By Sunil Dixit, VP of Product, Adyen
There are some big changes in store in 2020, some obvious, some less so. In the payments landscape, it’s all about user convenience and customer experience, whether that’s through increased security for card users, or new ways to pay. Fragmented payments systems and services, from online to in-store, will move towards a unified centralised payment stack. We think there are a few trends to watch in 2020.
Ecommerce is continuing to expand and it’s supporting the rise of the subscription economy and innovative platform business models. With more sensitive card data than ever being shared to complete payment at the checkout, protective steps must be taken to secure this information by all parties. To combat the rise in fraud, tokenisation will become an increasingly common way to protect payment details. In the first half of the year 140,344 fraud attacks were recorded by RSA’s Fraud and Risk Intelligence (FRI) team. That represents 32 attacks every hour and is an increase from 86,344 in the last six months of 2018. So, what is tokenisation, and how can it help?
Tokenisation is used to safeguard a card’s payment card number (PAN) by replacing it with a worthless, unique string of numbers – a token. Payment tokens are generated per card, per merchant. This means that the customer’s sensitive PAN is substituted by a token and not transmitted during the transaction, making the payment more secure. The beauty of network tokenisation is that it helps protect businesses and customers from the financial hits of data theft. Even if hackers manage to steal tokenised data, they cannot use the stolen tokens to pay online since they are unable to link the token to payment information stored securely by the payment partner. Furthermore, network tokens are always up-to-date. If your payment card changes after a loss or theft, the token can still be used to pay, ensuring you can continue to enjoy streaming services without disruption.
Strong Customer Authentication (SCA)
The implementation of the second Payment Services Directive (PSD2) will continue to roll out across Europe in the new year, with certain transactions requiring authentication for purchase. 3DS 2.0 uses the full capabilities of mobile devices to create a more secure way to identify the customer, without adding friction to their checkout experience.
Some banks are expected to launch SCA in a gradual fashion over the course of 2020, with others not going live until the end of this year. This is due to the European Banking Authority announcing a delay in the deadline of PSD2 enforcement to 31st Dec 2020. There is still a lot of ambiguity for merchants looking to ensure they are able to support the new directive. With the possibility of EU regulators enforcing PSD2 at different times, businesses will need technology that can dynamically apply SCA to ensure payments aren’t declined due to SCA not being active.
Biometrics take centre stage
2019 saw the first biometric fingerprint credit card issued by a UK bank – expect 2020 to see more of this kind of payment innovation. With smartphones unlocking themselves through facial recognition and fingerprint scanning, biometric security is already ingrained into most of our lives. As payment providers look to increase security, both in response to PSD2 regulations and the increasing sophistication of fraud tactics, biometrics data is going to become an incredibly important tool for purchases. Beyond the UK and Europe, Australian and Brazilian banks are getting on board with 3DS 2.0, ahead of the decommissioning of 3DS 1.0 over the coming years.
Transactions through 3D Secure 2 already incorporate biometric authentication such as fingerprint and voice recognition or facial scans into the process. Even better, 3DS 2.0 can use data collected in checkout to authenticate a transaction without intervention from the customer. This creates an improved customer experience for mobile transactions that require strong authentication.
Expect to see your personal features becoming a more secure way to pay as banks and merchants look to step up their fight against fraudsters.
The payments landscape moves fast to support on-the-go customers carrying smart mobile devices. Self-service kiosks in quick service restaurants, endless aisle inventory in retail, apps that can be a hotel key card as well as a mode of booking and paying for an overnight stay. All these experiences offer exciting possibilities for improving customers’ lives and provide unprecedented levels of data and insights for businesses. Make sure your payments stack is ready for 2020 to deliver the experiences your customers deserve.
TIME TO THINK OUTSIDE OF THE BLACK BOX
Mike Brockman, CEO, ThingCo
If you have the unbridled joy of parenting a teenager you’ll probably know what telematics insurance is. In very simple terms, telematics or ‘black box’ insurance enables insurance companies to track driving behaviour using technology fitted to the car or via a smartphone app. It is the first practical example of IoT – machine to machine communication of real-time data.
Telematics has been crucial to helping thousands of young people get experience on the road who would otherwise have found the cost of insurance too high. When you look at the number of road casualties in the UK over the last nine years there is a clear correlation between the rising adoption of telematics and a fall in young driver casualties[i]. The problem is that as soon as they can, young drivers chuck in telematics and take traditional insurance. As such telematics insurance has got stuck firmly in a rut.
So why is that a problem?
First, telematics saves lives – think what it could do if more drivers had it.
Secondly motor insurance costs are linked to claims costs – if we can bring down the cost of claims through the engagement, speed of response in accidents and anti-fraud benefits of using telematics data to its full potential, everyone could access cheaper insurance.
Thirdly we are living in a world deeply impacted by COVID-19. Travel trends were already altering prior to the pandemic but have changed and could remain significantly changed for the foreseeable future. Consumers are beginning to think more deeply now about their motor insurance and value for money. This may create demand for motor insurance cover that is more responsive to people’s individual driving behaviours – why pay an annual premium when you only use the car once or twice a week? On the flipside, those nervous of using public transport could see an increase in their car use. Telematics allows insurance providers to offer insurance based on actual rather than predicted use.
The fundamental reason for telematics getting stuck in a rut is insurance companies are not offering something consumers actually want and they are not deriving value from their investment in the technology. Different telematics devices give different qualities of data and that data determines the economic equation they have to resolve in terms of how much they pay for the technology and what value they get from it.
