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Budget 2021: What Does It Mean For Banks, Financial Institutions

Insurance to be the game-changer with no 74% FDI, lower bad debt eases stress on banks

The Union Budget 2021 was certainly a unique and historic Budget in many aspects. The first paperless budget was also the first of the new decade in which India hopes to further establish its leadership as a global superpower.

Being only the fourth budget delivered after a contraction in the economy, it does not shy away from increasing the capital outlay and providing a fiscal push to lift the morale of an economy that is reeling under the shock of a ‘once-in-a-150-year-event’.

Like last year, the salaried Indian may not be exactly jumping for joy. With no change in tax slabs, and the possibility of fuel prices going up, coupled with moderate inflation, the wallet is certainly going to get lighter.

But, coming on the heels of the COVID-19 pandemic, which seems to be quite fortuitously receding, where banks were surprisingly less impacted, the Budget certainly provides hope, cheer, and the opportunity for growth in the financial sector, if handled wisely.

Fiscal 2020-21 has been a mixed bag for the Indian banking industry. While credit growth has remained subdued, Non-Performing Assets (NPAs) and stressed assets have reduced marginally. The second half saw credit growth picking up marginally, thanks to relaxation of credit to the agricultural sector and due to a marginal increase in vehicle loans and credit to industries. All said and done, the second half of fiscal 2020-21 is expected to bring some gains for the Indian banking industry, albeit marginal and will be a relief in comparison to the pain the industry faced in the first half of the fiscal.

With this as a backdrop, what does this budget mean for the Indian Banking, Financial Services and Insurance (BFSI) industry, especially after the markets reacted so favourably to the Budget? I have outlined eight facets which I believe are the key takeaways for the industry from this Budget.

Shape up or ship out: The finance minister was very clear in her Budget speech and her interaction with the media afterwards – public sector banks will have to be ‘functionally strong and professionally managed to meet the needs of a growing India’. In short, they need to be far more efficient. The decision to privatise two public sector banks will only provide further impetus to the banking industry, especially public sector banks, as they will be forced to be more competitive and will also face a more competitive environment going forward.

Insurance will be a game changer: India has lagged behind the developed nations and its Asian counterparts, especially emerging economies like Thailand and the Philippines, in the context of our treatment of the insurance industry. Insurance penetration and density are far lower compared to other Asian countries. With the proposed increase in FDI limit to 74% and the proposed IPO for the Life Insurance Corporation of India (LIC), the sector will receive a much-needed shot in the arm. The additional focus on health and well-being will also drive more capital inflow into this sector and the large banks, which have a portfolio of insurance products, will be forced to innovate.

Spend more, save less: The Reserve Bank of India (RBI) has, through repo rate reductions, given a nudge for the banks to spend more and save less. The huge capital outlay that the Budget saw will take things forward in this direction as the focus will be on driving public spending and increasing consumption. Banks will have a greater and definitive role to play in here. In fact, we might witness loans getting cheaper or more attractive and innovative financial products being offered by banks as an incentive to make customers spend more.

There are markets left unexplored: Make no mistake, even with the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the increased drive to get people under the banking umbrella, there are market segments which are still underbanked, underserved and underexplored, especially the large migrant population in the country. Their needs are different and the way they save and handle money is different. With the focus now shifting to the plight of the migrants after their conditions were showcased by the media during the early days of the lockdown, the government introduced schemes for their welfare in the recent budget. Banks must take note of this unique-yet-important market segment. In fact, who knows, they might be the new billion that the banks are searching for.

NBFCs and shadow banks are still major players: The NBFCs and shadow banks have always had a special role to play in the lives of the Indian customer, thanks to their easy accessibility and long-standing relationships. Most of the NBFCs and shadow banks have evolved from being neighbourhood chit funds and cooperatives and the trust in these institutions by the small saver is what makes them important in the economy, even though the large multinational and private banks continue to spend millions of rupees on customer acquisition. It is the same story of why the average Indian still trusts the nearby kirana store, instead of a retail major, especially in difficult times. With the proposed modifications in NBFC governance along with changes suggested in the last budget, the government has acknowledged this fact and, in the decade ahead, I am sure their importance will further increase, though with increased surveillance and control.

Simplicity and innovation will be the key: The Budget outlined steps to make our tax filing easier. Trust me, if you had personally filed taxes a decade ago, you deserve a medal. Things are simpler now, but as they say, this is always relative. Banks can certainly take a cue from this and try to make their customer experience across their multiple touchpoints like KYC, customer response and so on even more seamless. There are lessons to be learnt from companies like Netflix in creating this experience as customers switch from one device to another device.

