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HOW FINANCIAL SERVICES ARE FOLLOWING IN THE FOOTSTEPS OF AMAZON WITH DIGITAL IDENTITY

Even before the pandemic hit, sectors like retail, gaming or e-healthcare moved quickly to embrace the speed, convenience and experience of digital services – led by technology pioneers like Amazon or Google.

Despite the availability of online tools and support via apps or chatbots, traditional banks and financial institutions have traditionally encouraged consumers to visit in-branch locations.

Since many lacked the tools to securely validate a person’s identity digitally, it was believed that fraud was more difficult to detect in the virtual world. They also had a natural desire to take advantage of their substantial physical presence investments to build solid client trust and loyalty through face-to-face encounters.

However, during the past several years, the epidemic has acted as a digital accelerator for banks as well as consumer demand. Financial services could no longer afford to take their time navigating the digital world; those who do so risk falling farther behind in a society that is fast changing. In fact, a McKinsey analysis revealed that the lockout sped up digitalization by seven years, and an S&P Global study discovered that 60% of consumers visit physical branches less frequently than they once did.

It’s crucial that banks look to pioneers in developing digital experiences, like Amazon, as an example of best practices to follow as they think about how to foster trust and engage with clients in the digital realm.

Putting customers first

Amazon’s devotion to its customers is one of its distinguishing characteristics. It places a laser-like focus on every facet of the user experience and mercilessly streamlines it through ongoing experimentation and A/B tests. The digital experience must be frictionless so the customer may complete the purchase without the assistance of a salesperson. Although Amazon learned this lesson twenty years ago, the traditional financial services sector is only now beginning to confront it.

Nobody would have imagined doing something like buying a mattress online ten years ago. It seemed dangerous just to consider purchasing a pair of sunglasses online without first making sure they look well on your face. Amazon, though, assisted in changing the market’s course. Customers grew accustomed to Amazon’s four-click process: add the item to the basket, checkout, confirm shipping, and buy rather than traveling to the furniture store, trying out a dozen or so mattresses, and then having their preferred mattress delivered a few days later.

In contrast, customers in the financial services sector are required to pass through a myriad of hoops in order to use basic banking facilities. Those who want to open a bank account online must respond to a never-ending list of inquiries meant to confirm their identification. Finanteq discovered that opening a bank account at certain major banks involves more than 120 clicks. When contrasted with the Amazon experience… How many consumers would make a purchase if it required 120 clicks?

Our most recent consumer survey confirmed the value of a seamless customer experience. It was shown that 60% of customers admitted to giving up on an online registration because it took too long, was too complicated, or caused them to worry about the security of their personal information. Poor digital experiences are expected to turn off many customers from banks.

A seamless, simplified client experience is essential, and more importantly, anyone who prioritizes it can achieve it.

Approaching a frictionless journey

Banks are currently attempting to mimic the Amazon experience, and in doing so, many have discovered that a contemporary onboarding process can be the doorway to trust, security, and an improved user experience. In order to comply with anti-money laundering (AML) and know your customer (KYC) regulations, banks don’t have to make their customers answer dozens of questions and go through a number of hoops. Instead, they can restructure their identity verification procedures in a safe and effective way.

How? Many people are deciding to support a new paradigm based on digital identities. Digital identities, which are supported by cutting-edge technology like AI and biometrics, are able to meet the most stringent KYC requirements while also speeding up customer onboarding. This journey toward putting the needs of the client first will enable the financial services industry to emulate Amazon.

However, these technologies are available for use by the entire business and are not just for early adopters. By doing this, banks may take part in the digital identity revolution while simultaneously enhancing client experience and securing the onboarding procedure. However, this is impossible if banks are unaware of how many steps their existing onboarding process entails and where exactly consumers are lost. Competitors with advanced digital skills are winning the war because they have this understanding of who their consumers are, how they are onboarded, and where friction is present.

The financial services sector must also be ready to fundamentally rethink the digital experience and center digital roadmaps around client needs and wishes. With the aid of contemporary technology, banks and other institutions are able to monitor onboarding processes, pinpoint the precise points at which and how the customer acquisition process is stalling, and relentlessly experiment with A/B tests that enhance the user experience and remove roadblocks along the way. Amazon would carry it out in this manner.

In today’s post-pandemic environment, clients prioritize simplicity of use and convenience, and digital is the standard. Financial services must concentrate on developing seamless digital experiences that give consumers the freedom, power, and security to access their assets in the manner that fits them best if they want to win customers’ loyalty and trust.

