September 18, 2020

How inclusive is your website design?

Inclusive Design is a key frontier in web design and may have a significant impact on the number of customers you reach

As the Covid-19 epidemic has forced many of us to retreat to our homes over the last six months, some for extended periods of time, the quality of the digital experiences available to us has become more important than ever. As our world becomes increasingly digitalised, with more products and services migrating entirely online every day, it is crucial that as many people as possible remain able to access them.

One in five people in the UK currently live with an impairment that could make it difficult for them to access websites and apps, experiencing limitations in their vision, hearing, physical movement and dexterity or cognitive processing, and this number is only likely to increase as the age profile of the population continues to get older. Despite this overwhelming need, Inclusive Design remains a relatively niche topic in customer experience discussions, and around 70% of websites in the UK are estimated to be either wholly or partially inaccessible for users with an impairment or disability. Perhaps partially as a result of this, around a quarter of disabled adults in the UK have never used the internet.

While one in five of us has a permanent disability, a third of us will have an impairment at any given point in time – for example from a temporary injury – and everybody will experience periodic situational impairments, such as when we are in a very loud environment or need to interact with content in a language we don’t speak fluently. Despite this overwhelming demand for websites to be accessible to people with a range of impairments, very few are designed optimally, or with inclusivity specifically in mind. That also means that there is a potentially huge untapped market open to any brand that does make their online presence widely accessible. In fact, research shows that products and services designed with the needs of people experiencing poverty, disability or the effects of ageing in mind can reach four times the intended number of consumers, significantly impacting the bottom line. The Papworth Trust found that the people most likely to be living with a disability are those over state pension age, suggesting that as our population ages, inclusivity will become an increasingly important CX consideration for websites.

The Inclusive Design process begins with including people who normally have trouble using products, services or websites in the design process, and having them test iterations before a final version goes live. It involves asking for feedback from customers (as well as those who have previously been excluded) and making appropriate adaptations as a result. It also involves design teams adapting their mindset, so that inclusivity is not considered a bolt-on part of the design process but is instead considered automatically at every stage.

What do inclusively designed websites look like? Firstly, they do not assume that a one-size-fits-all customer experience exists, but target experiences based on the individual customer’s needs. While assistive devices have for many years aimed to remove barriers and enable users to interact with a one-size-fits-all product, Inclusive Design aims to redesign that product so that those barriers do not exist. Sometimes this involves utilising functionality that has already existed for years – Alt text, for example, wasn’t originally primarily used to improve a website’s SEO, but to make non-textual content parsable for screen readers. Sometimes, it involves fundamentally rethinking how information is displayed, to ensure that every page is easy to navigate and understand. An accessible website will rarely have a cluttered design, and will make use of large navigation buttons and text, so that it remains accessible on a variety of devices and screen sizes, as well as to people with a range of physical or mental health needs. It will make good use of keyboard shortcuts and make transcripts available for audio material. In short, it will as a default present information in a manner that is accessible to as many users as possible and will provide alternative formats where this is not possible.

This shouldn’t need to come at the expense of aesthetics, in fact the opposite is the case: an inclusively designed site will often conform to basic design principles better than its overly cluttered counterparts. The Royal National Institute for the Blind stated this well, when they said that “well designed graphics and multimedia are a positive aid to using and understanding websites, and do not need to be sacrificed for accessibility”. The Arts CouncilSkinOwl and Apple websites are some that Inclusive Design advocates have put forward as best practice examples of sites that are both widely accessible and beautifully-designed.

It has been said that CX is made up of three core components – success, effort, and emotion, and that improvements in emotion drive the most significant increases in loyalty. If every interaction with a brand’s website results in frustration or embarrassment, it is easy to understand how this can negatively impact loyalty to that brand. Conversely, a seamless process that makes customers feel truly included is likely to result in significantly improved brand perception.

July 27, 2020

Five ways great employee experience leads to better CX

Happy and engaged employees create better experiences, which leads to a more satisfied and loyal customer base

Of all the areas of life that have been disrupted in the first half of 2020, one of the most affected has surely been work life. While millions of office workers have been adjusting to working remotely, essential workers have needed to adapt to scores of new rules and regulations at their workplaces as the year has progressed. Regardless of how they’ve been affected, the majority of workers have faced significant change, and this is having an unprecedented impact on employee experience.

As we wrote recently, customer experience is likely to be a key differentiator for brands in the post-Covid world. In recent years, the significance of the impact of employee experience on customer experience has also been increasingly acknowledged. A customer’s first point of interaction with an organisation is usually through its employees, and this first interaction can be make-or-break for first-time or infrequent customers. If employees do not make a good impression, potential customers may leave and never come back. Companies that can provide excellent employee experiences in this fast-changing world, then, and translate this into great customer experiences, will be in a strong competitive position. Below, we have listed five of the key ways in which the employee experience affects customers:

1. It’s been statistically demonstrated that an engaged workforce makes businesses more profitable. A study published in the Journal of Occupational and Organizational Psychology has shown that employee commitment to their organisation has more impact on business performance than vice versa. The research looked at the commitment of a sample of retail bank employees, the financial performance of the bank over time and the customer satisfaction of the business areas the employees worked in. It found that within a year it was already possible to see a reciprocal relationship between job attitudes and business performance. Research elsewhere has found that companies with highly engaged employees outperform their competitors financially by nearly 150%.

2. This improved profitability is at least partly due to superior customer experience. 87% of Starbucks customers’ affinity for the brand has been found to be driven by the way the company treats its employees. Nordstrom is famous for its world-class customer service to the extent that there have been books written about it. It’s no coincidence that Nordstrom also offer exceptional employee experience: they’ve been ranked one of the Top 100 Places to Work in the U.S. for over 20 years.

3. Engaged employees simply understand how to deliver good customer experience better than unengaged ones. A staggering 70% of engaged employees indicate a good understanding of how to meet customer needs, compared to just 17% of disengaged employees. U.S. supermarket Publix is employee-owned and regularly wins customer satisfaction awards, in part because these engaged employees have a reputation for regularly looking for small ways to make customers’ lives easier.

