Many channels

With more and more customers banking online and showing an interest in mobile banking and social media, what does the immediate future hold for FS technology vendors? Liz Morrell reports

Trying to predict the future is hard enough at the best of times, but with all the issues currently facing the banking world attempting to understand what technology move to take next is nigh on impossible. As if the challenges of regulation and regaining consumer confidence weren’t enough there is the shift in use of channels to contend with too. The increasing uptake of online and mobile banking, as well as the opportunities of social media, brings a whole new set of challenges and it is with these that most financial houses are concentrating their efforts, meaning that the systems vendors need to do similar.

But it’s a tough job. “The banks are expanding online and blending in mobile and social media because you can’t have those three islands existing in isolation. The banks are all at different stages of development for each but it has to be blended together without forgetting the traditional channels,” says Alex Kwiatkowski, research manager - EMEA banking at IDC Financial Insights.

He describes it as a ‘many channel’ rather than multi-channel approach and says that in itself poses huge challenges in terms of integration and delivering a single view of the customer. Peter Fawcett, consulting practice team lead - retail and commercial banking Europe at Tata Consultancy Services, says banks and financial institutions must take the new channels seriously in terms of investing for the future. “Online and mobile banking platforms are now mainstream and many customers nowadays only use these to interact with financial institutions. If a customer is using social media to contact a bank they expect instant responses. Banks need to be ready for this and vendors need to provide innovative approaches and solutions that help.”

In a hurry
But in the rush to ensure they can meet such new and demanding challenges, Kwiatkowski believes that some banks don’t think about solutions further down the line. “You can make cosmetic changes and for example launch mobile banking quite quickly, but it’s about what changes do you need to make further in the legacy system, such as updating CRM systems,” he says.

And it is this issue of legacy systems that causes the biggest problem for banks with few able to even consider a rip and replace policy in the near future and instead being forced to combine technology of today with technology of yesteryear. “A bank of any size will have a spaghetti of systems and trying to replace any of those without it falling over is a bit like doing open heart surgery,” says Simon Burrows, FinTech M&A director at PWC.

“What you should be doing is making sure that your back end systems, your risk management, CRM and business and analytics are all up-to-date,” says Kwiatkowski.

But this is all at the same time as providing service as normal. “The challenge for the bank is to give people the same experience so they get the same impression and range of services as if they walk into the bank branch,” says Ed Brindley, business development director at Wincor Nixdorf. He says vendors must continue to design and produce adaptable systems. “We are putting in a layered software platform.” Doing so then allows banks to switch on functionality more easily as required.

Of course, the banks and financial houses also have to understand how much effort and investment to put into each of the new channels and while it is readily accepted that there is a major shift to online and mobile banking the confusion remains around social media. “It’s a bit of an unknown quantity as to whether it should just be about information or be interactive,” says Kwiatkowski.

Richard White, partner at digital agency Volcanic and a former senior marketeer with Bank of Scotland and Lloyds Banking Group, believes it is important. “Research from Hotwire shows 43 per cent of people buy financial services as a result of social media based recommendations, so it’s clear that FS organisations need to at least consider it.”

But the proliferation of social media tools can be confusing. “There are some really good tools available to undertake specific tasks, e.g. searching and listening, responding to customer service queries. However, they are not intuitive and usually require training. Also, there does not seem to be any end-to-end tool that undertakes all the activities that are needed to harness and exploit social media,” says White who urges banks and vendors to keep the technology simple and be clear on their aims.

Banks and financial institutions face uncertainty in knowing how and where to invest even if they do have the cash to do so. “There are a lot of dilemmas and quite a few unknowns so the challenge is to make the appropriate investment so you are not so far behind the curve that you will never catch up,” says Kwiatkowski. He believes that vendors need to be sympathetic and work with the banks. “In terms of investing in enhancing channels we know that banks want to do it but there’s no sudden loosening of the purse strings,” says Kwiatkowski. “The technology vendors are having to wait for the banks to increase their investment spend but the expectation is to do much more with less.”

Glenn Murphy, head of IT at London & Capital, observes that financial companies are expecting more because of the regulatory pressures they are facing and expect vendors to be able to help, a challenge that can be overwhelming. “For example, the FSA push a lot of regulations down to the banks and naturally they want to ensure they can provide a decent offering, so they push it back to the vendors to provide something that meets those requirements.”

He adds that the speed of change is causing additional headaches when deciding where to go next with financial systems investment. “The next big thing will be around mobile payments and the level of authentication and security that is needed, so again it’s up to the vendors to raise their standards to meet those banks’ needs.”

Kwiatkowski likens the challenge of investment in FS systems to the roulette wheel. “It’s about do you put it all on one or spread it across channels,” he says. In the rush to decide on tomorrow’s technology he also warns that the customer isn’t forgotten. “There is the art of what is technically possible and the art of what is operationally viable. Just because you can do it does not mean that customers want it.”

But equally there is no doubt the customer is becoming more demanding. “In 2012 the customer is now in control” says Fawcett. “Customers want to be communicated with rather than marketed at and expect the same level of service no matter which channel they use.”

Brett King, founder and chairman of Movenbank, says partnership and collaboration will be critical in the future because of the changing customer and transaction scenarios. “As technology becomes more pervasive, banking will too. Future scenarios require complex integration with partners, processing geo-location, behavioural and trigger/event-based data.”

But Pat Carroll, CEO at ValidSoft, says vendors also have to be more knowledgeable than ever: “Understanding security and/or banking is no longer enough; any serious player in security will need to understand how telcos/mobile operators work to develop the right technology with the sufficient factors for strong authentication. The message for the banks is simple: cost- effective security for m-banking and m-payments already exists, and security checks needn’t be over-complicated or laborious. It can be instantaneous.”

In the same way that banks need to show they are adding value to their customers, then so do the vendors. “In order to see off new entrants into the market and increase customer loyalty, vendors need to provide innovative platforms for all channels to banks,” says Fawcett. “Banks need partners that can help them understand their customers better by drilling down into the large volumes of customer data available. From there they need further support to use this data to personalise their relationships with customers. Banks need to be as tech-savvy as their customers and need a technology partner who can show them how to do this.”

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