Category : Insurance


AI in Insurance: Enhancing Efficiency and Accuracy

In today’s age of remarkable technological progress, artificial intelligence (AI) has become a transformative force in numerous industries, revolutionizing the way they operate. Among the many sectors experiencing its transformative power, the insurance industry stands out as a prime beneficiary.

With the ability to enhance efficiency and accuracy in ways previously unimaginable, AI is reshaping the landscape of insurance operations, from underwriting and claims processing to risk assessment and customer service.

The global AI in insurance market size was valued at USD 6.92 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 24.08% from 2022 to 2028. A recent survey found that 21% of insurance organizations are preparing their workforce for collaborative, interactive, and explainable AI-based systems. It is also predicted that investment in AI insurance will be ranked high on the agenda of decision-makers.

AI is transforming the insurance industry by automating tasks, analyzing data, and enhancing decision-making. This leads to improved efficiency, accuracy, and customer service, which drives customer satisfaction and boosts profitability.

How is AI Changing the Insurance Game

#1 Tackling the claims problem

a) Accelerated claims processing

In today’s digital era, insurance companies have streamlined the claims process through convenient methods like smartphones and web portals. AI-powered bots guide customers, verify policy details, detect fraud, and expedite settlement for prompt resolution.

Insurance companies are using new technologies to accelerate claims processing and improve the customer experience:

  • AI-powered chatbots can be used to automate and streamline the claims processing process, which can help reduce costs and improve customer satisfaction.
  • AI-driven touchless insurance claim processes can automate the entire claims process. This includes reporting the claim, updating the system, and communicating with the customer.
  • Document capture technologies and optical character recognition can efficiently extract text from scanned documents.
  • AI-based handwriting recognition software can now process handwritten documents at a speed and accuracy that far exceed human capabilities.
  • Automated processes are now being used to handle many aspects of claims processing, from routing claims to approving them.

b) Claims reserve optimization

AI plays a pivotal role in the digital trends insurance industry in claims reserve optimization by leveraging data analytics to enhance accuracy, efficiency, and decision-making. It analyzes historical claims data, identifies patterns, and predicts risks, enabling more precise allocation of reserves while reducing errors and administrative burdens.

The benefits of AI-based insurance solutions for claim reserve optimization:

  • Real-Time Claims Estimation: AI and ML technology streamlines the process of analyzing claims data, saving significant time that is typically spent on data preparation. This enables insurers to estimate claims more efficiently and accurately.
  • Early Fraud Detection: AI-powered solutions can identify fraudulent activities in insurance claims, reducing the need for manual effort and intensive claim processes. By detecting fraud early on, insurers can prevent delayed claims and improve the overall efficiency of claim processing.
  • Enhanced Safety in Hazardous Locations: Leveraging AI in insurance helps assess damages in hazardous locations while minimizing safety risks for claims inspectors. This technology aids in identifying potential dangers and ensures that compensation claims are accurate and fair.

c) Claim fraud detection and prevention

AI plays a crucial role in the identification and prevention of fraudulent insurance claims, thereby enabling insurers to establish a streamlined and effective system for managing claims. By swiftly analyzing vast amounts of data, insurance AI algorithms can identify patterns and detect anomalies that deviate from these patterns.

AI in insurance is revolutionizing fraudulent claim detection and prevention through the following methods:

  • Big fraud schemes: AI technology allows insurance companies to cross-reference and analyze data points from internal and external databases, simplifying the detection of fraudulent activities.
  • Fraud patterns: AI integration in insurance streamlines fraud detection by identifying patterns. For example, when a claim for a stolen smartphone is filed, AI can quickly search databases for prior suspicious activity, raising a red flag for further investigation.

By leveraging AI, insurance companies can improve their ability to detect and prevent fraudulent claims, safeguarding the interests of policyholders and the industry as a whole.

AI solving Insurance claims problems

#2 Customer Service and Retention

a) Prediction of customer churn

The insurance industry has higher customer acquisition costs than many other sectors. Retaining existing customers proves to be a more cost-effective approach. Insurance companies are now leveraging AI-based solutions for churn prediction, enabling them to anticipate when customers are likely to churn and proactively implement measures to retain them.

Through the utilization of AI and Machine Learning algorithms, key indicators such as shifts in app usage and rewards program engagement, alterations in the frequency of customer support interactions, fluctuations in income, or changes in life circumstances can be identified. Furthermore, these algorithms can also forecast employee attrition by monitoring changes in work patterns and gauging employee satisfaction.

Consequently, this approach presents a mutually beneficial solution for insurance companies and their customers.

b) Deliver efficient customer support

Insurance companies are increasingly adopting chatbots to improve customer service by reducing response time and thus saving costs. These AI-powered solutions enhance team productivity by quickly resolving simple queries, allowing more focus on complex issues. Implementing virtual agents (chatbots) and personalized interactive videos enables 24/7, multi-channel customer service, positively impacting online experience, loyalty, brand reputation, and revenue generation.

AI in insurance enhances customer service in the following ways:

  • Resolving FAQs: AI chatbots address common questions, reducing support tickets and costs. Learning Customer Behavior – AI learns patterns to offer personalized service options based on previous activities.
  • Faster Response Times: AI speeds up support by providing agents with relevant information.
  • Natural Language Understanding: AI analyzes customer interactions to understand and resolve issues promptly.

AI helping in customer service and retention

#3 Insurance Pricing and Underwriting

AI is transforming insurance by revolutionizing pricing and underwriting. It analyzes data patterns to price products accurately and identifies risk factors from claims data. AI also enhances underwriting decisions by swiftly analyzing applicant information. This potential for efficiency, accuracy, and profitability makes AI a game-changer in the insurance industry.

AI in insurance improves underwriting in the following ways:

  • Pricing: AI analyzes vast data to identify patterns and accurately price products based on risk factors.
  • Underwriting: AI enhances underwriting decisions by quickly and accurately assessing applicant risk based on various factors.
  • Efficient Application Processing: AI automates data collection, extraction, and form filling, streamlining application processing.
  • Better Risk Assessment: AI and ML models deepen understanding of customer risk profiles, enhancing risk assessment accuracy.
  • Frictionless Customer Experience: AI shortens underwriting workflows, meeting real-time service expectations and improving customer satisfaction.
  • Improved Profitability: AI-based automation improves underwriting profitability by reducing costs, customer churn, and retention expenses.

AI helping in Pricing and Underwriting

#4 Personalized Recommendations

Meeting the diverse needs, preferences, and lifestyles of customers is crucial in the insurance industry. Personalized policies, loyalty programs, and recommendations tailored to individual attributes and preferences have become essential.

Research shows that engaged and satisfied customers are 80% more likely to renew their policies. To meet this demand, insurers are utilizing advanced technologies like Machine Learning and AI to develop tools for creating personalized insurance plans based on customer data.

By implementing insurance chatbots and virtual assistants, insurers can provide machine-generated insurance advice, ensuring customers receive adequate coverage and a seamless experience. Additionally, chatbots and voice bots can engage customers with personalized offers, preventing customer churn to competitors and offering tailored recommendations and upselling opportunities.

AI to personalize Insurance recommendations

AI Use Cases in Insurance

Insurance companies are increasingly using AI to improve their operations and provide better service to their customers. Here are some examples of insurance companies that have used AI:

  • Lemonade: Lemonade is a New York-based insurance company that uses AI to process claims in minutes, while the traditional claims process can take weeks or even months.
  • Hippo: Hippo is a home insurance company that uses AI to identify fraudulent claims with 99% accuracy.
    State Farm: State Farm is an American insurance company that uses AI to provide customers with 24/7 support through its chatbot, AskJake.
  • AXA: AXA is a French insurance company that uses AI to develop new products tailored to the needs of individual customers.

A leading non-life insurance company in India offers a wide range of insurance products, including motor insurance. The company’s video chat-based claims survey solution uses the Robosoft Video Chat Solution to enable customers to have video chats with claims adjusters to discuss their claims. The solution also allows claims adjusters to record and capture images of vehicle damage. The solution has been a success for the company and has helped to reduce the time it takes to process claims.

As AI continues to evolve, we can expect to see even more insurance companies using AI to improve their operations and provide better service to their customers.

Wrapping Up

The advent of AI has the potential to revolutionize the insurance industry, bringing about unprecedented changes for insurers and their customers. With AI, insurers can offer their customers a more seamless user experience and potentially more affordable rates.

Moreover, AI enables insurance companies to optimize their processes, resulting in increased efficiency and cost savings. By leveraging AI technologies, insurers can make more accurate risk predictions, leading to safer policy decisions. As AI continues to evolve and be adopted by more companies, we can expect further advancements and improvements in the insurance landscape. Therefore, the future of insurance is indeed being shaped by the transformative power of AI, and this trend is only likely to continue in the years to come.

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Banking Digital Transformation Fintech Insurance

Digital Rising: Opportunities for the Wealth Management Sector

Wealth management was once the exclusive purview of financial advisors who managed the portfolios of a select, affluent few. Personalized portfolio plans and personal relationships drove such advice. The advent of digital technology has democratized many industries – and wealth management is no exception. As we know, in financial services, digital solutions are at the heart of the consumer experience.

The rise of fintech brands, especially those that help manage investments, is dependent more on technologies than on bespoke human advice, as it is all about scale. This has resulted in redefining wealth management as a service. According to a report by FactSet, investors across the wealth scale—from the mass affluent customer with $100 to invest to the ultra-high net worth (UHNW) client worth $10 million—are already embracing online platforms.

