Finacle Blog

It would seem so (think smart sourcing, smartcard and yes of course, the smartphone!). So, it's only natural that banks should look to become smarter. How can they do so? Here's our list of top strategies: • Customer engagement through smarter segmentation, smarter product communication and smarter customer management technologies

• Customer and employee empowerment - using technology and tools - to create emotional satisfaction

• Convergence of technologies from the work and personal space so that the bank's systems are available to customers on personal mobility tools and social networks  

• Using this quiet period to accelerate preparations for the future, rather than to conserve resources or wait it out

Is there another way?

Posted by Sai Kumar Jayanty at 6:51 AM | Permalink | Comments (0) | TrackBacks (0)

Banks are learning that recovery is actually a cyclical process - of crises followed by pullbacks, and that only the smarter banks will make it. The question is, how do they become one? Here are our top three picks of what makes a smarter bank:

• They are differentiated on the outside, and agile in the market
• They are simplified on the inside
• They use ease of execution to deliver excellence and efficiency

Which banks that you know of fit the bill? Are there any smart banks that have done something different? Is there a process to become a smarter bank?

Posted by Sai Kumar Jayanty at 3:47 AM | Permalink | Comments (0) | TrackBacks (0)

Researchers in the U.S. have come up with a prototype of a touch screen that can be used behind a layer of fabric. The technology recognizes squiggles, so all you need to do is trace the message on your pocket (with the mobile phone inside) and shoot it out. Apparently, the prototype can pick up even long sentences, but is ideally suited to short messages.
One more example of how technology is pervading our lives, and even sneaking in the back door. Is this a good thing, or are we overdoing it?

Posted by Sai Kumar Jayanty at 3:42 AM | Permalink | Comments (0) | TrackBacks (0)

At least one bank is ending 2011 on a high note. In December, Chase swept the honors in two mobile banking awards. Javelin Strategy and Research ranked their solution "Best in Class" above those of 24 retail banking heavyweights; Key Lime Interactive adjudged Chase's mobile banking website and app the best among the top 4 U.S. banks.

We're entering an era of new commerce in which mobility will not only be a force to reckon with, but will actually determine the fate of financial institutions.  However, only a few banks seem to be on the ball, with most others sitting on the fence or watching from the sidelines.

Since it's the season for countdowns, here's one for mobile banking. This post is about the banks that dared in 2011.

Let's start with Chase. They've taken the product innovation route to success, adding stellar features such as remote check deposit and person-to-person payments to their mobile banking offering.   And they're going everywhere with it, right from the iPhone/ iPad and Android platforms to the Amazon App Store.

Up north, Norwegian Banks will be the first to roll out new mobile banking technology that is possibly a few years ahead of its time. The solution - which ignores the current trend of native apps in favor of an HTML5 based-web application - is said to be so user friendly that it virtually eliminates data entry in payment or fund transfer transactions to make them three times as fast as they are now.

Closer to home, BNP Paribas and Orange have made some noise with their new "entirely mobile" banking service. It's a comprehensive offering, which includes mobile banking of course, but also an m-payment facility, a choice of the newest smartphones and mobile subscriptions, and even an application to receive news feeds.

Will these moves pay off? Only time will tell. But although there are no certainties in the world of new commerce, one thing's for sure, he who does not dare does not win.

Posted by Sanat Rao at 4:26 AM | Permalink | Comments (0) | TrackBacks (0)

They're growing faster, bigger and more influential. One reason they've succeeded is that they've managed to leverage some key trends very smartly. More specifically they have: • Integrated their IT systems
• Taken mobile banking everywhere
• Maintained regulatory checks
• Stayed away from overleverage  
• Spawned innovation hubs
• Worked towards financial inclusion

What more should emerging market banks do going forward? What lessons can banks from the developed world learn from these institutions?

Posted by Varun Goyal at 4:23 AM | Permalink | Comments (0) | TrackBacks (0)

For all their claims of customer-centricity are banking institutions doing enough to endear themselves to the customers of the future? What are governments doing to progress the interests of their younger citizenry? And what are the choices facing all three? The "customer next" is young, highly networked and connected, and will control approximately US$ 10 trillion in spending power by the next decade. Heady stuff. But the real source of power of these customers is the ability to influence public opinion and incite real action against issues such as unemployment, inflation or political suppression, all in the space of a few days and a clutch of social networks.

