IBSi Blogs

Across the globe, the pandemic massively accelerated the shift towards digitalisation across all sectors. Banks are no exception. The migration of banks’ IT systems onto cloud-native platforms promises to rapidly transform customer experience delivery, business continuity, operational efficiencies and resilience.

by Jerry Mulle, UK Managing Director, Ohpen

However, at what point do the benefits outweigh the status quo – and what are the motivations behind this pivotal transition in the industry? Legacy banking IT systems are increasingly unattractive to financial institutions in the modern world, compared with benefits offered by cloud-native banking, and are making digitalisation more appealing to them. Institutions are looking to evolve and modernise their services to deliver greater customer experiences. What’s more, implementing these new cloud systems can now be done faster, in a modular way and with minimal disruption.

Cut costs, save energy

Some financial institutions are still working with outdated legacy systems, relying on slow, bulky on-site local servers – and even excel datasheets in some cases – to run their processes. These institutions are now realising that they are losing out in doing so. The cost of maintaining such systems or enhancing them to meet new regulations can be immense. Decommissioning old IT systems and switching to a cloud-native platform can enable significant cost reductions – some of our clients, for example, have experienced cost reductions of up to 40% by doing so. Data, server storage and performance power suddenly become on-demand which enables the ability to scale up and down as needed.

Running legacy systems also has another long-term disadvantage: a larger carbon footprint. The pressure on financial institutions to move towards more sustainable models hasn’t increased from society and protests alone, but also from their own internal stakeholders. What’s more, with Europe’s top 25 banks still failing to meet their sustainability pledges, according to research by ShareAction, it’s clearly more important than ever for financial institutions to take tangible steps to reduce their environmental impact. Cloud-native banking can play a key role in achieving this.

Institutions can reduce the carbon emissions emitted by their systems by 80% when they switch to cloud-based IT alternatives, according to AWS, moving them further towards meeting their net-zero targets. What’s more, basing systems on the cloud replaces the use of heavily airconditioned server rooms for more efficient software applications and direct integrations with third parties, reducing unnecessary waste.

Unlocking agility and driving innovation

The reasons behind large financial institutions’ incumbency often comes down to the legacy systems they have in place. Sometimes dating back to the early 1990s, these bulky systems greatly reduce banks’ flexibility and capacity for innovation. Deeply ingrained into their overall strategy and ways of working, institutions often fear potential technical issues caused by replacing such systems with cloud alternatives. However, the transformation process is becoming increasingly less disruptive to everyday operations – delivering almost 100% system uptime.

Cloud systems also open doors to significantly more flexibility when it comes to creating new products and offerings. Cloud-native systems are based on an API first strategy allowing institutions to curate their own partner ecosystem as well as inherit best of breed integrations as part of the solution. As a result, banks are empowered with endless levers and combinations to create new propositions.

In addition to this, banking on cloud-native platforms is more accommodative to emerging AI capabilities, which empower banks to increase the efficiency and tailoring of the services they offer to their customers. For example, in areas such as mortgages and loans. Documents such as IDs and payslips, which are considered unstructured data, can be interpreted using AI, while connections into other data outlets like credit rating agencies can enrich application information. This ability to organise unstructured data means that we are nearing the times of one-click mortgages, improving the customer experience like never before.

Cloud-native systems therefore form an appealing prospect for large incumbents: not only do they provide a disruption-free entry point to use more efficient technology, but also offer an enhanced ability to adapt to the unpredictable ways in which financial technology will evolve. Cloud technologies will allow institutions to cement their place in the market by empowering them to tackle unknown challenges in the future – challenges that legacy systems will struggle to solve quickly – while simultaneously putting the customer’s needs first.

A future in the clouds

The solutions that cloud banking offers have both potential and clout, enabling banks to cut costs and empowering them to reduce their energy consumption, deploy AI in more efficient ways and prepare for future technologies. For customers, this means that innovative developments in financial services are becoming more directly available for their use. Customers will benefit from instant services, such as loans and mortgages that are automatically tailored to their personal requirements, all powered by AI. As a result, these elements compelling banks to move towards cloud-native systems, and captivating their customers, are set to keep unleashing innovation across the wider financial services landscape at speed.

Over the last decade, FinTech has transformed UK banking. This was most prominently seen in the rise of challenger banks like Revolut and Starling and remittance companies like Wise. Unencumbered by the need for branches and sensing chronic disillusionment with traditional banking, the newcomers created systems and products that customers wanted, often at better prices than traditional banks could offer.

by Philipp Buschmann, Co-Founder and CEO of AAZZUR

This sent those banks scrambling to frantically bring their products into the 21st century. All so they could offer a customer experience that matched that of the challengers.  This genuine focus on customer experience is FinTech’s most visible legacy. Thanks to the positive customer relationships companies fostered, incumbent banks now face an expectant customer base who are willing to move to get what they want.

