How many features of that fancy smartphone do you use on a regular basis? If you’re like me, an average mobile phone user, not many, I bet.
The thing is, it’s no different with for mobile banking. While mobile technology continues to evolve rapidly – take wearables for instance, which will be the second highest selling consumer electronics product by 2020 – banks are yet to exploit even its existing power to the fullest.
This is lost opportunity, at a minimum. We believe banks must intensify their approach to digital, reworking strategy if needed to keep pace with the shifts in the market. In the past, their reluctance to forge ahead could have stemmed from concerns about security and compliance. But today, they need have no such fears, because security technology has also advanced leaps and bounds. Hence banks don’t have to choose between quality of experience and robust security. They can have both.
Having established the need for deepening mobility adoption by banks, let us examine some of the possible scenarios of the future. Banks can indeed onboard customers without them ever visiting a branch and help him sign in by just looking into the app. In certain countries, banks have gone mobile first to spread financial inclusion. They could really benefit from a facility such as this.
Another use case is transaction banking on wearables. Imagine that a guy named John is out on his morning run. During a break, he taps his smart watch to see a notification reminding him that his rent to Tom, the landlord, is due today. He taps his approval to a question asking him if he would like to initiate payment. The transfer goes through, even as he begins to run again. In next to no time, Tom’s acknowledgement of the payment pops up on his wrist.
Here’s another good one – a facility to authenticate oneself without a password. All it would take is a mobile phone with a front camera to complete an iris scan, and presto, you are in that quickly.
It is time to get ready for the frictionless banking experience. If these sound somewhat far-fetched you need to be there at Confluence 2016. You really need to see for yourself our innovative solution that provides an Uber type, simple to use, frictionless, end user experience. The emerging wealth generation and those that think banking relationship is too complicated to utilize will absolutely love it!
So today, the world’s largest transportation company owns zero fleet, the largest hotelier lists more than a million rooms but owns none of them, and the largest movie service doesn’t have a theater to its name. And Alibaba – which was only a local e-commerce provider just a couple of years ago – is not merely repeatedly breaking global sales records, but obliterating them.
What these providers have in common is a winning business model that leverages the collective power of a network or ecosystem to deliver incredible experiences at competitive prices to customers, at scale.
How can banks not be a part of that? Straightaway, we can think of a couple of areas of digital technology-driven opportunity for banks and their customers. These are SMB (Small and Medium Businesses) commerce and marketplace lending. At Confluence 2016, we will explore how banks can be enabled to capitalize on these opportunities.
- SMB commerce: Digital is not the sole prerogative of big business. Progressive small and mid-sized businesses are equally keen to ride the digital wave by entering e-commerce. We believe banks are rightly placed to enable their SMB clients to open an e-commerce store with ease. Imagine a scenario where a bank can, one, set up its own online shopping mall and rent out space to SMB customers, and two, provide those customers with tools so they can easily build fully customized online outlets.
- Marketplace lending platform: The peer-to-peer lending market is gaining traction and is expected to cross US$ 1 trillion by 2025. Prosper and Lending Club have originated loans worth US$9 billion so far. Banks can participate in this wonderful opportunity by combining the latest technologies with their expertise in credit assessment, to generate a new stream of revenue.
We will showcase some of these scenarios and also invite clients to share their usage experience at Confluence. We hope you will be there to see it for yourselves.
As we head into what promises to be a very exciting Confluence, here’s what you can expect from Finacle.
Infosys Confluence 2016 focuses on Zero Distance, the approach to operating at the convergence of desirability, feasibility and viability. By uncovering ways for us to connect with end users, by bringing to life desirable ideas and by creating value from them. It’s a framework that will allow you to adapt and respond to rapid digital disruption, on the basis of innovation, automation and lifelong learning. At Finacle, we are bringing this spirit to life by enabling our customers to deliver truly digital experiences to their customers. TrulyDigital Banking is therefore our chosen theme for the Finacle track at Confluence 2016.
But why do we even need a theme like that, when digitalization is clearly on the mind of every banker on the planet?
For a good reason…there is no common, accepted understanding of what truly digital banking really means. We intend to bring to you the “blueprint” of a truly digital bank that will help guide you on your journey to digital transformation.
So what does a TrulyDigital bank do?
Provides Frictionless Banking
A truly digital bank needs to reimagine its customer’s banking experience. Increasingly customers are demanding greater speed, convenience, accessibility, security and personalization. For the truly digital bank, it is all about delivering a frictionless delightful experience anyplace anywhere anytime. For example, even something as routine as account opening could be completely redesigned to suit customer behavior and preference, and implemented with the help of the latest digital technologies and tools, such as digital onboarding, biometric authentication. The same can be extended to other banking interactions delivered consistently across desktops, tablets and smartphones.
Exists in an ecosystem
The traditional monolithic bank is rapidly unbundling at the hands of new-age, technology driven players that are threatening parts of the banking business, like payments. At the same time, it is becoming impossible for the conventional bank to be everything to everyone. These trends are driving the expansion of the banking ecosystem. The truly digital bank will have to coexist within this ecosystem, collaborating and co-operating with its customers, customers’ customers and competition to create an aggregated portfolio of products and services that fulfills its customers’ varied needs.
