NPP benefits to come from added services, not 'plumbing'

Mention in the Banking Day publication

Click here to view Banking Day

Read More

Will Data be the next payment method?

I was talking at the FST Conference in Sydney last year on Next Generation Customer Experience. Majority of the questions I was asked were around the ROI on big data analytics, which set me thinking on how do you identify the part of the value chain to focus for highest benefit realization. A lot has been written around the use of unstructured data in driving targeted one-to-one offers helping generate higher revenues at better conversion rates. But, the ROI is increasingly skewed with very few organizations able to harness the true potential. So, where in the value chain do you focus?

The answer lies in focusing efforts around forming stronger relationships with a wider consumer base through a greater insight around transaction data. The entity which controls this aspect of the value chain stands to gain the most in terms of monetizing the transaction data for greater revenue share and retention. The battleground will be checkouts (physical and online) in a bid to control access to consumer spending patterns. Thereby, Unlocking insights around Payment transactions will be the epi-center of the next analytics boom. This could lead to a new payment method – consumer data. Both organizations and individuals in the future will be able to pay through this new method trading off insights on spending patterns.  

According to a Wall Street Journal story, consumer data and similar intangible assets could be worth more than $8 trillion. MasterCard is packaging insights on consumer spending patterns and trends gained through analysis of payments transactions selling them to banks, governments and retailers. What stops super market chains from working with individual brands within their store to on-sell anonymous information of spending patterns on associated complementary or even competitor products? Imagine Walmart through data analytics discovers that 70% of the consumers of diapers in a locality of nappies buy baby food in the same transaction. How valuable will this information be to Heinz who can then use this information to co-market their baby foods with Huggies? What’s more, even bigger value if Walmart can trade off that insight to the account payable to Heinz.

We are not far from the day when online retailers will choose a subset of ‘one-off’ buyers to fill out their personal details and preferences (outside of the normal) and trade that off as a discount against their product.  They can get these customers to waive off the privacy restrictions and trade their personal data to other channel partners and retailers.

Banks, traditionally being away from the consumer, lack a good understanding of their customers shopping habits and sometimes location data to target & customize their offers. This presents an opportunity for telcos and retailers, who are touch-point advantaged to trade off that data as a payment method with bank fees. This provides many benefits. First, they can reduce their liquidity requirements for a greater rate of return by offsetting with the customer’s other services in return. Second, it serves as an alternate currency and investment vehicle, which can be independently traded and valued, bringing in extra revenue at greater convenience.

As an illustration, Rite Aid and CVS who are part of the MCX consortium recently blocked mobile NFC payments specifically targeted around ApplePay as Apple masks customer data thereby robbing them of consumer insights to analyze spend correlations and patterns. Their own mobile wallet technology, PaymentC, aimed at reducing credit card usage and pushing for lower transaction fee structures is not out until mid-2015.

What do you think? Feel free to leave comments and feedback

Read More

Surviving the Payments Squeeze

Payments in financial services is becoming very fragmented with disruptive innovation through new business models occurring across the value chain taking the share away from the banking industry. Next generation technology players and non-financial institutions through a combination of innovative products, data analytics and open APIs have exploited market discontinuities. So what's the future of bank payment? How should the banks respond to survive this squeeze? 

Read my point of view published in the Nov 2014 edition of the Australian Banking & Finance. Please feel free to leave your comments. 

Payments initiation (consumer facing part of the payment value chain) is increasingly getting fragmented with highly competitive technology-led platform players, non-financial institutions and crypto currencies (operating as wholesale currency), taking the share away from financial institutions. Consolidation in the payments clearing space with players like EFTPOS in Australia and crypto-currencies is also slowly gaining ground. Some players will provide a shared service cross border and white labelled clearing and settlement capability at a lower price point through greater economies of scale across the industry. This will compress margins further and likely drive smaller financial institutions out of the market unless they can provide additional value-added services and capabilities.

If banks do not act fast enough within the next 3 to 5 years, this squeeze from market participants across various facets of the value chain will confine them to at best, being efficient, cost effective payment processors. To transform themselves, banks will need to reassess their engagement and participation to the wider e-commerce and m-commerce value chains.  

What should banks do?