The push towards digital payments will increase: In the last one year, the UPI-based payments have grown nearly three times. This is no mean achievement. It has helped us transform further to a cashless economy. The fact that the finance minister chose to highlight the push towards digital payments is going to be a boon for banks and other financial institutions as this will help them become an integral part of their customers’ lives, but only if they create a payment infrastructure that can compete with the likes of Paytm and Amazon Pay. Probably, this is where the banks can collaborate because the gains outweigh the pains.

Non-performing assets will be closely watched: The focus on non-performing assets and their impact on the banks’ balance sheets has been a topic of scrutiny in the last few years and this has helped the banks reduce them, even though it has been modest. Financial forbearance was clearly outlined in the recent Economic Survey and the decision to create an independent body which will focus on these non-performing assets is a welcome move. This will further strengthen the banks’ battle against non-performing assets, helping the banks to provide more value to customers who, in turn, provide value to the banks and their shareholders.

I hope the indicators provided in the Budget by the finance minister will be a call to the BFSI sector to chart out a path of growth and development even as they listen to their customers, and the experts, and chart out a path which will help them grow while helping the nation achieve its goal of becoming a $5-trillion economy over the next few years.

The author is CEO and Founder of SunTec Business Solutions, an enterprise provider of software products to the Banking, Telecom and Travel Industry globally.

This article was originally published in Outlook Money, 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’’.

SunTec CEO Nanda Kumar’s 30 Years of Tech Transformation

When you formed your tech company at the dawn of the Internet Age and have successfully transitioned it through several expansions and pivots, you know a little about transformation. Companies looking to survive must be prepared to look at all areas of their technology in order to stay relevant, SunTec CEO Nanda Kumar said.

Mr. Kumar founded SunTec in India in the early 1990s in what was then more of a socialist economy. Those were the first market forces he encountered but they were far from the last.

Then came the advent of the Internet, which has forced industry, several times over, to adjust their in-house technologies and their entire service delivery system as they adjusted to new realities. For Mr. Kumar it meant a fundamental shift for his young telecom company.

“It meant moving away from a more, product-centric approach to a customer-centric approach,” he explained.

With the ability to now directly connect with the individual instead of the group, it meant if you could develop a method of delivering customized products and services, you could better meet their needs and drive value to your clients. That approach would work in more industries than just telecoms, Mr. Kumar realized.

“Why are we limiting this only to one industry when we come across multiple industries?” He asked. “That’s how we ventured into banking and financial services in 2000, and we said ‘why don’t we look at customer-centric pricing?’”

Businesses exist to deliver value to customers, and Mr. Kumar saw digitization as a mean to provide that benefit. Take an input, do something to it and create a more valuable output. It works for manufacturing, real estate, services, and every other sector.

Companies can do this for customers but they can also do it for themselves by monitoring their internal systems and processes at all points to locate areas where additional value can be attained. Mr. Kumar calls this enterprise value chain management.

It models many areas of nature, where all stakeholders are equally rewarded, he explained.

“Think about a simple node and multiple stakeholders. Each one can specify your value expectation so you can create a model which automatically balances that and is equal to something like a smart contract. You can go at it at the very atomic level, at the cell level, or at the galaxy level. That is nature’s model.”

Mr. Kumar cited banking as an example. In the past they may go to their largest customers with annual proposals from which they negotiate a contract. Now, with SunTec’s help banks can develop enterprise capabilities to more efficiently work with large corporate clients. They began in India before expanding their footprint from Australia to North America while adding retail and corporate offerings.

“And on top of it we also have specific point solutions like taxation systems,” Mr. Kumar said. “We could provide a centralized enterprise which delivers a single service for all taxation compliance and settlement. We can do that for faster pricing on a real time basis or any of any other service.

“This is the current story but long-term we are looking at the whole ecosystem management.”

He draws a parallel to the human body and its energy creation process. The body consumes raw materials, digests it and stores it for use by the cardiovascular system, whose job is to distribute energy. Every cell needs that energy or it quickly dies. What would happen to Amazon if every product it sold suddenly got returned? The individual cells (companies) would start to die off and that process would spread throughout the body. Conversely, energize every cell and the body will perform at peak levels. So while ERP focuses on the “digestive” business processes, enterprise value chain management focuses on the distribution.

“That is what we are trying to do for the value chain,” Mr. Kumar said. “Basically you should make sure that energy is distributed with zero waste of energy.”

When you make any product, you should be able to calculate the cost of producing each component and therefore the cost of the whole. If you are manufacturing on demand on a real-time basis, you should be able to calculate the exact cost of producing that specific unit, which means you also know your profit on it.

The ability to provide that granular transparency is a perfect fit for blockchain technology, Mr. Kumar said. Everything can be recorded on a real-time basis for all to see. That builds trust.

But with that trust and transparency will come questions, so while companies can look deep into their processes, so can customers, so it is imperative to deliver value.

“It could be functional value, it could be status value, ego value and all that that’s in the differentiation,” Mr. Kumar said.

