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Cards and Payments: Delivering the Digital Opportunity · PDF file Cards and Payments: Delivering the Digital Opportunity A First Data White Paper A New Era of Competition Digital

May 09, 2020

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  • A First Data White Paper

    Cards and Payments: Delivering the Digital Opportunity How to Deliver Innovation that Customers Value

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    A First Data White Paper Cards and Payments: Delivering the Digital Opportunity

    Introduction New technology has always presented card issuers, whether they are banks or retailers, with challenges and opportunities. Fifty years ago issuers were in a unique position and could place themselves at the vanguard of innovation as credit cards and ATMs brought new products and channels into play. More recently, they were slower to respond to developments such as online banking. Issuers have generally been able to rise to the challenge and take advantage of the opportunities.

    However, in the digital age things are different. Banks are under threat as never before...

    The last decade has created new threats to banks and card issuers that exceed those of the past. The stars are aligning in such a way as to leave established banks and card issuers at risk of being left behind in the wake of new technology, new customers, and a new era of competition.

    New Technology

    This isn’t the gradual or incremental change banks have dealt with in the past. Both the pace of change and the rate of adoption and discarding of technology have accelerated greatly, driven by the ubiquity of mobile devices. Think of Facebook: it grew from zero to 1.2 billion active monthly users in just 10 years, and more than 75% of users access it via a mobile device!*

    New Customers

    The heavy use of mobile devices coincides with the emergence of a new breed of customer – the Digital Native. Customer needs and demands always evolve, but this time it is different. These consumers interact with many products and services in very different ways to their predecessors. Digital technology isn’t a novelty for them; it’s the de facto standard.

    A Digital Convert may put up with being referred to a branch or telephony channel, or being asked to wait whilst something is sent in the post, because they’ve experienced those channels in the past. However, for the Digital Native, these channels may be completely alien.

    New Threat

    New Technology

    New Customers

    New Competition

    * Reference: http://www.theguardian.com/news/datablog/2014/feb/04/facebook-in-numbers-statistics

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    A First Data White Paper Cards and Payments: Delivering the Digital Opportunity

    A New Era of Competition

    Digital Native customers have a louder voice, more choice, and more encouragement to switch providers than ever before:

    Metro Bank was the first new high street bank to launch in the UK for 100 years.*

    UK Financial institutions have been forced to spin off parts of their businesses to create more competition.

    The government and regulators in the UK are actively encouraging new entrants, making it easier for them to get banking licences (as of April 2014, 29 applications in process), and mandating that banks make it easier for customers to compare products and switch (for example, the Current Account Switch Service).**

    Well-known retail brands such as M&S, Tesco, and Virgin have or are preparing to expand their financial services offerings.**

    Start-ups such as Atom Bank are on the horizon, along with specialists companies, like TransferWise, who are taking advantage of digital opportunities to target specific customer needs with simple and highly efficient propositions.**

    Following the global financial crisis, the trustworthiness of banks has been called into question as never before.

    The rise of social media means that when banks get it wrong, consumers have a louder voice and conversely, when they get it right, advocacy becomes even more important.

    Banks and card issuers recognise that digital is the future; Indeed billions of pounds and euros are being committed to drive digital innovation.

    But banks are not recognised as places where innovation flourishes. So what can they do to be more successful at delivering innovation?

    References: *http://www.theguardian.com/news/datablog/2014/feb/04/facebook-in-numbers-statistics **http://www.thisismoney.co.uk/money/saving/article-2606119/FCA-reveals-29-firms-lodged-banking-licence-applications.html

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    A First Data White Paper Cards and Payments: Delivering the Digital Opportunity

    What’s Holding Banks Back?

    The question that begs to be asked is whether banks and card issuers are really as customer centric as they’d like to think they are.

    Annual planning rounds pin executives down to delivering “something on time” rather than “something that customers really want.” It’s a subtle difference, but one that means that banks are not truly focused on the end customer. Banks are forced to define solutions rapidly and often with little customer engagement to define the exact problem to be solved. As the organisation moves into delivery mode, the customer is left even further behind in the chase to deliver the solution on time.

    The processes that surround delivery are focused on ensuring that the solution is technically robust, but time is not allowed to test whether or not it truly solves customers’ problems and will be commercially viable.

    The opportunity to raise concerns about whether a solution will be taken up by enough customers to realise the benefits initial forecast becomes increasingly more difficult as the launch date nears and the often unrealisable benefits forecast get baked into plans.

    Even when “customer research” is undertaken as part of the project, it is easy to fall into a trap of hearing what you want to hear or simply ignoring the obvious because it will delay the project.

    It’s easy to see why this situation has arisen.

    Banks are solid, secure, and conservative. Change takes place comparatively slowly and deliberately. It’s often complex involving old legacy systems that have to support a multitude of products, priorities, and stakeholders.

    If a new product or service doesn’t work from a technical point of view, or adversely impacts another part of the system, millions of customers will be affected and a big brand will suffer.

    On the other hand, if customers don’t take up the product or service, whilst that is commercially damaging it can often be absorbed – it’s normally a relatively small drop in the ocean.

    However, in the current climate, it’s never been more important to be able to deliver innovation that is both technically robust and meets customer needs.

    eStatements are a great example of banks delivering a solution that did not realise the benefits forecast, because they did not understand the customer need or problem being solved.

    From a technical point of view, eStatements do exactly what was intended; they deliver a monthly statement in a durable format that meets a regulatory requirement and negates the need for expensive and environmentally damaging paper statements.

    But, the reality is that most customers have not switched off paper statements, and as such, the commercial benefits have not been realised.

    Why is this? Fundamentally, the issue is likely to be that customers don’t see a problem in receiving a paper statement.

    The environmental benefit was not strong enough, whilst on the other hand recent research has suggested that customers are better able to manage and improve their finances when they receive paper statements.

    The question banks should have asked their customers is how they can deliver on that need and fulfil their regulatory obligations through a digital solution.*

    Reference: London Economics for the Keep Me Posted campaign, February 2015

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    A First Data White Paper Cards and Payments: Delivering the Digital Opportunity

    A clear vision also helps to galvanise the team. It demonstrates commitment from senior leadership and empowers the team to take responsibility for delivering the vision on behalf of the organisation.

    Of course, it’s no good having a vision unless you communicate it, and in the flat structure of a small technology company, that’s relatively easy.

    Banks and issuers can’t reduce the complexities or scale of their large organisations to make it easier to communicate, but they can create a clear vision and then spend time and effort to communicate that vision across the organisation.

    Fail Fast and Re-Focus

    The ability to “fail fast” is another perceived advantage that benefits small companies. They can take “risks” and get away with delivering “beta” versions of a technology, which a large bank would not be able to do.

    However, this view somewhat misses the point. It fails to acknowledge fully that the really important thing is how an organisation responds to that failure.

    What Do Banks and Card Issuers Need to Do?

    We must recognise and value the advantages enjoyed by the large players – strong brands; huge customer bases; understanding of the complex cards and payment ecosystem and regulations; and robust delivery processes. These strengths and assets should be cher

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