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WHY SOFTWARE WILL DECIDE THE WINNERS AND LOSERS IN THE BATTLE OF THE BANKS

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By John Rakowski, director of technology strategy, AppDynamics

Digital technology is shaking up all manner of industries; with mobile applications and software changing the way we work, shop and interact with brands and their services. The banking sector is no exception and it was recently predicted that as many as 2,400 bank branches could close over the next five years, with 1 billion people expected to be using their mobile device for banking purposes by 2017.[1]

As customer behaviour shifts, long-established banks must consider how they can restructure their business around technology and software in order to stay relevant and maintain a competitive edge. Whilst they get to grips with how they do this, they face mounting pressure from the emergence of digital focused challenger banks such as Atom and Fidor, who are ready to capitalise on the change in customer expectations by offering more transparency and easier online access to accounts, whenever and wherever customers want, from any device.

The Competition and Markets Authority (CMA) recently released its report into the banking sector, encouraging the industry to work better for the consumers they serve.[2] The report praised the number of challenger banks entering the market and their dedication to providing better customer service, being held up as an example to the sector for their development of innovative products and fresh ways to engage with users across online and mobile banking. Whether customers are visiting a bricks-and-mortar branch or using a digital service, they are expecting a more seamless, personalised experience and easier access to information about their accounts.

In spite of this shift towards digital, established banks have a reputation of being slow to implement new technology and they struggle to move away from legacy infrastructures which have been in place, in some cases, since the 1960s. For these global corporations, with highly complex business structures, adopting mobile or cloud technology can be a long process, with many citing security concerns and ultimately cost as challenges to quick and effective deployment of digital services.

The success of banks like Fidor is down to the fact that their business strategy has been entirely geared around customer experience, co-creation and challenging the idea of “what a bank needs to be” to meet the needs of today’s consumers. Fidor’s online-only model allows it to focus on re-establishing lost connections with customers and allowing them to actively participate in the bank’s decision making process, therefore continually strengthening trust, an essential factor in any relationship. Its community-based approach asks members to say what services and products they want and offers services such as peer-to-peer loans and quick and easy access to account information.

Other institutions are becoming increasingly aware of the need to transform, and have started to take vital steps to introduce digital services to connect with customers in genuine and useful ways. These include faster mobile transactions and apps which give customers more insightful analytics into their accounts and expenditure, and tailored financial services available to them. Many organisations have standalone digital teams, whose function is to trial and create intuitive connected experiences for customers and bring them to market. These dedicated groups are responsible for accelerating the pace of innovation for their organisation, ensuring they can continue to provide customers with what they need.

Although a seemingly great way to fast track innovation, the structure of these independent digital teams, who often operate on a project based basis, means that the output can create confusion to consumers. For example, a number of leading UK banks have two or more mobile apps in addition to a day-to-day banking application. These apps focus on areas such as customer spending analytics, through to video banking, but the fragmented approach of multiple apps leads to customer confusion and low adoption. For absolute success in providing value to customers, these digital services need to be easy to use and totally seamless. Pressure is on for these siloed innovation teams to be integrated into the overall technology and business estate in order to create a user friendly experience.

Over 20 challenger banks applied for banking licences over the past year, so the race is on for all organisations in this sector to innovate. But as banks move to deliver more intuitive connections with their customers through digital, new challenges emerge. Digital is disrupting in all areas of life and business, and as software continues to play an increasingly important role in how people bank, there will be more pressure on companies to make sure that their apps and other associated digital services are up to the test. To succeed in this highly connected world, these services need to provide seamless, smooth, personalised experiences with minimal user friction and outages.

A number of major banks have fallen victim to software glitches in recent months, with technical outages causing disruption to customer transactions, leaving many unable to access their accounts or delaying salary payments. The results of these outages include frustration and reputational damage for the bank involved, on a national scale. But it is not just major incidents that banks need to be wary of. With digital increasingly becoming the major touchpoint between consumers and banks, if these services delivered through apps are consistently buggy or difficult to utilise, customers will not hesitate to jump ship, take their money elsewhere and opt for a new provider offering better customer experience.

To highlight this, recent AppDynamics research revealed that three in ten people would change banks if a mobile app wasn’t up to scratch. Customers expect banking apps to be reliable no matter when or where they are using them. This means that banks must ensure they are meeting this expected level of performance, providing constant access to key services, fixing emerging issues before they become headline glitches, and ensuring they have foresight of any changes in customer demand.

