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Financial Services Providers operating in niche segments significantly reduce competition, as consumers generally opt for those who don’t try to be all things to all people. April 2019 saw FSPs tailoring products for art buyers, dog-owners, healthcare professionals, holiday-home renters and Muslim investors, among others.

(Photo by Stephen Kraakmo on Unsplash. Thank you!)

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Title risk assessment of artworks

Title risk assessment of artworks

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Title risk assessment of artworks

RIS Title Insurance Corporation, the underwriter and insurer of title insurance for collectibles and art, has introduced a new service for title risk assessment of artworks for potential buyers called Know Your Title. This product was introduced as a result of the company seeing a flood of pre-sales inquiries, as buyers and/or future sellers want to mitigate potential risks beforehand. ARIS researchers now look into litigation associated with sellers, questions of ownership, possible instances of theft in an artwork’s history and other risks. Therefore, ARIS wants potential future sellers to know exactly what they’re getting themselves into, before they purchase artwork.

http://www.artnews.com/2019/04/08/aris-art-insurer-know-your-title/

A Rise in Niche Segments

A Rise in Niche Segments

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A Rise in Niche Segments

Financial Services Providers operating in niche segments significantly reduce competition, as consumers generally opt for those who don’t try to be all things to all people. April 2019 saw FSPs tailoring products for art buyers, dog-owners, healthcare professionals, holiday-home renters and Muslim investors, among others.

(Photo by Stephen Kraakmo on Unsplash. Thank you!)

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Commerce becomes contextual

Commerce becomes contextual

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Commerce becomes contextual

Dramatic changes in technology, consumer demands and regulations are redefining the financial services sector. Increasing access to affordable and more powerful devices is driving convenience to a new level, giving rise to trends such as Contextual Commerce. These changes are forcing incumbents and challengers to partner and innovate as never before. Besides focusing on partnerships, financial services firms are leveraging on new technologies, to respond effectively to emerging opportunities and consumer demands.

(Photo by Stephen Kraakmo on Unsplash. Thank you!)

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Banksurers Here, There and Everywhere

Banksurers Here, There and Everywhere

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Banksurers Here, There and Everywhere

The financial services sector in South Africa doesn’t have many examples of Behavioural Finance or Economics, though more companies are taking this approach each month. As we anticipate the public launch of Discovery Bank this month, the Discovery Vitality model is probably the best-known example of Behaviour Economics in the country. The 20-year old rewards programme has an established track record with Vitality members generating roughly 30% lower hospitalisation costs and living from 13-21 years longer than the rest of the insured population[1]. Even the pundits are saying it’s got the best chance of success, out of all the new banking entrants.

Two other insurers have made known – or felt, in the case of one of them – their intentions to also enter the banking space. Each of them is certain to bring their rewards programmes into their business models as well, to improve consumers’ financial behaviour and make this stick. Momentum is expected to position its Multiply Money benefit as a fully digital savings and transactional offering. The benefit is offered through its wellness programme, running since at least 2013. Multiply Money already offers consumers assistance and rewards for good financial behaviour, such as completing one’s financial wellness status in a formal assessment, checking in with an accredited advisor and tracking spend through the mobile app.

While Old Mutual has reserved comment on whether or not it will apply for its own banking licence, it would seem logical that it would, given its integrated financial services model. Old Mutual launched its own rewards programme in mid-July 2018, linking this directly to ‘good financial behaviour’. Old Mutual has been already running a low-cost transactional Money Account since August 2015 through Bidvest. The company knows the South African banking market very well from its Nedbank shareholding and it owns Zimbabwe’s second-largest bank, Cabs. It stands to reason that this well-resourced group could bring some serious competition to the market.

With the degree of disruption that is expected in 2019 – new banks and insurtechs on the rise – there’s never been a more pressing time for financial services companies to monitor competitor strategies and behaviour, in order to remain relevant.

 Harvard Business Review, June 23, 2017: “Can Insurance Companies Incentivize Their Customers to Be Healthier?”

Banksurers Here, There and Everywhere

Behavioural Finance – Fad or Fact?

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Behavioural Finance – Fad or Fact?

Over the past few years we’ve heard the term Behaviour Economics (BE) being bandied about in advertising, marketing, FMCG and now in financial services. Discovery Bank claims to be the world’s first Behavioural Bank, working off its Vitality Rewards model. The Bank says it will reward people for ‘good financial behaviour’. With the launch set for 01 March 2019, BEI decided to take a deeper look into this behavioural approach, analysing how (if at all) the various financial services companies in South Africa, make use of BE. Before we share those thoughts, we need to answer your question: why does Behaviour Economics even matter? Simply put, we want people to buy our products and services. Merely promoting them isn’t good enough anymore, surrounded as we are by a sea of competition, distraction and noise. If we understand why our target markets behave the way they do, we could possibly reach them more easily and in a more lasting way.

So let’s unpack the term ‘Behaviour Economics’. Basically, we’re talking about the marriage of psychology and economics. BE aims to help us understand the decisions people make around resources such as money, including the mistakes. For starters, BE challenges the belief that people are rational when they make decisions, especially big ones. Looking at South Africans, studies[1] show that we face a number of serious financial challenges, often brought about by irrational choices and decisions: 41% have no retirement plans; 36% of women don’t save or invest at all and 51% of employed Millennials don’t invest in provident or pension funds. The economic impact of this on all taxpayers cannot be overstated.

Many incentives have been created around us – to help us be more responsible – but many assume that people behave in their own best interests. BE shows us that people are quite irrational. For instance, many people would rather avoid a loss than reap a reward. BE calls this Loss Aversion. For example, imagine buying a bottle of shampoo. Your favourite brand is on promotion. One bottle offers a 20 percent discount and the other is the normal price, with free conditioner. Loss aversion theory tells us you’re more likely to choose the bottle with the gift, even if its value is less than the discount. People don’t want to miss out on the chance of a free gift, no matter the value. It feels more tangible than a discount, like they’ve scored a deal.

In another example, many people would rather have a small reward now, than hold out for a much larger one in the future. BE calls this Hyperbolic Time Discounting. An example would be someone offering you a R50 discount now, versus a R100 discount in six months’ time. Chances are you’d probably not want to wait six months, because there are risks involved. Discovery has understood this very well in their Vitality rewards programme. Weekly goals that you set yourself and meet, are rewarded immediately.

Traditionally, companies have designed products and services for consumers, based on what they believe will sell. The new thinking is that it’s far more effective to try and nudge people’s behaviour towards wanting to buy. Putting Behavioural Economics to use, especially at product design-stage, can increase market success. Using it to understand why your consumers behave in one way rather than another, can bring you closer to them, for a more fruitful relationship for both parties.

 Sources: 10X Retirement Reality Report 2018; Old Mutual Millennial Survey 2017/18