Rahul Singh, President of Financial Services, HCL Technologies
In 1994 Bill Gates famously said, “Banking is necessary. Banks are not.” Perhaps he was clairvoyant. But it is more likely that he had the opportunity to take a harder look at what banks do for customers – and what they ought to do – than most of us. While banks thought they were great at securing our money and investing it safely, in truth, we also sought getting purchase recommendations based on our income; or travel advice along with that short term loan for a relaxing summer holiday; or a better way of viewing our household debt. In today’s difficult times where plunging incomes are often the norm, household debt serves as a good example for what banks could do on the back of digital to provide more relevant services—services that would also win the confidence of their customers.
Leading by example
Take Norway’s Sbanken, now the largest independent online bank in the Nordics. Recently, the Financial Supervisory Authority of Norway noted theworryingly high debt in the country and the impact of rising interest rates. Sbanken understood the anxiety this would cause for its customers and created a new service that they could use to view their total debt. All loans, mortgages, credit card dues, etc. can now be viewed in one place – a service created using Sbanken’s API platform to pull in the data.
Sbanken has made considerable progress with automation and mobile services. The bank’s annual report for 2017 speaks for itself:
“Automatically approved consumer loans and short-term credit products are immediately made available in the customer’s account…In 2017, approximately 90 percent of approved mortgages and approximately 85 percent of approved car loans were automatically approved. Around 65 percent of mortgages were completely paperless, with customers using digital signature based on their BankID.”
Through these simple initiatives, Sbanken has demonstrated an astute modern banking strategy: build unique value propositions and relationships with the customer at every ‘point of trust’. By doing so, banks can offer services that go well beyond traditional banking. The results? Customers will pay for them, new revenue streams will open and loyalty will improve.
A quick look at some of the top innovations in banking amplifies the trend of building `trust before transactions’. DenizBank in Turkeyrecently set a good example for this; 10 percent of GDP comes from agriculture in Turkey, making the farming community banks’ prime target group. Deniz Bank serves them by issuing cards that don’t charge interest on purchases between the planting and the harvesting season, since these are the most difficult months for farmers from a cash flow perspective.
The customer-centric innovations don’t stop there. Last year, Deniz Bank went above and beyond the role of a traditional bank and launched a mobile app that allows farmers to send pictures and videos of their crops to agricultural experts and ask questions. The app also delivers information on pricing, markets and weather, and acts as a platform where farm equipment can be rented out (and acquired on rent) – something of an Uber for the agriculture industry. The app had 100,000 users in its first year, which is ample evidence that staying relevant pays dividends.
If they what to continue providing their customers with out-of-the-ordinary features, banks need to understand that their lives and needs are changing rapidly. In short, the offerings need to be bigger and better. Transferring money faster and cheaper, allowing simpler P2P payments, enabling tax management, being available via a social media platform or a chat application whenever they’re needed – these are all starting measures banks can take to ensure they stay relevant to their customers’ changing needs.
Digital means democracy
Going forward, the ambition of banking leaders should be to offer Banking-as-a-Service (BaaS) to partners like Google, Facebook, Apple, Amazon and WhatsApp. BaaS may become inevitable as large technology companies, and even smaller convenience stores and family-owned businesses, get to know their customers better than banks do. Many of these businesses hold powerful data about their customers which can be leveraged to deliver personalised and meaningful banking services. The thing to remember is that these businesses don’t have the required banking expertise to understand financial markets, regulatory environments and the models that dictate profitability in financial instruments. By 2034, technology simplification will ensure that BaaS reaches a tipping point. Fintechs like Solaris Bank and Fidor have already brought core banking platforms to the market, proving that anyone can plug in and bring a new bank to life within weeks – even without any previous banking expertise.
Evidently, the world has changed. To continue to succeed, banks must combine their traditional knowledge and networks with those of fintech partners and build technology platforms that democratise banking. In a digital world, the only way banks can beat the competition is by opening their systems to partners, allowing them to offer new financial services to their customers. If they don’t, someone else will.