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thefintech.info

FINTECHS: HOW TO IMPROVE USER SATISFACTION AND FRAUD PREVENTION

The Twitter vs. Elon Musk issue should serve as a lesson to any company built on user numbers: quantity does not equate to quality. Banks and FinTechs must now switch from a growth-focused strategy to one that caters to the demands of its key demographics and fosters loyalty in order to become profitable, powerful, and able to endure the current economic storm.

This was a key topic on the Money 20/20 program this year. Together, the four pillars of effective strategy—customer experience, loyalty, digital transformation, and fraud—have pointed to a new paradigm of slower growth and higher quality. Neobanks like Starling, for instance, stated that rather than focusing on acquiring more accounts, their strategy is focused on luring and keeping customers who suit their target demographics in order to produce profitability.

That’s a smart decision considering that fraud affects 85% of new account opening applications, according to BankInfo Security. The days of valuing anything based on how many users there are quickly passing away. It is evident that when banks are just interested in obtaining a big number of new accounts, criminals will gladly open fictitious accounts to further their illegal activities because banking systems may not be up to the greatest cybersecurity standards. For precisely these reasons, FinTechs actually see three times more fraud than traditional banks.

Soaring account openings, which show significant user adoption and brand identification, are a reason for joy for the majority of expanding businesses. Growing businesses aiming to bring on new clients quickly present criminals with a golden opportunity. One bank, for instance, advertised to high-income prospects that they could apply for a credit card and a deposit account at the same time, which resulted in a subset of criminal applications. Later, these were connected to losses from credit fraud and the abuse of mule accounts.

Similar to how digital and automated account operations have helped banks serve consumers more quickly, they are also vulnerable to fraudsters who can open new accounts using stolen or fake identities. This can cost individual institutions millions of dollars in fraud losses and damage trust.

Fraudulent account openings that go undetected are a surefire recipe for disaster. Building genuine client loyalty—which calls for a comprehensive strategy that includes the newest digital technology, seamless customer experiences, and more effective fraud detection and prevention—is how success and long-term viability are demonstrated.

Everlasting loyalty, and how to achieve it

Two crucial elements for banks in developing customer loyalty are ensuring a faultless client experience (both online and offline) and ensuring the greatest degree of fraud protection and prevention. Fighting fraud is crucial for client protection, but users also need the quick and seamless digital interactions they come to expect from consumer-style apps.

For both conventional and new banks, this is their biggest challenge. Consumer-friendly application and transfer procedures must be implemented, along with rigorous fraud checks. Banks must keep providing loyal clients with a frictionless experience while putting up significant effort to safeguard them as they use an increasing number of services. While increasingly sophisticated criminal networks continue to readily evade many of the current fraud protection tools and procedures, the addition of ever-increasing layers of identity authentication might alienate customers and cause genuine application abandonment. Banks are unable to keep up with how hackers are getting through every security measure in place, including passwords, device IDs, one-time passcodes, and other forms of identification.

Criminals are skilled at employing digital deception to get past security measures, from credential stuffing to social engineering. They cannot, however, imitate a real customer’s true behavior. Behavioral biometrics is taking a stance on the front lines of the battle against fraud and in the direction of safe, simplified customer experiences.

Reshaping the route of criminal behavior

In order to discriminate between law-abiding users and criminals, behavioral biometrics uses machine learning to analyze user behavior. This technique reduces fraud and identity theft while also enhancing consumer experiences. This is accomplished by profiling user activity at both the user and population levels to discover behavioral anomalies and trends associated with legitimate and fraudulent activity. This is done by analyzing real-time physical interactions such as keystrokes, mouse movements, swipes, and touches.

Cybercriminals are unable to hide the tiny behaviors that distinguish them from legitimate clients, much like poker players always have their “tell.” When repeatedly entering personal information, for instance, genuine users can draw on their long-term memory because they are familiar with the facts, but cybercriminals frequently pause to consult resources or make use of copy-and-paste tools as they enter unknown information. Another illustration focuses on age-related behavior. Senior users enter data differently than younger users, which can be a hint that a cybercriminal is attempting to access the account.

Micro-behaviors can even reveal the user’s emotional condition, even if the profile looks to mirror the physical attributes and preferences of a recognized legitimate user. For instance, cognitive analysis can reveal even the most sophisticated social engineering tricks by identifying whether a user is acting on purpose or under duress. Only when fraud prevention technologies continuously scan a session for the subtlest changes in user behavior can some of today’s most sophisticated attacks be identified.