Puts insight ahead of everything
Analytics-driven insight will be the most valuable resource in a truly digital bank, which will distinguish itself with its ability to quickly capture and convert data in near- or real-time into actionable insight. Analytics will be part of enterprise culture, and therefore encompass every employee regardless of job, role or function. The following four aspects of banking will see increasing usage of analytics – customer experience improvement, fraud and risk management, revenue expansion and operations optimization.
Practices ubiquitous automation
The truly digital bank will automate its business in the interest of efficiency and optimization. Automation, driven by business rules, algorithms and machine learning, will enable the banks to process millions of transactions every day without increasing costs. At the same time, it will accelerate the pace of business expansion, as well as free the workforce from repetitive tasks so that they can focus on value generating activities.
At Confluence, we will talk about all these ideas in greater detail, but more importantly, we will demonstrate some of our amazing new offerings for truly digital banking. You don’t want to miss it for anything.
One of the hallmarks of truly digital banking – which is the theme for the Finacle track at Confluence – is the role of the vast banking ecosystem. As a variety of banking and non-banking players collaborate and co-create to offer customers universal banking services, they would need a robust, secure mechanism to facilitate their interactions.
One of that mechanism is very likely, the Blockchain. There is a huge amount of interest in this technology, which has the potential to transform the way the industry works. Investment in Blockchain projects is expected to surpass USD 1 billion next year, and a number of banks are already experimenting with it quite seriously. Barclays, for instance, has a partnership with P2P payments provider Circle, which uses the Blockchain network. Then there’s Visa, one of the participants in a USD 30 million investment in Chain, a Blockchain development platform. There are several ways in which Blockchain technology can improve capital market transactions, and a consortium of 42 banks is already working with Fintech firm R3 to examine some of them.
The World Economic Forum (WEF) has identified blockchain technology as one of its six mega-trends in a new report broadly aimed at outlining the expected transition to a more digital and connected world. In this survey, 58% of the respondents expect that 10% of global gross domestic product (GDP) would be stored on a blockchain by 2025. The survey also suggested that bitcoin and the blockchain would reach a “tipping point”, or a point at which it becomes broadly adopted, by 2027.
In fact, not just capital markets or payments, but any financial services operation that requires accurate, tamper-proof record keeping can leverage the Blockchain to improve security, as well as processes and systems. Blockchain can be deployed in a number of areas, in a permissioned environment, to establish the authenticity and improve the efficiency of banking services.
The “permissioned environment” is a big reason for Blockchain’s appeal for banks. Where true cryptocurrency networks are unpermissioned, whereas permissioned blockchain, only admits approved entities to post transactions or validate the network. It offers a degree of de-centralisation & control that is imperative in a business that is strictly governed by regulation.
Also, the asset agnostic nature of Blockchain enables banks to build any number of assets on it, all of which are tracked and verified at the level of the network.
Capital Markets, Payments, KYC/AML and Trade Finance are all ripe with opportunity for implementing Blockchain technology. Infosys Finacle is already working with a few banks on Blockchain pilot projects. More details shall be revealed at Confluence 2016. Be there!
At Infosys Zero Distance (ZD) is a quest to progressively reduce the gap between what clients expect of us and what we deliver. Today all our significant actions are measured against the Zero Distance yardstick.
And so when the time came to name a theme for Confluence 2016, Zero Distance was the obvious choice.
At Infosys Finacle, we have been applying the ZD principle to not only get closer to our clients, but also to enable our clients zero the distance to their clients. One way in which we are doing that is by enabling our clients to evolve into truly digital banks. This calls for not only reengineering banking functions around digital technologies, but actually reinventing the banking model to suit a truly digital culture.
Leveraging data driven insights to arrive at key decisions, is a vital part of that agenda. Today banks have access to almost unlimited consumer data. With increasing digitalization, the flow of data will only intensify as the number of data sources, especially external ones, multiplies at speed. Fortunately, development of analytics technologies has caught up with the pace of data proliferation, and today banks have the choice of several advanced analytics applications for converting the data at their disposal into granular, real-time insights into virtually every aspect of the banking business.
Take customer understanding, for instance. Using advanced analytics, banks can group their customers based on individual values, expectations, and needs, rather than on aggregated demographics. Identical individuality has been replaced by individual identity.
That is but one use case. Analytics can inform virtually every type of decision that a bank needs to take on a day-to-day basis. Consider the following scenarios:
John, a customer of XYZ Bank, has been reading and posting online reviews about a car he’s dying to own, to decide if it is indeed right for him. Does XYZ Bank get to know of this early enough to influence John’s decision? Can the Bank play a larger role here by offering him a test drive at the nearest showroom and helping him get the right financing option?
ABC Bank has multiple branches in one city. Does it measure the success of these branches by mapping the positive and negative experiences that customers have shared in online and offline channels? Which branches have gone the extra mile in creating positive experiences for customers? Which products are most popular?
