But despite that fact, only 11% of organizations claim to have a sophisticated omnichannel implementation, and if you’re not one of those companies, that fact should worry you.

Omnichannel experiences are going to be a crucial focal point for businesses in upcoming years and could be a serious differentiating factor for your company. In this article, we’ll explore everything you need to know about using omnichannel experiences to turn all of your channels into sales channels.

First things first, what is an Omnichannel Experience?

An Omnichannel experience provides customers with a fluid and continuous user journey across all of a company’s channels. It requires all of a company’s touchpoints to be integrated and connected. 

That means that no matter where a customer might interact with your brand, they are provided with a homogeneous experience that allows them to swap over from channel to channel with ease.

Customers should be able to go through a series of channels, from social media and SMS to the company’s website and even in person, all while feeling that their interactions in one channel have somehow advanced their journey within the others.

What are the differences between Omnichannel and Multichannel?

You can think of Omnichannel and Multichannel in the same way you do squares and rectangles. An omnichannel experience is a multichannel experience, but a multichannel experience isn’t an omnichannel experience.

*For those of you who aren’t geometry teachers:

A rectangle is a four-sided shape with four 90-degree angles. A square is defined as a special rectangle where all four sides have the same length. So a square is a rectangle, but a rectangle isn’t necessarily a square.

A multichannel strategy allows customers to access multiple communication channels that aren’t necessarily synchronized or integrated. For example, a restaurant with a phone number and a website counts as having a multichannel strategy.

Only when these channels are seamlessly integrated can it be considered an omnichannel experience.

The State of Omnichannel In the U.S.

One of the most important data points you need to consider when evaluating the effectiveness of a particular strategy is the context in which it will operate, and this particular context presents us with a mobile and online-heavy customer preference.

Predictions indicate that mobile commerce (“m-commerce”) will constitute 40.4% of total e-commerce sales by 2024, and by 2025, mobile sales are expected to represent 10.4% of all retail transactions.

While you might think that this means retailers should be prioritizing their mobile channels, that won’t be enough to complete a sale. Retailers need to have their mobile channels integrated into their other touchpoints because customers use their mobile devices while engaging with other points of sale.

Just take a look at the numbers:

A customer-centric omnichannel experience prioritizes seamless transitions between brand touchpoints for swift and effortless purchases. With consumers becoming more and more tech-savvy and discerning, retailers are going to have to put even more effort into providing seamless experiences between sales channels

Why Is Omnichannel Better? The Benefits Of Creating Omnichannel Experiences For Your Customers

Before we get into how to create a robust omnichannel experience, we need to understand why this kind of strategy is beneficial for retailers. Let’s dive into a few benefits that providing a comprehensive omnichannel experience can provide retailers.

Facilitated user experience

→ An overwhelming 89% of customers express frustration when they have to explain their issues to various customer service representatives repeatedly. (Sprinklr)

→ When faced with multiple negative experiences, approximately 80% of customers prefer choosing a different company for their purchases instead of remaining loyal to the same one. (Helpscout)

→ Despite the rise of online shopping, 55% of consumers still find pleasure in visiting physical stores to physically interact with and examine products. Their in-store encounters often influence their ultimate purchasing decisions, even if the actual purchase is made online. (Viden)

Customer Loyalty

→ Positive customer service experiences lead to an 89% increase in the likelihood that customers will choose to make repeat purchases from the same company. (Helpscout)

→ Companies implementing robust omnichannel customer engagement strategies, on average, manage to retain 89% of their customers. In contrast, those with weak omnichannel approaches struggle with a customer retention rate of only 33%. (Invesp CRO)

Increased sales and profit

→ Brands excelling in omnichannel customer engagement experience a 9.5% annual revenue increase, compared to 3.4% for those employing poor omnichannel strategies. (Shopify)

→  Although omnichannel customers constitute only 7% of the total customer base, they contribute to 27% of all sales. (Digizuite)

Target’s findings indicate that customers engaging with multiple channels spend four times more than in-store customers and ten times more than those who exclusively shop online. 

→ Research indicates that well-established omnichannel brands experience an annual decrease of 7.5% in the cost per contact, showcasing the efficiency of their customer engagement practices. (Shopify)

Higher purchase frequency

→ Marketers have discovered that utilizing three or more channels in a campaign can result in a 287% higher purchase rate compared to single-channel campaigns. Additionally, omnichannel experiences lead to a 250% increase in customer purchase frequency and a 13% growth in the average order size. (Omnisend)

Five Factors That Influence The Result of Your Omnichannel Strategy

There are several key factors that can significantly impact the success and effectiveness of your omnichannel experience. Understanding and leveraging these factors is crucial for creating a seamless and customer-centric omnichannel approach.

Your Social Media Channels

Social media platforms play a pivotal role in shaping the omnichannel experience for customers. The way your brand engages with and utilizes social media channels can influence customer perceptions, preferences, and interactions across various touchpoints. 

Integration of social media into your omnichannel experience is a must, not only because social media is being used more and more for promoting products, but it can also become a major point of sale. 

Social media integration can enhance brand visibility, foster community engagement, and provide additional avenues for customer communication.

Personalization

Personalization is becoming a crucial aspect for retailers Tailoring interactions based on customer preferences, behaviors, and history across channels helps create a more individualized and relevant customer journey. 

Whether through targeted marketing messages, personalized recommendations, or adaptive user interfaces, incorporating personalization into your omnichannel strategy enhances customer experience.

We’ve actually written an article all about how hyper-personalization is changing the way consumers interact with their favorite brands. You can read all about it by clicking here.

O2O (Online to Offline) Capabilities

The seamless transition from online to offline experiences is essential in today’s omnichannel landscape. A well-executed Online to Offline (O2O) strategy ensures that customers can effortlessly move between digital channels and physical stores. 

This integration provides a cohesive experience, allowing customers to research online and make purchases or seek assistance in-store, fostering a holistic and convenient journey.
To better understand how a solid O2O strategy can benefit your omnichannel experience, click here.

Strong Connection to Physical Stores

Maintaining a robust connection between digital and physical storefronts is paramount. A well-integrated omnichannel strategy acknowledges the importance of brick-and-mortar locations, ensuring that both online and offline touchpoints complement and reinforce each other. 

This connection enhances brand credibility, facilitates convenient product access, and supports customer preferences for in-person interactions.

Saving Information from One Channel to Another

The ability to seamlessly save and transfer customer information between channels is a key element in creating a cohesive omnichannel experience. 

When customers can effortlessly pick up where they left off, whether switching between devices or moving from online to offline, it enhances convenience and minimizes friction in the customer journey. Implementing effective data synchronization mechanisms is essential for maintaining continuity and relevance across various touchpoints.

Disney, Starbucks, Amazon & Timberland: 4 Business Cases of Good Omnichannel Experience

Disney excels in delivering a comprehensive omnichannel experience, paying meticulous attention to even the minutest details. The journey begins with the enchanting and mobile-responsive design of the entertainment giant’s website, extending to the mobile-friendly functionality of its trip-planning website—a rarity in the industry.

Upon booking a trip, the My Disney Experience tool becomes invaluable for planning the entire journey, encompassing aspects like dining choices and securing Fast Passes. While in the park, the mobile app proves indispensable for locating desired attractions and checking estimated wait times for each.

The success of Disney’s omnichannel experience lies in its provision of diverse features and tools, ensuring a truly integrated experience for customers.

Starbucks

The Starbucks rewards app stands out as a premier omnichannel experience. Customers receive a free rewards card that seamlessly integrates across various channels. Unlike conventional loyalty programs, Starbucks allows users to check and update their cards through the phone, website, in-store, or the app. Any modifications to the card or profile are instantly reflected across all channels in real-time.

The convenience extends to scenarios like standing in line for coffee with an insufficient balance. By reloading the card, the cashier is promptly notified of the update before the card is swiped.

The app’s significance in a customer’s mobile experience cannot be overstated, making Starbucks’ app a pivotal element in delivering an exceptional omnichannel experience.

Amazon

Amazon, renowned for its extensive reach, has successfully implemented an omnichannel strategy despite lacking physical stores. A key contributor to its triumph is the adept utilization of customer data, positioning the company at the forefront of this domain. 

This data is employed to furnish personalized recommendations, present pertinent promotions, and facilitate straightforward customer reviews and reordering processes.

Additionally, Amazon enables customers to use a single account across different countries and sub-brands like Audible and Goodreads. Regardless of the purchase origin on Amazon.com, a unified and clearly articulated returns process is in place. 

Impressively, Amazon’s ecosystem seamlessly incorporates third-party marketplace sellers who interact with customers through Amazon’s channels, ensuring a consistent brand experience. Remarkably, this is achieved without the presence of physical stores. In the realm of omnichannel retail, prioritizing smooth experiences is crucial, and Amazon excels by maintaining transparency and clarity in its communication about rules and expectations.

