2023

Across Europe, consumers have largely turned cashless during the pandemic, with contactless and online payments increasing exponentially. But with the high streets across Europe slowly entering into the new normal, will consumers demand a return to cash payments?

By Koen Vanpraet, Group CEO, PXP Financial

The COVID-19 Effect on European E-Commerce and Retail from PXP Financial surveyed consumers in six European countries, finding widely varying appetites towards a cashless society. For example, Poland is the most enthusiastic to ditch cash, while The Netherlands the least – and the UK is smack in the middle with its views on the matter.

In the research, 41% of consumers across the six countries – UK, Spain, Germany, The Netherlands, Poland and Italy – indicated that they would feel positive about a cashless society, while 31% would feel negative. Poland topped the tables of going cashless with 54% of respondents indicating positivity towards dropping cash. Italy followed on 49%, Spain next with 42% followed by the UK at 40%. The two least positive countries were Germany on 33% and the Netherlands on 31%.

A culture of cash

Despite the varying attitudes towards a cashless society, consumers across most of the countries showed enthusiastic uptake of cashless payments – contactless payments, e-wallets, mobile payments, and wearables among them. The notable exception was Germany. For most Germans, using cash isn’t just a personal preference; it’s a cultural value that they’ve grown up with and one tied closely to a national value with centuries-old roots.

But even here as the pandemic has pushed what would have been previously low-value cash transactions onto other payment types, a whopping 73% of German consumers said they had to change their favoured payment method – cash – during the pandemic. When asked what payment methods they tried as a result of the pandemic, Germans overwhelmingly favoured PayPal as their preferred non-cash payment form at 58%, followed by contactless at 48% and online banking at nearly 43%.

Looking at combined answers from all respondents, when asked what payment methods they had tried because of the pandemic, 48% of people have tried contactless. The highest uptake was in Poland at 70%, with Spain ranking the lowest at 27%. Respondents are now also more likely to spend money at retailers that offered contactless/contact-free payment options than before Covid-19, with 65% of all respondents saying yes. Again, Polish shoppers (80%) are more predisposed to contactless, given that it was one of the first countries in Europe to trial the technology.

Re-evaluating the value of cash

Other country-specific highlights in the report show some surprising trends. Italy is one of the most cash-heavy societies in Europe, but the arrival of Covid-19 has led to a rapid re-evaluation by consumers of their payment habits. In the PXP Financial survey, Italian respondents are mostly favourable about the prospect of a cashless society, with nearly 50% seeing it as positive, compared to 21% who viewed it negatively.

The irony of heavy cash usage in Italy is that it gave rise to the introduction of prepaid and contactless payment. Italy is one of the most advanced contactless countries in the world. These figures were reflected in the survey, with nearly 44% stating that they had tried contactless because of the pandemic. Over 63% said they had tried PayPal, while 38% had opted for online banking. Those who tried mobile payments for the first time amounted to just over 14%.

Meanwhile in Spain, although Spaniards are traditionally avid cash users, there are positive signs that things are changing in favour of non-cash methods. Compared to their European counterparts, it appears that Spanish shoppers wouldn’t be sad to see the end of cash. Around 42% believe a cashless society is a good thing, whereas 34% view it as a negative. This is evidenced by the fact that the popularity of payment cards in Spain (particularly credit cards) has surged in recent years, and in mid-2020, for the first time, card usage overtook cash.

At the dawn of a contactless society

Even before the pandemic, there were some European countries who were already deep into the development of a contactless society, with the UK already being entrenched in contactless payments.  But that doesn’t mean everyone was and around 52% of respondents said that they had been influenced to try out contactless payments as a result of the pandemic.

Usage of online banking and PayPal was neck and neck at roughly 38% each. Meanwhile, mobile payments had caught the attention of 22% of UK consumers surveyed, while a further 6% said that they had tried wearable payment forms like watches and wristbands during the pandemic.

Poland is a technologically advanced market, with more dynamic payment method usage than in neighbouring Germany. Poland was one of the first European countries to pioneer contactless payments, evidenced by an overwhelming 80% of Polish respondents said they would now be more likely to spend money at a retailer that offered contactless payment options than before Covid.