4. The impact of employee experience on customer perception of an organisation goes beyond their direct shopping experience. In the age of social media, some organisations have seen just how directly a negative employee experience can impact their bottom line, when media stories about poor staff conditions have attracted the attention of potential consumers. In 2016, for example, Chairman Mike Ashley told The Guardian in 2016 that the negative press surrounding leaked working practices at Sports Direct resulted in a 57% drop in first-half profits that year. This can have an impact even on organisations that have a strong customer experience track record: the “Boycott Amazon” movement has been gathering pace in recent years, in part because of increasing awareness of the poor working conditions experienced by many of Amazon’s warehouse employees.

5. Engaged employees actively find new ways to make customer experience better. The companies that give their people space to innovate are also the ones that tend to provide strong customer experiences. It is no coincidence that Google, a company that has been almost relentless in the optimisation of its product roster for over 20 years, is still seen as the default search engine by much of the world. And even seemingly small-scale improvements can make a big difference. An analyst at New Zealand’s Contact Energy, unhappy with many of the repetitive tasks required for their role, developed an automated process to handle those tasks. Recognizing that this initiative delivered results, the company rolled out the solution more widely, and today the company actively works to improve customer experience by automating simple jobs so that agents are free to spend more time dealing directly with customers. Improved customer satisfaction was an almost indirect side effect of improvements to the day-to-day experience of employees.

Happy and engaged employees create better experiences, leading to more satisfied and loyal customers and, ultimately, brand and company growth. The workplace status quo has already been comprehensively shaken up over the last few months. Organisations that take the opportunity to make lasting improvements for their employees may also find they win a loyal new customer base.

Written by:

Fran Cavanagh

July 2, 2020

What will the “new normal” look like for retail ?

Adjusting in-store and online shopping experiences to address new realities

After what have surely been some of the strangest few months for the retail industry in recent memory, brick-and-mortar stores are starting to re-open in many areas that have been worst-hit by Coronavirus outbreaks. Consumers and retailers alike seem enthusiastic about this return to some semblance of normality: some keen shoppers were seen piling into London’s flagship Nike store when it reopened earlier in June, and in the absence of most out-of-home entertainment options, shopping trips are becoming established as a highlight of many people’s weekly routines.

The prospect of reopening is not without its challenges. Brick-and-mortar retailers all over the world are figuring out how to conform to a variety of new regulatory requirements, and nearly everywhere there will be a need to reassure nervous consumers who have become used to shopping conveniently and safely from home that it is safe and desirable to return to physical stores. That won’t be a straightforward task: in the U.K., for example, YouGov has found that 46% of consumers are uncomfortable with the idea of shopping in newly-reopened stores.

As they reopen,  retailers will need to balance measures aimed at getting high volumes of customers through their doors with those designed to ensure customer safety, and to do all of this while providing a better customer experience than ever before. The “CX Factor” could in fact become the crucial differentiator between the post-Covid retail winners and losers, if customers continue to avoid stores that don’t offer a compelling reason for visiting them in real life. Customer experience has long been an important differentiator for brick and mortar stores: according to Kantar, more than two thirds of customers are more likely to choose a brand if it exposes them to new experiences or sensations. But a certain degree of customer inertia was likely helping to keep some underperforming retail brands profitable, even as e-commerce competitors and those with distinctive in-store offerings were eating into their profit margins. This status quo has been well and truly shaken up, and customers who have been forced to form new habits can’t now be relied upon to automatically retain their old loyalties.

Some of the restrictions retailers will face during this “new normal” phase will undoubtedly pose challenges: reduced stock offerings and limited ability to try on items in fitting rooms are unlikely to be popular with consumers. Creative retailers will find ways to differentiate themselves and come up with innovative new approaches to customer service, for example by offering more personalised experiences and more options for customers to engage online. Some luxury brands are already shipping direct from stores using a premium delivery service like Addison Lee, while others are setting up luxury drive thrus for a click-and-collect-style service, complete with extra styling. Elsewhere, staff at some clothing retailers are arranging video calls with customers to personally show them the latest merchandise before they make a store visit, booking fitting rooms for them with specialised apps and viewing their wish lists online. Others are using Instagram live streams to publicise new product launches. Augmented Reality looks set to truly get its moment in the sun in 2020. Virtual changing room apps that allow a garment to be “tried on remotely” in store could quickly go from being a fun novelty to a truly practical solution, allowing customers to steer clear of the hassle of returning items and retailers to avoid the subsequent quarantining of returned products.

The challenges facing brick-and-mortar retailers are significant. GDP growth has dropped hugely in the U.S. and much of Europe in the first half of 2020, and the public are understandably tightening their belts by cutting down on discretionary spending. In the continuing absence of many forms of out-of-home entertainment, though, in-person shopping experiences may prove popular as countries reopen this summer. Retailers that can provide a good enough reason to visit them in person will have a distinct competitive advantage. So will those who can provide a great and distinct online experience, as consumers adapt to new ways of shopping. Those who can do both will likely find they have a winning combination.

June 2, 2020

Vantage: Aire

Aneesh Varma, Founder and CEO of Aire sheds light on how alternative data can help lenders better assess credit risk

Tell us more about Aire! What makes your company and your vision unique? What is the main customer need Aire aims to address?

Access to credit underpins so many of our life choices: renting a car, educating ourselves, buying a house – all of these rely on credit. But unfortunately, as our ways of living become more complex (multiple income streams, frequent job moves, relocations) the ability for the traditional credit bureau to keep pace with us, lessens. This isn’t the consumer’s fault, it’s a failure of an outdated credit system – a system that at Aire, we’re working hard to upgrade.

The solution lies in the individual context of each consumer. To do this, we engage directly to understand their real-time financial situation, presenting this data back to lenders as actionable insights, seamlessly and at scale. This benefits everyone – filling the gaps left behind by just historic bureau data to provide lenders with greater decision-making power to score their customers fairly.

But this is also a personal mission. Moving from the U.S. to the U.K. in my twenties, despite holding down a good job, I found myself ‘invisible’ to the U.K. credit system. Making access to credit equitable is a hard problem to solve but it’s so important – done right, it stands to benefit millions, if not billions, of consumers across the world.

