Consumers have more choices than ever before when it comes to
handling their finances. Many institutions are struggling to find the
right mix of retail and commercial strategies, as well as the optimal
way to combine their self-service, online and branch channels. Some
financial services firms focus on ‘convenience,’ others on ‘service,’
and still others on the ‘customer experience.’ Some analysts argue that
any institution’s success in retail banking demands a continual
investment in their business and a close monitoring of changing trends
in technology and customer behavior – all backed by a management team
that has a strategic clarity to their approach.
We asked industry leaders for their insight on what marketplace trends
to be most focused on today and going forward; some of the more
innovative strategies they have seen applied; the role technology plays
in determining strategy; and how they help FIs compete in this rapidly
changing marketplace.
Bankers need to adjust their strategies to account for several trends that will make or break many institutions over the coming years. Included in these are the needs of growing demographic segments of the population, the increased challenges and opportunities presented by technology standardization and capacity, and the current and emerging forms of risk.
Here at the TowerGroup, we provide independent research and analysis of the business and technology trends within the financial services industry. We keep the pulse of innovative strategies, and here are some of note:
The DCMX Mini is a cell phone-based credit product, delivered by NTT DoCoMo in Japan. This allows for a small line of credit attached to a mobile phone account, that can be used for purchases. BBVA has partnered with the Bank of China to provide remittance services to Chinese nationals residing in the US. This capability is based upon BBVA’s market-leading remittance services for Mexican nationals in the US, and shows that, with the right partnerships, that capability can be used across a wide variety of populations. HSBC offers support for their mobile populations via a mobile handset in the form of travel advice, directions, and coupons for local restaurants, attractions, etc. in cities where their customers are traveling.
Of course, technology is at the core of all these innovations, and more. It is both the great equalizer in that it provides a common experience for customers, as well as a source of differentiation. Another such example of innovation can be seen in Brazil, where Santander has deployed wireless network-enabled mini terminals at convenience stores, lottery agents, and other neighborhood locations to provide for bill payments, loan applications, and other banking services. These terminals are much easier to deploy than branches, customers are more comfortable using these devices in locations familiar to them, and the merchants also get increased traffic and sales as a result.
We work with the largest firms across the banking, brokerage, and insurance industries to help them with innovative trends such as these, as well as with a wide range of issues, including competitive benchmarking, vendor selection and strategic planning.
Without a doubt, one of the biggest trends in the financial services industry is the convergence of payments. Market forces are bringing together previously silo’d payment mechanisms, blurring boundaries especially between ACH, checks, remittances and documents. The convergence has been facilitated by legislative factors like Check 21, ever improving price-performance of technology, and changed rule sets by entities like NACHA that enable transformation from one payment type to another.
Convergence is fusing together adjacent worlds like retail delivery, merchant acquiring, bill payment, remittance, lockbox, and document management. Customers will look for the convenience of say, paying bills while making purchases at stores – an example that joins the separate worlds of remote deposit capture, bill payment, remittance processing, and merchant acquiring. They will also look for cost efficiencies, and float savings from the intersection of imaging, recognition, transmission, and archive technologies. Financial services firms will need to respond to ever increasing demands for both convenience and efficiency by leveraging solutions and business models that can work across boundaries.
At Metavante Image Solutions, we are uniquely positioned to help financial services firms as they develop winning strategies. Our comprehensive solutions are truly end-to-end: from merchant and branch capture to back office to inter-bank exchanges, including check, ACH, remittance, lockbox, risk management and document processing. Our strategy is centered on integration and leveraging competencies across products to deliver versatile solutions to our customers.
At the end of the day, consumers and businesses do not care about technologies or silos, but are concerned with efficiently, effectively and safely moving money and information. Financial institutions will choose delivery means that suit their strategic needs. Some may want in-house applications, while others prefer a service bureau option. Either way, we can help them deliver a unified and integrated payments strategy, both internally and externally.
Our proven solutions address the needs of institutions of all sizes from de-novo banks and credit unions to the largest banks and corporations in the world. Radical changes are upon us and we have positioned ourselves to be there to help financial institutions meet these exciting challenges and opportunities.
We believe there are three main trends that our Customer Executives are faced with today: the continued electronification of payments; the need for more sophisticated and comprehensive online services, and the requirement for online fraud solutions integrated with these payment offerings. FIs encumbered with aging and expensive systems that were originally designed to move funds through a traditional paper-based banking system must now focus on faster clearing and settlement, incorporating new electronic infrastructures that facilitate efficiency and better service to their customer AND in many cases their customer’s customer.
