Year: 2021

Digital and customer-focused innovation for the customer

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Established in 1946, Garanti BBVA has steadily grown to become Turkey’s second largest private bank, with consolidated assets of close to TRY 526bn ($68.5bn) as of September 2020. Its investments in technology, innovation, products and services – offered with strict adherence to quality and customer satisfaction – have carried it to this prized position in the Turkish banking sector.

Garanti BBVA is an integrated financial services group operating in every segment of the banking sector, including corporate, commercial, SME, payment systems, retail, private and investment banking. It also has local subsidiaries in pension and life insurance, leasing, factoring, brokerage and asset management, and international subsidiaries in Cyprus, Malta, Netherlands, Germany, Switzerland and Romania.

Customer experience is even more important in today’s dynamic environment with countless changes accelerated by technology

Its business model is driven by strategic priorities focused on responsible and sustainable development, customer experience, employee happiness, digitalisation, optimal capital utilisation and efficiency. Custom-tailored solutions and a wide variety of products have played a key role in its reaching TRY 400bn ($52.2bn) loans and non-cash loans.

Garanti BBVA stands out in the sector with their 5,213 ATMs (the second largest ATM network among private peers), an award-winning call center, internet, mobile and social banking platforms – all built on a cutting-edge technological infrastructure.

In the midst of the second wave of the pandemic tightening its grip on the global economy, World Finance spoke with Mahmut Akten, Executive Vice President of Retail Banking at Garanti BBVA, about its continuing response to COVID-19.

 

Has the continuing pandemic changed your approach to business or clients?
For Garanti BBVA, the safety of our employees and the satisfaction of our clients are and always will be our priority. At the start of the outbreak, we moved all eligible employees to remote working to preserve the workforce and launched multiple initiatives to help people adapt to the ‘new normal.’

We made our customers’ life easier by introducing measures like adding new services on digital channels, increasing digital and contactless transaction limits, limiting the number of customers waiting in branch lobbies and postponing debts.

Additionally, as a result of the rapid increase in e-commerce transactions during the pandemic, Garanti BBVA customers are now able to make their payments at the checkout by applying for a general purpose loan which takes around 5 minutes to complete the process and place the order. In other words, providing both our employees and customers with uninterrupted and innovative banking services in the healthiest conditions is crucial.

What has made you most proud of Garanti BBVA’s response to the pandemic?
Garanti BBVA was one of the first Turkish companies to organise efforts to fight this epidemic. The most important action was, as a part of our global campaign, to deliver 200 ventilators to be used in the treatment of COVID-19 patients in the worst days of pandemic. Additionally, we made donations to university hospitals for the purchase of medical devices and materials which brings our total contribution to $5.3m.

We are also one of the most successful banks to comply with the rapidly changing pandemic situations without any interruption or lack of quality in our services. For example, in the first days of pandemic, we implemented a one-click debt postponement function on our digital channels in a short period of time. Thus, our customers were able to postpone their debts without visiting branches or calling the call-centre.

 

Have you made any digital changes recently to facilitate remote working or any other ‘new normal’ activities?
The COVID-19 pandemic showed us the undeniable importance of digital services, even though we have been investing in digital channels and technological systems for over 25 years. In the future, we will continue to focus even more on digital transformation and remote services, and will evaluate the most suitable and healthy conditions both for employees and customers.

During a pandemic, providing customers with all critical banking services in a remote and safe way becomes crucial. At Garanti BBVA, we have been offering most of our services, from major products such as personal loan application and disbursement, overdraft account new limit and limit increase, credit card applications, deposit account openings, investment products, pension transfer to numerous transactions and payment services through our digital and remote channels.

Therefore, Garanti BBVA regards customer experience as the most important element for differentiating itself and standing out from the competition.

 

Have you added to the financing of renewable energy projects?
For retail banking, we brought out our Green Mortgage product to support environmentally friendly buildings, which has TRY 379m ($50m) total financing provided. As an important step, in 2019, we focused on increasing our impact on climate change and started working on our scope 1 and scope 2 emission targets for submitting to the Science Based Targets Initiative. In light of these developments, at the beginning of 2020 we signed a contract with utilities across Turkey to purchase 100 percent renewable energy for our buildings and branches that have a compatible infrastructure. We will keep supporting our stakeholders for climate change transition and opportunities in this journey. We will also focus on encouraging our customers to become aware of their own individual impact and guide them on adapation mechanisms on sustainability such as using public transportation, green products, electric and hybrid vehicles. We will continue to advise our customers on how to facilitate and accelerate their efforts in sustainable trends such as circular economy, sustainable investment funds and sustainable innovation.

 

Do you anticipate changes in how you do business in the post-pandemic environment?
At Garanti BBVA, digitalisation has always been one of our most important priorities. As a result of investing in our digital channels and technological infrastructure for many years, we have reaped the rewards of fast adaptation during the pandemic. When it comes to the post-pandemic environment, the increase in using digital channels that accelerated during the pandemic will continue at an even faster pace. As well as digital channels, innovative hybrid service models will stand out for more sophisticated products and services in the future. For example, in the mortgage loan process, to recognise customers, ensure security and to give advice, seamless videocall functions on digital channels will be provided so that customers will be 100% remotely served without visiting branches. Therefore it can be said that, with the increase of hybrid models, the role of remote service employees will be more important and much stronger.

 

Can the traditional bank branch survive?
Garanti BBVA provides a wide range of financial services to its more than 18 million customers. We have 18,162 employees working throughout an extensive distribution network of 894 domestic branches, seven foreign branches in Cyprus, one in Malta, Netherlands, Germany, Switzerland and Romania. Traditional branch banking services have been reshaped with the help of digitalisation to increase operational excellence, customer experience and efficiency. Most of the pillar products are being served with a fully omnichannel experience to our customers. For example, when a customer applies for a general purpose loan at a branch, the same application can be completed on digital channels and loan documents can be approved via a call centre with an end-to-end seamless experience. Moreover, when a customer process is left unfinished on digital channels, a notification is sent instantly to the customer representative and immediate action is taken to finish the process.

These developments are seamlessly combined with the power of human touch and have resulted in great success. It is an undeniable fact that human touch is still a very powerful communication tool that directly affects customer experience, especially at critical points of customer processes. Since customer experience has always been one of the main pillars of our strategy, we strongly believe that companies delivering a facilitating experience are, and will be, the most successful ones in their industries. Therefore it can be said that even though the usage of self-service channels has been increasing, human touch will continue to be a key aspect of banking interactions.

 

Looking further ahead, what do you think will be the most exciting applications of AI and virtual reality within banking?
Automatic learning is a prerequisite for intelligent systems. It enables data-driven predictions and creates new business opportunities. The most important areas that will be affected by new technologies are automation, personalisation, human-machine interactions and security. Exciting examples of where the banking sector can benefit from new technologies include the automation of recurring processes for efficiency, providing customers with the service they need at the right time with a personalised experience, a healthier credit-scoring algorithm and more ‘human-like’ digital interactions. At Garanti BBVA, data-driven interactions are one of the important strengths that differentiate us in the sector. To maintain this strength, we have been investing more and more in new technologies.

As to the future, our capital-generative, disciplined and sustainable growth strategy that strictly adheres to solid asset quality enables us to move forward strongly. Sustainable growth not only increases production and sales but also generates innovative technologies and products. Besides this, our effective risk management through an integrated review of financial and non-financial risks, as well as our organisational agility in capturing new opportunities, will continue to result in sustainable value creation for all our stakeholders.

A money evolution

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In March 2020, reports claimed the World Health Organisation (WHO) had warned against using cash amid fears it could be spreading coronavirus. The WHO later pushed back on the claim, declaring it had never issued any official warnings – but it wasn’t the only whisperings of ‘dirty cash.’ China had already begun sterilising money in February out of hygiene concerns, and in March the US Federal Reserve started quarantining dollars from Asia, begging an important question: how clean was cash?

In response, retailers across the world began putting more emphasis on cashless transactions, with contactless payments growing by more than 40 percent globally in the first quarter of 2020, according to a survey by Mastercard. A study by data firm Dynata found the preference for cash dropped by 31 percent in the early months of the pandemic across the countries surveyed, and YouGov research found that ATM withdrawals in the UK had fallen by around 60 percent over lockdown.

The explosion of online shopping further contributed to the trend, with consumers turning to online systems such as PayPal to make their transactions; Amazon’s revenue increased 37 percent to a record $96bn in Q3, as shoppers across the world flocked to the e-commerce giants to get their goods.

A gradual decline
This shift hasn’t come out of the blue, of course; the idea of a ‘cashless society’ has been touted for years, dating back as early as the 1960s with the advent of credit cards, and spurred on by the rise of electronic banking, digital wallets and mobile payment systems, made possible by the explosion of fintech firms such as Venmo, iZettle, Swish and PayPal.

Sweden had already gone almost entirely cashless – at the start of 2018, only one percent of the country’s GDP was circulating as cash – and Finland was edging ever closer too, with the central bank having forecast a cash-free society by 2029.

The pandemic has accelerated the move away from cash usage and the adoption of contactless payments instead

In the UK, cash payments were predicted to represent just nine percent of all transactions by 2028, according to a 2019 report by UK Finance. And in China, more than 90 percent of city-dwellers said they used WeChat Pay and Alipay as their primary payment method, a study by the Brookings Institution found.

But while the move towards a ‘cashless’ future might not be anything new, many experts believe the pandemic is likely to have sped up the trend.

Among them is Natalie Ceeney, Chair of Innovate Finance and leader of the 2019 Access to Cash Review study, which looked at consumer cash needs in the UK. “The pandemic is likely to have dramatically accelerated the decline in cash,” she told World Finance. “Those who can use digital have made a significant shift in their behaviours.”

Luc Gueriane, Chief Commercial Officer at financial services provider Moorwand, agrees. “The pandemic has accelerated the move away from cash usage and the adoption of contactless payments instead,” he said. “A lot of people are now realising the convenience of not using cash and are beginning to have more trust in digital banking products that have helped them throughout the pandemic with money management features.”

That’s good news for the fintech sector, and it brings benefits to the finance industry at large – but how close are we to really going ‘cashless’, what barriers are there, and how would economies ultimately cope with the transition?

How convenient
The potential advantages of a cash-free society are many – not least the convenience that digital and contactless payments bring to consumers. This in turn could encourage increased spending; a study by MIT professors Drazen Prelec and Duncan Simester in 2001 found that shoppers spent up to twice as much when using a credit card versus physically handing over cash, for example.

That could have positive knock-on effects for both businesses and the wider economy.

Going cash-free could also save merchants money, according to Gueriane. “Physically managing cash is an expensive part of any business,” he said. “There are costs associated with handling, storing, and depositing paper money, such as security for keeping the cash safe, or transporting and depositing cash into bank accounts.”

That’s likely to become an even bigger factor if cash usage continues to decline; a study of 750 retailers in Sweden found that if cash transactions fell below seven percent of the total, the cost of handling the physical money became higher than profit made on cash sales.

“Smaller merchants have resisted for years on taking card payments because they don’t buy into the argument that the cost of cash is there,” said Gueriane. “But COVID-19 has pushed retailers to acknowledge the economic benefits of investing in contactless terminals when so few people are actively taking cash out anymore.”

Those costs aren’t only limited to businesses, of course; cash is a costly business for banks, with large sums spent on protecting physical money and monitoring criminal activity – and extra costs associated with actually producing the physical paper and coins.


Cursed cash?
But perhaps the most commonly cited motivation for going cashless is the ability to monitor payments and so eradicate cash-related tax evasion and criminal activity.

“Tax revenue is lost from cash-in-hand payments,” said Gueriane. “Every transaction is recorded on a bank statement, which makes it easier to see if and when money’s gone missing. Money laundering and tax evasion are reduced because there is always a paper trail.”

In his 2016 book, The Curse of Cash, economist Kenneth Rogoff argues that tax avoidance, money laundering, violent crime, the drugs trade, corruption, human trafficking and terrorism are all facilitated by cash.

According to his findings, the value of cash circulating in the US in 2015 was $1.34trn (which, divided evenly, would mean every person in the country having a cash pile of $4,200). With around 80 percent of this money made up of $100 bills, he suggests a significant chunk of this is being used to facilitate illicit activities – which could arguably be wiped out if the country went cash-free.

It’s not only in the US that this is happening, of course; in 2016, the European Central Bank (ECB) announced it would stop printing and issuing €500 notes, “taking into account concerns that this banknote could facilitate illicit activities.” When the move was announced, €500 bills accounted for nearly a third of the €1trn cash floating around at the time, much of it believed to be linked to money laundering, terror financing and the shadow economy.