Fighting fraud is fundamentally what makes today’s financial services successful, from account opening through unwavering devotion. Criminal behavior patterns stand out in a huge group of real users; it requires cutting-edge technology to find them, but they can never be hidden. Thanks to the implementation of behavioral biometrics, real customers can gain from frictionless interactions and fraud protection by simply being themselves. The banking sector has been technologically changed in recent years, and seamless services and secure protection are essential. Thanks to robust AI and machine learning, we can now use criminals’ actions against them and give loyal consumers an even better experience.

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thefintech.info

WILL AN ECONOMIC RECESSION AFFECT THE FINANCIAL INDUSTRY?

Financial services, like many other aspects of the global economy, have been profoundly influenced by the pandemic and the war happening in Ukraine. Since then, FinTechs had to learn how to lead the financial services sector in a period of severe challenges. FinTech has been a key booster of digital payments as consumers have quickly moved towards contactless payments and online shopping. Now we are facing the times when the recession and other aspects like the pandemic started affecting FinTechs. The main question is how can the impact be reduced.

What is a recession?

When the economy’s performance declines for a sustained period of several months, a recession has occurred. Recessions are characterized by shrinking GDP (Gross Domestic Product), higher unemployment rates, and decreased consumer spending. It is characterized by a drop in stock prices, a decline in the value of the currency, a contraction of the economy, inflation, a drop in production, a rise in corporate bankruptcy filings, a rise in unemployment, a decline in personal income, etc. People may face negative effects on their daily lives during a recession.

Economists reacting to a recession

Many analysts anticipate that economic growth will slow in 2023, although they disagree on whether or not the country will have an official recession. While some analysts forecast a 0.1% slightly positive economic growth rate in 2023, others predict a growth rate of -0.4%.

According to economic commentators, the global economy may be entering a difficult phase, but the FinTech sector shouldn’t be overly concerned because excellent companies will find a way to obtain additional funding if necessary.

Economic experts are currently speculating on how various industries, including FinTech, will do in a downturn. Predicting the sector has become considerably more difficult when the economy begins to contract.

The importance of FinTechs for the economy

The innovative solutions provided by FinTech businesses are essential to the financial services industry in the modern world. A growing tech-savvy audience is served by technology advancements that offer data-driven solutions based on market trends and customer behavior. Additionally, this revolution is advancing financial inclusion and broadening services across all industries, which are both fueling the expansion of the sector.

Additionally, technical advancements have advanced quickly in recent years. The Fintech industry promotes economic growth by expanding financial options for a variety of businesses and by satisfying the requirements of a younger demographic.

Fintech may also benefit all companies by enhancing payment methods and customer relationship management. As a result, they may contribute to the development of more realistic economic opportunities and an uptick in financial activity, which will promote economic growth.

Consumers are increasingly turning to FinTech advantages to satisfy their financial needs as a result of increased reliance on technology. The pandemic is starting to pass, but the ensuing economic crisis could be more dangerous for the sector than the virus itself. FinTechs are anticipated to continue reshaping the financial landscape in the years to come. FinTechs are available to any firm, and they can be used to enhance or automate work processes. And as a result, they are daily expanding their economies and enterprises.

Keep track of your finances and select secure banking services for your company in these trying times. The industry may benefit from the decline in investment, at least in the long run. Analysts predict that only businesses with genuine goods to sell will withstand the strain, forcing investors to reassess who they are backing.

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thefintech.info

WHY A FINANCIAL REVIEW OF YOUR MORTGAGE COULD BE THE KEY TO SURVIVING ECONOMIC HARDSHIP?

Rising inflation and growing interest rates across the world continue to impact the housing market and in turn, mortgages. Looking at inflation or interest rates in isolation might spark ideas about how to approach your own financial situation, such as adjusting your mortgage payments.

However, small actions like these might not be sufficient to mitigate the overall effects of the economic forces at work.

Your objective should be to do a complete analysis of your finances and develop the financial acumen necessary to change the settings as necessary. Every aspect of your yearly mortgage financial check-up, including debt, cash flow, mortgage reset, and more, should be examined.

The actions that follow will put you in the greatest position to weather any economic upheaval while assisting you in taking stock of your finances and thinking through your mortgage alternatives.

Review your mortgage type

Examine your home loan’s structure and the things you can start doing right away to get ready for an increase in interest rates. If you have a loan with a floating rate, utilize a loan calculator to estimate what your payments would be once the current interest rate expires. This will help you understand the effect on your monthly repayments and allow you to make plans accordingly. This could be accomplished by reducing debt or by increasing savings before the current interest rate expires. Discuss options for refinancing your current mortgage with your lender right away, or look into the several mortgage options that are available.

