Prevailing economic conditions mean that it’s more important than ever for banks and other financial institutions to maximise their margins and get more out of their existing customers by bringing products to market quickly. But their existing IT systems are making this tough. Steve Alexander, Divisional Director, Banking & Finance at IPL explains, the multi-channel framework offers a solution that will overcome the problems caused by the ageing IT systems, without the high cost of replacement.
Squeezed by an economic environment of low interest rates and low returns, the secret to banks’ success lies in being able to innovate quickly and maximise what are extremely thin margins. This requires a number of things: a deep understanding of existing customers and their activity, systems that enable banks to get products to market quickly, and a need to provide a better and more unified customer experience by enabling people to access services whenever and through whatever channel they choose. The common factor holding all of these areas back is existing IT.
The Silo Problem
Understanding customers’ activity fully is key to any organisation’s ability to develop new streams of revenue. Banks and financial institutions are no different: What is customer X doing at the moment? What additional services might they be interested in? The problem is that many existing banking IT systems are like silos. Each system was built at a different time, the interfaces between the back- and front-ends are all different, and the data stored within each doesn’t necessarily match up. To interact with their accounts and holdings, customers need to access multiple systems, which makes it extremely difficult for the bank to gain a full understanding of a customer’s activity. A better understanding of the customer and how they’re using the bank’s products and services would enable financial organisations to target their marketing at the appropriate people in real time and, in the slightly longer term, develop products to match fast-changing demand.
Faster Product Development
But even with in-depth customer understanding, the current IT systems prevent rapid product development. Their complexity means that bringing new products and services to market can take months or even years, largely because of the difficulty of linking the modern system required by the new product to legacy systems. This means that if the Bank of England was to raise interest rates tomorrow, the major banks would struggle to respond in a timely way and offer new savings products. The result would be customers moving to competitors who are able to offer better deals. Speed to market really counts. In contrast to long-established organisations, new entrants to the market, such as Metro Bank, aren’t hampered by decades’ worth of legacy systems. As such, they’re able to bring products to market quickly, making them far better positioned to capitalise on new opportunities before the competition can even start thinking about doing so.
Better Customer Experience
With the proliferation of mobile and later smartphones, a new breed of on-the-go consumer has been born. These people expect to be able to interact with their bank(s) at a time and in a way that suits them, whether it’s via SMS, a mobile app, regular website or another channel. The advantages for the banks of offering these services are twofold. First, giving customers what they want will help consolidate and grow the customer base. And second, by offering more services in automated ways, banks can drive down costs. Furthermore, a customer’s online behaviour is fully trackable, gaining valuable business insight that is not available through customers visiting bricks-and-mortar stores or using the current set of disparate siloed systems.
The Answer to all these Problems…
These three key problem areas that banks and financial institutions are facing – better understanding of customer activity, products quicker to market and an improved customer experience through the use of multiple channels – can all be tackled in one fell swoop: the multi-channel framework. Sitting atop the legacy systems, the framework becomes the central part of the bank’s IT systems, and avoids the need for costly redevelopment. It may sound as though this is simply middleware, but there is much more to a multi-channel framework. Adding a layer of middleware to enable front-end systems to talk to back-end ones doesn’t remove the problem of data silos or disparate customer-facing front-ends. A multi-channel framework incorporates the necessary middleware to communicate with the legacy systems, but by additionally providing a cross-channel set of reusable business processes, consistent data can be presented to the customer, regardless of how they’re accessing their holdings.
Having all holdings data available through any channel means the customer doesn’t have to log in to multiple systems to carry out their banking activity, and banks are able to get a far better understanding of how customers are interacting with their products and services. As well as providing the improved customer experience that they desire, this will enable the banks to place relevant adverts in front of their customers in real time.
Furthermore, a framework will help banks develop new products and services much more quickly than they currently can. This is because the new front-ends only need to be built to interface with the framework, rather than with a range of complex legacy systems or disparate pieces of middleware. This reduces development time and risk significantly.
Finally, because the framework handles the complexities of communicating with the diverse legacy systems, the bank can easily add further functionality and offer its services through new channels, all the while offering customers a consistent, unified experience, regardless of which back-end system the data is coming from.
It’s worth noting the value that a multi-channel framework would offer to financial institutions that are acquiring or merging with others. Rather than having to reprogram all the acquired organisation’s legacy systems, these can be plugged into the framework, and their data fed through to the existing unified front-end.
Multi-channel frameworks: Better margins for banks and more satisfied customers. A win-win all round.