Timberland

Timberland enhances the customer experience in its physical stores through the adoption of near-field communication (NFC) technology. This technology, commonly used in tools like Apple Pay and Android Pay, facilitates wireless data transfer when a mobile device is tapped against a designated chip. 

In contrast to its application in e-commerce, Timberland employs NFC in-store by providing customers with tablets that can be pressed against products and signage.

By pressing the tablet against the NFC chip, relevant information about the corresponding product or offer is instantly displayed. This eliminates the need for customers to seek assistance from store staff, allowing them to conveniently access details about available deals for each item. 

As customers explore various products, the tablet’s personalization software utilizes their shopping history to provide tailored product suggestions, enhancing the overall shopping experience.

Omnichannel Is an Ever Changing Challenge 

As new technology becomes available and Artificial Intelligence advances, there will be more and more opportunities for companies to upgrade and improve the omnichannel experience that they can provide customers. 

At the end of the day, omnichannel strategies need to be as flexible as the experience they provide for users.

Digital transformation is omnichannel. Omnichannel is phygital. And digital transformation has no finishing line 

We’ve touched on this in passing throughout this article, but those of you with keen eyes might have noticed it. Omnichannel is Phygital. The unification of physical and digital touchpoints is just a part of the omnichannel experience, but it is perhaps the most important part.

With brick-and-mortar on the rise and customers becoming more selective with their purchases, being able to provide a seamless transition between online research and in-store verification can mean the difference between having your customers window shop and finalizing a sale.

Phygital strategies are quickly becoming the cornerstone of successful omnichannel strategies, and that’s not by chance. In fact, we expect the term “phygital” to be one of the bug buzzwords at NRF 2024: Retail’s Big Show.

If you’re interested in what else you can expect from the largest retail convention in the world, we highly recommend you check out our article, “7 Breakthroughs You Can Expect From NRF 2024: Retail’s Big Show.”

Much like any form of digital transformation, creating a proper omnichannel experience has no finish line. The goal is continuous improvement, and that’s something MJV can help you with. If you’re looking to integrate your touchpoints and create a true omnichannel experience for your customers, why not get in touch with one of our consultants?

Remember, you don’t have to go it alone.

Confira o post: Omnichannel Experience: The Art of Turning Your Channels Into Sales Channels em MJV Technology & Innovation.

About NRF 2024: The Largest Retail Event In The World

NRF 2024: Retail’s Big Show is the world’s leading annual retail event, with around 40,000 on-site retail specialists from almost 100 countries. Its members include department stores, catalogs, independent retailers, restaurants, grocery stores, multi-level marketing companies, and vendors.

The National Retail Federation represents the largest private-sector industry in the United States containing over 3.8 million retail establishments, supporting more than 52 million employees, and contributing $3.9 trillion to the United States’ annual GDP.

Just take a look at some of the statistics for NRF 2024, and you’ll see that it’s no boast when we say “the world’s leading annual retail event.”

The event took place at the Jacob K. Javits Convention Center in New York City from January 14-16 and was an incredible experience for all involved.

MJV @ NRF 2024

For the second consecutive year, MJV was in NYC exhibiting and sponsoring the retail store tours.

MJV’s retail know-how

With 25 years of experience operating in the retail sector, MJV has been there and back again. In particular, we’ve seen the industry transform in the digital age. With our expertise in putting together more than 500 retail & CPG projects, we are confident that we can unlock the answer no matter what your retail challenge is. We pride ourselves on delivering cutting-edge retail and CPG solutions. 

Sponsorship

But that’s not all; we’ve also teamed up with NRF to sponsor one of their tours.

The Big Show Official SoHo Tour, where participants visited innovative retail outlets to experience the latest industry trends.

Phygital is The New Mainstream

At NRF 2024: Retail’s Big Show, the industry geared up to showcase its commitment to embracing innovation and addressing emerging challenges.

The retail landscape is on the brink of a transformative shift, as the convergence of physical and digital experiences is poised to become the new norm. Termed “Phygital,” this integration is set to reshape consumer interactions, supply chains, and operational strategies.

This phenomenon is nothing new, but it’s been gaining more and more traction over the last few years and is set to take off in 2024: In-person viewing combined with home delivery, touchscreens that provide shoppers with useful information, and even Augmented Reality in stores are just a few of the innovations that we can expect from this growing trend.

But that’s just the tip of the iceberg. NRF 2024 provided retailers with many more insights into the future of retail. Let’s start by taking a look at some of the drivers of change that will be shaping the upcoming year.

7 Takeaways From NRF 2024 

Changes in consumer behaviors, societal trends, and technological advancements are expected to reshape consumer packaged goods (CPG), fast-moving consumer goods (FMCG), e-commerce, and retail sectors.

Alongside what will be pushing retail forward and what will be blocking its path, there are several trends that we will undoubtedly see littering the path towards the future. These trends are going to play a big role in how companies tackle challenges and implement innovations, and took center stage at NRF 2024.

In this article, we’ll leave you with the top seven takeaways that were front and center at Retail’s Big Show.

1. Artificial Intelligence

The era of hyper-personalization, driven by AI and data analytics, is anticipated to take center stage, leading to tailored experiences for individual consumers. This is also a trend seen on the consumer side of things, with customers demanding more personalization in their shopping experiences. 

Artificial Intelligence is expected to play a pivotal role in several strands. One of them is. Hyper-personalization. With customers demanding more personalization in their shopping experiences, organizations are investing in AI to drive hyper-personalized shopping experiences, utilizing generative technologies to understand and cater to individual preferences. 

There’s an emerging strand that is poised to strongly rely on AI—the financial services operations’ fraud detection and prevention.
We’ve actually recently written up a case study about an AI-operated fraud detection project that we recently completed for a client. It’s just one of the many ways artificial intelligence is changing the game. You can read it here.

2. Retail Forecasting

Still, on AI, there is a subtrend that stands out, which refers to the use of AI to improve anything related to retail forecasting.
As AI becomes more sophisticated, its ability to predict is going to change the way that retailers look at issues—from reactive to proactive. The goal will be to preemptively tackle problems and seize opportunities before they appear.

The ability to use consumer data from previous months or even years to predict future demand and market movement is already benign used by retailers today, but the real insight here is how this trend will grow over the next year.

AI can provide significant optimization to balance and manage demand and supply. As important as knowing how to use AI is redefining processes to guarantee the feasibility of the tools alongside your management systems.

3. In-Store Experience

Physical stores are expected to make a comeback, emphasizing immersive in-store experiences that go beyond traditional shopping. It’s gotten to the point where even companies that have gone bankrupt are using brick-and-mortar to make their comeback (think Toys ‘R’ Us).

Analysts who saw the pandemic as the end of all things physical are now backpedaling in order to make sense of the rise of in-person shopping. And that comes down to one possibility in our eyes: the rise of shoppertainment.

More and more consumers are looking to physical stores to provide them with more than just products they can get online, but actual immersive experiences. And with the way that VR, AR, and Mixed Reality are developing, it’s looking like the phygital experience is going to get a major update over the next few years.

4. Retail Theft

Retail theft is spreading across the US like wildfire. It’s even become increasingly common to see some franchises shut down because of it. Some companies are even taking unpopular measures to contain and decentivise theft, such as putting body cams on store security officers.

The problem with this? It absolutely destroys the purchasing experience, and prevents other trends, such as self-check-out or walk-out stores, from moving forward.

Innovations like checkout-free stores are poised to redefine the retail transaction process for instance. This has been exacerbated by our quick shift to touchless technology. AI will also play a big role in the feasibility and adoption of this technology, but the sudden boom in retail theft has created a barrier to this trend really taking off.

Self-checkout has already taken a hit in many major store chains, and Amazon has recently closed several of its cashier-less stores in the UK. In order to overcome this, stores are going to have to implement innovative security measures like facial recognition to take retail theft head-on before new check-out technology can really evolve.

5. Embedded Finance

Will we be able to differentiate between a bank and a retailer by 2050? Apple seems to think that the answer to that question is “no.”

More and more retailers are offering financial service solutions to their customers, and it’s only a matter of time before we see the rise of the “Everything Company” and that rise will begin with the incorporation of financial services.

Embedded finance is the integration of financial services into non-financial solutions. This helps companies to create easier-to-use tools for their clients, such as one-click payments, store-owned credit cards, and native payment programs or insurance plans. 

Retailers have realized that any strategy or tool that facilitates the moment of purchase can have an incredible impact on overall customer satisfaction and sale finalization. Perhaps because of this, embedded finance has been gaining momentum over the past few years, with companies like Apple and Amazon leading the charge. 

We’ve recently released an article all about embedded finance if you would like to know more about how this trend is gaining traction.

6. Customer Loyalty

Another big trend sweeping through retail is the inclusion and focus on customer loyalty and loyalty programs. While loyalty programs are nothing new, consumers are becoming more savvy and discerning as the years go by.

What this means is that it takes more before a customer is ready to commit themselves to becoming the loyal customer retailers so desperately want them to be. And that doesn’t just mean cash back on purchases. Consumers require real incentives, personalization, and a strong connection to the retailer’s brand identity and vision before committing. 

