In an exclusive interview, leaders from the digital channels and international payments divisions at Fiserv gave their insights and perspectives on the current developments in the industry, outlining that for some players there’s still a long way to go. Valentina Romeo reports

The debate around multi-channel banking and customer sophisticated demands is ongoing and yet there are banks who are struggling getting it right, especially concerning mobile technology.

Serge van Dam, vice president at Fiserv made a clear point about how banks are positioned towards multi-channelling their customers’ experience.

"While people agree on the fact that some traditional banking channels will remain, there’s no doubt that some transactions are moving digital, and more of more of these digital transactions are moving mobile," he said.

He explained that across a large number of clients, mobile has already overtaken online banking in terms of transaction points. Throughout this spectrum, there are banks who are leading the change, but also there are those who are obstructing customers from making them able to benefit mobile at 360 degrees.

"Some banks are being very progressive around what we call "wide channelling", that is encouraging their customers to use the channel that is best for them, based on whatever criteria," he said.

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"[However], some of those banks are making it difficult either by not having the channels or the appropriate user experience idea, or making logins very painful, so there are banks out there which are making mobile logins needing a token, in order to log in into your mobile phone. You are still making a mobile banking, but you’re not exactly making it easy for your customers."

Apart from having or not the appropriate channels, van Dam said many banks are under-prepared or unprepared for a future where there’s a proliferation of payment types, and of digital channels.

"The role of the bank in that transaction value chain is broader, so the function responsibility has grown. Many banks realised they’re not prepared today.

"The only thing is that ‘doing nothing’ is not really an option," he added.

Once a customer is in the bank’s domain, he said, it will be fundamental to ensure the customer has access to all the relevant products that the bank can offer. "Even trying to do that has been very difficult," van Dam concluded.

Regulation: the answer to risk?

Clearly, the proliferation of channels and devices affected financial institutions and has exposed them to additional risks, in terms of point of weakness, different platforms, and different elements of compliance, as well as loosing control of the part of technology and interaction.

"That doesn’t mean you shouldn’t provide those channels, it just means that you should continue look at the best practice in terms of risk management. You just have to build on top of the things that already exist today and not being afraid of doing so," said Sunil Sachdev managing director international payments.

The traditional forms of payments have come under a lot of scrutiny in terms of their economic models and regulators have played a large part in that.

Sachdev said regulation is important because it can create the guardrails and the environment for transactions to happen in a more effective and efficient manner.
But at the same time, he added: "It is up to the solution provider and the financial institutions to come together to best protect their brands and their customers."

"I think that banks are starting to really ask themselves ‘where do I want to be?’, because we know that life of doing a transaction has gotten far more complex", Sachdev also said.

Monetising

The digital channel revolution that’s happening today, gives an opportunity for a bank to diversify their fee income by looking at different forms of transactions that can be consumed on mobile or online, and that are not necessarily associate with their debit card or credit card type of product.

"If banks are able to figure out how to leverage these channels effectively and provide the right transactions or use cases, there’s obviously additional fee revenue that can be made," van Dam said.

As an example, he cited electronic bill payments and the decreasing cost of operations facilitated by the electronic payment.

He commented: "There’s money to be made on both sides of the transaction, depending on the market. By enabling bill payment though your digital channel as a bank, you opened up an opportunity to earn fee income without having to worry about the regulatory piece on interchange."

Data

Another point for financial services organisations is how to derive the best value out of data.

"Our job as a channel provider is to make that experience as compelling as possible using things like location by services, push notifications and so on. The data is there already, it is just a matter of crunching it and then turning it into a compelling user experience via digital channels," van Dam said.

As payments continue to get ‘electronified’ and real time payments advance, also other challenges are coming up around data. According to van Dam, one is being able to ensure that when transaction is getting authorised and passing so quickly through the systems, it is necessary to break that code and identify important elements, such as in pre and post-transactions.

"Financial institutions have to create a strategic focus on looking at the data that they have today, from the myriad of channels that they offer to consumers, and they need to figure out how they can find the different insights that will help them enhance the product," van Dam said.

"Things that we’ve already done with the revenue enhancement team and different markets is that through some of the data crunching that we’ve done, we’ve been able to shorten data collection and enhance few revenue for certain products that banks offers," he added.

However, again, even if getting the demographic of the information and transaction, he said there’s still a gap in many financial institutions to being able to monetise their data, and, consequently, to find those insights to create better products and services.

Virtual currencies: what limits?

Sachdev thinks virtual currencies are still pretty nascent and will continue to play on their fringe.

In the case of Bitcoin: "You just have to look at the value of it over the last 12 to 18 months, to understand that it’s not really a stable currency, so it’s still something nascent," he said.

In a digital environment, virtual currencies attract specific use cases, and being able to purchase or borrow using Facebook credits or Bitcoins becomes highly advantageous and convenient. But when purchasing or buying something in the real world, there’s a whole level of security around the currency that includes managing, tracking and valuing.

According to Sachdev, there are two broad perspectives in virtual currencies: one is that Bitcoins could take over and replace all currencies that exist today. He also explained that the other way to look at currencies is that they can become more fragmented, and therefore the ability to value or cross-value it becomes more difficult.

He concluded: "I don’t think banks really concern themselves about these currencies, despite regulators are watching them closely. Once they become a regulated entity, then a financial institution will just adopt that currency as they do with anything else, and continue to provide the same level of products and services."

ATM and branches

With mobile increasingly becoming the most frequent point of contact between a consumer and a bank, in some markets the use of ATM and the function of branches will encounter a definite change.

"ATMs are expensive to maintain," van Dam said, "Consumers will need cash in the foreseeable future, but we expect to see a decline in its use due to electronification and in terms of the branch, it will change shape, so consumers will focus their activities based on their needs and use specific channels accordingly."

He also added: "We now see the focus of the branch being much more an advisory experience delivered in confidence by a financial institution, rather than transactional banking."