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How to prepare for the death of linear banking

Source: Finance Derivative

By Sudeepto Mukherjee, Executive Vice President, Financial Services at Publicis Sapient

The future of banking is ever-evolving as banks must adapt to new technologies and customer preferences. Over the last few years, most banks have used Customer journeys to become more customer centric and enhance core areas of their business business. Focus on improving services like “onboarding” or “getting a loan” have resulted in a better experience and faster response times for most customers.  However, customer journeys remain far from what they could be – most are designed for the most basic experiences and aren’t hyper-personal or specifically targeted. Legacy technology , siloed operating model and the inability to capture timely metrics around customer needs and pain points  can be barriers to overcoming this challenge.

As a result, customers are inevitably offered generic journeys with a thin veneer of personalization that barely scratches the surface of feeling tailored.  But with the rise of digital banking, innovative FinTechs, AI, machine learning and data analytics, banks can now offer customers infinitely more options than ever before when it comes to managing their finances and a clear trend towards more personalised and non-linear banking experiences is emerging.

Because of this, the future of banking will be significantly different. An area where huge progress can be made is hyper personalisation – experiences  will be customized for the individual by meeting specific needs and processing a wide range of metadata around behaviour, assets, age, ethnicity, gender and literacy. Customer journeys will ultimately  feel much more personal and inclusive.

For banks, this means moving away from making decisions based on broad segment categorisation to analysing and understanding data on an individual level.

Troublesome journeys

One of the catalysts for these changes is that while the current focus on journeys has driven optimisation and cost savings, it has failed to significantly move the needle on increasing wallet share (through cross sell) and enhancing customer experience. Most journeys follow a traditional “channel marketing” style – a linear process of a product or service from start to finish. This process raises challenges because channel marketing is so focused on the endgame, in terms of distribution, that it sticks to a rigid design and fails to provide optionality to customers. With this approach and these constraints that allow for no diversions, the result is that customer journeys are lacklustre and in need of an overhaul.

A customer journey is typically designed as a ‘happy path’. But when companies have ‘unhappy paths’ to deal with, like seemingly insurmountable expectations around products or experiences, there is little room for flexibility or adaptation. The distribution-led channel approach makes the customer journey unresponsive to feedback, for example, which isn’t ideal.

Once linear customer journeys are replaced by always-on targetted solutions, the pathways can become more reflexive. The result will be tailored feedback that can be sent in real-time to make the journey more relevant to solving specific needs. Here’s how this change could happen.

The human approach

Every brand wants to be both inclusive and accessible. In the financial services industry, banks are arguably one of the most integral parts of societal infrastructure. If your money isn’t held in a bank, it’s likely you don’t meet the most basic requirements for survival, such as getting a home or a job, and as a result you become unable to fulfil basic daily tasks and functions. You see a huge focus in developing countries like India to make banking more accessible to citizens. This is a win-win as banks benefit from rising customer deposits and citizens benefit by getting access to more financial products and services to enhance their wealth.

But, banks face a dilemma: their products and services are targeted towards people who have money as they derive a majority of profits from them –  yet by not catering to people who don’t have money, they are missing out on a huge opportunity to enhance future profits as these people can significantly enhance their wealth by becoming bank customers.

The big reason for this is the high cost of serving the different cohorts and this cost of variance means that banks can’t be inclusive to those whose money isn’t sitting in a bank or to people of protected characteristics because it’s simply too expensive. But as we have discussed above, there is not only a moral and societal expectation but also a huge financial benefit for banking providers to be inclusive of all members of society. The core reason for their inability to do this comes down to the limitations of technology, a gap in data and the degree to which experiences can be adaptive and hyper-personalised. Computation Design where machines and algorithms can leverage data to provide specific experiences tailored to very individual needs can help change this paradigm.

Using machine learning to emulate human experience

The human approach and computational design thinking are aligned in many ways. Both approaches operate on the idea that experience is personal, subjective and contextual. In addition, our understanding of society will be increasingly necessary in creating those adaptive and inclusive experiences.