Is A2Z Bank’s CEO empowered to closely monitor and manage the Bank’s key metrics that are tied to its financial goals? Is he able to drill down further by line of business to identify the issues that need his immediate attention?
At Confluence, we will explore how advanced analytics technologies can play a crucial enabling role in all these scenarios and more. We will talk about how the insights from analytics can build competitive advantage across the banking value chain. Don’t miss it.
An effective digital strategy can boost profitability by 40 % or erode it as rapidly as 35% in the next 5 years – if you don’t get it right, says one study. Another says digitization is at top the agenda at retail banks, ahead of all else. There is universal agreement that the future of banking, indeed every business, is digital. Most banks you speak to are cognizant of the need to digitize, and fast; a number of them have already got a plan going.
So, you would think that at least as far as digitization is concerned, everyone in the industry is on the same page.
That notion was quickly dispelled at a recent conference titled “Beyond Digital” which was organized by IDC Financial Insights in Singapore. Most participants had a different definition and understanding of digital banking, with a surprising number still limiting its scope to the customer touch point. The same narrow perception applied to digital strategy – which was seen as one more entry in a list comprising org, product, marketing, people, and other strategies.
Clearly, there is some way to go before banks attain an evolved digital end-state, the state in which they become “truly digital”. To start with, a common definition of what digital banking entails could be very useful. At Infosys Finacle, we believe there are four fundamental characteristics define the truly digital bank. One, the customer is its focal point, and customer experience, its primary lever for achieving differentiation and growth. Two, the bank relies on a wide ecosystem of product and service partners to deliver “universal banking”, rather than trying to do everything on its own. Three, the truly digital bank leverages automation not only at the back end, or for the improvement of efficiency, but to actually deliver personalized, no-break service experiences to customers. This it does through large-scale automation across all front and back-end systems and processes. Four, the bank adopts advanced analytics to personalize the banking experience to individual context and need, and also to continuously refine products and services.
From the above it is clear that truly digital banking is an all-encompassing state, which requires everything the bank is, or does, to be re-examined and reinvented to suit the demands of next generation banking. Effecting such a fundamental transformation calls for a deep and comprehensive digital strategy, which subsumes every other strategy in the bank. And while the fundamental precepts of truly digital banking remain the same for all, every bank would need to chart it own path of evolution. So while two banks might appear to have the same strategy on the surface, they will inevitably execute it differently. And therein lies an important source of competitive advantage for the truly digital bank.
PS – You can learn more about our perspectives on truly digital banking here
For years together, any product innovation in the banking world was focused around same or similar segment of customers. A significant shift in the target segment for financial services was brought about by the advent of mobile money in the developing world, about a decade back. Telcos used mobile wallets to target a segment of users, hitherto considered as an unviable segment by the traditional banking industry. Nevertheless, the user segment targeted by wallet services bring in inherent roadblocks like choice of UI, distribution channel, customer education etc.
Banks have also started and rightly so, looking at creating niche value propositions over and around the segment they have been traditionally operating in. For example, banks have started looking at specified services for Youth or the new generation, which forms a significantly large user base. Engaging with this generation also brings about the advantage of a long term relationship. Women and SMEs form other such segments, which warrant for focused value proposition and offer services differentiated from the generic bouquet. Although, the user segments targeted here are new, they are strongly coupled with the existing banked users. While the customer base here may not be as large as at the bottom of the pyramid for the wallet services, it certainly is a significant chunk and it’s a whole lot easier for the banks to address.
Banks will increasingly try and identify such segments and create niche services. This may need the banks to engage with specialists dealing with these segments, who may or may not be from the banking domain. However, the new set of infrastructure or people required, will only be marginally incremental unlike in the case of creating a wallet ecosystem. The increasing innovations from FinTechs will also partly share the burden of launching the niche services, with the banks.
Last year the European Union Council passed the revised Payment Services Directive (PSD2) that mandates the opening up of banks’ payment APIs. The National Payments Corporation of India has introduced unified payments interface APIs, wherein anyone can initiate a payment transaction and create unique payments experiences.
The UK government is also currently working with banks and Fintechs to define a framework for an open API standard ecosystem that will make it easier for Fintechs to build apps for any bank’s customers.
We believe that open banking, a connected ecosystem of financial and non-financial services, is the future of digital banking. Now, whether that happens by initiatives taken by banks, Fintech competition, or regulatory mandate remains to be seen. But open banking technologies are certainly set to transform the business of banking. The fundamental promise of this model is to enhance the choice, utility, and experience that customers derive from their banking service providers.
Open banking will be driven by – apps, app stores, and extended developer ecosystems which banks and other providers will build around their APIs. Banks stand to gain immensely from this model. As more and more third-party services integrate with their open banking ecosystem, banks will gain access to even more data that they can channel back to fine-tune and personalize their customer experience.
An API-centric approach also enables banks to seamlessly connect with innovative services that leverage emerging technologies like wearables or IoT. The ability to add value-added services and expand into new niches will create new revenue and growth opportunities for banks. It also makes it easier for them to address niche markets more cost efficiently.
Found this perspective interesting? Checkout our point-of-view on key strategic and technology trends that are transforming banking here. And do let us know what you think.