It’s not just the large-scale criminal activity that cash can cover up, though. Counterfeit notes, robberies and employee theft are all issues associated with paper money, with the latter alone costing American businesses $50bn a year, according to a report by the Statistic Brain Research Institute in 2017.

It was indeed the attempt to quash this kind of crime that accelerated Sweden’s move towards going cashless, according to Jonas Hedman, associate professor at the department of digitalisation at the Copenhagen Business School. “Something unique to Sweden was a spate of robberies, which resulted in the unions of various organisations like bank employees, bus drivers, cab drivers and others pushing for a cash-free society in order to protect their members,” he said in an interview with the Wharton School.

Cybercrime
Eradicating cash, however, doesn’t necessarily equate to eradicating crime. That’s at least the opinion of Innovate Finance’s Ceeney. “Reducing cash is often cited as having huge benefits in terms of tackling crime, but this is extremely misleading,” she said.

“The sad reality is that criminals usually find a way, and as cash use reduces, crime simply shifts to other targets, or is laundered in different ways. In Sweden, as cash reduced, bank branch and cash transit robberies declined to almost nothing. At the same time, the theft and hijacking of other valuables rose. In the same way, many criminals now target the vulnerable online in ‘push payment’ scams, rather than turning up at their door trying to solicit cash.”

Friedrich Schneider, Professor of Economics at the Johannes Kepler University in Austria, carried out research to find out what impact eliminating cash would actually have on tax evasion and crime. His results concluded that if cash was abolished, the shadow economy would be reduced by 20 percent, corruption by 18 percent and crime by five to 10 percent – that’s significant, but it clearly doesn’t just get rid of it altogether.

Money laundering and tax evasion are reduced because there is always a paper trail

Criminals could switch from cash to cryptocurrencies, with the likes of Bitcoin having already garnered a reputation for illicit transactions on the dark web.

There’s also the added threat of cybercrime. The UK’s Financial Conducts Authority (FCA) reported that data breaches at financial services companies rose by more than 1,000 percent between 2017 and 2018, with cybercriminals stealing £503m from the country’s financial institutions in the first half of 2018, according to UK Finance. The more we rely on digital, the bigger the risk might become. It’s not just targeted bank hacks that pose a threat, of course; many have argued about the dangers of relying solely on digital infrastructure when flaws in the system or power outages can cause mass meltdowns. Visa’s IT collapse in 2018, when a broken switch led to more than five million failed transactions across Europe, is a case in point.“Cash works even when the power goes down, whereas digital payments don’t,” said Ceeney. “This has raised concerns within central banks and governments as to the resilience of a digital infrastructure were cash to become obsolete.”

A survey by Paysafe found that half of consumers globally believed cash to be the most reliable form of payment during a crisis. “When a hurricane is approaching the US, Federal Reserve officials have told me they see an increase in the demand for cash by up to 500 percent,” Brett Scott, author of The Heretic’s Guide to Global Finance: Hacking the Future of Money, told World Finance.

“Because people recognise that an offline form of money is what you need when there’s a natural disaster. Ultimately if you want your economy to survive, you need these resilience elements in your monetary system. If you want a multi-modal, resilient payment system, you’d better keep cash – which is why the central banks should be promoting it.”

Sweden’s setbacks
In recognition of these issues, Sweden has started to backtrack on its cashless plans. In 2018, the Swedish Civil Contingencies Agency advised consumers to keep a cash pile for use in the event of a war or cyber-attack, later suggesting that it should be made obligatory for supermarkets, pharmacies, petrol stations and health services to accept cash. In November 2019, the country voted on a law making it mandatory for banks holding over £5.8bn in deposits to offer an adequate level of cash services. Following suit, the UK announced in its March 2020 budget that it would legislate to protect the nation’s cash infrastructure.

“We heard a very consistent message from policy makers, regulators and business leaders in Sweden that their digital revolution had gone too fast,” said Ceeney. “The Swedish parliament has even debated ‘what do we do when we are hacked by the Russians?’”

It wasn’t just the prospect of cyber-attacks and digital failures that drove the decision, though. The biggest problem was the fact a significant portion of the population was cut out. Many believe going cashless risks excluding vulnerable groups and exacerbating inequality.

Counterfeit notes, robberies and employee theft are all issues associated with paper money

“Sweden’s population demographics are similar to those of the UK, and like us, they had people in their population who were unable to use digital payments, and yet were struggling to get cash or use cash,” said Ceeney. “They were in danger of leaving people behind.”

This clearly isn’t a situation unique to Sweden. According to estimates from the Federal Deposit Insurance Corporation (FDIC), 5.4 percent of US households are unbanked, meaning they wouldn’t be able to function in a cashless society.

That figure is closer to two percent in the UK, according to the Financial Inclusion Commission, but the Access to Cash Review found that around 17 percent of the population would struggle to cope if the country went cash-free. And it’s not just the elderly who would be excluded, according to the research, with poverty the biggest indicator of cash dependency, and other vulnerable groups also frequently reliant on cash.

Gueriane believes this element of exclusivity is one of the biggest barriers to societies going completely cashless. “The crisis has made it clear that a lot more action is needed around making digital banking solutions available to all individuals,” he said. “Many programmes (digital banking solutions as well as crypto) are working to help make banking more financially inclusive.

However, if there isn’t buy-in from all involved, then there is a risk of a cashless economy becoming financially exclusive to certain demographics.”

The cash rebellion
It’s not just vulnerable groups and low earners who are on the side of cash, though. In the US, a survey by Genesis Mining, ‘Perceptions and Understanding of Money 2020’, found that 60 percent of respondents were opposed to the idea of paper money being replaced with digital-only money.

Diary studies by the Federal Reserve found that cash is still the preferred payment method for many in the US. “These studies have shown that cash use is still dominant in low-value transactions, below $20,” said David Stearns, software engineer at Stripe and author of Electronic Value Exchange. “That’s especially true for the very young, who don’t yet have access to a card, and the older demographic (45+).” Stearns points to the importance of cash in cultural traditions, such as tipping and gift-giving. But for some the biggest issue is having freedom of choice – and the desire for a diverse monetary system that includes centralised, state money.

Partly for this reason, Brett Scott believes there’s mounting resistance against the idea of a cashless society. “I’m seeing a lot of pushback,” he said. “I’m on a Facebook group with 25,000 members, which is ordinary people who are suddenly worried about this issue. The state should be protecting the diversity of the monetary system.”


Concerns over privacy
Central bank digital currencies could be one solution to maintaining this diversity as we move towards a potentially cashless future. China’s central bank is trialling a digital yuan as an alternative to cash, while Sweden’s Riskbank is piloting the e-krona – a digital wallet that allows users to make payments, deposits and withdrawals on a mobile app. The latter has evolved out of concerns that consolidation of payment services “could restrain competitiveness in the market and make society vulnerable,” in the words of a 2017 report on the project.

The report states: “The development towards an almost cashless society entails households having little opportunity to save and pay with risk-free central bank money and this can ultimately lead to a decline in the resilience of the payments system. A possible e-krona could function as a complement to the payment forms that are currently offered in the private sector.”

But this wouldn’t overcome susceptibility to cyber-crime and the vulnerabilities of digital infrastructure, and nor would it overcome another potential barrier to going cashless – concerns over privacy. Unlike with cash, transactions would still be traceable – which is exactly what some fear, according to Scott.

He believes getting rid of cash could be dangerous in countries where states already have widespread control. “The prospect of monitoring political subversion and opposition looms large in certain countries,” he wrote in an essay on the topic. “The end of cash will probably mean the beginning of an all-encompassing panopticon that can be used for widespread surveillance, tracking and manipulation of individuals.” Stearns agrees that privacy may be a concern for some – and a potential barrier in the future. “Cash is the only anonymous payment method, so consumers who care about privacy will resist its elimination,” he said.

Cryptocurrencies could offer a way around these issues, since transactions are invisible – but they aren’t without their issues, not least, once again, digital vulnerabilities and the shadow economy.

The road ahead
Ultimately, many believe it’s unlikely cash is going to just die out tomorrow. “Just like there is no total paperless office, you will see cash living alongside other forms of payments for some time,” Bernardo Batiz-Lazo, Professor of FinTech History and Global Trade at Northumbria University, told World Finance. “Innovation in payments is incremental, however the emergence of central bank digital currencies – and possibly social-media related digital payments such as WeChat and AliPay – may mean more diversity.”

Cash is the only anonymous payment method, so consumers who care about privacy will resist its elimination

Yet it’s clear younger generations are adopting digital payment systems faster than their predecessors; 47 percent of Gen Y and Z respondents use mobile payments more than any other payment method, according to an international Paysafe study (compared to 28 percent of Generation X and 10 percent of Baby Boomers). As that generation comes to dominate the economy, that’s likely to have an impact on cash usage in the future.

But with ongoing concerns around financial exclusion, security and resilience, how we deal with this shift is likely to become one of the biggest financial questions in the coming years. If economies are to harness the benefits of a cash-free society, governments, central banks and private institutions will need to rally together to extend digital reach to the financially excluded, find solutions to potential privacy concerns, and establish ways to maintain resilience and diversity in the monetary system, all without compromising on security.

Even then, the road to a global, fully cashless economy – where money flows smoothly between borders, and cash-related criminal activity is nothing more than a spectre of the past – is likely to be long and winding. Economies will need to prepare themselves for a bumpy ride ahead – and for some, the transition may come at a price.

Helping to lead a digital revolution in the Philippines

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Deep into lockdown 2020, it became clear that businesses of all sizes would survive COVID-19 by the quality and accessibility of their digital offerings. In a country like the Philippines, which is the global capital for social media, traditional enterprises had to sink or swim in line with the global scramble to transfer business previously carried out face-to-face into the online arena. At BPI-Philam, a bancassurance firm, we were ahead of the game on this, having already used technology to increase market share and reach out to customers who may only recently have joined the country’s formal economy.

COVID-19 cost many Filipinos their livelihood, especially those in the informal sector. The latest statistics show a 10 percent unemployment rate, equivalent to around 4.6 million people out of work, as of July 2020. But it’s not all bad news. There are those who have been able to open online businesses to generate income, leading to a 4,000 percent increase in business registrations during the lockdown, as consumers also shifted to digital for some semblance of normality in their lives. Aside from getting essentials like groceries and hygiene products, people flocked online to purchase electronics, foreseeing a greater need for connectivity amid the implementation of quarantine.

As the community quarantine wore on, food businesses also made their presence felt, catering to those who wished to get a literal taste of food they would only normally get outside of their home. The boom of these various home-based businesses allowed the consequent growth of delivery and courier services, which in turn provided a source of income for those who lost their jobs early into the quarantine, while likewise providing additional income for the business owners.

 

Spending priorities
In the context of a global pandemic when purse strings were tightened and jobs lost the world over, one would be forgiven for thinking that the young Filipino workforce would reject the long-term idea of spending on insurance. So many suffered financially during 2020, and news headlines have warned about families and individuals sacrificing long-term savings and insurance as they reprioritise their spending in the here-and-now. But there have been some surprising findings to come out of this grim scenario in the Philippine market.

As uncertainty surrounding the pandemic loomed, Filipinos began to be more conscious of personal finance matters. In the first quarter of 2020, consumption of personal finance topics online grew by 800 percent. From loans to effect on oil prices to stock market performance, interest in money matters spurred conversations all over the place. Instead, people became more conscious about saving and securing income to provide for the whole family when jobs are on the line.

It seems that rather than sacrificing long-term security for immediate financial relief, COVID-19 has in fact led to a real motivation to save more and spend less in order to prepare for further impact in the future. In fact, BPI-Philam’s affiliate company, Bank of the Philippine Islands (BPI), reported an increase in total deposits to 1.68 trillion pesos, up by four percent year-on-year as CASA deposits grew by 14.7 percent. This is particularly pertinent given that some 10 percent of this country’s economy is generated by the overseas Filipino workforce (OFW). The impact of COVID-19 has certainly been felt by members of this group who are locked down and unable to work, and others such as seafarers and healthcare workers abroad who cannot get home at all, even months after the pandemic first struck.

Indeed, some industries like seafaring, which are inherently vulnerable due to their communal setup and differing policies among the states and territories they do business in, bear the brunt of the pandemic even more. As of October 2020, there were still reports of stranded Filipino seafarers onboard vessels on foreign seas, waiting to be repatriated. Others had their contracts extended far beyond normal extension limits because they are necessary to keep the world’s supply chain going. All these things have adversely affected OFWs’ personal earnings at this time, for better or worse.

Some of the more tenured OFWs have been able to establish another source of income over the years in the form of small side businesses, but many are worried that even that is at risk with the pandemic still raging worldwide.

