Almost all successful businesses are born from innovation, either through making a process more efficient or making a product or service that’s better. As a result, it’s an important topic for business leaders, and a lot of time and resources are devoted to developing innovative business practices.
Sometimes, businesses are so eager to innovate and do things differently that they fail to consider whether the innovation is truly worthwhile. Simply changing business processes for the sake of change isn’t innovation unless it leads to better results. Corporate innovation is the answer to this issue. It’s the practice of carefully considering how innovation can best be used to deliver improved business results.
Because corporate innovation is still a relatively new concept, there’s a lot of ground to be covered. A lot of businesses, particularly those in competitive markets, require innovation to thrive. As a result, it can be beneficial to you or your business to learn more about corporate innovation. A corporate strategy course can offer insights into how to innovate and develop a business strategy for the best results.
Organisations that can strategically exploit innovation have an advantage over their competitors in today's rapidly moving business markets. By making the most of innovation, they’re best positioned to boost performance and profitability. Systematic innovation management proved invaluable in reacting to sudden changes in the market, either due to technological developments or changing consumer trends.
You can find corporate strategy and innovation courses online that teach you how to leverage the resources of your business to gain a competitive advantage. You can learn online for greater flexibility as you discover how to use innovation as a strategic weapon to distinguish yourself apart in a competitive market. Whether you’re looking to start your own business or want to improve your skills for your career, you can gain a lot through learning about corporate innovation.
Companies are always developing new products to market or modifications of existing products. An original concept is frequently the catalyst for a company's first success. However, growth comes with its own set of difficulties. Changing the winning formula can often seem like a major risk, potentially leading to worse performance and losing revenue.
Large, well-established businesses are especially prone to resisting change and becoming entrenched in their ways. Rather than reinventing the wheel, they prefer to expand on current items. Startups with fresh viewpoints and financial backing are upending entire industries with new technologies and innovative ideas in the modern world.
Those that are able to innovate are far more likely to gain a strategic advantage over the competition. Gaining a strategic advantage means being able to produce a better product or service at the same or lower cost. It’s an important aspect of a successful business, as being second best to the competition will limit opportunities for growth.
The first step in establishing corporate innovation is to set out a clear vision for what the company hopes to achieve.
Once these goals are set and understood, it becomes much easier to design a plan to reach those goals while also considering the conditions of the market. Aside from this, bringing in outside ideas can help speed up the process of innovation. This can be through hiring new and experienced faces, bringing in a consultant or networking with other businesses.
Dima Kats, CEO of Clear Junction, explains what open banking is and why businesses should care.
Open banking breaks down traditional barriers in the financial sector that kept customer data locked up. For years, the only way businesses and consumers could view financial data like transaction histories was through paper statements or web forms. The lucky ones may have been able to access data in PDFs, or perhaps as downloadable files for specific desktop programs. For most customers though, that put restrictions on how they could use that data. Open banking changed everything. It puts businesses and consumers back in control of their data, allowing them to grant direct access to third-party companies via application programming interfaces (APIs) operated by their banks.
Data access is important for fintech companies that want to enhance their own services, such as fast loan approvals or budgeting applications. An online budgeting service could use customers' transaction data to show them summaries of where they spend their money, helping them to plan their finances more effectively. Fintech also includes elements of artificial intelligence (AI), typically in the form of machine learning. The combination of access to larger amounts of financial data and the power of AI will enable businesses and consumers to glean new insights from banking services.
Initial access to that data has been difficult in the US, but on 9 July 2021, the Biden administration took a big step to support open banking's quest for data by introducing an Executive Order on Promoting Competition in the American Economy. The Order contained a series of measures covering issues ranging from the right to repair through to non-compete clauses. Among them was a request for the Consumer Financial Protection Bureau (CFPB) to consider new rules that would mandate portability for financial data. This move didn't happen in a vacuum. The CFPB had already issued non-binding guidance on open banking in 2017, followed by an advanced notice of proposed rulemaking last October that would give open banking principles regulatory teeth. Nevertheless, the Executive Order brings even more momentum to this issue.
Hard rules on data portability will have a significant impact on a US banking market that has seen an erosion of competition in the last few decades, with nine in ten banks closing since 1985. Gaining access to their data will give consumers and businesses more power to switch financial institutions. It will also spark a whole new wave of innovative competition. Smaller challenger banks in the US will be able to offer services using customers’ banking data.
Ushering in a new era of open banking in the US will also encourage cooperative relationships between incumbent and new financial players. Soon, consumers and businesses will be able to make their financial data available to fintech players who can use it to offer cutting-edge services at speed and scale, often in partnership with incumbent banks or with each other. Fintech companies will be able to use APIs to exchange data with banks directly so that they can complement each others' services and provide seamless user experiences.
The Executive Order was also a clear sign that this administration wants to keep laws and regulations in sync with new technological developments. This is encouraging, as it gives more certainty to new and rapidly evolving areas of the economy. Clear rules stipulating data sharing will encourage fintech companies to invest in more exciting services.
