"Groupon" Banking

Who does not love a deal? Companies, such as Groupon have made a global business around deals, local ones in particular. Combine that with social media, deliver deals on mobile and analyze the resultant Big Data, and we are talking about an interesting opportunity for banks.
Since banks are constantly looking at ways and means to incorporate cutting-edge practices from other industries, how about some “Groupon” Banking?

Banks are not new to coupons or deals; most banks with a credit card offer deals to customers. So what is the novelty factor?
Let’s study some of the key characteristics of Groupon deals:

  1. The deals are local.
  2. There is a “deal of the day.”
  3. Deals are listed under categories (e.g. restaurant, jewelry etc.).
  4. You can access them from most smart devices.
  5. You can immediately buy deals that interest you.
  6. You get regular updates on the latest deals.

Let’s quickly look at some ideas that banks can work on:

  1. Offer deals of the day, tied up with a banking product. For instance, the deal is only valid if bought using the bank’s credit card.
  2. Tie up with entities like Groupon and offer deals to bank customers via the Mobile Banking App.
  3. Offer financial deals of the day, such as special interest rates or fee waivers on housing loans.
  4. Offer additional benefits if customers use the bank’s card on their deals; for example, an extra 5% off on that day for all Standard Bank cardholders.
  5. Present a deal with financing from the bank. For example, book a holiday with an instantly available bank loan.
  6. Offer a pre-qualified bank product at a discounted price for financing a purchase, such as a pre-approved car loan, where the car comes at an exclusive price only for the bank’s customers.
  7. Offer new products not available elsewhere as an exclusive deal for privileged customers – say, a 100 Celerio cars from Maruti Suzuki to be delivered on launch date to these customers, when ordinarily, people would have to pre-book and wait! Despite there not being a price advantage, being one of the first to own a particular car is an incentive in itself.
  8. Extra loyalty points or a cash back on the deal.
  9. Auto delayed payment or installment payment on the deal.
  10. Link a deal with a noble cause, such as a contribution to charity.
  11. Enable the bank’s mobile app to run in the background and text location-based deal alerts to customers; for instance, list out all relevant deals in the vicinity of a particular restaurant or mall.
  12. Offer deals at the time of payment through the mobile.
  13. Offer an option to pay for the deals with loyalty points.
  14. Browse multiple deal sites and filter out and alert customers to relevant offers.
  15. Seek customer preference or harness Big Data and predictive analytics engines to choose and offer pertinent deals to customers.
  16. Entice prospective customers with special deal prices or discounts, either for taking a bank product or just for perusing their advertisement.
  17. Sponsor a deal on a specific day of the week and associate the bank’s name with it. For example, the first 1,000 persons to avail the “Citibank Wednesday Special Deal” get an additional discount.

The above list is indicative and there are innumerable ways in which a bank can play around this idea to engage existing customers, attract prospective ones and associate the bank’s name with a good deal.
In its endeavor to be part of “every main street transaction,” Groupon now dabbles in loyalty cards, payment cards, devices for POS transactions (add on to iPads) and so on, which are intrinsic to the banking process. All that banks need to do today is incorporate the deal/coupon element and they are in business.
Moreover, banks have the added advantage of mobile banking, approved merchant establishments, card acquirers, customers, suppliers and vendors, loyalty programs, affiliates, partners, social media presence and local presence through branches, which they can leverage to their advantage and bring together in a sweet deal or coupon and achieve customer delight.
It is difficult to resist a deal if it is delivered to your inbox every single day. This also strengthens the bond between the bank and the customer. However, it is not just this stickiness that banks aim for. Research shows that deals and coupons often attract the one-off customer and banks now have a way to profit from such transactions as well. If banks get better at using predictive analytics to make the right offers (deal/coupon), the one-off customers may become regular ones over time.
If Groupon can make a business out of coupons and deals, banks are even better equipped to either take them on or tag along with them for a slice of the pie. A recent survey in the US shows that the younger banking customer is looking at tech providers like Google and Amazon to replace banks. This is a wake-up call for banks to get more innovative and tech savvy with concepts such as “Groupon Banking.”

Banking Complexity – Root Cause

Is complexity the natural byproduct of sophistication? Definitely not, if complexity drives up costs, drags down value and shuts out a potential 20% in profits. But that is exactly what complexity is doing to banking, a sector that ranks 6th on a global complexity index featuring 26 industries.
Any effort at mitigating the adverse effects of complexity must start by identifying possible causes. Banking regulation, without doubt, is a big source of complexity. Example: the Dodd Frank Act, which is still a work in progress, is already more than 8,000 pages long. Add to that the still unfolding impact of Basel III provisions and a host of other local and regional regulatory norms and requirements, and the cost, time and complexity of compliance only increases. The last has a direct impact on banks’ ability to innovate. Respondents to the EFMA-Infosys Innovation in Retail Banking 2013 survey cited regulation as one of the top barriers to innovation with large & medium banks rating it at number 4, and small banks at number 2, after IT systems.
For a sector where change typically tends to be evolutionary, disruption did indeed come as a surprise. Who ever expected competition from telecoms, retailers and other non-traditional entrants? Non-traditional players eyeing the retail banking markets were clearly encouraged by new possibilities created at the intersection of cutting-edge technology and changing expectations among increasingly digital customers. Most banks simply did not have the regulatory elbow room or the structural flexibility to steer smoothly into the tail winds created by technologies like cloud, analytics, social media and mobility. And even as they were navigating their way out of product-centricity into customer-centricity, the table stakes were raised to engagement and experience.
The sustained uncertainties of global macroeconomics only added to the overall pall of complexity in banking.
Given these multiple reasons for banking complexity, and the size and diversity of banking institutions, it is obvious that there cannot be a one-size-fits-all strategy for simplification. Every simplification program has to be tailored to the individual circumstances and needs of each bank.
Of course, it is possible to draw up a laundry list of banking elements that are primary candidates for simplification. That will be the focus of my next post.

