Business

What are the biggest challenges that financial institutions face when it comes to using analytics, and how can they be overcome?

Published

4 months ago

May 22, 2023

admin

By Sophie Dionnet, General Manager Business Solutions, Dataiku

Financial institutions are data-driven by nature. All their core processes — including customer suitability assessments, credit allocation decisions, and liquidity buffers management — are dependent on data accessibility and AI models to make the best risk-adjusted business decisions.

This data intimacy should give financial services institutions a head start towards delivering steep acceleration to full analytics and AI embedding, but there are significant hurdles that remain.

Let’s Start With Access to Data

Data is the bread and butter of financial institutions, with data structures that come from the historical composition of business models and underlying information systems. As a result of this, data is often organised by products and activities.

Histories of mergers and acquisitions have also influenced the foundations of information systems, creating legacy burdens and barriers to eased data access. This, combined with a high level of regulatory administration surrounding data access, is the first significant barrier to analytics development.

A first step is for organisations to recognise that scaling with analytics starts with broadening access to data. Banks and insurance companies are rightfully extremely reluctant to do so for a variety of reasons including regulation (e.g., GDPR), absence of central warehouses, perceived risks on infrastructure resilience, and more.

However, it remains a critical step to deliver the right acceleration. This can be done by combining the agility of open experimentation spaces with strong governance to gate criticality assessment and move to production.

One of the main benefits of this strategy also sits in the capacity for data management teams to move to an evidence-based approach. Why? Because all businesses will claim that their data is of the utmost importance, in the same way all teams will always ask their tools to have a P1 status on recovery plans.

Leveraging evidence on tangible usage is a powerful way to lower administrative discussions and painful qualification efforts. This, of course, needs to be done with the right type of technology structure to lower all related risks — be it from a data access standpoint using sample data, down to security and access control.

The Importance of Upskilling

Another main barrier to analytics development is linked to upskilling and trust. The average data literacy level is high in financial services institutions amongst modelling experts. However, for others, the move to business embedded analytics requires a shift in mindset, as well as possible technology upskilling and change management.

A good example is best practice on how to deal with absent data. There are some domains where taking proxies will be perfectly acceptable, and others where taking proxies would be poor practice. If there are no prices and characteristics for all the instruments traded on a particular day, there are times when making an estimate can make a lot of sense (for example, to estimate margin calls and risks).

However, in some cases, “guessing” vacant data can have a significant impact on decision making. Companies willing to embrace analytics must invest in the upskilling of their employees and build a suitable collaboration environment to organise exchange and controls between risk experts, business professionals, and data scientists to develop well-controlled initiatives.

How Is the Financial Services Sector Achieving Success With AI?

The first to embrace the AI journey were the investment teams, who — in their constant search for unique market insights and investment models — have seen in AI a unique opportunity to innovate. While it has been very successful for a few, it has also led to many unfruitful initiatives and has, to a certain extent, led to the misconception that AI is only about innovation and cracking highly advanced market topics.

The financial companies that have been most successful with AI are those who focus their AI initiatives on the “day one solving topics” such as operational processes optimisation, customer analytics and customer journey enhancement, risk management across all dimensions, and more.

After more than 10 years of deep regulatory transformation, all financial players have significantly enhanced their risk frameworks. But much remains to be done across all dimensions. The successful integration of AI in risk management has played an essential role in supporting reinforced robustness of the banking system, including agility and impact in investigations, development of new internal controls, and enhancement of financial crime monitoring through analytics, to name a few examples.

AI is also a real revolution within risk assessment, notably through the enhanced use of alternative data. This is true both for traditional risks and emerging risks such as climate change, helping all financial players — banks and insurers alike — to reconsider how they price risks. Those who have developed a strong expertise in leveraging alternative data and agile modelling have been able to truly benefit from their investment during the ongoing health crisis, which deeply challenged traditional models (notably on scoring for corporates).

Lastly, the positive impact of AI on customers should not be underestimated. Financial services are confronted with an aggressive competitive landscape as well as demand from customers for improved personalisation, driving improved customer orientation in these organisations. The capacity to build complete customer views and optimise customer journeys, notably on claims management, are two examples of areas where AI has significantly supported deep transformation within banks and insurance companies, and there are plenty more opportunities waiting to be explored.

Overall, analytics and AI remain a significant opportunity to yield for most. The fact that we are seeing AI and analytics make a more frequent exit from data labs to be fully embedded in business lines shows the motion is there. However, there remains much to do, and there is a race out there between players to see who will seize the full potential first. My bet will be on those who decide to overcome tangible and perceived barriers to data access, with combined emphasis on governance, a decisive focus on systematic process enhancement.

