In the financial services arena, it is an irrefutable fact that banks have been around the longest. These traditional brick and mortar institutions have a host of technologies in their repository that together form the rather diverse underlying infrastructure of the bank. Today, many of these banks often label themselves as modern and high-tech, regardless of the fact that they are fully operational and reliant on systems that originated in the 80s; though perhaps this statement is too kind: some systems date back as far as the 70s. Suffice to say that these systems have been updated, upgraded, overhauled, tweaked and polished over the years, but the point remains that the ideology behind this infrastructure easily predates the mass adoption of the internet, mobile phones were unheard of and no one could foresee internet shopping or Facebook.
The key issue here is not necessarily the age of the platform per se, though it certainly plays an important role, the issue is the ideology: whether or not the technology supports the business model of the bank. Unfortunately these days, the chances are that it doesn’t. With the emergence of alternative payments, to say that banks running on these older systems are overstretched is a colossal understatement. Financial institutions in this predicament appear to deal with impending innovation in one of two ways: to either stretch systems beyond their initial purpose and capability, or to attempt to integrate the virtually unintegratable. In some circumstances, completely autonomous systems are being built that do not deliver any specific or significant value and at what cost? If the platform isn’t supporting the business model it is doing more harm than good and banks may find themselves in a cycle of perpetually increasing maintenance costs to support limited and fragmented innovation.
When discussing how banks can increase market share in payments, we need to take a step back. In order just to maintain market share, something has to change, and currently that something is the inclusion of value-added-services. Banks must adjust their business and operation models to cater for their customers; both end consumers AND merchants.
With all the new, evolving and innovative entrants in the market built on modern infrastructures that both support and drive current and future innovations, being complacent is not an option for the more established banks if they want to stay relevant. This concern needs to be approached on both a business and technological level. It would be a grave mistake to continue to churn out endless promotions to keep customers happy as this approach is not viable in the long run. Technology drives sustainable value: with the right underlying platform, banks can offer quick-to-market, new and exciting services that meet the needs of end consumers and merchants. In short, they can offer value.
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The current business landscape is very fast paced, certainly a world away from the financial services market in the 80s, and this landscape, although exciting, also lends itself to numerous uncertainties. Sustaining, let alone growing market share, is only possible when the new product or service a bank wants to deliver is flexible, and in some cases, even disposable. To keep that competitive edge, banks need to have the capability to create something quickly and at very little cost, and if it doesn’t work, it’s ok, time to build something else, quickly and at very little cost. The problem that arises is that most banks can’t do this and those that can invest far too many resources at an extreme cost. Nothing is quick or cheap, not with the technology they have in place. However, the technology that can deliver this ability and the development tools required are available on the market.
There are documented cases where a financial service provider has launched a new product from concept to go-live in two weeks, spending only US$3,000 in the process. Completely new interfaces have been created in an hour! How many banks can raise their hands and declare, “yes we can do this, no problem?” In this increasingly changeable payments landscape, the answer needs to be yes, otherwise the bank’s shelf life is limited and they may soon be out of the game altogether. When was the last time you saw something ground-breaking and innovative built on a legacy system?
From a technology perspective, the following advice can be offered to banks that want to increase their market share:
- New products and services must add value. Using quick-fix plug-ins to keep up with market trends just to be able to say you offer this service will not attract customers. The curious may sign up, but it will only be a small number and the attrition rate will be very high. Banks cannot base their value-added-services around endless promotions or exclusively on their loyalty programmes. This isn’t sustainable in the long run.
- Do not overstretch your technology. Older systems were never built to compete with the modernised technology of today and there are a number of well-publicised, high profile failures that can attest to this. There is no going back from bad publicity and no amount of loyalty points or discounts can make customers forget.
- Invest in integration and stop relying on plug-ins and bolt-ons. This technology only ensures that your infrastructure is increasing fragmented and prone to failure. These quick-fix methods will not result in compelling products and services, competitive differentiation and could exacerbate the risk of system glitches.
- Build a Payment Service Hub. Bring some of the business, processes and systems in-house. If you want to increase market share you need to be a pioneer and you cannot outsource if you want to lead innovation.
- Be prepared for failure. You need to be ready for the failure of business ideas and have the technology to enable you to quickly recover from these.
Listen to your customers. It is all very well and good throwing around the latest terminology, ordering consumer research and talking about the importance of big data – do something with it. Convert this knowledge into opportunities. It is easy to get swept away in the latest gadgetry and lose sight of customer requirements and many financial service providers do, make sure that your business is in touch with your end customers; the consumers and the merchants.
Banks cannot sit on legacy systems and expect to maintain, let alone, increase market share. Today’s customer profile is very different from that of even five years ago. Customers are no longer easily satisfied: they have multiple accounts with multiple service providers and their expectations are high. Gone are the days of customer loyalty for life, today more than ever, customers are prepared to chop and change for a better deal, be it a financial or service related incentive, and banks cannot afford to sit on their laurels waiting for this to happen.