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Unskilled staff threaten banks’ ability to digitally transform

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Only four percent of bank business and IT executives believe that the impact of technology on the pace of banking change has stayed the same over the past three years, while 96 percent said it has either significantly accelerated or accelerated, according to a new report from Accenture.

This technological disruption has a large effect on how banks operate, and it seems unlikely that the pace of change will decelerate anytime soon.

Here’s what it means: Some technologies will have a bigger impact than others, but it will require substantial work from banks to stay on top of them.

AI is the most promising technology to transform the banking space. Forty-seven percent of respondents said AI will have the biggest impact, followed by just 19 percent saying the same for quantum computing and 17 percent for distributed ledgers and blockchain. The disappointing outcome for blockchain appears to be in line with recent announcements from banks: Citi has abandoned its plans to launch a crypto and Bank of America’s tech and operations chief has expressed skepticism on the benefits of blockchain.

Banks’ workforces appear to be at different stages in terms of tech savviness.Seventy-four percent of banking respondents either agree or strongly agree that their employees are more digitally mature than their organization, resulting in a workforce waiting for their organization to catch up. However, 17 percent of respondents said that over 80 percent of their workforce will have to move into new roles requiring substantial reskilling in the next three years, compared with only 5 percent saying the same for the last three years.

Additionally, banks don’t know as much about third-party partners as they perhaps should. Over one in 10 banking respondents believe that their partners’ security posture is extremely or very important, as well as that their consumers trust their ecosystem partners. However, only 31 percent of respondents say they know that their ecosystem partners work as diligently as they do, while 57 percent of them simply trust their partners and 10 percent hope that they are diligent.

The bigger picture: Banks need to prepare for a future that will require them to put in a lot of resources, and some might struggle.

To make the most of AI opportunities in banking, incumbents need to upskill their workforces. While AI is the most promising technology to transform the banking space, this promise can only be realized if banks have the necessary talent in-house to adopt new AI solutions. As such, they should make it a priority to upskill their staff to make AI transformation a success — which may be difficult for those players that have to upskill a majority of their workforce.

And banks need to up their security efforts since open banking is becoming a global trend.Open banking makes working with third parties more frequent. This will force banks to double down on their security efforts, as a security breach with their partners could affect customer trust in a bank’s overall services. If employees aren’t up to date with new technologies — including application programming interfaces used for open banking, and AI — they can’t keep a bank’s network secure.

This article was originally published on Business Insider. Copyright 2019.

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Alipay to Support Digital Transformation of 40 Million Service Providers in China

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Alipay, the world’s largest mobile payment platform (operated by Ant Financial Services Group) has announced a three-year plan to further open up its platform to support the digital transformation of 40 million service providers across China.

The goal is to enable these providers to develop and offer a range of lifestyle apps for food delivery, hotel booking, transport, and medical services.  

“The service sector in China is still in the nascent stages of digital transformation, and that means it has huge untapped potential,” said Ant Financial Chief Executive Officer Simon Hu in the company’s press release. “Amid the ongoing coronavirus outbreak, we have also seen how digital technology can be used to help service providers become more agile and respond effectively to the fast-changing market environment.”

“Building a one-stop digital lifestyle platform not only creates immense value for our users – it will also play an essential role in accelerating the digital transformation of the service industry and unlocking more growth opportunities,” added Hu.

As part of this initiative, Alipay will allow service providers to tap into in-app traffic, while AI-driven incentive programs will encourage service providers to consistently improve the customer experience. 

The press release also explains that users will be able to access personalized recommendations from newly added service sections, meaning service providers will be able to enhance their distribution efficiency.

Under the three-year plan, Alipay will also help 40 million service providers digitalize their operations, increase efficiency and reach more customers by 2030 — with the help of 50,000 Independent Software Vendors (ISVs). Currently, there are over one million on the platform. ISVs are companies that package Alipay’s technologies into solutions to meet the needs of specific industries and use cases, from consumer retail, food-and-beverage, hotels/accommodations, transportation, and medical services.

Impact of coronavirus

In the early days of the COVID-19 outbreak, the company introduced an incentive program that encouraged developers to create mini programs as a way to help users cope with the effects. These include programs that meet lifestyle needs of those working from home, therefore minimizing the need for physical contact with service providers.

In just a week, over 1200 developers responded by creating 181 contactless service mini programs on the Alipay app, for services across China — for example, grocery delivery, legal/medical advice, logistics, and public services. One program providing free medical consultation from AliHealth received an average of 700,000 daily visits.

