Connect with us

Banking

What to expect from banking and payments in 2023

Published

on

Michael Mueller, CEO, Form3

 

The banking industry went through a number of significant challenges in 2022. The steep increase in interest rates had a number of different consequences, one of the most significant of which was the impact it had on the funding environment for the fintech sector.

Fintech valuations were driven down as a result of high interest rates. While I agree that this will lead to some thinning out in this area in 2023, we could also see banks looking to acquire some of the most interesting fintech players, taking advantage of the low valuations to get a good deal.

Higher interest rates also helped the big banks do rather well, increasing their net interest margins. There’s been a shift of power back to the incumbents and away from the new entrants, and this trend will continue into 2023.

Another significant trend we saw in the banking industry in 2022 was strong progress in the area of digital transformation. This was partially driven by a number of different market events, for example the plans for Pay.UK’s New Payments Architecture (NPA); the forthcoming introduction of FedNow in the US, which is sure to have a significant impact over the pond in mid-2023; while at a wider scale the move to the ISO20022 standard is looming on the horizon.

With banks motivated to review their technology and infrastructure in light of the changing market conditions, in 2023 we can expect to see some further shifts throughout the industry.

More movement toward the cloud

Payment volumes grew in 2022 and will continue to grow in 2023, even if the economic situation continues to deteriorate. Banks need to have the capacity to process the increased volumes that the customers will bring to them, while retaining the efficiency to remain competitive.

To this end, more and more banks will look at using cloud native technology to process payments in 2023. An increasing number of banks will enter into partnerships with third parties who offer ready-made platforms, effectively outsourcing the whole process.

The move away from on-premise technology stacks to cloud native technology will help a lot of banks reduce the cost of their digital transformation, while increasing their agility and boosting security, which is good news for the banks themselves – and their customers.

But digital transformation could be scuppered by a lack of talent

Digital transformation efforts, though, are being affected by a lack of available talent. There’s a skill shortage that means highly qualified payments and solution architects, product managers, analysts, engineers and InfoSec practitioners that are required to drive these digital transformation programs are in short supply. Even the larger banks are being held back from accelerating their digital transformation plans because they simply can’t find the people.

Banks need to achieve agility in the back office to support the development of new products and services in the front office. This requires them to initiate digital transformation projects because the existing infrastructure most banks have isn’t fit for purpose. There’s an increasing number of technical solutions they are using that have reached the end of their shelf life, so this is not an area where any bank can be complacent. Combined with the skills shortage in this area, some banks may struggle to keep their digital transformation strategies moving along in 2023.

APP fraud will be a major area of concern

APP fraud is going to be a key issue for banks in 2023. The UK’s Payments System Regulator is moving to combat the high incidence of this type of fraud – which totalled almost £250m in the first half of 2022 – and plans to make both sending and receiving banks liable for paying back victims in future.

Unfortunately, where real-time payments go, APP fraud follows. The rampant levels of APP fraud in the UK reflect this; when volumes of real-time payments grow in the EU and US later this year, with new legislation requiring PSPs in the eurozone to begin accepting instant payments and the launch of FedNow happening between May and July, levels of APP fraud will also go up.

There will have to be a lot more collaboration between banks in 2023 in order to combat APP fraud. Confirmation of payee schemes, as well as the sharing of datasets to scan transactions for fraudulent behaviour can play a part, while Artificial Intelligence technologies can be utilised to screen these datasets, looking at behavioural profiles of customer accounts.

Cross-border payments will improve

Cross-border payments will continue to become more efficient, cheaper and quicker in 2023, and that’s a continuation of a trend that we’ve seen for a number of years now. Cross-border payments used to take five days, now it’s two days, soon it will be one day until a point where they are settled within minutes. The EU’s instant payments mandate should make many such payments cheaper as well.

One area where there will need to be more focus concerning cross-border payments is compliance and sanctions, caused largely by the war in Ukraine. Banks will have to continue to invest in compliance technology from an anti-money laundering and sanctions point of view, so they can react more quickly to any illegal activity and avoid hefty fines and reputational damage.

Over the next 12 months customer protection must be a priority for banks, so being involved in industry-wide efforts to combat fraud is a must. Technology partnerships will also be key for banks that want to keep delivering first-class services to their customers. While they will have to work hard to keep their digital transformation efforts on track, 2023 holds a great deal of promise for the banking and payments sector.

Banking

How banks can help customers during the cost of living crisis

Published

on

 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree

 

Surging energy and food prices are significantly driving up household expenditure, which means living standards in the UK will fall to 2.2% this year, according to the Office for Budget Responsibility. This is the biggest drop in any single financial year since the records began in 1956-57.

It’s a tough situation for many consumers who are still struggling with financial hardship following redundancies and pay freezes from the pandemic. According to TSB’s Money Confidence Barometer, 82% of people have experienced an increase in the day-to-day cost of living. This resulted in almost a quarter of them using their savings, while one in five changed their usual spending habits and behaviours.

