On the back of research that shows that banks need to refurbish
technology to remain profitable, Temenos’ Adrian Hadley tells
RBI why IT renovation is essential to compete with market
entrants
Go deeper with GlobalData
Research from IDC Financial Insights
has shown that banks that have renovated their core banking systems
– in part or in entirety – are more profitable in comparison to the
ones that have not done so.
According to retail banking product
director at Temenos, Adrian Hadley, keeping technology updated is
key to making a bank more customers centric and banks do not have
the luxury to wait to renovate their core banking systems.
Retail Banker
International: How do you think technology is empowering banks
in keeping their customer satisfied?
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By GlobalDataAdrian
Hadley: The first thing a customer notices in their
interaction with their bank is how easy and available the bank is
to access across multiple digital channels as well as face to face
in the branch, and over the phone to the call centre.
Increasingly, banks understand that
keeping the interface modern, accessible, easy to use and adaptable
for different kinds of customers with different kinds of devices is
essential to achieving customer success.
Banks change their core banking
systems about every 25 years, but they are changing their user
interfaces and their customer facing channels at a much faster
rate. In addition, banks now have to provide different technology
for different roles – an iPad for an agent, an Android phone for a
mobile customer and a Windows Desktop for a teller.
These user interfaces have to mash
up many different banking and non-banking capabilities, such as
workflow and CRM, for each of these different roles.
RBI: How does
technology strengthen customer service initiatives?
AH: Banks
must continually raise their game in order to provide the level of
service customers expect. While there are many factors to be
considered, from a bank’s brand values, to the types of products
and services on offer, technology is what underpins this and lays
the foundations for these brand values and products to be built
upon.
A flexible component-based
architecture is the essential ingredient for a bank striving for a
long, innovative and profitable future. The ‘building block’
approach enables innovation by deconstructing products into a set
of features that can be re-combined and reassembled to form new
products – in effect, Lego for banks.
Combined with the ability to bring
products to market in a matter of weeks – rather than months, or
years, when products are built from scratch and you have a game
changing proposition.
A complete banking solution
implements many lines of business across multiple geographies
across front, middle and back office. Whereas a smaller bank will
likely implement all of these on a single system, perhaps
exploiting multi-tenant capabilities, larger banks will more likely
prefer to be able to implement specific parts progressively – one
at a time.
This requires an architecture that
is able to be delivered as separately installable sets of
components. Rather than a ‘rip and replace’ approach to upgrades or
maintenance, components can be tweaked, replaced or augmented on an
individual basis.
RBI:
Currently, in your opinion, what is the state of customer
loyalty to banks and why?
AH: Customer loyalty is
at an all time low. And here are several reasons why. Rather than
comparing experiences and interactions between bank A and bank B,
customers are relating this level of service to their experiences
with the likes of Amazon, or mobile phone providers.
The recession has also served to
create a more financially-savvy population. Customers are looking
for better value from their banks and they’re very happy to jump
ship to find this.
Against this backdrop of a more
competitive environment, it is also now far easier to switch
banking providers than it was five or ten years ago. It will be
easier still with the European Banking Industry Committee’s ‘Common
principles for bank account switching’. Even the most content
customers still shop around for the best rate on a current account
or mortgage.
New research from Temenos shows that
91% of CIOs have improving customer service among their
organisations’ priorities for the next 12 months. Whereas only 58%
of CIOs are prioritising upgrading their existing systems. There is
a clear disparity between the business objectives and the
realisation that a technology overhaul is needed to deliver on
this.
RBI: Where do the main
challenges in the European retail banking market lie?
AH: It’s fair to say
that European retail banking is in a state of flux. While the
industry has faced challenges around customer service, regulation,
risk and cost for decades, if not centuries, these factors are
front of mind today more than ever before.
At the same time, new entrants are
disrupting a marketplace that has historically been difficult to
penetrate for newcomers. While these emerging players cannot draw
on their banking track records to win customers, they can draw on
their reputations for excellence in customer service, teamed with
the fact that they are reinventing the concept of banking and
bringing new innovations to market.
By contrast, perhaps one of the
largest impediments for the traditional players is their legacy IT
systems. The majority of Europe’s tier one banks are running
systems which are more than 20 years old.
This legacy architecture was not
built for today’s banking environment, where customers are not
willing to wait for days to open a new account, for example.
Rather than supporting banks’ growth
and product innovation, legacy core systems are in fact strangling
them. Their lack of flexibility is stifling their ability to
compete with newer better equipped entrants to the market.
On the other hand, the Metro Banks
and Tesco Banks of the world are entering the market with clean
slates and designing infrastructures which empower the provision of
a level of customer service not seen before.
According to research by IDC
Financial Insights, 75% of the fastest growing banks have replaced
their core system. The industry has to question: can it really
afford to wait to renovate the core of their business?