This development in the US will hopefully also stimulate competition abroad, where open banking concepts are in various stages of development. In Europe, version 2 of the Payment Services Directive (PSD2) took effect in 2018, imposing similar data portability rules. The results have been impressive. In the UK, 2.5 million UK consumers and businesses now use open banking-enabled products to handle their finances, according to the UK government's Competition and Markets Authority.
With the call for open banking now coming from the highest levels of leadership in the US, it's time other countries around the world align themselves with similar regulations that will encourage competition and partnerships in the financial sector. This will boost the customer experience with new and innovative services. It takes joined-up thinking to create a new era of joined-up services.
Price comparison website ComparetheMarket has been issued a £17.9 million fine by the Competition and Markets Authority (CMA) for overcharging on home insurance.
An investigation by the competition watchdog found that the site imposed “most favoured nation” clauses in contracts between December 2015 and December 2017 that prohibited home insurance providers selling on its platform from offering lower prices on other comparison websites, protecting ComparetheMarket from being undercut by competitors.
The CMA said that the policy “limited competitive pressures” on insurers selling through ComparetheMarket and made it more difficult for competing price comparison websites to grow and challenge the company’s entrenched market position. The resulting slack in competition between ComparetheMarket and these other sites also resulted in higher insurance premiums, according to the CMA.
“Price comparison websites are excellent for consumers,” said Michael Grenfell, executive director for enforcement at the CMA. “They promote competition between providers, offer choice for customers, and make it easier for consumers to find the best bargains.”
“It is therefore unacceptable that ComparetheMarket, which has been the largest price comparison site for home insurance for several years, used clauses in its contracts that restricted home insurers from offering bigger discounts on competing websites — so limiting the bargains potentially available to consumers.”
ComparetheMarket hit out at the ruling. “CompareTheMarket.com is disappointed with the CMA’s decision and does not recognise its analysis of the home insurance market,” the company said in a statement.
“We fundamentally disagree with the conclusions the CMA has drawn and will be carefully examining the detailed rationale behind the decision and considering all of our options.”
ComparetheMarket is one of the UK’s largest price comparison websites and well-known for its television adverts featuring meerkat puppets.
Driving customer loyalty has always been an important initiative for financial institutions, but COVID-19’s profound impact on the world has fundamentally changed how financial services companies now view loyalty. As more and more interactions shift online to virtual channels; customer behaviour changes as economic constraints hit home; approaches to risk change; and digital sales and services accelerate – the value of progressive data strategy and culture is all the more crucial.
As McKinsey’s recent report highlights, as revenue growth and customer relationships come under pressure, banks will need to rethink their revenue drivers, looking for new product launch opportunities, as well as reorienting offerings toward an advisory and protection focus. Advanced analytics can help identify those relevant niches of prudent growth.
However, the high prevalence of data silos and the unprecedented growth in data volumes severely impacts financial institutions’ ability to rise to this challenge efficiently. And with IDC conservatively predicting a 26% CAGR data growth in financial services organisations between 2018-2025, there are no signs that managing data is going to get any easier.
The financial services sector was already extremely data-intense due its the large number of customer touchpoints and the lasting legacy of COVID-19 will see this expand even further. Beating this challenge will require financial institutions to focus on turning their quantity and quality of their data into governed and operationalised data. To gain competitive advantage and win the fight in driving customer loyalty, financial services firms need to eradicate their data silos and start benefiting from real-time business decision making.
Beating this challenge will require financial institutions to focus on turning their quantity and quality of their data into governed and operationalised data.
Defining a data analytics strategy is crucial for financial services organisations to increase customer loyalty and deliver a better customer experience. A solid data strategy holds the key to uncovering invaluable insights that can help improve business operations, new products and services and, crucially, customer lifetime value — allowing organisations to understand and measure loyalty.
In addition, a robust data strategy will help organisations keep a sharper eye on customer retention, using data to actively identify clients at risk of attrition, by using behavioural analytics, and then generating individual customer action plans tailored to each client’s specific needs.
In our survey of senior financial sector decision-makers, 80% confirmed that customer loyalty is a key priority, given that consumer-facing aspects of financial services generate revenue and are a critical differentiator. And, according to Bain & Co., increasing customer retention rates by 5% can increase profits by anywhere from 25% to 95%.
But increasing customer retention and improving loyalty is not easy. There are ongoing challenges to earn and maintain. For example, 54% of our survey respondents believe that customers have higher expectations of financial services experiences and 42% agree that digital disruptors that support new digital experiences, offerings and alternative business models, are encroaching on their customer base.
At the same time, regulation is a concern too, with 41% saying PSD2 and GDPR are impacting their ability to develop and improve customer loyalty initiatives.
Despite all these challenges, the business impact of poor customer loyalty – such as lost opportunities for customer engagement and advocacy (45%), higher levels of customer churn (45%) and lost revenue-generating opportunities (42%) – is too important to ignore. Given that it costs five times more to acquire a new customer than sell to an existing one — gambling on customer loyalty in today's highly competitive environment is a big risk to take.