Where is Aire in its journey? What have been some of the key milestones and challenges in getting there?

Founded in 2014, by 2016 we’d become only the fourth organisation in the U.K. to be authorised by the FCA as a Credit Reference Agency. But despite this regulatory stamp of approval, this is not an easy problem to solve.

Our early years were entirely dedicated to developing and refining our new approach to credit risk and affordability. Since then, we’ve been working with a handful of innovative lenders – our early adopters – to prove it works. For example, our work with one of the biggest digital U.K. lenders, N Brown, around affordability has helped us prepare for the mainstream market. We’ve also worked with Toyota Financial Services in the Collections space. Last year, we launched in the U.S.

Most crucially, we’re responding to the real-time needs of lenders fast. In the wake of COVID-19, we’re helping them understand the financial situation of their customers in real-time, proving to the market Aire’s acute validity in a fast changing world.

Incumbent lenders often remain sceptical about the relevance of alternative data when assessing credit risk. How did you overcome this challenge when engaging with lenders?

Aire is not about displacing the traditional credit bureau model. In fact, we see great value in that for lenders. But assessing consumers on only historical data does leave gaps when it comes to understanding their real-time situation.

By integrating into the lender’s existing decision-making processes, Aire adds insight rather than replaces it. We use advanced machine learning techniques to interrogate this data, validating it against our existing models to provide powerful insight back to the lender – insight that directly influences their decision-making processes. Achieved through seamless user experience, provided at scale and in real-time, it’s this combination that makes our proposition entirely unique.

The response from lenders has been positive because ultimately a lender’s job is not just about sending money out, it’s also making sure it comes back again. Aire sits at the centre of this relationship – keeping the consumer represented, and the lender informed.

Different lending products require different approaches to assessing credit risk. What types of data does Aire use in its credit scoring models? What types of lending is Aire’s solution most suitable for?

Our work centres around first-party data – that is, information gathered directly from the consumer and this allows us to operate across the customer lifecycle. Gathered via our Interactive Virtual Interview (IVI), a digital conversation that can be distributed at scale to a lender’s customer base, we collect a range of inputs that make up a consumer’s current financial situation, their job position, accommodation status, and attitudes to life and work. In combination, these factors give a robust indication of a customer’s ability to afford credit. At acquisition, we’re proven to boost credit acceptance rates by 12-14%, without increasing a lender’s appetite for risk.

When it comes to customer management and collections, we help lenders assess customers’ headroom for further borrowing by identifying risk of financial distress and validated disposable income insights, providing real-time information about changes in their circumstances that will inform how the lender treats them.

How customer data is evaluated in credit scoring systems often remains a mystery. Could you shed some light over how your algorithms translate different customer behaviours into credit insight?

We’ve never sought to re-write the rules of credit. Instead, we’re providing lenders with sharper tools to make more informed lending decisions. And it comes down to two fundamental questions for lenders. Firstly, will the borrower repay the money lent to them? And secondly, will they be able to afford to keep up with those commitments? At Aire, we’re using additional, real-time data to help answer those same questions.

Our Interactive Virtual Interview begins the process of understanding the consumer. An entirely dynamic process, there are over a million potential routes through it. Our machine learning algorithms then validate the answers for accuracy and apply weightings for each input to produce actionable insights back to the lender. These algorithms have been developed over several years by data scientists and expert manual underwriters to ensure they are as predictive and accurate as possible and are analysed systematically before being put into use.

While Aire currently focuses on financially highly developed markets such as the U.K. and the U.S., are your credit scoring solutions applicable in developing markets too? How do needs and requirements differ in both worlds?

Aire was built not just to solve a U.K. problem – we think of ourselves as having global reach. But you have to be patient and mindful about how you expand out. Aire has taken a strategic decision to focus on the U.K. and U.S. as both are established credit markets with proper levels of consumer protection and relatively similar regulatory regimes in place. These are also markets in which consumer credit providers are comfortable using additional data sources to help inform their lending decisions. This has massively opened up in the U.S. in just the last six months.

But the accuracy of Aire is such that it could absolutely operate as a standalone credit service in countries where lenders don’t share data through a traditional credit bureau. In this sense, Aire has the potential to be global. As I often say to my team, we’re built in London, for the world.

How has the coronavirus pandemic impacted Aire’s business? How has the company reacted to these new realities?

There’s no doubt the world now faces one of the greatest humanitarian crises. With so much in flux and for so many, traditional data will only lose its relevance for lenders. We’ve already seen the volume and value of new consumer credit agreements fall as consumers protect their finances and lenders try to get a handle on default rates.

At Aire, this change reflects where we’re seeing most interest from lenders right now. The need to mitigate risk when it comes to existing customers is paramount and what Aire offers is the chance for consumers to represent themselves and sudden changes to their financial situation properly, e.g. as furlough, sudden redundancy, or a reduction in working hours. But we’re also of help when it comes to operational efficiencies, making previously manual processes like customer outreach digital and far richer through our Interactive Virtual Interview. While nobody would wish for such disruption on the world stage, it’s reassuring that what Aire offers can truly benefit both lenders and consumers during this challenging time.

What advice would you give to anyone who is unconvinced about the power of alternative data in credit scoring? How do you see this space evolving in the future?

Adding in additional data streams, such as first-party data gathered directly from the consumer, only serves to benefit a lender’s credit decisioning process. And when we truly understand the consumer, lenders can start to get ahead of their problems – detecting their problems faster, helping them recover quicker. The opportunity to provide a forward-looking picture of a consumer is really exciting and that’s the potential we see with alternative data.

In essence, this is just about getting personal at scale – providing a more granular level of insight to inform lending decisions for the modern age. At Aire, we’re offering this digitally (through our Interactive Virtual Interview) and at scale to lenders. The benefits of alternative data are simple – for any lender, the more knowledge they have on their customer, the more informed decisions they can make about their ability to take on credit, fairly and free from bias.

