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Tablet devices are becoming immensely popular and their adoption is forecast to grow over 40% by 2016 - by which time tablets are expected to overtake the sale of PCs. Today, tablets like the Apple iPad, iPad mini, Samsung Galaxy Tab and Amazon Kindle Fire continue to sell like hot cakes. Research shows that over 30% of U.S. Internet users use tablets for two hours per day on an average. The above statistics are anything but surprising. The fact that tablets bring together the best attributes of smartphones and computers-- portability, convenience, screen readability, personalization, easy to use interfaces, and sociability--makes them an ideal companion for leisure as well as business.

But why should banks take note of tablets?
Most tablet owners are young (25 to 44 years old) and wealthy (incomes of over US$80,000 per year). Tablet owners are also known to use many banking products and have investable assets. Research shows that self-service banking channel adoption growth among tablet owners is two times that of non-tablet owners. Transactional banking services like bill presentment and payment are being adopted more by tablet users than smartphone-only users--particularly in areas with higher tablet adoption. In fact, transactional tablet banking usage is expected to exceed 200 million users by 2017. In Europe, tablet owners have 50% greater chance of shopping on their tablet device than using their smartphone. It is expected that significant migration of transactions (especially bill presentment and payment) and purchases would happen from desktops/laptops/smartphones to tablets. Today, large numbers of customers are accessing banking services using their tablet's Internet and apps capabilities. Many more are asking their banks to provide tablet banking services that enable complete online banking functionality as well as offer an optimized, enriching user experience.

Banks should not ignore these tablet trends and customer demands. Enabling tablet banking benefits banks through:

• Differentiation and improved customer acquisition/retention: Banks can differentiate themselves by effectively leveraging tablets and demonstrating to customers that they understand the requirements of the channel as well as their customer's needs. It has been seen that tablet banking users bank more frequently than non-tablet users and are more engaged. This helps banks enhance their brand interaction and loyalty. Tablet banking also provides an opportunity for banks to attract specific customer segments - for example, households with an annual income of over US$75,000.
• Improved customer service and satisfaction: By supporting the tablet channel, banks can enhance the dynamics of their online and mobile banking channel and enable superior self-service channels' usage experience to customers. Richer, faster and collaborative services could be enabled leading to improved customer service.
• Increased profitability and reduced cost: Tablet users are more likely to make purchases and respond to offers and ads, thereby generating higher revenue. Tablet banking can also assist banks in enabling greater customer migration from costly offline channels (e.g. branch, call center) to lower cost self-service channels.
• Enhance advisors' performance: Tablets have the capability to transform the face-to-face interactions of financial advisors and customers. Some of the banks have started leveraging tablet apps during face-to-face interactions between financial advisors and customers. For one, tablets enable advisors to be more productive irrespective of their location - e.g. cafes, restaurants, etc. Further, tablets' collaboration and rich media capabilities enable advisors to explain complex investment decisions or products in more engaging and compelling manner. Graphical tools on tablets that enable financial planning, risk profiling, product selection, etc. make for better client involvement in decision making. The linking of tablet apps with the bank's CRM systems further enable advisors to have faster and more flexible access to the bank's product catalogs, applications and other business processes. This enhances advisors' efficiency and productivity.

What are your banking peers doing in the tablet environment?
Examples of proactive adoption of tablet banking by banks abound. For example, BB&T, Chase and BNP Paribas have their own good iPad apps that let customers make transfers, manage accounts, pay bills and more. Some of these apps provide more features than smartphone apps - e.g. access to a host of calculators and insightful articles. BNP Paribas Fortis (Belgium) publishes an e-magazine named UltiMag that is available exclusively on the iPad. Finanza & Futuro Banca piloted Finantix Wealth Apps, an advisory suite that runs on the iPad and helps the bank's advisors engage with clients/prospects in a more effective manner. Commonwealth Bank tailored their Internet banking channel, called NetBank, for tablet devices. Danske Bank enabled a banking solution on the iPad for their Nordic customers. They are the first bank in Denmark to offer an iPad solution. In India, Corporation Bank enabled transaction-based banking services through tablets, becoming the first public sector bank in India to do so.