Cases in point are new Merchant and Remote Capture Solutions (Enterprise Payment Solutions offered through ProfitStars and Jack Henry & Associates) now being utilized by many of our FIs. In the case of these Web-based Merchant Capture solutions, the FI supplies their business customers with small, inexpensive scanners for processing and deposit checks electronically. Simple and easy to use, all that is required is an Internet connection and Web browser. The business simply scans each item and keys in the payment information, and then sends it to us via a secure Internet connection. Once the checks are presented, a decision engine decides to process the check as either an ACH or Check 21 transaction.
Online technology solutions must be delivered enterprisewide and incorporate a strong integration to not only the core solution but also the other complementary solutions utilized in the FI, such as fraud detection, anti-money laundering and BSA (Bank Secrecy Act) products.
Proven technology solutions such as Enterprise Payment Solutions featuring Check 21, Remote Deposit and Merchant Capture along with YellowHammer Fraud Detective, Anti-Money Laundering – all owned and offered through Jack Henry and ProfitStars – feature a variety of tools that help banks and businesses lower the chances of loss due to fraud and returned NSF checks.
By lowering operational expense, reducing fraud, improving float and generating new revenues, FIs receive the competitive advantage they must have to stay alive. FIs today require solutions that leverage technology and are not restricted by it; provide regulatory relief and not be encumbered by disparate non-integrated sources of information; and deliver speed, convenience and efficiency to the customer.
Like the majority of banks, we are striving to manage our expenses and lower the cost of funds. This entails finding the right combination of strategy and technology. We look for economies of scale and real savings when we invest in any new technologies. We expect to gain both of these with the deployment of a suite of check imaging products. We are implementing both branch capture and remote deposit capture. These Check 21-based technologies have many benefits for us and our customers: reduced risks, greater efficiencies, access to good funds sooner, a way to attract new deposits, and more convenient customer service.
This last point is especially important because consumers and businesses want convenient access to their accounts. Our strategy has always been to make all of the channels available – branch, online, telephone, ATM, and call center – and let our clients choose them at will. We certainly see a strong movement towards self-service channels, but at the same time we offer over twenty-five branches for our walk-in customers.
Another area that is rapidly changing is the whole payments arena. ACH, debit cards, and online bill payments are growing rapidly. Not only is the check being morphed into the ACH system, but all of these electronic payments are blending together. We need a very strong and flexible back end to be able to handle these settlements, and that is one of the reasons that we chose Open Solutions and their Oracle relational database.
Because of our strong sales culture, we also needed a powerful front-end system that would empower our customer-facing staff with needs-based sales tools. Open Solutions delivers this by providing a full view of a customer’s relationship with us, versus the traditional manner of account centric relationships. We have actionable information at the desktop, and we can now setup new customers in just a few minutes versus a much longer process under our old mainframe system. Just as important, we are proud that our high levels of customer satisfaction are still in place after the core system conversion, so the Open Solutions implementation has been a big win for us and our customers too.
One of the trends that we are seeing among larger financial services firms is a growing interest in wealth management. They want to target these valuable customers and deepen their relationships with them. This means that they really need some powerful tools to segment their customer base and gain a complete 360 view of their accounts and activities.
To accomplish this, they must work to break down their information silos and aggregate their customer data so that it is easily accessible to every employee. The key here is multi-channel integration. Unfortunately, banks have a long way to go before they can achieve this, but they can take lessons from e-commerce giants like Amazon.com and retailers like the Gap that are experts at knowing their customers and personalizing their experiences.
At Hewlett-Packard, we have developed the Open Bank initiative with partners like Microsoft to help integrate disparate channels, systems and applications. When the branch, ATM, call center, automated voice response and online channels are all synchronized, banks are equipped to address both price and service sensitive customers. For example, we are working with a large European bank to help them with relationship-based pricing. They have enjoyed tremendous success with bundles of products, coupled with the ability to granularly control their fees and interest rates.
As far as smaller community institutions go, they have a huge advantage in that they already know their customers and often have a single system in place to manage their data processing requirements. Thanks to our relationships with the leading core systems and services providers our powerful and affordable Integrity servers drive their software solutions – both in-house at the bank and in service bureau mode at their technology providers.
North American financial institutions are facing a mature marketplace and must be prepared to do something different in order to compete effectively. They have to continue to place a strong emphasis on knowing their customer and providing convenient service to them via the channels of their choice. We plan to be there to help them achieve these goals.
