Global Banking & Finance Review Issue 36 - Business & Finance Magazine

Issue 36

People’s Bank is Revolutionising Sri Lanka’s Banking Industry Ranjith Kodituwakku CEO and General Manager People’s Bank

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EDITORS LETTER

FROM THE

editor

Chairman and CEO Varun Sash Editor Wanda Rich email: wrich@gbafmag.com

Dear Readers’

I am pleased to present Issue 36 of Global Banking & Finance Review. For those of you that are reading us for the first time, welcome.

Head of Distribution & Production Robert Mathew Project Managers Megan Sash, Amanda Walker Video Production and Journalist Phil Fothergill Graphic Designer Jessica Weisman-Pitts Client & Accounts Manager Chanel Roberts Business Consultants Rick Saikia, Monika Umakanth, Stefy Abraham, Business Analysts Samuel Joseph, Dave D’Costa Advertising Phone: +44 (0) 208 144 3511 marketing@gbafmag.com GBAF Publications, LTD Alpha House 100 Borough High Street London, SE1 1LB United Kingdom Global Banking & Finance Review is the trading name of GBAF Publications LTD Company Registration Number: 7403411 VAT Number: GB 112 5966 21 ISSN 2396-717X. The information contained in this publication has been obtained from sources the publishers believe to be correct. The publisher wishes to stress that the information contained herein may be subject to varying international, federal, state and/or local laws or regulations.

The purchaser or reader of this publication assumes all responsibility for the use of these materials and information. However, the publisher assumes no responsibility for errors, omissions, or contrary interpretations of the subject matter contained herein no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the publisher

Featured on the front cover is Ranjith Kodituwakku, CEO and General Manager of People’s Bank in Sri Lanka. Established in 1961, People’s Bank is a stateowned commercial bank offering retail and corporate banking services with the aim of contributing to quality of life, enterprise development and the national economy.

I recently spoke with Ranjith about the bank’s venture into investment banking, how it has addressed the challenges of the past two years, and how its customer base is benefiting from its significant investment into digitalisation. Turn to page 24 to see how People’s Bank is revolutionising Sri Lanka’s banking industry.

For over 30 years, Lombard International Assurance, a leading independent global wealth solutions provider has been partnering with the advisors of high net worth individuals and institutions to provide customised insurance-based solutions. I spoke Stuart Parkinson, Group CEO of Lombard International to discuss the relevance of Wealth Assurance today, the enhanced services offered by its digital platform, and the use of wealth to create social good. (Page 30) On Page 8, Søren Otto Simonsen, Senior Investment Editor at Saxo Bank outlines the key aspects of ESG investing that measure the sustainability and ethical values of a company.

We strive to capture the breaking news about the world's economy, financial events, and banking game changers from prominent leaders in the industry and public viewpoints with an intention to serve a holistic outlook.

We have gone that extra mile to ensure we give you the best from the world of finance.

Send me your thoughts on how I can continue to improve and what you’d like to see in the future.

Enjoy!

Wanda Rich Editor

®

Stay caught up on the latest news and trends taking place by signing up for our free email newsletter, reading us online at http://www.globalbankingandfinance.com/ and download our App for the latest digital magazine for free on Google Play and the Apple App Store

Issue 36 | 03

CONTENTS

BUSINESS How Boardrooms Can Build a Better Future with Board Intelligence

12

Paroon Chadha CEO OnBoard

34

The future of global e-commerce and understanding the buyer’s journey Joris Kroese Founder and CEO Hatch

BANKING Traditional banks and closing the digital divide.

18

Rowan Brewer CEO Paymentology

From process to experience: the next frontier is engagement banking Jonathan Stallard Executive Backbase

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48

CONTENTS

PAYMENT

22

Open for business: Harmonising Africa’s Payments Landscape Akshay Grover Group CEO Cellulant

INVESTMENT

08 Understanding ESG and

Pat Spencer Managing Director Moneytree Software

TECHNOLOGY Urban Air Mobility: Debunking The Myths Of ‘Flying Cars’

Søren Otto Simonsen Senior Investment Editor Saxo Bank

Kai-Tse Lin Co-founder and Chief Operating Officer Bellwether Industries

The changing face of consumer finance Robert Schuijff CEO

44

Fintech apps are an advisor’s 16 ally, not a foe

Sustainable Investing

FINANCE

20

FINTECH

26

Challenges of digitalisation in the 38 developing world - and how to overcome them Frank Molla MD Sub Saharan Africa BPC

etika

Leveraging Technology to Improve Financial Inclusion in the United States

Financial Service Trends for Digital in 2022

Ismail Amla Executive Vice President, Professional Services NCR Corporation

40

Ian MacArthur CEO Sagittarius

Issue 36 | 05

CONTENTS

24

Cover Story People’s Bank is Revolutionising Sri Lanka’s Banking Industry Ranjith Kodituwakku CEO and General Manager People’s Bank

30

INTERVIEW A CONVERSATION WITH STUART PARKINSON, GROUP CEO OF LOMBARD INTERNATIONAL GROUP Stuart Parkinson Group CEO Lombard International Group

06 | Issue 36

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INVESTMENT

Understanding ESG and Sustainable Investing Investment Editor at Saxo Bank Recent years have witnessed a shift in investor appetite, as they now look beyond just monetary gain. As the world becomes more sustainable, so do investors. Rational investors are increasingly aware of their investments and seek to invest in companies that can impact the world in a positive manner and maintain ethical, fair practices.

as over 200 companies agreed to reach zero carbon emissions by 2040. There are three key aspects of ESG investing that measure the sustainability and ethical values of a company. It is important to note that funds and companies work with ESG in different ways, so before any investor chooses to invest in a fund, familiarisation with its procedures is encouraged.

ESG Criteria

Environment

ESG investing has risen in popularity over the last decade as brands are increasingly aware of their impact on society. A study by Navex Global showed 88% of publicly traded companies had a specific focus towards ESG goals. Going forward, considering ESG factors are becoming increasingly popular

Environmental criteria examine how a company’s manufacturing and distribution processes impact the environment. Typical examples are analysing pollution, waste, and energy use. Investors will investigate a company’s carbon footprint and whether they are using fossil fuel energy (oil, coal, and gas) or green energy (solar panels). They will also

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check if any toxic chemicals, such as pesticides, or harmful emissions are being produced. Other factors include deforestation, climate change, and resource depletion.

For instance, if a manufacturing company has high carbon emissions which create high pollution, the company would have a low ESG rating. An environmentally responsible investor would steer clear from such a company. On the other hand, an environmentally friendly firm that uses 100% renewable energy sources and has minimal waste would score high in an ESG analysis of the environmental part. As the world shifts towards renewable energy to reduce global warming, there is an increasing expectation for all firms to reduce their carbon footprint.

INVESTMENT

Social Social criteria investigate business relationships, values, and how the company supports its community.

Specifically, this concentrates on health and safety in the workplace and human rights such as child labour and slavery. They also consider how the company affects their local community – if they donate any funds to local charities and schools, for example.

Recent developments also inspect gender equality, consumer privacy, and data security, such as whether the company is GDPR compliant.

Additionally, diversity in the workplace is considered, which involves being accepted regardless of nationality and religion and other relevant topics within the social criteria.

A socially responsible trader would be deterred from a firm that sources their labour from Third World countries to abuse child labour. For example, the Clean Diamond Trade Act signed in 2003 stopped developed countries from importing diamonds mined in conflict countries. Prior to this agreement, diamond-rich countries would abuse child and slave labour to minimise mining costs and maximise profits. The social aspect of ESG extends further than solely internally, as it considers relations with suppliers and distributors to ensure all parties are treated fairly.

Governance Finally, governance investigates the management and operations of a business to ensure a company

is managed in an ethical manner.

Common issues include corruption and bribery amongst shareholders, political lobbying, and board diversity.

Investors will also look into a business’ tax strategy and ensure they are fully transparent with their financial accounts. Furthermore, investors will review relations between shareholders and leadership to verify all parties are being treated fairly.

For example, if a company is not transparent regarding its finances and is a culprit of tax evasion by bribing auditing firms, this is a violation of ESG criteria. Funds consisting of highly rated ESG companies would not incorporate the company into the fund; however, a firm with a highly diverse board with no involvement in any political lobbying or corruption would be ESG compliant.

Issue 36 | 09

INVESTMENT

Sustainable Investing Sustainable investors seek to invest in companies and funds that create a better world. There are several methods to sustainable investing, such as socially responsible investing, ESG investing, and impact investing.

•

Socially responsible investing (SRI) is a form of ESG investing also referred to as negative screening. SRI investors focus on restrictions regarding ethical values such as conflict, politics, and religion. For example, an SRI investor may be deterred from companies that engage in animal testing. Another recent example is SRI investors taking into consideration the climate impact, as they avoid firms who produce large amounts of carbon emissions.

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•

ESG investing involves selecting companies that cautiously monitor all three aspects of ESG requirements as previously discussed. Typically, this method is less restrictive than the former as it includes energy companies. Previous studies by Refinitiv have established a correlation between ESG investment funds and positive returns. Some investors argue the ESG factors can differentiate a sound investment from a weak one.

These investors believe businesses with a low ESG score are not sustainable in the long run and are potentially weaker investments.

INVESTMENT

•

Finally, impact investing revolves around choosing businesses that have a positive social or environmental impact on society and the world. As stated by the Global Impact Investing Network (GIIN), impact investments tend to lay in healthcare, education, renewable energy, and agriculture sectors as these have the greatest impact on society. For example, investors may purchase stocks in a renewable energy production company in the hope of further aiding the reduction of fossil fuel usage.

Søren Otto Simonsen Senior Investment Editor Saxo Bank

How to invest As an investor, there is a wide range of products to become a socially responsible investor. There are several ETFs compiled of sustainable investments which allow investors to diversify their portfolio across a range of assets, whilst staying socially responsible. Alternatively, if an investor wants to purchase shares in singular companies, they can evaluate ESG rankings across a variety of independent agencies.

