Personal Finance. Money. Investing.
Updated at 16:07

According to Roberts Lasovskis at investment platform TWINO, the year ahead is an opportunity to get onboard with the changes happening all around us, embrace regulation, and create solutions that focus on the customers.

Lendy’s collapse in May and FundingSecure in October put a combined £240m of savers’ money at risk, while Funding Circle’s new withdrawal processes have raised investor concern among even the most well-established lenders. But there is light at the end of the tunnel, and the industry can be optimistic for 2020, providing last year’s lessons are learnt.

Firstly, there is one particular aspect of the two peer-to-peer collapses last year that has attracted much of the criticism from both media and investors. Both Lendy and FundingSecure came advertised as ‘approved by the FCA’, yet in collapse, both displayed structural faults and warning signs that should perhaps have been noticed earlier. Managing credit risk is an expensive learning process, but should be taken very seriously, and using as many data sources and as much testing as possible. Inevitably, these high-profile failures will cause a tightening of regulation across the industry. That is a good thing.

The sector should not just tolerate and survive regulation; it must embrace it. Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers. This is an inevitable step for a maturing industry, and now is the time for peer-to-peer to ensure its regulations are fit for purpose, and that investor money is not put at unnecessary risk.

Higher levels of scrutiny from administrators lead to better industry structures and more robust business models that generate greater trust from consumers.

As well as building consumer trust and engagement in the sector, increased regulation encourages the development of better products. When regulation works well, companies are forced to innovate and adapt to meet the new challenges, eliminating the number of shortcuts or ‘easy options’ that are taken when developing a product for consumers. Ultimately, this creates safer and more sustainable returns for investors.

Beyond regulatory intervention, it is paramount that in 2020 the peer-to-peer industry prioritises transparency - with investors, borrowers and other industry partners. Transparency and clear communication are key to rebuilding trust in the sector, and even in specific products. Take Funding Circle as an example. It is undoubtedly one of the most successful businesses in the sector, and yet has been suffering a recent crisis in trust, which has been largely caused by customers not fully understanding what procedural changes are going to mean for their money.

The changes in question are not necessarily the full problem. The model is no less safe and the business is no less high-profile. Nor do investors automatically object to the idea of a delay before they can access their money (look at fixed-term savings accounts for example). As with all peer to peer lending platforms, it is simply a question of understanding risk - customers misinterpreted the changes as a sign that their money was under threat and understandably rushed to protect it.


As with all communication, and this goes for most industries, the customer must always come first. Fintech itself exploded as a sector in the wake of the 2008 financial crash, as a reaction to bad practices in the financial services industry. New businesses and solutions were developed to fix the shortcomings in finance and financial services, and to pivot them back to a consumer-focus. Many are predicting an economic downturn in the next year or couple of years, following a decade of growth. Fintech businesses emerged from the last downturn by creating solutions that focused on their customers, and should do so again.

Peer-to-peer is a prime example of how fintech puts customers first, directly connecting those investors who want to see their money grow faster with those seeking convenient loans. For all the perceived problems in the P2P sector, the fundamental market for the products have not changed. By remembering where it came from, and the problems it set out to solve, the sector can still thrive in 2020, even if the predicted economic downturn materialises. To avoid the pitfalls other providers have fallen into, peer-to-peer must embrace regulation, communicate with transparency and focus on leveraging their expertise to provide trustworthy customer-centric solutions.

In a recent interview with Finance Monthly, Dame Inga Beale discusses the current state of the insurance industry, drawing a contrast with the innovations occurring in banking.

“If you speak to some of the challenger banks, and you say, ‘who are your competitors?’ They say, ‘Oh, we don't really have any competitors. We're so unique, we're so different to the old banks that we don't really regard them as competitors.’” she said.

“It's interesting how they think they've created something so new and innovative that they don't even regard the old traditional incumbents as being a threat.”

It has been a memorable year for FinTechs, culminating in British challenger bank Starling pipping traditional firms to the title of Best British Bank. Business Insider Intelligence reported in October 2019 that 68% of consumers are using a checking or savings account with a challenger bank. 83% of those surveyed claimed they are likely to switch to a challenger bank in the next 12 months. Beale believes it is a focus on the consumer that has driven a revolution.

“Insurance I believe is behind banking. I think it's because we haven't been putting the customer at the heart of what we've been doing. They [challenger banks] have appealed to the young generation much more and have managed to brand themselves in a modern, exciting way. I think insurance has got a bit of catch up to do” she said.

“We [insurers] often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”

“We often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”

The insurance industry has also been slower to adopt the innovations of InsurTech firms. Usage-based insurance (UBI) is increasingly becoming the norm but the implementation of technologies such as Robotic Process Automation (RPA) has been slow to market. While 30% of companies adopted this technology to review claims in 2018, no insurers were using it to evaluate the risk of insuring a client in the underwriting process. Despite this, the market for underwriting improvements is set to grow to over 60% by 2020.