SunTec has applied these principles to telecoms, banking and travel, with insurance the next move, Mr. Kumar said. An essential question the insurance industry must always address is how to collectively share risk, and the technology exists to dynamically develop products based on desired margins and levels of protection

“You can see that that really isn’t happening so in that case, if somebody is adding value, you should be able to charge for that,” Mr. Kumar said, adding the days of insisting you have delivered a service but not being able to prove it are coming to an end.

Auto insurance is primed for such efficiencies, he suggested. With all of the tracking technology available it’s easy to reward safer drivers with lower premiums.

Mr. Kumar said he’s actually surprised by how long the digital transformation of business has taken, given the clear value it has created. The pace was slowed by the dot-com bust and the crash of 2008.

It likely hasn’t been by the COVID-19 pandemic, however.

“What has taken 20 years has now really become cemented in the last one year,” Mr. Kumar observed.

His clients are moving to software-as-a-service models, which brings significant opportunities to provide insight-driven engagement, Mr. Kumar said.

“What we are looking at is, what is the brand statement value which they’re proposing to the end client, and how do we make sure that the value flow is aligned to their brand… To do this you need very atomic real-time control, that is what we are trying to what we are proposing in the ecosystem model – the value flow, the risk assessment, everything has to be real time.”

Mr. Kumar believes that digital future includes government-produced digital currencies, because controls can be both easier to administer and more consistent

“In a way you can put these conditions into the substrate of the infrastructure, that is all the contracts…So, the regulation of what goes to go into the substrate can be decided by the government and the ecosystem managers (can) enforce all that.

“(But) that enforcement activity might disappear, because it will automatically enforced.”

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’’

Generation Z: How Banks Can Adapt to the Next Generation of Connected Customers​

When the Great Recession hit in 2008, it dealt a huge blow to millennials who were just venturing into adulthood and created a domino effect exacerbating their financial struggles. Unlike millennials, Generation Z was preparing to enter a more stable world with improving economies and employment rates – until the coronavirus pandemic derailed those plans.

Despite these setbacks, a report by the Center for Generational Kinetics (CGK) shows Gen Zers still seem to have clear financial goals, usually associated with later life stages. Ninety-one per cent plan to buy their own home someday, 69 per cent think saving for retirement should be a priority and 66 per cent are worried about accumulating or not being able to pay off debt.1

This clearly shows traditional banks have a sizeable opportunity to engage with and support Gen Zers. More importantly, they have a significant advantage over many challenger and digital banks: trust. Traditional financial institutions have a long history of demonstrated success, proven stability and scale, which are key when assessing trust and exactly what customers desire during uncertain times like these.

The question is, can banks capitalize on the opportunity? I believe they can—so long as they’re cognizant of Gen Zers’ goals, their own capabilities (or rather, what may be limiting their capabilities), and their willingness to go out of the way to design products for digital-native Gen Zers.

Understand the Gen Z Mindset

Generation Z, born between 1997 and 2015, is presently the youngest working generation. They are digital natives and choose to align more with fintech companies rather than the traditional banking system, primarily due to the convenient and hassle-free experience fintechs offer.

They’re also more financially savvy, which is warranted. Gen Zers saw their parents—most likely to be baby boomers or millennials—struggle during the Great Recession, and many are saddled with student debt. Despite the challenges, this generation is already planning for their retirement and are driven to be financially aware. While most millennials already use various financial products such as credit cards, debit cards and are availing loans, many Gen Zers are yet to go beyond opening a bank account, which presents a significant opportunity for traditional banks.2

Design Personalized Products and Services

To attract and retain Gen Zers, banks will need to develop products that offer value, and are authentic and educational, catering to Gen Z’s desire to learn innovatively, and are tailor-made for this audience. Like all customers, Gen Zers think about their needs, not about banking products and services. Banks can no longer expect to create satisfied customers by merely holding their money; they need to become facilitators that provide the vital support their customers need to achieve their overall goals.

To develop these personalized products, banks need to stay at least several steps ahead of their Gen Z customers, predicting their needs every step of the way. By leveraging data intelligence (including credit profile, account information, transaction history, loan information, personal profile, household information and more), banks can create a complete profile of their customers. This will help them develop a customer-centric business model by giving them a deep understanding of each customer that will allow them to design meaningful touchpoints with their customer. If banks allow insights to guide them on how they design personalized products, it will enable them to build a loyal client base.