Unfortunately, neither governments nor financial service institutions are really listening. For instance, in the United States, scientific education and innovation, the foundation of job creation, have both taken a back seat in recent years. Financial institutions are adding to the pain of the average citizen by imposing new charges, such as interchange fees, and resorting to large-scale retrenchment. The situation is perhaps best captured by the fact that today, the U.S. spends four times more on a 65 year old than on someone aged 18!

If economies, banks and their future customers are to co-exist in harmony, they need to resolve a few conflicts. Each of them, in their own way, must decide whether valuation is more important, or value. For banks, this means choosing between the same old valuation-driven policies that benefited 1% at the cost of 99%, or a new philosophy that puts the interest of customers above all else. For governments it's a choice between bailing out those banks that are too big to fail and helping smaller, community-centric institutions. Even individuals face a similar dilemma - whether to "invest" in a bank, which promises valuation or support a smaller agency that is steeped in values.

The second conflict is one of growth versus sustainability. Should governments, banks and customers focus on sustaining what they have - such as an existing economic structure, a captive domestic market or a safe investment portfolio - or chase new but riskier growth opportunities?

And finally, all of them must choose between the single and the universal; between remaining a part of a larger alliance or community, and striking it out on their own. These are the tough choices occasioned by the new reality, the new normal and the new customer.

Posted by Rajashekara V. Maiya at 4:03 AM | Permalink | Comments (0) | TrackBacks (0)

Experts tell us that social media-powered revenues across industries may be upwards of USD 30 billion by 2015. Now the big question for most industries is - how was that magic number arrived at? And more importantly - what share could we take in it? (http://socialcommercetoday.com/speed-summary-boozco-report-the-30bn-social-commerce-market) I am not even attempting to offer an answer to that question. Rather, it raises further questions in my mind. In contrast, the banking industry does not seem very curious or enthusiastic about social media. While they could have gotten away with it some time ago - citing brand or reputation risk - banks can no longer hide behind that excuse. (would like to retain the key phrase of 'hiding behind social wounds' somehow; pls consider)
 
After all, they are also in the business of selling products, services, packages etc., so they ought to reinvent themselves and relook at their clientele just as any other corporation does.
 
The ever-growing popularity of social networking sites is leading to the idea of 'social cities', whose inhabitants will never leave them. So if banks want to reach out to their clientele, they must make inroads into their social presence, which may include such cities in future.
 
Banks, trying to play the social card by making those boring banking sites interactive for users (well...it is being tried everywhere, and it does sound good), must acknowledge that their timing is a tad too late.
 
Instead of forcing "social" aspects onto their sites and re-inventing the retail experience on web 2.0, they could probably try just the reverse - push banking offers, catalogues, apps, widgets, whatnot onto these social cities. Something that ICICI India is doing on Facebook (although they still have some way to go!!).
 
Look at it this way - social sites are already multi-channel enabled; they have the reach 'from boardrooms to bedrooms'; every industry is counting on them to push their products and offers; so why not look at social media sites as  banking catalogues, branch bulletin boards, self-service channels, and so on? Social media pages become banking portals; they are the branches; indeed they represent the banks' persona. And they are easily available on the cloud.
 
Talking extreme cloud - as a consumer, I may just log on to a social site, access a banking app that in turn consolidates all my bank relationships, while I post wall updates and seek the opinion of friends about buying a new mobile. On the heels of my friends' incoming advice, I receive an interesting credit offer from my bank; I try out its terms with a simulator tool on my mobile on my way to office (hence, never leaving my 'social city'), negotiate with the ubiquitous bank representative on the other side of my 'wall', decide, and buy the product on the internet from office, share the news with my online social circle on my way back home (and probably earn commission from my bank, which could be in the form of virtual currency, which I can further re-use in my 'social city'). The network marketing opportunities are limitless for banks. The social sites pretty much become portals for round-the-clock servicing via direct selling/distribution agents. Banks just need to enable those agents with the right tools on their social pages.
 
