ShareBanks in Asia have come out of the financial meltdown relatively unscathed. The reason most experts attribute this resilience and health of the Asian banks in comparison with their Western counterparts is to the fact that Asian banks, bank(ed) on the basics - lower loan-to-deposit ratios (LDR) and a large captive deposit base.
While for most of their western counterparts, the meltdown proved to be a ‘meltdown’ in every sense of the word, for the Asian banks, the financial crisis had more to do with the demand from the West going southwards in the graph.
Now, moving forward, while they continue to build on their strength of liquidity and capital, the focus needs to prevail with fervor on customer relationships. For relationships to have any meaning, and for banks to make the best out of them, they should be able to see customers as a whole and not as mere pieces of a jigsaw puzzle. This implies having a 360-degree view of the customers, which enables management of risks wisely, and measuring and mitigating the same, which again, most industry pundits see as the key to success for a financial services firm. Discuss
The lifeboat was Transaction Banking
But for their transaction banking portfolio, some, if not most of the big banks, would have gone completely southwards in their growth chart. And thanks to this learning, it is encouraging to see most banks innovate, trying to cement their position in the transaction value chain.
Progressive banks are leaving no stone unturned in order to exploit the relationships they have already established with customers, by catering to not just their banking needs, but all their financial services requirements and more. They have begun to realize that it is the customer relationships that hold the key.
Are they doing enough? No -- not when you compare it to what non-banking players, who have entered the once sole domain of the banks, are doing. Mutual Funds, Brokerage Funds, and even brands once associated with only telecom or retail services, are now firing on all cylinders to enter this space, where banks once had a free rein.
Question, again – will banks remain on the top of the transaction value chain? Will the position they once enjoyed be lost or at the least be challenged? Will the lifeboat of transaction banking still be on board the bank’s ship, lest the wind takes it southward again?Discuss
Advanced Pricing Models? Inevitable!
Mobile Broadband is today the second-largest broadband access technology -- second only to DSL -- making up almost 20% of subscribers for broadband across the world. Thanks to wireless broadband technologies like HSPA, HSPA+, EV-DO, LTE and WiMAX, mobile broadband has come a long way and is here to stay.
Increase in the popularity of bandwidth-intensive applications 'on-the-move', such as watching online video, using IP-based telephony services, and downloading music files, is no doubt acting as the catalyst. Mobile broadband’s ascending growth curve across regions, and solid mobile data traffic figures substantiate its popularity across markets – especially developed ones, and particularly among the youth and the tech-savvy. In emerging markets like India and Africa, the growth curve is no less encouraging. In fact, its rate of adoption in Africa is twice that of the growth of fixed broadband!
Service providers acknowledge the fact that the flexibility of the services, with both prepaid and postpaid offerings, accounts for this high growth rate. Easy availability of gadgets that support the services, flat rate plans and bundles that are equivalent to those in the fixed broadband plans, and the emergence of new high-speed technologies have also spawned the increase in customers for mobile broadband.
Although wireless carriers should be able to handle the increasing demand for internet usage over the next few years by simply upgrading to the next generation of wireless technology, carriers, who plan to be in this game for the longer haul, will have to leverage additional spectrum and innovative ways of billing. The current flat fee data plan offerings with unlimited Internet access are encouraging overuse (bandwidth hogging) of wireless networks, which are the stumbling blocks in reaping benefits from increased demand.
Understanding the customers and segmenting them based on their usage characteristics, and targeting most profitable customers through usage-based pricing is becoming the need of the hour. It will not be long before innovative and flexible pricing and bundling emerge as the peg in the billing wheel, and the players find using advanced pricing models inevitable.Discuss
With business, customer sentiments and customer demands - all on an upward swing, bankruptcies, recession and forced M&As, in all probability will become events of the past by the end of 2010. Analysts across verticals and geographies are optimistic about the positive sentiments in the majority of sectors and predict IT spending, which was among the most hit during the slump, moving northwards.
On the other end, to stabilize the much-affected banking market, regulators are weaving tight regulations to avoid a repetition. Consolidation in the banking industry will continue in 2010, and a number of institutions will shrink. The industry will witness a new financial world order through tight regulations across geographies.
Having said that, banks in Spain, Greece and Ireland have not yet recovered from the downslide and analysts are not ruling out the probability of a few more big falls in the European region. Tier 1 banks in North America are getting stabilized -- so failures will likely be among low-tier banks that have less than $1 billion in assets, according to industry pundits. M&A activities by Canadian banks will increase. In Latin America, in spite of its highly concentrated banking sector, a few M&As are in order during 2010.
As competition intensifies, ‘anytime anywhere any device’ will become the mantra across markets. Financial Institutions are thus banking on channels like mobile banking, social networks, etc., with an unprecedented zest. Face-to-face interaction with customers assumes prominence only in the APAC region; but mobile devices will ultimately evolve into the primary transaction channel the world over.
