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REMEMBERING THE PAST TO MAKE THE FUTURE BETTER

Daniele Grassi, CEO of Axyon.AI

From the shifting economy to the changing political landscape – everything has an impact on the market. Yet, even with all the advancements in econometrics and analysis over the last few decades, the sector has still been unable to fully anticipate the true effect these changes will have.

The answer lies in the past and understanding how to harness historical incidents to inform future events. Those firms that can unlock the data hidden in these trends will be able to lead the market, see increased profits and avoid the negative impact of market shifts.

The challenge of looking back

There is an innate challenge in using past events to anticipate future change, however. Markets face extremely complex dynamics where thousands upon thousands of actors interact in non-linear ways. As a result, it becomes extremely complicated to identify the underlying trends and processes that will influence future change. However, through understanding these intricate relationships, firms can begin to anticipate regime shifts and even black swan events.

It’s here that the traditional quantitative analysis, supported by human supervision, is not enough. There is simply too much data and too many variables to consider. Even if analysts do make predictions, these are mainly based on surface-level trends. However, there are many more patterns and dynamics that traditional quantitative analysis and the human mind are unable to perceive, such as small shifts in entirely different industries that can create huge waves for the entire market.

A storm in a clear sky

The benefits of anticipating market shifts go beyond remaining competitive or increasing profit; these insights can also offer protection against entirely unexpected developments. While experts may be able explain in hindsight how a black swan event occurred, this understanding is not always enough to prepare or offset the negative impact of future events.

Every time a black swan occurs, the circumstances causing it appear to be different. Nevertheless, the result always ends up disrupting and damaging many investors and institutions.

Part of the reason for this lack of preparation is due to how firms currently adapt to market change. Traditional stress tests are not perfect, as they tend to replay a limited set of scenarios in order to predict how future market changes could affect a portfolio or the risk balance of an institution in general.

Even when these historical scenarios have more complex variations included, they often use a limited range of variables that do not account for deeper market shifts. This is where scenario analysis needs a more effective process.

Enhancing analysis

With the proper tools, human investigations can be enhanced to provide more accurate predictions of the market. However, technology is often still a stumbling block for many financial institutions, due to a fundamental lack of understanding and whether it will deliver practical benefits for the business.

The reality is far more positive, as AI solutions can actually help workers to be more efficient in their role. As a result, financial professionals should welcome the use of technology to help predict future trends and market issues.

New machine learning techniques, such as Generative Adversarial Networks (GANs), can support this goal by modelling the market with far greater accuracy. The data used in the formation of these scenarios can be more detailed and broader in scope, which means that the technology can look at data points coming from a range of actors that influence the market – such as economic data, fundamentals, sentiment and news. GANs can then use all of this nuanced information generate scenarios that take into account the inner workings of the market and not just surface-level events.

In practice, this is achieved by having two AIs working against one another. One AI produces fake scenarios while the other decides whether that data is real or false. As the AI learns to spot the false data, its counterpart improves its practices to make the next set of data, or market scenario, even more realistic. By using this kind of synthetic data, potentially in the form of thousands and thousands of years of realistic market scenarios, the planning and preparation for market changes can be constantly developed and not limited to static events that have taken place in the past.

While currently existing at a research-level, this technology is likely to reach mainstream adoption in the next few years. If firms are prepared to make this transition, they will be able to gain a far better understanding of how the market will shift, not only by drawing directly from historical events, but also by understanding how variations on these events can shape the market as well.

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Top 10

PREMIUM RATES REQUIRE PREMIUM SERVICES

By Kash Amini, CEO and Founder of MasLife

 

A few years ago, the UK world of finance was disrupted by the likes of Monzo, Revolut, Starling and other neobanks. They have managed to play the roles of the ‘good guys’ and built an impressive customer base – ending 2019 with almost 20 million customers globally according to Accenture’s Digital Banking Tracker. Now, it seems the unicorn fairytale is about to end with ongoing challenges to grow profit. It’s not all rainbows and corals, fintechs need to offer more if they want their customers to pay premium rates.

