Business Making Progress

Failing to seize the opportunity - what bankers have in common with railroad tycoons

Following last week’s CEB TowerGroup, my main observation was that bankers are facing a ‘perfect storm’ that will necessitate a change in approach across the whole industry. Unfortunately it seems that bankers are still denying the circumstances they face, believing that they will survive.

Why do I say this? In a mobile, connected world, customers are becoming used to service levels that take into account their previous buying preferences, interests, background with the service provider and even their location. They are used to accessing services wherever and whenever they need to, via any channel, and are increasingly savvy to offers and promotions. Despite media stories of ‘Groupon fatigue’, the popularity of daily deal and voucher sites speaks of a new generation of bargain-hunters that often won’t make a purchase without some kind of added incentive.

Banks are not yet interested in this consumer trend, but they should be. Instead of seeing payments as a cost centre to their business, the data it gives them about customer spending habits, when combined with today’s mobile technology, provides a massive business opportunity.

At the moment, it seems like the banks are unable to see the bigger picture. Much like the railroad tycoons in early twentieth century America, they have the cash to invest but are not seeing the opportunity. Airlines were just setting up internal flights, which eventually became the competition that turned the railroads into a second-choice service that could only compete by discounting prices. The railroad owners could have got into the airline business, but instead of seeing themselves as transport providers, they only concerned themselves with the smaller world of railways. Bankers today, similarly, see themselves as providing a customer service that goes beyond today’s boundaries of banking. Traditionally, they’ve been the consumer’s trusted advisor. Now that trust is eroding, they will lose out if they don’t capture new ground. Otherwise, banking becomes a commodity and the only way to survive will be to drive further efficiencies and reduce costs.

In the very near future, customers will realise they don’t need banks, they need banking – and will shop around for the best offer if their loyalty has not been secured.

Solving the problem will require looking to new areas. At the CEB TowerGroup event, the key note speaker made this comparison: after 100 years of failed expeditions, Mount Everest was eventually conquered when new explorers brought in nylon ropes from the world of sailing (to avoid the problem of frozen ropes snapping) and oxygen masks that had been developed for fire fighters. Innovation is ‘out there’ – you don’t need to find it in your own discipline or reinvent the wheel, just observe how other sectors are embracing change and see what might help solve business problems in your area. When it comes to innovation, bankers would be wise to remember that to get to the top, they need to look to other areas for inspiration.

So where should banks look for innovation that will help them adapt their business for the next 20 years? Much of the technology they need to become more responsive to customers’ needs and open up new revenue streams already exists. Bringing together the engines from algorithmic trading, BPM technology from the telecoms industry and location-based services from the mobile world, they could make full use of the information they already have about what consumers like to buy (and where and when) to develop new, more targeted, offerings.

We have a vision for Responsive Customer Engagement, a technology approach that means a bank can respond to a customer’s actions and turn it into an opportunity to secure more revenue – and, perhaps more importantly – customer loyalty. One business model for this could be in providing a customer buying one item on their credit card access to offers and promotions from other merchants in their locality. The merchants – also the bank’s customers – would also become more bought-in, as their payments provider becomes their access to a mass of new custom.

I will be talking more about how these technologies could help banks tap into consumer trends and bring the change they need to survive in future blog posts. For now, I’d like to leave you with a thought from the mountain: if you haven’t yet reached the pinnacle, perhaps you are using the wrong tools. Don’t get left behind!

Banks in 2012: Predictions of the Future or Statements of the Present?

Many have you have read various predictions related to the Banking industry over the past few months. Here at Progress Software, we’d also like to chime in with a few observations of what the industry looks like today and what 2012 will bring.

1. As we have seen with the airline industry, 2012 will witness the emergence of more banking alliances. To win customer loyalty, banks will partner with retail and other third party consumer businesses to create more cross-sell opportunities. But we think this new model will be a bit harder for banks to adopt due to the “siloed” nature of their organizations and infrastructure.
2. Banks will do their best to launch social media apps as part of their mobile and channels strategies to better serve their customers. However until banks understand how to capture payment and other transactions in real-time, they will struggle to deliver real value.
3. With the boarding of financial banking apps on smartphones, new ways of skimming will appear. Anti-virus companies will hop on the bandwagon and banks will have to develop strategies and tactics to sense and respond in real-time to these types of fraud.