As the financial situation worsens, consumers are increasingly relying on their banks for help and support. But, while banks can’t control inflation, energy or food prices, they can play a more supportive role by adapting their services to offer stronger customer service, better tools for financial management and be more flexible with loan repayments.

 

Strengthen customer service with intuitive AI solutions

Since the pandemic, consumers have changed the way they bank, using more mobile apps for primary banking rather than going into physical branches. This provided an opportunity for banks to accelerate their investment in digital services including automation and offer customers more support during the cost of living crisis.

Lavanya Kaul

Effective tools include AI-powered chatbots which respond intelligently to customer enquiries to quickly help troubleshoot problems and provide useful advice. But to be successful, you need to ensure you strike the right balance between an efficient and convenient process and creating a personalised experience. Customers need to feel like you understand and care about their problems and are here to help, rather than just fobbing them off with a monosyllabic bot. To avoid this, banks need to embrace intuitive AI solutions to ensure that empathy comes across in all automated interactions with customers. While doing that, messaging is key. In times of stress, we don’t function as well and financial struggles are a huge stressor. The clearer the message and the simpler the instructions, the better.

Financial education, when combined with technology solutions such as open banking, can offer more long-term solutions for people to navigate their finances. This can help put more information into the hands of the consumer to help them grasp their financial situation better. Some banks have cracked this with innovative solutions like HSBC’s Financial fitness score tool that can analyse your money habits and signpost you towards ways to improve your financial health. This may include joining one of the financial education webinars run by the bank or having a ‘financial health check’ with a member of staff.

 

Launch money management features & apps

Introducing money management features and apps to increase the visibility of a customer’s financial situation, empowers them with the information they need to make smarter choices.

TSB offers Spend & Save and Spend & Save Plus current accounts which include a savings pot that enables customers to put extra money aside when they can and an auto-balancer feature that automatically transfers money from the savings pot into their current account if their balance falls below a certain level. This allows them to start building up savings and protects them from unnecessary overdraft charges.

Personal financial management (PFM) apps also help customers get a better understanding of their finances. These connect with a customer’s bank account and enable them to keep a close eye on their spending habits and track upcoming bill payments. An example is Prism, a PFM app which allows customers to manage bill payments by sending them reminders about due dates. It also provides a summary of their income, account balance and monthly expenses at a glance, therefore consolidating all their financial information in one place and saving time on bill payments.

Lloyd’s Banking Group and HSBC launched a subscription management tool for all customers on mobile, allowing them to see and cancel recurring card payments for things like TV subscription services. HSBC says that during the first quarter of the year, it led to customers dumping around 200,000 subscriptions.

 

Introduce payment holidays

While improved customer service and financial management tools are important support tactics, they might not be enough for more vulnerable customers. For example, those who are about to default on mortgage payments or loans due to redundancy or periods of ill health need banks to do more, like offering payment holidays. Banks relaxed the rules for payment holidays during the pandemic, so they should consider doing it again to help more vulnerable customers through the crisis. Customers need to understand that they are not alone when experiencing financial difficulties and that help is available

 

Ride out the crisis together

As inflation reaches a 30-year high, customers are now more reliant than ever on banks for guidance and support. But to provide the right level of service, they need to move away from their traditional ways and behave more like technology companies by embracing automated solutions to create the right products and services for customers. Then layer on top of that the need for more personalised and empathetic customer interactions, as well as consider additional support for more vulnerable customers.

While we don’t know how long the cost of living crisis will last, what we do know is that the pressure on household finances is likely to get worse before it gets better. Therefore, banks need to step up, be the supportive partner and do whatever they can to help customers. After all, the only way we can ride out the crisis is by supporting each other and working together.

 

Continue Reading

Banking

Coreless Banking: How banks can thrive in 2023

Published

on

By

Hans Tesselaar, Executive Director of BIAN

 

In recent years, banks have faced immense disruption and struggled to transform with technology. In fact, our research with IBM found that 88% of banking executives are troubled by their bank’s commitments to multi-year projects, interoperability across technology environments and theft of sensitive data. A lack of industry standards is also causing significant problems and hindering the organisation’s ability to bring new services, at the desired speed, to market.

While banks have made significant advancements in recent years, in order to truly embrace digital transformation throughout the industry,and meet the needs of today’s digital first-customer, banks must focus on adopting a coreless banking model.

In 2023, coreless banking approach will enable the delivery of banking services that aren’t longer dependent on legacy systems, and will support the digital-first customer, bringing real transformation to the industry.

Hans Tesselaar

Putting the Customer First

Without the comprehensive digital infrastructure necessary for today’s environment, financial services organisations are unable to bring services to market as quickly and efficiently as they would like – and need. The extensive use of legacy technology within banks meant that the speed at which these established institutions could bring new services to life was often too slow and outdated. This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on their language and the way they would work alongside their existing ecosystem. This is instead of their functionality and the way they’re able to transform the bank.

