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Banking on business success: reducing risk and engaging customers

(Image credit: Image source: Shutterstock/ESB Professional)

In an increasingly digital world - automation is key. Access to information has been transformed, connectivity and collaboration improved.  The pace at which business takes place has fundamentally changed forever. Businesses need to adapt and change the way they operate to compete with changing consumer demands and optimise efficiency. The digital age does not allow companies time to establish themselves – they must continually innovate. 

The industry effect 

Almost all industries are ripe for digital change, but the financial services industry is experiencing significant disruption. New banking technologies and cloud adoption has already changed the way financial institutions operate. The upcoming revised Payments Service Directive (PSD2) will again change the current rules of engagement, allowing the technology sector - especially fintech start-ups - and challenger banks to take advantage of an area that is currently ruled by major banks.   

A UK digital objective 

A recent study by The Confederation of British Industry (CBI) revealed that UK companies alone could make £100 billion “in extra economic growth” by investing in technology. Despite having a strong technology industry, the report claims that UK companies are lagging behind in its adoption to improve levels of productivity.   

Get direct 

Helping businesses to reduce late payments is one area where technology can make a significant impact. Delays in payment can seriously affect revenue streams that will jeopardise entire operations. Earlier this year, Zurich’s SME Risk Index Report revealed that £44.6 billion in late payments is owed to SMEs, while Bacs (the organisation behind Direct Debit) claimed that 39% out of all 1.7 million SMEs in the UK spend up to four hours a week chasing payments. This is an area where automating services like Direct Debit can vastly improve the process, especially for those businesses collecting frequent recurring payments from customers or clients. 

Direct Debit is one of the most popular ways for households to pay regular bills, more than 90% of people with bank accounts have at least one recurring Direct Debit.  However, a number of UK businesses are yet to take advantage of this method of payment collection.  Many mistakenly thinking the service is beyond their reach.   

Direct Debit has drastically transformed a financial service offering - payment collections can be smooth, errors reduced, and customers kept informed. However, the financial damage regarding missed Direct Debit payments can have a significant, and negative, impact on customer relations. Concerns here can be immediately addressed by working with a reputable third-party payment processing service as such organisations can act as an interface between the biller and customer's bank if additional support is needed. 

Customer first   

The critical measurement of success for any business has to be the relationship between a business and its customers – getting payment cycles right is critical to gaining longer term trust and respect.   On this point, a past research report by Satmetrix claimed that “companies are continuing to lose customers often unnecessarily because they have not listened to feedback…”  In parallel, satisfaction and growth of existing customers had a positive impact on customer retention.  Very simply, when customers are satisfied with the service, they are more inclined to continue using it.    

Organisations need to look at automating resource-intense processes where possible, improving processes and eliminating repetitive tasks from the daily to-do list.  Paper processes are prone to errors which in turn can make auditing and compliance reporting time consuming and complicated. By automating critical services – such as billing and payment - companies can manage, add or remove payers, search customer records in case of a query, amend details, edit amounts and view reports - all from a central dashboard. And should a payment collection fail, personnel are notified immediately, removing the need for manual checks and end of week receipt reconciliations. 

The role of reporting 

And reporting is still a significant consideration in all this.  In light of new regulations and controls in the financial services sector, it is increasingly important to get the fundamentals right before the data mountain rises further. For Direct Debit processes alone, Bacs has issued a number of rules and guidelines for payment services – in addition to the Bacs processing calendar. Equally important here is the issue that outsourcing any processes that involve people’s personal data and money, strict compliance to data protection regulation must be followed. With further regulation, GDPR, coming into force in May 2018, additional security measures will need to be in place.  Once again, further regulations are creating concern in the industry. Direct Debit services can of course, sometimes, be complex and tiresome to manage, but challenges can be overcome with relative ease if enlisting the help of intelligent software. 

Compliance and control 

With data protection concerns increasing, and consumers better educating themselves around their rights, companies will need to do more to remain GDPR compliant. Compliance can no longer be seen as an afterthought, or left to a single department to oversee systems and demand changes.  All parts of a business need to be connected – sharing best practise and ensuring the same values and practises are upheld between personnel.   

If small companies can adapt quickly and partner with the right suppliers, they can move ahead of bigger - but less agile - suppliers. 

For businesses to succeed in a digital landscape where regulation is rife, compliance is key and revenue must be protected – automation provides opportunities for financial institutions and businesses to adapt and improve. 

By investing in digital services to improve operational efficiencies and reporting, or learning to develop such services themselves, financial institutions are better placed to keep up with changing consumer demands.   

Long Term Thinking   

Understandably, companies in a start-up or rapid growth phase, often just look at what technologies are needed to be enhanced in the short-term in order to get over the next hurdle.  But thinking this way just means that they will get left behind by more agile companies who are increasingly future-proofed. 

The short-term challenge is to change your IT mindset.  Start small with a change and then define the smallest cost that will deliver a benefit.  Always be agile and define changes in minimal step sizes.  Check it. Challenge it.  Assume that not everything will work. If you don’t try, you won’t win. Assign an experimentation budget - properly controlled of course. 

Adapt enterprise architecture to use a microservices approach. If a system is too big, start to wrap its external interfaces with microservices. Then, you can start to decouple individual parts of the enterprise.  Even large companies are starting this microservices approach, which is simply an evolution of the older Service Oriented Architecture enterprise, but more widely supported. 

It’s easier than ever for small companies to appear large; hiding behind websites and APIs for example, but to effectively compete with the larger companies, smaller enterprises increasingly need compliance and accreditation. As a start-up this is both time-consuming and expensive but be aware of your target customers. This could in fact become a key investment that opens up (or closes) a whole market. This also defines fundamental business development activities - offshoring data can be a deal breaker for some customers.  

For instance, within a decade, open banking APIs could open up a whole industry to help consumers manage their finances automatically based on a set of predefined rules. This could be as disruptive to banking as eBay was in retail, creating an entirely new industry. Small players need to be ready for those opportunities.  

With GDPR and the UK Data Protection Act people are more concerned than ever about their data. This can be advantageous in a small company because it is easier to incorporate compliance requirements into contracts.  Being able to innovate safely in a regulated industry requires the proper checks and balances to be in place.  GDPR makes compliance a lot easier because you can define specific data contracts for customers.  

From an IT perspective, innovation means trying out new and exciting developments as well as keeping the lights on.  Don’t try and save money in the short term, that will in fact cost you more in the longer term.     

Dr. Gavin Scruby, CIO at SmartDebit 

Image Credit: ESB Professional / Shutterstock

Dr. Gavin Scruby
Dr Gavin Scruby is a highly qualified and experienced CIO. He has brought numerous successful products to market, and delivered some of the largest banking and government projects in Europe.