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Pandemic Forced Fintech Innovation

The COVID-19 pandemic has in many ways provided an incubator for new business processes, and one certainty is we’ll look different on the other side of this than we did before it, SunTec CTO Mike Yesudas said.

The last two years have been unique in that suddenly, the world had to work from home. Business processes had to change out of necessity quickly. That removed usual frictions for everything from payments to digitization to intelligence.

If there had been no COVID-19 pandemic, companies would have acknowledged new technologies but would have stuck with the familiar. Instead, there was no choice but to look to these new options.

We’ve also had to pivot in 2021, Yesudas said. One year ago, we were ready for the virus to be primarily controlled. Vaccines were on the way, and a return to normalcy was pending. But then came the new variants and thoughtful planning focused on assuming the virus would remain. That means conversations about digitizations must also continue.

The expectations for every company’s digital capability have soared since 2019, Yesudas said. Before that time, a company could have some sort of mobile app with suppliers, and that would suffice.

Digital a Primary Focus

Not any more. Such a mentality, and the products it spawns, are already dated. The company that wants to differentiate must focus on intelligence specifically artificial intelligence.

But there’s a catch. Most business cases on either side of the pandemic will look different, which means data gleaned before it will have limited if any use.

“Data collection starts with should have started yesterday,” Yesudas said. “But, it’s not too late to start collecting the data from today and focusing on how your data looks. So data will play a big part into 2022 as opposed to what we saw in years past.”

The most significant fallacy people encounter is the assumption data is continuous and can be easily integrated into models. Whereas facial recognition, for example, can rely on historical data, as faces do not change, but in business, that data is constantly in flux. Significant influences like a pandemic, or regulation, stop your data flow, and when it resumes again, it will be different.

“Definitely our banking is going to be changed because pre-2019, pre2020, and post-2020. It’s almost a different world. You can sense it,” Yesudas said. “Just about anything that you want to do in banking today is going in that direction.”

It is an interesting time for companies adopting new technology, especially laggards, and this is both whole companies coming to market and existing ones adopting new technology. The former could unveil an MVP, debut, and iterate on the fly, while the latter could tinker somewhat after debuting an app or service.

Now you need to be meet the expectations of an increasingly online base used to Amazon and Netflix, Yesudas said. The differentiator must be there right out of the gate. The secret sauce?

Data and User Experience Key

“In my opinion, it would be the ones that would liberate the data and combine that with the user experience because we are not technically in the software world anymore,” he said. “We have moved to the intelligence world, which means things are learning, giving a better experience, and making businesses leverage the data they’ve got.”

Yesudas said that the banking world is watching blockchain technology but not using it much. The technology is there, but they need an adoption driver. Mobile phones have been around since the ’90s, but it took the iPhone to change the industry. Blockchain awaits a similar spark.

“If you follow some of the trends, with big data, for example, in 2008, many people remember it for being the year of the great financial crisis,” Yesudas said. “But if you look back at technology before 2008, and up to 2008, you will see all these big data things that were coming up. You will see lots of the big data technologies come out after 2008.”

“Now 12 years later, we have gone with another massive global event. And I believe the next one is actually intelligence that comes out of data. It’s not just data by itself in terms of storage. That was what big data was, but it’s actually deriving the intelligence from it. That’s what the revolution here is for, and that’s going to be the next big thing.”

Most companies have more data than they realize, but they do not seem to leverage it in the best way, Yesudas said. Banking has reams of the stuff that goes to waste, hurting both the customer and the bank. Accounts should be intuitive and let you know when your funds are low or ask you to ask someone to transfer funds as a top-up. For many developments, we have yet to see the data that powers them is already present.

Old Data Obsolete

The process begins with solid data surveillance capabilities, Yesudas explained. Add analytics and ensure a fresh flow because if your data is more than 30 days old, it is probably obsolete.

Yesudas said that supply chain participants have learned many lessons over the past two years. The most severe issues were more upstream than empty shelves and a shortage of drivers. Even when the product was available, container shortages in some regions further delayed shipping.

Industries had to get used to maintaining two unique supply chains, one for data and one for the product, Yesudas said. That data was crucial, as companies had hours instead of days or weeks to change suppliers or shippers and were not used to that.

Blockchain technology could help, Yesudas suggested.

“So the immutability of data is one of those things that would underpin today’s supply chain so that the data flowing parts of the supply chain, I’m hoping that we get to see and we get to see some of the disruptors in the industry come up with some of those, those wonderful inventions that may not save us all from the supply chain shortages that fell on us.”

This article was originally published in lendacademy.com, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1Lendacademy

Banks Should Not Lose Human Touch in the Digital Era

India has seen a fintech adoption rate of 87%; the figure is 64% in the rest of the world.

The banking industry has undergone an extensive transformation over the past decade buoyed by the advent of digital technologies. Technology companies that are operating in the financial services sector have also leveraged emerging technologies such as artificial intelligence (AI), internet of things (IoT) and machine learning (ML) among others to transform the banking sector.

This disruption has also caused a shift in customer preferences and expectations by moving away from traditional banking practices and opting for online, branchless banking that offers a one-stop destination for all banking needs.

With the emergence of fintech companies and neobanks, India witnessed a fintech adoption rate of 87%, in comparison with its global counterparts (with only about 64%), making the country the third largest fintech market in the world.

Banks require the right software that allows not only to connect front and backend systems but reduce costs that could be incurred from revamping their entire technology.

Given that traditional banks have an edge over fintechs in terms of customer trust and customer data, the deployment of the right software can help banks enhance customer experience and offer personalized services. For example, with the right software, banks can suggest personalized loan plans and financial schemes to rural customers. Today, banks need to expedite their digital transformation and position themselves as a one-stop shop for all banking services, thereby deepening their relationships with customers and retaining their trust.

With the onset of the covid pandemic, banks pivoted the way they functioned by embracing leading-edge technology to evolve and transform their business. Customers are today deeply rooted in the digital or mobile-first approach and are looking for better hyper-personalization from banks.

Traditional banks thus need to reimagine everything from their people and their data to their architectures and ecosystems, by seamlessly transitioning to digital and accelerate adoption of digital banking and payments tools and platforms among banking customers.

Ramping up their spend on newer technologies, increased investments in infrastructure and upgrading their IT systems are some of the key areas that Indian banks must move towards to close the digital gap. Banks can do this either by partnering with fintech companies or by building digital capabilities in-house.

The Trust Factor

Customer retention and trust are vital for a bank’s success. Therefore, it is imperative that banks create ecosystems that offer value-based engagement and hyper-personalized services and meet their short- and long-term needs to build and retain the loyalty and trust of the consumer.

Digitizing pricing and billing processes to prevent any revenue leakages by deploying the right solutions can help in the consolidation of products and services. Banks and financial companies must focus on expediting their digital transformation journeys and modernizing their legacy core systems to increase agility, scalability and innovation.