That said, in a heavily regulated industry with a wave of tech-disruptors, keeping customers happy and loyal is no mean feat. But driving a deeper understanding of customer lifetime value and measuring the loyalty of customers is possible. The good news is that almost all organisations (97%) use predictive analytics as part of their customer insights and loyalty initiatives, with three fifths (62%) using it as a key part. 65% also agree that data analytics enables them to offer personalisation and predict customers’ future behaviour.
Overall use of data analytics is maturing in financial services compared to other industries; 96% of the people we surveyed were very positive about their firm’s data strategy and how it is communicated for the workforce to implement. Although 48% did admit it could be improved.
This consistent need to improve is backed by McKinsey. Its survey of banks saw half saying that while analytics was a strategic theme, it was a struggle to connect the high-level analytics strategy into an orchestrated and targeted selection and prioritisation of use cases.
Revolut is one disruptor bank showing the world what a thriving data-driven organisation looks like. By reducing the time it takes to analyse data across its large datasets and several data sources, it has reached incredible levels of granular personalisation for its 13 million global users.
Within a year, the data volumes at Revolut had increased 20-fold and it was an ongoing challenge to maintain approximately 800 dashboards and 100,000 SQL queries across the organisation every day. To suit its demands and its hybrid cloud environment it needed a flexible data analytics platform.
An in-memory data analytics database was the answer. Acting as a central data repository, tasks such as queries and reports can be completed in seconds instead of hours, saving time across multiple business departments. This has meant improved decision-making processes, where query time rates are now 100 times faster than the previous solution according to the company’s data scientists.
Revolut can explore customer demographics, online and mobile transfers, payments data, debit card statements, and transaction and point of sale data. As a result, it’s been able to define tens of thousands of micro-segmentations in its customer base and build ‘next product to purchase’ models that increase sales and customer retention.
The 2 million users of the Revolut app also benefit as the company can now analyse large datasets spanning several sources – driving customer experiences and satisfaction.
Revolut can explore customer demographics, online and mobile transfers, payments data, debit card statements, and transaction and point of sale data.
Every employee has access to the real-time “single source of truth” central repository with an open-source business intelligence (BI) tool and self-service access, not just the data scientists. And critical key performance indicators (KPIs) for every team are based on this data, meaning everyone across the business has an understanding of the company’s goals, industry trends and insights, and are empowered to act upon it.
A progressive data strategy that optimises the collection, integration and management of data so that users are empowered to make and take informed actions, is a clear route to creating competitive advantage for financial services organisations.
Whether you’re a longstanding brand or challenger bank, the key to success is the same – you need to provide your services in a timely, simple and satisfying way for customers. Whether you store your data in the cloud, on-premise, or a hybrid, the right analytics database is central to understanding your customers better than ever before. By using data to predict and detect customer trends you will improve their experience and get the payback of increased loyalty, which is even more essential in a post-COVID world.
Liberty Global and Telefonica, the respective owners of Virgin Media and O2, have announced their intention to merge, converging their services into a single telecommunications giant likely to present a major challenge to BT.
O2 is the UK’s largest phone company, with 34.5 million users on its network that covers Tesco Mobile, Sky Mobile and Giffgaff. Virgin Media has around 3 million mobile users and 5.3 million broadband and pay-television subscribers.
The combination of O2’s 4G and 5G infrastructure and Virgin Media’s ultrafast cable network will create a joint venture worth upwards of £31 billion.
Liberty Global’s chief executive, Mark Fries, emphasised the potential that the merger could hold. “Virgin Media has redefined broadband and entertainment in the UK with lightning-fast speeds and the most innovative video platform. And O2 is widely recognised as the most reliable and admired mobile operator in the UK,” he said in a statement.
Jose Maria Alvarez-Pallette, chief executive of Telefonica, described the coming partnership as “a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical.”
Analysts have begun to speculate on other possible motivations behind the merger, and its likelihood of success. Professor John Colley, Associate Dean at Warwick Business School, suggested that the move may be “opportunistic”, stemming from the focus of the Competition and Markets Authority (CMA) shifting its focus towards business survival during the COVID-19 crisis rather than the protection of competitive markets.
“However O2 and Virgin Media are businesses that are benefitting from the present covid-induced state of affairs”, Colley continued. “One suspects that the CMA will take a keen interest in this merger.”
Mike Kiersey, Principal Technologist at Boomi, a Dell Technologies business, commented that the success of the merger will likely hinge on the two companies’ ability to bring their respective infrastructures into harmony with each other:
“To establish an efficient operating state, a clear integration framework must be put in place, whether that means the entities remain separate or embrace a purely integrated approach. In most cases, a symbiosis of both IT departments will be the likely result.”
Make no mistake: if Schwab can pull off a deal for TD Ameritrade then it has pulled off something of a coup. It is not just the deal of the year-in this sector it is the deal of many a year.