Seek Out Value Networks

The pandemic has forced banks to digitalize at an unprecedented pace, but they must place more focus on open innovation. Collaboration is not a new concept and is gathering steam as banks look to improve their operations to shore up competitive differentiation and attract the newer, digital-proficient generation. More recently, banks are realizing this power of collaboration, and are not just partnering with fintechs but with Big Tech companies too, so they can together increase the pace of innovation for customers, especially millennials and Gen Zers.

tly launched its “Plex” bank accounts in partnership with 11 banks and credit unions. The service is set to roll out in the U.S. in 2021, and will give people a chance to open digital bank accounts with traditional, trusted financial institutions. This is just one example of how banks are embracing innovation and collaborating with other industry players to unlock the power of their respective ecosystems, deepen their existing relationships, and design ways to serve a new generation of customers.3

It’s exciting to see banks embrace the idea of building a partner ecosystem that operates outside current industry boundaries and can help establish disruptive revenue streams. Banks understand they need to rebuild themselves as consumer platforms that are inherently digital – but unless they have the right technologies to underpin the value chain and value networks they need for their Gen Z customers, they are not likely to succeed.

Build Agility, Augment Capabilities

Today, traditional banks face existential challenges—very different from the ones they faced 20 years ago. They’re now required to think more strategically while adapting easily—and quickly—to changing circumstances. Bank CEOs aren’t required to be tech experts, but they do need to understand their business runs on data, and they must understand how to utilize this data effectively.

Nearly 80 per cent of banks lack the technology to provide great customer experience, and their hands are tied because they’re using outdated core systems. Relying on traditional core banking systems is like trying to lift a pen with your elbow instead of using your fingers. Banks should instead consider hollowing out the core to create a system of engagement which sits below the channels and on top of the system of record and provides intelligence and the ability to assemble all products into one catalogue.

Many core banking systems are aging, antiquated and inefficient. If banks can employ this type of layer to automate the way they handle data, they can significantly improve their operations, customer service and economics – and they can do it by augmenting their capabilities rather than replacing them entirely.

Customer-centricity is Key

Banking is often perceived as a chore, and people are often intimidated by the world of finance. Given the exceptional interest Gen Z has taken in managing their finances early in their lives, banks are in a unique position to make that process easier for them and streamline the experience by using data to make better credit decisions. But traditional banks can only do this if they work towards earning Gen Zers’ trust.

As of now, some banks are yet to tap into all the available opportunities to add extra value to clients and help them meet their broader goals. If banks can better understand Gen Zers’ priorities, goals and expectations, they can deliver customized, value-add value services while also creating opportunities for partners. For instance, if a Gen Zer is keen to buy a house but has yet to start saving, their bank could first educate them about the mortgage market, and then go beyond to identify and share methods to help them plan and save to reach this milestone.

Many have predicted the fall of the traditional bank for years, but the traditional bank has a bright future. Physical bank branches remain key for customer engagement. According to research by Qudini, four fifths of Gen Z customers want their bank to offer a face-to-face service, with 81% stating this was important or extremely important. Banks already realize that they need to evolve and have acted to do so. Many are now looking to make bank branches into experience centers, something similar to Apple Stores that allows them to offer a place for customers to explore products and services, address complicated banking problems, and make them feel safe discussing their financial objectives and challenges.4

The financial value of Gen Zers to the banking system is expected to increase significantly in the next five years. The traditional approach to banking, customer engagement and customized services will not appeal to this new generation. If banks want to earn Gen Zers’ trust and business, they must be able to design and innovate products that are different and hyper-personalized. But they first must realize that their business runs on data—quality data.

Banks cannot afford to simply design products and services based on today’s demands. They must envision and radically innovate for the next generation of new customers now to transform themselves for the future. Banks that fail to evolve for the times – and the audience – run the risk of being left behind and missing out on engaging with this crucial demographic. If traditional banks don’t put away their inhibitions and evolve with the times, they may no longer appeal to a whole generation of customers, endangering their operations as time goes on and technology takes center-stage.

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’’.

1CNBC
2Plansponsor
3Google Blog
4Qudini

How Banks Can Insulate and Support SMEs in The Aftermath of Coronavirus

Small and medium-sized enterprises are the backbone of any economy; they inspire innovation, create jobs and fuel economic prosperity. According to the World Bank, SMEs represent about 90% of businesses and more than 50% of employment worldwide. But the coronavirus pandemic has severely impacted small businesses all over the world posing a serious threat to their existence.

There are various factors that have contributed to this downturn, including lockdowns imposed by governments, reduced consumer spending and increasing prices of commodities. While some businesses have managed to stay afloat, limited access to credit has caused many small businesses to fear insolvency in the coming months. During this time of turmoil, SMEs look to their banks for advice and support. How can banks better understand the challenges SMEs are facing during one of the biggest economic shocks in history and help them overcome their financial challenges? Some of the solutions might seem obvious, but it is imperative banks take a closer look at their relationships with SMEs.

Refuel Trust

Over the years, a lack of trust has only grown wider between SMEs and their banks, primarily because SMEs believe that their banks don’t understand their needs. As cash reserves started to run low during the pandemic, small and medium-sized businesses turned to their banks to deliver the lending support their governments promised. While in many cases there is credit available in the market, SMEs are often wary about tapping into it based on future interest rates, and fear that their credit rating may impact their ability to borrow later in the future.