For quite a while, the narrative used to be all about trust. Good old HSBC or Lloyds Bank might not have the quickest customer service or interactive mobile app features, but they had customers’ trust. It was a question of changing the UK customer mindset to venture out and see what neobanks had to offer. With a decent few millions of customers in the UK, we parked this conversation and started with ‘How can traditional banks compete with fintechs?’. New era. More technology, more flexibility, better customer service.

New chapter – 2020 has led the fintech conversation strongly with profit challenges. People are still more inclined to pay premium rates to the industry veterans rather than to flying unicorns. You probably know all of this, now, scrap that. Forget all you knew about the last few years and months in the consumer finance space. This is 2021 we need to talk about and customers now want more than ever.

 

This year has changed us all.

In the UK, three out of four people reported a change in their wellbeing, according to Deloitte’s The Impact of Lockdown on Wellbeing and the Economics of Happiness from July this year.

Google analysis shows that people are looking for ethical brands, now more than ever.

According to McKinsey, each month, more consumers expect the impact of COVID-19 on the economy will last a year or longer.

We could carry on listing stats and customer research but what do they mean for the fintechs struggling with profitability? These changes mean that you need to think about the impact your brand has on customers’ wellbeing. Yes, even a financial institution should do this. Consider your brand purpose, how have you helped the world to go through the pandemic? The future is blurred and unpredictable and people will think at least twice about where they pay their premium rates.

The fintech vs traditional banks war started with trust. Now, let’s admit it, the oldies have an upper hand of a long history in times of financial uncertainty. To fight on their level, you have to offer more than just seamless technology, apps with emojis and solid customer service. This is what your customers already expect, they don’t want to pay premium rates for what they consider standard.

Based on the behavioural changes the pandemic storm has brought, here are three key attributes the unicorn breed of fintech firms are missing, which could spell the difference between an onwards-and-upwards trajectory rather than a crash-and-burn scenario.

 

Do some good

We are not talking about an all singing and dancing corporate social responsibility campaign with a big PR stunt about it. Consumers don’t buy that anymore. It’s about the real impact of your services.

The finance sector and most fintech apps do not have the consumer’s interest in mind. They are intentionally letting users go into debt in order to generate revenue. This isn’t the way to humanise the finance sector, and it is definitely not a mindful approach to customers’ wellbeing and future finances. Customers are looking for ethical applications, so fintechs who can show and prove they care about not just the customer, but about scenarios chiming with customer feelings – like improving the climate or wellbeing will likely be chosen.

Helping people realise how to reach their potential is missing big time. Fintechs need to give users a 360 degree approach to their life and realise the need for a holistic approach to customer finance.

 

Be human

Years ago, this would have sounded strange in the context of financial services. For  a long time, it’s been one of the most sterile industries. But fintechs are missing a trick here.

When you’re looking at finance holistically, it’s important to realise that a healthy relationship with money is part of one’s wellbeing and affects all the other aspects of your customer’s life – personal, business and health.

Gamification can offer the answer to humanising financial services. It moves the process of dealing with money away from it being ‘just a finance app’ and adds more support to creating a healthier approach to personal finance.

Dr. Bradley Klontz, respected financial psychology expert, has conducted several studies on customers’ relationships with their finances. People with money avoidance issues will avoid looking at account balances, bank statements, will not adhere to budgets and run away from their financial problems. Gamification and calming features can help people overcome the worry of opening their money account and make them feel more connected.

 

Look premium

Most people wouldn’t pay a premium price for a basic t-shirt, so why would they when it comes to a banking app? If you want to charge premium rates, you need to offer premium looks as well and emoji icons and neon colours are not going to make the cut. Think about the design of your app and payment card, do they really look premium? Do they attract premium customers?

Design is the base for good looks but it should go in hand with the points raised earlier – gamification and overall wellbeing. Consider images that decrease the anxiety associated with financial matters, together with a calming user interface design. Incorporating nature and meditation features to give a much more holistic feel will also promote a better relationship with one’s finances. Health and wellness themes will make it more pleasant for people to deal with finances.