 

Future impact
Like other industries that had to quickly adjust their operations when the lockdowns began in March 2020, most Philippine insurance companies’ sales also went down during that period, and BPI-Philam was no exception. That was to be expected as cash flow became an issue in the short term, but the uncertainty surrounding COVID-19 brought heightened anxiety to consumers, pushing them to react in certain ways. When they truly understood the gravity of the situation, people sought information and had greater awareness of the benefits of insurance, so the demand for such products shot up.

People became more conscious about saving and securing income to provide for the whole family when jobs are on the line

To support the industry during this extraordinary time, the Philippines Insurance Commission eased certain regulatory requirements and eventually allowed insurance companies to sell products online. Many new private players also entered the market at this time, while others upgraded their offerings, devising ways to reach customers who are stuck at home.
It’s worth asking what implications all of this will have on the way products like insurance are marketed to a young workforce, and look at how the insurance gap can be plugged. As a bancassurance firm, BPI-Philam’s customer base is the same pool of clients serviced by its partner bank BPI. This means that they are already part of the formal economy, being account holders to begin with. Nevertheless, BPI-Philam’s insurance products are designed to cater to various income brackets, not just the affluent ones. Part of the company’s commitment is to provide affordable and accessible insurance in its race against risk, to close the protection gap in the Philippines. BPI-Philam maximises the available technology to make the process of acquiring an insurance policy more convenient, even for busy people. For instance, its customers’ policies are automatically enrolled in its ePlan portal so they can manage it themselves anywhere there is an internet connection.

 

Wellness out of chaos
BPI-Philam has an advocacy for Filipinos to live healthier, longer, and better lives. This paved the way for it to offer a wellness series, a suite of protection solutions powered by Philam Vitality that reward customers’ healthy choices. Philam Vitality is a science-backed health and wellness programme for customers that extends perks and benefits like premium discounts, additional insurance coverage and add-ons, incentives, and lifestyle rewards from partner establishments. The wellness series is aimed at taking customers on a personal pathway to a healthy and active lifestyle, and it is not just limited to young people. The company partners with health and wellness providers like gyms, health clinics, and sports equipment stores or related brands to make the journey more fun and convenient for all customers. Those subscribed to select BPI-Philam insurance products that are integrated with Philam Vitality are entitled to earn points they can redeem for exciting rewards that will further uplift their lifestyle. One encouraging observation is that despite the lockdown throughout much of the country, overall engagement of the Philam Vitality program amongst BPI-Philam’s customers decreased by only around four percent. This shows that people were still taking good care of themselves by staying active even while at home.

 

Looking ahead
When it comes to balancing priorities going forward, it seems the natural progression right now is one of changed attitudes: although people are spending less money overall on insurance, there are more people willing to spend their money on insurance in the first place. There is no doubt that COVID-19 hit the burgeoning bancassurance market as much as any other, but BPI-Philam’s experience reflecting on 2020 is that many Filipinos are more protective of their long-term future than perhaps they were before. This could lead to a brighter future for the company as well as its customers as it seeks to expand its client base even further while championing the healthy and balanced lifestyle that 2020 brought into such sharp focus the world over.

Dominican Republic’s digital banking arena receives boost

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Roll back to 1998 and only two percent of the world’s population had an internet connection. That figure has since surged to 40 percent and continues to accelerate. More than 20 billion new devices were connected in 2017 alone. By 2030 it is anticipated this will sail past the 500 billion mark. Most will be fully mobile.

By any standard these are extraordinary figures. For Banco de Reservas de la República Dominicana (Banreservas), the COVID-19 pandemic highlights the investment the financial institution has made in mobile technology, allowing it to respond meaningfully to those in need. Fortunately, this preparation had already been underway for some years, enabling it to react to the pandemic with confidence while supporting the broader Dominican Republic economy.

 

Tech and Latin American finance sector
With internet users now comprising 50 percent of the global population, the global tech transformation is not just powered by developed nations. Even in the poorest 20 percent of global households in developing nations, seven out of 10 rely on a mobile device to manage their finances.

The explosion of virtual media and face-to-face digital services is reflected strongly across the Latin America and Caribbean banking sector. The latest State of Cybersecurity in the Banking Sector in Latin America and the Caribbean report (released January 2018) saw 53 percent of respondents rely on smartphones to check bank balances and make basic transactions. This compares with 29 percent of those still using branches. Even fewer were relying on telephone banking – just 23 percent.

As far as Banreservas is concerned, broad compatibility and strong risk management is fundamental to the user experience

The numbers – the specific data originates from the Washington-based Organisation of American States (OAS) – emphasise a profound tech shift: even for mundane, day-to-day tasks such as transferring funds, 43 percent of consumers relied on mobile banking rather than visiting a bank in person. These same consumers do not mind whether their transactions are made via laptop, tablet or smartphone. In other words, trust in mobile banking technology continues to surge, whatever device is used.

 

Swipe right for Dominican digital
The bald mobile tech insights don’t end there. As recently as September 2020 Banreservas’ own data registered more than 71 percent of all financial transactions carried out via ‘alternate’ – read digital – channels, representing an 8.7 percent hike compared to the year before. While 80 percent of Dominicans have a mobile phone – around 50 percent of these being smartphones – home computers are proportionally lower per-household, despite high levels of internet banking. Mobile tech is becoming crucial while also fast overtaking legacy tech.

Yet there was little strategic vision for Banreservas’ digital channels, even as recently as 2014. Bricks-and-mortar branches still remained the company’s client touchstone. But since 2015 the strategy has switched sharply to migrating transactions via digital channels, lifting this share from 42.7 percent in 2014 to 71.7 percent in 2020.

 

Mobile tech speed increased
Since 2016, more than 50 percent of financial transactions are now made through high-tech devices. In 2019 Banreservas went further in defining their digital strategy, fostering a culture of continuous improvement but anchored to two vital key pillars: better security and better transparency.

Trust in mobile banking technology continues to surge, whatever device is used

Banreservas is committed to being at the forefront of modern digital instruments, increasing controls and reducing threats, key factors in the banking sector. The financial institution is currently working on improving its processes and strengthening its collaboration with clients, opening opportunities to incorporate other segments, such as SMEs, the private sector and especially younger clients, already immersed in the digital and virtual culture. This is completely common to their environment.

 

Digital productivity boost
Banreservas’ digital strategy is also backed by high-tech biometric voice authentication, allowing clients to access their own mobile account. Banreservas is the only domestic bank offering voice recognition tech through its self-service voice channel, VOICE ID. More than 20.6 million biometric calls were authenticated in 2019 alone.

The digital tech is underpinned by more back office robotisation. Practically speaking, this means less paper and error potential – far more agility. Many highly repetitive and high-volume tasks are now digitally handled. The impact on internal productivity has been considerable. Banreservas is working on reducing paper use in other areas such as teller vouchers and account statements.

So while the public health situation remains unwelcome and worrying, accelerating the trend towards digital payments, Banreservas technology is in place to manage public anxiety about viral transmission from cash, as well as addressing – and reducing – outmoded legacy system bureaucracy.

The six pillars of digital wisdom

Determined to make Banreservas relevant for the next generation and beyond, the financial institution has designed a fresh-from-the-ground-up digital proposition leveraged by six pillars.

  1. Transactions – this means all self-service digital channels support transactions across different business segments and can be done independently of any branch.
  2. Requests and services – similarly all service needs, whatever the business sector, can be handled outside the branch network.
  3. Commercial management – developing digital capacities for a timely, value-added customer management experience that accepts pre-approved payments for basic products and services.
  4. Digitisation of end-to-end processes – developing end-to-end integrations with the Bank’s BPM, CRM and ERP applications.
  5. Digitised operational management model – robotisation of repetitive back office processes with potential high margins of error are now outsourced to digital storage with all the client’s information safely recorded. This is vastly more efficient, safe and productive.
  6. Internal digital culture – the promotion of an internal digital culture with collaboration and teleworking tools, transforming inter-departmental dynamics.

 

Legacy support solid
Acutely aware of the transformative need of mobile technology across Dominican society, improving this tech experience remains a priority for Banreservas. Yet the existing legacy branch network – more than 290 branches plus 700 ATMs and a 1,250-strong network of banking agents – still have their part to play, supporting its internet banking and mobile app technologies. No customer is excluded. Since February 2018, Banreservas has affiliated to UNARED, the largest network of ATMs, thereby doubling its ATM network reach to 1,500, allowing even more Dominicans to access their accounts. In line with its respected financial inclusion policy, the institution continues to strengthen its USSD tech channel, allowing vulnerable customers to carry out free transactions from their mobile phone, without eating deep into data quotas. During 2019, this service supported more than 27.7 million queries and 1.6 million transactions.

 

Money when needed
Proximity and access to banks are two reasons why some Dominicans don’t have a bank account. But via Cerca Banreservas banking agents – a network of sub-agents –are able to offer a network of around 1,250 banking outlets. Since 2014, Banreservas has developed this sub-agent penetration, strengthening its competitive position and expanding access points, enabling non-traditional service providers like convenience stores, gas stations and other businesses to function as financial service proxies. Customers can make regular banking transactions such as deposits, withdrawals, paying off loans and credit cards, as well as paying government taxes in a safe way without additional charges.

Banreservas is committed to being at the forefront of modern digital instruments

This flexibility was an advantage for those managing the insecurity of the current health situation – Banreservas’ technology was instrumental in supporting substantial government aid programmes for the Dominican population. Practically, these sub-agent opportunities make it easy for Banreservas clients to have equal access to their finances, wherever they live – which is crucial in a health crisis.

 

Focus on the user wherever they are
The best IT and app experiences are frictionless and simple. As far as Banreservas is concerned, broad compatibility and strong risk management is fundamental to the user experience. To resolve these needs a main goal here was to design an elegant and modern visual experience. All of Banreservas’ apps are designed to meet visual requirements and guidelines of Banreservas’ corporate brand, enabling its clients to experience a harmonious journey, whatever device is used.

 

Banreservas: Breaking down the barriers

  • Banreservas has reduced the average distance between lower income neighbourhoods and its network from 16 km to 3km – an improvement of more than 80 percent – vastly increasing access to the financial system.
  • By 2020 the Banreservas apps registered more than 2.3 million downloads through different versions, facilitating more than 30 million transactions.
  • In September 2019 the Enterprise Banreservas app was integrated across the bank’s channels, allowing SMEs and corporate customers to make use of the bank’s services in a more agile way, from any location.

 

And for functionality Banreservas’ clients can get, for example, a quick view very easily. This is just one of the functions of the app and it means an immediate balance summary without having to go through a more formal login process. That means many clients feel permanently logged into the app without compromising their account’s security – much like many social and instant messaging apps, in fact.

The retail sector is also strongly supported. Their apps have a native transaction allowing peer-to-peer transactions without having to exchange banking product info. It’s an arrangement based on proximity. If the clients are not within the required distance, they can use a token to complete the operation, without providing any financial account information whatsoever.

 

Innovate frequently and fairly
All Banreservas apps take advantage of native fingerprint and facial recognition device capability – from smartphones to tablets and smart watches, including iOS8 and Android. All apps have the same user interface principles and guidelines of the Banreservas corporate brand. Serrucho is a good example of a Banreservas retail app functionality, helping split a shared bill, though this tech goes well beyond dividing restaurant bills between friends, for example.

There is support for multiple business authorisations: Banreservas’ Enterprise app can perform multiple company approvals, providing a full execution and payment history for easy oversight.

Once a client installs an app the initial enrolment process is carried out by a one-time password that the client receives by SMS or email, validating their contact information. After login, all transactions – like credit card and loan payments plus taxes and utility bills – can be executed without extra verification. Frictionless risk management is crucial for mobile tech. It must be secure and trustworthy, managing the balance between a user’s experience and crucial risk mitigation.

 

Fast and flexible response to COVID-19
Banreservas has been a strong ally to Dominicans during the COVID-19 pandemic. Its robust digital technology allowed it to support government programmes, reaching out to the population quickly and effectively.

At a time of few precedents, flexible measures were rapidly implemented for the benefit of any Dominican needing them.

Working alongside the government’s aid programme, Banreservas helped design a new digital financial tool based on the customer’s bank ID details plus a unique number to be used as a PIN. The results of this initiative were impressive and practical: more than 700,000 Banreservas consumers could use almost 4,400 grocery outlets, warehouses, supermarkets and department stores without exacerbating the spread of the virus or risking their own health.

Internally, Banreservas adapted quickly to working remotely because of previous tech platform preparation and the recent renewal of its main client support applications: it was primed to respond effectively. In March 2020 around 23 percent of employees had access to remote working tools. But this number swelled to 51 percent by April 2020 and almost 70 percent by the end of September. In addition, productivity increased among employees meaning faster response times to both internal and external demands.

