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WHAT BANKS CAN DO TO GET THE MOST OUT OF THEIR ATMS

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Mark Aldred, Banking Specialist at Auriga

 

Banks continue to face strict competiton from both traditional and new entrant banks. In addition to this, Covid-19 has caused a change in consumer bahaviour that has accelerated digital transformation based on the customers’ apparent appetite for smart and digital-first services. A recent survey by Mastercard unsurprisingly found that 22% of respondents have stopped using cash entirely, with cash usage receding amid the pandemic.

Although consumers are becoming more and more familiar with digital payments, the desire for cash has not diminished significantly. After an initial decrease of cash usage in the pandemic, we see worldwide that the trend is reversing and that the amount of cash being circulated through the ATM is now going up in aggregate. Additionally, research from RBR’s Global ATM Market and Forecasts research revealed that the compound aunnual growth rate (CAGR) of worldwide cash withdrawals will increase by 2.1% between 2019 – 2025.

Despite this, banks continue to close down ATMs. While ATMs are facing increased regulatory and operation costs, as well as increased risks from fraud and cyberattacks, this simplistic approach should be called into question, as this may involve leaving some people and communities behind. In the UK, Community Access to Cash pilot schemes have been developed in order to provide cash to underbanked communities, boost local economies, and put payment choice back into local hands.

As a result, financial organisations in the next few years must action policies that enhance ATM security, reduce the total cost of ownership, and improve, modernise, and personalise the customer experience.

FIs must ensure their operating strategies prioritize efficient, nimble, highly scalable and continuously available service channels, both physical and digital. Where this is not the case, it will leave consumers feeling excluded from banking services, which will ultimately reduce the quality of service customers receive.

 

Mark Aldred

What ATMs can do for banking customers

Contrary to popular belief, ATMs are so much more than just cash-and-dash machines. As long as consumers need cash, however, ATMs remain the most convenient tool for them to access it and for FIs to make it available. Therefore, self-service will continue to play a major role in the customer journey and a fundamental part in consumers’ brand perception.

With the correct technology, self service devices can offer basic banking and community services, such as managing your account, bill payments and loan applications. However, in order to make this a reality for communities, the right software and infrastructure is needed, especially since the customers’ needs and demands already exist.

In the context of branch transformation, multifunctional ATMs are already seen as part of many branch transformation initiatives and can also be an excellent complement or alternative to face-to-face interactions in a branch, as they can offer an extensive number of features and capabilities, 24 hours per day. We predict that they are sure to gain ground in a post-pandemic, interaction-averse landscape.

In addition to this, assisted self-service terminals (ASSTs) have also proven a sound  investment in a number of markets. According to a study from RBR, 340,000 assisted self-service terminals have been deployed worldwide. They allow customers to perform an even wider range of transactions with the assistance of bank employees. The reduced workload on branch staff will allow them to focus on other advisory duties. Because ASSTs encourage greater use of self-service terminals, many banks see them as the ideal bridge between physical and digital channels. They also preserve the human element in banking, which continues to be valued for certain transactions.

It is vital to enable access to cash for all communities, from inner cities, to the most rural areas. Not only do communities need access to cash, but they also need access to an array of banking services that support their local economies. There has been a demand from some areas of the financial industry to implement advances in self-service banking technology in all communities. This can include giving a community a bank branch or reforming a bank branch in a community so that it serves as a focal point for financial and other services. In addition to this, by customising modern ATMs so that they can provide additional services, it can allow cash access to be subsidised through generating extra revenues. These additional services can range from paying a bill, to doing a live call with a financial product specialist.

The pandemic has accelerated digital transformation plans for organisations across all industries, and has led to increased interest in cardless cash withdrawals. A report from RBR found that the number of ATMs offering this solution is increasing as deployers from different markets continue to utilise contactless technologies and implement new alternatives.

 

How banks can better manage their ATMs

Banks are constantly searching to review the way they are managing their ATMs, from decreasing the ATM management cost, to the costs of cash handling. These efforts are all aimed at reducing the total cost of ownership for ATMs. Banks are now considering pooling and collaborating with each other in order to further reduce the cost of ownership. The benefits of this can include an increased network and more opportunities to commercialise the offering with the increased services provided through ATMs.

Some banks are launching joint ATMs, whereby they share their ATMs with other banks. For example, the Geldmaat initiative is a cooperation between three major banks in the Netherlands. This initiative guarantees the availability and accessibility of cash for the banking customers of all three banks. Some banks are also externalising the complete management of their ATM channel, with BPCE in France serving as an example. Even after the current pandemic, we should expect to see the financial services industry continue to innovate in this area and develop new forms of ATM architecture. And if this is possible, why shouldn’t the concept be extended to branches. In this and other respects it’s only the beginning.

