Commentaries and insightful analyses on the world of finance, technology and IT.

April 21, 2014

Big data use cases in financial services

In a hyper-competitive, customer-driven environment, Financial Services Institutions (FSIs) must capitalize on internal and external data sources to gain an accurate understanding of customers, markets, products, services, channels, and competitors. In addition to structured data, a vast amount of unstructured but valuable data is generated through social media. FSIs must index, consume, and integrate structured and unstructured data using big data technology to realize the value of data.

The big data market is worth over US$ 5 billion and is expected to exceed US$ 50 billion by 2017. Over 2.5 quintillion bytes of data is generated daily. With rapid advances in technologies like MapReduce, Hadoop, NoSQL, and the cloud, there is significant innovation in data. In addition, the cost of hardware (e.g., NAS-based storage, in-memory data grids/ RAM, etc.) is reducing. Further, software-enabled storage products are now available at reasonable prices. A combination of these factors facilitates highly scalable architecture required for big data implementations. 


Let me highlight key use cases of big data technology for FSIs:

1. Risk management: Big data helps FSIs manage liquidity, credit, default, enterprise, counterparty, reputational, and other risks. It also enables centralized risk data management. Real-time individual risk profiles can be created for customers based on their social networking activities, purchase behavior, and transaction data.
Big data can help meet regulatory requirements in a cost-effective manner. Regulatory mandates require storing and analyzing transactional data dating back several years. Big data helps build dynamic data structures that comply with changing reporting requirements. It also enables instant analysis of risk scenarios for institutions with growing data volumes.

A comprehensive view of aggregated counterparty risk exposures, positions, and impact enhances performance and reduces default. Big data helps analyze behavior profiles, cultural/ demographic segments, and spending habits of customers to enhance the lender's risk management capability. Predictive credit risk models based on a large amount of payment data helps prioritize collection activities. In addition, market events across regions can be captured and insights gleaned in real time from news, audios, visuals, and social media.

2. Fraud detection: Big data can help in fraud mitigation, Know Your Customer (KYC) and Anti-money Laundering (AML) monitoring, and rouge trading/ insider trading prevention programs. Big data analysis enables detection of deviation from a standard pattern of customer behavior for proactive fraud identification and prevention. For instance, real-time outlier detection and analysis can be undertaken for a credit card used in distant locations within a short span of time. Similarly, real-time analysis of transactions based on diverse data sets is possible. When fraud is anticipated, the transaction can be blocked even before it takes place. Significantly, big data can help in ATM fraud reduction through proactive analysis of geographical and other data points, and identification of ATMs that are likely to be targeted by fraudsters.

3. Customer delight: Big data can help FSIs better understand the needs of their customers. Petabytes of data can be analyzed in real time to deliver bespoke services and products to customers. Real-time analysis of unstructured data from social media and other sources enables customer and trading sentiment analysis (find out how customers feel about a new product/ service, or assess influencers and customer sentiment in response to broad economic trends/ specific market indicators). FSIs will be able to better manage their brand image by proactively anticipating customer needs and issues, and responding to negative opinions.

Big data aids in micro-level understanding of clients and enables targeted and personalized offers. Significantly, it offers a 360-degree view of the customer. Issue resolution at contact centers can be improved through real-time analysis of unstructured data (voice recordings) for content quality, sentiment analysis, and trends and patterns identification. Internal customer logs and social media updates can be analyzed to identify customer sentiment and dissatisfaction points for timely action. Big data can recommend robust call center data integration with transaction data to reduce customer churn, enhance up-sell and cross-sell; and enable proactive alerts. It facilitates extraction of unstructured information from IVR and other customer service systems, and enables blending of internal data with social media inputs.

4. Sales enhancement and cost reduction: FSIs can gain useful insights into when and where customers use their credit/ debit cards, and customer behavior patterns from big data. Based on the monitoring of customer behavior, FSIs can take predictive actions and enhance their cross-sell and up-sell capabilities. Sentiment analysis-enabled lead management and sales forecasting can be initiated through social media analytics. It can also facilitate real-time and proactive micro-segmentation, and smart location-based offerings.

Several FSIs are challenged by legacy systems that are costly to maintain. These institutions can migrate their legacy data to integrated big data platforms and add valuable data sources to mine rich and valuable insights. Operational efficiencies can be further improved with big data platforms that enable monitoring and analysis of transactional and unstructured data (voice recognition, social media comments, and e-mails). The workload at financial service enterprises can be predicted and staffing needs in branches and call centers can be optimized.
5. Operations and execution: The operations of FSIs that have undergone mergers and acquisitions can be challenging. New core infrastructure solutions enabled by big data can streamline operations. For example, big data enables standardization of loan servicing time across channels and entities. In addition, institutions can adopt data processing approaches and optimize the supply chain. Enterprise payments hub optimization provides a better view of payments platform utilization.