The way forward
Many banks have failed to proactively harness the opportunities that tablets offer and leverage it effectively to address some of their business challenges. With an assumption that their customers are happy as they are (accessing their existing online and mobile banking channels using tablets), many banks have largely ignored the development of tablet-specific apps designed to enhance the user's banking experience on tablets. It is important that banks look at tablets as a new and distinct channel and adopt it proactively - the business benefits to be had from tablets channels are too big to be ignored.

Posted by Anjani Kumar at 7:36 AM | Permalink | Comments (0)

 
"Using game principles in non-game environments to drive business profitability" is a definition of gamification that is gaining universal acceptance.

As any avid gamer will tell you, a sound game plan focuses on leveraging the technology and behavioral insights at your disposal. Gamification is a lot more than just introducing badges and points into the functioning of an enterprise. While traditional games are based on entertaining users, gamification principles are based on motivation to achieve enterprise goals.

How did the concept of gamification come about?
"It's not right, Stepa, the way we shut ourselves up from the rest and don't know the chaps at all. The emulation started spontaneously, without us, we just joined in."

This is a part of a conversation taken in context from the book, "The Tanker Derbent", which talks about motivation and social competitiveness in the 1920s. Even in the 1930s, the enterprises had well-laid plans designed to motivate an employee to surpass the firm's own expectations. Firms rewarded personnel both morally and materially in several ways, be it providing them concert tickets, placing winning portraits on a honoree board, or even a house. Today, one can see some of these elements everywhere, from pizza outlets to consulting firms. However, although the standard principles of motivation existed in firms, they were never considered a single package until the word "gamification" was coined. Working in the financial services unit of an IT firm, I can personally see a major buzz taking place this year in this sector, despite the fact that financial institutions are often considered late adopters of technology when compared to retail, communications and marketing companies.

 

What is gamification not about?
It is definitely not Farmville; and does not include virtually harvesting crops and stocking grains. When referring to an enterprise, we are considering a crowd with social intelligence. I have seen a website claiming "just add points and boost your employees' performance". Merely adding points may work for a fortnight but not in long run. Gamification is often misinterpreted as providing incentives to lure employees to over-perform. The truth is, it is about interpreting what motivates employees to complete their obligations and stick to the firm's goals.

Then, what really is gamification?
Gamification is about applying suitable game dynamics and principles in planned phases. Consider a scenario where users of an online bank platform need motivation to stick to the personal finance management application on web. This stickiness to the portal can be obtained by using rich user interfaces, simple, un-burdened, "habit creating" content that needs insights into customer behavior. Once this is a success, the goal of the customer in managing his funds effectively is fulfilled while the goal of the bank in cross-selling products is also satisfied.

Some aspects that a gamified experience should consider providing the user are:

• Self-competence - Draw out a person's personality and characteristics to face and overcome challenges and make strategic decisions.
• Social competence - An urge to have healthy competition and mastery within a social group
• Self-efficacy - A belief that someone can perform the task to completion
• Mastery - Results in the user sticking to the gamified environment.
• Real goals -Providing a win-win scenario for the enterprise and user
• Motivation - Interest inculcation in the user to complete his goals

10 suggestions

1. Define a business need for gamification. Carefully separate what works from what doesn't. This comes from experimenting. So think agile.
2. Use behavior analytics as an input to re-engineer the platforms. Being creative definitely helps in this process.
3. Game theory says "games arise when multiple actors with different objectives compete or cooperate for a scarce resource." Gamification says "Motivation and value arise when multiple actors with similar objectives get a gamified experience in a non-game environment". Both, game theory and gamification, are connected.
4. Game mechanics make sense only when the underlying achievement is providing the target user with meaningful recognition. Within organizations, where the target user group comprises of employees and, as a result, is far smaller, game mechanics can help positively influence participation.
5. Game mechanics can help improve R&D efforts by offering solutions to business problems
6. Recognition on enterprise forums motivates contributors to increase contributions.
7. Enterprise content can be harnessed by providing visibility, recognition and access to the experts contributing the content. Promote the contributors through social networks.
8. Leaderboards are a good source of long-term motivation. Motivate user involvement at every stage--from a learner to a master.
9. Effectively manage the change that comes when deploying a gamified experience. Monitor, harness and tweak platforms accordingly.
10. To be relevant and effective, game mechanics requires continuous updates to themes and the overall aesthetics of the game. This undoubtedly involves financial investments but, in return, far better returns (ROI) as well.