The key to digitalization success is targeting the right business areas, bringing in the right skills, and identifying the key processes to maximize value delivery. A comprehensive hybrid-advisory approach leveraging automation, data analytics, digital, and cloud solutions are the need of the hour.

The Key Pillars of Digital Experience in Wealth Management

Rapid technological advancements, changing investor preferences, and increasing financial awareness are prompting wealth managers to reconsider their customer engagement and business strategies. Digitalization helps modern wealth advisors create and understand their client personas better, moving away from “one size fits all” to a more customized approach. The right technology framework will lower infrastructure costs and improve the efficiency, speed, and scalability of the whole wealth management value chain.

Improving customer prospecting through AI/ML and digital onboarding

Digitalization through AI/ML can help wealth managers identify the right prospects and drive customer acquisitions through data-led personalized marketing. Its ability to combine data from various sources enables it to efficiently classify customer segments based on a variety of criteria, identify prospects using real-time data signals from social media, and generate dynamically personalized content for potential clients, all of which help to increase customer acquisition.

Digital Onboarding: Customer onboarding has traditionally required time-consuming manual documentation. However, many broker-dealers and other wealth management companies are digitizing and automating the process to enhance the client experience and save money.

The foundation for a long-term client relationship is established during the wealth management onboarding process, which includes the first serious interactions between an adviser and a client. Client onboarding processes include

  • Prospecting
  • Product selection
  • Regulatory checks
  • New Account Opening (NAO)

As a result, businesses are now able to onboard and serve more clients in less time and with fewer resources, maintaining their competitiveness in a market where investors and regulators are driving down fees. Firms with a robust digital onboarding experience will have a solid competitive advantage in the industry.

Achieving investor centricity through data analytics and management

Wealth managers need accurate and real-time data to assess investor sentiments, understand critical market parameters, and produce insights for quick investor decisions. Data can provide timely, pertinent, and actionable insights that can be used to create new (and enhance existing) product and service propositions, optimize channel management, generate higher returns through informed portfolio choices for the investor, and boost customer engagement, and customer retention.

Wealth managers can make wise decisions and appropriate portfolio modifications by using a quantamental investment technique that leverages sentimental analysis, alternative data, and return analytics. Most wealth managers have advanced their client analytics and advisory capabilities and are in various phases of development.

At present, wealth managers have most of their data locked in product silos and legacy systems. Before using advanced analytics, it is understood that access to precise and complete data is necessary. Wealth management companies need a client-focused, precise master data architecture that combines data from all points along the value chain. By increasing their investment in data management and analytics as part of their digitalization initiatives, wealth managers have a better chance of generating higher returns.

Personalized client experience at the front and center

Personalization is one way that advisors can stay competitive with other firms that may offer lower fees or higher returns on investments. According to a survey, investors are increasingly in need of personalized, goal-based planning and other specialized services. In the next two years, 58% of respondents said they would like personalized financial guidance.

Personalization as its name says is unique to each client. To build solutions that will work with whatever position the clients find themselves in, advisors have for decades always thrived on understanding their clients’ backgrounds and perspectives on risk. For instance, knowing information about a client’s household size, state of residency, and annual income are crucial data points in creating customized options that may be more suited for particular people.

Wealth managers can now offer personalized services at a reasonable cost, enabling them to better compete with firms that offer lower fees or higher returns on investments. Automated rebalancing and custom indexing are two examples.

Advisors can automate trading and rebalancing via automated portfolio allocation. And with the help of automated reporting tools, the adviser can inform a large number of clients about portfolio changes.

Enhancing digital investor management and advisory services

For the wealth management sector, it is crucial to offer a more holistic customer and advisory experience. In addition to the human touch, new-age investors are extremely drawn to digital personalization. Wealth managers may increase client acquisition by creating personalized content for potential investors using AI and data-enabled marketing. By increasing customer engagement, a redesigned digital experience can increase customer retention and give advisers more leverage.

A few of the main touchpoints are-

  • Omnichannel engagement experience: Extends “zero-touch” service by using customized solutions built on video conferencing, on-demand virtual meet (with human advisor), and bot-enabled self-service. Portfolio review and building can be performed over user-friendly virtual solutions accessible over multiple channels.
  • Data-empowered custom solutions: Includes chatbots and avatars that create a personalized and smoother investor experience, thereby promoting customer retention, upselling, and cross-selling. Many established firms are providing AI/ML-powered offerings to query investor portfolios and their holdings and provide data analytics on the performance of the securities in their portfolio.
  • Advisor mobile apps: Enables wealth advisors to organize their activities and handle customer interactions. These apps (for example, MyMerrill) can include functionalities like advisor dashboards and 360-degree visualizations of customers and their risk appetites.

Adopting a cloud architecture to improve scalability and operational efficiency

The Information Technology (IT) landscape within wealth management firms consists of legacy systems that maintain a high volume of financial data, which requires increasing maintenance efforts and costs. An increase in financial data will drive automation processes and solutions as automation and AI/ML become more integrated into wealth management services.

Cloud infrastructure can offer a more reliable alternative to internal legacy systems for handling the increased inflow of data at scale, as well as higher operational efficiency and improved agility/time-to-market. By identifying the migration’s decision paths, which will guide the cloud migration strategy through the assessment, design, build, and migration stages, wealth management firms can optimize their existing application portfolio for cloud adoption.

Robo-advisory: taking the stress out of investing

Robo-advisors use automated, algorithm-based systems to provide portfolio management advice. These services are created with customer-centric thinking, and the technology is developed based on their wants and needs.

Customers are drawn to Robo-advice for a variety of reasons. First of all, it entails lower transaction fees and smaller investment requirements. Secondly, it entails more effective investment management. This is because the majority of Robo-offerings offer portfolio management using algorithmically based automated investment solutions that automatically rebalance the customer’s portfolio’s asset allocation without requiring any activity from the user. Thirdly, it provides less experienced investors with more comprehensive advice. Finally, Robo-advice offers more transparency on each investment and how they are likely to perform. The digital interface of many Robo-advisors makes it easy for an investor to analyze their returns versus benchmarks and progress toward goals.

Robo-advice services, whether new-age start-ups or established ones, also have the potential to widen the availability of investment advice from high net-worth individuals to less wealthy investors. Designing robo-advice services for the mass affluent presents a challenge because the customers may have good investment knowledge or little to no investment knowledge, and there is no human advisor there to make sure that the customer has understood the advice they have received.

Robo-advice services that are well-designed assist customers in receiving the best advice for their financial situation and reduce the likelihood that they will purchase the incorrect product. An agile, customer-experience-led, iterative strategy that designs and tests various interaction patterns is the most effective way to do this; whether that be an interactive Web or Mobile App, Chatbot, or combination of multiple technologies, that is right for the persona of a customer using the service.

Enhancing Digital Experience across the Wealth Management Value Chain

Opportunities for digitalization are seen throughout the wealth management value chain. An integrated digital transformation that addresses all the relevant user touchpoints would make it possible for investors and advisers to have a generally improved user experience. Every component of the wealth management value chain can be linked to a digitalization lever (Front office, Middle office, and Back office).

  • Customer experience is adversely affected by front-office digitalization. The focus is on seamless engagement and improved digital user experience to reduce the turnaround time, increase process efficiency, and ensure a smoother customer journey by Big Tech and Fintech experience.
  • The middle office, which drives the core line of operation in wealth management, is firmly focused on data analytics. However, given the sensitive nature of client data protection concerns and legislation like GDPR and equivalent laws coming into place around the world, a controlled approach to data management and cloudification is the way forward.
  • Automation and cloudification are the main digitalization potential in the back office space. The user experience quotient is not very high primarily because the activities are more in-house driven rather than external stakeholder driven.

The Road Ahead

The need to stay digitally connected and have a lasting influence on investors and asset managers have accelerated after the global pandemic. The focus is on creating a digital ecosystem built on tools and measures for a touchless remote experience without compromising on quality, which may have permanently changed how people work.

From a service and product perspective, the focus is steadily moving toward personalization, driven by effective data analysis. The emphasis is now on specialized products, personalized advisory services, and flexible pricing structures for different investment classes. One key factor that unites these shifts is the proactive application of technology and accelerated digitalization, whether inorganically or organically.

Effective use of technology through an omnichannel delivery model is essential for people-centric and relationship-driven industries like wealth management to promote the right level of customer engagement. Firms can look forward to investing in in-house technology and aligning with tech vendors, for the timely implementation of modern investment solutions, keeping relevant to a variety of customer segments, and staying ahead of ever-increasing competition.

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How Technology in P&C Insurance Enhances Profitability and Customer Engagement

As an industry, insurance is often considered to be evergreen in terms of profitability. However, while demand for insurance has grown globally, insurance providers are facing a number of challenges that affect profitability.

According to a McKinsey report, profits reduced by around 15 percent compared to 2019, and premium growth had slowed to around 1.2 percent in 2020, compared with over 4 percent growth in the decade between 2010 and 2020. However, post COVID-19, insurance companies are poised to take advantage of the rebound. Based on a survey of over 424 insurance respondents, the Deloitte Centre for Financial Services reports that insurance companies have an optimistic outlook, while the Swiss Re Institute predicts rising demand worldwide, with premiums for all lines rebounding by 3.9 percent in 2022, as compared to the earlier drop of 1.3 percent in 2020.

