Lack of trust impedes banking communications
It’s getting increasingly difficult to build trust in the digital era.
While financial institutions need to be vigilant against cybercriminals, so too do consumers need to be wary of compromised and fraudulent correspondence from banks. So, while these organisations are, quite rightly, engrossed in fortifying their systems, defending against threats and verifying the legitimacy of their customers, they may forget that they also need to prove trustworthiness.
According to a conducted in March 2020 by YouGov on behalf of Entersekt, 2,300 UK consumers were asked to share their experiences regarding banking-related digital communications. The results showed that more than one-third (34%) of respondents did not trust digital communications from their bank and so ignored them.
And now, as we find ourselves in unprecedented times when more of us are having to rely on digital channels through which to bank, these findings are even more concerning. So, to improve their trustworthiness and ensure their communication strategies engage their customers, helping them determine what’s important and what could be fraud?
A starting point would be to open a trusted line of communication; one that doesn’t rely on the well-documented, easily compromised text and email channels, and which elevates itself above the deluge of spam and robocalls consumers receive daily. One way of doing this is to use a secure banking app –a channel consumers often use that’s on a device that’s always with them.
To leverage a banking app in this way, it’s important that the mobile channel is sufficiently protected. Digital certificates simultaneously reassure the bank and the client of the authenticity of both parties. Adding further levels of protection – end-to-end encrypted data and a second two-way communication channel between users’ mobile devices and the bank – helps to ensure true security.
Once the security is locked down, a bank’s app provides it with a safe environment from which it can establish a dialogue with its customers; an experience consumers say they want – the ability to engage in matters that are important to them.
For example, perhaps a customer has just landed overseas. The app recognises this and sends a prompt reminding the user to activate their card so they can use it in that country. A few taps later and the card is ready to use. In the unfortunate case of suspected fraudulent activity, the client can easily and immediately notify the bank, and disable the card or freeze the account depending on the nature of the fraud. Messages can be sent notifying customers of updates, PIN delivery, and insurance upgrades, depending on changing situations.
By concentrating on customer needs and wants, this type of secure messaging allows a bank to step into the role of a trusted financial advisor, assisting customers in their financial decision making to promote financial wellness. The key is to establish a dialogue. Communication and trust is a two-way street; talking at someone is a sure-fire way to have them ignore you. Only when they trust you, will they listen.
This article was contributed by Frans Labuschagne, Country Manager at Entersekt
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.