Posted by Sam Felix Pradeep Kumar at 4:12 AM | Permalink | Comments (0)

 
Credit is a prime financial domain that is always in the spotlight and often characterized by an uneasy relationship between the credit taker (borrower) and credit giver (lender). In the blog, let's discuss and share our thoughts on a niche credit segment - vehicle financing. In addition to auto, recreational and marine vehicles, this segment includes big ticket transportation enablers, like aircraft.

Currently, credit givers in this segment rely broadly on two categorized channels - direct and indirect. For long, banks and credit unions have been significantly dependent on indirect channels, which are primarily dealer-based. This lending strategy not only greatly reduced the costs and effort involved in marketing products but also ensured a steady inflow of business. A critical imperative in indirect lending is the establishment of a long-term relationship between the dealers and members.

The critical question, however, is this: Is the assured quantity of business inherent in indirect lending more important than quality?

With the financial industry in turmoil over the past few years, it's no surprise that the vehicle financing business has suffered. Banks and credit unions are continuously experiencing large defaults by charged-off dealers, resulting in the souring and termination of many business relationships.

What are the root causes?

1. Unsurprisingly, dealers almost always aggressively pursued high growth volumes. Once they gained the requisite bargaining power, they frequently misused it by lowering the bar required to approve loans. To maintain a long-term relationship, credit givers often agreed to relax the approval requirements. As a consequence, credit givers suffered large-scale delinquency, charge-offs and losses.
2. In indirect lending, business credit givers have little or no idea about the customer's behavior and lack the direct relationships necessary to explore more repayment options.
3. A lot of the applications that came through the indirect channel had fraudulent or incorrect information. Some of those cases were overlooked due to the credit giver's negligence - by placing underwriters under tremendous pressure to pass applications to meet business margins. Financial institutions too, turned a blind eye, either due to a high level of trust on the dealers or due to the need to meet their own volume-based targets.

With these factors resulting in the indirect lending channel being blamed for causing major losses, credit givers shifted their focus on building direct channels. The primary motto of a direct channel is to gain an in-depth understanding of the end customer's borrowing patterns by connecting directly with them.

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Use case: Direct lending is an area where Infosys was able to provide a large US banks with the significant expertise required to develop in-house analytics tools and techniques for faster decision making. We also provided solutions designed to promote and establish direct lending as a major business channel, a prime requirement for credit givers. Moreover, predictive risk detection and mitigation models were proposed and implemented in different scenarios. These tools and solutions were leveraged by borrowers and lenders - all entities participated in the business process directly or indirectly to:

• Develop user-friendly web interfaces for loan origination, status tracking and decision display through direct channels
• Build an interactive online interface with 24x7 assistance available through chat or call
• Cross-sell vehicle financing products with other retail banking products through retail banking channels
• Establish a multi-channel platform for direct lending through online and mobile banking, social networking, etc.
• Automate tele-calling services to reach out to potential customers in order to process applications faster and enhance customer experience
• Build a data warehouse that contained all of a customer's details, including their transaction history for analytics and business intelligence

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Future trend and risk mitigation:

While indirect lending continues to be popular and account for a large market share, particularly among captive finance companies, direct lending is growing at a very fast pace. Building and efficiently managing them will provide credit givers with an undeniable edge in developing a sustainable business. A number of credit givers are leveraging Infosys capabilities to build integrated lending platforms that support end-to-end loan processing for loans that originate through direct channels. Additionally, it is crucial to develop risk-based credit scoring models to identify--and mitigate--risk at an early stage. If managed efficiently, credit givers who use direct lending channels will be able to analyze and predict their customer's needs to identify the gap between what is provided and what is expected. This, in turn, will result in the bridging of the gap between credit takers and credit givers.

Posted by Abhik Kar at 2:29 AM | Permalink | Comments (0)

The decision for banks today to change to a new core banking product is a very long-drawn, tough and strategic decision. Business growth, market competition and changing regulations are some of the external factors driving core replacements. There are hard-pressing internal drivers like channel penetration, adaptation to modern technology, systems consolidation and the presence of legacy systems, etc. which influence banks to push and go for this change.

Core vendors work very closely with their clients, right from the day when the final selection of the vendor for core replacement is made. Core vendors and banks work relentlessly all through--from the requirements, design, solution, testing till the final implementation and go-live date. Both parties, core banking product vendors and banks, stake a lot on this journey. Consequently, they leave no stone unturned in overcoming hurdles along this core transformation journey.