 

Future resilience is built in
Banreservas’ mobile technology has proved reliable and cost-effective for many Dominicans at a time of profound economic stress. Many people’s lives have been upturned. Some lives have been changed forever. But there is also much to be proud of. Despite the global economic hardship caused by the pandemic, the 2021 forecasted GDP growth for the Dominican Republic by the IMF is just four percent.

It is one of the least exposed economies of the region. The Dominican Republic’s financial inclusion programmes have supported many, from consumers to local businesses and corporates. National debt levels remain modest and employment prospects are still promising across tourism and export markets such as coffee, sugar and gold.

 

Historic landmark
The price of gold, for example, climbed more than 25 percent in the last 12 months, offsetting the economic downturn the country experienced as a result of the pandemic. Remittances also rose strongly, around 11 percent, during 2020.

A profusion of medical instruments and pharmaceutical products – such as electro medical devices, drapes and masks, to name a few – exported to the US to help fight COVID-19 is just one example of the country’s economic innovation and dynamism. High value and high tech trade is supported by the Dominican Republic’s network of 74 unique free zones, right across the island.

Financial inclusion and education has never been more important or necessary

Each is designed to support specific industry sectors and needs, diversifying the economy. In 2021 Banreservas celebrates its 80th birthday and this landmark will highlight the many achievements it has made to support the country’s economic durability. The current COVID-19 pandemic is testament to this investment in a very tangible and real way. In contrast, other countries in the same region will be fighting hard not to lose hard-won progress against inequality and poverty. Financial inclusion and education has never been more important or necessary and Banreservas’ mobile technology underpins this commitment to all Dominicans, now and well into the future.

Mobile banking: a catalyst for economic transformation

Posted on by itsupport

Digital technology has been a great financial democratiser worldwide. Mobile phones and app-based banking have put previously inaccessible financial transactions into the hands of millions. While especially true for certain populations in the global south, you would be mistaken to think that businesses such as Atlas Mara Zambia are only tackling the challenge of having people join the formal economy in the first place. Rather, the bank has mobilised its offering for the emerging middle class and established banking customers alike, positioning itself as the top digital bank in Zambia and embracing the needs of every user.

 

Three lifestyles
Atlas Mara Zambia has identified that their ‘typical’ customer in fact has three distinct lifestyles, and the bank has optimised its offering to cater for each one. It has customers who have typically been excluded from accessing financial services or are early entrants into formal banking. These customers require basic banking services such as money transfers and merchant payments, and they value convenience and ease. There are customers who are ambitious and always aspire for more, living their life on the go; access to credit and savings solutions is paramount for them. And there are also customers who value status and recognition and enjoy rewards and lifestyle benefits, for whom protection of wealth is key. In meeting all the needs of these varied customer profiles, technology must take centre stage. Convenience is a common thread, and Atlas Mara Zambia has had to build all its customers’ needs into its digital capabilities to provide this for them.

 

Fintech at the centre
Following the birth of Atlas Mara Bank Zambia at the coming together of two banks, Banc ABC and Finance Bank, it was imperative that the organisation cemented its delivery of products and services around its customers. Quite deliberately, it realigned itself around customer needs, reviewing its whole digital infrastructure, covering ATMs, cards, mobile banking, point of sale as well as its call centre and agent banking network. While its stock of digital assets underwent review, mobile banking capabilities took centre stage. The reality that mobile technology has become an integral part of life across generations in our current lifetime has seen banking customers’ lives revolve around the mobile phone.

Today it has become more than a communication tool and commands a large part of all our lives. Building a provision of financial services around the mobile phone has allowed Atlas Mara to seamlessly integrate into its customers’ lifestyles.

First and foremost was a refresh of the mobile banking platform for customers, making it easy to access through self-registration on both mobile app and, crucially, ussd (more on this shortly). Once registered, the customer is then able to open savings accounts, make merchant payments, money transfers (local and international), and access credit through micro loans and salary advances. Atlas Mara customers also enjoy supplementary services such as access to statements for the account as well as any linked prepaid cards, forex rates, blocking cards, setting up standing orders as well as being able to make cardless cash withdrawals at ATMs or agent outlets. All of this while earning rewards for all their transactions. For all these services, it is not only the customer-facing front-end that is digitalised, but also the back-office processes, making the experience seamless for the customer.

 

Collaboration, not just innovation
Being digital means successfully harnessing technology to provide paperless, real-time, convenient, relevant, and secure financial services to customers through various distribution assets, including mobile and internet banking, ATMs, agent outlets and call centres. By allowing an intricate interplay of these distribution assets that aligns with customers’ specific lifestyles, the bank can leverage technology to further its aim of delivering the ultimate in world-class financial products and services.

Atlas Mara clearly recognises the need to invest in its digital assets to ensure it remains relevant for its customers and to deliver high-level security protocols. But what is also critical in this digital age is to recognise that partnerships are the signature of the future. More and more banks and service providers are alive to the fact that customers’ needs revolve beyond what they are able to offer as a single entity, and Atlas Mara has a portfolio of partners growing in both breadth and scale, driving a common goal of using technology to meet the ever-changing needs of customers.

 

Financial accessibility for the unbanked
Digital technology has allowed financial institutions to reach large numbers of people at low cost, whether they were previously part of the formal economy or not. Despite some 1.7 billion people worldwide still having no bank account at all, uptake of financial services through mobile phones, apps and other digital technologies has furthered retail banking more in a handful of years than it previously had in decades.

More and more banks and service providers are alive to the fact that customers’ needs revolve beyond what they are able to offer as a single entity

While it provides mobile banking through smartphone apps, a large part of the Zambian population is heavy reliant on ussd, and the bulk of the bank’s customer activity still happens on its mobile banking ussd platform, and not the app. In offering mobile banking through ussd, therefore, Atlas Mara Zambia does not simply cater to those with smartphones, and there is an important reason for this.

There has been other outreach and marketing in this direction, too; there are certain challenges for a highly digitalised bank that still needs to reach those who may not have access to smartphones, or are part of a rural population.
Primarily, contact is key. All of Atlas Mara’s mobile banking services are available in seven local languages in addition to English. This helps customers interact with the platform more comfortably in their language of choice. Social media is heavily used to engage and interact with its clients on how to use its services and also provide security tips, and SMS messaging continues to be used, especially for the ussd audience. Geographical setting is also important, as the rural populations require a more localised engagement approach. So while the mobile banking platform is already available in local languages, the engagement messaging also has to be in local languages and be channelled through local radio stations as well as local influencers.

 

The phenomena of Chilimba
The bank has developed a mobile banking solution called Tenga Mobile Money wallet for its non-customers, particularly to serve the unbanked population. This tool is available for any Zambian with a national ID and registered local mobile number. With these two things, one can access Tenga Mobile Money through a self-registration process via either an app or, crucially, through ussd (dialling *360# through the phone’s keypad). Once registered, customers can fund a mobile money wallet through any Atlas Mara agent outlet countrywide, or through its partner agent networks.

Additionally, Tenga Mobile Money wallets can receive funds from any local bank account, allowing customers with existing bank accounts elsewhere to transfer funds into their Tenga Mobile Money wallets. Once funded, customers can access all the usual financial services available on its mobile banking platform. Furthermore, Tenga Mobile Money customers can also enjoy access to Atlas Mara’s Group Saving feature, which allows one of Zambia’s oldest traditional banking phenomena (locally called Chilimba) to be carried out digitally. The benefit to the business of such an offering is obvious, as it becomes known for providing ease, convenience, and trust for those who may not previously have had a bank account or used formal financial services.

 

Financial catalyst for growth
By allowing every citizen access to financial services, supported by a robust financial education programme, as an institution Atlas Mara becomes not only a leading fintech business, but a catalyst for economic transformation. By allowing people to experience financial emancipation by providing them an opportunity to define their financial signature, the foundation is laid for individuals’ future interactions with banking services that support their lifestyles.

Successful retail banking is all about adapting around the customer, and Atlas Mara’s offerings placed for every level of Zambian society are inclusive, adaptable, and support traditional values with forward-thinking technology. Customer needs are always evolving, and the bank has a structured way to continuously meet those needs. The company’s mobile banking technology has been a key lever in delivering basic banking needs of savings and extending credit, and has also now intertwined with its customers’ lifestyles, providing various enhancements such as money transfers, merchant payments and even insurance services. With open banking APIs, the bank has even forged partnerships with other entities, enabling it to meet its customers’ needs without having to leave its platforms.

In every financial industry, social and economic boundaries are less clear cut as social mobility increases, and fintech such as that offered by Atlas Mara will continue to boost this trend. Because of the way mobile phones intertwine with everyday life, mobile banking has become the most important channel for most people to access banking services. By building a financial ecosystem intertwined with mobile technology, Atlas Mara has delivered world-class banking services for both customers and non-customers, creating the ultimate digital bank in its market.

The Zoom Boom

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Economically speaking, it has been the kind of year that any entrepreneur dreads. After the long recovery from the Great Recession, many economic experts and business moguls allowed themselves to believe that the worst days were behind them, and that they would never again see such a crisis in their lifetime. But then along came COVID-19, plunging the world into the worst economic downturn since the Great Depression. 2020 success stories are certainly few and far between, but amid such chaos, certain individuals have thrived. Eric Yuan, founder and CEO of video conferencing phenomenon Zoom, is undoubtedly one of this year’s biggest winners.

When the world as we know it started to shut down back in early March, the word “Zoom” quickly joined the likes of “social distancing”, “bubbles” and “WFH” as part of our pandemic-related vocabulary. Everything from daily work meetings to high-intensity workout classes and Friday night drinks suddenly moved from the real world to the virtual one, and Zoom was there to facilitate it all. The company’s user numbers have skyrocketed since the onset of the pandemic, with over 300 million video call participants flocking to its platform every day during the month of April.

Meanwhile, Zoom founder Yuan has been enjoying the fruits of his labour, seeing his net worth soar by almost 400 percent in 2020, with his personal shares in Zoom now valued at around $17bn. But to credit Zoom’s success to the events of 2020 alone would be doing the company – and indeed, Yuan – a disservice. While many of us might not have heard of Zoom until a few short months ago, Yuan has been steering the company on a pathway to success ever since its inception in 2011. By focusing intently on the user experience and always making customer satisfaction and happiness a priority, Yuan has ensured that Zoom stands out from its competitors, showing that even in a crowded market, the cream always rises to the top.

Engineering meets entrepreneurship
Born the son of mining engineers in Shandong Province in eastern China, Yuan showed an instinctive entrepreneurial spirit from an early age. Clearly a driven child, Yuan was not yet ten years old when he started collecting discarded construction scraps, which he would then hand over to be recycled in return for cash. As a young adult, Yuan showed a burgeoning interest in technology when he chose to study applied mathematics and computer science at Shandong University of Science and Technology. It was during this time at university that Yuan had his first thoughts of what would eventually become Zoom. When visiting his girlfriend at the time – who he later married – Yuan would have to undertake a ten-hour train journey, meaning that the couple could only spend time together once or twice a year during the holidays. Speaking on the Evolving for the Next Billion podcast in 2018, Yuan said; “Someday if I can have a smart device and with just one click I can talk with you, can see you, that was my daydream, right? And every day I thought about that…the technology was not ready but the idea was there.”

Yuan had a clear vision of what he wanted to create with his new company – as well as an awareness of the pitfalls to avoid

After completing his masters degree, Yuan spent a fateful few months working in Japan in 1994, where he attended a speech given by then Microsoft CEO Bill Gates, who at that time was gearing up to release the groundbreaking Internet Explorer web browser. Inspired by what he had heard, Yuan felt the pull of Silicon Valley, determined to play a part in the innovations of the West Coast dotcom boom. However, his US aspirations were almost thwarted at the first hurdle, when his visa application was unceremoniously denied due to a translation-related misunderstanding. Undeterred, Yuan continued to make application after application – submitting a grand total of seven rejected requests in a year and a half – before finally being accepted on his eighth attempt.

In 1997, at the age of 27, Yuan was able to take the first step in the journey that would lead him to Zoom, settling in San Jose, California, and landing an engineering job with video conferencing company, Webex. His talents and drive soon established Yuan as a key player within the company, and he quickly rose through the ranks, eventually becoming the VP of engineering. In the 14 years that Yuan spent at Webex, the company grew significantly, establishing itself as one of the leading options for video calling and conferencing. The appeal of video conferencing really became clear in the mid-2000s, with tech conglomerate Cisco acquiring Webex for a cool $3.2bn.

But Webex’s video hosting software certainly wasn’t perfect – and Yuan was only too aware of this. By taking the time to speak with Webex users, Yuan took note of a growing list of common customer complaints, which included connectivity issues, video and audio lags and time-consuming installation processes for new users. Thus far, Webex had survived and thrived largely because of a lack of competitors in the video conferencing market, but Yuan recognised that it would only be a matter of time until other, more forward-thinking companies would start snapping at Webex’s heels, potentially offering a better service at a better price.

