As a business person working across the digital and technology areas in banking for the past two decades, I have realized that business leaders have a bit of mental block in managing technology. They typically ignore technology until it's all over the environment. By the time they react, the market typically would have moved ahead and then they play catch-up for years to come.
In the first couple of years of my career, I was not involved in technology initiatives and I always thought “Why do tech folks talk about SIT/UAT?”, "Why can’t any initiative go live immediately post coding?” From that time to becoming CTO of a bank, it has been a memorable journey and I have realized that despite technology being proven as a business every time, whenever I do a business discussion around technology ahead of the time, I get the same feedback from business folks: “You have started speaking like a tech guy.”
Business teams have been largely avoided digital initiatives due to lack of knowledge as well as short-term focus on quarter on quarter business numbers. Key areas where banks have missed the business by underplaying technology are:
Despite being there for past two decades, internet banking did not dramatically change the business dynamics. This has largely been used by banks to automate customer servicing, with almost no focus on customer onboarding.
Even from servicing side, a few banks like ICICI Bank in India have taken the extreme step of moving all key services online and incentivizing customers to use the platform. Most banks have used the platform as an alternate channel and moved 15 to 20 basic services online. Even the focus on cross-selling & upsell and content management has not been there for best of the banks.
With the arrival of FinTech, this platform is going through a bit of revival. This platform now needs to be looked as part of the omnichannel strategy of the bank instead of as an isolated channel.
Initial mobile banking platforms were based on SMS messages and with the arrival of iOS and Android mobiles, mobile banking moved to an enhanced app-based experience in the last few years.
Most of the banks took the platforms as an add-on and moved a few services to this channel (a few services out of the internet banking bouquet). Despite the potential, most banks could not create any business model on this unique immersive platform. Even the services made available on mobile banking were not intuitive like bill recharging, which required at least five clicks before payment.
The entry of wallets created a massive movement in India where people started perceiving wallets to be a superior product. Wallets were essentially savings accounts (which is a prepaid instrument as well) with zero interest rate, low limits on transactions and higher regulatory/KYC risks.
Whatever could be done in a wallet account, could have been done on mobile banking app (except that it doesn’t sound great!). Plus, you could do transactions for a higher amount. And, you will get interest from it!
Even now, most banks have not made mobility as a key channel for customer onboarding and servicing. There are either no or low incentives given to customers for getting onto a bank’s cheapest and most engaging channel. Physical channels are still competing with mobile channels rather than embracing the same.
Most of the banks took “mobile banking” as mobility and did not embrace mobility across all customer & employee engagement models. Mobility has helped in the re-baselining client as well as employee engagement. The entire customer journey from onboarding to service to cross-sell to exit across all products needs to be enabled on mobility.
With regard to employee enablement and engagement, there is potential to build mobile platforms for customer onboarding, servicing, collections in addition to using the platform for training and employee management.
Technology was available for more than a decade to automate 90% (if not more) of operations, credit, sales management, compliance, etc. However, only the operations area came under automation largely as “it was a weak link in the organization’s power structure and was always considered as the cost center.”
Due to their relatively powerful positions, credit, sales, marketing and compliance kept their distance from technology. As we all know, when automation takes over, there is higher transparency (removes discretion), lower costs (linked to lower human resources needs), lower turnaround Time (increases accountability), and higher customer satisfaction (does it matter?).
By avoiding automation, these units kept their growth linear. Higher sales require an increase in team size, higher loan logins require bigger credit team, increase in regulation required more compliance folks. This ensured that in the power equation, they remained ever powerful.
FinTechs have used this void to enter and create disruption. They have largely focused on automating sales (Paytm and BankBazaar), credit (ZestMoney and MoneyTap) and compliance (Karza Technologies and Signzy). Now, everyone is looking at automation as a key area of competitive advantage
APIs have been in existence for a long time in the banking industry. While specific technology may have changed, APIs were used for a long time for ATM transactions, SWIFT, payment gateways, CIBIL, bill payments, etc. New innovations like IMPS and UPI are simply secure API platforms for payments.
Even now, any discussion with board or management on APIs would have a debilitating impact on the CIO. I have heard of a large private bank which could not set up an API platform as “the business head could not understand the business case around APIs.”
FinTechs have taken the leadership position by optimally using KYC APIs, payment APIs, credit APIs, RegTech APIs, AI APIs, etc. As we look around, every part of the business is getting converted into an API. Google offers cloud vision APIs!
Analytics/Artificial Intelligence/Machine Learning
Analytics has been largely used by banks for creating dashboards and marketing clusters. There has never been a deeper usage of analytics due to the lack of consistent data strategy within the bank.
While using AI/ML daily as a user (LinkedIn/Ola/Amazon), it would take bank management years to invest in this space. Typical challenges like internal politics, lack of knowledge, hiring issues, and lack of data culture will delay deployment and usage of AI/ML.
It's time to reassess technology in banks. In 2015, BBVA Chairman Francisco González had shared his view that “BBVA will be a software company in the future.” Citibank, JPMorgan Chase and DBS are moving ahead by moving digital into the center of their businesses.
Is your organization ready at the top management level to handle technology?
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