Legacy data systems are typically siloed and designed to support human decision-making. As a result, more and more banks are adopting new data-driven technologies such as cloud, AI and ML that will enable them to make real-time, at-scale, automated decisions which will radically speed up their primary processes.

With tech and fintech companies offering digitized products to customers, banks must also focus on leveraging concepts such as open banking and application programming interfaces (APIs) that enable access to data and account information of customers. Digital transformation helps banks in driving customer relationships to ensure higher levels of loyalty, improve product depth, retain existing customers and attract new customers through cross-selling. Banks must focus on always being one step ahead of the customers and become financial supermarkets (offering all banking services under one roof) for their customers.

It is also important for banks to understand the significance of delivering value to their customers in every transaction.

The challenge leading banks are working on solving is how to create a differentiated experience, innovative propositions and a human connection when banking is in danger of becoming a faceless, price-sensitive commodity. It is imperative that banks develop a roadmap to create a differentiated experience, innovative tech propositions and a human connection with their customers.

Those in the banking industry who embrace leading-edge technology to evolve and transform their business will ultimately be able to meet changing customer expectations and emerge as winners.

This article was originally published in livemint.com, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1Livemint

The Indian Banking Opportunity – Transforming the Business of Banking

The Indian Banking Opportunity – Transforming the Business of Banking

The banking and financial services sector in India has been one of the country’s most stable and dependable economic pillars since Independence. But today, it stands at a critical inflection point. Over the last few years, the sector has had to withstand several disruptions. The ongoing COVID-19 pandemic has proved to be the biggest challenge it has faced in recent times. The restrictions necessitated by the pandemic accelerated the pace of digital banking adoption and changed the way banks operate. And these changes are likely to stay even after the novel coronavirus is vanquished. For traditional banks with their decades old operating models this is an opportunity to reinvent their business models with a digital technology powered front-end that supports a robust traditional banking core.

The Optimal Growth Environment

If the demonetization drive gave an impetus to digital payments, the ongoing COVID-19 crisis has fast-tracked the digital transformation of the entire customer experience – ranging from payments to even KYC and authentication processes, deposits withdrawals and more. In 2020, India overtook China with more than 25 billion transactions, and digital payments are expected to account for a whopping 71.7 percent of total payments volumes by 2025. And this shift to digital modes was not restricted to big corporations or metro cities alone.72 percent of MSME payments went digital in 2020 as well.1 Experts expect this trend to continue in a post pandemic world, fuelled by changing customer demands.

What Customers Want

What, then, do customers want from their banks? To put it simply, they want a better and more value driven banking experience. This includes ease of use, on demand access, hyper-personalized and relevant products and offers resulting in better and more meaningful engagement with their banks. This is easy to understand in the context of other services the modern customer avails of today. Consider the viewing recommendations on Amazon Prime based on viewing history, or preferred routes saved on Uber based on ride history. Most interactions customers have today with brands are hyper-personalized based on their previous engagement and usage and they naturally expect the same from their banks. The problem is that traditional banks with their legacy infrastructure and data silos cannot deliver this level of personalization. But digital native fintechs can and are making significant headway already. With an 87 percent adoption rate, India is the third largest fintech market in the world.2 Traditional banks need to relook at their strategies and reinvent their operating models to keep up.

The Opportunities to be Explored

Right now, the banking sector in India is sitting on a goldmine of opportunities. The Government of India is actively pushing the digital transformation and inclusion agenda. The Aadhar program is the world’s largest biometric identity program and provides the foundation for successful financial inclusion initiatives like the Pradhan Mantri Jan Dhan Yojana. The country’s burgeoning young and digitally savvy population demands innovation and uberization of services and increasing penetration of smart phones and internet has brought on demand hyper-personalized services to their fingertips. By leveraging technology powered solutions Indian banks can overcome most of the hurdles in their way to consolidate their leadership position.

The Technology Powered Transformation

Banks have two major advantages. One is the significant customer trust they enjoy. And the other is the huge reams of customer data they hold in their repositories. It is now time for them to leverage this data as they move away from transactional banking models to behavioral ones. They must break down data silos to comprehensively understand customer behavior and engagement. These insights will then form the basis of their behavioral strategy and shape their hyper-personalization approaches to pricing, offers, bundles and even loyalty and rewards programs. And as the banking customer base expands to include new customers and previously unbanked ones, banks must consider new innovative models such as BNPL to effectively connect with and offer what these new customers want. Special schemes such as the Visa Bring India Home program to connect with MSMEs and artisans and bring them into the digital banking ecosystem are also important.3 Eventually, banks must move towards becoming orchestrators of a comprehensive ecosystem that brings together everything a customer needs and wants under one umbrella.

Of course, to capitalize on the opportunities before the sector, banks need to have a powerful and advanced digital foundation in place. Traditional systems, technology and capabilities will not deliver the agility, scalability, analytics, or behavioral business models banks are looking to implement. They must now modernize their systems to implement capabilities like relationship-based banking, hyper-personalization, and more. Many traditional banks are adding powerful digital capabilities to launch value driven platforms and business models. SBI’s YONO, DBS’ Digibank, the IDFC First Bank and even the India Post Bank that takes banking to every doorstep in the country are some interesting developments. This trend is likely to continue to pick up pace over the next few years with more synergetic partnerships between banks and fintechs and innovative new strategies from banks themselves. Implementing powerful middle layer solutions can help banks adopt digital models without disrupting the core banking platforms.

The business of banking is undergoing significant transformation, and organizations that do not take this opportunity to revamp their business models will lose out on future growth. It is not a question of merely adopting cloud models for greater scalability and agility. Right now, banks must focus on transforming their business and operational models to unlock a new digitally powered customer centric era of banking.

This article was originally published in The Banking & Finance, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1Business Today
2Economic Times
3Money control

2022: A New Paradigm for Banking

Banks have undergone significant transformation in the last two years, witnessing a remarkable acceleration in their digital transformation programs. Banks are now highly digitized, and digital adoption among customers is at an all-time high. Innovation within the banking industry remains strong, as banks continue to evolve and adapt to changing customer demographics and preferences. At the same time, they must continually adapt to overcome the challenges presented by the banking democratization trend – where bigtechs and fintechs present a new form of threat to traditional banks.

The game has now shifted to one of survival first and growth next. As 2022 approaches, the key question for banks is about its relevance to customers – and how well equipped they are to meet changing customer needs and preferences.

