Page 1

JUNE 2017 ISSUE

UK RETAIL BANKER w www.rfigroup.com t twitter.com/RFiMediaGRB

Head of Samsung Pay Europe, Samsung

RFi GROUP INSIGHT

SPECIAL FEATURE

PERSONAL LOANS

07 What happened to the contact?

17 Global Digital Banking Conference 2017 - Europe

36 Personal loans increase by 13%


CONTENTS

10

07 14

12 17

20

22

RFi GROUP INSIGHT

WOMEN IN LEADERSHIP

SPECIAL FEATURE

07 What happened to the contact?

14 Sophie Bialaszewski, Lloyds Banking Group

20 Millennials & the value of trust: the future of digital banking

SPECIAL FEATURE

CURRENT ACCOUNTS

17 Global Digital Banking Conference 2017 - Europe

22 M&S Bank offers £185 incentive to new customers

THOUGHT LEADER INTERVIEW 10 Nathalie Oestmann, Samsung 12 Andy Booth, Barclays


CONTENTS

25 28

33 36 40 43 SAVINGS

CARDS

SME & COMMERCIAL

25 Inflation overtaking savings returns

33 Mastercard presents a biometric credit card

40 World First launches SME international platform

MORTGAGES

PERSONAL LOANS

PAYMENTS & DIGITAL

28 Decline in the interest-only market

36 Personal loans increase by 13%

43 Samsung Pay launched in the UK


RFi GROUP JUNE STA TEN SELECTED STATISTICS FROM DAILY STATS ON RFi GROUP WEBSITE (www.rďŹ group.com)

UK In the UK the average age of a first-time home buyer is

33 years-old

57% of UK consumers

6

would be very comfortable (8+/10) using a digital-only bank with no branch access

c t w

CANADA

41% of Canadian

consumers are open to trying biometric payments if made available to them

MEXICO

24% of consumers in

Mexico are planning to take up a credit card in the next 6 months

04 RFi MEDIA

INDIA

47% of urban banked

consumers in India have used biometrics in the course of managing the financial products or making purchases


ATISTICS HONG KONG

CHINA

64% of urban banked

23% of banked consumers

consumers in China consider the concept of a mobile wallet highly appealing

d

eir

in Hong-Kong consumers have used live chat services with a virtual assistant

#RFiGroupDailyStat

TAIWAN

20% of Taiwanese

banking customers find having a stable family life their most important financial goal

NZ

21% of Kiwis

would be likely to use biometric payments if they are available

AUSTRALIA Within a typical month in Australia, an average of

35% of credit card

purchases are made online UK RETAIL BANKER 05


Welcome to the June edition of the UK Retail Banker, a newsletter designed to give you an update on news and trends within the UK retail and commercial banking market, contextualized by RFi Group data. We at RFi Group are still basking in the glow from our annual event – The Global Digital Banking Conference, which took place on 11th May (http:// www.globaldigitalbanking.com). The day was jam-packed with announcements, case studies, thought leadership and insightful content all focused on “winning the customer of the future”. In this month’s edition, we are sharing some of that content with you, in the form of a couple of postevent summaries, and interviews with two of the speakers from the day.

Although perhaps less optimistic than the plans for innovation coming out of the conference, the product news this month sheds light on the economic situation for UK consumers, and things are not looking good. With inflation outrunning wages, borrowing is on the up and consumer sentiment is on the decrease. Some important news and figures to be aware of, so definitely worth a read. I hope you enjoy the issue. Kind regards,

Sarah Hollinshead Editor, UK Retail Banker shollinshead@rfigroup.com


RFi GROUP INSIGHT

WHAT HAPPENED TO THE CONTACT? WORDS MANISHA NOBEEN

C

ontactless payments have existed in the UK since 2007, but consumers were slow to adopt the technology for a long time, with only 28% using contactless cards in early 2015. More recently, contactless adoption has accelerated, with 63% making a contactless payment in early 2017. Despite this rapid adoption in recent years, contactless usage in the UK still trails behind its global peers such as Australia, New Zealand, and Canada, where contactless payments have reached near ubiquity. So,

the question becomes, when will contactless usage reach a similar level in the UK? As RFi Group has been closely watching the contactless journey in a number of markets for several years, we now have an excellent database to track contactless adoption patterns and forecast where the trends are going. As such, this report will take a look at contactless adoption in the UK, as well as other comparable markets, in order to estimate when contactless in the UK will reach ubiquity.

UK RETAIL BANKER 07


RFi GROUP INSIGHT

FIG. 1: CURRENT CONTACTLESS USAGE FORECAST FOR THE UK Usage

Forecast from H1 2016

80% 70% 60% 50% 40% 30% 20% 10% 0% H2 2014

H2 2015

H1 2016

H2 2016

H1 2017

H2 2017

H1 2018

H2 2018

Source: RFi Group UK Payment and Innovation Council

When RFi Group UK contactless adoption data is overlaid on the equivalent Australian data, it can clearly be seen that the adoption curve in the UK closely mirrors that seen in Australia. RFi Group data shows that contactless adoption in the UK has followed a very similar pattern to that seen in Australia, just a few years behind. Contactless card usage in Australia was also slow to take off, with only 44% using the tool in late 2013, but this increased to 64% in early 2015, before eventually stabilising at around 70% in mid-2015. When RFi Group UK contactless adoption data is overlaid on the equivalent Australian data, it can clearly be seen that the adoption curve in the UK closely mirrors that seen in Australia (figure 1). When RFi Group first looked at this data in the first half of 2016, it led to a prediction that contactless in the UK would reach ubiquity, at around 70%, by the end of 2017. So far, this prediction has played out, with adoption rates in the first half of 2017 in line with that predicted. If current trends continue, as RFi Group expects, we should see the UK reaching near ubiquity in contactless usage in late 2017, up 18% from the figures seen in the second half of 2016.

08 RFi MEDIA

The trend towards contactless payments in the UK has been largely driven by younger consumers, as well as those living in London, with these groups also likely to drive the push towards contactless ubiquity. RFi Group Payments and Innovation Council data shows that 69% of those aged under 35, and 68% in London, use contactless, up 15% and 5% respectively in the last 12 months, compared to 60% of over 35s and 62% in the rest of the UK, demonstrating the key role these groups are playing in the move towards contactless payments. One of the key drivers of their contactless usage appears to be the view that contactless payments are quick and easy, with around 75% of those under 35 stating this as their reasoning for usage. In London, it is also likely that the ability to use a contactless card on the transport system is driving this behaviour.

The trend towards contactless payments in the UK has been largely driven by younger consumers, as well as those living in London. The final piece of the puzzle is what exactly card issuers can do to help contactless cards make the final push towards ubiquity. Taking steps to improve consumer trust in contactless payments are essential, with 1 in 3 agreeing


RFi GROUP INSIGHT

that they lack understanding of contactless payments and are reluctant to trust the technology. A further 33% are concerned that contactless technology will not reliably process transactions, hinting at consumers’ distrust in the technology. Continuing efforts to educate consumers on the use and benefits of contactless, as well as the security features, is likely to help build trust. Alternatively, card issuers could look to offer rewards for using contactless payments, with 49% agreeing that rewards would help incentivise their contactless card usage, with this proportion increasing among those under 35 to 60%.

Card issuers could look to offer rewards for using contactless payments, with 49% agreeing that rewards would help incentivise their contactless card usage. As can be seen from RFi Group’s data, based on current adoption rates, the UK is following a similar contactless adoption pattern to Australia. As such, it appears likely that

It appears likely that contactless payments will reach ubiquity in late 2017, although this may prove to be faster if banks and financial institutions can act to help reduce some of the barriers to adoption, such as increasing knowledge surrounding security. contactless payments will reach ubiquity in late 2017, although this may prove to be faster if banks and financial institutions can act to help reduce some of the barriers to adoption, such as increasing knowledge surrounding security of contactless payments to help alleviate trust concerns or offering rewards to further encourage contactless adoption, particularly among younger segments. Moving forward, RFi Group will continue to monitor contactless adoption, as well as other emerging payment solutions around the world, such as mobile wallets, to ensure we keep on top of the exciting payments industry and make predictions for the future.