 

The issue, however, is that most core vendors scale down their communications with the bank post the project going live. Continuing this relationship, once the implementation is successful and the dust settles, is equally important for both--the vendor as well as the bank.

 

Most banks go for a license-plus-maintenance contract for an initial period. During the initial period, banks typically do not perform major customization and enhancement activities. These are initiated once they reach a steady-state period, which normally takes months to a year depending on the size of the bank. Whether the banks sign up for long-term maintenance or decide to have custom development done in-house, it is in the interest of both the parties that they keep their communication channels open and build strong relationships irrespective of whether it is backed by a contract or not.

Listed below are some reasons why this continuous communication and bonding is needed between the vendors and banks post-go-live:

1. Banks have bought a core banking solution and not just a product. As banks grow, they tend to make significant IT architectural changes to their technology landscape, which frequently impacts their core banking solution or integration with it. As a result, these changes need critical evaluation by the core banking vendor's advisory/architecture boards.

2. Core banking vendors, on the other hand, keep developing their product and roll out newer versions to keep abreast of changing needs, regulations and competition. They make these decisions based on their product architectural board's directives and strategy recommendations. It is imperative that they, too, evaluate their existing client solutions regularly to confirm that the bank's core banking enhancements are in alignment with the product strategy and direction.

Although core banking vendors keep rolling out newer versions at periodic intervals, these may not be adopted by banks due to non-alignment with the bank's strategic focus. As a result, the client banks may / may not opt for version upgrades in future. Constant evaluation and communication with banks is crucial to ensuring that their IT architectural changes are in tune with their vendor's product strategy. Let us assume, a bank (client) chose to embark on customization and enhancement activities in-house, without an alignment with the product vendor. There is a possibility that it may create issues and impediments from an architecture/feasibility standpoint when attempting to retrofit the bank's custom changes to the newer product versions.

3. Core vendors should ensure their consultation and advisory architecture boards help the banks with their solutions and direction. This will provide banks with confidence in their relationship and help create great business value for core vendors.

4. After go-live, it's necessary for core vendors to elevate their clients to the status of partners. This partnership will not only help forge strong bonds with customers and retain their business but will also enable vendors to gain more credibility - a sure differentiator against other competitors.

5. This will also be a win-win for core product vendors since it can be the perfect channel to implement feedback and suggestions from existing customers into the product for continuous improvement.

 

Finacle has, for some time now, operated a Finacle Client Advisory Board. Finacle customers, who participate voluntarily, can put forth their plans before this board. The board can validate their plan, present suggestions and offer feedback. Such partnerships will help banks forge stronger bonds with their vendors, improve credibility and act as a value-added service that deliver an edge over the competition.

Posted by Venkataramana R at 3:46 AM | Permalink | Comments (0)

Posted by Rishikesh Bagati at 6:37 AM | Permalink | Comments (0)

 
"All I ask is the chance to prove that money can't make me happy." - Spike Milligan

In my last blog, I had emphasized how PFM (Personal Financial Management) tools offerings are beneficial not just for customers but for banks as well. In this blog, I will talk about the challenges faced by--and issues with--many banks' PFM offerings and share recommendations on how banks can effectively implement PFM tools.

First, the issues and challenges:

1. An either-or decision: A good number of banks believe, without credible research evidence to back their belief; that customers are not asking for PFM tools. Also, that the existing PFM tools offered by other banks are not being significantly leveraged. Consequently, when it comes to investment priorities, such banks overly focus on "trendy" investment avenues (like mobile banking) and totally ignore the budgeting for the implementation of PFM tools. This approach fails to take into account the fact that investments on both new channels and PFM tools are important - after all, PFM has proven beyond doubt its terrific value to both customer and banks.

2. Great being the enemy of good: A significant number of banks are convinced that customers won't aggregate all their accounts on the bank's website, even if it offers PFM tools. True. Chances of customers' linking all their accounts when they use third-party PFM tools are higher as compared with their using the PFM tools available on a bank's website. Yet, even if customers only partially link their accounts using the bank's PFM tools, significant insights into customers' financial behavior would be gained. These insights can, in turn, be mined for the mutual benefit of the customers as well as the bank.