Computational design will drive adaptive experiences for customers through the power of artificial intelligence and machine learning. Machines will be able to create experiences without a need for direct human intervention and this will, in turn allow experiences to scale. Going forwards, scaling won’t be about our ability to design – it will be about our ability to understand different populations of people and the subtle differences in their needs.

Diversity and inclusion targets are targets which everyone should be morally driven to strive towards because there’s absolutely no question that being inclusive and representative of society is the right thing to do and drives financial and mental well being for citizens To reach the point at which a financial services organisation can be inclusive, it must move on from generic customer journeys and focus on adaptive experiences. It must start considering the data that it wants to capture now and this process is about getting that data through current systems, interfaces and experiences.

The next major issue that banks will have to address as they gear up for the future of their customer journeys is how to wrestle with their privacy policy. This is the degree to which organisations think about data privacy: what they can and cannot capture and what they will and will not do with the data in ways that are more transparent and explicit than they are now.

Two things that banks can start doing now are thinking about the richer data needs of the future and start capturing data now, to collect high-quality data sets that will support personalisation in the future – and understand that data privacy and customer data policies should be much more intentional to ensure they’re aligned with customer values.

Although many current journeys lack flexibility, banks can start analysing them now because they can still be valuable in terms of data captured for the future. And, even if they can’t act on it right now,  organisations should begin to capture data –  to build and gather information in advance of its value. This will make the process of an organisational shift towards non-linear banking journeys in the future much easier.

The End (of the customer journey)

The traditional linear banking customer journey will  continue exist to fulfil the most basic of needs like onboarding and providing access to core banking services. . However, banks need to start shifting towards a more adaptive model delivering first-rate, personalised customer experiences based on individual needs. The technology will soon exist where consent driven customer data will underpin a more direct customer experience engagement method that utilises chat-bots, real-time support and advice in order to truly meet customer expectations for 2023 and beyond.

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Business

The Role of Technology in Unifying Africa’s Capital Markets

Source: Finance Derivative

Author – Eugene Tawiah CEO and co-founder of SecondSTAX

  • Can you elaborate on the current state of African capital markets and the challenges they face in terms of fragmentation and accessibility for investors outside their respective jurisdictions?

Despite having some of the best-performing stocks and bonds globally, Africa’s exchanges are largely inaccessible to investors outside the jurisdictions where they are domiciled.

The siloed nature of these exchanges as well as insufficient data on the risk profiles of assets has led to limited access to capital for markets and limited access to high-growth assets for investors.

  • SecondSTAX aims to unify African capital markets through technology. Could you explain how your platform facilitates seamless investment and trading across borders, and what specific technological innovations enable this integration?

We facilitate seamless investment and trading across African borders by leveraging innovative technologies such as our cloud-based smart order management and execution routing system which allows investors to trade across multiple African exchanges with ease. 

Our integration of liquidity partners on our platform has mitigated the risks involved with currency disparities and exchange and has aided us in facilitating a seamless trade environment and also in reducing the impact of currency volatility on our users.

Lastly, our platform provides investors with access to real-time and the latest trading news, emerging research on trends and economic data from reliable local sources. This feature allows investors to make informed decisions by having necessary data accessible on a single platform.

  • Collaboration and integration within African capital markets are crucial for fostering economic growth and development. How does SecondSTAX work with exchanges like the Nigeria Exchange Group, Ghana Stock Exchange, and Nairobi Securities Exchange to promote this collaboration, and what benefits does it bring to investors and issuers? 

Through our collaboration with the Nigeria Exchange Group, Ghana Stock Exchange, and the Nairobi Securities Exchange and the utilization of our portal, we significantly expand our users’ access to high-growth assets, effectively opening up African capital markets to a broader audience of both local and international investors. 