Big data can improve operational capabilities of FSIs and enhance global, regional and local services. Real-time insights from transactions help provide the right services to customers and at the right price using the right channel. Capital markets firms have multiple data sources and data silos across the front, middle and back office. Big data allows operational data store consolidation. When data tagging is undertaken using big data, trades/ events can be identified, thereby preventing duplicate, invalid or missed trades. Big data enables storage of a large quantity of historical market data and allows feeding dynamic trading predictive models and forecasts. It also facilitates analysis of complex securities with market, reference and transaction data from diverse sources. In addition, organizational intelligence can be improved through employee collaboration analytics.


Have you taken the big leap yet?

April 1, 2014

The US Mortgage Industry Outlook

Regulatory impact

The mortgage industry in the US has undergone a significant transformation post the global financial crisis. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) was formed in 2011. The CFPB has been very active in rule-making since then. One of the landmark events was the coming into effect of the changes to the Truth in Lending Act on 10th January 2014. The changes included the Ability-to-Repay and Qualified Mortgage Standards rules, which are expected to bring uniformity in the products offered by various lenders to borrowers.

Government-sponsored enterprise (GSE) reform

A majority of the mortgage loans today are guaranteed by GSEs Fannie Mae and Freddie Mac. The various policy announcements clearly indicate that there is clear consensus among authorities about reforming GSEs, reducing the role of government in guaranteeing mortgages and bringing private players back in the market. Work is already underway on building a new Common Securitization Platform (CSP) that will replace the two disparate platforms from Fannie and Freddie. This is another major event that is being tracked closely by the mortgage industry since it will require them to make significant changes to mortgage securitization and investor accounting practices.

Shift in originations from re-finance to purchase

The originations sector of mortgage lending faces headwinds after enjoying years of strong growth led by re-financing due to low interest rates. With rates expected to rise, lenders need to shift their focus to purchase loans, which require different sales techniques as compared to re-finance. In this challenging scenario, mortgage companies will need to show innovation to achieve growth. The role of IT will be a differentiator as newer channels, such as the Internet and mobile, will be critical to increase volumes and reduce cycle time to close a loan. As we see an increase in the millennial generation as first time buyers, lenders will need to look at these channels, which will have higher adoption rates with this demographic. The Qualified Mortgage rule from CFPB, which took effect in January 2014, and the soon to be announced Know Before You Owe rule from CFPB, scheduled to come into effect on August 2015 makes it even more critical for mortgage lenders to build the right processes and systems for originating and closing mortgage loans in compliance.


Choosing the right technology and business partner for mortgage lenders is now more critical than ever given the significant challenges expected in the future. We are already witnessing churn in the mortgage industry, leading to some companies gaining an edge over the rest of the pack by being more agile in responding to the changes in the market and leveraging innovative technology and business solutions to differentiate themselves.

February 19, 2014

Breaking the Glass Ceiling in IT Leadership

Over the past decade and a half, large numbers of women have joined the IT workforce, albeit mostly at the entry and junior levels. The percentage of women in middle and senior leadership positions are disproportionately low. Looking at this imbalance, one is forced to question the wisdom of the age-old saying "The cream always rises to the top"

Surely history has proved time and again that women in leadership positions, irrespective of industry or sector, are no less capable than men - Margaret Thatcher in politics, Indira Nooyi in FMCG, Marissa Mayer in IT are just few examples. So why then are so few women visible in middle and senior leadership positions in the IT industry? What are the invisible barriers and biases against women that are stopping them from gaining their rightful positions commensurate with their potential?

In my view, following are the few key factors:

  • Assumptions (often made subconsciously) by managers that women may not be able to take up critical/stretch assignments due to family and personal commitments. This leads to women with potential ending up with "soft" assignments where they don't have enough opportunities to prove their leadership capabilities. Consequently, they get trapped in a viscous circle and the professed "lack of ambition" becomes a self-fulfilling prophecy.
  • In spite of their rapid entry into workforce across geographies, women face a key barrier - the lack of supporting ecosystem. In majority of instances, working women are the ones who take care of the home and children. Add to this mix inflexible work policies (e.g., no or limited work-from-home facility or extended leave policy) and/or lack of supporting infrastructure (e.g. daycare facility) and working women's situation becomes truly difficult. No wonder then, a significant number of women with high potential are left with no other option but to slow (if not totally abandon) their thriving careers midstream. Unfortunately, in most such cases, managers construe this as "lack of ambition" or "personal constraints" on the women's part, and don't really analyze the root causes and try to address them.
  • Another key factor that holds women back is "stereotyping". There is a significant lack of awareness of gender diversity at middle and senior leadership levels. Considering the low percentage of women at these levels, there is really no credible benchmark and awareness on the unique attributes women in leadership positions often exhibit (building relationships, resolving conflicts amicably, inspiring and motivating others, etc.). Furthermore, the same personality attributes are often looked at differently in men and women. So, for example, the "go-getter" approach in men is looked at as being positively assertive while if women use a similar approach, they are considered aggressive.  It is also a fact that, to an extent, women themselves contribute to the stereotyping. Many women have been raised in environments that dictate certain personality characteristics as becoming of women; or where sons have always been treated superior to daughters. For example, many of these women have been taught in their formative years that being submissive, always putting others before self and not being ambitious but accommodating are the superlative virtues they should possess. No wonder then, it becomes difficult for many women, with otherwise excellent leadership capabilities, to get rid of such limiting traits and beliefs.

