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RETAILERS CAN USE OPEN BANKING PAYMENTS TO ENHANCE THE SECURITY OF SOCIAL COMMERCE

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Leon Muis, Chief Business Officer, Yolt Technology Services (YTS)

 

Social commerce is on the rise and is transforming the online shopping space. According to a recent survey, over a third (35%) of consumers have already bought through social media. Among younger customers, its popularity is even higher, with more than half (51%) of millennials likely to purchase over social media, whether via established platforms such as Facebook, Instagram and Pinterest, or more influencer-based platforms such as Tik Tok.

And, thanks to the ease of purchasing, more than three-quarters (76%) of consumers have made impulse purchases via social channels and 82% like the convenience it offers. A fifth of those already purchasing through social platforms do so weekly, spending an average of £71 a month.

These powerful figures show why retailers are increasingly moving from using social media to just showcase products to closing the loop and converting customers directly within apps and platforms.  Demand is a key driver, as research shows that 71% of consumers would rather complete the sale on social rather than be redirected across to a retail site and payment page to check out.

 

Understanding the risks of social commerce

Yet, inevitably, there are risks to social commerce. One of the biggest concerns is whether consumers’ sensitive details can be handled as securely when the buying process speeds up-with data breaches, where fraudsters have acquired sensitive customer details, a major factor in this.

There can also be concerns as to whether goods advertised on social media are genuine or not. According to the Anti-Counterfeiting Group (ACG), 31% of shoppers unintentionally bought fake products online in 2019, with 23% of these counterfeit goods being purchased through social media.

Social proof – consumer reviews and so on – can help here, but consumers should be looking at sellers’ credentials, especially when purchasing on a social marketplace, with a critical eye. For example, is the seller actually based where they say they are? Clues like delivery time can be helpful in this instance, if a seller claims to be in the UK, but the delivery is taking a couple of weeks it could be suspicious.

 

The impacts of fraud

The impact fraudulent transactions can have on businesses and consumers alike is profound in both the short- and long-term. Costs include everything from compensation to the victim, shipping, and insurance costs, as well as chargeback fees, which can reach hundreds of pounds per transaction and incur transaction fees too. Retailers may also need to replace ‘lost’ inventory, as well as manually review suspicious transactions – yet another cost.

The short-term impact is tough enough, with merchants spending 3-5% of their revenue combatting fraud. These are costs that are hard enough to bear in good times, let alone during a pandemic when profit margins have been hit and businesses, especially SMEs, have struggled.

But more costly still, can be the losses incurred longer-term. Customers may opt to shop elsewhere, no longer confident that their sensitive financial details are protected. At a higher level, reputational damage may cause potential investors to walk away from businesses, especially where huge headline-grabbing cyberattacks occur.

Of course, where this happens on a social media platform the impact is even more brutal still since customers may lose faith in both the retailer and the social media platform, impacting their future trust in both, as well as testing the commercial relationships between the social media platform and retailer.

 

How  open banking can boost the payment security of social commerce?

Open banking payments (PIS) help to solve these challenges, since it can boost payment security for social commerce considerably.

Using PIS, social commerce payments can be verified by the customer directly through their bank, using their bank’s own security measures. This means the consumer doesn’t have to enter sensitive bank account or credit card information on the social media website, something they may be wary of doing.

As a result, there’s an additional layer of security for the consumer during the payment process since they are using the payment capability of their trusted bank. Meanwhile the fact that the customer doesn’t need to leave the social media site to pay also improves the customer journey and ensures conversion to payment, reducing checkout abandonment rates as a result.

The verification process allows retailers to identify potential fraud cases far quicker and reduce the number of fraudulent transactions being made, saving them money on insurance and chargebacks at a time where every penny counts. And, longer-term too, the additional security provided by PIS can help businesses feel more confident about expanding without the threat of increasing their exposure to potential fraud.

Social commerce is growing. But retailers also need to remember that social media is where customers are most vocal. If they have a bad experience, retailers not only stand to lose them as customers, but potentially others in their network too.

Give them a great payment experience, however, and they will most likely talk about it with their peers within their social media networks – increasing customers for the retailer as a result.