Despite the opportunity, risk factors have increased and insurers are aware of the need to deal with challenges facing the industry and build business resilience. Across the insurance sector, there is a higher claims incidence, leading to increased pay outs and loss of profitability. Insurers need to maintain higher capital because of regulatory pressures. They are also facing increasing competition from new entrants in insurtech.

Property & casualty insurance at a pivotal stage

The US property and casualty (P&C) insurance market is a case in point. Not so long ago it was the pandemic that was keeping insurers awake at night. Now, inflation is putting them to the test. The US holds the biggest market share of P&C insurance and is among the most mature geographies for insurance. However, inflationary pressures are significantly holding down P&C insurance carriers. Although the market grew by a moderate 4.7% between 2018-19, these challenges are dampening future prospects.

Opportunities in P&C are rising, but insurers are weighed down by market volatility, changing customer expectations, and loss of profitability to name a few. Given the uncertainty of tomorrow, P&C insurers need to build business resilience – the ability to endure present challenges and be ready for future shocks and negative events.

The insurance industry is learning from the success of insurtechs and waking up to the advantages of strengthening customer connections by going digital. One of the biggest positives in recent years is the accelerated digitalization that enables non-face-to-face interactions between the insurer and the insured. Today, customers want more intuitive, user-friendly apps that will help them gain quick access to relevant data that will help make the right choices for their insurance needs, streamline processes, and more. They also expect 24/7 assistance in making decisions. Research indicates that a good number of respondents are ready to move away from insurance companies that do not offer these advantages.

Consumer insurance buying preferences

Source: Accenture

Building resilience in P&C insurance with technology

As P&C insurance is complexity-ridden and highly regulated, the way forward needs to be holistic and future-ready. Resilience is key to countering market volatility, inflationary pressures, and intense competition – that means becoming nimble, responsive, and well-prepared for all the odds. These challenges, considered together, call for a major shift in strategy by traditional insurance players.

Technology can provide P&C insurance companies with not just the chance to become more future-ready but also to differentiate themselves using technology. Insurers can adopt digital to create a wider platform that can connect customers, partners, and employees all at the same time. Tech innovation finds application across the value chain from marketing through distribution, products and services, and throughout backend processes from underwriting to claims. Technology can also help design and create memorable user experiences, engaging with customers more deeply with empathetic, hyper-personalized interactions at various touchpoints of the customer journey.

P&C Insurance value chain

Source: Aite Group

Streamlining claims with automation, AI, and straight-through processing

Automating claims processing, typically a long and tedious task, reduces processing time and cost by programming tools to handle repetitive tasks.

Insurance claim processing comparison

Source: Altexsoft

Self-service in insurance is also becoming popular. One such example is that of easy claims filing online by customers themselves. Apps offer features allowing customers to take photos and upload them while lodging claims for auto insurance from the site of the event itself, enabling remote inspection. This advantage is offered by Bdeo’s AI-enabled platform on their mobile app. In addition, their chatbot uses Natural Language Processing to get reliable information on the accident by ensuring claimants share photographic evidence of acceptable quality on the platform. The insurer uses these inputs as part of their inspection and investigation of the incident remotely. This helps make more accurate evaluations and improves the claim processing experience for both the insurer and claimant.

AI will make it even easier to identify fraudulent claims, as well as provide predictions and estimates of possible damages and extent of losses. In fact, studies indicate that AI has great potential in disrupting core processes including underwriting, claims, marketing by enabling more human-like interactions with customers. Here we illustrate the use of AI in streamlining content extraction that can speed up the processing of claims dramatically while making communication and other value-added services easier to achieve.

AI powered insurance claim processing example

Source: Whatfix

Straight-through processing is another solid investment pathway for insurers – it can be done without any manual input, reduces operational costs, and helps insurers take pricing volatility in their stride. At the same time, policy holders can choose how they want to receive claims settlements in a convenient manner.

Strategic decision-making bolstered by Robotic Process Automation (RPA)

Property and insurance carriers tend to be skeptical about RPA, however RPA has proven to drastically reduce errors, improve operational efficiencies, enhance scalability, and optimize headcounts at financially viable numbers. The benefits of RPA multiple when the insurer decides to automate non-strategic tasks while retaining humans to perform value-added tasks. For example, in auto insurance, gathering and validating information around accident claims from various sources such as police reports of accidents, driver’s licenses, photos of damage to the vehicle(s) involved etc. can be tedious and time-consuming, but RPA can comb through data from various sources quickly.

The true potential of RPA is visible when it is collaboratively applied with other technologies to augment strategic decisions made by the human workforce. In the underwriting process, which is again typically lengthy, bots can leverage AI and analytical capabilities to glean information from both external and internal sources, fill up application forms with appropriate data, assess loss runs, evaluate the claimant’s past track record of claims and settlements, and offer pricing based on this deep well of insights – all in quick time. With RPA, it also becomes easier for insurers to keep up with multiple regulatory standards, which are still evolving and ensure compliance.

Driving responsible customer behavior using telematics

Arriving at the optimal price is foremost for 52% of auto insurance customers and 50% of home insurance customers, as per an Accenture study. Giving their customers optimal pricing will instantly create a competitive advantage for insurers. Telematics applications are already being used to great effect for pricing in the automotive insurance space. Now there is scope to use these applications such as vehicle tracking to instruct and control driver behavior and conditions such as drowsiness, for example.

Smart household or property devices that come alive with the Internet of Things (IoT), will come in handy for closely monitoring data such as humidity and temperature, which could potentially cause damage or depreciation to the home infrastructure or property over time. Data and analytics extracted from these devices can be used to plan risk assessment and inspection of large commercial properties with associated risks. Visuals captured via satellite can be used to draw attention to potential risks or causes of damage to property in a cost-effective manner without requiring an in-person visit from the insurer. These insights can be used by insurers to both monitor and suggest pre-emptive measures around potential risky behavior or lifestyle of policy holders.

Smartening up insurer-insured relationships through smart contracts

As early as 2018, BCG research had predicted that smart contracts could help P&C insurers with savings of more than $200 billion per year in their operational costs.

Here’s why smart contracts are the smart option. These are formulated in lieu of physical insurance policies and all associated claims management information using blockchain technology, which stores transactions as lines of code. Tracking, management, and cloud storage of policies, records of physical assets, and claims-triggering events can all be automated and also takes care of user authentication and detection of fraudulent activities. Smart contracts are easily accessible by insurers, reinsurers, brokers, and other parties thus reducing duplication of effort as well as manual intervention and programmed for claims processing actions automatically.

Unlike physical contracts, smart contracts can track insurance claims and hold both parties accountable. These contracts are, thus, inherently more secure and transparent for users, settle payments on approved claims quickly, and go a long way in lifting the trust factor as well as efficiency of back-end operations.

Ensuring omni-channel customer experience with bots and tools

Keeping up a persistent line of communication with policyholders and prospective customers is important for the insurer in terms of business and keeping customers interested. Chatbots can be introduced early in the discovery or pre-sales stages to initiate conversations about product offerings that might be suitable to customers and prospects. Likewise, the customer’s need for 24/7 assistance and quick responses can be met by chat-bots rather than wait for a human team member who can be freed up to address core service areas. They are already proving popular in the auto and home lines of P&C insurance. For example, Lemonade, who is a leading online P&C insurer, extensively uses app-based chat-bots supported by AI. Their bots are able to devise insurance policies and quotes that are tailored to each customer and available directly on the app. They also interact with and field customer queries while helping process claim applications promptly.

Familiarizing customers and employees with digital adoption platforms

Not all employees are tech savvy. Neither are customers. It makes sense for insurers to invest in training to improve agent performance and customer experience. Integrating training tools with the tech stack adopted by the insurer, will help their workforce and customers effectively use the various tools and processes that are now available to simplify the myriad processes that go into insurance. These include walk-throughs, self-help widgets, quick guides, and AI-enabled assistants for employees.

In conclusion

P&C insurance companies have to work through a maze of challenging situations and gaps as they go about strengthening relationships with customers. AI/ML, IoT, telematics, blockchain, and other emerging technologies can offer a wider, more personalized spectrum of benefits by harnessing data, shaping new offerings like social insurance, and more.

In short, technology can be the bridge that makes interactions meaningful and productive for both insurers and those seeking insurance. It remains to be seen how far P&C insurance players are ready to leap in building the bridge that holds the key to the future.

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Banking Fintech Insurance

InsurTech Challenges and Role of Technology for Growth of Insurance Sector

In a world of unpredictable yet unavoidable change, individuals, companies and even governments turn to the insurance sector to be prepared. Insurance needs are changing in many ways, such as including risks related to climate change like floods or bushfires, or even novelties like ‘hole-in-one’ insurance (where a golf tournament insures itself to pay the prize bonanza on the off chance that a hole-in-one is achieved). With an increasingly online generation, even as traditional insurers bank on the credibility and trust they have accumulated, the new age InsurTech companies chip away at the market with digital experiences and new models.

When it comes to innovating with technology, InsurTech companies have an advantage over traditional insurers. They are nimble and flexible with their offerings, able to quickly establish low-cost digital platforms and new operating models. InsurTech companies’ biggest advantage is the hold they have over the customer’s pulse. With smartphones becoming commonplace, customers find that InsurTech offers comfort, convenience, and speed in making important insurance-related decisions and transactions.