Convenience Banking with personalized care
Organizations that allow the customer to deal with them the way they choose to, will surely be the winners. This is true not just for banking, but for every industry.
'Convenience Banking', for instance, is something that the customer always demands. Banks, on their part, allow customers to do transactions like deposits, fund transfer, pay bills, etc. online, but as ‘multi-channel and convenience banking’ expands, banks may stand to lose the personal touch with the customers. If not managed well, they could run the risk of losing control over their customer relationships, and the whole concept of convenience banking could become very inconvenient for both the bank and the customer.
In this scenario, initiatives like agent web chat, click to call, click for call back and email help assumes pertinence. Here again, though the channel is online, an effort is made to establish a personal contact by the bank personnel. Though this may not be a 100% substitute to the 'human feel', the bank's representative is like a personal advisor for the customer and tries to establish a touch point with the customer. This could be the way forward as the bank is spared the cost of maintaining a branch and related infrastructure, in proportion with the growth in its customer base.
Furthermore, going forward, banks might need to look for such innovative means of creating personal touch points even on channels like mobile and ATM banking. 'Convenience Banking' has to be married with '‘personalized care' to ensure full control over customer relationship and experience.
Interacting with each and every customer of a bank has 'in their (customer's) own terms' may sound 'visionary' now, but that is what a winning organization’s future call is.
VoIP is only the beginning; The future is XoIP!
IP is no longer a luxury of the top tiers -- it is now a need for any communications service provider. The technology has become almost inevitable in the communications industry. Technology advancements, evolution of cost-effective network solutions, the converging market place and increasing competitive pressures are paving the way for IP-based services, particularly VoIP. Little wonder, if VoIP is pegged as the best performing vertical in the world for about a decade now.
While VoIP today, is of course the cake, several analysts see the icing too as good!
You have people surfing the web on their laptops in the Tube; others busy participating or presenting a web-based demo over business lunches in restaurants; yet others using advanced PDA devices to transfer pictures, plans and even medical reports that are seamlessly received at the other end. Airports and other public places are buzzing with travelers using their iPhones, BlackBerries and mobile phones for sending photos, checking emails and chatting... Employers are encouraging people to work from home offices, seamlessly participating in live video conferences with the company’s headquarters located in another continent.
While Voice over IP is mentioned as the best performing vertical, 'Anything' over IP (many industry pundits call this XoIP) does not seem far behind, and will sooner than later become the best performing industry.
IP has changed the game, and several growth markets are maturing rapidly by its virtue. While offering world-class experience and value to their customers, IP-based operators face challenges unheard of hitherto – challenges that check their very survival by hindering revenue inflow. The most glaring among these involve their existing billing systems that are silo-based, mainly due to their product/service–specific framework.
In order to truly leverage the possession of multiple services, a triple/quadruple-play operator needs to be able to effectively package products as per their usage levels, create cross-product bundles for each targeted customer segment, enable usage-based pricing and attach attractive price tags appropriately. However, expecting the existing silo-based legacy systems to be flexible enough to make this possible would be akin to ramming a square peg into a round hole.Discuss
Pricing decisions have never been more important for Communication service providers. Wrong pricing decisions could be deterrent to growth and are bound to have adverse long-term consequences. For instance, in a cable network, extreme internet users might consume more than their fair share of the access bandwidth. These ‘abusers’ might congest a major portion of the operator's network, leading to dissatisfaction among the majority of customers.
Metered, usage-based pricing, and bandwidth caps for broadband were among the most unpopular concepts in the telecom arena during 2009. In fact, there was so much of bad press on this count that most service providers, who had embarked on this, and some who had even announced it, shelved it. But usage-based pricing is vital for the future, especially for saving providers, who have heavy internet users (Bandwidth Gluttons, Hoggers or Abusers) consuming more than their share of the shared access bandwidth.
Metered, usage-based pricing is touted as the only way to combat internet brownouts that happen due to bandwidth hogs. The year 2010 will witness metered, usage-based pricing making a comeback. So, as this year closes, we see service providers moving only closer to implementing such concepts. Since usage-based pricing eventually means more money and healthier network management for broadband service providers, these strategies will define the future of broadband, at least short of any regulatory or legislative moves blocking them!Discuss
Pricing - a Competitive Necessity in Operational Leasing and Fleet Management
The Vehicle Operational Leasing and Fleet Management industry is in a transformational phase. On one hand, we see a lot of changes happening on the technology front. GPS-based Fleet Management Systems have changed the way business is carried out in the industry considerably. Service providers can now track the movement of fleets, and provide reports to their clients on how each fleet operates. Wonderful way for the business!
