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

by Jon Munnery, Insolvency & Restructuring Expert, UK Liquidators

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

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

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

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

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

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

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

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

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

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

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

A new age of cutting-edge banking technology

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

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

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

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

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

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

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

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

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

Open banking is coming up to the fourth year of PSD2 as a regulatory requirement in the UK. We can see the impact it has already had, and the predicted growth for the year to come. In addition, the pandemic has driven the growing demand for flexible financial services, and this has transformed how consumers and small businesses leverage their financial data.

by Travis Spencer, CEO, Curity

Open banking has allowed third-party organisations to access data through APIs to create a frictionless experience with better products and services to manage finances.

As APIs continue to give financial institutions the ability to connect to both customers and businesses alike, security has become more important than ever. It is vital to evaluate the various measures that financial services need to adopt to thrive in a safe and secure way.

Carefully managing financial data has always been of the utmost importance for businesses. Failing to do so and leaving sensitive data to fall into the wrong hands can be critical for consumers, businesses, and banks. Financial-grade API security is paramount when it comes to exchanging data and financial information between institutions and third parties such as FinTech vendors and other partners.

Complexities of authenticating

It is important to have solid confidence in the users’ identity. This requires a Strong Customer Authentication (SCA) method, which generally translates to a high Level of Assurance. This is accomplished to some degree by using multi-factor authentication. Similarly essential, users must prove their identity as part of the registration and authentication process. To achieve this, the regulators require standards-based proven methods that ultimately result in a token (i.e., a ticket or memento) that encrypts and secures the identity of the user, their authentication method, and provides assurance that the user represented by that token really is who they say they are.

Users confirming consent

Authentication is important, but, alone, it isn’t enough. Open finance regulations are clear that users must consent to a business accessing certain data or performing an action such as creating a transaction. But it must also be possible for users to manage and even revoke their consent through an easy-to-use user management service.

Protecting users’ data

Securing and protecting users’ data can be a difficult task, but it’s a critical one in open banking. It takes a long time to develop trust – particularly when finances are involved – and it can be slashed in seconds if users lose confidence in a business’s ability to look after them and their data. As well as costing customers time, money, and resulting in extreme dissatisfaction, this can ruin a business’s reputation. Consequently, the safety of user data must be prioritised.

A blend of various procedures, frameworks and processes can be introduced to mitigate the risk of fraud, leaking or manipulating data and violating privacy. This is an opportunity to ensure consistent security practices are implemented across the board. Standards and directives such as PSD2 are designed to protect user data, as well as securing bank services. Businesses need to ensure they are investing in the right technology to adhere to these standards. By choosing solutions that automatically implement these specifications, businesses can reap the benefits of a secure customer database which will help improve the customer experience to build credibility and trust.

Prioritising skills

Businesses must also invest in their teams. It’s not enough to simply put protocols in place. Design and execution require a specific set of skills which, unfortunately, are high in demand and low in supply. Recent research commissioned by the UK Department for Culture, Media and Sport found that half of businesses in the country (approx. 680,000) have a basic skills gap, lacking staff with the technical, incident response, and governance skills needed to manage their cyber security. Meanwhile, a third (approx. 449,000) are missing more advanced skills, such as penetration testing, forensic analysis, and security architecture.

Regardless of being essential – considerably more so as services are progressively digitalised, cybersecurity skills are often poorly understood and undervalued by both management boards and within IT teams. This can prompt a lack of investment in training, mishiring, and poor retention of staff in security roles. This only intensifies the challenge of building a team that possesses the requisite skills.

Hiring can be hard when there’s a deficiency of skills and abilities, so businesses need to be innovative. This means considering new recruitment avenues and, importantly, breaking free from the conventional model of what cyber security professionals look like. Curiosity is vital, so, for more junior roles especially, attitude should be a key qualification. Businesses should trust that many skills can be acquired on the job if the candidate has the essential fundamental knowledge and drive. To help with this, employers should provide training and mentorship.

The future is looking bright for financial services. The way banks do business and how consumers manage their financial transactions will continue to revolutionise. New opportunities and new practices are likely to arise meaning security remains an important factor to combat any future requirements.