Digitization Without the Intelligence

The rate at which banks have embraced digitization in the last 24 months has been nothing short of phenomenal. Before the Covid-19 pandemic, programs that were expected to take a decade or longer to complete were finished in less than two years. There is no doubt that we now live and work within a truly digital world. But as we begin upon a new year, the banking sector still faces a core problem. Whilst banks are highly digitized, their inherent nature means they are not as technologically or data savvy like many of their fintech challengers. A recent report by Accenture revealed that out of nearly 2,000 directors in more than 100 of the world’s largest banks, only 10% of board directors and 10% of CEOs had any professional technology experience.1

While banks may have become ‘digital,’ they’re now in a position where they lack the experience and intelligence to drive forward their digitization efforts and reap rewards for themselves and their customers. As traditional data kings, banks now must learn how to leverage their data, and use it innovatively and conveniently while ensuring it is secure. Unfortunately, many banks still lack the technology to truly use this data intelligently – which is a massive missed opportunity.

The Importance of Data Exploration and Extraction

To overcome this challenge, data exploration and extraction will become vital and prove a turning point for banks in 2022. We’ll see banks undergo large-scale data exploration programs to scrutinize and examine the data they retain so they can fully understand their data assets. This includes everything from transaction and payroll data through to foreign exchange data.

Currently, big banks are not ready or able to leverage all of the data they hold to their advantage – an area where the smaller players and fintechs excel. Many banks simply do not want to abandon their core banking focus and don’t have the key to unlock the data and realize its full potential. But there is little point in holding such indispensable data if a bank can’t use it to create real change or value. In the coming year, banks will need to step up their game, adopt a technology-first approach to data science and forge partnerships with external service providers to truly deliver a frictionless customer experience.

However, this doesn’t come without risk. Once data moves to third parties and is beyond the bank’s control, it could lead to data misuse and mishandling. If not managed properly, such partnerships can pose an obstacle – so it’s vital that banks implement well-defined policies to mitigate and eliminate risks that may compromise customer trust.

Ultimately, banks of the future will need to differentiate themselves by demonstrating they are connected, present and relevant to customers as they navigate their daily lives, and focus on becoming trusted advisors in the eyes of those users.

Effectively Using Artificial Intelligence (AI)

While banks have a wealth of data, many also have significant technology gaps. Luckily, one of the most influential technologies today can help them address gaps between merely holding and effectively using data: artificial intelligence.

The use of AI in banks is not new – many banks have been using AI to build their own chatbots and virtual assistants for years. A large global bank previously introduced a humanoid on its bank floor to assist customers in its flagship branch on Fifth Avenue in New York and later in Miami, FL and Beverly Hills, CA. It handles customer support activities like teaching customers how to open accounts, relaying credit card details and more. There are solution providers like Simudyne that help financial institutions run large scale stress tests using AI. While the use of AI was initially restricted to front office scenarios, with time banks have begun to use AI in middle office tasks like fraud prevention, customer segmentation, KYC verification, credit underwriting, lending risk management and much more.

In its next stage of evolution, AI is bound to reinvent the way pricing is done across industries, including the banking industry. This sector has numerous products and services even within the same category, making it challenging for the pricing teams to keep track. Above these complexities, pricing teams must constantly deal with changing market conditions and dynamic customer behavior, which often makes it a super human task to make the optimal pricing decision. By tracking the buying trends and competitive product prices, AI will be able to help banks drive optimal pricing decisions and bring more transparency in pricing by clarifying the variables behind each decision, doing away with the ‘black box’ effect which can introduce mistrust on price recommendations.

If banks are ready to think out of the box, the possibilities can be endless. AI can help banks combat friction in customer experience. For example, banks can leverage AI to shorten the KYC and AML compliance requirements by conducting the necessary checks and following all the processes, just like digital bank Monzo did for its onboarding. It focused on optimizing verification accuracy, lowering signup abandonment rates, reducing manual review and improving verification speed. Banks can now get one step ahead and create a bank that is driven extensively by algorithms that nudges its customers at the right time to make the right decisions that consider customer financial goals.

A Bank’s Ecosystem Remains a Vital Cog in the Engine

Whilst many have said a bank’s Achilles heel is its legacy systems, they are still fundamental to progression and innovation in the banking sector. As we enter 2022, a bank’s ecosystem must remain highly robust while simultaneously becoming more agile. The current lack of ecosystem flexibility creates an opportunity for APIs and niche challenger players to compete in the banking landscape. If banks continue to rely solely on these robust, but rigid core systems, can they remain relevant to customers? And what are the different ways in which big banks with a rich ‘heritage’ of applications can remain relevant to new-age customers?

What banks must do in 2022 is deploy a middle layer that has the intelligence to translate data available in their core ecosystem into actionable insights. This middle layer will amplify the effectiveness of the robust core system making the bank more agile and flexible to meet customer needs while leveraging the benefit of a robust core. This can help banks effectively deliver value while taking informed decisions to remain profitable.

For traditional banks, and the banking industry, to remain relevant, they must also compete with bigtechs that offer a complete solution to customers’ problems. And the only way for banks to do that is to quickly adopt a platform strategy, build their ecosystems and own their customers’ journey while extending their solutions like those of their partners to holistically solve customer problems. This type of interaction conducted on a highly efficient platform will ensure there is an effective value exchange between the customers, banks and its partners. The value exchange is everything: it’s where the customer and the bank meet on common ground at the right price, at the right experience for the customer and, importantly for banks, at the right level of profit.

It’s true that 2021 generated significant digital innovation in banks and a new approach to their customer experience strategies – but 2022 has the potential to truly harness the power of this innovation and allow banks to lead from the front.

This article was originally published in The International Banker, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

 

Sources

1Finextra

Are fintechs competition or partners to banks?

The banking sector has been one of the most stable foundations of the Indian economy. It is at an interesting juncture now with some significant developments impacting profits and share of wallet, and giving rise to new opportunities. Customers today want greater personalisation, relevance and value-driven engagements than ever before. Digital-native fintechs are ready with their innovative uberised offerings to win them over.

At 87 percent, India’s fintech adoption rate is much higher than the global average.1 For traditional banks there is no wishing away fintechs. The question is, should they now prepare to compete with fintechs, or is it a better strategy to work in collaboration with them to create a comprehensive customer-centric banking ecosystem in India?

Holistic Financial Ecosystem

To answer the above question, one must consider the larger market context. The Unified Payment Interface (UPI) programme has seen steady growth in uptake since its launch and in October, the UPI transaction value touched $103 billion with 4.2 billion transactions.2 The progress made on the UPI front has opened new opportunities for banks to orchestrate a larger ecosystem with more relaxed data-sharing norms. Banks must now focus on quickly owning the customer journey with platforms that can assist in the process.

The biggest advantage banks have in this new digital economy is their vast repository of customer data. They can scale up their digital transformation efforts to implement the technology platforms required to change their business strategies, and come up with new value-driven offerings. But the future of banking and financial services does not lie in increased competition between banks and fintechs; it lies in synergetic partnerships.

A Symbiotic Partnership

Banks stand to gain from fintechs’ technology expertise, and fintechs are eager to leverage the data most banks have, in addition to benefiting from their geographical network, and continuing customer trust. In partnership with digital platforms, banks can look at transforming their own portfolios and services, and tapping into a new target audience. The relatively relaxed regulatory norms governing the fintech world makes it easier for them to connect with people previously left out of the formal banking system.