·        Move from a ‘transaction managed efficiency’ paradigm to a ‘rich, data flow’ e and m-commerce paradigm. Today, the payments value chain does not commence when the consumer is deciding on the method of payment but commences when they think about what to purchase, where and when. The traditional benefits of greater insight around customer spend patterns banks have enjoyed are slowly getting diluted. Technology firms (Apple, Facebook, and Amazon) and telecom providers have circumvented the advantage banks have held through a deeper insight into location specific and consumer behavioural patterns. To respond effectively, banks need to move from playing the role of a payment processor to being an influencer or advisor in the e-commerce value chain. The future of bank payments will lie in the experiential partnerships they build with retailers or large businesses to understand customer behaviour demographics, items of interest, and spending correlations.

BoVA, for example, helps the car purchase lifecycle by providing customers with an estimate of the sell price of a car. By playing in the non-financial part of the buying process, BoVA increases the number of conversations with its customers and get better insight into buying patterns. Garanti (a Turkish bank) has a free M-app for personalized offers based on location and past spend, and estimates balances at the end of the month.

·        Open loop digital wallets. The digital wallet will increasingly become a reality. Some banks have responded to this trend through proprietary bank controlled apps. This however, fragments the digital experience, making it inconvenient for consumers to transact through multiple wallets. An efficient response would be to create an open loop digital wallet which is device, channel agnostic and bank product agnostic (incorporate products of various banks) - with merchant localization as necessary, to enable convergence and greater convenience. Additionally, tying open-loop wallets to an ‘individual’ merchant loyalty program will benefit both banks and merchants by providing a greater understanding of consumer behaviour. This insight can be used to roll out location specific offers for a combination of goods and payment methods. This can be done through a simple and configurable methodology, improving speed to market and allowing unique value propositions to be developed.

·        Use the information opportunity presented by real time payments. On the payments clearing and settlement side, the advent of regulation around real time payments infrastructure will strive to remove discontinuities in the payments value chain around low value payments, remittances and trade finance by reducing time for funds in transit and improving straight through processing rates. Along with that, the real time, information rich capability will help banks deliver value added services more effectively. Take for example the requirement for an enterprise-wise cash position for a corporate organization for better inventory and working capital management, or additional remittance data being provided with the payment to allow the recipient to automatically apply the payment to the appropriate invoice(s) in their accounting systems.

·        Embrace Bank Payment Obligation (BPO) trade flow to effectively integrate the trade flow and the supply chain business processes with the payments value chain.

How do you get ready for it?

Since the evolution of payments is difficult to predict, it is important for banks to embed certain key considerations and design principles in their technology implementations to prepare for the next wave of change.

·        Flexible/generic definition of payment flows. Currently, the payments landscape is dominated by a legacy IT infrastructure. There are different payment processing systems for individual products and channels like credit, debit, cross border, ACH, and cheques that reduce time to market for new products and bring in payments resilience issues. Banks will need to adapt their systems to being more channel and product stream agnostic by building generic payment flows to achieve platform stability and efficiency whilst ensuring faster product introductions.

·        Message agnostic configuration and abstraction of risk and fraud services from channel and product systems is a prerequisite. Currently, risk and fraud business rules are embedded in the product systems which will need to be extracted for horizontal integration to ensure financial crimes stay within manageable limits.

·        Open systems API-led payment services design where banks need to commence exposing services like execute payment, balance enquiry, etc., for better service commoditization. New regulations like PSD2 for payment services are being proposed to open customer bank accounts and payment services to third party developers and providers. This will enable banks to progressively expand their role into the e-commerce or m-commerce value chain instead of being confined to a payments processor role.

·        Pre-defined and pre-configured platforms and systems to support multiple integration points across devices and channels with ERP, finance and accounting and treasury systems. This will improve straight through processing rates as well as enable real time fraud and risk management along with RT liquidity and cash management.

The industry is going through substantial disruptive innovation and will undergo a shake-up in the next 3 to 5 years where only few will survive.

Will your bank survive the payments squeeze?