UK RETAIL BANKER 09


THOUGHT LEADER INTERVIEW

F

ollowing the official launch of Samsung Pay in the UK last month, Nathalie Oestmann, Head of Samsung Pay Europe shared her thoughts on the next phase in digital payments after her speaking engagement at the RFi Group Global Digital Banking Conference – Europe Edition. In an interview with RFi Group’s Sarah Hollinshead, Oestmann spoke about the opportunities in the European market, in which Samsung Pay is now live in 16 countries including Spain, Switzerland, Sweden and the UK. Oestmann has a long career in the payments world, having spent 15 years at American Express, working across Marketing, Sales, and Product Development. Almost 2 years ago, Oestmann joined Samsung Pay to become the leader of the development program and roll out of this innovative payment service. Oestmann shares her expert view on the future of payments, what position Samsung plays, and when we will see a cashless society.

WORDS SARAH HOLLINSHEAD

Nathalie Oestmann Head of Samsung Pay Europe, Samsung

10 RFi MEDIA

This is a long game, success today does not mean success in the future and we need to keep innovating to ensure our users have the best experience.


THOUGHT LEADER INTERVIEW

What does the future look like for payments and specifically - when it comes to payments - what is Samsung Pay doing to meet the changing needs of customers? Mobile wallets could be the single biggest transformation in payments processing if they take off in the way that Samsung and many analysts expect. According to BCC Research, the mobile wallet market is projected to reach $635 billion by 2020, increasing with a CAGR of 41%. Visa Europe expects that 50% of transactions will be initiated by a mobile device by 2020 and 1 in 5 consumers will make a mobile transaction every day. Retailers are particularly excited about mobile payments because they can offer valuable insights about customer transactions that companies can use to enhance the shoppers’ experience. Our customers are diverse and also technically savvy. They want their phone to make their lives easier. Focusing on the single largest consumer group in Europe, Millennials, account for over 1/3 of the EU 5 population. We know that they are constantly connected, spending over 7.25 hours on the internet per day. They expect simplicity, order and support on their journeys. They are also 2 times more likely to use their phones to make a purchase then the rest of the population – I am assuming this is population Within your role as head of Samsung Pay for Europe, what are some of the best innovations Samsung Pay has brought to market? Samsung Pay is more than just a mobile wallet and we’ve already introduced a variety of other ways to use the app such as integrating loyalty cards. We are also working on a number of other ways Samsung Pay will be beneficial to users and look forward to developing and launching these in the future. When it comes to loyalty cards, 66% of those familiar with mobile wallets expect to be able to load their loyalty cards to collect and redeem retailer store points. We have seen very strong

results in Spain where we first launched with offline payments, a simple mobile wallet and then added the loyalty feature. Not surprisingly, we found that our mobile wallet users were also loading their loyalty cards. On average, 4 loyalty cards. But also, surprisingly, we found the customers who had not onboarded their payment card, perhaps because their preferred bank was not yet live with us, had started to load their loyalty cards. In fact, those that had a loyalty card lodged in addition to a payment card also increased their payment usage of the wallet in a significant way. In addition to loyalty cards and the rewards received from merchants, Samsung Pay has also introduced its own loyalty programme which we launched in the USA late last year. This has proven to be a very successful programme. A Samsung Pay User will receive Samsung rewards every time they use Samsung Pay. This is on top of the payment card rewards programme, such as Membership Rewards by American Express and the loyalty rewards collected from the retailer where the purchase is made. We call this “triple dipping” and our customers are really excited about it. They can use their points to buy Samsung and other products from a catalogue or enter a sweepstake to win free travel. And, of course, being a consumer goods manufacturer, we are looking at the Internet of Things, or IoT and how to integrate Samsung Pay across devices and how to remove the friction of payments to run your home. Europe is obviously a huge market, with varied nuances, how do you work differently across the individual markets? Europe is a very dynamic marketplace with very advanced payment innovation, and this makes my job very exciting. We’ve been working closely with the networks, banks and retailers across the payment ecosystem and the one change that is coming to Europe which will provide the right

kind of disruption, in my opinion, is the Payment Services Directive or PSD2. This will come into effect next year and will enable faster payments and ensure all banks are open via Open APIs to third parties such as Samsung, Facebook and Google. This will enable us to innovate and provide consolidated value to our customers across all their banking platforms. I think you will start to see some exciting developments across Europe once this comes into effect! When it comes to innovation and innovative thinking, what are some of the best and most successful examples of innovation you are seeing? Conversational Commerce is where the industry is heading. I believe we will see a proliferation of chatbots and AI dominating our online/in-app shopping experiences and see so many use cases where payment via social chat will become more and more relevant. How do you measure success? This is a long game, success today does not mean success in the future and we need to keep innovating to ensure our users have the best experience to meet their changing needs. Where to next for payments globally and meeting the need of your customer – what will change, what has to change? Consolidation. We need to see who will remain in this market. And for me, only the consumers can decide. When/if ever will we see a cashless society? Yes, I think we will see a significant reduction in cash and we are already seeing this, particularly in the Nordic region?. The payments innovations today will help to enable a cashless society. I’m convinced of it. Follow @RFiMediaGRB on Twitter to keep up to date with the latest interviews and news at RFi Group.

UK RETAIL BANKER 11


THOUGHT LEADER INTERVIEW

U Managing Director, Transactional Business, Barclays WORDS SARAH HOLLINSHEAD

12 RFi MEDIA

K banking is at an inflection point and Barclays is ready to seize the opportunity.

Open banking was the phrase on everyone’s lips at the RFi Group Global Digital Banking Conference – Europe Edition last month. Big banks, challenger banks, fintechs and other industry players all shared their views on the implications for the consumer, fraud, and the financial services eco-system at large. Of the many insightful speakers of the day, Andy Booth, Managing Director, Current Accounts & FX for Barclays presented his view on impending changes to the industry. RFi Group’s Sarah Hollinshead sat down with Booth to understand fully how Barclays are positioning themselves and responding to what is viewed as one of the biggest shifts in financial services history.


THOUGHT LEADER INTERVIEW

Overall, the outlook is very positive when Booth predicts the future of the banking eco-system, and Barclays’ place within it. “You will see a proliferation of different types of providers, both around current accounts and payments. There is no reason why Barclays cannot be at the forefront of that. The best elements of the new innovations will be built into or accessible through Barclays.” Booth draws attention to the benefits that customers can receive through open APIs, and as the ‘caretakers’ of a mass amount of consumer data, Booth believes Barclays is able to better deliver customer experiences, and ultimately win.

of innovation in mobile banking, in particular, compared to some of the newer, app-based players in the market, Booth believes the gap is not as wide as the media may suggest. “We are proving through innovations at Barclays that we can more than keep up with competitors on mobile banking and keeping millennials happy. Through our “Launchpad” function, we are evolving our mobile banking capability, testing new features amongst several thousand consumers. We fail fast and learn fast.”

digital and outside of digital. We have improved our overdraft proposition, our range of cash back and value offers and also helped young people with the skills they need to go forward into work via LifeSkills. But the best enhancement was building a bigger presence on campus. The face-to-face element here is very powerful.” In the midst of discussing the relative merits of branch vs digital channels for the customer, Booth exclaims that this is an archaic and industry-only way to look at the financial services offering anyway!