That’s just the tip of the transformation. FinTech has reimagined what it means to even be a bank through Banking-as-a-Service (BaaS). This, combined with the data opportunities afforded by Open Banking, is FinTech’s real legacy and where the sector’s new players still lead most incumbent banks.

Traditionally a bank controls every aspect of its services. BaaS allows FinTechs to integrate their systems with each other to expand their own offerings or profit from others integrating theirs. Take Starling for example. It benefits hugely from opening its payment rails to companies like SumUp and MasterCard while simultaneously offering its own customers the services of FinTechs like Wealthify and PensionBee.

Traditional players in UK banking are already getting in on the action. Lloyds is working with Thought Machine, RBS with 11:FS. By integrating with some of the most innovative companies in the world they are able to vastly expand and improve their own offerings with relative ease. The most exciting bit is it’s not just banks doing this. Any retail business can now offer a vast ecosystem of financial products.

What, though, does this mean for investment in the sector? The end of the last decade saw billions of VC and private equity dollars annually pumped into FinTech. But the planet is a volatile place right now. It is this, more than anything else, that will dictate the direction of investment.

In times of crisis, investors seek safety, so expect a shift towards sure bets. In UK banking, this already seems to be the case. The biggest benefactors will be the largest FinTechs. Companies like Revolut, Starling and Wise are now, just like the very banks they were created to challenge, simply too big to fail.

Another big factor will be where traditional banks invest. As they continue to mirror the challengers, innovation seems most likely. Either internally or by partnering with smaller, agile firms like AAZZUR and focusing on the benefits of BaaS and embedded finance.

Further down the FinTech ladder, smaller startups are most at the mercy of the market. If global volatility stays roughly the same or decreases, investment should continue. The level of innovation at some of these companies is too high not to support.

But if something throws the globe – and, in turn, the markets – into prolonged chaos, expect funding to dry up for almost everyone but the biggest names. And if 2008 showed us anything, a few big scalps are still to be expected.

It’s this that makes me so certain embedded finance and BaaS are set to see an investment surge. Both from investors and businesses themselves. Why? Because they allow traditionally sluggish businesses to finally start turning a profit, offering their investors a genuine return. Most importantly, it allows them to detach themselves from investment life support.

Right now, that’s just good business but at some point, that could mean survival.

The pandemic has been a great accelerator of existing digital trends, with none more evident than eCommerce. Global volumes of online transactions skyrocketed with global eCommerce sales growing by more than a quarter in 2020. During this massive shift, embedded financial solutions went from being an emerging novelty to a near-universal feature of online retail, with huge technological advancements alongside Open Banking-friendly regulation paving the way for innovation.

by Tom Bentley, Chief Commercial Officer, Vodeno 

Online stores began offering their own financial products and services, like custom credit options, personalised cards and accounts and even insurance all at the point of sale. The convenience and accessibility of these products marked an indelible shift in customer expectations.

With embedded financial products growing ever more varied and numerous, retailers now need to stay at the forefront of cutting edge financial technology to keep up. And while pre-packaged third-party products offer a quick fix, retailers who integrate them run the risk of ceding both control of their user experience and valuable customer data. Smart brands are relying on Banking-as-a-Service providers who can deliver the technology, necessary licence and regulatory and compliance expertise needed to offer banking products directly within their ecosystem.

The wind is firmly in the sails of embedded finance, but we have only just begun to see the full scope of what it means for online retailers. So, what will its lasting impact be on eCommerce companies? And what should retailers expect in their future?

Behind the minds of retailers

To successfully predict what impact embedded finance will have on retail, we must first examine the driving factors behind its growing uptake. To this end, Vodeno surveyed more than 750 retail decision-makers from across the UK, Germany and Belgium to explore what has motivated the growing prevalence of embedded finance on their platforms, and what their plans are for the future.

Among those surveyed, there was no outstanding single reason for their adoption of embedded finance solutions. 41% selected ‘creating new revenue streams’ as a key motivator, while 40% chose ‘growing the customer basket’, viewing embedded finance as a means of increasing profitability. 40% viewed it as a means of increasing customer loyalty, and 38% wanted to improve customers’ satisfaction with the brand.

The difference between these motivations is indicative of the variety of benefits embedded finance has the potential to offer. It is not just a tool for increasing revenues or making the user experience more engaging – for 39% of respondents, it was primarily a tool for gathering improved customer insights.