Polish consumers overall have a positive view on having a cashless society, with 54% seeing it as a welcome prospect. On the other hand, 19% viewed the end of cash as a negative.

As a result of the pandemic, Polish consumers were more willing to try new payment methods compared to the other countries in the survey. Over 70% stated that they had tried contactless, while a significant 81% said they had opted for online banking. PayPal scored highly in Poland too, with 92% of respondents trying it for the first time during the pandemic.

The Netherlands already has one of the highest rates of non-cash payment method usage in Europe but is characterised by a few anomalies compared to other European markets.

Although non-cash payments are extremely popular, online banking and credit transfers, rather than debit cards, are favoured by Dutch consumers. Cards account for a lower proportion of retail sales compared to other European countries. Credit card usage in particular ranks much lower in the Netherlands when compared to the UK, for example.

But when it comes to getting rid of cash altogether, Dutch respondents are reluctant to wave goodbye to bank notes and coins. 38% of those surveyed view a cashless society negatively, compared to 31% who think going completely cashless is a positive thing.

Preparing for the ‘new normal’

The PXP Financial research shows how important having the widest possible choice of payment methods is for retailers.

Retailers and payment organisations need to work together to understand what their customers need in the new normal as the high streets across Europe open up once again. Together, retailers and payment organisations can develop solutions to ensure continued customer loyalty even as the face of retail changes in line with the widening array of payment methods. Added-value services like loyalty schemes, promotions, in-store rewards through QR codes are all valuable tools that retailers can use to offer their customers convenience, speedy footfall and payment security.

The research underscores the need for retailers to understand the direction of consumers’ attitudes towards where they shop, how they pay for the goods they are buying and what they require from retailers going forward. Covid’s new normal has accelerated the speed of direction and retailers must catch up with their customers.

Many banks turned to low-code automation to handle new government-backed lending programmes and the surge in demand that came with them. For the banks and financial institutions involved in processing stimulus loans, the volume of applications and complex administrative effort required has been potentially overwhelming.

By Herbert Schild, Industry Lead, Financial Services, Appian

By simplifying and automating loan processes, low-code can accelerate the time from loan application to disbursement, which could be a lifeline to businesses. Low-code automation technology allows financial institutions to create applications quickly and integrate them seamlessly into existing systems.

If a new lending scheme, regulatory or loan criteria change comes in, applications can be flexibly adapted at any time and at pace. Applications developed on a low-code automation platform can be deployed immediately and used across devices. Whether in the cloud, on-premise or as a hybrid, a low-code automation platform should comply with the highest security standards. This allows bankers and mortgage advisors to work on a loan at any time and from any location with data privacy and information security. The pandemic and associated lockdowns changed work culture as we know it. Enabling employees to work from home with sensitive data in a secure, flexible way has never been more important and it is the way of the future.

Robotic Process Automation (RPA) for routine, repetitive tasks

RPA or even digital loan applications are still relatively underused in the banking industry, despite available options and potential to add value. One can automate rules-based daily routines such as data entry and updates across systems, freeing employees from repetitive tasks so they can take on new and more strategic work. In addition, RPA reduces risk and human errors from manual data entry. Ultimately, data quality improves for faster and more accurate lending assessments.

In practice, banks also take an economic risk every time they add new customers. Complying with regulations like Customer Due Diligence (CDD), Know Your Customer (KYC) and Anti-Money Laundering (AML) screening is expensive and time-consuming. RPA speeds up the customer onboarding and compliance processes by automatically capturing, enhancing, and delivering precise data for faster loan qualification. This speeds up the application process, and leads to faster,more reliable approvals.

Risk management, Artificial Intelligence (AI) and Intelligent Document Processing (IDP)

The promise of AI remains alluring yet still seems out of reach for most practical technology implementations. However, the reality is within grasp. AI can support financial institutions in a variety of ways, including quick loan programmes, from processing applications to issuing funds. Intelligent AI systems can identify multiple applications from the same borrower or from a non-existent company, thus playing an important role in risk and fraud detection and prevention. Based on internal information from credit decisions and customer repayment behavior, as well as external data sources such as credit scores, AI can recognise patterns to assess new loan applications. Such information can help determine the creditworthiness of the potential new or existing customer for faster loan decision.

