In a recently published report, S&P Global Ratings said it sees political risk and international investor sentiment toward the UK as the key risks facing UK banks in 2018 (see UK Banks: What's On The Cards For 2018). This isn't new--the UK banking system has operated against a constant backdrop of elevated political risk since 2014 and during that period, they have made good progress toward improving their balance sheets. Achieving stronger returns on equity has proved more elusive, however.
As the Brexit talks rumble on, we expect them and the related parliamentary processes to dominate the newswires. The UK's minority government increases political risk, especially as the UK is unused to operating with a minority government. Our sovereign rating on the UK has a negative outlook and our economists forecast relatively low GDP growth of 1.0% in 2018. Nevertheless, we anticipate that economic and industry trends will be stable for the UK banking sector.
We see some possibility of unsupported group credit profiles (UGCPs) being revised upward in 2018, if balance sheet strength further improves and earnings prospects accelerate, but it is hard to imagine wholesale sector upgrades, given the political backdrop. Unless the political and economic environment deteriorates more sharply than expected, or banking groups experience management mishaps, we consider the likelihood of lower UGCPs to be limited.
Uncertainties related to Brexit negotiations, specifically regarding transitional arrangements, are likely to weigh on business confidence, while inflation is set to outpace pay growth for most of 2018. We forecast that the economy will grow more slowly in 2018 than in 2017 as these factors weigh on business investment and private consumption. In our baseline forecast, we expect that economic growth will moderately accelerate in 2019 and 2020 while the UK transitions to its new relationship with the EU in 2021.
Only a rating committee may determine a rating action and this report does not constitute a rating action.
(Source: S&P Global)
Below Mark Boulton, Insurance Sector Lead at Fujitsu UK&I, delves into the introduction of automation and AI in the insurance sphere, touching on the future prospects of the insurance sector throughout 2018.
Insurance has always been a grudge purchase, often seen as a necessity or safety net, but not something that immediate benefit is felt from.
It will have been frustrating for many, therefore, to see that car insurance premiums have risen by 11% on average in the last year alone, according to the Association of British Insurers (ABI).
Many of us may even start to question the value we’re getting for our insurance purchases in light of such news.
The price – which is the most important factor in choosing an insurance package (A New Pace of Change, Fujitsu) – is just one element, however. Compounding this situation is the fact that people often find insurers difficult to deal with, particularly when trying to make a claim.
It’s this group of factors that demonstrate the opportunity the insurance industry has to transform itself into a more value-driven service for customers.
At the heart of any change will be technology, and two of the leading areas here are Artificial Intelligence (AI) and automation. How is technology impacting insurance for the better? There are three main areas to consider - customer experience, assessments and risk mitigation.
Personalisation
Think of going through a process for a life insurance policy. Multiple in-depth questions to taken into account age, lifestyle, and health, with an existing model applied to the answers provided.
Such models have been used for decades at some companies, resulting in off-the-shelf packages for people that do not necessarily reflect them as individuals.
Technology is helping change this. Based on any assessment and wider data analytics, automation can quickly produce more personalised experiences for the customer. This might be a payment model that suits their lifestyle or financial situation or a more nuanced insurance package to reflect their needs.
Such personalisation sit at the heart of the transformation. We’ve seen this across other industries, and it is one crucial way insurers can start to move from transactional-based relationships to value-based relationships with their customers.
Convenience and speed
It’s not just adding value of course, it’s getting the basics right. Services like Amazon Prime and Netflix have totally transformed the expectations we have of all companies when it comes to speed and convenience. We want things served to us exactly how we want them, and quickly.
Insurers have certainly made progress in recent years – for example, it is standard now for policies to be quoted and purchased online. More interestingly, however, is the use of apps and chatbots.
These give a holiday maker who may have lost their camera easy access to their policy, but also the chance to ask questions to the chatbot. Powered by AI, we can expect chatbots to play an increasingly important role in the relationship between insurers and policy holders.
Given the often complex nature of insurance policies, chatbots can be a simple way for people to get the answers they need. No need to phone customer services or wait an hour in a call queue; just direct answers delivered instantaneously.
