Tech­nol­ogy In Re­tail Bank­ing Is Ac­cel­er­at­ing: Can Com­pa­nies Keep Up?

Subroto Som, Ex­ec­u­tive Vice Pres­i­dent, Head of Re­tail Bank­ing Group at Mashreq Bank talks about how the fu­ture for re­tail bank­ing may be even more rad­i­cal than most cur­rently believe.

Forbes Middle East - - MASHREQ BANK -

These are dra­matic times for the re­tail bank­ing in­dus­try. Dig­i­tal dis­rup­tion is forc­ing play­ers in this mar­ket to re­assess their strat­egy, op­er­a­tions and every­thing in be­tween. With the pro­lif­er­a­tion of tech­nol­ogy in our ev­ery­day lives, cus­tomer ex­pec­ta­tions and be­hav­iors are also chang­ing at a rapid pace. In this era of in­stant grat­i­fi­ca­tion and short­en­ing at­ten­tion spans, con­sumers ex­pect speed, ac­cu­racy and omni-chan­nel ex­pe­ri­ence, which has spurred what we might term as a dig­i­tal arms race be­tween banks and new in­cum­bents.

Con­sumer habits have changed and con­tinue to change at a fast pace; and there is a large and grow­ing ap­petite for dig­i­tal ser­vices. The de­mand for ser­vices such as mo­bile bank­ing is no longer lim­ited to time and space—the em­bed­ded and real time cus­tomer ex­pe­ri­ence has be­come paramount.

It would be no ex­ag­ger­a­tion to say that dig­i­tal trans­for­ma­tion is now vi­tal for banks that wish to re­main rel­e­vant in the fu­ture. And the pace at which banks will have to change will con­tinue to ac­cel­er­ate, not due to the pace of tech­no­log­i­cal de­vel­op­ments but be­cause

of cus­tomer adop­tion. While it is im­per­a­tive that banks adopt new tech­nolo­gies, they also have to be nim­ble on their feet and be able to change their course of ac­tion quickly when needed.

In the bank­ing in­dus­try some of the big­gest dis­rup­tions stem from tech­nol­ogy com­pa­nies that are en­ter­ing fi­nan­cial ser­vices through fintech, and it is time for legacy banks to think more like a tech­nol­ogy com­pany. This emerg­ing dig­i­tal econ­omy will also mean that banks will have new op­por­tu­ni­ties in mul­ti­ple ecosys­tems. Col­lab­o­rat­ing with tech­nol­ogy com­pa­nies and fin­techs, rather than com­pet­ing with them will in­deed be a pos­si­ble strat­egy, es­pe­cially given that most fin­techs are star­tups and there­fore much more ag­ile than a large bank.

With this in mind, we at Mashreq are in­vest­ing in part­ner­ing with and in­cu­bat­ing fin­techs. It’s a mu­tu­ally­ben­e­fi­cial re­la­tion­ship: fin­techs help de­liver point so­lu­tions to point prob­lems, while we pro­vide them with the real-world use-cases that en­able them to scale up their so­lu­tions. Ev­ery­body wins.

With the in­creased dig­i­tal­iza­tion in our lives, it should come as no sur­prise that re­tail bank­ing in par­tic­u­lar is trans­form­ing at a sig­nif­i­cant rate. To­day, 97% of Mashreq fi­nan­cial trans­ac­tions are com­pleted through au­to­mated and dig­i­tal chan­nels, which is a clear in­di­ca­tor of cus­tomer pref­er­ences. This re­mark­able shift in con­sumer be­hav­iour is what drove our de­ci­sion to re­shape our branch net­work to make them more ef­fi­cient and to de­liver a con­ve­nient dig­i­tal ex­pe­ri­ence to cus­tomers. Close to 65% of non-fi­nan­cial trans­ac­tions fol­low a sim­i­lar route.