Unified View and Dashboard Through Internet Banking

As banks are increasingly moving towards specialized solutions to meet complex client needs, there is a need to redesign the channel solutions/architecture. Many IT vendors envisaged this change and are building solutions for the future in the form of a comprehensive channel platform offering.
Internet banking channels are widely used by corporate /retail customers in the current environment. The technology revolution in mobile in the recent past is slowly paving the way for mobile banking to overtake Internet banking as the preferred channel and is also enabling customers to access the Internet over a mobile/platform. In the retail banking space, apart from using the mobile to make routine balance/transaction enquiries customers are also utilizing it for fund transfers, domestic/international payments, and utility bill payments. With the Internet being accessible over a mobile platform thanks to advanced technologies, more and more customers are moving towards mobile instead of Internet banking platforms.
Some of the corporate banking solutions provided by vendors for Cash Management and Trade Finance come with a customer front end and accounting /processing back office piece. The need for Internet access along with a trading portal among companies availing of Treasury services from banks has given rise to a customer front end requirement in Treasury. Corporate Loan Origination is another area where integrated front/back end solutions are already in use.
Private/Wealth Management solutions being offered currently provide a portal to the customer for viewing or querying balances and are enabling security trading with a back end solution.
Using the customer front end, the corporate customer is able to log-in and inquire/transact in the following manner:

  1. Enquire about current limit utilization sanctioned by the bank and initiate the opening of new documentary credit through the Trade Finance portal
  2. Create a new structure for pooling funds or linking/delinking one of the accounts in the existing structure
  3. Access the trading platform for buying/selling securities through the Private Banking/Treasury solution
  4. Place a new overdraft request with the bank within an overall omnibus line of credit already sanctioned to the customer.

For each of these transactions, the workflows need to be designed in such a way that when the customer initiates the transaction through the Internet, processing and settlement/accounting happens at the core back end. There needs to be seamless integration between multiple solutions in different platforms. It could also happen that a transaction initiated through the Internet is processed through multiple processing solutions before settlement/accounting happens in the core back end.
When corporate customers expanded operations the dependence on the Internet with multiple log-ins and portal access for Trade Finance, Cash Management and Treasury became a necessity. A corporate entity requires a solution with a single log-in to access different applications covering all the requirements and a dashboard to provide a consolidated view/position. This should seamlessly connect with various gadgets used by a corporate executive to approve transactions as and when required based on hierarchy defined in the system. When a single current /operative account is tied up with all processing solutions, a single consolidated view is possible. Because of the nature of business and specialization offered by different banks, corporate customers may prefer multiple bank accounts. A comprehensive channel platform and linkage to multiple bank accounts and solutions with seamless integration is required. This needs to be designed to cover security elements / data integrity /data segregation as part of integration.
The next set of technology challenges revolves around building a comprehensive internet offering with a single sign on with different subsystems /portals linked to the same, and an automated update, status check and view wherever required, with data segregation/integrity. Though corporate customers can provide restricted access to their concerned staff handling these operations, from a management dashboard perspective, a consolidated view for managing and utilizing the funds is critical. A dashboard on the enterprise platform which updates on a real time basis based on the transactions initiated in any of the applications is required.  The integration elements /workflow need to be redesigned for smooth processing and accounting connecting all the channels/sources and back end/core systems wherever necessary.
The solutions developed by some of the IT vendors are under implementation and are awaiting market acceptance and penetration in this space to strengthen. However, IT vendors need to provide a solution which is integrated, comprehensive and more user friendly to the corporate customer, considering the banking and nonbanking requirements across the entire financial ecosystem. In a fast moving world, business processes demand a quicker turn-around time, and hence data available in a snapshot view would help to enhance decision making capabilities. The same model can be extended/ adopted through a mobile banking platform with Internet enablement.

Banking in OZ

After having emerged relatively unscathed from the Great Financial Crisis, Australia’s banking sector has now been ranked as one of the five safest in the world. Even in the immediate aftermath of the crisis, the country’s banks as well as the regulatory mechanism were touted as benchmarks for fiscal prudence, resilience and oversight.
The sector is dominated by the Big Four – Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (WBC) – who were rated the most profitable banks in the developed world with combined profits growing nearly 15% in FY 2012-13. There are also several regional and community banks, like Suncorp Bank, Bank of Queensland and Bendigo & Adelaide Bank who may not match up in terms of sheer financial size but have built strong positions for themselves in profitable niches.
The financial services sector in Australia leads all other sectors in the country in ICT spending and is expected to invest heavily this year on technology transformation projects as well as in cloud, data and mobility.
For vendors looking to tap into the opportunity in Australian banking, a pre-configured customized blueprint would be an essential requirement for success. Vendors must offer a set of pre-configured functionality, methodologies, tools and capabilities that are suitable for greenfield deployments as well platform migration.  This should be supported by a repository of structured processes that enables banks to standardize and rationalize across branches, business units and geographies. There is also a lot of demand for solutions that can streamline and accelerate segment-specific new product launches or the expansion of channel infrastructure.
Banks also expect core systems replacement programs to run the legacy applications and processes in parallel with the new systems to minimize business disruption. The ideal approach, therefore, would be a component-based strategy for core system transformation. Apart from managing disruption, this would also enable the periodic reinforcement/reassessment of priorities. And with the inevitable transition to the cloud, technology vendors should also be equipped to deal with cloud-based replacements in the future.