Written by: Aneesh Varma
Founder and CEO 

Moving from New York to London in 2007, Aneesh Varma found himself left out of the credit system. A self-proclaimed third culture citizen having lived in 11 countries, Aneesh spent six years lobbying governments for change.

Resolute on making change happen from the inside, and with the experience of a couple of successful start-ups behind him, Aneesh founded Aire in 2014 with a bold vision: to make credit equitable for everyone

May 4, 2020

Credit scoring: Going alternative

FinTechs are utilising alternative data to develop fundamentally new approaches to credit scoring

When assessing applicants’ financial reliability, lenders globally have traditionally relied on a limited range of data sources. In the U.S., Canada, the U.K. and Germany, creditworthiness is determined primarily based on credit scores provided by large credit reporting agencies (e.g. Experian, Equifax, SCHUFA). These scores are typically based on the applicant’s recent bank account and payment history, and his/her borrowing and repayment activity, with approval and the terms of the loan, including the loan amount and interest rate, closely tied to the applicant’s credit score. Some other countries, including Brazil and Australia, are also transitioning towards this system based on positive credit scores. In other countries such as France and Japan, lenders focus on employment history and corresponding regular income when determining applicants’ creditworthiness, while outstanding debt and featuring on negative lists tracking unpaid / missed payments often serve as detracting factors.

While these established credit scoring systems typically work well for the more financially active and well-off consumers, large segments of the population globally are unable to prove their creditworthiness through these metrics. For instance, in the U.S. system, those with a limited or no credit history, such as first-time borrowers and non-citizens / non-residents typically fail to build a sufficient credit history or reach a high-enough credit score. Similarly, in France and Japan, those who are not employed full time or do not rely on a single employer for their income (e.g. the self-employed, gig economy workers) might struggle to obtain a loan from their bank. Moreover, these credit scoring systems become significantly less inclusive when applied to developing economies, where large segments of the society remain un- or underbanked, or without official employment income – producing very limited traditional data for lenders to base their credit scoring on.

The accelerating digitalization of transactions is producing an increasing variety and volume of consumer data, extending the pool of information that lenders can potentially use to determine applicants’ creditworthiness. Moreover, the emergence of open banking infrastructures globally has helped facilitate data sharing between industry players, increasing the availability of consumer data. Utilizing machine learning technology, the increasing amount of data that is not necessarily related to applicants’ financial history is now increasingly used to build predictive models assessing creditworthiness.

Traditional lenders and credit bureaus have recently started to extend the pool of data their credit scoring systems rely on, with data such as utility and rent payment history increasingly included in credit reports. On the other hand, some FinTechs have developed fundamentally new approaches to assessing creditworthiness, incorporating a wider variety of data sources.

Improving credit scores through alternative data

One area where innovation has focused on is helping lenders improve loan approval rates by offering supplemental information about their applicants that lack sufficient traditional data.

For instance, U.K. PropTech firm CreditLadder has built a tool enabling customers to use their rent payment history to improve their credit score at Experian and Equifax. Using TrueLayer’s open banking APIs, CreditLadder connects with the applicant’s bank to access their rent payment activity, which is then incorporated into their overall score at the credit bureau.

Aire, another U.K. FinTech, connects with lenders via a real-time API integration, stepping into the online loan application process in case the applicant lacks sufficient data to prove his/her creditworthiness towards the lender. Through a virtual interview, Aire’s machine learning technology assesses the applicant’s financial situation, spending habits, professional background and lifestyle to produce a behavioural profile to support the lender’s decision making. By increasing approval rates without affecting the lender’s risk appetite, Aire has helped its partners distribute over US$10BN worth of credit.

Building alternative credit profiles

Other innovators are focusing on building a more complete profile of applicants that often serve as the sole source of their partnering lenders’ decision making process.

Singapore-based Lenddo uses non-traditional data to help consumers across South-East Asia, Africa and South America without a credit history build a credit profile. Lenddo uses thousands of data points from consumers’ digital footprints, including their social media activity, browsing behaviour, geolocation and other smartphone data to assess their creditworthiness. Since its launch 4 years ago, Lenddo has helped over 5M applicants in 15 countries to access credit from partnering lenders.

Credit Kudos, a U.K. based ‘challenger credit bureau’ enables consumers to utilize their open banking data to build an independent credit report incorporating a wide range of financial data, including the user’s day-to-day banking and payment activity. Following its recent partnership with AI technology firm Cybertonica, Credit Kudos will also be able to incorporate biometrics and behavioural analytics into its algorithms, making its credit scoring systems more robust.

Another limitation of traditional credit scoring systems is that they can typically only be applied locally. One FinTech which is tackling this obstacle is U.S.-based Nova Credit, which uses data from international credit bureaus to help international students and professionals from 8 countries globally to build a ‘credit passport’. Customers are then able to utilise Nova Credit’s partnership network in the U.S. (incl. American Express and IntelliRent) to apply for credit cards, student loans and other lending products.

Lending to the underbanked

While most credit scoring innovators use their algorithms to help other lenders better assess creditworthiness, some FinTechs are using their technology to provide loans directly to consumers.

For instance, U.S.-based start-up Tala offers short term microloans in Kenya, Mexico, India and the Philippines. Given the lack of traditional data in these countries, Tala’s credit scoring algorithms rely largely on the applicant’s phone usage patterns and online activity to decide whether and at what rate to offer a loan. Similarly, mobile app based microlender Branch relies primarily on data from its applicants’ smartphones, analysing their contact lists, GPS information, text and call logs, as well as their interaction with the Branch platform and customer service.

Although alternative lenders using non-traditional data are most widespread in developing countries, access to credit is far from universal in developed countries. Deserve, for instance, offers credit cards to consumers in the U.S. without a credit history or social security number. Instead, Deserve assesses creditworthiness based on the applicant’s bank account activity, with regular income (from any source) and regular on-time payment of bills/rent the main qualifying requirements.

Whether by supplementing traditional credit scoring data, building alternative credit profiles or providing credit directly, these innovative solutions are making credit more accessible and more affordable to previously underserved segments. At the same time, alternative credit scoring systems are also improving risk modelling for existing lenders, making their algorithms that previously relied on traditional data more robust. As machine learning technologies improve by processing more and more data, these predictive models will become increasingly reliable methods of assessing creditworthiness and are likely to be increasingly adopted by both incumbent and alternative lenders.