“Most of the insurers these days are investing in incubators or innovation labs. But to actually amalgamate them into your existing business is the tough call. There are not many [insurance firms] that have mastered that yet,” says Beale.

“If they don't learn how to amalgamate this new InsurTech and this new technology approach, the interaction with a consumer will suffer. Consumers want a different type of product that's more tailor-made, responsive. We need to think differently and incumbent large insurers, unless they adapt, will be left behind.”

A multitude of choice is available to today's insurance consumers. Beale pointed out the moves the industry has made to simplify the process.

“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions,” she said.

“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions."

Though price comparison websites have now serviced an estimated 85% of consumers, Beale believes they may already have peaked.

Beale says: “There might always be a place for comparison sites but I think this idea, that you will partner with a firm and they would be your financial support is much more likely to be the future. Therefore, you will have a strong affinity with that firm providing the customer service is up to it.”

“I think you'll shop around far less on price because we'll be using data triggers to feed in automatically, and you'll feel, actually, that pricing is fair because I only paid for the exposure I had on that day.”

Beale also admitted that there is a long way to go before customer loyalty reaches such heights to make a dent in the role of price comparison websites.

“We tend to have people buying insurance products that are very geared to specifics; so people will buy insurance for their car, insurance for their travel, insurance for their home. We haven't yet managed to package that up nicely so that the consumer's life is made simpler.” she said.

“We've got a long way to go to build that ecosystem around an individual and surround you with this nice bubble of the financial protection and support that you need in your life.”

Since leaving the demands of corporate life behind, Inga Beale has become a regular keynote speaker with the Champions Speakers agency, where she specialises in topics such as diversity and inclusion, insurance and business management.

As a result, they can provide products and services that are faster, easier, and/or cheaper than that which traditional banks can deliver, but what are the key elements FinTechs should consider in this offering?

Here Scott Woepke, Head of Financial Services Strategy at Acxiom, outlines four pillars of fintech-customer relationships that will help fintech providers grow their market share.

Fintech companies are disrupting the financial services industry because they’re not tied to legacy operations, traditional organisational rules and established structures. They’re thinking differently, experimenting, and exploiting data to develop products and services that are easier to use, convenient, and sometimes cheaper than those of traditional banks.

Like all businesses though, fintech companies must build and nurture relationships with their customers.

  1. Usefulness

Customers don’t like to switch banks – only 3% of personal and 4% of business customers switch to a different provider in any year. They’re often risk averse and it’s difficult to convince them of the benefit. Historically, the common method employed to encourage people to switch banks is to offer a more competitive interest rate. However, for many customers, a competing offer of marginally more money or savings is unlikely to win them over. There is a zone of indifference where small price changes have little impact on perceived value.

So, it’s a tough sell and customers certainly won’t sign up to a new current account or move to an incumbent financial services provider simply because it’s digital. Having a shiny new website or phone app isn’t enough.

It’s important that fintech companies understand the problem they’re helping to solve, and that the solution fits into customers’ daily lives. Fintech products must make it easier for people to manage their finances and people will build relationships with businesses that improve their efficiency. Customers are attracted to fintech companies that help them manage their money better by, for example, helping them understand their income and expenditure or using AI to make real time recommendations. For the fintech-customer relationship to succeed, the usefulness of the product must be compelling.

  1. Ease of use

All things being equal, customers are unlikely to switch to a new provider offering a similar banking experience. A YouGov’s study indicates that one in five (21%) Brits have considered switching current account but ultimately have not gone through with it. This was despite compelling cash incentives and the Competition and Markets Authority (CMA) promoting a seven-day switching service.

So, to encourage customers to leave behind the traditional products and services they’re used to, fintech companies must create alternatives that are easier to use and access. The user experience and customer journey must be better than those provided by traditional financial institutions.

To motivate a switch, fintech companies must deliver a compelling and differentiated value proposition that may provide better pricing, but delivers accessibility, ease-of-use, convenience, and loyalty programs. Some fintech companies have also been successful with customer acquisition by offering new tools that introduce discipline and management of savings that help customers reach their financial goals – like saving for a holiday or to buy a car or home. A well-designed and compelling financial fitness programme will not only attract new customers, but it will help build much deeper relationships.

To motivate a switch, fintech companies must deliver a compelling and differentiated value proposition that may provide better pricing, but delivers accessibility, ease-of-use, convenience, and loyalty programs.

  1. Brand image

Only 55% of Britons trust banks, and only 36% think they work in their customers’ interest, so brand and reputation play important roles are intangible assets with economic value. A strong brand image will generate trust and establish perceptions of quality, value and satisfaction. Fintech companies must invest in increasing their brand awareness as customers are unlikely to open an account at a bank they’ve never heard of.