3. Just lay it out there: Many other banks have scattered rudimentary PFM capabilities on their websites in a haphazard manner - there is lack of a coherent PFM strategy. User experience (UX) is also sub-optimal. The lack of integration of PFM tools with other banking tasks workflow is quite apparent in these cases. Such banks' PFM architecture - if there is any - is non-scalable and incapable of meeting evolving PFM requirements. For quite a few banks, even though their PFM tools provide customers with a good overview of their personal finances, these still fail to provide any timely and actionable insights - either for customers or for the bank (and are unable to prompt the bank on potential revenue generating opportunities).

4. Myopic focus: A number of banks also insularly focus on offering PFM tools only through their Internet banking channel. They fail to realize that for the effective implementation of PFM tools, their delivery on myriad self-service channels (including mobile) is crucial.

So what can banks do differently to provide great PFM capabilities to customers and, in turn, reap immense business benefits? At a high level, this requires that banks to re-evaluate their entire PFM strategy and PFM technology architecture. Listed below are specific recommendations:

1. Start small. For the banks that are still un-initiated on PFM, it is important that they start small and gradually scale up. They must start their PFM implementation journey with a limited set of simple features (e.g. financial goal recording, access to financial advice guidance, etc.). Banks' PFM architecture must, of course, be scalable to be able to implement advanced features (e.g. account aggregation) at a later stage. It is also advisable that banks consider delivering PFM capabilities on mobiles/tablets and Internet banking channels right from the start.

2. Plan for scaling up. Once the basic features are in place, banks must plan holistically for providing sophisticated PFM capabilities. For e.g., banks could plan to extend their PFM architecture to support account aggregation (first partial and later full), budgets creation, spending analysis vis-à-vis budget, cash flow management and peer group comparison capabilities. Months ago, Yodlee, the account-aggregation platform developer, started Yodlee MoneyMovement, the transaction platform, that lets consumers move money and pay bills within the PFM tool. It also allows P2P payments, account-to-account funds and more. The tool can also be integrated into the mobile environment. For optimal gains from their PFM investments, banks must focus on enabling timely and actionable insights from their PFM tools. For instance, if a customer is over-spending in a particular expense category, banks must not just notify this fact but also share insights (e.g. through saving tips and services/product recommendations) on how she can bring down her expenses in that category. Relentlessly focusing on UX is also crucial. A good example is MoneyDesktop's PFM tool that provides a "GuideMe" application designed to work like a personal financial coach. MoneyDesktop also uses BubbleBudgets - graphics comprising bubbles representing different spending categories. The bubbles change color based on how well a customer adheres to her budget goal. A bank's PFM offerings must be intuitive, easy-to-use, and importantly, fun. As an example, personal financial education can be imparted in the form of online video games instead of boring FAQs and overwhelming reading material.

3. Technology underpinnings: It is important that a bank's PFM technology architecture is capable of supporting the key PFM business process requirements and dynamic workflows. Further, the technology must be able to support location and context-based PFM capabilities and on myriad customer-preferred devices. A bank's PFM technology infrastructure must be device and channel-neutral. Having robust and well-integrated analytics capabilities is another key imperative. Analytics capabilities are important not only for meeting customers' PFM needs but also for the bank to be able to create predictive models, provide personalized advice, and gain real-time intelligence to up-sell/cross-sell and improve profitability. Also, having robust security technology architecture to protect customer's security and privacy is extremely important.

4. Seamless integration: PFM features and functionalities shouldn't come across as disparate services. Rather, these should be seamlessly integrated into the bank's other online banking services. For example, a bank's PFM tools should be integrated with the main online banking page, rather than these being enabled through separate websites or as a new tab. My Community Federal Credit Union, Midland, Tex., for example, is making PFM part of the landing page of its online banking site. A bank's PFM capabilities should become part of its existing online banking customer workflow. PFM tools must also be well integrated with a bank's other existing systems (including pricing, product, reward and loyalty systems). 

5. Make it "social": A bank's PFM capabilities must enable customers to manage their various personas. Customers must have options to join appropriate communities and forums to enable connections with other users and bank staff, compare their finances; raise questions and get these answered, share financial management ideas and more. At appropriate levels, banks must also consider opening their PFM functionalities on social sites. In Sep'12, Knab.nl was launched in the Netherlands. Knab.nl is a social media-enabled new bank that offers an intuitive financial dashboard for PFM.

