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THE RISE OF DIGITAL WALLETS

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By Anil Malhotra, CMO of Bango

 

Mobile phone payments are nothing new. The first mobile phone payment to a merchant can be traced back to 1997, when Coca Cola set up vending machines that allowed users to pay via text. A mobile money transfer system called M-Pesa was launched in Kenya in 2007, and in 2011 Google launched the world’s first mobile wallet. Since then, mobile payments have grown faster than any other payment method, with mobile network operators billing over a trillion dollars to more than 5 billion people every year.

Now, with a reported 54% decline in the number of cash transactions in the UK from 2010 to 2020 and mobile phones predicted to become the second most common payment method after debit cards by 2022, it looks like the future will see traditional wallets cast aside in favour of digital ones.

 

Why have digital wallets become so popular?

Access and convenience. Digital wallets make payments easy, storing multiple payment methods in one digital home that’s quick to access and use via your phone, smartwatch or tablet. They even allow users to turn cash into electronic money that can be spent on-line or instore.

Digital wallet users will never again have to have an awkward ‘I’ve forgotten my wallet’ conversation. No wallet? No problem. Just tap and go. The device will even give you an instant notification of how much money you’ve spent in the transaction and you can link your loyalty schemes to your digital wallet so that any points, stamps and rewards are automatically calculated.

Anil Malhotra

In the increasingly competitive world of online payments, wallets digital wallets also foster greater financial inclusion. Although some digital wallets such as Apple Pay or Samsung only act as a vessel for existing funds — like a physical wallet — there is a growing number of e-wallets that allow users to generate balance through “cash conversion”.

Users can go to a shop, an ATM or kiosk and deposit cash that will then become electronic money available in their wallets. This feature increases the amount of people who can use a digital wallet and therefore adds to the increasing global popularity of mobile phone payments. For this reason, there is a raft of wallets that have gained government support across regions such as SE Asia, Africa and Latin America.

 

The effect of the pandemic

The coronavirus pandemic had an effect on the increasing popularity of mobile phone payments last year.

In April 2020 the contactless payment limit in the UK was raised from £30 to £45, with users and businesses alike encouraged to prioritise contactless card and digital wallet payments over cash to stop unnecessary contact with surfaces and reduce the spread of the virus. This dramatically accelerated the steady trend towards non-physical payments.

In some markets, Bango measured an increase of over 50% between April 2020 and January 2021 in the value of payments charged to wallets. This is expected to continue, with many retailers are still refusing to accept cash payments.

But despite the increasing popularity of digital wallets, some remain wary of mobile phone payments.

 

How safe are digital wallets?

Like any new payment method – for example contactless card payments – one of the nagging questions is whether digital wallets are safe. The short answer is, yes, they are. As safe as any financial transaction can be.

Digital wallets are secured by the password and/or face ID requirements of the smart device they live on, giving users control and peace of mind that their payment information is safe. Key payment identification data is also commonly tokenized, meaning that personal identifiable information and financial identities can be hidden.

They are safe at the point of sale too, with the UK treasury reporting that there was no significant rise in reported fraud when the limit was raised from £30 to £45. As a result, in the UK the contactless payment limit has now been increased even further to £100.

 

How can merchants benefit from the rise of digital wallets?

The increase in use of digital wallets is good news for merchants. More demand means merchants can justify investing in the technologies that enables digital wallet and mobile payments, technologies that ultimately saves them money.

Wallets offer lower processing costs than other methods, such as carrier billed payments using airtime and even card processing in many cases. They also offer fewer limits on transaction values and frequency.

According to a recent survey 37% of merchants are currently supporting mobile payments at the point of sale, with payments companies like Bango helping them offer mobile payments capabilities on a global scale. And when it comes to growth aided by digital wallets, scalability is key.

Most large merchants operate in more than one country as standard, but with different financial processes, regulation, laws and of course varying types of digital wallets, merchants need to work with companies that can unify and centralise payments.

A unified approach to global digital payments enables merchants and payment partners to innovate and differentiate quickly, helping them stay competitive in the online market and of course grow their business.

Digital wallets also benefit merchants by leaving a digital footprint of sorts. Using commerce platforms like Bango, businesses can analyse wallet users’ payment choices and have a clear insight into what they are interested in buying. This information can be used to target marketing activities through purchase behavior targeting and provides opportunities for merchants to incentivize the use of wallet payments by linking to special offers for your product.