From a marketing perspective, it’s important to understand the importance of timing, offers, and channels for communication. In terms of timing, there are windows when customers are more likely to switch, for example, when they’re unhappy with their current provider. Lifestyle changes such as starting a family, moving home or getting divorced can also provide motivation for a change. The offer (or proposition) is very influential in the customer’s decision to switch providers. Finally, the channel of communication is critical and it’s important to remember mobile is the preferred channel for banking and content consumption.

  1. Trust

Handling money and customer data are the bread and butter of fintech businesses, so earning customers’ trust is essential. Any perception of risk will negatively affect the adoption of new technology. The importance of trust can vary by product (i.e. borrowing vs. investing) based on customers’ sensitivity about the service.

To build trust, fintech providers must ensure they operate within the laws and regulations of the countries where they are based. New technology is breaking down geographical boundaries, but it’s vital for the fintech-customer relationship that customers understand their legal protections and can trust that their assets are safe.

In the UK, the government has played a role in the definition of the technology and has provided financial backing of the infrastructure, making fintech services more acceptable to potential customers. Since January 2018, PSD2 and Open Banking have forced the UK’s nine biggest banks to release their data in a secure, standardised form, so that it can be shared more easily between authorised organisations online.

While fintech companies represent a threat to the incumbent financial services providers, they still have a lot of work ahead to overcome the customer inertia that exists with their providers. Understanding customer perceptions and needs will be an important factor to success and help develop a long term, sustainable fintech-customer relationship.

There’s no doubt that maintaining a continuous cash flow when running a SME is incredibly hard. Here, Catherine Rickett, debt recovery manager at Roythornes Solicitors, shares with Finance Monthly her top tips to keep the cash flowing as an SME business owner.

Between recruitment and staff retention, financial outgoings and ensuring the bills are paid on time, chasing unpaid invoices can often seem like a job that can wait for tomorrow.

Whilst many suppliers and clients will pay without a quibble, some are more difficult to enforce, and it is these conversations that are frequently fraught with confrontation. Often it can be difficult to have ‘that discussion’ with a client whilst attempting to maintain a good relationship and retain them.

Building solid relationships are invaluable in business, especially when you're just starting out, and the prospect of bringing legal action against a long-standing or important client can often be rather daunting. I would argue that this is a major misconception, as 85% of our solicitor’s demand letters result in payment in full and in the vast majority of cases without any adverse impact on the business relation in question.

Having a firm but fair approach to payment collection is key to ensuring invoices are paid on time and in full. With that in mind, here are our top tips to keep business cash flow consistent:

1. Be proactive about collecting payments from clients. Have solid, late-payment penalties and collections policies in place, and stick to them. If your client doesn’t hear from you as soon as the payment is overdue, you can be sure that you won’t be the first to get paid; he who shouts the loudest, gets paid first!

2. Make it easy for your clients to pay. The easier you make it, the more likely they will pay you. Consider having card payment facilities, BACS, direct debit, online payments or even PayPal.

3. Know your client! Consider undertaking a credit check on new or even existing customers if you are having difficulty in obtaining payment. It may be that your customer is unable to make payment due to their own financial problems.

4. Consider applying an incentive for early payment. Money is better in your pocket than theirs and whilst you may feel uncomfortable lowering your prices for early payment, sometimes it can cost more to recover debt than any discount applied.

5. Have clear procedures. You need effective systems in place, with standard letters going out on the day after an invoice is due, seven days after etc. It’s not an ad hoc ‘admin chore’; you need to be strict with yourself and your customers.

6. Keep a ‘cash cushion’. Ideally, this should be three months' operating expenses to protect you from unexpected cash flow issues. Bad payers are a business reality and if your company is working from an account balance of nil, one slow sales month could mean instant disaster.

We understand the need to preserve relationships so that commercial agreements can continue and our team of experts are able to have these difficult conversations on your behalf, starting with our solicitor’s demand letter for as little as £5 + VAT. Even if the problem is not resolved at that point, there is no obligation to commence proceedings and we will then advise our clients on the appropriate action to take.

Credit management has a vital role to play within any business. Its primary aim is to ensure customers pay their outstanding balances within the pre-agreed timeframes. When implemented effectively, it helps reduce late payments and improve cashflow, in turn driving a more positive liquidity position for the business. Below Martin de Heus, VP of Direct Sales at Onguard, explains for Finance Monthly.

All of this is fundamental to the work of the credit manager. Unfortunately, however, credit management departments don’t always believe their job also entails keeping the customer happy. Whereas sales and customer service departments might be trained in the arts of charm and diplomacy, credit management teams are more likely to value persistence and tenacity. After all, organisations want outstanding invoices paid as quickly as possible.