6. Segmentation strategy: For gaining greater benefits from their PFM investments, banks should particularly target mass-affluent online banking customers below the age of 40. Additionally, banks must have systems to support behavior-led customer segmentation. LearnVest, a PFM offering for women, is a great example of a demographic-specific PFM offering. The bank's branch staff must be well equipped to leverage the insights gained from PFM tools for timely cross-selling/up-selling to customers.

What more do you think should banks do differently to effectively leverage their PFM capabilities? I will be interested in knowing your views.

Posted by Anjani Kumar at 2:39 AM | Permalink | Comments (0)

Activities across the financial services and banking business can be split into the three main functions - front office, middle office, and back office. From a business importance perspective, front office applications directly drive customer touch points or support customer touch point's activities within the enterprise. Middle office applications traditionally support decision making processes in addition to managing the risk, which arises out of operations or business interactions. Often, middle office applications provide the critical link between the front office and back office processes of the business. Thus, the middle office is vital for business enablement across the enterprise. Back office applications typically manage the fag-end but most important process of clearing, settlement, recording and storing information, which originates from multiple sources across the enterprise. 

Continue reading "Securing Finance Applications - A way forward" »

Posted by Dr. Ashok Hegde at 12:17 PM | Permalink | Comments (1)

In reference to the Uncertainty Principle of quantum mechanics, Albert Einstein had remarked, "God does not play dice". Well, God may not, but we mere mortals sure do love playing dice - literally or metaphorically. And dare I say; this captivation with dice has, in fact, led us to the current uncertainty around the economy - at both, the macro and micro levels.

Today, the dire state of many customers' personal finances has brought Personal Financial Management (PFM) tools into the spotlight. PFM tools help consumers manage their finances - by enabling them to create and track budgets, save goals, aggregate account information, forecast and categorize income and spending, analyze their investment performance, compare their own finances against the peer group, share saving tips with others, and many others.

In addition to the poor state of the economy, increased adoption of Internet and mobile banking channels and regulatory changes (e.g. new regulations in UK that mandate financial advisors to directly charge customers for advice) are a couple of key factors that have increased the appeal of PFM tools amongst customers. It is no wonder then that global spending on PFM tools continues to increase at a rapid pace. In addition to the existing heavy demand for PFM tools in North America and Europe, PFM tools are gaining traction in Latin America and Asia Pacific as well. Yodlee, for example, powers PFM services for over 35 million consumers in over 150 of the biggest financial institutions - including 32 of the top 50 banks in the U.S. Citibank's Citi Financial Tools and Bank of America's My Portfolio are examples of in-house PFM tools that use Yodlee's account aggregation platform.

While many banks offer great PFM features through their online and mobile banking channels and with immense business benefits, quite a few other banks still remain skeptical of PFM offerings and are not sure of what is in it for them. 
 

Well, pardon my hyperbole, but I am convinced that PFM is Godsend. Not just for customers but for banks as well!
 

The business benefits to the bank from PFM offerings are too large to ignore. Few examples:  

• Increased customer advocacy and differentiation enablement: Effective PFM tools can create positive buzz on social media about the bank's intention of keeping the customer's interest at heart. The result is enhanced customer retention and acquisition. It has been observed that once customers start relying on good PFM offerings from a bank, they are less inclined to switch banks - lest they lose the PFM offering. For example, Bank of Montreal saw significant increase in its customer retention and acquisition after it deployed BMO MoneyLogic (a PFM solution from Strands Personal Finance) for its 2.5 million online banking customers. PFM also enables banks to provide a differentiated online service experience and "break from the clutter". For example, Bank of Internet USA, a web-based institution, differentiated its online service experience through Intuit's FinanceWorks PFM offerings. As a result, it started seeing 12% monthly growth after the PFM features were made available.
 
• Enhanced customer insight: PFM tools help banks collect relevant and holistic customer insights on their income, spending, budgeting and other financial management habits. This is accomplished by enabling aggregation of transaction data from all the customers' internal and external accounts and leveraging in-built categorization and analytics capabilities. Banks can harness these timely insights for the development of relevant products and personalized advice to customers. The timely insights would also enable banks to identify risky clients and take appropriate measures.
 