Yuan voiced his concerns and suggested ways to improve the software, but was met with resistance, ultimately leading him to part ways with the company in 2011. Not one to rest on his laurels, Yuan immediately began planting the seeds for his next venture: the ubiquitous video conferencing platform that we now all know as Zoom.

 

Curriculum Vitae

Born: 1970

Education: Shandong University of Science and Technology in Jinan, China

1997

Yuan moves to the US after an incredible total of seven rejected Visa applications. Upon entry he settles in San Jose, California, and lands himself an engineering job at the video conferencing company, Webex.

2007

Cisco acquires Webex for a total of $3.2bn, showing a huge vote of confidence in the video conferencing software that Yuan himself had played a key role in creating and developing during his time there.

2011

Yuan parts ways with Webex after receiving pushback on his suggestions for improving the firm’s video conferencing software. This same year, Yuan would raise $3m of investment to start his own video conferencing company.

2013

After much meticulous planning, Zoom officially launches in January. The company claims to have reached the impressive milestone of one million video participants just four months later, in May.

2017

Yuan’s fast-growing video conferencing phenomenon officially enters the exclusive unicorn club, and reaches a $1bn valuation shortly after securing $100m in investment from Sequoia Capital in January.

2019

After two more years of solid growth following the Sequoia investment, Zoom goes public in April. On its first day on the public markets, Zoom was valued at $16bn, making it one of the year’s most talked about IPOs.

 

An instant hit
From its very earliest days, the Zoom ethos has been focused squarely on one crucial thing: keeping people happy. In an interview with Forbes magazine, Yuan simply described Zoom’s company culture as “happiness,” explaining that his priority was making sure that everyone involved in Zoom – from its employees to its paying customers to its visiting video participants – were happy in all of their interactions with the platform. Having learned valuable lessons from his time at Webex, Yuan had a clear vision of what he wanted to create with his new company – as well as an awareness of the pitfalls to avoid.

Zoom might be the pandemic’s greatest success story, but the company’s recent triumph has been many years in the making

By 2011, when Yuan officially founded Zoom, the video conferencing market was quickly becoming a more crowded scene, meaning that his fledgling company needed to set itself apart from its well-established competitors – the likes of Skype and Google Hangouts among them. Along with taking a customer-focused approach, Yuan conceived of another key strategy that would enable Zoom to stand out from the crowd. Instead of pursuing an audio-first approach and then attempting to add video to that function, Zoom was to be built as a video-first platform.

This unique approach and clear vision soon won over investors, with Yuan able to raise $3m in 2011 to bring his idea to life. Working with a small team in California and a number of engineers back in his native China, Yuan was able to create the first Zoom iteration within two years, which performed incredibly well with beta testers, and eventually launched in January 2013. Yuan’s carefully conceived creation was an instant success. By May, Zoom claimed that it had rocketed to one million participants in its video calls, quickly securing another round of funding worth $10m.


From the start, investors and users alike could tell that Zoom was a little different to its competitors. The platform’s low data usage meant that video calls could still work for people with a patchy or slow internet connection, and its cloud-based nature reduced the need for time-consuming installation processes. The platform could also instantly identify what device its video participants were using and adjust accordingly, meaning that there was no need to create different versions of Zoom for Mac or PC. What’s more, at a cost of just $9.99 per month for its ‘pro’ package, it offered a cheaper alternative to its rivals, with arguably better functionality. As users flocked to the platform, investor interest in Zoom also continued to grow, with venture capital powerhouse Sequoia investing $100m in the company in its Series D round of funding in January 2017. This substantial investment saw Zoom valued at $1bn for the first time, officially making it a rare tech unicorn. But, unlike most members of the lauded unicorn club, Zoom was actually posting profits year after year. Following its $1bn valuation, the company enjoyed two more years of impressive growth, posting $330m in revenue in the year ending January 31, 2019. With such a healthy track record the next step was clear: it was time for Yuan to take the company public. That day finally came in April 2019, with company stock surging by 72 percent on its first day of trading. By its third day on the public markets, Zoom had leapfrogged Lyft to become the most valuable tech IPO of the year. Zoom had made it – but nobody could have predicted what was to come next.

Right place, right time
While Zoom’s IPO certainly put it on the map in tech and investor circles, Yuan and his company were still a long way off becoming household names. When it went public back in 2019, Zoom was still predominantly a business-focused communications tool, with most of its users coming from the corporate world. Among the general public, meanwhile, the platform was little known – after all, just how often did your average citizen hop onto a video conference, outside of a business setting?

Thanks to Yuan’s clarity of vision and, most of all, his commitment to customer happiness, Zoom is more than just a pandemic success story

Then came COVID-19, and almost overnight, our entire lives changed. Across the globe, governments issued orders requiring people to stay at home, leaving only for essential journeys such as stocking up on lockdown provisions.

Bustling city centres suddenly lay empty, and the lights were turned off in offices across the land as workers opened up their laptops and started clocking in from home. With social distancing measures coming into effect, and people abruptly separated from their friends and loved ones, technology became something of a vital social lifeline for many, with video calls helping to keep people connected while they had to remain apart. Zoom, then, became not just a vital tool to facilitate working from home, but also a way for people to connect with the world outside their homes. In the space of a few short weeks, Zoom hit the mainstream. Soon, Zoom quizzes, Zoom drinks and even Zoom dates were all just another run-of-the-mill part of our new normal. Simply put, Zoom was at the right place at the right time, offering an easy-to-use, reliable service that even the biggest technophobes could navigate with ease. Zoom might be the pandemic’s greatest success story, but the company’s recent triumph has been many years in the making. From his years at Webex, Yuan understood that the customer experience is paramount, and from its earliest days, Zoom has been committed to offering a superior service. This year, when push came to shove, this customer-focused mindset allowed Zoom to expertly leapfrog its competitors, establishing itself as the clear pandemic champion. But as 2020 draws to a close, we have to ask: is the Zoom boom sustainable?

Changing the world
As spring turned to summer and weeks of lockdown turned to months, a new, Zoom-related turn of phrase entered the public lexicon: Zoom fatigue. Even the most enthusiastic early lockdown Zoomers felt their passion wane as lockdown dragged on, with the novelty of virtual yoga classes and video call pub quizzes beginning to wear off. But fatigued as we might be, with fresh lockdowns being imposed on countries throughout Europe, we are likely to be Zooming for some time to come. Even at the end of these government-mandated lockdowns, however, many people – Yuan himself included – believe that we will see a fundamental shift in the way that we work, with regular homeworking becoming the new norm in the years to come. “Coronavirus has completely changed how people think about where or how you should work,” Yuan said in an interview with The Telegraph – conducted via Zoom, of course. “Millennials grew up realising that they can get the job done without having to go into the office. Give it maybe 10 years and the millennials become the leaders and then it will become very common. Coronavirus is just a catalyst.”

Similarly, Coronavirus might have been a catalyst for Zoom’s success, but it certainly wasn’t the cause of it. Those seeds were planted long ago, when Zoom was but an idea in the back of Yuan’s mind. Thanks to Yuan’s clarity of vision and, most of all, his commitment to customer happiness, Zoom is more than just a pandemic success story – it’s proof that a good idea can indeed change the world.

Overcoming a global crisis with the use of antifragility

Posted on by itsupport

Nassim Nicholas Taleb, a brilliant scholar, mathematical statistician, former option trader and risk analyst, is an iconoclastic researcher whose work concerns problems of randomness, probability, and uncertainty. Among his contributions to the universe of ideas, we can include the popularisation of the notion of Black Swan: an unpredictable event, typically one with extreme consequences, often inappropriately rationalised after the fact with the benefit of hindsight.

It would be tempting to see the COVID-19 crisis and its unforeseen consequences as one of these black swans, or at least, if we cannot share this vision, we can try to utilise Taleb’s fascinating proposition for reacting to this crisis: that of antifragility.

Antifragility is the art of reacting and taking profit from stressors, volatility and unpredictability; it is turning a hazard to our advantage. It is a concept that reverses the common notion of hazards, turning them into an opportunity to make us better, even if initially it may make us feel awfully vulnerable. Antifragility is an idea that goes beyond the notion of resilience, of “to bend but not break”, because it implies a further step. While being resilient means resisting the storm in order to remain the same once the storm is over, being ‘antifragile’ means that not only are we undamaged by shocks, but we even improve, having developed what Taleb defines as “the ability to gain from disorder.”

Can this idea help us in the current COVID-19 storm? What we are facing is a global crisis, a multi-faceted phenomenon bringing the world into uncharted waters, the repercussions of which are not just sanitary, but also humanitarian, social, political and economic. In the financial markets, it has marked the end of an extended bull run that started in 2009.

 

The wealth management business
In a relationship-driven industry, wealth managers have been facing difficulties in the short term due to the high-touch nature of their business. In a scenario where physical situations such as face-to-face meetings are avoided, it may be difficult to maintain client engagement, to bring new clients on board or increase the Share of Wallet (SOW) with existing clients. However, wealth management firms can manage to turn social distancing and travel restrictions into an opportunity to build new competences, and to develop new ways for providing products and services.

Some say that we are living a double-trigger acceleration: the digitalisation process was already imposing a quick transformation to wealth management players, forcing them to update operational models, competences and ways of providing services. The COVID-19 pandemic has provided further stimulus to the ongoing trends, enforcing a definitive change, driven by the ‘perfect storm’: an unprecedented crisis on both the demand and the supply side that has brought about a financial crisis.

Unlike airlines or restaurants, wealth management firms have continued doing business even during lockdowns, managing their clients’ investment needs

These seismic circumstances have affected both investors and wealth management firms. Investors have suffered from the impacts on their portfolios because of market drops and record levels of volatility. Concurrently, wealth management firms have shifted towards transactional revenues, partially replacing recurring revenues that originated through assets under management. These shrank along with market performance, and the surge in brokerage fees from panic-driven trading activity has masked the underlying trend of falling revenues.

Reactions by players in this scenario may be very different. They might be fragile when faced with the shock because they are not properly equipped, or they can show resilience, finding alternative solutions to maintain their standard degree of functionality while the stress increases. Our business’ current reaction to the COVID-19 crisis is a robust reaction to an acute stress: it is enduring to some degree and carrying over, by operating according to the same general playbook.

Unlike airlines or restaurants, wealth management firms have continued doing business even during lockdowns, managing their clients’ investment needs and providing advice services, by observing the social distancing rules via the available technology. However, a robust and resilient business by definition goes back to its initial state once the external shock is over. The alternative solution is antifragility, which leads us to gain from chaos: only the players who manage to ride the wave of disruptive change quickly, to develop new competences and accelerate existing propositions, or acquire new ones, will have an advantage over competitors.

Antifragility is a competence that, today more than ever, needs to be acquired and developed. We must take advantage of the current circumstances to work on it and find our way to put it into practice.

At BNL BNP Paribas Wealth Management, our route to antifragility passes through making the most of the dramatic change in the trajectory and direction of industry trends observed in the wealth management business following the COVID-19 pandemic. This crisis has uncovered the limitations of existing business models, based on the centricity of the physical relation with the private banker, and has imposed the need to radically reimagine them.

While some wealth management secular trends have been altered or even halted by the current global health and economic conditions, other trends have registered sharp accelerations. Social distancing has forced us to quickly find solutions to ensure continuity of transactions and to improve data knowledge through scalability of existing digital solutions. The search for alternative ways to dialogue remotely (conversational banking), the utilisation of artificial intelligence in support to post-sales, a greater utilisation of big data both to evaluate commercial appetite and to better qualify advisory activities, provide just a few examples. Our being antifragile also means coping with five key attitudes we have been observing in relation to our clients:

1) Closeness: Need for increased opportunities for contact. This need can be satisfied by emphasising digital channels to reliably continue regular engagement between investors and advisers, even by teaching clients how to get the most benefit out of digital communication channels and tools to promote remote proximity.
2) Curiosity: Clients are more curious, they are more interested both in scenario analyses and investment typologies. In highly uncertain times, clients place greater reliance on their advisers, who must provide them with their best insights.
3) Cautiousness: The crisis has affected clients’ psychological profiles. They now have a greater need for security, not just for themselves, but also for their families, their wealth and their entrepreneurial activities.
4) Horizon: We have observed a tendency to shift towards longer investment horizons.
5) Belonging: We observe a stronger sense of belonging and social responsibility for clients’ communities and their countries.

We are convinced that some of these changes in clients’ needs and preferences, although brought about by the crisis, will not be temporary, but will constitute a structural shift, requiring a strategic reset of firm operating models.

