Connect with us

Business

2024: Digital transformation’s ‘big bang’ moment?

Source: Finance Derivative

By Frode Berg, Managing Director – EMEA, Provenir

Today’s financial services industry is defined by rapid technological advances and a fast-evolving regulatory ecosystem that’s working hard to keep up.

Against this dynamic backdrop, the pressure on banks to remain both competitive and compliant has never been so intense. In an era shaped by the likes of Netflix and Just Eat, consumers are expecting the same seamless user experience and speed of delivery from their financial services providers.

Banks’ ability to survive and thrive in the new economy will therefore depend on their ability to successfully embrace digital thinking and the smarter artificial intelligence (AI) innovations that we are now seeing enter the market at pace.

A pressing need for a new mindset

What this means is that digital transformation is perfectly poised for significant acceleration in 2024.

Fuelled by the widespread adoption of hyper automation and the integration of AI-driven decision-making processes, digital transformation will further empower financial institutions to streamline their operations, boost efficiency, and harness the power of data analytics for more informed, precise, and strategic decision-making.

This can ultimately propel ambitious financial institutions to new heights of innovation and customer satisfaction.

But it will depend on their ability to fully grasp the opportunity. Banks and other financial institutions must start thinking of the digital journey as a non-stop set of continuous interactions with their customers.

It starts from the first point of contact, whether it’s a customer browsing a website or applying for a financial product on their mobile device. It’s imperative that providers maximise every digital interaction along the journey.  And to do that, banks will need to ensure they have the technological capabilities as well as a thorough understanding of the customers’ needs. This will ensure frictionless and personalised interactions which are quick and informative for all consumers.

Data is imperative in ensuring that banks understand consumers, with the growing use of Big Data and the evolution of technologies such as AI and machine learning, the amount of data available to banks is unlimited. Banks should be using technology and data to understand what a consumer needs and when during every interaction of the consumer journey.

True digital transformation goes far beyond simply moving from paper or legacy technology to online systems. It’s much more than simply digitising processes. It requires a shift in a company’s mindset to discover how it can create more engaging and memorable digital banking experiences.

Harvesting the rich data landscape

The good news is that the building blocks are already in place.

Thanks to open banking, there is now a plethora of rich data for banks to draw on. Recent figures from Open Banking Limited highlight that 11% of British consumers are now active users of open banking as the country warms up to the proposition. According to recent CMA9 data, in January 2023, 7 million consumers and SMEs used open banking services.

This trend is being mirrored globally, with open banking particularly gaining traction in Brazil where Pix, the country’s open banking-powered instant payment scheme, outnumbered credit and debit card payments in the first quarter of 2023.

The entry of major consumer-focused players into the open banking space indicates that mass adoption is on the horizon, and I’d expect that the arrival of PSD3 will help mitigate the remaining regulatory challenges and further enable financial services organisations to explore innovative data-led strategies.

The reality for open banking is that the industry has experienced difficulties getting past hurdles such as consent, whilst struggling to truly convey the benefits of open banking to customers.  Customer journeys often appear cumbersome due to the need to redirect to external banking providers, which often leads to attrition or loss of revenue.

Consumers are also cognizant of the negative outcomes of sharing data raising concerns around  data security. However, there is optimism with the banking sector that open banking will continue to be game-changing in terms of customer-centric, tailored, real-time decisioning.

Rise of the machines

There will also be more significant strides in technology in 2024. As AI continues to mature, there is likely to be a shift towards using more precise language, using alternative terms such as robotics and machine learning that are more fitting to its capabilities.

As these technologies evolve and develop, banks are enabled to review all the key data they receive, allowing them to tailor their products to consumers’ individual needs and identify opportunities. Machine learning could be pivotal in ensuring that financial services firms move away from a ‘one-size-fits-all’ mentality and  identifythe key trends in behaviour at the right point in time for individual customers.

In fact, according to McKinsey: “The cumulative benefits are so great that the annual potential value of AI and analytics for global banking might be as high as $1 trillion.”

And consumer expectations around customer experience are also likely to rise even further, given that they are increasingly reaping the benefits of convenience brought by AI in various aspects of their lives.

Banks are also increasingly leveraging the power of AI to combat fraud, as well as to fight off competition from smaller and more agile rivals. By 2025, it’s expected that the banking sector will spend an extra $31 billion on embedding AI into their existing systems, which really drives home just how indispensable AI technologies will become to the sector.

Whether banks now choose to partner with fintechs to speed up their digital journey or compete against them, one thing is certain: we are on the cusp of the real ‘big bang’ moment in digital transformation.

