It's true that banking is one of the most systemically complex industries in the world. But when it starts underperforming mail in simplicity it's time to introspect.
For the sake of banking customers who, as the study points out, are willing to pay up to 4.4% more for a simpler experience as well as be more inclined to recommend the brands.
For the sake of banking profitability, with research suggesting that up to 20% of potential profits are inaccessibly tucked away under layers of complexity.
For the sake of cost savings, which could be as much as 50% and 30% on application and total IT costs respectively, if IT complexity were reduced.
For the sake of innovation, with a majority of banks citing technological complexity as a barrier to it.
Whatever be the sources of complexity in banking, it is becoming increasingly clear that it is an impediment to business value. But as the demands for simplicity - from customers, regulators and bankers themselves - keep getting louder, simplification becomes an exigency.
In 2014, simplicity will become a leitmotif for all banking activities. Banking leaders will focus on simplicity to enhance operational efficiency, competitive advantage, customer-centricity, innovation capability and compliance. Complexity, it is said, is a natural byproduct of sophistication. But sophistication that precludes value is merely style without adequate substance.
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The banking sector, thus far held back by warranted concerns about security and reliability will get in on the game in 2014. By 2016, more than 60% of all global banks are expected to process a majority of their transactions on the cloud. More than two thirds of banking executives who participated in a recent study indicated plans to increase investments in cloud computing.
Now, rising security and reliability standards in the cloud ecosystem are definitely helping to heighten interest among banks. In 2014, banks, who thus far preferred the relative safety of private clouds, are expected to scale their operations into the public cloud domain. This move is also in line with the prediction that by 2017 at least half of all enterprise cloud systems would be hybrid.
But there are also significant competitive considerations behind the shift to cloud. Firstly, the cloud allows banks to redress the legacy IT drag without having to commit to huge upfront capital investments. Secondly, it enables access to best-in-class technology systems and services so that traditional banks can match wits with the new more technologically adept competition. Thirdly, the cloud is almost critical to banks' ability to cater to the demands of digital customers and their preferred touch points. And finally, banks need the versatility and agility of the cloud to succeed in an age characterized by data-driven decision making.
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The banking sector's approach to social media thus far can broadly be described as 'willing but watchful'. That's understandable, considering the compliance risks of committing to a medium where regulatory boundaries are still fuzzy. The reputational backlash to some first-mover efforts also hasn't helped.
But that picture is changing rather rapidly. A leading analyst predicts that almost a third of retail banking customers would have purchased social integrated products or services by end 2016. In three years, social media will become a significant channel of retail banking in Europe, which currently lags Asia-Pacific and the US in this area.
Globally, around 44% of people already rely on social platforms for information on banking products and services. According to a US poll, information made available on social media delivers the highest conversion rate (~18%) amongst customers with intent to buy. In contrast, conversion rates from banking websites, CSRs (Customer Service Representatives) and even branches are in single digits. Banks cannot afford to overlook this customer acquisition opportunity.
Today, although banks have some sort of social media presence, it is mainly used for delivering marketing content. In 2014, banks will embark on more comprehensive social strategies that explore the complete range of possibilities in the medium including transactions, personalization, trend analysis, credit risk management, customer service and crowdsourced innovation.
The regulatory ambiguity is also beginning to lift. Early last year (2013), the Federal Financial Institutions Examination Council (FFIEC) released a guidance document detailing a broad structural framework for US banks to consult for their social media programs. In India, the Institute for Development and Research in Banking Technology (IDBRT) has launched a similar guidance for Indian banks in their social media efforts.
So in 2014, banks will step up the scope and pace of their social media plans. Regulation also shows definite signs of catching up. But the important thing to remember is that the customers are already there and waiting.
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Mobile hardware sales and shipment statistics are arguments that have now become peripheral to the case for mobile banking. So let's hone the focus a little bit.
Around 590 million customers banked on their mobile phones in 2013. In just four years that number will cross a billion, equivalent to about 15 percent of all global mobile subscribers. Mobile payments, meanwhile, have been bounding along - from USD 202 billion in 2012 to USD 410 billion in 2013 and projected to cross USD 1 trillion by 2015 and USD 2 trillion by 2017. That same year mobile purchase volumes will reach USD 1 trillion.
But mobility's role in banking may be truly understood only when it is viewed through the prism of customer expectation.
More and more customers are basing their stay-or-switch decisions not on the availability, but on the quality of mobile services that banks provide. This distinction becomes acutely relevant in the case of younger customers. Innovative mobile services are also emerging as a significant driver of satisfaction among banking customers. Most importantly, customers want banks to innovate services around uniquely mobile opportunities like location to deliver personalized offers.
From a banking channel strategy perspective, especially in emerging markets, the mobile is just another channel even today. That will change soon, given that mobile is expected to eclipse online as a preferred channel by 2017.
Banks have to transition their strategies to acknowledge and account for customer expectations and the unique possibilities of mobile banking. Banks have to understand that mobile is just not an alternative channel delivering convenience but a game changing opportunity for innovation, customer engagement and experience.
In 2014, banks will invest in innovations that will deliver more consumer and enterprise value by leveraging the native possibilities of mobility. Mobile banking will go beyond delivering the convenience of access to leveraging the unique characteristics of the mobile ecosystem.
In 2014, customer expectations will compel banks to evolve from an entry level 'Mobile Also' tactic to a game changing 'Mobile First' strategy.
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