Starbucks, for example, has an excellent customer loyalty strategy, and we’ve also recently written an article that goes in-depth into how it works and why it’s so innovative.

7. Retail Media

The rise of retail media networks is projected to transform how brands engage with consumers, turning retail spaces into advertising platforms.

The push for more investment into retail media was a big topic for NRF 2024, and the same can be said for next year’s convention as well. Recently, we’ve seen how profitable a substantial retail media strategy can be for retailers, both for the advertiser and the seller.

Amazon is, without a doubt, the biggest name in the retail media industry: 89% of the U.S. retail media ad market goes through Amazon Advertising Solutions. As of 2022, the e-commerce giant has reached over 200 million members in its Prime program in the U.S. alone. It remains unmatched in terms of access to in-depth transactional data.

But this is only the beginning. Media companies and other online retailers are pushing to break into the retail media game and steal some of the market share from Amazon. Expect to see more retail media strategies on the docket for retailers in 2024 and beyond.

You can go into in-depth retail media by clicking here.

Where Are We Headed?

As the industry steps into the future, the evolution towards phygital experiences can only be indicative of a dynamic sector constantly adapting to changing consumer preferences. Moving forward, immersive and personalized experiences are projected to have the biggest impact on Phygital’s evolution and possibly retail.

Don’t be surprised if Amazon releases a brick-and-mortar immersive shopping experience sometime within the next year. We’re almost certain that they’ll be providing customers with some form of instant payment solution as well.

NRF 2024 served as a crucial platform for industry leaders to collaboratively envision and steer the course of retail towards a future where Phygital is not just mainstream but continually evolving.

These are just a few of the biggest topics from Retail’s Big Show, but if you didn’t attend the convention, don’t worry, we’ve got you covered.. MJV has released an exclusive and comprehensive report on NRF 2024, material that was created by mapping and analysis of the main tendencies for the future of retail:

It includes moments and quotes from keynote speakers, trends and topics covered by industry leaders, and so much more. Click here to download the full report and receive curated insights from NRF 2024: Retail’s Big Show.

Follow us on LinkedIn or sign up for our Retail Snapshot newsletter to stay on top of all things retail and NRF!

Confira o post: 7 Takeaways from NRF 2024: Retail’s Big Show em MJV Technology & Innovation.

When the customer has chosen his or her products and enters the payment phase, they enter what A. G. Leafley, former CEO of Procter & Gamble, called “the moment of truth.” This is when companies do or die. Failure to provide seamless payment options may entail failure to provide a convenient experience for your customers. They may walk away, leaving you holding the bag.

But what exactly is embedded finance, and why is it so important to provide these seamless payment options? This is what we will address today in this article.

What does embedded finance stand for?

In a nutshell, we can define embedded finance like this:

Embedded finance is the integration of financial services into non-financial solutions. This helps companies to create easier-to-use tools for their clients, such as one-click payments, store-owned credit cards, and native payment programs or insurance plans.

Another way to look at embedded finance is the “bankization” of non-banking or non-financial institutions. At first glance, this may sound like more work for companies since they now have to provide in-house financial services that would otherwise be the responsibility of third-party financial service providers.

There’s a saying that goes like this: “Every company will eventually become a fintech.” What that means is that customers—and the future of the industry—expect financial solutions from your company.

Embedding finance to nurture customers

Let’s imagine that an online retailer wants to smoothie out its payment process. It wants to go beyond saddling Apple Pay or Google Pay to its platform (which are underused, according to a PYMNTS report). How can it go about that? How would you go about that, if this was your company?

The solution is to provide payment strategies that are adequate to the realities of the average American customer. That reality at the moment is one of scarcity, not of abundance.

Though consumer spending is at full throttle, enabling the U.S. GDP to spike at an annualized rate of 5% last quarter (more than double the quarter before that), Americans’ domestic finances are in dire straits.

The solution is to provide payment strategies that are adequate to the realities of the average American customer. That reality at the moment is one of scarcity, not of abundance.

Though consumer spending is at full throttle, enabling the U.S. GDP to spike at an annualized rate of 5% last quarter (more than double the quarter before that), Americans’ domestic finances are in dire straits. 

They’re pulling funds from 401(k)s like there’s no tomorrow. Credit card bills are at an all-time high—as are defaults. A CNBC story shows us that the credit card balance in the U.S. today is at a historically high $1.08 trillion. On top of that, the housing market is a pain to most Americans: 41% of the average U.S. monthly income goes to paying the principal and interest payments on median-priced homes.

It’s understandable that, when strapped for capital, customers need more comprehension on the part of companies. When companies put the customer front and center in their priorities, they thrive.

Embedded Finance as a Means of Financial Health

The first thing companies should understand when preparing to include embedded finance in their financial strategy is that payment begins when the customer meets you. In a troublesome financial environment, companies have to strategize how to offer buying options for their customers while building a trusting relationship.

This is an essential element because, as Peter Diamandis and Steve Kotler say in their book The Future Is Faster Than You Think, in the post-blockchain financial environment, companies have been able to take hold of their financial relationship with their customers without the need of a reliable infrastructure to move money around.

“Trust is built into the system”, they argue.

Because that’s the expectation the customer has regarding you, they may not know that embedded finance is needed at the moment. Still, the market movement indicates that’s what companies need to do.

Customers want financial products and services that are built into their daily activities. This reveals how critical customer-centric solutions, especially concerning financial needs, are. We can back this up with the latest statistics on real-time problem-solving and customer-centrism.

→ CX Index research says that 90% of business leaders believe that customer-centrism should be front and center in their preoccupations;
→ A Zendesk survey indicates that 80% of leaders plan to increase customer service budgets over 2024;
→ Real-time support increases brand loyalty in the view of 63% of the companies Tidio interviewed;
→ Also, according to Tidio, failing to address problems in real-time makes companies 2 times less trustworthy.

Embedded finance vs. Banking as a service

How can companies offer embedded finance solutions, taking into account customer expectations and market movements?

There are some extraordinary examples we can look at right now. It seems that most solutions at this time center themselves on embedded banking, which sometimes makes it look like embedded finance is the same as embedded banking or banking as a service (BaaS). But it isn’t.

Embedded finance provides financial ease for customers across all financial points. Whereas BaaS centers itself on providing banking services—loans, checking accounts, balances, insurance, etc.—through non-banking institutions. This means saying that BaaS is subordinated to embedded finance.

However, it’s understandable why companies have centered their efforts on BaaS when moving to embedded finance services. Many American adults are underbanked. That is, even though they have a bank account, they have no means of access to banking and financial services such as smart payment options, digital credit cards, digital banking, and other tools.

The following numbers are courtesy of FDIC.

→ 22% of American adults (63 million) are either unbanked or underbanked
→ 27% of African Americans are underbanked
→ 4.5% of U.S. households are unbanked—that is, no one in the house has a checking or a savings account
→ 21.7% of unbanked households answered that they “don’t have enough money to meet minimum balance requirements”

Examples of Embedded Finance Products

A successful example of this is Lyft, the ride-sharing app. It offers a checking account and an associated debit card to its drivers. In this account, drivers can get paid right after each ride, without having to wait for a lump sum payment. To improve on their capital, the funds in their Lyft account can be used through their Lyft debit card, getting cash back after each use.

Brazilian taxi-hailing app 99Taxi uses a similar strategy with their drivers—though in their case, it’s a credit card they offer. They also offer their users a loaning option. The company loans up to BRL 2,040 at monthly interest rates ranging from 6 to 10%. In a country with scorching interest rates such as Brazil, this is an example of how non-legacy non-banking institutes can offer banking services to customers who otherwise wouldn’t have access to these products.

Next up, payments are among the chief drivers for embedded finance adoption. SmartPay Rewards is at the forefront among companies. It’s a gas station and convenience store app working as an Automated Clearing House (ACH) that offers discounts and rewards in exchange for using its payment tool. ACH payments have lower deduction fees than credit cards. On the other hand, the stations and convenience stores win by being charged less, and customers win due to discounts and rewards predicated on brand loyalty.

Another amazing advantage of embedded finance is opening up investing opportunities to underbanked customers. If a few years ago you had to open an account with a legacy institution like Morgan Stanley or JPMorgan Chase, now with companies like Venmo and Paypal,  you can invest in crypto—or even traditional securities—with enhanced options. An example outside the U.S. is fintech unicorn Nubank, a digital bank. Its savings option is actually an investment made through the bank in one of many government bonds.

The Future of Finance Is Embedded

As you’ve read in this article, embedded finance ultimately means creating new revenue streams by offering your own financial services. From now on, every solution that companies develop will, at least, consider—if not rely on—how to incorporate these services to drive a new, embedded revenue model from day one.

We are at the dawn of a new era, not only within the industry but in how companies make use of money to drive relationships and loyalty, getting closer to their customers. Putting them front and center while offering them options on what to do with their money and providing ease of use can be the difference between success and failure.

