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NEXT GENERATION BANKING: MAXIMISING REVENUE AND ADDING VALUE THROUGH FINANCIAL SOLUTIONS AS-A-SERVICE

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Michael Mansard, Principal Director – Subscription Strategy at Zuora

 

The UK’s financial services (FS) sector has reached a tipping point. Lower interest rates, tighter regulations and higher fines have piled on the pressure for both legacy banks and fintech startups. With the economy entering recession in the wake of the pandemic, market caps are plummeting, and many have raised concerns on what the industry might look like moving forward.

More traditional FS organisations have evolved to manage risk to the millimetre, but today’s environment is making it increasingly hard to do so. What’s more, this stoic approach to risk aversion comes at the cost of agility, with many businesses still operating on business models that haven’t changed for decades. In the UK market, for example, the concept of “free banking” has become ingrained, with FS organisations believing that customers simply won’t be willing to pay for their services.

However, there is research to prove that consumers are willing to pay for a service, provided there is clear value attached to it. This opens up an opportunity for a new business model, one that will enable FS organisations to improve and expand their offering, maximising profit while delivering genuine value to their customers. To compete with newer, more agile digital players, it’s clear that changes need to be made, and that more traditional firms need to consider building out a new digital offering, as opposed to simply expanding their existing services.

 

Next generation banking

The COVID-19 pandemic has accelerated an existing global trend in consumer buying behaviours. Individuals are increasingly moving away from buying “things” in favour of spending their income on experiences. This shift towards “the end of ownership” has, in turn, spurred a surge in subscription services.

Subscription models charge customers a recurring fee at regular intervals, whether that’s weekly, monthly, annually or on a pay-as-you-go basis, to access a product or a service. The key differentiator between paying for a subscription service in installments and the recurring fees or premiums available through most FS organisations is the focus on customer-centricity, whether that’s through pricing, delivering continuous value or giving subscribers power over their own customer journey. Zuora’s recent  End of Ownership Report found that subscription models are proving popular for this reason, with 77% of UK adults currently signed up to subscription services.

For the financial services industry, subscription models could open up more opportunities to upsell and cross sell different services, helping to maintain existing customers, reduce churn and unlock new streams of revenue. One FS organisation leading the way in this area is Singapore-based DBS bank. DBS’s Video Teller machines are the first of their kind in Singapore, enabling customers to interact with agents through virtual conferencing. The bank’s SingPass face verification technology also enables faster sign ups, helping to cement its position as a leading player when it comes to the digitisation of processes and services.

One of DBS’s projects, an initiative titled Start Digital, has been launched in partnership with the Singapore government. Designed to accelerate the digitisation of Small and Medium-sized Business (SMBs), the subscription programme offers DBS customers a number of digital solutions to help them grow their business. Digital transformation is at the top of the agenda for every business, and this subscription service has enabled DBS to deliver true value to its customers, strengthening existing relationships whilst opening up new, improved revenue streams. DBS is, essentially, utilising subscription services to become a next-generation bank, transforming itself into a key partner in its customers’ futures.

 

Increasing value

The key to making subscription models a success is working out precisely what your customers want. For example, recent research found that over half (52%) of UK consumers would be enticed to switch to another bank if their subscription included an entertainment bundle. This was closely followed by smart phone insurance (33%) and utility services (31%). Offering these additional services may sway consumers to sign up, but for FS  businesses looking to emulate the success of DBS, the real challenge is pivoting from subscriber acquisition to subscriber retention and achieving that elusive “partner” status.

Subscription models collate a substantial amount of usage data, offering the businesses that are using them the opportunity to engage with their customer base and adjust their services to match demand. This data can help businesses to curate competitive pricing structures and develop their strategies to entice and retain customers with tailored offerings. Personalisation is one of the primary success factors for subscription sellers; tailoring a product or service to suit a customer’s individual needs is a great way to win loyalty and build stronger, long-term relationships.

Subscriptions offer FS organisations the opportunity to expand their addressable market. Banks can make their product and services more affordable, for example, not necessarily by reducing the overall cost of the product or service, but by offering customers the option to spread their payments over a longer period of time. By expanding their addressable market and therefore growing their user base, subscriptions can help organisations to boost their revenue over the long term.