Read More

IT Services Disruption in Financial Services

Disruption in Financial Services technology - Interview with Len Rust (Click Link)


Feel free to leave your comments and thoughts
 

Read More

The Innovation Paradox

A common concern of customers is that their sourcing partner has failed to deliver innovation over the life of the contract. When I go into a presentation with a prospect, I am often asked – how will you be different from our current supplier in driving innovation into the engagement. There could be one of several answers why this is the case -

·     Current partners lack the capability or are culturally inept in bringing innovation to their clients

·     The customer has squeezed the partners so hard that they only  commenced making money  in Year 3 or Year 4 of a 5 year contract. Profitability or lack of it is the issue

·     Customer organization / stakeholder interest prevented an innovation culture

·     Complexity in sourcing makes idea generation difficult because of the lack of complete visibility of the business value chains

While all these are valid justifications to the conundrum, there may be a completely different perspective of the source of the issue. Let me explore the root cause by explaining the potential dimensions around innovation value zones -

The perception of innovation influenced and delivered decreases as we move from Zone 1 through 4. There are three reasons why technology sourcing partnerships fail to deliver innovation.

Firstly, more often than not, I have seen cases where the customer intrinsically expects the technology sourcing arrangement to deliver the Category 3 or Category 4 innovation given the competitive pressures or evolving business models contracting or threatening their market share. For them the innovation value zone is them and their consumers, while most technology sourcing partners understand their influence to be in a different value zone – between them and the customers division they influence or the overall customer process chain. The partners positioning of their innovation attempts lie predominantly in Category 1 or at best Category 2 innovation. Though these may have an indirect influence towards Category 3 or 4 innovation themes, most customers fail to appreciate their partner’s contribution and are dissatisfied with their performance on this dimension during the lifetime of the contract. This may stem from either a lack of understanding of the impact or more so a fundamental dichotomy in expectations between that parties involved. The further a technology partner’s offering is to a Category 4 value zone, the greater is the probability of disconnect on innovation delivered or influenced due to expectation mismatch.

Secondly, technology partners have a limited understanding of how to deliver parameters of success to help their customers excel in their innovation zones across the four categories. Most providers are unable to understand the impact of their services across various innovation zones coupled with a limited capability in how to engineer value creation for their customers.

Third, customers do not have scorecard metrics in place to measure engagements to periodically monitor alignment to the innovation zones. It’s important to define the impacted value zone clearly for the right outcome. This creates ambiguity between the customer and the partner in the quantum of innovation influenced and delivered.  

Read More

Do you have Sales X-Factor?

In part 1 of my blog on what makes star sales professionals, I discussed the need to understand the human mind – how do they react under different situations and make decisions as key to being successful. While that’s important, its only one piece of a two part puzzle. The other is how do a set of human with different minds of their own interact in an organizational set-up and under different situations? What behaviors from you will drive an entire ecosystem to work alongside you and who/what will they depend on to make their decisions? The answer to this lies in a deep understanding of organization psychology and how different divisions come together to achieve various objectives.

Doing these things well will give you enough time to formulate your pitch, sharpen the articulation and leave behind those one or two key messages which will linger on & get you in the reckoning.

Let me give you an example

A large telecom provider is facing a tepid business environment which drives a radical change towards productivity and efficiency improvement. There is a huge focus across business and technology on cost reduction through rationalization of people, automation and process improvement. The organizational structure was streamlined removing several layers.

Understand the organizational context

There is huge sense of insecurity across the organization. Given the focus on productivity and efficiency, the historical operating model carries a negative context and everyone associated with that is perceived adversely. This includes the people within the customer organization as well as those outside linked to the legacy ways of working.  The new team is goaled with challenging the ways of working.

Take time to understand your key stakeholder’s current context of decision making

It’s very important to understand what objectives each organization unit within your customer serves. What is the current context of the key stakeholders within those divisions? What are their alignment and interaction mechanisms with other divisions?

What should be your strategy?

If you are the incumbent partner, how should your strategy change?

-          Acknowledge the change first

-          Understand the organizational structure, get a sense of individual measures of success

-          Critical to understand your customers new org culture since that will be a derivative of how and who they decide to go with.

-          Has the org culture changed? How are people rewarded? Is it conservative or taking risks is good

-          Depending on your understanding of how different divisions within your customer interact, your strategy and execution structures will need to vary.

Read More

Banks Move with Data Natives

My comments in Sydney Morning Herald

Read the article

Read More

Star Sales Professionals - Are you wired right?