Of course, there is still progress to be made with chatbots, but these will only get better in the years to come.
Apps and chatbots are also interesting because they both rely on and deliver vast amounts of data. The more these are used, the more they can be refined to give people services that suit them better. They fuel the personalised services.
Working together
It’s all very well talking about the benefits and transformative powers of technology, but making these a reality is something many organisations are grappling with.
Something I’ve observed in the financial services industry is the existence of distinct groups of employees. On the one hand, there are those innovation-focused, digital savvy experts who want agility, speed and flexibility. On the other hand, there are those who want to focus on the central facets of their areas products - keeping those long-standing traditions working in good order for the customer.
These two groups are naturally at odds. They often speak in different terms, work in different ways, and approach problems completely differently. Imagine the kinds of conversations that might come up with discussing emerging trends like AI and automation. It’s not easy for them to get to the place they need to.
To be able to respond to the concerns being voiced by consumers, and to harness the business agility needed to respond to market trends, insurance businesses from the c-suite down need to make a culture shift. Driving change from the top is the only way to future proof the business in a digital world that has already changed the state of play for good. We simply cannot afford to rely on the same rules.
Find your digital path now
Our ‘Fit for Digital’ survey found 98% of insurers believed their organisation had been affected by digital. A further 72% said their sector would fundamentally change in the next four years.
Change is inevitable. And the technology that will enable that change - including AI and automation – is here today. Insurers must find the cultural harmony to embrace new digital services and products, without losing the heart of what they already do well.
The next few years will see some insurers thrive and others struggle. To be a thriver, it’s vital to the right digital path now.
Millennial leaders are set to shake up traditional company management as they focus on building businesses based on both profit and purpose, new research from American Express has revealed.
Redefining the C-Suite: Business the Millennial Way, surveyed over 2,300 global leaders and Millennial managers - the future leaders of business - to better understand how businesses will change as Millennials rise to senior management roles. The findings also provide an insight into how business leaders today can set their companies up for success in the future.
The research found that while over half (56%) of Millennials surveyed in the UK said that a C-Suite role is attractive to them, and that they are more likely than their Gen X counterparts to want a job that gives them status, Millennials also indicated that they want to shake up traditional business leadership.
75% of Millennials think that successful businesses of the future will see management look beyond the usual models of doing business and be more open to collaborating with new partners. Millennial professionals also think that teamwork is a more important quality in leaders than Gen X-ers, suggesting that the C-Suite of the future will promote a much flatter structure in the organisations they lead. Millennials also ranked passion as an important quality in leaders (30%) much more highly than their Gen X counterparts (19%).
As part of their C-Suite shake up, Millennial leaders will put employee wellbeing at the top of their agenda. When asked what the biggest challenges are to businesses of the future, Millennials’ top answer was paying employees fairly (49%), followed by retention of talent (40%). 74% of Millennials also say that successful businesses of the future will need to support employees outside of work, compared to just 67% of Gen X-ers.
The research also found that while the majority (76%) of future Millennial leaders think that businesses of the future will need to have a genuine purpose that resonates with people, they also recognise the importance of driving a profit – something often perceived as being at odds with doing purposeful business.
According to the research, 63% of Millennials say that it is important for them to be known for making a valuable difference in the world, and Millennials are more likely to invest in CSR when running their own businesses (58%) compared to their Gen X counterparts (50%).
At the same time, UK Millennials were found to have a keen eye on maximising shareholder profit, with 53% of Millennials saying that shareholder profit will be important for the success of businesses in the future compared to 46% of Gen X-ers. To achieve success in the future, 71% of Millennials also think that businesses will need to manage costs tightly, and 77% say that financial transparency will be important.
Commenting on the findings, Jose Carvalho, Senior VP and General Manager at American Express Global Commercial Payments Europe said, ‘Millennials are demanding more from the businesses they work for – and will come to lead. This is setting the stage for an evolution of the C-Suite, where they will seek to put both profit and purpose at the heart of their businesses whilst also structuring them in a way to ensure tight cost management and efficient processes.