In today’s ever changing landscape, building stronger relationships with customers has never been more important. Implementing the right customer experience initiatives at the right time could be the difference between an FS business remaining profitable, or going under. Subscription services, and the unique insights that they can provide, have been proven to drive growth across a vast range of industries, as highlighted in Zuora’s latest Subscription Economy Index which discovered that subscription usage has grown by more than 435% over the last 9 years. This growth isn’t set to slow down any time soon, with reports predicting that the Subscription Economy will expand into a $1.5 trillion market by 2025. It’s time for FS organisations to deliver true value to their customers and adopt subscription services as the next generation of banking.

 

Banking

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

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by Lili Metodieva, MD of Monneo

 

As our world becomes more interconnected, so too does the need for banking systems to follow suit. In the past, businesses and individuals were often restricted to banking in a single country, but the rise of borderless banking is enabling both to benefit from greater financial freedoms. In this article, we will examine why this trend is so important and explain how Fintech companies are helping to make it possible.

 

What is borderless banking?

Simply put, borderless banking refers to any bank account, which allows users to spend, send and receive money across different countries and currencies, without incurring heavy fees. The concept has become increasingly popular in recent years, with more people now working in cross-border job roles and with many businesses requiring capital in a different currency than that of their country of origin.

For customers, borderless banking is making cross-border financial transactions more efficient and cost-effective. Through its rise, businesses and individuals can gain easier access to international streams of capital, which is crucial in this current moment of economic uncertainty. In fact, 74% of companies say cross-border payments have helped their business to survive [1].

 

Where do IBANs come in?

International Banking Account Numbers (IBAN) play a crucial role in facilitating borderless banking. The globally recognised system enables cross-border transactions to happen safely, by providing each international bank account with its own unique 36-digit alphanumerical code. On account of this code, financial institutions can quickly identify where funds are coming from, as well as where they’re going to.

More recently, providers such as us have been able to deliver Virtual IBANs (vIBAN). Working alongside a network of well-established European and International banks, we’re able to offer businesses a single platform interface that consolidates the management of all IBAN accounts. In turn, our multi-currency service makes conducting global financial transactions incredibly straightforward.

 

How has Brexit affected borderless banking?

The COVID-19 pandemic has accelerated the growth of borderless banking and services related to it, but other developments, such as Brexit are beginning to stand in its way. Most notably, the drawn-out withdrawal process has seeded a growing reluctance amongst risk averse, larger organisations to settle transactions using UK bank accounts or IBANs, due to unfounded concerns around regulatory complexity.

Despite leaving the EU, the UK remains a member of the Single Euro Payments Area (SEPA), so it’s unclear why these concerns around British IBAN accounts exist. Regardless, this unfortunate development must be addressed quickly as it has the potential to adversely affect the livelihood of businesses and individuals at a time of critical need.

 

What does the future hold for borderless banking?

There’s clear demand for borderless banking and borderless payments, but the discrimination of certain IBAN accounts represents a major obstacle, which could stand in the way of their widescale adoption. Moving forward, there needs to be a push towards borderless IBANs, which will make international financial transactions more reliable. At the end of the day, this is what IBANs were originally created for, so it’s important the current problems are rectified quickly.

To ensure this can happen, the industry needs protection and clarity from regulators. Likewise, it’s now time for membership organisations to stand up on behalf of the sector and lobby for the financial inclusion of businesses.

If the confusion regarding UK IBAN accounts can be sorted in a timely manner, businesses across the nation, as well as those further afield can look forward to a future of more streamlined and effective financial services. With this support, the diverse sector can deliver further access to innovative financial services and products, which improve outcomes for businesses and consumers alike.

As a sector, Fintech has the potential to provide vital assistance to the wider economy, particularly in an era of increased cross-border business. At Monneo, we’re committed to being part of that change and as a part of organisations like ‘Accept my IBAN’, are working towards reporting and ending IBAN discrimination.

