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February 25, 2016

Banking on cloud

Posted by Sheenam Ohrie (View Profile | View All Posts) at 9:39 AM

There is this telling anecdote of how an e-commerce giant discovered that most of the banks in a particular market did not have the infrastructure to handle the estimated transaction volumes of a one-day only 'Big Billion' sale. Now, it is hard to think of a provisioning strategy that could solve that problem without leveraging the potential of the cloud.

For banks, the key question when it comes to cloud adoption is not 'why', but 'how'. Based on our experience with our financial services partners, we believe that banks should follow a simple three-step strategy to transition smoothly into a cloud-first model. The first step is to shift non-critical environments, like development and testing, to the cloud. This should be followed by a focus on leveraging cloud techniques to optimize infrastructure investments and performance. The third step is to move the production environment to the cloud and take a cloud-first approach to all future technology-sourcing decisions.

In our view, banks betting on digital leadership should at least have progressed to the second phase of this three-step program. There are already some early examples of cloud-first banking. Robeco Direct N.V., a Dutch bank, has moved its retail banking platform to the cloud, following the country's banking regulator authorizing the use of Amazon Web Services. Bankinter, a leading Spanish bank, is using the cloud to run its credit risks simulation. In fact, it has been able to do these simulations in just 20 minutes, compared to the 23 hours it took earlier.

Banks need to view the cloud as an enabler of new business model rather than a technology, and evaluate its utility based on the value it delivers to all stakeholders. Granted, there are still some security concerns and regulatory grey areas that need to be addressed. But a coherent cloud strategy will be a critical component of any successful digital banking strategy.

Found this perspective interesting? Checkout our point-of-view on key strategic and technology trends that are transforming banking here. And do let us know what you think.

February 19, 2016

Cybersecurity - A strategic strength for truly digital banks

Posted by Rajashekara V. Maiya (View Profile | View All Posts) at 7:59 AM

Cybersecurity threats are the unpleasant consequence of increasing digitization. The more connected the world becomes, the more points of entry there are for cybercriminals. Over the past few years there have been many disconcerting revelations of billions of dollars being skimmed off some of the largest financial institutions in the world. There have also been a series of extremely critical data breaches at some of the most technologically savvy banks.

As banking ecosystems expand to incorporate more partners and services and as the number of digital touchpoints proliferate, the threat landscape for digital banking will only broaden. As security increasingly becomes top of mind for digital banking customers, a bank's digital security credentials will become an important component of customer trust as well as competitive differentiation. In fact, credit ratings agency Standard & Poor is already considering the possibility of downgrading banks that are weak on cybersecurity.

The biggest challenge for banks will be to deploy robust threat protection technologies and strategies without compromising customers' digital banking experience. This means that the industry will have to focus on innovation to achieve the right balance between the two. Many banks are already exploring new technologies and possibilities to achieve that balance. Halifax UK, for instance, is experimenting with electronic wristbands that use a customer's unique heart rate to authenticate digital transactions. Barclays is also expected to roll out a voice-biometrics system to its 12 million retail customers that will not only enhance security but also cut identity verification time from 90 seconds to less than 10. In Brazil, Banco Bradesco Cartoes is introducing fingerprint-based biometric authentication at its ATMs. Emerging technologies like Blockchain could also help revolutionize the security of digital transactions.

Even as banks continue to invest in upgrading their security infrastructure, it looks like cybersecurity could become an important component of regulatory oversight. Financial services regulators in New York state, for example, are already working on detailed cybersecurity regulation for banks that mandates policies for vendor management, authentication protocols, third-party security management and breach notifications. Once these guidelines are finalized, they could even be extended to the rest of the United States. So as the pressure mounts from cybercriminals, customers and regulators, banks will have to prioritize security and invest in solutions that detect and prevent attacks before they actually happen.

Found this perspective interesting? Checkout our point-of-view on key strategic and technology trends that are transforming banking here. And do let us know what you think.

February 18, 2016

If you can't measure it, you can't manage it

Posted by Abhishek Singh (View Profile | View All Posts) at 12:14 PM

Customers rule the marketplace. To witness this, one only has to look at the various indices that enterprises use to measure the customer experience such as Net Promoter Score (NPS), Customer Satisfaction (CSAT) index, Customer Experience Index (CXI), Customer Effort Score (CES), First Call Resolution (FCR), etc. However, customer experience is a dynamic phenomenon governed by several factors. There is the customer journey, i.e., how a customer moves through multiple stages of a product consumption lifecycle with an enterprise. Different consumers interact with enterprises through various touch-points such as website, mobile app, physical store, call center, social networks, etc. Further, while some consumer trends impact the top line, others impact the bottom line and some impact both. Thus, arresting certain negative trends can be cost prohibitive while driving some positive trends may generate no revenue or profitability.

