By Madhur Jain, SVP & Global Head- Solution Consulting, SunTec
The advent of technologies such as artificial intelligence (AI), machine learning and the internet of things (IoT) have transformed the way in which the world operates. Customers now demand personalized experiences and firms that haven’t digitized their businesses must transform in order to compete in this new world. One industry which has found it more difficult to adapt is banking, as many banks are saddled with rigid and core legacy application systems. Large banks and financial institutions continue to remain slow to adopt these emerging technologies which is preventing them from delivering an optimal customer experience, driving growth and keeping themselves relevant in a dynamic market.
Banks must modernize their legacy banking systems in order to compete in this evolving marketplace. A strategy that can help banks modernize their operation is adopting a modular approach to enable an easier digital transformation. While there are many options to modernize core banking systems, success will be elusive unless the legacy infrastructure is broken down into smaller manageable logical parts. This three-step approach focuses on simplifying the core from the outside-in:
Step One: Examine and detail high-velocity customer journeys: Banks should start by listing out all customer journeys that have high velocity interactions with customers. Detail the journey from start to finish through all impacting applications. They should then evaluate the journey in terms of value it delivers to customers, revenue it generates for the bank, level of complexity within the middle and back office and the risk involved. This helps get the scope defined and rated based on the dimensions.
Step Two: Identify what part of these chosen journeys can be moved from the back-office to the reimagined “middle-” (digital) office: For each journey, identify the business logic that needs to move from the back office to the new enterprise middle layer; the digital core. Analyze and evaluate the change in the legacy core for the business logic simplification/hollow out. As a final stage, deliver the scope backlog by looking at the journey, the risk and revenue.
Step Three: Pilot these middle-office operations to select journeys and pilot within a smaller group before rollout: The pilot can be rolled out to internal bank users or a limited set of customers identified to help fine tune through the launch and the change. Certain complex back office logic which may be far too tightly integrated can be de-risked by identifying workarounds.
This modular approach allows banks to execute the fundamental steps of core architecture modernization in a seamless manner, without any unexpected surprises along the way. It uses an intermediary layer to provide the required connectivity, and scale successfully to integrate systems and applications across the enterprise using existing core platforms. The result is the ability to simplify and modernize processes by enabling rapid, continuous change without impacting routine operations.
Benefits of a Modular Approach
Segmenting applications to drive personalization is one benefit of a modular approach as banks need deeper insights into the impact of various applications aligned to different stakeholders in order to transform their core systems and become truly digital. In fact the feedback from leading banks that have adopted an intelligent middle layer such as Xelerate Digital core, has been largely positive with the bank being able to dissociate the customer experience from the system of records. These banks were successfully able to move from a manufacturing architecture to an assembly architecture with the ability to quickly adopt new technologies, add more functionality and capabilities, offer customized products and enhance the customer experience.
It works by helping banks segment their applications landscape and by acting as an intelligent middle office that integrates core back office systems with customer interfaces and external partner ecosystems. The result is centralized information on products, services and pricing across segments and business offerings. When coupled with real-time analytical capabilities, the middle layer enables banks to analyze every customer instantly by synching historical customer data with current patterns to create truly personalized offerings.
Risk mitigation and change management are another benefit. The middle layer allows banks to gradually replace the legacy core system in a phased manner, decoupling engagement channels from systems that store data and records. This keeps the data and key information secure and central, driving increased business agility, and reducing risks associated with core technology transformation.
Revamping core back office systems requires intelligence to interface with new-age front-end applications. The digital middle layer uses built-in intelligence to orchestrate business logic, workflows and processes across multiple systems to drive superior value through increased customer wallet share, as well as to help phase out complexities of legacy core systems.
Creating an agile and customer-centric bank for the digital age
Deploying a modular and flexible middle layer that acts as the digital core helps create a truly open ecosystem that fosters collaboration and innovation, without the cost or challenges of completely modernizing the core. The transformative intermediary layer ensures that the core platform remains strong and resilient, while handling the connectivity and processing required of an intelligent and responsive organization. The outcome: banks can easily transition from being a ‘financial services provider’ to true customer owners for sustained growth and success.