The issue is that the role of the credit management department also needs to be about maintaining positive customer engagement. Sales and customer service departments will have done their best – with the help of various tools and technologies – to get to know the customer and ensure their satisfaction. Maintaining this positive relationship is generally much trickier if the customer falls into debt.

It’s a delicate situation. The wrong approach may negate any early groundwork and jeopardise a potential long-term relationship. Nonetheless, these customers are in the credit manager’s portfolio for a reason: experiencing payment difficulties, in arrears or have already been transferred to a collections agency.

The organisation wants to keep Day Sales Outstanding (DSO) as low as possible, however the customer still expects to be treated well and with respect. Respectively, how can organisations create a positive customer experience despite these payment difficulties?

As credit managers are aware, the reasons for non-payment differ greatly between customers; there is never a ‘one size fits all’ approach. Some may be experiencing temporary difficulties. For example, an understaffed accounts department with a high workload might mistakenly overlook an open invoice. While some always pay late as a matter of policy, and others are genuinely facing cash-flow problems.

Because of these differences in circumstances, all these will act favourably to a personalised approach.

Today there is technology available that monitors each customer’s order to cash journey and this will segment customers, assessing who the customer is, what they need, what the risks are, their payment behaviour and how they prefer to communicate. Automated reminders, processes and actions can be created based on these segments. Consequently, communication with a customer who always pays late will differ from those with the customer who simply forgot to pay an invoice. This functionality provides customers with the attention they need, while at the same time, giving credit managers more time to focus on exceptions.

Because this software provides insights on the entire order to cash process, all stages of the journey can be optimised and KPIs achieved. This may include lowering the DSO, optimising cash flow, improving the ability to focus on the core business and focusing on a positive customer experience. It also gives a fully integrated overview of the cash flow forecasting and outstanding debts.

In short, a positive experience and the lowest possible DSO can co-exist – and a credit management team can focus on the customers’ needs and requirements. After all, with the right care and attention, a late-payer can suddenly transform into a loyal customer – and one that pays on time.

PSD2 had been previously described as a game changer for the financial industry, that was set to have a substantial impact on how mobile payments are conducted and authorised. Along with the challenges that face the mobile payments industry, there are also sizeable advantages to the new payment services directive that offer increased security for its users and a level playing field for payment providers. Shane Leahy, CEO of Tola Mobile, explains for Finance Monthly.

Since its inception in January 2018, many businesses which already operate within this space have argued that PSD2 hasn’t made an immediate and significant impact within their processes like they thought it would. Having said that, it is clear that PSD2 has bought a whole host of benefits and opportunities for new players to enter the market and produce a strong, customer-centric offering.

Whilst it was initially reported to be disruptive, the new regulation update has allowed for a real opportunity to move out of digital services and into a new era of payment services. PSD2 is helping to standardise and improve payment efficiency across the EU fintech industry, all whilst promoting innovation and competition between banks and new payment service providers.

PSD2 not only encourages the emergence of new payment methods in the market, it also creates a level playing field for new and existing service providers to innovate, create and ultimately give customers increased choice and availability. It puts the customer back in charge and offers a secure protection of data regulations that merchants will have to abide by.

One of the biggest impacts for mobile payment providers has been the imposition of spending limits on the Mobile Phone Network Operators (MNOs). For them, and companies who are operating under the PSD2 exemption, the maximum transaction amount a subscriber can be charged is £240 per month. This is all for voice, SMS, data and third party products either offered and available to the subscriber.

Another impact has been the requirement for a two-factor authentication process on every payment, and the restriction on the ‘billing identifier’ being taken by the payment provider from the network. In this instance, the billing identifier is the mobile phone number, and this has to be provided by the subscriber during the discovery phase of the acquisition of the mobile payment. This aligns the process more closely to credit card payment acquisition. By having a two-factor authentication, a new level of payment authorisation and transparency not previously seen in mobile payments has been discovered. This brings new levels of trust that is more commonly associated with credit cards, but with more ease of use and convenience of using your mobile phone number to make purchases for goods and services.

Some banks within the industry have grasped PSD2 with both hands, including Dutch client bank, RaboBank. RaboBank is creating its own mobile ecosystem around mobile payments with a rich choice of value-added services, as it looks to move its customers from a SIM-based mobile payments model into the cloud - and becomes one of the first banks to tap into what PSD2 allows banks to do.

Recent reports from MobileSquared have seen that ticketing could be one of the biggest industries to be affected by PSD2, with a third of customers in the UK being keen to start using charge to mobile to buy low-value tickets such as bus fares and train tickets. PSD2 opens up the market to a full transformation that will allow big ticket items to be sold using direct carrier billing. This brings a whole host of benefits for ticketing merchants and its customers, that can benefit from a seamless payment system, quicker processing times and easily accessible.