The market is slightly stunned but loves the potential Schwab TD Ameritrade tie up and well it might. Schwab’ share price is up by 7.5% since news of the possible deal broke. For its part, TD Ameritrade’s share price is up by 17%.
Schwab already ranks first by market share in the discount brokerage market. Snapping up the number two player TD Ameritrade means that Schwab would tower over the sector.
However, regulatory approval for the proposed mega deal is in no way guaranteed. But if Schwab can get over the regulatory hurdles – and that is a big if – expect Schwab to boost its earnings per share. For starters that will come through better monetisaton of Ameritrade’s sweep deposits. Then there are the synergy cost savings.
KBW suggests that an all-equity transaction could equate to 10%-15% EPS accretion for Schwab. And such a forecast may even be on the conservative side.
Schwab has about $3.9trn in client assets and over 12 million active brokerage accounts. TD has about $1.3trn in assets and services 11 million client accounts. In addition, it provides custodian services for more than 6,000 independent advisers. Only privately held Fidelity, with about 30 million brokerage accounts, is in the same league.
However, Spare a thought meantime for shareholders of smaller rival E*Trade. Any Schwab/TD tie up is the stuff of nightmares for E*Trade and its share price promptly dropped by 10%.
(Source: Retail Banker International)
Through a digital-only approach, challenger banks have made the concept of queueing in a bank branch to transfer money or waiting on hold on the telephone for customer support seem bizarre and almost prehistoric. In fact, new research from data firm Caci has found that the proportion of customers using banking apps is expected to rise over the coming years to 71% by 2024. At the same time, the proportion of branch users is set to decline to 55% by the same year.
In the face of simple, low-fee, mobile-first products and services from Monzo and others, traditional banks have so far been slow to respond and have risked losing customers whose loyalty they have historically taken for granted. Fundamentally, these new digital banks have proven themselves to be far more customer-centric than traditional banks by addressing pain points, fulfilling desires and engaging with users as individuals through the use of new banking apps and services.
However, there is a contrary point of view that argues that traditional banks should dismiss digital banks as trendy and inexperienced businesses with little hope of challenging their authority. This argument maintains the mistaken belief that their status as a historic brand/bank means that customers will remain loyal to them.
These new digital banks have proven themselves to be far more customer-centric than traditional banks by addressing pain points, fulfilling desires and engaging with users as individuals through the use of new banking apps and services.
While this may sound naive following the loss of market share from the big four legacy banks (Barclays, Royal Bank of Scotland/NatWest, HSBC and Lloyds) from 92% a decade ago to 70% today, there is a hint of truth in this argument. The Bank of England recently found widespread weakness among UK challenger banks in stress tests that showed that new lenders were cutting corners in the pursuit of growth. Over the last month, a new report from Fitch Ratings has found that digital disruptors are more vulnerable than established banks to an economic downturn and Brexit-related risks.
The risk associated with digital disruptors isn’t theoretical either. Over the past few months, Revolut has been linked to multiple scandals around the fact that it failed to block thousands of suspicious transactions on its platform. Despite reaching the 300,000 customer mark earlier this month, most of its customers still don’t trust the scandal-free Monzo enough to switch their main current account to the start-up’s app-based account. In fact, Monzo CEO Tom Blomfield told Reuters that only 30% of its users are using the app as their main bank account.
Legacy banks should, therefore, capitalise on their stability and highlight the risk of challenger banks in their marketing and advertising campaigns. The lack of trust in digital disruptors, however, won’t be enough to stop their rise. Unlike traditional banks, challenger banks have employees with tech, customer insight and digital media backgrounds. Coupled with a lack of legacy systems, these new banks are more able to digitally transform and shape their products and services to meet the needs of customers.
In order to retain customers and fight back against digital competitors, traditional banks need to innovate and reimagine customer loyalty. In banking, loyalty has often been code for inertia. However, against the threat of digital competitors, banks need to reinvent loyalty to make services personal and pleasurable in order to retain and grow.
In order to retain customers and fight back against digital competitors, traditional banks need to innovate and reimagine customer loyalty.
This means utilising resources and experience in order to provide the excellent service they’re promising to their customers through being truly digitally enabled. For instance, engaging fully with Open Banking rather than seeing it as a threat or inconvenience. Open Banking stipulates for real-time flows of data between banks and external partners and challenges banking providers to develop a deeper understanding of customers’ needs and behaviours, enabling the kind of innovation users now expect from financial service providers.
However, reimagining loyalty isn’t a technological project. Traditional banks also need to reimagine how financial services are conceived, designed and delivered, and how the brand that offers those services listens, understands and communicates with its audience - at an individual level. Without differentiating their services and listen to customers, traditional banks risk losing customers to competitors offering lower rates and more advantageous accounts.
Fundamentally, banks need to prioritise customers at an individual level and using the treasure trove of they hold about them to anticipate their needs and provide a great experience. While challenger banks are experimenting with new technology, traditional banks should be focusing on customer loyalty and how they can build it today - rather than relying on the loyalty of yesterday.