Many have wondered what makes successful sales professionals. What’s the key to this magic formula which can help companies unlock millions, even billions of dollars in value? Different personas come to mind - Successful sales people should have extrovert personality traits – outgoing, ability to make connections and sustain strong relationships or the consulting sales avatar.

All with the intent to get into the minds of the decision makers and the organization one is selling to. How do you do that? Ability to have a strong understanding of human psychology is perhaps now more than ever the most important characteristic in successfully converting sales opportunities.

Let me explain this with an example

I recently came across a scenario where a mid-sized retailer has gone through a major leadership change – new CEO who brings in a new leadership team to arrest sagging business performance and market share loss to larger Tier 1 players.  

Understand the decision context

The new CEO starts off aggressively addressing the market share issue –

·         Focus on acquisitions – makes select acquisitions in blue ocean market segment consolidating the retailer’s position

·         Places bets on few products – assesses the product value chain across operations and technology, identifying gaps like slower time to market, low business automation etc.

·         Change the culture to an inclusive one with greater ownership and accountability to employees and investors

Technology and operations has been seen as laggards and growth inhibitors. The new leadership team was tasked with a larger transformational agenda to make the business process efficient and change its own culture.  

Take time to understand your key stakeholder’s current context of decision making

Past context - In the previous role, this CIO has balanced risks with business model transformation – selectively taking risks in areas which required significant change, leaving others on existing models which were under acceptable levels of outcomes.

Current Context – The CIO had to bring in a new leadership team and create a culture of accountability and ownership. The mandate was to radically transform technology – deliver key business outcomes and ensure stability & resilience.

What clicked?

From analysis of human psychology, it was found that the CIO forms an own opinion rather than rely on the team, but takes them along on every step. Using the right language with the right words resonating with the CIO’s decision making philosophy was important. Also, engaging in conversations around the challenges which will come and how to prepare the organization to face them was critical. Analysis also showed that the CIO expected transparency and honesty, even if that meant compromising your organization’s revenue prospects in the short term.  

It’s important for sales professionals to have a strong understanding of human psychology of their stakeholders at various levels within the prospect organization – it’s a skill more important than anything else.

In my next post, I will reveal another key attribute in star sales professionals.

 

Read More

Is your bank future ready?

This article was published in the March 2014 edition of Australian Banking and Finance magazine.

While productivity and cost efficiency dominate conversations in board-rooms across the globe, banks need to have a view of how the industry will change over the next five years. In continuation of my last article published in November 2013, I focus on new models banks should experiment with to increase their market share, but this time through on customer experience lens.

HCL and AB&F conducted a survey of industry executives to determine the themes behind the key priorities. We found that providing differentiated customer experience is akin to innovation with IT underpinning it. However, delivering this is a challenge under current business models.

Consider three broad categories of customers – (1) who require help to do research and identify their needs, (2) Who have identified their needs, but are unaware of how to address it (product selection), (3) know exactly how to address their need and want their bank to make it faster and more convenient for them to satisfy? Most banks today address the smallest of the categories – the third, and are negligent in addressing the bigger market opportunities around categories (1) and (2). They engage lower in the customer experience value chain and are removed from customers' day-to-day lives. Their product development and bundling strategies thus tend to hinge on an average to poor understanding of customer behaviour. This makes them susceptible to the threat of new entrants from industries like retail, telecommunications and even technology firms (e.g. Google and Apple). These competitors have a greater ability to provide mass retail financial services due to a more intimate understanding of customer needs (at least addressing the category (2)). Which brings us to the question: how long will customer trust and security serve as good enough entry barriers to the banking industry?

WHAT'S NEXT?

Conventionally, banks have focused their attention on improving customer retention and experience through innovations in ‘their own’ channels - branches, internet and mobile. This myopic view of their sphere of influence will only drive incremental growth and customer satisfaction.

To address the bigger market of category (1) & (2) customers, banks need to adopt Xperiential Platforms - constructed around buying life cycles through collaboration with diverse industries across points of touch. These platforms will be built around delivering enhanced customer experience through strong customer insights providing customers what they want. To realise this, there are four options:  

Lifecycle Aggregators – 63%+ of executes we surveyed, rated investment in tools to gather strong customer insights and in merchants/brokers/service aggregators amongst their top 2 customer acquisition strategies. However, why should investment be restricted only to the sales end of their product lifecycle? Why do banks not extend this to behave as platform led aggregators of business functions across the customer lifecycle to gain proximity to customer’s daily lives? They will need to build different aggregator ecosystems for customer need chains like wealth and advisory, mortgages and transaction banking. This model is centred on prioritising process value chains and establishing the right partnerships in those value tiers.