With the continued effects of the new directive set to be felt across the next 24 months, payment providers in the European Union must ensure they are compliant with the regulations of this well anticipated update.

The customer is at the core of PSD2, and banks, merchants and new payment providers will be looking to become completely compliant with the changes to suit a more customer-centric offering. Payments via any IoT devices will become a more popular method for customers and merchants will look to push more mobile payments due to lower processing fees, subsequently empowering the customer even more. As the industry sets to move towards a more open and intelligent banking ecosystem, financial institutions and fintech companies should embrace the impact PSD2 is having and understand that it will continue to have an ongoing significant impact on their offering throughout 2018.

Online research from Equifax reveals over half (51%) of Brits under 45 years old would be interested in banking products or services from technology giants like Apple, Amazon or Google. Of those, 45% said that products or services like loans, credit cards or current account from these technology companies would only appeal to them if they offered better value than their existing bank.

Across all age groups, the level of interest in banking products from leading technology firms falls to 40%, with over a quarter (27%) of Brits stating they would rather use their existing bank as they’re more familiar with them.

Jake Ranson, Banking and Financial Institution expert and CMO at Equifax Ltd, said, said: “The recent announcement that Apple is joining forces with Goldman Sachs to launch a consumer credit card highlights how tech companies plan to shake up the banking industry, creating products and services to compete against the big high street banking names as well as newer digital entrants.

“Although a sense of brand familiarity pins many people to their current bank, there’s an appetite for new products and a desire for alternatives that can offer something genuinely different. The tech giants have a loyal brand following in their own right, if they can combine this with a competitive product offering we’ll see an interesting shift in dynamics as the fight to attract customers heats up.”

(Source: Equifax)

Online research from Equifax, the consumer and business insights expert, shows that using a debit or credit card with a pin number is still the preferred method of payment for 42% of people in the UK. Contactless methods followed at 34%, with the vast majority of these respondents (31%) preferring a contactless card to using their phone or wearable technology (3%).

The survey, conducted with Gorkana, also highlighted that the majority of consumers (66%) are happy with the current £30 contactless payment limit and only 16% think it should be increased. Of the people keen to see a higher limit, 13% would like to see it increased by a maximum of £10, and 39% would like the limit to be set between £40 and £50.

When asked why they would use contactless rather than cash, 34% see the speed of the transaction as the main advantage and 21% said it’s more convenient than making a trip to a cash point. Only 16% of people feel that contactless payments are more secure than carrying cash.

The research found that 45% of consumers withdraw cash just once a month or less, yet 28% of people surveyed said they would never choose contactless payments over cash. Despite the rising popularity of using wearable technology like watches to make payments, 36% of Brits don’t expect this payment method will ever overtake cards.

Sarah Lewis, Head of ID and Fraud UK at Equifax, said: “The rise in popularity of contactless and wearable payment methods is a hot topic right now but our research shows that retailers and service providers are going to have to accept a variety of payment types for some time to come. Many consumers have been early adopters of contactless and wearable payments, and really value the convenience of these options, but others remain wary and prefer the more traditional means.

“Contactless payment is not without its risks and these results show that consumers are well aware of this. There has been talk about increasing the contactless payment limit but this would simply increase the incentive for criminals to steal contactless cards, resulting in higher levels of related fraudulent activity. Contactless and wearable payments will continue to grow in popularity, but the financial services industry has a lot of work to do to make customers completely comfortable with these options.”

(Source: Equifax)

Amazon was once a small business selling books on the internet. Now it’s at the top of its game, with its hands in a multitude of baskets. Surely there’s a wide variety of lessons we can learn from their dynamic strategies. Below, Karen Wheeler, Vice President and Country Manager UK at Affinion, presents Finance Monthly with a guide to Amazon’s operations through the eyes of financial organizations.

It’s rare to meet someone who has never used the world’s largest internet retailer, Amazon. Whether it’s conquering Christmas lists, watching boxsets through Prime or managing life admin through the intelligent personal assistant Alexa, its offerings are endless.

This extensive list of services and benefits that are all designed around user convenience, simplicity and enhanced customer experience is one of the biggest contributing factors to its success.

Financial organisations, however niche or specialist, can take a leaf out of Amazon’s book when it comes to engaging with customers and harnessing innovative solutions to continuously improve their offering.

Here are five lessons financial firms such as banks and insurance companies can learn from Amazon.

  1. Put the customer at the forefront of any business model

Listening to what the customer wants has been the driving force behind many of Amazon’s products and developments. McKinsey’s CEO guide to customer experience advises that the strategy “begins with considering the customer – not the organisation – at the centre of the exercise”.

This can often be quite a challenging ethos for the financial services sector to buy into, particularly for the more traditional bricks-and-mortar companies where the focus is often on the results of a new initiative, rather than the journey the company must take its customers on to get there.