Without this integrity – and constant striving for health - a market risks becoming a venue for market manipulation, insider trading and other undetected criminal behaviour. Catherine Moss, corporate Partner at Shakespeare Martineau, explains for Finance Monthly.
Preventing behaviours amounting to market abuse, and tackling a lack of awareness of risk, has been central to the regulators’ quest for fairness for a number of years. So, following on from the July 2016 introduction of the Market Abuse Regulation (MAR), how is the UK faring and with a further review by the European Securities and Markets Authority (ESMA), what does the future hold?
Markets are driven, and develop depth, through pricing; and prices are – and have always been – vulnerable to manipulation. MAR, and its previous manifestations, were designed to identify behaviours which manipulated markets, or which allowed people to buy securities or commodities on a privileged basis with information which was not generally available to other trading parties.
The UK has had a legal framework around insider dealing and market abuse for a number of years. However, the introduction of MAR in 2016 formed a further part of a Europe-wide attempt at greater harmonisation, in response to scandals which came to light in the financial crisis and the greater complexity of the financial markets and emergence of alternative trading platforms. In the move towards a more congruent, European-wide, regime encompassing not only securities trading but trading in fixed income and commodity markets and related benchmarks, did the EU fulfil its markets’ needs? Leaving aside the question as to whether the latter could ever be achievable given the myriad trading venues now available, have market participants found the legislation fit for purpose?
The upcoming review of MAR will be undertaken by ESMA, looking into how well the regulations and directives are being implemented, whether the regime should be broadened, whether cross-market order book surveillance should be made subject to an EU framework; and, suggesting purposeful legislative amendments. Consideration is to be given to extending the regime to the foreign exchange markets. In addition, aspects of MAR which are still - unhelpfully - subject to specialist debate as to their scope, for example buybacks, insider lists and managers’ transactions, are to be further considered by ESMA.
At its simplest, there is a need to balance the desire of a company to access public money and trade its securities on a public platform against the requirement to adhere to the rules which apply to that market and its participants. It is crucial to the health of a market to ensure that information which may unfairly disadvantage other parties is not only managed securely but released in accordance with that market’s rules. Julia Hoggett, Director of Market Oversight at the FCA, put it starkly: “The life blood of all well-functioning markets is the timely dissemination of information, without which effective price formation cannot take place. The malignant form of that same life blood is the misuse or inappropriate dissemination of that information.”
However, as companies and their advisers know, market abuse legislation - whether EU or local - has been traditionally quite complicated and tricky to comply with. As the recent survey results from the Quoted Companies Alliance (QCA) demonstrates, issuers and their advisers have exhibited a broad range of responses to legislation which is meant to direct efforts to maximum harmonisation. However, these requires additional processes and procedures to be put in place, understood and adhered to.
Lack of certainty as to the MAR requirements, for example, on the duration of closed periods, is striking. The FCA has quite rightly observed that “awareness is not present in all market participants.” Given the FCA’s stated objective of making effective compliance with MAR a state of mind - at least amongst the community it regulates - it must be asked how this is to be achieved within the current, or future, legislative framework where achieving certainty as to the meaning of the legislation appears difficult.
Clearly, with the introduction of any new regulation, some companies and issuers adapt faster than others, particularly if they are larger and better resourced. It is obvious from the QCA’s survey results, however, that many smaller and mid-size issuers are still navigating MAR’s complex requirements hesitantly. But more worryingly, it can be seen from the pattern -and lack - of regulatory announcements that some issuers, particularly in less obvious and well-policed trading venues, seem not to have recognised the breadth of its application. Education clearly is key and greater regulatory and market promotion of the constraints which issuers are to work within is to be encouraged.
With the introduction of any new regulation, some companies and issuers adapt faster than others, particularly if they are larger and better resourced.
So, what should be done to ensure that the requirements of MAR become part of an issuers “state of mind”? Effective regulatory response can seem sometimes to be limited to the publication of extensive decision notices which are picked over by advisers, keen to ensure that practical examples of poor behaviour, or the failure of systems, can be relayed as precautionary horror stories to their clients.
Many issuers seek regular training sessions with their advisers or company secretaries and become more confident as the reporting and transactional cycle demands their attention. Others find it difficult to engage in the processes required. Some, however, are not well-served by the advisers operating in the market and sector within which they trade. The FCA appears keen to seek to educate all issuers but, inevitably, issuers are still tripping up as they fail to understand, or to take advice on, the requirements of the regulatory framework within which they operate.
Whilst the ESMA review of MAR is unlikely to change the regime substantively, some regulatory time should be devoted to tailoring it more expressly to an issuer’s needs and securing a greater measure of awareness. Whilst the regulatory burden is unlikely to be lessened, clarity of approach together with greater support from markets and trading platforms as to the implications of MAR to their issuers would be welcome.
“If you are not taking care of your customer, your competitor will” – Bob Hooey. And that’s exactly where loyalty programs come in. Why do they work? Rob Meakin, Managing Director at Loyalty Pro, explains.