AI does more than provide value on risk management. Intelligent Document Processing (IDP) technology takes unstructured data in PDFs and other documents, converts them into structured data to help systems process them. Machine learning and AI technologies are combined and supplemented by employees, if necessary. This combination of people, technology and data enables lenders to concentrate on what’s important in issuing stimulus loans without being slowed down by tedious data entry and analysis.

When time is of the essence, low-code automation has the advantage

Governments have introduced various stimulus lending packages but many banks struggle with processing loan applications quickly enough to help keep businesses afloat during the pandemic. Processes that can’t keep up with change or require lots of manual intervention to adapt are substantial barriers. The adoption of a low-code automation platform has enabled credit institutions across the world to react quickly to change and advance digitisation.

RPA, AI, IDP and data integrations on a low-code development platform, empowers change – fast. Banks and financial institutions can adapt to the circumstances and growing demand, as well as automating manual and complex processes to improve effectiveness, manage risk, increase customer and employee satisfaction. These are crucial to succeeding in today’s decentralised work environment.

Like it or not, at some point in your life you will buy an electric vehicle (EV). Perhaps it will be for yourself (a powerful Tesla Model X or a sensible Toyota Prius) or for your company (a Mercedes eSprinter for deliveries or a large Renault DZE for hauling heavy goods) but either way the EV revolution is coming and every watt of power that charges an EV will need to be paid for.

By Anthony Wicks, Key Account Manager, Self-Service GSV – Parking & EVC, Worldline

In the UK, the government is phasing out internal combustion engine (ICE) vehicles starting in 2030 – a deadline that the current administration brought ahead by 10 years. This, combined with a system of grants for electric vehicles and charging points, should drastically reduce vehicle emissions – a source of not just atmospheric CO2 that contributes to climate change, but nitrogen dioxide and fine particulate matter that has been claimed to cause some 40,000 deaths per year in the UK.

Consumers are getting on board too. There are nearly 500,000 EVs on the UK’s roads – a small fraction of the 38.8 million total, but five times what it was in 2015. The current European EV fleet stands at 2.3 million in 2020, however it is estimated to rise to 34 million in 2030. As charging infrastructure grows, as it becomes as common to see EV charging as it is petrol stations (the number of which have fallen by 35% since 2000), more people will buy EVs. Currently, they are a niche, with buyers purchasing them either out of environmental concerns or just for the cool factor, but they will become a standard choice for many drivers over the next decade.

Building a new infrastructure around fuel

Charging an EV is not like refuelling an ICE vehicle, it takes much longer. Currently, there are three categories of EV charger: slow, fast and ultra-fast (also known as rapid and ultra-rapid, and occasionally you may find it broken down into slow, fast, rapid and ultra-rapid). Slow chargers, the most common, use around 7kW and can typically fully charge an average EV car from empty in eight hours – these will typically be overnight chargers that people will have in their homes. A 50kW model can add 100 miles of range in around 35 minutes, and ultra-fast 150kW chargers are available that bring charging times down to a few minutes.

This means that the whole structure of charging a vehicle must change. It may become common to leave your car on charge in your garage overnight rather than ever visiting public charging stations if you are only using your vehicle for commuting and shopping. Drivers who must travel further afield might choose to charge in purpose-built charging areas with cafes and entertainment, much like service stations. We are increasingly finding that businesses that have little to do with fuel offer EV charging as an added extra – you can recharge your vehicle while shopping at a supermarket, or anywhere that there is parking.

It also means that payments must adapt to the way that people will be using chargers. Charging points will mostly be unattended, so ensuring that customers have a positive experience, that customers who need help can access it and that unscrupulous customers cannot commit fraud will be all down to the design and capabilities of charging points.