We have seen new trends emerging in the last few months with some consumer brands having approached new ways of engaging with their customers. But the big unicorn fintech world still awaits a strong player which can take a lesson from this year’s changes, offer additional value and cater to the current and future premium customers.

 

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Business

SOCIAL MEDIA AND THE FINANCIAL INDUSTRY: TOP 5 REASONS TO DEVELOP A LONG-TERM STRATEGY

Social media is not just for people to share stories and opinions anymore, and it has not been just that for a long time. Nearly every platform is a place for businesses, including financial institutions, to build a following, share important information with active or potential clients or customers, and reach out to people in a variety of ways, whether through text, images, or videos. And while we doubt a solely meme-based strategy will work for your business, a social media presence is vital, and you should consider how your company can use it to its fullest.

To do so, you will need a long-term strategy. While developing one might not be easy in a constantly changing online landscape, here are some of the top reasons to start developing your long-term strategy as soon as possible:

 

1) You Can Be Ready for Major Opportunities

The world is constantly changing, especially in these current times, and while there are many things that can happen, there are some key situations you know your business is prepared for. Whether it is a downturn in the economy or circumstances that would lead to a ramping up of investments across the board, you want people to be able to know where to go and who to talk to. With a social media plan, you can respond to these opportunities quickly and effectively, ideally with less confirmation and more action.

And waiting for the right time to start is the only wrong choice that matters now. Your business will need time to build an infrastructure, a social media methodology, and a following. By the time that is done, any new opportunities will have passed, or will certainly not have been seized on to their fullest potential.

 

2) You Can Build Trust in Your Institution

While you likely do not want your clients constantly worrying about their accounts (that is what your institution is there for, to alleviate such concerns), you also should not be completely absent from their minds or exist only as a distant and replaceable entity that provides a very basic service. You want what makes your organization great to shine through, and with a social media plan, that is more likely.

By staying in the public eye through providing important and useful information to them free of charge on social media, among other initiatives, you can improve your company’s brand in a significant way, and likely retain clients and gain new ones in the process (whether by word of mouth or improved natural traffic) through positive reputation and a sense of trust in your people. It is an investment that might take time to pay off, but it will pay off.

 

3) You Can More Easily Promote Your Online Systems and Resources

If you can provide direct links to your pages, sites, and tools, it is much better and quicker than giving someone a pamphlet that they might never read. Social media allows for just that, without the commitment of an email newsletter or similar techniques.

And while you certainly have people already using your institution’s online tools (and it would be hard to imagine your company does not have them in 2020 to at least some degree) you can use social media pages to better direct them, increase usage as opposed to more inefficient methods, and provide information as to their best uses. You want the investments made in technology and design to pay off. Use a social media plan to make that happen.

 

4) You Can Build a Team and Mission

As you are certainly aware from all other parts of your business, a good team and good processes make all the difference, and with a long-term plan, you can create the foundations for those personnel to thrive and give them clear instructions on how you want the company to be seen by active and prospective clients. Once people know what they are working with, they can work better.

A planned team will be able to be more organized and be able to use data of several types more efficiently than a simple unplanned posting schedule. You will be able to track what is working and what does not all the better for the changes.

 

5) You Can Be Proactive Instead of Reactive

Rounding back to the first point, if you have a long-term social media strategy for your financial institution, then you can plan for the future, even if that future is uncertain. You can have a plan that allows your social media and marketing teams to work more easily in conjunction and to target the likely people to use your organization’s services in the near future. As opposed to responding to events, you will be at times anticipating them.

Consider the top websites of recent years. While you probably aren’t operating on the same scale, does a single one of these websites not have a significant social media presence on at least a few platforms, if they are not one of the most trafficked websites in the world? Your financial institution needs to go to where the people are, and ideally be there before people start looking for answers. A long-term social media plan allows for just that.

 

Conclusion

You do not need to start investing all of your marketing budget into social media or create a team that’s as large as some of the top companies in the world. You just need to get started and get your priorities clear when it comes to social media. Even devoting just a few resources towards creating a consistent, long-term strategy can make the difference between stagnation and success over the next decade, and given that every competitor is either already working with a plan or soon will, its best to start working as soon as you can.

 

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