For banks, a business-as-usual approach based on predominantly manual processes and existing underwriting criteria will not work. They need to focus on building long term trust with SMEs that rely on them for financial support, personalized advice and security for their business. This can be achieved by banks reimagining the role of their relationship managers and providing a world-class banking experience to the SME market. A combination of a digital-personal approach will help reinstate trust on both ends.

Offer Unparalleled Customer Experience

SMEs still favor human interaction over self-service, putting banks’ relationship managers at the heart of all interactions. They view their bank as their “business partner” and not just a “financial services provider.”

When it comes to offerings, SMEs need banks that can deliver more robust solutions like billing and pricing, and more value-added services –  and they are willing to pay extra for the same. For instance, much of the transactional digital services that banks offer their retail consumers are too commoditized to address the diverse needs of the SME market. The consequence of not being attentive to their expectations could cost banks significant revenue.

Banks need to provide SMEs with a positive customer experience and focus on meeting their needs. That means banks must offer quick, digitized online customer onboarding that uses technology to enable know-your-customer (KYC) and anti-money-laundering (AML) reviews more quickly and efficiently. Banks also need to be very transparent in their dealings and information dissemination by laying all the cards on the table. They must be able to respond immediately to SMEs’ needs.

The art is in finding the right balance between providing a great customer experience to SMEs and managing the cost of service. Banks can tap into the large volumes of transactional data to understand the SME business and the risk associated, and thereby offer value-based services to SMEs. Banks can facilitate access to the entire ecosystem of services and offerings that are not limited to banking, and this in turn, becomes a successful and timely opportunity for banks.

Anticipate Their Needs

SMEs are a dynamic segment and need to be catered to carefully. But can banks anticipate and address their needs well in time? Incumbent banks are challenged by their systems – systems that are not built to expose data to analytical tools. Not leveraging data could simply translate to even lower trust levels, in turn affecting banks’ revenue. Without having context of their business or their needs, it would lead to an inability on the part of banks to offer the right solutions to aid SMEs’ specific needs.

Banks can contextually support SMEs by understanding their business performance and responding to their requirements by efficiently analyzing and taking cues from existing data. This will allow them to anticipate the needs of these enterprises and reimagine the role of the relationship manager for a digital marketplace.

During times like thesewhen banks are expected to help small businesses bounce back, they can look at their institutional interactions with SMEs over the last six to eight months. If your customer is trying to speak with you more often, they expect you to engage with them – tying back to offering rich, unparalleled customer-experience.

Leverage Data Intelligence

If banks want to deliver better results, they need to monitor and understand data and interactions and ask themselves: what are the patterns that sit behind this data? And then they must act on it accordingly. The benefits of data and analytics outweigh concerns around the expense. Banks can use their data to enable remote advisory services at low cost and on a far greater scale, enable digital KYC, offer tailored solutions and custom design offers that meet the SME’s need.

It doesn’t end there. Banks are in the unique position where they can orchestrate multiple service providers into delivering those non-financial services required by an SME business. In addition to providing capital and innovative solutions, banks can – and should – create an ecosystem of partners for the SMEs they work with, a great benefit to both. Making these connections will be of vital importance to economies world over as businesses look to recover from this crisis.

Approach Pricing Innovatively; Enhance Profitability

Banks also need to digitize their business models and reinvent propositions for SMEs. This includes redesigning offers, ensuring customer-centricity and responding to SMEs instantly. SMEs turn to their banks to help them run their business better. Banks that still run on legacy core systems must separate their product and pricing capabilities from their core banking system and build a digital core layer instead. This digital layer will capture and log records of interactions with SME customers, their personal as well as business information, purchasing patterns and so much more, giving banks a better view of their needs and creating a more efficient communication channel.

Banks must develop a clear value proposition to partner with SMEs and offer them a broad range of solutions to operate and grow their businesses. That includes connecting SMEs with an ecosystem of suppliers, distributors and other SMEs, as well as offering the right solutions and deals to aid SMEs (cloud-based services is just one example). Banks must build this ecosystem, enable collaboration, and understand that this is about more than just entrepreneurs worried about the health of their business; for many SMEs, their livelihoods, dreams and more are on the line.

SMEs are the largest affected community due to the pandemic and banks have an exceptional opportunity to help revive these businesses. Banks can re-gain their trust if they become an integrator of services within the ecosystem to help address the unique SME needs. If managed correctly, banks will benefit from high rewards and can also generate platform revenues.How banks respond to these core set of customers today will have an accumulated effect on their reputation tomorrow.

This article was originally published in Financial IT, 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’’.

