes the manual work for finance teams – to get from A to B more quickly – is growing in popularity.

Software firms using embedded payments are saving them hassle and time. Not only that, it helps the key financial decision makers of SMEs stay in a constant state of financial planning, where they can change their strategy whatever the market conditions may be.

The end of traditional banking for SMEs?

Increasingly, SMEs are struggling to get the payments support they need from traditional banks. The ‘higher risk, lower return’ view of the small business market among banks leaves software platforms in a ripe position for a takeover.

There are over 90,000 software companies in the UK alone. With nearly half of software platforms (48%) turning to embedded payments to gain a source of competitive advantage, this figure could represent a threat to corporate banking as we know it.

SMEs don’t have the deep pockets that multinational businesses have. The Amazons and BMWs of the world have long reaped the benefits of a corporate account with a large bank – and the round the clock support this offers.

But SMEs face high conversion fees and often receive minimal support chasing late payments, leaving them between a rock and a hard place. If these businesses can save money by moving from banks to software platforms, then banks are at risk of losing their position over the middle market.

Looming regulation

Until now banks have been able to defend their position because safety and security is key. Once platforms become regulated, then what? It won’t be long before regulators eye up the software industry as their next big focus.

But regulatory bodies like the FCA, PRA and more favour ‘controlled innovation’, so this will take time.

Currently, to process transactions in Europe, businesses must go down the lengthy and costly process of becoming Payment Service Providers (PSPs). That’s why many software platforms are choosing to partner with a licensed payment provider which sells the payment package to them, instead.

In fact, 89% of software platforms choose to work with PSPs rather than become a PayFac themselves. It makes sense when it’s taken more than a year for some platforms to begin processing payments on their own.

Given the sizable financial risk of processing your own payments and the administrative burden this brings, it’s no wonder software firms are looking to fintech for a better way.

After all, it’s not just about processing the payments. A partnership with a payment technology partner comes complete with support in onboarding, underwriting, compliance, risk, payouts and customer support.

In short, software platforms see the benefits of selling payments and are primed to become the next big financial players.

Not only is there revenue for the taking but their customers benefit as well. With software platforms ready to offer SMEs a banking alternative and a superior customer experience, they’re offering a truly win-win solution for all involved. And it’s payment technology partners that can help them make this vision a reality.

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Banking

Emerging technology will power long-term sustainability within the UK banking industry 

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By Peter-Jan Van De Venn, VP Global Digital Banking at Hexaware Mobiquity.

 

Sustainability has been a big focus for the banking industry in recent years, with the issue becoming increasingly important for consumers. It’s no wonder that sustainability has become baked into the purposes of almost every bank, from Natwest to HSBC.

However, the economic uncertainty of the last year has led to many banks putting it on the back burner. Challenging market conditions have forced financial institutions to change their priorities to concentrate on protecting the bottom line. Our research found there’s been a significant drop in the number of UK banks saying that sustainability remains a key business strategy. 12 months ago it was a major priority for 100 per cent of banks, but now that number has shrunk to 60 percent.

Whilst it’s understandable that banks are feeling the pressure at the moment, there’s a risk that they will miss out if they hit the pause button. From cost savings brought by innovative digital products and services, to improved brand reputation and increased profitability, there are a lot of longer-term benefits they could be failing to unlock. So how can they keep moving forward?

Losing momentum

Emerging technology holds the key to their success, with the power to disrupt current behaviours and promote a more sustainable culture. Banks are already aware of this, with 76 percent using digital transformation to drive sustainability, but a lack of leadership has made it difficult to build momentum in the last 12 months. Currently just over half (54 percent) of banks have tasked an executive at board level with overseeing sustainability – way down from 83% just 12 months ago.

This lack of board authority means banks are struggling to engage the entire organisation to move ahead with sustainable initiatives. As a result, almost two-thirds of banks are seeing progress slow, admitting they are not actively taking steps to foster more sustainable behaviours throughout the organisation. Those that have taken their foot off the gas need to find a way to move forward again.

No time for standing still

Banks know that technology can drive sustainable behaviour. For instance, many of them are already encouraging their workforce to work remotely, as a way of reducing travel. This has two benefits – not only does it cut the costs of running physical offices at full capacity, but also reduces the bank’s carbon footprint. There has never been a better time to invest in technology to drive more sustainable behaviours.

New digital products and services can also extend the benefits beyond employees to encompass the wider customer base. A fair number of banks are already investing to make this happen. More than a third (35 percent) of banking organisations are using Machine Learning (ML), Artificial Intelligence (AI), cloud and analytics to make digital services more easily accessible. Investment in these technologies will be critical as the number of physical bank branches continues to decrease, with figures from Which? showing this is taking place at a rate of 54 branch closures each month.

Hitting environmental and social responsibility goals

Emerging technologies can also help banks keep pace with tightening ESG rules and regulations. Banks are faced with demands for increasingly granular reporting and transparency on ESG – demanding a new approach. In line, 41% of them are developing data visualisation tools to improve stakeholder engagement and understanding of ESG risks and opportunities, while 37% are using machine learning and artificial intelligence to identify and track ESG risks and opportunities across a wide range of data sources.

More than one in three are also using the blockchain to improve transparency and traceability in supply chains, and implementing digital tools and platforms to collect, analyse, and report ESG data and metrics in a standardised and consistent manner. All these applications of emerging technology will put banks on track to address global environmental challenges and unlock a greener future.

Long-term sustainability

As the economic pressures hopefully start to subside, increasing numbers of banks will start investigating how they can use emerging technologies to provide engaging experiences and value-added services for customers, to drive greater revenue and efficiencies.

Whilst banks are right to focus on their revenue under difficult trading conditions, it’s important they don’t miss out on the long-term benefits that sustainability can bring. To capitalise on this, banks must keep pushing the boundaries and invest in emerging innovations to drive more sustainable banking behaviours, benefiting the planet and driving great digital experiences for customers.

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