To learn more about how embedded finance can help your company develop new revenue alternatives, as well as other financial services trends, download our 2024 Financial Services Trends Report.

Confira o post: Solutions Everywhere: The High Time of Embedded Finance em MJV Technology & Innovation.

The way it functions isn’t exactly simple, and it involves more than a single entity. While understanding how it works might be a topic for more technical ears, the effect it has had on the financial industry is a topic that should be understood by all.

In this article, we’ll briefly go over what DeFi is, and how it works, but the focus of this content lies on where DeFi is headed— and how understanding the possible outcomes for its future can help you make more informed decisions.

Let’s begin with the basics.

What Does Decentralized Finance Stand For? 

Decentralized Finance, commonly known as DeFi, represents a revolutionary approach to financial operations by leveraging peer-to-peer transactions facilitated through a network architecture. In this system, validation is achieved through the consensus of all devices connected to the network simultaneously—a fundamental characteristic derived from the principles of blockchain technology.

The marriage of digital technologies, particularly blockchain, to the financial sector, has marked the onset of a transformative era. The financial domain, being at the forefront of embracing technological advancements, witnessed the profound implications of an ongoing revolution.

Ethereum, as a pioneering force in the blockchain realm, has consistently been intertwined with the narrative of this technological evolution. Notably, it has played a pivotal role in shaping the landscape of decentralized finance, emerging as the second most influential project globally within the blockchain ecosystem.

Despite initial skepticism, DeFi proved too compelling to disregard. Initially met with attempts to undermine its credibility, over time, even entities within the established financial order recognized the need to comprehend and integrate the evolving dynamics of decentralized finance.

DeFi’s Role in Open Finance Developments 

In response to the burgeoning influence of decentralized finance, the financial industry witnessed the emergence of Open Banking as a countermeasure against the encroachment of alternative players in the financial landscape. Essentially, it represented a strategic move to either impede or construct a parallel financial ecosystem.

As DeFi gained momentum, conversations about market openness evolved into regulatory measures aimed at enhancing the flexibility of financial service offerings. This involved a series of steps to streamline bureaucracy within the financial system, coupled with regulatory flexibility to foster competitiveness. Consequently, companies outside the traditional financial circuit were empowered to provide their own services.

The initial manifestation of this opening up of the financial system was observed with the rise of fintechs, marking an unprecedented level of decentralization. Despite offering a limited range of specialized services, fintechs managed to outperform traditional institutions, solidifying their position and securing a portion of the consumer market—a trend we foresaw almost a decade ago.

This opening up of the financial system is what led to Open Banking, which eventually gave way to Open Finance, and the rest, as they say, is history. 

If you’re interested in where finance is headed, MJV has got you covered. Click here and download our Financial Trends Report for 2024.

How Does DeFi Really Work? 

DeFi hinges on the utilization of blockchain technology, often relying on Ethereum as the foundational framework for numerous DeFi operations.

Blockchain, a type of immutable distributed ledger, secures entries cryptographically, forming the basis for transactions. It is also the underlying structure for cryptocurrencies, which are tokens created within a blockchain and possess inherent value.

The DeFi model is constructed around smart contracts—applications running on a blockchain utilizing the distributed ledger and cryptographic encryption capabilities. These contracts outline the terms and conditions for executing specific operations.

In contrast to traditional transactions facilitated by a central authority, a smart contract is programmatically designed to execute the financial transaction stipulated within the contract. These contracts can manage cryptocurrency assets, facilitating their transfer from one entity to another.

DeFi smart contracts not only execute transactions but also offer transparency in terms and conditions, as they are available in code format for scrutiny by others. The absence of a central authority in DeFi adopts a peer-to-peer model, enabling two parties to execute a transaction without the need for an intermediary.

Within the DeFi model, emphasis is placed on empowering individual users. The custody of cryptocurrency assets involves control over both private and public encryption keys. Adopting a decentralized approach, individuals hold custody in the form of private cryptographic encryption keys.

The Next Big Thing For DeFi: The Tokenization of Real-World Assets

A significant hurdle to the widespread adoption of DeFi and blockchain solutions lies in the intangibility of crypto assets. When confronted with cryptocurrencies, the initial query often revolves around their concrete existence: Where is the money, and how can one possess it?

This inquiry isn’t exclusive to retail investors; even figures like Warren Buffett raise the same question. Buffett’s stance on crypto, articulated during a Berkshire Hathaway shareholder meeting in 2022, echoes the sentiment that crypto lacks productivity and intrinsic value. He questions its utility, emphasizing the eventual need to sell it back without tangible benefits. On Squawk Box, he further labeled crypto as a gambling token devoid of intrinsic value.

The challenge skeptics grapple with is discerning the value inherent in crypto—what precisely is acquired when purchasing crypto, and what real-world backing supports it? Buffett’s argument against the intrinsic value of crypto extends to mainstream currencies like the dollar, contending that their value hinges on mutual agreement among agents. In contrast, digital “illiquid” assets, including crypto, can find support through real-world assets (RWAs) facilitated by blockchain technology. Tokenized RWAs, in particular, open up investment avenues across various financial strata.

A noteworthy example is Freeport, which divided Andy Warhol paintings into a thousand fractions, essentially transforming artworks into tradable shares. For a mere $200, one could claim ownership of 1/1,000th of Warhol’s Rebel without a Cause (1985). This concept bears resemblance to NFTs, although the latter are entirely digitized assets. Given that the art market is valued at $67.8 billion and artworks can command prices as high as $7.5 million at auctions, tokenized artworks, even in fractional form, present an enticing investment avenue for individuals with more limited financial means.

Echoing this sentiment, Roland Berger, in their exploration of RWA tokenization, asserted that it not only broadens investment opportunities by overcoming geographical and financial constraints but also enhances the precision and immediacy of asset pricing. Consequently, RWA tokenization extends access to investment opportunities to a more extensive demographic that was previously excluded.

Is DeFi Shadow Banking With Steroids?

In the aftermath of the 2008 financial crisis, extensive academic and policy endeavors focused on understanding “shadow banking.” Broadly defined, shadow banking refers to financial activities mirroring those in the regulated banking system but escaping regulatory oversight.

At the time of the crisis, shadow banking encompassed familiar entities like investment banks, money-market mutual funds (MMMFs), mortgage brokers, and various contractual forms such as sale-and-repurchase agreements (repos). 

Esoteric instruments like asset-backed securities (ABSs), collateralized debt obligations (CDOs), and asset-backed commercial paper (ABCP) were also part of this landscape. Credit default swaps, facilitating new forms of leverage outside the banking system, were deemed integral to the shadow banking system. 

While these forms of shadow banking differ, complexity emerges as a common thread, acting as a destabilizing force. Complexity renders financial products and their interactions within the broader financial system harder to grasp, increasing the likelihood of unforeseen risks.

Even if risks are anticipated, complexity-induced opacity amplifies the chances of underestimating risks in favorable times (leading to bubbles) and overestimating them in adversity (exacerbating panics). 

The financial crisis of 2008, triggered in part by the expansion of shadow banking, has left enduring social costs. Regulatory systems have struggled to fully address the risks associated with derivatives, securitizations, and money market mutual funds constituting Shadow Banking 1.0. 

Yet, on the horizon looms the prospect of Shadow Banking 2.0 in the form of decentralized finance, or “DeFi.” Despite DeFi proponents envisioning a future where money transfers are as seamless as sharing photographs, the stakes involved with money are significantly higher. 

Without regulatory intervention, the development of DeFi poses the risk of amplifying the complexities, leverage issues, rigidity, and runs reminiscent of Shadow Banking 1.0.

The silver lining is that there’s still an opportunity to prevent DeFi from evolving into Shadow Banking 2.0. This potential hinges on proactive regulation designed to curtail DeFi’s growth and separate whatever persists from the established financial system and the real-world economy. 

Rather than introducing new financial products and services, DeFi merely aims to provide existing ones in a decentralized manner, eliminating intermediaries. However, the DeFi ecosystem is replete with intermediaries, and achieving complete disintermediation in financial services is an impractical aspiration. 

If DeFi falls short of delivering true decentralization, regulators are justified in taking measures to rein it in, safeguarding the stability of our financial system and the broader economy.

Is It Going To Overtake The Prevailing System? 

In this exploration, we venture into speculative terrain, contemplating various scenarios for the future of the financial services ecosystem. While the exercise involves some uncertainty, it holds validity when pondering the long-term trajectory.

Scenario 1 – The Merge

A plausible future unfolds where we witness the convergence of the current financial services ecosystem—transformed significantly over the past decade and no longer adhering to traditional norms, particularly post-pandemic—with the realm of decentralized finance (DeFi).

 Envisioning this scenario, the existing financial system assimilates decentralized finance technologies and practices. Concurrently, DeFi undergoes a shift towards stability and predictability, values entrenched in the current system.