Firms Offering VAT Compliance Solutions Have a Bright Future

The VAT landscape is evolving within the GCC, and therefore, there is a need for a solution that offers agility to respond to these changing regulatory requirements.

Nanda Kumar, founder and chief executive officer, SunTec – an tech evangelist with over 3 decades of experience — believes, it’s important to have single solution in place covering all aspects of VAT compliance and to be future-proofed given that any future regulatory changes will be handled by one single solution with ease.

“A solution that automates the entire VAT compliance process including centralised rule-based tax determination, input tax recovery, tax invoice, reconciliation, corrections, adjustments, statements, and regulatory reporting. Our expertise has been specifically in the financial services sector and we’ve seen a healthy adoption of our solution.”

In May this year, Saudi Arabia announced that it was tripling VAT to 15 per cent. Oman too announced earlier this year that it was likely to introduce VAT in early 2021. With the implementation of VAT being well underway, deploying a VAT compliance system is no longer an option but a necessity.

“Given the volatile oil prices, governments’ need an alternate source of revenue which is in the form of the VAT policy. Further, banks and financial institutions are amongst the most VAT complex businesses. It is extremely crucial for banks to be ready for VAT compliance and the ever-changing regulations.”

The UAE is among the key markets for SunTec and has partnered with 12 of the 20 major banks, both domestic and foreign. “We help these banks comply with all indirect taxation requirements through our enterprise tax engine. We are currently processing about one billion transactions per year. We are also engaged with a large progressive bank who runs our relationship based loyalty product on the Xelerate platform through innovative pricing which has helped them in customer retention and expansion,” added Kumar.

The pandemic has forced banks and financial services firms to rethink their business models. With customer centricity being a key focus, banks are evolving and assessing the relevance of existing products and services and realigning them to meet changing customer demands. The open banking model will further enable banks to rebuild product and delivery models.

“With UAE emerging as startup capital with most innovative fintech companies in the Middle East and North Africa, banks are looking at collaborative engagement. We are working with some of these banks around some of these initiatives. In addition, after UAE, Saudi Arabia and Bahrain, we are now seeing Oman gearing up for VAT implementation. We are engaged with over 25 banks in GCC and are looking at consolidating our presence across the rest of the GCC markets,” added Kumar.

Recently, in a webinar, organised by Dubai Chamber in collaboration with The Oath Magazine and Pinsent Masons LLP, examined the impact of Covi-19 from a VAT perspective and outlined key considerations for businesses operating in the UAE. Better management of the compliance cycle of VAT can go a long way in helping businesses navigate Covid-19 successfully.

A total of 235 participants attended the webinar, including business owners, managers, finance, legal and human resources professionals representing a wide range economic sectors and fields. The session was moderated by Joanne Clarke, Tax Director (VAT), Pinsent Masons LLP, who is an international VAT advisor specialising in technical advisory, compliance and disputes.

During the webinar, Clarke stressed on the importance of improving VAT cash flows and minimising capital costs associated with the tax. Businesses should actively seek to identify and mitigate real VAT costs that impact their bottom line, she noted.

Clarke advised businesses to be cautious when dealing with transactions and activities driven by Covid-19 pressures such as contract defaults, corporate restructuring, bad debts, as these can have a VAT impact that can be significant and negative if not managed correctly. In addition, she encouraged companies to avoid non-compliance and administrative penalties wherever possible and seek professional support in dealing with tax authority interactions.

Joanne Clarke, Tax Director (VAT), Pinsent Masons said: “While we have all been operating in a Covid-19 environment for the majority of 2020, the real financial impact of Covid -19 continues to be felt at a fiscal level and by businesses alike. In this session, we looked at the Covid-impact from a VAT perspective, to support businesses with mitigating risks, increasing VAT cash flows and potentially optimising their VAT position, so that VAT is not another cause of financial pressure on businesses during this time.”

Jehad Kazim, Vice President – Legal Services at Dubai Chamber, mentioned that the participants benefited from the webinar as it provided an ideal opportunity for them to pose their questions directly to the experts and added that VAT remains an area where businesses in the UAE continue to see guidance and support. She noted that the strong participation in the webinar is a positive sign that the business community is committed to ensuring full VAT compliance and staying informed about important regulatory developments.

This article was originally published in Khaleejtimes, 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’’.

SunTec CEO: Bank branches need to become Apple stores

The bank branch of the future must become an experience centre like Apple stores, according to SunTec CEO Nanda Kumar.

In August, EY released the results of the EY Future Consumer Index which showed that the pandemic had forced 43 percent of consumers to change the way they bank. The index also warned that customers are not certain to prefer digital banking channels once the pandemic is over, with only 16 percent saying the crisis has changed the way they bank long-term.

Kumar believes that as the pandemic forces consumer behaviour to change, it is time for retail banks to adapt to the consumer too by looking to the tech giants for inspiration.