Jose continued, ‘This offers valuable insight for today’s business leaders as they seek to future proof their organisations and prepare for Millennial leadership. At American Express, we are dedicated to providing payment products and services that are designed to help companies effectively evolve and navigate change to ensure they continue to get business done now and in the future.’
(Source: American Express)
A recent report form PwC concludes that UK investment in InsurTech in the second quarter of 2017 surpassed that of the previous three quarters, increasing to $290 million (£218m) in the first half of 2017, compared to $9.7 million (£7.3m) the year before.
Global investment in InsurTech by global insurance firms, reinsurance firms and venture capital companies surged 247% to $985 million.
Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland has this to say to Finance Monthly:
“This year has been phenomenal for the insurtech industry in the UK, and these latest figures reflect it. Increasingly, we see the market gaining momentum, and the amalgam of data made available is reshaping the industry in an unparalleled fashion. Investors are coming to much better understand the values that lie within a connected world, from more dynamic customer relationships to personalisation and need for tailor-made solutions.
“Fujitsu’s recent research looking into the UK’s digital landscape showed that nearly 40% of people want the UK to make faster digital progress. As such, insurers need to keep up with the rapidly changing dynamics and unlock the power of technologies.
“Although many insurance companies have digital on their radar, it is important for this industry to take advantage of digital innovation by not only creating savvy online apps and improving the digital elements on the consumer-facing side, but by also implementing digital throughout the business. This will help insurers not only save more, but also become more integrated and process efficient. The amount of deals and investment in the past year are a vote of confidence and now is time UK claims its role as a global insurtech hub.”
While many younger drivers have been using so-called black box car insurance, telematics has yet to become mainstream. The FT's Oliver Ralph test drives a telematics system to see how it affects his driving, and whether it could be the future of car insurance.
Retail banks have an opportunity to differentiate with new offerings and control their own disruption. Find out how: http://cs.co/90018tx9R
The world of banking, perhaps more than any other industry, has undergone significant change in recent years. As technology, strategies and partnerships progress, we’re beginning to see new avenues of growth such as gamification, which according to Karen Wheeler, Vice President and Country Manager UK at Affinion, may hold the key to enhanced customer engagement for the banking sector.
The digital revolution has transformed the way people interact with their banks, within-branch visits falling as the rise of mobile banking has led to customers being able to manage their finances whenever, and wherever they are. And this trend is set to continue, with new figures from CACI revealing that mobile transactions are set to rise by around 121% between 2017-2022, and the average branch visits dropping from seven to four by 2022.
Traditional providers have also been faced with the uprising of challenger banks, which are striving to capture the attention of millennials with their agile, digital offerings. The territory of the high street stalwarts is being encroached on by the likes of PayPal and ApplePay which have disrupted the payments market, traditionally an area which banks dominated.
To stay relevant and encourage loyalty in an increasingly competitive industry, banks know they need find new ways to engage with their customer base. With today’s consumers never far from their smartphones, and moving fluidly between digital platforms, could gamification be the answer in the quest for greater engagement?
Gamification explained
Gamification originates from the computer games industry, and aims to engage with the principles of basic human psychology. In particular, it involves an understanding of what motivates people, how we want to be rewarded – and what will make us play again. Or, for banks: stay loyal. At its core, gamification has a human centred design; optimised for feelings, motivation, insecurities and engagement.
Some of the aims of gamification include: driving a level of competition within users that results in increased usage and engagement; tapping into the human need for esteem and self-actualisation to increase the levels of motivation; playing on the human desire for power in an attempt to drive users to log back in and increase their status; and evoking similar reactions to those elicited by gaming by releasing chemicals which invoke feelings of excitement, euphoria and pleasure.
So, what does this mean in practice; how can gamification be used within the customer experience?
Bringing gamification to life
There are normally a number of different mechanics used in gamification which include points (normally the main method of currency in a gamified system, as they play on the human urge to collect resources), and rewards, when a user earns points which can be translated into a ‘currency’ for exchange of goods and services (whether real or virtual), and gives the user something to work towards.