Those are words for any business leader, retailer or independent store owner to live by. But actually, are you taking care of your customer? Are you putting them first, or your business first?
The difference between the customer of 2008 and 2018 is very different. Ten years ago, online retail was a relative youngster, the high street dominated retail purchasing and waiting 3-5 days for an online purchase to arrive wasn’t considered strange. Nowadays, customer loyalty has shifted from brand to service, Amazon now offers delivery within an hour and consumers do a vast amount of their shopping online.
The decline of the high street store and rise of online shopping have reduced footfall and revenue for many companies looking to compete in an increasingly shrinking space, particularly those in the independent retail space.
In a country with increasing inflation, tightening purse strings and a lack of confidence in its economic future, gaining customers’ loyalty and increasing repeat purchases is more important now than ever before.
Whether you’re an independent coffee shop owner or Managing Director of a local toy store, everyone is looking for a solution to increase footfall and entice the customer back.
Empowering the customer
This solution lies within a loyalty programme that addresses the needs and wants of the customer first and the business second. Yet far too often, loyalty schemes are designed with the latter in mind. Look at Tesco – they attempted to redesign their loyalty offering to make it “simpler” for the customer, but appeared to put their business interests first.
And what happened? The move not only alienated customers, but the social media and general public backlash was so pronounced that it forced the supermarket to delay rolling out their new scheme. What Tesco didn’t do was to think about what the customer wanted. Or if it did, it certainly didn’t do enough market research on it.
It put the supermarket on the back foot and facing a PR nightmare. It took power away from the customer by “simplifying” its vouchers, but what this ultimately meant was reducing some of the vouchers’ values. This was very much egg on the face for the UK’s biggest retailer.
The sweet spot of simplicity
Pulling wool over customers’ eyes in the case of the above example won’t go down too well. But actually, businesses are able to create a loyalty scheme that can find that perfect spot of simplicity and genuine reward.
If you’re a business that relies on repeat custom, you need an easy loyalty solution and one that isn’t going to drive away your customers, and you need to make sure you’re satiating the needs of everyone. In practice, not everyone wants loyalty in the same way; this means that you need to ensure that you’re covering both an app and a loyalty card – and even paper vouchers in some instances.
And there’s no use overcomplicating a points-based system, either. It’s not just about simplicity, but simplicity through choice; after all, it’s what you can do with the points that matters. Offer a discount or promotion at your own store. Allow the customer to donate to a choice of charities in the area. Work with other community stores and business owners to increase loyalty in the region.
Personalising your offering
If you do decide to offer promotions and discounts at your own store, make sure that the rewards you are offering the customer are tailored and personalised to that customer. Using the latest loyalty solutions that can take your data, enhance it and give you a complete customer view are essential for bringing the customer back to the store.
It’s about being clever with the data you have. If a customer is going into your coffee chain Mondays, Wednesday and Fridays generally, why not offer a personalised discount on the Tuesday and the Thursday too, specific to that customer? These days, consumers want the VIP treatment and to be part of the ‘membership economy’ – and you can do that through tailored schemes that cut through.
In this age of wavering customer loyalty, you need to deploy a loyalty scheme that is honest, personalised and simple. But these concepts are not mutually exclusive when we’re talking about loyalty in 2018.
Put your customer first so your competitor won’t have to.
With the rise of several follow ups to Bitcoin, cryptocurrencies are proliferating at a very serious rate. With ICOs left, right and centre, Bitcoin could soon be facing serious competition; or is the competition already here? Below Richard Tall from DWF explains why Ethereum could be the new kid on the block.
I was helping a client the other day, to identify some of the legal issues surrounding his cryptocurrency trading business. One of my questions to him was which cryptocurrencies he trades in - and he very kindly shared a list of them with me.
It was pretty long.
I have previously made the point that, in the last four years, humankind has invented seven times more "currencies" than the governmental currencies that already existed. The two most famous of these, to those of us not immersed in the market, are Ether - the token associated with Ethereum - and Bitcoin.
Seemingly to most, Bitcoin is a bigger beast than Ethereum. But does the latter present a threat to the former's dominance?
The present state of the cryptocurrency market
As I write this article, the market capitalisation of all cryptocurrencies has taken a hammering as they suffer further setbacks. These range from UK mortgage companies refusing to accept funds generated from cryptocurrencies as deposits for properties, to concerns about further governmental bans in jurisdictions such as South Korea.
All of the major cryptocurrencies have trended in much the same way, albeit they do different things. Ether's market cap today is about $102 billion (slightly larger than Kraft Heinz) and Bitcoin's is about $190 billion (about the same as Citigroup).
In 2017 alone, the value of Ether rose by 13,000 per cent against a somewhat modest showing of 2,000 per cent from Bitcoin. There is little point in trying to ascribe reasons to the differing levels of value increase though, as a market driven by those seeking to get rich quick is no real market at all.
Ethereum's perceived threat to Bitcoin is not a simple comparison of relative worth, then. There are essential differences to what each does and while Bitcoin is currently synonymous with cryptocurrencies in the minds of the public, as the market matures the value of both Bitcoin and Ether will be driven by factors other than the frenzied speculation which currently persists.