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Business

Exploring the symbiotic advantages of SoftPoS for merchants and consumers

Published

40 mins ago

September 26, 2023

admin

By: Brad Hyett, CEO at phos by Ingenico

Amid the dynamic shifts that have come to define today’s fintech landscape, convenience holds more sway than ever before. Driven by the global surge in adoption of contactless payments in recent years, Software Point of Sale (SoftPoS) has emerged as a transformative phenomenon, taking on a pivotal role for consumers looking to make quick and easy payments, while providing a vast array of benefits to merchants.

At the very heart of SoftPoS technology lies the ability to turn any NFC-enabled smartphone or tablet into a payment terminal. This innovation has sent ripples of excitement and intrigue through the fintech community: by allowing merchants to stray from the traditional method of accepting payments through costly hardware like chip-and-pin machines. The technology has removed barriers that for many years have stood in the way of small businesses looking to adopt digital payments.

With the recent system outages on payment platforms Square and Cash App, which have cost small-business owners thousands in lost revenue, businesses might be looking at additional ways to process payments. In its very essence, SoftPoS solutions allow both merchants and consumers to harness the full potential of the devices they already use in all aspects of their daily lives.

Empowering merchants through customer satisfaction

The appeal of SoftPoS solutions goes well beyond their cost-effective nature. It revolves around enhancing the customer experience by making payments seamless, rapid, and trouble-free. Armed with an NFC-enabled smartphone or tablet, merchants can effortlessly finalise transactions with a simple tap.

Through SoftPoS, the ability to accept contactless payments becomes accessible to a broader range of merchants, enabling customers to conveniently use their preferred payment method in more locations than ever before. This streamlines payment experiences, making them convenient, concise, and straightforward. The era of struggling to find the right amount of cash or swiping cards is fading away, being replaced by a smooth payment process that aligns with the fast-paced essence of modern life.

Yet, this transformation isn’t unidirectional. The benefits of SoftPoS have a positive impact on merchant operations as well. The simplified checkout procedure increases the chances of completing sales, and when combined with swift transactions, it leads to shorter lines, happier customers, and a higher number of sales within the same timeframe. SoftPoS solutions grant businesses greater mobility, enabling them to provide a more personalised customer service and expedited checkout experience. The outcome is amplified revenue and a strengthened financial standing.

The convenience of rapid transactions stimulates repeat business, nurturing loyalty among efficiency-minded consumers. In a competitive business landscape, retaining customers is of utmost importance. With the increasing prevalence of contactless payments, enterprises cannot afford to lag behind. The appeal of SoftPoS extends beyond its present advantages. It serves as an investment that prepares businesses for the future, positioning them at the forefront of the payment technology revolution.

Staying ahead of the innovation curve

As we look ahead, the momentum towards a completely contactless future of payments is set to increase exponentially. With smartphones and tablets seamlessly integrating themselves into every aspect of our daily routines, SoftPoS has emerged as the conduit for a secure and streamlined customer experience while addressing the growing demand for convenient and immediate experiences.

Here are the top three reasons as to why SoftPoS implementation is the boost that merchants need to bolster their bottom line and stay ahead of the innovation curve:

Enhanced security: As the demand for seamless payment methods intensifies amongst merchants, the imperative expands far beyond convenience to encompass the integrity and security of each transaction. Accreditations such as the PCI’s CPoC standard add an extra layer of reassurance for customers and sellers that facilitate contactless payments.
Inclusive financial ecosystem: The meteoric rise of SoftPoS solutions serves as a testament to the disruptive nature of innovative technology in how it is reshaping the business landscape. It signals the dawn of a more streamlined, all-encompassing ecosystem. This accessible and cost-effective technology empowers merchants with modest resources to remain competitive and relevant in the evolving financial landscape – an invaluable boon for small-scale vendors.
Customer satisfaction through a cost-effective method: Harnessing the capabilities of smartphones and tablets as payment terminals wields a twofold advantage; a potent combination of cost-effectiveness and elevated customer satisfaction. In a realm hurtling towards the complete digitalisation of payments, SoftPoS is an absolute necessity. Businesses that have been quick to embrace its potential in its early days have positioned themselves to lead the way in the future of payments.

