Main Category: Blog

For every business, one of the most important goals is bringing in new customers. You would agree that the bigger goal is holding the customers for a longer period. Businesses need to constantly devise strategies to acquire and hold the customers onboard to be successful in the long run. Digital disruption and social media have brought more opportunities for the customers and brands. At the same time, this also intensified the competition in the market.

In this era, what makes customers stay with the brand for a longer time? Is it the price, product or service, brand, awareness, loyalty reward program, customer experience or marketing strategies? This is an ever-changing landscape.

In this article, you will get to know about the impact of brand intimacy on holding customers for a longer period by building brand intimacy. You will also discover ways to build brand intimacy to unlock next level of business growth.

What is Brand Intimacy?

Brand intimacy is the emotional science that measures the bonds we form with the brands we use and love. – MBLM

Why is Brand Intimacy matters?

Daniel Kahneman mentioned about the dominant role of emotional and intuitive processes on the human mind in his book ‘Thinking fast and slow’. Human beings use emotions as their first natural choice to take decisions.

As per Natarelli M. (2020), We now know that up to 90 percent of the decisions we make are based on emotion. Almost every decision we make is based on emotion, not rational thought, and measured consideration. The same is true for the consumer while taking purchase decision about the brands.

Hence, brands making a more emotional connect with the consumers are more likely to grow faster compared to other brands.

As per Brand Intimacy Study 2020, the most intimate brands have continued to perform better than the S&P and the Fortune 500 for ten years running when it comes to profit, revenue and other key financial indices. These percentage differences are significant and indicate intimate brands generate millions more dollars in revenue and profit annually and over the long term.

The top five intimate brand in USA of 2020 are – 1st Amazon, 2nd Disney, 3rd Apple, 4th Ford, 5th Jeep.

Figure 2- US Top 10 Most Intimate Brands 2020

Advantages of Brand Intimacy

• Focuses on the emotional science that drives on-brand behaviors and purchase.
• Promotes customer-centricity by enhancing bonds based on reciprocity.
• Demonstrates superiority as intimate brands outperform the S&P and Fortune 500 across profit and revenue.
• Consumers are more willing to pay a premium for highly intimate brands than for brands with lower levels of intimacy.

How is Brand Intimacy can be developed?

There are three simple steps can be taken to build the brand intimacy –

1. Understand Where You Are Today

According to Daye D. (2020), the first step in building an iconic and thriving brand is to measure the emotions you are eliciting among your customers through all the touch points.

2. Identify Where You Need To Go

Identify the emotions that your brand wants to be known for.

For example, “Apple not only understands emotions, they use emotions as the beacon to guide their strategy and marketing. Apple has identified its core emotions it wants every customer to feel across every single touch point with which they engage.

The four emotions that Apple aims to elicit among customers are delight, surprise, connection, and love. Whether it is a new product like the iPad, the interface and UI of the AppStore, or the customer experience of the Genius Bar, Apple consistently targets those four emotions to drive long-term brand growth through emotional connection with those that are most important to its future” Daye D. (2020).

3. Bridge The Gap

“Once brand’s core emotions are identified, the key to building and growing the brand is executing every interaction with relentless consistency. The key to relentless consistency is to uncover which of your brand elements (i.e. colors, pack shape, logo lockup, brand script, brand characters, taglines, package shape, etc.) evoke the brand’s ‘core emotions’ and then ensure that these elements are executed across every touch point with relentless consistency” Daye D. (2020).

For example – Decathlon a French sports retail company measures the customers emotions after every sale through a digital monitor. They focus on delighting every customer. It forms the core of their culture. They have trained their staff to act like a coach rather than a salesman. They focus on understanding their needs of customers to recommend the best solution available. This gives decathlon an edge for building emotional bonds with their customers. They also engage customers by organizing various sports activities and adventures at regular intervals. As a result, Decathlon overtakes Adidas, Nike in sports gear retailing in India.

Conclusion

Emotions continue to remain the main influencer for arriving at the buying decision. The digital disruption and social media have brought consumers and brands closer to each other. The brands that are successful in build brand intimacy are more successful than their competitors in the long run. The entrepreneurs, business leaders, marketers and researcher have a great chance to emotionally engage with customers and create a win-win situation.

