Monday, September 15, 2014

Revenue Management & Business Assurance is strategic to success at all times

How often do we hear from the banks that business climate is tough and hence, lack of growth? How often we see the central banks commenting on the liquidity situation locally and globally? You may ask, why globally for a central bank? Well, no economy today is separated from what is happening in the Middle East or how the US or the Euro zone react to the interest rates and affect the financial markets globally. Some Arab Spring in the Middle East may lead to a regional turmoil, which affects the global crude oil output, thus, pushing the crude oil prices to unprecedented levels. Or the US Fed announcing the pruning of the QE program, sending the global financial markets into a tizzy. And locally, of course, there are multiple factors at work, which may put financial markets at risk of losing control and growth.

Top up these challenges with the most critical of them all – customer. The customer expectations of a bank have completely changed and they are increasingly being compared with other organisations they interact with – retail, telecom, for example. The ease with which a customer can change banks has increased tremendously. With just a click of a mouse or a phone call, everything can be done. It has become as simple as that. In such a challenging environment, increasing customer value is not only the key to growth, but for survival too.

Again, keeping the customer at the fulcrum of all decision making is becoming essential. For banks and financial services organisations, increasing customer centricity means creating and offering innovative products and pricing strategies – the ones that suit the customer needs and keep him to bank with you.

Convergence of business domains, business models, brings in another complexity to the banking world. Today, telecom operators are also providing banking services, albeit very basic ones. But, it will be only time that they start behaving and offering what a universal bank will. Consumer retail is another example which is tinkering with offering banking services like payments, etc Then convergence of technology is also happening these days, the technology used for high speed phone networks is being used as a core feature in banking infrastructure. Banks are also increasingly becoming real-time, gradually, reaching a stage where they see other industries being already there.

Consumers whether in banking or otherwise, are increasingly demanding remote channels to transact. This digitisation produces disruptive business models that require swift responses. This also means capturing new revenue streams and optimising these digital channels. And all this is to be done in tandem with proactively managing risk, maximising operational agility and maintaining the margin controls.

All this can be achieved by putting in place a comprehensive Revenue Management & Business Assurance solution. A solution which not allows you to managed and get the best revenues, but also helps you to manage your business risk, maintaining compliance and managing operational risks alike. This solution should be seen as something which will help increase enterprise profitability, promote sustainability and meet the challenges of a demanding business environment.

Revenue Management is a holistic and strategic approach to product management and optimisation of revenue, profit and customer value.  It involves accurate, timely and effective pricing of products and services and Omni-channel delivery of customer experience.

It encompasses a set of core business and system processes, from increasing the wallet share through customer retention and loyalty programmes and product cross-selling and up-selling, to capturing of new revenue streams through quick roll-out of product variations and offers.

It is essentially customer centricity – generating and selling personalised offers. An offer with right product at right price through right channel, at the right time, and all at the optimal / right profit margin, thereby, leading to enhanced customer experience leading to better engagement and loyalty.

It also entails using the entire value chain within the customer ecosystem to capture the full possibilities from it. It could be proving flexible settlement structures to facilitate revenue sharing and transfer pricing, or delivering the capability to determine the exact value contribution of the partners.

It is the way to look at offering a package to the customer at an optimised price to meet all his and your requirements at the same time.  It is a way to incentivise your customer and drive his behaviour accordingly. Discounts can be given on deposit fees during off-peak hours and this helps you to manage risk and load at the same time. Similarly, interest rate discounts on home loans can be offered based on the relationship of the customer, his total product usage, risk profile, etc. All such offerings, go a long way in driving customer delight and helping you maintain your margins at the same time.

Revenue Management is a way to be customer centric and be inside-out, rather than being outside-in. Offer what the customer needs, instead of selling to him something from outside, which he may or may not need. This approach improves the customer experience extensively and leads to customer stickiness and increased wallet share.

On the same lines, Business Assurance becomes another key component for sustainability, growth and performance. A comprehensive business assurance in a nut shell is management of enterprise wide risk by a comprehensive single customer views, product profitability and potential risks.

Business Assurance is a set of systems and processes to ensure structures, processes, systems for revenue management work together to manage risks, eliminate revenue leakage, maximise margins and deliver analytics to meet regulatory and compliance requirements. It allows data collection at individual transactions, helping to manage compliance to regulatory controls such as anti-money laundering.