Application performance monitoring will help banks to deliver a first rate service to customers, but they need to go one step further if they want to build brand loyalty. As demonstrated by the success of banks such as Fidor, customers are demanding more personalised online services which are built around their behaviours. The industry-wide move to digital is resulting in a huge amount of data being generated, through millions of interactions with digital banking applications. This data provides a great opportunity as it contains a wealth of detail into customers’ needs and wants, detail that can used to win lifetime loyalty. It is therefore essential that banks can quickly analyse this data rapidly through analytics, to identify new opportunities and ensure their services directly correlate with their customer’s banking needs.

Digitisation of the banking sector will continue at breakneck pace, bringing with it both challenges and countless opportunities. Providers who can master new technology, shift to a modern software strategy, and can maintain a customer-obsessed focus will reap the benefits in a competitive and fast-moving marketplace.

[1] The Telegraph, Thousands more UK bank branches could face closure, September 2015 [source]

[2] Competition and Markets Authority, CMA proposes better deal for bank customers, October 2015 [source]

Banking

SoftBank telco unit rotates CEO, Son steps down as chairman

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SoftBank telco unit rotates CEO, Son steps down as chairman 1

By Sam Nussey

TOKYO (Reuters) – SoftBank Corp, Japan’s third-largest telco, said on Tuesday Chief Technology Officer Junichi Miyakawa would become its chief executive officer, effective April 1.

The change at the top of one of SoftBank Group Corp’s largest assets comes after two years of deliberation, with the telco emphasising the need to “pass on the strengths of its current management system to future generations.”

The rotation is likely to lead to speculation over SoftBank Group CEO Masayoshi Son’s own succession plans. The 63-year-old billionaire abandoned a previous plan to hand over the reins and went on to launch the $100 billion Vision Fund.

The son of a Buddhist priest, 55-year-old Miyakawa is a technical whizz driving projects including the wireless carrier’s 5G build-out. He replaces 71-year-old Ken Miyauchi, a key lieutenant of Son, who took up the post in 2015.

Miyauchi will take the post of board chairman from founder Son, who will remain on the board. A household name in Japan, Son joins business leaders such as former Apple CEO Steve Jobs in being the face of the company he runs.

During Miyauchi’s tenure, the telco had a bumper IPO in December 2018 to feed cash to SoftBank Group as it shifted its focus to investing in tech companies. Son has since further reduced the group’s stake after a series of high-profile stumbles.

Miyakawa takes the helm as the industry faces unprecedented political pressure to cut fees, potentially eating into fat margins in its core business.

Looking to grow sales beyond selling mobile and broadband subscriptions, SoftBank is integrating a hodgepodge of companies including online fashion retailer Zozo and message app operator Line Corp into internet business Z Holdings.

Known for blue sky thinking including flirting with the idea of making cars, Miyakawa’s pet projects include an attempt to deliver broadband via drones. Alphabet Inc said last week it was abandoning its own balloon-based attempt.

(Reporting by Sam Nussey; Editing by Tom Hogue, Shri Navaratnam and Subhranshu Sahu)

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Banking

Over 60’s turning to digital banking up by 90% during pandemic

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Over 60’s turning to digital banking up by 90% during pandemic 2

More than 90% of people aged over 60 have used online banking for the first time during the Covid-19 pandemic, according to a poll by iResearch Services, highlighting the importance of banks getting digital right in 2021.

In comparison, 17% of people aged under 30 said they were accessing services via an app or web browser for the first time.

The findings show how banks must adapt to help service the influx of new digital users and gain their trust, accelerated by the Coronavirus pandemic. With 97% of 18–24-year-olds trusting their bank with their data, compared to only 33% of people aged over 66.

Commenting on the findings, Gurpreet Purewal, Associate Vice President, Thought Leadership, at iResearch, said: “Our study demonstrates the lasting impact of Coronavirus on how people will access banking services from now on. Banks will be required to refocus on really understanding customer needs in order to engage with the different requirements of each individual customer.

“More than half (54%) of respondents said they are less likely to attend a physical branch after the pandemic. This demonstrates a seismic shift in the way people will access banking services now and into the future.”

In other findings, 63% of respondents said their bank acted in their best interests during the pandemic, but a third said they would consider switching their bank for better, more personalised communication.

Purewal added: “On the whole, High Street banks have emerged with great credit from the pandemic for the way they have supported their customers. As the economy rebuilds, it will be more important than ever that they communicate in the right way to help consumers through 2021 by leveraging digital platforms and understanding their needs fully.”

Asked how banks can improve their communication with customers, ‘connecting on a personal level’ ranked highest, followed by ‘more honest and open dialogue’, a ‘demonstration of how they are helping customers’, ‘more creative campaigns’, ‘consistent messaging across channels’ and finally ‘responsiveness to major events’.