This will allow them to make well-informed decisions regarding which companies have the greatest positive impact on society.

Global resources The United Nations (UN), the Organization for Economic Cooperation and Development (OECD) and the International Labour Organization (ILO) provide ESG guidelines and additional resources.

Issue 36 | 11

BUSINESS

How Boardrooms Can Build a Better Future with Board Intelligence

The new year offers new opportunities for boards to build better processes that can help them become more effective in executing their missions and advancing the organisations they serve.

These changes will require boards to capitalise on new methods and technologies to streamline operations and better track and analyse overall board activities. The insights gained as a result will provide a foundation for continuous improvement, steering boards in the right direction and facilitating real-time corrections should they veer off course.

These changes will not be easy. They will require boards to be purposeful in reshaping standard operating procedures. The good news is that the past two years have shown that boards are capable of rapid transformation. It is one positive to come out of this challenging time.

How We Got Here The advent of COVID-19 in early 2020 propelled boards and businesses worldwide into the digital age once and for all, as many organisations were forced to make an abrupt

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switch to digital formats and virtual meetings. The start of the pandemic was a sea-change moment. As the world moved to stem the virus’ spread through social distancing, boards shifted into full crisis management mode. Board administrators scrambled to learn how to securely distribute digital board materials and switch from in-person to virtual board and annual shareholder meetings.

For some boards, that meant cobbling together various technologies and platforms to create a facsimile of the boardroom experience, albeit more complex and with a steeper learning curve. For other boards, the shift was made easier through the use of purpose-built solutions, board portals, and other forms of board management software.

Now that these boards have experienced the benefits of using technology that simplifies and optimises board interactions, there is no going back. Analog boardrooms and tedious processes soon will be a thing of the past. Board leaders must resist the urge to fall back into pre-pandemic habits and embrace the benefits of digital transformation— both those that exist today and those that have yet to be realised.

Incremental Change The pandemic accelerated the digital evolution of boards, and now is the time to keep the momentum going. It’s all about taking small steps.

Consider the compounding effects that insights can have over time. Fitbit and Apple Watch step trackers, for example, began with a simple promise: they would track your daily steps toward a goal and report your progress in realtime. Today, the step trackers and their simple use case have transformed into intelligent devices capable of providing insights into users’ behaviours and coaching them toward better health and wellness practices.

The same can hold true for board meetings and governance processes generally. Boards should start by thinking beyond virtual meetings— which many have already adapted to during the pandemic—to consider what other board interactions might benefit from digital transformation.

Board management solutions offer the ability to convert a variety of other functions, such as voting, taking attendance and annotations, building agendas, conducting surveys, and defining roles and terms, from analogue to digital.

BUSINESS

Converting from analogue to digital makes these processes more efficient, allowing board leaders and administrators greater time to focus on more meaningful priorities. It also provides an opportunity to collect data and develop baseline reports with real-time insights for more informed decision-making.

These insights could benefit boards at multiple levels. At the meeting level, for example, they could help boards evaluate questions such as: When before meetings do we publish our board information? How many pages is the board book? How many interactions and discussions are happening before the meeting? Do board members consider themselves adequately prepared for the meeting?

Is there optimal time in the meeting to cover everything on the agenda?

All of these data points can be measured, analysed, and optimised for more effective meetings.

Leaders can better identify and target inefficient and unnecessary processes, enabling them to spend their valuable meeting time together on the most vital matters.

This data is more nuanced and complex, but it should be captured and analysed so that boards can evolve toward better versions of themselves for the organisations and communities they serve.

Another level of intelligence could focus on data about the board itself. Boards can begin to address questions such as: Do we have the right people in the room? Do we have the right outside experts? What skills do our board members have?

Do we need a new committee for environmental, social, and governance (ESG) issues? Are we providing board members the support they need for continuing education? Are we keeping an eye on term limits and proactively planning for the board’s future?

The next level of intelligence involves evaluating boards against external benchmarks from peer organisations. This could be done by comparing attributes such as size, geography, or stage of business development. For example, the board of a fast-growing financial services firm could assess how its board activities and priorities compare to similar firms locally, nationally, or even globally.

The Future of Board Intelligence

Issue 36 | 13

BUSINESS

Paroon Chadha CEO OnBoard

With this, boards could answer important questions such as: Are we making decisions quickly enough? Are we keeping pace with our peers on ESG issues? Are we evaluating cyber risk frequently enough? Where are we lagging on diversity and inclusion compared to other boards?

The ability to use real-time data and analytics to address these types of critical, future-focused questions represents an evolution to full digital transformation. This applies to every board across every sector. Moving past the challenges of 2020 and 2021, it is time for boards to take the reins, leave outdated and inefficient processes behind, and leverage board intelligence for a better future.

Significant change is never easy, especially when it comes to making the transition to digital operations.

Below, we outline five action steps to help board leaders make the shift to a broader use of digital processes:

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1.Build consensus. Ensuring appropriate communication throughout the process is critical to facilitating a smooth transition.

Board leaders should work from the start to gather input and build buy-in organisation-wide so all stakeholders understand and support the need for a board management solution.

4. Research your options.

Administrators and board leaders should thoroughly explore the available digital tools, platforms, and applications to determine which one best suits their organisation’s needs.

Important factors include costeffectiveness, ease of use, security, adaptability, and training and support.

2. Evaluate current processes. Boards must understand where they are before they can determine where they need to go. This requires analysing how the board operates today, including who is involved in each procedure, director and administrator responsibilities, the amount of time involved, and the tools, processes, and resources they use to complete specific tasks.

5. Execute a clear implementation plan. Once a digital solution is selected, board leaders should work in partnership with the solution provider to develop and execute an implementation plan that assures everyone receives the necessary training and support.

3. Define your needs. Based on a comprehensive analysis of current processes, board administrators can identify what works, what doesn’t, and any specific requirements their organisation has in looking for a board management solution.

Some boards may think that adapting to virtual meetings qualifies as digital transformation. But to truly transform board processes and effectiveness—and thereby enable better oversight, support digital transformation of the company generally, and ultimately transform the way the business operates—boards must rethink governance processes and ask themselves if their analog solutions are aiding or inhibiting their important work.

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FINTECH

Fintech apps are an advisor’s ally, not a foe The rising popularity of fintech apps in 2022 will influence the relationship between financial advisors and their clients. As such, advisors will do well by recognizing apps for what they are — just tools. Used well, apps can inform, educate and build loyalty.

But pitfalls await those advisors who either ignore the tools or put too much stock in them.

There is no denying how prevalent such apps are becoming in the daily lives of people. The percentage of U.S. consumers using fintech surged to 88% in 2021, according to an annual report by fintech startup Plaid.

Fortune reported usage was only 58% a year earlier. More Americans now use fintech than they do videostreaming subscriptions (78%) and social media (72%), according to the Plaid report.

What this means for advisors is that fintech is defining expectations for people when they bank, make payments and invest. Advisors need to build their familiarity with the technology. They don’t necessarily have to be an expert with Robinhood, Coinbase or similar offerings, but they should know such apps exist and how they work. The “why” behind the use of an app can prove insightful in better understanding a client.

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How the use of fintech apps gives client insights Clients may use apps to better understand investing. They may use apps for ease of use. They may use apps because they want more transparency in where their dollars are invested.

The Plaid survey said 93% of respondents said apps helped them save time, while 81% said apps gave them more control over their finances and 78% said apps helped them save money.

Whatever the reason, the choice gives insight into the client’s wants and needs. Advisors need not frown upon fintech apps as some technological competitor but view them as another means to better understand their clients.

Now more than ever advisors need to know their clients well. Clients are not just concerned about portfolio performance anymore. Amid the pandemic, which forced people into spending so much more time at home, many clients are rethinking their path to retirement and what retirement itself should entail. How people lived, how they worked, how they spent their time, what they valued all changed — or at least evolved.

Now, people might want to start tackling their bucket list rather than waiting until they quit working. Other priorities, too, may have shifted. How well advisors can adjust to this new dynamic can demonstrate how much they care about their clients and build loyalty.

No number of fintech apps can replace the experience and knowledge of a financial advisor.

But they can complement the relationship. As counterintuitive as it sounds, apps can help build upon the personal experience.

Wealth management technology and the importance of user experience Consumer apps are one way in which fintech will increasingly influence the relationship between client and financial advisor. Another area involves the wealth management technology advisors use themselves.

Apps of all stripes are helping to set user expectations. The challenge for financial advisors is to better meet those expectations.

Although wealth management firms invested heavily into upgrading their apps last year, they still lagged other industries in terms of user experience, according to a J.D. Power app satisfaction study. Overall customer satisfaction improved from a year ago, particularly in terms of

FINTECH

speed, range of services offered and overall appearance, but wealth management still trailed rankings for apps in the banking, credit card and insurance industries.

The takeaway for financial advisors is to choose their technology investments wisely. Advisors already are juggling eight to 10 platforms. Whatever their technology investments are, they should be sure they serve the needs of their clients as well as their own. Is the calculation engine robust but also highly visual?

Does the solution easily aggregate other accounts? Is the client-facing user interface intuitive and easy to use? Is access seamless whether desktop, online or mobile? Are client reports transparent enough so clients can easily see where the data comes from in making projections? Can the advisor easily create a customizable report that provides a real-time synopsis of the key elements of each individual client’s financial plan?

Be wary of apps that overpromise the next big thing. A client may not want a text-heavy 10-page report, but advisors spending hours to create a custom video through an app’s video editing software may not be prudent either. Don’t pay for what you don’t need.

Whatever the app, how it facilitates communication between advisor and client is key. But realize that one size

doesn’t fit all. Communicating through a mobile app might be preferable for many clients. Still others may want to video conference. And others might want a regular email and an office visit. Most prefer a number of touchpoints. Advisors should track how their clients prefer to receive communications — and not just by what platform. Some clients are more detail-oriented and appreciate a lengthy report. Others are more visual and appreciate graphs and charts.