Gaurav Warman

References:

• How to Build Customer Loyalty with Brand Intimacy (CxOTalk #354), Available at – https://youtu.be/EB3JEEJXHxI [Accessed on 31st Dec 2021]
• Amazon ranked #1 company for “brand intimacy”, Available at – https://youtu.be/SZF2uOe8ifY [Accessed on 31st Dec 2021]
• Vogel K. (2020), 10 customer engagement strategies from real small businesses, Available at – https://www.ringcentral.com/us/en/blog/customer-engagement-strategies/, [Accessed on 31st Dec 2021]
• Natarelli M. (2020), How Emotion Drives Brand Choices And Decisions, Available at – https://www.brandingstrategyinsider.com/how-emotion-drives-brand-choices-and-decisions/, [Accessed on 31st Dec 2021]
• Daye D. (2020), Igniting Brand Growth Via Emotional Connections, Available at – https://www.brandingstrategyinsider.com/igniting-brand-growth-via-emotional-connections/, [Accessed on 31st Dec 2021]
• Malviya S. (2019), Decathlon overtakes Adidas, Nike in sports gear retailing, Available at – https://economictimes.indiatimes.com/industry/services/retail/decathlon-overtakes-adidas-nike-in-sports-gear-retailing/articleshow/68804024.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst, [Accessed on 16th Sept 2021]

Technologies are transforming the nature of work and its environment. The fact that level of input Technology has on our daily activities and life is growing in tremendous ways.
Whether we feel it and act to it, or just stay passive such input would occur.

How many of us were skeptical about online shopping and using our own credit cards as a method of payment before the COVID-19 pandemic? and how many were pushed to experience it during the pandemic and yet found it to be easy and safe?

This is just a small example of such an effect on us as a consumer and how our behavior as consumers are changing.

Such acceleration of adaptation to the new technology by the consumers has put most of the organizations in serious challenges toward their abilities to adapt and respond at the same speed as what is happening out within their consumers and competitors.

These challenges can become threats as well if they have not been resolved properly. This may lead to the loss of the clients and the business associated with them.

This issue leads us to a serious topic:
Ability to define and anticipate the consumer’s requirements and engage with them to ensure the retention and sustainability of the business within the work environment.

The question here is how can we be upfront in our thinking and what kind of skills do we need to learn that can equip us with such abilities?

Based on many studies and research that has been done, we can define some of these practices that would help us to acquire such capabilities.

1-To look ahead when defining critical rules.
We need to define what are the critical rules that are contributing to the implementation of our strategy. We need to rethink those needed skills with an increasing tech-enabled future and develop these tools in the current workforce. This may result in changing roles of people as we start to adapt to technology.

2-Ability to re-assess the nature of work and the needed skills and capabilities.
This will lead to identifying our assumptions of success of our people to perform within the new nature of work and accordingly to start building such capabilities within our people.

3-To focus on management development.
It will be needed to keep the development of management for re-skilling to equip them with the requirements of the new roles usually those supported by new technology.
Studies and research show that more than 60% of companies’ future roles can be filled with current employees, assuming that adequate programs are in place.

4-It is most important to get the people engaged with the technology.
The reason is that many of these technologies are AI-enabled processes.
The more we are shifting to the processes that can be done by machine, it means that those tasks previously used to be done by the employees will be replaced by the machine. People would need to understand the new roles to align themselves with the results generated from the machine.
We would like to leverage the technology with the alignment of the people to result in superior service to our clients and retain their loyalty.

5-We need to anticipate what the future managers would need in a work environment.
The future managers would be looking for a workplace with a real value proposition and this is different than what used to be earlier in the past.

As per the US Bureau of labor statistics by 2030 Millennials will make up 75% of the workforce.
This generation who are tech-savvy would need to have flexible schedules, diversity in the workplace, engagement, autonomy, and a meaningful connection with their employers.
This means we need to allow focus on factors that are most critical to retaining and inspiring our employees: A culture of inclusion, a workplace that makes getting things done fast and easy, and a top-notch rewarding system that evaluates contribution and productivity.

In conclusion, we need to agree that technology is fundamentally changing the nature of work. This means that to secure our future with such changing environment in the workplace driven by the latest technology, we need to act today to create an environment that inspires the people within the organization and allows them to excel with their future talents and abilities. Such an approach would allow us to retain our talented people and attract future stars to the organization in order to win the future game.

Osama Al Rahma

The year was 1983. It was a busy semi-urban branch of the Union Bank of India.

In those days, when technology had not yet ‘upgraded’ the banking transaction procedures, a customer, to draw money from his account, had to present his cheque at the ‘Token- Counter’, get a token, and present it at the cash counter, to collect the cash.

