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BANKING FOR BETTER 

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By Alex Kwiatkowski, Director of Global Financial Services, SAS.

From shifting market dynamics and mounting geopolitical tensions, to skyrocketing cyber threats and a worsening climate crisis, the world faces risk and uncertainty on many fronts.
But how are these and other prevailing trends reshaping the financial services sector?
A volatile landscape  
Describing the past few years as ‘volatile’ could be seen as a slight understatement, akin to saying the Titanic had a minor mishap at sea or that Liz Truss’s economic policy was mildly unorthodox. From the COVID-19 pandemic, Russia’s despicable invasion of Ukraine and the increasingly intense impacts of climate change, the resilience of not only businesses but whole nations has been pushed to breaking point.
In many ways, the banking sector has proven remarkably resilient to such challenges and risks. In the face of prolonged disruption, profitability remained higher than many had anticipated. However, the deeper structural challenges, such as digitalisation, the emergence of fintech disruptors, the brouhaha over crypto, and the growing threats associated with cyber attacks, are continuing to gather force as we head into a new year.
A recent Economist Impact survey, sponsored by SAS, found that while banking leaders are conscious of the imminent risks and those on the horizon, many are generally optimistic about how their organisations could be reshaped over the next decade, and beyond. I believe this optimism is well-founded rather than misguided, although pragmatism is required.

Alex Kwiatkowski

Digital transformation

For some years leading up to the COVID-19 pandemic, banks had been wrestling with exactly when and how to digitally transform. Like so many other industries, the chief legacy of the pandemic was to force rapid and wholesale change on a sector not always eager to embrace new ways of operating.
Traditional banks are now on track to be digitally transformed by the end of this decade, with technologies such as cloud computing and AI becoming industry norms. When considering the next three to five years, 57% agreed that digital transformation is among their top strategic priority. Cybersecurity and data protection (55%) are not far behind.
This focus on digital transformation is understandable, given the opportunities it may bring. Respondents from the Asia-Pacific region were the most excited, with 64% selecting it as among the greatest opportunities for their organisation. This was much higher than their counterparts in North America (52%), Latin America (50%) and Europe (50%). In fact, the tech-savviness among Asian consumers has created an opportunity for banks to leap ahead in delivering innovations compared with other regions.
When asked about the role of advanced data analytics in a successful digital transformation, just under half (48%) of executives selected this as the most important digital capability that their organisation must harness. It was the clear overall favourite, followed by blockchain (35%), AI/machine learning (34%), IoT/5G (33%) and robotic process automation (29%).
However, the survey also revealed a number of hurdles that may prevent the full uptake of data analytics, such as the increased risk of cyber attacks and a reliance on legacy technology systems. In addition, functions and departments working in silos was viewed as a potentially significant barrier, with 48% noting this as a “significant barrier” to change.
Purpose-driven banking
Alongside this goal of digital transformation, a growing consensus has emerged among banking leaders that the wellbeing of customers, communities, employees and the environment ought to be at the forefront of strategy.
Termed ‘purpose-driven banking’, this shift often encompasses ESG-related activities as well as a broader commitment to customer relationships over profits.
Purpose-driven banking has broad support among the industry’s leaders, with 82% of executives agreeing that financial services organisations can pursue profit and a better society at the same time. That sentiment is even more common among C-level executives, with 91% in agreement.
Arguably one of the most interesting results of the survey is the fact that 76% of respondents believe that the banking sector has an obligation to engage with and address societal issues. An even larger portion (81%) said that their bank takes responsibility for the social impacts of its activities.
Interestingly, a clear majority felt that the financial services industry is behind other sectors in terms of progress on ESG commitments. About three-quarters (76%) of C-level respondents said this, compared with 61% of all other executives.
Establishing transparent and measurable ESG goals aligned with corporate strategy is one area where leaders feel behind, with just 38% feeling that their organisation had achieved this. Another important aspect of the purpose-driven mindset is recognising how banks are fundamentally linked to other stakeholders in society. When asked which were the “most important groups for financial services organisations to engage with in order to have the most positive impact”, the technology industry, investors and customers were the top three choices. They were followed by consumers and government or policymakers.
Growing pressure from customers, communities and other external stakeholders are likely to influence the extent to which the banking sector embraces ESG practices, however it’s clear that the banking sector looks set to transform over the next decade. And transform it must.

Banking

How banks can help customers during the cost of living crisis

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 Lavanya Kaul Head of BFSI, UK & Ireland, LTI Mindtree

 

Surging energy and food prices are significantly driving up household expenditure, which means living standards in the UK will fall to 2.2% this year, according to the Office for Budget Responsibility. This is the biggest drop in any single financial year since the records began in 1956-57.

It’s a tough situation for many consumers who are still struggling with financial hardship following redundancies and pay freezes from the pandemic. According to TSB’s Money Confidence Barometer, 82% of people have experienced an increase in the day-to-day cost of living. This resulted in almost a quarter of them using their savings, while one in five changed their usual spending habits and behaviours.

As the financial situation worsens, consumers are increasingly relying on their banks for help and support. But, while banks can’t control inflation, energy or food prices, they can play a more supportive role by adapting their services to offer stronger customer service, better tools for financial management and be more flexible with loan repayments.

 

Strengthen customer service with intuitive AI solutions

Since the pandemic, consumers have changed the way they bank, using more mobile apps for primary banking rather than going into physical branches. This provided an opportunity for banks to accelerate their investment in digital services including automation and offer customers more support during the cost of living crisis.