As we continue to assess financial-grade security and authentication protocols, success will also rely heavily on expertise and know-how. The skills gap in security needs to be considered to ensure that flexible finance options within open banking and open finance can be utilised without compromising security. Businesses must ensure they are prioritising training for the team to close this skills gap and improve practices across the industry. There is a massive opportunity to push protocols and standards across the board, as it will not only help to ensure a high level of security but also makes skills more transferable in the long term.

While consumers’ online activity had seen steady growth for years, Covid-19 turbocharged this. In retail, internet transactions as a percentage of total sales hit a high of 38% in January 2021, against 20% before the pandemic, according to the ONS. Even a year later, with all restrictions lifted, they remain at 27%.

by Clare Beardmore, Head of Broker and Propositions, & Jodie White, Head of Product and Transformation, Legal & General Mortgage Club 

Meanwhile, online banking was already well developed prior to Covid-19. More than three-quarters of adults in Britain used internet banking in the opening months of 2020. Yet open banking services have also witnessed rapid and massive growth over the past two years. January 2020 saw the number of customers using open banking in the UK pass one million. Nine months later, that doubled. Today, there are five million users.

There’s little doubt when it comes to the public’s appetite for digitally-enabled services. Among brokers, however, it’s been more mixed, and uptake varies widely.

But customer expectations are growing. Developments inside and outside the sector are leading to increased expectations for fast, smooth digital experiences. Customers increasingly demand solutions that will make their mortgage journey easier and quicker. And they want to be able to choose how to work with their broker.

Advisers that fail to offer a digital approach and communicate through online channels will only be restricting their ability to reach these customers. In this environment, the bar set by market leaders soon becomes the standard. Those who are yet to offer a range of digital communication channels risk hindering customer retention or may find themselves bogged down with administrative tasks, preventing them from doing what they do best: providing advice.

In short, a strong digital offering is becoming table stakes in the advice sector.

No need to reinvent the wheel

The good news, however, is that brokers don’t have to do this by themselves, and they don’t have to do everything. They’re not technology businesses after all.

Instead, brokers should avoid the gimmicks and look for technology that adds value for themselves and their customers. In most cases, they are one and the same: Technology that reduces inefficiencies in the mortgage process and friction cuts brokers’ costs, as well as the inconvenience and delay for clients.

Any serious adoption of technology must focus on the impact on the end customer. Consequently, a serious examination of existing technology cannot do better than begin with customer relationship management (CRM) systems.

Customer relationship management is critical to the client’s journey. It plays a central role in capturing and managing borrower information and streamlining the loan process. Its importance has meant that a wide range of robust existing systems is currently available. There’s no need to reinvent the wheel – nor even to invest; Legal and General’s Mortgage Club, for instance, provides certain members with free licenses to the Smartr365 technology platform, which includes a comprehensive set of CRM tools.

By automating tasks, eliminating effort, and providing workflows to accelerate the mortgage process, CRM systems are critical to meeting modern customer expectations. However, they can’t and don’t aim to replace the broker.

The human touch

For advice, the human factor is still vital. That’s reflected in the continued dominance of intermediaries in lending. Over seven in ten buyers used an adviser for their most recent purchase. With borrowers facing a sustained rise in interest rates for the first time in a decade, and finances squeezed by rising inflation and a cost of living crisis, that’s not going to change.

CRM technology, however, can boost efficiency and free time for brokers to spend working with clients to find the best solutions. It also promotes continued engagement to enhance retention.

Rather than replacing the broker’s expertise, the technology enhances advice by enabling advisers to apply their knowledge more effectively. To give one example, intuitive checks built into an affordability calculator share a far more complete picture by revealing why certain inbound leads might be failing. That allows intermediaries to offer better-tailored advice to customers.

Crucially, the technology must serve the advice journey, not determine it. The way to avoid that is to integrate digital capabilities in a wider transformation journey focused on using the tools available to meet customer needs and support advice. To do so, brokers must embrace technology, as their customers already have done.

Those that don’t could be bringing the next crisis on themselves.

