Today community banks operate in an environment ripe with opportunities, accompanied by challenges. Game-changing technologies, new fintech competitors, regulatory burdens, and increasingly sophisticated members encourage community banks to refine their traditional strategies for success: profitable growth, optimal member service, and a superior member experience. Like many other businesses, many community banks are now struggling with… Continue reading Data Analytics – a transformative step for Community Banks
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Credit Unions, securely open your APIs for business growth
Today’s consumers are interacting with digital systems, and those digital systems are interacting and communicating with each other with increasing complexity, building a valuable network of data, applications and endpoints. This shift to digital systems leave many credit unions, community banks and other small and medium sized banks struggling to compete with bigger firms when… Continue reading Credit Unions, securely open your APIs for business growth
Building a future-proof credit union to pivot in a changing market
In the fast-paced financial services market, you can either change or get left behind. Winds of change in member expectations, rising regulatory costs, and the roadblock stemming from legacy systems are the key challenges being faced by credit unions. Keeping pace with the changing member preferences and dynamic technology can be overwhelming. And far… Continue reading Building a future-proof credit union to pivot in a changing market
Customer experience is critical to any business. Many companies across the globe, often aren’t putting customers at the center of their ventures. Instead, they are using new technologies to create operational efficiencies and in turn, reduce costs.
But, when we think about how to approach customer experience and how to change it, first and foremost we need to have a clear view of what matters to the customers and what doesn’t. The recent economic downturn due to the severe health and financial shocks inflicted by the pandemic and the massive economic disruptions is forcing businesses to rethink the core competencies of customer experience.
The picture is not very different when it comes to the lending industry. Now, low rates are not enough for lending firms/ banks to attract clients or, more importantly, retain them. So, they must personalize their customer journey at all stages, and that includes every step from initial interaction to onboarding to loan origination and more.
How can businesses successfully transform their customer experience to get results?
Today’s tech-savvy customers expect to provide access to funds anytime, anywhere. Customers have no patience for hours of time-consuming and lengthy processes. Many lending firms are still supported by legacy back-end systems built several decades ago. These systems have resulted in inefficient manual and paper-based processes, significantly affecting the consumer experience.
Businesses can improve customer loyalty and fuel growth by offering services beyond traditional coverage and focusing on digitization. Digitization fulfills the customers’ need for convenience, at the same time offering lending firms many new opportunities for growth, both top line, and bottom line.
Research shows that 35% of business executives claim that digital transformation helps them to better meet customer expectations and improve operational efficiency (40%), and38% of executives plan to invest more in technology to make it their competitive advantage.
Here are 4 steps in which digital transformation needs to happen to impact the customer journey in a positive way.
Define digital strategy: The business world is face-paced due to rapidly changing technologies and innovations. Even established companies are being disrupted every year by evolving and advancing technologies. Companies need a plan that not only outlines which technologies need to be adopted but also protection from digital disruption. That’s why understanding your core systems and processes to identify opportunities is critical before harnessing the potential of digital transformation.
Re-imagine customer journey: With customers gaining control over the way companies deliver experiences, it’s time to build new experiences that meet their demands. Businesses looking to improve customer experience during the first interaction should consider collecting data and documents in digital format (digital onboarding)
Omnichannel strategy: Customer expectations are changing rapidly, and they expect to be able to transact digitally on any device and the experience to be connected across all channels. Implementing an effective omnichannel strategy is a powerful weapon for businesses to win customers who demand convenience and simplicity irrespective of the kind of electronic devices or physical channels they use. Firms need to introduce a single platform that manages most (if not all) of the channels
Personalization: Today’s customers actively look for relevant inputs that might either improve their financial health or help them make smarter decisions, causing wellness programs for finance and financial management tools to increase in popularity. This has led to the integration of data sources to reduce documentation, personalize pricing, and make the overall process experience more effective.
In fact, lenders are now using digital tools to unlock varied forms of customer interactions and services previously not accessible to borrowers. Customer data, combined with machine learning, helps personalize the offerings and delivers effective customer-centric communication at the right time.