It offers the capability for smooth integration of internal external systems, driving complete transparency, leading to operational optimisation and agility to drive informed decision making at all organisational levels. It can also allow managing the margins by allowing threshold pricing to achieve the margin targets.

Such a comprehensive Revenue Management & Business Assurance has to be a part of the strategic plans of the banks and financial institutions to maximise returns in such a complex and demanding environment.

Thursday, September 4, 2014

How do banks compete in today’s disruptive environment? (Part 2)

As banks continue to jostle around for growth and some even for their existence, you may ask, if things are so bad, is there really a way out? Yes, there is definitely a good way to work these out. Well, there are so many banks from around the globe, which have successfully been able to figure out this Holy Grail. But these banks need to start thinking and get going right now.

We spoke about Product Bundling being one of the ways to remain customer centric and generate more revenue per customer and increase customer stickiness.  But will the traditional product bundling (only banking products & services) serve the purpose? Will they not become commoditized over a period of time? Yes, they will. However, a point to note is that this concept is still picking up with the banks and financial institutions. They are slowly gravitating towards this. So there is a long way to go. However, what happens next, how do you still innovate and remain customer centric? To find an answer to this, it might be useful to think like a retail super mart – bundle banking products & services with luxury items or services or lifestyle services, like a lounge access or a spa voucher. This aloud, what your target customer would like / prefer / need. Like, for an expat student, it might be beneficial to bundle a checking account with foreign inward remittances and top it up with a mobile sim card. Again, we have to think what our customers want. With changing lifestyles, customers are looking for these lifestyle defining services. It might be a good idea to bundle a credit card with a Formula 1 lounge party access coupons and behave like the Godfather – make him an offer, he can’t refuse. Well, make it enticing enough, for sure.

Today’s customer wants to be recognized for the overall value he brings to the bank – not only in his own capacity to use bank’s products & services, but, also through referrals. He wants to be given due credit (either monetarily or otherwise) for additional customers he brings. Not only this, today banks want to have a system which integrates with the facebook data feed and customer enjoy benefits for any recommendations they give to their friends to use the bank. This is another innovation around customer centricity that banks are planning to target across the globe. And why not, with more than a billion users, facebook is a ready pool of potential customers.

This eventually becomes the story of value chain banking (a step up of supply chain financing, which is a subset of value chain banking). You want to target the complete value chain – whether it is a household or a traditional corporate supply chain or a corporate and its employees. You want to give benefits to the employees of the corporate which has a good relationship with you. You want to allow loyalty points transfer across the household or you want to give some benefits on the mortgage, based on the overall credit card spend the household has. In the SME side of the things, the Director of the SME is a SME customer as well as a High Net Worth customer in his personal capacity. You want to target both of them together and give him some benefits to garner both sides of the business.

These kinds of pricing or loyalty benefits can be used to drive customer behaviour. You want to incentivise the use of a particular channel in which you have invested a lot; you may want to give pricing benefits to the customers who use that channel. Similarly, you want to force your customers not to do transactions during a certain time of the day, say, for fund transfers at branch, you want to desist your customers from performing these transactions during lunch hours, as the load increases considerably during this period. Or you want to charge cheque pickup for interior locations at different rates when compared to near locations. These kinds of pricing innovations to drive customer behaviour become essential to be competitive and remain relevant and creative.

With the widespread advanced mobile technologies, customers have access to everything on their palms 24 X 7, hence, they expect actions in real-time as well. The moment they act, a reaction should happen from the bank. However, traditionally, all bank systems are designed to work in batch mode – end-of-the-day batches typically, and in certain cases, even end-of-the-month ones. Then how as a bank you meet this expectation, becomes another question which needs answer and quickly. This can be addressed with a system which is capable of handling transactions in real-time and dynamically. This can be moving the customer dynamically from one offer or pricing to the other, as his business parameters or expectations or experience changes. All this will be equally complemented by getting all insights on the customer behaviour and transactions in real-time.