Two of the highest priority items right now for bankers are deposit attraction/retention and remote deposit capture (RDC). Loan originations are going well for most institutions, but bankers are continually seeking new deposit sources. We see a strong demand among small to mid-sized businesses for RDC and banks having the flexibility to choose the option that best meets their specific item processing needs. Banks can use RDC to break down geographic barriers and provide a convenient service to their business customers by enabling them to consolidate all of their deposits at the institution.
Because every region is different and every institution has its own strategy, banks need to have the flexibility to customize their services and easily offer new products. A key to ensuring a high level of technical flexibility is building the bank’s technology on a Microsoft-based open architecture. One such platform is Harland Financial Solutions’ Phoenix System, which gives banks more control over operations and helps them respond promptly to market changes. With a rich product suite and multi-channel offerings, community banks can more easily compete with the super regional and money center banks.
Two other significant shifts that we have noticed in the community bank marketplace are the move to a secure ASP core processing environment, and the demand for a single source provider. More and more institutions want to focus on their core customer service competencies and not be concerned with running an in-house data center. It is important for banks to look to partners who can offer both options, as well as a clear migration path between them.
Partnering with a single source provider is something that helps significantly with risk mitigation and vendor management. Banks want an integrated system that covers all of the bases: core system, imaging, CRM, EFT/ATM, item processing, etc.
The bottom line is – banks can, and will, enjoy success in the area of retail banking. But it won’t happen by accident. With a clear strategic plan and the support of a partner committed to providing competitive, open and integrated solutions, banks will be equipped to address the changing trends in technology and consumer behavior.
There is a new world of opportunities for financial institutions that are willing to diversify and think strategically. For example, two areas that have a bright future are Health Savings Accounts (HSAs) and Remote Deposit Capture (RDC). HSAs are a great way to encourage savings among consumers, and financial institutions should take a serious look into beginning to start offering them to their corporate customers. RDC is also an excellent service for businesses of all sizes that accept checks, and is part of the larger mainstream imaging movement that Check 21 has fostered.
In the back office, Check 21 and ACH are beginning to merge – everything is revolving around payments and the electronic movement of money. Financial institutions must be able to manage all of these electronic payments streams coming from ATMs, credit/debit cards, online banking/bill pay, lockboxes, wire transfers, etc., if they want to remain competitive. It must all be tied together efficiently – it can’t be handled in ‘pieces or parts.’
Right up there with payments in terms of top issues facing banks are risk management and security. This is something that has traditionally been viewed as just a cost, but that must change. Consumers are very concerned about ID theft and security in general and will gravitate to those institutions that are proactive about security. Every department within individual financial institutions must be security-aware and act upon their risk management policies and procedures.
At the heart of every financial institution is the core data processing system; it is fundamental to every aspect of their operations. At Open Solutions we offer an open relational database that brings together the personal and commercial 360-degree relationship with the institution into one centralized location. By its very nature, it is integrated and provides all of the tools that the employees need to deliver more-targeted products, measure profitability and make better management decisions.
Institutions that want to remain competitive must offer a full gamut of products and services. At Open Solutions, we are uniquely positioned to help them deliver Internet banking, cash management, CRM/business intelligence, financial accounting tools, imaging, Check 21, digital document, IVR, network services, regulatory management solutions, HSAs, Web hosting and design, and payment and loan origination solutions.
The banking services space in North America is quite diversified. Customers have choices ranging from credit unions and community banks providing personal service in a limited geography, through to national retailers, Internet banks and other newcomers offering competitive niche offerings. This flurry of competitive activities is redefining consumer expectations.
Share of wallet is on everyone’s mind. Banking executives want to keep the customers/members they have, and to do that they must cross-sell more products to them. Technology is not the innovation, but it provides leverage for financial product innovation. At Fincentric, we promote selling the right product to the right customer at the right time. Teller and call center agents hold the keys to the customer relationship, yet they have no time to further customer relationships beyond the quality of service provided, and CRM systems usually offer little assistance.
One of the biggest stumbling blocks to financial product innovation is the disparate range of systems that most institutions are saddled with: core banking, insurance, lending, marketing, etc. Many institutions have some way of understanding their whole customer relationship and determining what next to sell via segmenting and campaigns. However, outbound calling and direct mail campaigns are intrusive and largely ineffective. At Fincentric, we addressed this issue with our Leadbuilder solution that presents the teller or customer service representative with the right product or service to pitch, and then automatically follows through with a directed referral.
