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Mission: Possible – Banking the unbanked

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By Jovi Overo, managing director of BaaS at Unlimint

 

The Oxford English Dictionary defines psychology as ‘The scientific study of the mind and how it influences behaviour’. On the surface, a background in the discipline may not seem an obvious starting point considering where I find myself today – in fintech. Moving from psychology to finance and technology may seem like a leap, but in truth, it’s been incredibly helpful in dealing with the trials and tribulations of starting and subsequently doing business. The successful ability to influence a client when starting a business is key. Communication skills are central to this and by effectively communicating the benefits of doing business, the more powerful one will be at influencing client decisions. However, this is a two-way street. It is essential that clients listen, and, to do so you must build a rapport so they both like and, perhaps more importantly, trust you. Psychology has played a starring role in helping me to sharpen these skills which have so far served me well, particularly in a client-facing role.

While psychology has given me the foundation to grow professionally, I soon realised I was in the wrong field. This is why I moved to finance and banking. I spent the early part of my financial services career as co-founder of an investment advisory firm in the City of London. I then switched to fintech via an MBA (Master of Business Administration) at Imperial College Business School. For the last decade I have been particularly involved in the startup, payments, fintech, and BaaS (Banking as a Service) sectors.

My particular interest in BaaS means I can influence real change by developing and using fintech products. My current responsibility includes building solutions and the new BaaS division from the ground up. This allows me to develop my own creativity to bring change to the sector, help clients with all their financial needs, and meet my personal goal to make the world a more interesting and innovative place through fintech. I believe fintech makes banking, payments, and financial products better and that leads to making people’s lives a little easier, a little less stressful, and a little more inclusive.

I feel that now is a particularly exciting time for the growth of fintech as well as opportunities for entrepreneurs in the sector. In fact, the global fintech market will reach $225.1 billion by the year 2027, growing at a CAGR (Compound Annual Growth Rate) of 12.9 per cent. Growth of the market is predicted to be driven by the use of smartphones for services related to fintech and online transactions. Last year, approximately 44 per cent of payments were through a mobile app while 64 per cent of worldwide consumers utilised one or more fintech platforms.

For aspiring fintech entrepreneurs who are willing to take calculated risks and learn from mistakes and failures, the opportunities are immense. Belief in both what you are doing and trying to achieve is half the battle. Fintech, Web 3.0, Blockchain, and DLT (Distributed Ledger Technology) are all in their relative infancy. If history has taught us anything it’s that successful innovation drives progress. My tip for entrepreneurs who may be considering the fintech sector is to jump in with both feet!

I would certainly say that my passion for fintech is absolute, as it makes financial products, payments, and banking better. The inevitable result is that people’s lives are easier and less stressful.

In terms of industry trends, fintech is perfectly poised for the future. Further, I think that cryptocurrency, despite its volatility, is here for the long term. Innovative credit products and solutions are also a trend that is here to stay. There will never be a shortage of customers who wish to borrow conveniently and cheaply. This represents an enormous opportunity if employed correctly in tandem with adequate credit risk management.

For over a decade, the Global Findex Database has been a conclusive source of information in relation to accessing financial services including borrowing, payments, and savings. Its 2021 report revealed an increase in financial inclusion, but also found that 1.4 billion adults around the world still remain unbanked. In developing countries, figures for those with a bank account have increased from 42 to 71 per cent in the last ten years. In 2021, Morocco (71 per cent), Vietnam (69 per cent) and Egypt (67 per cent) were the countries with the highest number of unbanked populations.

I find some of these statistics both unacceptable and inexcusable. The countries where a lot of the unbanked reside have unreliable infrastructure, such as electricity for payments processing. In addition to this, bank branches are often absent in areas where unbanked people live, and too many financial services are poorly designed and difficult to use. Therefore, financial services provided by fintech will absolutely help bridge this gap by offering mobile solutions. The conundrum of the distance between bank branches and customers can therefore be solved.

Growing up, I was rich in love but I vowed to make it a mission of mine to ensure that children should not have to go through poverty. The largest group of people living in back breaking poverty are children and children of single parent households where that single parent is a woman. Women are the largest group to be unbanked and most likely to suffer from financial inclusion. This is where my passion drives me to address this problem. We don’t do nearly enough. We can do better, and we must do better, and we WILL do better. This is my mission.