What EV charging operators need

For the reasons above, charging stations will be unlike any other piece of infrastructure that we use currently, somewhere between petrol pumps and vending machines, but in some ways not like either of these.

Consider the question of when the payment for charging is taken: if we use the model currently used on vending machines, where a customer taps or swipes their card, their details are taken, they make their order and the amount is deducted from their account, then there could be problems. If a customer taps their card, uses £100 of charging but does not have the funds to pay for that amount, what happens? If you use your card after you are done charging what would prevent somebody from simply driving away? If you pay upfront for £100 of electricity but have to abandon the charging process halfway through, how is the refund processed? If a customer pays by smartphone, which currently has a £100 limit, then what happens if they leave their car charging for £110? Will tourists be able to pay in their own currency? Then there are the payment methods that modern consumers have come to expect: app payments, ‘click and collect’, loyalty programmes (which will need to carry over from existing fuel loyalty programmes) and an omnichannel experience that keeps the same interface across multiple devices.

You can see how complicated EV charging can get, and this is before we have considered security protocols like PSD2 and 3D Secure or new banking rules like Open Banking. EV Payments tie together two pieces of what will become everyday life for billions of people: EVs and digital payments. Businesses need to get the payment system right because consumers who find the already long-winded process of charging an EV difficult can always switch to charging at home.

Solutions for the day after tomorrow

New payment solutions, such as Worldline’s Easy EV hardware and software, are designed to be the one-size-fits-all solution to the growing EV charging market, able to adapt to any EV hardware and any client business model across Western Europe. The systems are compatible with a huge range of payment types and should new payment methods emerge they can be rolled out easily.

The solution works with both end-to-end and standalone payment processing, with pre-authorisation and electronic receipts available as standard for users opting for end-to-end processing. What’s more, acquiring on an end-to-end solution is included for both a standalone version as well as the full end to end solution. This means that whichever solution EV charging providers opt for, in any country in Europe, they can be assured that they are getting a service that ensures that customers can pay for their charging.

Security is a major concern for any payment, especially at unattended electric charging stations, and the latest security standards are built in at the point of sale without adding extra steps for the customer. As is standard in modern payments, this security layer is designed to be as frictionless as possible.

We know that EVs are going to become standard soon, probably overtaking ICE vehicles several years before the 2030 deadline. Payment providers, charging station manufacturers and operators should work together to create payment experiences that make something that consumers will have to do several times a week into a joy instead of a burden.

Platformification is a relatively new business model happening in FinTech that is enabling companies to lift-out entire operations and benefit from mutualisation.

By Andrey Yashunsky, CEO and Founder, Prytek

Platformification is arguably the love child of increasing consumer demands, constantly changing industry regulations and the emergence of a range of next-generation technologies. In banking, for example, the never-ending regulatory standards have made it nearly impossible for smaller and medium-sized banks to invest in the technology that larger banks can comfortably (and quickly) afford to build in-house. As a result, platformification has quickly become a lifeboat for many banks that are determined to keep up with the digital transformation taking place in the industry, while also maintaining profitability.

BOPaaS (Business Operating Platform-as-a-Service) describes an advanced style of platformification that combines the standard benefits of managed services, with advanced access to cutting-edge technology and leading industry expert advice. Through its adoption, firms immediately benefit from a vertically integrated ecosystem: new technologies are designed and built at the heart of this ecosystem, which can then be cross-leveraged across all the businesses connected to it. This technological innovation, which is made possible through the mutualised R&D costs, helps to entirely transform business operations and job functions. A recent example is Karbon, a customer lifecycle management (CLM) product that is currently being offered by Delta Capita, a global managed services, technology solutions and consulting provider. The creation of Karbon was made possible through Prytek’s investment in Blackswan.

A hybrid approach to managed services

The integrated nature of BOPaaS is what makes it special: It is a hybrid of technology-based managed services and recommendations, engagement and interactions with industry specialists. Both are equally important. The development of state-of-the-art technology would be wasted if it wasn’t in the hands of an expert that knows how to effectively implement it in a way that can transform operations, and ultimately enhance the end-user experience. It is also important to know that it is not just the financial services industry that can benefit. For example, Prytek also operates BOPaaS in the cyber-education and HR sectors, and has plans this year to expand its reach further. Ultimately any industry that relies on human data input, or expensive centralised models, and is determined to improve client satisfaction could benefit from platformification and BOPaaS.