The banking industry has undergone huge change in recent years, and so too have its players. As such, the time-honoured classifications of ‘incumbent’, ‘challenger’ and ‘neobank’ no longer sufficiently describe a bank’s offering, role or position in the industry;  arguably some incumbents are proving to take more ‘challenging’ strategies than some of their comparatively younger challenger or neobanks. So how will banks be defined in the future?

by Rivo Uibo, Co-Founder and Chief Business Officer at Tuum 

The evolution of banking is partly in response to an underlying shift in the way that people live and work and the demand across diverse demographics for more tailored banking services. Freelance workers have different banking needs to employees; the needs of Gen Z customers, such as saving money and managing subscriptions (including Spotify, Netflix etc.) are far removed from those of older generations. In essence, to prosper in today’s banking industry, banks must now find a means of being relevant to diverse customer demands and desires and provide these banking services in the most convenient way.

In tandem with this trend, the advent of embedded finance, open banking and APIs together with the rise of new entrants to the market including tech giants and superapps and demand aggregators (brands that provide financial services on top of their core offerings such as Alipay, Uber payments or Gusto wallet), are adding further complexity to the banking landscape and the number and diversity of players.

Banks are therefore under pressure to maintain market share and are looking at different approaches to achieve this. Let’s look at the different business strategies that banks are pursuing today and where these business models are likely to lead to.

High street banks

Even before the pandemic, high street banks were ramping up their digital offerings and reducing their number of branches. But in the wake of the pandemic and soaring demand for digital banking, high street banks face strong competition from online-only banks. As a result, they have radically reduced their number of branches; according to a report by Which? published in December 2021, almost 5000 UK bank branches had closed since 2015 or were set to close in 2022.

That being said, In the UK, high street banks offering personal and business banking (including RBS, Barclays, Lloyds and HSBC) are still regarded as the market leaders and mainstays of the industry. Only time will tell if their (albeit reduced) in-person banking services and industry standing will be enough to survive heightened competition from their more nimble digital counterparts. In the meantime, these mainstream banks will be closely analysing the options open to them to maintain customer share (greater focus on digital/focus on other market segments).

Digital banks

These forward-thinking, online-only banks provide banking services that fully reap the efficiency benefits of modern technological capabilities. Leading digital banks currently include the likes of Monzo, Nubank and N26. These large players, which started out as ambitious neobanks, have succeeded in gaining a sizeable customer base through innovative, digital service offerings. N26 is today one of the most valued banks in Germany and is aiming to be one of the biggest retail banks in Europe (without having a single branch) while Nubank boasts 40 million customers in Brazil.

Aside from these larger successful players, many digital banks tend to be niche players, laser-focused on the banking needs of one specific customer group. These financial service providers are made up of both those who have their own licence and those that depend on other banks or banking platforms for their licence – but both are perceived equally by end-users as ‘digital banks’. Their strategy is to gain maximum traction within their target customer segment and then expand and enhance their service offerings. A great example of a niche digital bank is Jefa, a LATAM bank set up by women for women, offering free accounts, a debit card, and a mobile app to assist money management. With the defaults of banking in LATAM broadly hostile to women customers, Jefa is making headway in a giant untapped market that has been ignored by other banks. Another good example is New York-based Daylight, a digital bank that offers services specifically tailored to meet the needs and assist with the financial challenges of LGBTQ+ people and their families.

Notably, as long as a financial institution is fully regulated and users’ money is protected, customers are beginning to show less loyalty for long-standing banks and are increasingly motivated by innovative services and excellent customer experience from digital banks. The rise of platform players – in the form of next-generation core banking and BaaS platforms are playing a key role in enabling digital banks to quickly roll out new tailored banking services and driving innovation in everyday banking.

Multifaceted banks

These banks succeed in functioning in multiple modes; they successfully provide banking services directly to their own diverse customer base while also opening up their infrastructure to provide the technology and licence to third parties.

Goldman Sachs is a key example of such a bank today. It launched a consumer banking brand, Marcus, in 2016, together with a new transaction banking unit, which amassed $97 billion and $28 billion in deposits by 2020 respectively. Goldman Sachs opens up the underlying infrastructure that powers Marcus and its transaction banking unit to external third parties as well, such as Stripe or Apple. By leveraging both its balance sheet and regulatory expertise as well as a modern platform, it is an attractive embedded banking partner for large sticky brands.