There is another way to look at complexity in product offerings at a bank. A savings account is a traditional deposit account and you top it with certain services, you call it Silver Savings Account; you give certain additional services to Silver, you call it a Gold Savings Account and similarly, a Platinum Savings Accounts comes with certain additional benefits and services. And as a bank, you market them as 3 different products. Well, for marketing, this is fine and works well. However, when it comes to systems, where these products lie, it becomes very tough to manage and control. Imagine, what happens when you have 5-7 different variations to each basic product and the total goes beyond 1,000 in a small bank. For the base product processors and core banking systems, it is an operational nightmare to maintain these products. And with the needs of the market, this number is ever increasing by the day. You need an efficient product management system – a system which will house all the variations to all the base products. A system where all the benefits, all service variations and definitions will be stored. This will encapsulate everything from the core systems and make them light and allow them to do what is required of them, to process the transactions. You need product management, which is quick and responsive - speed to delivery / execution becomes critical.

Essentially, in today’s ever changing market dynamics, to compete and grow at the same time, the need of the hour is an “Agile3” Strategy – Agile Systems, Agile Product Management and Agile Processes. All these in tandem will manage the customer experience and help orchestrating it across all delivery channels seamlessly. And this will drive customer centricity, as we say.

This the second and the final part in this series.

Sunday, August 31, 2014

How do banks compete in today’s disruptive environment? (Part 1)

In this changing environment, changing dynamics of the market, how do banks remain competitive and deliver more to their customers? How do they achieve the double targets of keeping their customers happy and at the same time maintain ever increasing revenue and profitability growth. And above all, how do they remain customer centric? These are some critical questions that demand answer, for the banks to be able to define their strategies for their next phase of growth, both organic and inorganic.

Even though customer centricity is the buzzword in the market and being customer centric is the key challenge faced by the banks. However, how many understand what is customer centric? In simple words being customer centric is to do and sell what customers want. Thinking like one’s own customer is being customer centric. In fact, being customer centric is putting customer at the centre of all processes, all products or offerings and even people. Customers have to be the fulcrum of all decision making. Customer centricity is decision making which is outside-in, rather than being inside-out. Bring in the ideas from outside (customers) and then decide. Decide based on what your customers want.

One would ask, what enables customer centricity? Though, one needs to change their operating models, etc to facilitate customer centricity; a highly flexible system capability sitting as middle layer in a typical IT landscape in a bank can easily deliver this capability from systems perspective. This capability can enable right offerings based on what the customer wants. Imagine a right offer orchestration layer which can deliver right offers to the customers across the channels and manage the customer experience at the same time. This enables increase of the wallet share from the customer, based on relevant parameters (profitability, channel, etc).

Many banks still have their products, channels and business lines in silos, or they are partially integrated. This makes their systems product centric, non-integrated as well. Non-integrated systems prevent these banks to have an enterprise-wide, 360 degree view of the customer, which in turn prevents them to be customer centric. This cripples bank-wide efforts to improve customer experience and doesn’t allow them to adequately monitor operational and transactional level activities. These banks need a capability to introduce this flexibility which allows them to have a complete customer view – whether it is a corporate along with its subsidiaries and their complete product holdings, channel utilisation and other transactional metrics, or a husband, his wife and his children all in a single view, contributing as a household.

Such an enterprise-wide view across the value chain will not only allow for better monitoring capabilities, but will generate improved cross-sell and up-sell opportunities.  This system will allow you to actually execute such strategies by maximising the customer profitability and improving customer experience and satisfaction manifolds.

In an environment where customer behaviour changes frequently, one needs a system which can capture and manage the changes to the offers dynamically. Similarly, the pricing and other ingredients of the offer should be modified dynamically too. You need a system which allows offer personalisation based on individual customer requirements or requirements across a customer segment. It is a capability which allows more choice and less risk in terms of customer offerings.

Need of the hour is a system which runs on business rules and hence, when the customer requirement changes, customer behaviour changes, the system and hence the bank can deliver a changed experience. You also need a system which offers flexibility to manage new changes as and when such developments happen. A highly flexible and configurable system to orchestrate the changed environment becomes essential to succeed.

It’s a logical understanding that as the number of product holdings per customer increases, average revenue per customer increases considerably and the annual churn of customers reduces drastically. In fact, customer stickiness increases exponentially, as the number of product holdings per customer increases from 1 product to 4 to 5 products. This automatically, increases the total revenues for the bank tremendously. Thus, the product bundling capability becomes a key element for success in a bank. A system which can seamlessly drive dynamic product bundling to cater to ever changing customer requirements will prove to be absolutely necessary.

