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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

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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