Beijing-based grocery startup Meicai also launched a delivery mini program for Alipay users amid the coronavirus outbreak, attracting more than 800,000 new users.

Mobile use in China

According to figures from the China Internet Network Information Center, 99.1% of Chinese internet users went online via mobile devices in 2019, compared with just 24% in 2007. Thanks to this increase, the domestic service sector has begun adopting digital technologies.

The National Bureau of Statistics figures show that China’s service industry contributed to 59.4 percent of GDP growth in 2019. While the sector is clearly important to the economy, Chinese service providers still place heavy reliance on traditional brick-and-mortar. Digital technology hasn’t been fully embraced yet as a means to boost efficiency and improve customer experience.

Consumer demand for digitalized services, however, has been expanding rapidly — in 2019, the number of searches for lifestyle services within the Alipay app increased 300% compared with 2018.

As Hu explained, “Since the very beginning, Alipay’s success has always depended on the success of our partners, and that is why we believe the only way to best serve consumers is to open up our platform further, so service providers can better tap into consumer demands.”

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How BMO branch technology saves employees up to 30 minutes per day

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When it comes to banking, it comes as little surprise that customers are increasingly preferring tellerless interactions. 

A recent customer insight report from Mercator Advisory Group found that those who don’t like using mobile and online banking prefer to use self-service kiosks at physical branch locations.

Even back in 2015, a study by Source Technologies found that self-service retail banking kiosks improve operations, “reducing the time it takes to get an official check from nine minutes (using a teller) to 40 seconds – 13.5 times faster than a teller-conducted transaction.”

When banks invest in features like remote authentication and mobile deposits, it isn’t just customers who benefit — staff are able to better focus on more complex transactions, and developing relationships with clients.

“We see that more and more of our customers are migrating toward self-serve interactions, especially for the simpler, straightforward transactions,” explained Kyle Barnett, BMO’s chief operating officer for US personal and business banking, in an interview with PYMNTS. 

One of technologies implemented by BMO was a faster, real-time process for scanning and depositing cheques, saving customers from having to fill out a paper deposit slip. This has led to deposits clearing within hours instead of days. 

Another BMO implementation was its easy PIN authentication; instead of using a driver’s licenses or state-issued ID, customers use debit cards to verify their identities. The transaction is therefore accelerated, and data is aggregated instantly on the teller’s screen.

Both of these improvements were implemented in more than 500 branches by the end of 2019.

“If a customer walks in and opens up an account [during the] same interaction, they can actually leave with a fully functioning, embossed card that has their name on it,” Barnett said. 

And unlike before, when a customer was issued a temporary card and had to wait for the fully-functioning replacement to arrive in the mail, “they also get the PIN right there as part of the account opening, and can even set up a custom PIN if they want at the ATM.”

With the in-branch experience changing, and customers requiring fewer interactions with tellers, the result has been “really freeing up our branch bankers to have more time to dedicate to customers, and have better holistic conversations, and create more personalized recommendations.” 

One case study found that employees have saved between 15 and 30 minutes per day on processing forms. Multiply that by the number of employees within BMO, and you get a major win for efficiency and time saving. 

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81% of banking executives would look to collaboration for digital transformation

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According to Finextra’s The Future of Payments 2019 report, it’s been “the year of digital transformation for legacy-era brick-and-mortar banking giants.”

And collaboration is overwhelming the favored path to get there.

At EBADay, hosted by Finextra in association with the EBA, it was reported that 81% of banking executives would seek to collaborate with partners to better, more successfully execute digital transformation. 

 

While collaboration was the clearly-favored choice, some respondents did choose options for digital transformation that either kept the process in-house, or completely outsource it:

  • 8% would build a new operating layer on their own
  • 6% would outsource processes
  • 5% would create a new bank “on the side”

When asked to describe digital transformation (DX), 55% said that it means fully changing an institution’s fabric. For others, DX means:

  • Offering more innovative products while reducing costs (20%)
  • Replacing and renewing the core banking operating system (13%) 
  • Offering digital channels such as mobile (12%)

Thanks to consumer demand, banks have been forced to step up and introduce new products and services that leverage current and emerging technologies — all in the name of giving customers better choice. 

As it stands, customers of the retail banks are able to deposit cheques, transfer funds, and apply for loans via their smartphones. 

“This collaborative attitude underscores how the rise of digital banking may not need to be an all-out competition between incumbents and startups,” explains Business Insider, “and may even tilt the scales in the direction of collaboration.”

And it looks like it’s already been happening: Lloyds found that 48% of financial services they polled said they have completed acquisition deals for fintech firms, or have taken a minority or majority stake in them. 

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