At the peak of recession, USAA launched home circle as a one-stop shop to service the home buying life cycle. The platform allows potential customers to search for homes and real estate agents, create their personal profile, researching a neighbourhood’s demographics and listings, online community to share experiences, provide movers’ assistance and finally finance and insurance services. They have set this up through an end-to-end partner aggregator ecosystem giving them in-depth, individualized insights on each customer, improving their retention rates.

Should banks be in the business of addressing a need by helping customers through the journey of buying a house or maintaining status quo of simply financing the buy? Though provision of finance is their core business, ignoring the process up until the decision point of buying a house can prove detrimental for their market share.

Point of touch industry collaboration – Banks will need to collaborate with other industries on joint research, customer profiling and behavioural analytics to create new innovative and convenient products delivered by the host at the point of touch.

McDonalds’s has tied up with PayPal to enable customers place their orders using McDonald’s mobile app or online through PayPal Here mobile payment service. They can then pick up their order through a dedicated line set-up for this service. PayPal has signed up more than 15+ retailers including Home Depot and Office Depot, while Starbucks has a similar arrangement with Square using the Square Register. Banks need to play in the wider e-commerce value chain instead of only the payments value chain (their core competency).

Bigger successes will come from triangulation across multiple industries such as a Bank, Telco and Retailer coming together to create complex products.

Industry solutions through technology ventures – with technology players providing superior value through involvement in the wider expanse of the business process, not just their ‘current’ core business. U.S. Bank and mobile money solutions provider, Monitise, are co-developing an advanced digital commerce and experience solution for big retailers to help consumers interact with them and buy consumer brands through mobile. Key capabilities include product selection, instant checkout payments and leveraging digital and scanning technologies for product discovery. This solution covers a greater spectrum of retailers’ customer value chain by providing an end-to-end shopping experience. U.S. Bank is participating in non-financial activities helping consumers discover, learn, buy and share products they want – a much bigger value!

Consortium with competition within the industry – Much like the airline industry consortiums across countries (e.g. Star Alliance, One World), we will see greater functional collaboration between banks on specific business processes like payments to reduce high transaction costs and alleviate threat of new entrants. One example is cross border sharing of payment gateway / processing infrastructure for seamless, immediate and low cost execution. Customers can get preferential payments transfer, mortgage or savings bank rates between partner banks.

HOW CAN IT BE DONE?

Key to delivering this change is technology and a customer experience framework encompassing the following tenets:

·         Customer interaction journey maps to optimise decision-making on key business drivers. E.g. ClickFox analyses touch-point data across channels creating customer interaction journey maps.

·         Complex Event Processing (CEP) is essential. To illustrate, a customer walks into a branch to get a printed bank statement. As soon as he reaches the counter, his bank statement is ready along with a discounted 100 bps home loan pre-approval (not stated, but was looking for). How did that happen? The bank had an app for customers to add preferences and pre-refer branch visits purpose. In addition, the bank developed a CEP-based application that monitored significant deposits and correlated that to important life events such as having a baby. They matched it with rental payments, combining it with behaviour information gathered through listening posts to form the basis of the cross-sell recommendation.

·         Dis-intermediate core through distribution in/core out strategy. Since access to fresh CAPEX is rare, banks will have to use their existing investment slate utilising regulatory and other mandatory investments to dis-intermediate core and extricate pricing and product rules from core systems. 

·         Channel wide, device agnostic listening capability is required to cover customer correspondence, conversations in branches and phone, surveys and campaigns instead of just social media.

In essence, while the journey to an experimental consortium model is incremental, the underlying technology building blocks need to be in place from day one.

Are you ready for the journey? 

Read More

Re-defining customer experience in banking

The most common conversation in board rooms around the globe today is how to improve productivity & operational efficiency and reduce cost. Banks, more than any other industry need to have a view of how the industry will evolve over the next 5 years.