Research indicates that 28 of the 280 FinTech firms that have turned unicorns to date have played an instrumental role in driving innovation or disrupting the way insurance is done. From claim management to reinsurance, asset management, customer onboarding, and engagement, InsurTechs have earned their colors across the insurance value chain and are here to stay.

Challenges to InsurTech

Despite these gains, experts believe that InsurTech market growth will have to endure several constraints. Foremost among them is a lack of awareness about the value InsurTech can deliver, and dearth of professionals who can expertly work with advanced technologies. These factors could restrict InsurTech companies from scaling their technology capabilities to the extent desired.

However, it is undisputed that the future of insurance will be tech-driven in the form of embedded ecosystems, AI & ML, blockchain, low code technology, and more. 85% of insurance companies recognize the need to prioritize digitalization, so it may not be long before traditional market leaders catch up with their technology capabilities or look to buy out smaller players. InsurTech start-ups have their work cut out in gaining the kind of trust and credibility enjoyed by established insurers. Now, they must rethink strategy to retain their technology advantage.

Insurance Market Concentration

If we look at the US which is the global market leader, InsurTech is expected to grow at more than 7% CAGR over the next five years. The competition is definitely heating up here.

Read more: The Rise of FinTech in Asia: Success Stories and Learnings

Business opportunities for insurance will continue to flow in as the world becomes increasingly digital. More aspects such as health, travel, auto, and home will be included under the umbrella of online insurance.

InsurTech companies will need rely on their strength – technology – to offer a wider, more personalized range of benefits shaped by data, new offerings like social insurance, and cost saving tools like virtual agents powered by conversational AI etc.

McKinsey research opines that five rapidly advancing technologies will significantly redefine the future of insurance. These include applied AI, distributed infrastructure, future of connectivity, next-level automation, and trust architecture. By putting the full force of their tech advantage here, InsurTech players can solidify their business and expand their portfolio.

1. Powering up core processes with AI

Since the pandemic, at least a quarter of life insurers in the US have expanded their automated underwriting practice to simplify the application process. From reducing claims processing time and cost to improving fraudulent claim detection and claim adjustment processes, AI and automation are proving be invaluable.

Take for example, the AI-enabled platform offered by Bdeo, available on their mobile app. It comes with a chatbot that uses Natural Language Processing principles to liaise with claimants, get first-hand info on the accident/damage that has occurred and helps them share photographic evidence of acceptable quality on the platform. The insurer can use the app to inspect and investigate the incident remotely using computer vision models. Doing so helps avert errors in evaluation and improves the overall claim processing experience for both the insurer and claimant.

Studies predict that AI will disrupt underwriting, claims, marketing, distribution and other core processes by enabling more human-like interactions across various customer touchpoints. There is a plethora of opportunities that can be exploited. For example, the associated customer data can be used for predictive analysis and forecasting, which can in turn, inform the development of new product and service lines.

2. Enabling intelligent insurance with distributed infrastructure on the cloud

Many core insurance processes that have been weighed down by legacy systems are finally modernizing. This allows insurers to leverage cloud-native infrastructure, ramp up to manage workloads without impacting customer experience and speed up their innovation efforts. Thanks to cloud computing, they will be better placed to harness the massive amounts of claim-related data available to benefit their customers and increase profitability.

This is a huge opportunity for traditional insurers to collaborate with InsurTech to form partnerships that leverage their strengths and quickly enable plug-ins, distribution channels, and other value-adds. For instance, InsurTechs can offer digital solutions to efficiently sift through vast historical data of established insurers, to identify and interpret customer patterns and insights to determine the kind of new product/service lines to be developed. In fact, at least 75% of insurers were found to be seeking out InsurTech collaboration to improve their customer experiences according to a Capgemini survey.

3. Developing insurance products using telematics

Telematics technology is increasingly being used to monitor, interpret, even influence consumer behavior. For example, innovation stimulated by IoT adoption is being applied in connected home devices to track humidity, temperature and other parameters, which potentially cause damage to property. Insurers can leverage the data generated on these devices to estimate risk over time. Similar innovations are being explored across the domains of insurance to life, health, auto, manufacturing, commerce etc. The advent of 5G will enable real-time data sharing and make it possible for insurers to turnaround services faster than ever.

For example, being covered against ride cancellations is a value-add for customers and digital solutions can be developed to enable this as a timely service using real-time availability of data. Another example of value-add is the coverage against bodily harm to earners and riders of every trip offered by Uber in partnership with a leading insurer.

4. Enabling human decisions via bots

While robotic process automation (RPA) has proved its worth in automating back-office functions in the insurance industry, there’s a lot it can do in terms of next-level process automation that will shape the future of insurance. For example, the IoT-enabled, real-time monitoring of factory equipment can predict maintenance needs and prevent repair or damage that result in insurance claims.

RPA also has a distinct role to play in supporting human decisions in a cost-effective and timely manner. As an example, it can expedite claims processing wherein photos of the damage to a vehicle are automatically assessed and verified for authenticity without requiring an in-person visit by a claims adjuster to the damage site. Likewise, building optical character recognition features into RPA will help extract text from claim applications in large volumes and ensure that the information it contains is distributed to the right functions for further processing.

5. Laying the foundations for trust with blockchain

Increased digitalization of insurance is raising security concerns due to the sensitive nature of customer data that is being shared across the insurance ecosystem. Building customer trust will be a priority for insurance players, which is where blockchain comes to the rescue.

Along with its advantages of transparency and efficiency, blockchain will play a leading role in helping carriers safeguard customer data from cyberattacks and data breaches. It will also simplify user authentication, identity management, and fraudulent claim detection etc. Through blockchain-based smart contracts, policies can be converted to decentralized lines of codes that will make consumer’s data immutable and easily available for immediate verification in the event of any claims made to the insurer. If it proves to be fraudulent, the contract will immediately be discontinued, and the premium amount paid returned to the insured. This kind of data transparency and responsiveness of the system will help build trust between all concerned parties.

The future of digital insurance paved by tech-led design

As insurance becomes more digitally driven, user experience (UX) will be all the more crucial for branding. While an omnichannel insurance experience is the norm today, creating memorable user experiences at all possible touchpoints will be paramount to carving out stronger market positions for the InsurTech brand.

For example, the silver agers generation are no longer the most dominant consumers of insurance. In fact, studies that the interest now being shown by millennials and Gen-Zers towards insurance products exceeds that of the older generations.

Percentage of people using app to manage insurance

Or, as this chart indicates, nearly half the individuals in the 65+ age category are unlikely to use an insurance app. If the insurer wants to attract more consumers from this cohort, they will need to leverage data to understand preferences, simplify interfaces, customize their offerings and so on.

According to the World InsurTech Report 2021, half of the insurance customers are willing to explore solutions offered by new-age digital players. The insurance market will experience disruption and a new order will emerge. Traditional insurers are more likely than ever to engage in partnerships with InsurTechs to stay relevant. Niche players and start-ups in InsurTech will not only need to leverage emerging technologies but also understand the complexities of insurance better and closely follow changing needs of their target demographics.

Led by research, data analytics, and empathic and intuitive design of user-centric interfaces, InsurTech players will be able to create market differentiation that can help them explore opportunities to build partnerships with traditional players so that both survive and thrive.

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Customer Experience Insurance

Digital Insurance Trends Shaping Customer Experience

It’s challenging for traditional insurers to stay competitive in today’s dynamic digital market. Insurtech companies however are growing in the current experience economy, where consumers value experiences and emotions over goods and services. These forward-thinking, technologically driven businesses are providing great customer service by adapting to and exceeding the ever-changing demands and expectations of today’s customers.

According to a recent IDC InfoBrief sponsored by Liferay, customer experience (CX) will account for 37% of IT spending in the insurance sector by 2024 and grow at a CAGR of 17.5% to reach 50 billion USD. The IDC InfoBrief also states that “providing an excellent and personalized experience to new digital customers is a must for any insurer to build loyalty and long-term relationships, with 60% of insurers saying attracting and retaining customers are their top priorities”.

It is evident that insurers would face difficulty acquiring and retaining customers without a customer-focused strategy. Insurance companies must rethink how they engage with clients if they want to improve customer experience.

Increased Expectations for a Seamless CX

The largest customer segment for insurance was typically thought to be the silver agers generation. However, a survey by Allianz indicated that after the pandemic, millennials and Gen-Z were more interested than their older counterparts in upgrading their insurance coverage. However, younger customers are used to a clear and smooth digital experience, from social networking to mobile banking to music streaming and e-commerce services. Expectations from the insurance industry are no different. According to a study, customer experience (CX) accounts for nearly 60% of brand loyalty, and 96% of consumers believe that customer service is essential for maintaining brand loyalty.

The insurance sector is finding it challenging to meet these expectations. In a survey from the IBM Institute of Business Value, 60% of insurers acknowledge that their company does not have a customer experience strategy. Although the insurance sector has developed and offered some specific insurance products in response to these shifts in customer expectations, it is still trailing in providing clients with the comfort and ease that mobile technology can give.

Digital Trends Insuring a Better CX

The use of mobile phones and the internet has increased significantly worldwide. And when it comes to leveraging digital technologies to scale their business model and work toward providing a hassle-free experience, the insurance sector is not far behind. Some of the digital trends in the insurance industry are listed below:

1. Omnichannel insurance customer experiences

EY Global Insurance Consumer Report revealed that during the COVID-19 pandemic, digital interaction with agents was preferred by 43% of consumers in Europe markets, up from 28% before the pandemic.