Offer multiple channels and multiple approaches to best meet the needs of your clients.

“The key for wealth management firms to level up in this competitive environment is to heavily lean into their unique value propositions, making it easy and intuitive for investors to move seamlessly between the app and other digital or human channels, while delivering personalized guidance and important information along the way,” said Amit Aggarwal, senior director of digital solutions at J.D. Power.

Fintech apps help consumers gain better insight into their own banking, budgeting and investing habits. The technology helps financial advisors, too. By clearly understanding what their clients seek in an app experience and tailoring their own interactions to best meet those experiences, advisors can build stronger relationships with their clients.

Pat Spencer Managing Director Moneytree Software About the author: Pat Spencer is managing director for Moneytree Software. Moneytree is a software development company with 40 years of experience in developing useful financial planning solutions.

Moneytree works collaboratively with thousands of advisors across the country to help them confidently manage the financial journey of their clients. Moneytree was acquired by Accutech Systems Corp. of Muncie, Indiana, in 2019.

Accutech has over 34 years of experience building innovative trust and wealth management solutions and provides exceptional personalized service to over 200 banks and wealth management companies nationwide.

Issue 35 | 17

BANKING

Traditional banks and closing the digital divide.

Traditional banks find themselves at a crossroads. One which will define their role for years and decades to come. Established financial institutions now face the challenge of keeping pace with both the capabilities and agility of a new generation of digital-first competitors. All whilst managing the added obligation of ensuring existing systems continue working, with no disruption.

As a result, the role of banks has evolved at an unforgiving and exponential pace. A new report found that “89% of banks surveyed agree that COVID-19 accelerated the implementation of new technology for the banking sector by five years”. This, amidst the wave of digital banks and fintechs already beginning to leapfrog traditional institutions in terms of innovation, speed and capability, must come as a worrying omen for traditional banks.

Born digital, newer market entrants are unencumbered by legacy processes large banks have abided since their inception. This has brought intense competition across the banking industry, urged on by a new era of customercentricity and product granularity.

Simply put; for banks, any opportunity for inertia has now evaporated. There is no choice but to embrace full-scale digital transformation. And, with it, harness the myriad business and societal benefits in the process. Or, face the very real threat of extinction.

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Of course, many banks have adopted some new technology, with varying levels of success. But, on an industry-level, systems overall remain far behind the technological standard immediately available to a fast-maturing neobank generation. A generation with an inherent ability to adapt, innovate and pivot – flexibly and quickly.

Traditional banking systems – however you slice it, and however many incremental improvements you bolt on each year – remain largely built on the rails of decadesold technology, badly overdue a bottom-up rethink.

However, many practices appear simply too deeply woven into the fabric of traditional banking systems to be migrated without perceived risk of a major disruption. Or at the very least, millions of miles of red tape.

Thankfully, whilst challenging and admittedly farreaching in scope, the process of full-scale digital modernisation, migration and optimisation, can be achieved smoothly, effectively, and – critically – while there is still time. In order for banks to achieve this crucial step-change, they must examine three critical components of their payment operations.

First; the ability to issue cards and products in multiple regions. This is achieved largely through access to the best and most flexible API functionality, with which digitally native banks have carved out new USPs. For example, offering low to zero fees on services that big banks have historically used as valuable lines of revenue, such as international card-usage fees.

Customers now have choice, and can use a range of challenger banks for specific needs, whilst cutting traditional banks out of the loop.

BANKING

Rowan Brewer CEO Paymentology

The second to make the entire process as digital and data-rich as possible. Data is today’s most valuable business asset. Without the power to harvest, interpret and leverage key datasets in real time, businesses miss huge opportunities to use customer card-spend data to innovate products completely tailored to individuals and their specific needs. “Digital” no longer just means “online” or “in-app”. It requires harnessing customer-data to empower meaningful, decisive action.

Lastly, banks must ensure they can execute their vision at scale, for millions of customers, 24/7, at the highest levels of security and reliability. Like neobanks, who must think ahead in terms of their processors’ ability to handle the volumes, volumes that sudden success and exponential-growth will require, traditional institutions need to adopt processors with the capacity and expertise to both migrate and scale their operations, smoothly.

By embracing the infinite potential and opportunity of a next-gen payment platform – one with the best APIs, scalability, migration expertise and global reach - traditional banks need not fear their new challengers. Nor envy their opportunities, as there is still time. The only remaining barriers are vision and will.

Issue 36 | 19

FINANCE

The changing face of consumer finance Living in a post-pandemic world, a lot of consumer behaviours have changed and in some respects, people are reluctant to return to the status quo. This also applies to the world of lending and payments. Technology has disrupted the financial market and made way for new, more flexible financing solutions which reflect “the new normal”.

Micropayment solutions have become particularly popular with players from fintechs to traditional banks moving into the space. The first iteration of Buy Now, Pay Later (BNPL) via thirdparty lenders, has already given way to a second version that is claimed to rival spending on credit cards.

For instance, a US study from C+R Research found that shoppers apply for short-term loans for 35% of all their online purchases from BNPL providers.

The new consumer finance ecosystem is changing the way we view spending.

However, not all spending is equal.

The damage credit rejection can have is more prominent than we think. A YouGov study, commissioned by etika, found that a credit application decline can significantly impact customers' mental health, credit score, and future relationships with retailers.

So how can we navigate a landscape that is rapidly evolving while keeping consumer wants and needs at the forefront of operations?

What’s driving the evolution of consumer finance ecosystem A major driver of the evolution of consumer lending is the e-commerce boom brought on by the pandemic.

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Users turned to online shopping both out of necessity and for entertainment purposes. The convenience of online shopping appealed to many and the number of online purchases continues to grow despite shops reopening.

According to Shopify, two years ago 17.8% of sales were from online purchases. This number is expected to reach 21% in 2022 which represents a doubling in the ecommerce market share over two years. In response, smaller and more competitive finance providers and fintechs have entered the consumer finance ecosystem to service changing demands and behaviours of consumers.

Another side effect of the pandemic has been the cashflow pressure felt by consumers. Many are experiencing difficulties balancing their incomes and outgoings, when faced with the need to purchase large ticket items. To them, the ability to access credit is a lifeline.

As the consumer finance matures, future shoppers have a growing variety of BNPL options and other long-term finance providers to choose from.

This begs the question of whether customers know exactly what they're getting and whether or not these solutions fit their financial needs.

The impact on consumers and the need for ethical finance With consumer finance products evolving at a very quick pace, it is important that consumer well being remains a forethought in product offerings. New technologies can be utilised in a way to make financing solutions more accessible and fairer to consumers.

Let’s look at credit declines as an example. The application process is binary, and declined applications can have significant impacts on consumer happiness, as noted in a recent YouGov study of over 2,000 UK adults. 54% of respondents would feel upset or very upset if rejected for credit by an online retailer and 8% said it would affect their mental health.

Evidence also shows that credit declines would negatively impact a consumer's relationship with a retailer. 37% of respondents would change their attitude towards a retailer if rejected for credit and a further 23% of respondents would not go back to that retailer at all if their finance application was rejected.

This is whe re it be c ome s c rit i ca l f or ne w c onsum e r le nding solutions tha t of fe r a lte rna tives to tra ditiona l f ina nc ia l se r v ic es , to ta ke c onsum e r we ll be ing i n t o c onside ra tion. The c onc e pt o f e thic a l f ina nc e is ra pidly ga in i n g tra c tion a nd this me a ns more an d m ore c ompa nie s of fe r f ina nci n g tha t c onside rs e nv ironm e nta l , soc ia l a nd gove rna nc e f a c tor s t h a t a f fe c t borrowe rs.

What needs to change Long-term loans for high ticket items are often harder to obtain.

Consumers often gravitate towards financing options for household necessities, such as washing machines and fridges.

FINANCE

Robert Schuijff CEO etika

Additionally, when retailers tell customers what they can afford and offer finance accordingly, the number of declined customers drastically reduces. Secondly, the improved customer journey reduces drop-off and therefore increases sales conversion. The result is a more ethical approach to consumer finance.

In the short-term loan market, technologies have emerged to make the finance application process easier and quicker. However, the vetting process and regulation is less stringent. On one hand, this is positive as financing is made more accessible while on the other hand, there is often not enough thought given to the financial wellbeing of consumers who may struggle to make repayments on time and face late fees.

That is why ethical financing is becoming more and more important. The power of technology can be utilised to meet new consumer demands in a way that prioritises their financial wellbeing. For example, businesses can run ‘soft’ credit checks on consumers without hurting their credit scores.

At etika, we offer alternative finance solutions to consumers looking to buy big ticket items such as furniture or white goods based on what they can feasibly afford without breaking the bank. In fact, 92% of etika customers sampled had an improved credit score after utilising etika’s finance that fits!

The future of consumer financing is ethical.

Consumers should be central to the consumer financing ecosystem and companies now have the ability to make this possible through technology. The next phase of consumer finance will be about making sure consumers have access to finance that fits their needs and they ultimately can afford.

This is especially important today when inflation is rising and economic uncertainty continues. People turn to micropayments and consumer loans to cover the costs of higher ticket items they may not otherwise be able to afford outright. Credit should be provisioned in a way that does not harm the consumer whether it be their financial wellbeing or emotional health.

Issue 36 | 21

PAYMENT

Open for business: Harmonising Africa’s Payments Landscape

Hampered by a highly fragmented and competitive payments ecosystem, many businesses are struggling to grasp the market in Africa. The emergence of fintech, however, promises to inject new energy into the sector – helping to piece together this landscape and provide a frictionless payments experience, according to Akshay Grover, Group CEO of digital payments company Cellulant Over the past few years, Africa has developed a well-earned reputation for being at the heart of payments innovation. Yet businesses trying to get a foothold on the continent have to deal with a highly fragmented payments market. Notably, these business have to engage a large number of partners to process the different types of payments their customers use, as each individual and each country favours different

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solutions. Due to the complexity of these issues, multinationals are being driven away, resulting in a loss of opportunities – particularly for businesses operating across multiple African countries.