When predicting the future of retail, these figures suggest that embedded finance has the potential to revolutionise retail as a whole, allowing businesses to build stronger bonds with their consumers while increasing sales volumes and leveraging data-driven strategies.

Examples of these new strategies are already emerging into the global retail market, with the US department store franchise Kohl’s recently announcing a new branded credit card that offers unique rewards and loyalty benefits to cardholders. With roughly two thirds (66%) of respondents stating that their business had engaged with technology vendors in the last 12 months to create their own embedded finance products, we can expect to see more and more of these types of use-cases in the near future.

What retailers can expect

The underlying technology and regulatory requirements of embedded finance are a major sticking point for non-financial businesses such as retailers.

Overcoming the difficulties of regulatory compliance was a primary consideration for 38% of respondents, who picked their vendor because they offered banking solutions independently with little development required on their part, and 34% prioritised vendors who had access to a banking licence for the geography that they operate in.

Given the extraordinary rate of change within consumer expectations today, having products that can be designed and launched at short notice is essential. 37% of respondents who had engaged with a technology vendor to implement their own products felt that being able to enable their retail partner to launch a new product quickly was a key factor in picking their BaaS partner.

What’s next for retailers

Based on the feedback from our survey, we can predict what the shape of the retail sector will be in the future.

We are not simply seeing eCommerce and embedded finance growing in tandem – embedded finance is elevating online retail by creating more engaging and rewarding customer experiences and making shopping online more appealing to users everywhere. We are seeing embedded finance bring brands and consumers closer together, and the attitudes and priorities of decision-makers today offer a glimpse into the retail landscape of the future.

There is limitless potential on offer for retailers who grasp the embedded finance opportunity firmly enough, but those who hesitate too long run the risk of being left behind.

The Indian government has achieved the milestone of inoculating over 150 crore vaccines. With the progressive unlocking happening in the majority of cities and villages across the country, the Omicron-led contagious third wave is anticipated to come under control soon.

by Vishal Maru, Senior Vice President Merchant Payment Services, Loyalty and Digital Payments, Worldline India

Physical shopping is regaining its lost glory as small retail outlets, malls are opening up while native markets are thriving. Amid all this, the requirement for quick, secure, contactless digital transactions remains a top priority for merchants and consumers alike.

Making embedded payment solutions available to all or any merchants across the country can help address these growing needs. Enterprise Resource Planning (ERP) solution has become critical for physical stores to assist in keeping track of inventory, system, and payment ledgers of the business. Today, most digital payment solution providers are realising the benefits of enabling ERP solution providers to integrate their billing software with POS terminals.

How does an embedded payment system work?

The embedded payment is about integrating payments options with enterprise resource planning platforms used by the merchants. This automates the process of entering the purchase amount manually in the POS terminals. It captures the card transaction details within the billing software for merchants. At the physical store, the selected items are added to the cart for billing by the merchant and therefore the system reflects the ultimate price including local taxes and discounts if any. Customers can pay by their preferred digital mode instantly because the waiting time is drastically reduced.

An advantage to the merchants

The Integrated system enables a merchant to supply quicker check-outs and error-free payment acceptance to the cardholders additionally to a quicker reconciliation of card transactions. Embedded payments on Android POS terminals make it a furthermore powerful and useful gizmo for merchants to manage their enterprise end-to-end because it is a mini kiosk with all features like payments, billing, inventory, reconciliation, customer loyalty, credit/cash history, BNPL, etc. on one single platform.

Embedded payments modernising most sectors

Embedded payments are changing the way businesses accept payment. It’s getting adopted across wide merchant categories like retail stores, hospitals and pharmacies, hotels, and quick service restaurants among others. This can not only help merchants to supply innovative payment acceptance but also first-of-its-kind contactless payment but automating their current billing processes and enhancing payment acceptance modes for quicker checkouts.

The growth within the size of the embedded payments is primarily thanks to increased government focus and initiatives that are aimed toward digitising the economy. It’s not to mention the customer-centric innovation that the industry is bringing to the table. As an example, POS terminals aren’t any longer limited to facilitating card transactions, it accepts payments via NFC-powered contactless cards, QR codes, UPI and offers several value-added services like EMI, DCC, among others. Additionally, it offers services like accounting and inventory management, payroll management, merchant financing, etc.

The connected POS helps hospitality players lead sales, invoicing, and orders at restaurants, rooms, activities, meals, and hotel boutiques. It will not only work in a restaurant but also for hotel activities, the boutique, and room service moreover. It ensures a connection between a hotels’ various departments, making it more efficient for the deployer while offering a flawless high-end customer experience.