All the existing and old banks of the world (as I mentioned in my previous post) have many legacy systems, which complicate the situation further. They are typically very obdurate in their approach towards the new systems and enjoy the manual activities from their owners a lot. In such situations, you need a proven system which can work alongside these old systems and let them do what they do best – customer data storage, transaction processing, etc. The new system has to have strong integration capabilities, both real-time and batch.

These old systems bring some more challenges – any new change brings customisation efforts typically running into months together. Imagine a new idea that you want to test out in the market and the change is a good few months and few hundred thousand dollars away, thereby completely eroding any competitive advantage that may have accrued otherwise. Research says more than 70% of the banks take more than 3 months to introduce a new change or a new product offering.  In today’s competitive landscape, banks need capability to launch innovative product offerings faster than the competition.  You need a system which is highly flexible and parameterised and comes with a complete workflow to manage the processes and acceptance and rejection of the changes. To considerably reduce this time to market, you need a capability which allows very less IT / technical intervention, rather allows the business to try out new innovations all by themselves. Being an innovation leader not only allows you to be disruptive, but it also develops a strong brand value for you.

This post is the first post of the 2 part series to describe ways to address challenges faced by banks today

Monday, August 25, 2014

As a bank, are you being challenged by today’s paradigm?

The most fundamental challenge for any organisation, as always, is to generate strong revenues and profitability, year on year and strengthen the overall positioning of the organisation. This positioning can be in terms of brand value, brand recall, business league tables, reputation in the market, etc. All this is no mean task in today’s scenario of financial stress, liquidity challenges, increased competition which is both traditional and disruptive and of course the eagle eye of the regulatory authorities. All this becomes even more complicated with the increased data flow across the globe.

Generating good revenues and profits in these turbulent times are one piece of the puzzle. Most of the banks across the globe have ambitious expansion plans, both in their home as well as foreign markets, which they hope to bear fruit sooner than later, especially, once the economic conditions improve. Managing the customer expectations of the merged or acquired entity becomes paramount in such situations. The bank needs to make sure that the customer experience after the merger / acquisition is seamless and the offers are managed in a cohesive fashion. This is the real success of the merger activity, by all means.

Making sure, the operations deliver what is promised to the customers is also becoming more relevant in these times. Supported by better compliance and transparency throughout the customer lifecycle, banks across the world can better manage their operational risk.

Combined with these challenges is the need to remain relevant. And this is the real need to be competitive in this environment and still manage the needs of the customers you are servicing.  As the banking industry becomes saturated with products and services and hence, becomes more commoditized, it becomes increasingly difficult for banks to maintain their respective individuality as a service provider. Financial services has always been a competitive business, but banks today have their task cut out, as they differentiate not only with the existing providers, but with the steady trickle of new entrants, who are nimble not only with their processes, but technology wise too.

Customer centricity has been the buzz word in the industry for many years now. However, as the banks strive “to improve the customer experience” and “put customer at the centre of all decision making”, they still struggle make a meaningful impact in being “customer centric”. In the aftermath of financial crisis, banks are finding it tougher to make positive impression on their customers. Differentiating on price and products is becoming increasing difficult and then they face challenges of ever changing customer preferences (which are becoming quite dynamic, by the way) and increasing stringent regulations. Each customer wants to be treated deferentially and be recognised for not only the business they do with the bank, but, for also the business they bring through referrals or introductions or across the value chain.

Even though customers regard the quality of service delivery as a top aspect of their banking experience, they equally value price competitiveness, product innovation, and effective delivery mechanism. The challenge for the banks is manage customer experience holistically in these areas.

You can’t lower the price beyond a certain point, then, how do you still compete? The answer lies in pricing innovation, giving some benefits for the relationship the customer has with you. Being more dynamic and real-time in today’s world is increasing desired by the customers. If the Relationship Manager targets a customer with the same set of products that he has always been offering and which even the competition next door have, then, what is that one story which will allow the RM to get the business and remain relevant? With the ever increasing customer touch points, the delivery mechanisms are more varied and complex. The need of the hour for the banks is to offer more attentive service, integrate multiple delivery channels and make sure the offers made to the customer are consistent across the channels for superior customer experience.