Scenario 2 – Dethroning the Status Quo

An alternate prospect involves a decisive shift between financial systems. This scenario contemplates the potential dominance of one ecosystem over the other, driven by a killer competitive advantage, the evolution and adoption curve of emerging trends, or a specific macro-financial phenomenon. 

The outcome could manifest as the unequivocal supremacy of DeFi over the traditional system in place now. This in itself could lead down two branching paths. The first being the emergence of shadow banking 2.0, where unregulated DeFi runs rampant through the financial system, leading to more prevalent and harder-to-counter financial crime.

The second scenario is what proponents of DeFi believe is the “ideal scenario,” one where decentralization leads to money-transferring being as simple as sending someone a photograph. Intermediaries are no more, and the power that financial institutions previously held lies instead in the hands of the people.

Scenario 3 – Full Disruption

In a third hypothesis, the interplay of disruptive technologies and a lack of regulation, a common occurrence with novel arrivals, may confer such a substantial advantage to financial players that it results in the obsolescence of any other financial system. 

While this scenario suggests a comprehensive disruption, it’s essential to note that these changes are contingent on various factors, including the development of a new form of technology or model that supersedes the blockchain and renders both DeFi and the traditional system obsolete.

Any evolution in these scenarios will likely manifest through discernible signs of change, whether in the form of emerging technologies or shifts in consumer market behaviors.

Where Do We Go From Here?

The growing adoption and development of DeFi, cryptocurrencies, and blockchain technologies is but a tiny part of the financial puzzle. No one trend or movement acts alone in an ecosystem as complex as the financial industry.

Multiple factors have been, are, and will be responsible for what the future of finance will look like. Hindsight is 20/20, but foresight requires a magnifying lens (or maybe a microscope is a more appropriate metaphor). In order to get even a tiny glimpse at what the future holds, you need to understand the big picture.

If you’re interested in where finance is headed, even just within the next few years, MJV has got you covered. Click here to download our Financial Trends Report for 2024. In it, we go in-depth into the world of DeFi, Open Finance, instant payments, and much, much more. Don’t miss out on this opportunity to get a head start on the competition!

Confira o post: Has DeFi finally found its purpose? We think so em MJV Technology & Innovation.

There is no such thing as “traditional” financial services anymore. What we have formerly known as traditional banking solutions are increasingly becoming a residual consumption choice, and tends to disappear with the rise of younger generations into the workforce.When we say this, we mean that even the most tenured financial institutions have already adapted to the new reality that is taking place in the financial industry. Part of that reality is Open Finance.

The wide range of opportunities available through Open Finance has contributed to creating new financial products and experiences for customers. On a more macro level, it has enabled the emergence of new payment methods that have profoundly changed our consumption habits.

Since the introduction of Open Finance – still as Open Banking – the financial industry has changed a lot. Now it’s time to examine how Open Finance has changed its course. In this article, we’ll discuss how we arrived at our current context, the state of open finance today, and where we see the market heading in the years to come.

The State Of Open Finance In The US

While it may have started later in the U.S. compared to Europe, it is rapidly becoming a central topic of discussion for the nation’s largest banks. This surge of interest is largely attributed to the forthcoming regulation expected to come into effect in early 2024. 

The regulatory landscape in the U.S. is set to evolve with the introduction of new rules by the Consumer Financial Protection Bureau (CFPB) and amendments to the Dodd-Frank Act, particularly Section 1033, which will govern open banking practices.

One of the pivotal changes brought about by these regulations will be the elimination of unsecured screen scraping. Historically, account aggregators and fintech companies have relied on this method to access user financial data. The impending rules will mark a significant shift towards more secure and standardized access mechanisms, making the financial ecosystem safer and more robust.

To adapt to this changing landscape, many financial institutions are now actively committing resources to their open banking initiatives. Banks are forming dedicated teams and organizations responsible for formulating a coherent strategy. The goal is to ensure compliance with the new regulations and to leverage the opportunities that open banking presents.

In the United States, the Financial Data Exchange (FDX) is playing a pivotal role in shaping the open banking ecosystem. FDX, a nonprofit organization, is dedicated to creating a common, interoperable, and royalty-free standard for secure access to user-permissioned financial data. Its FDX API has emerged as the de facto standard for North America, facilitating the seamless and secure exchange of financial data.

Open Finance By The Numbers

The concept of open finance can sometimes seem to be a broad umbrella term that encompasses way too much to be put into a few words or statistics, but it’s important to understand just how interconnected each aspect of the financial industry is to this topic.

Below are just a few examples of open finance’s reach and the ripple effects that it has had on the market:

How Did Open Finance Get So Big?

Open Finance’s remarkable ascent is rooted in a complex narrative that intertwines decentralized finance (DeFi), the evolution of traditional financial systems, and a growing synergy with innovative technologies. 

To understand how Open Finance became a prevailing force in the global financial landscape, one must journey back in time to 2012 when Vitalik Buterin, a Russian-Canadian programmer, conceived and co-founded the Ethereum (ETH) network. 

Ethereum marked the inception of an open-source platform for building decentralized applications (DApps), setting the stage for what would eventually become Open Finance.

The Leading Role of DeFi In Open Finance’s Developments

DeFi, a financial operations protocol designed to decentralize financial services through peer-to-peer transactions and blockchain technology, predated the emergence of Open Banking. 

However, Open Banking was not a natural evolution of DeFi, it emerged as a counter-trend to the DeFi wave. Initially, many experts attempted to dismiss the significance of DeFi. But as time progressed, established financial institutions began to recognize the potential of decentralized finance and its impact on the financial landscape. 

Open Banking was conceived as a strategic response to the evolving DeFi ecosystem and its potential to disrupt the traditional financial sector. As DeFi gained momentum, discussions around market openness evolved into regulatory initiatives aimed at making financial services more flexible. 

These measures aimed to reduce bureaucracy in the financial system and enhance regulatory flexibility to foster competitiveness. The result was the emergence of fintech companies, which represented a notable shift toward decentralization. These agile and specialized fintech firms quickly gained prominence and captured a share of the consumer market.

From Open Banking to Open Finance

This pivotal development led to the emergence of new financial players, the adoption of fintech principles by traditional institutions, the proliferation of virtual currencies, the rise of digital wallets, and the advent of instant payments. Regulatory advancements also further facilitated the expansion of non-traditional financial service providers.

The convergence of financial and retail sectors introduced tech giants like Amazon and Apple into the financial services arena. These influential players blurred the lines between traditional financial institutions and technology-driven entities, redefining the industry’s landscape.

The transformation from Open Banking to Open Finance marks a significant evolutionary step. Open Finance has superseded Open Banking, becoming a distinct entity within the financial services ecosystem. Open Finance’s development was intricately linked to Open Banking, and the two concepts are inextricably connected. 

The journey from decentralized finance and fintech innovation to the emergence of Open Finance has been paved with detractors and friction, but some would say that its arrival was inevitable, due to its omnipresence in other countries. The question now is: Where does Open Finance find itself today?

What Is The Next Big Thing In Finance?

While Open Finance clearly shows dividends within the industry, the engine of change is still in full swing. No matter what new dish is available on the menu, the cooks in the back are constantly concocting new, innovative technologies that will undoubtedly have a major impact on the industry.

There are several driving forces within the financial sector, but these six are the ones we believe will have the most significant impact in the upcoming years:

What are the limits of Open Finance—and the future of the prevailing financial system?

As you saw in the previous topics, DeFi has significantly influenced the path the prevailing financial system took over the years. 

And while this path looks straightforward, the only constant we can expect is change. There is no doubt that other concurrent advances will also shape the way we experience financial services today—and in the future.

While having a decentralized system for the sharing of financial information will undoubtedly bring about significant changes within the financial industry, it is not the meteor that will wipe out the dinosaurs within the financial sector.

In our Financial Trends Report for 2024, we carried out a forecasting exercise with three different scenarios about the future of financial services (and the system as a whole). To gain more insight into what the future might hold for FIs, click on the link below and register your interest in receiving the report scheduled for release on November 16th.

Change is never a simple transition, and the road that has been laid out for financial institutions comes with its own unique challenges and branching paths. In order for companies to be fully prepared for the trek, they need to be well informed, first and foremost.

The path ahead is winding and full of opportunities, and while walking it might not be a simple task, you don’t have to go it alone because MJV has got you covered. If you’re facing any challenges regarding changing your operations or building your own financial services solution, don’t hesitate to reach out to us.

Digital transformation is not a finish line, it’s a path—one that you don’t have to travel alone. Go far, with MJV Technology & Innovation.

Confira o post: The State of Open Finance in the US: 6 Drivers of Change em MJV Technology & Innovation.

However, while many countries have embraced this financial revolution with open arms, the United States finds itself somewhat behind the curve.

The Current State of Instant Payments in the U.S.

In the European Union (E.U.), instant payments have already become an integral part of daily life. More than half of the population in the E.U. now uses instant payment methods as a routine part of their financial transactions. It’s a payment landscape where money flows effortlessly and swiftly, enabling individuals and businesses to settle debts, split bills, and make purchases with unparalleled ease.