Starling Bank is another (online) bank that together with providing award-winning digital banking services to its own customers (it has been voted Best British Bank in the British Bank Awards for the last four years), it also offers its own infrastructure to other banks and fintechs in order for them to roll out financial services.

As embedded finance and the rollout of financial services by non-banks takes off, banks that can offer their infrastructure and banking licences will become increasingly in demand.

Only time will tell exactly what the banking landscape will look like in the future but what is very clear is that the age-old classifications of banks need reconsidering. And in order to survive and thrive banks themselves need to decide what path to take. We are entering a stage in the evolution of the sector where there is no clear roadmap for a given incumbent or a given challenger bank. Each individual bank needs to assess its strengths and ambitions and re-evaluate its strategy to carve out its own place in the industry.

The growing demand for personalised and relevant services will mean that only a minority of banks will be able to operate on multiple levels because it is hard for a bank to be everything to everybody. In the meantime, advances in banking technology and the growth of platform players supporting digital banks will enable this segment to further expand and diversify while the banks that serve both their own customers and support other third party banks and fintechs will help to drive competition and bring about more choice and more options for customers in the future.

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

by Phillip McGriskin, CEO, Vitesse

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

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

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

Making greener payments in the cloud

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

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

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

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

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

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

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

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

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

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

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

The key benefits of a clean data environment include:

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

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

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

by Amon Ghaiumy,  CEO and Co-founder, Ophelos

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

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

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

The growth of BNPL spending

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

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

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

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

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

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

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

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

What could these regulations look like?

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

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

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

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

Using debt resolution as an asset

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

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

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

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

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

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

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

Commodities have long been considered a good hedge against inflation and, true to form, with inflation in many countries now at its highest level in decades, those businesses that failed to invest in minerals, energy sources, livestock and foodstuffs face a financial squeeze to keep their supplies chains operating.

by Paul Macgregor, Head of Sales, NovaFori 

Yet, even for those businesses with foresight, that have planned and hedged, the current inflation-based pressure points on the global economy are accentuating stresses and strains that already existed in global supply chains and business value chains. Long-standing inefficiencies were exposed by the pandemic and became even more visible with the onset of the post-pandemic period. These inefficiencies could be significantly reduced by harnessing intelligent digital marketplaces.

In the world of commodities, this is particularly noticeable. It shows the use of traditional analogue as a way for businesses interact with customers, suppliers and intermediaries to be outdated and in need of a rethink. For this sector, a new way of offering efficiency, transparency and good practice is needed.

The rate of inflation in the UK reached 5.4% year-on-year in December, a 30-year high, and is sure to rise further in April when a 54% rise in the UK fuel price cap takes effect. In the US, meanwhile, consumer prices rose 7.0% in December, the highest level since June 1982. Against that backdrop, coffee, crude oil and aluminium prices have risen well over 100% in the past year, while cattle, copper and gas are up more than 50%.

Most eye-catching is lithium, up by close to 500% since the start of last year. Demand for lithium has jumped as demand for electric vehicles (EVs) has soared. Lithium is used in the batteries, which typically also include nickel and cobalt, prices of which have also risen significantly – nickel up over 30% in the past year and cobalt up almost 100%.

Fusion of analogue and digital marketplaces

Taking metals as an example, the value chain can go from mining to processing and then on to fabrication, transportation, storage and consumption, and finally, it is hopefully recycled. The more verticals within the chain that a business owns, the more scope there is to benefit from significant efficiencies.

There are points in the value chain where most businesses deal with intermediaries or brokers to advise them on both sales and purchases depending on where they fit into the cycle. These intermediaries play an important part in the process with their local knowledge, business relationships and understanding of the metal in question. Their involvement is typically in a more traditional analogue form.

Three key metals used in batteries are nickel, cobalt and lithium. All three are mined in remote parts of the world; The Democratic Republic of Congo is the world’s largest cobalt producer. The world’s largest reserves of lithium are in Australia, Argentina and Chile, while significant amounts are to be found in China and sub-Saharan Africa. Major deposits of Nickel are found in Indonesia, Canada, Russia and Brazil.