 

Next-Gen ATM Acquiring

In IT terms, banks should look to adopt a channel integration model that allows both the connection and the isolation of the external channel independent entities (e.g. Transactional Switch, Core Banking, and Services), to make them completely independent and seamlessly usable across all channels. The benefits from this model include a much simpler, cost effective, standardised and generally accepted interface (usually based on ISO-8583, ISO-20022 or Web Services) that focuses on the business services, forgetting all the complexity linked to ATM management, and more broadly to the self-service branch automation.

Further operational advantages include a modular approach and accelerated time to market by having a single point of control of the branch automation channel without the need to define, agree, coordinate, and implement across different products.

This capability finally allows users to extend automation to cover all the functionalities currently managed within the branch. This allows banks to deploy new lean branch concepts that automate the transactional banking services, with 24/7 availability, leveraging video banking technology, and focusing branch personnel on consulting and sales activities.

Customers still require access to cash and will need (and are entitled to) convenient access to the money they hold in their accounts. Having ATM software that enables seamless alignment with current and future needs is going to be key for the future. Customers demand consistency between mobile and physical channels – ATMs that meet those needs will lead to greater usage and could even reduce the cost per transaction of maintaining an self service channel.

 

Banking

WHY THE TIME IS NOW TO BANK BEYOND BORDERS

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by Lili Metodieva, MD of Monneo

 

As our world becomes more interconnected, so too does the need for banking systems to follow suit. In the past, businesses and individuals were often restricted to banking in a single country, but the rise of borderless banking is enabling both to benefit from greater financial freedoms. In this article, we will examine why this trend is so important and explain how Fintech companies are helping to make it possible.

 

What is borderless banking?

Simply put, borderless banking refers to any bank account, which allows users to spend, send and receive money across different countries and currencies, without incurring heavy fees. The concept has become increasingly popular in recent years, with more people now working in cross-border job roles and with many businesses requiring capital in a different currency than that of their country of origin.

For customers, borderless banking is making cross-border financial transactions more efficient and cost-effective. Through its rise, businesses and individuals can gain easier access to international streams of capital, which is crucial in this current moment of economic uncertainty. In fact, 74% of companies say cross-border payments have helped their business to survive [1].

 

Where do IBANs come in?

International Banking Account Numbers (IBAN) play a crucial role in facilitating borderless banking. The globally recognised system enables cross-border transactions to happen safely, by providing each international bank account with its own unique 36-digit alphanumerical code. On account of this code, financial institutions can quickly identify where funds are coming from, as well as where they’re going to.

More recently, providers such as us have been able to deliver Virtual IBANs (vIBAN). Working alongside a network of well-established European and International banks, we’re able to offer businesses a single platform interface that consolidates the management of all IBAN accounts. In turn, our multi-currency service makes conducting global financial transactions incredibly straightforward.

 

How has Brexit affected borderless banking?

The COVID-19 pandemic has accelerated the growth of borderless banking and services related to it, but other developments, such as Brexit are beginning to stand in its way. Most notably, the drawn-out withdrawal process has seeded a growing reluctance amongst risk averse, larger organisations to settle transactions using UK bank accounts or IBANs, due to unfounded concerns around regulatory complexity.

Despite leaving the EU, the UK remains a member of the Single Euro Payments Area (SEPA), so it’s unclear why these concerns around British IBAN accounts exist. Regardless, this unfortunate development must be addressed quickly as it has the potential to adversely affect the livelihood of businesses and individuals at a time of critical need.

 

What does the future hold for borderless banking?

There’s clear demand for borderless banking and borderless payments, but the discrimination of certain IBAN accounts represents a major obstacle, which could stand in the way of their widescale adoption. Moving forward, there needs to be a push towards borderless IBANs, which will make international financial transactions more reliable. At the end of the day, this is what IBANs were originally created for, so it’s important the current problems are rectified quickly.

To ensure this can happen, the industry needs protection and clarity from regulators. Likewise, it’s now time for membership organisations to stand up on behalf of the sector and lobby for the financial inclusion of businesses.

If the confusion regarding UK IBAN accounts can be sorted in a timely manner, businesses across the nation, as well as those further afield can look forward to a future of more streamlined and effective financial services. With this support, the diverse sector can deliver further access to innovative financial services and products, which improve outcomes for businesses and consumers alike.

