By Jane Tweddle , Industry Principal for Banking and Insurance at SAP
It’s no secret that customers now expect to be able to interact with banks through a wide variety of channels – in branch, over the phone, online, and through mobile devices and applications – and receive a seamless experience across these different channels. In order to meet this expectation, many businesses have focused on transforming the customer experience, and are seeking competitive differentiation through responding to changing customer demographics and demands.
Although this is the right approach, it’s also important to consider the business processes that sit behind and ultimately support the innovations that enhance the customer experience. Banks need to avoid simply ‘bolting on’ new offerings to legacy processes and systems that are no longer reliable or agile enough to support new and constantly evolving industry requirements.
One of the ways in which forward-thinking banks are starting to achieve a more agile way of operating is through cloud computing. This has transformed the ways in which organisations do business, allowing them to react to changing requirements at a far quicker pace and take advantage of new opportunities more flexibly than ever before.
Develop new products more quickly
Many organisations enjoy having the ability to flex capacity up and down to support heavy periods of development and testing. Cloud computing is particularly well-suited to this, as it can quickly bring extra capacity to allow for the testing new products or services, running short-term intensive processes like risk modelling, or processing large sets of data.
Rather than having to invest into equipment that might end up not being used much of the time, businesses can scale up and down as needed using cloud solutions, without having to bear the cost and space implications of physical infrastructure. Cloud solutions also enable faster proof of concept and prototyping, allowing banks to test technologies and new products in a much more agile way, and bring new and bundled solutions to market much quicker and with less capex investment in technology.
Dip a toe in new markets
In a similar vein, with the speed and scalability that is afforded by the cloud, banks now have much more flexibility to quickly enter or exit new markets and geographies than ever before. Expanding banking services to emerging regions is an immense long-term growth opportunity. The newer, more connected customer is quickly spreading across the world, from developed economies to emerging markets, driven by the explosion and affordability of mobile devices. For example, it’s estimated that by the end of this year, 600 million people in Africa – about 56% of the population – are likely to own a mobile phone; with some researchers estimating penetration could reach 80%.
This clearly offers a unique opportunity to reach unbanked populations. Yet, services built on costly legacy infrastructure just won’t be able to support these opportunities for growth. Millions of people across the world want and need access to banking services, and cloud services alone will help banks to take advantage of this, without having to invest in costly bricks and mortar branches or their own in-country data centres.
Crunch through customer data and engage and collaborate better
Increasing volumes of data, the range of different data collected, and the need to retain loyal custom, are key drivers for cloud adoption within the banking industry. Analysing high volumes of data in differing forms and from different locations is becoming increasingly complicated and, as such, the industry is recognising the benefits of a cloud environment. Not only does this free up valuable storage space, but hosting all data in one environment make sharing of data and analysis much simpler and quicker. It also makes mobile consumption of data easier. Most customer and transaction data can’t be held on mobile devices, so access via the cloud makes a big difference for financial advisers and customer service representatives.
This helps banks to serve customers in news ways and use better insights to differentiate themselves to their customers in providing more innovative products and services and deepening relationships. Moreover, access through cloud and social tools allow better collaboration internally, across silos as well as externally, with customers.
Connect with corporate customers
Integrating corporate customers has often been an issue for financial services providers. It takes time, investment on both sides, and often does not provide a full end to end process, back through to the ERP system, for example.
To illustrate, a delayed collection update can block deliveries due to factors such as customer credit limit validation, having a major impact across the supply chain. At SAP, we’re looking to combat this through our Financial Services Network – developed in collaboration with some of the world’s leading banks. It is an on-demand solution that connects banks and other financial institutions with their corporate customers on a secure network owned and managed by SAP. The network allows corporations to automate financial transactions, reduce rejections and facilitate reconciliation of bank balances globally – all offered over a single channel via the cloud.
An example of a financial organisation innovating in this way is Citi, who recently implemented the SAP Financial Services Network which is a bank to corporate platform based in the cloud that is designed to simplify corporate transactions such as payments, as well as reconciliation and remittances.
Private public, or both?
There’s a multitude of drivers for businesses to adopt cloud computing, and many different cloud setups to meet these requirements. Whether it’s a private cloud for storing business-sensitive data, a public cloud for non-core platforms such as ERP or procurement applications, or a combination of both through a hybrid solution, today’s flexible cloud environments can be customised to meet each organisation’s specific needs.
The challenge for many businesses is currently one of confidence. Many banks are showing reluctance in placing data in the cloud but the technology to provide secure services is constantly evolving, and the European Commission’s Data Protection Act is supporting greater controls around the use of information by firms.
The growing cloud opportunity
For the banking industry, cloud is no longer just a buzzword. Analyst firm Gartner estimates that by 2016, more then 60% of banks across the world will process the majority of their transactions in the cloud. Service providers are offering more and more cloud solutions designed specifically for banks, encouraging organisations to take the plunge.
At SAP we are starting to see transaction-based services, such as core banking, being taken up more and more via the cloud, as well as ERP, HR and procurement solutions. But to be able to reap the flexibility and scalability benefits of cloud, it’s crucial that banks develop a clear cloud strategy that’s specifically tailored to their business. It’s therefore key to tap into the right technologies that will help execute that strategy to its fullest potential.