For example, those with poor credit scores are not considered for credit cards by traditional banks. In the new digital economy, however, innovative schemes such as buy now, pay later (BNPL) are being introduced to offer quick loans at the point of sale. These schemes do not require extensive documentation, are easy to avail, and easy to pay off, encouraging greater consumption of goods and services.

While banks by themselves may be hard pressed to roll out BNPL schemes, they can easily do so in partnership with fintechs. India has a vast young, digitally-savvy population that is just making its way into the formal banking economy, and such schemes can help engage them more effectively than traditional credit systems.

Partnerships between fintechs and banks are already a reality. Indian banks have also invested in fintechs, and will continue to do so to modernise their positioning. The recent tie-ups between HDFC Bank and Mintoak Innovations, and SBI and Cashfree Payments are examples of such symbiotic partnerships.3

As banking becomes increasingly customer-centric, the future for banks lies in becoming orchestrators of a comprehensive platform that serves the financial and non-financial needs of a customer even without them stating such a requirement.

For example, a customer taking a home loan will automatically be offered home insurance, and access to discounted services at partner organisations offering interior decoration services, furniture and furnishings, and more. Banks and fintechs working together can help build unique, customer-focused ecosystems that deliver hyper-personalised, relevant products and services for lasting customer satisfaction, and greater profits.

Despite the disruption of the pandemic, the banking sector is now faced with new opportunities for growth. It must now focus on ramping up its infrastructure and strategic partnerships to capitalise on these. Partnering with fintechs is the way forward for the sector. The coming years will see greater integration between banks and fintechs as both try to navigate the challenges of 21st century banking.This article was originally published in Moneycontrol, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1Business Today
2Economic Times
3Money control

BNPL or bust: Is online lending damaging financial wellness

In this exclusive interview, Amit Dua, President and Global Head – Client Facing Group at SunTec, talks to FinTech magazine about how online lending has changed the borrowing culture with mobile-first customers banking on the go.

The BNPL space has skyrocketed over the past 18 months, mainly in harmony with the increase in online spending. But now that numerous online stores offer the service at the point of sale, and companies like Apple and PayPal have jumped on the bandwagon, are we in danger of creating another credit debt boom? We spoke to Amit Dua of SunTec Business Solutions to find out more.

Q: What are the main drivers behind the online lending revolution in fintech?

There are several factors driving the proliferation of fintech lending. First, consumer behavior has dramatically changed in the past few years. People are not only socializing virtually, but they’re spending online too – and borrowing. Digital lending has quickly accelerated with the vast technological developments of the last 15 years such as artificial intelligence, big data, the introduction of 4G and the advent and advancement of the smartphone.

We’re now a mobile- first world where customers can bank on the go. Access to personal loans, mortgages and automatable financing is available at the touch of the button – anytime and anywhere. When this occurs within a regulatory environment highly favorable to fostering lending online, it’s clear that the digital lending fintech revolution is here to stay. It’s a transformation that will continue to snowball especially in this ‘value-add’ environment that we live and work within. We must also consider the impact changing operating models of the world’s leading fintech providers has had. The innovation and simplification of their functionality drove the entire financial services industry to digitize quicker than perhaps they wanted to or had planned.

Q: Has the ease of online lending changed the borrowing culture?

Completely. Digitizing the offer of credit for consumers and businesses alike provides a significant growth area for both traditional and challenger banks and fintech providers. Because online lending has become increasingly accessible, convenient and available, fintechs are gaining more momentum. The regulatory environment continues to be ripe and open to disruption – and fintechs have been able to capitalize on this and offer a wide range of payment-as-a-service provisions to meet traditionally unmet customer pain points. With the opportunity now to start and complete a loan application from end-to-end on your mobile device [even as you stand at the point of purchase], why do you need to step foot into your bank branch to arrange a credit facility or loan agreement? Borrowing money from some financial providers is now as easy as booking a holiday online.

Q: How is this wave affecting the incumbent banks?

The digital lending tsunami has proved that traditional banks must simplify and streamline the consumer borrowing process – and quickly. There’s no longer a one-size-fits-all approach when it comes to lending. Many banks haven’t changed their basic lending processes in decades so they are often too long, too complex and can’t be fully completed online. As a result, banks have inadvertently presented themselves as an expensive, exclusive and slow option for lending. Unmet needs lead to disengagement, which means loss of revenue for banks.

Banks need to create options that meet the ever-changing needs of consumers especially the millennials and Gen-Z. They must improve their agility, responsiveness and decisiveness to not only react to customer requirements but predict them. Many customers may never bank in person again meaning banks need a comprehensive solution to provide credit and arrange lending in a low risk, low cost and personalized method to solve the unique needs of their customers.

Q:  What can banks do to address the issue?

Simply, they must step up their game. The technology proliferation and digital transformation acceleration that the pandemic created presents an unmatched opportunity for banks – one they must seize.

It’s no longer about waiting for the customer to approach the bank and seek credit options for their specific circumstances. Banks must now switch to a completely customer-driven model in which they develop credit and lending options for a wide range of customers with very specific, unique needs before the customer themselves realize what they need. Today’s customer is savvy and proactively scours for deals online themselves. They actually dislike someone contacting them.

Fintechs got their foot in the door first by enabling end-to-end loan completion agreements on a mobile device. But banks, with their well-established legacy in customer trust and loyalty, can turn this tide. The pandemic changed the way consumers interact, transact and engage with financial firms. Digital is now the standard, not a ‘nice-to-have’. However, there’s a heightened variance in the market. Some banks are highly digital and provide sophisticated services and products tailored to a digital environment and a truly ‘online’ customer while others require real improvement. All banks must go digital and must reconsider their entire organization systems, processes, data and people – including how they ensure online lending meets their digital native customers’ needs.

Q: Is increased and potentially less regulated online lending good for the business economy or problematic?

On one hand, increased regulation can be a good opportunity for the economy because, as with all kinds of services and provisions, it is essential to a prosperous, thriving business environment. In terms of online lending specifically, regulation is a vital tool to protect both consumers and lending providers. But there is a fine line between necessary and appropriate regulation and the type of laws that stifle innovation and are detrimental to growth.

Digital lending can provide a cost-effective and convenient solution that offers a win-win for both the consumer and the financial institution. An unregulated lending ecosystem is a recipe for disaster. We need regulation that matches the lending environment as the right level of regulation serves the best interests of the industry for all stakeholders.

Q: What new online lending technologies are disrupting the market?