In addition to preferring digital interaction, audiences, particularly younger ones, expect consistent, integrated experiences across all communication channels. For instance, if a customer begins a claim submission procedure over the phone and wishes to complete it through the web customer portal, he or she must be able to do it without having to input specific information once more. To meet such demands and preferences of the customer, there is an increasing desire for more integrated and holistic experiences that offer a unified, connected experience flow across channels.

Insurers thus need to assist the customers at every stage of their journey by establishing an omnichannel ecosystem for marketing, sales, and customer support. It helps them gain consumer loyalty along with giving them better control over the CX. These omnichannel experiences can be created by:

● Assisting customers on their preferred web channels

● Connecting customers’ offline and online experiences

● Tailoring the content of websites or mobile apps for various screens

● Following client activity across channels with the help of advanced monitoring technologies

● Using progressive profiling and autofill forms to prevent users from frequently filling out forms while logging in from various devices or platforms

● Making use of client information to retarget individuals with tailored campaigns across platforms, etc.

2. Self-service options

A self-service portal that allows customers to manage their policies, make payments, submit claims, etc. is something that more and more customers are expecting from their insurance service providers. According to the World Insurance Report, 72.7% of tech-savvy customers prefer to renew or apply for coverage digitally while 57.6% of non-tech-savvy customers agree that digital policy management is important. Statistics indicate that most customers are equipped for self-service policy management, regardless of their level of digital skills. For insurance companies, self-service capabilities have several advantages:

● Lower customer acquisition costs

● Increased customer retention and loyalty

● Rapid claim processing, etc.

3. Personalized insurance apps

Over the past few years, the number of customers who would transfer insurance providers owing to poor UI UX rose by 80%. Custom insurance applications are currently the most popular channel for customer account service because a huge chunk of insurers allow customers to manage their policies via mobile apps. When providing personalized services, insurers saw an 81% increase in customer retention and an 89% increase in customer engagement.

The below qualities should be present in the customized app:

● A user-friendly interface that is compatible with both computers and mobile devices

● Workflow automation and analytics capabilities

● Payment processing

● Personalized dashboards for simple policy management and monitoring

● Other features include an embedded knowledge base, electronic signatures, and downloadable documents.

4. Internet of Things (IoT)

The insurance industry will undergo major changes in the future as a result of IoT. These technologies can be used in the four largest digital insurance ecosystems: connected cars, smart homes, connected health, and commercial lines.

The IoT makes it possible for insurance companies to use data from internet-connected devices to improve operational effectiveness. These interconnected devices communicate with one another automatically, allowing for more precise predictive analytics, snap decisions, and seamless process automation.

IoT has made it possible for insurers to collect data on policyholder behavior and quickly alert them about accidents. In this approach, IoT helps with both customer relationship management and claims processing. While customers might forget to recall and submit event details, IoT records everything. As a result, insurers are better equipped to precisely analyze damage, pinpoint the exact cause of accidents, and determine fair compensations.

5. Chatbots

Another effective technique that insurers of today should use to meet client expectations is chatbot technology. These are bot-powered chat widgets that have been added to the insurer’s website, messaging service, or client portal. Insurers must set up chatbots for many reasons:

● They assist prospects by providing quotes or addressing queries

● They improve customer experience by offering 24/7 help

● They free up agents by handling repetitive customer queries

● They generate leads by collecting visitors’ contact information

● They qualify leads and automatically identify the right plans for them

● They can be used to automate the claims process

When it comes to processing insurance applications and claims, a good chatbot can almost entirely take the role of a real person. This cutting-edge strategy enables insurers to provide excellent customer service while enabling agents to concentrate on more difficult responsibilities.

6. The rise of Insurtech

Insurtech is the application of cutting-edge technology to innovation in the insurance industry. More specifically, big data, AI, blockchain, IoT, natural language processing, and other technologies are what power Insurtech. The most important insurance operations, such as underwriting, fraud prevention, claims processing, etc., are addressed by these solutions.

The core digitization strategies stated above are only the outset of Insurtech. It replaces conventional, legacy-driven insurance procedures by adding these cutting-edge technologies. The most frequent use cases for Insurtech involve risk assessment and mitigation due to the constant emergence of new threats.

7. Predictive Analysis

Predictive Analysis has always been a major aspect of insurance agents’ day-to-day tasks. The role of insurance agents has always included a significant amount of predictive analysis. The data analytics landscape saw a significant transformation in recent years. Agents can now select from a wide range of tools and techniques to carry out a precise Predictive Analysis. If they wish to remain competitive and meet the criteria set by InsurTech leaders, they need to quit depending on manual processes.

Predictive Analytics has been credited by insurers with lower underwriting costs (67%), increased sales (60%), and increased profitability (60%). In 2022 and in the years to come, predictive analytics will become increasingly valuable in the insurance industry.

Predictive Analysis can be implemented in the following tasks:

● Insurance pricing and policy optimization

● Risk assessment

● Fraud detection

● Claims management

● Proactive customer engagement

For instance, prediction algorithms powered by machine learning can enhance insurance plans and present more pertinent insurance products to prospective or existing consumers by analyzing customer behavioral signals and purchase trends. Predictive analytics eliminates the component of the guesswork from the policy pricing process, enhancing customer satisfaction and boosting revenue for insurance businesses.

8. Artificial Intelligence

The insurance sector is actively implementing AI-powered solutions as the technology becomes more and more prevalent and is utilized to power a variety of activities. By 2030, automation powered by AI is expected to replace more than 50% of claim-related processes, according to McKinsey. Insurers need to start their AI journey right away to make it practicable.

By automatically analyzing vast volumes of consumer data, AI processing enables insurers to provide customized client experiences. These innovations significantly alter the entire underwriting process while simultaneously speeding up claim response time.

The following technological solutions give insurers access to AI capabilities:

● AI-enabled insurance chatbots

● Predictive analytics tools

● Fraud detection software

● Document capture technologies

● Risk management software

● Claims processing software

Additionally, AI and similar technologies aren’t susceptible to human error, thus removing associated risks that could have a detrimental impact on insurers’ profitability.

9. Simplicity and speed improve customer CX

Insurance is a very sensitive matter in terms of customer experience. This is because when an accident occurs, the essential quality evaluation by customers takes place at a time of the highest emotional fragility and strain. Complex contracts and a bad claims experience are the two primary causes of friction. Because of this, many customers have negative impressions of their insurance experiences.

Customers report a lack of knowledge, assurance, and trust in insurance, according to the EY 2021 Global Insurance Outlook. This is further supported by the idea that, rather than providing for their clients, insurers frequently seek different justifications and defenses to avoid paying insurance compensation. Such immoral practices will have disastrous CX effects.

Insurance companies will need to integrate digital channels with back-end systems, automate manual operations, and improve third-party processes to enable faster digital processing to meet client demand for speed. As digital behavior develops and consumer expectations, influenced by digital services from various industries rise, the necessity for simplicity and speed will only expand.

10. Customer-Centered Design

In an era where customer experience is beginning to trump price and product as a brand advantage, it’s critical to not undervalue the importance of personalization and customer-centricity.

Given that the growth of digital ecosystems has lowered the barrier to entry, brought about the rise of new players (Insurtech businesses), and increased market rivalry, the ability to offer customers the best value has emerged as the primary competitive advantage. Corroboration of increasing innovation may be found in operational areas like policy servicing (in life insurance), claims (in vehicle insurance), and back-office operations (in health insurance).

Companies in the Insurtech sector create digital products with the customer at the center and offer disruptive services to the market. When a customer interacts with an insurance business, it’s important to understand their situation and be empathetic. The only approach to develop that level of empathy is to conduct insurance UX research and use the results of that research to design and construct a customer-centric humanized insurance UX/CX. The personalized claims experience and the personalized buying experience are the two major touchpoints in the insurance customer journey.

According to a Capgemini survey, eight in ten consumers are willing to pay more for improved customer service. According to Accenture’s Global Insurance Consumer Study, 69% of customers would give major data on their health, exercise, and driving habits in exchange for lower insurance rates, and 66% would also disclose significant data for personalized services to reduce injury and loss. Good customer service frequently results in returning business and referrals to friends and family.

CX Trends in Insurance: Right Implementation from Best Insurtech Companies

1. Lemonade

Lemonade is a digital-only insurer with a web & mobile platform. The platform offers:

● Chatbot-powered conversational policy purchase process

● Renter’s insurance within the app

● Car insurance is based on driving habits

● Easy switching from other insurers to Lemonade

● AI-assisted claim review and instant payment

● Option to donate unclaimed premiums to the charity of choice

2. Metromile

Metromile is the leading pay-per-mile car insurance in the US offering personalized digital insurance services. The platform offers:

● Rates are based on the user’s driving habits

● Telematics devices that plug into the car’s diagnostics port and driver’s mobile phone to get data on car usage for better CX

● AI-assisted claim review system

● Access to a nearby garage, vehicle rentals, etc. to get back on the road in case of an accident

3. Beam Dental

Beam Digital is a digital-first, preventive-focused dental insurance offering simplified digital insurance benefits. It offers:

● Electric brush connects to their app to help track and improve brushing habits

● Gamified dental care turns good brushing habits into rewards and savings

● Nearby dentist and hospital search

● Online access to coverage and plan information 24/7

4. Luko

It’s a digital home and real estate insurance app offering prevention, comprehensive coverage, maintenance, and repair. It offers:

● Damage assessment by an expert through a video call

● Access to free services to fix damages and a network of certified skilled workers to get advice through video calls to help with minor repairs

● Partnership with quality smart home device service providers and offers a discount on insurance if security solutions are used

● To donate unclaimed premiums to causes chosen by users

5. Thimble

It’s an on-demand business insurance platform made to serve small businesses and self-employed. The offerings include

● Buy a policy online, in the app, or over the phone instantly

● Customized insurance coverage by hours, days, months, or years

● Flexible payment options for premium

● Options to change, pause, or cancel policy anytime

● No direct claim handling hassle as they are handled by underwriting partners

At Robosoft, we have partnered with enterprises across the spectrum of financial services – insurance, digital banking, payment, lending, and more. We craft digital solutions that simplify lives and delight customers seamlessly across consumer touchpoints.