Amid the rapid growth of the EV sector globally, demand for lithium-ion batteries has soared. The rate of increase in the price of nickel, cobalt and lithium reflects, to an extent, the nature of the market in which each exists.

Given the geographies, the logistics and the local market complexity, such as grade of materials, shipment times, insurance, pricing and other local issues, intermediaries play a key role, by utilizing digital marketplaces to grow the geography of their client base. It may seem counterintuitive, but their analogue processes can in fact complement digital marketplaces with their local knowledge. The two go hand-in-hand, expanding access to the market, increasing the number of participants and adding liquidity. The result is greater price competition and a more efficient market.

Digital B2B marketplaces trusted to transact billions

Digital business-to-business (B2B) marketplaces are trusted to transact billions of dollars worth of goods annually across a wide variety of industries, including vehicle sales, leasing and re-leasing through to luxury goods and food products. They have a role to play in improving marketplaces for physical commodities.

Digital B2B markets widen distribution networks, help to ensure competition and liquidity in the marketplace, and enable price discovery using various auction methodologies. At the heart of it, buyers compete for goods or services by bidding incrementally upwards before finalising the price. The bidding process can be open or closed, during which it’s possible to capture every activity of potential buyers, including lots searched or browsed, bids submitted, and lots won or lost.

Once in operation, B2B markets can incorporate data science in the form of machine learning with the capability to make recommendations on products, buyers and timing, thereby helping sales teams to operate more efficiently.

Recommendation algorithms also point buyers to possible substitute products if they exist. For example, with EV batteries it could recommend another supplier with a similar specification and price. This enables sellers to satisfy customer demand where previously the transaction would not have been completed. The use of data science in such a way can broaden understanding of the marketplace and the wider industry.

It is fair to say that for some industry sectors, including the EV battery sector, without an efficient and digitised supply chain, achieving the end goal of a carbon-zero future becomes a far greater challenge. The issue goes beyond what is good for business, it has a real societal impact too.

In the post-pandemic environment, the commodities sector may retain some of its traditional characteristics that smooth the works of the market, but they will also have changed for good with increased digitalisation. As the world eyes the prospect of ‘building back greener’ with net-zero emissions targets, digitising the multi-billion-dollar commodity value chain has a part to play. Markets will be created where they didn’t previously exist and enhanced where they do exist. Inevitably, there will be disruption, but that will be accompanied by opportunities for those who embrace change.

As lockdowns, social distancing guidelines and a wave of uncertainty swept the world in early 2020, experts at McKinsey predicted that global payments industry activity could drop by as much as 8% to 10% of total revenue due to the then-emerging COVID-19 pandemic. Instead, the opposite occurred.

by Jairo Riveros, Chief Strategy Officer and Managing Director for the USA and LATAM, Paysend

Between 2020 and 2021, the global digital payments industry grew $5873 billion, a compound annual growth rate of 16.1%. In addition, we saw a record amount of funding with payments startups raising an estimated $31.9 billion in 2021.

The growth of digital payments and digital money transfers shows no signs of slowing. As we enter a new year of exciting growth in the space, we can continue to trace the path that digital payment innovation has taken since the industry’s explosive growth in 2020.

How we got here

With social distancing in effect, it’s no surprise that the COVID-19 pandemic helped digital payments skyrocket in popularity. However, what’s important to note is that three trends contributed to digital payments’ spike in utilization: rise in online consumer spending, the move to digital currency and the shift from brick-and-mortar to digital storefronts.

First, digital payments were already growing in popularity. In 2019, Americans spent about $360 billion on eCommerce transactions, and 77% of people used one or more types of mobile payments. While the pandemic caused digital payments to soar in popularity, the stage was already set for the rise of digital payments even before March 2020.

Second, physical money lost favour worldwide during the pandemic. Globally, cash use decreased to account for only 20% of all face-to-face payments. But in the U.S., it just wasn’t available—the U.S. Mint lowered its coin production from March to June 2020 to keep Americans from being exposed to COVID-19. A national coin shortage ensued that summer, but many businesses stopped accepting cash as a form of payment.