The European experience with instant payments serves as a stark contrast to the situation in the United States. While Americans have grown accustomed to the convenience of digital wallets, true instant payments remain elusive for many. 

Traditional payment systems in the U.S. have been relatively slow to adapt to the changing demands of consumers and businesses. Transferring money from one bank account to another can still take hours or even days, hindering the efficiency of financial transactions and limiting economic growth.

Highlights: FedNow to the Rescue

Despite all this, hope is on the horizon in the form of the Federal Reserve’s FedNow. This government-backed initiative promises to usher in a new era of instant payments for the American public. 

FedNow aims to provide a real-time payment service that will enable individuals and businesses to transfer funds instantly, 24/7, 365 days a year. With the backing of the Federal Reserve, FedNow could bridge the gap between the U.S. and the E.U. when it comes to instant payments.

The introduction of FedNow could have profound implications for the American financial landscape. It has the potential to stimulate economic activity, streamline business operations, and enhance financial inclusivity. 

Small businesses, in particular, stand to benefit from instant payments, as it could improve cash flow and reduce the reliance on costly and time-consuming payment processing services.

However, the road to widespread adoption of instant payments in the U.S. may not be without its challenges. The existing infrastructure of the American financial system may require significant updates and investments to support the seamless transfer of funds in real-time. 

Additionally, consumers and businesses will need to adapt to this new way of transacting, potentially necessitating changes in their financial habits and practices.

Visualizing the Instant Payment Revolution

In order to provide a clear overview of the current state of instant payments in the United States, we’ve created a succinct infographic that goes over the data surrounding this imminent transformation. Click here to gain a full understanding of the context surrounding instant payment solutions.

Download our white paper and take a deep dive into the state of digital payments in the U.S. Explore >>>

Confira o post: Infographic – The Instant Payment Fever: A Revolution in Finance em MJV Technology & Innovation.

Legacy systems, once the backbone of their operations, have become stumbling blocks to innovation and efficiency. This article delves into the imperative of data modernization, shedding light on why businesses must invest in this transformational journey.

Legacy Systems: An Impediment to Progress

Legacy systems, like a ball and chain, can weigh down even the most ambitious and forward-thinking organizations. These outdated systems, often characterized by inflexibility, high maintenance costs, and a lack of interoperability, pose a significant hurdle to business growth. 

In a world where data is the lifeblood of decision-making, relying on legacy systems is akin to navigating a complex maze blindfolded. With each passing day, the technology landscape evolves, presenting new methods and tools for harnessing the power of data. 

Outdated systems are often characterized by inflexibility, high maintenance costs, and a lack of interoperability. In other words, they’re holding your organization back from using new technologies to harness the power of your data.

Embracing data modernization is not just about staying current; it’s about future-proofing your organization. By upgrading your systems and processes, you empower your company to adopt new technologies seamlessly, enhance productivity, and gain access to valuable insights that drive informed decision-making.

Why You MUST Invest in Data Modernization—In Numbers

The case for data modernization is not just anecdotal; it’s supported by hard data. Let’s explore some compelling reasons why businesses should prioritize modernizing their data infrastructure:

Competitive Advantage: Organizations that invest in data and analytics capabilities are twice as likely to outperform their peers in terms of profitability. In a highly competitive market, having the ability to extract actionable insights from data can be a game-changer.

Efficiency Gains: Legacy systems are notorious for their inefficiencies and high maintenance costs. Research by Gartner indicates that in 2022, 90% of corporate strategies explicitly mention information as a critical enterprise asset and analytics as an essential competency. Modernizing your data systems can lead to significant cost savings in the long run.

Customer-Centricity: In an era where customers demand personalized experiences, data modernization is essential. A study by Epsilon found that 80% of consumers are more likely to do business with a company if it offers personalized experiences. By leveraging modern data capabilities, businesses can tailor their offerings and interactions to meet customer expectations.

Regulatory Compliance: Data privacy regulations are becoming increasingly stringent. Non-compliance can result in hefty fines and reputational damage. A recent survey reveals that 92% of companies consider compliance with data privacy regulations as a top priority. Modernizing data systems includes robust security measures and compliance mechanisms to mitigate these risks.

Innovation: Innovation is the lifeblood of business growth. According to a report by the Boston Consulting Group, 79% of executives believe that companies that do not adopt data-driven insights risk losing their competitive position and face the possibility of extinction. Data modernization empowers organizations to innovate, develop new products, and stay ahead of the curve.

Legacy System Upgrading Best Practices

Having established the importance of data modernization, let’s delve into some best practices to guide your organization on this transformative journey:

Assessment and Planning

Begin by conducting a comprehensive assessment of your current data landscape. Identify bottlenecks, outdated systems, and areas where data processes hinder efficiency. This assessment serves as the foundation for your modernization strategy.

Cloud Adoption

Migrating physical data repositories to the cloud is a cornerstone of modernization. Cloud solutions offer scalability, cost-effectiveness, and improved data accessibility. The scalability of the cloud ensures that your data infrastructure can grow with your organization’s needs.

Data Integration

Streamline data from various sources to create a unified view for analytics and decision-making. Data integration eliminates data silos, enabling your organization to derive meaningful insights from diverse data streams.

Data Security

Robust data security measures are paramount. Implement comprehensive security protocols to protect sensitive information and ensure compliance with data privacy regulations. Data breaches can be costly and damaging to an organization’s reputation.

Data Governance

Establish clear policies for data quality, ownership, and compliance. Effective data governance ensures that your data remains reliable and maintains its integrity throughout its lifecycle.

Now, let’s explore the myriad benefits that data modernization brings to the table, illustrated by real-world success stories from companies that have embarked on this transformative journey.

Real-World Benefits of Data Modernization

1. Improved Decision-Making

Modernized data systems provide real-time insights, enabling organizations to make data-driven decisions swiftly. Take the case of Netflix, which has undergone a significant data modernization process.

By analyzing viewer behavior and content preferences, Netflix can recommend personalized content to its users, resulting in increased viewer engagement and longer subscription durations.

2. Enhanced Customer Experience

In today’s customer-centric landscape, personalization is key. Amazon, a pioneer in data-driven customer experiences, leverages data modernization to analyze customer interactions and preferences.

By tailoring their online shopping recommendations, Amazon has achieved a high level of customer satisfaction and loyalty, translating into significant revenue growth.

3. Cost Optimization

Data modernization often involves migrating to cloud-based storage, which offers scalability and cost savings. Salesforce, a leader in customer relationship management (CRM), adopted a data modernization strategy that included cloud migration.

This move allowed Salesforce to efficiently scale its infrastructure based on customer demand, optimizing costs while maintaining high-performance levels.

4. Agility and Innovation

Companies that embrace data modernization are better equipped to innovate. Tesla, a trailblazer in the automotive industry, revamped its data analytics processes. This change enabled them to develop advanced driver-assistance systems and autonomous driving features, setting new industry standards and gaining a competitive advantage.

5. Compliance and Risk Management

Data modernization ensures compliance with data protection regulations, reducing the risk of costly fines. Capital One, a major financial institution, implemented stringent data governance practices and robust security measures to protect customer data.

This proactive approach not only ensured compliance with industry regulations but also safeguarded the bank’s reputation.

Delve Deeper into Data Modernization

Data modernization is a complex topic. You might think it’s just as simple as replacing old tech, but changing a single gear in the corporate machine means dismantling and replacing every other department that used to rely on that outdated technology.

By investing in data modernization, organizations can unlock their full potential, harnessing the power of data to drive success in an increasingly competitive landscape. It’s time to embrace the future and leave legacy systems behind in the annals of history.

In order to assist you on this journey, MJV has made a presentation titled “MJV Data Governance: A Shortcut To Turn Numbers Into Intelligence”. If you’re worried about the legacy systems that your company relies on, or are just curious about the subject and would like to dive deeper into it, you can check it out by clicking here.

Confira o post: 5 Benefits of Modernizing Your Company’s Legacy Systems em MJV Technology & Innovation.

What will it be? What exactly are the challenges when it comes to fraud detection in the financial system? There is no doubt they are great in number—so it raises the question: Can a government-developed system be effective against data fraud? Can it meet the demands and the expectations of the market? Will the customers be happy?

This is what we hope to answer in this article. Let’s get on with it.

First Things First: What Is FedNow?

FedNow is the initial government-created and backed U.S. portal that enables banks to send and receive funds virtually instantly.

As things stand, FedNow has some competitors—which are older and more firmly established with the public, such as Venmo, Cash App, Zelle, and The Clearing House’s RTP. Unlike these, though, the idea is that FedNow will enable faster payments through instant and irrevocable transaction settlement, providing the payee with access to funds in almost real-time, featuring an open-loop interbank system, which means that payments will be routed and settled between financial institutions over a shared network.