So what can be done by IT organizations to truly level the playing field for women and men in middle and senior leadership positions? I am interested in knowing your views. Following are my thoughts on some of the solutions.

  • Over the next several years, IT organizations can actively focus on hiring or promoting more women in middle and senior leadership positions. The approach should not be seen as a favor to women but a belated attempt to right long-standing gender imbalance issues. Care should be taken that only truly deserving women are promoted or hired to leadership positions. And certainly, when looked at with an open mind and without any biases, there is no paucity of deserving women in the IT sector. The active promotion of women in leadership positions will enable the creation of role models who would inspire and mentor other women leaders to gain confidence in their own unique leadership capabilities. Ultimately, this will create a virtuous cycle resulting in an increasing number of women rising to leadership positions. Organizations should also proactively focus on enabling networks for women leaders at all levels - so they can actively seek mentoring and guidance on leadership aspects.
  • Organizations should also proactively enable gender diversity orientation education at all levels of leadership. Managers should be clearly aware of prevalent biases (even if subconscious) against women in leadership. Such a focus on gender diversity awareness will help create a more gender-neutral environment, where women with potential remain focused on enhancing their leadership skills rather than constantly looking over their shoulder at how their leadership traits are being perceived by their manager.
  • Every organization should create enabling policies and infrastructure using a two-pronged approach of entailing changes in the organization's workplace policies as well as a change of mindset among decision makers across all levels. Women-oriented policies (e.g. extended leave policy, working from home, flexi-timing where appropriate) and infrastructure (e.g. day care facility) is certainly the way to go. However, this is not enough. Managers at all levels should be sensitized that these policies are meant for both genders and imperative to create a more equal opportunity workplace. It should also be made clear that business results and value added would be the sole criteria for a leader's performance evaluation. And factors like the number of leaves taken, work from home hours availed, hours worked, etc. are immaterial.
I am sure you would have additional valuable insights on the said subject. I would be interested in knowing your views. You may please post your comment on this blog space or email me @

January 21, 2014

Making customer loyalty management through mobile banking truly work!

In my last blog, I had posited that banks must leverage their mobile channel for effective customer loyalty management. In this blog, I will share recommendations on what banks must do with their mobile channel for effective customer loyalty management.

1. Don't be the copycat. Banks must not clone their online banking loyalty management strategy onto mobile banking channel. This will prove counter-productive. Instead, banks must leverage the distinct features of the mobile channel. Specifically:

  • Mobile messaging system (push notification, SMS, MMS) should be a key focus. These should be leveraged effectively to occupy and retain customer mindshare. The mobile messaging system enables low-cost delivery of relevant news, actionable offers and reminders. For example, banks can focus on helping customers gain maximum benefits from the loyalty program through proactive alerts when their award points are close to the expiry date.
  • Location-based services in conjunction with mobile messaging to influence consumer behavior in a proactive and timely manner. Banks must keep the content and the customer's frequency preferences in mind though - add the context within location-based services. Real-time personalized offers based upon customer location will enhance the customer's experience. For example, when a customer is near a concept branch, an SMS alert can be sent providing information on new technology-enabled services or relevant products based on her preferences. She can then try the product/service at the concept branch. Focusing on linking the mobile loyalty program (and, by extension, loyalty programs from all other channels) to a centralized customer database (that captures all of the customer's purchasing behavior and preferences) is desirable to enable timely and relevant offers.
  • Loyalty programs through the mobile website. Banks must not overlook their mobile website and focus overly on native applications for loyalty management. Considering many non-smartphones have browsing capabilities, enabling mobile websites would expand a bank's reach. The focus should be on optimizing the mobile website to make it easier for customers to enable loyalty reward redemption, check their reward points/status, etc. Banks can further focus not just on enabling superior experiences on the landing-page but also enable HTML5 and other smartphone features (e.g. cameras, etc.) to facilitate superior experiences.
  • Mobile-based points redemption. A high percentage of conventional loyalty points and rewards go unredeemed. By enabling meaningful mobile reward and coupon redemptions, banks can increase their usability. The focus should be on reducing the number of steps involved in redemption.
  • Native mobile application to enhance user experience. Enabling good loyalty-related mobile applications that can enable customers to sign in for the program, check their reward point/balances, and also access the mobile loyalty card and redeem reward points is desirable. The app can provide a customizable user interface and even leverage the camera to enable integration with the offline experience. As an example, FIS Mobile Wallet comprising Cardless Cash Access is a cloud-based platform that provides financial institutions control over the users experience and branding within the application. In addition to many other features, this solution enables target offers and mobile coupons redemption.
  • Invest in technology. Technologies supporting self-identification of location, NFC, geofences, Wi-Fi related technologies and others are crucial for enabling location-based services. Banks must focus on enabling and integrating smart cards, NFC technology, RFID, and other advanced payment applications (e.g. mobile wallet) into their mobile loyalty program. There must also be a focus on integrating banks' various channels onto a single platform for enabling a unified customer view in real-time. Running the rewards program over a single platform that encompasses mobile, social, online and location-based technology is desirable. Leveraging customer intelligence technology will help in enabling targeted offerings, understanding customers' likes/dislikes and financial behavior, ensuring experience personalization, identifying customer segments to avoid for loyalty management programs, and more. Further, banks can focus on predictive analytics to enable innovative loyalty offerings.


