Finacle Blog

'It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.' - Charles Darwin

More than a hundred years after Darwin made this observation, it continues to hold true. And that is why it is so important for banks which have lived through the crisis to get on top of the changes driving the survivor's world. While there are many propellers of change, tightening regulation, growing consumerism, measurable productivity drivers and growing unexplored potential are the most significant, each one carrying both threat and promise.

In the past couple of years, lawmakers have made the headlines regularly for their zealous attempts at plugging the regulatory loopholes which precipitated the crisis. Tight regulation is here to stay, and although it extracts a price for compliance it also forces organizations to adopt holistic risk-management practices which will stand them in good stead. Basel, the latest U.S wall street reform Act and G20 norms might actually improve profitability by directing capital deployment towards creditworthy purposes.

It is quite a challenge to manage the current crop of banking consumers, who are characterized by diversity as much as their questioning and assertive attitude. Moreover, with each bank trying to outdo the other with similar products, channels and experiences, customers have no strong loyalties. Transparency, personalization and co-creation are some of the biggest words in today's lexicon, as banks strive to appease their clients by disclosing more information, catering to unique tastes and involving them in product development. Yet, each of these actions is an opportunity for banks to differentiate themselves and reclaim the trust of their customers.

The first half of this year saw off 90 banks in the U.S alone! This explains why conservatism in still in fashion in banking circles. In trying to improve productivity and efficiency, banks are seeking to understand what drives these most and how they may be measured and are consequently changing the way they deploy processes, resources and technology. In addition to raising productivity, these actions are empowering customers and improving experience.

The saturation of established markets and compulsions of financial inclusivity are pushing banking to the hinterland. While underserved markets present many compliance challenges, starting with the proving of identity, their immense potential cannot be ignored. Thanks to mobile connectivity, biometric security and other technology innovations, fringe markets can be served without investing large sums in physical infrastructure. Since future growth will spring from these markets, it is important to wrest first mover advantage.

Responding appropriately to these new forces, pulling in different directions, is easier said than done.  Remember that in the survivor's world it's not only the nature of response which matters but also its alacrity. A slow reaction cedes the upper hand to competition or worse, is already outdated at the time of deployment. Besides being agile, banks need to be capable of managing huge diversity, otherwise how can they personalize their offerings or penetrate unexplored markets? Clearly, a strong culture of innovation is required to help them make this transition.

Posted by Rajashekara V. Maiya at 3:57 AM | Permalink | Comments (0) | TrackBacks (0)

Since much has been said about how the digital consumer has embraced self-service banking, I won't dwell on it further. But what is interesting is that the branch network has survived this phenomenon belying all expectations of obsolescence, even growing about 60% in the United States between 1991 and 2008.

The primary reason for this seems to be that human beings still crave the personal touch in some of their dealings, especially those which are high-involvement in nature. So, while it's OK to pay bills online, it's much better to take an investment decision after discussing it face to face with an advisor. This is largely congruent with the banks' interest to shift all routine transactions to self-service modes and leave branch staff to focus on complex issues or revenue generation, which unassisted channels are not very effective at.

But, in a less than ideal world, the lines are often blurred. Hence, a Gen Y customer might suddenly feel the need for personal assistance during an ATM transaction and a high-net worth ranch owner may find it most inconvenient to travel out to a city branch while planning a portfolio. How can banks service both these needs without compromising cost or performance?

Video banking may be the answer. Treading a middle path between a self and fully-assisted mode, it allows banks to render greater, more personalized service over self-service channels and customers to enjoy the same at a time and place of their choosing.

That being said, video banking is capable of a lot more. Spain's Banco Sabadell, among the first to launch an iPad banking service, is enhancing it to facilitate video calls with a sales rep while Australia's New England Credit Union has used video banking for years to connect branch customers with specialists located elsewhere. And others are finding this a useful means to improve cross-sales and communication, attract both Gen Y and unbanked clients and create differentiation in a crowded market landscape.

Read the detailed paper  @Self-service or Fully Assisted - A Middle Path Holds the Answer

Posted by Shweta Shivaraja at 8:35 AM | Permalink | Comments (0) | TrackBacks (0)

In an earlier post I said that customer-centricity calls for a comprehensive cultural shift within an organization, and that it is hard to achieve for precisely this reason. Since a change of this nature can take years to set in, it needs the stewardship of senior management to ensure that it does not lose direction or momentum midway.

 

In a 2009 survey of large American companies, it transpired that one in two respondents has a Chief Customer Officer (CCO) in whom is vested the power and responsibility to act in the best interests of the customer. The CCO is the change agent, and it is her job to portray the customer within the organization and to define customer acquisition and retention strategies. For the CCO to succeed she must be positioned as the cross-functional authority on the customer and empowered to cut through departmental silos.

Above all, the CCO must focus on driving profitable customer behaviour, nurturing a customer-centric culture and building value for the customer as well as the company. Clearly, that's a tall order for one person, and is one that requires the services of a small but flexible team dedicated to its fulfilment. 

The Big 3: Methodology, Metrics and Technology
What does it take to create a customer-centric culture? In practice, the CCO works with different organizations to align the company's deliverables and behaviour with its customers' needs through a confluence of methodology, metrics and technology.

Broadly, CCOs' best practices conform to the following framework:
• Corporate objective and strategy - to align corporate action to acquire and retain the right customers.
• Customer strategies - to define and implement effective strategies that enable the organization to maximise the value to and from the target customer base.
• Culture management/creation and customer data - to instill a customer-centric culture and provide relevant and timely customer - crucial for effective decision making.
• Customer value and priority - to prioritise resource allocation to maximise returns.
• Customer retention - to build intimate relationships that strengthen loyalty and provide deeper insight to the behaviours and needs of target customers.
• Customer acquisition - to leverage existing insight and relationships to acquire new and profitable customers.
• Kaizen and innovation - to continuously improve and innovate the customer experience, creating and maintaining competitive differentiation.

Since a customer-centric organization and its CCO rely heavily on customer metrics to set strategy and make decisions, it is absolutely critical to define and provide the right measures to the right people at the right time. Metrics are used to:
• Drive continuous learning and understanding of how the company impacts customers.
• Assign accountability and impart urgency for improvement.
• Execute ongoing modification and improvement programmes, facilitating decision making.
• Create awareness and manage customer profitability pipeline and risk.

The role of technology, the third element, is to enable all of the above.

Critical Success Factors
Large scale organizational change management, which is key to creating cultural shifts of this magnitude, must be handled with finesse to be successful. A leading research firm sums this up in more prosaic terms, and recommends that five critical success factors be put in place, namely:
• Create the right environment.
• Take on a broad change agenda.
• Establish a strong operating structure.
• Kick-off high priority activities.
• Look ahead ot the future.

What do they mean within an organization?
The right environment is one in which the CCO enjoys consistent and vocal senior management backing and is judged purely on the basis of progress versus an agreed plan. In return, the CCO must take on a broad change programme and be willing to meet wide ranging challenges including securing buy-in from various parts of the organization and involving employees as change-agents... weaving customer-centric thinking into the very DNA of the organization.

The operating structure must be agile and therefore the core team tends to be small but multi-disciplined. This team must be talented enough to allow the CCO to keep focused at the strategic level. Activities that raise the prominence of the customer - arriving at a holistic view of customer experience, analysing customer economics and establishing a Voice of Customer program - are high priority and must be rolled-out the quickest. Last but not least, since change in culture can take years of effort, the CCO must have the necessary vision and focus to keep up the organization's enthusiasm until the goal is met.

Posted by Dougal Edwards at 3:52 AM | Permalink | Comments (0) | TrackBacks (0)