The situation is exacerbated by the fact that the most existing and old banks of the world have hundreds of legacy systems, which come with their own challenges. Not that, these so called legacy systems can’t be replaced with the new age ones, they can be, however, such a desire to change, brings with itself a slew of challenges, which can be even monstrous both with planning and execution. Most of these banks have struggled to do so. And the financial strain these replacements bring to the banks, they are better left with maintaining the status quo. The business faces its own perils by living with the status quo, as the new players eat their pie and quite fast at that. The real problem is not the legacy systems by themselves, but the way they were designed and hence, the time-to-market with any new change that is desired to meet the market requirements. Typically, it can run into a 12 months cycle and thus eroding any competitive benefits that might have accrued otherwise.

But the question is – can you live with the legacy systems as is, in today’s market? For sure, not! Most of these legacy systems are typically product centric or account centric. Individual accounts grouped by product type, instead of customer-centric, grouped by customer or segment. These account-centric systems give a fragmented view, thereby restricting capability of the bank to have a holistic & single, 360 degree of the customer – which is essential for cross-sell & up-sell. Lack such capability hampers the bank’s real move towards customer centricity. Even new age CRM systems can’t do this effectively in real-time. Then, wherein lays the solution to the challenges raised by such old systems of the yore? Or for that matter, how to think of going Beyond CRM to implement what a CRM system would typically tell you?

Banks should think of how to develop a capability to be more relevant and responsive to customer needs? What would allow them to reduce their time-to-market? How can they react to competitive pressures more innovatively and timely? How can they be pro-active with their customer offerings? What is the capability that will help them meet their strategic objectives for overall revenue management? What will allow them to match their customer requirements transparently and also meeting all compliance and regulatory requirements at the same time? These are the some of the questions that banks need to ask of themselves to assess how to be truly customer centric.

Friday, March 21, 2014

Mr Advani finally agrees to Gandhinagar

I as a self professed and a firm believer of BJP and their liberal political agenda is miffed at the way Mr Advani has acted over the past few months. Before going further, let me put in a disclaimer – even though, I like BJP, but that is restricted to their liberal and reform agenda and not at all related to any communal stuff, that many pseudo secular parties claim to be so.
Well, coming back to Mr Advani. I strongly believe, Mr Advani should ideally have left his desires of the PM chair and should have eased into political retirement. Performing a role of an ideologue and patriarch to the core would have better suited him at the age of 86. Not that he is not a known politician across the country. He is well known political face across the length and breadth of the country. He had even served as the Deputy Prime Minister and the Home Minister under Vajpayee NDA government. However, the desire to host the National Flag from the ramparts of the Red Fort one day continues to rage. And this desire is affecting the party and its Mission 272+ for sure.
Mr Advani’s antics are surely hampering the party and its image. His discomfort with Mr Narendra Modi is well known and it even goes to the extent of becoming a butt of all jokes at such a critical time and causes embarrassment. The question is, Is this discomfort only due to his desire to be the PM of India and hence, not liking the idea of Mr Modi being projected the NDA’s PM candidate? To a common man, that is one probable reason that would easily come to fore, as Mr Advani’s desire to be the PM of India is a part of the Indian political folklore.
As a common man with considerable interest in Indian politics (for it affects the country directly and indirectly), I believe, this discomfort also sums from the perceived authoritarian image of Mr Modi. It is widely perceived that Mr Modi will get his way out, some way or the other and hence, can easily cut to size the likes of Mr Advani. Please keep in mind that under the load of 2 successive defeats at the hands of congress in 2000s and especially after Mr Advani paving way for Ms Sushma Swaraj as the Leader of Opposition, after 2009 defeat, he was sort of left in the lurch, may be even demoted to a wise patriarch. Imagine all this after being the face of BJP for decades.
I also feel, Mr Modi’s ever gaining popularity and image as messiah of all development in Gujarat, would have also played into Mr Advani’s mind. His rise as one of the most sought after leader in BJP in all campaigns over the past few years, might also be adding to all this. Add to this the rock star status that Mr Modi has enjoyed for some time. And all hell broke, as they say.
In all this, Mr Advani never ever thought of the party (or maybe he thought), as it looks to a common man and supporter. May be he could have handled it better, by at least not making his displeasure public by resigning from all party posts. And when all was going fine, he did it again; by giving conflicting statements over his choice of seat to fight the General Elections next month. Finally, he agreed to his existing seat Gandhinagar in Mr Modi’s Gujarat.
Ideally, one would have liked Mr Advani to have taken a back seat and accepted the new generation and acted like an elder statesman, guiding the party in these crucial times.