There was a commotion in the banking hall, in front of the token counter. An elderly customer was pleading with the bank official at the counter. His plea was that he was given Token no.13, and he wanted to get it changed, as he felt 13 was a ‘bad omen’. He was drawing the money to buy ornaments for his daughter who was getting married. 13 was ominously a bad number; since he was to use the money for an auspicious purpose, he wanted to get the Token number 13 changed. But the Bank official was adamant, explaining that Tokens are issued seriatim, in the order in which cheques are presented at the counter. He was telling the customer: “You came, and Token 13 was in line to be issued”. The customer was not pacified: “I cannot use this token 13 to draw cash for my dear daughter’s good”. Other customers in the banking hall were also getting into the fray. The banker: “it is only superstition that number 13 is a bad omen.” Then another customer blurted out to the Banker. ‘Your Bank is itself superstitious in that your head office building has dropped 13 from the floor- numbering’.

[ In the multi-storeyed ‘Union Bank Bhavan’ – the Head office of the Bank- at Nariman Point, Mumbai, after the 12th Floor the next higher floor is marked 14th floor].

The aggrieved customer finally did not collect the cash; he went back and sent a request through another bank to close his account and transfer the proceeds to that bank.

‘Superstition’ or ‘belief founded on strong faith’ is a conflict in perception, and I have narrated this small incident to suggest how ‘perception’ plays a prominent role in customer service or disservice in a service industry.

What is ‘Perception’?

When we look at an object, science tells us, that light rays from the object get focussed on the Iris of our eyes. And we ‘see’ the image of the object. What happens thereafter? The image is passed through the optic nerves to the brain where our collective repository of ‘data’ – experiences, assumptions, interpretations, etc. process the image to ‘perceive’ it in a highly subjective way. ‘Seeing’ is only gathering the impression of an image and ‘Perception’ is its ultimate processing and presentation in totality.

Why perception is important in customer service?

For a service provider, understanding the ‘need’ of a customer and responding to the same positively form the basic quality of service. Positive response emanates from ‘empathy’ – a cardinal concept in customer care.

To understand a customer’s real need to be serviced, you have to put yourselves in his place and sense the requirement from his perspective (to know where the shoe pinches, you have to wear it on your foot!) and this unique perspective is the pattern of perception in which the customer visualizes and holds his need.

Understanding ‘customer’s perception’ is not just a pre-requisite for rendering good customer service; we will have to also constantly strive ‘to create a positive customer perception of our company’. Customer perception determines how your customers feel about you, whether they continue to do business with you, and whether they recommend you to their family and friends.

Experts suggest various ways to ensure that customers see your company in the best possible light. Let me quote some time-tested methods of understanding and influencing customer perception:

Quote:

1. Respond to customer feedback –
Most businesses collect customer feedback in some shape or form. But a study by ‘Qualtrics’ found that less than half of customers surveyed felt that their feedback resulted in changes.                       Taking the time to respond to and act on customer feedback goes a long way toward making customers feel that you care.

2. Interviewing customers

For more in-depth analysis, consider interviewing customers at different stages of their lifecycle. Why did they choose to sign up? Why did they choose to leave? How would they describe                  your product or service? Having a long conversation with customers will move your understanding beyond simple survey responses.

3. Understand who your audience is

You can’t be universally loved by everyone. Instead, understand who you’re trying to appeal to and what they want.

4. Recognize and reward customer-centric behavior

Because customer perception is influenced by every interaction customers have with your business, it means that every employee has a part in how your customers feel…..In order to create a             positive customer perception, you need to first build a customer-centric culture that empowers employees to act in the customer’s best interest….

Unquote

Let us take conscious efforts to align our understanding of our customers’ needs with their perception levels, and, extend services that would be lasting, lingering, and salubrious experiences really ‘felt’ by them.

“I’ve learned that people will forget what you said,
people will forget what you did, but people will
never forget how you made them feel.”
– Maya Angelou

Mathew Vilayil

Experts are indicating that the survival and growth of organizations are becoming challenging. The average age of an organization is continuously shrinking. These business challenges can be attributed to the VUCA threat (Volatility, Uncertainty, Complexity, and Ambiguity). Disruptive forces like technology and globalization are adding fuel to the fire. The laws of doing business are undergoing a change.

A few enlightened organizations have adopted a new approach called Intrapreneurship to thrive in business. Intrapreneurship helped organizations in defying the threats and disruptive forces. Apple is a great example. In this series of articles, you will learn about the potential benefits of Intrapreneurship for organizations. You will discover the success stories of intrapreneurship. You will identify methods of building a culture of intrapreneurship within the organization. So, keep reading.

