Finacle Blog

In the race for commercial success are smaller banks destined to always come away second best?

The limited reach and resources of small and mid-sized banks make for an uneven fight in an industry dominated by global behemoths. Creating identity and competitive advantage through innovation is the only way for these banks to take on the Goliaths, but that calls for investment in core banking replacement which is beyond the reach of most. This additionally requires skilled manpower and upfront investments.

Thankfully, there is a way out of this stalemate in the form of a pre-configured, parameterized and fully integrated framework which allows banks with smaller operations to be up and running on a new platform with a minimum of fuss. Because this framework is already configured with the necessities of banking drawn from best banking practices globally, namely various product, process, reporting and regulatory parameters, and is pre-tested, it significantly reduces the need for scoping, process mapping, multiple static data setups and testing. Any special needs can be taken care of with small customization or by picking and choosing from a functionality menu.

Although this ready to use framework is a more cost-efficient and faster option than full-blown implementation, it still requires the bank to own the infrastructure. This is where a SaaS delivery model can fit in neatly to bridge the affordability gap. In this model, the software and hardware is owned and hosted by an external agent, who charges the bank a fee for accessing the service. In one stroke, the bank is spared the pain of upfront infrastructure investment and maintenance. This also sets the stage for technology virtualization, wherein the bank can move software residing on different servers from one data center to another.

This is the opportunity for banks to become agile, efficient, innovative and competitive. And suddenly, the race won't seem that one-sided any more.

Posted by Rajashekara V. Maiya at 5:45 AM | Permalink | Comments (0) | TrackBacks (0)

"It isn't necessary to imagine the world ending in fire or ice. There are two other possibilities: one is paperwork, and the other is nostalgia."  - Frank Zappa

Much as we may dislike paperwork, it's what makes today's world go round. Hence, most of us who've lost an important original document don't wish to repeat that experience. Ever!

Which is why, the idea of a virtual vault, or an e-locker for documents is so appealing. This is an innovative service much like a locker, offered by banks for customers to store copies of their important documents such as school certificates, social security cards, birth and marriage certificates, Wills, et al in electronic format. For customers, the advantages are obvious - easy access to these papers from anywhere, and saving the bother of submitting documents to the bank each time they acquire a new product. But banks can benefit too. A virtual vault gives them access to more customer documentation than they would otherwise, assuring them of the customers' identity to strengthen their KYC performance. And perhaps a new business opportunity to authenticate customers on behalf of Government agencies, or when sought by customers themselves in order to fulfill statutory requirements.

Caveat: As is the case with all things online, banks must ensure that the virtual vault is absolutely tamper-proof and secure, else ID thieves and hackers will have a field day.

But while all of the above is nice to have, the real deal is for the virtual vault to serve as a 'backup' set of original documents should they be lost or misplaced. Anyone who has gone through the process of claiming the loss of an original document (application, declaration, surety, even a police complaint!) would straightaway recognise the worth of such a facility. Until that happens all we can do is file away our papers and keep our fingers crossed!

Posted by Arunnima B S at 5:34 AM | Permalink | Comments (1) | TrackBacks (0)

The New Year is upon us and once again I find myself renewing my resolution to manage my finances better. While I've tried every trick in the book, starting with a handwritten account, moving to the good old reliable Excel sheet, and now a personal financial management (PFM) widget on the net, all of them have left me vaguely dissatisfied.

While I suppose the PFM tool is an improvement, it falls short in some ways. First, I can't combine both my accounts in different banks into a single complete financial picture. Second, because I can't access it on my mobile phone, I'm at the mercy of my laptop and Internet connection.

It seems that many people, particularly from the younger generations, share these concerns. In a study of the financial priorities of about 1,000 U.S. consumers, respondents belonging to Gen X and Y said that they really needed advice on managing their day to day finances and still trusted their banks to provide it, despite the crisis and all. However, they wanted this help over mobile, video and social networks, rather than across the table at the nearest branch. So, while there is an opportunity for banks to make inroads into Gen Y, they can't exploit it without the right tools.

