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February 26, 2013

Prevention of bypass surgery or heart attacks for core banking

Posted by Reghunathan Sukumara Pillai (View Profile | View All Posts) at 5:42 AM

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Core banking systems were originally envisaged with the singular aim of maintaining customer account data in a centralized system accessible across the bank's network of branches. Account aggregation into assets and liabilities for general ledger consolidation was inherent in the core. To ably assist front office operations, the system comprised simple processes. Higher value transactions were often routed through multiple approval levels within the core, with a defined workflow.

The evolution of core banking necessitated workflows for customer creation and account opening, and therefore process flows were defined for KYC, de-duplication, and blacklist/negative list checks. However, some providers moved this activity into a different software/module since workflows and interfaces were associated.

As customer demand grew, multiple processes and layers were piled on to the core banking systems. Lifecycle activities for clearing operations, involving lodging of physical cheques, schedule printing, and reconciliation of instruments were incorporated. As were complex trade finance and payment functions including issuance of documentary credit with attachment of bills, payments/settlements with SWIFT message generation and so on. While these proved beneficial in the short run, the core system reeled under the weight. The problem was further compounded as banking moved from people to process oriented, with complex processes and multilevel workflows added at every given opportunity. 

These aging systems, which deftly handled simple accounting functions, are now gasping for breath. By way of remedial action, complex processing can be handled outside core banking with the use of an accounting platform solely for transactions. Alternatively, complex processing functions can be bundled up into modules and plugged in as needed. A strong interfacing mechanism which can integrate to industry standard middleware may be developed.

Transaction processing and accounting form the "heart" of core banking. Segregating all other functions in a modular fashion will result in minimal impact on the "heart" thus preventing a complete collapse.

February 6, 2013

Social Media, for Customers and their Banks

Posted by Vivek Sharma (View Profile | View All Posts) at 9:00 AM

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For a long time, consumers were quite apathetic about their banking decisions. And who could blame them? Products were standard across institutions, with very few or no variations, and one bank looked like the other. Customers chose their bank based on location, acquaintance with employees, and word-of-mouth reviews.

However, in this "knowledge era", many decisions are making their way into high-involvement territory, banking included.  Today's customers are confident, knowledgeable, and highly inquisitive. Before giving their business to any bank, they would like to know a lot more about it. In other words, they are very involved in the products and services they consume.

So, while  choosing a bank, these tech-savvy customers make extensive use of information available on the Internet, including that on social media platforms. They don't  blindly take a decision on the basis of the family's advice or word-of-mouth; they do it based on what they know. These customers make informed decisions by aligning their requirements with the products or services offered by the bank. They also weigh the bank's brand personality against their own.

Banks are facing different challenges from the environment. Apart from dealing with competition and providing services to increasingly demanding customers, they are plagued by concerns of acquiring and retaining them.

Present-day customer behaviour is significantly influenced by social media.  Hence, it is imperative for banks to connect with their customers on social media platforms, share relevant information, take feedback, give heed to problems, and also respond to them in real time.

Moreover, banks need to be proactive and highly responsive to stay relevant in the dynamic world of social media; they also need to customize their services and communication to its trends. In this way, a bank can build its own brand personality, which appeals  to its customers, and also connect with them at an emotional level. It's a fact that customers who relate thus, stay longer, generate greater business, and make better advocates.

Today, banks are at the crossroads of social media. They can choose to be active in it, or stay away altogether. Those that take the latter route must know that they're doing so at the risk of losing customers and market standing

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