Banks should aim to pro­vide all ser­vices on­line

The Star Early Edition - - OPINION & ANALYSIS - Dar­rel Orsmond Dar­rel Orsmond is the fi­nan­cial ser­vices in­dus­try head at SAP Africa.

BANKS are find­ing it in­creas­ingly dif­fi­cult to en­sure value for their cus­tomers be­cause of the chal­lenge from fi­nan­cial tech­nol­ogy com­peti­tors that are muscling in on the “of­fer” – the point at which a cus­tomer’s process of re­search and as­sim­i­la­tion cul­mi­nates in the cus­tomer act­ing.

Be­fore the ad­vent of our mo­bile- and in­ter­net-driven world, cus­tomers would col­lect in­for­ma­tion, talk to friends, re­spond to ad­ver­tis­ing and, in the case of a loan, ap­proach their bank man­ager for a fa­cil­ity. This rea­son­ably well-de­fined process has changed dra­mat­i­cally over the past 10 years, and it is ex­pected to con­tinue chang­ing for the fore­see­able fu­ture.

To­day, cus­tomers ex­pect per­son­alised of­fers to come straight to them, in terms of both breadth – the ar­ray of ap­pli­ca­tions, from health care to fi­nan­cial ser­vices, mu­sic and so­cial me­dia – and depth: the de­vel­op­ment of smaller and smaller ver­ti­cals within each ap­pli­ca­tion into greater and greater de­tail.

It’s highly un­likely banks are play­ing any role in the mul­ti­tude of fi­nan­cial de­ci­sions that cus­tomers make ev­ery day, and an analysis of the of­fers re­ceived by cus­tomers via mo­bile phone and the in­ter­net will show that very few are be­ing sourced by a bank, let alone the cus­tomer’s bank.

The first fron­tier

His­tor­i­cally, banks met their cus­tomers face-to-face. Then the ar­rival of the tele­phone re­sulted in a branch be­ing visted only when the tele­phone process failed. With the ar­rival of the in­ter­net, both banks and cus­tomers have deemed on­line ac­cess to be a more time-ef­fi­cient and some­times sim­pler man­ner of en­gage­ment.

Key to this is that it was banks that de­ter­mined the process, the terms (au­then­ti­ca­tion, iden­ti­fi­ca­tion, orig­i­na­tion, and so on) and the time (for how long and when). As new tech­nolo­gies ar­rived, banks au­to­mated their cur­rent process and en­sured all their process re­quire­ments were met.

This process is re­ferred to as Fron­tier 1 (see graphic), where the cus­tomer en­ters the bank’s process, per­forms what is needed and leaves. These Fron­tier 1 pro­cesses are an ex­ten­sion of branch and in­ter­net pro­cesses, pro­vid­ing cus­tomers with re­mote ac­cess at their leisure, and gen­er­at­ing sub­stan­tial process ef­fi­cien­cies and cost re­duc­tions for the bank and the client.

Most banks are pro­gress­ing rapidly to com­plete as large a suite of func­tions on mo­bile as pos­si­ble, in a race to claim lead­er­ship in­no­va­tion cre­den­tials. Although this is hugely ben­e­fi­cial for cus­tomers, and banks can­not es­cape not com­pet­ing, it is a zero-sum game, be­cause, at some point, all banks have done all they can based on their ex­ist­ing propo­si­tions, and they are in the same po­si­tion and need to look at the next curve. And herein lies the chal­lenge.

The se­cond fron­tier

As banks in­crease their scale and vol­ume on Fron­tier 1, some are recog­nis­ing the pos­si­bil­i­ties of har­ness­ing their cus­tomer knowl­edge, their in­tel­lec­tual prop­erty in terms of risk and prod­uct de­sign, and their ar­chi­tec­ture to re­spond to cus­tomers’ pay­ment ac­tiv­i­ties with real-time of­fers.

