Addressing them end-to-end can also deliver substantial cost savings, particularly through deployment of smart processing technologies.
Banks can then reinvest these savings in the front-end experience. Personalize and reward payments. Most banks underexploit the data available to them. For years banks have used data to generate leads, but new technology enables them to personalize rewards, features, service levels, and fees to encourage cross-selling and customer acquisition.
Banks can now use advanced analytics to personalize the right offer in the right channel at the right time. Many banks already explicitly tier the rewards they offer on their products to attract customers and seal the resulting relationship. These programs reward such relationship-enhancing behaviors as larger and more frequent transactions, bill payment, contactless payments, and the addition of complementary products.
Are tech firms a serious threat to banks?
Collaborate to offer a credible response to third parties. As nonbanks pose an increasingly serious threat, banks are becoming more open to collaborating with other banks on industry-wide solutions.
Many banks now recognize that control of the smartphone interface makes it easier for the digital giants to provide a seamless omnichannel experience. Otherwise, they risk ceding this space to nonbanks altogether. But they need to do more to get their cards to the top of third-party wallets. Besides establishing strategic partnerships, banks must differentiate on the basis of services they provide around the payment. In particular, banks can carve out differentiation in the areas of financial insight and financial control.
See Exhibit 3.
For example, customers may want to switch cards on and off, redeem rewards, address a transaction dispute directly within the app, or switch or upgrade products easily. Protect and monetize data. Banks sit on vast troves of data that they can use to understand customer behavior and to identify commercial opportunities. Better use of data can deliver substantial back-end improvements, particularly with regard to fraud, underwriting, operations, and IT. Banks now need to assess all sources of data and identify new use cases to monetize.
Some banks have developed new products or services from their data, demonstrating that new business models can emerge from superior data and analytics practices. The consumer payments sector is at a tipping point. Yet far too few retail banks are thinking strategically about payments as a source of competitive advantage.
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- How Banks Can Thrive as Digital Payments Grow?
The Impact of Digital in Payments Smartphones are now ubiquitous worldwide, and consumers use them for a multitude of daily transactions, from buying groceries to paying for public transport. How Banks Can Respond To improve their payment offerings and provide a more engaging customer experience, banks need to build on their core strengths, focusing on four imperatives.
Contact the Authors. Tom Dye Principal New York.
Are Apple, Amazon and Facebook the future of banking?
Featured Content Global Payments Deepening the Customer Relationship Read more. None of that will sound appealing to tech firms that have largely avoided regulatory scrutiny, at least up until the recent Facebook user data crisis. In other words, the very regulatory restraints that banks often complain about serve as protection from new competition. Instead of trying to compete directly, tech firms are expected to form alliances with banks that already have the required licenses and regulatory oversight. For instance, reports suggest that Amazon's checking account product would be offered in tandem with a major bank.
Likewise, Apple could launch a joint credit card with Goldman Sachs early next year, the Journal reported last week. The new credit card could help Apple juice the revenue its makes from its services business, while simultaneously boosting the prominence of Apple Pay. Forging an alliance with Apple could be a win for Goldman Sachs as well. The Wall Street heavyweight has broadened its focus beyond investment banking by recently rolling out a consumer banking platform called Marcus. JPMorgan is serious about artificial intelligence.
Amazon is deliberating whether to add a person-to-person payments feature to its popular Alexa virtual assistant, the Journal reported in April. One idea would let drivers in Alexa-enabled cars pay for gas by using their voice. Likewise, Facebook is exploring the creation of its own cryptocurrency that would let the social network's 2.
Facebook confirmed in a statement that it's "exploring ways to leverage the power of blockchain technology. That's more of a possibility," said Elliott. Most stock quote data provided by BATS.
How Banks Can Thrive as Digital Payments Grow
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