Blockchain is by now known as one of the leading technologies of the 4th industrial revolution and is set to have an impact as far and wide as the internet did. This month Finance Monthly delves into the growing world of blockchain, its biggest uses and the top companies that are using blockchain in their corresponding sectors: Banking, Energy, Retail and Gaming.
Banking
Once treated with caution, blockchain technology is now expected to cause substantial disruption to the banking industry, as banks and bankers are consistently seeking use of blockchain technology in order to transform sizeable areas of their business. From payments, settlements and compliance or identification, the accessibility to a decentralised platform by multiple parties at one time, cost-effectiveness and security benefits are winning legions of fans within the banking sector. Some of the main advantages and usage to blockchain technology within banking are:
Payments – Banks are able to shift their payment systems on to blockchain (or at least part of) or for launching digital currencies.
Trade finance – Blockchain technology provides a modernised update that many feel is necessary when it comes to working with various parties on goods shipment. The technology simplifies the process by enabling numerous parties’ access to the same information, at the same time, removing the need for unnecessary paperwork.
Identity – Due to the cryptographic protection blockchain technology provides, it is able to share a constantly updated digital record at all times to more than one person, or company - Great for customer identification and ensuring trust between consumers and banks.
Syndicated loans – Ideal for managing the lifecycle of a loan, Credit Suisse has already adopted the fashion of putting syndicated loans on blockchain technology.
Energy
Blockchain technology promises to help the energy industry radically transform its processes and markets. Although one of the slower industries to adopt the technology, for those who have, one of the many capabilities on offer is the adoption of a peer-to-peer trading model, which changes the way in which energy is bought and sold.
The rise of renewable energy sources that connect back to a wider grid, has helped convert energy consumers in to producers, therefore letting them sell excess power back to the grid and cutting out the middleman; in short it connects those who want green energy, to the producers who can supply.
The other common use within the energy industry is within the development of cryptocurrencies for monetary payments – something only a handful of companies have begun to trial, such as MARUY.
Retail
There are a few areas within the retail sphere in which blockchain currency can add value. The first is with trust and transparency. With the rise of online shopping, it is harder for retailers to earn trust from their customers, as the human element of a company is essentially being removed.
Blockchain technology will help to support the transparency desired by consumers. Similar to banking, all parties involved – supplier, manufacturer, retailer and consumer – can all trace a products journey and history and therefore, reaffirms the trust between retailer and consumer.
A second and obvious use for the technology is of course with payments. Blockchain promises a shared ledger where all financial transactions are recorded, eliminating the margin of error within the transaction. Blockchain also permits retailers to bypass the fees of intermediaries with a currency such as Bitcoin – this offers all the benefits of traditional currency, but without transaction fees and reconciliation issues.
One retailer trialing the use of blockchain technology at present is Walmart. The US chain is using the technology within its food division. The retailer is able to identify and remove food from its stores that has been recalled and using blockchain, the company is able to obtain crucial information from its suppliers, on its food sources, to ensure all vital food standard requirements are being met.
Gaming
Developments within the gaming industry are not uncommon and blockchain technology is now the next, or for some the latest, wave of disruption to the industry. The key shifting factor for gaming is taking it from a traditional hardware platform and on to the cloud, via a decentralized gaming ecosystem. Blockchain technology naturally lends itself to achieving this.
With blockchain, the gaming industry can be a much more enriching experience for gamers, as currently gamers – both casual and hardcore – invest a lot of time and money in to obtaining collectable, limited edition items within their games, however with the help of blockchain, they’ll be able to play and pay for their gaming needs using tokens, such as Playkey’s token, PKT.
Blockchain technology helps in this shift by encouraging owners of powerful gaming PCs and GPUs, to “rent” their servers to the individuals who don’t necessarily have the funds, or hardware they require, to play the games they desire. This means gamers will not have to invest in expensive gaming consoles and other hardware. The more developers look into blockchain technology, the more it becomes obvious that it is a natural transition for the industry.
Below Felicia Meyerowitz Singh, Co-founder & CEO at Akoni Hub, talks Finance Monthly through the implementation of PSD2 legislation this weekend, with an overview of open banking, what it means for financial services, and what opportunities are in store for banking customers.
It’s been a long time coming but we are entering an era of greater access and better financial services that will finally put the needs of customers first.
The catalyst of achieving this much needed and long overdue result is the culmination of big debate, endless lobbying and necessary government legislation.
For years banks have sat on the most valuable asset to any business: the infinite transactional and financial data of customers that essentially define individual’s tastes, preferences, budgets and - crucially - their requirements for building and planning their lives.
High street banks - reluctant to share their oligarchy of power, held on tightly to this data - unwilling to share it with others - or use it to enrich their consumer experience and put them at the heart of their business model.
With open banking, this power will be wrestled from the big incumbents and data will be available to third parties, SMEs and new digital players. This will lead to a better future for financial services, one that increases competition and creates a greater consumer experience. More businesses will finally have a shot at delivering services that are tailored and relevant to individual customers.
Open Banking will also strengthen the role and influence of FinTech companies that have the agility and open APIs to make data sharing possible and to disrupt the status quo. We have already seen new banks like Starling Bank taking the lead, by creating partnerships with other FinTechs to create a customer rich ‘Amazon of Banking’ experience.
Together with multiple significant other sources of data being made available with consent and through API format, this will finally deliver financial products in a simple and meaningful manner, with automated prompts as companies or market products change, resulting in data innovation and improved financial outcomes, as well as removing the hassle for enterprises, saving time and money.