Many point to partnerships and strategic collaboration as the best approach for financial services to efficiently accelerate digital transformation, but it’s down to each organisation to perhaps now take the time to consider their options and the path that best suits them.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Overcoming intricacies of premium processing in the insurance industry

Source: Finance Derivative

By Piers Williams, Global Insurance Manager at AutoRek

Complexity is an unavoidable reality for the intricate world of insurance. For program administrators, including brokers, managing general agents (MGAs) and managing general underwriters (MGUs), accurate management of insurance premium payments and complex workflows like bulk payments and diverse data sources is essential – there cannot be room for error. Unfortunately, poorly executed and complex processes can lead to costly mistakes. This is especially true for essential financial control processes that directly impact the performance of insurance businesses such as premium payment processes – also commonly known in corporate industries as account receivable and payable processes.

In particular, the traditional, manual management of insurance premium payments is what can often lead to unresolved outstanding debt and large balances of unallocated cash. When you combine this with the 30% growth in delegated/program businesses (over 30%+ in the last 3 years), using Excel sheets and the ever-increasing policy volumes, the approach becomes unsustainable and inefficient.

This article will outline the transformative benefits automation offers and the key actionable strategies that will enable program administrators to optimise the management of insurance premium payments for greater efficiency and effectiveness in their financial operations.

Embracing automation: the future of insurance

The future of insurance lies in automation – this is where premium payment processing comes in. Automation enables businesses not to erode margins through write-offs but accelerate cash flow and protect revenue. The primary goal is to accelerate premium reconciliation and allocation by implementing an automated straight-through process, minimising the need for human intervention to ensure that minutes – not hours – are spent on the reconciliation process.

By leveraging automated systems and advanced data integration, premium payment processing has the potential to offer a more streamlined, accurate and effective insurance ecosystem. Automation minimises the likelihood of human error and delays in transaction times; ensuring that precision is at the forefront of the financial processes. This shift towards automation addresses one of the key challenges faced by the insurance industry – eliminating inefficiencies which can lead to costly mistakes and unnecessary delays.

Producing scalability in a competitive market

Program administrators are confronted with a multitude of pain points in their day-to-day operations. Given that program administrators handle a significant amount of insurance policies across multiple binders/programs in the market, considerable admin effort is required to process a vast number of internal and external data sources as well as payments and policy data. As a result, program administrators risk losing valuable time and resources – giving them less time for value-added tasks, like resolving breaks, addressing downstream issues, and creating better partnerships with insurance partners.  

The impact of such operational inefficiencies can impact not only accounts receivable, collections and credit control processes but also business profitability, binder/program performance, competitiveness and reputation to name a few. Without the adoption of more advanced technologies like automation, program administrators are increasingly at threat of not being able to produce scalability in a competitive market.

Whilst automation offers huge efficiency upside for businesses there are also many benefits delivered by simply having a single premium data control platform. One of the most notable challenges with premium payment operations is the often-large numbers of internal and external data sources that must be managed and processed. This data needs to be continuously processed to ensure reporting is up to date and management has a comprehensive view of outstanding premiums, allocated premium and cash positions at any point in time. The management of this data, if not performed within a platform, presents a huge risk from a control perspective, as often premium payments will not be allocated for 30, 60 or 90 days, therefore needing a solution to keep track of all data automatically to ensure efficiency and control to ensure.

The opportunities premium payment platforms unlock not only when reconciling and allocation premium but also from a financial data control, consolidation and audit perspective, can be transformative. When this is further combined with the new reporting that is unlocked and streamlined operations using features like workflows leads to a drastically enhanced and often very different operating model. This model, however, enables businesses to work in near real-time, enhance relationships and most importantly remain competitive.

Identifying and addressing inefficient processes

Investing in modern technology like automation is often the first step in streamlining operations and eliminating inefficient processes. The goal is to encourage program administrators to focus less on manual administrative tasks that are time-consuming and instead, focus on key business decision making to improve financial gain – automating manual processes does exactly that.

Likewise, the insurance industry is constantly evolving so the adoption of premium payment processing will be crucial in remaining competitive in a shifting market dynamic. With this in mind, legacy systems, once the backbone of insurance operations, must go. These systems are outdated and unable to meet the demands of a data-driven, regulated market, leading businesses to embrace digital transformation and no longer depend on inefficient processes.

Continue Reading

Business

Who’s Scared of Embedded Payments?

