In the evolving digital economy, banking and insurance customers are becoming more demanding and competition more intense. Indeed, modern smart phones have created such conditions that anybody can have virtually all bank branch services at their fingertips and expect real-time, or at least “fast”, delivery. In addition, new regulations are enabling new players in the market to provide added value services on top of legacy banking services. For example, regulations such as “PSD2” in Europe are creating improved conditions to allow for innovation.
One year ago, McKinsey voiced that “payments will be a cornerstone in the next phase of digital banking,” and added, “more than 50 percent of incremental revenue in almost all banking products in Western Europe will be digital by 2018.” Now they go one step further, reporting that “nonbank already captured almost 50% of all digital payments”. Financial services institutions are reacting by developing various strategies based on a mix of innovation and business agility. This strategy leverages partner ecosystems and IT agility to market and meet the quick deadlines the digital business era demands.
To successfully compete and grow in the digital era, financial services institutions need to be customer centric. This leads to delivering the right services at the right moment and in the right place that fits customer expectations of their digital experience. This is a huge shift in an industry where organisations are more used to pushing their banking services independent from the knowledge of what customers expect in their various real-life situations.
Since customer relationship management was (re)invented many years ago, we can remember the strong highlight put on ensuring a 360° approach with customers. Today, a time when almost everybody has one or several bank branches in their pocket, the shift to become customer centric is huge. It is not only a matter of ensuring all channels to the customer are consistent, which is already a significant challenge for most banks, but it’s also a matter of proposing services fitted to the customer lifestyle.
Actually, financial institutions need to fully leverage each interaction in these very reachable moments (some are designating these as “moments of truth”) so they can connect with their customers. In this context, financial institutions are facing two options:
- Provide their services as back-end services to other players in the ecosystem who have the reach in such “moments of truth”, and,
- Keep the reach with the endcustomer and mash-up their own services with other services from partners in their digital ecosystem.
But this is only the starting point: as digital technology enables new services to be introduced from any player into the ecosystem, it is also an important matter to create and enhance new services continuously!
Now, let’s step back and consider various “Digital Enablers” to put in place:
1. Enable outbound omni-channel services with end customers: To reach connected consumers, partners and field forces, API and API management technologies can ensure that your information services and data (e.g. the payment network for credit-card processing) are available and functional via each channel and implements the security required to protect personal information and identity.
2. Secure digital business with partners: EDI and other B2B integration interfaces have been around for years; now we need more real-time transactional technologies. Again, API technologies should be considered, provided it can leverage the previous “technical” channels such as B2B and MFT. Adding API technology will enable partner transactions and when used in a “one stop shop” approach, it enables a consistent portfolio of services to banking product managers.
3. Blend with your enterprise services: Mashing up partner data and applications with in-house services can provide unique value to customers. To do this right means:
- Federating identity management systems and enforcing corporate and regulatory compliance
- Orchestrating how applications/systems/cloud are accessed and delivered, with minimal investment in designing policies
These 3 capabilities provide the bi-modal IT articulation (or “2-speed IT” as some analysts name it) for digital business needs.
Indeed, on one hand they enable the secured and controlled integration in the FSI ecosystem and on the other hand they make it possible to quickly publish new services based on either new internal innovative services or external ones. And, even more importantly, to mash up various internal and external services is to bring new added-value services to the aforementioned “moment of truth”.
On top of the above enablement capabilities, and because of the increase of speed, analytics and business activity monitoring are key capabilities to consider in order to ensure a positive cost/income ratio. They address two different objectives:
1. Analytics for monetisation: Monetisation is fueled by real-time data-flow monitoring that provides the detailed information necessary for generating incremental revenue. The more detail that is available, the more flexible and agile the business model becomes.
2. Business activity monitoring: The digital economy is increasing the number and velocity of data flows, while reducing the time available to identify and react to disruptions. Highly proactive and lean business activity monitoring capabilities are essential to continuously improve processes and achieve operational excellence.
Going to digital business is not a simple transformation that will take financial institutions from point A to point B. It’s a new journey that starts with setting up a few open doors so you can better leverage your partner ecosystem and provide more to your customers. It will evolve over time. Digital is a world of uncertainty and the principle of thinking big and acting small has never been more important!
By Bruno Cambounet, VP Financial Services and Insurance at Axway