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Banking

Banking on the cloud to create a crucial advantage in financial services

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Banking on the cloud to create a crucial advantage in financial services 3

By Rahul Singh, President of Financial Services, HCL Technologies

Once considered a revolutionary technology, cloud is now at the heart of agile and innovative businesses. The financial services industry is no exception, and has been a major adopter of cloud-based Software-as-a-Service (SaaS) for its non-core applications. Functions such as customer management, human capital management, and financial accounting have progressively shifted to the cloud. Several banks have also warmed up to using cloud for services such as Know your Customer (KYC) verification. IDC analysts say that public cloud spending will grow from $229 billion in 2019 to almost $500 billion by 2023, and a third of this will be spent across three industries: professional services, discrete manufacturing, and banking. The time is ripe for an increasing number of financial services providers to consider moving more of their core services to cloud.

Adoption is already on the rise

Earlier reluctance to move core activities to the cloud has softened, and many banks have put strategies in place to migrate services, including consumer payments, credit scoring, wealth management, and risk analysis. This significant change is driven by factors such as PSD2 and open banking, which require secure and cost-effective data sharing.

Regulators too were once cautious in their approach to cloud technology, but this is also changing. The Australian Prudential Regulation Authority (APRA), for example, whilst acknowledging the risks associated with cloud, also recognised the risk of sticking to the status quo. ARPA trusted the enhanced security offered by the cloud, and updated its cloud-associated risk advice. Wisely, APRA recommended that banks must develop contingency plans that allow cloud services to be provided through alternate means if required.

Rising pressure from new challengers

The other pressure for incumbent banks is from next generation fintech firms. These are cloud-native organisations, and are able to onboard customers remotely in minutes, roll out new services in days, and meet compliance requirements at lower costs.

As a result, the need for traditional banks to upgrade core systems and integrate the latest technologies is stronger than ever. The COVID-19 pandemic has been an additional driver, highlighting the importance of upgrading and migrating core systems to the cloud. Financial services organisations have been forced to rethink their approach to digital transformation, and pay special attention to a cloud-aligned culture. The industry is recognising how the cloud can address new and ongoing regulatory changes, meet different demands from customers, support the roll-out of emerging technologies, and enable incumbent providers to respond to the relentless competition from fintech firms.

New year, new priorities

As we enter 2021, financial services providers will need to reset their priorities, and go beyond using the cloud for scalability and cost efficiency alone. The new areas to focus on will include:

  • Creating a robust digital foundation: The cloud market is expanding fast, and there is an ever-increasing number of services on offer. Whilst the big three hyper-scalers are the obvious choice, various other players are also gaining traction, such as IBM, Oracle, and Alibaba Cloud. Organisations will need a robust digital foundation to adopt cloud at scale in a secure and compliant way. A well-architected digital foundation, supported by resilient operations, ensures that organisations have continued access to their systems and data, regardless of where employees are located, or what device they are using.
  • Adoption of technology platforms: Enterprises are finding ways to reduce complexity by embracing a platform approach, and increasing the speed of business IT consumption. Physical infrastructure is being abstracted into cloud-based platforms, with data consolidated into data lake platforms. Software products like Apigee are being offered as capability platforms to drive better analytics and intelligence.
  • Enhancing IT security: Cloud offers organisations greater security than on-premises servers, if implemented correctly. Financial services organisations have relied on control and compliance-based security for years, but these practices are increasingly vulnerable to cyber threats. Whilst service integrators create robust cybersecurity solutions for financial services organisations, cloud providers are also looking to provision industry-specific security and regulatory measures like end-to-end data encryption – making it easier for financial services organisations to be compliant whilst migrating to cloud.
  • Driving innovation: Cloud is the fundamental factor behind the ability of fintechs to innovate rapidly. Using cloud, financial services can leverage new technologies and tools like augmented reality (AR), virtual reality (VR), natural language processing (NLP), machine learning (ML) and the Internet of Things (IoT) to unlock new processes that improve customer interaction and experience with portable real-time services. Whilst fintechs have led the way in cloud-based innovation through open banking platforms, some of the leading banks are also adopting cloud to simplify their business processes, including KYC as a Service, to enhance customer experience.
  • Enterprise synchronisation: Effective collaboration, both internally and with external partners, is crucial to success in the ever-expanding financial services ecosystem. Cloud allows businesses to integrate collaboration through shared tools and platforms. This is a critical ability as it leads to faster decisions and improved innovation cycles.

Legacy systems hold banks back from improving revenue generation and restrict their ability to build a responsive and resilient business. Cloud is a key factor in the success of challengers: traditional banks have no time to waste in migrating their core systems to cloud and building a secure future.

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