On the other hand, price pressures are intensifying and competition stiffening like in the case of most industries. It has been observed that in nine out of ten situations, when corporates cut expenses, they look at reducing logistics costs first, making it even more difficult for the already stretched fleet management companies. Well, as they say, when the going gets tough, the tough get going! We are today witnessing the emergence of a different breed of fleet management companies, who believe in doing business differently with technology as the key enabler.
Helping them get to where they want, in a profitable manner, are equally innovative business intelligence solutions -- that are able to seamlessly manage customers, suppliers and intermediaries. These systems are capable of analyzing and tracking down customer usage requirements, and providing them with the optimum offers. They provide bundled offerings across the service categories like operational management, leasing, consulting, driver services, fleet reporting, maintenance, etc.
Pricing is the kernel of these intelligent systems, seamlessly providing the required level of personalization, in accordance with the relationship that the service provider has with the customer, while taking into account the local market conditions also.
Billing is another important tenet of these systems -- flexible and customer-centric, providing customers with split, as well as consolidated bills for the different services they avail, according to their business requirements. If a customer needs to see the charges at multiple levels, and needs to send the bills to multiple addresses, the system can do it for the customer. Retaining the customers and intermediaries in a highly competitive environment requires high-end capabilities to identify and reward loyal and performing associates (customers and partners). The new-age pricing and billing systems address these requirements as well. Discuss
Differential Pricing; a Definitive Need
Institutions cannot afford to have ‘one-price-fits-all’, if they have to remain competitive in the current market. It is simple and straight - customers are different and so they need to be treated differently. As far as pricing goes, differential pricing holds the key. Implementing differential pricing strategies is demanding because be it in banking, telecom, logistics or any other industry, there are multiple lines of business and products with each line of business being supported mostly by as many disparate systems. These systems have been adopted at different time periods and they are based on different generation of technologies. They follow different pricing models for their own transactions. Therefore, to implement differential pricing, an institution has to consider centralization of pricing and billing operations for starters.
Techniques for differential pricing could include pricing based on the transaction attributes, cross product pricing, performance based pricing, loyalty based pricing, profitability based pricing, etc. It is well understood now in the industry circles that they need to address pricing challenges in order to retain customers and make a profit out of them. Moreover, customers’ demand for better pricing presents an opportunity for service providers to grow organically through the implementation of attractive pricing structures. Discuss
Pricing the Customer Centric way is Key in Cash Management
The credit crisis has led banks to consider transaction banking as the pivot to their business more than ever. In this paradigm cash management, payments, electronic invoice presentment and payment and trade services have become imperative elements of global banking.
But industry pundits strongly feel that the proclaimed focus on the transaction banking has not been accompanied by an equal zest in much required technological investments and innovation. While chanting the mantra of transaction banking, banks have moved forward more by cutting costs on internally focused business strategies rather than understanding and improvising processes for serving customer needs.
Industry pundits, see the need to provide information consistency and pricing improvement as the most prominent requirement for bank’s commercial customers. Pricing in fact, continues to be the most important reason for customers changing their cash management relationships. Usage of technology for bringing about differentiation in their cash management services through pricing should be considered with gusto. Discuss
4G Market: Opportunities and Challenges
4G is an upcoming trend in the telecommunication industry. It brings incredible opportunities not only for service providers but also for network equipment vendors and software vendors. In addition to the much spoken about benefits of high data speed and capacity, possibility for different business models like pay per use, more diverse device portfolio and more new services like VoIP, 4G brings in its set of challenges. Pricing is one such challenge operators will have to face and tide over in order to make the best of 4G.
Pricing is a tool which helps service providers to compete as well as differentiate against competitors effectively in the market. So when operators start offering 4G services, different price models need to be looked at to effectively price products and services. Some basic models such as the all-you-can-eat, flat-rate, etc., need to be fundamentally rethought or at least subsidized with high-margin services in the advanced network market. Wireless carriers need to acknowledge the death of the ‘minute’ and move past it embracing ‘second’ in terms of billing. Discuss
Relationship-based Pricing @ the Heart of Islamic Banking
Islamic Banking is not new. In fact, it has been functioning in its modern institutional form for over 50 years. But, now there is an ever growing demand for Islamic financial services.
Debt and profit-and-loss sharing instruments are two common Islamic financial methods, while interest (riba) is forbidden. Globally, the flourishing Islamic banking and finance market is projected to be worth a whopping USD500 billion. In value terms, the Islamic finance sector is currently enjoying an estimated year-on-year growth of 20 percent.
Hence, it comes as no surprise that almost all the top 10 financial institutions and other Banks in the world are looking at or have already embarked on Islamic Banking in all earnest. Predominantly banks in Muslim majority countries have introduced niche Islamic banking to cater to this demand. Today, estimates say that more than 130 banks and financial institutions worldwide, managing close to 90 Billion USD, are practicing the principles of Islamic banking and finance.