This real-time clearing and settlement service between banks enables depository institutions and other service providers to offer additional value-added services. Fednow also includes optional fraud prevention tools, the ability to opt-in as a receive-only participant, payment inquiry support, and payment capability request tools. It means that the customer will be able to make, say, a mortgage within seconds. However, as Forbes clarified, recently, the Fed is still phasing in the system. There’s a $500,000 cap on transactions as things stand (by means of comparison, RTP allows up to $1 million in transactions).

To begin, thirty-five banks and credit unions have already adopted instant payment capabilities through FedNow, alongside the U.S., Department of the Treasury’s Bureau of the Fiscal Service. Furthermore, sixteen service providers stand prepared to assist with payment processing for these financial institutions. Within the platform, the Fed has included Dropp, a micropayment platform powered by Hedera, in its list of service providers. This has made Dropp one of the various technology solutions that The Federal Reserve offers through its payment service.

This move should ensure that FedNow provides safety for its users.

And safety is something sorely needed in the current state of the digital world.

FedNow has joined the ranks of instant payments. Discover the state of digital financial solutions in the US. Click here and download our litepaper.

Fraud in the U.S.

A little technology is a dangerous thing. A lot of technology might be safe. This is at least what the data on fraud detection shows us right now in America.

According to Stripe, from $130 billion in 2020, the global cost of online payment fraud is expected to reach $206 billion by 2025. This number is itself an upshot from the acceleration COVID-19 fueled, which led to a 20 percent increase.

In this environment, synthetic identity fraud—where a cybercriminal creates a fake identity combining real and false information (like a real Social Security number linked to a fake name)—is on the rise. The same Stripe research indicates that by 2025 the losses it’ll entail will reach the $14 billion mark. Other online payment-related frauds will toll businesses anywhere from $35 to $50 billion.

There’s more. A study from PYMNTS.com states that in 2022 the real-time payments market hit about two billion transactions; the projection is that it’ll reach nine billion by 2026, totaling up to more than $10.5 trillion. It’s needless to say this is a deep blue sea for scammers, especially since this market is anchored in phone-based payment systems provided by Apple and Google. What’s more, the tendency is that big online retailers like Amazon will embrace instant payment solutions like FedNow—seeing as how it already started accepting Venmo in 2022.

And as time passes by more innovative solutions which are as of today incipient, will mature. One example is buy-now-pay-later (BNPL) digital solutions, whose economics, as the New York Times put it, grew out of control in great part because of the exploitation of dishonest players.

As the Consumer Finance Protection Bureau report on BNLP asserted last year, companies “are not providing the same rights and protections” customers—and businesses—need. One of the most common frauds in this kind of economics is the synthetic fraud already mentioned. All in all, the market is just too immature (regardless of the spectacular sixty million users it has today, and the projected $437 billion in spending it might see by 2027).

The Most Common Payment Frauds in the U.S.

TABLE 1.1: THE MOST COMMON PAYMENT FRAUDS IN THE U.S.

FedNow Fighting Fraud: Are They Fixing It?

In the months preceding FedNow’s release, Nick Stanescu, senior vice president and FedNow business executive, stated that fraud management features are a high priority for the project and solutions were being tested together with transaction flows in the new system. The verdict was that the team was “making great progress.”

But what kind of innovation has FedNow brought to fraud detection?

Network-level transaction limit

◍ According to the Fed, the $500,000 limit per transaction is a starting step in security policy.

Participant-defined blacklists

◍ Financial institutions can designate suspicious accounts from which their organizations can’t send or receive transactions.

ISO 20022-level security

◍ FedNow participants can set preferences and use ISO 20022 messages to support their fraud mitigation and error resolution.

Digital signatures

◍ The FedNow Service requires that messages exchanged with subscribers be cryptographically signed to verify the integrity and authenticity of messages.

Data Encryption and Tokenization

◍ Data in the FedNow Service environment is encrypted in transit and at rest.

◍ Certain sensitive data is tokenized.

Authentication and Authorization

◍ All connections to the FedNow Service are mutually authenticated.

◍ Access to the FedLine Solutions user interface is protected by multi-factor authentication.

◍ Throughout the system, role-based access controls and segregation of duties are implemented to enforce the principle of least privilege.

But all this begs the question: Will it be enough?

According to the Fed itself, not all of these measures will be available from the get-go. PYMNTS informs that the “Fed plans to roll out additional anti-fraud measures in 2024 and beyond.” Stanescu also said that more features are still “being built” into the service. As the list suggests, the bulk of the safety measures lies with the banking institution, not the Fed. The idea is that the institutions, that have extensive research and development into private fraud detection measures, can help to perfect the platform.

What Lies Ahead

Fraud and cybercrimes against financial institutions grow by the minute and at a greater rate than policy measures. For every innovation in fraud detection, a new crop of scams grows. As RSA research revealed, 70% of businesses stated that the efforts of companies are not achieving the desired effect, even with the use of various tools. This becomes especially concerning when considering the current landscape.

So no one payment platform can for a fact solve the problem of fraud detection. The reason is that the problem is systemic, ranging from data leaks, confidence tricks, data frauds, scams, and all imaginable sorts of sources. So while FedNow might provide an improvement regarding the unification of instant payment systems under the government banner, it’s imperative that financial institutions look after stronger and more resilient safety measures.

Confira o post: Will FedNow Be a Game-Changer for Instant-Payments Fraud Management? em MJV Technology & Innovation.

Here are five key takeaways that highlight the dynamic nature of the fintech landscape:

1. Open Finance and Interoperability

One of the central themes at Fintech South was the concept of Open Finance. The financial industry is undergoing a transformation towards greater openness and transparency. The Financial Data Exchange (FDX) is at the forefront of this movement, facilitating data sharing between traditional data providers and fintechs/data aggregators. The aim is not just to share individual data elements but to encompass the entire financial life of consumers. This shift toward customer-centric data-sharing ecosystems promises to revolutionize the way financial services are delivered.

2. Redefining Banking for All

Access to financial services is a fundamental right, and Fintech South highlighted the importance of increasing financial inclusivity. The Red Life Company exemplifies this commitment by helping individuals without traditional credit scores—particularly black communities—gain access to banking services. By redefining banking as a service and leveraging useful data for banks, it’s possible to demonstrate that people are more than just their credit scores. Initiatives like this aim to recirculate wealth within underserved communities.

3. The Future of Fintech: Trends for 2024

Looking ahead, several trends are poised to reshape the fintech landscape in 2024 and beyond. These include a resurgence in venture interest, the vast untapped potential in the fintech space (which currently represents only 2% of financial revenue in the U.S.), and the continued convergence of technology companies with financial services. Biometrics, such as “pay with your hand”, are emerging as a game-changer, while generative AI is paving the way for innovative solutions. Additionally, incorporating Environmental, Social, and Governance (ESG) criteria into payments is gaining traction, especially among younger consumers.

4. Transforming the Future of Commerce

The future of commerce is being redefined, especially in the hospitality and restaurant sectors. While these industries have traditionally been resistant to technological change, there is a growing need to adapt. Solutions like Sunday, a payment platform, are streamlining the customer experience, improving efficiency, and reducing payroll costs. Cashless payments are becoming increasingly common, and the positive response to QR codes suggests a growing acceptance of digital payment methods.

5. The Power of Data, AI, and Automation

Data-driven Insights and Artificial Intelligence are driving efficiencies and transforming the workforce in financial services. Companies like Nvidia, Deluxe, Tidalwave, and iLab are leading the charge in areas like AI digital mortgages and proactive conversational AI. Automation is no longer just an IT strategy; it’s a company-wide initiative. The importance of data governance and data hygiene cannot be overstated. To succeed in this rapidly evolving landscape, businesses must focus on identifying and solving problems, experimenting with different solutions, and measuring results rigorously.

Fintech South 2023 served as a dynamic platform for exploring these key takeaways and much more. As the fintech industry continues to evolve and disrupt traditional financial services, events like this are essential for fostering innovation, collaboration, and a deeper understanding of the opportunities and challenges that lie ahead. The financial future is being shaped by technological advancements, and those who embrace change and adapt will be well-positioned for success in this transformative era.

Confira o post: 5 Key Takeaways From Fintech South 2023: Shaping The Future Of Finance em MJV Technology & Innovation.

This article delves deep into the realm of data modernization, exploring various aspects that define it. If you’re eager to unlock the potential of your data infrastructure, read on for insights and inspiration on how data modernization can elevate your organization to new heights.

Data Modernization Quickstart: What It Is?

Data modernization is not just a buzzword—it’s a strategic imperative. In a nutshell, data modernization is the process of upgrading a company’s data stack or legacy systems to more modern technologies.

While this might seem simple and straightforward to many, large companies have systems and processes that date back decades and are stubbornly ingrained into the business’s technology architecture.

The Landscape in the U.S.

The United States is a hotbed for data modernization initiatives, with businesses of all sizes recognizing the need to evolve their data strategies. Major players in the data modernization market include tech giants like Microsoft, IBM, and Amazon Web Services (AWS), offering a range of products to meet diverse data needs. 

