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The Digital Future is Today: Why the Future of Banks Will Hinge on Customer Centricity and Smart Design

By Nanda Kumar, CEO, SunTec Business Solutions

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As the financial services industry continues to tackle short- and long-term challenges brought on by the COVID-19 pandemic market disruption, banks are facing a completely digital reality powered by accelerated digitalization.

Banks, which have for years relied on legacy technology and traditional processes, will be hard pressed to survive and remain competitive as new modes of operation amongst technology-driven, agile competitors push the pack forward. Banks will eventually face two options: embrace the methodologies of innovative market competitors, or risk losing long-term customer loyalty and thereby, revenue.

To build a secure future for themselves, banks must begin designing customer-centric solutions and making smart use of the assets and partners available to them. They must champion flexibility and scale to maximize the value they deliver, as they enter a new era of competition.

Banks were already under pressure to accelerate their digitalization efforts and revitalize the customer experience pre-pandemic, and COVID has forced their hand. According to a recent survey by management consultancy firm McKinsey,  the pandemic has not only accelerated client demand for digitally banking services, but clearly shown that bank customers are placing a higher reliance on their advisors during these uncertain times – bringing the importance of customer experience into sharp focus. It’s clear that banks cannot continue to make limited progress. It’s about a complete step change and an understanding that digital is now the norm, not a ‘nice-to-have’.

Customer and Competitor Pressures Mount

Especially during these disrupted times, the looming threat of customer recession and competitive challengers are catapulting banks’ technology projects – many of which are long overdue – into overdrive. As the Bank Governance Leadership Network (BGLN) recently highlighted,  COVID-19 has accelerated the industry pivot to digital, and new challenger banks and FinTech providers are expected to challenge the notion of  customer trust. While banks have understood the need for digital transformation for years, they now recognize the urgency to adapt so they can better manage rapidly changing customer priorities and market conditions.

With the entrance of technology goliaths like Google and Amazon, and user-centric banking and fintech platforms, like Venmo and PayPal, which leverage customer data to create not only reactive, but predictive customer journeys. Customers have come to expect bespoke and seamless user experiences, and as their expectations heighten, banks that don’t offer solutions that follow the entire customer journey will soon be left behind, ultimately forfeiting loyalty and retention in a generation of customers that values hyper-personalized experiences.

Digital is no longer an option for businesses – it’s an imperative. And none more so than banks. Most banking customers today would not even consider opening an account at a bank that did not have best-in-class digital capabilities.  It is critical that banks develop comprehensive plans that will enable them to accelerate their digital transformation initiatives and deliver a new level of personalized customer offerings. To do that, they will need to reimagine their holistic systems, processes, data and people.

Transforming the Core: Risk Reduction via Redesign

Though the ever-evolving demands of customer expectations and competitor innovation seem insurmountable, banks are actually well-positioned to compete. The key to reducing business risks lies within developing a clear digital strategy and redesigning core processes, leveraging their pre-existing data assets and partnerships.

By adopting a digital core and ‘hollowing out’ customer engagement functions from the core system, and managing it as a horizontal cross-enterprise layer, banks will be able to take a low-risk, modular approach, while offering enhanced product innovation capability, sophisticated customer data management, partner ecosystem and revenue management.

The digital core, which captures and meticulously logs the data from every customer interaction, relevant personal information, purchasing patterns, and more, is integral to improving customer centricity. By tapping into customers’ data, banks can leverage their information to meet their unique needs, create and bundle products, services and offers for any customer segment, and adopt relationship-based pricing strategies and new business models.

Furthermore, by utilising partnerships that maximize economies of scale, banks can quickly adopt new technologies, add more functionality, enhance the customer experience, provide customized internal and external products and integrated services. Most importantly, they can do this whilst maintaining ownership of the customer relationship and value prop.

Cloud: Here Today, and Here to Stay

The recent pandemic disruption highlighted the need for stable, reliable technology solutions that can weather market volatility. Especially as internal and customer functions faced increased risk and disruption, banks saw first-hand the need to embrace cloud capabilities to maintain a competitive edge.

Cloud computing offers banks the ability to innovate at faster and lower costs, increase the amount of services and offerings to customers, while monitoring and preventing revenue leakage. By reducing time to market and thereby creating new revenue streams, banks have the opportunity to accelerate their customers’ digital transformation journeys at an accessible price point.

Banks have begun to recognize the value that cloud infrastructure can offer their customers, and savvy organisations will take full advantage of cloud deployment’s benefits for their digital transformation projects across pricing, billing, product, loyalty, deal, offer, partner monetization, and tax management processes.

The opportunity for banks is to leverage the cloud’s flexibility, agility, scalability, high performance, security and strong reputation in handling large volumes of transactional data and functionality to translate it into value for their customers, instilling confidence in their ability to keep up with nimble industry players.

Keeping the Customer at the Center of Design

In order to design solutions that keep customers content, banks musts assess the value that their products are offering to customers. With customer value, comes customer trust – and with trust, comes loyalty and ultimately business longevity. When designing solutions, banks must take similar strides to their fintech competitors – the most successful of which offer not siloed, but rather experience-based products and services.

Undoubtedly, the bank of the future will orbit around the growth of Solutions as a Service – providing hyper-personalized products and services for any customer segment, adopting relationship-based pricing strategies, and optimising billing processes. For banks to survive in this hyper-competitive market landscape, reinforcing value to customers will be paramount. Banks need to understand what customers truly want, and what they are trying to achieve with every interaction. Essentially, banks will have to shift their mindset to think like a customer, anticipate their needs, and restructure their traditional process to design holistic solutions catered to those needs.

Now more than ever, it is imperative for banks to focus on agility, scale, and speed to succeed in their digital transformation journeys. Driven by market competition and increasing customer demands, banks must build the bank of tomorrow, today – embracing the flexibility and cost efficiencies of partner models, existing data assets, and cloud computing to build experienced-based designs, deliver true value and ensure customer loyalty.

This article was originally published in Finance Derivative, 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’’.

Nanda Kumar

Nanda Kumar

Nanda Kumar (NK), the Founder & CEO of SunTec Business Solutions (the world’s #1 company for relationship-based pricing and billing), is a pioneer in building customer-centric software-platforms. He single-handedly built India’s first automated billing solution for DoT (Department of Telecom). With an experience of nearly three and a half decades as a technology and business evangelist across industries, NK has helped shape the wave of customer-centric software platforms and solutions for pricing, billing, and product management, particularly in transaction intensive verticals.
An innovator at heart, he holds several patents including a patent for real-time value-chain management, a patent for developing software using the product-application-solution framework, as well as a patent for building system and method for collaborative designing, development, deployment, execution, monitoring and maintenance of enterprise applications.

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