We are witnessing intense competition among organizations worldwide. Consumer preferences are changing faster than ever before. A couple of decades back, consumers largely depended on TV and word of mouth to seek information for buying decisions. The information flow was either slow or moderate but not fast. It didn’t impact consumer behavior the way it is influencing today. Today information is readily available from multiple sources. Thanks to the rise of social media and smartphones. Consumers can access a plethora of information on products and services at the click of a button. They can easily compare products, and prices, to judge their value. The information gave tremendous power, transparency, and visibility to consumers. They are constantly discovering better deals on the internet. As a result, the ‘not-so-competitive’ products and services are moving out of the market sooner than ever. The responsibility to keep the product offerings competitive lies with the company’s top management. It requires them to act faster to align with the future. Innovation is a promising solution for organizations to stay competitive.

“Innovation is executing an idea which addresses a specific challenge and achieves value for both the company and customer”

– Nick Skillicorn

The harsh reality is that achieving innovation is easier said than done. Nowadays, innovation can no longer be managed by a few brainy people sitting in the top positions. Today’s demands for innovation are much greater than anyone’s imagination. Organizations need to increase the muscle power for innovation. Unless the leadership team encourages the employees to adopt an ‘entrepreneurial mindset’ to participate in the innovation process, it won’t be easy. The practice of developing an entrepreneurial mindset in employees is INTRAPRENEURSHIP. It was first coined in the 1980s by management consultants Gifford and Elizabeth Pinchot. Steve Jobs made it popular by practicing it. He once said the Macintosh team “was what is commonly known as intrapreneurship. A group of people going, in essence, back to the garage, but in a large company”.

When employees think and act like entrepreneurs, they become INTRAPRENEURS.

“Intrapreneur: An employee who is given freedom and financial support to create new products and services and systems who does not have to follow company’s usual routines and protocols”

– Richard Branson

Intrapreneurs think about increasing market share, introducing new products, reducing costs, building high-performance teams, and boosting profitability. Intrapreneurs have done wonders for organizations. Steve Jobs successfully practiced intrapreneurship at Apple in the 1980s, which made Apple the brilliant organization we know today. iPhone, launched in 2007, is a baby of intrapreneurship. A product that transformed the tech industry and the world. That’s the power of intrapreneurship.

Benefits of Intrapreneurship for organizations

There are several benefits of intrapreneurship for organizations. Some of them are –

Business Growth: It is a well-known fact that intrapreneurship facilitates innovation which leads to business growth. For example, in 2020, a portfolio that was theoretically invested in BCG’s most innovative companies would have performed 17% better than the MSCI World Index during the period 2005 to 2020.

Increasing Sustainability: A culture of intrapreneurship within the organization increases the sustainability of the organization. World Economic Forum (2021), indicated, “Intrapreneurial talent is a critical resource for corporate innovation as business increasingly pivots towards sustainability and purpose.”.

Gaining Mindshare: Organizations gain customers’ mind share with new and improved products. Brands make a special place in the mind of consumers when the products are continuously upgraded as per their preferences. For example, Apple launched its first model in 2007 and continuously upgraded its model to reflect consumer preferences at regular intervals. iPhone 14 is slated to be released by September 2022. Apple and its products have become an essential part of consumer’s life. This is being converted into the shareholder value and the business numbers. Since 2001, Apple stocks have risen by 15,000% and reached a mark of $3 trillion market capitalization. As of 2022, a total of 2.2 billion iPhones have been sold since inception.

Building Competitive Advantage: Building a culture of intrapreneurship is not a cup of tea for many organizations. It is very tough and requires dedicated efforts by the leadership team. It is both art and science. A visionary leadership team can achieve the dream of intrapreneurship. The doors of success are then wide open for the organizations. Hence it provides a competitive advantage to the organization that practices intrapreneurship.

Building Talent Pipeline: An intrapreneur is a rare breed of employee. It takes time to recognize them as intrapreneurs. The business growth is directly proportional to the number of intrapreneurs present within the organization. Intrapreneurship opens the door for building a talent pipeline for the organization. Behind every successful organization, there is an army of intrapreneurs. And such an organization does everything possible to attract, recognize, engage, and retain key people for the longer term.

Today Intrapreneurship is adopted by many organizations worldwide. Some prominent names are Google, NESTLE, Sony, 3M, ITC India, Infosys, and Starbucks, among many others. Success stories of intrapreneurship are very inspiring. It is worth it for the organizations.