The ramification of this is that fintechs are stepping in to play an important role in bridging the gap between merchants and their consumers by providing simpler payments solutions, including aggregating multiple providers' services via a single platform.

The fragmented landscape One of Africa's most popular forms of payment is mobile money, which is favoured over the card solutions that dominate Europe and the US. Approximately 57% of Africa’s

population does not even have a traditional bank account, resulting in debit and credit card penetration being extremely low, sitting at around 3%.

Yet despite mobile money being widely used, the service is provided by a huge number of mobile network operators (MNOs), with each African country served by its own range of MNOs. As such, it is costly and time-consuming to receive payments from different countries with unique systems and payments providers to capture what would normally be an attractive market successfully.

Meanwhile, for banks, the minimal card penetration and the prevalence of mobile money mean that historically they have been side-lined from the payments ecosystem and are struggling to close the gap for those who are still unbanked.

PAYMENT

How fintechs can address the bottlenecks Arguably, the solution to this payments challenge for businesses is collaboration. Partnerships between banks and fintechs have the potential to make digital financial solutions more accessible to consumers across all of Africa, not only facilitating greater financial inclusion but also strengthening the synergy between businesses, banks and consumers.

For businesses, the main benefit of this collaboration is the direct access to fintechs’ services, including the streamlining of various payment methods. This is vital to piecing together the fragmented market, providing businesses with a single point of entry – a single platform and log-in credentials, as well as an aggregated data feed – for all their different payment methods.

At Cellulant, for instance, we provide locally relevant and alternative payment methods for global, regional and local merchants, partnering with banks to extend the reach of these services to as many customers as possible. The result is a single API payments platform that enables businesses to collect payments online and offline while allowing anyone to pay from their mobile money, local and international cards or directly from their bank.

This approach can help solve problems for all kinds of businesses across Africa. In Zambia, for instance, three telcos account for the majority of all mobile payment services, with a fairly even split of market share. To receive mobile money from all consumers in their target market, merchants, therefore, need to have three different phone contracts, one with each of the mobile money providers, to receive money into three different mobile wallets – an inconvenient and time-consuming process.

For this reason, disruptions occur at the point of sale (POS) and in the back office. At the POS, the salesperson needs to operate three phones, with distinct log-in details and user interfaces; meanwhile, backoffice teams have to reconcile these payments from different providers, dealing with data trapped in different systems and different formats. In addition, these differences create similar issues when it comes to managing chargebacks, reversals and refunds or disputes.

This experience is likely to strain smaller providers, heaping on unnecessary costs, draining time and eating into business margins.

On the other hand, multinational businesses suffer these same issues across multiple payment methods and countries – multiplying the administrative hassle many times over.

Collaboration is Key Direct access to a fintech’s services, however, can improve the user experience for the cashier managing the transaction at the POS – enabling them to work with just one familiar platform – while back-offices become more streamlined and efficient in terms of reconciliation. The process is also more straightforward for consumers, enabling them to support their local businesses through their preferred payment method.

Akshay Grover Group CEO Cellulant

Africa is a captivating example when it comes to the collaboration between banks and fintechs. This exciting project will piece together the African payments landscape in new ways that will increasingly benefit businesses wishing to tap into this attractive market. Such a partnership will be vital if harmonising solutions are to reach critical mass, and fintechs are going full steam ahead to ensure new opportunities and economic prosperity for those that need it the most.

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INTERVIEW

People’s Bank is Revolutionising Sri Lanka’s Banking Industry

People’s Bank is a state-owned commercial bank that was established in 1961 in Colombo, Sri Lanka. It offers retail and corporate banking services with the aim of contributing to quality of life, enterprise development and the national economy. Ranjith Kodituwakku, a veteran banker who joined People’s Bank in 1982, has held the position of CEO and General Manager since 2020.

Ranjith recently spoke with Wanda Rich, editor of Global Banking & Finance Review, about the bank’s venture into investment banking, how it has addressed the challenges of the past two years, and how its customer base is benefiting from its significant investment into digitalisation.

C a n you te l l us a bou t Peo p le’s B a n k a nd how i t ve ntured int o i n ve stme nt ba nki ng?

In July 2021, People's Bank celebrated its 60th anniversary. For over 60 years, the bank has held a strong reputation for its digital supremacy, robust performance, leadership and sustainable growth. It has made great efforts to understand its customers and has revolutionised Sri Lanka’s banking industry by deploying new technology and innovative products.

This approach has gained the bank a customer base of over 14 million, the largest in the country.

People’s Bank Investment Banking Unit (PBIBU) was established as a part of the bank’s treasury in 2011,

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to focus on the rapidly growing economy of the country and its capital markets, both debt and equity. Since the inception we have successfully completed 30 debenture issues, in which we have managed to generate more than Rs. 150 billion to the issuers.

What are the services the investment banking unit provides?

Our services are expansive and include financing and advisory services, initial public offerings, debt structuring, fixed income security trading, loan syndications, custodian services, trustee services and securitisation. With our group synergies and the strength of the bank, PBIBU was able to establish its name in the capital market as one of the best and most innovative solution providers within a short time span.

Are there any notable transactions that you are particularly proud of?

Yes - 2021 was a remarkable year for PBIBU, during which it was able to achieve several key milestones in the investment banking industry. One such feat was structuring the largest ever non-banking listed debenture issue for LOLC Holdings PLC, for LKR 10,000 million. Also, PBIBU managed the largest ever state-owned entity listed debenture issue in Sri Lanka for Ceylon Electricity Board - LKR 20,000 - and the largest ever non-banking financial institution listed debenture issue for People’s Leasing & Finance PLC - LKR 10,000 million.

The past year has been full of challenges for markets and the economy. How has People's Bank managed operational risk during this period?

The pandemic and the resulting lockdowns and restrictions during both 2020 and 2021 had a massive impact on both local and global economies. It dealt a severe blow to key foreign exchange earning sectors, resulting in a drastic decline in foreign exchange inflows to the country, undermined the stability of the exchange rate, and further hurt investor and lender confidence.

The combination of these circumstances put the bank and its employees under tremendous pressure. It put our commitment, our digital capabilities, our customer centricity and our overall ability to deliver to the ultimate test.

Nevertheless, we continued to serve, keeping more than 70% of our branches open, even during the height of lockdown, and providing over Rs. 800 billion in funding during the pandemic-stricken twenty-fourmonth period.

How has People's Bank's investment in digital channels supported customers' banking experience during this time?

Over the last few years, People’s Bank has established the country’s largest customer base of over 14 million and has built up a digital

INTERVIEW

network which has penetrated deep into the rural areas. In 2021, the registered user base for retail internet banking and mobile banking appliances exceeded 1 million. The development of self-banking units (SBUs), consisting of ATMs, CDMs and kiosks, allowed customers to bank 24 hours a day, 7 days a week, 365 days a year.

During 2021, our islandwide network of ATMs, CDMs and self-banking kiosks facilitated 82.6 million transactions worth over Rs. 1.2 trillion.

People’s Wiz, the bank’s paperless digital solution for opening an account, has recorded onboarding of 1.7 million customers.

This is more than triple the number in 2020.

Ranjith Kodituwakku People’s Wave, the bank’s CEO and General Manager mobile banking app, has People’s Bank become the country’s most downloaded banking app with over one million active users. People’s Wyn, the mobile app for businesses, registered 7,220 customers, more than three times the number in 2020.

T he b a n k’s d ig it al l oan processi ng faci l i ty, Pe ople’s W i z Re t ail L o a n Ori gi nati ng System (RLO S), revo lu t io n is e d t h e process of granti ng l oans a nd a l l o we d t h e b a n k to di sburse personal l oans w ithin 2 4 h ou r s wit h min imal documentati on.

During the year, the bank introduced several innovative products and features. One of these was the People's Pay Wallet app, a payment solution combined with lifestyle features. The bank also incorporated features such as anti-moneylaundering technology into the process of digital account opening and real-time gross settlement into its corporate internet banking. People’s Bank also became the first and only bank in Sri Lanka to be accredited with the ISO/ IEC 27001:2013 certification, the highest international accreditation for information protection and security.

How do you see the way forward in the year ahead?

We expect 2022 to be another challenging year. We will continue to focus on our strengths, our strong financial performance, our digital drive and our quality of service.

However, due to the problems and issues in the larger economy, we can foresee a variety of challenges. With our focus, commitment and product portfolio we are ready to meet – and, as we most often do, exceed - customer expectations.

People‘s Bank will also concentrate on providing a portfolio of investment banking products and services.

Notwithstanding the macroeconomic volatilities, we expect to continue our journey in 2022 with optimism, ambition and vigour, with our sights set on achieving higher goals and targets.

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TECHNOLOGY

Urban Air Mobility: Debunking The Myths Of ‘Flying Cars’

With the popularity of cars and lower driving costs, people are more likely to access this method of transport. But this is also the reason why traffic congestion happens.

Ever since the idea of an aeroplane was born, humans have tried to make flying cars a reality. Technologies have continued to advance since the 1960s and research and development of electrification has sped up the growth of this lucrative market, which according to Morgan Stanley is estimated to be worth $1.5 trillion by 2040.

This new era of aviation is going to be here sooner than you think. There are limitless possibilities to this technology, with many predicting a future with electric vertical take-off and landing (eVTOL) aircraft and unmanned delivery drones being a normality in our cities.

So as we edge ever closer to this being a genuine option for inter-city and intra-city transport, with the first commercial passenger-carrying services likely to be operational as early as 2024, it’s worth understanding some myths that exist around urban air mobility and why they require ‘debunking’.

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The Myths Surrounding Urban Air Mobility and eVTOL aircraft With an industry as new as Urban Air Mobility (UAM), it’s understandable for companies and those working in this space to be faced with questions about whether it will be a long-term success.