Top benefits of adopting digital mode
a. Improve operational efficiency
b. Meet changing customer expectations
c. Improve product quality
d. Increase design reuse
e. Reduce product development cost
f. Introduce new revenue streams
Digitization isn’t just doing the same thing in a better way, but rather creating something new. It implies an end-to-end process of developing and delivering data-driven financial products that are applied for, disbursed, and managed through the digital channel.
The new, digitally conscious customer
Truly understanding customer needs may help firms improve not only the buying experience but also their bottom line. In an environment that becomes increasingly globally competitive, service quality is an important measure of customer satisfaction, which ultimately leads to customer loyalty. Today’s customer has zillions of alternatives, and bad customer experiences will certainly make him switch to better avenues to serve his needs.
Hence, retaining your loyal customers and attracting new customers can only be possible by providing seamless and personalized experiences, and making them a top priority every time. The need for an intuitive, frictionless digital borrower experience is increasingly becoming the key to lenders’ success.
Through digitization, you can potentially expand your business, likely increase the number of customers who will stay with you, and help ensure your business is profitable long-term.
Have you started digital transformation yet?
Find out how Insight Consultants can help you in your digital transformation journey by Contacting Us
The world is staring at an economic downturn due to the severe health and financial shocks inflicted by the pandemic and the massive economic disruptions triggering the Russia-Ukraine war. The current economic scenario has the potential to send some FinTech firms into hypergrowth and others into ruin. Global inflation is continuing to rise, but what does this mean for FinTechs?
Traversing through an inflation
Several countries are now going through what the experts call – stagflation, which is a mix of low growth and high inflation. It can be a mixed bag for fintech companies as they are involved in different activities like lending money, buying equipment, and more. The reality is no one exactly knows how to navigate a modern inflationary environment.
Inflation effect on fintech
Decreased confidence from investors: Fintech companies are ever reliant on investors to grow and expand their businesses. Unfortunately, the risk of inflation will call for bigger demands on investment returns and lower company profit.
Increased borrowing from fintech: With rising costs due to inflation, fintech companies remain essential in providing loan services to small businesses and individuals
Increased spending on equipment: Fintech has been essential in storing and moving money through the technologies and/or infrastructures they develop. Due to current events, however, profits from these services have been affected.
By focusing on fundamentals and drawing the right balance between being conservative and bold, fintech players can cushion the impacts of inflation.
Strategic preparedness to face the storm
Inflation in 2022 has the potential to send a few fintech’s into hypergrowth and others into ruin. Interest rate hikes and the end of quantitative easing are inevitable, as the Federal Reserve has signaled, to combat a 40-year high in inflation. Firms need to Implement a strategy that works to address different economic landscapes. Inflation could lay waste to many fintech’s in 2022 unless they act now.
Moves Fintech firms need to make to prepare for the possible coming storm
Do more than just provide a service: Help your customers achieve positive financial outcomes that outweigh better interest rates. Leveraging personalization, automation, and predictive analytics to help customers be more financially successful will give your firm a competitive advantage than other competing banks and fintech’s. Shortcutting the laborious processes of opening accounts or applying for loans is also a huge selling point.
To be cautious and invest in long-term fraud control measures: An economic downturn invariably leads to an increase in NPAs. With a jump in the number of defaulters, fraudulent transactions and suspicious activities become prevalent. Investment in long-term fraud control measures is a must during an inflation.
Improve pricing practices: Companies must adopt more dynamic pricing practices. Using AI understand the pricing opportunities. Use Artificial Intelligence to predict their customers’ willingness to pay and understand the gap to current prices.
Tap the un-banked sector: During an economic depression, large banks lend only to customers with high credit scores. Fintechs can aim at the underbanked community and get the lion’s market share.
Exploit the possibility of new acquisitions: Firms which are not adequately capitalized come under significant cash pressures and become available for a takeover. Exploiting the opportunity and acquiring those businesses can provide an inorganic boost to the top line and access to new proprietary data.