Another key factor is that if you give something away – as the insurance industry has done with telematics ‘black boxes’ – you are sending a strong signal to the customer that the technology is of no value to them and only there to serve the insurer’s need.
You need to make the device a desirable piece of technology that consumers would value in their own right – rather than something that is imposed on them to get cheaper insurance. By introducing new technologies into these devices such as Voice, camera, ADAS, black spot warnings, it becomes a truly connected device that not only helps the driver but also creates incredible amounts of data that’s useful to the insurer to manage risk and provide better customer services.
With next generation telematics, the data is no longer a one way street direct into the insurer. You can feed that data back to the customer and develop additional services such as a voice alert when they have been driving for too long without a break, an incentive of a coffee at the next rest-stop.
Telematics also transforms the claims process for the customer and the insurance provider. A crash alert can kick in and activate a voice command in the device and that will ask the driver if they had an accident, whether they need help and will alert emergency services if necessary.
This is where the data brings huge value to the insurance provider providing a whole range of detail – like a liability assessment, video footage, fault, g-force etc. This data is dynamite to First Notification of Loss team with an insurance provider.
But the biggest difference next generation telematics offers is it really strengthens the relationship with customers and insurers can make it fun as well. Insurance and fun aren’t usually two words you see in the same sentence but unlike traditional insurance, or old school telematics, it allows engagement and the opportunity to provide incentives without any big brother feeling about it.
Technology has changed massively over the last ten years, the quality of devices has developed and the Cloud has opened the potential for telematics products to be designed for customers in the most attractive way. Barriers around trust and big brother can be broken down by being absolutely clear that the data belongs to the driver – they can choose how it is used to their benefit, spelling out the advantages, being transparent and flexible.
COVID-19 is providing an opportunity to stand back and think about telematics differently – how to make it customer friendly and how to make the economics work. By leveraging next generation telematics technology the insurance market has a window of opportunity to turn the motor insurance grudge purchase into something consumers really start to value.
BRANCHES ARE THE HUMAN FACE OF YOUR BANK?
Sudeepto Mukherjee, Senior Vice President, Financial Services Lead EMEA & APAC Publicis Sapient
Branches have always played a pivotal role in a bank’s ability to acquire and service customers. Historical surveys have consistently pointed to the fact that proximity to branches is one of the key reasons that determine who consumers choose to bank with. Even with the increased adoption of mobile banking in the past decade, research from data specialists CACI had found that surprisingly, the decline of branch visitors has been modest, equating to less than 2% per year, with digital channels supplementing the customer experience rather than replacing it.
The COVID pandemic has changed all of that. It has suddenly forced consumers away from branches into call centres and web/mobile channels to meet their banking needs. So the big question is what role should branches play as we recover from this pandemic? Will branch centric business models like that of Metro Bank still thrive or will the digital only banking offerings like those from Starling and similar win out?
Banks will always have 2 different faces to consumers. The first face is one that is human and relationship based. This is the part of the bank that consumers rely on to get advice on how to manage their life savings. The face that they call upon when they are in financial distress and need help overcoming that. The face that helps them make product choices on what credit type would best suit their circumstance. The second face is that of the bank as an efficient machine that uses the best available technology, data and AI to meet transactional needs quickly. This is the face that consumers rely on to make payments in real time and conveniently. The machine that provides the ability to quickly respond to queries around account balances and transaction history. The machine that alerts consumers when certain actions are performed on their accounts. Customers expect both these faces from their bank. However, the financial crisis and the PPI scandals saw banks loose the trust and credibility of customers as they were seen to be driven more by internal profits rather than consumer needs. The human face of the bank was no longer visible to most consumers and the machine failed to live up to the expectations set by the Big Tech giants like Apple and Amazon that seamlessly provided services via their digital platforms.
The Bank Branch can play a pivotal role going forward in re-establishing this human side by helping a bank build trust and become the primary advisor for our financial needs. Instead of just meeting transactional needs like check deposits and account openings, banks can now transition branches into relationship centres where their employees are 100% focussed on financial advice and well-being of their customers. They are teachers and coaches, life-cheerleaders and financial partners – they are many in number.
Historically this model has been difficult to achieve because of the high cost of such personalised service at scale in branches. However, advancements in technology/AI coupled with the propensity of customers to use digital channels for transactional needs now make this imminently within reach .
This transition will require a fundamental shift in 3 big areas:
- Creating a strong digital infrastructure to enable an omni-channel service: Banks will have to double down on their digital transformation efforts and build an infrastructure that can serve most transactional needs seamlessly via digital channels and call centres. The operational burden on both call centre and back office staff will have to be significantly reduced by automating as many processes as possible and providing the right tools and insight to help consumers efficiently.
- Culture and Capability: This will also require a big shift in both capability and culture. Every function of a bank (like risk, finance, product control) will have to get more comfortable in leveraging technology to do a majority of the tasks currently done by humans while investments will be needed in new capabilities so front line staff can focus on building relationships at scale and provide good advice to consumers.
- Bringing customers along on this journey: All this will work only if there is also a strong focus on educating customers on how best to interact with a bank and use branches only for the most complex needs while relying on other less expensive channels for day-to day banking services.
Making this transition will not be easy. Constrained finances and a higher compliance burden, have resulted in a large technology debt and complex operating models in most banks. Banks have to take a more ambitious approach to “jump” to this new model. Digital leaders like Amazon and Netflix have shown how a shift from physical stores to a more digital centric ecosystem can not only be more efficient but also create value for consumers.
Now is the time for banks to seize this opportunity to redefine the role of branches and re-establish them as essential advice centres for meeting their communities financial needs.
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