Conclusion: Innovation is the key to survival. Organizations stand a great chance to survive and grow by building a culture of intrapreneurship. To unlock the full potential of intrapreneurship, entrepreneurs must encourage employees to think and act beyond their position and titles. The presence of more intrapreneurs within the organization can add tremendous value for all the stakeholders. It is a must in today’s intensely competitive world.

I hope you found the article quite useful. In the following articles, you will explore the more success stories, and ways to build a culture of Intrapreneurship. Stay tuned and do well.

About the author: Gaurav Warman is a Talent Development Practitioner with 15 years of experience in large organizations across Asia, Middle East, and the APAC region. In his current position as Head of Learning and Development at Lulu Financial Holdings in Abu Dhabi (UAE), he is successfully managing the talent development requirements for a large and diverse workforce across 11 countries. He has delivered over 1200 workshops, trained more than 45000 professionals, and developed over 300 training programs. He is passionate about topics such as behavioral psychology, leadership, and personal effectiveness.  He loves reading, listening to music, and cycling long-distance rides. He specializes in Executive Coaching, Talent Development, Leadership Development, Learning & Development, Quality Management, Project Management, and Keynote Speaking.

References

• https://studiozao.com/resources/intrapreneurship-examples
• https://unyscape.com/inspiring-examples-of-indian-intrapreneurship/
• https://www2.deloitte.com/content/dam/Deloitte/de/Documents/technology/Intrapreneurship_Whitepaper_English.pdf
• https://www.cablecenter.org/2022-innovation-report/employee-activation/
• https://www.ideatovalue.com/inno/nickskillicorn/2016/03/innovation-15-experts-share-innovation-definition/
• https://blog.cfte.education/the-5-most-famous-cases-of-companies-that-promote-intrapreneurship/
• https://www.macworld.com/article/677790/complete-guide-to-this-years-iphone-14.html
• https://kommandotech.com/statistics/how-many-iphones-have-been-sold-worldwide/#:~:text=2.2%20billion%20iPhones%20have%20been,total%20revenue%20generated%20by%20Apple.
• https://www.weforum.org/agenda/2021/03/how-change-making-intrapreneurs-can-provide-renewable-energy-for-businesses/
• https://gulfbusiness.com/apples-market-cap-briefly-tops-3-trillion-after-relentless-rally/
• https://online.jefferson.edu/business/what-is-an-intrapreneur/#:~:text=Origins%20of%20Intrapreneurship,consultants%20Gifford%20and%20Elizabeth%20Pinchot.

Bill Gates said in 1994 “Banking is necessary but banks are not”. Before we understand what is NEO Banking, lets to try to understand the fundamental difference between Neo Banking and Open Banking.

Open Banking:

The system of allowing access and control of banking and financial accounts through third-party applications is Open Banking. Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs). Moving towards open architecture is the next logical step toward sustainable growth that banks, insurers, and other FinServ incumbents are set to explore in the coming years.

Use Cases – Account Aggregation, Personal Finance Management, Instant Lending, Digital Onboarding, Money Tracking, International Payments, Remittances, New Account Opening.

Neo Banking:

A neobank (also known as an online bank, internet-only bank, virtual bank, or digital bank) is a type of direct bank that operates exclusively online without traditional physical branch networks.

Challenges in Current Banking Landscape:

1. Legacy Systems: Core Banking platforms have played a critical role in these banks’ daily operations, gradually, they are being viewed as problematic, as they inhibit progress. Today’s systems are more agile and, in some instances, modular as well. This is in sharp contrast to the monolithic architecture of CBS – changing one part of the larger system could have an adverse effect on other parts. This, in turn, necessitates lengthy impact assessments and testing, which would incur significant expenses.

2. Proposed Regulations: Globally, banks are now shelling out in excess of $270 billion per year on compliance and regulatory obligations. Regulations like PSD2 are mandating banks to open up their APIs for FinTech and external developers. This will lead to the prospect of banks losing a share of the customer relationship to FinTech.
https://www.varonis.com/blog/psd2

3. Tech Giants: Tech Invaders like GAFAM and BAT (Google, Amazon, Facebook, Apple, Microsoft, Baidu, Alibaba, Tencent) – are making huge dents in financial services markets across the globe. We have seen the growing traction of lending services by WeChat and Amazon in their respective regions. With their superior technology, access to huge data pools, and superior customer experience, these players are making serious inroads into the financial services ecosystem, and are changing the way people save, pay, borrow, and invest – thus powering their financial lives. The Chinese Moghuls – Alibaba, Tencent, and Baidu – already have a significant head start in their FinTech initiatives. These three players have ventured into most of the key FinTech segments, and are beginning to show signs of leading the next wave of FinTech.