Building on the idea that we are all naturally seeking power and status, badges are also used to symbolise accomplishments and play on the human desire to show competence, and leaderboards are used to recognise achievements and promote friendly competition between users.
In recent years, gamification has evolved from its traditional rewards-based platform, to one fuelled by sophisticated data-driven capabilities which allows businesses to offer personalised, user-centric experiences. This is no surprise when you consider the way we now live our lives; the proliferation of devices, apps and social media channels means our expectations of the digital customer experience are high.
How can banks use gamification in the customer experience?
Gamification is actually not a new concept in banking; it has always been part of their set-up and is now growing, driven by customer behaviour and digital capabilities. Back in 2011, Gartner predicted by 2015, more than 50 percent of organisations that manage innovation processes will gamify those processes. With this date now far behind us, how accurate was this prediction?
Back in 2013, Spanish bank BBVA led the way with incorporating gamification into the experience it offered customers. The provider analysed how its customers interacted, and found that many felt more secure in going to the branch to complete their transactions. BBVA Game was launched to encourage customers to use its digital platform; with the ultimate aim to improve their customer retention and online customer experience.
The game allows people to make account enquiries, pay bills and carry out different kinds of transactions. Where the gamification element comes in to the mix is that, with each completed transaction, the users will earn points. There are also challenges and missions for users to undertake, with medals and badges being rewarded – which can then be shared to social media.
What can traditional banks learn from challengers?
BBVA has also invested in the development of Atom, the digital bank leading the charge for challengers. In a clear sign that Atom wants to its customers something different, it acquired software company Grasp, which specialises in games and virtual reality development, to build its digital platforms. Atom claims to “celebrate your individuality in every way”, by allowing its customers to choose a logo, name and colours to personalise the app experience.
By allowing customers to adapt the interface to suit their preferences, Atom is tapping into the psychology of taking control by allowing customers to make their banking experience truly unique. European bank OTP banka Hrvatska has also recently announced impressive results from its new gamification platform, with 16.1% more clients signed up for mobile banking services and the number of clients using prepaid Mastercard increasing by 12.8%.
The future of gamification
Banks have to work hard to keep customers loyal, so changing the perception of banking away from a boring necessity to something more engaging is essential if they want to maintain their relevance and value in people’s lives. Gamification should be seen as a route to engagement; a part of the customer journey, not something separate.
Gaming creates positive emotion, drives social relationships and fosters feelings of accomplishment, by combining banking with fun, personalised and reward-based games.. This shift away from ‘banking as a service’ to ‘banking as an experience’ gels with the gamification model, and is one we can expect to see financial providers – both new and old – capitalise on as the digital revolution marches on.
Whether it’s in investing, a partnership, a sponsor, or simply a paying client, a sinking ship can cause a deep wound in the business. Here Rachel Mainwaring, Operations Director at Creditsafe talks Finance Monthly through the steps in identifying a failing house.
One of the fears for any business is that it won’t get paid for the work or services it has supplied because their client is in financial difficulty. This fear became more prominent last year when, for the first time in three years, there was an increase in businesses closing their doors through insolvency (up 24% on 2015).
Given the uncertainty within the UK economy after the Brexit vote, an increase in failures was not entirely surprising. But knowing who will be affected is a trickier call. When a company gets into trouble, it can often take the businesses it deals with by surprise. Unfortunately, a sinking business is not always as obvious as the Titanic going down with the band playing.
With 2017 set to be just as unpredictable as 2016, it’s essential that companies are attuned early to the signs of possible distress. Obviously a negative balance sheet and falling profit can indicate that a company might be failing – but results statements in Annual Reports or company filings can be issued many months after year-end and long after problems have begun to take hold.
There are other, less obvious signs that business leaders should be looking out for when doing their due diligence on the companies they are in business with, as well as those they may be about to start working with.
These signs can usually be found in a company credit report, which is why they really are worth investing in obtaining. Things to look out for include:
Changes in directors. It’s natural for directors to change occasionally within a business, but if it becomes a trend, or if a director isn’t replaced within a few months, it could be a sign of deeper issues within the company.
