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THE TIDAL WAVE OF CHANGE

By Theodora Lau and Bradley Leimer, in partnership with Money20/20 Europe

We are experiencing an unprecedented global shift in demographics. Our society is aging; we are living longer, healthier, and more productive lives. Life expectancy has improved significantly, and we have added decades of healthy living since the early 1900s. Along with longer lifespans, we are also staying employed longer than before. Soon, we will have five generations working alongside each other. Not only “when” or “how long” we are working has changed, “how” we are earning a living has changed as well. There are an increasing amount of contingent workers participating in the gig economy. There are also more women joining the workforce or even starting their own company than ever before. According to the Women’s Business Enterprise National Council (WBENC), there are 12.3 million women-owned businesses in the U.S., and women now own 4 out of every 10 businesses. Gone are the days of single-earning households with one steady paycheck. Adding to the increasingly complex picture is our varied financial obligations, from tuition for our children to financial caregiving for our parents. How do our financial institutions innovate to meet the needs of our evolving world? One could perhaps take a page of the playbook from the East.

The story of Grab

Grab started as a ride hailing company in 2012 in Singapore. Since that time, it has evolved to Southeast Asia’s leading super app, fueled by US $1.46 billion in fresh funding from the Softbank Vision Fund. In addition to transportation, it now has a robust food delivery business, and an ever-expanding financial services platform, with the goal of becoming the region’s largest merchant network, insurtech policy provider, and fintech lender. Their newly launched financial services offerings branded “Grow with Grab” will include payment and microlending, aimed especially at the 9 million micro-entrepreneurs that Grab serves today.

Elsewhere in the U.S., various fintech companies are enabling companies to pay workers instantly for completed work. For example, Caviar couriers using the Square Cash can access funds immediately after completing delivery. Marketplaces using Stripe Connect can send Instant Payouts to sellers or service providers. Meanwhile, Uber and GoBank have partnered to provide Uber drivers instant access to accrued funds via GoBank checking accounts and debit cards; and Earnin sends a workers’ earnings instantly to their bank accounts – instead of having to wait. All of these seemingly small innovations are important, especially for many consumers today, where bi-monthly pay cycles do not line up with their bills, leading them to turn to credit card debt and overdraft fees to bridge the gap.

The multistage life

But the story doesn’t stop at payroll. If we are living longer and healthier lives, what do we do with those extra years? Traditional pension schemes and retirement plans assume a direct path of education, career, and a hard stop at age 65. But a longer lifespan will enable us not only to work longer, but also take more risks and try out new things – re-invent, re-skill ourselves, perhaps even start a new company. In fact, over half of all new entrepreneurs in the U.S. are over the age of 45, according to the Kauffman Foundation. And as much as 85% of jobs that will be available in 2030 do not exist yet for today’s graduates – it is never too late to disrupt ourselves. 50 is indeed becoming the new 30.

Given this new paradigm, is retirement still relevant? Or should we retire the traditional notion of retirement, and re-think how we should manage and grow our savings? As Professor Andrew Scott wrote in his best-selling book 100 Year Life: “The simple truth is that if you live for longer then you will need more money. This means either saving more or working for longer.” But with relatively low rate of savings and investments, what can financial services companies do to help nudge consumers into healthier financial habits?

Part of this lies in to understanding the current longevity trend. While aging is universal, how we age is not homogeneous – and we can no longer segment individuals and their needs by age. A 50-year old today is vastly different than a 50-year old twenty years ago. A 50-year old in China is also different than a 50-year old in Europe or the US. Their financial needs, aspirations, and obligations are also likely different. Perhaps the best way to serve them is to better understand where they are in their life stage. Someone putting children through college will likely have very different needs than someone as an empty-nester – though they could be of the same biological age. Likewise, an entrepreneur starting up a new business will have different needs than those still in traditional corporate or manufacturing roles. In an increasingly connected world where we are leaving digital breadcrumbs of nearly every aspect of our lives, emerging technologies such as data analytics and artificial intelligence could prove useful in not only providing contextual insights based on habits, but also guidance or even decisions made automatically on our behalf.

Just as much as we need to become more flexible in the new era, it is paramount that financial services innovate and adapt to the changing needs of our society. With longer lifespan and longer earning power, we could afford to take more financial risks than ever before; saving smaller amounts will have a much larger impact on our lives with this extended time. We need to be more fluid than ever when it comes to managing our assets, expecting more up and down cycles, and matching our financial tools to help us plan for a greater frequency of multi-generation households and the growing complexity of our financial obligations.