Written by: 
Matyas Fekete

April 27, 2020

How AR has evolved to play an important role in CX?

Augmented reality is starting to fill in genuine gaps in the customer experience, easing pain points and simplifying customer journeys

Augmented reality (AR) is the blend of the real world and interactive digital elements, and while sounding like something from science fiction, it has become an increasingly common part of retail experiences in recent years.

While in the past AR technology had a bad reputation as something that was shoehorned into marketing and customer experiences without fully being thought out – think Jack Daniels transforming their bottles into a pop-up story book explaining their manufacturing process or Chiquita, the banana company, using AR to boast about their sustainability credentials – recently, it has become an incredibly useful part of the customer experience offered by several brands.

The key is to use AR in a way that serves a purpose, rather than as a gimmick that leaves customers wondering why it was used at all. In Jack Daniels’ case, the brand had been telling their story successfully for years on their bottles, without the help of a pop-up story book. For Chiquita, AR technology could have easily been replaced by something simpler. San Diego’s upscale restaurant, Harney Sushi, tackled the same issue by allowing customers to scan edible QR codes. They would be routed to a website where they could access a wealth of information about how and where their fish was sourced from alongside other information about sustainability.

When AR is used for a specific purpose that suits the technology, it can be very useful and impactful. Brands like Sephora have used AR to aid their customer journey, as trying on make-up with AR mirrors allows customers to test different shades of colour before making a purchase. Moving this to their online experience means that customers can test make-up from the comfort of their own home, in real time. This allows customers not only to test the products easily but, with facial recognition, while they’re moving as they would in real life.

Other brands have used AR to target pain points in the customer journey. Argos and Ikea have used AR to allow customers to simulate how furniture would look and fit in their homes. This circumvented a long-winded process of measuring and imagining but also allowed customers to have more time to explore products online and offline. In a similar vein, KLM have added an AR baggage size check, which allows customers to check if their baggage fits inside of the overhead compartments before they get to the airport. All of these companies are using AR technology to make the customer journey smoother and easier, instead of using AR for the sake of it.

Amid the Covid 19 pandemic, AR suddenly has a crucial role to play in facilitating all kinds of customer experiences that have had to abruptly move online. AR has meant that luxury shopping can continue even while a lockdown is in place, with brands like Rolex and Gucci using augmented reality apps to allow customers who would never buy luxury items sight-unseen to “try on” their products while they can’t get to a physical store.

As AR technology in marketing has matured, it has continued to become more and more relevant. No longer just a gimmick, it is now being used to fill in genuine gaps in the customer journey. Easing pain points, simplifying customer journeys and even sourcing more niche products and services (take a look at the Inkhunter app to see how they’re making finding the perfect tattoo easier) are just some of the new ways AR is being used. And you can be sure that more and more ingenious uses for AR technology will continue to come to light as the technology itself continues to progress.

March 26, 2020

FinTech health check: Covid-19

What the current Covid-19 pandemic means for the global FinTech industry

The current pandemic sweeping through most of the world has wreaked havoc in most areas of the economy as well as our personal lives. As schools and businesses gradually shut down, governments plead for people to stay home to contain the spread of Covid-19. With the virus showing no sign of going away, countries could remain on lockdown for many months to come.

However, as is the case with every change, among the many challenges, the pandemic might provide some industries with an opportunity. As we minimise personal contact, services offered in digital form are becoming more popular. While Netflix and Amazon Prime replace cinemas, DHL and FedEx does the shopping for us, and Uber Eats and Grubhub connect us to our favourite restaurants, people have an option to manage their finances remotely too.

Within financial services, FinTech companies have been the main drivers of digitalisation. With some more mature FinTech services appearing to have plateaued recently, could the current crisis provide the next push for the industry? Let us have a look at some obvious suspects that could gain traction during the pandemic.

  • Peer-to-peer payments: As people across the world are advised, or even forced to stay home, digital wallets (e.g. Venmo) and mobile money (e.g. M-Pesa) might be the easiest and quickest channels to send money to peers, whether within the country or internationally. With many of the world’s borders closing, sending money to family members / friends stuck in a foreign country is likely to become more relevant. Cross-border payment solutions (e.g. TransferWise, Revolut) can help people send much needed funds to others faster (even real-time) and cheaper (even fee-free and at mid-FX rate) than banks and traditional FX companies.
  • Online merchant payments: As part of the lockdown enforced by many governments, ‘non-essential’ shops are being forced to close, while more wary consumers will likely try to also avoid stores that continue to be open such as supermarkets and pharmacies. Thankfully, ordering groceries, ready-made food and medicine, as well as non-essentials such as books and clothes should not be a problem across most of the world. With a variety of digital payment methods such as mobile money in Africa, QR payments in Asia and digital wallet payments in Europe and North America available to online buyers, we expect the likes of PayPal in the U.S., M-Pesa in Kenya, AliPay in China and Swish in Sweden to accelerate their war on cash even further.
  • Consumer lending: As people might lose some of their income or even their jobs over the next months, loans of all types are likely to rise in demand. While banks are still kings in the lending arena, their digital loan propositions are often cumbersome and require personal visits to the branch. On the other hand, some FinTechs are mastering digital credit scoring by utilising advanced machine learning and artificial intelligence to better understand their customers through alternative sources of data. In areas including consumer loans (e.g. Affirm, Klarna, Tala), mortgages (e.g. LendingHome, Blend) and student loans (e.g. SoFi, CommonBond), these solutions can help provide, facilitate or refinance loans more efficiently.
  • Business lending: Similarly to individuals, some businesses might find themselves in need of cash to cover their costs as they face a slump in demand or even being forced to close down for some time. With their advanced credit scoring algorithms, small business lenders of the likes of Kabbage and Funding Circle as well as payment service providers such as Stripe and iZettle might see an uptick in demand for their short-term loan and cash advance services.
  • Health and life insurance: Amidst a life-threatening pandemic, health and life insurance will always be amongst the most in demand financial services. While some countries offer universal health insurance for all their citizens, in some others such as the U.S. many people rely on private health insurance. With incumbent insurance companies generally slow to innovate, InsurTechs such as Oscar in the U.S. have come to the fore with their digital solutions, offering personalised plans to individuals, families as well as businesses, the latter who are looking for coverage for their employees. InsurTechs such as Ethos in the U.S. are tackling the life insurance space and are increasingly gaining traction, using predictive analytics and sophisticated data technologies to provide cover that is easy to access and available for all.