These partnerships not only enhance market liquidity but also foster intra-region trading, ultimately integrating African capital markets. Furthermore, our alliances with the African Securities Exchanges Association and African Development Bank facilitate the seamless movement of investments between exchanges and licensed investment firms, empowering firms to engage in trades beyond their domicile jurisdictions within the African region. 

By offering a centralized database of information, we empower investors to make well-informed decisions about their assets, further strengthening the efficiency and transparency of African capital markets.

  • In what ways do you see SecondSTAX contributing to the promotion of innovative financial solutions for African businesses? Can you provide examples of how your platform supports businesses in accessing capital and expanding their operations?

Our intuitive, cutting-edge cloud-based platform facilitates seamless investment and allows investors to securely buy and sell stocks and bonds across multiple African exchanges with ease. 

We aim to streamline the investment process and enable investors to manage their investments from a single portal, providing functionality for every aspect of the investment lifecycle—from know-your-customer (KYC) verification to account onboarding through to trading and settlement in multiple local currencies.

Our partnerships with renowned brokerage firms such as Kestrel Capital (Kenya), Databank Group (Ghana), and Afrinvest (Nigeria) allow for investments to be made in native currencies thus allowing for an easier pathway to wealth accumulation in Africa. 

Also, our partnerships with multiple exchanges enhance economic growth and investment opportunities in those regions, allowing businesses greater access to more affordable long-term funding from capital markets supporting their growth and increasing market liquidity.

  • With the rapid advancement of technology, what opportunities do you foresee for further enhancing the efficiency and effectiveness of African capital markets? How do you envision SecondSTAX evolving to capitalize on these opportunities?

New technologies serve as an enabler and force multiplier to improve the lives of investors across the globe. This is true for developed countries and is certainly the case for the African continent as well. Artificial (General) Intelligence (AI/AGI) is very relevant to the evolution of the African capital markets, and we are already incorporating it into our platform as a way to synthesize timely trade ideas from the rapidly changing news, detailed research and market trading data available across the various stock and bond exchanges in Africa. 

This will democratize investing, making the African capital markets dramatically more accessible to everyone, from the savvy professional trader through to the novice investor, looking for the opportunity to grow their wealth. 

With 100+ years of combined technology and finance experience deploying complex large-scale systems and having built similar products and services at globally renowned firms, our team of experts at SecondSTAX believes we can create the frameworks that shall be used to turn these unique insights into opportunities for investors to trade more effectively and generate improved investment returns across Africa.

  • One of the goals of SecondSTAX is to attract investments from both African and international investors. How does your platform address concerns about regulatory compliance and investor protection in cross-border transactions?

We partner with well-established licensed brokerage firms with a multi-decade track record of trading and execution excellence within their local capital market jurisdiction, ensuring we efficiently operate and mitigate emerging risks within the regulatory frameworks of the markets we operate in. This also helps us to securely leverage the robust existing market infrastructure for trade facilitation and settlement thereby encouraging trust and credibility with both the regulatory bodies and investors.

  • Looking ahead, what is your vision for the future of African capital markets, and how do you believe SecondSTAX will contribute to realizing this vision? Additionally, what role do you think technology will play in shaping the future landscape of capital markets in Africa?

We hope for a unified African capital market, and in five years, we will be successfully integrated into major African capital markets, and be a trading and execution vendor partner commanding at least 25% of all African capital market transactions into and between these markets. We would also have launched services to support the investment goals of retail investors, facilitating simple transactions for them. We expect that by enabling the shift to a more efficient capital markets ecosystem in Africa, we will reduce the overall cost of funding for projects in both the private sector and the public sector.

The use of technological inputs on our platform will result in a vibrant capital markets ecosystem which should drive growth for all African emerging economies.

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Business

Total Experience in Insurance

Source: Finance Derivative
Author: Monica Hovsepian, Global Industry Strategist for Financial Services, OpenText

While the insurance industry might be undergoing major changes driven by technology, the end goal remains much the same. Improving the customer and employee experience has been the priority for the industry ever since the digital transformation got underway.