The good news is that we're seeing some real innovation of existing PFM tools to scale the next level of expectations. Going by the name of Online Financial Management (OFM), this solution aims to fill existing gaps to enable users take most financial decisions with confidence. Therefore, OFM's mandate is to:

• Enable all the activities in financial management - categorisation of expenses, budgeting
  and tracking, comparison of equivalent products, designing investment portfolio, and
  decisioning
• Allow users to consolidate information from accounts in different banks
• Allow users to connect with bank advisors or peer communities for their recommendations
  via the OFM solution
• Automatically customise the solution depending on the user's profile, and also enable the
  user to personalise it further
• Make the facility available on as many channels as possible, including ATMs, kiosks and
  mobile
• Also address the needs of Corporate and SME customers

Unfortunately, since every silver lining has a cloud, there are a few challenges here:

• The few PFM tools that do permit account consolidation, use a technique called 'screen
  scraping' which is not perceived as being secure, especially, when the tool is from a third
  party non-bank site. Banks have a distinct advantage in that their portals are trusted more,
  but even so, there is a definite need for a safer standards-based technique.
• Present day solutions are not real-time. That needs to change.
• OFM must be flexible, so that it can be quickly modified to keep pace with ever changing
  market needs.
• And the biggest challenge is to get regulators to prescribe strict guidelines to ensure
  security, integrity and privacy.

So until then, I'll have to live with my current PFM tool. I suppose the only other thing I could do is curb my spending behaviour!

Posted by Arunnima B S at 4:06 AM | Permalink | Comments (0) | TrackBacks (0)

Not just a new year, but a brand new decade as well to keep the soothsayers busy. We add to the predictions with our list of the hits and misses in banking innovation in 2011. It looks like a sunshine year for mobile banking, with banks across the spectrum innovating on their standard offerings to create an element of differentiation. Emerging market banks will stick to their inclusion agenda over the mobile, while those based in the mature markets of high growth regions -such as Hong Kong or Korea - will brace themselves against mobile-led competition from non-banking newbie players. We think Europe will finally see some action at the higher end of smartphone-based banking.

Except for mobile payments and commerce and Islamic banking in certain pockets, product innovation will stay where it is. So will social media, until someone figures out how to exploit and make money from a phenomenon that in the banking realm, has so far only taken our imagination by storm.

We think that once again, major U.S. banks will give core systems replacement a miss. No one wants to be the first to find out whether their concerns of risk, implementation difficulty and change management are unfounded or not.

It's a better outlook for the economy and consumer confidence. While no one's rushing to buy just yet, there is a slight uptrend in consumer spending. Will retailers and banks join together to create innovative offerings to spur buying? We hope so.

With the Dodd Frank Act kicking in, in the U.S., it's easy to predict that regulation is here to stay. A number of U.S. banks have indicated that they will direct their technology spends towards managing risk and compliance. This sentiment is echoed in other regions. However, don't expect technology to come up with a silver bullet for ensuring 100% compliance any time soon.

Internet banking is officially declared legacy as it is quickly upstaged by the mobile. While some innovation may happen spurred by technology or customer need, we must accept that Internet banking is going to be just one more channel.

Branch banking on the other hand, will prove that it is still the nerve centre of the business. We expect banks in underpenetrated markets to strengthen their branch networks, whereas those having too many branches in mature markets might rationalise the number to save costs.

Plans to put critical apps on the cloud will be up in the air until issues regarding security are sorted out. We foresee more enthusiasm than action.

Prepare to welcome more outsiders chancing their luck in banking on the basis of innovative, technology-intensive, low cost business models. While established players have nothing to fear just yet, they must remain on the lookout for disruptive market moves.

With Gen Y's influence growing stronger, banks have no choice but to factor in their needs in all their major decisions. Suffice it to say that Gen Y will drive the direction of most banking innovation in 2011 and beyond.

Posted by Balwant C Surti at 5:06 AM | Permalink | Comments (0) | TrackBacks (0)