Given Facebook's success with 'virtual currency', it is no surprise that social sites are already on an 'on-demand cloud platform', something that banks are envisioning for the future. Because of the competitive nature of banking today, expecting a consortium of banks to come together and form a social cloud, might be a pipe dream (as the experience in Australia shows), but re-using a third player, with a much bigger client base and tremendous potential, could be a real option. The remittance routing and its associate charges in the traditional banking circuits finally causing a loss to banking revenues globally, due to efficiency and presence of players like Paypal, is a cautionary tale for banks.
The same logic can be extended to the growing need of social media powered banking experience.

The next generation of banking is out there on those social clouds - on my own device, in the place that I enjoy the most and where I am certain to be found.
 
Maybe it is too early to think of this as the beginning of the end (read: transformation) of traditional internet banking sites (how ever much they sizzle), but with Gen-Y's interests, you never quite know!!

Posted by Amit Vats at 3:59 AM | Permalink | Comments (0) | TrackBacks (0)

"Their expectation is that if they want something, it is there." - Hugh Mackay, Social Researcher
Call them Gen Y, Generation Next, the Millennials or the Echo Boomers.  In another 10 years, this generation comprising people currently in the age group 15 - 34, will impact financial institutions the most - as customers, as employees, and as partners. A consulting organization's report states that Gen Y with its inherited as well as earned riches will be the wealthiest generation ever.  How are banks gearing up to cater to this fastest growing customer segment and their unique banking expectations?
Gen Y attaches great importance to user experience.  Easy and prompt access, anywhere anytime tops its banking wish list. That Gen Yers want to bank with the latest communication gadgets is a given; after all we are talking of an extremely tech savvy and socially networked population. Their other needs include Online PFM (Personal Financial Management) tools and remote interaction with financial advisors. As new devices hit the market, they want their bank to provide suitable banking tools on all of them. And if their current bank doesn't do so, they will find another bank that will. There is no such thing as "loyalty by default" in the Gen Y lexicon; banks have to work hard to earn and retain their favor.
This social-networking generation seeks and gives out information all the time.  Give them a good banking experience and they will turn into customer advocates. The flip side - if they do not get what they expect or what was promised, be sure that it will soon be public knowledge on all the social networks that matter.  
"Give me ownership in my work and involvement and I'll give my all." - A Gen Y Employee
In some years Gen Yers will constitute a large part of the banking workforce. So what are their expectations from work?
They want flexibility and freedom in their work space and thrive on innovation. Ever eager to learn, they expect to be taught in the language they understand; but want to be listened to as well. Millennials are ambitious and want their career paths clearly drawn out.  Unlike Gen X, they aren't willing to wait for years to reach their goals.  And just like Gen Y customers, if they do not get what they want, they'll simply move on - in this case, to another employer.  This calls for a thorough revamp of HR and training policies within banks, which are still bound by the rigidities of hierarchy and formal structures.
And what of the Gen Y business partner?  Banks will surely benefit from their out-of-the-box thinking and innovative ideas.  Take the example of a millennial technology vendor.  His ability to understand and anticipate the needs of fellow Gen Yers (employees and customers) should enable him to build and implement more relevant, creative solutions.
A few years hence, banking will be very different from what it is today thanks to the teeming Gen Y population. The message for banks - find the means to engage them or lose out to competitors who do.

Posted by Arunnima B S at 6:58 AM | Permalink | Comments (0) | TrackBacks (0)

Time was when the average Indian spent a lifetime building a nest egg. Then came a shift in demographic composition as well as an economic boom, which ushered in the propensity to spend and greatly benefited banks. In fact, the last few years have seen luxury loan products shore up bank balance sheets.  Stiff loan terms notwithstanding, there's little sign of letup in demand, especially from members of Generation Y profitably employed within the corporate sector.  
But can banks assume that such a situation will prevail in perpetuity?  Surely, a time will come when cheaper funding will be available from other sources? Consider the workforce of large companies - both Indian and multinational. What if their employees decide - with company backing - to initiate a self-service cooperative financing movement, to pool their surplus funds, and lend to members at lower-than-market rates?  Will banks be able to sustain their luxury loan market then? How will they meet this onslaught from clients-turned-competitors? By easing their loan terms?  And if they do, how adversely will it affect their margins?
And will large companies actually support such a move and venture into a space, which is completely outside their functional domain? Chances are, they will. Human resources are their key assets and they will be keen to support an arrangement, which facilitates employee retention. Personnel with large pending loans cannot quit their jobs in a hurry, and this will extend employee-time with the organization.
These co-operative societies could probably start on a small scale with auto and personal loans, and with time, expand their portfolios to include even mortgages. This kind of competition from unexpected quarters might give banks a run for their money. That's enough reason for them to take this potential market threat seriously, isn't it?