Customers rule the marketplace. To witness this, one only has to look at the various indices that enterprises use to measure the customer experience such as Net Promoter Score (NPS), Customer Satisfaction (CSAT) index, Customer Experience Index (CXI), Customer Effort Score (CES), First Call Resolution (FCR), etc. However, customer experience is a dynamic phenomenon governed by several factors. There is the customer journey, i.e., how a customer moves through multiple stages of a product consumption lifecycle with an enterprise. Different consumers interact with enterprises through various touch-points such as website, mobile app, physical store, call center, social networks, etc. Further, while some consumer trends impact the top line, others impact the bottom line and some impact both. Thus, arresting certain negative trends can be cost prohibitive while driving some positive trends may generate no revenue or profitability.

This creates specific challenges for CXOs. For instance, what does the chief executive officer (CEO) of an enterprise measure and what does he ignore? Should the chief marketing officer focus on the same metrics as the CEO? These questions are also relevant for chief finance officers, chief information officers and chief technology officers. While all these departments impact the customer experience, how do you customize the view that they can influence the most?

 

The analytics-driven Customer Experience Measurement System (CXMS) simplifies this complexity. It allows decision-makers to focus on their business instead of wondering about tracking the right metric and the impact of their decisions on the customer experience.

 

CEMX-1.jpg

 

 CXMS is a system to measure customer experience levels across various phases of the customer journey and across multiple customer touch-points using a set of pre-defined metrics. The system collects data from the organization around products, processes and personnel. Metrics may be categorized as core or secondary depending on the impact on an organization's cost, revenue and/or operating efficiency. The weighted average of all the constituent metrics yields a measure known as Total Experience Index (TXI). This helps organizations measure and monitor the state of customer experience to improve business profitability. CXMS comprises a designation-based dashboard for different stakeholders to view their areas of priority and identify how they impact the overall customer experience. Further, the system can establish thresholds for automated alerts and monitoring. In case of any issues, a drill-down menu helps identify the failing factor behind the metric and its source - whether it is related to the system, an employee or the nature of the product/service that the organization is selling.

 

A key challenge with creating a superior customer experience is to understand how customers feel, i.e., the emotional contribution. This can be a happiness trigger, boost in self-esteem, increased intimacy with loved ones, etc., that make the customer experience positive or negative emotions. Thus, while the science can be measured, managed and influenced, the emotional factor can only be monitored. CXMS helps organizations get a complete grasp on the mathematics, statistics and analytics behind customer experience, thereby minimizing the unpredictability of this variable. This allows employees and executives to focus on the instinct-driven decisions while the system provides analytics-based insights. While I agree that there are aspects of CX that cannot be measured, the ones that can, should be - accurately.

 

Today, technology is pervasive and consumers are increasingly connected with each other and their business service providers. Social media, smart phones and wearables are influencing human choices. In such an environment, it is intriguing that companies continue to depend on surveys and feedback forms to understand customer sentiment about products and services. Today's customers communicate with their providers through every single interaction about how they feel about the business and their experience. The question is - are companies listening?

 

CXMS patent has been filed with the United States Patent and Trademark Office (USPTO) and is currently awaiting award.

February 11, 2016

Automation in the Truly Digital Bank

Posted by Venkatramana Gosavi (View Profile | View All Posts) at 9:28 AM

The banking back-end is no stranger to automation. However, in a digital banking model, automation will play a more prominent role both in terms of scale and sophistication.

There are three reasons why large-scale automation is absolutely essential to digital banking.

First, it will be critical in enabling banks to cope with the exponential increase in transaction volumes in the digital era without compromising cost, efficiency or accuracy. Without a centralized and automated solution, even something as fundamental as reconciliation will be prone to expensive delays or inadequacies in compliance reporting. Automation enables banks to centralize reconciliation across channels, reduce costs and enhance productivity, efficiency and accuracy.

Second, large-scale automation across all enterprise systems and processes will be required to deliver a differentiated no-break service experience to customers at various front-ends. For instance, as banking increasingly becomes mobile-only, banks will have to enhance the functionality of their mobile apps to go beyond merely enabling transactions. This means that even account origination, which currently requires a significant degree of manual intervention in most banks, will have to be completely digitized. So the level of automation across the enterprise ecosystem will have an impact on the banking experience at the customer interfaces.

And third, digital banking is shifting the focus away from the branch. This presents a huge opportunity for banks to release valuable human resources from mundane repetitive tasks and reassign them to more value generating activities. Large-scale automation, driven by business rules, algorithms and machine learning, can help banks standardize recurring tasks and enhance the overall productivity of the workforce.

Automated investment platforms or robo-advisors are already making a substantial impact on a specialized function such as wealth management. Even incumbent banks are experimenting with robots to cognitive computing to automate and streamline the digital banking experience. But without a concerted and comprehensive effort to automate banking, banks will find it challenging to achieve any tangible improvement in efficiency or experience. In a world where many consumer devices are becoming more autonomous and smart, a significant degree of automation will be required for banks to engage well with all these entities.

Found this perspective interesting? Checkout our point-of-view on key strategic and technology trends that are transforming banking here. And do let us know what you think.

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