Other than the immediate traction some of the above solutions might experience, the pandemic is likely to trigger FinTech activity in other areas and have a long-term impact in previously underpenetrated industries, none more likely than the healthcare sector. With current FinTech solutions only scratching the surface of the industry, the pandemic is likely to reveal the shortcomings of healthcare systems globally that need streamlining. HealthTech and other forms of digital health innovation will become more critical as Covid-19 spreads. Looking towards the future, the FinTech solutions that emerge from this crisis will help people, businesses and the government better manage our finances and lives in such unprecedented times.

For this to happen, there is a call to action for the investment community and governments around the world. They need to remain committed to and protect FinTechs as in these difficult times many may find themselves short of funding and / or working capital. Covid-19 is set to reset many parts of the global financial services industry, with FinTech (including start-up valuations) amongst the most affected. On the other hand, the current situation may also spur M&A activity as some FinTechs look to scale their operations in response to new opportunities or to just survive.

Written by:

Matyas Fekete

March 13, 2020

Hyper-localisation: a retail reality that is here to stay

Overcoming the barrier of meeting local markets needs

2020 has brought yet more stories of the decline of the British high street. Yet a countervailing trend suggests that consumers are at least as, if not more, interested in accessing local information, services and experiences than ever. A person’s postcode is increasingly a more important determinant of their behaviour than traditional demographics. Businesses that can tailor their customer experience strategies to meet increasingly hyper-localised demand will have a significant competitive advantage in 2020 and beyond.

Research suggests at least 80% of consumers conduct web searches for information local to them. They act on these searches quickly, with half of the people who performed a local search on their smartphones, and 34% of those who searched on their tablet/desktop, visiting a physical store to browse further or complete a purchase within a day. While in-store, the competition doesn’t end: one in six will then do further searches on their smartphone to look for price comparisons.

The way consumers are searching for local information online is evolving rapidly: as search engines are getting ever better at predicting the information people are most interested in by looking at datapoints like their current location and previous search history, fewer people feel the need to explicitly add phrases like “near me” to their searches for local services (as they know the search engine will figure that part out for them). The terms “nearby and “closest” have both dropped in popularity on Google Trends since 2019, and businesses – especially retail companies with many local branches – will need to regularly review their SEO targeting to make sure they stay top of mind and don’t fall down the crucial local search rankings.

Online reviews are an increasingly important decision-making resource, to the extent that they may be supplanting word-of-mouth recommendations from friends and acquaintances. Of the 90% of consumers surveyed who have searched for a local business in the past year, 82% had also read reviews for a local business, and on average they would read 10 reviews before making a decision. Contrary to the idea that local communities are losing their distinctiveness, local businesses that are particularly authentic or convenient are still widely attractive to consumers. Businesses that can build up a buzz in a local area, through positive reviews on social media pages and sites like Trustpilot, will be particularly successful.

To stay locally relevant, large organisations must employ particularly smart personalisation strategies. Customer data is a key resource, with most large retailers now having access to rich behavioural data about their customer base – levels of affluence or price sensitivity at a postcode level, for example – that can significantly influence shopping behaviours across store locations. Stores that don’t keep on top of trends in their local customer bases can rapidly lose revenue: a recent case study described how one major supermarket’s inability to adapt quickly to changing local preferences had led to 3.2Mhouseholds – each averaging a 6.58 shopper visits per year – shopping elsewhere, resulting in $1.2B in lost revenue.

While retail trends will continue to come and go, consumers’ interest in local information and services is proving to be evergreen.

Written by: 
Fran Cavanagh

February 14, 2020

Vantage: Tink

We interviewed Tink, Europe’s leading open banking platform that enables banks, FinTechs and startups to develop data-driven financial services

Tell us more about Tink! What makes your vision unique?

Tink is Europe’s leading open banking platform that enables banks, FinTechs and start-ups to build smart digital financial services for their end-users. This is done by allowing our customers to fetch data from over 2,500 banks in Europe — that reach 250 million European bank customers — and build personal customer experiences on top of this.

Our mission is to enable data-driven financial services that delight both our customers and our customers’ customers. Tink has been paving the way for more customer-centric financial services since it was founded in 2012 by our CEO Daniel Kjellén and CTO Fredrik Hedberg. By enabling our customers to access financial data on behalf of their customers, we allow them to focus on the development of their core business idea, bringing their vision to life, and ultimately creating better experiences. We do this by removing all of the complexity and providing seamless authentication (and consent) flows for customers of practically any bank in Europe, with just one line of code.

2019 was a busy year for Tink, including high-value funding rounds, expansions and partnerships with the likes of PayPal and NatWest. What can we expect from Tink in 2020?

I think we’re just getting started! In January alone we made three major announcements. We first announced that we closed a €90 million funding round, which we will use to sustain our growth in Europe and help us further evolve our offerings. In the second announcement, less than a week later, we shared that we entered into a strategic partnership with BNP Paribas in Europe — building on the existing collaboration with BNP Paribas Fortis in Belgium, and will soon go live with the bank’s Italian network known as Banca Nazionale del Lavoro. The third major announcement from January was that the Tink Platform is now officially live in France. This means that over 4,600 developers on the Tink Platform can now start building services for the French market.

Looking at the months ahead, it’s clear that the PSD2 saga isn’t over yet. However, we’re not going to wait for the dust to settle. We’re committed to living up to our promise in making sure that we provide the tools to empower our customers to start building the future of financial services whether the APIs are ready or not.

Partnerships with banks are integral to Tink’s success. What are the main challenges of working with incumbent players? How do you overcome these?