2. Focus on differentiation through targeting and advanced segmentation. The loyalty programs of many banks lack differentiation and, as a result, are unable to deliver distinctive customer experiences. Loyalty programs should not reward all customers with the same incentive - this would just add to costs without providing commensurate benefits. Unfortunately, cost-to-serve studies reveal that many banks spend way too much serving their lowest-value customers. Needless to say, this is self-defeating. It is imperative that the focus be on rewarding the most profitable customers and on product and service improvements for this customer segment.

3. Follow a holistic strategy. A bank's mobile channel loyalty management strategy must clearly tie-in with their larger multichannel loyalty program strategy. Further, a bank's mobile loyalty management strategy must be flexible and scalable to cater to evolving and future mobile devices and platforms accessing myriad data streams. The focus must also be on mobile loyalty management program measurement with the use of robust analytics. Identifying the right metrics is crucial. For example, it is necessary to measure effective impact in terms of incremental customer spend (and also customer satisfaction and loyalty improvement) vis-à-vis loyalty program investments. Looking beyond just the loyalty scores and enabling complete loyalty systems is desirable. Loyalty metrics that sort the customers into key categories (e.g. positive, neutral, negative) can be considered.


For a considerable period, many proactive banks have already been effectively leveraging the mobile channel for effective customer loyalty management. As an example, in Aug 2011, Citi and Best Buy had rolled out the "ThankYou Rewards" - a mobile loyalty program. The free application would award points to consumers for using their Citi credit card or for conducting other banking-related activities. Furthermore, users could browse and search Citi's Rewards catalog, which featured a selection of Best Buy products and other premium items. Users could redeem their points at their local Best Buy or even remotely.

November 4, 2013

Why banks must leverage the mobile channel for effective customer loyalty management!

Today, more than ever before, customer retention has become crucial for banks. After all, it has been well established that, for banks, the cost of new customer acquisition is much higher than the cost of retaining the existing customers. Hence, the role of effective customer loyalty management cannot be overemphasized. When customers are more loyally engaged with their banks, they not only buy more products and services but also aid in new customer acquisition through word-of-mouth publicity. Moreover, loyal customers have been seen to purchase more services and products and have a long-lasting relationship with their bank.



For the past few years, many banks have leveraged myriad approaches for their customer loyalty management - for example, by enabling preferential rates and discounts, personalized and efficient services, attempting to deliver unique customer experiences, and much more. However, today, there is far more pressure on banks to maximize value for their customers and with minimal impact to the bank's bottom line vis-à-vis their loyalty management programs. It is in this light that the role of the mobile banking channel in customer loyalty management becomes crucial.




The favorable trends listed above are further complemented with three key enabling attributes of mobile vis-à-vis loyalty programs




  1. Accessibility accentuator

  • Loyalty programs through "offline" channels (like a branch) are more transaction oriented, for example, customer enrollment, point-of-sale transaction, etc. The mobile channel, on the other hand, enables pull-based and relationship-driven engagement.
  • Enabling a loyalty program through the mobile banking channel can help banks immensely increase the program's access to their customers. Customers have better control and access on a real-time basis. The loyalty program becomes embedded in the customer's lifecycle with the bank on a real-time basis.
  • Mobile banking users are known to access their financial information more than users who access only the online banking channel. This provides greater opportunities for banks to cross-sell and up-sell services and products, and enables purchase rewards and other loyalty incentives. Customers who use their reward points make even more purchases, thereby generating revenue for banks.

2. Stickiness solidifier

  • Convenience is the most important factor for a customer's stickiness with their bank and the mobile channel has proven its capabilities in terms of enabling convenience. A significant percentage of mobile banking users consider their mobile banking experience as the primary reason for staying with their bank.
  • The mobile banking channel is already enabling deeper customer engagement and helping meet evolving customer expectations (for example, customers have taken a liking to sophisticated capabilities like remote data capture, or RDC)
  • Moreover, mobile banking users have been found to be better advocates of their banks - they are more likely to recommend their banks to others as compared to non-mobile banking users

3. Contextual clarifier

  • Mobile banking enables banks to provision new types of real-time contextual information about the customer - purchasing behavior, spatial and transactional information, etc. Loyalty programs of banks can effectively leverage these real-time contextual insights to gain the greatest bang for their buck.
  • The mobile channel enables greater control to banks (vis-à-vis their loyalty programs) on when and how they interact with their customers - in both the pull and push mode.
  • It enables greater timely leverage of opportunities for banks from the customer's relevance and context perspective. For example, based on real-time information, the bank can send customized messages on personalized offerings - one that is based upon the customer's current location, financial behavior and transactional data history.


Proactive banks are already capitalizing on their mobile channel to achieve effective loyalty management. Last year, Intuit Financial Services released a mobile loyalty rewards programs for banks. The "Mobile Purchase Rewards" feature enables customers to receive/activate rewards based on their personal purchasing habits or customized discounts that are merchant-funded. Customers are able to redeem the reward/discount by simply swiping their bank's ATM/debit card.