Crucial differences between Ethereum and Bitcoin
In reality, Bitcoin and Ethereum are quite different.
Ethereum is a computing platform which provides scripting language for smart contracts. This means that there is a blockchain upon which a number of contracts can be written and which automatically execute on the happening of a set series of events.
As with most blockchains, it is open source, which means that anyone minded to do so can use the Ethereum blockchain to write and implement smart contracts, which are simply a series of promises in digital form. A bit like a contract really, just with the word "smart" added at the front.
Ether is the unit of value deployed on the Ethereum blockchain, and consequently shares certain characteristics with Bitcoin. It is a potential store of value and is fungible between persons who perceive it to have a value.
Bitcoin is ubiquitous. It has become mainstream, can be used as a means of payment in a number of different arenas and is part of common parlance.
Technically, there are no limits to the use of Bitcoin. While it settles in a way different to dollars or pounds, it essentially does the same thing - which is not a lot, really. Money exists and it sits in our bank accounts. It may enable us to do things but in itself it does not undertake any activity.
Ethereum - more than just a cryptocurrency
As we are currently seeing, governments are starting to put restrictions on cryptocurrencies, driven not by a desire to see their citizens exchanging any particular kind of asset for another asset, but because their citizens are speculating on something which their governments perceive they do not understand.
Ether is simply a child of Ethereum. Ethereum is actually a huge computing network which enables anybody to build a decentralized application. A business, if it determined that it needed a blockchain developed solution, could employ a programmer to build that on the Ethereum platform.
Ether, while associated with the Ethereum platform, is capable of performing the same function as Bitcoin. Whether or not it does so is simply a factor of the parties to any transaction determining whether or not Ether has any value to them.
So back to the central question, is Ethereum a threat to Bitcoin? Probably not.
While Ether is clearly a competitor to Bitcoin, bearing in mind that the combined market capitalisation of both is way south of the market capitalisation of some of the world's biggest companies, there is room for both. Ether has the advantage of being associated with Ethereum, and Ethereum does what Bitcoin cannot do, and came to be because of the limitations and single function of Bitcoin.
Mainstream businesses are beginning to embrace Ethereum technology with banks and other entities using Ethereum-led solutions for things such as payment services. The biggest threat to Bitcoin remains Bitcoin itself, with the continuing creep of government regulation and the ongoing tag of financial crime driving market behaviours.
From AI to IP, with GDPR and cybersecurity in the midst, Karl Roe, VP Services & Cloud Solutions at Nuvias, tells Finance Monthly what’s in store for organisations using the cloud in 2018.
The Rise of AI
2018 will see Artificial Intelligence (AI) drive a transformational change among organisations and impact on cloud use.
ICT isn’t getting any simpler, and businesses are being forced to move faster as their customers’ requirements become more demanding. This is driving innovation in areas like AI, but automation of past processes won’t be enough to keep up with the “need for speed” in business agility.
We will see lots more AI projects and initiatives in 2018; it will be the cornerstone of change in automation of ICT. Proactive, automated, non-human decisions are now a necessity. Are the robots coming? Yes, they are – but we still need to develop the Intellectual Property (IP) to drive them.
IP Will Be Key
With emerging technologies like AI becoming more prominent in 2018, organisations are demanding bespoke software and solutions that solve their specific business problems.
As a result, companies are increasingly working with cloud service providers to gain a competitive advantage – this includes using public cloud providers to power their IP-centric solutions. Investment in infrastructure development is diminishing, replaced by a need for specific business-driven solutions that require unique software to bring these solutions to life.
From Partnering to Strategic Alliances
IP is the key, but many end users don’t have the time, resources or in-house skills to create their own unique solution that gives them the business advantage they require.
As such, they are forging long term business relationships with technology service providers who understand their need for change, and develop specific IP or software which utilises public cloud services, embraces AI, and most importantly which solves a business or specific customer problem.
Public cloud providers also need these strategic partner alliances to ensure there is a shorter time to value in moving workloads to the cloud, and providing solutions that move beyond IaaS (Infrastructure-as-a-Service) to fully utilising PaaS (Platform- as-a-Service).
PaaS as the Basis for Digital Transformation
We are starting to see the SaaS (Software- as-a-Service) players now extending into PaaS in response to customer demand.
Customers that are using a SaaS kingpin like CRM want to extend that platform into other use cases and requirements. It’s been a long time coming but as the world moves to a cloud-first strategy, the complexity in integrated public clouds is driving companies to explore PaaS.
Secure Cloud Services & Cyber Security get Board Visibility
Cloud services have been a safe bet in the Boardroom in recent years, but now the question is, are they truly secure? Decisions to utilise cloud services have been a relatively easy Boardroom decision, due to their known cost and agility. But with more and more high-profile data breaches, questions are now being asked around cloud security at a Board level within businesses.
