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

« July 2013 | Main | September 2013 »

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"