Source: Finance Derivative

Johannes Kolbeinsson, CEO at PAYSTRAX

Embedded payments have been swiftly integrated into the e-commerce ecosystem, showcasing their transformative potential in reshaping how we make transactions. There is a bright future for embedded payments, but we must emphasise the significant untapped potential within the space as it currently stands, as the user experience still isn’t quite seamless, and third-party payment processors still present a fraud risk to companies. 

A Rapidly Expanding Market

The growth of embedded payments is undeniable. Driven by the rise of digital wallets and one-click checkout systems, the global market for embedded finance as a whole is projected to grow from $92 billion to $228 billion between 2024 and 2028. Recent shifts in consumer behaviour, especially toward frictionless digital experiences, have been accelerating the adoption of these solutions across sectors. Embedded payments offer that seamless one system approach, not only quickly processing payments on app, but building a one app relationship with consumers that develops brand loyalty.

This trend directly mirrors the business strategies of the major players in the tech world. Companies such as Apple, with its mobile wallet and credit card ventures, and Shopify, combining e-commerce with embedded payments, have demonstrated that blending payments directly into platforms can drive user engagement and boost conversions. The logic is plain and simple: by keeping consumers within the app, businesses streamline the purchasing process, increasing the likelihood of finalising transactions, and building brand and customer loyalty.

The Embedded Payments Boom

Embedded payments have become the latest hot topic in fintech. In fact, just a few years ago, in 2020, embedded finance payments were generating around $16 billion in revenue. Looking ahead to next year, forecasts suggest that number will skyrocket to over $140 billion. The success of platforms like Uber with one-click payments and the buy-now-pay-later (BNPL) models from companies like Klarna are clear indicators of this shift. Consumers increasingly seek ease and convenience, and embedded payments are meeting those demands head-on.

However, for all the excitement, embedded payments still face challenges in adoption. Fraud prevention, authentication, and user experience remain key barriers that need to be addressed on an industry wide level to truly deliver the seamless, instant payments these systems promise consumers.

Addressing the Friction

While the promise of embedded payments is enticing, friction remains. One of the most critical challenges for businesses adopting embedded payments is ensuring robust risk management. Creating an online experience that feels as secure as an in-store transaction should be a top priority, especially as financial fraud becomes more prevalent.

Currently, many companies are jumping into embedded payments without fully understanding the complexities involved. The lack of in-house expertise in building the necessary infrastructure across digital services, transaction processing, and enablement layers can lead to implementation issues and security vulnerabilities. Businesses need to conduct proper due diligence to avoid potential pitfalls, as hasty implementations can compromise both functionality and security.

User experience is another key factor in determining the success of embedded payments. Historically, we’ve seen how PayPal revolutionised online payments with its email-and-password system, setting a new standard. Embedded payments, while advanced, are still evolving to achieve a truly frictionless experience. Authentication processes frequently occur outside of the platform or app, and the range of payment options can be limited. To fully realise the potential of embedded payments, businesses must balance security, usability, and convenience.

Trust and Security Concerns

Security and trust are paramount when it comes to anything finance related, and these are areas where embedded payments must improve to gain widespread consumer adoption. With growing concerns about data privacy and the rise in online fraud (40% of all reported crime in the UK last year were fraud), it’s clear that consumers need reassurance before embracing embedded payments.

While embedded payment systems offer unparalleled convenience, their inherent vulnerabilities could make them a prime target for cybercriminals. The lack of standardisation and regulation in the sector, coupled with a general shortage of expertise that comes with a new industry, poses significant risks for users. Nevertheless, history suggests that consumers are willing to trust new technologies over time. Just a decade ago, saving card details online was met with hesitation; today, it’s commonplace. Similarly, as security concerns are addressed, embedded payments will likely gain traction as consumer trust grows.

The Path Ahead for Embedded Payments

Despite the array of payment methods available today, the potential for embedded payments to dominate the future of finance is undeniable. Their speed, ease, and ability to facilitate in-app purchases with a simple click make them an attractive option for both consumers and businesses.

Yet, for embedded payments to live up to their promise, key challenges remain. User experience and authentication are the primary obstacles. Truly embedded payments should enable users to complete transactions within the app, without being redirected elsewhere for authentication. As instant payments become the norm, any requirement to leave an app to verify a purchase could deter adoption. Addressing these issues will be critical to the future success of embedded payments as they continue to evolve and reshape the digital landscape.