Posted by Mahesh R at 6:55 AM | Permalink | Comments (1) | TrackBacks (0)

In a new report, Javelin Strategy said that bank customers trying to attract attention to their grievances might find it more effective to use social media. No doubt they had the successful social media campaign against the US$ 5 debit card fee on their mind. In the same breath, the analyst concluded that social media had some way to go before it could be considered a viable customer service channel. And that is no surprise. In contrast to the retailing, telecom and automotive sectors to name a few, which are leveraging 'social' to co-create with, service or otherwise engage their audience, the banking industry has largely stayed away from the medium. Among the many reasons for this reluctance is a fear of crossing the regulatory line, a lack of understanding of social media or simply, an inability to get started.

But start they must. This is why.

It's where the customers are. It is estimated that people spend 1 out of every 5 online minutes on social networks, where conversations often turn into a public product or brand review. This is where reputations are made and unmade. While organizations cannot control public perception any longer, at least they can monitor it by being part of these social conversations.

It's a serious channel of communication. Social media conversations are an invaluable source of instant, unfiltered consumer insight. By tuning in, banks can spot the latest trends, discover the market's latent needs, find out which of their products work, and why others don't. At a fraction of the time and cost of traditional media.

Others will do it anyway. New technologies and changing consumer behavior have disrupted the traditional banking paradigm and allowed outside players to make an entry with innovative business models. When telecom and retailing giants offer financial services, they package it along with their other expertise, which includes social media savvy. Take the example of Tesco Bank, which not only has a pet insurance product but also an online social community of pet lovers. Traditional banks need to be there in social media to defend their turf, and also reclaim some of the customer intimacy that they have lost thanks to remote banking.

Finally, it pays. What banks must realize is that social engagement is not a one-way street. Studies show that enterprise community members stay longer, do more business and frequently act as the company's advocates.

Now which bank wouldn't like that?

Posted by Balwant C Surti at 3:25 AM | Permalink | Comments (0) | TrackBacks (0)

I just finished scheduling a payment transaction through Internet banking. I rest assured that I will receive an alert on my mobile when the payment is successful. When I reflect on how my banking experience has changed over the years, I am amazed at the efforts that banks put in to keep customers happy. We wanted to have multiple channels, and we got it. We wanted to have consistent experience across channels, and we got that too. Multi-channel banking is now a reality and it is here to stay. But have we, customers, really understood the potential of multi-channel banking? I, for one, have some doubts and apprehensions. I turn to e-Banking, which I am quite comfortable with, and look for answers. It seems to me that e-Banking, as a channel, can be leveraged to encourage customers to embrace multi-channel banking.

Banks can use e-Banking to communicate to their customers that there are multiple channels available for any given banking activity. Simple "Did you know" tips on the e-Banking website can help bridge the information gap. For customers out there who are not willing to leave e-Banking and try other channels, banks can use the e-Banking portal to provide incentives to try other channels. Set up a reward system, or give redeemable points. After all, having multiple channels is not enough. Banks need to ensure that customers use them optimally.

Security is a major concern for many customers when it comes to using new channels. Banks can address this by providing tips for secure banking through e-Banking portals, thus creating awareness about secure usage of channels. Further, e-Banking can play a role in redesigning the customer experience. Persona driven customer experience is especially significant in multi-channel banking and e-Banking can help banks get there because they already have the basics for this set up in their e-Banking portals - Personal Finance Management, Analytics and Social media integration. With all this, it certainly looks like e-Banking can act as a catalyst and drive multi-channel banking adoption.

