Banking

Supporting vulnerable customers: key learnings for banks and insurers

Published

4 weeks ago

August 31, 2023

Jake Canaan, VP Global Sales Engineering, Quantum Metric

In today’s difficult economic climate, vulnerable circumstances can affect anyone, whether it’s due to job loss, struggles with a higher cost of living or the development of an illness. In fact, research has found that almost one in four (23%) consumers are now considered financially vulnerable, with 56% of these consumers believing the situation will worsen over the next 12 months.

Banks and insurers have an opportunity to implement tailored solutions that make vulnerable customers feel truly understood and ensure their specific requirements are well-met. This includes taking proactive measures to enhance messaging and usability across all customer touchpoints, demonstrating a genuine commitment to serving all customers with the utmost care and consideration.

Accommodating every customer’s needs

Providing the right support for vulnerable customers starts by considering the different ways in which they may require assistance. For example, they may lack familiarity with digital technology and encounter difficulty navigating websites and apps, which could cause them to make payment mistakes. They may also make impulsive or poor financial decisions such as falling victim to scams or accidently purchasing an inappropriate product. Given that mobile now drives most traffic across the industry and is the platform preferred by consumers, banks and insurers should develop apps with vulnerable customers in mind – making them simple, intuitive, easily accessible, and educational.

Debt is another key example of vulnerability. With the cost-of-living crisis continuing to bite, many are finding it increasingly hard to pay off what they owe. In fact, a recent Quantum Metric report found that the biggest financial challenge for 60% of people is understanding how to afford bills or pay off debt. What’s more, one in four people want support getting out of debt. Not only do banks and insurers need to actively offer solutions for these customers, but they should also exercise extra caution to ensure fair treatment from their situation.

The power of open banking and APIs can be harnessed to integrate debt advice and mental health resources into websites and apps, in turn building a picture of a customer’s financial health and enabling tailored solutions. Additional assistance could include amending payment plans to alleviate pressure or offering discreet ways for customers to disclose debts without the potential embarrassment of in-branch communications. Private, self-service support options eliminate the need for uncomfortable discussions, ensuring a more sensitive experience.

When a vulnerable individual faces a challenging situation, the impact can be significantly worsened by receiving sub-par support from their bank. Therefore, there needs to be a clear and effective customer support system in place to ensure people receive the assistance and care they require during such critical times. By prioritising a robust support structure, banks can alleviate the difficulties faced by vulnerable customers and provide them with the necessary guidance and understanding to navigate their circumstances with confidence and ease.

However, this can’t happen if staff are not equipped with the necessary skills to comprehend the nature and extent of vulnerability, as well as its implications. By training employees to sensitively recognise and respond to signs of vulnerability, financial institutions can better empathise with the needs of their customer base, identify vulnerable customers, and respond effectively across various areas such as product design, customer service, and communications.

Improving the user experience

Once all employees are fully qualified to understand vulnerable customers’ requirements, banks and insurers can begin taking practical measures like enhancing user experience (UX) to industry-leading standards by removing red tape and ensuring effective messaging. To help identify the parts of the UX that require upgrading to suit vulnerable customer’s needs, financial institutions should leverage data-driven journey analytics. This data can provide insights into customers’ activities and frustrations, meaning friction points and usability issues can be pinpointed and rectified much quicker.

Banks and insurers should also consider how emerging technologies, such as AI, could help improve UX for vulnerable customers. Recent Quantum Metric research found that 55% of people are comfortable sharing financial information with a chatbot. Vulnerable customers are more likely to require assistance more often when navigating digital banking features. Relying on human customer service to be delivered over the phone or in-person means that during non-working hours, these customers may feel like they have nowhere to turn. By leveraging AI technology, such as 24-hour automated chatbots, vulnerable customers can still receive support no matter the time of day.

Trust built through transparency

It’s important that financial institutions are completely transparent with all their customers, but especially those who may need additional assistance understanding certain products or services. By implementing processes that help ensure customers are fully aware of any terms and conditions before signing up, financial institutions can protect customers and ensure they aren’t caught out by requirements. By pre-emptively addressing intricacies such as associated fees, these measures proactively mitigate the emergence of complications further along the road, safeguarding customers’ financial interests.

This can also benefit banks and insurers too – not only does transparency build customer trust, but it also means there is an auditable trail confirming that a customer has agreed to any risks, should evidence of compliance ever need to be provided.

