We live in an age of unprecedented digital convenience of comfort food, online retail, and on-demand transportation. Our customers, also the consumers of these services, continually reset their expectations from digital banking services based on their experiences in other industries. What’s more, banking is not only at the center of all this incredibly fast digital exchange but also a key enabler that cannot afford to miss a beat. Banks looking to make a mark in this digitally accelerated universe that is our lives must be truly digital. Being truly digital requires instilling speed and adaptability in every aspect of the business.
Against this backdrop, all banks have embarked on a digital transformation journey in some form or shape. However, despite elaborate strategies, few banks can be said to be truly digital. Not that banks are not providing digital banking services today, but how agile they can be and how quickly they can offer new digital services and experiences in the future is the litmus test and mark of a digital bank. The starting point towards this end state is a clear definition of what being truly digital means. And no definition is complete without a discussion about customer engagement.
The prescribed approaches
The spectrum of approaches available ranges from cosmetic fixes such as new channels for old services to digitizing the entire infrastructure.
New digital banking channels integrated with and built over legacy systems can ultimately be only as good as the backend systems. Even the most digitally optimized channel approach or architecture is limited by the efficiency (or lack thereof) of the underlying systems. For example, for a new account application, the processing is largely offline with no end-to-end solution available.
Incremental strategies also have their drawbacks associated with maintaining parallel systems (digital and legacy), delayed ROI and no clear visibility or assurance of effectiveness and results.
Clearly, the only way forward for banks is a complete digital transformation, a transformation that ensures that the underlying systems are also fully digital and capable of conversing with their digital upstream and downstream systems. To get this right, a meticulous orchestration of individual transformations is needed. Let’s look at these critical aspects.
Pillars of Digital transformation
Moving from silos to a hub
Legacy systems work in silos and focus primarily on an assigned banking function. The overall complexity of the banking system leads to m:n connections of such silos. This is also the case with the many-to-many connection scenario between channels and systems as multiple channels access multiple systems. Digital transformation must aim for more than just converting legacy silos to digital ones. The transformation should lead to the creation of a unified digital hub that eliminates complex interconnections.
Think customer. Think engagement
The goal of digital transformation should be to provide the customer with seamless, personalized, contextual and consistent experience throughout the journey and across all channels. Let’s look at what this really entails:
- Seamless and consistent experience across channels: Channels accessing individual underlying systems lead to inconsistency in experience. Unification is possible only when the channels use a common digital hub for providing digital services.
- Be with the customer throughout the journey: A recent report indicates that only 5% of banks in the USA support digital customer onboarding. A truly digital bank must be able to provide an entire gamut of offerings digitally. And the services should be fast and customer-centric.
- Personalized and contextual engagement: Today’s customers, with exposure to digital experiences offered by Uber, Amazon and Google want more than just a cross-sell popup from their banks. Customers expect their banks to know them personally and wish to receive only relevant suggestions and nothing else, be it an investment product or simply a retail banking scenario.
Personalization is a vast topic in itself but banks can start with theme based personalization, and content personalization (formats, language preferences, dashboard widgets, etc.), and then graduate to deeper areas such as functional and control personalization (limits, alerts, templates, adaptive authentication).
Additionally, personalization is incomplete without context. Unless a digital business gets customer context right, personalization rendered on the basis of information about life events or other data is of little relevance. Context complexity also varies from fundamental information such as time of the day, access channel right up to social media profile and shopping wish lists to name a few.
The engagement hub
To provide a personalized and contextual experience to a customer, banks should have a 360-degree view of the customer across systems. The hub which we talked about earlier should act as an engagement hub by generating data-driven insights about the customer. This essentially translates to the need for introduction of an engagement layer between core systems and the access channels.
There are varying strategies for digital banking transformation each with its own set of advantages. However, the success of any strategy ultimately depends on how it can provide relevant customer engagement across the various stages of customer journey. And the key to success lies in thinking and empathizing with the customer.
If you are a bank looking to drive deeper engagement with your customers through customer-centric processes and consistent cross-channel journeys, talk to us to know about the Finacle Digital Engagement Hub (DEH). With this advanced omnichannel solution, you can on board, sell, service, and engage your retail, small business, and corporate customers. It offers a broad range of modern, emerging, and traditional channel experiences to every type of user – end customer, bank staff, external partner, and trusted third parties that consume your APIs. DEH powers clients across 76 countries and has been recognized as a leading digital banking solution by industry analysts. The Finacle FinTech ecosystem further strengthens the overall value proposition.
Author Bio: Balchandra Kemkar is an expert on Digital Banking at Infosys Finacle. In his role as a product manager for the Digital Banking suite, Balchandra is responsible for products such as the Finacle Digital Engagement Hub (DEH), Online Banking solution, and Mobile Banking solution for retail and corporate banks. His keen interest in technology can especially be narrowed down to emerging technologies such as IoT, Analytics, Blockchain, and UX. Balchandra has over 13 years of experience in IT. He has a Master’s in Business Administration from XLRI, Jamshedpur.
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UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg
LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.
Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.
Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.
Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.
“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.
“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.
Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.
Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.
Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.
Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.
Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”
“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.
By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”
Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.
“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.
($1 = 0.7146 pounds)
(Reporting by David Milliken; Editing by William Schomberg)
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken
LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.
The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.
A separate survey of households showed consumers at their most confident since the pandemic began.
Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.
The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.
Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.
Official data for January underscored the impact of the latest lockdown on retailers.
Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.
“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.
The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.
BORROWING SURGE SLOWED IN JANUARY
There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.
Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.
That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.
The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.
Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.
“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.
Some economists expect higher taxes sooner rather than later.
“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.
Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.
The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.
IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”
However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.
Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”
($1 = 0.7160 pounds)
(Editing by Angus MacSwan and Timothy Heritage)
Oil extends losses as Texas prepares to ramp up output
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.
This week, both benchmarks had climbed to the highest in more than a year.
“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.
Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.
“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.
Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]
The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.
“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.
(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)
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