4. Running Physical Branches: leads to higher cost and provides average customer experience. Tracking customer interactions with bank staff is also a challenge and is limited to the actual transaction that a customer would end up doing.

Digital Transformation can give these banks an opportunity to transform themselves. In order to reap the complete benefits of digital, banks will need to align their innovation strategy with the emergence of technology on all major fronts, i.e., business model, service delivery, operations, resources, and customer management. This presents Neo Banks as a key challenger to the existing large traditional banks.

Characteristics of Neo banks:

Licensed Bank: These are digital-only banks that have obtained a fully operational banking license. This enables them to offer certain products and services on their own, rather than through licensed banks. Some of these banks may still continue to offer services in partnerships with banks and other FinTech companies.

Traditional Banks Digital Initiatives: These are separate, stand-alone, mobile-only banks created by traditional banks; they use new-age technology to deliver products and services in a customer-friendly manner. These digital banks use completely different technology platforms compared to their parent banks, thereby fast-tracking the overcoming of hurdles associated with legacy architecture.

Over The Top: These are digital-only platforms that don’t have their own banking licenses. These platforms offer either a stand-alone product or a bouquet of financial products in partnerships with financial institutions/banks and FinTech firms but at a cost quite lower than of traditional banks.

Unique Use Cases solved by Neo Banks:

Chime lets users get paid early for up to two days with the Early Direct Deposit feature. It adds money as soon as it receives a notification of the transaction from the user’s employer and immediately transfers the funds to the user’s account.

Starling Bank has launched a marketplace banking platform, which integrates with financial services spanning pensions, savings, travel insurance, and mortgage brokerage. This helps Starling bank to provide users with access to a choice of third-party money-related apps & services and to create a network effect on both sides of its market.

Fiinu has developed an automated lending robot called Fiinuscore which – combined with PSD2 and Open Banking – will be able to provide small overdrafts to millions of people within the payday loan price cap. This will help consumers to minimize overdraft fees.

bunq lets users link one card to two bunq bank accounts at the same time using their patent-pending Dual PIN technology. Users can also switch the accounts linked to the cards.

Online bank Tangerine also offers its banking services (account opening, cheque deposit, account checking, etc.) to customers through cafés, pop-up locations, and kiosks. People can come to talk about their finances and savings goals face-to-face.

In a world where businesses would spend hours trying to reconcile all their transactions and be forced to juggle multiple tools to manage their finances, Open provides an easy solution. It helps collect payments, auto-reconcile transactions, make seamless payouts, auto-generate accounting reports, and do expense management, all on a single platform. Open also exposes developer-friendly APIs for SMEs & startups to integrate banking into their business workflows.

Rise – Banking for migrants in UAE

Engagement Options:

Direct Investment: As a part of their digital transformation journey, banks and financial institutions have started to make direct investments in various FinTech startups over the recent years.

Strategic Partnerships: New technologies of startups are integrated into banks’ applications and also in the form of a “white label” arrangement.

Mergers and Acquisitions: Almost one in three banks and asset managers have plans to buy a FinTech firm in the next 12 months

Synergy Points between Traditional Banks and New Age FinTech’s

1. Access to New Markets: The partnerships with the new-age FinTech players enable these institutions to devise ways for reaching out and acquiring new market segments, i.e., the underbanked segments of the population. The partnership between Mastercard and Grindrod Bank and Net1 for providing services to the underserved population in South Africa.

2. Creating new offerings for existing customers: The second major challenge faced by financial institutions is developing innovative & profitable services for their existing customer base in the lower market segment. This plays as an obstacle to the steadier and regular revenue stream for financial institutions compared to the costs of acquiring new customers. Eg: ICICI Bank’s partnership with Stellar, a Silicon Valley-based non-profit offering distributed ledger infrastructure services, to build a blockchain-enabled payments network for their customers.

3. Data collection, use, and management: Effectively collecting, using, and managing data for financial inclusion has been one of the major challenges faced by the financial institutions in this space. The main theme for forging partnerships with FinTechs is to leverage their expertise in creating alternative risk modeling techniques.