We are proving through innovations at Barclays that we can more than keep up with competitors on mobile banking and keeping millennials happy. We fail fast and learn fast.

“Throughout their journey, customers do not look at it in terms of channels. The more you move away from that lens, the better you can be at making your customers happy.”

As custodians of customers’ data, Booth believes that not only are Barclays central to delivering better services, they are responsible for the safety of consumer’s personal information.

Often the cumbersome branch network of the traditional banks is referenced as a limiting factor to fast innovation, yet Booth believes the branch feedback loop is invaluable for bettering customer experiences.

“Going forward, we want to be seen as the place where you can continue to be safe, both with money and data. With proliferation of services in the market and more richness of data comes complexity, and we will be at the forefront of explaining to customers how to protect themselves and make the most out of opportunities.”

“We are blessed with having a huge network of colleagues that meet customers every day. To be an outstanding bank, you have to listen to customer facing employees in contact centres or branches, as the human relationship is very important. Partnered with a strong digital side, this is the best way to serve customers.”

“It is easy to have very experienced retail bankers, but in reality, you need a rich balance of people. We actively recruit and promote a broad and diverse range of people and they are well integrated into the team. In the last 12 months, we have run very special projects, managed and delivered solely by millennial employees for example, without any wider bias or input. They have delivered some fantastic work, presented directly to senior stakeholders and bank management.”

Booth explains the unique level of trust that consumers have in their banks, and RFi Group data corroborates this (see page 20 for more information). Open banking could expose customers and companies to a number of risks, and Barclays believe they can play a pivotal part in combatting that risk.

Barclays have seen the pivotal role of attracting the next generation, arguably the most digitally savvy, through a physical presence. Onboarding the student population and beginning that relationship early has been a large focus.

“We are custodians of customer data and we aim to keep customers at the heart of everything we do. Open banking provides a fantastic opportunity for everyone to enrich customer experiences. Through incorporating a range of services and information, we at Barclays will gain broader insights on the customer, and this will translate into more meaningful actions.”

When questioned on the response time

“We are now the number one provider of student bank accounts in the UK. We have done a range of things in both

Another myth that Booth was keen to debunk was the illusion of a bank run by a few white-haired, middle aged men trying to serve a population that they do not understand. More and more, big banks are proudly taking on a more diverse employee to better serve the UK population.

With a career in the financial services sector spanning more than 20 years, and now looking after some of the most potentially disrupted areas of retail banking: current accounts and international payments, Booth is excited by the changes to the industry, and anticipates a fun ride ahead. “It is a fascinating place to be. The next 3-5 years are going to be the most exciting period for banking, both for customers, bankers, and for Barclays.”

UK RETAIL BANKER 13


RFi GROUP WOMEN IN LEADERSHIP

Sophie Bialaszewski isn’t your usual digital leader; neither is how she got there. With an MSc in Public Policy and a background in communications, her differentiator is her ability to combine culture change, innovation and communications to deliver campaigns and programmes that inspire, excite and help people experience a new way of working.

I’ve not had a traditional route to become a digital leader in a large bank but what this has allowed me to do is to become a translator and use my skills to create experiences that are inspiring people to work in new ways.

Sophie Bialaszewski Head of Innovation Culture, Lloyds Banking Group

WORDS CHLOÉ JAMES

14 RFi MEDIA


RFi GROUP WOMEN IN LEADERSHIP

Sophie Bialaszewski isn’t your usual digital leader; neither is how she got there. With an MSc in Public Policy and a background in communications, her differentiator is her ability to combine culture change, innovation and communications to deliver campaigns and programmes that inspire, excite and help people experience a new way of working. Sophie’s vision is that innovation will be everyone’s job at Lloyds Banking Group and she has spent the last 3 years building the internal capability and team to bring this to life. She is trail blazing new initiatives like the hac-kit (think hackathon in a box with a mission impossible count down) to foster intrapreneurship, upskilling colleagues with FinTech talks and films, and connecting colleagues with startups through espresso martinis (meetups) and mentor matching schemes. The programmes Sophie’s team run provide colleagues with the tools and techniques they need to DIY innovation as the future leaders of the bank. Sophie was also instrumental in developing Lloyds Banking Group’s Innovation ecosystem with 14 FinTech collaborations including 3 Global accelerators, start-up innovation challenges with the Government and supporting women in FinTech with Innovate Finance. Her talent is recognised amongst the external community; where she has been listed in the Innovate Finance 100 women in FinTech, Innotribes Global Power Index for FinTech and is featured on the FemTech Leaders’ website. Recently, RFi Group spoke to Sophie about what makes her tick. And here, is what she said. How did you get to where you are today and what, or who, has been your greatest influence in business? I’ve not had a traditional route to become a digital leader in a large bank. My background is in public affairs,

communications and education but what this has allowed me to do is to become a translator and use my skills to create campaigns and experiences that are inspiring people to work in new ways. My role today is Head of Innovation Culture at Lloyds Banking Group where I have two main remits: (1) to make innovation everyone’s job; and (2) support the next generation of entrepreneurs in the UK through supporting early stage fintech start-ups.

From the outset of my career (15 years ago) I worked with the tech giants and the government to help the UK view digital as an enabler of growth. My biggest influences have been digital and fintech. From the outset of my career (15 years ago) I worked with the tech giants and the government to help the UK view digital as an enabler of growth and today I am looking at how we enable people to be digital leaders and ‘intrapreneurs’. Our collaborations with global accelerators like startupbootcamp are enabling rich culture exchange between a large corporate like Lloyds Banking Group and start-ups, and the exchange of views, expertise and knowledge is having a real impact on changing ways of working. I love looking to what’s on the horizon and how best to prepare people to be successful in the future. What is the driving force behind your career goals/aspirations? For me it’s always about doing something I love, enjoy and I want to learn more about. I’m a total geek and love learning. The reason I was drawn to culture is that you get to empower people to think differently, to create an environment that enables talent and you

get to work with great people across the business and outside. Have you ever made a business decision you may have done differently with hindsight, and can you share it? And, what would you say is your greatest professional achievement to date? Wow, big question! I tend not to dwell on what’s happened in the past but to learn from it. I think managing teams of people is one of the hardest things to do but also the most exciting. In hindsight and with experience you learn to read the signs better from your team and from audiences when you’re pitching ideas. So, my advice to my younger self would be to listen more and ask more questions. One of the biggest achievements I am most proud of is our Lloyds Banking Group FinTech Mentoring programme which Innovation Managers Kathryn Harris and Maxine Leigh in my team have been instrumental in making happen. It gives direct value to start-up founders and our most senior colleagues through matching relationships that facilitate deeper discussion, learning and opportunity; the impact of which reaches far and wide.

In hindsight and with experience you learn to read the signs better from your team and from audiences when you’re pitching ideas. One of my favourite stories is about a fintech start-up called Mobillity, a proposition which uses existing data to save customers money and improve financial well-being (by analysing their bank transaction records and linking with other sources to reduce their utility, phone, gym and other re-occurring costs). Following an Espresso Martini event that Lukas Zörner (the founder of Mobillity) joined, he was mentored by an interested senior leader in Lloyds.

UK RETAIL BANKER 15


RFi GROUP WOMEN IN LEADERSHIP

Lukas then successfully secured a place on thestartupbooptcamp FinTech 2016 cohort and has since tested his proposition in our customer labs. How cools is that! We are helping and supporting the next generation of entrepreneurs in the UK and enabling culture exchange and a growth mindset. What do you do to keep evolving your career, to ensure a fulfilling and successful longevity? Always having an eye on what’s next. As part of an innovation team you cannot stand still, there is always something different to look at and learn from. We have to continually evolve the vision and capability of a team to not only deliver what you need to today but ensure you are skilling yourselves up for the future and constantly pushing and trying new things to challenge the status quo. Getting out and about outside your organisation, networking with people from across industries also keeps the mind fresh. How do you achieve a work/life balance and what activities do you participate in outside your working life, that you see contributing to your business success?