Posted by Sudha Annie Saigal at 3:18 AM | Permalink | Comments (0) | TrackBacks (0)

India had 153,000 High Net Worth Individuals (HNWIs) with a combined wealth of about US$ 570 billion at the end of 2010, a big jump over the 126,700 in 2009! That only 20% of Indian HNWIs currently seek the advice of financial advisors means that there is a huge untapped market out there.  No wonder then, that established multinationals like Goldman Sachs, banks like Barclays and even domestic brokerages like Motilal Oswal have ventured into the Wealth Management space. Their success hinges upon how well they understand this market. For instance, a majority of the HNWI population lies in the age group of 30-55. Ergo, wealth managers must chalk out their needs and preferences and offer suitable products. Besides this, they could deploy a combination of the following strategies to gain a firm foothold in India:
Build brand, build trust
Customers take advice only from trusted advisors.  Wealth management service providers need to build a reputation by being transparent in their dealings and creating customer awareness. This is all the more important in these times of investor insecurity. Thanks to the financial crisis, capital markets are volatile and the market values of other asset classes have sharply fallen, creating panic among investors. The short term view of financial advisors has not helped matters.
Use advisor technology
Qualified advisors spend a lot of time on mundane tasks like preparing reports and following compliance procedures. Financial institutions can boost advisor productivity by adopting superior technology with capabilities like lead management and asset allocation.
 Provide 360 degree solution
A 360 degree view of customer data generates loads of insight, enabling advisors to correctly identify client needs and provide the right solutions.
Employ mobility solutions
With mobility solutions, wealth management companies can conduct their business even in areas outside the branch network.  Financial advisors can also work from anywhere and still access client information on a real-time basis to ensure that they know as much about their customers' financial situation as the customers themselves.
Partner with local brokers / banks
Wealth management firms can tie up with local banks and brokerages and cash in on their reputation and reach.
Ensure compliance
Wealth managers have to conform to government rules while introducing new products.  In stray cases, they might also have to withdraw existing products when new regulations come up.
Interesting times are ahead thanks to a swelling market, a greater need for professional financial advice and an increasing number of wealth management firms, each trying to outdo the other. Without doubt, those who implement the right strategy mix will emerge winners.

Posted by Hema Singh at 5:11 AM | Permalink | Comments (0) | TrackBacks (0)

Investors in the stock market can choose either of two routes - buy stocks on the exchange or purchase Mutual Fund units. Those taking the stock exchange route can trade real time, place online or offline orders, take intraday positions, go long or short and buy/sell as little as one share.  Contrast this with investing in an index-based mutual fund - which represents a basket of stocks comprising a particular index, say, the BSE Sensex.  The fund house accepts the buy order subject to a stipulated minimum amount.  The price is based on the net asset value (NAV) calculated at the end of each trading day.   Now combine the best of both - individual stocks and mutual funds, and you have Exchange Traded Funds (ETFs), which are basically index-based funds, which can be traded in a stock exchange.
Advantages
> ETFs are similar to stocks:
• Investors have access to real time quotes.
• Trades can be executed online or offline (through a phone call to the broker).
• There are no forms to be filled out on each purchase.
• Limit orders can be placed.
• Minimum order size is one unit.
> Like mutual funds, ETFs enable investors to diversify their portfolio.
> Because of lower expense ratios, costs involved are lower than those of mutual funds.
Disadvantages  
> One of the major advantages of ETFs is that they are traded just like stocks, but stock trading involves brokerage fees so does ETF trading. This can significantly reduce the profit of an active ETF trader.
>  Liquidity is low due to thin volumes.
> In many ways, ETF SIPs are not convenient for investment.
> Unlike mutual fund investors, ETF holders have to shell out brokerage fees when reinvesting ETF dividends.
A little about how ETFs are faring today.
Global Scenario
Although ETFs were first introduced way back in 1993, investors evinced interest only much later. Now, they are a rage worldwide.  Take the case of the United States. 60% of trading volumes on the stock exchanges there come from ETFs. There are 1,300 listed ETFs with Assets Under Management (AUM) of approximately $1 trillion.
A few popular ETFs:
• QQQs (Cubes) based on the Nasdaq-100
• SPDRs (Spiders) based on the S&P 500
• iSHARES based on MSCI Indices
• TRAHK (Tracks) based on the Hang Seng
ETFs in India
Benchmark launched the Nifty BeEs, India's first Exchange Traded Funds, in 2002. The total ETF AUM today, is in the ballpark of Rs. 10,840 crores. Of this, 83% is held by gold ETFs.  Not surprising, given that the yellow metal is a good hedge against risks in uncertain times and is absolutely loved by most Indians.
That being said, the ETF concept has not caught on as expected in India. This can be attributed to a few limitations.
• ETF units are purchased through stockbrokers, unlike Mutual Funds, which follow the distribution model.  Brokers have no special incentive to sell ETFs   and in fact, find it more profitable to promote individual stock investments.  Fund houses have to bring home ETF benefits to brokers.
• The composition of ETFs mirrors that of the underlying indices.  Frequent changes in index components necessitate portfolio calibration, adding to the cost.  
• Investors can get higher returns from funds which hold stocks that outperform the market.
• Due to demand supply dynamics, ETF prices do not always reflect index values. If there is large variation, it could be on account of price rigging.  There has been an instance in the past when the Nifty fell 5% but the price of a Nifty-tracking ETF rose 300% in the space of 3 months.
Little wonder then, that the share of ETFs in the Indian Mutual Fund industry is a mere 0.3% compared to 9% in the U.S. Ways have to be found to overcome these challenges and arouse investor interest.
ETFs that track non-index stocks and other asset classes like commodities, precious metals and currencies, provide opportunities to further distribute risk. This, coupled with the inherent advantages of ETFs will surely lead to higher investments in the future. However, there's a long way to go before these funds become the first choice of investors.