[1] – https://www.mastercard.com/news/research-reports/2021/borderless-payments-report/

 

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Banking

IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

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Eugene Danilkis, CEO at Mambu

 

We are living in an experience economy, and banking is no different. Customers need innovative payment and finance management solutions. New entrants are edging into the landscape and challenging existing players. This should mean users have a better view of their finances and the tools they need to manage their money – but banks are failing to deliver.

Personal finances are a complex beast, emotional pulls are strong, and the worry of financial security is always on the mind. It’s the job of banks to be the shoulders customers can lean on and trust.

Open banking was supposed to take this to the next level, enabling banks to deliver personalised products and services based on improved data sharing and customer insights. But three years on, adoption remains sluggish. So, why is open banking failing to live up to its promise?

 

A missed opportunity

Open banking was introduced to the UK in 2018, but consumers are still mired in confusion as to what it means and how it helps them. According to Mambu’s global open banking survey, 61% of consumers say they’ve never used open banking, despite more than 8 in 10 using one or more mobile banking apps.

Eugene Danilkis

This is a problem for banks and consumers alike. Lack of understanding around the technology is hindering its adoption, despite this being in the best interests of both. By enabling the secure sharing of financial information, open banking creates an improved customer experience. Not only does this minimise friction and make online payments faster and easier, but allows for personalised services and greater automation, enabling customers to take advantage of tools like budgeting apps.

For banks, open banking is an opportunity to build innovative new products that will improve the customer journey, helping them retain accounts and acquire new ones. By collaborating with third parties, banks can hyper-target customers and build services that address specific user needs, increasing customer satisfaction and in turn brand loyalty.

It’s true there’s been a recent spike in open banking users. According to Juniper Research global, open banking users rose from 18 million in 2018 to 40 million in 2021. But this can be traced to the necessities of a pandemic rather than any sudden clarity in communications.

 

Putting customers at the heart of communication

Mambu’s research shows more than half of consumers (52%) have never heard of open banking. COVID-19 may have increased the uptake of the technology, but it hasn’t increased understanding among users.

So, what can banks do to encourage consumers to embrace open banking? Fundamentally, they must better educate their customers in terms they understand. This means talking to them like human beings, using clear and transparent language to simply explain the personal benefits open banking brings and why it’s really just smart banking.

The understanding gap between technology and terminology shows that consumer demand is there, but better communication is needed. Making sure consumers truly understand the tools they’re using, the control they now have over their finances and how open banking improves the customer experience is vital to dispersing the current fog of confusion. It’s the benefits of this technology that banks need to hone in on: customers ultimately care about what open banking can do for them and how it’s going to make their lives easier.

Centering the customer and their needs in this way will allow banks to fully realise open banking’s potential. The technology has already given them the opportunity to develop valuable services for customers that help build brand loyalty. But the industry has failed to put the customer at the heart of their communications and processes, and show them how much better banking can be.

 

Building trust

Key to reversing this trend is addressing consumer concerns around data privacy and financial safety. Yes, banks need to prioritise simplicity and clarity in messaging, but this isn’t an excuse to shy away from important conversations. Just because there’s an understanding gap around open banking doesn’t mean consumers aren’t switched on about tech and financial issues.

Mambu’s survey found nearly three in five customers have concerns about privacy and security in relation to open banking. So, it’s vital that banks provide reassurance and relevant information about data sharing from the outset if they’re to assuage these fears.

The industry can also encourage greater adoption by developing and improving open banking interfaces. Banks are the gatekeepers to how easily end-users can authorise certain actions, manage third-party access and navigate different open banking functions. If the interface is user-friendly, customers will have a better experience of the technology and be more likely to use and recommend these services.

 

Time to get talking

Customer communication is holding the industry back.. The ability of open banking to transform financial services is a concept that industry players are well-versed in. But the feeling isn’t mutual for customers.

Banks are failing to capitalise on the open banking opportunity by engaging with new and existing customers about what the technology can do for them. Debunking  common myths can open the door to increased growth and trust for banks, as they seek to open up new revenue streams post pandemic..

Make no mistake, open banking isn’t going away. But customers will if banks don’t get talking.

 

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