In Conclusion

In order to win the hearts and loyalty of digital customers and remain relevant in the future, insurers must first foster a transformation culture and customer excellence culture to position towards delivering value to customers and solving their real problems.

This will allow them to evolve from “detect and repair” to “predict and prevent”. It also implies making use of the possibilities that emerging technologies bring. This involves upgrading service channels, adopting, developing, and leveraging new technologies, tackling legacy systems, leaving behind inefficient processes, changing company culture, and shifting mindsets.

Digital is a key battleground in the experience economy, with significant opportunities for those that delight consumers. Let’s get to work and simplify digital experiences and the lives of consumers.

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Banking Fintech Insurance

BNPL – Passing Fad or Promising Future for Fintech?

Taking a loan to pay for higher education is a common phenomenon in the US. But who would have imagined that due to food inflation, even essentials such as groceries will be considered for the ‘Buy Now Pay Later’ (BNPL) phenomenon? On Klarna, a leading player in this domain, more than 50% of the top 100 items bought on the app belong to grocery or household items.

As more younger consumers go online, they have been experimenting with alternative payments methods. The rise of smartphones and e-commerce, now integrated with social media platforms is among the top trends impacting online sales and payments. The creator economy too is fueling social commerce. Such trends have attracted a new demographic – the millennials and teenagers. Now wonder that Fintech players are crafting new solutions to meet this demand. Pre-paid cards and digital bank accounts for teenagers are meant to address this trend. Fampay, Junio in India and Revolut <18 in the UK are a few examples.

BNPL: ‘credit’ where due

Over the last couple of years, the BNPL trend also referred to as ‘Pay in 4’ model, is meant to address a market opportunity. The post-COVID scenario and inflation in many countries has made it even more attractive – especially for a demographic with limited income resources.

In a 2021 research in the US, it was found that 60% of those surveyed had used a BNPL service. The main incentive of course is the interest-free instalment option which reduces the spending pressure and provides an incentive for online purchases. Klarna, claims a 41% increase in order value and 30% increase in conversion through their BNPL solutions.

The adoption of BNPL is a worldwide phenomenon. According to research in 18 countries from YouGov, Indonesians made the highest proportion of purchases using a BNPL plan (27%) – almost double the global average of 15%.

BNPL adoption rate worldwide

Source: YouGov

The same survey also mentions that in India, BNPL services grew a mind-boggling 637% in 2021. Naturally, such solutions are popular among the younger demographic. A whopping 75% of BNPL users in the US are Gen Z or millennials. Credit card penetration in India is still in single digits. BNPL was seen as the answer to a demographic which could be denied a credit card.

Fintech brands too were quick to spot the opportunity. In mid-2021 there were already 50+ companies offering ‘Buy Now Pay Later’ services across the world. The number is likely to have gone up in the ensuing period. In India, brands such as UNI have positioned themselves as a revolution in credit offering payment options in three or two instalments.

BNPL players are also tying up with large retailers such as Amazon, Macy’s and Target – thereby gaining access to a large, ready customer base. Aside from the smooth user experience, some serious technology is at play behind BNPL experiences. Apparently, Affirm uses over 200 consumer data points for risk management, while its existing loan users improve its AI algorithm.

Some of the aspects BNPL players must pay attention to, from tech POV are:

Infrastructure: The cloud infrastructure should help scale up operations easily, provide new products and services using on-demand computing. It should also safeguard consumer data and aid in maintaining regulatory compliance.

Risk Management: machine learning comes into play here in developing models for better risk identification and management, real-time credit score prediction, and payment management.

Security: BNPL players are expected to maintain the essential infrastructure in accordance with security standards. Major players such as Klarna collaborate with AWS’s compliance and security assurance teams.

Analytics: The integration of data workflows should make it simple for data to be absorbed from a variety of structured (such as transaction and payment history) and unstructured sources (such as social media activity, credit bureaus, and spending behavior). Such information gives early warning signs of credit degradation during times of difficulty and assists in the creation of a 360-degree perspective of the consumer. The data analytics tools aid businesses in understanding the preferences of their customers and the performance of their own products.

Tech partners: to create better products and solutions, fintech companies merge or partner with services who add value. Block (formerly Square) acquired Afterpay a pure play BNPL company. To enhance its underwriting capabilities and speed up automated credit decision making, particularly to draw in millennials and Gen Zs, Klarna purchased the Italian payment business Moneymour. Additionally, Provenir, a provider of credit risk analytics, and Klarna have teamed up. Credit scoring, underwriting, and real-time decision-making at the point of sale are bundled as a result of their combined efforts.

So does all this point to a rosy future for BNPL? According to industry experts it may be prudent to exercise caution as regulators have taken steps affecting the business model of several players, in markets like India. What’s driving such actions is the fear of triggering overspending leading to credit risk and worse still, poor financial discipline among a young audience.

Buy Now, Pain Later?

In June 2022, the Reserve Bank of India issued a circular banning non-banks from loading pre-paid instruments (PPIs) such as digital wallets or cards using credit lines. Several brands suspended their BNPL offerings following this development. According to Euromonitor:

The Financial Conduct Authority (FCA) in the UK has named the key risks the model holds for consumers and the wider credit market. These include, but are not limited to, the lack of information for consumers around the features of BNPL, the lack of consumer creditworthiness assessment, and the potential creation of over-indebtedness.

Nearly 70% of BNPL users admit to spending more than they would if they had to pay for everything upfront, according to LendingTree. What’s more, 42% of them have made a late payment on them. While consumers maybe attracted by simple onboarding experience and ease of payment, the offline experience has not always been pretty in India. According to reports, lending apps have used unsavory methods to coerce users who have defaulted on payments.

These developments point to the industry being regulatory dependent in the near future and rightly so. What could be the broad contours of solutions for both end consumers and Fintech players? According to financial industry insiders, full-service banks seem to be better placed to make the most of the real demand for ‘pay-over-time’ services. Pure-play BNPL service providers may have to tweak their core offering based on the regulatory oversight in their home markets.

Trust, convenience and ease of use are three critical aspects of BNPL success. Traditional banks score better on trust – a critical factor in financial service products. According to YouGov study, only 36% in the 18-24 age group trust BNPL companies as compared to 61% in the same group for traditional banks.

Trust metrics on financial services by age

Source: YouGov

The implications for the ecosystem

There are several pointers for both end-consumers and the fintech ecosystem from this emerging trend.

Brands in the BNPL sector have a real obligation to educate users about financial prudence, especially to the younger demographic. It must be made clear to the end-user in every touch point that this is a loan and there are consequences for missed payments. Consumers must also be educated about the risk of over-spending and its fallouts. This is important as a key metric for BNPL players is the re-use of a service. According to PayPal 70% of their customers use the service within six months of first use. In the US, as BNPL is offered at more merchants the older demographic too is coming into the fold. So, it’s not just the Gen Z’s and millennials who will be target audience in the future.

For brands, convenience could translate to ubiquitous acceptance across online portals and POS at physical locations. Clubbing all BNPL payments with one brand would also make it easy to manage for the end user. Ease-of-use comes into play with respect to the app experience. The onboarding should strike a balance between being friction-free and conveying the details of the financial terms in a transparent manner, especially the repayment schedule and penalties for delay.

In sum, BNPL is a useful and convenient product feature especially for those with limited leeway in upfront spending capacity. But industry growth aided by great digital experience will depend on regulatory constraints and educating the consumer about the need for financial prudence.

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Banking Fintech Insurance

5 key FAQs on neobanks and their digital experiences

Founded in 1472, Banca Monte Dei Paschi di Siena is said to be the oldest surviving bank in the world. Since then, the banking industry has come a long way. It has not only grown in size but also wields huge influence across the world. Several powerful local and global brands have been established and many of them are synonymous with trust and financial safety. But as with every other industry, change is the only constant in banking too.

The onset of the internet, smartphones and better mobile connectivity has given rise to digital banking. For a large set of customers there was no reason to visit a brick & mortar branch office as all transactions could be completed on the web or on the mobile. Over the last few years, the term neobank has been used to describe digital-first or digital-only banking services. Europe, India and the US have been home for several successful neobanks in the recent past. What’s more, as a sign of its popularity, several niche services have already been launched in the domain:

– Launched recently, Lucy is a neobank targeted at women entrepreneurs.

– There’s a neobank exclusively to meet the needs of musicians: Nerve merges user experience and financial technologies to help artists build stronger communities and sustainable careers.

What makes neobanks an attractive proposition for consumers? Let us attempt to answer a few basic questions about neobanks, the reasons for their popularity and the role of digital experiences.