The support offered to vulnerable customers can vary depending on the financial institution and the individual needs they cater to. However, both banks and insurers hold a critical responsibility in providing impactful support to these customers through various strategies. These encompass crafting specialised products and services that cater to specific requirements, fostering transparent communication to ensure easy comprehension of information, offering multiple channels for accessible customer interaction and training staff to sensitively identify and respond to signs of vulnerability.

The key to effectively aiding vulnerable customers lies in engaging them on their own terms, underscored by the critical significance of attaining a thorough understanding of their unique circumstances. By doing this, financial institutions can ensure vulnerable customers receive the care and support they truly deserve.

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Banking

Are SaaS platforms challenging banks for a piece of the payments pie?

Published

3 days ago

September 26, 2023

admin

4 common myths about the role of open source in financial services

Attributed to: Ralph Dangelmaier, Global CEO of BlueSnap

The finance industry is at a tipping point with software firms on the brink of becoming banks. This may seem like a farfetched idea, but now that software platforms come equipped with payment capabilities, their SME customers may want to receive more financial products from these platforms.

This is part of the wider trend of ‘embedded finance’ – when companies which aren’t banks incorporate financial services such as lending, insurance, and payments into their product.

Software firms are particularly leveraging ‘embedded payments’ – where the ability to accept and process payments comes with the software itself. Think of a school consolidating all the payments a parent would make for their children – tuition, books, extracurricular activities – in one software platform. This trend has exploded in popularity because there’s a desire among companies, and their customers, for everything from products to payments to happen under one roof.

With the market value of embedded payments expected to reach £2.08 trillion by 2026 and customers becoming increasingly married to their software, let’s look at how we ended up at this turning point in payments.

How chasing convenience puts money in platforms’ hands

Ralph Dangelmaier

The growth of embedded payments is propelled by the need for ease, trust, and convenience. As platforms are selling payments hand-in-hand with their software, customers don’t need to integrate with additional service providers just to accept payments. And they’re already bought into using the platform for its other functions.

Not only is this kind of back-end reconciliation easy and convenient but it helps software platforms generate revenue too. That’s because software companies that embed payments become Payment Facilitators (a.k.a PayFacs) – allowing them to monetize transactions that happen within their platform.

By selling payments, software firms can see up to a fivefold increase in value per client. Rather than depending on software subscriptions alone, these platforms now receive a cut of every transaction that’s facilitated using their software too. This provides them and the businesses they serve with a mutual incentive – shared profits.

Software platforms are passionate about helping their customers create the most easy-to-use experience to drive a higher volume of transactions. Of course, there are many ways to launch new revenue streams, but why leave money sitting on the table when all you have to do is become convenience-obsessed?

Why finance teams want software and payments in one

As a payment expert who’s worked in a bank’s back office, I know how important a financial software stack can be. In its highest form, it can steer a business’ entire financial strategy.

Often these stacks are well curated, but the biggest drawback is the manual collection of data across platforms. Trying to build a financial picture of a business using your ERP, CRM, human resource and billing system can involve hours of laborious data entry.

For everyday finance teams, this isn’t an efficient use of time. They need to be able to pull data swiftly to advise their executives on financial strategies. CFOs are also under pressure to choose the right software stack to streamline processes and ensure payments ROI.

That’s why payment technology that removes the manual work for finance teams – to get from A to B more quickly – is growing in popularity.

Software firms using embedded payments are saving them hassle and time. Not only that, it helps the key financial decision makers of SMEs stay in a constant state of financial planning, where they can change their strategy whatever the market conditions may be.

The end of traditional banking for SMEs?

Increasingly, SMEs are struggling to get the payments support they need from traditional banks. The ‘higher risk, lower return’ view of the small business market among banks leaves software platforms in a ripe position for a takeover.

There are over 90,000 software companies in the UK alone. With nearly half of software platforms (48%) turning to embedded payments to gain a source of competitive advantage, this figure could represent a threat to corporate banking as we know it.

SMEs don’t have the deep pockets that multinational businesses have. The Amazons and BMWs of the world have long reaped the benefits of a corporate account with a large bank – and the round the clock support this offers.

But SMEs face high conversion fees and often receive minimal support chasing late payments, leaving them between a rock and a hard place. If these businesses can save money by moving from banks to software platforms, then banks are at risk of losing their position over the middle market.

Looming regulation

Until now banks have been able to defend their position because safety and security is key. Once platforms become regulated, then what? It won’t be long before regulators eye up the software industry as their next big focus.

But regulatory bodies like the FCA, PRA and more favour ‘controlled innovation’, so this will take time.

Currently, to process transactions in Europe, businesses must go down the lengthy and costly process of becoming Payment Service Providers (PSPs). That’s why many software platforms are choosing to partner with a licensed payment provider which sells the payment package to them, instead.