In the coming years, as innovations like AI-driven fraud detection and biometric authentication become more integrated, the potential for embedded payments to achieve a truly seamless experience will grow. This could be the defining shift that cements embedded payments as the default mode of financial transactions in our increasingly digital world.

Continue Reading

Business

The need for speed: Why fintechs must supercharge background checks to stay competitive

Source: Finance Derivative

By Luke Shipley, Chief Executive Officer and co-founder at Zinc

In the fast-paced world of finance, and particularly where finance and technology intersect, hiring candidates with the right skills is crucial for staying ahead of the competition. For fintech firms, conducting fast yet thorough background checks is key to balancing regulatory compliance with the need for speed.

However, financial regulations in the UK demand rigorous oversight to safeguard consumer data, prevent fraud, and maintain financial stability. As part of these regulations, fintech companies must conduct thorough background checks to ensure new hires align with compliance standards, mitigating risks to both the company and its customers. These checks involve verifying critical information such as financial history, credit reports, criminal records and employment history, which are essential for determining the suitability of candidates handling sensitive financial data. These checks are both time-consuming and resource-intensive, slowing down the hiring process.

Fintech firms can sustain rapid growth and meet regulatory obligations without sacrificing operational efficiency by streamlining this crucial part of the hiring process with the right tools. This also enables HR teams to focus on creating a positive experience for new hires, rather than burdening them with additional administrative tasks. Implementing efficient systems that reduce these checks from weeks to days allows companies to swiftly onboard talent, maintain customer trust, and stay competitive.

Challenges of traditional background checks

Traditional background checks in the fintech industry are complex and time-consuming due to the stringent regulatory requirements that financial organisations must follow. Verifying candidates’ financial history, running credit reports, conducting Disclosure and Barring Service (DBS) checks, and confirming employment history for the past several years are all critical tasks. These checks are not only meticulous but also require coordination with external agencies, which often slows down the process.

Manual handling of these background checks can extend the hiring timeline by weeks or even months, creating operational inefficiencies for fintech companies that need to scale quickly in a competitive industry. Prolonged hiring cycles can also lead to delays in onboarding vital talent, putting added pressure on already stretched teams.

For HR departments, managing these extensive checks manually places a heavy administrative burden. The time spent gathering documentation, verifying information, and coordinating with third parties diverts HR professionals from focusing on more strategic initiatives, such as talent acquisition and improving the candidate experience. As a result, the manual process not only hinders recruitment efficiency but also affects the company’s ability to attract top talent in a timely manner.

Role of technology in streamlining background checks

Here, technology plays a crucial role as it revolutionises the background check process in fintech by reducing manual interventions and simplifying time-consuming tasks. Automated platform systems now handle complex steps like identity verification, credit checks, and employment history validations far more efficiently than traditional methods. These technologies not only speed up the process but also provide one centralised place for employee documentation and improve accuracy by reducing the risk of human error in verifying critical information.

Automation also allows fintech companies to complete thorough background checks in a fraction of the time, continuing to ensure global compliance without delaying the hiring process. HR teams are freed from the burden of manual data gathering by automating repetitive tasks and reminder emails so they can focus on higher-value activities, such as candidate engagement and talent strategy.

Moreover, integrating background check platforms with existing HR systems streamlines recruitment workflows. This integration ensures a seamless transfer of data, and provides real-time updates on the status of each candidate’s background check. The result is a faster, more efficient hiring process that allows fintech firms to onboard new employees quickly, creating a positive reflection of their brand at every stage of the onboarding process.

Improved candidate experience

Technology in recruitment not only benefits HR teams but also significantly enhances the candidate experience. Automated systems cut down lengthy waiting periods, helping candidates move through the hiring process more swiftly.

From digital applications to real-time status updates, candidates enjoy a seamless, transparent process, which minimises stress and uncertainty. This streamlined approach improves communication and ensures that candidates are informed at every stage of their check progress, fostering trust and keeping them engaged. Additionally, modern tools like AI-driven assessments or automated interview scheduling save time, allowing candidates to focus on showcasing their skills rather than dealing with logistical hassles. Fintech companies can improve their overall employer branding by providing a more efficient and organised hiring process, attracting top talent who appreciate a modern and tech-forward experience.

It is why speeding up background checks is crucial for fintech companies aiming to stay competitive. By leveraging modern technology, these companies can benefit from greater efficiency, regulatory adherence, and an enhanced candidate experience. Fintech firms should embrace tech-driven solutions to balance speed and regulatory requirements, ensuring a smooth, transparent, and efficient hiring process.

Continue Reading

Copyright © 2021 Futures Parity.