As a sector, Fintech has the potential to provide vital assistance to the wider economy, particularly in an era of increased cross-border business. At Monneo, we’re committed to being part of that change and as a part of organisations like ‘Accept my IBAN’, are working towards reporting and ending IBAN discrimination.

[1] – https://www.mastercard.com/news/research-reports/2021/borderless-payments-report/

 

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Banking

IT’S TIME FOR BANKS TO SIT THEIR CUSTOMERS DOWN AND TALK OPEN BANKING

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Eugene Danilkis, CEO at Mambu

 

We are living in an experience economy, and banking is no different. Customers need innovative payment and finance management solutions. New entrants are edging into the landscape and challenging existing players. This should mean users have a better view of their finances and the tools they need to manage their money – but banks are failing to deliver.

Personal finances are a complex beast, emotional pulls are strong, and the worry of financial security is always on the mind. It’s the job of banks to be the shoulders customers can lean on and trust.

Open banking was supposed to take this to the next level, enabling banks to deliver personalised products and services based on improved data sharing and customer insights. But three years on, adoption remains sluggish. So, why is open banking failing to live up to its promise?

 

A missed opportunity

Open banking was introduced to the UK in 2018, but consumers are still mired in confusion as to what it means and how it helps them. According to Mambu’s global open banking survey, 61% of consumers say they’ve never used open banking, despite more than 8 in 10 using one or more mobile banking apps.

Eugene Danilkis

This is a problem for banks and consumers alike. Lack of understanding around the technology is hindering its adoption, despite this being in the best interests of both. By enabling the secure sharing of financial information, open banking creates an improved customer experience. Not only does this minimise friction and make online payments faster and easier, but allows for personalised services and greater automation, enabling customers to take advantage of tools like budgeting apps.

For banks, open banking is an opportunity to build innovative new products that will improve the customer journey, helping them retain accounts and acquire new ones. By collaborating with third parties, banks can hyper-target customers and build services that address specific user needs, increasing customer satisfaction and in turn brand loyalty.

It’s true there’s been a recent spike in open banking users. According to Juniper Research global, open banking users rose from 18 million in 2018 to 40 million in 2021. But this can be traced to the necessities of a pandemic rather than any sudden clarity in communications.

 

Putting customers at the heart of communication

Mambu’s research shows more than half of consumers (52%) have never heard of open banking. COVID-19 may have increased the uptake of the technology, but it hasn’t increased understanding among users.

So, what can banks do to encourage consumers to embrace open banking? Fundamentally, they must better educate their customers in terms they understand. This means talking to them like human beings, using clear and transparent language to simply explain the personal benefits open banking brings and why it’s really just smart banking.

The understanding gap between technology and terminology shows that consumer demand is there, but better communication is needed. Making sure consumers truly understand the tools they’re using, the control they now have over their finances and how open banking improves the customer experience is vital to dispersing the current fog of confusion. It’s the benefits of this technology that banks need to hone in on: customers ultimately care about what open banking can do for them and how it’s going to make their lives easier.

Centering the customer and their needs in this way will allow banks to fully realise open banking’s potential. The technology has already given them the opportunity to develop valuable services for customers that help build brand loyalty. But the industry has failed to put the customer at the heart of their communications and processes, and show them how much better banking can be.

 

Building trust

Key to reversing this trend is addressing consumer concerns around data privacy and financial safety. Yes, banks need to prioritise simplicity and clarity in messaging, but this isn’t an excuse to shy away from important conversations. Just because there’s an understanding gap around open banking doesn’t mean consumers aren’t switched on about tech and financial issues.

Mambu’s survey found nearly three in five customers have concerns about privacy and security in relation to open banking. So, it’s vital that banks provide reassurance and relevant information about data sharing from the outset if they’re to assuage these fears.

The industry can also encourage greater adoption by developing and improving open banking interfaces. Banks are the gatekeepers to how easily end-users can authorise certain actions, manage third-party access and navigate different open banking functions. If the interface is user-friendly, customers will have a better experience of the technology and be more likely to use and recommend these services.

 

Time to get talking

Customer communication is holding the industry back.. The ability of open banking to transform financial services is a concept that industry players are well-versed in. But the feeling isn’t mutual for customers.

Banks are failing to capitalise on the open banking opportunity by engaging with new and existing customers about what the technology can do for them. Debunking  common myths can open the door to increased growth and trust for banks, as they seek to open up new revenue streams post pandemic..

Make no mistake, open banking isn’t going away. But customers will if banks don’t get talking.

 

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