Third, lockdowns and stay-at-home orders forced us to take our financial needs from physical storefronts to digital storefronts. While this led to an uptick in eCommerce, lockdowns affected far more than just retail—60% of international and domestic cash transfers, for instance, took place online in 2020.

The trends we’ve seen

Digital payments carried this momentum into 2021 – 82% of Americans used some form of digital payment in 2021, up from 78% in 2020.

In addition to digital payments as a whole, several practices within the digital payments umbrella term have also grown more popular. The rise of the “buy now, pay later” option on eCommerce has struck a chord with consumers – about 33% of shoppers between 18 and 37 in a survey said that the option to pay in phases influenced their choice to complete their online purchase.

Further, remittances as a whole have increased in 2021, with the World Bank predicting in November that remittances would increase by 7.3% in 2021. But sending them digitally is also popular among those issuing remittances. In fact, a 2021 Visa survey showed that digital payments were the most popular method for sending money outside of the country. 23% of survey takers reported that they’d used digital payments to send money outside of the country, while 65% said they planned on doing so for the 2021 holiday season.

Digital payments have become so widespread that it’s causing some to purposely leave their wallets at home. For example, 15% of digital wallet users reported that they regularly leave their residences without bringing their physical wallets with them. With the federal government discussing standards for digital driver’s licenses, consumers will truly be able to live day-to-day without bi-folds, tri-folds, or clutches.

Where we’re headed

In 2020, digital payments became a necessity that also increased the efficiency of payments. By 2022, streamlining digital payments even further has become a hallmark of the sector’s evolution. It’s an exciting time for the digital payments industry, and we can expect several trends in digital payment innovation to emerge or continue in 2022.

Catering to customers as a whole will continue to be a focus for fintech companies as they improve their product’s user experience. Because digital payments already make financial processes more efficient compared to in-person processes, we can expect this efficiency to increase even further. For example, startups will begin to make fintech services a more seamless experience for users, as embedding financial services into non-financial companies becomes more commonplace. Additionally, both payments and credit processes are poised to become even more efficient for consumers.

Furthermore, we can also expect efficiency to be extended to international banking. Digital technology has made places around the world more accessible than ever before. Fintech is already doing its part to grow this global accessibility, with multiple banks beginning to offer multi-currency digital wallets to enable greater financial flexibility for global citizens.

At the same time, it will be important for the sector to address immigration and financial inclusion. One way the sector can innovate in this area is by introducing instant, low-cost and hassle-free remittance transfers in Latin America since digital transfers are still a budding practice in the region. Making digital payments in the region easy and inexpensive will let remote, low-income households in the region make and receive payments both quicker and more securely.

The biggest issue plaguing consumers right now are expensive transfer fees. Take the U.S. as a prime example. Consumers who don’t utilize traditional banks spend about $140 billion per year on unnecessary fees. In order to promote financial inclusion for all, it’s imperative that providers lower service fees.. We’ve seen some movement on this front within banking recently – Capital One announced in December that it was giving up $150 million in annual revenue to do away with its consumer overdraft fees.

Lowering service fees won’t impact digital payment ROI, as the global digital payments industry is expected to hit $2.9 trillion in 2030. Digital payments are also poised to continue their stark ascent in usage – one study estimates that by 2024, cash will account for under 10% of U.S. payments and only 13% of payments worldwide. Meanwhile, the same study estimates that digital wallets will be used in 33% of all in-store payments.

It’s an exciting time for the digital payments industry, and if the past two years have shown us anything, it’s that the sky’s the limit for innovations in the field.

 It’s been said that “change is the only constant in life.” The global pandemic created a wave of change for everyone. We experienced the sudden shift to remote work, the acceleration of e-commerce, and a focus on digital capabilities.

by Michael D’Onofrio, CEO, Orbus Software 

For financial services, there was the additional challenge of tighter budget control, and increased regulations around cybersecurity and data protection, in addition to rising customer expectations for stellar digital-led delivery.

As a result, we’re seeing three key challenges emerge for financial services CIOs:

• addressing disruption from new technologies and emerging business models,
• achieving a first-class customer experience,
• maintaining business as usual.