While blockchain has been associated with the likes of Bitcoin and other cryptocurrencies, it’s relatively new to the digital lending sector. But the potential changes it can bring are fundamental. Not only does it offer best-in-class security – which is imperative for online money transfers and other lending processes such as gathering auditable data, underwriting and securing smart contracts – it enables, the bank and the customer to record their transactions in an easy and verifiable way. By building a lending platform on blockchain technology, contracts and transactions become indisputable. A World Economic Forum report stated that by 2025, 10% of the world’s GDP will be stored on blockchain. It’s definitely a technology that’s here to stay and will only grow in importance.

Digital signing technology has also accelerated and although not new, it’s innovated extremely quickly in the last 12 months due to Covid-19. Know Your Customer digitally (e-KYC) has developed rapidly, reducing the time it takes from starting a loan application to receiving approval and the funds in your bank. By digitalizing the entire verification process many online lenders have been able to better meet the needs of more customers in a much quicker, seamless way. Gone are the days where a representative from your bank needed to meet you in person to complete the KYC documentation. Everything can now be completed digitally.

Although not a new technology, the cloud also offers a huge opportunity for banks in the lending space. Cloud tech enables bank to innovate faster and in a cost effective way. It also enables them to work fast, and that’s what today’s digital customer wants; speed, accessibility and ease when it comes to lending.

The opportunity for banks is to leverage the cloud’s flexibility, scalability, high performance and security to handle large volumes of transactional data and functionality to translate it into value for their customers. This will instill confidence in their ability to keep up with agile, highly responsive, and adaptable fintech players. In this case, it can help to enable loan application decisions to reduce from weeks to days, save money, drive higher quality decision-making based on the amount of data cloud tech can facilitate, and, ultimately, drive revenue.

Machine learning automation and big data also enables lenders to not only make quicker decisions but better-informed ones too. Automation can save a lot of internal resources and overheads for the provider while ensuring a hyper-personalized customer experience for the applicant. Speed, responsiveness, and agility are just some of these boxes machine learning automation and big data ticks.

Q:  Is the boom in online lending purely customer-driven and will it become ‘the norm’ in the foreseeable future?

It’s not only driven by the customer. A ripe regulatory environment for example where laws stimulate a strong digital landscape for consumer borrowing has also bolstered the digital lending boom.

There are also the benefits digital lending offers to financial institutions – whether that’s a traditional bank or a new fintech player. As well as the cost savings digital lending can create for institutions it can also generate revenue growth that results from stronger pricing power and being able to meet the needs of a bigger percentage of customers.

This article was originally published in FinTech magazine, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1McKinsey
2McKinsey
3Disruption Banking
4Disruption Banking
5Disruption Banking
6Google Cloud

The Importance of Customer-Centric Strategies for Traditional Banks

With more and more challenger banks and fintech providers battling for the attention of consumers, it is a pivotal time in traditional banking history.

Traditional banks now face tremendous challenges around how to capture market share, retain existing customers and attract new ones.

To thrive and grow, banks must identify how they can be more customer-centric, offer enhanced transparency, deliver customised digital capabilities and maximise their assets to showcase their value across each step of the customer journey.

For many banks, this will require them to reimagine their core technology, foster strong partner networks and understand the true meaning of digital transformation, all while placing empathy and agility at the heart of their strategy.

Despite the new difficulties banks face, they have a huge natural advantage in that customers inherently trust traditional banks and the services they provide.

Banks should not take this innate trust for granted but rather use it to position themselves as a leader in customer centricity that understands the specific needs of their consumers.

Banks are uniquely positioned to adapt and optimise their existing assets to provide the type of products and services today’s consumers want and need. They already retain detailed intelligence on their customers, have established methods to interact with them and can aggregate and analyse data to offer a superior customer experience.

Banks that emerge stronger from this pandemic will be those that move towards a much more focused and strategic customer-centric model that enables them to deliver on customers’ expectations through technology innovation that also helps them to control costs and differentiate themselves from competitors.

Customization is king

In efforts to retain existing customers and attract new customers – especially millennials who are much more likely to opt for a fintech provider to meet their financial needs – banks must change their approach and how they develop and deliver consumer services.

They must create products and provide services that are hyper personalised, that understand not just what the customer wants and needs now but predict what they may require in the future.

Big tech companies like Facebook, Google, Apple and Amazon have successfully crossed into the financial services market and changed the game for incumbent players. Their business models are built on customization, prioritising user experience and the customer journey to maintain their existing customer base and grab increasing market share from traditional players.

These tech companies understand how to leverage customer data to provide the ultimate personalised experience and use it to suggest – and even predict – the customer journey, setting the standard for consumer expectations.

The sheer power, size and reach of these companies has left many traditional banks unable to compete. With a daily presence in consumers’ lives combined with significant capital, existing customer data and strong brand loyalty, big tech and fintechs have become the drivers of innovation – and have pressured banks to rethink how they can focus on customer-centricity and strive to own the customer value chain.

Challenger banks and fintech providers have enjoyed a high level of trust among customers due to their service-first models that build consumer confidence and encourage loyalty.

As traditional banks struggle to retain existing customers, they are also losing out on valuable insights that could help them attract new customers, especially millennials. As the banking experience evolves from product-based to customer-based, financial institutions will be pressed to find new ways to deliver the services that customers, especially younger people, expect.

Needs-based banking

Banks must strive to keep empathy and agility at the centre of their strategies to best serve the customer of tomorrow. That means providing a needs-based customer service that anticipates customer requirements and delivers products and services that meet these needs.

Banks must bring needs-based banking to the forefront as customer preferences continue to evolve. For this to happen, banks must have the right blend of first and third-party data – all in one place.

In 2021 and beyond, it’s vital that banks leverage artificial intelligence (AI) and machine learning to help customers improve their financial wellbeing.

Banks should also embrace customer data to ensure their offerings add real value to the customer journey.

By creating and maintaining access to consolidated data, banks can quickly respond to consumers’ evolving needs and seamlessly access this data by building a digital core layer in their functionality, which captures and logs the data from every customer interaction, personal information, purchasing pattern and more.

Smart banks will leverage their customers’ information to offer service-first models built on trust and loyalty, while ensuring transparency for both customers and potential regulatory requirements.

The bank model of the future is rooted in empathy, understands the customer’s needs, drives customer retention and ensures the long-term health of their business.

By humanising banking, banks will soon realise it empowers them to innovate faster, future-proof their business and reduce costs all while enhancing the customer experience.

Data has the power to enable empathetic banking and help humanise the banking experience, which can be a true competitive differentiator.

This article was originally published in Fintech Futures, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

There is a Strong Push for Digitalization from Customers: Nanda Kumar, Founder and CEO, SunTec

A technocrat by training, innovator by passion and motivator through his writings, he was fascinated by the idea of creating something that solves fundamental human problems and thereby adds value to businesses. This led him to build one of India’s early enterprise software product company SunTec. He is recognised for building an automated billing solution for India’s national telecom provider, and later Xelerate, a customer relationship management platform that is currently used by over 130 companies across 45 countries. The company’s founder and CEO Nanda Kumar, in an interview with Shubhendu Parth, shares insight on the impact of the pandemic, the sudden spike in digitalization and how the banking, insurance, and telecom sectors are transforming to meet the new-age requirements. Excerpts:

DQ: As we move to the recovery phase in the post-pandemic new normal, do you see a change in priorities in technology adoption by large businesses?