My personal opinion is that innovation does not come easy to large financial institutions. The operating model has been optimized like clockwork around fixed processes and parameters. These institutions are frequently audited, manage huge amounts of capital, and typically serve thousands, if not millions of customers; they have enormous responsibility on their shoulders.

For Tink, this means that we’ve had to mature as a company much faster than most start-ups. We have had to get a banking licence issued by the Swedish FSA, set up a support organisation with extremely stringent Service Level Agreements (SLAs), and source the best talent in the industry to process all of the legal and technical requirements to deploy new technology at scale.

Tink’s partnership with NatWest made the news recently, resulting in the launch of NatWest’s personal finance management feature. What makes this feature unique? And what other features do you think are integral to a state-of-the-art mobile banking app?

Few people outside Sweden know this, but Tink was originally founded as a consumer app in Sweden. During our years as a consumer company, we’ve learned that the future of mobile banking is not a features game, it’s an engagement game.

Today our Personal Finance Management (PFM) technology aims to help users understand their finances, empower them to make smarter decisions and, ultimately, achieve financial happiness. We do this by providing our customers the tools to quickly build intuitive, personalised and visually engaging customer experiences.

When it comes to PFM there is no one-size-fits-all solution. The relationship between a bank and its customers rests on a foundation of trust and therefore the PFM experience should too. Ultimately, it’s all about having the users’ best interest at heart and building from that starting point.

While many industry players have implemented open banking features and apps, the progress of open banking has been slower than many expected. What do you think has led to this? And what do you think is necessary for open banking to reach its full potential?

The sceptics are saying that the progress has been slow, but I don’t necessarily agree. It is true that the quality of PSD2 APIs has not been as good as many hoped. In fact, in September we had to conclude that none of the PSD2 APIs that Tink integrated checked off all of the requirements outlined in the regulations. Now, in 2020, we still find significant deficits from a technical and user experience perspective. However, these shortcomings should be considered temporary, as the industry is successfully working together to develop exciting new use cases that will deliver value to customers in extraordinary ways.

There is evidence of this success everywhere. According to the European Banking Authority’s Payment Institutions Register, over 183 companies have been granted a licence to perform account information services and/or payment initiation services in 2019; Tink’s platform is now counting over 4,600 registered developers, up by more than 200% year-over-year, and we’re seeing open banking use cases emerge for every phase of the customer journey — from onboarding to support.

So, from my perspective, I think we’ve already made impressive leaps, but I’ll admit that there’s still an amazing opportunity ahead of us. I often say that open banking is a 20-year industry transformation. I personally believe that regulations such as PSD2 — when fully implemented — will provide a more than adequate framework to enable banks, licenced TPPs, and other stakeholders to deliver enhanced financial, and increasingly non-financial, services.

The past few years have seen the consumerisation of B2B banking services, as business account holders are continually having their expectations raised by their experience as consumers. To what extent do you think Open Banking will disrupt the B2B space going forward, and what particular applications do you see as candidates for this?

Most people will probably encounter open banking technologies for the first time as consumers when using multi-banking PFM apps. However, in the B2B space, businesses across all industries have been using account aggregation for many years.

Before PSD2, most enterprise financial management software vendors enable business customers to gain a consolidated view over their finances. But after the strong customer authentication (SCA) regulations were enforced on September 14, 2019, a lot of the existing connections broke and now businesses are anxiously looking for new mechanisms for creating a single overview. Over the next 12 months, we expect to see more-and-more businesses move over to open banking platforms such as Tink to fully benefit from recent enhancements.

More importantly, seeing the innovation in the B2C space, businesses will start to demand more intelligent services from their banks and service providers. Specifically, with open banking, there are opportunities to improve invoicing, cash management, tax optimization, and capital risk. The chief financial officers and treasurers of the future will expect higher levels of automation, lower costs, and more direct control over business operations through open banking.

The banking space is becoming increasingly competitive, with incumbent banks, FinTechs and most recently BigTechs all vying for market share. What role do you foresee for these types of players in the banking ecosystem of the future?

Like many other industries, the financial services industry is currently going through a digital transformation. By now, most large banks are trying hard to become more digital, agile, and innovative. I don’t think there is a single bank in the world that thinks that the future of, for example, customer onboarding is going to be in a branch office. They know it will be online, on an app, and at the leisure of the customer.  However, these banks also have a large number of traditional customers that continue to rely on predictable and familiar practices. These contradicting forces, the investments in compliance, product and service innovation, and change management, and the current monetary policy enforced by the ECB is putting immense pressure on operating margins for some of the largest banks in the world. And honestly, this is one of my personal concerns because history shows that when a bank stumbles, so does the economy.

Some banks will try to solve this problem alone, but the smart ones will take advantage of the ecosystem. This is why I think roles for FinTechs, BigTechs, and financial institutions are going to be increasingly symbiotic. When thinking about BigTechs, some have indeed announced partnerships with banks to launch financial services. However, they themselves have no interest in being as heavily regulated as the banks. When thinking about FinTechs, some may be looking to take a piece of the pie (e.g. challenger banks, alternative finance lenders, payment institutions), but most operate alongside the banks by complimenting or even augmenting their existing offerings.

This is Tink’s position as well, we aim to empower banks — as well as some of the other creative FinTechs in the market — to build the future of financial services. Ultimately, powered by open banking technologies, I imagine that this ecosystem will continue to grow and stretch into every other industry we know.

What are some key trends that you expect to see in 2020? How will Tink look to take advantage of these?

There are several things that will define 2020. Firstly, we expect to see a plethora of customer-focused use cases going beyond simple ‘money management’. Think easy onboarding portals, personalised financial dashboards, embedded payments, instant loans, and bespoke financial services. I think that applying machine learning and artificial intelligence (AI) to open banking data is going to be pivotal here.

Second, I also foresee banks shifting their focus from an investment perspective. Many of the discussions in 2019 were around ‘exposing APIs’ for the sake of compliance, providing other players with a window into your company’s data. This year, we expect to see banks step up as TPPs (Third Party Providers), looking at ‘consuming’ other providers’ APIs in order to enhance or augment their existing financial services, operations, and digital interfaces.