• Improved cross-selling and up-selling opportunities: Insights gained from PFM tools can be leveraged to deliver personalized marketing messages as well as bespoke and relevant products and services offerings. PFM enables tremendous cross-selling and up-selling opportunities for banks. It has been observed that when banks provide PFM features on their online banking channels, customers visit the site more regularly and for longer durations. This presents banks with a larger window to market and sell products to customers.
 
• Reduced costs and increased profitability: Online PFM tools enable increased online/mobile banking and electronic payment usage. This results in reduced branch cost - as customers start relying more on self-service channels. PFM tools also enhance the usage of electronic payments (e.g. debit and credit cards) by customers and reduce dealings in cash. This is because electronic payments get categorized automatically in online PFM tools while cash payments usually don't. Further, in many instances (e.g. Unitus Community Credit Union), customers are even willing to pay the bank for their PFM services. Consequently, Unitus started charging users for PFM offerings. Not just that, Unitus also found that its PFM users were amongst its most profitable customers.

 

We've seen quite a few compelling reasons as to why banks should provide robust online PFM offerings. PFM tools enable banks to stay relevant to the online customers by adding value, and further build their trust. Bank of America, Wells Fargo, BBVA, ING, Barclaycard are only few examples of major banks that have integrated PFM features effectively in their online banking sites. For example, Citigroup re-engineered its online banking site and centralized its PFM tools suite on its main online banking page.

If a bank is still not convinced of the need of online PFM offerings, they should look no further than the success of third-party PFM sites like Mint.com!

Posted by Anjani Kumar at 4:12 AM | Permalink | Comments (0)

 A typical day in a treasury manager's life revolves around things like currency exchange rates from various benchmarks, fluctuating transactions on his computer and, of course, the venerable coffee machine. While we cannot do anything about the coffee machine, the other components of his working life can be brought closer to him to improve his productive life.

With mobile banking in widespread practice worldwide, we already have some of the important constituents required to bring the components of a treasurer's screen onto his mobile device.

• The device: Almost all of today's tablets and smartphones are 3G/4G LTE-enabled and can operate at very high Internet speeds
• The apps: The FX rates, transaction window and administration are all available in silos with various mobile banking applications provided by different banks
• The industry standards: With the Society for Worldwide Interbank Financial Telecommunication (SWIFT) working on large-scale ISO 20022 messaging standards, a similar one can be developed for mobility as well.
  

People who work in treasury are continually on the move and usually spread across locations divided by time-difference limitations, which causes further constraints in their availability. The loss arising due to such delays comes with a monetary impact and banks miss out on cashing-in on the fluctuating FX rate or the potential customer win. With mobility, some of the key advantages would be:

• Instant delivery of alerts to managers for their perusal
• Elimination of potential delays since communication via emails will be immediate
• Stay connected (and on top of things) round-the-clock with a comprehensive dashboard
• Ease of decision-making with a transaction summary that provides instant access to past figures and future forecasts
• Ability to make strategic decisions without impacting ongoing tasks with networked apps that enables managers to meet virtually on a common forum while being mobile
• Better control over funds with full-time access to payments transaction tools
  

The question is - why limit mobile banking as the only channel of bank-customer interaction? Why not take it to the whole new level of actually performing banking activities?

Posted by Nikhil Mittal at 11:23 AM | Permalink | Comments (0)

"A vision without a plan is a hallucination." - Will Rogers

 

A large number of banks across the globe are still grappling with wilting loan portfolios, cost pressures and issues surrounding customer retention and growth. Unsurprisingly, many banks have found that their existing core banking systems (CBSs) are the biggest obstacles in their efforts to overcome survival and growth challenges. Bankers say that their existing, legacy CBSs:

·         Are unable to provide consistent customer information

·         Lack the flexibility to accommodate business process changes

·         Are not scalable due to the rigid architecture

·         Require lengthy development cycles to develop new or enhanced products (a factor that directly impacts time-to-market)

·         Find it difficult to respond to customers' needs for flexible product bundles, new banking products or relationship-based pricing

·         Cannot keep pace with new and constantly-evolving regulatory changes

·         Struggle with many other such shortcomings

Expectedly, over the past few years, a large number of banks across the globe have endeavored to modernize their CBSs. A significant number of banks are further expected to undertake CBS modernization programs until 2015. As a result, it is not surprising that the global CBS market is expected to grow to over US$5 billion by end-2013. Unfortunately, failure stories of CBS modernization projects abound. CBS modernization is a complex multi-year endeavor and requires large scale changes to key components of core systems (e.g. General Ledgers, accounts, deposits and loans systems). It involves both technology and business transformation.