I am lucky that the bank has a great attitude towards empowering people to work in an agile way so I have a flexible working pattern that works for me and my family. I’m a new mum so work/life balance is important to me. I am lucky that LBG has a great attitude towards empowering people to work in an agile way so I have a flexible working pattern that works for me and my family. Whilst I was on maternity leave I joined an adult drama class, something I have wanted to do for a long time – it was

16 RFi MEDIA

always something I loved at school but never really returned to. It’s a great way to put yourself out of your comfort zone, and taking on new personas helps you view life from a different angle. And, honestly performing on stage is so super scary it makes panels and conferences seem easy. It’s also a great way to meet a diverse group of people, have fun and build your confidence. Do you mentor others? And, what have you learnt in the process. I do yes and I also have mentors which is great. I mentor within and outside of LBG and when you are able to create these relationships organically you create sponsorship of each other and friendships. A great mentor can also challenge how you think. I remember talking to a mentor about a situation and I said, I’ll just keep on trying. He said, “No. Stop, try something different as what you’re doing is not working”. It was a great piece of advice that I remind myself of when faced with a challenging situation. What advice would you give to young women who want to success in the workplace and what do you see as the biggest challenge for future generations of business women? I am an optimist – the future is whatever you want it to be. A friend of mine once said to me do what you want to do and you’ll be what you want to be. It’s so true. For young men and women I would say work for an organisation that values you, that you believe in and that empowers you. Be true to yourself in your leadership style – we all have a natural way of being and behaving and although you do need to be able to adapt your approach, where you will have the most success in bringing people along with you on the journey is when you are yourself. I am not the typical leader you’d find in financial services, so what! I’ll use my differences to my advantage and so far its worked brilliantly. I’d also advise them to work in diverse

teams – the more diverse the team the richer the ideas, the experiences and the skills. The better the outcome.

Be true to yourself in your leadership style – we all have a natural way of being and behaving... where you will have the most success in bringing people along with you on the journey is when you are yourself. What’s the best piece of advice you have received as a woman in a leadership role that you would pass on to others hoping to get there? Always ask why – whether you’re being asked to do as task, present at a conference, whatever it may be. Having the context of why you are being given an objective will help you be successful. Asking why gets you the information that you need but also challenge those above you to clearly think through what they are asking you to do.

By helping others to grow and developing talent you will learn along the way and people will identify you as an enabler. I’d also add that you should help and collaborate with the people around you. We are not successful on our own, by helping others to grow and developing talent you will learn along the way and people will identify you as an enabler.

To read the full WIL series and all past Australian Retail Banker editions, feel free to visit the archive centre on our website or follow @RFiMediaGRB on Twitter.


SPECIAL FEATURE

RFi GROUP GLOBAL DIGITAL BANKING CONFERENCE 2017 - EUROPE WORDS SARAH HOLLINSHEAD

Francisco Lorca, Jesse McWaters and Susanne Chishti

Jesse McWaters

Nathalie Oestmann

Open Banking to reinvent the financial services eco-system The impacts of Open Banking permeated every discussion at the Global Digital Banking Conference – European Edition last month, where senior executives from the banking and FinTech communities gathered to determine what the future of banking looks like, and how to win the customer of the future. Taking place at the beautiful, and highly ironic, Gibson Hall, an old banking hall dating back to 1862, delegates were reminded about how far banking has come, but still questioning just how far it will go. It seems fitting to begin this overview with a famous quote by Andy Grove (as referenced by Alan Lockhart, Open Banking

Ricky Knox

and FinTech Relations at Royal Bank of Scotland on the day) “Only the paranoid survive”. During this period of unpredictable change, there were admissions that we may not even recognise the financial sector in 10 years, but to get behind the change now is the only way to win. Banks could be the winners The big banks are under the most scrutiny, as open data will encourage more competition and scalability from new players in the market. However, Andy Booth, Managing Director for Current Accounts and FX at Barclays, believes the future is bright for his institution, stating that “through investment in internal innovation,

UK RETAIL BANKER 17


SPECIAL FEATURE

collaborations and partnerships, Barclays will earn the right to stay close to our customers.”

customer satisfaction. But, mainly, there is a risk of banks falling behind if they don’t.”

In a panel lead by Francisco Lorca, Managing Director London, Startupbootcamp FinTech, banks and FinTechs took to the stage, and a particular comment from a banker sparked a heated discussion: “Never forget, banks have customers, FinTechs bring smarts, but we have customers”.

Consumers will be the biggest winners The benefits of Open Banking to consumers were widely discussed throughout the conference. In the context that consumer expectations are no longer defined by financial institutions but by best-in-class brands from any industry, the pressure for better experiences is rife. Katie Evans of Money and Mental Health highlighted an important point, that “Open Banking done right could really reduce financial difficulty and transform people’s lives, especially those with money or mental health problems.”

This was further backed by Jaroslaw Masterlez, Managing Partner – mAccelerator, mBank, who reflected from the perspective of a digital-only bank that grew to become the 3rd largest retail bank in Poland in just 10 years. He exclaimed “the winner of the future is not FinTech, they have great ideas but lack of resources and trust. The future of banking lies in the ability of modern banking institutions to create an ecosystem with PSD2.” Trust is an important factor to how the banks will stand the test of time as regulation encourages more competition. With bankers on the day referencing this as a key advantage, Charles Green, CEO of RFi Group shared some interesting consumer insights that bought that level of security into question. From the recent Global Digital Banking Report, the UK came in third (behind developing markets China and India) as a market where consumers are most comfortable with digital-only providers, and onein-four UK consumers would consider a non-bank for a new banking product. Green noted that in the last 18 months, trust towards technology companies has grown at a greater rate than trust towards banks (trust in technology companies grew by 11% compared to 7% growth in trust for banks), hence decreasing the gap between the two and raising a range of questions for the future. Jesse McWaters, Financial Innovation Lead, World Economic Forum provided a neat summarisation of why banks are looking at the positives of an Open Banking world: “there is an opportunity to cut costs and gain great consumerbased data. There are benefits in

18 RFi MEDIA

You need to educate and train people on the journey you are on, and explain the ‘why’ of the change. It cannot be just a division, it has to be the whole organisation. The ethical questions around consumer data were also discussed at length in a panel led by Jonny Voon, Innovation Lead at the government’s Innovate UK, as part of a discussion around artificial intelligence and the internet of things. The general agreement was that data should be used to help customers, to better know the customer, before ever trying to sell to them. Simon Thompson, Global Head of Digital Commerce for HSBC smartly tied this up, saying “data should be used to make services proactive rather than reactive.” The interplay of culture and technology Alan Lockhart of RBS boldly stated that “culture eats strategy for breakfast”, and he received a lot of support for this notion on the day. Lloyds’ own Sophie Bialaszewski’s job title, Head of

Innovation Culture, in itself highlights the significant focus on culture within the bank. Sigga Sigurdardottir, Chief Customer and Innovation Officer for Santander explained the chief focus of her role: “You need to educate and train people on the journey you are on, and explain the ‘why’ of the change. It cannot be just a division, it has to be the whole organisation.” Akhil Doegar of DBS Bank Singapore furthered this thought by asking: “Have you just applied digital lipstick, or are you digital at your core?” He explains how the core bank and digital bank previously had to be separate under different legal controls. However recently, DBS has integrated both parts together in a way that ensures the digital bank has the freedom to develop new technologies, but at the same time they do not move away from the objectives of the organisation as a whole. Of course, having strong digital platforms is key as well, displayed by Graham Olive, Deputy CEO of OakNorth Bank, the first UK bank to operate entirely on the cloud. He explained how “being on the cloud has dramatically reduced our IT spend and helped us break even in under a year”. The branch/digital-only debate Another highlight from the day was a lively debate between Ricky Knox, CEO, Tandem Bank and Nick Kennett, Chief Executive of Financial Services, Post Office on the future of the branch. Kennett believes in the power of the physical branch, with 110 million banking transactions in Post Office branches last year, and growing 10% YoY; “it is about choice and allowing customers to choose what channels they use.” Knox however sees people moving away from the branch for new products and services, and that banks are at risk of losing out on new business. Not one to shy away from speaking his mind, Knox exclaimed that “we are at an inflection point where digital is overtaking branch as an origination point. Banks only do digital origination because it is cheaper, and that’s why they suck at it”.


