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Channels and Customers, the New Flavours of Retail Banking Innovation


By: Rajashekhara V MaiyaAssociate Vice President & Lead Product Manager-Finacle Product Strategy at Infosys Limited
Retail banks continue to focus on innovation…Rajashekhara-V-Maiya

While the results of the 4th edition of the annual study on innovation in retail banking, presented by Efma and Infosys, largely mirror those of the previous surveys, they also differ in subtle, yet significant ways. For instance, in the 2nd edition of this study, 61% of surveyed banks said that they had invested more in innovation compared to the previous year, compared to 11% who had done just the opposite. Two years later and in the midst of a challenging environment, 73% of the 300 bankers surveyed confirm increasing innovation investment compared to 2011, whereas just 6% say they have scaled it down. Also, while European respondents continue to assess their innovation performance rather pessimistically, this year a little over half concede that they have become more innovative. Other differences observed in the 2012 survey include a growing threat perception from disruptive innovation, owing no doubt to the entry of non-banking players from the telecom, retailing and technology space, and an increasing use of open innovation by banks. For example, Barclaycard’s crowd-sourced credit card and ING Bank’s customer experience center were both built through open innovation.

The findings of the 2012 study indicate that retail banks worldwide are now firmly committed to innovation. And while innovation understandably plays second fiddle to risk, balance sheet and cost management, 79% of banks acknowledge that it is strategically important to the future of their business. They are also quite certain of its direction, which is clearly towards channels, customer service and experience.

…to drive customer acquisition and revenue

In the 2009-2011 surveys, respondents said that innovation was critical to both growth and efficiency, perhaps somewhat more to the latter. The latest study marks a shift in thinking, because for the first time, customer acquisition and revenue growth clearly outrank cost efficiency and compliance as the key drivers of innovation, in all the four regions, namely, Europe, Middle East and Africa, Asia Pacific and the Americas. 75% of respondents are increasing investment in channel and customer service innovation in order to achieve these goals. Region-wise, European banks appear to be the least enthusiastic about investing in channel innovation, reporting only a net balance of 59% (proportion of banks increasing investment minus those decreasing investment). All the other regions report a greater than 70% figure, with Middle East and Africa leading the way with 89%.


Channels, especially online and mobile, are a top innovation priority

The choice of channel comes as no surprise: nearly 2 out of 3 banks say they are highly innovative in the online channel, whereas more than half say the same about mobile. What is somewhat surprising is that although 87% of banks concur that IT is important (or very important) to channel innovation, the branch channel continues to consume more of the IT budget than any other; however its share is lower than that of online and mobile combined.

Personal Financial Management tools are the most popular innovation in the online channel; 29% of banks have already introduced them, and another 60% are planning to do so within 3 years. Social media is another area of interest and around 1 in 4 banks have integrated some services with Facebook and other sites. ICICI Bank, India’s largest private sector bank offers a Facebook banking service providing account information, promotions etc., which links back to the bank’s website; it is the first Indian bank to provide more than just marketing information through social media. Interactive options like web chat or click to call, designed to improve customer experience, are also catching on; 1 in 5 banks surveyed have them already and almost all of them will do so in the next 3 years. This intent is clearly visible in Alior Sync, a new service from Poland’s Alior Bank, which it deems the world’s first virtual bank providing videoconferencing access to staff as well as documents and desktop sharing.

The list of mobile-related innovations features advanced visualization and mobile payments at the top. The first – better known as augmented reality – is on offer at 38% of banks in the form of branch and ATM locating services; a comparable number of banks facilitate the second through contactless and P2P payments and mobile commerce. On the other hand, personalized location-based offers and mobile wealth and advisory services are yet to take off, and will take about 3 years to catch up with some of the more popular mobile innovations.


With regards to channel strategy, 86% of banks said that multi-channel integration was important, followed by 81% for the single customer view and 72% for multi-channel analytics. These capabilities are critical and complement innovation to deliver a superior customer experience.

But action on the ground does not match intent

However, the above expectations are tempered by other, less optimistic findings. Arguably, the most significant one is that even today, only 2 in 5 banks have the structure and metrics to measure their innovation performance. Next, the enthusiasm for channel innovation is belied by poor adoption – as per the survey, nearly 60% of banks have deployed less than a fifth of the 22 channel innovations that are listed. Fortunately, the speed of adoption is picking up, and it is expected that nearly half the banks will have deployed nearly half these innovations in a year’s time.


No two regions are the same

In Europe, where innovation is the fifth priority after risk and cost management and others, the online channel draws the highest share of IT investment, which is consistent with the region’s high Internet penetration, led by the countries in North Europe.

