Technology-led Innovation for Customer-centric Banking
Posted in Operations & IT Articles, Total Reads: 2403
, Published on 16 May 2013
It is about time banks realized, that customer is the king. Developing technology-led innovation is the only way forward. Banks have to move from “product-based” banking to “customer based” banking if they want to develop long lasting relationship with customers. With 83 % future customers in internet banking and 10-12 % in mobile banking, developing services in these domains is the only way for banks to improve profitability and cater to changing customer needs. Innovation in CRM systems will ensure complete customer focus, and better customer tracking systems will go a long way in satisfying customers.
Customer is King: Technology-led innovation for customer-centric banking.
It is about time banks realized, that customer is the king. Developing innovative ways using technology to enshrine customer relationship is the only way forward.
“Our first priority is and always has been to serve our client interests”, says Goldman Sachs. But today, it doesn’t seem so. And this is true for most banks in the industry today. In the past, banks have used complex product offerings to acquire customers. However, moving forward, banks need to undergo a transition from “product-based” banking to “customer-based” banking if they want to develop long lasting and trustworthy relationship with their customers.
So, what are the measures banks have to adopt to get back in the game? Why are not banks not able to understand the changing customer needs? And why are they not able to improve their bottom-line?
The number of customers who seek personalized services has drastically increased in recent times. The needs of the customers are changing and with increase in purchasing power of customers, they seek value added services. They are willing to bank with multiple providers and at the same time use self-service channels to carry out transactions with the bank. A recent study1 by Accenture Management Consulting revealed that 63 % of the customers have increased the number of banking relationships, and are using direct, self-service channels to access their accounts. The customer survey conducted by Accenture Management Consulting as a part of the study also revealed that moving forward, 83 % of customers will use internet banking, and about 10-12 % of customers will use mobile banking for most of their financial needs. 34 % of the customers also said that they are considering leaving their current bank for another, which offers more personalized, self-controllable and relevant services which are consistent across all service channels. However, banks have not been able to alter their services according to the changing needs. As a result, they have lost customers, and have taken a hit on their bottom line.
This brings me to the more important question as to how banks must react to this “power shift” in favour of customers and provide that value proposition which will improve customer relationship and result in sustainable development in the long run. Technology-led innovation can create significant differentiating factors for banks, and it is something which every bank has to seriously consider if they have to survive in the financial services industry. At the recently concluded Confederation of Indian Industry’s (CII) 7th edition of the banking TECH Summit 2012, Dr. KC Chakrabarty, Deputy Governor, RBI emphasised that “Technology adoption further fuels creation of innovative technology. However, it has to be customer centric and responsive. For technology and innovation to lead to better customer experience it has to be faster and hassle free, safer and error free and easier but cheaper.” Therefore, taking the technology route provides several options for banks to design and develop innovative systems. And banks are slowly responding to this (although a little late) by altering their strategy towards tailored and value added services.
Innovation in the areas of Internet technologies, mobile technologies and Customer Relationship Management (CRM) technologies are some of the things which needs to be analysed by banks very carefully. The time is ripe for banks to make the transition into customer-centric banking.
With boom in internet usage, and changing demographic profile of customers, it has become imperative for banks to keep up with speedy development by offering dedicated internet banking facilities to all its customers. A study2 undertaken by Infosys gives 3 strategic steps for banks to move towards consumer centricity. Providing 24/7 assistance to customers through websites which link banking accounts with the rest of the financial world is one of them. For example, banks are undertaking massive development of their websites and internet banking facilities to acquire more information about their customers’ financial needs. They are creating website-tools to help customers better understand their investments, and present further investment opportunities to them. Be it investing in the stock markets, investing in real estate or investing in any financial instruments, banks are using software developments to educate customers about the risks, payoffs’ etc. This will assist them in making well informed financial decisions. In the retail banking space, customer complaints and issues are efficiently serviced through internet banking. Customers are also able to quickly transfer money. Linking banking accounts to e-commerce, and commercial services has done wonders for banks to win customers and develop a good relationship with them. But is this relationship long lasting and sustainable? The costs involved in technological innovations are substantial, and if banks don’t offset these costs by optimising their internal operations, they are bound to become unprofitable at the cost of customer satisfaction.
The era of mobiles, tablets and other hand held devices calls for further technological innovations in banking services. This time banks are adapting early to behavioural changes of customers. Most of the banks are offering mobile banking services, to capture those customers who seek banking on the go, and sophisticated professionals who are being termed and HNWI (high-net worth individuals). Mobile banking offers extremely quick transactions, there-by reducing cost per transaction for the banks. This is a simple yet cost effective way of real time customer support. Phone top-ups, movie ticketing, mobile wallet are some of the very innovative services which banks are providing. But there is a long way to go before a large number of customers start using these services. The reason for this is the scepticism about IT security. The number of banking fraud cases has increased. According to a study3 by Juniper Networks there has been a 400 % increase in mobile malware since the introduction of Android Operating System in 2010. This has deterred customers from using mobile banking services, and banks have tried to invest in application layer security but in vain. It will take some time before firewall-enabled banking applications are developed, but it is definitely the way forward for the banking industry.
Customer Relation Management (CRM) Systems is another area of innovation which banks must not neglect. Linking trading and transaction management systems with desktop applications (i.e. excel, outlook) will provide a unified view of understanding the customer better and providing better products and services. A major aspect of CRM is creating tools and software to increase the customer engagement time, and also to understand the exact needs of the customers. Sometimes it is very difficult to understand the latent demands of the customer and CRM systems must be used to do that. Another important aspect of CRM is effective communication with the customers. Investing in training employees to ensure effective communication will help satisfy customers and increases the chances of customers and clients re-visiting the bank for their financial needs.
Financial services industry is undergoing a transition. The measures taken by banks will be sustainable only through periodic tracking by the management. Integrating the customer centric technology with the business processes of the banks will be the most challenging part of executing the customer centric strategy. However, banks have no other choice because technology-led innovation will go a long way in building valuable customer relationships.
The Article has been authored by Shamanth M from IIM Ahmedabad
International Journal of Multidisciplinary Research, Vol.1 Issue 4, August 2011, ISSN 2231 5780, A CUSTOMER CENTRIC APPROACH TOWARDS RETAIL BANKING SERVICES: A GLIMPSE by MS.APARNA MISHRA and MS.KAMINI TANDON.
CII News Update: Every Banking Innovation Has To Be Customer Centric and Responsive: Dr K C Chakrabarty, RBI published on 28 June, 2012 at Mumbai (Link-http://www.cii.in/PressreleasesDetail.aspx?enc=6u1Rj5Ov5DQZnu/9kWh97euARlJwvkWKw6zfTuS7K5L0yPkynJoOj7T3kHJHIC2BMsXndk9GIv5XGx6RMPjk0Q==)
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