Communicate effectively to customers: Like any other change, price adjustments need a strong change management process enabled in order to achieve maximum effectiveness. A clear rationale for the price increase needs to be developed and the sales team needs to be appropriately enabled to ensure this rationale is communicated effectively.
Companies that have the right tools and systems in place to make informed decisions on time will outperform their competitors. Organizations that use AI have greater visibility into customer and product profitability, allowing them to analyze data more frequently and implement more targeted price increases. This enables them to device change more quickly, increasing their chances of successfully navigating inflationary periods.
There is both an ocean of opportunity for the industry and some challenges ahead. With the current crisis, the future and sustainability of fintech are reliant on its response, especially for smaller fintech firms that would have to push for continued innovation amid rising costs. While a recession is always perceived as unfortunate for the larger market, by addressing the challenges at hand and exploring newer possibilities, fintech players can do well for themselves and the economy.
How do the promises of data become real business results for Credit Unions ?
Data, undeniably, is everywhere – and day after day, as the digital world transforms more human actions into data-generating experiences, its volume continues to grow. We live in a world where a strong data and analytics competency is becoming a ‘must have’ for successful companies. When it comes to Credit Unions, they have vast amounts… Continue reading How do the promises of data become real business results for Credit Unions ?
Lending to borrowers with little or no credit history.
Traditional credit data still largely excludes credit invisibles, underserved individuals, and new borrowers—all of whom need access to financial products now more than ever. Moreover, since traditional credit data is difficult to extract, financial institutions have historically struggled to extend credit data to the unbanked. So, what about the underbanked and people who do not… Continue reading Lending to borrowers with little or no credit history.
Embrace digital onboarding and enhance customer acquisitions
Attracting, acquiring, and onboarding new customers via digital channels is a crucially important phase of the customer journey, one which sets the tone for everything that follows with your customer engagement. Digitization of the customer experience journey must start with onboarding—one of the first interactions the customer has with a bank or financial institution.… Continue reading Embrace digital onboarding and enhance customer acquisitions
The average thief isn’t on the streets or in train stations anymore; but is online. Due to its surge in popularity, and fast transaction cycles, online lending is a prime target for cyber criminals. Though financial institutions may have always had customer security in mind, the industry has felt the backlash in recent years.
Yet, as the saying goes, knowledge is power. You can make the best utilization of the convenience provided by technology aiming yourself with the power of knowledge. Cyber-attack methods and tools keep evolving with advancements in technology, increasing the possibility of ingenious scams that can be deployed from anywhere across the world.
Role of AI in combating fraud
In this scenario of increased cyberattack, AI mechanisms are emerging as the means to strengthen cybersecurity and thwart attacks. Research reveals that 63% of financial institutions believe that AI can prevent fraud, while 80% agree that AI plays a critical role in reducing fraudulent payments and attempts to commit fraud. Machine learning technology can be deployed across multiple channels (e.g. transactions, loan applications, etc.) in the financial industry. Banks and financial institutions can benefit from patterns that emerge with use of AI and ML to prevent frauds even before they happen.
Leading ways lenders are using AI for fraud detection
Building purchase profiles: To accurately detect fraud, financial institutions must first understand what typical customer behavior looks like. Using machine learning to sort through vast amounts of data from past financial and non-financial transactions, FIs can build and slot customers into several different profiles.
Develop fraud scores: All transactions can be assigned a fraud score by using data from past legitimate transactions, incidences of fraud and risk parameters set by the financial institution. The score, which considers variables such as transaction amount, time, card use frequency, IP address of a purchase, and much more, is used to assesses the fraud risk involved with that particular transaction.
Enhance underwriting: AI can have far-reaching benefits for underwriting performance. Increasingly accurate loss predictions enable underwriting teams to spot good and bad risks, grow a profitable portfolio, and automate processes to streamline their workflow.
Fraud investigation: Machine learning algorithms can analyze hundreds of thousands of transactions per second. Investigating and prosecuting fraud claims can be incredibly time-consuming, so ensuring agents are armed with the proper tools to increase efficiency is essential.