One public myth is that ‘flying cars’ are just a ‘pipe dream’. When the first mobile phone was launched in 1984, it was met with the similar scepticism of ‘why’, and if the unimaginable capabilities of the modern mobile were mentioned they’d have been laughed out of the building.

However, the technological developments over the last three decades have gone from a simple phone call to having an entire computer in a pocket-sized, ultra streamlined design. What began as another ‘pipe dream’ is now a part of our everyday lives - and that’s just the plan for eVTOL aircraft and UAM travel.

A second example is that flying cars are just another version of conventional aircraft that have been in the skies for decades. People take things too simple; UAM is much more than building aircraft which are just bigger-sized drones and smaller-sized aeroplanes. It is carving a totally different path from conventional air transportation.

TECHNOLOGY

Why UAM is no longer a ‘pipe dream’ Urban Air Mobility is going to be here in a matter of years. The thought of taking a trip in a flying car, travelling over congestion hotspots to arrive at your destination in minutes rather than hours, is appealing to everyone who travels on the ground.

The last 12 months have seen significant developments in the industry, which saw companies such as Archer, Lilium, Joby Aviation and Vertical Aerospace become publiclylisted on either the New York Stock Exchange or NASDAQ. Billions of dollars have already been invested in the UAM market, and that trend will continue in future.

It’s also worth noting that UAM aircraft will be certified and regulated to the highest aviation safety standards possible, from the likes of the European Union Aviation Safety Agency (EASA), the Federal Aviation

Administration in the USA and the UK’s Civil Aviation Authority. These organisations are helping to move the development of UAM forward.

There’s also a big difference between UAM aircraft and traditional air transport we’re used to seeing. UAM aircraft are designed for journeys of between 30 miles and 150 miles, while a typical wingspan of an aeroplane is three to four times bigger than most UAM aircraft.

In terms of power sources, most aeroplanes are powered by fuel and only a few are powered by electricity.

By contrast, UAM aircraft are going to be powered by green energy, such as electricity and hydrogen. It is becoming evident that these aircraft are relatively eco-friendly compared to aeroplanes.

UAM not only has a new aircraft category but also needs tailored infrastructure, air traffic

management systems and planned maintenance, because UAM has to adapt to the complexity of the urban environment. These elements are composed of a complete ecosystem to handle this issue.

What Does The Future of Travel Truly Look Like?

From a sustainability standpoint, the majority of current aeroplanes being used are powered by diesel combustion engines. Compared to current transportation methods, a standard Boeing 737 aircraft emits approximately 90kg of carbon dioxide per hour!

The technology to produce the batteries needed to power eVTOL aircraft is rapidly advancing, with many suggesting that by the next decade, the majority of aeroplane fleets will be powered by electricity.

Issue 36 | 27

TECHNOLOGY

Kai-Tse Lin Co-founder and Chief Operating Officer Bellwether Industries

Electric aircraft would not only eliminate direct carbon emissions, but they could also reduce fuel costs by up to 90 per cent, maintenance costs by 50 per cent and noise by nearly 70 per cent.

Given the relationship between today’s transportation and cities, we know that different kinds of transportation are complementary to each other.

Public and private transport will exist together and the diversity of transportation supports cities’ operation.

Passenger-carrying services continue to get a lot of attention, but it’s important to realise there will be services catering for private use as well. The majority of commuters don’t necessarily travel into the city or to the airport everyday. Added benefits of private transport - which include added flexibility, convenience, privacy and time savings - are some reasons why passengers would rather use this type of travel over aircraft transporting multiple passengers. According to a report

by Transport for London (TfL), it said there were ‘over 4 million daily car journeys, and 67% of these journeys were less than 5 kilometres long.’

And further afield, in the first survey conducted by the European Union Aviation Safety Agency (EASA) on UAM, 83 per cent of respondents had a positive initial attitude and 71 per cent were ready to try out UAM services. The top three expected benefits were improved response time in emergencies (71 per cent), reduction of traffic jams (51 per cent), reduction of local emissions (48 per cent) and development of local area (41 per cent).

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A future vision is the idea of a three-dimensional lifestyle. In the past, people could only live on the ground and aeroplanes could only bring people from one place to another. UAM will change people’s lives to a large extent, by offering them an opportunity to start a life in the air. In addition to transportation in the air, it is likely that there will soon be more things brought to the air to complement this trend. UAM is the first step for people to live in the air and change from a 2D to a 3D lifestyle.

UAM is worth the public’s attention and expectations and it is only a matter of time when this new era of aviation becomes commonplace in society. It’s hard to understand and envisage such a huge advancement coming so quickly, but when the first eVTOL aircraft are planned for public use within the next three years at the earliest, the world needs to prepare for its arrival sooner rather than later.

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INTERVIEW

A Conversation With Stuart Parkinson, Group CEO of Lombard International Group Lombard International Assurance is a leading independent global wealth solutions provider that has been partnering with the advisors of high net worth individuals and institutions for more than 30 years. Its aim is to provide customised insurancebased solutions to help individuals and institutions ensure that their assets are protected, portable and can be passed on. Group CEO Stuart Parkinson spoke with Wanda Rich, editor of Global Banking & Finance Review, to discuss the relevance of Wealth Assurance today, the enhanced services offered by its digital platform, and the use of wealth to create social good.

Stuart explained that there are often many complex factors and unique expectations of HNW/UHNW individuals and their families when it comes to protecting, preserving and passing on their wealth. “For these clients, wealth is often accumulated over generations, or generated through creating their own businesses,” he said. ”Their

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assets carry with them a sense of responsibility, as well as the duty to be preserved and protected for future generations. However, as the world becomes more unpredictable and uncertain, with shifting geopolitical landscapes, confidently achieving these goals can be more challenging.

In addition, modern family dynamics and structures, such as family members being dispersed around the world, also contribute to greater financial intricacies.”

For this reason, he notes that HNW/ UHNW families often have financial interests spread across multiple jurisdictions and therefore need to be able to navigate various different regulatory regimes. “This has resulted in an increase in demand for customised wealth and succession planning solutions. This is where the Wealth Assurance industry steps in with the provision of solutions that are comprehensive, compliant and proven, while also highly flexible, portable and adaptable to the evolving lifestyles of HNWs/UHNWs.”

The results of their 2021 European Wealth Assurance Report showed a clear appetite for Wealth Assurance products (also known as unit-linked life insurance or private placement life insurance [PPLI]). “30% of wealth professionals stated that more than half of their clients currently use it, and 57% agreed that it is a good option for wealth planning, recommending it to their clients whenever possible,” Stuart reported.

“In addition, the survey confirmed that 'asset stickiness' and client retention benefits for wealth professionals, as well as succession planning, are the top motivators for them to use Wealth Assurance solutions.”

As business practises shift towards more automated interactions and the world becomes increasingly complex and globally connected, Stuart recognises that the need for continuous digital development is more important now than ever. “There is a clear opportunity for the Wealth Assurance sector to enhance its

INTERVIEW

digital footprint in order to deliver even greater cross-border service and operational efficiency to its stakeholders,” he said. “Hybrid and remote working over the last 12 months has been a catalyst for further innovation in the way we manage our service delivery. This has included introducing new enhanced processes, such as the use of secure e-signatures and the development of new features on our existing digital servicing platforms like Connect in Europe, which delivers further operational efficiency and service enhancements for our clients.

“Digital solutions and the automation of business processes must therefore continue to transform and evolve while maintaining a client-centric servicing approach,” he went on. “Finding the right balance between human expertise and technology is critical to delivering operational excellence.”

The European Wealth Assurance Report also revealed that 75% of wealth professionals expect a "high" or "very high" level of digitalisation over the next three years, so developing its business process automation to support partnerships and enhance services and efficiency is high on the company’s agenda.

“At Lombard International Assurance, we use

technology and digitalisation as enablers of service excellence,” Stuart said. “Digitalisation brings automation, which in turn enables us to deliver greater efficiency throughout the entire lifecycle of our solutions. For several years now, the integration of technology into key operational processes has contributed to increasing our operational efficiency.

“One example is our digital servicing platform, Connect, which provides enhanced, secure online access to client policies. Through Connect, new policies can be fully onboarded remotely in some of our core markets, in a compliant and efficient manner. France was our pilot country for the launch of our digital onboarding solution back in 2019. Fast forward to today, and over 80% of new policy subscriptions use our online process.”

As the digital infrastructure is embedded into Lombard International Assurance’s Partner & Client servicing department, its expert team - which includes people of 40 different nationalities, who speak over 30 different languages - can now focus more time on valueadded services. “This means that we can respond to queries on the more complex cases more efficiently, support our business development teams further and grow long-term relationships with our partners.

Issue 36 | 31

INTERVIEW

“In addition, our Partner Outreach Programme is a proactive approach that our Partner & Client Services teams in Europe use to check in with family offices, wealth planners, asset managers, private bankers and other partners to gain feedback on their experience with us,” Stuart continued. “It gives our partners a voice in supporting our prioritisation of operational enhancements, and provides valued feedback to address any potential changes required.”

Stuart also discussed how interest in Environmental, Social and Governance (ESG) investing and sustainable finance has grown significantly in recent years, and the importance of Wealth Assurance in such strategies. “The pandemic has highlighted the importance for HNWIs to reconsider their wealth and how to leave a lasting legacy. Contrary to popular belief, wealth and succession planning is about more than just protecting and passing on wealth to the next generation; the debate has expanded to include the concept of wealth itself, and how it can be used to create social good.

“Wealth Assurance providers have a unique role to play with supporting clients on their ESG preferences. Sitting at the intersection of asset management, private banking, and insurance, Wealth Assurance is the gateway through which an increasing number of HNWIs and their advisers are choosing to activate their ESG investing strategies.”

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When reviewing the past 12 months, Stuart pointed out that 2021 was a landmark year for Lombard International Group. “Not only did we celebrate our 30th anniversary, but our international teams also delivered a strong performance in new business. While ways of working will continue to evolve, we have proven that our ability to stay relevant, agile and flexible, and our use of a combination of in-person, hybrid and digital capabilities, have enabled our operational efficiency, business development and strong engagement.”

