Banks across the world are fighting to strengthen their positions. Digital transformation during Covid-19 has been essential. Banks all over the world have mastered some sort of digital sophistication over the last 12 months. While banks strengthen their digital offerings, operational efficiency is one of the areas that has also been in the headlines.
In February, McKinsey senior partner Katy George shared some of the challenges companies who are seeking for resiliency are facing.1 One of the important points that she highlighted was how the pandemic had: “demonstrated in the clearest way the direct connection between operational efficiency and economic prosperity”.
One area that, for many of the banks, is still a work in progress, is the customer experience throughout the whole digital banking journey. McKinsey highlighted this as an area to consider before the pandemic. They suggested that piecemeal productivity gains will not lead to significant bottom-line differences for banks.2
With this drive for efficiency, a lot of traditional banks are looking to emulate the approach to hyper-personalisation that Big Tech firms like Amazon, Netflix and Apple have used, successfully.
Although we may be a long way from this level of ‘hyper-personalisation’ when it comes to traditional banks, many of the fintechs are more successful in this space already.
One of the niche areas where traditional banks can use hyper-personalisation to greater effect is when looking at the revenues of their customers. Last year, we spoke to Ivan Dovica, one of the founders of Dateio, about how his StartUp is helping banks understand better the way they can personalise their offers to match customer behaviours:
Using the technology that fintechs like Dateio provide, banks can learn to more quickly and better anticipate what their customers need. It all sounds so simple.
What are Traditional Banks Doing About Hyper-Personalisation?
We spoke to Nanda Kumar, who has already navigated several digital revolutions, and has worked with banks across the world helping them with customer-centric software platforms and solutions. Kumar is the CEO of SunTec Business Solutions, the world’s #1 relationship-based pricing and billing company. More than 400 million end-customers benefit from SunTec’s solutions.
“Our first client back in 2000 was ING in the Netherlands. Today, we work with the Top 10 banks in the world. We have banking clients from Australia to North America including all the leading Indian banks.” Kumar shared. “Customer needs are constantly evolving.”
Kumar went on to explain how banks have had to evolve due to the evolution of customer needs: “The world has to come to them, rather than them coming to the world. We can’t take the bank to the customer. So we say to banks: ‘You keep all your core systems, we will help with intelligence to support them’.
“In our experience customers only worry about two things: What is the product or functionality you are delivering to me? And, how much does it cost? We help with the cost part of what customers worry about.”
Kumar points out some of the advances when it comes to engaging with customers and how using facial recognition by banks like HSBC has been a gamechanger in the digital approach taken by traditional banks.
While these initiatives show appetite to deliver products for customers which address both security and ease-of-access. Customers are also taking more care to protect their digital identity. Kumar believes that “When you adapt a manual system for a digital purpose this is where things can go wrong.“
“The correct strategy is really very simple. Anything and everything which can be completed by systems, complete with systems. Anything that needs humans, use humans for interface.”
Creating Value for Everyone you Interact with
A few weeks ago, in his 2020 letter to Shareholders, Jeff Bezos, Founder and Chief Executive Officer shared how:
“If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.”
Kumar believes that Bezos concept is the ideal state one is looking for in any business. What SunTec does is go a little further and look at pricing.
“We start with value-based pricing. Value to every person, stakeholder or organisation you interact with. For instance, if the customer is not aware of prices in their market, you can choose what pricing to offer them. As an enterprise pricing master, our Xelerate platform complements core banking capabilities and enables contextual pricing.
“This gives banks a unique opportunity to provide value-based engagement and hyper-personalized services to empower their customers, help meet their short and long-term needs, and build and retain their loyalty and trust.” He concludes.
Banking as a Service
Over the course of 2020 the acronym for ‘Banking-as-a-Service’ or BaaS grew in popularity. #DisruptionBanking has been posting stories about this developing area of disruption since early 2020.3
While explaining how SunTec’s solutions help clients, it was necessary for Kumar to extrapolate a little about how his company operate as a BaaS provider:
“We know that everyone is moving towards banking as a service. One thing we need to remember is that banking and currencies are virtual by nature. And this commerce happens on the basis of trust.
“Successful banks are becoming more like technology development centres, and that is strategically easy for them to achieve.” Kumar explains.
“Regulation is meant to protect the customer, exclusively. There are benefits that customers are getting from within the app of a traditional bank. There is a convenience they are getting from the fintech app.”
Kumar goes on to point out how partnerships between traditional banks and fintechs are great examples of how to understand BaaS:
“There is a great example from a bank in India who did exactly that, partnered with a fintech who had a fantastic AI based system to integrate and identify people’s creditworthiness. It was designed for street vendors in Mumbai to help them finance bringing produce from the farm to the city. The fintech had stumbled onto a growth area, while for the bank, it was just corporate financing.”
“In the past,” Kumar explains, “It would have taken a bank many years to have the level of flexibility to partner with a fintech that we are seeing today. Ultimately it’s about one thing: ‘What is beneficial for the end consumer’.
When it comes to other Banking as a Service providers on the market, like Backbase, who are helping banks create a better digital experience for their customers. Kumar explained how SunTec’s solutions offer an area that these BaaS providers may not specialise in themselves, but they need.