It’s a case of convincing senior management that the initiative is a risk worth taking and just requires some patience. Amazon originally launched Prime as an experiment to gauge customers’ reactions of ‘Super Saver Shipping’ and it was predicted to flop. Nowadays it’s one of the world’s most popular membership programmes, generating $3.2bn (£2.3bn) in revenue in 2017, up 47 per cent from 2016.

  1. Don’t wait to follow a disruptive competitor

To stay ahead of the curve amidst the flurry of fintech start-ups, financial organisations need to come up with their own innovative customer experience solutions, rather than allow newcomers to do so first and then follow suit.

From the customer’s perspective, a proactive approach will always go down better than a reactive one. Amazon CEO Jeff Bezos has previously spoken about tech companies obsessing over their competitors and waiting for them launch something new so that they can ‘one-up’ it. He once wrote: “Many companies describe themselves as customer-focused, but few walk the walk. Most big technology companies are competitor focused. They see what others are doing, and then work to fast follow.”

What sets Amazon apart is listening to what the customer wants and prioritising them over competitors.

A great example in the insurance sector is US digital insurer Lemonade, who last year set a world record for the speed and ease of paying out on a claim of just three seconds. This was done through its AI virtual assistant ‘Jim’ and has helped to kickstart a new trend of using AI in the industry. Ultimately, Lemonade listened to the masses in that most of us see shopping around for insurance and filing claims as complicated and admin-heavy. A quick, simple, paperless alternative would no doubt result in increased customer loyalty and, in turn, increased profits.

  1. Analytics are key for personalisation

It’s no secret that Amazon is one of the leaders that has paved the way for analytics. It’s through the company recognising the need for them which has led to customers becoming accustomed to personalisation and expecting it as soon as they have had their first interaction with a business.

Financial organisations are no exception to this and, while it may seem like a scary commitment to more traditional firms, it doesn’t have to be complicated. A classic, simple example is Amazon storing customers’ shopping habits and sending them prompts for new products similar or related to those they have purchased in the past.

In the financial world, digital bank Monzo is leading the charge by monitoring customers’ spending habits to offer them financial advice to help them save money and budget responsibly. For example, its data once showed that 30,000 of its customers were using their debit cards to pay for transport in London – so Monzo can advise them they could save money if they invested in a year-long travel card, for instance.

There are endless things financial organisations can do using customer data to provide the customer with an experience unique to them, rather than continuing to make them feel like just another cog in the wheel. At Affinion we believe in ‘hyper-personalisation’, in that these days it’s no longer good enough to just know a customer’s history of transactions with a company and when their birthday is.

Customers are getting more tech-savvy by the day and are expecting real-time responses with a deep insight into their interactional behaviour – they won’t remain engaged if follow up contact is irrelevant and untargeted. Customer engagement has moved on from companies communicating to the masses, it’s about creating tailored, intuitive relationships with them on an individual basis.

  1. Venture out into new areas

The way we live as a society is forever changing and, as we get busier and busier, any small gesture to make life that little bit easier goes a long way. The consolidation of services such as banking, insurance, mobile phone networks, utilities and shopping is a great way to ensure customers remain loyal to a brand as it will – if done right – add value and reduce hassle to their lives.

As an expert at disrupting industries, Amazon has taken note of this growing need for convenience over the years and has expanded its offering for customers, allowing them to carry out multiple day-to-day tasks with one account. In the last few months alone, Amazon has hinted that it may acquire a bank to break into the financial industry and potentially start its own healthcare company.

Regardless of size, financial organisations should always be looking for new areas they could tap into to broaden their offering and show customers that their needs are at front of mind.

  1. Always go above and beyond

A rising factor in the way that customers align themselves to a brand is its stance on ethical issues and its contributions back into society. It’s a shift that seems to be most prominent with Generation Y, as the Chartered Institute of Marketing found that 81 per cent of millennials expect companies to make a public commitment to good corporate citizenship and nine in 10 would switch brands to one associated with a good cause.

Amazon has gone that one step further, with its AmazonSmile initiative that allows the customer to choose a charitable organisation that it will donate 0.5% of eligible purchases to. Not only does this show Amazon’s commitment to charitable causes, it gives the customer control of where their money ends up.

This is an easy win for the financial sector, given that one of its sole purposes is to look after money and move it around. For firms that target younger generations in particular, looking at ways to involve customers in charitable donations in a fun, transparent and seamless way is a no-brainer for increasing loyalty and advocacy.

Always a chore, never a pleasure

For many people, personal finance is perceived as a chore and often quite complicated. Improving the customer experience and building in programmes to engage them can help greatly with this and financial organisations need to adopt the ‘customer first’ ethos that Amazon showcases so effortlessly. With new fintech disruptors creeping into view, keeping customers loyal has never been so important.