De­vel­op­ments in e-com­merce and mo­bile tech­nolo­gies have also rad­i­cally changed the way we trans­act to­day. The change has come about in just a short decade, which is re­mark­able given that banks had been op­er­at­ing in pretty much the same man­ner for cen­turies. Be it spend­ing on re­tail, food and bev­er­age, travel or fi­nan­cial ser­vices, to­day cus­tomers want to be able to pur­chase goods and ser­vices any­time and any­where—through their smart­phones and tablets— and this is what is driv­ing dig­i­tal spend­ing growth at an un­prece­dented rate.

At the heart of this trans­for­ma­tion is tech­nol­ogy such as AI and ro­bot­ics, which are ad­vanc­ing ex­tremely quickly. Adopt­ing these tech­nolo­gies can dra­mat­i­cally im­prove ef­fi­ciency and in­crease sav­ings, which the bank can pass on to its re­tail cus­tomers. In our case, these tech­nolo­gies help drive cus­tomer ex­pe­ri­ence. Ro­bot­ics, for in­stance, has en­abled us to au­to­mate our op­er­at­ing pro­ce­dures, thus re­duc­ing man­ual en­tries and ac­tiv­i­ties that are repet­i­tive in na­ture. The happy byprod­uct of this is re­duced hu­man er­ror and greater cus­tomer sat­is­fac­tion.

An­other area that is play­ing a key role in the trans­for­ma­tion of the re­tail bank­ing sec­tor is data an­a­lyt­ics. An­a­lyt­ics en­able banks to get bet­ter in­sight into cus­tomer pref­er­ences, which in turn al­lows them to de­velop more fo­cused new prod­ucts and in­crease the level of trans­parency when it comes to their trans­ac­tions, fees and charges.

In light of these changes, it’s safe to say that re­tail banks of the fu­ture will have to com­ple­ment the lifestyle of their cus­tomers. Cus­tomers will ex­pect an in­te­grated and seam­less ex­pe­ri­ence across all of their bank’s chan­nels. Every cus­tomer in­ter­ac­tion, be it a branch visit, trans­ac­tion through a robot or ma­chine, or a mo­bile bank­ing app will have to be seam­less, con­ve­nient and in­ter­con­nected.

An­other big change in the re­tail bank­ing sec­tor will be greater use of a com­bi­na­tion of AI and data anal­y­sis to of­fer so­phis­ti­cated and value-added ad­vi­sory ser­vices to cus­tomers. In essence, the uni­fi­ca­tion of these tech­nolo­gies will help cus­tomers spend their money more ef­fi­ciently or save to­wards their short­term fi­nan­cial goals—and this may be achieved with­out hu­man in­ter­ac­tion. Ad­di­tion­ally, the ubiq­ui­tous ATM will likely evolve into a 24/7 ser­vice cen­ter, rather than be­ing merely a cash-dis­penser.

To take ad­van­tage of these trends and tech­nolo­gies, banks may have to change the core tech­nol­ogy ar­chi­tec­ture and mod­ern­ize them. Mak­ing changes only on the cus­tomer-fac­ing chan­nels may be­come in­creas­ingly slow and ex­pen­sive.

Last but not least, dig­i­tal-only banks will play a sig­nif­i­cant role in trans­form­ing the bank­ing space. Us­ing AI and big data they will be able to of­fer a sim­pler, in­tu­itive and in­no­va­tive bank­ing ex­pe­ri­ence to cus­tomers. All in all, the re­tail bank­ing land­scape will go through a seis­mic shift, due to the rapid ad­vance­ments in tech­nol­ogy and cus­tomer adop­tion.

Go­ing dig­i­tal brings its own sets of threats and chal­lenges, in­clud­ing the grow­ing risk of cy­ber se­cu­rity such as phish­ing at­tacks, iden­tify frauds and data leaks. Fi­nan­cial in­sti­tu­tions and au­thor­i­ties in the re­gion need to mit­i­gate these risks and strengthen their ex­ist­ing se­cu­rity in­fra­struc­ture to ad­dress these chal­lenges.

The big­ger banks, and the more wide­spread, will have to chal­lenge in­ter­nal cul­ture and mind­sets, and the ones that re­main stead­fast on their dig­i­tal trans­for­ma­tion jour­ney and con­tinue to in­no­vate will even­tu­ally emerge vic­to­ri­ous.

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