Reimagine and reinvent: Five drivers of change in banking

Meanwhile, Covid-19 is transforming the sector, with banks beginning to emerge from the pandemic with new priorities and strategies.
Amid this changing landscape, we look at the five biggest drivers of change in banking.

Cloud computing

The banking industry is increasingly migrating its services to the cloud despite previous security concerns. Such a move is an imperative part of banks’ digital transformation strategies, enabling scalability, flexibility, and reliability while also cutting infrastructure costs. During the pandemic, cloud architecture helped banks to continue operating while their staff shifted to remote working.

“As a normal discipline, technology providers are releasing the next nifty functionality only on cloud,” says Zubair Ahmed, EVP & General Manager MEA at VeriPark. “That is creating a necessary shift not only towards cloud but also towards infrastructures that are easy to create, maintain and exit. It’s very good for banks in terms of architectural resilience and the ability to react fast.”

VeriPark is working with many FIs to develop effective strategies for cloud migration, particularly in the MEA region. “In the entire region, transition to cloud is becoming a reality. VeriPark has a vibrant strategy of taking CRM (Customer Relationship Management) services to the cloud – 12 million customers in one Nigerian bank migrated recently. In UAE, we worked with a large bank to transition CRM to cloud in less than five months for the first iteration. It became the first cloud instance for CRM in the country.”

Digitization

Long before the Covid-19 pandemic hit, banks knew they needed to embrace digital transformation. After all, countless successful financial technology companies (fintechs) around the world had already shown what was achievable through digital channels alone. National lockdowns emphasized the need of many banks for digitization as they struggled to connect with customers and make revenues with branches closed.

“Going digital has intrinsic benefits around reduction of cost,” adds Ahmed. “When things become digital, they become error free. Time to market for a given process is faster, and if it’s not faster then it’s measurable, so that it can be improved. Those elements of operational efficiency and effectiveness are intrinsically built within the digital business case, and our clients are definitely taking advantage of that.”

Personalization

A study conducted by Dynata in the US has found that 82% of customers expect their bank to “personally understand” them. As such, there are clearly advantages for banks that can provide targeted products that customers are most likely to be interested in.

“AI-based tools for onboarding customers will help create more intuitive experiences,” agrees Ahmed. Once again, this is where fintechs are showing their value. By utilizing artificial intelligence (AI), VeriPark helps banks increase revenue and drive customer satisfaction through more relevant and meaningful services.

The growth in personalized rewards programs emphasizes this trend. HSBC, for example, deploys AI to predict how individual clients will redeem credit card points, using the information to recommend offers over email.

Blockchain technology

Industry experts believe distributed ledger technology (DLT) has the power to transform the banking sector. For instance, Know Your Customer (KYC) compliance currently involves time-consuming and expensive processes that end up getting duplicated between firms. Blockchain technology promises to cut all the red tape. It’s a slower growing trend, but one with huge potential.

“Let’s say you’re moving to another country and want to shift your furniture. This single transaction engages about 12 different industries: your bank here, your bank there, your customers, insurance, warehouse, transportation, freight, customs and so on. At each stage, you must re-produce the same documentation and prove your identity, again and again. With blockchain, you could do it all in one go, with one transaction, with the information then shared in a secure circle of trust, across borders and across industries,” explains Ahmed.

Enhanced customer services

According to Ahmed, banks are emerging out of the pandemic with a renewed focus on their customers. They are looking for ways to better understand and meet the needs of their customers, thereby driving change in the way many are approaching customer services. With more people looking for complex products such as mortgages online for the first time, an effective digital transformation is key.

“Banks have to rapidly adapt their internal risk and compliance policies,” says Ahmed. “Keep the customer in the center and re-articulate the processes, because most of the processes were created for the need of control and proper risk management, and not the customer, in mind. For example, during the pandemic some customers can no longer accept a paper document to sign on. Some banks are reacting in the wrong manner: they will send a form and ask the customer to print it out, sign it, take a picture, and send it back. This is a classic example of a bank not really rising to the occasion, in re-imagining the entire process with the customer at the center of its thinking. It pays long lasting dividends in focusing on the customer”

* This post is part of a series of "Digital transformation in banking" articles written by Verdict Media in collaboration with VeriPark for Retail Banker International and Private Banker International.