From better inventory management to simplified invoicing, quick payments, and absolute customer satisfaction, embedded payments are adding value to the business and enhancing customer experience in every possible way for better and greater achievements.

As personal and business banking customers across the UK adopt digital technology at an accelerated rate in their everyday lives, this raises the industry benchmark for smarter, sleeker, and more innovative banking solutions.

by Jon Munnery, Insolvency & Restructuring Expert, UK Liquidators

The coronavirus pandemic is a testament to business agility, as financial institutions swiftly transitioned to online operations under unprecedented economic conditions and overhauled communication infrastructures to maintain customer relationships virtually. The banking industry witnessed a watershed moment in consumer behaviour as the temporary closure of bank branches pushed those most resistant to change and opposed to embracing digital banking to test the waters.

Now that most Covid-19 restrictions have been lifted, how has this affected the footfall of bank branches?

Is it the end of an era for high street bank branches?

Taking it back to before the pandemic, customers moved to online banking in droves which saw footfall figures gradually dwindle, and further decline when the pandemic hit. This led to a record number of branch closures, with hundreds more set to close in 2022.

According to a House of Commons briefing paper, the number of bank branches in the UK roughly halved from 1986 to 2014. The decline in bank branches can be attributed to the following factors:

• Cost-cutting measures
• Mergers within the industry
• Competitive pressures from new entrants in the banking sector
• Increasing popularity of internet banking.

Which? have been actively tracking UK bank branch closures since 2015 and can confidently conclude that bank branches are closing at a rate of around 54 each month.

The NatWest Group, which comprises NatWest, Royal Bank of Scotland and Ulster Bank, will have closed 1,154 branches by the end of 2022 – the most of any banking group.

Lloyds Banking Group, made up of Lloyds Bank, Halifax and Bank of Scotland, has shut down 769 sites, rising to 830 in 2022.

Barclays is the individual bank that has reduced its network the most, with 841 branches having closed – or scheduled to – by the end of 2022.

The pandemic sped up the shift to online and mobile banking and provided banks with the optimum opportunity to showcase the potential of their digital services on offer. Data gathered by YouGov Custom reveals that over half (56%) of consumers say they will avoid bank branches in the future – thanks to coronavirus.

A new age of cutting-edge banking technology

While the hospitality industry speeds the way in innovative food delivery and the retail industry revolutionises in-store customer experiences – the banking industry is cementing its position as a trailblazer in fintech.

Here are some technological trends in the banking industry that are making bank branches redundant.

• Mobile banking – The continued rollout of mobile banking services has drawn fierce competition from challenger banks responsible for driving away customers from household high street banking giants. The UK is leading the challenger bank revolution as the likes of Monzo and Revolut are best known for dominating the UK market. Revolut recently became the UK’s biggest fintech firm as its valuation peaked at £24 billion.

According to the Which? consumer champion’s current account survey, challenger banks are outperforming traditional high street banks, with users ranking Starling Bank, Monzo, and Triodos highly for their customer service and mobile apps.

The survey also found many traditional high street banks languishing at the bottom of the customer satisfaction table, often ranking poorly for service in branches. This not only diverts customers online, but fuels the takeover of digital banks and therefore, the decline of bank branches.

• Chatbots – Digital humans or robo advisors powered by artificial intelligence are in use by many banking providers to streamline the customer service journey and generate an instant response to customer queries. It also cuts out any necessary time spent by human chat agents to answer non-complex queries, for which answers can be automatically populated from the website.

Artificial intelligence is also being used to improve the efficiency of back-end processes, such as data classification and risk analysis.

• Mobile branches – Although digital banking is accessible for the majority, not everyone can navigate online banking services with ease. The demand for in-person services remains, albeit small, which brings us to the introduction of mobile branches. NatWest and Lloyds provide access to mobile bank branches to allow individuals to carry out basic banking, such as deposits and withdrawals.

While customers no longer need to visit a physical branch due to the advanced functionality of online and mobile banking, the expectation for fast and immediate customer services remains as customer support transitions online. In a world where support can be accessed almost instantaneously through the click of a button, the stakes are high for digital banks, their reputation and customer loyalty.

Cloud technology for distribution and processing of market and reference data is disrupting financial data management. According to a comprehensive research report by Market Research Future, the financial cloud market size is expected to reach US$ 52 billion by 2028, growing at a compound annual growth rate of 24% between 2018 and 2028.

by Mark Hermeling, CTO, Alveo

The migration of market and reference data to the cloud has been an ongoing process for several years.  Shifting to the cloud has not only reduced infrastructure and maintenance costs by moving off on-premise infrastructure to increase scalability and elasticity, and therefore ensure an element of future-proofing, it has also helped reduce the cost of market data management through appropriate-sized infrastructure, centralised licensing and more easily sharing data sets.