1. What are neobanks? Are there different types of neobanks?

When banking began the digitization journey, the FinTech industry emerged, providing technology to digitize several processes in financial services. This enabled online banking, payments and other services like insurance and wealth management. Customer preferences shifted as they embraced the convenience of online transactions. They prioritized convenience over the traditional approach of trusting a person at the local bank branch or an insurance agent. They preferred digital payments over cash, removing the need for ATMs. Neobanks emerged at the intersection of technology and banking in this industry shift. The concept of neobanks emerged around 2015, and in a very short span of time disrupted the entire banking industry.

“Neobanks are digital first, born in the cloud, completely online banks, with absolutely no physical presence. They provide banking services only via web or mobile a smartphone app.”

In Europe and the US, neobanks are also referred to as ‘challenger banks’ or ‘open banking’. They all have the following key characteristics:
– Customer first: understanding the generation that are digital natives, and rely on their phones for everything, neobanks adopt an entirely digital approach to the customer experience, offering crisp, user friendly and intuitive interfaces.
– Technology powered: Neobanks are entirely technology driven, using technology to acquire customers and deliver services. They deploy artificial intelligence to create personalized, customized offers based on data. Traditional banks rely on in-person or phone customer service, while neobanks may rely on chatbots or Robo-Advisors.
– No physical presence: Neobanks have no physical presence at all; they operate without branches, offices, ATMs or any type of physical infrastructure.
– No banking license: Neobanks typically do not have a banking license and offer services along with a banking partner, although some countries that allow digital banking licenses have seen some licensed neobanks.

Robosoft Neobank eBook download

In general, a neobank is different from a traditional bank, a mobile wallet or a digital bank, and can fall into these categories.

1. Independent neobanks that work with banking partners: most neobanks follow this model, where a FinTech firm creates a digital experience with a mobile or web platform, and they collaborate with conventional banks to offer services and products. Yolt, Lunarway, and Moven are examples of neobanks that work in this model.

2. Neobanks owned by traditional banks: several traditional banks have realized the value of a digital-only, customer first approach. Aside from their online banking portals, banks set up wholly owned neobanks as part of their digital initiatives such as DigiBank set up by DBS.

3. Licensed neobanks: some countries such as UK, Brazil, Germany, South Africa, and Singapore allow digital banking licenses, and as a result, some neobanks have acquired banking licenses. This allows them to offer more valuable, regulated services. Monzo, N26, MyBank, Starling Bank, and Revolut are some examples.

Additional read: Mobile Fintech vs Traditional Banking products

2. Aside from lack of physical outlets, how are neobanks different from traditional banks?

What neobanks did best is understand the new age consumer and use technology to create a user-first banking experience, rather than a regulation and process first banking experience.

Traditional bank vs Neobank Challenges

Neobanks create a purely delightful digital journey with easy to use and attractive interfaces. New solutions are built based on a mobile-first experience over a branch-first experience. They use data to create unique solutions and understand the pulse of the customers to create digitally enabled experiences.

3. What aspects of neobanks do customers like?

It is believed that the incredibly easy account opening and smooth, quick on-boarding are hugely attractive to those who have signed up with neobanks (Niyo in India anchors its advertising on the fact that its account opening takes just 100 seconds).

Deloitte surveyed millennials in over 20 countries and found that 68% say that new financial players understand their needs. They expect banks to offer a slick and sophisticated app, with new offers tailored to their needs. 79% of millennials access their mobile banking app multiple times a week. With Gen Z entering the workforce, there will be new expectations of social media integrations and deeply unique experiences.

Consumers want fully connected services from neobanks, which means creating products and services that cross over the traditional industry lines.
– Hyper-personalization options such as bundling services like real estate with home loans, peer to peer payments, personal finance planning, and even lifestyle related features are being integrated into the digital experience.
– For small and medium enterprises as well, neobanks are offering integrated services of banking as well as financial management including accounting, invoicing and taxation.

Neobanks have seen widespread adoption and growth as they are agile and easy to set up, and customers find it simple to engage with them.

Easy account creation: customers can easily open an account in a few clicks, without having to visit a bank branch or provide reams of documentation.

Personalization: the user experience is unique and tailor-made with data available on spending patterns and other insights

Range of services at lower fees: not having to bear costs of labor or branches as well as less spend on regulatory compliances allow Neobanks to offer services including banking, debit and credit cards, forex, loans and others free or at very low service rates

4. What’s in it for neobanks?

Low cost and agile: Neobanks are 100% online, so they have no investment on physical infrastructure and low operational spends such as customer support, ATMs or bank branches.

Wider reach of customers: the ease of account creation via mobile phones and simple user interfaces, enable neobanks to reach the unbanked populations including small and medium enterprises, blue collar workers and youth.

Data on consumer patterns and trends: being completely digital allows neobanks to collect and analyses consumer data, understand the patterns, and behaviors. Using machine learning allows them to provide a customized experience, and artificial intelligence helps neobanks create personalized services.

Benefits for the Neobank

5. What is the industry shifts which were favorable to neobanks?

Digital acceleration: The pace of adoption of new technologies and relying on digital solutions for everything (be it ordering food or hailing a cab) increased recently. The pace of this change accelerated after the Covid-19 pandemic and has impacted several industries including media & entertainment and delivery services.

Hyper-personalization: Product or service parity is common across categories. While consumers may see very little difference between brands, the ones which cater to a ‘segment of one’ are bound to have an edge. Consumers expect unique services, ongoing communication and access to relevant information and data.

Change in the notion of trust: An imposing building and presence over decades was equated with solid performance and trust by the older generation. Millennials and Gen Z don’t see such as markers of trust. They expect the digital experience to work and work best for them.

Shifts in technology capabilities: The foundational elements of technology put in place in the first wave of digitization by banks and FinTechs have a lot to do with the success of neobanking. API integrations allow data and information to be shared by various applications, which allows neobanks to offer simplified services, and fast digital experiences. Account aggregator system reforms such as India’s UPI (Unified Payments Interface) have enabled ways to connect, bypass legacy-infrastructure hurdles, and innovate using technology.

Technology-enabled design as brand edge: Both B2C and B2B enterprises have come to accept that design can be a secret weapon in creating brand affinity. While slick user interfaces attract users and simplify the digital journey, machine learning and artificial intelligence are bridging data and user experiences. With these AI / ML applications, neobanks draw from individual data to create a personalized experience, or offer unique services or products by predicting a user’s need.

Additional read: 5 factors set to impact the future of banking

Despite the rise of neobanks, traditional banks which have adapted well to the digital world still have an edge due to brand recognition, positive equity and a huge customer base. All in all, it promises to be a win-win for the end consumers who can get the best of banking facilities, customer service and digital experiences.

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Customer Experience Digital Transformation Enterprise Applications Fintech Insurance

FinServe trends post COVID-19: Multiexperience, Embedded banking, Platformification, Personalization & More

Like many other industries COVID-19 significantly impacted the Banking & Financial Services Industry too. Though the lockdown norms are being relaxed slowly, customer behavior has changed drastically. Customers no longer visit offline branches to conduct their financial transactions. They are wary of venturing outside their homes and for them to regain confidence in the in-person branch visits will not happen soon. As a result, financial institutions are forced to focus their customer targeting efforts on channels that are readily available via digital mediums.

The fact of the matter is for banks, financial institutions, and insurance companies, the face to face interaction that worked well in offline branches has to be maintained online. This is seen as a huge challenge for them. Hence, there needs to be a total shift in company tactics that can somehow retain that human connection with customers. The financial sector is poised to undergo a drastic change in the near future and customers should be ready for that change.

Let us take a look back in the pre-COVID19 period as a tipping point between the new normal and the post-COVID era. In a recent research conducted by the Digital Banking Report around digital transformation, customer experience, use of data and advanced analytics, innovation, and technology, it was clear that the financial industry leaders already knew what needed to be done, and in many cases, how to proceed. With COVID19 the pace of adapting and digitally evolving has accelerated, bringing a new opportunity as well to build loyalty among consumers.

In the new normal, financial institutions witnessed an environment where the way work, how consumers bank, how employees learn new skills and how brands are perceived are all different. The degree to which these changes take root is driven by both business and societal dynamics as well as how long it takes to move to a new equilibrium.

In a special report, After the Virus, Cognizant’s Center for the Future of Work examines the implications of COVID-19 five years from now as it relates to work, education, entertainment, e-commerce, human engagement, and the environmental agenda. The report presents some interesting insights to lay a foundation of what the banking industry must do to fast forward their business strategy and keep abreast with the changing consumer behavior and better position themselves as future-ready.

In this article, we will take a look at some critical factors that financial institutions and banks need to take on an immediate basis to adapt to the new normal and remain competitive.

Critical factors for financial institutions and banks to adapt to the new normal and remain competitive

Multi-experience for financial services will remain to be top technology trends in 2020

As per Gartner reports, Multiexperience remains to be amongst the top technology trends of 2020 and is poised to replace technology-literate people with people-literate technology. Instead of people getting accustomed to the evolving technologies, it will so happen that the technology will evolve to understand the people better.

Multi-experience is all about leveraging various modalities, digital touchpoints, apps, and devices to design and develop a seamless experience for the customers. The idea is to interact with the customers at as many touchpoints as possible to offer a consistent customer experience across the web, mobile, app, and other modalities.