SPECIAL FEATURE

RFi GROUP & SKY NEWS COVERS

In May, Sky News - Business Presenter and RFi Group Media Director, Chloé James, covered RFi Group’s Global Digital Banking Conference in London for a special series of episodes with some of the greatest innovators and thought leaders from around the world, who appeared as speakers at the conference. The series highlights some of the most successful UK start-ups and businesses, looking at digital banking, fintech, innovation and what it takes to crack the competitive European market. Interviewees include: Charles Green

Ricky Knox

RFi Group

Tandem

Edward Maslaveckas

Francisco Lorca

Bud

Startupbootcamp

A move to a cashless society The day closed with an evaluation of a cashless future. Nathalie Oestmann, Head of Samsung Pay Europe shared statistics that revealed that “36% of Europe carry on average $40 in their wallets, and this is decreasing significantly. Therefore, we are definitely heading that way.” Mastercard and Visa representatives were both more cautious in their assessment of a potential cashless society, with Mike

Cowen, SVP Digital Payments and Labs of Mastercard saying “It is possible, but we shouldn’t expect it. Should we have it? Yes, handling cash is expensive!” Finally, Andrea Fiorentino, Head of Mobile Market Readiness for Visa was the least forthcoming with this thesis: “We will not have a cashless society in any of our lifetimes, and we do not need to go cashless, as machines take over more tasks of handling cash.” With an abundance of insight shared

from a broad spectrum of speakers, the atmosphere was polarised between energisation and perhaps a bit of anxiety, as the day closed. Whilst very different viewpoints were shared and opinions debated, one thing remained clear; the banking industry is on the brink of the biggest transformation yet. For want of a better phrase, let’s turn to a Ricky Knox quote from the day to conclude: “In 1998, you had to be smart to realise you were going to be disrupted. Now you’d have to be dumb to think you won’t be”.

UK RETAIL BANKER 19


SPECIAL FEATURE

Charles Green, RFi Group

MILLENNIALS & THE VALUE OF TRUST:

THE FUTURE OF DIGITAL BANKING IN THE UK WORDS NINA MOHANTY

20 RFi MEDIA


SPECIAL FEATURE

R

ecently, we millennials have come under fire for our entitled nature of being and our irresponsible spending habits (particularly in the realm of avocado toast). While we all appreciate a cheeky brunch, millennials are taking back control of their finances. In fact, every generation in the UK is ready for a shift to the digital space. But when it comes to fintech, the millennial appetite for digital solutions is simply insatiable.

Our lives are more complicated than ever before and what we millennials want – what we all want – are digital providers we can trust. At the recent Global Digital Banking Conference in London, CEO of RFi Group, Charles Green, shared key insights on the future of digital banking the UK. A recent study conducted by RFi Group found that millennials are at the forefront of pushing digital solutions in financial technology. Not only are millennials more likely to try out and adopt new fintech products, but we are also leading mobile payment adoption across markets, be it through card-on-file purchases in apps or adoption of mobile wallets. Our lives are more complicated than ever before and what we millennials want—what we all want—are digital providers we can trust. In fact, the same RFi Group study found that globally, over half of UK consumers believe trust to be ‘very important’ when choosing a financial institution. Sure, the need for trust was shown to increase with age; but within the UK, 53% of millennials, 54% of Gen Xers, and 64% of Baby Boomers believed trust was integral to a financial relationship. Furthermore, RFi Group found that it matters who we trust with our data. When asked to what extent consumers felt

they could trust various institutions to safeguard their privacy and personal information, banks came out on top, even over government agencies! Naturally, this provides an opportunity for banks. When it comes to mobile wallets, there is no doubt then that consumers are more willing to try out new banked branded proprietary mobile wallet solutions as opposed to third party products. This all comes down to perceptions of security and trust and whom we feel can most effectively secure our personal information. With PSD2 coming into force and the rise of open banking, this means providers face the challenge of security as an integral piece of the financial relationship. In the UK, we are spoiled for choice with fintech products and services. Challenger banks like Starling, Monzo, Atom, and Tandem battle regularly for consumer affection and adoption while Revolut, TransferWise, World Remit and more are helping us to efficiently (and cheaply!) be the global citizens we fancy ourselves to be. The UK market is in the midst of a fintech revolution. Every generation, millennial to baby boomer, has hit the refresh button on our relationships with financial services. And just like on any first date, we’ve got high expectations. Going forward, we want innovation, customer service, and a pleasant user experience in exchange for our affection. But more than anything, this new relationship is going to have to be built on trust. To see the full report or learn more about RFi Group, visit www.rfigroup.com.

Nina Mohanty is a millennial and soon-to-be graduate of the Masters in Management at the London School of Economics interested in all things fintech. You can find her on Twitter @ninamohanty.

UK RETAIL BANKER 21


CURRENT ACCOUNTS

Current Accounts WORDS SIMON HADDAD

M&S Bank offers £185 incentive to new customers

M

arks and Spencer Bank (M&S Bank) has improved the switching incentives offered to new current account customers, now offering benefits of up to £185.

All new customers who switch using the Current Account Switching Service will receive a £125 gift card to spend instore. Customers receive a further £5 a month for the first 12 months if they set up two direct debits and deposits worth at least £1,000 per month into the account, which brings the total benefits received to £185 after the first year of holding the account. M&S Bank customers can also open an exclusive M&S monthly saver that offers a 5% interest rate. According to RFi Group’s UK Priority & Retail Banking Council data from the second half of 2016, 12% of consumers who are likely to switch their main current account in the next 12 months would consider a provider based on the rewards/cashback offered, suggesting that this new offer could attract M&S Bank many new customers.

WHY WOULD YOU CONSIDER A PROVIDER FIRST? Top 3 15%

12% of consumers who are likely to switch their main current account in the next 12 months would consider a provider based on the rewards/cashback offered, suggesting that this new offer could attract M&S Bank many new customers.

14%

14%

13%

13%

12%

12% 11% 10% Interest rate

Customer service

Source: RFi Group UK PRBC 2016 H2

22 RFi MEDIA

Rewards/Cashback


CURRENT ACCOUNTS

Barclays launches new service to combat fraudsters Barclays is launching a new service to increase the security of its banking products as part of a £10m nationwide campaign to increase the public’s awareness of the risks associated with financial fraud. Under the new service, Barclays’ customers will be able to ‘switch off’ their debit card from their mobile app, as well as letting users set daily ATM withdrawal limits via the same app. The bank is also devoting some of the £10m to a national advertising campaign highlighting the

Under the new service, Barclays’ customers will be able to ‘switch off’ their debit card from their mobile app, as well as letting users set daily ATM withdrawal limits via the same app. dangers of financial fraud and will host regular fraud awareness ‘takeovers’ on its mobile and online banking sites where users will automatically be shown the fraud prevention message before seeing the standard product information. The bank will also launch a fraud quiz that users will be able to take online to test their digital safety and receive advice on how to improve it.