Ankur Sharma

The Past

GCC’s Remittance Industry has witnessed a fast-paced transformation in the past 20 years. The total outbound remittance from the GCC countries has grown from USD 25.77 Billion to over USD 118 Billion recording 357 % of cumulative growth during the period. During the early 2000 period, the majority of mid and lower-segment customers preferred transferring money to their loved ones through the mode of draft instrument. During the period, the customers had to spend over 20 minutes completing a remittance transaction. Customers used to send physical drafts with a handwritten letters to their loved ones which took over 7 days to reach the beneficiary and even more days to encash the instrument. For many, sending money was the utmost happiest and cherishing moment in their monthly routine. The Exchange house branches hardly had around 3 to 4 computer systems, where the data entry operators (draft data entry process) occupied a prominent position and FLAs were predominantly into recording the sender and beneficiary information in a pre-printed remittance advice form and passing it to the data entry operators.

The advancements in core application systems, the introduction of third-party specialized remittance and forex applications, and the development of industry-oriented technical subject matter experts have positively enabled many exchange houses to initiate Application Programming Interface (API) with drawee banks and Money Transfer Operators which has helped to change the concept of having multiple drawee banking arrangements in the same receive market. The advent of technology has helped many of the Exchange houses to introduce, innovative and inventive products and services which drastically reduced the Turn Around Time between the money send and receive process. The advancement in technology has forced the customers to change their desire, demand, and consumer behavior within no time from the traditional draft based to the Electronic Money Transfer Services(EMTS). The FLAs at branches started getting independent systems and served the customers by eliminating the dependency of the data entry operator.

The efficiency of treasury management and working capital has radically improved through the advent of Treasury Management Systems. Many South Asian banks have entered the GCC’s Exchange house industry through management agreement or share acquisition which has facilitated the introduction of Banking ethos, internal process, and policies to the Exchange house industry. Many Exchange houses and branches were managed by the Indian Banking veterans and the customers were served by benchmarking the Indian banking standards. Forward-looking Exchange house brands started thinking out of the box to differentiate their product offerings and introduced loyalty cards, privilege forex rates, cheques, and telephonic order acceptance facilities to HNW customers. The proactive branch managers were performing the role of “Brand Ambassadors” in their micro markets and lured customers from the immediate competition through deep relationship connectivity.

The 9/11 incident forced the regulatory bodies in different GCC countries to re-think the importance and approach towards Compliance, Anti-Money Laundering, and Risk Management perspectives. Many new regulations, directives, and governance practices were enforced in the industry which obligated many Exchange houses to invest in Compliance, Risk Management and Internal Control systems, resources, and subject matter experts. While the industry was growing at an unprecedented growth rate, many exchange houses started witnessing cyber security compromises, frauds, and threats that were new to the industry, and the exchange houses and Instant Money Transfer Operators (IMTOs) had to earmark budgets and specialists to protect the reputation, data, money, and core application from such cyber threats.

The global recession during 2008 and associated financial crunch have forced many banks to seriously think about alternative revenue channels. Many banks changed their conventional outlook and entered the retail remittance space which led to the erosion of market share from the exchange house industry to banks. Today among the top 2 key send markets in GCC – UAE and Saudi, banks handle over 25% and 92% of retail remittance market share in the respective markets. For the banks, remittance services were a forward integrated product offering, as the majority of mid and high-income segment customers were availing of various banking retail services. The introduction of the Electronic Wages Payment Monitoring System (EWPMS) in the UAE was a revolutionary development that helped in structuring and standardizing the payment of wages and salary payments in the country. Exchange houses were the most beneficial service providers in this initiative as the banks were not interested in catering to the lower-ticket size employee class payments. As part of new revenue exploration initiatives, future-looking exchange houses advanced into Digital Remittance, Payment Solutions, Travel Currency Solutions, and Business 2 Business (B2B) trade-settlement transfer solutions which positively contributed towards the revenue enhancement.

The Present

The survival of the fittest concept was well-validated across the GCC’s Exchange House industry where those brands that underestimated the importance of Change, Innovation, Compliance, and Corporate Governance have effaced the arena. Telecommunication, Fintechs, and Start-ups are occupying prominent space in the Cross-border money transfer industry by capitalizing on their existing customer database, infrastructure, expertise in technology, and economies of scale strengths. Today the cross-border money transfer industry in the GCC market consists of omnichannel players representing multi-faceted industries. Digital penetration will rapidly continue where many new entrants have already equipped their battleground and strategic tools through forward and backward integrated service offers where salary credit, routine purchases, bill payments, top-ups, money transfer, loan application/utilization, and wealth management happen in the same platform. The currency netting-off model by the send and receive partners have brought a high level of cost optimization and working capital efficiency to the remittance operational ecosystem. We have already witnessed Crypto based settlements and social media-based money transfer services which the millennials and generation Z will highly opt for in the near future. Collaborative ecosystems are getting shaped where the strengths of different brands are collaborated to offer value additions and to enhance the Customer Life Cycle.