Posted by Deepak Sinha at 7:53 AM | Permalink | Comments (0) | TrackBacks (0)

Banking activities extend much beyond the retail services which banks provide to individuals. Wholesale banking comprises underwriting, market making, consultancy, mergers and acquisitions (M&A) fund management and the like. The clients in this case are business corporations, government entities and other institutional customers.  According to a study conducted by a global management consulting firm, wholesale banking contributes 30% to India's total banking revenues. From $16 billion in FY 2010, wholesale banking revenues are expected to rise to a whopping $35 billion to $40 billion by FY 2015 and why not, with the following factors driving new business in India:
Infrastructure

Infrastructure is one of the thrust areas in the 12th five year plan (2012 - 2017). The requirement for huge investments will create enormous demand for wholesale banking services like lending, debt syndication, capital raising and secondary market. The caveat - banks must be willing to innovate and come out with sophisticated products especially in areas like project financing.

Globalization of Indian companies

Indian companies are turning international, providing opportunities galore in the following areas for wholesale banking players:
- investment banking, as the number of outbound acquisitions rises
- trade finance and treasury requirements, as foreign trade gets bigger
- global cash flow management for international corporations

The India story
MNCs have responded positively to the India story. Simplified foreign direct investment (FDI) regulations facilitate inbound M&A deals creating several deal structuring, treasury and trade finance opportunities.  Heightened foreign institutional investor (FII) interest also augurs well for the wholesale banking business.
Greater product sophistication

While demand for traditional trade finance facilities like bank guarantees will increase for sure, client interest in bundled foreign-exchange, derivative structures and other such complex products will grow even faster. Banks are gearing up to meet these needs by creating talent pools and developing appropriate technology platforms.
Mid-corporate opportunity
Intense competition and wafer thin margins in the large corporate customer segment have forced banks to woo midsized corporations. As these entities grow in size and ambition, they will require highly sophisticated capital market products.
Regulatory change
The corporate bond and securitization markets in India are currently bogged down by regulatory issues like substantial disclosure requirements. Easing of regulations will surely stimulate growth.
Foreign and local banks are vying with each other for a larger share in the wholesale banking pie. Both have their tasks cut out. Foreign banks need to pursue mid-sized and small companies and also overcome any forex-related disadvantage - since the exchange market operates 24 hours per day, currency exchange rates fluctuate in small fraction of cents . Local institutions on the other hand, should surmount challenges like talent attraction/ retention and technology lag. The stage seems to be set for plenty of action.

Posted by Nirmal Khatua at 5:47 AM | Permalink | Comments (0) | TrackBacks (0)