 

Banking

BANKS OF THE FUTURE WILL BE ASSEMBLED, NOT BUILT: HOW BANKS CAN EXPAND AND INNOVATE BY RETHINKING THEIR PARTNERSHIPS

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Author: Kelly Switt, Senior Director, Financial Services Strategy, Ecosystem and Strategic Partnerships, Red Hat

 

The financial services business ecosystem has been radically reshaped in recent years and is arguably more dynamic and ripe for innovation than it has ever been. Banks that take bolder steps to build strategic partnerships have the potential to dramatically transform themselves and the industry. While open banking reforms have encouraged organizations to open up their architectures to each other, there is much potential still to be unlocked: beyond the minimum of meeting regulations by the deadline and exposing the APIs required for aggregation services, there is a vast untapped opportunity for creativity in joint business models. The kind of opportunity that has long since been grasped by web-scale companies and fintech startups.

 

Deutsche Bank, BBVA, and neobank bunq are examples of banks that have understood the value of creating open finance communities. However, the majority of financial organisations are yet to embrace deeper collaborations that truly take advantage of external parties’ ready-built solutions, which would save time and resources and enable inhouse teams to focus on differentiating their business where it really counts. So how can an organisation break free of legacy structures and attitudes to better integrate and engage with partners?

 

Step 1: Adopting a growth mindset

Establishing deeper strategic relationships with partners requires a mindset shift for much of the industry. Traditionally, banks have tended to see third parties as vendors, treating the relationship as a transactional exchange, in the context of legal agreements that set forth the provisions and conditions of the services to be provided. Instead, banks need to adopt a growth mindset that encourages organisations to look beyond their own four walls, and embraces participation in a wider community. By engaging with an ecosystem of partners and treating them as a valuable additional set of experts, banks can accelerate problem-solving and reach their business goals faster.

 

Step 2: Aligning internally as an organisation

Before bringing in a partner to tackle a business problem, an organisation needs to conduct an internal assessment. It’s important for all departments within an organisation (IT, sales, marketing, etc.) to contribute their perspective on unpacking why a problem exists across the organisation: what are compliance and risk issues? What are the technical challenges? In what ways is the business impacted? Once everyone is grounded on why the problem needs fixing, it is a much clearer path to identify both the business and technology capabilities needed to solve the problem – i.e. the tools as well as the people skills. If different departments aren’t set up to engage with each other, it’s time to dismantle barriers and build bridges to ensure everyone is included in this discovery phase.

 

Step 3: Be open with partners

When the business has galvanised around its key objectives and the capabilities it needs to move forward, the organisation can look at engaging partners that have experience and expertise in the right areas. The more information that is shared with a partner about the company’s challenges, opportunities and goals, the more empowered and committed the partner will be to help meet the desired outcomes. Armed with insights, partners can help connect the dots and invite further parties to a project, leading to a network effect that benefits both the organisation and the wider ecosystem. To ensure that everyone continues moving in the same direction every step of the way, it is crucial to have transparent discussions in which ideas can be exchanged freely, and to make decisions in an open and collaborative way. Disagreement and constructive feedback must be encouraged – partners should be empowered to speak up with concerns – as this is an important part of mitigating risk.

 

Step 4: Humanise business relationships

Business relationships are personal relationships. The most successful ones are built on mutual understanding of what makes each other tick, what motivates someone to behave the way they do and what drives their performance. Getting to know people on a more personal level can create deep-seated relationships where everyone feels fully invested in driving the project forward. The banking sector may not be known for encouraging vulnerability, but revealing a bit more of the human in us is a key ingredient for building trusted relationships. The pandemic has added urgency to the need for greater empathy to lead people through difficulties, and has shown how people can come together through shared emotional experiences to better manage adversity.

 

Step 5: Build on a consistent technology platform

The technical foundation for engaging in any new partnership is a strong integration strategy. An organization may need to rethink its system architectures and shift towards open platform models. In the case of using containers to take advantage of cloud scale, establishing a common platform at the base of the technology stack that runs consistently across an organisation can provide more control, security and stability. A common application management layer that is agnostic to the underlying technology and based on open APIs gives internal teams together with partners greater freedom to collaborate, accelerating innovation. It helps avert the risk of ending up with many custom integrations, which can lead to cost overruns, outages or services-related issues for customers.

 

Unleashing future possibilities

Progress is able to happen much faster when people and teams work together. As more and more businesses in banking and adjacent industries wake up to the opportunities inherent in a move towards greater openness, we will start to see unprecedented innovation in financial services, and myriad other areas of our lives, creating better and more inclusive customer experiences for societies globally. Banks of the future will be assembled, not built.

 

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Banking

SHIFTING EXPECTATIONS AND THE RISE OF FLEXIBLE BANKING

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Rajasekar Sukumar, Vice President Europe, Persistent Systems

 

In virtually every aspect of connected life, consumers are demanding personalisation — and banks are under pressure.