Nanda Kumar: What the pandemic has taught us is that businesses with a well-thought out and well-executed digitalization strategy have been much more resilient to the disruptions caused by the pandemic. They have been able to serve their customers and manage their back-end processes without compromising the safety and well-being of their customers, employees and other stakeholders. The pandemic has also forced businesses to fast-track their digitalization efforts and going forward, we anticipate a greater priority being accorded to technology solutions that enable remote working and customer management.

“With the world being increasingly comfortable with everything digital, complete and end-to-end automation of physical processes is underway in many companies.”

There is also a strong push towards digitalization from customers, who have also grown accustomed to digital and are actively favouring companies that offer seamless and frictionless digital transactions and experiences. Businesses whose digital strategies are flawed or not well-executed run the risk of losing their customers to the competition.

As such, businesses ought to use this period to quickly future-proof themselves so that they can quickly adapt to rapidly evolving customer expectations and fast-changing socio-economic conditions. In other words, businesses must be prepared for a state of permanent and continued disruption. This can be done through core modernisation on a progressive basis, better management of data and introduction of automation and meaningful analytics to allow for personalization and better customer management.

DQ: The pandemic has brought about a massive change in the way business is done. From the technology perspective, do you see organisations moving away from certain technologies?

Nanda Kumar: With the world getting increasingly comfortable with everything digital, a complete and end-to-end automation of physical processes is underway in many organisations. They are accelerating the shift of their critical workloads to the cloud. Further, they will increasingly use no-code AI platforms to fast-track their AI projects rather than relying on development from scratch. Finally, most businesses will recognise that their legacy infrastructure does not need a complete rip-and-replace; rather, they can create more value by adding a middle/intelligence layer. This means moving some critical functionalities to systems operating outside of the traditional layer of the core.

DQ: The pandemic has also reshaped consumer behaviour across a majority of retail industries. How are businesses in key industries like banking, insurance, and telecom transforming themselves? What areas are they lagging in?

Nanda Kumar: Across industries, customer behaviour in terms of purchasing capacity and buying patterns was highly volatile last year. If we can take one lesson from this volatility, it is that all businesses need to accelerate their digital transformation initiatives towards understanding new customer requirements and meeting them efficiently.

“Showing their focus on customer experience, many telecom companies are adopting cutting-edge self-service tools and apps that speed up complaint resolutions.”

In the BFSI sector, branch-based interactions and relationships have played a pivotal role in acquiring new customers and fostering solid relationships with existing customers. But with COVID-19 and resultant social distancing norms, we have seen a sharp decline in branch footfalls, a pattern that may linger for several months or perhaps even years. The greatest challenge for the BFSI players today lies in seamlessly transferring a branch’s level of trust, flexibility and security to a digital environment.

In-branch banking will need to transform to remain an important vehicle for banks to attract new customers, retain existing ones and engage more deeply with them. Bank branches could become experience centres, offering a place for customers to explore products and services, and to solve more complicated banking problems.

Banks and insurance companies have already gone digital and paperless for new customer onboarding. Video KYC and digital biometrics play a pivotal role and have made the onboarding process more straightforward and efficient. Their next goal must be to deliver the same quality of digital banking experiences that their customers expect from digital-first companies. Customers today are used to frictionless transactions offered by a variety of apps such as Zomato, Swiggy, Netflix and Spotify. Banks ought to make their digital banking experiences as hyper-personalized and customer-focused as these apps do.

The telecom industry is similarly dealing with a rapid shift in customer needs and expectations. The pandemic has led to a demand surge for fast and reliable home-based connectivity, and telecom companies are responding with increased bandwidth capacity, and new products and solutions designed for this fast-growing segment. Demonstrating their focus on customer experience, many telecom companies are adopting cutting-edge self-service tools and apps that speed up complaint resolutions. We anticipate this trend to gather momentum in the near future.

DQ: Where does the company fit into the larger picture of enterprise technology adoption in the post-pandemic age?

Nanda Kumar: We are uniquely positioned today to help business organisations orchestrate their customer experience end-to-end, as they evolve and transform their operational models for the post-pandemic age. Our solutions revolve around the heart of every business, which is pricing and billing. As institutions grapple with the reality of today’s business environment, they must be able to dynamically offer the best and differentiated pricing to their customers backed with a compliant billing solution.

“Banks will increasingly connect or forge partnerships with third parties and move towards Banking as a Service (BaaS) model, which will become a priority.”

Further, our solutions are designed to help enterprises gain deeper insights about their end customers’ behaviour, create dynamic customer segments and rapidly design and launch hyper-personalized products and offers to serve the end-users efficiently.

In essence, our products and solutions help enterprises design and manage a customer-centric product portfolio, price their products attractively in order to maximise value for everyone, and optimise their partner ecosystem and their billing processes.

Additionally, SunTec’s cloud-agnostic and API-first products and solutions help our clients scale, transform and deliver value in a digital world. We support organisations in executing a customer-first strategy, which enables them to exponentially increase their revenue and customer base, deliver exceptional customer experiences, prevent revenue leakage and ensure compliance.

DQ: How do you compare and contrast the state of technology adoption by leading Indian players in banking or telecom sectors with their global counterparts?

Nanda Kumar: Around the world, major consumer-facing industries like banking and telecom have been early adopters of digitalization. Both the industries are also tightly regulated and often invest in cutting-edge technologies just to ensure regulatory compliances.

While the technology adoption by banks and telecom companies is heavily influenced by competitive and regulatory pressures, several progressive firms in India have global benchmarks in embracing cutting-edge technologies. In telecom, Airtel and Jio are world-class case studies in offering vastly superior digital experiences to their customers through partnering with global technology leaders. In banking, in addition to some private banks, State Bank of India has shown outstanding customer-centric digitalization in its YONO app.

However, these firms are also outliers in their respective industries, while a majority of Indian banks and telecom companies have a long way to go in building truly customer-centric digital experiences through effective adoption of technology. We do hope that this scenario will change quickly in the post-pandemic era.

DQ: Mobile and digital banking seem to be taking over from traditional branch-based banking and payment mechanism. What will the future of banking look like for the end-customer?

Nanda Kumar: To serve this evolved, digitally savvy generation of customers, banks will need to mine their historical customer data to make sure their offerings add real and perceptible value to their customers. In the Indian context, UPI-based payments have made significant strides in enabling the digital economy right from the time of demonetisation in late 2016.