Directors with previous failed ventures. You can check individual directors’ histories – and if they have a record of previous failures, that could be a warning sign. Our data found that if a director has been involved in a company that has failed in the last three years, they are nine times more likely to fail again compared to a director who has never been involved with a business collapse.
Adverse payment information. According to trade body R3, at least one fifth of UK corporate insolvencies in 2016 were caused by late payment or the insolvency of another company. If there is an increase in the number of days a client is taking to pay their bills, that could indicate cash flow difficulties. Check whether their average Days Beyond Terms (DBT) has increased or whether they have any CCJs against them.
Spike in views of a company’s credit report. It’s natural that if other businesses are worried a company is getting into financial difficulties, they will check their credit status and report. So look to see whether there has been a rise in the number of views. It could be due to other issues, but nevertheless it can be a useful indicator.
Links with businesses with low credit scores. Many companies are owned by or have links with other businesses. Their financial position can have a knock-on effect on each other. So another thing to look at in a credit report is the information on linked companies and other businesses in the Group structure. Look at their credit scores and histories – it could be very worth doing.
It’s important to study a credit report carefully and not merely look at the topline statistics. It’s also important to do some of your own research. What’s been written about an organisation in the press, for example? Do you have contacts at other businesses who may have worked with them?
What’s more, it’s important to keep monitoring on an on-going basis: if they seem fine in January, that doesn’t necessarily mean they will be, come July.
It’s also possible to sign up for risk tracker alerts that automate your monitoring process and notify you when there has been a change to a company’s credit report – from a director leaving to the company receiving negative publicity in the press.
Keeping abreast of your clients’ credit status is not difficult to do. The small effort involved could pay for itself many times over if it prevents your business incurring a bad or irrecoverable debt.
Sopra Banking Software uncover why it is that men still dominate senior positions in Tech and why men are out-earning women, even in equal positions.
The UK gender pay gap won’t close until 2069 unless measures are taken to combat it now. That’s another 53 years that women will continue to pay a higher price for being female.
A study by McKinsey Global Institute found that in an ideal scenario, where female roles are identical to those of men, “as much as $28 trillion, or 26%, could be added to the global annual GDP by 2025.”
Gender Disparity in the Workplace
Laura Parsons, Senior Manager at Deloitte, shares these findings: Last year, girls outperformed boys in every science, technology, engineering and mathematics subject, and even though innumerable top-paid jobs demand capabilities in STEM subjects - 70% of women in the UK with a STEM qualification aren’t working in compatible fields.
What is it that pushes women out of these industries, and how do we secure them from entry level to senior positions, and offer support in pursuit of entrepreneurial ventures?
Unsurprisingly, McKinsey Global Institute found that 38% of women in the technology field feel that gender discrimination staggers growth and chances for progressing their career in the future. 60% of these women attribute not wanting to be a top executive to excessive stress and pressure. Of all the fields researched, these figures were among the highest.
Melissa North, head of human resources at Sopra Banking, shares: “Businesses are not taking adequate measures to ensure women feel they have the reassurance to pursue a work-life balance, including starting a family - and therefore women don’t succeed long term. Feeling like they must compromise having a family to have a career is one of the leading reasons women don’t stick around to get moved into leadership roles.”
Pip Wilson, entrepreneur, investor, and co-founder of amicableapps, adds: “Ultimately, the thing that will completely level the playing field is an even split between men and women in childcare.”
As a parent, Pip Wilson shared the domestic workload with her husband to be able to focus on the success of her business ventures. This often meant her husband would stay home while she worked, and vice versa.
Something as simple as employers providing or supporting childcare initiatives for employees could prove to be one of the most important incentives for females in the workplace.
Tech: A Growing Sector for Women
Entrepreneurs and business women, such as Melinda Gates, wife of businessman and philanthropist Bill, see the value of using tech to their advantage: “To me, the tech industry is one of the best places to work right now. If I was working again, I would work in biological science or tech or a combination of both. Every company needs technology, and yet we’re graduating fewer women technologists. That is not good for society. We have to change it”.