In the absence of interest (riba) based income, fee (ujr) income becomes an important source of acceptable revenue for Islamic Banking Institutions. Fee income in the form of transaction charges or Ujr is realized from transactions like ATM, DD, SI, Brokerages, tele banking, etc. In addition to these charges other fees can be levied for various transactions or services for other Islamic products designed in conformance to Shariah (Islamic banking law).
In short, the nucleus of Islamic banking is fee-based.
Centralized Relationship-based pricing and billing solution (fee computation engine) - Ideal solution for the Islamic banking world
A Centralized Relationship-based pricing (RBP) and billing solution in the perspective of Islamic Banking is a system capable of identifying transactions from multiple platforms and then charging a fee / Ujr based on pre-defined criterion in compliance with the principles of the Holy Koran. It is built on Shariah rules and regulations and has embedded in it, the related information capturing features.
Through sophisticated rule-based pricing engines, RBP solutions can emulate the pricing and billing (fees / Ujr) functions of any Islamic banking product. Pricing can be based on multiple parameters. New product bundles and prices can be easily configured and deployed. Cross-selling becomes easier. The key features of RBP are pricing freedom and flexibility.
Relationship-based Pricing and billing solution enables banks to pursue innovative approaches to manage customer relationships by providing a 360 degree view of its relationship with customers creating a win-win solution for both the bank and customers which in essence is the heart of Islamic Banking.Discuss
'Customer Profitability' driven benefits and rewards
Is the global financial crisis over? If not, when would the banks recover? The reactions are a mixed bag. But most experts agree on one fact – that strategic IT spend should not be curtailed for whatever reasons. Solutions that enable Financial Institutions (FI) to offer rewards and benefits to customers based on their overall profitability, taking into consideration their multiple touch points with the institutions, figure among the topmost in their respective list. The reason why solutions that proffer customer profitability-based benefits and rewards take such precedence is that they resonate with the mantra chanted by most analysts and experts today - risk management, operational excellence and customer focus.
Customer profitability-based pricing, packaging and bundling, and price optimization or modelling, are strategies adopted by pioneers in the financial industry, who have spotted light at the end of the tunnel. FIs need technology that can deliver customer intelligence and advanced analytical applications that help predict and understand customer behaviour. Industry analysts see more banks showing interest in adopting such solutions. Today, a number of leading FIs have either implemented or are on the look out for price modelling and customer rewarding capabilities that help them provide benefits to their valued customers based on their profitability. Providing an optimized price will surely increase the profitability and increase chances for customer retention. Industry experts see customer-based pricing, or Relationship-based Pricing as the industry knows it today, as a strategy that can help banks turn around crisis into opportunity, by enabling personalized pricing, de-commoditizing products, fixing revenue leakage points and of course, by offering unique benefits to customers based on the value they bring in. Discuss
The global financial crisis continues to show its dark face by blighting the customer relationships of financial institutions across time zones and locations, while most surveys point to the fact that the situation has helped in eroding a large part of the customers' confidence in financial institutions.
Most retail banking customers today peg financial stability over trust – a word that was once considered to be the cornerstone for all retail banking relations. On the other side, corporate banking customers continue to place trust above everything else. At the same time, convenience that was once the kernel of all banking relations has tumbled down the charts.
In short, customer relationships are the key that can push banks and financial institutions into acquiring and retaining customers in the current situation. Stability, trust or convenience – and every other factor seems to boil down to the basics in banking, which is building customer confidence through greater focus on customer intimacy across all banking channels.
Discuss
The OSS/BSS space should lead innovations to cope with the emerging needs in the market that spring up with the advent of next-generation networks like IP-enabled services and LTE, according to industry experts. On the other hand, industry pundits also argue that the support-system space is wobbling before an impending collapse into a morass of complexity, due to the ever-persistent push for innovation. They feel that several carriers have multiple Operational Support Systems, and so, the goal ahead for the modern OSS providers is to consolidate, rationalize and simplify a carrier's network support systems, thereby providing a holistic view of what's going on inside the network in real time.
Moving to LTE also has its own pains, as the problems facing the wireless industry are complex and troublesome. Wireless networks are largely constructed with non-interoperable components from competing vendors. Getting a comprehensive view of a network's performance could be next to impossible in this situation. Discuss
The next big thing after advanced metering
The triumph of advanced metering over traditional systems is certain now. The Utilities providers, who have already developed advanced metering capabilities, might now start looking for strategies to leverage the benefits offered by the highly automated metering systems. Facilities like dynamic pricing and customer loyalty management can grow up to be the key differentiators in the utilities services market in the coming years. Leading industry watchers Metering.com reports that dynamic pricing can provide numerous benefits to utilities and their customers alike, by lowering the need for expensive peaking capacity, improving system reliability, and reducing power costs.Discuss