In terms of the immediate future, he revealed that 2022 will be a time for Lombard International Assurance to continue to further enhance its business strategy, while focusing on greater global integration and new opportunities. “We will continue to develop and grow our business in each of our core regions of Europe and the United States, with renewed attention on Asia and Latin America. This includes broadening our geographical footprint in Europe and building new distribution partnerships with renowned international wealth partners in emerging markets.

Crucially, though, it is our people that are our strongest asset and Lombard International Assurance is widely - and rightly - recognised as being home to the best talent and expertise in the market.”

INTERVIEW

Stuart Parkinson Group CEO Lombard International Group

Issue 36 | 33

BUSINESS

The future of global e-commerce and understanding the buyer’s journey Joris Kroese is the founder and CEO of global omnichannel commerce solutions provider, Hatch. Having begun his career within the ecommerce sector in 2001, he has spent over two decades honing his industry expertise. Here, Kroese discusses the future of global ecommerce and the importance of understanding the buyer’s journey.

We talk a lot about the future of global ecommerce. What is often forgotten in these conversations is the crucial role of the customer in shaping how ecommerce ticks.

Consumer habits make and break ecommerce, and consequently, the future of the market hinges on how our consumers like to shop. This is why it is so important to accept that, in understanding the buyer’s journey, we cannot in fact predict every customer’s path to purchase.

In ecommerce today, with a marketdriven by innovation and growing omnichannel expertise, the buyer’s journey is inherently unpredictable.

The future of ecommerce, therefore, lies in accepting this very fact.

Understanding the consumer means

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understanding that every customer has their own set of expectations, habits, and shopper preferences. The best thing brands can do is embrace unpredictability by fostering a multifaceted approach to ecommerce.

If the pandemic taught us anything, it’s that ecommerce brands can expect the market to change drastically at any time. Two years ago, social commerce exemplified this, catapulting itself to the forefront of ecommerce as more people than ever turned to digital ways of shopping.

What we’ve also learned is that this trend was not just for the pandemic: the power of social commerce hasn’t disappeared, and we can expect it to continue to feature in the global future of ecommerce that lies ahead of us.

Ecommerce innovations that make shopping easier, quicker, and more seamless for the customer are exactly what we can expect to come.

To take a look into the future of global ecommerce, we often have to look at the regions striving towards great market innovation. Asia-Pacific, and particularly Southeast Asia is one

such example. Digital transformation moves at a rapid pace in the region, with brands adapting to consumer habits faster than anywhere else in the world. According to Accenture, the region accounts for almost twothirds of the global digital commerce market today, steadily propelling ecommerce forwards. Projections by EMarketer indicate that ecommerce sales in Southeast Asia will reach nearly $USD90 billion this year, with almost 65 percent of the region’s sales coming from Indonesia, while the Philippines will lead the region in growth for the next several years.

Meanwhile, in Thailand, over 96 percent of internet users access the internet via mobile phones, averaging 5 hours daily usage. With mobile internet and social media at such a saturation level in the region, we can be sure that ecommerce brands will continue to adopt the necessary tools to attract consumers increasingly discovering brands on their phones rather than in physical stores. Just like how social commerce emerged as a convenient method of shopping for social media users, other digital innovations that meet consumer

BUSINESS

Joris Kroese Founder and CEO Hatch

habits will continue to dominate the market in the years to come. While still in its early stages in Southeast Asia, there is great potential for Artificial Intelligence to make its mark on retail and ecommerce, and other regions are likely to follow suit.

While customer-centric innovation is a key characteristic of the future of ecommerce, global trends may continue to look a little different according to region. As previously mentioned, the customer journey is not a preconceived path. Consumer needs often depend on the environment of the market region.

Despite the advancement of the market in APAC for example, trends that are characterising ecommerce growth in Europe and North America don’t necessarily look the same across the board. Click-and-collect, for example, is hugely popular in European countries including Germany and the United Kingdom, but less so across much of APAC. According to Sensormatic Solutions, this can be largely attributed to highly densely populated cities that pave the way for the APAC market. In a city such as Tokyo or Bangkok for example,

click-and-collect is not as feasible as it might be across most of North America where it is flourishing as a key feature of ecommerce today.

There is no ‘one-size-fits-all' approach to ecommerce today and adopting such a stance will not advance the market towards the future. It would be easy to say that the future will look one way: that brick and mortar will not exist in the global market future, or that everything will simply take place via our mobile phones. The reality is much more complex than that. The work of ecommerce brands is to facilitate the many forms a customer journey may take. For many brands today, this means blending the physical and the digital. It is likely that this will be a core characteristic of the future of ecommerce in the years to come.

Where to Buy Local technology, for example, helps a consumer browsing online locate their local brick-andmortar store where they might prefer to make their purchase. Likewise, Where to Buy technology can also redirect the customer to other online outlets for their shopping needs.

Whichever way the consumer prefers

to shop, it is the responsibility of ecommerce brands today to ensure that their target customers are being catered to. While digital transformation across global markets is a glimpse into the probable future, the most important thing we need to remember is that customer-centricity will remain a key factor in driving ecommerce forwards.

About Hatch Hatch is an Amsterdam-based global omnichannel commerce solutions provider that aims to revolutionize the e-commerce landscape. Their “Where to Buy” solution connects brands with global retailers, both online and in-store, to create an omnichannel buying experience that seamlessly allows customers to purchase products at every touchpoint within their buyer’s journey. As e-commerce continues to experience an exponential boom, Hatch expects to manage over 60 million leads by the end of 2021.

Hatch currently employs 80 people across its offices in Amsterdam, Kyiv, Bangkok, Moscow, and Taipei. For more, see gethatch.com.

Issue 36 | 35

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TECHNOLOGY

Challenges of digitalisation in the developing world - and how to overcome them The more the world becomes increasingly reliant on digital technology to power daily services and markets, the more digitalisation and development become further intertwined for emerging economies.

As the second-largest banking market in the world for growth and profitability, Africa is an area that holds critical lessons when it comes to examining digitalisation in the developing world and its hurdles.

There have been several key obstacles that continue to haunt the African continent in terms of accelerating digital development: access, infrastructure and regulation.

However, three new innovative banking players show how these challenges can be overcome.

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Access to banking services The first challenge has been access to banking services. A significant proportion of the African population is still unbanked: 57 per cent do not have any kind of bank account.

There is still a firm reliance on cash. This is encouraged by the fact that approximately 90 per cent of employment in Central, eastern and western Africa could be categorised as informal, according to the International Labour Organisation.

Cash naturally lends itself as a simple payment method when it comes to informal employment. However, with an exceptionally young population (the median age of Africa’s 1.1 billion population is 19 years old), and an urban population that is expected to triple, it is also likely that younger generations will embrace convenient new banking methods and normalise them for future generations.

Network infrastructure A second challenge regarding financial inclusion in sub-Saharan Africa is the lack of infrastructure. Historically this referred to bank branches and physical access points for banking services, but now this refers to insufficient internet and network infrastructure required for digital banking services.

Related to this issue is that prospective customers are still asked to confirm their identity before formally joining digital financial services. In Africa, a considerable amount of the population still does not have proper identity documents.

Sub-Saharan Africa makes up over half of the one billion ‘unregistered’ people worldwide, according to the World Bank. Yet these documents are crucial when it comes to registering new users online.

TECHNOLOGY

To overcome challenges around access and infrastructure, it introduced a network of over 700 selfservice kiosks placed in retail outlets that their target customers visited frequently. While doing their regular shopping, customers could open accounts and immediately access their own debit cards.

Standardised regulation There is no standardised regulation to encourage fintech innovation in the continent, with regulators giving different financial services activities different regulatory treatment across jurisdictions. This makes it extremely hard for digital platforms to extend their services regionally. Ideally, there would be a more open approach to banking and financial services.

Right now, a digital-only bank can only operate by acquiring a full banking license or partnering with an existing bank to exist under a third party licence. In contrast, lighter regulatory frameworks like the E-money licence in Europe would accelerate digital development. The hope is that the African Continental Free Trade Area (AfCFTA) will encourage a standardised regulatory approach to help the growth of fintechs and digital banks.

How several new players have overcome these challenges Innovative new digital leaders have overcome the above obstacles by localising product offerings and distribution around local demand and infrastructure.

TymeBank With no monthly fees, pay-as-yougo-banking, up to 10 per cent interest on savings, and a straightforward account opening process, South Africa’s first digital bank has signed up more than four million consumers and business customers since its 2019 launch.

There remain key hurdles to the continued widespread adoption of digital technologies across the African continent. However, as several new players have demonstrated, enormous and rapid growth can follow when inventive ways around these hurdles are incorporated into the launch and operation strategies.

Orange Bank This subsidiary introduced its digital banking proposition in sub-Saharan Africa a couple of years ago with the offerings of mobile money operator Orange Money. This has been important as that business boasts over 20 million active customers. This has been key, as it allowed Orange Bank to leverage over a decade of customer behaviour insight around money transfers.

To open an account, an individual simply needs a smartphone or USSD, a communications protocol in GSM networks that allows the sending of short text messages. This helps to mitigate the lack of sophisticated network infrastructure in parts of the region.

Kuda As Nigeria's first mobile-only bank licensed by the Central Bank, it is often referred to as ‘the bank of the free’ and it focuses on providing an optimum banking experience for anyone in the country. This licensed digital microfinance bank helps Nigerians maximise their money by decreasing banking fees.

With a current account and a debit card, account holders can deposit money in over 10,000 outlets across the country for free. There are also tools to help customers track their spending and saving habits. An intelligent budgeting feature shows a visual analysis of expenditure helping customers to efficiently manage their finances, which has proved popular among the bank’s local base.