Increased competition from Fintechs and the Big Tech such as Google, Amazon, Facebook and Apple is already forcing banks to shift from product-based offerings to experience-based and service-first models. This transition will further force them to truly own the customer value chain. Banks will increasingly connect or forge partnerships with third parties and move towards the Banking as a Service (BaaS) model, which will become a priority, allowing banks to rapidly innovate and expand their product and service offerings through a collaborative partner ecosystem.

The future of banking is not necessarily a brick-and-mortar institution. As Bill Gates famously said “Banking is necessary, but banks are not”. Undoubtedly, banking will form the substrate of any and every transaction that takes place in today’s world.

This article was originally published in Dataquest, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Interview with Mr Nanda Kumar, Founder & CEO, SunTec Business Solutions

We recently interacted with Mr Nanda Kumar, CEO SunTec Business Solutions to understand his perspective about the latest development in the technology sector. Here are few excerpts of the interview:-

You embarked on this tech-enabled end-to-end value management almost three decades back and much has happened in the outside world. Staying put on the growth path during these disruptive times is a case-study. We would like our audience to know your story on this continued passion for delivering value.

Value management is in fact rooted in our organisational DNA. It is also captured in our vision statement, which is to enable every value exchange in the digitally driven world. While the outside world has seen many disruptions over the last thirty years, fundamentally, businesses are able to survive and thrive only if they are consistently delivering value to their customers. This applies as much to SunTec as it does to our clients.

30 years ago, we were fortunate to start our journey alongside the dawn of the Internet age with telecom clients. Early on, we realised that if we were to succeed in a rapidly changing world, we needed to shift from a product-centric approach or strategy to a customer-centric one. Also, fundamentally, this evolution had to happen from a disjointed system to one where pricing had to be based on reliability of delivery and transparency.

When we applied this shift while working with our telecom clients, we were able to generate more value for their customers with every single additional phone call they made, by analyzing their monthly bills using our technology space.

Once we saw the customer-centric approach work for our telecom clients, the logical next step was to apply this approach to other industries and help them create more value for their end-customers. We ventured into banking and financial services in 2000 with a whole new approach to pricing by making it customer-centric. Our idea was to help our clients maximise value for themselves and their customers by offering attractively priced and hyper-personalised products and solutions on one end, and plugging any potential revenue leakage on the other.

Customer centricity has therefore been the guiding light for most of our journey and even today, we are singularly focused on helping our clients create more value for their customers as well as for themselves by becoming more customer-centric than ever. We firmly believe that a customer-centric business is much better suited to sail through disruptions and continue to deliver meaningful value to its customers.

You have shaped the wave of customer-centric software platforms and solutions for pricing and billing, particularly in transaction-intensive verticals. Having pioneered the concept of relationship-based pricing, please share your thoughts and outlook on this critical aspect, which is key to balanced pricing dynamics.

Pricing and billing together determine just how successful a business will be in creating value for itself and for its customers. Pricing is also the final determinant of value exchange. If the price is set too high as compared to the perceived value of a product, there will be fewer or no customers. On the other hand, if the price is set low, the business will have lower profits. Another important factor is the context of the consumption. For instance, the value of a bottle of water will increase exponentially for a person in a desert as compared to those who have an abundance of water around them. So human emotions also play a role.

Getting the billing systems right is in fact critical, because even a tiny discrepancy at the backend can lead to revenue leakage and drain the profitability. For example, if a bank with 10 million customers is losing on average just ₹0.25 of say half of its customers per month, it is still losing ₹1.25 million per month or ₹ 15 million every year, which is a drain on its profitability.

Plugging this leakage often necessitates taking advantage of modern technology to craft and offer the right product at the right price to the customer. Also, banks are increasingly realising that in today’s hypercompetitive environment, when technology is a great equaliser, they need to start adding external partners to their systems in order to offer more value to the customer. We’re seeing this transition with some of our banking customers, who have built an ecosystem play with a variety of external businesses as partners.

Now, as soon as banks start building an ecosystem play, pricing and billing becomes even more important. For example, if your bank is offering you a concierge service or a travel service as a value addition, they have to not only price it correctly, but also do so after factoring in your own behavior. How many times do you travel every month or every year? Are you a preferred customer of your bank? What is your credit rating? Such behavioral factors are today playing a greater role than ever in helping banks create and deliver more value for their customers without sacrificing their profitability.

How do your products and solutions enable organizations to adopt a customer first strategy and exponentially increase revenue and customer base?

Our solutions are designed for complete customer experience orchestration. From a customer point of view, they want to know why they should be charged, whether they are being charged transparently, how they can save money, how they can get customized offers and so on.

We have a solution designed for deals and offers management and yet another solution designed for product rationalization, which helps prevent the customer churn and minimizes the cost of servicing legacy products that are perhaps offering lower value to the customers.

In essence, our products and solutions help banks design and manage a customer-centric product portfolio, price their products attractively in order to maximise value for everyone, and finally optimise their partner ecosystem and their billing process.  They allow banks to go beyond their market offerings and tap into the industry’s broader ecosystem to serve, satisfy, and grow their customer base.

With COVID 19 the Digital Transformation journey of most of the banks seems to have gathered momentum, what are the customer-facing trends that may emerge over the next 6-8 quarters?

Banks are today busy reinventing their business and revenue models on account of the widespread disruption caused by the pandemic. One of the most striking trends that we’re seeing is greater collaboration, even among competing players inside the banking ecosystem, as banks look to shore up competitive differentiation and attract the newer, digital-proficient generation. For example, Google will soon start offering “Plex”, mobile-first digital bank accounts through its Google Pay app to its US customers. For Plex, Google has partnered with 11 banks and credit unions, including Citi.

Banks are therefore not just partnering with fintechs but with Big Tech companies too. In turn, customers will soon see the entry of non-traditional players in banking, like Google, Facebook and Amazon. Big Tech is today able to offer precisely what a bank used to offer in the past because they already have a large database of users and all of their users need financial products and services.

Platformification of banking is another important trend from a customer perspective, which would offer them access to more credit and flexible payment options with ecommerce players, or help protect their financial wellness in adverse economic conditions.

Finally, as banks look to reduce costs, automate, and simplify their business in order to gain more efficiencies, the role of bank branches will likely change post pandemic. One possibility is their transformation into ‘experience centers’, where a bank’s customers can get to know and understand various products and services better.

As a trendsetter, what are your Top 3 emerging trends in the Fintech space, which shall further revolutionize the banking and financial services industry

The fintech space is uniquely positioned to complement larger banks by serving the digitally native Generation Z, which is also the youngest working population today. Younger people naturally gravitate towards fintech players on account of convenient and hassle-free banking experience that traditional banks are still not able to offer.

Particularly in India, digital and mobile-first neo-banks will continue to gain more ground in 2021 as they are both cost-effective and faster than conventional banks, on account of better technology capabilities and more agile structures.