What links these challenges is the balancing act of controlling risk while enabling technology-driven transformation. Organisations with a more proactive and collaborative approach to risk management fared better during the pandemic than those with a defensive and reactive approach.²

However, Gartner notes that “almost half of global financial services organisations are still in a very early or even immature stage of their digital transformation journey”³ and rely on traditional business growth or are still working on digital optimisation (versus digital transformation) efforts. When confronted with the above challenges, those with strong Enterprise Architecture were more equipped with the tools to assess and respond.

Addressing market disruption

A 2022 Alix Partners study found that “70% of business leaders report high disruption to their company, up 11% in the past year. 94% of executives say their business model must change in the next three years.” The pace at which disruptive forces impact businesses today means leaders can no longer “wait and see.” The best-performing companies disrupt and reinvent themselves on a continual and ongoing basis.”¹

Technology is the foundation of the modern bank and at the heart of much of this reinvention. But many financial services firms rely on customised and legacy systems (about 55% of enterprise applications!) and are only very slowly migrating to cloud-based options. Outdated technology infrastructure reduces agility, flexibility, and organisational resilience. You just can’t pivot or bounce back from a threat or transform as quickly.

Rising from disruption requires executing on increasingly integrated capabilities. This requires clarity and alignment on the challenge being faced, the systems, people and processes impacted, the strategy to move forward, and the shifts already underway. Many organisations don’t have the tools needed to cut through this level of complexity.

Enterprise Architecture supports the ability to execute through a shared common language across lines of business, an understanding of the layers of the organisation impacted, and a toolset to respond. A microservices and service-oriented architectural approach supports greater business agility. EA improves speed to market for application and data integrations, and the automation of business processes or workflows while establishing control over scenarios. For CIOs, speed, executional clarity and alignment make the difference in responding to change – and, planning for the future.

Achieving a first-class customer experience

To remain competitive retail banks need to ensure customers can move between communication channels easily and that they personalise online interactions to maximise customer interactions and additional revenue opportunities. McKinsey reported that 76% of US consumers moved to digital channels for the first time during the pandemic, while a survey by Accenture²  showed that 58% of customers want to be able to switch between human and digital channels.

In order to achieve a first-class customer experience, financial institutions need to focus on delivering true omnichannel: offering the same services to customers across all digital and offline channels, synchronising their data for reuse across channels in real-time. For many FIs, this trend accelerated the need for digital transformation and increased focus on digital customer experience.

The challenges CIOs face here are threefold:

• Cost and complexity of adopting omnichannel technology often spiral out of control
• Omnichannel technology projects are sometimes impeded by disconnected silos of enterprise information
• Security and compliance risks are not always visible and not accounted for

The delivery of integrated channels and seamless end-to-end transactions relies on Enterprise Architecture. Enterprise Architecture can not only help with the delivery of such things but also enable the creation and deployment of digitally-enabled business strategies and new operating models using those technologies.

Enterprise architecture can help control investment across IT portfolios, create a single source of truth of all enterprise information from all areas that are to be integrated, and gain visibility into compliance and security to anticipate and prevent potential threats.

Reinventing Business-As-Usual

According to an FT article from last summer, banks in the US and Europe were starting to show signs of being back to Business as Usual, moving away from the negative effects of the pandemic. This does not mean we are out of the woods. But it is a start.

The pandemic highlighted two things: the need for and benefits of cross-departmental collaboration, and the importance of “as is” and “to be” planning. Organisations need to start moving away from a reactive business model to a proactive one where the focus is back on winning against the competition. This is also the time for financial services firms to reassess the short-term fixes they put in place over the last two years and look at long term designs.

We know change is a constant. What differentiates resilient organisations is the ability to endure and even benefit from change. They have the agility to align IT assets with risk, resiliency and business processes & programs around an actionable plan.

Enterprise Architecture is the missing link between technological resilience and operational resilience. Enterprise Architecture provides organisational clarity to accelerate this transformation in a strategic and purposeful way, mapping the process of a desired future state. Overcoming these challenges in the coming year will be key for FIs in order to be truly resilient and be able to weather the next storm.