Key to this is delivering analytics in an easily understandable form without overwhelming businesses - leveraging the rapidly advancing data science technologies, machine learning and AI, as well as outstanding design and user experience is part of the market change we are moving towards. While the UK and EU lead the way, there are early sprigs of global growth for international solutions.
Incumbents are not resting on their laurels. Many banks and financial institutions that make up the global sector are making impressive strides to capitalise on open banking, while also exploring valuable collaborations with new innovators that can help them harness the immense value of their data.
A great example is BBVA, which has embraced the digital movement and has set itself apart from other global offerings and is putting the client front and centre. The Spanish bank has nurtured the development of impressive FinTech firms – such as the digital ID startup Covault- while also making some canny acquisitions to keep it at the forefront of innovation that resonates with a new generation of consumers and keeps them agile and technology focused. This includes the purchase of digital bank Simple.
Open banking also presents some challenges. Exposing large quantities of personal consumer data could increase the risk of cyber-attacks, hacking and identify-theft. The possible reluctance of customers to share their personal data could also derail the initiative. Educating consumers and gaining their trust around data sharing will therefore be crucial to the success of this initiative. So too the need for businesses to share information within a secure platform and for online payment providers to be scrutinised by the rigorous laws in place.
If all goes well, the developments of open banking – and the opportunities they bring to consumers– cannot be overstated. Banks will get another chance at creating better value-added services, while SMEs will finally have the access they need to deliver what their customers truly want and ultimately transform their consumer experience. Additionally, corporates are also now included in the scope of Open banking, increasing pressure on banks to deliver improved services to the neglected business market.
We only hope that customers will see the value of it all to willingly share their data and banks will leverage their relationships of trust to deliver solutions of value to their commercial client base. With their consent, the blueprint for a better future of finance can be mapped out for generations to come.
From Baby Boomers, to Millennials, to Generation Z – as a society we’ve become all too accustomed with categorising people based on the year they’re born in. For banks in particular, it’s long been tradition to segment by age and build campaigns that target customers accordingly. Here Karen Wheeler, Country Manager and Vice-President at Affinion UK, explains to Finance Monthly why banks shouldn’t follow this tradition.
But, have they become too hung up on age groups? We’re now in an era in which we’ve never had more access to rich customer data, which should – in theory – mean that banks can better understand their customers’ behaviour, preferences and expectations. However, according to research by Vanson Bourne and Sitecore, 64% of UK consumers still feel like brands make assumptions about them based on single interactions alone.
Consumers are now easily frustrated by a business that doesn’t seem to understand them. So, what can banks do to prove they have a deep understanding of what their customers really want?
It’s time that banks shifted their thinking and took a smarter approach to segmentation. Basic grouping by age or gender is no longer accurate enough and developing a “segment of one” is key. Here’s three reasons why banks need to look beyond basic segmentation to build better relationships with customers.
1. Broad brushing generations can back-fire
There used to be a predictable life pattern, but now you can get married, have a baby, buy your first house or travel the world at almost any age. The lines are blurring, and things are becoming more fluid. It’s now recognised that just because two people are born in the same age bracket, it doesn’t mean they share the same experiences, needs, attitudes and desires in life.
For example, a 31 year old woman who is married and living in the country with school age children, has very different needs to a single, 31 year old women with a flat share in London. At best, irrelevant offers based on outdated life patterns can be a mild nuisance to customers, but at worst, making assumptions risks causing offence and can backfire on the brand.
Air France recently faced backlash after announcing that it will be launching ‘Joon’, an airline for millennials. Passengers of the airline will be served by cabin crew wearing “basic chic” uniform including white trainers, blazers and ankle-length trousers. Experts have excused the airline of stereotyping millennials and for assuming that every consumer born between the years 1981 and 2000 act and think the same.
2. Personalised offers have more impact
In the past, life stages were more fixed by age, but as society changes and with so much data now available, banks have the ability to build a much more holistic view of their customers which can enable personalised, relevant interactions – giving people what they like most, at the right moment in their lives.
A good example of a bank that’s already doing this well is Barclays. Its “Life moments” strategy is built upon carefully targeting customers with appropriate financial products and services as they approach new life stages, such as having a baby or buying a car – regardless of their age. More recently, Barclays announced it will offer recent graduate job interviewees free overnight accommodation in London, Birmingham and Manchester, after its research found that more than half of graduates surveyed said they had not applied for a job because of the amount it would cost to travel to the interview. By targeting this life specific stage, it positions them as a bank that not only has the best interests of graduates at heart, but a source of help during a time of need.
3. PSD2 is coming
2018 is set to be a game-changing year for banks. As the PSD2 (Revised Payment Service Directive) becomes implemented across the EU, banks’ monopoly on their customer’s transaction data and payment services is about to disappear. The new EU directive opens the door to almost any company interested in eating a bank’s lunch.
Before it’s implemented, there’s an opportunity for banks to use their ‘first mover advantage’. They shouldn’t wait for fintechs, AISPs or PISPs to encroach on their customer relationships, instead they should look at their own platforms and how they interact with their customers. Investing in tactics like better segmentation could improve and consolidate relationships at a time when it’s never been more important.
Many loyalty programmes haven’t worked for banks in the past. But is this simply because they’ve taken an outdated approach to UK consumers and not been personalised enough? Next generation customer engagement is all about tackling this with personalised content and interactions across more levels than ever previously possible. It’s about understanding the intangibles of human motivation to create more rewarding journeys, recognising the value of different rewards to different people and utilising new ways of collecting, storing and making sense of the data that’s generated.
If banks are to become truly valued in their customers’ lives, demonstrating an understanding of their priorities and anticipating their needs is key.