Driving technological and service innovation

These types of platforms are not only driving technological innovation, but they are also enabling firms to spend more time engaging with clients and strengthening business relationships. They are taking over the responsibility of the businesses’ non-differentiating operations as well as the responsibility to monitor for changing regulations, customer demands and digital transformation opportunities. By freeing up more time and effort of employees, BOPaaS customers can focus on the aspects of their business that makes them truly unique – which is almost entirely the way it delivers its customer service.

The article highlights how the proliferation of API-led possibilities has led to a tremendous potential in shaping up the new open banking business models in the banking industry.

by Sanat Rao, Chief Business Officer and Global Head – Infosys Finacle

While the concept of Open Banking has been around for some years, the industry mostly espoused it for the sake of regulatory compliance. However, in the wake of the pandemic, there has been a definitive and rapid uptake of open banking approaches and adoption globally. For instance, in Covid’s devastating aftermath, many beleaguered borrowers – especially small businesses and individuals – have found the Open Banking ecosystem to be an easier source of credit. By authorizing their banks and various other institutions to share their data with third-party providers in real-time, the borrowers are able to tap a wider supply of credit on more favorable terms. And this is just one of the many forces driving an accelerated adoption of Open Banking that has made it a key transformational lever of our world today.

Along with this growing appetite for Open Banking, the scope of Open Banking has also enlarged in recent times. The early days of Open Banking saw limited information sharing and little else; today, as participants gain in compliance and confidence, they are offering a wide portfolio of offerings, including credit, payment and accounting solutions, with plans to introduce savings and investment products as well.

Two factors are supporting this growth – first, a regulatory push in many countries and second, the proliferation of open APIs. The numbers speak for themselves – in the first two quarters of 2020, Open Banking API platforms globally grew 49 percent QoQ¹. In the latest EFMA Infosys Finacle Innovation in Retail Banking Study, financial institutions said Open Banking APIs will have moderate to very high impact on banking business in 20212. APIs are a huge enabler of Open Banking ecosystems, facilitating both efficient exchange of data between participants and a variety of offerings on third-party/ non-banking channels.

“APIs are poised to change the future of banking. They have tremendous potential to enable innovations in Open Banking led business models, that are most relevant to banking industry going forward”

The Growing Impact of Open Banking

Open Banking is changing the very nature of banking and banking institutions. At the highest level, it is dismantling the “pipeline” universal banking model and enabling a ‘platform’ model in its place.  Consequently, banks, which traditionally manufactured their products and distributed them through their own channels to their own customers, are now offering a variety of financial and non-financial products sourced from other providers or distributing their own products and services on third-party channels.  They are doing this by working with their external ecosystem in a variety of ways:

• Creating joint products with partners: Examples include Paytm which has introduced a co-branded credit card with CitiBank (and VISA), and Marcus by Goldman Sachs (and Mastercard) which has collaborated with Apple to launch the Apple Card.
• Embedding non-banking products within customers’ primary journeys: DBS is a great example, with successful marketplaces for used cars, property, travel and utilities that allow it to enter the customer journey well before the customer starts looking for a banking product.
• Collaborating with third parties to deliver (even) rival products: Once again, consider the example of Paytm, which is working with IndusInd Bank and ICICI Bank on high value fixed deposits and digital loans respectively.