We call this approach “inbound customer marketing.” It puts the customer in control, as it presents the offer when the customer has decided to do business with the financial institution and not vice versa. Leadbuilder not only presents next-best-product pitches and current marketing campaign offers, but it also passes positive referrals to the appropriate sales channel; records and measures sales performance; and records declined offers to ensure they are not re-pitched. When coupled with our all-Microsoft based Wealthview Banking™ core banking system, financial institutions have the tool set they need to meet their strategic goals. Our technologies are enablers of financial innovation, and our clients are among the most efficient and successful of financial institutions.
In an era of financial services commoditization and market saturation, financial institutions face an uphill battle in growing organically. Institutions are shackled in their ability to pursue growth and efficiency objectives as they groan under an unprecedented regulatory burden. How to move the business forward under such conditions has become the premier challenge of the day. Competitive pressures are mounting from inside and outside the traditional financial services industry as financial services customers reject old ways of doing business. In order to compete, financial institutions must adopt a strategic approach toward information and process management that enables customer-centricity, demonstrate a commitment to world-class customer service and improve the depth of their relationship with customers. Timely and actionable information is the currency of future success in global banking.
Savvy institutions are looking for ways to differentiate their brands not along traditional innovation dimensions of product and service, rather by streamlining and transforming business processes that yield new and differentiated value to customers. The evolution of self-service delivery channels and the migration of the payments market to electronic transactions represent the most significant innovations of recent years. An example of a stand-out strategy of this generation of banking is ING’s “direct-only” channel proposition, which combines best-in-class interest rates with high quality telephone and internet-based self-service tools.
The financial services industry is seeking ways to better align their IT topology to rapidly changing business requirements. New business models demand more responsive and agile enterprise architectures that enable dynamic process transformation. Rapid advances in technology are enabling financial institutions to enter new competitive spheres because technology provides them with so many new opportunities not previously thought possible. The advances made in computing power and speed afford opportunities for financial institutions to benefit from scale and scope in their operations and innovations. For instance, Web services and SOA will deliver greater efficiency and customer service through business process improvements that were previously beyond reach.
Fiserv’s mission is to provide integrated technology and services solutions, which ensure best-in-class business results for our clients. More specifically, we enable our clients to drive their business growth, to improve the efficiency of how they do business and to optimize risk management in terms of market risk, credit risk and operational risk.
Successful banks recognize the value of differentiating their customer experience. This requires an external perspective that leads to a deep understanding of customer needs and appreciation of the broader competitive landscape. Traditional assumptions of customer requirements for products and services need to be scrapped and a new view adopted.
The retiring baby boomer generation is expected to re-define the retirement lifestyle. Traditional banking products and established delivery channels may not meet their needs. They are willing to consider alternative providers who provide a better experience.
Families with school-aged kids find little time between homework, music lessons and soccer practice to hold quality conversations. Banking is a nuisance and time-saving delivery of bank services is valued.
The younger generation is eager to adopt new technology and take advantage of self-service channels for banking and payments. The fast-paced world of instant music downloads, competitive online gaming and one-click Internet shopping creates a new standard for delivery of financial services.
Successful banks understand these drivers and will begin to differentiate themselves by creating unique strategies. Many banks are looking to the retail industry for best practices since the major national retailers have carved out strong positions for themselves on a perceptual map. For example, customers can describe clearly the differences between Nordstrom and Wal-Mart, or even Target and Wal-Mart.
We see emerging examples in banking such as WaMu’s Occasio Branch concept, Umpqua Bank’s private label coffee and Commerce of New Jersey’s retail promotion skills.
Microsoft believes that people make the difference. When employees are enabled, they can deliver exceptional service to their customers. Technology, coupled with creative product development and customer-oriented policies, help make a bank People-Ready.
Driving Business Value: Bank employees are the company’s heart and soul; it’s their potential that makes the business great. We help banks position their people to be ready: ready to drive business performance; to build strong and lasting connections with customers; to work productively from the road; to improve operations; and to find, share, and use information with ease.
The true value to our bank customers comes when their people have the right tools to meet these challenges. That means greater productivity and more satisfied customers. Banks benefit from lower TCO, fewer workarounds, and less discrepancy between what’s happening in the field and the head office.
In net, we work with our partners to help our customers discover how they can find the right tools that help their people achieve a whole lot more.