The damaging nature of cyber-attacks is now clearly in the line of sight of Board members. GDPR will also raise more questions at this level, making cyber security in the cloud a Board level priority.
If everyone is one step ahead of the competition, how is it possible for anyone to be one step ahead? The FinTech sector is currently facing a complex situation where start-ups are one-upping tech giants, and vice versa, on a daily basis. So how is it possible to maintain an edge in the industry? Finance Monthly hears from Frederic Nze, CEO & Founder of Oakam, on this matter.
The financial services industry has entered the Age of the Customer -- in this era, the singular goal is to delight. With offerings that are faster, better and cheaper, new fintech entrants have the edge over traditional institutions who struggle to keep pace with consumers’ rising expectations around service. Yet this is not the first or last stage in the industry’s evolution. Just as telephone banking was once viewed as peak disruption, so too will today’s innovation eventually become the standard in financial services.
What will become of today’s new entrants as they scale and mature? The answer largely depends on why a particular fintech company is winning with customers today -- a hyper focus on problem-solving.
If customer review site Trustpilot is used as the litmus test for customer satisfaction, then clearly banks and other traditional financial firms are falling short of the mark. Looking at the UK’s Trustpilot rankings in the Money category, not a single bank appears in the top 100, and their ratings range from average to poor. Fintech entrants like Transferwise, Funding Circle and Zopa, on the other hand rank highly in their respective categories.
So how is it that such young companies have elicited such positive responses from consumers, beating out institutions with decades of experience and customer insight?
The advantage fintechs have over banks is that their products are more narrowly focused and are supported by modern infrastructure, new delivery mechanisms and powerful data analytics that drive continuous user-centric improvement and refinement. Still, they’ve had to clear the high barriers of onerous regulatory and capital requirements, and win market share from competitors with entrenched customer bases.
The halo effect of innovation and enthusiasm of early adopters, hopeful for the promise of something better, has buoyed the success of new entrants and spurred the proliferation of new apps aimed at addressing any number of unmet financial needs. This of course cannot continue unabated and we’re already approaching a saturation point that will spark the reintegration or rebundling of digital financial services.
In fact, a finding from a World Economic Forum report, Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services, in August this year stated that: “Platforms that offer the ability to engage with different financial institutions from a single channel will become the dominant model for the delivery of financial services.”
Whether a particular app or digital offering will be rolled up into a bank once again or survive as a standalone in this future world of financial services, will depend on the nature of the product or service they provide. This can be shown by separating businesses into two different groups.
Firstly, you have the optimizers. These nice-to-haves like PFM (personal financial management) apps certainly make life easier for consumers, but don’t have competitive moats wide enough to prevent banks from replicating on their own platforms in fairly short-order.
For the second group, a different fate is in store. These are offerings that are winning either on the basis of extreme cost efficiency (the cheaper-better-fasters) or by solving one incredibly difficult problem. Oakam belongs to this second category: we’re making fair credit accessible to a subset of consumers who historically have been almost virtually excluded from formal financial services
The likely outcome for the cheaper-better-fasters, like Transferwise in the remittances world, is acquisition by an established player. They’ve worked out the kinks and inefficiencies of an existing system and presented their customers with a simpler, cheaper method of performing a specific task. However, their single-solution focus and ease of integration with other platforms make them an obvious target for banks, who lack the technology expertise but have the balance sheets to acquire and fold outside offerings into their own.
Integration into banks is harder to pull off with the problem-solvers because of the complexity of the challenges they are solving for. In Oakam’s case we’re using new data sources and methods of credit scoring that the industry’s existing infrastructure isn’t setup to handle. In other words, how could a bank or another established player integrate our technology, which relies on vastly different decision-making inputs and an entirely new mode of interacting with customers, into their system without practically having to overhaul it?
For businesses who succeed at cracking these difficult problems, the reward is to earn the trust of their customers and the credibility among peers to become the integrators for other offerings. Instead of being rebundled into more traditional financial firms, these companies have the potential to become convenient digital money management platforms, enabling access to a range of products and services outside of their own offering.
Self-described “digital banking alternative,” Revolut was first launched to help consumers with their very specific needs around managing travel spending, but today has offerings ranging from current accounts to cell phone insurance. While some of their products are proprietary, they’ve embraced partnership in other areas, like insurance which it provides via Simplesurance. This sort of collaboration offers an early look at the shape of things to come in finance’s digital future
One might ask how the digital bundling of products and services differs from a traditional bank, with the expectation that the quality and customer experience will diminish as new offerings are added. A key difference is PSD2 and the rise of open banking, which will enable closer collaboration and the ability to benefit from the rapid innovation of others. What this means is that an integrator can remain focused on its own area of expertise, while offering its customers access to other high quality products and services
At Oakam, this future model of integrated digital consumer finance represents a way to unlock financial inclusion on a wide, global scale. Today, we serve as our customers’ first entry, or re-entry, point into formal financial services. The prospect of catering to their other financial needs in a more connected, holistic way is what motivates us to work towards resolving an immediate, yet complicated challenge of unlocking access to fair credit.