“Apple stores are to a certain extent, experience centres. It’s not there to sell the product, but for people to experience the product and educate them on the product and service and how they can make use of it,” says Kumar.

“Banks have to get into facilitating the business side of the customer or the lives of the customer. For example, by helping individuals to manage their finances… helping the customer to manage their aspirations like buying a home, going on vacation, or their kid’s education. Helping them to save and incentivising long term commitment. It is no more a case of just keeping your money as the traditional, utility service,” he adds.

Banks offering extra services in-branch to attract customers is nothing new, even if it isn’t the norm. In 2001, ING Direct opened its first US café in New York for customers to “experience banking that is as easy as having a cup of coffee”. While in 2002, documentary filmmaker Michael Moore began his film, Bowling for Columbine, by visiting a bank which was offering a free gun to anyone who opened a current account.

Kumar urges banks to refrain from selling guns, but says the point still stands. Bank branches have an opportunity to innovate and become places where customers go for advice, support and to be welcomed. But currently, most branches are not designed for that.

“If you look at a normal high street bank, they’re [the bank staff] are not there to service the customers, they’re just doing their work,” says Kumar.

On top of this, Kumar says that most of the functions these employees are fulfilling will soon be fully automated and there will be little need for them. That opens up a lot of space in the bank branch too, space that Kumar says must be for the “customer only”.

Much has been made of the rise of digital-only banks like Monzo and Revolut, with a study by Finder reporting that around 12 million British adults have opened a digital-only bank account already. The fear for traditional high street banks is that they could soon become obsolete. To prevent that doomsday scenario, Kumar says banks must look to the customer’s experience.

“A bank has to be a welcoming place. If the traditional banks don’t shift to that, I think it’s only a matter of time before the new generation of banks and fintechs occupy that space and these guys will become just a utility service.”

He adds that with bank branches often taking up “prime locations” in towns and cities, their branches can be one way to stay ahead of the digital-only competition. Digital banks don’t have branches because it’s expensive and online functions through mobile apps can provide all the services that a customer needs, Kumar says. But this is where traditional banks can capitalise.

“If the traditional banks improve their experience, that [physical location] definitely has got more value and more trust with the customer. But there has to be meaningful conversations where you can bring in experts etc,” Kumar adds.

This article was originally published in Payment Eye. Read More – https://www.paymenteye.com/2020/09/25/suntec-ceo-bank-branches-need-to-become-apple-stores/

“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’’.

Prioritizing a Customer-Centric Approach in Banking

What is unique about SunTec and how does it stand out among its competitors?

Nanda Kumar: Our work over the last three decades has earned us recognition as the world’s #1 relationship-based pricing and billing provider. More than 130 institutions and companies across banking, financial services, insurance, telecom and travel industries rely on SunTec to rapidly design and launch hyper-personalized solutions as well as billing for over 400 million end-customers.

Nearly all businesses now face new pressures heightened by the pandemic. We ask: how can they deliver better experiences to their customers during these unprecedented times?

Most banks began their digital transformation journey years ago, and have clear digital strategies – but, most of these strategies are limited to their customers’ last mile journey. But this isn’t just about world-class user interface (UI) or user experience (UX); it is about the overall experience customers have with the bank – better products, better services, better propositions. Habitually, banks think channels; customers don’t. Traditional banks think that their hands are tied because of their outdated core technology and business models. And that’s where we come in.

SunTec believes that banks need to carefully evaluate anything that impacts the customer directly and move it out of the core – in other words, “hollow out” the core. This involves moving some functionality over to systems that operate outside of the traditional layer of the core. This “digital core” — as we like to call it — is intelligent, prescriptive and forms the bridge between the current customer-facing capabilities and legacy core technology used by today’s banks.

SunTec products and Xelerate platform helps banks accelerate this journey towards transforming themselves to make them truly customer-centric. Our global clients look to SunTec to help them fast-track their digital transformation initiatives, overcome their inhibitions, and leverage technology to reinvent their existing business models and ultimately the service they deliver to their customers.

The fintech sector has experienced a great shake by the COVID-19 crisis that proved that banks are far from being truly digital. In your opinion, what problems are banks and other financial institutions now facing due to the pandemic?

Nanda Kumar: Just a year ago, we had predicted that it would take at least another decade for global banks to truly embrace digital transformation. A mere six months later, we were blindsided by one of the worst global pandemics in our lifetime. And like most businesses, banks and financial institutions were forced to juggle immediate priorities while also recalibrating for the future. They are now working hard to keep their distribution channels open while adhering to social distancing guidelines and are being challenged to perform functions that weren’t originally designed to be carried out remotely.