Tuesday, March 18, 2014

My 2 cents on Mr Kejriwal – he is needed, however, a long way to go...

Been reading a lot of articles on Arvind Kejriwal and his brand of politics or “anarchy”, as he enjoys it being called! It has been close to around 3 months since he was christened the “7th Chief Minister of Delhi”, and it has been a more than a year since he became the mascot of “Aam Aadmi” in political fiefdom of our elitist (in his words) political class. While, I strongly believe in the disruption that he brings to the current political mess, however, his projection as being different and an alternate is something questionable, at least to my ilk.
Many political parties including Congress & BJP say that he is no threat to them, however, deep inside, even they would accept his importance and probable threat. I believe, if he has the right intentions and the right means to achieve them, he can create a sea change in how elections are fought and politics is run in general, in our country. My thought process is simple – he is needed to keep a check on the current politicians and political parties, however, to reach where his eyes are set on (read PMship), its a long way to go. I agree, the public in general is fed up with the current dispensation and it needs an overhaul. However, this is a slow process, as no one can overnight do away with the rut that has set in. It will take years – who knows 5, 10 or may even more. But, with the ever growing discontentment in the public at large, lack of patience and generational shift, it will surely be 5-10 years. There is a classic case of BJP in our own backyard, which has grows since the Jan Sangh days in the 60s and 70s to political party ready to take charge once again.
He had a chance to prove his credibility as an administrator and politician for a change, however, he let go off of this golden chance, for want of politics. How much as he may say, his resignation in the guise of Delhi Jan Lokpal Bill was a political stunt. He very well knew that the public mood over the years of poor governance and corruption was completely against Congress and anti-corruption. And with the success in the Delhi Legislative Elections last year, he had the momentum with him along with the emotional bind with the public. So, he wanted to cash in on this mood and momentum and decided to go national overnight and fight the General Elections 2014. This is where the real problem rose – AK was AAP and AAP was AK. There was lack of national faces and this continues to this day. There was and is no national leader who people across the country know and can relate to. And with AK being restricted to Delhi (being the CM), the national ambitions overpowered the fire to perform for Delhi and he resigned. Since he resigned, he has been on a national rally spree, going all around the country to garner votes for himself and his party. Well, this is a no brainer. Agreed! The problem lies with him saying he is different, providing alternate to the 2 national parties. Mr Kejriwal, is no different. He accuses BJP of personality politics in the name of Mr Modi. While, he forgot that AAP and himself are doing the same in the name of Mr Kejriwal.
In all this milieu of Namo and Gujarat Model, Congress, even the small parties, never accused Mr Modi of being corrupt. All they had to say was always centred around Gujarat riots of 2002. No one ever said that Mr Modi was corrupt. However, he came and said that even Mr Modi is corrupt. I do appreciate your bold attitude J In fact, he claims everyone other than AAP members or supporters are corrupt. There is a perception that he thinks bureaucrats and law enforcement agencies are all corrupt. I am not ready to accept that everyone is corrupt. It would be good, if he highlights and segregates the good apples from the bad ones.

It would be good if he rises above referendums (people’s voice, as you prefer to call them). His latest one to get a referendum to decide whether to fight against Mr Modi from Varanasi is bizarre. Come on, is he going to take every decision like this? What to do of cases like Chinese incursions? Take a public referendum, before he gives a firm reply to our neighbours. Voting Lines are open until 9 PM tomorrow. And Chinese scrape additional 10 Kms off our land mass. Additionally, there are many instances to prove that the voice of people is not right always. There is more to politics than the agitational DNA that he and his coterie carry everywhere. He aspires to be the next Prime Minister of India, for which he would have to change his way of thinking and working completely.