Ultimately, digital wallets are a focused way to acquire customers as well as transact payments. And with digital wallet spending estimated to exceed $10 trillion by 2025, merchants who aren’t supporting mobile payments need to catch-up soon or risk loss of business as a result of not giving customers the easy payment experience they expect.

 

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

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In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.

 

Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.

As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.

 

Mike Hampson

Setting up training capabilities for client support post-pandemic

Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.

Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.

This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.

HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.

[2] https://www.law360.com/articles/1355897/

[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021

[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/

[5] https://industryslice.com/NewsLetter/8_33

[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/

[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte

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Finance

FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

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Marieke Saeij, CEO of Visma | Onguard

 

It’s clear that Intelligent Automation (IA) is still very much an emerging technology, with one indication being that is has only been mentioned a handful of times on Twitter since the beginning of 2021. Results from our latest annual FinTech Barometer reveal a mixed picture in terms of awareness, with half of finance professionals having never heard the term before. Whilst this is unsurprising for a technology concept very much in the ‘early adopters’ stage, organisations can stand to gain real benefits from embracing Intelligent Automation now, particular within the finance department. With this in mind, we explore some of these benefits and share a step-by-step best practice to implementing it into business operations.

 

Intelligent Automation ensures a predictable order-to-cash process

Such is the speed of introduction of new technologies that it’s a challenge for businesses to keep pace. As the newest innovation in finance, Intelligent Automation is one that organisations can’t afford to let pass by. It truly takes financial process automation to the next level. In addition to helping maintain a high-quality customer service, it also complements the existing skillset of finance professionals in the industry.

Marieke Saeij

While Robotic Process Automation (RPA) and Big Data are key innovations for the sector, IA can be likened to an additional layer that enhances existing technologies. By combining applications, this layer is capable of independently assessing situations and determining the appropriate process sequence. It can, for example, fully determine the risk of a specific customer, and can also predict at an early stage which invoices will be paid late, or even not at all, ensuring that finance professionals can then plan accordingly. The result is a reliable and predictable order-to-cash process.

 

The four steps to an IA-proof organisation

While the benefits of IA are numerous, implementing the technology can prove complex, although some are already treading the IA path without knowing it. In this instance it’s crucial to become aware and begin the purposeful process to full integration. Below are the four key steps to becoming fully IA-proof.

  1. Exploring the potential: Brainstorm where automation can be applied

Step one is to examine the extent to which automation can help your organisation. Blue sky thinking is the key here. What is the ideal relationship with the customer? What does the ideal order-to-cash process look like? In this phase, involving multiple departments from within the organisation is key, from management to operations. The finance professionals who have the most contact with customers are likely to have the strongest knowledge of which processes they would like to see automated. With no limits to ideas, it’s best to explore all the opportunities in the entire order-to-cash process and describe broadly the potential value to the organisation.

 

  1. Decipher which data and technology is needed

The second step is to map out which data and technology is required. Working with a specialist, either external or from the internal IT department, is beneficial at this stage to see where the opportunities lie. In many cases, off-the-shelf solutions are already readily available to help make the difference, so it pays to do the research and gain advice where possible.

 

  1. Firm up the strategy

With the plan mapped out, it’s time to fit the pieces of the puzzle together. Which technology and accompanying software is proving most valuable? It’s vital at this stage to analyse the results the organisation is achieving from deploying the right technology and software. It’s also important to outline any limitations and emphasising the potential risk of failure. This is the business case and the basis for the elevator pitch that will be presented to internal stakeholders.

 

  1. Draw up the roadmap and start benefitting from agility

The fourth and final step is prioritisation. The roadmap will describe step-by-step how to move from the undesired current situation to the desired end goal. In the first step, choosing a subproject that is relatively easy to achieve will help gain support from other departments within the business, and provide invaluable experience that can be applied to the more complex components that follow later. This agile approach facilitates a learn-by-doing mindset and allows the following steps to be tackled in a smarter and simpler way.

 

Effective preparation is half the battle

Exploring the potential of automation, mapping the required data and technology, establishing the strategy and laying out the roadmap are the four crucial steps to ensure the foundation for Intelligent Automation. Effective preparation and estimating which technology and accompanying software is needed will help to create a streamlined and error-free order-to-cash process. To ultimately save time and costs, empower finance professionals and maintain customer loyalty, the time for Intelligent Automation is now.

 

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