Obviously, financial metrics are the true bottom line, as ever in business. But, as ITT President Harold Geneen put it so sagely, ‘in the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later.’

Geneen was speaking in a different age, when the word ‘experience’ was used in a slightly different way. But his insight is just as important today. Getting digital experiences right – for both customers and employees – is critical to the overall business success of companies within the insurance industry.

McKinsey has highlighted this, reporting that many insurers are struggling to effectively respond to their customers’ demands for a better digital experience. They’re hampered by legacy information systems that are inadequate for modern purposes. On the other side of the counter, those outdated systems are making it hard for insurance employees to do their jobs to the best of their ability; 70% of employees in the sector have more work to do than they have time for.

Eradicating these frustrations is therefore a business-critical priority for insurers going forward. The customer experience (CX) and the employee experience (EX) must be addressed and optimised simultaneously, requiring a focus on balancing back-office optimisation and customer-facing excellence.

As these two facets become increasingly linked, it can be more useful for insurers to think of it in a singular term, approaching the task by building a total experience (TX) business strategy to differentiate themselves in a fiercely competitive and dynamic market.

Transforming the way customer data is managed

McKinsey also has some stats to back up the importance of managing CX effectively in this new digital age: companies that do so typically see a 20% improvement in customer satisfaction, a 15% increase in sales conversion, a 30% lower cost-to-serve and a 30% increase in employee engagement.

Getting to those benefits involves transforming the way you manage your customer data to make it more efficient and agile. At its core, this is about being able to understand your customers better so you can make better business decisions and deliver greater satisfaction. This can be achieved by leveraging modern information platforms to streamline internal systems and bring all important data into a single ‘pane-of-glass’ 360-degree customer view.

The EX component of TX comes in here too, as the kind of technology that achieves that 360-degree view makes things much easier for employees, and gives them readily-available insights they can then use to elevate the experiences they offer to customers, including joined-up interactions and personalised service and engagement.

Finding harmony across the channel mix

Once the foundations of the 360-degree view is in place, insurance companies can begin to build out the seamless experience demanded by customers across the mix of different channels, including websites and applications, over the phone or in-person services.

As an example, modern technology can facilitate self-service tools, to add convenience for customers and decrease the burden on employees, allowing them to focus on delivering more strategic, valuable engagements elsewhere.

To touch on the ongoing topic du jour, there are also many demonstrable use cases for AI in insurance already. Combined with analytics, it can be used to help reduce information overload and optimise customer experiences, by giving support teams with AI-driven intelligence to anticipate the next-best action, next-best offer, and next-best channel to engage customers with.  Furthermore, AI can be utilised to empower employees to engage with customers by writing relevant communications, by summarising claim documentations to expedite decisions.

The Future of Total Experience

As economic turbulence continues, insurers are heavily focused on operational efficiency. As a strategy that harmonises customer experience excellence and streamlined back-end operations, total experience offers more than just another buzzword in the digital age. Gartner states that ‘Improving the customer experience (CX) ranked higher in the survey this year than more strategic focuses, such as growing revenue or new products/services development to support transformation.’

TX can be key to driving success through benefits such as:

  • Building lifetime relationships with customers by providing rich, relevant, and targeted communications across all channels
  • Empowering and engaging employees by ensuring they have the most current and relevant information across critical business systems with a single source of customer truth
  • Making better business decisions by leveraging AI to deliver actionable insights to employees.

Geneen talked about taking the experience first, with the financial success to follow. In today’s new environment of digital insurance, creating the right experience first is what will lead to long-term success. That involves both end customers and the employees that are responsible for serving them. By leveraging technology to offer cohesive and integrated solutions for both employee and customer experiences, insurance companies can ride the wave of change currently washing over the industry and come out the other side on top.