Finally, we’ll see several incumbent banks in Europe trying out the marketplace model as we have seen with Starling in the UK. From being a closed shop, offering only their own set of products and services, to a marketplace, offering a range of products from other banks and TPPs to their customers.

Our opportunity is to provide the rails and brains of open banking. In other words, the infrastructure to access data and initiate payments, and the tools to enable our customers to build competitive data-driven services. We believe that any business that can provide value should be able to access financial data with the customer’s consent, enabling them to leverage the power of technology to offer great products.

Written By:

Jan van Vonno
Research Director

Jan van Vonno spearheads Tink’s research and thought leadership program. Founded in Stockholm in 2012, Tink is Europe’s leading open banking platform that enables banks, fintechs and startups to develop data-driven financial services. Tink’s customers include companies PayPal, NatWest, ABN AMRO, BNP Paribas Fortis, Klarna, and many others. Jan is responsible for the strategic positioning of Tink within the context of open banking and Tink’s outbound communication and content. Jan worked most of his career for the International Data Corporation (IDC). During his time at IDC, he covered various technology and business topic as the head of the European digital transformation research program

January 31, 2020

FinTech year in review

Reflecting upon the past year, and looking forward into 2020

Last January, the FinTech team at KAE predicted the key trends that we thought would drive the advancement of the industry in 2019. Last year was full of significant developments from players all across the world and in many different sub-sectors, but we thought it was time for us to hold our predictions up to the microscope and see how accurate we were.

Incumbents catching up

  • Prediction: Incumbents will improve their offerings in 2019 in an attempt to match, or even exceed, the experience offered by their FinTech counterparts and further enhance the pace of innovation in financial services
  • Reality: The payments industry saw several mergers and acquisitions around payment processors, for example, Fiserv acquiring First Data, enabling the traditional players to expand their product offerings without having to reinvent the wheel. Meanwhile, in banking, established players tested their own digital banking solutions to compete with the rise of digital-only banks such as Monzo and Revolut. We saw Natwest launching its digital challenger  as well as its digital business bank Mettle and HSBC launching, Kinetic, its app-only business bank, to mention a few. Whether via M&A activity or through developing solutions to rival FinTech competitors, 2019 saw a firm response to the momentum of FinTechs. This year, we can expect collaborations between FinTechs and corporations to grow asbanks turn to FinTechs to fill the gaps in their offerings, ultimately giving a much richer proposition to their customers.

Interconnected banking

  • Prediction: 2019 will be the official start of open banking; Europe’s PSD2 Regulatory Framework will come into force with several other regions waiting to follow suit.
  • Reality: Implementation was found to be more challenging in Europe and in countries such as Australia were deadlines were pushed back in order to give banks more time to prepare amid security concerns. Nevertheless, players including Lloyds and Tink both made moves to enable players across Europe to take advantage of open baking functionality. We would predict that we will see the API marketplace model grow. A good success example of this is Starling where 3rd party developers are free to integrate their own products into Starling’s marketplace, ultimately allowing its customers to use all integrated products through their Starling app. Open Banking has unquestionably opened a multitude of opportunities for connecting individuals and companies to banking data, and the way in which large organisations are transforming themselves to compete with new entrants will continue to be an area to watch in 2020.

FinTechs go global

  • Prediction: 2019 will be the year that more established FinTechs will prioritise expanding globally in pursuit of growth
  • Reality: The market saw various expansion developments, including, Revolut and Monzo expanding to the U.S., Klarna expanding in EMEA and Alipay setting its sights on Europe. Additionally, Visa’s FinTech Fast Track Program hit a milestone as its expansion into the U.S. established the programme as totally global. Despite the fact that FinTechs have indeed become more global, domestic markets remain the chief source of revenue. For example, 70% of Ant Financial’s Alipay users are based in China.

Gearing towards a TechFin future?

  • Prediction: 2019 could be the year when technology giants of the likes of GAFA (Google, Apple, Facebook, Amazon) really start to make a mark on the financial services industry.
  • Reality: Some of the largest technology companies have been highly active in the financial services arena; Apple launched its credit card with Goldman Sachs and Facebook announced its controversial cryptocurrency payment project (Libra) last year. On the other hand, we are yet to see significant product launches outside of payment solutions, with many of the current examples using a financial incumbent as an intermediary to bypass additional financial regulation. All things considered, the question of “How far into financial services do technology giants want to go?” remains unanswered, at least for now.

Blockchain’s reality check

  • Prediction: 2019will likely to be the year when even the strongest Blockchain enthusiasts concede that the technology might not be the solution for everything that needs improving in the industry.
  • Reality: Blockchain still has not revolutionised the industry. 2019 saw a decrease in funding from the previous year for the first time since 2012, though this is more than offset by the vast growth between 2016-17. Despite the 2019 investment slump, many industry experts are still feeling bullish about Blockchain’s prospects in the coming years; Blockchain solution spending was expected to increase by 80% in 2019 based on H1 data, while the forecast for 2018-2023 suggests compound annual growth above 60%.

But do the numbers correspond to the reality? For many, the real-world applications of Blockchain are still equivalent to the boom and bust of cryptocurrencies. The real benefits of seamless cross border transactions and traceable supply chains that eradicate fraudulent activities are still yet to establish themselves. 2019 was a mixed year for Blockchain but it seems all hope is not lost yet.

The battle for security

  • Prediction: Automated solutions addressing security challenges are likely to attract significant attention in 2019 as the battle between customer experience and trust persists.
  • Reality: With security and fraud prevention top of the list, payment processors were, as predicted, actively working to prevent and minimise the occurrence of fraud. There has been a rise in the number of significant trials around the use of biometric security technology as it can be used to process an individual’s physical traits to authenticate transactions with a high degree of success. Push payments fraud and other more intricate forms are still endemic, but with the rapid growth and enhancement of AI to detect and prevent suspicious transactions, 2020 may be the year that the financial industry finally takes control of fraud.

Written by: 
Andrea Ronnberg