UK RETAIL BANKER 23


CURRENT ACCOUNTS

Nationwide to open new branches in 2017 Nationwide has announced that it is preparing to open branches in areas deprived of banking services, bucking the branch closing trend of the major high street banks and other building societies. Nationwide made the decision to open new branches in response to over 1,000 branch closures across the UK in 2016. The building society will pilot the scheme with a new branch in Glastonbury, Somerset, which had been left without any banking services after branch closures last year. More than 1,800 accounts have already been taken out by locals ahead of the branch’s opening, smashing Nationwide’s target of 300 new account openings to support the sanctioning of the new branch. If the new branch is successful, Nationwide is likely to roll out more new branches, with Tom Prestedge, an Executive Director of Nationwide, saying: “If successful, Glastonbury will open the way for us to consider more branches, particularly in areas deprived of vital financial services.”

24 RFi MEDIA

If successful, Glastonbury will open the way for us to consider more branches, particularly in areas deprived of vital financial services. Tom Prestedge, Executive Director, Nationwide


SAVINGS

Savings WORDS SAMUEL GOLDFINCH

Inflation overtaking savings returns

F

ollowing the latest UK inflation figures from April, which placed inflation at 2.7%, comparison site Moneyfacts has found that there are now no savings accounts in the UK market, out of the 753 available, that offer inflation beating rates. According to Moneyfacts, the highest savings account rate offered is from Paragon at 2.25% on a five-year fixed bond. Some current accounts offer interest rates above 2.7%, however, these tend to have limitations on them, such as a ceiling on the deposit value that can earn the leading interest rate, or requirements for a minimum number of direct debits to come out of the account.

On average consumers believe that they are earning 1.3% on their savings accounts, with those holding a Stocks and Shares ISA receiving the best rates at 2.5% on average.

AVERAGE INTEREST RATE 3.0%

2.5% 1.9%

2.0%

1.8%

1.8% 1.3%

1.2% 0.9%

1.0% 0.0% Stocks & Shares ISA

Notice account

Fixed rate bonds

Regular savings account

Cash ISA

Instant access account

Total

According to RFi Group UK Savings Council data from early 2017, on average consumers believe that they are earning 1.3% on their savings accounts, with those holding a Stocks and Shares ISA receiving the best rates at 2.5% on average. With the latest inflation figures only recently released, banks may still respond with higher rates to try to match or beat the latest inflation rate.

Source: RFi Group UK Savings Council 2017 Q1

UK RETAIL BANKER 25


SAVINGS

LISA popular with older limit According to providers currently offering the Lifetime ISA (LISA), initial demand for the product has outweighed expectations. Demand for the product, which allows consumers to save for their first home or retirement, has been driven by older consumers, with Hargreaves Lansdown stating that 18% of those taking out the product are aged 39, while the Shares Centre has claimed that 36% of all applicants were aged 35-39. Although those at the upper end of the LISA age group, which is available to those under 40, have been the first to take them out, younger consumers are also showing high intentions to take up the product later. RFi Group’s UK Savings Council data taken in the month before the LISA was released, found that of those who consider themselves likely to take out a LISA (8+/10), 24% are 18-24 year olds, 56% are 25-34, and 21% are 35-39. This suggests that younger consumers have an appetite for the LISA, but their urgency to take up is lower, which may be due to them having more time before reaching the age limit or due to product availability as none of the high street banks are offering this LISA. There has also been some variety in risk appetite, with Hargreaves Lansdown, who only offer a stocks and shares LISA, noting that most LISA customers are investing into tracker funds which tend to be a lower risk than the active funds available. Nutmeg, another investment provider that offers the LISA has seen an even split on risk levels available.

26 RFi MEDIA

Younger consumers have an appetite for the LISA, but their urgency to take up is lower, which may be due to them having more time before reaching the age limit or due to product availability.


SAVINGS

Zopa obtains full FCA approval Zopa has been granted full authorisation by the Financial Conduct Authority (FCA) after a rigorous approval process that lasted 18 months. The new accreditation is expected to increase consumer confidence in the peer-to-peer lending sector and help push it into the mainstream, benefiting both Zopa and the peer-to-peer lending market. Now, Zopa can also apply to the HM Revenue & Customs (HMRC) department to offer an Innovative Finance ISA (IFISA), which is a new type of ISA. It allows investors to lend to businesses through peer-to-peer wrapped into an Isa and hence, enables them to receive the tax benefits common to other types of ISA products. Zopa is currently applying for a banking license that, once approved, will allow them to offer a wider range of spending, borrowing, savings and investment products. This process began in November last year and is expected to take between 15 and 24 months.

Jaidev Janardana, CEO, Zopa

The new accreditation is expected to increase consumer confidence in the peer-to-peer lending sector and help push it into the mainstream.

UK RETAIL BANKER 27


MORTGAGES

Mortgages WORDS MEERA PANCHASARA

Decline in the interest-only market

A

terms.

ccording to the Council of Mortgage Lenders (CML), the interest-only mortgage market has been in decline in recent years in both value and number

The number of interest-only loans fell from 3 million in 2011 to 1.9 million at the end of last year, with some of the largest declines seen in the number of high loan-to-value (LTV) mortgages. Despite these falls, there is still concern over high risk borrowers facing maturity shortly. For instance, there are 11,000 mortgages at over 75% LTV with 2 or less years to maturity, and while this has reduced in size, the pace of the reduction is slower compared to high LTV loans at longer maturities.

Even though this segment represents less than 1% of the book, it is the highest risk. It is, then, crucial that these borrowers either have adequate provision to repay their loans or act now to improve their position.” Council of Mortgage Lenders

The CML said: “Even though this segment represents less than 1% of the book, it is the highest risk – at least with respect to impending maturity and high leveraging. It is, then, crucial that these borrowers either have adequate provision to repay their loans or act now to improve their position.” RFi Group’s UK Mortgage Council data from Q1 2017 shows that not all interest-only mortgage holders are well prepared to eventually pay-off their loan. Although 26% of mortgage holders on an interest-only repayment structure plan to use cash saved in savings accounts or ISAs to repay the loan, there are 14% who haven’t made any provisions yet and are unsure of how to repay the loan when the time comes.

28 RFi MEDIA


MORTGAGES

WHAT ARE YOUR INTENTIONS REGARDING THE EVENTUAL LOAN REPAYMENT? WHAT PROVISIONS (IF ANY) HAVE YOU MADE/ ARE YOU MAKING TO PAY OFF THE LOAN? Mortgage holders on an interest-only mortgage 40% 30%

26%

20%

16%

14%

10%

14% 6%

6%

6%

Use my pension

Use another property (e.g. Buy-to-let property)

Use investment(s) (e.g. bonds, shares, unit trusts)

0% Use cash saved in savings accounts/ ISAs

Downgrade my property when the mortgage comes to an end (use the increase in the property value to pay for a smaller property)

I have an endowment policy

I have made no provisions and am unsure how I will pay off the loan when the time comes

Source: RFi Group UK Mortgage Council Q1 2017

UK RETAIL BANKER 29


MORTGAGES

30 RFi MEDIA


MORTGAGES

Young adults staying at home A study by insurance firm Aviva claims that almost half a million more young adults could still be living with their parents over the next 10 years if housing market trends continue.

Aviva said the number of young adults aged 25-34 years living with their parents has grown by 37% over the past decade, reaching 1.23 million. Analysing data from the Office for National Statistics (ONS) from 2016, Aviva said the number of young adults aged 25-34 years living with their parents has grown by 37% over the past decade, reaching 1.23 million. This number could further increase by 452,000 in 10 years if trends continue. Aviva believes this trend has been driven by rising average house prices, which increased 45% for first time buyer homes between 2006 and 2016.