In 2018, consumers enjoy more choice and power over their purchasing decisions than ever before. The retail market has evolved to the point where the strength of a product and its price no longer call all the shots. Below Peter Caparso, President North America at, explains why payments may even be considered a commodity in today’s markets.

To stand out with a clear differentiator, merchants now need to emphasise the customer experience. As an essential business function, payments have long been considered a utility. But perceptions have shifted, and to compete and thrive in a hyper-competitive retail environment, merchants must focus on delivering excellence across the entire customer journey – and that includes the all-important payment experience.

As digital innovation continues to transform how people shop, the quality of the customer’s remittance experience is now just as important as any other commodity or offer. It needs to be easy, intuitive and user-friendly. Ultimately, it must make the buyer’s life easier, not just ensure that the seller gets paid.

Delighting customers

When a customer becomes disillusioned or discontent with their experience with one service provider, they have the power to simply switch to another. In fact, research reveals that some 54% of customers are being driven to the competition because of poor service.

In this regard, payment solutions are no different to any other commodity. Merchants need them, but they aren’t dependent on any particular provider. Instead, they choose the one that provides them with a smooth and frictionless payment service. This is a critical element of the wider customer experience and plays an important part in winning and retaining business.

Providers, therefore, have to supply merchants with relevant technologies such as mobile and desktop functionality, and stay up to date with innovations like voice activated payments. To keep up with innovation and trends, retailers need to work with tech-savvy payment service providers (PSPs) that can provide exceptional customer service and experience to whichever user base they serve.

And as new technologies continue to evolve how payments are processed, a collaborative relationship between merchants and their PSPs will be all the more important. Working in this way will enable merchants to harness new, innovative solutions effectively – and to deliver faster, better services to match market demand. They can continue to attract and delight customers, and make a profit.

Tech driven excellence

The challenge for many merchants, is that not enough PSPs are aware that a payment is in fact, a commodity. What’s more, while many succeed in developing and providing a top-class technology solution, they fail to consider its usability.

The best solutions succeed in merging excellent technology (i.e. automation), with superior customer service. And to achieve the latter, there needs to be room for authentic human engagement. It’s an almost paradoxical combination but finding the right balance is hugely important.

When a merchant signs up to a specific PSP, the PSP has an opportunity to forge a strong relationship. It can collaborate with the merchant to help solve problems, develop improvements and progress business. Of course, the PSP needs to provide a mobile-friendly purchasing and payment service – or risk losing business. However, the ability to delight the merchant goes beyond simply meeting their tech-driven needs.

PSPs that don’t work with merchants in this way have a much harder task ahead of them. They’ll need to make sure that their technology is 100% perfect at all times. Of course, this is always worth aiming for – but, without a more collaborative relationship in place, it only takes one glitch to drive the merchant into the arms of a competitor.

As we head deeper into 2018, merchants need to go above and beyond and pay even more attention to the customer experience they offer – or risk falling behind their competitors.

The Top 5 Impacts of GDPR on Financial Services

The clock is ticking to the 2018 deadline to comply with the EU General Data Protection Regulation (GDPR). Acting now is critical for firms to avoid risking fines of €20m (or 4% of annual revenue) so advance planning and preparation is essential. Here Nathan Snyder, Partner at Brickendon, lists for Finance Monthly the top five considerations and impacts GDPR will have on financial services.

Amidst growing concerns around the safety of personal data from identity theft, cyberattacks, hacking or unethical usage, the European Union has introduced new legislation to safeguard its citizens. The EU General Data Protection Regulation aims to standardise data privacy laws and mechanisms across industries, regardless of the nature or type of operations. Most importantly, GDPR aims to empower EU citizens by making them aware of the kind of data held by institutions and the rights of the individual to protect their personal information. All organisations must ensure compliance by 25th May 2018.

While banks and other financial firms are no strangers to regulation, adhering to these requires the collection of large amounts of customer data, which is then collated and used for various activities, such as client or customer onboarding, relationship management, trade-booking, and accounting. During these processes, customer data is exposed to a large number of different people at different stages, and this is where GDPR comes in.

So, what does the introduction of GDPR actually mean for financial institutions and which areas should they be focussing on? Here Brickendon’s data experts take a look at five key areas of the GDPR legislation that will impact the sector.

1. Client Consent: Under the terms of GDPR, personal data refers to anything that could be used to identify an individual, such as name, email address, IP address, social media profiles or social security numbers. By explicitly mandating firms to gain consent (no automatic opt-in option) from customers about the personal data that is gathered, individuals know what information organisations are holding. Also, in the consent system, firms must clearly outline the purpose for which the data was collected and seek additional consent if firms want to share the information with third-parties. In short, the aim of GDPR is to ensure customers retain the rights over their own data.