Banks are constituting their platform businesses into the following innovative models:

• Banking-as-a-Service (BaaS): BaaS is a recent development, with the model still in an early stage of adoption. Possibly, its most famous exponent is Goldman Sachs, which offers a set of APIs for creating bank accounts, making and tracking payments, and accessing the details of their activity. Developers can leverage the Bank’s infrastructure to build financial experiences into their own front-end applications³.
• Marketplace: The marketplace model is gaining popularity with many banks creating marketplaces selling best-in-class financial and non-financial offerings in one place. In a way the marketplace is the opposite of the BaaS model because here, banks – much like departmental stores – aggregate the best options from other providers to fulfil even the non-banking needs of their customers. Apart from the earlier mentioned DBS Bank, U.K.’s Starling Bank runs a successful marketplace featuring a variety of services, such as wealth management, pension accounts and accounting software.
• Utilities: A very interesting spin-off is the utilities model where big banks capitalize on their scale and efficiencies to provide back-end infrastructure services to other banks/ providers who then focus only on front-end activities. Payment utilities are now quite common, and the action is picking up in banking as well. For instance, ABN Amro Bank has set up Stater NV providing mortgage services, such as collection, communication and loan management, to other small lenders and fintech companies.

APIs – Enabling the digital ecosystem, and fostering the open banking paradigms

The above business models, while different on the surface, are all powered by APIs on the inside. APIs work at several levels throughout the open banking enterprise: specialized internal APIs or microservices enable banks to solve problems and create new value for clients; APIs help in customer acquisition and product expansion; an API led architecture can enable banks to innovate on par with the best companies in the world.

Therefore, the importance of a sound API strategy can never be overestimated. While developing their APIs, banks should pay heed to the following:

• APIs must be based on good design principles and values, such as user-centricity, reusability and end-to-end process coverage.
• The strategy should produce a strong operating model, as well as a monetization model that supports key business values.
• If the business is to adopt an API-first approach for delivering new features in the future, it must design APIs for maximum reusability, today.
• A modern API management platform with clear ownership is essential, as is a sound governance mechanism for executing internal and external APIs.
• Last but certainly not least, the bank’s leadership should nurture an API culture throughout the organization. Having the right talent and training resources is critical, because over time, the bank must have multiple agile teams, working across the enterprise, developing APIs.

What’s next for APIs and Open Banking

After a slow start driven by regulatory compulsion, Open Banking has started to come into its own. It is a significant opportunity. Open banking is set to become mainstream and will pave way for new possibilities such as open finance. It will eventually foster market competition and innovation creating a win-win proposition for both financial institutions as well as for varied customer segments.

Sources:

1. Mark Boyd, Arjit Mathur, Phuong Pham (2020, August 4). Open Banking Trends Q2 2020: Banks. https://platformable.com/q2-open-banking-trends-banks/
2. EFMA, Infosys Finacle: Innovation in Retail Banking 2020 https://www.edgeverve.com/finacle/efma-innovation-in-retail-banking
3. Goldman Sachs Transaction Banking (TxB) APIs https://developer.gs.com/docs/services/transaction-banking/

Digital-first pressure for banks is well and truly on. Leading financial institutions know they must lead in both customer experience and operations en route to a digital-first future, while also recognising these as areas of strength for digital-native challengers and FinTechs.

by David Murphy, Head of Financial Services EMEA & APAC, Publicis Sapient

Today, almost everything is digital. The way we shop, interact, how we bank. A global pandemic made digital capabilities mission-critical, enabling banks to continue efficiently serving their customers remotely. And for the most part, this has been achieved with a great deal of success. However, before the pandemic, many banks were sceptical about their ability to pivot so quickly to a digital-first approach. They knew they needed to, but the ‘How?’ proved difficult as they were bogged down by legacy technology and cultural debt.

Banks have been aware of their digital-first future for quite some time, but many have simply struggled to get there, stalling at the first hurdle and giving away valuable market share to a wave of digital natives that are more agile, innovative, and free from the weight of traditional restraints; adapting and pivoting as required. So far, the market has been theirs for the taking, inspired by the likes of Amazon, Netflix and Airbnb which have disrupted entire industry sectors with their digital-first platform approach. They have successfully leveraged technology to create a superior customer value, offering slick and frictionless experiences that have appealed to a new generation of financial customers.