To move forward into the ‘digital era’ and continue on the path to true digitisation, banks need to overcome these obstacles surrounding interoperability. Additionally, with today’s digital-first customer in mind, financial institutions need to take advantage of faster and more cost-effective development of services. Failing to provide these services may force customers to take their business elsewhere. One thing is certain, consumers will continue to prioritise organisations that can offer services aligned to both their lifestyle and needs.

Coreless Banking 

The concept of a ‘Coreless Banking’ platform is one that supports banks in modernising the core banking infrastructure.

This empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their language. By translating each proprietary message into one standard message model, communication between financial services is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

With the capacity to be reused and utilised from day one, and the ability to be used by other institutions, Coreless Banking provides these endless opportunities for financial services industries to connect, collaborate and upgrade.

Banking in 2023 and Beyond

Throughout 2023, banks must prioritise their digital transformation journey and adopt a Coreless Banking model. This approach will empower technology leaders to tackle problems head-on knowing they aren’t tied down by the usual restraints caused by outdated legacy systems.

After the last few years, it is impossible to predict what is around the corner, but banks will rest easier knowing their architecture can modernise and change as needed with a Coreless Banking model.

Continue Reading

Magazine

Trending

Business17 hours ago

Accounting Automation in the Future

Accounting automation is the process of streamlining repetitive tasks in financial processes. For example, some processes like invoicing are time-consuming...

Banking2 days ago

How banks can help customers during the cost of living crisis

 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree   Surging energy and food prices are significantly driving up...

Finance2 days ago

Weathering the economic storm in 2023

Nikki Dawson, Head of EMEA Marketing at Highspot   New year, new business challenges. When it comes to creating and...

Business3 days ago

Three ways data can help financial organisations thrive in today’s economy

By Rinesh Patel, Global Head of Financial Services, Snowflake   Financial organisations are caught in the middle of an ever-evolving...

Finance3 days ago

What is the right strategy for the end of money?

By John Barber, VP & Head of Europe at Infosys Finacle More than five thousand years ago, humans replaced barter...

Business3 days ago

2023 – what will happen in the payment world?

Tommaso Jacopo Ulissi, Head of Group Strategy, Nexi Group 2022 was a year of transition for consumers, as BNPL (Buy...

Business3 days ago

2023 crypto trends that businesses need to know about

By Marcus de Maria, Founder and Chairman of Investment Mastery   As cryptocurrencies have started to enjoy wider global acceptance...

Business3 days ago

Defining Fraud in 2023

Scott Buchanan, Chief Marketing Officer at Forter Fraudsters are fluid — they constantly experiment with new tactics to find cracks in...

Business4 days ago

How accounting software may hold the key to keeping on top of credit control

By Paul Sparkes, Commercial Director of award-winning accounting software developer, iplicit.   One of the first rules everyone learns about...

Banking4 days ago

Coreless Banking: How banks can thrive in 2023

Hans Tesselaar, Executive Director of BIAN   In recent years, banks have faced immense disruption and struggled to transform with...

Technology4 days ago

Will cyberattacks be uninsurable in 2023? Three steps that financial organisations can follow now

By James Blake, Field CISO of EMEA, Cohesity   The growing number of cyber attacks and subsequent damage has led...

Business1 week ago

Why Financial Services Institutions must de-risk the customer journey in 2023

By Perry Gale, VP EMEA at Cyara   From rising interest rates, to the cost-of-living crisis and the ongoing recession,...

Business1 week ago

Why finance needs a technological leap in fraud prevention

Brett Beranek, VP & General Manager, Security and Biometrics at Nuance Communications   Banking fraud is always a punishing experience for...

Banking1 week ago

How Banks Should be Future-Proofing Themselves  

By John da Gama-Rose, Head of BFS, Global Growth Markets, Cognizant  Businesses across the world are facing a combination of...

Business1 week ago

The Promise of AI in Financial Services in 2023

By Kevin Levitt, Global Industry Business Development, Financial Services, NVIDIA   As we enter the new year, many are left...

Banking1 week ago

What to expect from banking and payments in 2023

Michael Mueller, CEO, Form3   The banking industry went through a number of significant challenges in 2022. The steep increase...

Business1 week ago

The big cash squeeze: will fortune favour the bold?

With a new political landscape, rising inflation, a cost-of-living crisis and increasing pressure from HMRC for payments, many businesses are...

Business1 week ago

How scaling agility can help mortgage lenders thrive in a tough economy

By Angus Panton, Director of Banking and Financial Services at Expleo   During periods of economic uncertainty, speed and agility...

Financial Services Is Stepping Into A New Era Financial Services Is Stepping Into A New Era
Business1 week ago

Embracing eCommerce: what retailers will face in 2023 

by T.R Newcomb, VP, Strategy and Corporate Development, Riskified     2022 has been a tumultuous year, with rising interest rates,...

Business1 week ago

Five steps for getting compliance right

 Troy Fine, Director, Risk and Compliance, Drata   With the accelerating pace of regulatory change and operational resilience policies, organisations...

Trending