In my next blog, I will share recommendations on what banks must do to effectively leverage their mobile banking channel for robust loyalty management.

October 22, 2013

Technology trends in financial risk and compliance

Due to recent global economic turmoil, the regulatory landscape for financial institutions has rapidly changed in past few years, driving the technology landscape to advance along with it in order to ensure effective compliance. During this timeframe, expectations from these technology solutions have amplified radically and the list of critical success factors for a compliance solution has accordingly emerged. The factors, which used to be considered the most important ones in a solution, are today considered to be mere qualifiers. On the other hand, criteria that were considered merely desirable--like time-to-market, automation, etc.--have now occupied the front seat in view of heavy penalties being levied upon institutions for non-compliance.

As a system integrator, we have partnered many global financial organizations through their compliance journey and worked closely, not only with client business and IT teams but also with product vendors who provide the technology solutions. Our partnerships with clients and product vendors have enabled us to experience this emergence in regulatory landscape and technology solutions first hand. Through this blog, I would like to throw some light on the top 3 trends in this emerging landscape:

  1. Adoption of industry-leading compliance products
    Financial institutions across the globe are increasingly adopting product-based solutions to fulfil their increasing demand of compliance solutions and support. In the current regulatory landscape, change is always imminent and institutions are constantly looking for ways to keep pace. Product-based solutions like Nice Actimize, Detica, Mantas, etc. in the compliance space, and MetricStream, OpenPages, RSA Archer, etc. in the risk space, have multiple advantages over traditional custom developed in-house applications. A few of those advantages are worth mentioning here.
    • Shorter time to production
    • Greater automation
    • Ease of change
    • Reduced cost of ownership
    • Advanced in-built reporting and analytics
  2. Unified compliance approach
    Over a period of time and as a result of mergers and acquisitions, most financial institutions end up having multiple products and solutions that cater to a logically similar function of the bank. Though the resulting technology landscape is a result of unavoidable events, it introduces inefficiency and inaccuracy into the bank's operations.With the availability of product-based solutions for risk and compliance in the market, banks are unifying multiple legacy applications into a single enterprise-wide compliance application. This ensures better control of compliance status since all the information is available at one place. The key advantages of having a unified compliance platform include:
    • Operational efficiency of compliance users
    • Effective due diligence
    • Easy entity resolution across LOBs
    • Reduced operational costs
    • Consistent predefined workflows across the enterprise
  3. Segregation of decision-making and workflows
    Any governance, risk and compliance (GRC) platform primarily requires two core capabilities for optimal business use - decision-making and workflows. These two are fairly dissimilar in nature and require different technical capabilities from the platform offering them. The decision-making capability is required to intake a lot of raw data, process it using defined business rules and identify "black swans". This huge data intake and processing is typically better served using a two-tier architectural model, similar to that of a client-server set up.

On the other hand, the workflow capability is expected to provide a pre-defined lifestyle to the issues identified. This requires assignment at every step of the workflow and integration with other organizational processes, like email, document management, etc. A web-based architecture is normally a good fit for this type of process management capabilities.

Product vendors in the risk and compliance space are acknowledging the different nature of requirements and aligning their platform components accordingly to offer a comprehensive solution to clients.

September 30, 2013

It's a watch...It's a bracelet...No, it's a wearable gadget!

As I was packing my clothes, shoes, watches, toiletries, medicines, an assortment of chargers for my personal phone/work phone, tablet, camera, etc. for a trip I undertook recently, I realized how arduous packing can become at times. It doesn't end with carrying just any set of clothes or shoes - you need to pack separate pairs of formal and semi-formal clothes and shoes, not to forget your ties. If a theme party or outdoor trip is also a part of your trip schedule, then there is another, separate set of required items to carry. If you are an avid runner - in come your running shoes too, as a part of the already loaded baggage. Luckily, I don't wear my spectacles regularly; else I would have had to carry it along with my sunglasses...the list becomes endless!

Many of you reading the blog must be wondering by now as to what this blog is all about - is it about fashion? If so, why is it published here on FinSpeak? Let me assure you, the blog is definitely not about fashion in its truest sense, but, yes, it is about another fast upcoming trend - one that has all the hallmarks of becoming a fashion statement.

That brings me to my title, which, as almost everyone knows, is inspired by the quote from the Superman movies. Yes, I am talking about wearable gadgets, the newest smart fashion trend with a utility value. First up, what are wearable gadgets? In layman terms, wearable gadgets are electronic devices that can be worn by the user. These wearable gadgets are not just any other another electronic device to be carried around - they are mobile, Internet-connected computers, and smart in the form of regular attire we wear, like spectacles, shirts, shoes, bracelets, wrist bands, etc. Broadly, the wearable gadgets can be in the form of a fitness device (like Jawbone UP, Nike FuelBand, Fitbit One), smart watch (Samsung Galaxy Gear, Pebble, Sony SmartWatch 2), smart glasses (Google Glass) and even smart clothes. There is plenty to choice, and in various forms, shapes and sizes.

