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.

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