2. Right to data erasure and right to be forgotten: GDPR empowers every EU citizen with the right to data privacy. Under the terms, individuals can request access to, or the removal of, their own personal data from banks without the need for any outside authorisation. This is known as Data Portability. Financial institutions may keep some data to ensure compliance with other regulations, but in all other circumstances where there is no valid justification, the individual’s right to be forgotten applies.

3. Consequences of a breach: Previously, firms were able to adopt their own protocols in the event of a data breach. Now however, GDPR mandates that data protection officers report any data breach to the supervisory authority of personal data within 72 hours. The notification should contain details regarding the nature of the breach, the categories and approximate number of individuals impacted, and contact information of the Data Protection Officer (DPO). Notification of the breach, the likely outcomes, and the remediation must also be sent to the impacted customer ‘without undue delays’.

Liability in the event of any breach is significant. For serious violations, such as failing to gain consent to process data or a breach of privacy by design, companies will be fined up to €20 million, or 4% of their global turnover (whichever is greater), while lesser violations, such as records not being in order or failure to notify the supervisory authorities, will incur fines of 2% of global turnover. These financial penalties are in addition to potential reputational damage and loss of future business.

4. Vendor management: IT systems form the backbone of every financial firm, with client data continually passing through multiple IT applications. Since GDPR is associated with client personal data, firms need to understand all data flows across their various systems. The increased trend towards outsourcing development and support functions means that personal client data is often accessed by external vendors, thus significantly increasing the data’s net exposure. Under GDPR, vendors cannot disassociate themselves from obligations towards data access. Similarly, non-EU organisations working in collaboration with EU banks or serving EU citizens need to ensure vigilance while sharing data across borders. GDPR in effect imposes end-to-end accountability to ensure client data stays well protected by enforcing not only the bank, but all its support functions to embrace compliance.

5. Pseudonymisation: GDPR applies to all potential client data wherever it is found, whether it’s in a live production environment, during the development process or in the middle of a testing programme. It is quite common to mask data across non-production environments to hide sensitive client data. Under GDPR, data must also be pseudonymised into artificial identifiers in the live production environment. These data-masking, or pseudonymisation rules aim to ensure the data access stays within the realms of the ‘need-to-know’ obligations.

Given the wide reach of the GDPR legislation, there is no doubt that financial organisations need to re-model their existing systems or create newer systems with the concept of ‘Privacy by Design’ embedded into their operating ideologies. With the close proximity of the compliance deadline – May 2018 – firms must do this now.

Failing to do at least one of the following now: a) identify client data access and capture points, b) collaborate with clients to gain consent for justified usage of personal data, or c) remediate data access breach issues, will in the long run not only cause financial pain, but also erode client confidence. A study published earlier this year by Close Brothers UK, found that an alarming 82% of the UK’s small and medium businesses were unaware of GDPR. Recognising the importance of GDPR and acting on it is therefore the need of the hour.

Against the backdrop of transformative technologies and the latest regulations, Graham Lloyd, Director and Industry Principal of Financial Services at Pegasystems, identifies for Finance Monthly what types of challenges financial services will have to navigate in their journey through 2018.

Successful social mediaThe growing discrediting of social media content and its practices comes at an awkward time for banks. The last thing they need is association with anything that could contribute more mistrust to their profile, but they cannot afford to ignore a powerful channel with such reach and strong links to here-and-now impact. It will be interesting to see how banks learn to handle social media with success.

Evolving customer engagementSocial media is just one element of customer engagement and there are far bigger issues on the horizon – digestibility, cost and effectiveness. Data mining is now so huge and its outputs so great that we should perhaps be referring to ‘big insights’ as there are so many of them. For most players, the problem is how to work out which insights to leverage within whatever time and budget constraints prevail.

Time to tackle trade financeWith trade finance risk-weighting kicking in properly in March 2019, we are entering the home straight for finalising the necessary business changes. Most players will presumably look to offset some of the costs of introducing capital requirements in this hitherto largely unweighted portfolio by seeking greater productivity/process efficiencies.

The truth is out about challengers! – Thus far, challengers and Fintechs have been portrayed as somewhere between a benediction and a panacea. The great generic USP – “we’re not a traditional bank” – has helped them weather all sorts of issues from low take-up to sub-optimal IT to almost-but-not-quite products, with scarcely a hard question asked. But the honeymoon period may be drawing to a close, and even in combination, they have still to take any serious market share away from big/traditional banks.

Possibilities of PSD2 – In the final run up to PSD2, there are sizeable revenue opportunities for a bank positioning itself as the ‘destination of choice’ for PISPs (Payment Initiation Service Providers). These new players will gravitate towards the banks offering a higher service standard and the least hassle, as the effects will flow through to the PISPs’ own customers and their expectations of security, certainty and convenience. Banks stand to recapture not only some of their own lost transactions, but also some which have flowed out of their competitors.

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