Wearable gadgets are witnessing significant traction as fitness devices (primarily in the form of bracelets or wristbands). These gadgets keep tabs on the user's fitness (through sensors) by tracking, collating and analyzing movements, sleep patterns, heartbeat, etc., and passing on the feedback to the user about their stress levels, lifestyle choice (active or passive), etc. Doesn't this sound interesting? I have a personal physician or physiotherapist at hand (literally on my hand!).

Now, if you fancy watches instead of bracelets, there are smart watches to choose from as well. Today's smart watch is a smartphone accessory - it can make calls, send emails, surf the Internet, pick notifications, provide pedometers, and other productivity apps. The smart watch journey has just begun, and all eyes are literally on the much awaited iWatch (the rumored smart watch from Apple). Now, having discussed bracelets and watches, the next accessory to look at will be glasses. For now, in "wearable lingo", when someone says smart glasses (head-mounted camera and display), it's synonymous with Google Glass. This despite the fact that there are other smart glasses available from Vuzix (Smart Glasses - M100), Vergence Labs (Epiphany Eyewear), etc. Currently, Google Glass is still in limited beta mode and shared with a select few. In fact, Google Glass itself was transformed into an instant celebrity when a cast member of the Big Bang Theory wore it to the Emmys this year.

The tech and analyst community is awash with multiple use cases for Google Glass in mobile banking, claims documentation, telemedicine, training and demos and many more, the list is endless. All these are in addition to basic functions like browsing websites, reading mails, texting, GPS navigation, shooting photos and videos, etc. It's only a matter of time before an array of smart glasses flood the market, giving consumers like me a lot to choose from. These wearables are not just any fashion item to choose from; they come with a lot of utility value. However, just like any new trend, wearables come with concerns too - the biggest one being privacy. I am sure this is something manufacturers will take into account as this market matures and even users of wearables will understand the utility value better. To determine if such privacy concerns will stifle the adoption of wearables, take the example of Facebook. For all the privacy concerns raised by critics, the social network boasts 1.15 billion active users per month (as of June 2013).

Having said all this, I am truly ready to take a look at wearables. The next time I travel, it might increase the time I take to pack my belongings but given their utility value, that's hardly a concern. The real question is, are you ready?

August 30, 2013

Core banking solutions and test data management

Why should core banking application vendors support basic test data management (TDM) capabilities?
Today's banking business and growing competitive landscape demands that mission-critical enterprise applications operate with precision and a high degree of predictability. Core banking applications top this criticality list due to their coverage, dependencies, impact and high level of integration with the bank's enterprise applications. By virtue of online interfaces and batch feeds, core banking applications are able to keep enterprise wide applications up and running, sometimes even 24x7x365.

Migrating to new applications and upgrading existing ones are a common phenomenon in banks. A critical requirement when this happens is that the activities take place seamlessly and with minimal adverse impact to customers, the business and operations. This only happens when the bank reaches a certain level of testing maturity, something that is achieved through continuous innovation. In addition to innovation, banks are also constantly looking to achieve cost reductions in testing and TDM.

Testing and TDM have normally been considered "business as usual" activities by banks. There is high dependency on the core and enterprise-wide applications, thus warranting tighter controls to ensure there is no downtime. Reducing testing cycle time reduces costs and will give banks a definitive advantage over their competitors as they will be able to quickly launch new products and service offerings. This will also internally accrue cost savings through:

  • Improved application quality and performance
  • Reduced time-to-market for new products
  • Quicker roll-over of newer product versions
  • Minimized effort and cost to achieve quality control and quality assurance goals

As a result, TDM has become a crucial component in the complete lifecycle of enterprise systems and applications testing. The growing need of TDM has led to vendors offering off-the-shelf TDM solutions. Some popular TDM applications in the market are IBM Optim, HP TDM, Grid Tools, Compuware and iTDMS, Mask IT from Infosys. Let us look closer at the components of TDM and the possible role of core banking application support in each of them.

Test data privacy and masking: These days, customer data privacy and security is considered extremely important and the organizational safeguards to protect them are monitored closely by regulators. Banks usually take copies of production environments when building their development, system integration testing and user acceptance testing environments. Core banking solutions can help here due to their ability to provide extraction of production data and data obfuscation to protect customer privacy. Data masking is another feature core solutions should support so that PII (personally identifiable information) data and all personal information is hidden on all test environments while maintaining data integrity. While there are external tools in the market that one can use for extraction, obfuscation and data masking, development and integration of these features by core banking vendors into their solutions will make for a greater value addition.

Test data generation and set up: Since testing is a continuous activity for banks, they require enormous volumes of test data, especially when they do multiple cycles in different environments or have to undertake performance, load or stress testing. There may be instances when the size of the actual production data copy is insufficient to reuse. Here, core solutions should have the capability to create synthetic test data using actual production data copies. Synthetic data creation will address the issues of test data availability and reuse.

Test data management chain: While the actual test data management process is done by test data repository tools, core banking solutions need to provide support by having adaptors and integration capabilities. This will ensure integration with testing tools and seamless data exchange between the applications tested and the testing products and tools.