The survey highlights that providing differentiated customer experience is synonymous to innovation with technology being the biggest driver – along expected lines. But enhancing elements of customer experience through usability, personalization and self-service without a fundamental business model change, will only help you succeed when your competition is within the industry.

Yes, most of the banks that survived the global financial crisis of 2007 have emerged stronger and more profitable. Customer experience has become much better by virtue of the banks transforming their online and mobile presence. However, various disruptive forces particularly in the form of new competition outside the industry are driving the banks away from the customer’s daily lives into just being mere providers of secure back-office transactors real. Let me explain.  

Consider three broad categories of customers –

(1) Who require help to do research and identify their needs,

(2) Who have identified their needs, but are unaware of how to address it (product selection),

(3) know exactly how to address their need and want their bank to make it faster and more convenient for them to satisfy?

Most banks today address the smallest of the categories – the third, and are negligent in addressing the bigger market opportunities around categories (1) and (2). They engage lower in the customer experience value chain and are removed from customers' day-to-day lives. Their product development and bundling strategies thus tend to hinge on an average to poor understanding of customer behaviour.

Look at what other industries are doing. Google recently acquired Nest home automation for $3.2 Bn. Why should a provider of smoke detectors and thermostats interest a technology giant? Because it gives them the ability to get into our home (the most personal of places) giving them valuable insights of how we live our lives. Even retailers like Starbucks are using their customer connect leverage to take away payment volumes from banks by getting customers pay through their loyalty cards.

While other industries are busy trying to get close to the customer, most of the innovation and focus within the financial services industry is focused around their online and mobile presence. This makes them susceptible to the threat of new entrants from industries like retail, telecommunications and even technology firms (e.g. Google and Apple). These competitors have a greater ability to provide mass retail financial services due to a more intimate understanding of customer needs (at least addressing the category (2)).

The only saviour for the financial services industry is that customers associate them with trust and security. But how long will they serve as good enough entry barriers?

Recent developments suggest this is short lived. Functions like Payments, deposits, transaction accounts and general insurance are very susceptible. Payments have seen competition emerge through technology platforms e.g. PayPal, Square and Stripe. Telcos in certain markets are now providing deposit, transaction and savings functions. Celcom Aircash customers in South East Asia who don’t have a bank account or want greater convenience can have a stored value account. They can create a mobile wallet, load money by walking into a shop and transfer to friends & pay bills. Celcom also provides viewing account balance and adding / withdrawing money from branches as added features. Customers can dial a number to register for the service and with an NFC sticker pay at point of sale.

HOW TO BANKS COMPETE WITH NON-INDUSTRY PLAYERS?

Conventionally, banks have focused their attention on improving customer retention and experience through innovations in ‘their own’ channels - branches, internet and mobile. This myopic view of their sphere of influence will only drive incremental growth and customer satisfaction.

To address the bigger market of category (1) & (2) customers, banks need to adopt Xperiential Platforms - constructed around buying life cycles through collaboration with diverse industries across points of touch. These platforms will be built around delivering enhanced customer experience through strong customer insights providing customers what they want.   

But How - One option is to become Lifecycle Aggregators. 63%+ of executes we surveyed, rated investment in tools to gather strong customer insights and in merchants/brokers/service aggregators amongst their top 2 customer acquisition strategies. However, why should investment be restricted only to the sales end of their product lifecycle? Why do banks not extend this to behave as platform led aggregators of business functions across the customer lifecycle to gain proximity to customer’s daily lives? They will need to build different aggregator ecosystems for customer need chains like wealth and advisory, mortgages and transaction banking. This model is centred on prioritising process value chains and establishing the right partnerships in those value tiers.

Some banks have made small movements. At the peak of recession, USAA launched home circle as a one-stop shop to service the home buying life cycle. The platform allows potential customers to search for homes and real estate agents, create their personal profile, researching a neighbourhood’s demographics and listings, online community to share experiences, provide movers’ assistance and finally finance and insurance services. They have set this up through an end-to-end partner aggregator ecosystem giving them in-depth, individualized insights on each customer, improving their retention rates. They have extended this to the Auto Circle – integrating the car purchase experience on a similar platform.  Customers can compare cars and reviews, save by buying cars from certified dealerships at a discount, repairs with vehicle protection with car financing and insurance.