Know Your Customer (KYC): AI-backed KYC measures can verify ID and documentation, match fingerprints and even perform facial recognition almost instantaneously. This powerful tool strikes the right balance between customer security and convenience.
Digital organizations can identify automated and more complex fraud attempts faster and more accurately by combining supervised and unsupervised machine learning as part of a larger Artificial Intelligence (AI) fraud detection strategy. There is no question AI is making cybersecurity systems smarter. Whether this technology is used for securing authentication, threat detection or bot battling, AI and ML can prevent bad actors from infiltrating and manipulating company networks.
Insight Consultants fraud detection strategy using ML
To detect fraud,
- Machine learning model collects data
- Model analyzes all the data gathered, segments, and extracts the required features from it.
- Predict the probability of fraud with high accuracy
An outdated financial system is always full of loopholes tricksters can use. Luckily, machine learning has the potential to improve bank fraud detection with data analytics and help nearly every industry.
If you are looking for ways to harness the power of machine learning and AI for your business, or would just like to know more, Contact Us.
Loan application fraud is a lender’s nightmare. It’s a real issue faced by many financial firms. It is estimated that financial institutions lose billions of dollars yearly to this type of scheme, with synthetic identity fraud alone being responsible for over six billion dollars of credit losses. Without face-to-face interactions, fraudsters and thieves attempt to use stolen identities and fictional financial data to commit online financial crimes — believing it to be an easier or more successful prospect.
Application and identity fraud prevention
When fraud happens, it comes with a cost to lenders. In the US alone, close to 300,000 people fall victim to credit fraud every year. In this situation, fraud mitigation must be an integral part of any lending risk management plan.
To achieve a successful fraud prevention strategy, FIs must conduct a balancing act between security and customer experience. They need to put in place an account opening process that includes real-time risk assessment and identity verification while delivering a digitally seamless customer experience. The importance of improving the customer experience cannot be understated. It is best for businesses to guarantee strong identity verification and fraud prevention, as every little mistake in this process can put the customer at risk and damage the reputation of the business. Ensuring a secure account sign-in process builds trust with users and attracts and retains more customers.
FIs can battle fraud on loan applications in a wide variety of ways:
- In-depth monitoring of new account application data
- Monitoring of existing accounts for suspicious activity patterns
- Identity verification to prevent loan fraud
The most common, widely used loan fraud detection method is identity verification testing, and let’s see how identity verification helps in reducing loan fraud.
Digital identity verification to lessen fraud attempts
Fraudsters exploit vulnerabilities in detection by compiling fake applications, or synthetic identities, that are a composite of several different identities. To prevent application fraud, financial institutions must successfully identify fraudulent activity or fraudulent identity documents in real-time at the beginning of the new account opening process. AI-powered ID verification is a great way to authenticate users at scale without sacrificing security while still gaining an edge on scammers.
Digital verification procedures that are part of a well-developed CIP and Know Your Customer (KYC) practices reduce the chance of synthetic identity fraud, while virtually eliminating doctored documents. Through consumer-permissioned (transactional and account-level information that a consumer gives a business permission to access on their behalf) access to financial data, verifications can be based on or validated by information direct from a financial institution. This is dramatically better than relying on documents that have changed hands at least twice in the loan application process.
AI- powered digital verification by Insight Consultants
Insight Consultants AI-Powered Document Verification Solution is was designed to give financial institutions an easy-to-use, compliant, secure, and cost-effective method of loan application fraud prevention. AI-powered identity verification provides optimal fraud prevention and ensures highly effective authentication in compliance with KYC requirements.
Using consumer-permissioning provides an additional layer of protection as it requires the applicant to know unique personal identifying information (PII) for each financial account they intend to use. As they go through the digital verification process, several aspects of an applicant’s identity are challenged. A fraudster would require access to PII to successfully launch a digital verification, which is nearly impossible.
In case you want to take your business security to next level, write to us at connect@insightconsultants.co. Else connect with us swiftly, fill out our request form here