It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak
Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic
A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.
A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.
The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).
The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive
The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.
Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”
The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.
As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.
From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.
Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/
Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.
“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”
New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery
· Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs
· Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success
· Allica Bank has launched a programme of free workshops to expand on the findings and support business owners
Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.
The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were:
Rule 1: SMEs should regularly train staff
Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.
Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy.
Rule 2: SMEs need to focus on innovation and technology
Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities.
Rule 3: Small business must have a formal, long-term vision
Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision.
Rule 4: SMEs should broaden their customer reach and find new markets
Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success.
Rule 5: SMEs need to develop reinvestment plans
22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%).
Rule 6: SMEs should engage with local business organisations and networks
Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs).
Chris Weller, Chief Commercial Officer, Allica Bank, said:
“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.
“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.
“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.
“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”
The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.
New research finds that financial wellbeing should be at the heart of banks digital experiences as the UK enters recession
MullenLowe Profero have today launched a new report focusing on two communities who will be hardest hit by the recession: 18-25 year olds and small businesses. These communities need financial wellbeing support at the core of an increasingly digital relationship. MullenLowe Profero partnered with Censuswide to survey 1,004 18-25-year-olds and 504 small businesses.
Concern around financial shocks is harming individual’s wellbeing
The survey finds the ability to absorb financial shocks being the critical worry affecting wellbeing and 40% of 18-25-year-olds are sometimes afraid to look at their bank account.
They are seeking financial education to relieve worries
With over two-thirds of respondents demanding financial education in order to find peace of mind and 40% of 18-25-year-olds state that thinking about their money has a negative impact on their wellbeing the report highlights the audience are open to more active support from banks. 60% of the audience feel banks should help them have the capacity to absorb a financial shock.
When our bank is in our pocket reminding us of our anxieties, is there now a duty of care to support our wellbeing?
The survey finds that the digital experience is now the number one reason for choosing a bank for 18-25 year olds.
With this shift in digital preference, people are expecting banks to play a bigger role in wellbeing. 58% of those worried about their money want banks to help them take control.
More than half of 18-25 year olds agree that a bank’s role is now to:
- provide education on money management
- help them keep on top of financial goals
- help them save enough money to cope with the ups and downs of life
People are feeling closer to local communities, but there is a gap in how brands should engage communities in a digital world
Half of 18-25 year olds agree that in the last few months the importance of their local community to them has increased. 40% agree they’ve engaged more with their local community in recent months. There’s a tension between how to engage a community as 60% agree they prefer a bank with better digital tools over a bank that offers more local branches. However, 60% feel banks need a branch presence to support local communities.
The importance of Global Wellbeing rises
Over half of 18-25 year olds agree that the events of the last few months have made them seek out brands that do better for the world. The research findings show that what they want most is to be recognised for their positive behaviours. 56% of the audience highlighted that they would find rewards and benefits for purchasing ethically and sustainably most useful.
Banks digital experience today lack empathy
In this time of reset, the survey found a third of customers and small businesses are considering changing banks in the next year as a result of the impact of the pandemic. The report concludes that brands that will win will champion financial wellbeing in the digital experience through empathy and emotional intelligence.
For the full report, get in touch with MullenLowe Profero at [email protected]
Howard Pull, Head of Digital Transformation Strategy at MullenLowe Profero, said: “Our findings are a wake up call for digital innovation in banking relationships. With digital experience being the number one choice for selecting a bank, there’s a huge opportunity for banks to support individual wellbeing at scale by understanding and responding to our goals and anxieties to build better money habits.”
The research was conducted by Censuswide, with 1,004 18-25-year-old current account holders and 504 small businesses with business bank accounts and annual revenues up to £2m between 23.06.2020 and 29.06.2020. Censuswide abides by and employs members of the Market Research Society which is based on the ESOMAR principles.
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