In Spain, DB launched a lifestyle credit card designed for better work-life balance. Services provided in addition to credit are legal & tax advice, medical hotline, paediatric & child health advisors by telephone and assistance in finding private teachers at preferential rates. Most of these non-banking services are outsourced, but the bank benefits from enhanced customer experience, greater retention and deep customer insights by being part of the daily life.

So, should banks be in the business of addressing a need by helping customers through the journey of their buying life-cycle or maintain status quo of simply financing the buy? Though provision of finance is their core business, ignoring the process up until the decision point of say, buying a house, can prove detrimental for their market share.

While lifecycle aggregators are one option banks have of getting close to customers, it may still not be as effective a counter to the threat posed by non- industry playing in the e-commerce value chain.

Will cover that in my next post - register to be notified and stay tuned.  

Read More

Open systems the key to customer service in banking - ITWire Interview

Indian software giant HCL has teamed up with US IT services company CSC to develop banking systems for the cloud. The partnership is intended to allow the two companies to build more responsive and customer oriented systems.

The key to successful banking products in the future, says Balaji Ram, the ANZ Head of Financial Services for HCL Technologies, is to use open systems and be where the customers wants to be, rather than forcing them to use the bank’s proprietary platforms.

Most of today’s business is conducted on proprietary platforms owned by financial institutions, says Ram. “The technology world is fast embracing open source technologies, which gives greater control to its customers, but banks are still driven largely through proprietary platforms.

“Many companies are spending millions of dollars revamping corporate websites or net banking portals to make it easy for customers to access the right products and services and manage interactions through the customer life cycle.”

But these proprietary systems are forcing customers to transact on the bank or insurance company’s online portal, says Ram. He believes there is a better way.

“Use open source platforms, which allows customers to control the platform and be present at the point of truth for greater customer convenience. Such non-intrusive interactions will not only help develop a deep and strong insight into customers' behaviour but also prepare organisations for future product or service innovation.”

He gives PayPal as an example of the trend. “When you make an online payment, PayPal does not take you to its portal to complete the transaction. It effects the transaction at the ‘point of truth’ of the buying cycle.”

Ram defines the ‘point of truth’ as the moment in time when online buyers make their payment. That’s the very point companies want to keep their customers online.

“Consider a scenario where you have recently received your monthly salary and are buying something online. How impactful would it be if your credit card provider can trigger alerts to give you a real time estimate of your future net worth and the effect of your purchase at the point of sale on mortgage repayments or upcoming credit card payments?

“Businesses of the future will need to make themselves available where the customer wants them to be, instead of forcing them into their environment for effecting transactions. They will provide APIs for customers to build their own personalised or customer demographic based applications and business services instead of a typical enterprise apps store.

“Imagine a bank, by virtue of the deposit and credit card transactions, providing profiling, spend categorisation, cash inflow and outflow estimate APIs. Prospective customers and businesses can then use these APIs to create their own personalised dashboard with portfolio management or investment functions which integrates balances across accounts.”

 

Ram gives the example of French bank Credit Agricole, which has opened its apps store to third parties, with more than 40 apps across budgeting, savings and social functions. An insurance company AXA has also created an API platform exposing customer account and transaction structures for third party developers to build apps.

Cloud technology is important in this process, says Ram. “In order to differentiate its operations, almost every piece of technology will need to be integrated and abstracted as a service, on the software-as-a-service (SaaS) model. This will also demand new capabilities in terms of enterprise-wide dashboards, lifecycle management and monitoring of different application and infrastructure tiers.”

Ram believes that this will lead to reduced development times and the ability to trial multiple features simultaneously across various demographics and markets. “That means companies can significantly increase the number of product or function releases each year. These iterations executed in the cloud can be rolled out or rolled back almost instantaneously depending on the success of the releases.”

Innovation is critical, says Ram. “Only 12% of the companies that were featured in the 1955 Fortune 500 list made it to the same list in 2010. Traditional business models are becoming irrelevant with the radical evolution of technology, fresh thinking and innovation.

“In today’s environment of volatility and disruptions, playing safe will make you extinct. To stay alive, the focus on operational efficiencies will have to make way to true innovation. Organisations will need to experiment with and adopt new business models to survive.”

Read More