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Business

AI in Investment: A Guide for Asset Managers

Source: Finance derivative

Giacomo Barigazzi ,Co-founder, Axyon AI

In today’s dynamic investment landscape, the race to harness new technologies for a competitive advantage is more fierce than ever. For those in the asset management sector, embracing innovation isn’t just a choice—it’s a necessity to stay ahead in the relentless pursuit of investment opportunities.

The bedrock of investment management has always been grounded in exhaustive research and due diligence. However, the rapid evolution of technology mandates a shift in strategy. Now, it’s critical for leaders in this space to not just familiarise themselves with, but to fully integrate advanced technologies such as artificial intelligence (AI) and machine learning (ML) into their processes.

Exploring the Varieties of AI in Asset Management

It’s essential for asset managers to recognise the specific AI technologies available to them, as this understanding can greatly influence their approach to investment strategy. Broadly speaking, AI in asset management can be categorised into generative and predictive models, each with distinct capabilities and applications.

Generative AI, powered by advanced machine learning techniques, is designed to produce new data that mimic real-world information, such as text, images, and more. This technology is especially useful for creating realistic and diverse datasets, enhancing personalisation, and improving the accessibility of financial services. For asset managers, generative AI can play a crucial role in developing innovative solutions and strategies by generating novel insights and scenarios.

On the other hand, Predictive AI focuses on analysing historical data to forecast future trends and patterns. This aspect of AI is invaluable for asset managers aiming to anticipate market movements and adjust their strategies accordingly. The predictive capabilities of AI provide a strategic edge by enabling more informed decision-making and risk assessment.

For asset managers intent on leveraging AI to enhance their operations, distinguishing between these AI types is a fundamental step. By adopting the appropriate AI technologies, they can significantly improve client outcomes, operational efficiencies, and, ultimately, investment performance.

Creating a personalised client experience

Improved performance is not the only advantage AI brings to asset management; it significantly enhances the client experience by enabling the development of personalised services. For clients, generative AI tools like chatbots and virtual assistants establish a continuous support system that provides instant responses to queries, as well as up-to-date insights on market developments and portfolio adjustments.

A heightened level of personalisation throughout the investment journey ensures clients are not just satisfied but also better informed – a dynamic which undoubtedly fosters greater human relationships in the industry.

Strategic considerations for asset managers

As the widespread adoption of AI in the financial services sector continues to materialise, asset managers face a crucial task in nailing down the right WealthTech solution. It’s not just about adoption; it’s about making strategic choices.

Ultimately, companies expect to see a strong ROI after adopting an AI solution. Only by making a well-informed choice will they see the expected tangible impact of AI in asset management. A lack of due diligence in the procurement process risks introducing a solution that is both ineffective and disruptive.

Integration is key. AI solutions should align seamlessly with existing systems to avoid unwanted disruption to day-to-day operations. Therefore, choosing a provider that is ready to provide extensive training to support a smooth assimilation into operations should also be a priority for management.

There is an element of self-assessment required in the decision-making process. By recognising areas in a firm that require enhancement and understanding the specific value offered by each AI solution, leaders will be best positioned to identify a product that will bring significant improvements in targeted areas.

With a sea of options available in 2024, selecting an AI solution demands thoughtful consideration. Managers need to assess how each aligns with their investment strategy and delivers results. Consulting with experts and analysing case studies from similar businesses equips managers with valuable insights for informed decision-making.

AI as an empowerment tool

While AI will be a revolutionary tool in the asset management industry that will drive efficiency and innovation, it is not intended to replace the human touch. The technology should be viewed as a tool that empowers asset managers to focus on high-value work of greater importance to clients.

AI’s transition from a nascent curiosity to an integral business tool underscores a pivotal shift in industry dynamics. Asset managers who are slow to adopt these technologies risk falling behind in a market that’s increasingly influenced by AI’s capabilities. By contrast, those dedicated to swiftly and responsibly adopting this technology will likely be rewarded with an extra edge in performance.

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