Test data sub-setting: When creating test regions using production data copies, the entire production data need not be copied to the test regions. With synthetic data creation, what we need is just a representative set of the whole production data. As a result, core banking solutions need to have solution sets to be able to sub-set data into smaller representative sets of data while maintaining data integrity. This can be used for core application testing and for other enterprise applications that need them.

Test data reuse: This aspect, too, requires greater dependence on testing tools for the database lining, backup of test data and marking use of test data. Core solutions need to have integration capabilities with testing tools and solutions. This will ensure testing teams across the organization do not trample on each other's testing process.

Core banking solutions should be able to support some of these basic TDM features. An extended feature or tool set from core vendors will be a better fit to the bank from the perspectives of easier usability, effort and cost savings, and will be a value add offering from the core banking vendor's side.

August 21, 2013

The Future of Branch Banking in the Digital Era

Across the globe, customers are becoming more comfortable in handling routine transactions using self-service channels. With the advent of digitization, banks have been forced to radically change their strategies for reaching customers and supporting growth and accessibility - from creating "brick and mortar" branches to investing in the latest and most innovative digital channels. This strategy shift helps banks improve operational efficiency and reduce transaction overheads, which eventually translates into improved profit margins.

Does this mean that branch banking, the main human interaction channel for banks, can be eliminated?

Digitization does not mean that face-to-face human interactions can be eliminated. In many geographies (like the Middle East*), the most profitable and loyal customers are those above the age of 40, who still believe in branch banking, are reluctant to embrace new technologies (i.e. digital deniers) and  generally belong to the high net worth segment. The other segment, the so-called "next gen", alias the "Facebook generation", prefers techno-driven, self-service transactions, and their loyalty depends on the technology and experience that the bank offers them. New age bankers are in the midst of these two segments, as both segments still approach branches for purchase decisions, particularly those involving complex transactions and the effective handling of these two customer segments (digital deniers and next gen) is what the future of branch banking is all about.

Digitized approach to branch banking

The future of branch banking lies in how effectively technology channels are synergized with brick-and-mortar branches. Branches should be remodeled to become transformation offices and branch officials, as transformation agents - people whom customers approach for their problems and solutions rather than to manage their routine transactions. Let's take a quick look at some publicly available examples of the digitization initiatives in the branch banking space across the globe.

  1. Digital banking store: Allied Irish Banks (AIB) recently launched a digital banking store in Dublin. Named Lab (Learn about banking), it is designed to encourage AIB customers to experiment with digital banking through personal experience. Customers can try out different products with product browsing, talking to advisers via video booths for customized advice, new mobile innovations, and self-service banking. The bank also leverages these stores to accept product innovation feedback from customers.
  2. Financial kiosks: Ziraat Bank in Turkey has deployed a network of unstaffed video kiosks that use video-conferencing to connect customers with the bank's agents in the contact center. Customers can use these fully automated kiosks to deposit and withdraw money, buy or sell foreign exchange, pay utility bills, transfer money, and buy bonds. The kiosks, which have generated a lot of excitement, has helped the bank expand its network a lot faster than conventional brick-and-mortar branches would have done.
  3. Concept branches: Multiple banks have sought to provide an enriched customer experience by introducing next-generation concept branches. Barclays bank created one such concept bank in London equipped with multiple types of cash machines, an interactive video wall, tablets PCs for the floor staff, and a "premier lounge" with Microsoft Surface tablets. Citibank also opened a similar "tech-savvy" branch in New York, featuring an interactive "sales walls" that allow customers to purchase the bank's products through flip-friendly, touch-screen interfaces and provides a 24x7 video chat station for speaking with an agent.

Key action points that can help the branches stay relevant in the digital era

  1. Branch officials should be empowered to be consultative sellers and leverage values through services than mere sales, and trained to handle digital deniers and next gen customers seamlessly. Such an empowered workforce will ensure qualitative repeat business.
  2. Intelligent front office: The driver behind making front offices "intelligent" is the use of integrated CRM engines, which can enable banks to improve the sales and service decisions of branch officials by gaining 360-degree insights into the customer's needs, wants, and purchase patterns. Analytics and Big Data can play a very critical role in achieving this capability. Moreover, this integrated approach will be an important parameter in the economics of the branch.
  3. Branches should be actively involved in the product development cycle as the collaborative model (between technology, employees and customers) will help product designers and managers  understand the pulse of customers instantly, an aspect that can result in great product innovations.
  4. Technology should play a pivotal role in creating an advanced point of sale options at the branch counters. The point-of-sale revolution will positively influence the customer relationship with bank branches. In practical terms, this means transforming the customer's chore of visiting a branch for financial transactions into an informative and enjoyable experience. In other words, "new age" branches need to be created with the added aim of socially engaging the customer, and not just servicing his immediate requirement.

To summarize, branch banking concepts are NOT going to be eliminated in the near future and will continue to be a favored destination for customers to sort out their complex transactions and problems. Future branch banking is NOT just about the usage of technologically advanced products, it is also about creating a "wow" impact on the customer. Branch banking is on the verge of change, driven by innovation, technology and customer preferences. The new agenda implies exploiting technology advances; creating more cross-selling and up-selling opportunities, and integrating innovative interactions and business models to create an enriched customer experience. Greater collaborative use of technology operating hand-in-hand with human efforts to manage customers in a very effective and efficient way will be the order of the future.