Frank Molla MD Sub Saharan Africa BPC About BPC Founded in 1996, BPC has transformed over the years to deliver innovative and best in class proven solutions which fit with today’s consumer lifestyle when banking, shopping or moving in both urban and rural areas, bridging real life and the digital world. With 350 customers across 100 countries globally, BPC collaborates with all ecosystem players ranging from tier one banks to neobanks, Payment Service Providers (PSPs) to large processors, ecommerce giants to startup merchants, and government bodies to local hail riding companies. BPC’s SmartVista suite comprises cuttingedge banking, commerce and mobility solutions including digital banking, ATM & switching, payments processing, card and fraud management, financial inclusion, merchant portals, transport and smart cities solutions. www.bpcbt.com

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TECHNOLOGY

Leveraging Technology to Improve Financial Inclusion in the United States The benefits of financial inclusion are known and numerous. Households lacking access to bank accounts or relatively affordable mechanisms for receiving, paying and spending money end up using a significantly higher percentage of their income on expensive, cash-based financial options. These options, like money orders and payday loans, tend to have much higher fees and usurious interest rates. Households suffering from financial exclusion are disproportionately poor and less educated. The highest percentages of these excluded households are in less well-off countries. But even in the United States, according to the latest FDIC surveys, 5.4% of households were unbanked. That group makes up 7.1 million households. Excluding people from the financial system also holds back economic growth; money that could have been spent on goods, services and education are instead trapped in the cash economy or used to pay punishing fees and interest.

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I believe the world is at a signature moment. Just as economic growth has dramatically reduced global poverty rates, ubiquitous, cheap and connected technology can dramatically reduce financial exclusion rates. It is now up to companies like NCR and the broader fintech ecosystem working collectively to make that happen. Together, we believe we can dramatically reduce financial exclusion within the next five years in the developed world, and within the next decade in the developing world.

Fostering increased access to technology, greater openness in the financial system, and a more robust and fair marketplace for financial products will move us towards this goal. Combined, these three forces factors are already driving a fastpaced revolution in fintech. This revolution is both a moral imperative to improve lives and a once-in-ageneration business opportunity that will benefit society by increasing overall economic growth.

Ubiquitous Digital Access Drives Opportunity While the Digital Divide still exists, technology progress and reduced costs are quickly shirking that divide.

According to Our World in Data, 640,000 new people come online every day. Smartphones and cheap or free data access are the critical instrument of progress. Today lowend smartphones cost less than $100 and forward-thinking carriers, such as Jio in India, are offering low-cost wireless data plans. While data plans for smartphones vary widely by country and are often pricey, Wi-Fi access is far cheaper and often free. If these trends continue, the number of people who do not have access to the Internet will continue to fall.

A whole generation of new banks, such as Chime and Monzo, have built businesses based entirely on mobile phone applications. In China, for example, where digital payments

TECHNOLOGY

are now the dominant form of exchange, the phone has become the predominant gateway to financial services. In the developed world, fewer people are using cash and employers are moving quickly away from paper check payments. COVID further accelerated the transition from cash to digital payments.

Traditionally, the unbanked and underbanked use digital financial services at a much lower rate than higher demographic households. But we have clear evidence that digital financial inclusion can work in less developed economies. In Africa, over 200 million people use mobile e-cash systems. In Kenya, the M-Pesa mobile cash systems is nearly universally adopted. With smart product designs, we can change that.

The M-Pesa system was designed with local culture and values in mind.

The tremendous pressure upstart fintechs are placing on traditional bank processes is causing a welcome unbundling of financial services, and competition on multiple levels. Venmo,

for example, offers to give customers who set up direct deposit instant access to paychecks. Traditionally, banks have taken a day or two to process these deposits. For the poor and financially excluded, two days can mean the difference between paying rent on time and incurring a penalty. Unbanked users who want to move money across borders in relatively small sums, as are common for remittances, can now pick from several options, including cryptocurrencies. Zelle, which is managed and owned by a consortium of major U.S. banks, allows users with accounts to instantly move money with no fees.

Concrete Steps Towards Inclusion While the winds of technology trends may be at our backs and the rapid rise of fintechs may be providing the impetus to rethink financial services, there are still a number of concrete steps that the financial services industry should consider.

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TECHNOLOGY

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Remove the usual obstacles. Minimum fee balances or service fees chase off low-income consumers. In fact, according to the World Bank, the primary reason the unbanked cite for lacking an account is simple lack of money. Clearly, this is something that is doable. CapitalOne, a major U.S. bank, just announced it was discontinuing overdraft fees while continuing to offer overdraft protection.

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Incentivize mobile banking. According to the World Bank, lower income consumers tend to have a mobile connection rather than home-based Internet. Designing mobile banking and financial services products that appeal to the unbanked will reduce exclusion. It’s also just good, universal product design. There is a very good reason why the dominant finance platform in most parts of the world that are either primarily unbanked or were only recently banked is the smartphone.

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Expand access points to advanced digital services. There is a good reason why convenience stores, supermarkets and other stores all have ATMs. This is because ATMs attract customers and make it easier for them to pay. In the digital economy, these same access points can take on an equally important meaning for stores as hubs of digital delivery of financial services, which might even be co-branded between the banks and the stores. Physical real estate combined with smart digital access points brings services closer to those in the community who might not make it into a bank branch on their own and who might otherwise not have easy access.

TECNOLOGY

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Emphasize prepaid products. In 2017, nearly 27 percent of unbanked U.S. households used prepaid cards according to an FDIC household survey. Prepaid credit cards or debit cards can offer a glide path to credit histories which can unlock other key doors. These cards are safer than cash or checks and can be used for online purchases.

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Find new ways to analyze customers and give them access. In the U.S, several companies are using artificial intelligence to create alternative and more accurate creditworthiness assessment systems. Created by exGoogle executives, Upstart looks at over 1,000 more indicators to assess whether someone is likely to pay their loans back. Upstart is actually more accurate than legacy credit rating products and it is particularly good at identifying people who might not get credit under traditional underwriting processes but are actually quite good risks.

Similar systems can work at lower levels of finance and loans, where the unbanked might operate.

Ismail Amla Executive Vice President, Professional Services NCR Corporation

Making these types of shifts will require us all to walk in the shoes of those who are on the outside looking in, to try to imagine what it might be like to live a life of financial exclusion.

The time is now. The technology is here. The opportunity is massive. Let’s make a big dent in financial exclusion, not in our lifetimes, but in the next decade – or even sooner.

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FINANCE

Financial Service Trends for Digital in 2022 Over the last two years, trends within the financial services industry (FSI) have irrefutably been shaped by a postpandemic world. Now, as we emerge from another year of uncertainty and constantly changing restrictions, priorities have shifted yet again. With more players than ever in the financial sector and a newfound focus on sustainability, 2022 is primed for major innovation within the industry.

If 2020 saw FSI businesses rushing to roll out digital transformations in an effort to meet increased consumer demand, 2021 saw companies refining strategies through customer-first digital experiences, harnessing the capabilities of AI and expanding platform offerings.

As a heavily regulated sector, conservatism and aversion to change often stifle the potential for innovation within FSI, however, COVID-19 accelerated this shift from physical to digital. Financial businesses therefore have no choice but to adapt in line with consumer expectations, with 58% of customers favouring digital channels for financial service delivery.

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Companies are not blind to the value of this, with a Deloitte report revealing that 38% of respondents from digitally advanced firms expected better revenue prospects in 2022, compared to just 13% for less advanced firms. Clearly, for both business and consumers alike, it pays to be digitally shrewd.

As we step further into 2022, here we examine the five key digital trends that will shape the financial sector as the year draws on: 1. Banks will take on more social and environmental responsibility For 2022, sustainability is at the forefront of the global agenda. With the recent shift in public consciousness towards climate change and ESG initiatives, it’s become increasingly important to consumers to support companies that they deem to be taking a proactive approach to combating environmental and societal issues.

FINANCE

From expanding ESG investment options to creating new C-suite roles such as ‘Head of Sustainability,’ financial businesses need to communicate a sense of purpose that stretches beyond simply profiting shareholders. With its unrivalled influence over wider society, FSI has a key role to play in shaping the future by committing to positive missions and tangible targets. Take HSBC and Santander for example, who have both pledged net zero emissions by 2050.

Equally, in 2020 ESG funds accounted for $51.1 billion of net new money from investors, a record and more than double the prior year. ESG stands for ‘Environmental, Social, and Governance’, with these types of funds focusing on companies that positively contribute to a more sustainable future, be it through mitigating climate change or inequality.

Besides simply appealing to consumers’ morality, however, ESG businesses are seeing considerable growth, with the International Energy Agency (IEA) predicting that renewable energy sources

will account for almost 95% of the increase in global power capacity through 2026. Consequently, in addition to such product offerings demonstrating more environmental consciousness, these funds are clearly also very lucrative opportunities for investors.

This year, sustainability within banking will become less of a trend and more of an established expectation from consumers. More banks will realign their focus to convey their sense of purpose in line with these new principles and strive to identify fresh ways to leverage their services and assets in order to effectively contribute towards sustainability.

2. Businesses will finetune digital strategies using AI AI has countless applications in FSI, from securing and facilitating transactions to data regulation and bias management. In recent years, however, the focus of AI has been to optimise customer experience through human-like, troubleshooting chatbots and gathering more

accurate real-time data to allow for seamless user experiences. Indeed, Juniper Research estimates that mobile banking chatbots will account for 79% of successful chatbot interactions in 2023.

Yet, beyond this increasing focus on providing valuable interactions for customers, in 2022 we’re seeing this focus shift towards harnessing the capabilities of AI to defend against cyber attacks. The unavoidable move towards digital banking and contactless payments introduces far greater potential for fraud, meaning more businesses than ever will need to use artificial intelligence in order to assist with compliance. AI, therefore, presents the opportunity to mitigate threats such as card payments and identity theft, with this information being more integral than ever before.