Those who don’t think it is a good time to buy a property now blame the rapid growth in house prices (63%), followed by the lack of affordable housing made available and concerns around Brexit negotiations (55%). Aviva’s survey of 500 young adults still living at their family home revealed that 8% don’t ever expect to move out. Meanwhile those who do expect to move out, believe they will be aged around 28 when the time comes. Housing affordability issues are a factor behind staying at home for 2 in 3 adult children living with parents, while 48% said they live this way to save money. RFi Group’s UK Mortgage Council data also shows a great deal of reluctance among young people looking to take their first step onto the property ladder. Just under 1 in 5 of all future first time buyers looking to buy a home within the next year don’t believe it is a good time to buy (score of 1-2/5), while a further 45% are unsure. Those who don’t think it is a good time to buy a property now blame the rapid growth in house prices (63%), followed by the lack of affordable housing made available and concerns around Brexit negotiations (55%).

UK RETAIL BANKER 31


MORTGAGES

Over 1 million struggling to repay their mortgage A report from mortgage broker and adviser, London & Country (L&C) Mortgages, has shown that 1.4 million households across the UK are struggling with mortgage repayments, while 2.6 million claim their monthly repayments are too high. The report also revealed that 58% of homeowners have never re-mortgaged to search for a better deal, while 2.5 million are compelled to cut back drastically on their spending to meet mortgage payments. David Hollingworth of L&C Mortgages said: “The fact that people have been making cuts in order to cover mortgage payments indicates how people feel they are ‘just about managing’ in many aspects of their lives.” He added that while many are struggling, they are not taking the necessary actions in order to manage their mortgage. RFi Group’s UK Mortgage Council data from Q1 2017 echoes these findings, showing that 11% of mortgage holders believe they will struggle to repay their mortgage over the coming 12 months, with 56% of these borrowers concerned about the rising cost of living.

32 RFi MEDIA

The fact that people have been making cuts in spending in order to cover mortgage payments indicates how people feel they are ‘just about managing’ in many aspects of their lives. David Hollingworth, L&C Mortgages


CARDS

Cards WORDS KALLIA MANIKA

Mastercard presents a biometric credit card

M

astercard has announced a new credit card that will include a biometric fingerprint scanner.

The new technology is designed to improve security and convenience for customers, with users able to authorise payments using the fingerprint scan, rather than PIN and signature, reducing both the risk of fraud and inconvenience for consumers who will no longer need to memorise their cards’ PIN number. The new card is expected to be launched in Europe and Asia later this year, with trials currently underway in South Africa. When taking out a new credit card, users will have their fingerprint details scanned and digitally stored on the card. To ensure privacy and security, the details stored on the card would be destroyed if the card is cancelled or if someone else attempts to use the card. This new card is compatible with any EMV terminal able to read a credit card chip, meaning merchants will not need to acquire any extra equipment or software to be able to accept the new card; although, it will not initially have contactless capabilities.

PLEASE INDICATE HOW LIKELY YOU WOULD BE TO TRY USING THESE DIFFERENT TYPES OF PAYMENTS, SHOULD THEY BE MADE AVAILABLE TO YOU Likely (6+/10) 50% 43%

40%

41%

30%

30%

RFi Group’s data from the second half of 2016 shows that 43% of UK consumers would be likely (6+/10) to use biometric payments if they were made available. RFi Group’s UK Payments Council data from the second half of 2016 shows that 43% of UK consumers would be likely (6+/10) to use biometric payments if they were made available, suggesting that a high proportion of the population is likely to try the fingerprint identification credit card from Mastercard when it hits the market.

20% 10% 0% Biometric payments eg. fingerprint scanning, face recognition, voice recognition

Mobile payments using technology that allows you to hold your mobile close to a payment terminal in a store when paying for goods

Wearable technology

Source: RFi Group UK Payment & Innovation Council H2 2016

UK RETAIL BANKER 33


CARDS

Amex cardholders can now talk to Alexa American Express (Amex) cardholders can now use Amazon’s Alexa voice service to help manage their card. Amex customers will be able to check their account balance, monitor recent charges on their cards, and make payments. In addition, cardholders can be informed about any offers Amex currently has available through this voice service. To use the service, the cardholders must enable the ‘skill’ on an Alexa powered device, and then activate the feature by logging into their Amex online account, before giving the command “Alexa, open Amex”. An additional PIN is also required. Commenting on the release, Luke Gebb, Senior Vice President, Enterprise Digital, American Express, stated: “Our card members are redefining how they engage with our brand across the digital platforms of their choice, and we want them to have great experiences wherever they are.”

34 RFi MEDIA

Our card members are redefining how they engage with our brand across the digital platforms of their choice, and we want them to have great experiences wherever they are. Luke Gebb, Senior Vice President, Enterprise Digital, American Express


CARDS

Credit card borrowing continues to rise According to the Bank of England, credit card borrowing grew from £67.3 billion in February to £67.6 billion in March 2017. Overall borrowing also increased, with household debt increasing from £1.5 billion in February to £1.6 billion in March. This increase defied economist expectations of a slowdown in spending. Overall consumer debt is currently at £197.4 billion. The fast pace of debt growth is expected to result in action from the Bank of England, with Chief UK Economist George Buckley at Nomura stating that: “This will certainly not go unnoticed at the Bank of England, from a financial stability perspective at least. Generally easier credit conditions including lower personal borrowing rates and extensions of interest-free periods on credit cards are generating some concern among members of the Financial Policy Committee.”

Generally easier credit conditions including lower personal borrowing rates and extensions of interest-free periods on credit cards are generating some concern among members of the Financial Policy Committee. George Buckley, Chief UK Economist, Nomura

UK RETAIL BANKER 35


CARDS

Personal Loans WORDS GEORGINA GALVAN

Personal loans have increased by 13%

F

inancial services company, Hitachi Capital (UK), has reported a 13.3% rise in personal loans processed by its consumer finance division in the 2016/17 financial year.

The main driver behind the increase was growth in borrowing for leisure proposes, up 60.8%, while other areas that saw strong credit growth were personal computers and healthcare, up 16.5% and 14.9% respectively. According to Robert Gordon, Chief Executive Officer of Hitachi, “While the market conditions over the past year have been a real test for UK household (…), the amount of loans taken out is evidence that UK consumer confidence is high.” RFi Group’s UK Priority & Retail Banking Council data also shows that consumers are becoming more confident with borrowing, with the proportion looking to reduce their borrowing falling between the first and second half of 2016.

36 RFi MEDIA

OVER THE NEXT 12 MONTHS HOW LIKELY ARE YOU TO CHANGE THE AMOUNT YOU Borrow Less

16H1

Same

35%

16H2

58%

27%

0%

20%

More

7%

67%

40%

60%

6%

80%

Source: RFi Group UK PRBC H1 and H2 2016

100%


PERSONAL LOANS

Debt county court judgements increase by 35% New figures compiled by the Registry Rust have found that there were 298,901 debt judgements filed in England and Wales during January, February and March 2017 against consumers that could not pay off their debts. The increase represents a 35% growth on the same period last year and is the highest number since before the financial crisis. Debt charities have expressed concern that this trend will continue, with Joanne Elson, Chief Executive at Money Advice Trust saying: “There’s a strong chance that this trend will continue as people feel rising inflation levels eating into their wages.” Interestingly, the average value of debts pursued through the courts has fallen 17% from the same period in 2016. This fall continues a long-term trend, with the average debt pursued in 2008 sitting at £3,662, but now at £1,495, showing that lenders are moving more quickly to chase people in financial difficulty.

The increase of debt judgements represents a 35% growth on the same period last year and is the highest number since before the financial crisis.