 

Jovi Overo is managing director of BaaS at Unlimint, an advanced all-in-one fintech solution. It provides fast-growing innovative businesses with the ability to accept and make payments globally. The company’s main offices are located in London, Frankfurt, Singapore, São Paulo, Hong Kong and Mexico.

Banking

Poor software testing puts banks at high risk of IT failures

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 Sune Engsig, VP Product at Leapwork

 

IT failures have plagued the banking industry for several years. From the TSB computer systems meltdown in 2018 costing the bank £330m and causing 80,000 customers to switch to a competitor, to Lloyds, Halifax and Bank of Scotland suffering an IT glitch on payday this year with customers’ faster payments and transfers being delayed.

Despite MPs calling for regulators to act, condemning the number of IT failures in the financial services sector as ‘unacceptable,’ the industry continues to let them happen leaving more and more irate customers locked out of their accounts. But with bank branches disappearing fast, customers are now far more reliant on online and mobile banking, so ensuring technology systems function correctly is paramount.  When you consider the complex compliance and regulatory setup of banks and other financial institutions, and the fact that they are dealing with incredibly sensitive customer information, those that do experience outages can face irreversible consequences such as loss of customer loyalty, severe reputational damage and regulatory fines.

A critical step in mitigating IT failures is having effective testing capabilities in place to find and fix any errors before new software is rolled out to market or new IT migrations take place. This lowers the risk of software failures and outages occurring after launch. Yet, 70% of software testers in banking and financial services think it’s acceptable to release software that hasn’t been properly tested, so long as it’s patched later, according to research by Leapwork. Furthermore, only 40% think software failures are a big risk to their company. But when the impact of an IT failure is so severe, why do banks still take risks?

 

Software testing challenges

Despite the swathes of software businesses now rely upon, 85% of software testing is still done manually. When it comes to the banking sector, as these institutions continue to develop new digitised products and services with increasingly sophisticated and customised software, it is clear that manual testing can no longer be the default. It is time-consuming, cannot scale amidst a skills crisis, and leaves companies open to human error.

There is a huge amount of pressure on IT teams to develop and release new software or manage new IT migrations. A critical step on this journey is having effective testing capabilities in place, like test automation, to find and fix any errors and bugs before new software is rolled out to market. This lowers the risk of outages and failures occurring after launch, which can negatively impact a company’s reputation and bottom line.

However, while some organisations recognise the value of automation tools, many continue to rely too heavily on code-dependant tools which, while an improvement on manual testing, are incredibly complicated to use and thus require specific skills and experience to operate. This means they too are impossible to scale, as they often depend upon developer skills.

 

Skills shortage forcing banks to take risks

Ensuring you undertake proper software testing seems like a no-brainer, but 40% of software goes to market without sufficient testing. The reason why; one in five (21%) of banking and financial services testers say ‘lack of available skilled developers.’ As companies transition from manual to automated testing, which typically requires coding skills, the major global developer skills shortage is creating bottlenecks, increasing costs and delaying project delivery times as development teams try to upskill manual testers, hire new talent or lean on existing developers.

As a result of the skills shortage, only 30% of testers in banking and financial services say they’re using some element of automation (i.e., an automation tool or a combination of manual and automation). In fact, 40% of CEOs across all industries think the fact that their company still relies on manual testing is the main reason why software isn’t tested properly, with 58% of testers in banking and financial services saying ‘underinvestment in test automation’ is the reason sufficient testing does not occur.

 

Testing issues not on CEOs’ agenda until too late

Across all sectors, 69% of CEOs think it’s acceptable to release software that hasn’t been properly tested, so long as it’s patched later, but 68% of testers claim their teams spend five to 10 days per year patching software. While nearly all testers express concern that insufficiently tested software is going to market, the overwhelming majority (75%) of CEOs say they’re confident their software is tested regularly. These numbers show a huge disconnect between CEOs and testers indicating that testing issues are falling under the radar and not being escalated until it’s too late.