It is more important than ever for us to invest in our future selves – and to take advantage of the extra time that we have. The question is, will financial institutions guide us through this new normal, or will we increasingly rely on fintech and big tech platforms to meet our financial needs? After all, the future of aging should not be a story of survival – but one of living.

Join us at Money20/20 Europe this June in Amsterdam, as we dive further into the game-changing stories and trends, driving forward the global Financial Services, Payments and FinTech community. Find out more about the Money20/20 Agenda and Stories by clicking on the links below.

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Finance

OPTIMISING YOUR FINANCE THROUGH TECHNOLOGY

Covid-19 restrictions and ongoing uncertainty have prompted a fundamental switch in mindset across a multitude of different sectors. Many organisations have begun to recognise that outsourcing their finance can make them more agile and give them the competitive edge they need to compete and scale effectively in today’s market.

Mark Pullen, CEO at Xledger  explains to what extent outsourcing can boost resilience for a lockdown recovery.

 

Solving the pain points

Inefficient processes are prone to causing delays and errors which can have a huge impact on the bottom line when viewed at scale. They can also negatively impact the client experience, causing frustration with missed deadlines and mounting uncompleted tasks.

New finance technology is automating many of the daily, monotonous back office functions such as bank reconciliation and invoice entry, meaning that the nature of the work that a finance professional provides will change. This presents a huge opportunity as it gives these employees the opportunity to be involved in higher-level work. Technology can also provide a resource that gives real time insight, allowing for better strategic decision making, which is so key in the current climate.

 

Optimising your finance function

Outsourcing high-value services within the finance function can improve workflow by implementing a defined and transparent process which streamlines operations. For a finance department, this can speed up areas that require internal controls such as expense reporting and cash release, but it can also speed up the full lifecycle of a project; from time tracking and resource to accounting and billing.

There is also a cost efficiency benefit when outsourcing, as management bandwidth is effectively increased by eliminating the need to be involved in many of the day to day processes. Instead this time can be focused on other business priorities and planning for future growth.

Outsourcing accounting functions to bespoke and standardised technologies means using data led processes that can be measured, optimised and benchmarked against in-house requirements. These processes can also be undertaken remotely, boosting the resilience of your business in these uncertain times.

 

Case study box-out: RPC Tyche

RPC Tyche is a global insurance software supplier with offices in London, Paris, and the USA. Initially a division of award-winning law firm RPC, but now a stand-alone entity, RPC Tyche’s main software offerings support capital modelling, and pricing commercial insurance and reinsurance.

 

The challenge

As part of a restructuring process following the de-coupling with the law firm RPC, RPC Tyche had to separate its back-office processes. They remained under the umbrella of the law firm while the changes were taking place, so initially had some flexibility with the shared finance system, but time was running out to separate the two entities cleanly. As a stand-alone company, RPC Tyche now needed its own financial system; one that could align with its new business processes and that could be implemented quickly to deliver the organisation’s business objectives. Furthermore, they needed a new finance solution that could help them grow exponentially, facilitate a globally diverse group structure, and still maintain efficiency when operating as a small team.

Gavin Dilley, Chief Finance Officer for RPC Tyche commented, “Following an initial discussion with a third-party advisor regarding Xero and Quickbooks, we were recommended Xledger because we required a swift and scalable solution. After contacting Xledger, their tried and tested implementation methodology ultimately assured us that we would achieve the fast-paced implementation needed for our go-live objective. We also really liked that Xledger was a multi-tenanted, true cloud solution with its scalability setting it apart from the competitors.”

 

Implementation and training

Following conversations with Xledger, RPC Tyche created a project management team to keep everything on track on their side, an arrangement that Gavin emphasised “worked really well.” He said that “as a small project team, the flexibility to undergo substantial configuration during the training sessions with the Xledger consultants brought focus and enabled us to dedicate sufficient time to the system without distractions.”

Although the implementation was expected to take three months, RPC Tyche experienced hold-ups owing to the separating of back-office processes, so they were pleased when it was mutually agreed to facilitate a one-month delay.

 

Post-implementation results

“The implementation process was highly effective, and we’re very happy with the results,” said Gavin. “Since implementing the Xledger solution, we’ve been so pleased we haven’t had to dip back into the old system as the transfer of historic data has been particularly successful.” RPC Tyche had a large volume of historic data and transactions, including timesheets and work in progress reports that were all successfully migrated to Xledger during implementation. “We’re particularly happy with how easy it has been to onboard our new Finance Controller, due to flexible training and the system being so intuitive.”