The use of cloud-native technology can make the approach more easily scalable depending on the intensity or volume of the data. Using cloud-based platforms can also give firms a more flexible way of paying for the resources they use, including driving an organisation-wide standardisation of data charging and consumption. In addition to this, an improved data lineage ensures that source data and any transformation in the data’s lifecycle can be clearly captured. This transparency not only helps firms optimise and share their data assets internally where appropriate but reduces the cost of change.

Shifting the ecosystem to the cloud

All the above show the benefits of moving to the cloud. Today, we are witnessing a seismic shift in the market and reference data management process, with the whole data ecosystem now migrating to the cloud, where financial services firms can move away from slow manual processes and fragmented on-premise systems and start reaping the rewards of improved efficiency and lower costs that the cloud can bring.

Data vendors are starting to push their products directly onto cloud platforms like AWS, Microsoft Azure and Google Cloud Platform. Added to that, we are witnessing providers of applications like portfolio management systems, trading solutions and risk and settlement systems, moving there also. Again, they are being attracted by the enhanced security and scalability, increased efficiencies and reduced cost cloud deployment can bring. So, rather than it being a case of companies placing individual applications in the cloud or using specific software as service providers to host their data management platforms, the entire data ecosystem is now moving to the cloud.

The implications are that data management systems need to be both cloud-agnostic and cloud-native to optimally source, integrate, quality-control and distribute market data. In other words, systems used need to be designed and built to run in the cloud and to work effectively in that environment but at the same time, they should not rely on a single cloud provider’s proprietary services or in any way be locked into a single cloud vendor.

With this shift accelerating, firms need to find new ways of provisioning data onto the cloud and into their applications that also reside there – and it is increasingly urgent that they do if they want to keep up with the competition and retain their edge over their rivals.

Every firm will need to consider everything: from building in more robust information security to keep data safe in the cloud right through to enhanced permissions management, usage monitoring, and of course, data quality, which is always a topic. That’s important. After all, if organisations automate more, put more applications in the cloud, or simply more directly connect them, then data quality becomes even more critical because the process of change removes what is typically a manual step in between cloud and on-premise, which could potentially act as a safety net to prevent mistakes escalating quickly into significant issues.

Achieving all this can be made easier through the partial or full utilisation of vendor-managed solutions with a ‘one-stop-shop’ for the end-to-end provision of market data from vendor feeds all the way to distribution to their customers. It is, after all, essential that cloud environments are optimised to achieve maximum efficiency. To be truly effective, these solutions need to be cloud-neutral: part of which involves being capable of interacting with data on any public cloud platform.

Starting the move today

Given all the above, while the ongoing migration of financial services market reference data to the cloud is nothing new, the migration process is now gathering pace. It is now longer just data management solutions and processes that are moving over to the approach. Upstream, data vendors are putting data on public cloud platforms and, downstream, application providers are doing so also.

There is therefore a growing imperative for financial services firms to shift their market and reference data to the cloud. They can’t afford to wait if they want to remain competitive. However, in migrating their approach, they will need to opt for cloud-native solutions that support ease of use and ease of management. These solutions will also need to be cloud-neutral and cloud-agnostic to deliver the scalability that firms will need moving forwards.

Moreover, in rolling out their approach, financial services businesses will also benefit from opting for a managed services approach to data management which allows them to tap into all the benefits of the cloud while eliminating the day-to-day burden of data processing and platform maintenance. With all that in place, they will be well placed to maximise the benefits of having their financial data in the cloud.

With hybrid working seemingly set to stay, can complete discovery of data and devices and ongoing monitoring of asset behaviours across highly dispersed financial service estates mitigate remote security concerns in the new hybrid working world?

by Andrew Gehrlein, Chief Financial Officer, Park Place Technologies

Across the conclusions of a recent McKinsey report on the future of the physical workplace it was clear that the majority of employees (52%) would prefer a continued hybrid model of working. McKinsey expanded the definition of hybrid workplaces to include the usage of flexible workspaces that are physically located outside existing company office locations to include home office workspaces alongside hub working and communal space works. How do banking infrastructure leads accommodate this ongoing transfer of working conditions, especially with the increased security parameters that the world of trading demands?

