More than half of all global retail banking was done online or via mobile last year by consumers accustomed to sophisticated online experiences. Digitally-savvy Generation Y may have led the charge, but most customers now expect their banks to provide the convenience of omni-channel banking. Be it a smartphone app to pay bills or branch staff processing transactions in real-time.
More than ever, banks need to do everything they can to satisfy and retain their customers. Key to maintaining these positive customer relationships is the transformation of their core banking legacy systems. This transformation can be most effectively undertaken by a progressive simplification of systems over 12-18 months thus avoiding the drama of ripping out old system and replacing them with new ones.
In Europe, many banks are lagging behind with slow transformation of their core applications. Continuing to use legacy systems creates challenges for these banks as it makes it difficult for them to integrate data from all systems which is needed for real-time analytics. By using real-time analytics banks would be in a position to respond more efficiently to customer’s expectations and personalise products and services across all channels. Real-time analytics also allows banks to operate more efficiently and enables them to manage risk better by providing a better understanding of their overall financial position and exposure to markets.
While the need to transform legacy systems is a key focus for banks in the coming year, we also see other trends on the banking horizon for 2015:
Cloud strategy will be a very important part of overall business strategy for banks
The simplification of legacy systems creates enhanced cost efficiencies and savings. Implementing cloud based services adds a further dimension, since it can be leveraged as a variable, flexible cost versus a fixed cost (i.e. procuring infrastructure, software and traditional services).
The adoption of various cloud solutions will be very important and these solutions (core and non-core) will generate a surge in the Security & Enterprise Risk and Governance framework. Hosting core banking applications on the cloud will be a practical option from an overall business point of view, as it simply moves banks from a capital expense model to an operating expense model, releasing much needed capital.
New regulatory pressures: 2015 stress tests and Basel III
Digital transformation will be critical for banks to gain the insights into asset quality needed to satisfy regulators. The need for more transparency in data and the ability for banks to trace and audit data at a customer and account level will be crucial. Financial transformation will help banks restructure their general ledgers and provide a better level of detail.
Most banks in Europe didn’t pass the 2014 stress tests and are gearing up for upcoming stress tests in 2015. At the same time, banks are looking ahead to the new Basel III requirements, which mean they must show all assets on their balance sheet and have 8.5 percent capital. Banks need to begin preparing now in order to hit the 2017 targets.
Experience-driven banking to improve customer satisfaction
According to Capgemini’s World Retail Banking Report 2014 (WRBR), less than 40 percent of customers globally reported positive customer experiences with their bank. In 2015, banks will need to keep up-to-date with customer expectations and focus on enriching the overall customer experience.
Additionally, richer analytic-driven insights will enable banks to take a more personalised approach to banking, based on individual spending patterns, enabling them to track and touch the customer experience across all channels and platforms.
Mobile strategies to engage Gen Y and revolutionise payments
Mobile will continue to be a critical channel for banks to drive business growth and create a competitive advantage. Recently-launched services such as Apple Pay mean mobile payments will become even more commonplace. According to Capgemini’s World Payments Report 2014 (WPR), m-payments are projected to grow at 60.8 per cent during 2015. Until mobile channels are fully integrated with back-end support systems banks will continue to struggle to drive value from mobile.
Branches become part of the Omni-Channel experience
The role of bank branches will undergo significant change as they move away from their traditional role. Branches need to become integrated into the whole customer experience across channels and platforms. They will continue to play an important role, but increasingly will be used as a medium for advertising or branding for the bank.
Digitally transformed branches will bring in new advisory business services and open up additional channels of revenue for banks. The traditional model will migrate towards a ‘self-service approach’, which will be more refined and personalised to better serve the customer.
In an increasingly digital marketplace, 2015 will be an important year for banks in which they will need to transform or lose out to competition. It remains to be seen whether those slow to adopt new ways of working will survive long-term.
By Jean Lassignardie, Corporate Vice President and Chief Sales and Marketing Officer, Capgemini Global Financial Services