Will digitalisation save the high-street bank?

RAJITH RAVEENDRANATH

HEAD – QUALITY & RELEASE ENGINEERING
SUNTEC BUSINESS SOLUTIONS

Rajith leads our Quality and Release Engineering functions, empowering the engineering teams with suitable processes and infrastructure. Before joining SunTec, Rajith has held delivery leadership role at Huawei Technologies. In a career spanning two decades, he has lead delivery projects in the areas of Telecom Core Networks, eCommerce and Android applications and middleware. Rajith is also actively involved with Software Engineering communities working on Continuous Delivery and DevOps.

Digitalisation has impacted the way we work, travel, shop, communicate, pretty much every aspect of modern life, yet one sector has been notably slow to embrace this is the traditional FS sector. Digitalisation is the transformation of manual processes, transactions and activities to digital services. There are entirely new ways of serving existing needs which are significantly disrupting existing industry value chains, and it is happening across all verticals. Numerous trends have emerged in the digital age, two recent ones, are relevant to the digitalisation of the Financial Services (FS) sector. The first is the growth of mobile internet which has created seamless and ubiquitous connectivity, enabling 3 billion people access to the internet on the go.

The second major trend is the growth of social networks, Facebook now has 1.9 billion users, and the platforms that provide them. Some of the platforms that are changing the landscape are YouTube, Uber and Airbnb, as they are developing new customer-centric platforms designed for the user. All of these platforms provide brand new digitally enabled interfaces suited to the user’s needs. The Fourth Industrial Revolution has yet to penetrate FS organisations with its gargantuan institutions, old legacy systems and vastly complicated manual processes. Overhauling the entire infrastructure within the sector which takes additional time and money. Digitalisation will be key for these businesses to remain in the game.

How can FS transform in the digital times:
Traditional banks have one advantage already, they are the big boys because of their vast existing customer bases. Most new digitised businesses have to build their customer database from scratch, so traditional banks have already saved costs which can be reallocated to digitalisation projects.

Traditional banks have access, although limited, to static data kept in their Systems of Record, but they lack the contextual, real-time data that can be gleaned from social networks. By deploying such user-friendly engagement models banks can fully inform themselves on their customers’ behavioural patterns and predict future needs, failure to do so means customers will ‘unfollow’ their FS provider, research by Deloitte has shown that 69% of customers have closed accounts due to poorly targeted communications.

These new engagement models create data deluge which banks have to manage. By implementing technological innovations, such as in-depth analytics helps streamline operations and create insight in order to improve customer specific engagement. In the past banks relied on one model to service every customer worldwide, now with new technology customer engagements have to be more direct and personalised as customers expect Uber-esque service delivery.

The future of the FS sector and technology:
In order to join in with digitalisation businesses must focus on two key aspects. Firstly, creating a user-friendly platform, a huge advantage is there are already platforms built and ready to use. Finally, FS must adopt new business models of engagement, to make sure they remain competitive in the age of the customer.
If banks can fully embrace this platform mentality, they will be able to offer their customers better service and greater agility. This will impact what they are offering and when, not only increasing customer acquisition but also improving customer retention because banks are giving customers what they want. Resulting in the customer feeling like they have increased control over their financial future, and they are at the forefront of the bank’s decision making process. Digitalisation will make banks victorious.

How can FS transform in the digital times:
Traditional banks have one advantage already, they are the big boys because of their vast existing customer bases. Most new digitised businesses have to build their customer database from scratch, so traditional banks have already saved costs which can be reallocated to digitalisation projects.

Tech startups in Europe are about to receive $765m investment, some of the funding will be used to build their customer base. This customer base gives banks a head start but they are still a long way from winning.
Some of the business outcomes caused by digitalisation are highlighted (figure 1), ranging from innovation to customer retention. These outcomes have been seen across multiple verticals, and banks want a piece of this. Organisations do not need to tackle all of these outcomes at once, however achieving one outcome could instigate the other outcomes.

Figure 1: Cycle of business impacts caused by digitalisation
How can FS improve customer experience through technology?
Through digitalisation banks are able to branch out and collaborate with other sectors, becoming a multifaceted solutions provider for customers, banks can now play with the cool kids. The first enterprises to realise the potential of these partnerships were eCommerce sites and mobile payment platforms. Successful partnerships in China saw the amount exchanged via mobile payments grow to $5.5 trillion in 2016. However, the online user wants more service offerings delivered to any device they use, banks need to scale its platforms accordingly. As seen with the recent partnership between Challenger Bank Tandem and retail store House of Fraser, who invested £35m into Tandem in order to access its technology to improve customer offerings across all devices.