Banking

Building towards an inclusive financial future

Published

4 days ago

September 22, 2023

editorial

By Catharina Eklof, CCO of IDEX Biometrics

From the visually impaired to displaced migrants, the unbanked, and people living with dementia – a burgeoning financial gap exists across many areas of society. In fact, as of late 2021, almost one-third of adults around the world were reported as unbanked according to the World Bank Group. That’s around 1.7 billion people – with half coming from the poorest 40% of the world’s population. Being financially excluded in this way means not having access to common financial services including savings accounts, loans, a credit rating, or even a bank account. Those who are awaiting clearance to join a country’s financial ecosystem, such as migrants, are also finding themselves left behind by the modern financial infrastructure.

As societies reliance on digital and contactless transactions over cash continues to grow, this financial gap is only set to widen. In less than 10 years, the share of Americans not using cash for payments has increased by double digits, reaching 41%. By 2031, cash payments are expected to make up only 6% of all transactions.

Fortunately, biometric smart cards can bridge this gap for people in the Global South, migrant populations, as well as those with visual or cognitive disabilities worldwide, who deserve to feel secure, included, and independent.

The challenges surrounding passwords

COVID accelerated the transition from cash to contactless payments and the use of digital wallets, creating a challenge for many. By 2024, it is expected that digital wallets and cards will account for 84.5% of all e-commerce spend.

Digital transactions traditionally rely on the use of PINs that can easily be forgotten, as studies have found that we manage 100 passwords on average across various sites and services. In the US alone, consumers report relationships with more than three financial institutions and have more than four accounts per household. The challenge of password recollection is only growing. To counter rising cybersecurity threats, several countries now mandate two-factor authentication for retailers and service providers, creating further complexity.
However, organizations are responding to financial exclusion. Card provider Mastercard introduced its contactless PayPass offering, as well its Touch Card developed alongside Amjan Bank which enables the visually impaired to distinguish between their cards. Both look to provide a better customer experience for people struggling with the digital changeover. For those living with dementia, Mastercard has also partnered with Sibstar and the Alzheimer’s Society to create a specific card where limits, transactions, top-ups and notifications can be viewed and managed via a complementing app. Likewise, Turkish neo bank Papara introduced a Bluetooth debit card that provides visually impaired users with audio prompts when making payments.

Protecting the visually impaired

There are at least 2.2 billion visually impaired people globally. In 2019, it was found that 89% of visually impaired have been victims of fraud or have made errors when paying for goods and services. This figure comes prior to the pandemic, and the proliferation of digital transactions, suggesting an even bigger concern today.

PINs present an obvious security issue for this demographic, with others able to oversee their inputs and then manipulate them. Contactless payments go some way to solving that problem but pose the risk of fraud as there is no PIN verification below the increasing threshold amount, now at £100 in the UK, where the average annual wage is £27,756. In India, where the average annual wage is 9,45,489 rupees (roughly £9000), contactless limits are set to 5000 rupees (£48). Many accounts also require visual-based inputs to prove identity, such as CAPTCHA, proving as a barrier for the visually impaired.

Enhancing awareness on a regulatory level is key for driving change and reassuring vulnerable groups. The EU Accessibility Act is an example of how payment service providers are obliged to comply with accessibility standards. This includes making interfaces perceivable, operable, understandable, and robust, to ensure that individuals with disabilities can effectively navigate payment interfaces.

Paving the way with biometrics

Including braille on cards for easy identification is a crucial step for the visually impaired. This can also be used on biometrics smart cards, with sensor textures to confirm the user has selected the correct method of transacting. Not only do these cards provide convenience and inclusivity, but they also promote ultimate security by linking a person’s identity directly to their fingerprints. This data is encrypted within the card itself, reducing any concerns surrounding fraudulent behaviour or of data being lost via a centralized breach or large-scale hack.

In this context, biometrics can be used to serve the unbanked and those currently unrecognized within national infrastructures. South America is an example of an early adopter of biometrics, turning to th e solution to cope with swelling population sizes, and the challenges associated with accessing proof of identity when setting up traditional bank accounts. Meanwhile in India, pension payment fraud has dropped by 47% thanks to bypassing the need for prior credit ratings or credentials.

Liveness detection, however, which ensures the biometric sensor is reading a true biometric source (rather than a false or recreated image of one), is vital to the success of financial aid programs globally. Securing remittances through biometric authentication ensures transparency and better fund control. Directing funds to cold wallets or biometrically authenticated cards can also improve program efficiency, safeguarding the interests of individuals and communities.

Overall, the biometrics market is expected to grow to US$87.4 billion by 2028, at a CAGR of 17%. Whilst its value as a simple and secure method of transacting is growing substantially, you can’t put a price on its impact on those who have so-far fallen through the gaps of finance’s digital revolution.