“Most of them are taking some risk in their customer acquisition strategies. Losses are not unheard of. Which is where SunTec comes in. We can provide risk-based interest computation. We can provide risk pricing. So you can bring risk factors into your computation.” Kumar explains.
While these partnerships are growing, there is still concern about BigTech:
“While the fintech might be disrupting traditional banks, BigTech like Amazon and Apple can pretty much replace the entire banking system.” Kumar continues.“BigTech has the technology today to know your house parameters, they know everything you do through your phone. They are basically an intruder.”
How can Traditional Banks be Operationally Efficient like BigTech?
Amongst the companies in the market offering digital transformation tools, are companies that specifically look at revenues within their customers businesses. With BigTech firms, none of them are particularly concerned about which jurisdiction around the world they gain their revenues from, it is all about the system. Systems like the ones that SunTec offer.
“I spoke to one of my customers in North America recently, and he was telling me how he didn’t consider another bank as a competitor anymore. Today, his competitors are Apple, Facebook and Amazon.” Kumar shared. “With Fintechs this is different. Fintechs are talking about the customer centric hyper-personalisation. They can lend to a person whom a traditional bank cannot. In time, banks will either adapt their technology to compete better or partner with the fintechs. Ultimately the fintech is taking the risk, you can finance them, and have the revenue without taking the risk.”
Kumar explains how with Traditional banks, they have gained their customers’ trust already: “Now they are expanding their horizons and looking at open banking. Some of our banking customers are creating their own marketplaces for niche customers like artists or SMEs. Within these marketplaces customers are transacting on the banks’ platforms, just like Amazon has created with their marketplace.
“Customers have the ability to transact through the bank, the bank has already established trust, searching for goods or partners through their app is only the next natural evolution. They could even go on and take on an Amazon tomorrow.
“Wouldn’t you prefer doing all your transactions on one banking app rather than scrolling Amazon, eBay, Klarna and a whole host of other ecommerce sites?4 As long as the bank arranges the best price for you based on your earnings or your monthly budget. There is a strong argument that the future could evolve in this direction.” Kumar concludes, raising a very strong defence for traditional banks against the incumbent BigTech firms.
Software is everything
“Because today hardware is done in software,” Kumar challenges, whilst raising the recent case of Apple’s M1 chip as an example:
Apple’s system on a chip (SoC) is revolutionary in itself, and quite a lot better than the next best Intel chip. Kumar explains how everything is designed by software, and how just like Apple, SunTec are focused on software.
Software runs through the organisations DNA.
The competition between BigTech and traditional banks is complex and multi-faceted. Whilst banks are learning to adapt to the new challenges, they need help with how best to use systems and software available to them on the market.
Software can help drive traditional banks to find more operational efficiency, which in turn will help them better compete with BigTech in the market.
Partnering with Cloud Providers
SunTec is pivoting their model almost completely onto a ‘Software as a Service’ (SaaS) platform. SunTec has invested to ensure that it’s platform is secure and compliant to meet the needs of our customers. Kumar explained how: “One of the biggest partnerships we are forming this year is with IBM. While our primary offering is in AWS and IBM FS Cloud, we work with Microsoft Azure and Google Cloud too. It is really important for us to work with these cloud providers, this helps us to be more resilient.”
This is a big investment into infrastructure for SunTec, but Kumar understands how banks need this level of support when working with companies offering solutions like his.
Just this March, SunTec announced how they were co-locating their Xelerate platform on IBM Z.5
Likhit Wagle, General Manager: Global Banking Industry at IBM, commented, “In the current low-interest-rate environment, Suntec’s Xelerate solution enables banks to generate additional income through sophisticated product bundling and pricing. In a competitive marketplace, the combination of the functionally rich Xelerate suite and the robust IBM Z offers unparalleled performance and security levels. Co-locating Xelerate platform running on Red Hat® OpenShift® side by side with core banking workloads on the same IBM Z or IBM LinuxONE server is going to be a game-changer for large banks on their digital transformation initiatives.”
And this is just one of many innovations that Kumar has been driving within SunTec.
No Code Development Platforms
You may have come across the term “citizen developer” over the last few months. In January, Jennifer Cadence, Product Marketing Manager at Google Cloud mentioned how “hundreds of thousands of apps were built this year by non-technical ‘citizen developer’ app creators from around the globe.”
In her post, Cadence highlights some of the ways no-code application development has become an important part of digital transformation. One of them stood out:6
“It allows people to build applications and process automations without coding and therefore opens up innovation to a wider range of employees.”
Cadence concludes with how she believed that: “Analysts agree Gartner’s October 2019 report ‘The Future of Apps Must Include Citizen Development’ indicated that by 2023, ‘the number of active citizen developers at large enterprises will be at least four times the number of professional developers.’”
Kumar shares how SunTec’s Xelerate is a no-code platform, how it’s built to operate and collaborate effectively in multi-application, multi-cloud ecosystems: “We need to keep ourselves agile in the marketplace and be unique in our proposition.”
“Our platform can be adapted to any industry, because ultimately what we are looking at is: What is the value we are giving to the customer? How can we empirically compute that? And help you be agile in your marketplace.”
Signs would suggest that SunTec are certainly embracing the best solutions available to their global banking customers.
The future is operational resilience, and now the future is also operational efficiency.
This article was originally published in Disruption Banking, Read More
“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.