Speaking on its potential, Jane Loginova, CEO and co-founder of Radar Payments explained that she believes financial services will continue to invest in AI security platforms that “can significantly reduce digital attacks and spot suspicious activity in real-time.”

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FINANCE

3. Banking platform offerings will expand There are more players in the financial space than ever before, with a rising number of non-banks cutting into market share by incorporating financial products into their digital offering. Because of the typically longer transfer process and sticking points that exist within banking apps, consumers are increasingly turning to third-party payment providers like PayPal when purchasing online. In addition to the greater convenience they offer, solutions such as this also serve to add an extra layer of security to transactions.

This is no new concept, particularly in China where third-party online payments like Alipay accounted for 39.7% of online purchases in 2014, versus online banking transactions at 34.4%. Today, this number will have increased exponentially. In 2020 alone over 15 billion transactions were carried out on PayPal globally, generating $936 billion in transactions.

However, there is still much untapped potential in the sector. In fact, finance expert Simon Torrance estimates there to be a $3.6 trillion market opportunity for embedded finance, with this set to reach $7.2 trillion by 2030. Such platforms replace traditional distribution channels to facilitate simpler transactions between service providers and consumers, yet if banks are able to take learnings from this and offer their own seamless experiences, consumers have no direct need to refer to third-party alternatives.

Though banking as a service (BaaS) and embedded financial services are fundamentally different concepts, there is much opportunity for

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banks to address these pain points themselves. Chirag Shah summarises this potential, explaining that ‘By bundling white-labelled services that non-banks can give to their customers, banks will be able to build new relationships and discover new areas of growth’. In the coming years, we will therefore likely see banking platforms and their offering expand considerably, or at least develop in partnership with third-party payment providers in order to unlock new opportunities and bolster revenue.

Currently, just 31% of FSI businesses have centralised customer data across digital and offline touchpoints. Yet, with the potential that CDPs present for financial services to optimise customer experience, 2022 will undoubtedly see more businesses turn to CDP implementation to help them better contend with their fintech rivals.

4. Customer data platforms (CDPs) will help FSI businesses contend with competitors

Post-pandemic, brands scrambled to optimise their digital platforms in an effort to not get left behind.

It’s little wonder then, that many recent innovations in FSI have centred around providing better, more consistent experiences for customers.

Recent years have seen the capabilities of CDPs develop extensively, with real-time data collection being more advanced than ever, as well as more accurate profile unification and segmentation.

With consumers expecting seamless experiences as a standard across platforms, CDPs are a valuable tool in helping to deliver this within FSI. Data-driven insights allow for more personalised interactions and in turn better conversions, with CDPs enabling businesses to predict customer behaviour and tailor their targeting to this. Beyond this, however, CDPs are proving integral in helping financial services better manage their data governance.

Still, this success relies heavily on the data that businesses choose to collect through CDPs and ensuring that they effectively amalgamate this information into useful insights.

Rather than creating platforms designed with particular needs in mind, these platforms will need to learn to adapt to customer demands and be ever-evolving.

5. Companies will double down on creating customer-centric experiences

Even with this recent push, FSI businesses have a relatively limited offering when it comes to personalisation, particularly when compared against other industries.

Besides fairly superficial layers of personalisation such as swapping in a user’s name, the reality is that most customer journeys in finance are not particularly targeted. There is therefore a much potential to develop this beyond relatively toplevel approaches, with CGI finding that 79% do not mind banks using data to offer improved products, services and advice.

As FSI companies continue to improve their data collection around user journeys through CDPs, we expect this to see this translate into more optimised experiences for each customer, all of which place the consumer at the heart of the experience. Gradually, we expect to see every step of the user journey tailored around a user’s past interactions and specific needs, as has become the norm in other sectors.

FINANCE

T his re n e we d f o cus on customerf i r s t e x p e r ie n c e s wi l l i n turn s e e f in a n c ial p latforms become m o re in c lu s ive a nd accessi bl e a s b u s in e s s e s e xpl ore the ful l p ot e n t ial f o r p e r sonal i sati on. As w e ll a s d r iv in g b etter engagement f or F SI b u s in e s s es themsel ves, c us t o me r s will likewi se benefi t f rom f ar mo re u ni que experi ences t h at a re s e a mle s sl y i ntegrated a c ro s s p la t f o r ms.

While the pandemic has brought with it much volatility, it has also served to usher in a new era of innovation within FSI. Advancing digital strategies that put customers first and adapting in harmony with shifting consumer expectations is central to this new offering, with 2022 set to drive this transformation forward further with a particular focus on building towards a more sustainable future.

Ian MacArthur CEO Sagittarius

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BANKING

From process to experience: the next frontier is engagement banking

The traditional structure of incumbent banks, whereby each product is managed in isolation, along with the legacy technology that is entrenched into these companies, has left them in danger of losing not only new but existing customers to more technologically advanced and agile neobanks. Neobanks’ refreshing approach of putting the customer first, something that traditional banks have never prioritised, has left incumbents scrambling to catch up – but retrofitting innovative processes onto legacy systems has proved to be an almost impossible task. The solution for these banks lies in an engagement banking platform, helping to improve customer satisfaction and maximise efficiencies, and stemming the flow of current customers lost to the trendier challenger banks.

costs for their customers, better technology, and a clear plan for the future that incorporates customers’ feedback. This disruption has been strongly felt across the industry and the innovative, agile approach of challengers has posed an uncomfortable threat to incumbents.

challenger banks are beginning to capture the most economically active demographic: those under 30. More than two thirds of traditional banking respondents under the age of 22 responded that challenger banks had advantages over their traditional banking provider.

In fact, a recent survey from Which? ranked Starling Bank as the top banking performer across a number of areas: security, online banking and customer experience. At the bottom of the list were established giants including RBS, HSBC and TSB, all of whom scored below 60%, ranking particularly poorly in customer satisfaction.  And it is this point that has accelerated the success of challenger banks, and the declining reputation of traditional banks.

Traditional banks were over-confident in their position; they didn’t appreciate the extent of the threat that the challengers’ approach would pose to their business. So they continued with business as usual. But neobanks proved that they are here to stay, and the established banks were slow to the party, believing that their market monopoly was strong enough that they could simply ignore the disruption of challengers. As a result, they have been left stumbling for a solution – and they need to act fast.

An industry at tipping point

As  millennials and Gen Zs increasingly comprise a dominant portion of banks’ customers, this trend is only set to increase. Although 4 out of 5 people still have their primary account with traditional banks, according to a survey by Kearney,

In recent years, challenger banks such as Monzo and Starling have brought – as the name suggests – a range of challenges to traditional banks, including the promise of lower

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Customer is king Challenger and neobanks have long been taking a more personal, emotive approach to banking, intuitively understanding that a customer-centric approach is

BANKING

the key to success in the 21st century.

Meanwhile, however, incumbents are still in an era bygone, continuing to take an approach led by products, rather than the customer’s experience.

a mortgage application – becomes all the more important. Traditional banks have struggled to offer this in a timely manner, and neobanks have reaped the rewards.

This is creating a worrying pattern for traditional banks, whereby customers are actively switching to the provider that puts them at the centre of their business. Even when it comes to products and services previously monopolised by traditional banks, such as mortgages and loans, challengers are beginning to become more prevalent – and if they can develop a successful digital offering in these arenas, there is a real possibility that traditional banks could be reduced in status to little more than  behind-the-scenes utility providers – a trend that we are already beginning to observe.

System overhaul needed

COVID-19 has only exacerbated this problem and made acute the necessity for strong digital capabilities. As people become less and less likely to visit an in-store branch, a bank that can fulfil all their financial needs – from transferring funds to applying for

It is clear to see why challenger banks’ splash into the market has been so successful and why they are able to take customers from traditional banks.

For incumbents, then, the solution seems simple: change your approach and become more customer-centric.

But while the solution is simple, it is not easy. The structure of traditional banks presents the main obstacle to success; they know that there needs to be a shift in focus, from process to customer – but their siloed, productfocused structures make this difficult to achieve. Until now, the client experience has been low on banks’ list of priorities, meaning that there is no connected customer process. With each product treated as completely separate, a fine-tuned process of recording customer’s needs, wants and experiences across all touchpoints – something customers have come to expect – seems almost impossible.

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BANKING

There is a roadblock that halts these traditional banks in their tracks: technology. The IT infrastructure of traditional banks is flooded with monolithic technology, which renders banks inflexible and severely restricts their ability to rapidly deliver new experiences, products and services.

They are unable to keep up with the demand of customers today – the complete opposite to their younger, more dynamic and more innovative rivals.

Retrofitting new processes onto old systems would be impossible, and completely replacing their current systems to an API centric system is a high-cost, long term journey, and one that banks don’t have the time or capacity for: they need results now.

Finding a solution There is an alternative route to outcome for traditional players, in the form of an engagement platform approach. An engagement banking platform, wrapped up in a solid cloud offering, can create a scalable, flexible and agile process that puts the customer at the centre, creating a seamless experience, no matter the touchpoint or product line, across the whole bank.

Not only will this enable banks to improve customer satisfaction and increase customer loyalty, retention and acquisition – a key focus for any bank – but it will also maximise efficiencies.

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Banks will be able to upsell more effectively by accessing complete, real-time data on each customer, and every one of their interactions with the bank, all in one place – further helping to improve profit margins.

What’s more, a platform approach to banking drastically streamlines the employee experience, ridding banks of monolithic technology and reducing frictions, including manual processes, use of paper, and duplications, resulting in faster processing and lower costs. An empowered workforce further helps drive efficiency and customer satisfaction – creating a positive reinforcement cycle.

Although traditional banks are still holding onto their positions at the top table of banking royalty, their powers are beginning to wane – and challenger banks are filling the void.

As the new generation begins to comprise a larger share of banks’ customer base, challenger banks’ agile, customer-centric approaches will continue to strongly disrupt the industry, and traditional banks need to respond and adapt – and quickly – or they will find themselves demoted down the pecking order.

Jonathan Stallard Executive Backbase

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