Since the initial rush to accommodate working from home mandates in March 2020, these IT infrastructure leads have now had the benefit of time and experience to consider, mitigate and control the security impacts that continued hybrid working poses in finance. Today, these leads are proactively focused on developing a clear, structured, and continued strategy for those organisations and employees who elect to work outside of company facilities in an environment where speed, security and increased regulatory pressures are paramount considerations in each financial exchange.

Hybrid staff continually need to access devices and exchange data above and beyond the usual elaborate security firewalls that these organisations typically embrace from within fixed corporate networks. Now, on a permanent basis, these IT leads must identify all possible ingress and egress points in their newly expanded dispersed network before holistically deploying enhanced next generation security and cyber services that give increased protection from hostile activities. This also includes systematic and ongoing understanding of endpoint usage, and endpoints themselves need to be capable of being restricted and isolated quickly, to avoid further contamination should a security breach occur.

Within a hybrid working strategy, organisations also need to develop a clear understanding of usage of cloud accounts, yet the nature of cloud service provision means that much of this is dynamic, and complex to track. Additionally, public network usage provides further challenges in settings such as communal spaces. Data transfer to a wireless printer inside a secure corporate facility poses relatively little risk yet place the same wireless printer within a hub space and the possibilities for hostile activities increase exponentially.

Equally in the home environment additional vulnerabilities exist. Routers can have exposed modem control interfaces; or staff using BYoD that may fall outside of patching windows; or the increase in domestic IoT exposure points, all of which need additional consideration. Faced with the level of challenges, it becomes quickly apparent that finance IT leads essentially need a real-time, always-on, centrally managed discovery and monitoring system of devices and data.

How can this be achieved? Pre-Covid, IT Asset and inventory device management was limited largely to a manual discovery and tracking that assisted with security and audit requirements. Faced with the complexity and threats outlined outside of corporate locations, today this discovery must be conducted as an ongoing service, in real-time, expanded across multiple remote locations for immediate discovery, automating and simplifying asset disclosure without manual IT inventory collection. In short, discovery needs to provide complete visibility into financial services’ data centres and cloud environments, and should include servers (physical, virtual and cloud), desktops, peripherals, edge devices, alongside the infrastructure services.

Discovery is the first step. Monitoring networks this complex is the second. Network monitoring tools have become increasingly specialised and siloed towards departmental usage, neglecting the holistic cross-departmental requirement that hybrid working needs. What’s required today is proactive and predictive generic monitoring across hardware and software that gives leads immediate and actionable insights to gain the greatest level of controls allowing identified new devices to be quickly added to the fold and protection. Only then, when IT leads understand what hybrid workers are using at any given point in time, can appropriate security solutions be confidently layered, safe in the knowledge that there are no gaps within defences.

Since the early days of the digital movement, technology advancements have revolutionized work environments to achieve more efficient and profitable organizations. We now see business leaders moving beyond the bottom line, using technology to create environmentally favourable operations.

by Phillip McGriskin, CEO, Vitesse

This is true for global payments, where some of the earliest digitization efforts focused on automating simple manual tasks. In doing so, businesses were able to eliminate paper-based processes to consume fewer environmental resources.

As the digital movement exploded, process automation grew to encompass entire workflows, streamlining operations while also reducing waste and improving the environmental impact. For instance, businesses could initially scan an invoice into software to reduce the need for data entry, but advancing technology soon made it possible to send invoices electronically, automatically extract and store information, and even pay vendors without the need for paper documents or payments.

As businesses began to lessen their environmental impact through the use of technology, interest in conservation grew. According to an Accenture CEO study on sustainability, 44% of CEO respondents are now working toward a net-zero future for their organization. For many, technology will lead the way toward a greener future, particularly as cloud technologies make it easier to adopt cutting-edge advancements in payments technology. Gartner predicts that spending on cloud technologies will have grown over 23% in 2021 and that 75% of all databases will be deployed in or migrated to the cloud in 2022.

Making greener payments in the cloud

In order to understand all of the hype around cloud technology, it’s necessary to introduce some of the basics. Quite simply, the cloud is an off-premise location where organizations can store data, facilitate transactions or even consume software applications provided by external vendors. The magic of the cloud occurs from a very real-world technology called application programming interfaces (APIs).

APIs act as a connection layer, providing users with a single point of entry to the available functionality on the cloud. So, whether you’re accessing your own stored data, utilizing that data to fuel third-party applications or connecting to other users on the platform, it’s possible to enable all workflows from a single portal.

We can see the impact of the cloud on recent payments innovations. Vitesse, for instance, makes it possible for organizations to send and receive payments via a global domestic partner network. Communication with and movement of payments through the network occurs in the cloud, allowing businesses to more seamlessly transfer money, with payments made in local currencies.