 

Adding extra value
We need to transform our business models in order to provide an intensified client experience allowing multiple points of remote interactions based on digital channels, by providing mobile touchpoints with ‘anytime, anywhere’ access, while granting customised and timely communications with investors. The ultimate value added will depend on the ability to provide expertise through any means rather than an over-reliance on geographic proximity and physical interactions.

We need to consider technology as a value driver, and integrate it into every part of the value chain, from the on-boarding process with tools such as video conferencing and biometric authentication, all the way through to digital trading and reporting. We need to quickly reinvent advisory and relationship management by means of technology, while personalising the content and advice experience delivered across channels. The current uncertainty, market corrections, and high volatility have proven the value of financial planning and professional advice to investors. This will accelerate the trend towards more comprehensive financial planning and advice at the heart of the relationship between private investors and their wealth managers.

We need to use advanced analytics and data science to better understand and guide customers’ investment decisions, using data and analytics to fine-tune customer, product and pricing strategies to meet customer expectations.

 

Adopting a philosophy
We need to develop holistic coverage models to provide personalised experiences that go beyond simple investment advisory and adopt a philosophy of total wealth management, by taking advantage of synergies that may be activated within universal banks. By doing so we can create value for clients by providing access to different kinds of products and services like wealth planning, real estate, and lifestyle experiences.

Value propositions to clients will need to progressively evolve towards a perspective of “Impact Investing,” with a focus on investments that can produce a positive impact while offering interesting risk/return opportunities for clients. We must learn to serve a more informed generation demanding cleaner, greener investment portfolios and investment strategies that focus on environmental, social and governance principles.

The wealth management industry is a highly interconnected ecosystem where all the players (asset managers, banks, securities exchanges and technology partners) have to be involved to turn the paradigm upside-down and observe the context, understand the new latent needs, challenge our certainties and use creativity to develop new ways of working. Only those that will shift gears and deliver on the potential of these opportunities will likely establish or expand market leadership. We must all prepare for an industry that will look significantly different. Only in this way will the next storm not take us by surprise but instead leave us better than before. In the words of the Austrian writer, Karl Kraus: “Chaos is welcome, because order has failed.”

The five main imperatives for banks in a post-pandemic era

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The pandemic is mounting a historic challenge for the global economy and the business community as a whole is dealing with the largest economic disruption we have faced on a global scale since World War Two. Greece, similarly to most European economies, has been experiencing a deep downturn in economic activity, estimated to reach a 10 percent economic detraction for 2020. Projections point to a modest recovery of around 4.8 percent during 2021, as positive developments on the vaccination front allow for cautious optimism for the year ahead and the prospects of an economic rebound.

This new crisis occurred when Greece was accelerating its pace to recover fully from the global financial crisis that had a huge impact on the Greek economy. Eurobank, one of the four Greek systemic banks, had completed its economic transformation and dealt effectively, ahead of local peers, with the non-performing loans inheritance of the Greek debt crisis. In 2020, Eurobank materialised, despite the objective difficulties imposed by the pandemic, its complex balance sheet strengthening plan, that had begun in 2018 and that will eventually allow the bank to increase its competitiveness in the post-COVID-19 recovery phase.

Leaving the economic downturn aside, the pandemic has also brought along fundamental changes in customer behaviour that have reshaped retail banking, forging us to rethink our organisation, redefine our service and operating models and our value proposition to our clients and reframe our economics.

As a result, I see five main imperatives for banks, to position ourselves for the strategic long-term changes already underway in the post-pandemic era, encompassing: redesigning our service model, transforming digitally, adopting new smart ways of working, alongside with strengthening our risk management, and bringing environmental, social and governance (ESG) corporate purpose to the forefront.

 

Transforming customer experience
COVID-19 has accelerated the migration of retail banking customers, throughout the world, towards digital channels: more users of e-banking, fewer customers visiting our branches. In light of that change, retail banks need to reassess their distribution strategies and the physical-to-digital channels’ mix. A key concern is how much physical space is really needed and how to make the most use out of it. In my view, as it is also supported by recent research, customers will never cease to value banking branches, especially for those interactions that entail advice or help, where customers appreciate human contact.

Eurobank has already been making investments to accommodate customers’ moves from traditional to alternative channels, whether that is advancing our call centres’ infrastructure and functionalities, upgrading our automated payment systems, redesigning our e-banking and m-banking or adding new features on our award winning v-banking service, which allows for individual or business banking customers to consult and transact with their relationship manager by video. At the same time, we are also reinventing our customers’ experience in our new era designed branches that will be available this year. Our goal is to provide seamless, omni-channel customer experience, as defined in our bank’s new motto: ‘Eurobank is your bank, wherever you are: in your house, in your office, on the street!’

 

Technologically accelerated changes
The experience of the pandemic has highlighted the importance of deploying banks’ wealth of data in the service of a more personalised customer experience, redefining the industry’s former ‘customer centric’ approach to the new, individualised, customer segment of ‘one.’ Following the paradigm of other industries, which have framed our customers’ expectations, banks adopt micro-segmented customer engagement strategies that, based on customers’ behavioural data and past product purchases, customise product recommendations and personalise service and communications.

Going forward, banks are called upon to play a continued role in the pandemic recovery, addressing ESG imperatives and having a sustainable impact on society

In the post-COVID-19 era, banks will focus even more on enhancing the customer journeys, expanding their data sources and analytics capabilities so that customers may receive timely credit extensions and personalised financial transaction reminders throughout the day, in a similar way they receive movie recommendations from Netflix. In parallel, it is imperative that we build, as we already do, our analytical capabilities, incorporating machine learning algorithms to rate our customers’ experience and explore their insights on a regular basis and at every touchpoint and embed it in our decision-making to foresee customer expectations and rapidly address customer needs in a personalised and relevant way.

 

Cost efficiencies and innovation
Eurobank has already signed up on the digital transformation journey, aiming for paperless branches, digitised internal process, and automated infrastructures to maximise productivity of central office functions.

In the face of the tech challengers that also frame our customers’ expectations, we have set as a strategic priority the creation of in-house innovation boosters for quick time-to-market ideas from the lab prototype to small-scale population testing. A few examples of first-to-Greek-market products include: Eurobank wallet, e-commerce solutions (bundling banking and non-banking services), payment link (an easy to use and minimum infrastructure payment service offered to merchants during the pandemic), bio-card, and tourism electronic platform.

In parallel, creating sector-based ecosystems, and becoming a one-stop shop providing our customers with value-adding banking and non-banking services, has been a value creation source for our customers.

During the pandemic, we transitioned rapidly to having at times over 50 percent of our staff working from home. Moving forward, we plan to adopt hybrid remote-onsite working models that will help us to benefit from the related flexibility, cost efficiencies, and higher employee satisfaction rates. In the meantime, investing in digital collaboration tools and in our people’s digital upskilling and reskilling is a necessity.

 

Risk management and ESG
The need to mitigate the risk of an increase in non-performing loans, due to COVID-19, calls for investments in automated credit decision-making that combined with the deployment of transactional behavioural data will allow for enhanced risk management and lead to improved credit decisions. Advanced early warning systems and sophisticated credit portfolio reviews with advanced analytics are expected to be widely deployed in the coming years to address various risk considerations including sectoral concentrations.

Finally, the role banks assumed addressing the pandemic crisis, ensuring employees’ and customers’ safety and supporting economic recovery, brings corporate responsibility to the forefront. Going forward, banks are called upon to play a continued role in the pandemic recovery, addressing ESG imperatives and having a sustainable impact on society.
At Eurobank, responsible banking is at the core of our strategic priorities, with the design and implementation of green funding, socially supportive programmes and corporate social responsibility initiatives. During 2020 we launched biodegradable cards and electric car financing, we eliminated paper statements, and endorsed paperless branches and paperless internal procedures, while ensuring environmental certification of our buildings.

Finally, lessons learned and strategic directions driven from the pandemic, can definitely have a positive effect on our bottom line. Challenges triggered by COVID-19 have been putting an undeniable stress on the banks’ profit and loss. Nonetheless, improved productivity and cost efficiencies can be achieved as a result of our digital transformation; and targeted, personalised and relevant customer value propositions in conjunction with advanced risk management systems can drive our top line.

In the post-pandemic era, banks will play a pivotal role as the backbone of the financial system’s stability and as the driving force to a socially and environmentally considerate world, fuelled by advanced data analytics to allow our customers a personalised experience with flexibility, ease of usage and relevance to their lives.

Paradigm shift in sustainable investment for Latin America

Posted on by itsupport

More than ever, the major environmental, social and economic challenges facing humanity today underscore the need to make structural changes to our economic system, both in the way we produce and the way we consume. Governments and corporate sectors are called upon to increasingly make decisions by placing sustainability criteria at the heart of everything they do, seeking to balance the creation of economic value with protection of the very environmental and social systems that support and make their existence possible.

The financial sector and capital markets play a fundamental role. The consideration of non-financial issues when making financing and investment decisions is gaining greater relevance as the risks and opportunities detected by applying ESG analysis become clearer.

In spite of the fact that sustainable investing is nothing new and has been steadily evolving for a long time now, from value-based investing to socially responsible investing (SRI), COVID-19 has served as a major catalyst for the future of ESG practices. It has underlined the need for joint action to be taken if we are to tackle the challenges we all face. There is a growing body of evidence that shows that optimum working conditions, transparency, mitigating negative effects on ecosystems and, generally speaking, having a positive impact on company stakeholder groups, constitute an advantage when it comes to creating added value and standing the test of time.

 

Adapting and evolving
Ultimately, sustainability is a company’s institutional capacity for building trust and adapting to new expectations, in terms of both the market and in relation to the relevant regulatory authorities. Addressing this fact, Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, has stated that 50 percent of the world’s corporations are now adapting to sustainable frameworks and recognising that doing so has a significant impact on their profitability.

The pandemic has exposed and exacerbated the challenges that we have faced for years, especially in the social arena. It is crucial to understand that many of its impacts are here to stay. The overall disruption seen so far has required a certain amount of intervention from both the public and private sectors to ensure the recovery of their economies, but this in turn has given us the opportunity to look ahead in terms of sustainability principles.

Within this ESG universe, we have defined climate change as a major factor, understanding it as perhaps the greatest challenge faced by humanity

The role of investors is no less important in this respect, since through their capital allocation decisions they are effectively injecting liquidity into the different economies, while encouraging activities that help enhance sustainability. Under the UK’s Green Finance Strategy, sustainable investing can be understood from three standpoints. Firstly, we have ‘Greening Finance,’ which consists of systematically integrating ESG criteria into mainstream investment analysis to help make more informed decisions. In this way, investors are provided with a more complete picture of a company’s strategy, risks and opportunities, and to potentially influence its practices to improve corporate sustainability standards. Secondly and thirdly, we have the ‘Financing Green’ and ‘Capturing the Opportunity’ components, which are about mobilising capital to sectors and technologies that pave the way towards cleaner technologies, enhanced levels of decarbonisation and greater sustainable development, and that are increasingly becoming good investment opportunities.

 

Continuous increase in numbers
Latin America has not lagged behind in this global transition; indeed, 2020 was a year in which sustainable investment has greatly expanded throughout the region. An example of this is the increase in the number of PRI signatories, which went from 28 in 2019 to, at the time of going to press, 69 in 2020. This shows a much greater interest and commitment on the part of institutional investors and investment managers in incorporating ESG criteria in their processes. Financial regulators and oversight authorities are moving ahead with new regulations and technical guidelines to promote the disclosure of ESG information by market players. We have also seen initiatives being taken by public-private associations such as the Green Finance Advisory Council in Mexico (CCFV), which recently launched an initiative signed by more than 70 institutional investors representing assets under management that account for 25 percent of the country’s GDP, requesting more disclosure from listed companies around their ESG practices and climate mitigation targets.

In addition to this, the Responsible Investing Program (PIR) in Peru, the Responsible Investment Taskforce in Colombia and the Green Finance Roundtable in Chile have gained greater importance in furthering knowledge, defining common standards and cementing collaborative relationships with issuers around the topic of sustainable investment.

 

Building momentum
At SURA Investment Management we are committed to strengthening our sustainable investment capabilities. As PRI signatories, we are making decisive progress with incorporating ESG criteria in our investment processes, doing so in a cross-cutting fashion with all types of assets. We have the firm conviction that this not only strengthens our investment criteria, but allows us to help create well-being and enhance sustainable development throughout Latin America. We understand sustainable investment as an investment philosophy, being aware that it is a process that we must build upon.