 I look forward to discussing any thoughts and opinions you may also have as well.

 

Improving the Banking Customer Experience - An Internal Perspective

Banking organizations are fraught with silos. Operating this way must feel like looking at the world through a straw, I imagine. With a limited view, your ability to affect change is thwarted by the distortion of the full magnitude of any given situation. With this narrow perspective, you’re vulnerable to errors or worse, fraud and revenue leakage.

Compounding this issue is the increase in customer demands. As expectations rise, tolerance for dissatisfying banking customer experience is at an all time low, and grumbling customers take to social networks to complain.

The good news is: there’s an answer. Banks can reevaluate their operations and gain the critical business level visibility needed to achieve premier levels of customer support. To do this, business leaders should assess four key areas:

• Volume – the number of customer requests coming in through all channels such as call center, online, mobile etc.

• Velocity – the pace of customer expectations (same session service expectations) and the ability to meet big data and customer requirements in real time at the moment they are requested

• Variety – the variety of data and channels we see such as web, mobile, call center, outsourcing services etc. The more channels there are, the harder it is to track, control and resolve issues before they reach the customer. Many institutions now outsource IT needs, etc. making it even harder to control each channel 

• Complexity – having end-to-end visibility into internal transactions despite multiple channels

You simply cannot offer new products and services and maintain consistent customer experience if you have not taken a hard look at your internal operations. The lack of visibility makes the complex dependencies between data sources and channels too hard to see and thus too hard to control.

To hear more about gaining end-to-end visibility in the banking world, check out Bank Systems & Technology’s recent webcast, “Customer Transaction Management - Gaining Visibility, Control and Reliability.” 

 

What I Learned from Bank CMOs

 

 

 

Earlier this month I attended American Banker’s Financial Services Marketing Symposium in New York. There were a variety of sessions that covered topics such as customer centricity, the role of social media and mobile channels and how to create a differentiated customer experience. All were informative and interesting.

 

As everyone in the industry knows, banks are feeling the (sometimes conflicting) pressures of regulatory requirements and having to differentiate themselves in a highly commoditized market. Mark Hendrix, SVP, Director of Marketing at Fifth Third Bank echoed recent regulatory requirements including Durbin, Reg E, Card Reform, and Dodd-Frank amendment – which alone has 1200 provisions written into it.  

 

According to Hendrix, banks are reaching the end of the golden era, they need to change the playing field by embracing the consideration of customer engagement, including all processes, services and events impacting their banking activity. He's right: they need to be more operationally responsive. And on the flight home, one of the points I continued to think about was his sentiment that what is driving the balance sheet is the interaction with the customer.... giving them the right answer in the right moment.

 

This encapsulates what banks need to do to stay competitive, increase customer loyalty, and grow revenue.  Just as our customers know, Progress can help.  

 

Banks Need Transaction-Level Insight Into Mainframe Systems to Meet New Transparency Demands

Recently I participated in the first installment of a webinar series  hosted by Bank Systems and Technology. I was joined by Greg MacSweeney of Bank Systems & Technology and analyst Gareth Lodge of Celent, and we discussed the need for banks to have transaction-level insight into mainframe systems to meet customer, partner and internal demands.

We are living in an increasingly complex world, especially in the financial services space where regulations continue to tighten. Banks must increase analysis to meet this heightened demand for reporting and compliance, and to do this we need real-time access and visibility into all transactional data. As Gareth said during our discussion, “Mark Twain said we can count on two things in life, death and taxes, and now we have a third: regulation.”

In addition to meeting these new requirements, customers are increasingly expecting immediate and detailed response and communication from their bank. However, this type of service requires access to transactional-level data in real-time. This is a multi step process and is not automated, so how do we get it done in a timely matter for the customer especially when this data is hard to find and difficult to interpret?

Many banks still maintain complex system architectures comprised of old and new mainframes- many of which are very difficult to access and navigate. It’s like operating in the dark, where there is very little transparency, creating frustration for IT departments.

In the future, we hope to see banks address some of these challenges with new technology. In order to meet new regulatory demands, banks need access to transactional level data, which will improve responsiveness and ultimately customer service. However, finding transactional level data on the mainframe and being able to act upon it poses quite a challenge from a business and operational perspective.

So how do we do that? Stay tuned for my next post, highlighting second installment of our webinar series. I welcome your comments here, as well.