*Source: "Future of retail banking"

July 30, 2013

Cash is King!

'Cash is king' goes the adage, and a king left unprotected can spell danger for the entire kingdom!

In the corporate kingdom, organizations take great care of this "king" and watch over him at all times. Guarded well, the kingdom remains strong and prospers. Poorly managed, the kingdom is bound to come crashing down or be taken over by the nearest rival.

Cash-flow management and projection is the key to making strategic and profitable business decisions. Corporates have been more focused over the last decade in terms of tracking and managing cash flows, and commercial banks have been offering a series of products for the same, ranging from controlled disbursement, account reconciliation, balance reporting, lockbox, and cash concentration services. All these, of course, aim at forecasting cash flows and providing investment opportunities. While the concept sounds simple, there are several emerging trends and challenges that banks need to closely look at. This write-up presents a point of view about the challenges that corporate banks are faced with today in the areas of cash management and how smart analytics and business intelligence can help organizations drive decision making.

First - cash flow is not just impacted by payables and receivables but also by other factors such as inventories, capital expenses, debt expenses, exchange rates and, most importantly, the variability of 'timing' in these cash movements. The timing factor is what is driving banks to provide companies with services that reduce operational risk via real-time reconciliations and same day exception detection and resolution. Statistical analysis and configurable models enable stakeholders to view historical trends and leverage actual transaction history to predict future cash flows and discern patterns.

Banks are topping their conventional services like account reconciliation, balance reporting, control disbursement, cash concentration, etc. with other value added services like real-time tracking of surplus positions, more visibility into global cash positions, and automated sweeps, which remove reliance on intra-day borrowings.

J.P. Morgan, saw the importance of serving its multi-national customer base and introduced a real-time enabled platform called iDDA for managing treasury activities globally. Such forecasting and tracking options help institutions better compete in international markets.

Another great example of banks going beyond the conventional services is that of Standard Chartered Bank. Their global liquidity management clientele grew by 15% as a result of implementing a complex cross-border multi-currency notional pooling system that enables customers to consolidate their balances across regions to attain higher interest rates.

Second - what corporates are constantly grappling with is to know how much is too much for cash reserves. The credibility that a company acquires with banks, creditors and other vendors is built over years but can be blown away in days if it falls behind on payments. Hence, investing liquid funds BUT maintaining the ability to satisfy all payment obligations when due requires a very careful balancing act.

From a simplistic view, the cash balance needed to be maintained by a bank should factor in:

  • Minimum depository balance: Deposits maintained by corporates
  • Operational balance: Cash needed to manage day-to-day operations, wages, inventory, etc.
  • Precautionary balance: Emergency liquid funds
  • Transaction balance: Money needed to fund outstanding checks, wire payments, etc.

Companies need to arrive at the magic number, one that will leave enough in the pocket to cater to even extreme conditions. Analytics plays an important role, with banks employing stress testing and other scenario analysis tools to gauge the impact of seasonal trends, sudden crisis or emergency events (terrorist attacks, stock market crashes, credit crisis, etc.) on the company's liquidity position. Companies that take a more risk-averse approach prefer using sweep accounts to move excess funds into the money market or other short-term investment opportunity. Sure, it will not earn you a fortune, but then the idea is to earn some interest while keeping the funds accessible.

J.P. Morgan's Access Liquidity solution for example, helps organizations better manage their liquid cash globally. Not only do they help companies track some of their trapped cash but also form a bridge to invest this cash by leveraging their asset management capabilities.

Third - there is overwhelming evidence that banks are focusing a lot on offering a consistent multi-channel experience for their customers. This aspect is so crucial that it is now a key factor that corporates examine when they decide to start a new relationship with a bank. The eruption of business usage on tablets and smartphones is changing the landscape of transaction banking. Treasury professionals are demanding that their banks offer a standardized multi-channel experience and banks have no option but to cater to this new generation of on-the-go customers.

A leading research firm's findings amongst a large section of treasury professionals surveyed showed that 43% of associates are presently using more than one channel, 80% of them consider multi-channel important and over 50% say it's a key factor in deciding a new bank relationship. This is clearly an area where banks need to act swiftly to gain an early mover's advantage.

The bottom-line is that a volatile economic situation forces an organization to refocus on the basics. In the wake of a crisis, cash management solutions are more relevant to corporations who are looking to unlock confined capital to achieve better rates of return across a global cash pool. Some banks that were hit hard by various financial crises have continued to augment their cash management business.

Citi is a great example - not only did they continue a high level of investment in their treasury and trade solutions technology, but also managed to build a new award-winning online cash management portal - CitiDirect Evolution.

Banks who are able to give their customers tangible and measurable value additions, provide flexible options for modeling and improve decision making will stand out in this economy. The customer wants every buck managed and utilized but also demands maximum bang for every buck spent! And why not? After all, cash is king!