For banks in the Middle East and Africa, the mobile channel is clearly where the focus of investment lies, which is understandable given its role in building financial inclusion in countries with poor banking penetration. Although banks are upbeat about their innovation performance, they seem to have achieved it with an informal approach; relatively, fewer banks in this region have a formal innovation structure.

Asia, with its diversity, faces a wider variety of innovation issues and challenges. Surprisingly, banks rate innovation in the online channel ahead of that in mobile. At the same time, they are keen on attracting the large, young population of their countries with new, high technology innovations.

American banks have a different priority to the rest. For them, customer service and customer experience innovation takes precedence over channel innovation. Within the latter, the online channel is considered more important than the branch or mobile.

Financial inclusion is a goal for some

Although the attitude and approach to innovation is consistent across regions, banks from the developing world have an additional responsibility to promote financial inclusion in their markets. Here, mobile channel innovation is offering able support – and sometimes even leading – traditional inclusion models leveraging banking correspondents, agents and microfinance institutions.

In India, Eko, a correspondent of the State Bank of India and ICICI Bank serves nearly 1 million customers through a low cost distribution and payment channel comprising over 1,300 small retail outlets offering no-frills bank accounts and basic financial services. Agents and customers transact with core banking systems using mobile text messaging.

Ghana’s Ecobank was awarded African Banker’s 2011 “Microfinance Project of the Year Award” for its financial inclusion platform. A multi-channel branchless model comprising 185 agents, 100 ATMs, POS terminals and SMS banking serves over 60,000 customers.


The 2012 study shows that banks worldwide have a similar, positive attitude to innovation, which they are backing up with higher investment, better performance and a clear focus on online and mobile channels.






Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 1
  • Financial performance impacted by the pandemic
    • Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers
    • Profit before tax (PBT) was impacted by the adverse effects of COVID-19 and the subsequent provisions set aside, reducing by 89% to £5.9 million
    • Customer deposits rose by 25% to £7.6 billion while capital remained strong with a CET1 ratio of 12.3%
    • A total of 15.9k payment holidays granted across the Group
  • The specialist bank continued to operate effectively through COVID-19
    • 98% of employees moved to remote working within days and no staff furloughed
    • Successfully achieved accreditation under UK Government’s CBILS
    • Continued investment in technology to digitalise the business
  • Shawbrook “cautiously optimistic” as momentum begins to return to certain specialist sectors

Shawbrook Bank has today (Monday 10 August 2020) published its half year financial results for the period ending 30 June 2020.

The specialist bank confirmed it had set aside £45.8 million of provisions to provide for potential future loan impairments caused by COVID-19. The bank reported it had also granted a total of 15.9k payment holidays to support its customers through the pandemic, of which 10.8k remained in force at 30 July 2020.

As a result of such provisions, the bank’s profitability was impacted with a reduction in PBT by 89% to £5.9 million.

Despite the challenging market conditions, the bank retained its active position in the UK savings market, increasing its retail savings deposit base by 25% to £7.6 billion. During the period, Shawbrook also successfully completed a £75 million Tier 2 re-financing to further optimise its capital structure.

Ian Cowie, Shawbrook Bank’s Chief Executive Officer, said that COVID-19 has had a clear impact on the bank’s financial performance, but Shawbrook remained in a position of strength.

He commented: “Prior to COVID-19, the Group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base.

“To further optimise the Group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.

“We have also maintained our active position in the UK savings market. However, the longer-term economic impacts of the pandemic remain hard to predict and as a result we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8 million and on loan commitments of £1.5 million.

“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”

Throughout COVID-19, Shawbrook maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.

The bank adopted a series of concession opportunities across its product range to help alleviate the financial impacts of COVID-19 on its customers. During this time, Shawbrook also successfully achieved accreditation to the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) to provide further funding support to its SME clients.

Mr Cowie added: “Since the outbreak of COVID-19, our focus has remained on supporting our staff, customers and partners while at the same time safeguarding the long-term sustainability of our business.

“When the UK lockdown was announced in March 2020, we acted with speed and agility, moving to an almost entirely remote operation within days. Led by a stable and experienced management team and with the support of new and existing technology, we have continued to operate effectively throughout this period.”

Throughout the first half of the year, the bank also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering.

Mr. Cowie added: “Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s Specialist SME Lender of Choice. As well as the ongoing deployment of targeted digital solutions across the Property, Consumer lending and Savings businesses, our investment in the development of a new growth platform in our Business Finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.”

Looking to the future he continued: “Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to certain of our specialist sectors.

“Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”

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Better banking—everyday in everyway

Better banking—everyday in everyway 2

By Bruno Pešec president at Pesec Global.