Prioritize and take stock of what you owe

The highest interest loan should always be paid off first. To prevent paying late fees or past-due interest charges, try to match all the due dates and set a reminder to make sure payments are received on time. Due to their lower interest or financing rates, mortgages or house loans are often considered more acceptable forms of debt.

Create cash flow

Consider applying for a home equity loan or refinancing your property with full cash out if your properties are free of liens or have low Loan-to-Value ratios. It will enable you to access cash from your existing properties to reduce the short-term pressure on your cash flow. Keep in mind that doing so involves the same risks and demands the same financial restraint. If you lose track of your financial objectives, you can find yourself in a worse financial situation than when you started.

Look for consolidation of debt to lower the cost of financing

Borrowers who have debt with high-interest rates may be able to combine their balances into one loan with a lower rate of interest. In addition to saving money on interest payments each month, paying one bill with a single due date is often simpler than juggling many due dates each month. Through a balance transfer scheme that most banks provide, you can combine your unpaid invoices or obligations with high-interest rates.

How HSBC HomeSmart can help

According to a poll performed by HSBC, clients prefer flexible home loans, particularly those that allow them to lower their interest payments during periods of financial surplus. This is favored as opposed to investing in time deposits, which often offer lower interest rates.

Consumers will have more control over their finances thanks to this type of loan facility, which also gives them the freedom to withdraw extra money when they need it. This surplus can also operate as a type of early savings for such unforeseen circumstances and give consumers a cushion when their monthly repayment increases.

With the HSBC HomeSmart home loan, you can prioritize what matters to you the most. It has daily interest calculation and the transactional flexibility of a current account. Customers can deposit extra money to reduce loan terms and save on interest. Additionally, customers are free to withdraw extra money whenever they choose. A balance transfer program or mortgage refinancing service allows consumers to combine their outstanding debt with high-interest rates as an added benefit. Customers can apply for mortgage refinancing with a top-up and cash-out option for loan consolidation and receive 0% moving costs, up to RM15,000, as additional benefits (HSBC will absorb the stamp duty, legal, and valuation fees for loan documentation).

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thefintech.info

HOW A MONEY INSURANCE PLAN CAN PROTECT YOUR CASH?

Insurance products cover all facets of life, including your financial situation. Any business that deals with cash or cash equivalents such bank draughts, treasury notes, checks, postal orders, and money orders should consider purchasing a money insurance package. It offers protection against financial loss brought on by occurrences like theft, robbery, and break-ins.

Money insurance offers protection against the loss of money while it is in transit, in a safe, or at the cash register. According to your needs, you can purchase all of these perks, just one benefit, or a mix of them.

What is covered in money insurance? 

All forms of liquid money, including cash, checks, draughts, treasury notes, currency notes, and postal orders are covered by money insurance.

The best aspect is that the premium for this insurance is reasonable and won’t break the bank. In truth, one can even get covered in one’s worst life circumstances as additional safety. We typically have life, health, and auto insurance, but business insurance is just as important.

You can safeguard your cash when you transport it from your business to the bank or another financial institution with the aid of money insurance. You will benefit from the insurance if your company is burgled but the burglar is never caught.

What is not covered?

Money shortages brought on by mistakes or omissions, as well as money lost while in the possession of an uninsured person or an unauthorized employee of the insured, are typically not covered by money insurance.

Money insurance does not cover consequential losses, losses from floods, cyclones, wars, or warlike operations.

Prior to purchasing a money/cash insurance policy, you should thoroughly study the policy contract and have any questions answered.

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thefintech.info

TECHNOLOGIES SHAPING THE FUTURE OF FINTECH

Different technologies have been applied to meet the needs of the sector as FinTech becomes more widely adopted globally. Consumer expectations, governmental approvals, security upgrades, and rivalry are a few of them. The sophisticated technologies powering the ecosystem have improved in intelligence and adaptability. The categories of artificial intelligence (AI), cloud computing, blockchain, the internet of things (IoT), and open banking can be used to categorize the major themes for the future of fintech. Let’s take a closer look at these FinTech technological trends.

Key FinTech Trends

#1: Artificial Intelligence for Smarter Solutions

According to the Cambridge Center for Alternative Finance, 90% of FinTech companies are already using AI in some capacity. The ability of artificial intelligence to learn how to perform effectively and more quickly than humans is its most powerful feature. AI models may efficiently complete tasks without additional human involvement by learning from data. Because of this, work is completed more quickly, correctly, and efficiently, making FinTech solutions smarter.