We need to take note that multi-experience is not omnichannel. While omnichannel involves tapping the user touchpoints across all the channels, multi-experience is about developing effortless customer experiences across apps, websites, and modalities of voice, touch, and text, irrespective of the channel.

The key difference between omnichannel and multi-experience is the core. Omnichannel is all about technology, whereas, multi-experience is all about people. This difference marks the shift from technology-literate people to people-literate technology.

Here’s a four-step multi-experience model proposed by Jason Wong, Research Vice President to apply multi-experience to a digital user journey:

  • Sync me: Storing a user’s information, which the user can find and access anytime.
  • See me: Understanding a user’s context, location, situation, historical preferences, and then offering better information and interaction to the user.
  • Know me: Using predictive analytics to make suggestions to the user
  • Be me: Acting on the user’s behalf, when given permission, and making the best decision for the user.

If we talk about financial services, Fintech is promoting a vision of a world without banks. Blockchains and cryptocurrencies are funding transactions without paper money or credit cards. Robo-advisers are providing portfolio management without managers. Mobile payments are turning phones into credit cards. The ability of upstart companies to provide high-performing web experiences is not hindered by legacy infrastructure — or legacy business models.

Customers want a fast, seamless, immersive, cross-channel digital experience that satisfies, and even anticipates, their needs. This is especially true of millennials, a generation quickly becoming the dominant demographic. Combine millennials’ expectations of brands in general with their fundamentally different banking and investing habits, and it’s clear that FSIs must adapt to those needs and requirements.

It’s not enough to provide exceptional experiences just for basic online activities. FSIs must prove themselves by offering complex activities, such as applying for a loan or configuring products. As institutions offer ever-more complex digital transactions, the focus on performance only increases. The reality is that today’s engaged consumers — influenced by their daily interactions on social media and other platforms — expect all sites and apps to be high performing and lightning-fast.

Not only digital but embedded banking services is the need of an hour

While not every consumer will want to do all of their banking digitally, most will expect that option in the future. Some of the banking services will include opening a new account, changing the terms of a loan, reaching a bank representative, etc. The experience must go beyond ‘just digital’ to become both seamless, simple, and user-friendly. With this, the core business of banks and financial institutions will encounter the next level of challenge. There is a question if banking will be controlled only by banks? As the challenge remains to be that customers will demand banking services to be available and integrated with different points of sale, devices, service providers etc. In short, banking services are expected to be embedded into virtually anything and everything.

Additionally, it leads to the discussion on banking service being offered in SaaS (Software-as-a-Service) model, pay-per-usage, subscriptions, renewals, etc. However, these terms were never traditionally associated with banking services, gradually there is growing customer demand for such a flexible approach to payments, investments, loans and other such banking services.

Contextual engagement and personalization of Banking & Financial Services

The expectation of real-time personalized offers and messages has increased dramatically. This requires a 360-degree view of the customer journey and advanced analytics to deliver solutions across channels. Personalization is currently the number #1 banking marketing trend. While the financial sector lags in adoption of personalized customer experiences techniques, consumer loyalty is at stake if more financial institutions don’t reimagine their efforts. To note, choose financial institutions based on how well they incorporate personalized experiences.

Certain banks are taking tips from retailers on personalized customer experiences by using data analytics, coupled with artificial intelligence (AI), to offer customers personalized experiences. As per Everfi’s banking trends for 2020, international banks like the Commonwealth Bank of Australia and the Royal Bank of Scotland use a model of “next best action” to follow consumers’ financial journeys, predict the future financial products or services they might need, and personalize product offerings and advice to each consumers’ unique situation or life stage.

Banking trends emphasize personalized experiences through Chatbots, and Mobile Apps

  • S. banks are using fintech in creative ways to appeal to a generation raised by technology. A mobile app packed with features is top on their list. Nearly 80 percent of consumers prefer using a single app to manage their finances.
  • More than a million Bank of America customers use an AI bot named Erica that is available through their app. Erica helps customers pay bills, shop, and more.
  • Citibank recently released a mobile app, 360º Financial View, that aggregates online financial tools and investments, even those outside Citibank. Citibank provides the all-in-one app to both current and potential customers. This allows Citibank to expand their market reach by advertising their products and services. It also gives users the option to open a new Citibank account.

It’s no surprise that personalized customer experiences dramatically improve the bottom line. Financial institutions that implemented the next best action model saw a 30 to 40% increase in sales. By anticipating customer needs and catering to them with personalized offerings, financial institutions are able to generate increased revenue, all the while meeting customer expectations around personalized experiences with their trusted banking institutions.

Digitally infused branches and platformification approach

As already adopted in other industries, financial institutions especially banks need to look beyond the standard set of services and consider platform solutions to assist consumers during select customer journeys for example; car buying, investing, loans, home purchase, etc.) They can consider their bank website to be the ‘main branch’ and all offline branches will act as secondary branches for the time being.

A financial institution’s website will be the primary go-to branch for customers where they can seek all kinds of information. The website will address all their needs and concerns just like any offline branch. If person-to-person interaction is needed, virtual consultation with the branch staff needs to be arranged. With this eventually, financial institutions can expect the number of offline branches to be reduced considerably.

But even with a few offline branches, a few leading organizations try to bring back the heyday for branches by making them engaging hangouts with increased digital services — from interactive kiosks to digital financial education modules and more.


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Branches will provide great opportunities to engage customers and provide highly personalized financial education.  We can also expect further investment in employee training and branch redesigns as they will continue to deploy digital financial tools.

Financial institutes prefer a new channel mix to enhance customer experience

With the potential for many consumers to work remotely indefinitely, financial institutions and banks opt for a new set of delivery channels which may include voice devices, video conferencing options, IoT devices, gamification methods, etc. The proliferation of mobile devices and shifting preferences among demographic groups mean that customers expect more real-time, cross-channel capabilities (such as status inquiries and problem resolution) than ever before. Physical distribution will still be relevant but far less important, and banks must learn to deliver services with a compelling design and a seamless unconventional customer experience.

As per a McKinsey report, banks have recognized that customer expectations are increasingly being set by nonbanks. There are questions to be answered like why does a mortgage application take weeks to process? Why does it take an extra week (or two) to get a debit card online versus in a branch? Why can’t a customer make a real-time payment from his or her phone to split a dinner check? There is an urgent need for banks to respond to these questions by improving their customer experience and meeting their customers’ changing expectations. Financial services is the only business where you can be rejected as a customer. In an age where mobile devices provide real-time transparency on just about everything, it is critical to provide customers with information about the status of an application or what other documents are required. Account balances must be consistent across channels, and banks should consider the real time updating that an on-demand e-commerce application like Amazon provides and aim to deliver that level of transparency when it matters. Working on such innovation provides opportunities for banks to improve and differentiate their customers’ cross-channel and cross-product experiences.

Contactless technology will ignite a cashless payment surge

In a recent Capgemini Consumer Behavior Survey conducted in April 2020 done for COVID-19 and the financial services consumer, states that in the post Covid19 era digital channels and contactless technology is preferred by consumers which will ignite a cashless payment surge. More than 52% said they prefer self-service bank mobile apps during the Covid-19 outbreak as compared to 47% before the virus pandemic. Similarly, 54% say they are conducting bank transactions over the internet during the pandemic. For the insurance sector, channels such as the firm’s website (27%) and social media (26%) remained the top interaction choices for policyholders, a noticeable jump in numbers in comparison to before the Covid-19 scenario.

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Additionally the report mentions that banks, governments, regulators and banking associates minimize one-on-one contact and encourage customers to use contact-free digital services. The World Health Organization (WHO) recommended contactless payments versus cash, if possible, as a way to limit the spread of the virus that may linger on paper currency. In countries like China, banks are using ultraviolet light or high temperatures to disinfect Yuan bills, then sealing and storing the cash for one to two weeks before recirculation – depending on the severity of the outbreak in a particular region.

Financial firms offer waivers, donate services and business continuity support

Banks and insurers, FinTechs, InsurTechs, and BigTechs are stepping up – worldwide to waive off charges on digital transactions, or offer a moratorium on loan or insurance coverage payments.

ICICI bank in India, launched ICICI Stack, a digital platform that offers nearly 500 services from retailers, FinTechs, and e-commerce merchants. China’s Ant Financial plans to open its payments platform Alipay to third parties, to provide business continuity during emergencies, and to become a part of customers’ digital lifestyle.

Citigroup (USA) is pushing proactive reminders and helpful instructions to customers about mobile and digital banking services. Other banks are taking steps such as fee waivers, payment deferrals, and loan modifications in response to customers’ changing circumstances. Insurers are also waiving out-of-pocket costs for treatment related to coronavirus. Many financial institutions offer community aid, donations and healthcare support to help overcome pandemic crises.

In Conclusion

Widespread adoption of new-age digital channels such as chatbots, automated voice assistants, and social media tools appears to be an inevitable truth for banks and financial institutes.

Throughout the unpredictable weeks and months ahead, the crisis-sparked surge in digital activity is bound to generate new customer habits that require banks and financial institutions to function online. Ultimately, the question is will full digital rein as the exclusive customer engagement channel? Not too likely, but it may become the primary channel that customers use to engage with banks and financial service providers. Each day of confinement promotes digital use, that begs another important question – Are Financial services incumbents ready to prioritize digital capabilities and offerings for success in a virtual world? The answer lies in the truth that the global pandemic has forced them to this reality and eventually shaped an enhanced customer experience.

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