Women should view this as the best time to enter the tech market: more people are graduating from tertiary levels than ever before, and women are outperforming men in STEM subjects.
As businesses become aware of what this lack of gender representation means for their overall success, the more women will become empowered to hold positions they didn’t before.
It’s tough to identify whether the gender bias is due to subconscious views during the recruitment process, or from the ongoing cycle that sees women receiving lower pay and fewer promotions, thus resulting in women keeping themselves placed below men through these continuous actions. The social constructs for gender roles will take time to be broken down.
There is good news for women, however. Studies show that those who ask for the same salary as men, in the same role, tend to get offers in line with what they are asking.
What Should the Workplace Look Like?
Take gaming for example: Women make up only 22% of game developers, yet represent 50% of the people who play video games.
As a business woman and consumer, Pip Wilson believes that people inside your company need to reflect the people you’re trying to serve.
Businesses need to recognise the responsibility they have to women and gender equality in the workplace, but also the possible benefits that come with hiring from a larger pool of talent, that includes women:
- Increased labour supply
- Higher incomes
- Productivity gains
- Reduced poverty in developing countries
- A unique angle and approach to problems, due to a different atmosphere cultivated by women
Once a culture of diversity has been adopted and is naturally functioning, there will be a good discrimination in place – one that filters and keeps only the best for the job, regardless of gender.
How Companies Can Address the Gender Disparity:
- Provide practical career insights to educators and policymakers
- Create more support for women returning to work
- Share detailed information on the gender pay gap with employees and the public
Melissa North, Head of HR at Sopra Banking Software adds that networking is important, “Having a belief and not doubting yourself is important as a woman climbing the business ladder as well as making yourself visible to other women in the industry and talking about your struggles. Not chasing your dreams of going into a new field because of commitments attached to gender shouldn’t hold you back.”
Tips for Women in Tech:
Talk to others: Fight the temptation to ‘do it yourself’, and get help and advice from wherever you can
Find mentors and those who have been in your shoes before: male or female
Use tech to your advantage: A study done by Accenture details how mobile tech has made it easier than ever to balance work and home life. Exploit the connectedness, making use of mobile apps and cloud services. A successful business no longer requires a 9-to-5 in an office
Have confidence and trusting your abilities: Many women tend to believe they fall short in the skills needed to thrive in business. A lack of confidence means avoiding intimidating tasks or new disciplines, more so than some men, who are more likely to try
At a time when the tech industry and business overall is dominated by males, women should take this opportunity to get a head start in whatever they want to achieve, using the various tools available in a changing world. Businesses should recognise this as an opportunity to empower women, and to attract the best new talent, regardless of gender – as it’s crucial to growth.
(Source: Sopra Banking)
Canada's economic progress has been driven by its historical preference for openness to people, capital and trade, Bank of Canada Governor Stephen S. Poloz has said.
In a speech marking both the 150th anniversary of Confederation and the 50th anniversary of Durham College, Governor Poloz looked at Canada's economic history and showed how all periods of substantial progress have been characterized by openness in these three areas. "The bottom line of our history is that openness and economic progress go hand in hand," Governor Poloz said.
While support for openness has ebbed and flowed over the years depending on circumstances, Canada's economic roots have meant that a preference for openness has tended to re-emerge, the Governor said. For example, the colonies that united at Confederation benefited from open trading with the United States before 1867. When they lost free access to the US market, Confederation became the strategy they employed to help the economy develop.
Canada's ascent also depended on people who understood the need for infrastructure to get resources to market, and how to attract the investment to finance these projects. "The people who developed what has become the world's soundest banking system were vital to Canada's development," the Governor said. Open markets, foreign investment and immigration remain absolutely critical for Canada today, Governor Poloz said.
Fears of openness are heightened during times of economic stress, the Governor added. However, experience has shown that such fears are misplaced.
"Our history shows that it takes a world to raise a nation, and nation building works best in an environment of openness for trade, people and investment," Governor Poloz said. "Our openness has helped us build a nation that I believe is the best place to live in the world. Imagine what we can build over the next 150 years."
(Source: Bank of Canada)