We are making good progress, having taken significant steps to factor ESG into our processes. Currently, our bottom-up analysis of potential investee companies includes a review of their ESG performance and their relationship with their stakeholders. To this end, we have developed a proprietary ESG assessment methodology that prioritises and weighs up environmental, social and governance factors within the context of the relevant sector. This provides an initial score based on input information that we obtain directly from these potential companies through ESG questionnaires, which we then proceed to supplement with analysis from an external data provider. Analysing a large dataset in this way ensures that our process is all the more robust when it comes to identifying investment risks or strengths.

Within this ESG universe, we have defined climate change as a major factor, understanding it as perhaps the greatest challenge faced by humanity; its increasingly tangible effects are having an impact on all sectors and geographies. Coordinating the efforts of different social actors is essential if we are to achieve the goal of not exceeding a 2°C increase in global warming. To this end, we recently formed an alliance with 2° Investing Initiative, a thinktank that works to align financial markets and regulations with the Paris Agreement goals. We will be carrying out a joint investigation on the potential for building a Latin American Market Portfolio that is aligned with this objective.

We are also incorporating ESG criteria in our decisions to invest in alternative assets. We carry out rigorous due diligence that includes an assessment of the environmental and social practices deployed by the projects in which we invest. Furthermore, we are striving to adhere to international standards. In terms of our infrastructure debt strategy, for example, we ensure that the projects that we finance are carried out according to the Environmental and Social Performance Standards of the International Finance Corporation (IFC) as well as its Equator Principles. This requires that, in addition to complying with all applicable regulations, they must provide a comprehensive view of their impact and take compensatory or mitigation action when necessary.

When it comes to our real estate investments, we ensure that all our property development projects carry green building certifications. We are currently drawing up a plan for integrating standards that will ensure the efficient use of resources as well as promoting the wellbeing of the people who inhabit them. An example of this ambitious process is the construction of the soon-to-be completed Nueva Córdova building. The first building in Chile to have a photovoltaic façade integrated into its structure right from the initial drawing-board stage, it will prevent the emission of 190 tons of CO2 per year. Furthermore, this project is currently in the process of obtaining its LEED Gold Certification, by incorporating technology designed to enhance the quality of its indoor environment and offering chargers for electric vehicles and bicycles.

 

Push things forward
Clearly there are challenges ahead when it comes to implementing sustainable investment practices: comparable ESG information must be frequently and readily available; markets must move towards more homologous assessment standards that allow for ESG criteria to be incorporated into the pricing process, as well as for more significant movements of capital. Another task ahead is adapting international methodologies to the reality of our own region, as well as establishing mechanisms to avoid ‘greenwashing’, since this would prevent the required structural changes from taking place. However, for us it is a very good sign that Latin America is joining forces with this global push for action and that more and more actors throughout the region are furthering their knowledge from the standpoint of being able to connect sustainability with financial returns.

At SURA Investment Management we are taking on an active regional role through our commitment to sustainable development, as a cross-cutting element of our investment philosophy as well as part of our core asset management strategy. We hope to set ourselves apart by drawing up ESG solutions and placing them at the service of our institutional investors. By doing so, we aim to contribute to the construction of a more sustainable region and planet, creating long-term value along the way.

At the heart of growth and innovation you will find IFCs

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The COVID-19 pandemic has caused unprecedented disruption to the global economy, pausing trade and business, and plunging major economies into crisis. However, as we reflect on what has been one of the most tumultuous periods in recent history, we recognise that there is now an urgent need to help global business get back on track. With an added layer of complexity for businesses around the globe, this is the moment when International Financial Centres (IFCs), like the British Virgin Islands (BVI), can come to the fore as conduits to global growth, investment and trade. IFCs are able to help businesses navigate the uncertainties of an ever-evolving regulatory landscape and help businesses to thrive in more innovative and diverse ways. As the global economy starts to build back from the COVID-19 crisis, there are four key areas where IFCs can help support the ‘great reset’.

 

Supporting emerging entrepreneurs
It is expected that by 2030 the global middle class will reach 5.3 billion people, and the key to this growth will be the ability to cultivate start-up and entrepreneurial cultures and allow them to flourish around the world. The World Bank estimates that 600 million jobs will be needed by 2030 to absorb the growing global workforce. In emerging markets, most formal jobs are generated by small businesses, which create seven out of 10 jobs. IFCs are already helping young businesses – vital to a burgeoning middle class – thrive in developing economies. With many start-ups operating under conditions of greater uncertainty, as well as facing more unique pressures around capital and access to funding, ensuring business-friendly environments with stable and clearly stated rules and regulations is key.

While current times have only enhanced these immense pressures for businesses, with alignment to international standards and increasing use of technology giving rise to greater synergy in international business, IFCs have been able to provide fertile ground to help start-ups grow and upscale. For many years, IFCs have allowed small businesses to set up secure and robust business structures offshore, so entrepreneurs can run their business with greater agility and without fear of tripping over arduous rules or prohibitively expensive administrative costs in their home jurisdiction. The tried-and-tested structures of IFCs have given those setting up a new business in these jurisdictions, as well as investors, more confidence to help a company grow. IFCs are therefore increasingly becoming an essential conduit for emerging entrepreneurs, making it easier for them to succeed.

 

Enabling sophisticated businesses
Alongside providing entrepreneurs with access to these tried-and-tested structures, IFCs have developed increasingly sophisticated mechanisms that have also enabled institutional investors and businesses to benefit from the ability to custom-build entities and transactions to meet their needs. In an industry report recently published by Vistra, which looked at global trends in international finance, the findings showed that “offshore centres have been some of the fastest to cater to the needs of increasingly sophisticated clients.” IFCs have developed complex business infrastructure and are specialised in providing financial services, particularly those that are vital for capital flows and facilitating inbound and outbound investment. For example, it is well noted that IFCs like the BVI are an important hub for overseas investment and have played a major role in the growth of a number of Asian economies, especially China.

Additionally, in an era of unprecedented economic uncertainty, mitigating risk and keeping assets protected from greater loss will play a hugely important part for many established businesses and their post-COVID recovery plans. IFCs provide a reliable and legitimate platform to facilitate cross-border trade and investment, especially with countries like China as we have seen with jurisdictions like the BVI. As China continues its remarkable recovery from the pandemic – which is forecast to be the only economy in the world to show positive growth in 2020, according to the IMF – IFCs will continue to play a vital role in this period of post-pandemic recovery for established businesses.

 

Championing the digital economy
One striking effect of the pandemic is that technological adoption and digital innovation have rapidly accelerated in all major economies. Despite initial hurdles, we have seen the continuation of deals, transactions, and other financial activities that have been made possible through adapting to digital methods and by using digital platforms. However, for those economies that are lagging in innovation, there is now a greater urgency to innovate digitally – not only to overcome the barriers presented by COVID-19 but also to keep up with the irreversible technological transformation that we’ve seen throughout the pandemic. For example, China has recently carried out trials of its digital currency and is actively pushing towards a cashless society. We have already seen that cryptocurrency has fast become a symbol of ‘stateless’ digital economies.

The potential for digital assets and a new digital economy is huge for the unbanked population in Africa, Latin America, Asia and the Middle East

By 2030, it is likely that currency managed on distributed ledger technology will be commonplace and could be instrumental in driving global business. The pioneers of stateless, digital assets are seeking jurisdictions that support and encourage these new asset classes. And IFCs are leading the way in developing and facilitating this new global technology.

A recent report found that the BVI, Cayman Islands and Singapore were the top three jurisdictions of choice for Initial Coin Offerings in the world in 2018. Moreover, another recent study found that 80 percent of all crypto hedge funds operating in 2019 were domiciled in IFCs. The potential for digital assets and a new digital economy is huge for the unbanked population in Africa, Latin America, Asia and the Middle East. We’re already seeing how mobile financial technology is revolutionising the movement of money around Africa, for example.

As innovative incubators for these technologies, IFCs can have a hand in making financial services available to billions. Furthermore, IFCs provide agile, sophisticated yet cost-efficient financial products within a supportive regulatory and business environment. For example, the BVI’s “incubator” funds, which target small start-up funds, allow clients to attract and pool a small amount of investment and manage it through their own fund while avoiding high administrative costs. These are also well suited to the digital fund space. These incubator funds enable a new manager to get established without having to appoint local directors, therefore speeding up the entire process significantly.

 

Adaptive regulatory environment
IFCs have a proven resilience and ability to respond to new regulation. As uncertainty and complexity define the growth environment in 2020, the importance of IFCs in exercising this resilience and adaptive regulatory regime to facilitate the formation of cross-border entities and guarantee strong shareholder protections cannot be overstated. Those within the industry recognise that in order to maintain a position as a leading IFC, there needs to be a strong track record of effective regulation. IFCs are often the first adopters of international standards set by global regulatory bodies, such as the Financial Action Task Force (FATF) and the OECD, and have often achieved a higher compliance rating compared to other financial jurisdictions around the world. The trusted and proven structures and neutrality of IFCs are able to provide businesses with greater security and confidence, with such structures also helping to enable economic stability and monetary benefits too.

According to the industry report by Vistra, for some clients, increased regulation is actually becoming a draw when choosing a jurisdiction. Therefore, in this age of continued uncertainty, businesses are finding reassurance in moving to jurisdictions that have robust regulatory systems. IFCs are also taking the lead when it comes to regulatory innovation, and understand that if we are to truly harness the power and opportunities of fintech, existing policies need to be updated and in line with a sector that is evolving fast. For example, when it comes to cryptocurrency or crypto-assets there is no bespoke regulatory regime at present, and most transactions that take place hinge on trust of the underlying technology. However, this is still a relatively new space and as adoption grows, there is an urgent need to regulate the sector in order to reap the benefits of crypto-technology and to foster good governance.

This is why the BVI is actively investing in regulatory innovation and recently launched its Fintech Regulatory Sandbox, joining many other IFCs that have been quick to establish regulatory sandboxes. This initiative enables fintech businesses to test new fintech products in a controlled environment and within a bespoke supervisory framework while protecting market participants. The process is designed to assess whether new financial products are compliant with existing systems and to help develop targeted regulatory responses. Initiatives like these are helping to stimulate innovation and leverage technology to deliver new financial products and services that improve business processes.

 

A key role in the ‘great reset’
IFCs are a sound platform for business establishment, growth and diversification and will be crucial to help stimulate emerging and developed economies in the next decade. As we have seen, a contributing factor to China’s economic growth has been due to IFCs like the BVI, which have continued to facilitate a large percentage of cross-border trade and investment among Asian companies – a trend that is only set to increase. As we look ahead and plan for business and economic recovery, we must continue to champion the unique facets of IFCs, from their ability to foster international business partnerships to their capability of incubating and supporting the growth of innovative financial technologies. In doing so, IFCs can play a major role in the ‘great reset’ in the post-COVID-19 era.

Embracing the new normal in the Philippines

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The year 2020 was expected to be a catalyst to economic growth, with even the World Bank citing the Philippines as having one of the most dynamic economies in the East Asia Pacific region, rooted in strong consumer demand, supported by a dynamic labour market and strong remittances. “Business activities are buoyant with notable performance in the services sector including the business process outsourcing, real estate, and finance and insurance industries,” reported the World Bank. These opinions were grounded on sound economic fundamentals and a globally renowned competitive workforce.

However, with the negative effects of the global pandemic on the economy, said projected growth has significantly slowed down in 2020. In fact, the Philippine economy fell into recession as GDP spiraled down by 16.5 percent in the second quarter of 2020 from the previous year, according to the Philippine Statistics Authority. Nonetheless, economic growth is projected to slowly rebound in the latter part of 2020, with an expected 7.3 percent contraction, and then further improving in 2021 and 2022 on the back of expected global improvements as well as the election-related spending boost in 2022.

 

The non-life insurance landscape
In 2019, total gross premiums written from the local non-life insurance sector grew by 13 percent to P92.479 billion from P81.469 billion in the previous year. However, as a result of the pandemic, the insurance industry, specifically non-life, is expected to be adversely affected by the decline in economy as well as its key industry drivers. With over half the net premiums generated from motorcar premiums, the non-life insurance sector is expected to take a huge hit on its premiums portfolio, especially with new motorcar sales taking a huge 39.5 percent drop as of August 2020, year-on-year. Similarly, other key industry drivers such as the property, stock market, tourism and travel sectors, among others, all suffered huge setbacks. Nonetheless, with lower claims incidences during the lockdown period and with continued work-from-home (WFH) arrangements until the end of 2020 for most companies, vis-à-vis, lower operating expenses, these may still balance off the expected drag in premiums, thereby resulting in continued profitable operations for the year. Further, with the mandated increase in capitalisation implementation in recent years, the remaining industry players are financially strong and are expected to survive.

We continue to grant full salaries and benefits to all, from the start of this pandemic up to the present day

Interestingly, the pandemic has forced insurance companies to embrace the changes of the new normal – digitalisation of operations was among its top priorities. As indicated in the past by the insurance commissioner, innovations in technology are changing the industry almost imperceptibly. At present, the industry has been thrown into a ‘black swan’ situation whereby most industries, excepting some establishments belonging to what we broadly now call the essential goods and services sectors, have been immobilised.