With banks keenly looking for new partners, the fintech companies with mature products and technologies will make for natural targets – both for collaborations and technology licensing deals and, in some cases, even acquisitions.

You are a firm believer that organizations need to master the art of building the competency for every employee. How do you start the process of having a self-motivated individual who is inclined towards continuous learning?

We are indeed fortunate to have many of our industry’s brightest individuals as part of SunTec. Thanks to our people, we’ve built an organization that prides itself as a leader in the relationship-based pricing and billing space globally.

It’s little wonder then when we had to go into a sudden lockdown on account of the pandemic in March 2020, our people all over the world ably rose up to take the challenge of meeting all our customer and employee commitments. We didn’t lose a day, not even an hour, in adapting to the new circumstances, which was indeed unprecedented.

From our side, we have worked hard to create a learning culture at SunTec that directly links the process of competency building with professional and career goals and aspirations of our employees. We have also taken care to provide full organizational support in the form of systems, tools and processes that support their learning goals. Finally, we also ensure that people always have a chance to apply their newly acquired skills and competencies in real life.

Known for building a strong team, a people’s man yourself, what would be your advice to the new generation of entrepreneurs who are actively participating in this disruption journey?

As an entrepreneur, your first job is to only hire people who complement your skills and competencies. Far too many first-generation entrepreneurs make the mistake of believing that only they have to solve all of their business problems. On the contrary, hiring someone who is better equipped to handle a specific function – sales, marketing, engineering or finance – and then letting that new hire solve their function’s problems is the first step towards building a great team.

Also, all young businesses undergo a major transition checkpoint when the team size crosses a certain threshold, and the founding team is no longer able to remember the names of all employees. Once the organization crosses this checkpoint, entrepreneurs must pay closer attention to effective propagation of their original organizational culture and value system among the new employees. This will ensure that the entire organization is pulling together in the same direction.

This article was originally published in Banking Finance, Read More

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

12McKinsey
3Disruption Banking
4Disruption Banking
5Disruption Banking
6Google Cloud

SunTec: Why Age-Old Pricing Strategies Don’t Have a Place in Modern Banking

The pandemic has caused a seismic chain reaction throughout the world of finance, and as financial institutions emerge at a pivotal crossroads within their operations, it is within their best interest to harness every level of financial technology in order to remain on top in the post-covid era. 

Over the last 26+ years, Amit has handled all the markets in advanced and emerging economies – Europe, Americas including LATAM, Asia, Australia, New Zealand, Middle East, and Africa interacting with global and local banks alike. He is a keen business strategist and regularly comments on a range of banking and technology-related issues.

Here he examines the new normal for banks and financial institutions, and dissects the strengthening capabilities of fintech adoption towards their impending digital transformations:

The Covid-19 pandemic has prompted notable shifts in the banking industry as financial institutions grapple with significant challenges, from dipping interest rates to an increasingly competitive market, loan defaults, and now even impending inflation. While some of these changes may be temporary, some will influence traditional banking patterns for years to come. This will in turn push banks to build new capabilities to adjust their operations to navigate the new normal and emerge from pandemic operations stronger than ever. Once the banks have exhausted the cost lever, what will really matter for banks (and importantly their incomes) during this phase is how they price their products and services as they transform into digitally powered organisations.

It’s critical that banks be accurate with their pricing strategies if they want to remain profitable – but age-old pricing strategies will not help banks get there. Instead, they must put emerging technologies such as artificial intelligence and machine learning to use to improve their pricing strategies. But how?

Mapping the Past To Drive the Future

A bank’s success was traditionally measured on a limited range of capabilities, namely credit allocation, capital management, and operations. Unlike today, there was historically very little difference between one bank’s product and what its competitors offered, and there was often no real priority given to customer needs. Today, banks are setting themselves up for failure if they don’t understand what their customers need. Banks of the future must better understand their customers and develop the skills to foster an emotional connection with them. But what has any of this got to do with pricing? Like customer preferences, prices can no longer remain static. Pricing must change to suit the evolving micro and macro environments.

Zeroing in on a pricing approach can be quite a challenge for banks. It’s usually factored around profitability, market share, the competitive landscape, consumer perception of price, revenues and profit projections – all of which are constantly changing. Banks are now required to adjust pricing quickly, or even course-correct on-the-go. But traditional pricing methods are not equipped to match this unprecedented pace and are also prone to human error. The good news is that there is a solution to this conundrum: technology.

Building-Blocks: Data-Powered Capabilities 

Artificial intelligence (AI) continues to gain popularity in banking, and financial institutions have begun to use the technology to solve more complex challenges. In the early days, AI was restricted to customer-facing functions like chatbots and virtual assistants – in other words, conversational banking. But over the last several years, banks have been using AI to fine-tune middle office tasks such as fraud prevention, customer segmentation, KYC verification, credit underwriting and risk management.

The biggest value AI adds to any organisation is its ability to deliver immediate actionable insights. We all understand the value technology delivers with its ability to analyse vast amounts of data in very little time particularly to the banking sector which has a great deal of customer data. AI can not only analyse the bank’s data but map this data against external factors – all in real-time – to help banks arrive at personalised and competitive pricing. In a way, this method fosters transparency into the variables behind each decision.

An AI-powered pricing platform will enable banks to closely monitor trends affecting customer behavior as well as the market, and then correlate these factors with competitive product prices. They can use the analysis to compare limitless pricing scenarios to devise more optimised pricing recommendations. The right pricing strategy will help banks manage their customers’ evolving expectations by prospecting, cross-selling, upselling and retaining customers.

As banks embrace digital, their top priority should be to make their customers’ lives easier and their experience seamless and enjoyable. Customer needs should be at the heart of every transformational plan. Alongside this, banks also have a responsibility to manage pricing, increase profitability, promote sustainability and counter dynamic challenges – one of which is the advent of hyper-personalisation.

Hyper-Personalised Pricing

Even before the pandemic, customers were already getting used to brands treating them as individuals, as unique customers. Fintechs and big techs opened a new era of hyper-personalisation – and banking customers want that same experience. They expect their banks to understand their needs and offer solutions accordingly.

As custodians of vast amounts of data, banks have a distinct advantage over fintechs, and AI can help unlock the true value of their data. AI platforms can analyse data across silos to understand customer behavior, usage of services and even willingness to pay for products and services. Banks can then calculate prices based on micro-segments and allow customers to compare prices in real-time. But before embarking on this journey, banks will first need to understand their business needs, map their pricing priorities and – most importantly – ensure maximum data security.

By scanning and analysing data, banks can shift away from selling identical products (at the same price) to different customers and instead focus truly creating value for their customers. A focus on this type of hyper-personalisation will help banks differentiate their brand, boost their revenues and improve financial inclusion.

This article was originally published in Bankless Times, Read More

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.

Sources

1McKinsey
2McKinsey
3Disruption Banking
4Disruption Banking
5Disruption Banking
6Google Cloud