The spectrum of technology investments by retail banks

The banking industry has for many decades been one of the biggest spenders on Information technology globally, and this is reflected directly in the Banking and Financial Services sector skew in vertical-wise-revenues of many of the global IT services majors.

This trend does not show any signs of changing in the foreseeable future and the constant evolution of consumer and mobile technology continues to drive banks to shore up their internal systems and platforms to align with preferred means of service delivery.

Traditionally, key components of a bank's IT infrastructure have been core accounting and cards systems that enable the bank with centralized book-keeping and account-management functionality, while allowing for automation of operations and internal work processes.

While these areas continue to account for a large percentage of banks' IT spend, there is a much broader set of solution categories and capabilities that retail banks constantly need to invest in. Behind most banks' allocation of IT budgets lie some fundamental tenets, and these drive investments into a corresponding set of IT solutions.

1. Improving internal efficiency: Workflow automation, elimination of paper-based processes, and enabling more efficient operating models such as centralized processing.

Most investments here surround banks' core banking and branch systems and these have for a long time formed the bedrock of IT infrastructure at banks.

2. Making services accessible: Technology platforms that offer multiple modes of service delivery, be it assisted-service or self-service, and covering the more traditional ones such as branch and telephone banking, to relatively newer ones such as ATMs, Online, and Mobile.

While in India, branches continue to be the primary banking channel for most people, the progression of consumer technology and the realms of what is possible with mobile devices is driving huge new investments here.

3. Enabling effective selling - Customer Relationship Management, Customer Profitability and Relationship Pricing, Customer lifecycle management and customer communication tools.

It has been a constant endeavour of banks to ingrain a sales culture in front office staff, and integration of sales functionality into servicing channels is vital to the success of any initiative to convert service interactions into sales opportunities.

 

4. Unifying service experience: Multi-channel integration, Enterprise Integration

The proliferation of banking channels and business-lines has brought with it challenges of fragmented relationships, disconnected customer interactions across channels, and dispersed information. Multi-channel integration platforms are critical to create a uniform customer experience irrespective of which channel a customer uses.

5. Knowing customers better - Business Analytics, Data Warehousing, Big Data

Understanding customers better is increasingly par-for-the-course for banks, and banks need to make investments in infrastructure that enables them to analyse large amounts of customer and prospect data to extract useful insights that can drive better and more targeted selling and servicing.

7. Preventing fraud and managing risk - Fraud management, Enterprise Risk Management, Regulatory Compliance solutions

Fraud is omnipresent, and banks need sophisticated tools that detect and prevent different types of frauds, ranging from customer perpetrated fraud to internal employee fraud. Banks are also subject to multiple types of risks and need a holistic approach to manage these. The highly regulated nature of banking continues to force banks to invest in tools that enable them to stay in compliance with regulatory statutes.

The challenges of maintaining growth in an increasingly saturated market is forcing banks to innovate constantly on both business and technology to get a bigger share of the customer wallet. Expecting customers to be loyal on the basis of past relationship is increasingly a fragile proposition, and customers are today demanding the best products, services and attention from service providers that they deal with.

The obvious outcome of this has been the proliferation of banking relationships that customers develop during their lifetime. This has serious implications for banks due to the ease with which customers can make conscious choices in spreading their business across multiple service providers.

Be it banking or retail, telecom or airlines, service companies need to constantly be on their toes, to lock customers in and to steal customers away from competition. This reality will continue to drive technology investments that support sustained growth and improved profitability.

(Raja Gopalakrishnan is Group MD, Asia, and Chief Operating Officer of the International Solutions Group at FIS)