Some of the use cases of AI in FinTech include the following:

  • Purposing chatbots into virtual assistants to answer customer queries, offer suggestions, and complete repetitive tasks
  • Deploying Natural language Processing (NLP) to enable human-like communication with virtual assistants and enhance customer engagement
  • Using AI algorithms to detect suspicious activity to prevent fraud, such as flagging suspicious transactions or insurance claims
  • Customer segmentation to offer tailor-made products based on risk score profiling and to facilitate faster loan approvals

As more businesses use AI as a crucial component of their operations, the value of the worldwide AI market is anticipated to reach $26.67 billion by 2026, according to Mordor Intelligence.

#2: Cloud Computing Improves Security

Through automated and incorporated security controls, cloud computing significantly improves security in addition to speed, scalability, flexibility, and faster deployment. The risk of handling sensitive data and adhering to industry rules is always there in fintech. Traditional IT ecosystems have been shown to be less dependable than cloud data warehousing. Data leakage and fraud are better prevented by the cloud’s characteristics like zero-trust verification and data encryption.

With cloud computing becoming more widely available, it is altering how we live. By offering a route for security-rich data exchange and dynamic applications that can be used in any industry or sector of business, regardless of what you’re doing right now, it helps enterprises to uncover digital transformation use cases.

FinTech solutions’ scalability is also facilitated by cloud technology, which will have a significant impact in the future. A scalable infrastructure is necessary for any startup that wishes to expand. Upgrading cloud infrastructure is simpler and less expensive. Additionally, this flexible environment makes it easier for firms to adjust to changes in the market, such as changes in customer demand, compliance with regulations, and the adoption of new technology.

#3: Blockchain Disrupts Outdated Financial Systems

The ability of blockchain to upend established banking systems is enormous. It is possible to store, share, synchronize, and distribute data across various data stores in real time by using Distributed Ledger Technology (DLT). Additionally, it resolves issues brought on by antiquated financial systems, like reliance on a centralized system, which creates a single point of failure, lack of trust, and greater operational expenses. Among the advantages of this are increased revenue, enhanced end-to-end experience, and decreased business risks.

The use of blockchain has increased traditional players’ desire for investment, including institutional investors, resulting in an increase in the capital allocation of digital assets in their portfolios. The most cutting-edge FinTech products include blockchain modules to appeal to cryptocurrency aficionados and penetrate the quickly expanding cryptocurrency markets. Traditional financial institutions should keep an eye out for this in the future of FinTech as they are also participating in this trend. Central banks all over the world are testing programs like the central bank digital currency (CBDC). Another illustration is how J.P. Morgan uses blockchain to speed up transactions by cutting the time it takes to process and verify large payments.

#4: IoT Сollects Customer Financial Data More Efficiently

Internet of Things (IoT) communication solutions is becoming more and more popular among FinTech companies, allowing more equipment—from wireless and end-point devices to centralized control management—to communicate across connected networks. Furthermore, smart technologies and embedded systems are developing quickly, enabling intelligent and smooth communication across various nodes.

IoT is used in the financial sector, among other things, to produce useful customer data, reduce the need for human input in resolving financial difficulties, detect fraud, and provide strong data protection. In the meantime, insurers are utilizing IoT more and more to assess risk, improve consumer interaction, and streamline the difficult underwriting and claims processes. For instance, when calculating premiums, auto insurers previously employed indirect factors such as the driver’s residence, age, and creditworthiness.

#5: Open APIs Drive Industry Growth

APIs and services for open banking are becoming more widespread as the globe transitions to an open banking system. These APIs are essential for creating an intuitive user experience and protecting data via endpoints. At the desire of the consumers themselves, open banking enables banks to access user data for third-party suppliers via APIs. As a result, you may effortlessly link your bank account to your preferred fintech personal finance management tool for more precise money tracking.

Open banking gives banks the chance to learn from and work with FinTech instead of competing. As banks are frequently reluctant to innovate, this results in a win-win situation. The relationship with traditional banks only helps them because FinTech companies are quick to innovate but lack financial heft. Another option is to construct a revenue-sharing ecosystem, in which incumbents provide access to services created by third parties for their customers while earning money through advertising, infrastructure, or subscription services. Additionally, APIs can be exchanged between different business lines or with reliable outside partners. This encourages ecological interactions and promotes innovation.

The FinTech Ecosystem

The foundational progress powering the FinTech ecosystem depends on a variety of building components, without which it would be impossible. The ecosystem will undergo a further transformation as a result of the inclusion of Blockchain, IoT, Open APIs, Cloud Computing, and Artificial Intelligence. Forward-thinking businesses must use FinTech innovation software solutions that promise to shape the future of FinTech and reap a wide range of benefits in order to compete successfully, improve customer experience, manage risks, and meet regulatory obligations.

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