However, while cloud technologies are streamlining processes and offering definite financial benefits to business organizations, such as a 30-40% decrease in the total cost of ownership, the cloud is also good for the environment, potentially reducing CO2 emissions by as much as 59 million tons per year. That’s the equivalent of taking 22 million vehicles off the roads.

The environmentally friendly aspect of cloud technology occurs by capitalizing on the economies of scale. Not only do cloud centres utilize far fewer servers than you would require to run your on-premise applications, but they’re also now doing so in a far more efficient manner:

• Cloud data centres can be positioned closer to the facilities from which they draw power, preventing power losses associated with long-haul transmissions and reducing overall usage.
• On-premise software is designed to handle high-intensity usage spikes. However, much of the time, systems sit idle, utilizing high levels of energy. Cloud servers, on the other hand, have higher utilization rates, meaning very little downtime and more efficient energy usage.
• Because cloud centres are typically engineered to use energy more efficiently than most on-premise applications, they can operate with less of an environmental footprint. One recent study determined that the energy required to run business email, as well as productivity and CRM software, could be reduced by as much as 87% of all business users moved these applications to the cloud.

Business organizations can more easily improve their own environmental accountability by moving processes, such as payments, to the cloud, while boosting internal efficiency and turnaround times for equal bottom-line results.

There were 208 US bank deals with an aggregate deal value of $77.58 billion in 2021, the highest level since 2006, according to S&P Global Intelligence. Having a clean data environment prior to a merger is crucial. Strategic technology partners can be beneficial during this time, as they can help banks get a holistic view of their data, while saving them both resources and time.

by Bob Kottler, Executive Vice President and Chief Revenue Officer, White Clay

What are the reasons behind the surge in M&A  activity? Bank executives are trying to offset losses triggered by the pandemic. Net interest margins are down to record levels due to the large demand for savings accounts compared to loan applications, forcing banks to pay out more interest than they’re receiving. Executives are aware of the opportunities that come with an M&A and are more eager than ever to take advantage of them. Having an aggregated clean data environment can help a newly formed bank maximise the benefits of the merger, ultimately leading to portfolio diversification, an increase in revenue and higher shareholder return.

Merging two banks brings operational challenges, one of which is needing to integrate data from two different core and ancillary systems to get a consolidated view of banking relationships. The success of the newly formed entity depends on the accuracy and complexity of this data, as the leadership team will use it to make long-term strategic decisions.

The key benefits of a clean data environment include:

• Getting pricing right – By unveiling the difference in pricing practices, the two banks can learn from one another and proceed with the pricing method that is more profitable and impactful to the bottom line. For example, the two banks might have similar or even overlapping customers, but are pricing loans completely differently, leading to a significant difference in customer profitability. A good technology partner will provide the newly formed bank with such insight, uncovering the most profitable path for the future.
• New market penetration – Having organised information about customers, including what products and services they have and don’t have access to, will enable the banks to cross-sell and market their offerings into the other bank’s customer base and expand their client portfolio. Additionally, a holistic view of customer data will allow banks to see if their existing customers are actually using the products and services they offer, and if so, market and sell more of those, leading to an increase in revenue. This will also help banks avoid regulatory penalties on unused banking products.
• Building better relationships with customers – Curated customer data will also allow banks to meet their customers where they are, providing crisp and relevant offerings that will help increase customer retention. For example, a married couple that banks with the same financial institution but has separate accounts expects the bank to be aware of their alliance and offer products and services based on their household needs. However, this is rarely the case. Technology partners can help newly formed banks get a clear overview of their client accounts, empowering them to make the necessary links that will lead to long-term, trusting relationships and increased profitability over time.
• Incentivising optimal banker performance – Data on banker performance will give the newly formed leadership team an overview of each department and individual banker, helping them quickly become familiar with the staff of the organisation they recently merged with. Tracking banker performance will also enable managers to set best practices, coaching staff better and ultimately helping the bank become successful, faster. Lastly, data will also give the board an accurate idea of how the newly formed leadership team is performing.

Banks are profitable when customers use the products and services they offer and when they sell new products, assuming that those products and services are priced appropriately. Having a clean data environment that enables banks to price products better, cross-sell deeper and deliver a personalised experience to their customers is necessary for a bank at any time in its lifecycle but is especially crucial during a merger. Bank executives are right to look at consolidation to offset challenges in today’s banking environment and add to their bottom line. However, without a universal view of their data, the benefits of a merger or acquisition may well be limited.

