Circa 2000 A.D. A guarded enthusiasm greets the new gadget which goes by the name of “cellular” phone. A pocket-sized wonder which promises to take communication to an altogether new level. Mankind treats it with skepticism – paying money to “receive” calls is not such an attractive proposition, after all.
Cut to the late 2000s. From prince to pauper, CEO to toddler, cell phone toting humans walk the earth in large numbers. Man’s new best friend, the mobile phone, keeps him company through day and night, through his joys and sorrows, trials and tribulations.
It is this omnipresence of mobile phones that has made them such attractive channels of modern banking. The advent of smartphones and tablets and vastly improved network and data services have also contributed to this in no small measure.
Furthermore, these newer touch screen gizmos have engendered “App” banking. This affords an enhanced mobile banking experience complete with greater interaction and touch screen based navigation. This combination – that of a smartphone and an “App” – can potentially ring the death knell for traditional modes of banking as well as the more recent web-based version.
An “App” is compatible with a whole range of gadgets, not just a smartphone. It can be retrofitted in a PC (without the touch screen) and can also be used through a smart TV. For the banks, an “App” is an asset which can be easily deployed on a customer device. Carrying the banks’ unique functions and preferences, it is almost like a branch in the customers’ pockets. It provides the user with consistent experience irrespective of the device, be it a smart TV, PC or mobile. The “App” technology enables banks to personalize customer experience and branding. The “App” store concept allows for its easy and cost effective distribution.
Originally envisaged for web banking, the “Market of One” concept is brought closer to fruition through “App” banking.
Rapid strides in mobile telephony – 4G on last count – and an onslaught of smartphones will ensure that “App” banking will rule the roost for a long time to come.
Industry requirements often outpace technology solutions and there is a continuing need to plug this gap. This is especially true of the banking sector. Software companies have to be somewhat intuitive in terms of product design and development, in order to cater to the emerging trends and to stay in line with market dynamics.
In the Core Banking context, software vendors develop products based on current demand or a foreseeable future need. This is either communicated by the banks or the vendor gleans background information as part of project implementation. Any development activity based on future requirements involves a great deal of expense. Vendors should therefore be prudent in judging market dynamics to ensure adequate returns and also have a contingency plan to fall back on in case of poor market response.
However, barring a few basic products and services, banking is largely a dynamic industry with new products and processes being added based on customer demand. Keeping pace with this rapid change is a challenge in itself for IT vendors. It would therefore help if these vendors maintained a portfolio of need-based products which can be customized on demand. These products need to be agile enough to swiftly accommodate newer features with minimal expense and effort.
A vendor can launch a slew of products including structured, insurance and insurance linked products with a savings account, or accessible through the Internet or handheld devices. Apart from market acceptance of these products, prevailing domestic and global economic conditions such as inflationary trends, currency fluctuation, foreign exchange reserves, stock market stability etc. go on to influence the decision-making process at the product conception stage. While most vendors have predetermined strategies, current market trends do play a crucial role during this phase. Vendors need to recruit people with banking industry knowledge and exposure in order to gain critical insights into the business and its future trends. These future-proof products should be as relevant ten years hence as they are today. This would result in a positive impact on the banking business by way of portfolio and profit enlargement and also ensure continued patronage for the vendor.
Technology is indispensible to banking success but overspending on technology can hurt the banks’ profits. Newer technologies should be adaptive without being expensive and must help minimize maintenance costs. Banks, along with their technology partners, need to do a bit of crystal-ball gazing in order to predict what would work in the future. Getting this right would ensure long-term success for both – the bank and the vendor.
As informed consumers, we never fail to check the expiry date of medicine, or the use by date of edible items. Also, we fret about organic and inorganic consumer goods lying idle, wasting away, consuming space or creating an environmental hazard through decomposition.
Why are we discussing such things in a banking forum? For good reason, which is that banks too face a constant challenge of obsolescence and expiry. Their IT environment, for instance, is plagued by legacy Core Systems, which become more and more expensive and tiresome to maintain as they age.
Core Banking System selection and implementation is an arduous process. While there is no denying the need for Core Systems modernization, even the latest systems begin to wear and tear over time. Changing regulatory requirements, increasing demand for innovative products, pressing need to lower the Total Cost of Ownership, changing channel preferences, tighter competition and ever-changing technology all conspire to advance the systems’ expiry date. Ignoring this reality or wishing it away would only multiply the issues that will crop up once the systems turn into legacy.
Therefore, it is imperative that banks plan the periodic revision of their Core Banking Systems and other applications, so that their core banking journey remains smooth and fruitful.
In today’s competitive landscape, banks strive to increase their market share by coming up with creative and innovative ways to acquire and engage their customers. Unlike banking of yore, present day banks are nimble and look for different ways to understand customer needs based on their actual behaviour and then offer relevant products and services.
The question that comes next is, “How can banks understand ‘actual’ customer behaviour?” All banks hold a large chunk of transactional data, which can be organized into meaningful information and provide insights into customer behaviour. For example, banks can align their credit card offerings based on customers’ debit transactions at different shopping outlets.