While financial services led many sectors in recognising the potential of technology decades ago, rapid advances more recently in areas like retail have put banks under increasing pressure to deliver services that are tailored to the individual.

The general view is that banks are just too slow to transform, but it’s an assumption I readily challenge. Over the last few years, banks of all sizes have developed and launched new digital services and mobile apps at a pace I’ve not see in the financial services sector before.

The perception of slow and steady persists, however, and it’s because banks are missing the focus on personalisation. With consumers so used to the personalised services of brands like Amazon and Netflix, this gap is widening even further — and it’s what’s giving challenger brands their advantage.

Created and developed to offer everything to every consumer, large banks are being challenged to deliver the rapid pace of change that is needed to put personalisation at the heart of their offerings.

Conversely, smaller challenger banks have no legacy strategy or proposition to adapt. They are entering the financial services market with clear and focused propositions, designed to appeal to a niche demographic for maximum differentiation and appeal.

So, what does this mean for the banking landscape of the future?

 

Shifting expectations

Taking a ‘one-size-fits-all’ approach to banking has been relied upon for decades, with the assumption that appeal is maximised if everything is offered to everyone. Yet this standardised approach is not connecting with customers.

As I mentioned, banks aren’t being reluctant to change this situation through digital transformation — it’s just that it’s not easy.

The challenge here is two-fold. Firstly, in how larger banks were built, with a one-size-fits-all architecture to deliver every product or service a bank could ever want to offer to any customer. Adding new systems through integration brings some flexibility, but under the hood this core banking infrastructure is restrictive.

The other issue is that larger banks are the victims of previous success. They have worked hard to appeal to every type of consumer, and they’ve got them on their books. But personalising and segmenting such a broad group is a huge, unwieldy undertaking.

In contrast, newer banks don’t have to shake off legacy perceptions or rework legacy systems. A digital-first approach brings agility and flexibility from the outset, with the ability to rapidly create a banking proposition that is designed for a very particular type of customer.

A great example is UK-based Monument. Launched this year, this digital bank has purposefully hand-picked a focused segment: the mass affluent with between £250,000 and £5 million in liquid assets.

Every Monument message and product has been developed with its niche audience in mind, pushing aside the myriad banking services they could offer to focus only the ones that really resonate and matter to those with high incomes.

 

A digital mosaic architecture

Instead of being shackled with a ‘one-size-fits-all’ infrastructure, challenger banks have the opportunity to develop what we at Persistent Systems call a digital mosaic architecture.

Instead of building in everything from the outset, a digital mosaic provides a flexible structure to add and integrate the right services, applications and data platforms to meet the needs of a particular customer group.

It’s easily composable, and that brings new levels of efficiency, flexibility and agility — and a step change in the personalisation of the customer experience.

With this clear advantage, digital banks can take a truly tailored approach from the start, selecting only the products and services they need, whether that’s debit cards, loans or cross-border payments. With each component acting like a Lego brick, they have the opportunity to select only the best technologies for each product or service they want to offer.

For larger banks, this becomes more complex, as “under the hood” their technology infrastructure lack the flexibility they need to adopt a mosaic architecture quickly. Furthermore, the workflows within this infrastructure were originally created with the bank’s processes in mind, rather than the customer’s priorities, demands and expectations.

With a more composable, mosaic architecture, everything starts with the customer experience — and the technology becomes the enabler, not the blocker, of personalisation.

 

A customer-first approach with the cloud

To even the playing field and gain more competitive advantage, established players in the financial services sector are increasingly looking to the cloud to remove their dependency on complex, legacy IT infrastructure.

I’m seeing previous trust issues with cloud delivery dissipating, as banks recognise the cloud is now both highly trusted and critical to digital transformation projects. Flexibility and security is created in core components such as a credit decisioning system, KYC solutions and anti-money laundering technologies, and banks benefit from the ability to deploy and scale at speed.

The cloud brings the opportunity to break free from a single technology, to compose and integrate a unique and powerful combination of cloud-based services and applications for the optimum customer experience.

Partnering with a trusted systems integrator means this doesn’t have to be an insurmountable challenge either. Use experts to create and implement a best-in-class cloud infrastructure while you focus on what’s really core to the business: running the bank for your customers.

In today’s fast-moving banking landscape, the power and flexibility of a digital mosaic has never been more critical — and the opportunity is now.

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