News that Apple is upping its game in mobile payments serves as another reminder that traditional banks are increasingly under siege. Aside from managing a growing mountain of regulatory requirements and escalating margin pressures, financial institutions face the emergence of formidable competitors, often from companies in the retail and communications sectors that haven’t traditionally operated in this space. Additionally we are seeing the emergence of “new-cos” that are using technology to create disruptive banking models that capture the imagination of consumers and erode the market share of traditional banks. A slew of new payment technologies with bolstered security features are making it easier for non-traditional financial companies to cross the chasm of distrust among merchants and consumers.
Oracle recognizes these challenges and is working closely with financial institutions on new strategies that focus on a “customer in” versus “product out” approach.
The rapidly evolving landscape, while threatening at first glance, actually holds hidden opportunities for traditional players who focus on reinventing the customer experience. As the general public becomes more accustomed to conducting transactions outside the traditional banking environment, financial institutions can leverage their scale to provide an experience superior to that offered by new entrants.
But those threats are growing in leaps and bounds, and need to be taken seriously.
Several months ago, Walmart expanded its foray into financial services with the introduction of a money wire service, building on its existing debit card, bill paying, and check cashing offerings. The retail giant has a lot of company. Wholesale giant Costco is now offering home mortgages.
Communications services providers are also eyeing the tremendous opportunity in front of them. The ubiquity of the mobile phone is accelerating. In a world of 7 billion people, the number of global mobile phones in use this year will reach 7.3 billion while 2.3 billion people remain unbanked. In many emerging markets, mobile phones far outnumber bank accounts, a reality that has led to the creation of a growing “mobile money” ecosystem that facilitates funds transfers among mobile phone users. According to one estimate, these types of mobile money services are now available in more than 70 countries and are used to transfer billions of dollars monthly.
These new competitors have also invested heavily in understanding and, more importantly, predicting customer behavior. Further, many non-traditional players do not face the same regulatory burdens as traditional banking entities.
As banking institutions survey the unfolding landscape, the message becomes obvious. To continue to lead on their home turf, financial institutions must not only rethink and improve the customer experience, they must look at new approaches to transform it, from end to end.
Oracle has studied the innovations of new players, and can assure banks that they can still look in the mirror and assess their own inherent strengths: expertise that only dedicated financial services institutions can deliver, including financial fortitude, proven delivery channels, and proven expertise.
The trick then is to combine the best of both worlds – the agility and omnichannel experience that today’s consumer demands, with the security and financial excellence only banks can deliver. Three important tenets can help to guide this transformation:
- The customer is in control. Customers expect to have it their way when doing business today and will take their business elsewhere if they don’t. Banks can use this to their advantage by focusing on providing an omnichannel experience. While most banks have adopted multi-channel strategies, few deliver the seamless, omnichannel service that customers have come to expect in the retail sector, for example. Rigid organizational structures continue to haunt many institutions, including an inability to gain a single, comprehensive view of the customer due to stove piped legacy systems. Banks that master the omnichannel experience stand to set themselves apart from less agile institutions and optimize their position among emerging players.
- Treat the customer like a best friend. Consumers expect to receive offers while they’re online or using a mobile app that will be of interest to them based on their browsing or past purchases. Financial institutions are ideally suited to deliver this personalization due to the volume and diversity of customer and transactional data they capture. External sources, such as social media, offer the opportunity to capture additional rich data, such as information on life events – relocation, marriage, the birth of a child, a new job – that might drive financial decisions. The ability to manage and analyze big data is essential to moving to a new level of customer intimacy.
- Simplify, simplify, simplify. Consumers are busy people, and they want to transact quickly and easily. Making it easier to get all the information they need about a product, and to quickly conduct a transaction, whether in a branch, on the phone, or via a mobile device, in easy-to-understand terms, can boost their receptivity and loyalty. Customers also want the ability to compare products and costs, and the flexibility to begin a process using one channel and to finish it using another. And they are eager to access end-to-end financial services via online and mobile channels. To make this vision a reality, financial services organizations require flexible, scalable, and extensible modern platforms and applications.
The most important changes, however, will not be technological in nature. They will reflect an ambition to change holistically, so that the new capabilities of predictive analytics, secure mobile transactions, and user-centric processes are reflected throughout the organization. Banks that don’t knock down stove pipes and don’t reconstruct their go-to-market strategies along lines consumers demand will find themselves on the outside looking in, no matter how many new gadgets or apps they develop.
 Weise, Karen, Why Half the World Doesn’t Have Bank Accounts,” Bloomberg Business Week, April 25, 2012, http://www.businessweek.com/articles/2012-04-25/why-half-the-world-doesnt-have-bank-accounts
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