A cus­tomer uses his or her credit card to pur­chase an item, and the bank’s Be­havioural Risk In­di­ca­tor (BRI), prod­uct rules and pric­ing con­fig­u­ra­tion im­me­di­ately make an of­fer for a loan, which is con­verted im­me­di­ately. Although such a prod­uct could be of­fered to­day, these of­fers have been vir­tu­ally hard coded and have not oc­curred as an au­to­mated by-prod­uct of a com­bi­na­tion of the dif­fer­ent parts of an ar­chi­tec­ture – in other words, the BRI evolved from the cus­tomer data, the prod­uct rules and the au­to­mated orig­i­na­tion via the on­line chan­nel.

In this se­cond fron­tier, banks are still op­er­at­ing from within their own pro­cesses, with lit­tle or no in­flu­ence from ex­ter­nal data.

The fi­nal fron­tier

Fron­tier 3 marks the com­plete dis­ag­gre­ga­tion of a bank’s pro­cesses to be ini­ti­ated and con­sumed on-de­mand from within the cus­tomer’s day-to-day ac­tiv­i­ties. In light of the fea­tures de­liv­ered by a mo­bile-bank­ing plat­form, this third fron­tier of cus­tomer en­gage­ment al­lows cus­tomers to pay, trans­fer, with­draw, and open or close ac­counts from any ap­pli­ca­tion. Some ex­am­ple are:

1. A cus­tomer walk­ing down an aisle at a ma­jor re­tailer shop­ping for a new com­puter finds geo-lo­ca­tion ser­vices trig­ger­ing an on­line of­fer for the pur­chase of com­puter equip­ment. This, cou­pled with a spe­cial deal from the re­tailer based on the cus­tomer’s past be­hav­iour, re­sults in an of­fer that is con­verted be­fore the cus­tomer reaches the check-out counter.

2. An in­ter­est rate or cur­rency ex­change rate changes, and an au­to­mated analysis of a cus­tomer’s pro­file sug­gests changes to prod­uct pric­ing and term. An of­fer is made with­out any phys­i­cal-process in­ter­ven­tion, and the cus­tomer con­firms, de­clines or ne­go­ti­ates, and ful­fil­ment takes place im­me­di­ately.

This fron­tier is im­mensely chal­leng­ing to re­alise, be­cause it re­quires banks to dis­ag­gre­gate their ser­vices in a way that al­lows them to be com­pletely con­sumed from within the cus­tomer’s day-to-day pro­cesses, or by al­low­ing other ser­vice providers to de­liver value to cus­tomers. Con­cep­tu­ally, this is tremen­dously dif­fi­cult, be­cause banks gen­er­ally in­sist on hav­ing end-to-end con­trol of where bank pro­cesses and cus­tomer pro­cesses meet. To achieve this, banks will have to break up their pro­cesses, which is the an­tithe­sis of what oc­curs in Fron­tiers 1 and 2.

Banks can – and should – start build­ing to­wards this third fron­tier, by dis­ag­gre­gat­ing their pro­pri­etary pro­cesses and sys­tems, and work­ing with other busi­nesses to ac­cess the cus­tomer’s value chain across a range of in­dus­tries.

Banks should also start work­ing with other role-play­ers to adopt in­for­ma­tion-shar­ing stan­dards and share rel­e­vant cus­tomer data, as long as reg­u­la­tory com­pli­ance is en­sured. Fi­nally, by re­duc­ing back-end com­plex­ity, banks can de­liver a clear sep­a­ra­tion of busi­ness rules, pric­ing and core pro­cesses to un­lock the fi­nal fron­tier of cus­tomer en­gage­ment.

Soft­ware com­pa­nies spend an enor­mous amount of time per­suad­ing cus­tomers to buy soft­ware that solves a spe­cific prob­lem, but less thought and ef­fort is ap­plied to get­ting the right ca­pa­bil­i­ties in place to com­pete with re­tail­ers.


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