Gavin added, “Since implementing Xledger, we have far greater reporting flexibility, better distribution of skills within the finance team and are naturally more self-sufficient because we can make amendments to the system without relying on the software provider.

The system is easy to use, and the purchase order functionalities, integrated workflows and automation of processes have enabled us to be highly efficient, even as a small finance team. Not to mention that the Xledger support team are incredibly responsive, so we can continually maintain productivity.”

 

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Business

HOW FINANCE FIRMS CAN IMPROVE THEIR CUSTOMER COMMUNICATION IN 2021

Amy Robinson, Senior Brand Development Manager, Esendex

2020 has certainly thrown a curve ball to all businesses across the world, and the finance industry is no different. This year finance has been the driver for both commercial and personal challenges across the country.

The start of the pandemic saw revenue disappear overnight for many businesses, while exponentially increasing demand for other predominantly online services. This commercial challenge had a knock on effect to personal finance with 9.6 million people being put on furlough between April and October 2020. Sadly, the rate of unemployment also increased by 0.7% and sits at 1.62 million people unemployed in the UK today.

These drastic changes to both personal and commercial finances mean that financial services firms have a unique and challenging task ahead of them. With 2021 planning well underway for most businesses, a key focus for finance firms needs to be around customer communication.

In fact, 1 in 3 firms in the finance sector are sending more messages now compared to before the pandemic, most made up of account updates (17.95%), customer service updates (17.95%), delivery information (17.95%), appointment management (15.38%), marketing activity (12.28%), customer satisfaction surveys (10.26%) and emergency information (7.69%). This trend looks likely to continue well into 2021 with Covid-19 still impacting everyday life.

Amy Robinson

However, the latest vaccines offer hope to both businesses and the general public that an end might be in sight. Consequently, it’s important for companies to start to plan how they will navigate this next phase alongside their customers, as the country and indeed the world, will hopefully steadily move into a recovery stage. Life, for anyone, is unlikely to return to a pre Covid-19 state, with the country entering into one of the deepest recessions we’ve witnessed in our lifetimes. Mass uncertainty is likely to continue well into 2021 and it’s the role of financial services to understand this, consider customer sentiment, and ensure that brands are adding empathy to their messages when communicating with customers. This is especially important for areas such as debt collection where businesses should look to focus on ethical debt recovery strategies.

Alongside the financial recession, the UK is also witnessing a mental health pandemic more severe and widely spread than ever before. In fact, a report by The Health Foundation found that 69% of adults in the UK report feeling worried about the effect that Covid-19 is having on their life. With this in mind, finance firms need to tread carefully when communicating with their customers. The FCA have recently confirmed support for consumer credit customers impacted by Covid-19, outlining how finance firms will need to behave when collecting monies owed. The theme heavily weighs in the consumers’ favour, allowing payment holidays to those unable to make their usual deposits.

Consequently, the big theme coming out of 2020 for financial institutions is around ethical and empathetic behaviour. Below are some tips and strategies for approaching customer engagement in 2021, while navigating the new government criteria and market trends.

 

Clear, effective messaging

At a time of high stress and anxiety, various government support schemes, furlough, unemployment and often relationships with multiple financial institutions, it’s easy for customers to become overwhelmed or confused. When communicating with your customers make sure the message is clear and concise; if there are actions required on the customer’s side then ensure this is clearly detailed using a step by step guide.

 

Support your customers

Aim to support your customers as far as possible and send them a reminder message should a payment be due or you require additional information. It’s easy to forget that you’re not the only business sending a customer an important message, so aim to communicate with them in a simple and timely manner. The channel used for this message can also make a great difference, so using something like SMS can really help to break through the noise and get the required response.

 

The power of conversation

Something often missing in a digital world is the power of the human touch. With so many emails and Zoom calls flying around the world, something as simple as a telephone call can be the most effective strategy. People can become frustrated and anxious if they feel that they are not being listened to or treated as an individual; by talking to a selection of key customers on the phone, you can help to bring back the human element and improve the perception of your brand. This is especially true when talking to customers from the older generation who may feel uncomfortable talking about finances online.

There’s no doubt that 2021 will look different for us all. By remaining agile, empathetic, and consumer-centric, we can ensure that we navigate the next 12 months in the smoothest way possible. This is a true change for customer engagement in the financial services sector, and while challenging, it will hopefully offer many benefits to this form of communication for years to come.

 

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