By Chin Ying Loong
In the past several years, the online universe has expanded and evolved across multiple channels. As a result, the digital customer journey has become increasingly complex. It is now common for customers to rely on multiple channels of interaction with a brand when making their purchasing decisions.
Certainly, in the banking sector, this shift has fundamentally changed the way banks are engaging and building affinity with its customers. Customer loyalty for a bank was often driven by convenience of branch locations, knowledgeable staff, personalized service and the confidence that came from dealing with a reputable brand.
But, times are tough for the industry today. The global financial crisis has affected the reputation of some of the world?s biggest and best-known financial institutions. What?s more, they are fighting a battle on at least two fronts ? differentiating themselves in an increasingly commoditized market, and defending their payments business against agile new competitors that are inherent technology companies such as PayPal and Google Wallet.
New banking channels
In the banking world, the multi-channel revolution has been underway for some time. Single location or single device-oriented channels, such as branch banking or ATM terminals or phone banking, pre-date the Internet. Newer channels, such as e-mail or online banking are being embraced rapidly with low resistance, as extensions to traditional banking operations.
However, multi-channel banking is still at a nascent stage in Asia Pacific. Silos rule, and most banks are tackling it one channel at a time. The reality is that banks are unsure of this approach and are still trying to determine the cost-to-benefit ratio of building beyond core transactional functionality.
The real problem is that most banks are facing difficulty keeping up with this new cross-channel reality. In fact, very few banks are doing a good job in meeting customers? expectations. They realize that in order to be effective, they must deliver a seamless customer experience across all touch points from email to the web to mobile. At the same time, this cross-channel experience must remain relevant to the customer throughout by presenting the right content or information to him or her at the right time.
Financial services industry CIOs are boosting their IT spending on next generation banking platforms which enables them to have faster time-to-market to roll-out new revenue generating services. The platform also adheres to new compliance standards and allows processing of large amounts of data in a fast and reliable manner.
As face-to-face service declines in the banking service sector, majority of its services will transition to other or online channels. And, while the smoothness of the customer?s experience may not be obvious when they initially choose a bank, it can become a major factor impacting their decision to stay.
How can banks transition to multi-channel model?
The issue of revamping banking infrastructure to meet changing business environments is not new. The drivers extend far beyond providing customers with innovative new ways to interact with their financial services providers. For example, legacy systems can be slow in terms of response times.
And, like an ageing automobile, over time the resources required to keep things running keep escalating until the cost and the management burden becomes unacceptable. The net result is too much gets spent on IT management ? almost 80 percent of IT budgets, while innovation suffers.
So, what is the first step for any bank transitioning to a multi-channel model? The answer is that they need to find a way to unlock the power of their existing core banking solutions.
This can be accomplished by adding a layer of integration software that connects these disparate systems. This middleware or service oriented architecture (SOA) solution allows the bank to access common business functions to easily create new capabilities or product offerings. For example, adding a mobile payment capability to funds transfer capability produces a new product ? mobile transfer ? that can then be offered to customers.
In practice, the IT department enables it, and then the marketing department packages it. In fact, a bank must be able to offer customers a cross channel experience that, at the back end, streamlines marketing content creation, integrates customer data stored in disparate systems for more effective targeted and harmonious behavioral data across touch points to provide campaign-wide insight and optimization.
With SOA, this can be done in a very short time. In fact, in many cases it can be done so quickly that a bank can test-market a product to see if it performs as well as expected.
Once the service oriented architecture is in place, the next step is to add a service delivery layer. This enables the bank to release its products and capabilities via any number of channels speedily and securely. Moreover, they can target each channel without having to worry about the device or devices used ? whether it is an iPad or Android tablet or a smart phone.
Banks know they need to deliver multi-channel services to differentiate and stimulate growth, but they are increasingly concerned about the cost of rolling out these services and the direct impact on their profitability. Both SOA and service delivery solutions enable faster, less risky, more affordable implementations of modern multi-channel services integrated with existing core banking systems. They however do not address the impact of this additional workload on the operational cost and overall performance.
This is where backend systems offloading solutions come into play. They can help contain these operational costs and help banks to take advantage of low cost technologies, , enabling them to experiment more and more often, and eventually build a foundation for the necessary banking transformation. All of this collectively will stimulate innovation which is clearly the key to success in the new millennium.
Oracle is unique in offering a complete range of solutions capable of supporting everything from the core banking system all the way through to a modern, mobile truly multi-channel business model. However, the important thing is that with Oracle?s multi-channel technology, banks need not worry about integration between various applications and business processes. They are free to focus on their core business and spend their energy and effort in creating products and services that differentiate and put them ahead of their competition.
Reaping the benefits of multi-channel
As the banking industry evolves and matures, many banks are looking to grow in scale, often outside their existing geography, and through acquisition. The challenge is how to leverage these different assets.
The answer is to establish a single platform ? something that can deliver a single user experience across all of their subsidiaries. If implemented properly, the platform can even enable the organization to create islands of excellence across the entire business landscape.
For example, if a branch or subsidiary in one location has a particularly effective loan origination system, it can be picked up and used to provide services to the group, in other geographies through multi-channel technology.
Then again, it could be re-branded and sold as a new offering to a different market segment in different countries or territories. This distributed approach means that banks no longer have to replicate their entire core banking systems and applications in different countries or subsidiaries and can cross-leverage the strongest aspects of each operation to mix and match market needs.
Real estate is expensive. But, online channels can enable a retail bank to grow quickly without buying or renting an extra square meter of floor space. As we?ve seen at one of the leading banks in Asia Pacific, customers can do all their banking online. With no branches, the organization has significantly fewer costs than traditional banks. As a result, they are able to pass on the savings straight on to customers.
The bank has also been able to innovate and offer new services, most recent example being the launch of a product that gives consumers the power to manage their high interest online savings and transaction facilities without lifting a finger. The account automatically ensures that any money not put aside for spending is earning a market-leading interest rate.
It?s an attractive model that is bound to appeal to banks across the region, especially those keen on adding online channels and improving services. It also offers the scalability required to take advantage of new opportunities that are emerging in the increasingly connected and fragmented market of the 21st century.
The author is the vice president for Fusion Middleware at Oracle Asean