BANK, TELCO OR APP? Why customers don’t care

By: Amit Dua
September 2016

AMIT DUA

PRESIDENT & GLOBAL HEAD, CLIENT
FACING GROUP, SUNTEC BUSINESS
SOLUTIONS

Amit heads the client facing group at SunTec, and is responsible for developing new and existing business opportunities as well as customised solutions to client requirements.

He is a well-known figure in the financial services industry with 23 years of experience; successfully leading global sales and customer engagements across Europe, Americas, Middle East, Africa and Australia. In his previous role at Infosys Finacle, he headed business development and engagement in different capacities for 18+ years.

Advances in Banking and Telecommunications over the last century has brought banking freedom and economic mobility of billions of people all around the world. Although these sectors have traditionally worked for separate aims, the digital revolution has made it more important than ever to learn from each other, as customers demand new services fit for their needs.

In the age of the smartphone, customers are creating new ways of banking and in some cases they trust their mobile operators more than the traditional banking institutions. Asia, which boasts half of the world’s smartphone users, but most are ‘unbanked’, meaning they do not have a bank account. Customers turn to mobile operators for daily banking services, and banks need to take heed, if they are to survive the threats posed by outsiders.

This is not the only trend which is decimating traditional banking processes and digital is not the only concern for banks.

As regulations such as the anti-money laundering force banks to increase spend on compliance technology, this eats into profits, and the overall budget for developing new innovations are hampered.

The worldwide spend on compliance technology will rise to nearly $100 billion by 2018, reflecting on how expensive it is to be a bank! Meanwhile, the communications industry, which exploded in a single century from the humble telegraph and created organisations even larger and more complex than the banks, is struggling to find new revenue streams as telephony has become a free commodity. Although they have embraced technological advances in areas from product design to customer billing to prevent losing fickle, promiscuous customers to churn, they have much to learn from the banking sector if they are to become a key player in the future of financial services.

So what can banks and telcos learn from each other to make sure the journey towards convergence is a marriage made in heaven, and not in hell?

 

‘One stop shop’ customer services

Customer habits may have changed, but banks still provide many critical services such as lending and savings. Such intimate services are not easily replicated by slick user interfaces and omnichannel services as they require very high levels of trust and knowledge. Banks are still the trusted option, though the 2008/9 Financial Crisis made a big impact.

One way banks can build up trust is through personalisation and the addition of carefully selected add-on services. In the UK, Lloyds Bank’s mobile application brings value to customers by sending money-saving ‘Everyday Offers’ and ‘cash back’ discounts from partner organisations such as airlines, supermarkets and restaurants. At Lloyds branches, tellers are prompted to ask customers about the services they are signed up for to help them find the best combination of add-ons. This is a good example of true omnichannel orchestration. Whilst challenging for large organisations, bringing together everything from email to the app and branch experience in a ‘One Stop Shop’ can be done.

Banks need to tackle this head-on, providing what their younger clientele want, through the channels they choose. The way to do this is to build technology platforms which can adapt to the services, internal and external, they need to provide, rather than in silos governed either by product lines established in a previous century, or worse still, dictated by historical mergers and acquisitions.

Telcos, while also very concerned with customer churn, also need to up their game on customer service. For many companies this is a pain point, with already record high numbers of consumer complaints on the rise, often due to inflexible back-end billing systems. Today, there are frenzied transnational acquisitions, as formerly national providers look for economies of scale and scope to outmanoeuvre their cut-throat competition. But without improved customer offers, scale alone will not help. To compete, enlightened telecoms businesses are shifting away from their role as one-dimensional network operators towards making customer offers well outside their original offer of connectivity

 

Leveraging their knowledge of the Internet of Things, leading telcos are forming partnerships with government agencies, healthcare, transport and even banks to deliver a joined-up experience for their (and their partners’) customers. This is still the exception rather than the rule. Most telcos have yet to make that transition.

Telco or Bank – spot the difference

While established banks and telcos struggle to digitally transform their business at the speed required, compelling challengers are stepping into the void. These have very different business models and are hard to define as either telco or banks. They may not be well-rounded enough to meet every need of every customer, but they are quickly acquiring market share in customer niches such as online overseas remittances, Over-The-Top digital media services, smartphone e-wallets and pay-per-view content. 

The estimated 29 percent of mobile payment transactions is a clear indication of mobile adoption loosening the grip which banks have traditionally held over payments. Entrepreneurs are building ultra-low-cost apps to offer banking and telco services while avoiding the costly regulatory scrutiny required for a banking or a mobile network license.

One example is Fidor Bank in Germany, whose API platform allows customers and partners to connect directly to the services of the bank.

Fidor has enabled telecoms giant Telefonica to launch its own mobile banking offering without a banking license. Customers can now transfer money via Twitter, trade crypto-currencies and provide services to third parties using the bank’s platform.

Another modern model is bKash in Bangladesh which combines payroll, money remittances and personal banking in one suite of mobile apps. Starting with small payments, such companies’ natural focus on customer billing and sheer regularity of customer touch have made them the competitors many traditional bankers failed to see.

Innovative telco Orange recently acquired Groupama Banque in another highly significant step blurring the lines between the sectors. Orange plans to create the first 100% mobile bank, leveraging their large existing customer base and innovative digital services capability. Telenor has more banking than telecoms revenues in Asia -and has been well established in financial services there for some time.

The key to the fightback for established banks is to focus intensely on providing exceptional customer experience through their brands. Several banks boast a heritage three times as long as the most established telcos, but the ambivalence of Generations Y and Z towards brand loyalty is a threat to their economic viability.

A brighter, more joined-up future

Consider the possibilities that differentiated customer services employing techniques such as gamification and advanced offer bundling could unleash. It Is not hard to imagine future house buyers bidding in real-time on their smartphones for a property, for which their mortgage offer is not only pre-agreed, but for which the rate is also dynamically adjusted as the sale price changes.

In such a scenario, the real-time ‘upsell’ opportunities are immense, with everything from more competitive rates as the Loan to Value ratio changes to customised insurance service bundles designed specifically to create customer delight and lock in long-term customer loyalty via word of mouth. These are the very techniques which online brands like Uber, Spotify, Facebook, and others have used to create massive market shares and disrupt incumbents.

The most important realisation about the future scenario I have just painted is that it could be created by a sufficiently connected player from any industry; banking, telco, or retail being the most likely.

By re-thinking your market, embracing future technological possibilities and carefully orchestrating customers’ relationships, financial service providers can position themselves well for the future.

There is a lot for both banks and telcos to achieve and not much time to adapt. It is one task to complete a Digital Transformation project, but the hard work comes afterwards, when updates to applications are expected to be made daily. This is in stark contrast to the old world of quarterly application fixes and represents a sea change in the intensity of which IT teams have to develop and test new technology.

Telcos and banks face the same challenge in keeping their customers happy. This does not mean offering the cheapest deal, but the best deal based on a customer’s circumstances at a moment in time. Having an agile IT infrastructure in place is a solid foundation to keep track of new technological innovations which is able to drive customer loyalty in an increasingly ambivalent world.