To stay relevant and profitable, it is essential for banks to embrace changes ranging from technology renewals to cultural shifts, according to a whitepaper from Temenos. Author of the whitepaper Ben Robinson, chief of strategy and marketing, explains what ‘experience-driven banking’ is all about to Meghna Mukerjee
In order to gain a competitive edge, banks must become more involved in customers’ commercial and financial lives, using technology and data as its key differentiators, according to a new Temenos whitepaper, Experience-Driven Banking – A Race Banks Must Win.
The whitepaper – launched at the Temenos Community Forum (TCF) 2015 that took place in Istanbul, Turkey, between 19 and 21 May – highlights banks’ need to invest in technology, break down silos, and allow a more holistic approach to customer service and retention, to gain customer loyalty.
Keeping with the theme of the conference this year – ‘experience-driven banking’- the Temenos whitepaper emphasises that institutions effectively combining the analysis of customers’ location and contextual information and delivering the right products, personalised to individual circumstances, at the right time and over the right channels, will succeed in delivering experience-driven banking.
Speaking to RBI, Ben Robinson, chief of strategy and marketing at Temenos and author of the whitepaper, says that though banks have access to customers’ transactional data, big technology companies such as Google and Apple have a deeper reach into customers’ lives, which makes them significant threats.
"It is a race against time and the emergency comes from the fact that banks’ main asset or weapon is transactional data. Initiatives such as like Apple Pay and Google Wallet come in, and – whatever they are dressed up to be – they are really endeavours to gain transactional data," he says.
Gaining this level of insight can put the likes of Apple and Google in a position to recommend third-party products and services to allow customers to make better, more informed spending decisions. Robinson points out that these technology giants "don’t have to do the heavy lifting of regulatory banking" either, and banks that do not improve their handling and usage of data risk surrendering the advantages they have spent decades accumulating to new, nifty competitors.
Currently, a lot of banks’ data is not real time, split across multiple systems, and organised around products instead of customers, which further negates its value, according to the whitepaper.
The need of the hour for banks is to "act fast", stresses Robinson, and to enable this, adopting the cloud is "imperative". A key feature of the cloud is its ability to ‘scale’ transactions and confirm them in real time, in the way that online retailers such as Amazon and travel sites such as Expedia do.
"Real-time is everything but the mainframe is a high performing piece of software. The customer wants the best service at the best price. Common yet flexible software architecture, underpinned by the right software components, can accommodate these pressures across all lines of business."
Robinson agrees that there is still scepticism around cloud adoption. "Firstly, there is the perception of risk. Secondly, it is almost impossible to overstate how complex some of the banking systems are. How do you replace it all? How do you move it all into the cloud? That’s a big issue for some banks," he says.
However, as a "generational change in banking" takes place, Robinson says the perception issue from the banks’ side will change as well.
Robinson also points out that recently, the regulators are leapfrogging banks by becoming increasingly open to cloud technology – particularly private and community clouds.
"The crunch is coming. If Barclays with its Pingit service has experienced customer interactions growing from two a month to 35 a month, that is a big change and leads to pretty heavy pressures on the systems and the technology infrastructure. Banks will need to address this."
Though the splintering between groups that are focused on the front, middle, and back offices will continue in the banking industry, the middle and back offices will increasingly require low costs and high levels of straight-through processing (STP), says Robinson.
Despite the growing demands of technological enhancements and advancements, the Temenos whitepaper mentions that banks continue to overlook the importance of modernising legacy. Old legacy systems hinder the simplification of processes and increase in automation – both of which are needed to fulfil customer demands.
With the launch of the latest R15 version of Temenos’ T24 core banking software platform imminent, Robinson says the upgrade will feature improvements around loyalty and the user interface.
"Our motto is evolution of revolution. We put enough into a new release that it has huge business value for our clients, but we don’t make the changes so big that it becomes user disruptive. The upgrade is aimed at enabling banks to gain critical competitive advantage."
According to Robinson, there is a big opportunity for banks to work "more closely and beneficially" with the merchant ecosystem as well.
"Banks should get to a stage where merchants come to them for customer data when they want to target people in a certain metropolitan area, with particular characteristics. Banks additionally have time to create data models to inform consumers and merchants about transactions at the point of sale, and about financial management."
In general, the emerging markets have high levels innovative technology adoption, says Robinson, as a majority of them have lesser regulatory barriers – with the exception of China. "Some banks are starting from scratch and are in fast moving economies. In some countries, we see consumers putting pressure on banks to adopt new technology to stay relevant," he explains.
However, banks across the globe need to tackle the barriers to innovation by starting small and adopting a change in culture and mindset, according to Temenos.
Alongside adapting a flexible channel strategy that addresses scalability, security and privacy issues, banks should aim to become a ‘one-stop marketplace for financial services, and leverage their brands and customer relationships to offer a broad array of products through their platforms’, states the whitepaper.
Robinson informs that the next step for Temenos is to launch a digital engagement platform that is a unified package for banks’ front office needs, encompassing capabilities such as "customer relationship management (CRM), personal financial management (PFM), channels, content, campaign management, and more". The first release of this platform can be expected at TCF 2016 in Barcelona, Spain.