The Future

The GCC’s remittance industry will continue its growth in outbound remittance except for a few markets. Like every industry transformation and brand disruption, the Cross-border money transfer service industry will also witness the “elimination of intermediaries” between the money send and receive process. New technologies are drastically changing the customer experience, front, middle and back-office concepts of the Exchange House Industry. Digital Onboarding Solutions will be a key enabler and accelerator of the future of money transfer. Opportunities for new product development and value creation will continuously evolve to address every customer’s pain points. Cross-Industry brand collaborations will play a critical role where the strengths of various brands will be collaborated to offer strategic differentiation in the marketplace. Data Science, Artificial Intelligence, and Business Automation will be more valuable and tributary in the Cross-border money transfer industry in many ways we never visualized that would have been possible. Cross-Border Money transfer know-how and services that were once available through established financial institutions will be supplied as “plug and play” services with strong and deep regulatory monitoring which will increase the level and penetration of competition we experience today. A huge market share is waiting for Exchange Houses in the B2B trade-settlement transfer solution segment which is still not capitalized the way in which it ought to be. We expect the transformation in regulatory outlook and many regulators will start adapting the concept of purpose-led regulation to balance between encouragement of fintech innovation and mitigating risks in the industry. At the same time, in the event of the latest FATF decision, regulators will have a more rigorous outlook on the industry and microscopic review of the business and Corporate Governance conduct.
The future belongs to those who embrace future-facing technology and remain nimble-witted to capitalize on the evolving business opportunity by placing customers at the center of every strategy and by strongly embracing Compliance, Risk Management, and Internal Control principles. Our industry will soon be changing its own definition and will be redefined as the “value transfer industry” from the present “money transfer industry”. The cognizant industry participants will advance with one mantra – “Think Tomorrow, Act Today”

Thank You!
Edison Fernandez

Edison Fernandez

For several decades, business growth was marked by a sense of hustle behind closed doors. In a bid to protect trade secrets and unique business models, companies often coiled into a shell, seeking to explore new markets and avenues for growth in their independent way.

While this process did help establish a close-knit internal system and solid organizational foundation, in matters of expansion it was a cumbersome and long-drawn process.

The era of digitization has, fortunately, transformed the way businesses conduct themselves. Today’s businesses wish to tap into new markets at an unprecedented pace. The only way to make this happen though is by collaborating with stakeholders both within the industry and cross-linked sectors.
With terms like growth culture, 10X growth, accelerated growth and what not permeating the boardrooms of even traditional businesses, the power of partnerships has been exemplified and can no longer be ignored.

At LuLu Financial Holdings, we have adopted this spirit of collaboration quite well. By building our network through mutually beneficial partnerships, we have been able to reach out to the entire world, while creating value for our core propositions.
Today, the very mission of the holding company is to grow through collaborative partnerships. The reason for this is that the financial services ecosystem is too vast to be serviced by a handful of companies. If until two or three decades ago, companies were relatively more patient, today, profitability has to match growth if companies are to stay relevant on a global scale.

Although investors are looking for the next big thing to disrupt the sector, no one can discount the value that legacy institutions bring to the table. A partnership between these two ends of the spectrum in any sector can thus, only happen through partnerships.

Partnering to build an inclusive future
As a responsible financial services provider, we have been fortunate to build our foundation on solid experience and an agile mindset. In the greater scheme of things, partnerships have helped us build linkages, bridge gaps between our services and our customers, and create meaningful output for the ecosystem as a whole. The foundation we have built over the last ten years gives us the legroom to partner and grow, without negatively impacting what we have built so far.

For example, in Bahrain, we recently tied up with Eazypay – one of the country’s most widely used payments provider. This partnership now allows the people of Bahrain to send money home or exchange foreign currency using their bank-issued debit card at any LuLu Exchange branch in the country. This is a massive boost for us in terms of market reach and opens the doors to tens of thousands of new customers who are looking for a convenient way to conduct their cross-border payment needs. By partnering this way, we have been able to bring convenience to our existing and new customers, while simultaneously giving Eazypay an added advantage in the market.

Taking collaboration to its next level is paramount, and as we navigate this new decade, we fully realize its significance in unlocking the true potential of the sector we operate in.

Adeeb Ahamed