Recent research by Publicis Sapient showed that 83% of  banks already have a clearly articulated digital transformation strategy in place, but the pandemic acted as a catalyst to act faster. According to the study, 81% of banks say the pandemic has made improving their digital skills and capabilities more urgent, and 70% say it highlighted weaknesses in their customer experience. Covid-19 has only served to reinforce the gaps in legacy banks’ customer experience and operational transformation. Banks are accelerating to compete with digital-first challengers like Monzo, Revolut, Chime and Nubank, while developing partnerships with FinTechs that can accelerate the provision of new customer propositions. Personetics, a firm that uses data and AI to enable banks to provide personalised insights to their customers is a great example.

Incumbent banks are however, far from complacent. Most say they must do more to keep up with these nimble, digital competitors while appealing to a new breed of digital-native customers. Leaders from the Global Banking Benchmark Study ranked digital-first challengers, FinTechs and consumer tech companies among the top five influencers of their own digital transformation strategy. “FinTech is the future,” as JPMorgan’s CEO, Jamie Dimon, wrote in a memo to shareholders ahead of the bank’s earnings numbers release.

Put simply, banks need to stop aspiring and start acting to counter the new competition ‘head on’ by transforming their technology, investing in appropriately skilled talent needed to make this technology work for them, and emulating the digital-first mindset and culture of the challengers. Crucially, they must digitalise and become truly customer centric. At the most basic level, they need to provide access to their services online and efficiently to customers entirely via digital channels. Not only basic services such as checking balances and making money transfers, but also more complex transactions such as mortgage lending. In this rapidly evolving environment, banks need to deliver superior customer experiences while being operationally agile enough to drive growth and give themselves a fighting chance to compete, which is not always easy. Look at N26, Starling, and Revolut, who have clearly demonstrated their ability to achieve a high level of digital maturity by creating digital-only propositions at speed while innovating on the product cycle in their area of specialization.

Banks need to optimise all areas of their customer experience and operations – from their business models and technology to their products and services and even their people in order to achieve both revenue growth and cost reductions in a post-pandemic world. This will also enable them to compete in an increasingly complex, digital-first financial services landscape. Banking of yesterday has gone, and to cement themselves for the future banks must innovate with customer experience top of mind.

How can banks learn from FinTechs?

Accelerate into a digital-first future. Know the competitive landscape. Banks need to understand their competition, then invest heavily in digital innovation to keep pace with them as digital-first challengers, FinTechs, and new entrants continue to reshape the financial services outlook.

Transform both people and culture. Leading banks recognise that investing in developing talent and skills to transform culture goes hand-in-hand with technology investments – they are not siloed. Lack of skills can be a key barrier to transformation.

Invest in a partner ecosystem and distribution network(s). Building partnerships will allow banks to scale and pivot at speed to compete with digital-first competitors.

Be agile to move and innovate at speed and scale. Leading banks have already grasped this shift and are now focused on building urgency – 40% of banks believe that agile product development is the key trait for digitally innovative financial services firms.

Move to a cloud-based model. Cloud is central to banks’ digital transformation strategies, whether for core modernisation, enabling personalisation or real-time payments. However, banks need to look beyond infrastructure and cost efficiency. Opportunities for customer innovation and cloud-enabled services must be seized. That said, adaptation will take time as sentiments steadily rise, 29% of bank leaders say cloud investment will be central to their digital transformation plans over the next 3 years.

Banks are aware of the impact that these new challengers and market entrants are having on the pace and priorities of their own digital transformation. In turn, flexibility is becoming increasingly important for digital competitiveness in the market. Banks need to prioritise investment in agile capabilities which will allow them to accelerate the rollout of new customer features and innovations.

While banks should not necessarily flock to follow the internal structures of digital competitors, it is crucial that they realise what has made them so successful: customer obsession. They have an established customer-led culture; a 360-view of customer data; they deliver omnichannel servicing and offer personalised experiences and products, but most importantly, they have a platform-based approach. The types of institutions that will be successful in the next 3-5 years are going to be institutions that integrate different parts of a large ecosystem into a platform experience. Banks must use data to deliver an in-depth understanding of the customer and their wants and needs, and banks must service those needs in a streamlined, seamless, ethical, and engaging way.