UK RETAIL BANKER 37


PERSONAL LOANS

Loan.co.uk launches a borrowing guideline Loan.co.uk, an online broker specialised in borrowing products, has launched a responsible borrowing guideline aiming to improve financial education among existing and potential consumers and to help them manage their debt. The new guideline, titled, ‘Reset the debt’, includes 10 useful tips for consumers to borrow responsibly. These suggestions include shopping around to find the best credit deal and asking for help from debt solution charities. With these recommendations, the company expects to demonstrate that it is possible to lend responsibly and help prevent customers’ debt problems.

With these recommendations, the company expects to demonstrate that it is possible to lend responsibly and help prevent customers’ debt problems.

38 RFi MEDIA


PERSONAL LOANS

UK RETAIL BANKER 39


SME & COMMERCIAL

SME & Commercial WORDS ELIA ORELLANA

World First launches SME international payments platform

W

orld First, a UK based foreign exchange company, has revealed a new platform that will facilitate international payments, the World Account platform.

The platform will enable businesses to open local bank accounts around the world with no fees, cutting down on cross-border payment costs by minimising the need for foreign exchange transactions.

IN THE NEXT 12 MONTHS, DO YOU EXPECT YOUR BUSINESS TO DO ANY OF THE FOLLOWING? 50% 44%

40% 30% 24%

20%

15% 10%

10%

5%

0% Increase annual revenue

Start operating into new markets

Increase its expenses

Require assistance dealing with new currencies

Source: RFi Group UK SME Banking Council H2 2016

40 RFi MEDIA

Increase its borrowing

The platform will enable businesses to open local bank accounts around the world with no fees, cutting down on cross-border payment costs by minimising the need for foreign exchange transactions. SMEs will also be able to manage their accounts both online and via an app. The company plans to continue increasing the platform functionality and the number of possible currencies as the service develops. Jonathan Quin, Co-founder and CEO at WorldFirst was pleased to announce that ‘Our World Account should solve what is a pain point for many ambitious businesses who buy or sell internationally enabling them to manage their international accounts in one single platform wherever and whenever they want. We think this will be the world’s most flexible financial platform to support a new era of international business.’ The service could prove particularly useful for UK businesses, with RFi Group’s UK SME Banking Council data showing that one in ten SMEs believe they will require assistance dealing with new currencies in the next 12 months, and a quarter expect they will expand into new markets.


SME & COMMERCIAL

The announcement comes after a successful trial investment of £28.3 million in 2016, prompting BNI to continue providing funding annually through the platform.

Banco BNI Europa to offer UK SME financing via MarketInvoice MarketInvoice, a UK peer-to-peer online invoice marketplace, and Banco BNI Europa (BNI), have announced a collaboration that will make £45 million in funding available to UK SMEs that will be put towards backing working capital solutions. The announcement comes after a successful trial investment of £28.3 million in 2016, prompting BNI to continue providing funding annually through the platform. Pedro Coelho, Executive Chairman of BNI said of the agreement that: ‘It is inevitable that banks will work more collaboratively with fintech businesses. I am a firm believer of this and see much scope in the industry.’ MarketInvoice has had a successful run to date, having funded over 70,000 invoices worth more than £1.2bn. At the same time, funds offered by institutional investors to UK SMEs via MarketInvoice have increased from £96.1m to £176.2m over the last three years, with this growth driven by international institutions. The spike in investment has been attributed to the release of MarketInvoicePro, a confidential invoice discounting facility launched earlier this year that offers SMEs a funding line against their outstanding invoices, which has so far proven popular with UK SMEs.

UK RETAIL BANKER 41


SME & COMMERCIAL

Foreign trade slowdown Recent figures from foreign exchange company, World First, reveal that international trade by SMEs dropped significantly in the first quarter of 2017 due to pressure from increased importing costs and lower margins. World First’s Global Trade Barometer showed that businesses have been cutting back on foreign trade, transferring 17% less on average per currency transaction in comparison to the last quarter of 2016. Another indicator from the same report is the increasing proportion of SMEs who

42 RFi MEDIA

have not made any foreign currency transactions, rising to 64% from 28% over the same period. Jeremy Cook, Chief Economist at World First, suggested that the slowdown could point to falling confidence, stating that ‘higher costs of importing materials and squeezed margins are seeing businesses pull back from international trade’. The figures also suggested that currency volatility, in addition to rising inflation, could be contributing to a lack of confidence in foreign trade.

World First’s Global Trade Barometer showed that businesses have been cutting back on foreign trade, transferring 17% less on average per currency transaction in comparison to the last quarter of 2016.


PAYMENTS & DIGITAL

Payments & Digital WORDS MANISHA NOBEEN

13% of consumers in the UK fall into the potential user group, with RFi Group’s UK Payments Council data from the first half of 2017 identifying this proportion to have a compatible device.

Samsung Pay launched in the UK

S

imilar to Apple and Android Pay, the new contactless payments system will allow consumers to make payments for goods or services, including the Transport for London network, through the use of their Samsung smartphone device. Compatible phones include the Samsung S6, S7 and S8 models, meaning that 13% of consumers in the UK fall into the potential user group, with RFi Group’s UK Payments Council data from the first half of 2017 identifying this proportion to have a compatible device. At this stage, Samsung Pay’s unique feature, the magnetic secure transmission (MST), which sends a magnetic signal from the mobile device to a non-contactless accepting payment terminal, mimicking a card swipe, and in turn enabling a contactless transaction, will, however, remain unavailable in the UK. Samsung will instead focus on creating NFC payments before enabling MST. MST may be introduced later to help store loyalty cards within the app, too. The app is available for Visa and Mastercard cardholders banking with Santander, Nationwide and MBNA, while HSBC, First Direct, M&S Bank and American Express are stating they’re willing to adopt the service.

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PAYMENTS & DIGITAL

Revolut launches fee-free transfers CONSUMERS WHO TRANSFER FUNDS INTERNATIONALLY 6 month trend

UK fintech provider, Revolut, has launched a free international money transfer service to encourage customers to join its network. Revolut now allows its customers to transfer up to £5,000 worth of funds abroad for free, with transfers over £5,000 charged a fee of 0.5%, making Revolut the only company allowing free transfers of such large amounts, according to Nik Storonsky, Chief Executive and founder of Revolut.

25% 20%

Alongside this service, Revolut has also launched a ‘turbo’ transfer service. The turbo transfer service is an optional feature which allows customers to make faster transfers, usually within 1 – 2 business days, for a fee of £5 per transaction.

15%

Targeting international payments could be a wise move for Revolut, where RFi Group’s UK Payments Council data from the first half of 2017 shows that 18% of UK consumers have transferred funds internationally in the last 6 months. The feefree limit is also likely to be enough for the vast majority of users, with 91% of those making international payments transfers of less than £5,000 over the last 6 months.

5%

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18%

12%

10%

0% H2 2016

H1 2017

Source: RFi Group UK Payments & Innovation Council H1 2017


PAYMENTS & DIGITAL

Starling to allow open access to real time payments UK app-based bank Starling has announced that it will launch a new service, which will allow other lenders and fintechs to accept real-time payments online or via mobile devices.

Starlings’ new service will allow start-up banks to offer immediate payment services without the help of the high-street banks. Starlings’ new service will allow start-up banks to offer immediate payment services without the help of the high-street banks. It will connect companies to Faster Payments and BAC, allowing customers to move money in real time and send direct debits. Currently, a new bank would need to route through one of the major banks to access UK payment schemes, such as Faster Payments, and enable money transfers, with these services usually coming at a high cost.

Payments should be open, connected and always done in real-time. Julian Sawyer, Chief Operating Officer, Starling

Julian Sawyer

When asked about the motive behind launching the new service, Julian Sawyer, Chief Operating Officer at Starling stated that “payments should be open, connected and always done in real-time” with the new service taking these goals a step closer to reality.

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UK Retail Banker - June 2017 Edition  

An RFi Group publication

UK Retail Banker - June 2017 Edition  

An RFi Group publication