Hope you and your family are doing well in this difficult period.
Staying healthy is most important today and at the same time it is a good time to reflect and think about the future.
We are all searching for the “next normal”. Navigating towards new and better times. How would that look? In these uncertain times, we would like to share some inspirational articles we came across lately. To support you and hopefully give some guidance.
Take care and stay safe.
Kindest regards,
Diederick van Thiel, CEO
Rosali Steenkamer, CCO
Food for thought
A majority of households and businesses will be negatively affected by the unprecedented nature and extent of the current health and safety measures.
The financial impact of quarantine measures and the stress will be especially acute for those who are already in debt. These individuals will likely need further support from banks to support day-to-day liquidity needs through credit.
From this credit perspective, banks should rapidly identify most affected sectors and customers to understand how they can be most supportive to their clients and community. Some are already considering relaxed payment schedules and availability of credit.
In “Leadership in the time of the coronavirus: COVID-19 response and implications for banks”, McKinsey strongly suggests segmentation of the client base to maximize the effectiveness of the support. This will include proactively engaging with clients to understand their situation, segmenting portfolios based on expected needs, developing an internal view of where support measures will be the most effective, and adjusting risk-mitigation actions for early delinquencies and for nonperforming exposures.
Supporting clients in these critical times will deepen customer relationships and reaffirm the role of banks as key enablers of the economy.
Due to the big uncertainty, consumers have financial stress. On the short run, we think lenders creating new approaches to bring relief for consumers smacked by COVID-19's growing economic impact will help. The Financial Brand published an inspiring overview of various credit reliefs that should work.
For the longer term, we suggest questioning yourself:
How to use new technologies like AI and advanced analytics to better predict financial risks in your customer base and to develop mitigating actions for that?
How to enrich credit assessments and convert new customer segments with psychographic profiles and alternative data like PSD-2 transactional and biometric data in order to implement smarter credit decisioning?
How to leverage on the big data explosion and add more meaningful data on customers that will generate additional insights?
Think forward
The Think Forward Initiative aims to empower people to make better financial choices because 42% of all EU households, approximately 215 million people, are not financially empowered and have difficulty to make ends meet.
AdviceRobo is proud to be selected in the Think Forward Initiative Growth Track 2019/2020 to collaborate with the TFI experts, mentors and research institutes to create a big change for many people.
Through valuable research, TFI gets a better understanding of people’s needs and struggles related to their financial lives. How do people cope with problematic debt? And why do people find it hard to save money for a rainy day? The TFI Research Hub generates such insights.
For inspiration, we share a study on how to decrease financial scarcity.
People living in financial scarcity can hardly relax. They make difficult trade-offs all the time, juggling various expenses to make ends meet: to pay the mortgage, feed the kids, fulfill other basic needs. Matching the debt collection more closely to income streams, might increase payments and decrease financial scarcity.
In Banking Outlook 2020, Deloitte says “Leaders of banks need to look beyond banking in anticipation of disruption to their industry”. Although published before COVID-19, this publication offers interesting views about the future.
Deloitte forsees a possibility of long-term stagnation, low inflation or deflation and near-zero or negative interest rates, particularly in Europe, which would hamper the growth potential and profitability in the banking sector. With COVID-19 it might be even more relevant to keep the following key take aways in mind...
Retail banking
Products need to offer a holistic focus on customers' financial affairs. Providers should prioritise customer experience through connectivity to other apps and making advice "contextual and real-time".
Risk
Banks' abilities to assess and mitigate risk is likely to be tested. While new technologies are likely to be prominent in this area, they bring with them risks of their own. Relationships with third-party providers could open chinks.
Technology
Fintechs will become mainstream. Banks will need to overcome the burden of legacy systems to unlock the potentials of AI and cloud, harness the power of data and move from product-centric to customer-centric business models.
Let’s fight the crisis together!
Assessing risk of new customers is even more difficult in this time of COVID-19. Probably, every lender already had some doubts about the reliability of traditional data in risk assessment. Due to the pandemic traditional risk-management becomes somewhat obsolete. It might not help on the journey to the next normal we all are searching for.
“The core question in this time of crisis is if the customer is going to pay back his loan! Looking at personality and behaviour of people when it comes to money, gives a deeper, objective and full picture of a customer’s likelihood to pay back. The challenge now for lenders is to enrich credit assessments with non-financial data that says something about the ability and willingness to pay back. That will make credit decisioning smarter, more reliable and future proof. In these disruptive times, using alternative credit scoring will help granting credit to self-employed and SME’s across the world”, says Diederick van Thiel, CEO of AdviceRobo.
Because of our years of experience with digitization advice as well as implementation in the financial industry, the AdviceRobo executives team could support you. We are happy to schedule a call to discuss the challenges you face in these disruptive times, especially when it comes to manage risk in a smart way. No strings attached, just thinking along with you to kickstart your voyage towards the next normal.
AdviceRobo is one of global’s most innovative financial risk specialists that offers artificial intelligence and alternative data driven risk services to their customers. AdviceRobo supports Tier 1 lenders, lending platforms and online retailers with innovative risk solutions to significantly grow their operational profit. Founded in 2015. Offices in The Hague, London, Paris and Tokyo.