By learning from challengers on how to become customer centric, they can invest in and improve on their own CX. This requires investment into digital innovation to keep up. The good news is that it can be done. The pandemic has shown that banks can move incredibly fast when required and support their customers almost entirely digitally with no branch access. Customer needs and demands are constantly in flux. An iterative approach which works constantly to improve, update, and respond to customer desires is essential. This approach will see today’s banks best position themselves for the digital-first future.

Cloud is one area of innovation that holds huge potential for the financial sector and that can offer significant cost savings if used effectively.

By Tom Schröder, Director International Partners and Strategic Alliances, Serviceware

According to McKinsey’s Consumer Pulse Survey, digital engagement levels among European customers have increased by 20% since the beginning of the pandemic. However, despite the need to innovate, many financial organisations are yet to fully recover from the full impacts of Covid-19. Whilst vaccine roll-out has signalled fresh hope for some, recovery will be by no means immediate. With further economic turbulence on the horizon, it is crucial that financial services businesses leverage strategic cost measures to not only mitigate the impact of short-term pandemic fallout, but most importantly recover and succeed in the long-term.

Balancing cost and innovation

Many financial institutions already use cloud-based software for business processes such as customer relationship management, HR and financial accounting. However, the opportunity for cloud within core activities such as consumer payments, credit scoring, statements and billing is endless. In fact, from 2016 to 2018, Deloitte Global saw a threefold increase in the number of financial organisations adopting cloud to promote innovation.

Cloud-based services can reduce internal costs and optimise business growth by offering a much more scalable and reliable IT infrastructure that is specifically designed to streamline performance and support development and expansion. Cloud technology gives financial institutions the opportunity to continuously refine and improve services, according to changing customer demand and business need, whilst enabling them to assess how much is being used versus how much is being spent. For many organisations, cloud also provides the opportunity to achieve better value for money, as businesses only pay for what is being used.

With cloud now being seen as the digital backbone of many financial businesses, cloud solutions will continue to evolve. However, with this change will come increasing complexities – both in terms of the services available and also the variety of operating models. It is therefore essential that financial institutions have the right tools to continually monitor and analyse cloud spend (on average, 23% of IT expenses), in real-time, and with accuracy. Those who do will effectively pave the way towards growth.

Managing legacy spend

In today’s current economic landscape, optimising budgets is an absolute necessity. However, traditional ways of managing IT spend are simply not working. This is where maintaining a complete view across the whole organisation is required. The ability to manage cloud costs will be unlocked by reliable financial management tools, which can empower the financial industry to truly understand and evaluate cloud spend. By gathering real-time operational, project and vendor cost data, financial institutions will be well-equipped to make fact-based decisions to drive down costs – both now and in the future. From our experience, we’ve seen our clients easily shrink their running costs by 5% and reallocate these resources to more appealing and business-driving growth initiatives.

In light of these changes, financial companies must now take advantage of the tools that will enable them to evaluate the implementation and operational costs of technology to help stabilise business – including cloud, on-premise and even shadow IT. Whilst in theory, all software and IT assets within a business should fall under one centralised IT department, providing the CIO with ultimate visibility, the reality is often very different. Shadow IT, incurred in part by bring-your-own-device increase and the explosion of remote working, has seen a rapid rise and Gartner predicts it now accounts for 30-40% of IT spend in large organisations. As such, this is causing an ongoing headache for the people that are in charge of technology, security, and compliance, who need transparency across all applications to ensure cost transparency against value, not to mention security.

As we look to the year ahead, and competition within the industry continues to rise, it is vital that financial institutions free up budget to invest in digital programmes and secure growth. To achieve this, it is imperative to gain total transparency over business costs. This will be essential for companies to not only stay afloat, but also build for a successful future.

For many businesses, an integrated, high-performance and, above all, flexible solution is needed to create a holistic overview of business spend, on which decisions (about cost, process, operations and more) can be based. If that means an initial investment to analyse the value of legacy systems vs cloud-based solutions, then it’s a cost easily justified. Put simply, financial institutions that maintain an end-to-end view across their entire IT portfolio will be able to take back control of their running costs and streamline their budgets towards future growth – this year and beyond.