Everyday, billions of banking transactions generate colossal amounts of data globally. This data is being used mainly for generating regulatory, internal or customer query transaction reports or for audit purposes.
Is it prudent to think that data of this magnitude, occupying humongous amounts of memory space in databases worldwide, has no uses other than the above? The answer to this question is “NO.” This transactional data is a volcano of information which is yet to erupt and its potential is as yet untapped.
This information can be organised to provide valuable insights into customers’ banking or rather, spending behaviour. With these insights, which are based on realistic or actual transactions captured over a period of time, banks can tweak or come up with new product and service offerings which appeal to the customers and are relevant to them. Also, banks’ marketing communication can be made more pertinent to the target segment. This would result in a tectonic shift in banking offerings across the globe and banks can fine-tune their products and services to target specific geographies.
I feel the future of banks depends on how relevant they stay to the target market, based on how they analyse the Big Data in their databases. Analytics is the way forward!
The recent Finextra article, “Consumers remain resistant to digital banking aspirations” resonated well with what I think about social media, mobile banking, Internet banking and branch banking. But I will not dwell on that; I will instead concentrate on what the research and the article say about mobile banking.
Availability of mobile banking does not figure in the top three factors customers consider when moving banks; “good” online banking, local branch, and 24 X 7 access to services do.
Only 5% of Germans and 10% of Britons consider mobile banking as one of their most trusted technologies. The top three are: Internet banking, in-branch self service and ATMs. The results for mobile banking are consistently low in all the countries surveyed.
Alternate payment systems, such as “Bitcoins” are not popular with customers either.
Customers currently do not regarding mobile or social media as a safe and secure means of communicating with their banks. Time was when Internet banking was similarly viewed, but today most customers have accepted it as being at least as secure as an ATM.
An interesting part of the study is the consumer acceptance of two key technological innovations, namely, the ATM and Internet banking. While the ATM is pretty old, Internet banking is still in its teens. It takes time for customers to accept change and trust in something new. I see that happening with the mobile phone too and related devices, such as the tablet and other connected mobile gadgetry to emerge in the future.
Customers are very concerned about the security of their banking data and extremely wary of banks that are planning to introduce Facebook – or other social media – banking. Most would not like to use their Facebook ID to log in to their Internet or mobile banking accounts. While I see their point, I feel that were my bank to allow my Facebook ID as a factor of secondary authentication, it would be a lot more convenient than the techniques they currently employ. That being said, banks should indeed tread carefully while mixing social media with mobile banking and perhaps not mix them at all, unless and until the security credentials are established.
The popularity of Internet banking, and it being voted among the top three trusted technologies makes me feel that someday customers will also consider accessing bank accounts on a mobile phone as a safe thing to do. Just as customers distrusted Internet banking initially but then acknowledged its convenience and the efforts of banks and regulators to make it safer, so also we shall see signs of that happening with the mobile phone. The reach of the mobile phone is far wider than that of any other channel and with everybody touting it as the next payment device, its security should only improve. Each new generation of mobile phone is safer and as the early adopters start to report better experience with mobile banking, the rest of the population will follow suit. Mobile banking applications are still not that easy to use and have some way to go before customers are impressed with the experience they offer. As a payment device they are even worse, but new players like Affirm (www.Affirm.com) are promising to change that by making payments as simple as “Tap. Tap. Buy”.
I am willing to bet that 5 years from now mobile banking will rank among the top three factors to drive customers to switch banks, and also among the top three technologies they trust. Any takers?
“Where there is a will, I want to be in it.” This popular Paraprosdokian is a lighthearted take on the irresistible lure to make a fast buck. Fraud, on the other hand, is a serious matter.In 2011-12 alone, Indian banks reported 5,569 cases of fraud, involving a staggering Rs. 4,448 crores.
The RBI maintains that improper pre-sanction inspection and lack of due diligence; submission of fake title deeds, KYC documents and/or fabricated financial statements by borrowers; use of loans for purposes other than those originally sanctioned; and sale of assets created out of loans without banks’ knowledgeare some of the reasons for occurrence of fraud.
A Core Banking Solution can mitigate fraud by putting processes in place to check malpractice or dereliction of due diligence by bank employees and to validate documentation.
For instance, it can prevent the deliberate circumvention of rules by staff by tracking from its database any abuse of internal control in favor of certain customers. The Core Banking Solution’s approval hierarchy allows banks to take the appropriate path to sanction, marked by steps like Maker-Checker, Exception Approval, Appropriate Authority for Specific Loan Limits, and so on. It can also maintain a list of fraudulent professionals, akin to a customer blacklist, in line with RBI recommendations. Banks can crosscheck and ensure authenticity of the support documents issued/validated by these individuals.
With respect to documentation, core banking solutions can support the infrastructure to interface with external systems and databases. Additional checks in approval procedures can validate Know Your Customer and other documentation (AADHAR Database, SSN Database). Similar interfaces can be built with the MCA (Ministry of Company Affairs), NSDL and the Income Tax Department. Any loan application approved against the configured checks can be routed through the Privileged Approval Mechanism, to be approved by a higher authority.
Although Core Banking Solutions cannot replace banking security applications, they can certainly support them in useful ways.