The insurance industry was considered non-essential and was thus not operational for several months, which propelled insurance companies to embark on more aggressive initiatives towards digitalisation of operations. The insurance commissioner has been pro-actively supporting the industry by extending submissions of regulatory reports and encouraging assistance programmes to employees and sales forces that are dependent on commissions for their livelihood. Equally important, the commissioner allowed insurance companies to implement sales initiatives through digitalisation, information and communication technology, or any similar technological platforms, subject to regulatory requirements.

 

Turning challenges into opportunities
While every industry and company is subject to shifts in political, economic, social and environmental conditions both globally and locally, it is the goal of Standard Insurance to continuously improve such that opportunities continue to open for us not just locally but globally, and not only in non-life insurance but in adjacent business as well.

Standard Insurance has always been prepared for catastrophic events, so when this pandemic happened, we were able to smoothly shift to remote working arrangements. Our in-house developed systems are all digital and integrated online. More importantly, all our systems are already in the cloud, which allows us to access systems from anywhere and makes the whole cycle of insurance operations possible.

We have assigned our management to one of two teams, each of which could run the entire company on its own, if it had to. As early as February 2020, the full cycle of operations was tested by these two separate management teams, with success, ready for implementation. Hence, Standard Insurance has been online and connected and has been one of only a few that were able to continue to work, immediately after the lockdown, and without a single day of missed operations throughout the pandemic. Continued interactions with brokers and intermediaries as well as internal communications coordination were done via video conferencing and other social media platforms.

To date, our digital analytics show that we are number one in terms of engagement in company websites and social media platforms compared to our competitors.

However, being a non-essential industry during the quarantine period, motorcar sales and insurance premiums generation have been a challenge. Collections likewise slowed down by approximately 20 percent of normal levels initially, but eventually picked up after implementation of the following measures the company mandated to mitigate the negative effects of COVID-19: We defended and increased our renewal ratios, we increased market share and we also maintained proactive collections.

In line with this, the company initiated several critical initiatives that will further improve its renewal business and get more switchers (business from competition) as well as other sales-related initiatives. Aggressive collection initiatives were likewise stepped up and cost-cutting measures have been put in place. In worst case scenarios, the TTC complex in Naic, Cavite, with housing facilities, telecommunications and wireless fidelity facilities, serves as a key business continuity planning (BCP) site outside Metro Manila. Further, all our affiliated companies’ business process outsourcing (BPO) offices can be used as BCP sites and we have in fact tested this possibility, with ease. These are offices of the Insurance Support Services International Corporation (ISSI) and Petsure, whose offices are located in Taguig, BGC and Quezon City, a total of four separate offices within Metro Manila, all well equipped with connectivity and space.

To maximise our online reach, our systems design and development team made our company website an e-commerce site, over and above the usual company information, products and services, among others. Our front office is able to sell e-policies to our clients and file claims online. All filed claims are automatically uploaded to our claims module and our claims front liners are notified immediately via our online platforms.

MyStandardOnLine (MSO) is a platform where all existing clients from the front office, or any intermediary platforms, can register, monitor, renew and pay policies. We have also launched Standard Prime, a loyalty membership programme that provides our clients exclusive offers, freebies and discounts.

As a game changer for our sales intermediaries, agents and sales associates, Standard Insurance launched ISSIoffice, an internally developed insurance office application linked to our major systems. It is an application software, using a smartphone or any telecomputing device, where the whole insurance cycle can be done, from negotiations between an intermediary and the client, to consummation of transaction and payment of premiums, as well as filing of claims and servicing of claims filed. ISSIoffice has an iteration capability where updates can be made online. Ultimately, we hope to gain market share with this tool’s prevalence and ease of use.

 

Cybersecurity in a pandemic
With WFH the new normal, the use of different technological platforms have increased the risks of cyber-attacks and data security issues. Hence, the cybersecurity team was elevated to play more important and visible roles to keep the business online without disruptions, to combat and protect the company from possible operational risks.

The team extended the use of our CATO mobile VPN software to both company-issued and personal computers and laptops to ensure safe usage. An alternative VPN portal from the Amazon Web Services (AWS) cloud is likewise provided for our business partners to use. Company-issued laptops come with our standard security configurations and endpoint security software, capable of detecting and stopping malware, as well as preventing the resurgence of dangerous ransomware that had victimised businesses even prior to this pandemic.

Furthermore, since online meetings are also part of the new normal, there is a surge in the use of video conferencing platforms in conducting collaboration meetings and training sessions, as well as internal and external communications.

Email communication now requires bigger storage, as all transactions, documents and files go through this medium. As such, the infrastructure team regularly reviews usage and upgrades user accounts as and when needed. Even with security measures in place, hackers are still finding ways through cyberspace to destroy, steal or cause harm. To combat this, the team regularly sends its security advisories to all company users, reminding them to be vigilant and strictly follow recommended protocols. By regulating the behaviour of our associates with reference to the use of devices, network and the internet, the cyber security team steadfastly endeavours to protect our company assets, our systems and our data.

 

Crucial role of human resources
Similar to our cyber security and systems group, our human resources department was also in full gear from day one of the pandemic. They were tasked to oversee the initiatives relating to the health and well-being of its more than 1,400 associates nationwide, thereby avoiding any operational breakdowns. These included extension of monetary assistance well within the first month of lockdown. During this time, some of their family members were on ‘no pay, no work’ arrangements so that aggregate family finances were drained and insufficient to meet their respective family needs.

Teleconsulting services and other related services, co-ordinated with our health insurance provider, were given. There was close monitoring of any suspected COVID-19 cases, and support for this, including contact tracing and assistance during quarantine, was immediately implemented. Shuttle services for associates working from the office as well as protective equipment were provided. To date, WFH arrangements are still highly recommended. More importantly, we continue to maintain a full complement of associates, without the need for retrenchment. We continue to grant full salaries and benefits to all, from the start of this pandemic up to the present day. On the whole, Standard Insurance has been able to continue business operations, maintain the team’s productivity, protect the well-being of its people and provide financial assistance to them when needed.

Core Europe: the art of how to prevail in retail banking

Posted on by itsupport

We are living in one of the most dynamic and transformative periods of banking. These developments have been at work for some time and are not merely a result of the COVID-19 health crisis. On the contrary, the pandemic serves as an accelerator and catalyst for this transformational change. The traditional banking model is defined by persistently low profitability, structural cost challenges, a legacy approach to technology, and ever-changing customer behaviour. A focus on simplification, technology and efficiency will serve as key levers to help consolidate the banking landscape.

 

Banking in the DACH region
Almost no nation has been spared the economic consequences stemming from the COVID-19 health crisis, which was characterised as a global pandemic by the World Health Organisation (WHO) in early March last year. Early on, the crisis triggered unprecedented market volatility and uncertainty not seen since the financial crisis. The COVID-19 outbreak has led to varying responses, and at varying speeds, from governments across the globe. The developments this year will undoubtedly require a rethink of how businesses operate and engage with customers.

If we turn our attention to focus on Core Europe, the situation for banks in the DACH region (made up of Germany, Austria, and Switzerland) looks particularly interesting. Pre-COVID-19, the average return on equity for German banks was below three percent; while Austria consistently ranks as one of the most densely banked countries in Europe.

We are convinced that simplification and efficiency are key differentiators across the European banking landscape

The region is at times mischaracterised as being structurally unprofitable for banking. A good deal of the below-average profitability of banks in the region can be attributed to cost challenges, a legacy approach to technology, overly complex business models, and, to a certain degree, a fragmented banking market. We see this as an opportunity, in terms of applying an industrialised approach to banking, as well as presenting further opportunities for consolidation. More importantly, our focus is on the strong macroeconomic backdrop of the region, which helps to inform our view. The DACH region is a market with over 100 million people, roughly one-third the size of the US, with solid underlying macroeconomic fundamentals and ample fiscal capabilities, more true today than at any other point in time.

 

Robust government crisis responses
In the DACH region, governments quickly implemented effective policies to contain the spread of COVID-19 to avoid putting their healthcare infrastructure at risk. Austria, which is the core and foundation of our business, implemented a lockdown affecting all businesses with the exception of critical infrastructure earlier than most countries in mid-March, and a second lockdown, in early November. DACH countries have gone to great lengths to support their economies and have put in place extensive stimulus packages. In Austria this amounted to over €50bn, or approximately 13 percent of GDP, while in Germany the fiscal stimulus package amounted to over €1trn, or approximately 30 percent of GDP.

This was possible as a result of the DACH countries’ strong fiscal positions, with a relatively low debt-to-GDP ratio and low levels of both consumer debt and homeownership when compared with Anglo-Saxon countries. These are all good macro factors from a retail banking standpoint and should translate to a lower cost of equity, given the stability and low volatility of the region. With a strong macroeconomic backdrop, a stable legal system, a stable regulatory environment and low levels of consumer indebtedness augmented with strong risk management, conservative underwriting and an industrialised approach to banking, we believe this to be a formula for success in retail banking across the region.

 

Our role as a bank in times of crisis
It goes without saying that BAWAG Group’s business will forever be changed by the events of 2020. Despite the aforementioned all-too-familiar challenges, we see many opportunities across the European banking landscape. Defining core competencies, focusing on core markets, being laser-focused on a handful of core products and services, maintaining a conservative risk appetite, and simplification are keys to driving consistent and profitable growth. BAWAG Group entered the crisis from a position of strength, having transformed the business and having kept its strategy consistent over the years. More than ever, we see a commitment to simplification and efficiency as key, as well as greater caution and prudence in order to address the challenges ahead. As a bank, we have played a critical role in keeping companies afloat and guaranteeing the financial security of our customers. We refocused our efforts on the well-being and full service of our customer base during these difficult and challenging times. Our digitalisation and simplification efforts in recent years are paying off, as we are able to ensure smooth and consistent operations, stay focused on execution, and most importantly, deliver for our customers and local communities.

During the lockdowns, all branches in Austria and Germany remained open with strict safety measures and distancing rules in order to protect our front-line employees. We quickly launched a simplified online application process for payment holidays for our customers and provided immediate access to government guarantee programs for SME clients. The past few months have also triggered a significant shift in how we engage with customers as well as how our team members work together. The post-COVID-19 workplace and operating infrastructure will look very different to what it was before 2020. Since the onset of the pandemic, over 75 percent of our employees have been working from home. We have decided that a flexible working environment will be permanently incorporated into our operating framework. This will provide for a more flexible and dynamic work environment, improved work-life balance, and a continuous reassessment of our overall operating infrastructure.

 

Focusing on what can be controlled
For BAWAG Group, 2019 was a record year, delivering net profit of €459m, a return on tangible common equity of 16.1 percent and a cost-income ratio of 42.7 percent.

For the first nine months of 2020, BAWAG Group reported a net profit of €201m, a return on tangible common equity of 9.6 percent and a cost-income ratio of 43 percent. The underlying operating performance of our business remained solid with pre-provision profits of €495m; allowing us to take a conservative and prudent approach to provisioning given the uncertainties in both the scope and length of the pandemic.

Despite the challenges stemming from the COVID-19 crisis, we continued to transform our business and focus on the things that we control, accelerating initiatives to further simplify our operations. Specifically, we have taken the next strategic step in consolidating our domestic and international retail and SME businesses, focusing on providing standard products and services across the DACH region. We are combining our strengths across the company to centralise and enhance operations; this will ultimately result in greater simplification and most importantly, an enhanced customer experience.

 

The strategy of being simple and efficient
We are now looking into the future as the changes we have experienced over the course of the last year due to the crisis will serve as a catalyst for accelerated long-term changes across the Group. We are going to do our best in continuing to navigate these uncertain times, ensuring that we protect our employees, support our customers and local communities, and protect and grow our franchise. Our goal is to always maintain a strong capital position, stable retail deposits, and a low risk profile. We do this by focusing our strategy on mature, developed and sustainable markets while always applying conservative and disciplined underwriting standards across all of our products.

We are more convinced than ever that simplification and efficiency are key competitive differentiators across the European banking landscape.

Defining core competencies, being laser-focused on a handful of core products and services and continuously simplifying our business over the years has allowed us to establish a highly efficient business with a cost-income ratio in the low 40s. This generated mid-teen returns pre-COVID-19 and healthy pre-provision profits. This gives us the flexibility to proactively and prudently address potential risks arising from a severe economic downturn. We will continue to play our part in supporting our customers and our local communities while protecting and growing our franchise in the times ahead. We will focus on the things that we control, continuing to drive operational excellence and disciplined and profitable growth.