According to industry reports, the data modernization market is expected to grow at a compound annual growth rate (CAGR) of 16.7% over the next five years, underscoring its critical importance.

Growth Expectations

The exponential growth of data, coupled with the increasing complexity of data sources, is a driving force behind the urgency to modernize data infrastructure. Organizations that adapt swiftly are better positioned to make informed decisions, enhance customer experiences, and gain a competitive edge.

The Best Practices

Data modernization works better when it’s an ongoing process. Don’t wait until your data stack turns into software from the ’00s. Download our e-book to learn how to modernize your legacy systems.

The Benefits of Data Modernization

Now that we’ve laid the groundwork, let’s explore the myriad benefits that data modernization brings to the table. To illustrate these advantages, we’ll share real-world success stories from companies that have embarked on their data modernization journeys.

• Improved Decision-Making 
• Enhanced Customer Experience
• Cost Optimization 
• Agility and Innovation 
• Compliance and Risk Management 

1. Improved Decision-Making

Modernized data systems provide real-time insights, enabling organizations to make data-driven decisions swiftly. Take the case of Netflix, which has undergone a significant data modernization process. 

By analyzing viewer behavior and content preferences, Netflix can recommend personalized content to its users, resulting in increased viewer engagement and longer subscription durations.

2. Enhanced Customer Experience

In today’s customer-centric landscape, personalization is key. Amazon, a pioneer in data-driven customer experiences, leverages data modernization to analyze customer interactions and preferences. 

By tailoring their online shopping recommendations, Amazon has achieved a high level of customer satisfaction and loyalty, translating into significant revenue growth.

3. Cost Optimization

Data modernization often involves migrating to cloud-based storage, which offers scalability and cost savings. 

Salesforce, a leader in customer relationship management (CRM), adopted a data modernization strategy that included cloud migration. This move allowed Salesforce to efficiently scale its infrastructure based on customer demand, optimizing costs while maintaining high-performance levels.

4. Agility and Innovation

Companies that embrace data modernization are better equipped to innovate. 

Tesla, a trailblazer in the automotive industry, revamped its data analytics processes. This change enabled them to develop advanced driver-assistance systems and autonomous driving features, setting new industry standards and gaining a competitive advantage.

5. Compliance and Risk Management

Data modernization ensures compliance with data protection regulations, reducing the risk of costly fines. 

Capital One, a major financial institution, implemented stringent data governance practices and robust security measures to protect customer data. This proactive approach not only ensured compliance with industry regulations but also safeguarded the bank’s reputation.

What’s the Role of Cloud Computing in Data Modernization?

Cloud computing plays a pivotal role in the data modernization journey. It offers a scalable and flexible infrastructure that aligns seamlessly with the evolving data needs of organizations. Here’s a closer look at how cloud computing and data modernization are intertwined.

Cloud Migration

One of the initial steps in data modernization is migrating physical data repositories to the cloud. General Electric (GE), a global conglomerate, embarked on a comprehensive data modernization journey that included cloud migration. This move allowed GE to centralize its data, improve accessibility, and reduce infrastructure costs across its diverse business units.

Data Storage and Scalability

Cloud providers offer vast storage options, ensuring organizations can securely store and manage their data. Dropbox, a cloud-based file storage company, leveraged cloud storage to accommodate its growing user base while maintaining data security and accessibility.

Data Analytics and Processing

Cloud platforms provide powerful tools for data analytics and processing. Airbnb, a leading online hospitality marketplace, utilizes cloud-based analytics to gain insights into user behavior and preferences. This data-driven approach allows Airbnb to continually optimize its platform, enhancing user experiences and business performance.

Flexibility and Agility

Cloud computing allows organizations to adapt to changing business conditions rapidly. Uber, a pioneer in the ride-sharing industry, relies on cloud-based infrastructure to handle dynamic demand for its services. This flexibility enables Uber to scale resources seamlessly, ensuring optimal service levels.

Cost Management

Cloud services operate on a pay-as-you-go model, allowing organizations to control costs effectively. Spotify, a music streaming service, relies on cloud infrastructure to deliver music to millions of users worldwide. This cost-effective approach allows Spotify to offer competitive pricing to its customers while efficiently managing its infrastructure costs.

Modern Data Companies: Two Stories of Transformation

Let’s delve into two compelling stories of companies that embarked on data modernization journeys and are now reaping the rewards—one from the retail sector and another from the financial services industry.

Retail Revolution: Walmart

Walmart, the world’s largest retail corporation, serves as a prime example of how data modernization can transform an industry giant. Walmart recognized the necessity of adapting to the fast-evolving retail landscape and embarked on an ambitious data modernization journey that reshaped its business operations and improved customer experiences.

Data Integration for Enhanced Customer Insights

Walmart’s data modernization journey began with the integration of diverse data sources, including in-store and online sales data, supply chain information, and customer interactions. This comprehensive data integration allowed Walmart to create a holistic view of each customer’s shopping journey, enabling the retailer to offer tailored product recommendations and personalized marketing campaigns.

By gaining real-time insights into customer behavior, Walmart improved its ability to forecast demand accurately, leading to a notable reduction in out-of-stock instances and a substantial boost in customer satisfaction.

E-commerce Growth and Omnichannel Success

Walmart’s data modernization efforts extended to its e-commerce platform, which experienced significant growth. By leveraging data analytics and personalization, they enhanced the online shopping experience, offering tailored product recommendations and promotions.

Walmart’s omnichannel strategy allowed customers to seamlessly switch between online and in-store shopping. This approach not only met evolving customer expectations but also positioned Walmart as a formidable competitor in the e-commerce space.

Results and Continued Innovation

The impact of data modernization on Walmart’s bottom line was substantial. Online sales grew, significantly outpacing industry averages. The retailer’s commitment to data-driven decision-making and customer-centricity served as a model for the retail industry as a whole.

Walmart’s journey demonstrates the power of data modernization in driving business growth, optimizing inventory management, and enhancing customer experiences.

Financial Services Transformation: JPMorgan Chase

JPMorgan Chase, one of the largest and most influential banks in the United States, embarked on a comprehensive data modernization journey to enhance customer services, improve risk management, and drive innovation within the financial sector.

Customer-Centric Insights for Personalized Services

JPMorgan Chase prioritized customer-centricity by leveraging data to offer tailored financial services. They collected and analyzed vast amounts of data, including transaction histories, customer interactions, and feedback. Utilizing advanced data analytics and machine learning algorithms, the bank gained deep insights into individual customer behavior and preferences.

This data-driven approach enabled JPMorgan Chase to offer personalized financial advice, investment strategies, and credit solutions. For instance, the bank provided customers with customized investment portfolios based on their risk tolerance and financial goals, leading to increased customer satisfaction and loyalty.

Compliance and Risk Management

Compliance with data protection and privacy regulations was a top priority for JPMorgan Chase. The bank implemented robust data governance practices, encryption protocols, and access controls to protect sensitive customer information. These measures ensured the bank adhered to stringent data privacy regulations while safeguarding its reputation.

Innovation and New Revenue Streams

JPMorgan Chase’s data modernization journey unlocked the potential for innovation and the exploration of new revenue streams. By analyzing transaction data and customer behavior patterns, the bank identified underserved market segments and emerging financial trends.

The bank introduced innovative financial products and services tailored to these market niches. For example, they launched a digital financial advisory platform that provided customers with personalized investment recommendations. This innovation attracted a new generation of tech-savvy customers and contributed to an increase in cross-selling of financial products.

Continued Success and Industry Leadership

JPMorgan Chase’s data modernization journey positioned them at the forefront of innovation within the financial services industry. Their comprehensive approach to data modernization, encompassing customer insights, compliance, innovation, and personalized services, not only solidified their existing customer base but also attracted new customers who valued tailored financial solutions.

In conclusion, the stories of Walmart and JPMorgan Chase illustrate how data modernization can drive business growth, enhance customer experiences, and improve risk management. These real-world examples showcase the transformative power of data modernization in diverse industries and emphasize the importance of leveraging data as a strategic asset for enduring success.

Data Modernization is a Strategic Imperative

Data modernization is not a mere trend but a strategic imperative for organizations seeking to thrive in the data-driven era. The benefits of improved decision-making, enhanced customer experiences, cost optimization, agility, innovation, compliance, and risk management are tangible and transformative. 

These success stories underscore the importance of data as a strategic asset and the role of cloud computing in enabling data modernization. As you consider your organization’s data modernization journey, remember that it’s a continuous process, and the rewards are substantial. 

To unlock the full potential of your data and stay competitive, take inspiration from these real-world examples and embark on your data modernization adventure today. If you have specific data modernization challenges or questions, don’t hesitate to reach out to our consultants for expert guidance and support.

Confira o post: Data Modernization ROI Explained: The Definitive Guide To Modernizing Your Legacy Systems em MJV Technology & Innovation.