By Damian Young, Director of Banking EMEA Nomis Solutions
Banking and technology have always been closely linked, each facilitating and encouraging advances in the other, but in recent years, the banking and technology worlds have become inseparable. Not only are banks embracing technology to improve on their functions, a tech savvy customer base is readily accepting these technological advancements and increasingly expecting them from banks.
Through the addition of new digital channels such as online and mobile banking, banks now have more data available to them now than in the entire history of banking. In order to successfully take advantage of the benefits of this massive increase in customer and environmental data, embracing advances in technology will be essential. However, paradoxically, in some instances technology is also what’s hindering banks progress.
As technology has advanced at a rapid rate banks have attached ad hoc solutions and work-arounds on to ageing systems to cope with this accelerated rate of change and enable essential and customer-expected new services (such as internet banking) in order to answer competition and remain relevant and progressive in the public eye. While this has enabled banks to reap the short term benefits of quickly offering a new service, it has also left them with a long term technology problem of a convoluted, complicated and outdated IT system that will increasingly struggle to cope with incorporating new technologies, necessary to remain relevant and competitive, the longer it is functioning.
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However, leveraging customer, market, account and internal data to make strategic decisions across Lending and Deposits portfolios is critical not only to achieving a competitive advantage over other banks and external industry challengers and achieving financial targets but also remaining relevant in the eyes of customers. Harnessing this data allows banks to achieve tailored and smooth services for customers as well as aiding with internal processes.
As banks return to stability and as markets creep back normality achieving profitability will once again become a key focus for banks. Utilising data to support pricing decisions, optimising asset and liability levels and maximising returns on portfolios will ensure that banks remain on the path to profitability.
Enabling this level of data analysis and management will potentially require significant investments in technology and as previously discussed, banks are still struggling with the technology issues of legacy IT systems. This means that making the powerful technology upgrades necessary to maximise the benefits of data can be a costly process in terms of finances and man power. However, in this new technology driven banking environment an opportunity arises in third parties to help banks with this issue.
Fintech companies, such as Nomis Solutions, offer solutions to these data issues that cover model customer, market and competitor data, understand key price sensitivity cohorts within this data and allow the banks to make fact based decisions on acquisition pricing, retention pricing and planning. The software allows the banks to run multiple scenarios at product, segment or cohort level to see how pricing changes affects volumes in such segments. It also allows the banks to price position their full portfolios under various constraints to achieve both volume and income targets. In short, this technology allows banks to answer environmental and customer demands and changes and contingency plan for them.
In addition, the solutions provided allow banks to better understand their customer bases to allow them to make informed decisions on product design, market targeting, segmentation design and portfolio growth. Utilising data to inform such decisions means that banks better satisfy regulatory requirements by utilising measureable information to make business decisions. This means that banks can clearly demonstrate how and why such decisions were made by showing evidence through data.
These new technology solutions increase not only the profitability, engagement and efficiency of banks but also data security. Solutions that utilise “cloud based” data approaches mean banks can be confident that their data is secure under the highest degree of data security provided by some of the world’s best known data service centres. The other benefits of this mean that data hosted in this way ensures speed, efficiency, confidence and reliability.
Technology is and will remain fundamental to the future of banking. It provides banks with multiple and constantly emerging channels to communicate with customers and analyse their behaviours allowing smoother, more convenient and accessible channels for customers to use whilst capturing more data to continually improve on this offering. This technology also means an improvement in banks internal systems and processes, resulting in a more efficient and ultimately more profitable bank.
Technology has always been at the heart of banking, particularly since the advent of the internet, but now we can firmly say that the two are inseparable and will remain so far into the future.
Technology and banking is now inseparable and the emergence of fintech companies mean that all banks can take advantage of new, cutting edge technology and only those that do so will lead in the new banking world.