Lavanya Kaul

Effective tools include AI-powered chatbots which respond intelligently to customer enquiries to quickly help troubleshoot problems and provide useful advice. But to be successful, you need to ensure you strike the right balance between an efficient and convenient process and creating a personalised experience. Customers need to feel like you understand and care about their problems and are here to help, rather than just fobbing them off with a monosyllabic bot. To avoid this, banks need to embrace intuitive AI solutions to ensure that empathy comes across in all automated interactions with customers. While doing that, messaging is key. In times of stress, we don’t function as well and financial struggles are a huge stressor. The clearer the message and the simpler the instructions, the better.

Financial education, when combined with technology solutions such as open banking, can offer more long-term solutions for people to navigate their finances. This can help put more information into the hands of the consumer to help them grasp their financial situation better. Some banks have cracked this with innovative solutions like HSBC’s Financial fitness score tool that can analyse your money habits and signpost you towards ways to improve your financial health. This may include joining one of the financial education webinars run by the bank or having a ‘financial health check’ with a member of staff.

 

Launch money management features & apps

Introducing money management features and apps to increase the visibility of a customer’s financial situation, empowers them with the information they need to make smarter choices.

TSB offers Spend & Save and Spend & Save Plus current accounts which include a savings pot that enables customers to put extra money aside when they can and an auto-balancer feature that automatically transfers money from the savings pot into their current account if their balance falls below a certain level. This allows them to start building up savings and protects them from unnecessary overdraft charges.

Personal financial management (PFM) apps also help customers get a better understanding of their finances. These connect with a customer’s bank account and enable them to keep a close eye on their spending habits and track upcoming bill payments. An example is Prism, a PFM app which allows customers to manage bill payments by sending them reminders about due dates. It also provides a summary of their income, account balance and monthly expenses at a glance, therefore consolidating all their financial information in one place and saving time on bill payments.

Lloyd’s Banking Group and HSBC launched a subscription management tool for all customers on mobile, allowing them to see and cancel recurring card payments for things like TV subscription services. HSBC says that during the first quarter of the year, it led to customers dumping around 200,000 subscriptions.

 

Introduce payment holidays

While improved customer service and financial management tools are important support tactics, they might not be enough for more vulnerable customers. For example, those who are about to default on mortgage payments or loans due to redundancy or periods of ill health need banks to do more, like offering payment holidays. Banks relaxed the rules for payment holidays during the pandemic, so they should consider doing it again to help more vulnerable customers through the crisis. Customers need to understand that they are not alone when experiencing financial difficulties and that help is available

 

Ride out the crisis together

As inflation reaches a 30-year high, customers are now more reliant than ever on banks for guidance and support. But to provide the right level of service, they need to move away from their traditional ways and behave more like technology companies by embracing automated solutions to create the right products and services for customers. Then layer on top of that the need for more personalised and empathetic customer interactions, as well as consider additional support for more vulnerable customers.

While we don’t know how long the cost of living crisis will last, what we do know is that the pressure on household finances is likely to get worse before it gets better. Therefore, banks need to step up, be the supportive partner and do whatever they can to help customers. After all, the only way we can ride out the crisis is by supporting each other and working together.

 

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Banking

Coreless Banking: How banks can thrive in 2023

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By

Hans Tesselaar, Executive Director of BIAN

 

In recent years, banks have faced immense disruption and struggled to transform with technology. In fact, our research with IBM found that 88% of banking executives are troubled by their bank’s commitments to multi-year projects, interoperability across technology environments and theft of sensitive data. A lack of industry standards is also causing significant problems and hindering the organisation’s ability to bring new services, at the desired speed, to market.

While banks have made significant advancements in recent years, in order to truly embrace digital transformation throughout the industry,and meet the needs of today’s digital first-customer, banks must focus on adopting a coreless banking model.

In 2023, coreless banking approach will enable the delivery of banking services that aren’t longer dependent on legacy systems, and will support the digital-first customer, bringing real transformation to the industry.

Hans Tesselaar

Putting the Customer First

Without the comprehensive digital infrastructure necessary for today’s environment, financial services organisations are unable to bring services to market as quickly and efficiently as they would like – and need. The extensive use of legacy technology within banks meant that the speed at which these established institutions could bring new services to life was often too slow and outdated. This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on their language and the way they would work alongside their existing ecosystem. This is instead of their functionality and the way they’re able to transform the bank.

To move forward into the ‘digital era’ and continue on the path to true digitisation, banks need to overcome these obstacles surrounding interoperability. Additionally, with today’s digital-first customer in mind, financial institutions need to take advantage of faster and more cost-effective development of services. Failing to provide these services may force customers to take their business elsewhere. One thing is certain, consumers will continue to prioritise organisations that can offer services aligned to both their lifestyle and needs.

Coreless Banking 

The concept of a ‘Coreless Banking’ platform is one that supports banks in modernising the core banking infrastructure.

This empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their language. By translating each proprietary message into one standard message model, communication between financial services is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

With the capacity to be reused and utilised from day one, and the ability to be used by other institutions, Coreless Banking provides these endless opportunities for financial services industries to connect, collaborate and upgrade.

Banking in 2023 and Beyond

Throughout 2023, banks must prioritise their digital transformation journey and adopt a Coreless Banking model. This approach will empower technology leaders to tackle problems head-on knowing they aren’t tied down by the usual restraints caused by outdated legacy systems.

After the last few years, it is impossible to predict what is around the corner, but banks will rest easier knowing their architecture can modernise and change as needed with a Coreless Banking model.

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