Buy Now, Pay Later (BNPL) – a new form of credit giving consumers increased flexibility when paying for goods and services – has seen growing popularity over the past year.

by Amon Ghaiumy,  CEO and Co-founder, Ophelos

With BNPL allowing customers to pay now, later, or in instalments when making a purchase – the service has seen a recent surge of use as people use it to purchase goods, or when facing difficult financial situations, as an alternative to high-interest credit cards. According to TSB, this has seen one in five adults in the UK now using it at least once a month, and one in ten using it weekly.

Whether a FinTech revolution or simply a shift in spending habits, it’s clear that BNPL is here to stay. However, regulatory changes are on the horizon with implications for both providers and consumers. Demand for BNPL will no doubt continue to rise in the long term, but as with any form of credit offering, there comes the unavoidable risk of debt.

In light of this, it is worth addressing changing trends in the BNPL space, how impending regulation could shape its future, and why BNPL providers should be putting the financial care of vulnerable customers at the forefront of their operations – particularly when it comes to debt resolution.

The growth of BNPL spending

The combination of necessity, accessibility and the fact it is a cheaper alternative to credit cards and payday loans is seeing customers increasingly opting to use BNPL products.

Following its surge of use in 2021, data is already pointing to a further increased uptake in 2022. A recent survey from BNPL provider Splitit for example found that over half of UK respondents (54%) are planning on using BNPL services in 2022.

BNPL’s increased availability is largely contributing to this growth. Gone are the days when product-specific credit would be used exclusively for ‘big ticket’ items such as appliances, electronics, cars or holidays. Nowadays, it’s possible to use BNPL to pay for all manner of consumer goods including everyday essentials, clothes and even food.

Banks have also jumped on the growing BNPL trend. Monzo, for example, became one of the first UK banks to begin rolling out a BNPL service to its customers, whilst its rival Revolut confirmed it was “at the early stages” of developing a BNPL feature for Europe last year. Similarly, Santander is launching its own BNPL app called Zinia across Europe this year, starting in the Netherlands.

However, it’s not just convenience that has led to a surge in BNPL’s use. Against the backdrop of the living crisis in the UK, we are seeing more people use BNPL for everyday purchases they need but can’t necessarily afford.

Research from TSB shows that one in four customers say they rarely have the money in their account to pay in full for the things they are buying, and also suggests that some are worryingly resorting to BNPL when they are struggling financially.

With many BNPL providers being observed to have little or no affordability checks – concerns are rightly being raised around already-vulnerable customers ending up in positions where they are struggling to manage financially.

This lack of diligent screening alongside growing supply and demand has pricked the ears of the FCA and the regulator is expected to introduce new rules as early as 2023.

What could these regulations look like?

It’s early days, but initial research from the FCA has indicated that as many as half of the people who enter into BNPL are already behind on payments, so it’s possible that regulation may call for stricter vetting from providers on customers to minimise risky loans from the outset.

With BNPL products currently unregulated, customer screening is largely done on a provider-by-provider basis, with some taking more measures than others. Under FCA guidance, this will likely change and should do, being vital that providers detect and protect vulnerable customers from the outset.

Also, many customers who miss payments are unaware of the implications it might have on their credit rating. As such, providers may be required to better communicate risks to their consumers at the point of purchase.

Either way, the FCA aims to implement rules that protect the consumers first and foremost, so providers should think about how they can get ahead of the curve now.

Using debt resolution as an asset

A simple change that providers can make today should be to reimagine their debt collection processes.

While fintech has given rise to innovations in customer experience at the point of purchase or lending, debt resolution is yet to adopt cutting-edge technology or modern ethical standards.

Still today, businesses often rely on outdated debt collection agencies who find it difficult to recover outstanding debts, spend too much resource on inefficient operational processes, or lack the tools, intelligence and insights to support financially vulnerable customers.

Meanwhile, financially vulnerable customers lack control throughout the debt collection process due to inflexible repayment options, an absence of digital tools for managing their debts and antiquated communication methods used by traditional collectors.

At Ophelos, we blend behavioural science with AI to help businesses identify and manage vulnerable customers who may be facing issues with debt. This approach ensures that customers can help devise their own bespoke payment plans, communicate with their providers in a way which suits them, and ultimately feel more secure in the arrangement.

As the cost of living crisis continues, how BNPL providers manage their approaches to debt resolution and vulnerable customers will increasingly be in the spotlight. Utilising technology to aid them in this process and partnering with ethical organisations in the space, will allow them to maintain their reputation among their customers, while also increasing their yield.

And so, while BNPL certainly has a place in our lives – providing convenience and flexibility at a lower cost when it comes to our finances – the businesses providing it must think carefully about the care of their customers. The question is: will it take regulation for firms to make this change, or will they lead the change themselves?