In fact, 89% of software platforms choose to work with PSPs rather than become a PayFac themselves. It makes sense when it’s taken more than a year for some platforms to begin processing payments on their own.

Given the sizable financial risk of processing your own payments and the administrative burden this brings, it’s no wonder software firms are looking to fintech for a better way.

After all, it’s not just about processing the payments. A partnership with a payment technology partner comes complete with support in onboarding, underwriting, compliance, risk, payouts and customer support.

In short, software platforms see the benefits of selling payments and are primed to become the next big financial players.

Not only is there revenue for the taking but their customers benefit as well. With software platforms ready to offer SMEs a banking alternative and a superior customer experience, they’re offering a truly win-win solution for all involved. And it’s payment technology partners that can help them make this vision a reality.

Banking

Emerging technology will power long-term sustainability within the UK banking industry

Published

3 days ago

September 26, 2023

admin

By Peter-Jan Van De Venn, VP Global Digital Banking at Hexaware Mobiquity.

Sustainability has been a big focus for the banking industry in recent years, with the issue becoming increasingly important for consumers. It’s no wonder that sustainability has become baked into the purposes of almost every bank, from Natwest to HSBC.

However, the economic uncertainty of the last year has led to many banks putting it on the back burner. Challenging market conditions have forced financial institutions to change their priorities to concentrate on protecting the bottom line. Our research found there’s been a significant drop in the number of UK banks saying that sustainability remains a key business strategy. 12 months ago it was a major priority for 100 per cent of banks, but now that number has shrunk to 60 percent.

Whilst it’s understandable that banks are feeling the pressure at the moment, there’s a risk that they will miss out if they hit the pause button. From cost savings brought by innovative digital products and services, to improved brand reputation and increased profitability, there are a lot of longer-term benefits they could be failing to unlock. So how can they keep moving forward?

Losing momentum

Emerging technology holds the key to their success, with the power to disrupt current behaviours and promote a more sustainable culture. Banks are already aware of this, with 76 percent using digital transformation to drive sustainability, but a lack of leadership has made it difficult to build momentum in the last 12 months. Currently just over half (54 percent) of banks have tasked an executive at board level with overseeing sustainability – way down from 83% just 12 months ago.

This lack of board authority means banks are struggling to engage the entire organisation to move ahead with sustainable initiatives. As a result, almost two-thirds of banks are seeing progress slow, admitting they are not actively taking steps to foster more sustainable behaviours throughout the organisation. Those that have taken their foot off the gas need to find a way to move forward again.

No time for standing still

Banks know that technology can drive sustainable behaviour. For instance, many of them are already encouraging their workforce to work remotely, as a way of reducing travel. This has two benefits – not only does it cut the costs of running physical offices at full capacity, but also reduces the bank’s carbon footprint. There has never been a better time to invest in technology to drive more sustainable behaviours.

New digital products and services can also extend the benefits beyond employees to encompass the wider customer base. A fair number of banks are already investing to make this happen. More than a third (35 percent) of banking organisations are using Machine Learning (ML), Artificial Intelligence (AI), cloud and analytics to make digital services more easily accessible. Investment in these technologies will be critical as the number of physical bank branches continues to decrease, with figures from Which? showing this is taking place at a rate of 54 branch closures each month.

Hitting environmental and social responsibility goals

Emerging technologies can also help banks keep pace with tightening ESG rules and regulations. Banks are faced with demands for increasingly granular reporting and transparency on ESG – demanding a new approach. In line, 41% of them are developing data visualisation tools to improve stakeholder engagement and understanding of ESG risks and opportunities, while 37% are using machine learning and artificial intelligence to identify and track ESG risks and opportunities across a wide range of data sources.

More than one in three are also using the blockchain to improve transparency and traceability in supply chains, and implementing digital tools and platforms to collect, analyse, and report ESG data and metrics in a standardised and consistent manner. All these applications of emerging technology will put banks on track to address global environmental challenges and unlock a greener future.

Long-term sustainability

As the economic pressures hopefully start to subside, increasing numbers of banks will start investigating how they can use emerging technologies to provide engaging experiences and value-added services for customers, to drive greater revenue and efficiencies.

Whilst banks are right to focus on their revenue under difficult trading conditions, it’s important they don’t miss out on the long-term benefits that sustainability can bring. To capitalise on this, banks must keep pushing the boundaries and invest in emerging innovations to drive more sustainable banking behaviours, benefiting the planet and driving great digital experiences for customers.