So what can banks do to ensure flawless CBS modernization? While there is no 'one size fits all' approach to CBS modernization, history shows that banks who executed successful CBS modernization leveraged certain best practices. These include:

1.     Business case development and stakeholder participation: Banks need to proactively initiate investigative efforts for building a business case for their CBS modernization. They cannot afford to wait for--and reacting to--major business triggers (e.g. M&A, favorable macro-economic indicators, etc.) for building the business case could be counter-productive. All stakeholders (not just the IT department but C-level and business leaders, board of directors, etc.) should contribute to business case development, decision making, strategizing and execution of the CBS modernization endeavor. Also, return on investment (ROI) considerations alone should not be used for CBS modernization decision making. Banks should consider leveraging the expertise of leading CBS providers to help build the business case.

2.     Goal identification: Clearly identifying and "etching in stone" the goal of CBS modernization and zealously tracking its progress is crucial. The business, IT team and the management must all have clear and consistent view of the goals. Productivity and efficiency improvements, regulatory compliance, etc. are only elementary goal considerations. It is crucial that the ultimate goals be loftier and forward-looking like, for instance, facilitating business and product innovation that leads to tangible large-scale business benefits.

3.     Data cleansing: Data cleansing (e.g. customer, account information, etc.) in the old CBS and associated impacted systems must be focused on from the start. Towards this, mastering the existing data stores (data structure, data quality, etc.) is crucial to enable flawless migration and consolidation of data under the new CBS. Disorganized data structures will prove to be even more problematic for large banks that are in a state of flux (e.g. due to fast growth of their, regional businesses, etc.).  It is recommended that banks pursue a measured and phased approach towards re-architecting their data models.

4.     Piloting and creating a reusable plan. Agility: Large banks should not try the typical "big bang" approach to CBS modernization. Instead, banks need to pilot the new CBS at a line-of-business (LOB), subsidiary, function, etc. level and thrash out all potential issues before performing an enterprise-wide rollout. As an example, recently, National Australia Bank (NAB) leveraged UBank, its direct banking subsidiary, as the test-bed for the new NAB CBS and migrated 300,000 customers to the new platform. As another example, recently, Deutsche Bank migrated its 5 million savings account customers onto Magellan (its new CBS). After having moved the savings accounts, the bank plans to migrate all business processes and PBC accounts in Germany in a phased manner by 2015. Banks must train their end users and have them used to the new CBS before the rollout. As part of the pilot, banks should also create a reusable CBS modernization plan (comprising tools, methodologies. checklists, processes, communication structure, etc.) to help flawlessly expand the new CBS enterprise-wide. Having the ability to quickly react to and fix problems (either as a work-around or permanent solution) after the roll-out is crucial. Banks must clearly set the phase-wise schedule for CBS modernization and manage the overall program diligently. Good governance is a critical imperative.

5.     Engage a trusted CBS vendor as a partner: Banks must engage the CBS vendor as a trusted business partner. As an example, in Apr '12, Infosys' Finacle was successfully rolled out for all the 137 branches of Wema Bank (Nigeria's oldest surviving indigenous bank) within a record time of 8 months. This rollout helped create important, key differentiators for the bank to set it apart from its peers. The vendor's product and business innovation capability, experience and credentials, product viability, deployment capabilities, financial stability, business commitment, domain and technology competence and governance model are all factors that must be closely looked into while selecting a vendor. Also, today, many CBS vendors don't have enough experienced staff to execute the many CBS modernization initiatives the vendors are engaged in. Hence, many of these vendors are increasingly leveraging external partners for CBS deployment support. Hence, banks should also closely scrutinize the CBS vendor partner's certification programs to ensure there are no risks to the bank's CBS modernization program.

CBS modernization is a strategic, complex and costly multi-year undertaking for banks.  The CBS modernization can cost a large bank hundreds of millions of dollars. Hence, it is imperative that banks leverage proven best practices to be on a firm footing to make their CBS modernization endeavor a grand success.

Posted by Anjani Kumar at 2:45 PM | Permalink | Comments (0)