 

Moving toward an automated future

Banking and financial services have been thought of as slow-moving and lacking innovation in the past. That isn’t the case anymore, as we’ve seen the industry take great strides towards digitalisation in recent years. However, with that digital transformation and integration of software comes outages, the consequences of which mean millions of pounds lost.

UK banks are at high risk of IT failures due to insufficient software testing, and a reliance on manual testing. On the current trajectory, more and more banks will struggle with failures and outages which could cost them a significant amount in financial and reputational damage. To minimise risk, they need to transition from manual to automated testing and explore testing options that don’t require coding skills so it’s easier to hire in talent or upskill existing team members, whether that be testers or everyday business users. Only then can they increase productivity and time to market while decreasing risk and costs.

 

 

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Banking

How banks can increase customer acquisition and user engagement with sustainability

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By Karolina Szweda, Head of Growth Marketing at Connect Earth

Young people are demanding more innovation from traditional financial institutions, and are primarily in favour of lower costs and more flexible digital customer experience promised by challenger banks and other FinTech providers. The future of banking is digital, and traditional financial institutions are well aware that they need to embrace innovation to remain competitive in the digitalised market.

In order to win over the younger generations, especially Millennials and Gen Z, banks need to invest in their digital transformation and deliver more customer-centric solutions. One of the affordable low-hanging fruits is sustainability.

As the public’s attention to the climate crisis grows, consumers and businesses are increasingly interested in reducing their negative impact on the planet. BCG reports that as much as 73% of consumers are altering spending habits because of climate change, and, according to PwC, 88% of consumers want brands to help them live more sustainably. As far as businesses are concerned, they are increasingly aware of the mandatory disclosure regulations set to take effect within the next years in major economies, and the need for carbon emissions reporting.

The problem is that the vast majority of consumers and businesses do not have access to actionable data on their carbon emissions. We believe that this is where banks can step in.

Increasing customer acquisition and retention

According to Deloitte, 71% of customers are more likely to choose a bank with a positive environmental impact. In addition, Global Risk Regulator reports that 93% of people expect sustainable financial services to become the norm, and according to Tink, 62% of consumers want their bank to show them an overview of their carbon footprint.

Banks are in a unique position to respond to this increasing demand by embedding climate data in their financial services offerings, which can help attract new customers and improve brand loyalty on a large scale.

With a carbon tracking API solution integrated into a digital banking app, financial institutions can be a catalyst for change and enable their customers to understand how they can reduce their emissions. By providing carbon emissions data for each financial transaction, banks can support and encourage their retail banking clients, corporate clients and/or retail investors to act more sustainably, while also increasing customer acquisition and digital engagement.

Most importantly, banks can also measure how their customers’ spending behaviours are changing as a result of being exposed to climate-related information, which they can use to segment and understand their customers better.

Increasing digital engagement

According to EY, 61% of consumers want to access more information that can help them make better sustainable choices. Banks are in a position to empower customers to do exactly that, whilst increasing user engagement with their digital banking apps.

Educating consumers on how to make more sustainable choices can be achieved through gamification, personalised recommendations and rewards to encourage behavioural change. The analysis of spending data along with tailored educational content can enable consumers to analyse, learn and improve their consumption habits and empower them to act on this knowledge.

Before accessing their carbon emissions insights, users can enter their custom information about their lifestyle habits, such as diet (meat-based vs. plant-based), daily means of transportation (car vs. bus) and more. Machine learning models improve as users input data over time, making carbon emissions estimates more granular. The model is trained to support thousands of different user types based on their profile and enables the bank to customise the experience and gamify the emissions reduction process for users.

How banks’ customers can benefit from accessing carbon emissions data

As far as climate action is concerned, having a real-life overview of one’s carbon footprint can be a true game changer for millions of consumers worldwide. Access to carbon data increases climate change awareness and empowers people to make a real difference.

Earlier this year, our team at Connect Earth confirmed the partnership with KBC Bank in Bulgaria to help them drive customer engagement and provide their retail banking clients with climate insights into their spending. We aimed to bolster KBC Bank’s corporate sustainability strategy, whilst meeting increasing demand from climate-conscious clients.

The financial sector has historically lacked the infrastructure to support sustainable finance in a tangible way. We are happy to report that the green transition has begun.

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