Some of the most innovative companies are also great at continuous and incremental improvement. I want to talk about three key points when it comes to succeeding with implementation of continuous improvement.

First is acknowledging that employee empowerment is at the heart of continuous improvement. The second is striving for total involvement by everybody, everywhere, everyday. Final, third point is that improvement is improvement. Cents turn into dollars.

Let’s expand on each.

Employee empowerment is at the heart of continuous improvement

In “Kaizen: The Key To Japan’s Competitive Success” Masaaki Imai divulges following as the core principles of continuous improvement:

  1. Process orientation. “Before results can be improved, processes must be improved, as opposed to result-orientation where outcomes are all that counts.”
  2. Improving and maintaining standards. “Lasting improvements can only be achieved if innovations are combined with an ongoing effort to maintain and improve standard performance levels.”
  3. People orientation. “Improvement is people-oriented and should involve everyone in the organization from top management to workers at the shop floor. Further more, it is based on a belief in people’s inherent desire for quality and worth, and management has to believe that it is going to “pay” in the long run.”

These principles are interlinked and interdependent. Without empowered people there can be no improvement. Micromanaging and overbearing bureaucracy stifle human creativity and desire to do better.

Due to the nature of my work I have residence in two countries, Croatia and Norway. Consequently, I have bank accounts in both as well. On one occasion I was had to make a bank transfer while in Croatia, and went to my local bank office to do so.

To my surprise they requested my debit card. I explained that I’ve forgotten it, but surely that shouldn’t be a problem as I’m here in person, have my national ID as well as passport, and cash required for transfer. The bank teller explained that he can ask branch manager to approve it, but it takes seven days.

Since the manager was right there, I asked why can’t we do it right now, since we are all here. “Sorry, such are the policy and procedures. I know it doesn’t make sense, but we must follow them.”

Banking is a highly regulated industry; fraud detection and anti-money laundering processes must be impeccable; but above is neither.

Everybody, everywhere, everyday

Bottom up is usually brought up when discussing implementations of continuous improvement. While it is true that those closest to work are most suitable to improve it, they often lack decision making power and budget to do so on a scale.

That’s why “everybody, everywhere, everyday” is a better mental model. No one is absolved of improvements. At any given moment there are at least hundred things you can improve right now, right here.

Think deeply about following:

  • Everybody in the organisation should be aware and have an understanding of organization’s strategy and objectives. There’s shouldn’t be multiple interpretations, and it should be unambiguous. Without clarity improvement efforts are going to be scattered and without impact.
  • No elitism, no absolution. Everybody should be actively committed to daily improvement, regardless of their rank or seniority. Leaders should be especially cognizant of leading by example. After all, how can they demand from others what they themselves are not doing. That’s hypocrisy at its finest.

    Bruno Pešec

    Bruno Pešec

  • To improve is to learn, and to learn is to improve. Unlock even more value from your continuous improvement efforts by capturing the learning and sharing it broadly and deeply within the organisation. Ideas spawn ideas, perpetuating a virtuous cycle. Peer learning is also a powerful intrinsic driver.

Improvement is improvement

Director of one European bank invited me to their customer service centre, and we were to discuss how could they innovate better. After the meeting I asked him to take me on the walk around the office so I can observe the processes. He was more than happy to oblige.

The walls were plastered with wallpapers and dashboard, colourful metrics were displayed one the hanging screens, and there was a special area dedicated to the “Hall of fame.” Much to my delight there was a wall dedicated to the improvement ideas.

It was covered with large sticky notes, each with few sentences about the problem and potential solution. I picked a few at random, and noticed that they have dates written in bottom left corner. All of the dates were months ago.

Perplexed, I asked the nearby call operator to illuminate me. What’s going on? She fired her response like she was just waiting for someone to ask her that question:

“After each call we used to write down some improvement ideas. At the end of the week we collated and submitted them to the improvement department. They were constantly rejecting our proposals for either being too small or not innovative enough. After few weeks we stopped sharing and tried to implement what we can. That resulted in one of us being scolded for taking initiative without approval, so we just stopped altogether.”

Director was blushing, but hasn’t said anything. I thanked the operator for her honesty, and told the director that he should find time to fix this. By ignoring small, incremental improvements, they are effectively atrophying their organisational muscles. And not to mention all the savings that are left behind, lost forever. Cents turn into dollars.

Better banking

I’ve talked about three key points in regards to the role of employee empowerment in the implementation of continuous improvement, and what you can do to use them well. Let me remind you that if you really want to engage in this, the first thing to do is take any of them and start today.

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UBX appoints new Chief Investment Officer

In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).

Matt Kolling

Matt Kolling

As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.

Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.

Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.

“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.

Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”

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