Branch banking has always played an important role in both attracting new customers and cementing relationships with existing ones. But COVID-19 has caused a sharp decline in branch traffic — a pattern that may linger for several months, or even years. At the same time, customers are increasingly enjoying the ease and convenience of a digital model that allows them to manage their finances in one place — from setting up automatic payments to making deposits and more — without having to queue in a bank. This has left banks to reimagine their physical and digital strategy and identify new ways to meet customer expectations while simultaneously rethinking their business models and revenue strategy.

If banks continue to solely operate in their current form without embracing both online and offline models, they risk becoming nothing more than a utility service. But if they can create an ecosystem by partnering with businesses that offer connecting services, they can build lasting relationships with their customers and deliver a new level of measurable value. Banks are particularly well-placed to orchestrate this for the ultimate benefit of their customers and are in a unique position to promote social and economic success for their customers – be it a mortgage to a family or a loan to an expanding business.

In order to adapt to new circumstances and pass the “Digital Stress” test, what strategy should banks implement? 

Nanda Kumar: Banks need to embrace and accelerate their digital transformation and customer-centricity strategies to survive and thrive during these unprecedented times. Several banks did recognize that this was a necessity prior to the pandemic, but COVID-19 and the corresponding market volatility have created a new sense of urgency, and an understanding that we cannot simply revert to an outdated “normal.” While several banks have tried to accommodate customers in the short-term with incentives such as deferred interest, waived or overdraft fees or credit card and mortgage assistance, these measures won’t drive growth, profitability or most importantly, customer loyalty.

Banks must reimagine how they can extend their value proposition beyond core offerings to navigate today’s increasing market pressure and changing customer sentiments. That means they must deliver more hyper-personalized services, enhanced transparency and holistic capabilities to add measurable value across each step of the customer journey and offer a new level of customer engagement and fresh kinds of physical and digital banking services. That can only happen if banks rethink their holistic technology, foster strong partner networks and understand the true meaning of digital transformation. If banks can embrace this new way of thinking that enables them to reevaluate their holistic systems, processes, data and people, they will be able to deliver an unmatched level of personalized services.

Why should banks give priority to customer-centric approach and how can they enable it?

Nanda Kumar: Customer loyalty is fragile, and customer retention and trust are critical to any digital transformation initiative – and any banks’ overall success. This gives banks a unique opportunity to provide value-based engagement and hyper-personalized services to empower their customers, help meet their short and long-term needs, and build and retain their loyalty and trust. For instance, if a customer reaches out to their bank for a mortgage, what stops that bank from helping that customer own that house, instead of just selling its mortgage business?

Banks needs to be cognizant of their customers’ changing preferences. As they adjust to the post-pandemic world, banks shouldn’t sideline the value of face-to-face service. In-branch banking will continue to play a pivotal role for many consumers and will remain an important vehicle for banks to attract new customers, retain existing ones — and engage more deeply with them. We see bank-branches becoming experience centers like Apple Stores, offering a place for customers to explore products and services, and to solve more complicated banking problems.

Customers want to have access to this type of physical experience centers while also being able to perform their banking functions and transactions digitally, whether it be mobile, app or web-based. With both the physical and digital realm, customers want to know that they will have an enhanced level of security, comfort and confidence, especially when it comes to financial issues that can be complicated, highly sensitive or both.

To prioritize their customer-centric efforts, banks must simplify complex operations and infrastructure, embrace intelligent technology and partners to create the right service bundles for their customers, and understand how to leverage customer data to offer service-first models. They can start with a fairly low-risk method that allows them to utilize their existing infrastructure rather than overhauling their entire system and adopt a digital core. That will allow them to hollow out customer engagement functions from the core system and manage it as a horizontal cross-enterprise layer. Banks should then be able to rapidly design and launch new products and bundles, innovative pricing models and reward customers based on their positive financial behavior. With platform-as-a-service gaining traction, organizations also need to enable monetization models that can support the same to ensure that they are the primary choice of their customers for all transactions.

As the banking experience evolves from product-based to customer-based, banks must identify new ways to design and deliver hyper-personalized services that customers expect. This is especially true for younger audiences including millennials and GenZ, who’ve grown up in the digital age, and expect a seamless digital journey. By making smart use of customer data to uncover the context behind banking transactions, banks can understand their customers’ ultimate goals and add value to every interaction, presenting offers and opportunities in real-time that are catered to different audiences and ultimately deliver a superior, world-class customer experience.

What’s the role of SunTec in addressing the impact of COVID-19?

Nanda Kumar: We are in unprecedented times, and banks must quickly adapt to changing goalposts, shifting customer needs and requirements, and continued disruption. The market volatility resulting from the pandemic has taught us that the only thing the banking industry can be certain of in this environment is more uncertainty.

We are working closely with our clients to help them place empathy and agility at the heart of all their customer engagements. There’s never been a more important time to humanize the banking experience. One might wonder how banks can anticipate what their customers need… but banks are very much in a position to leverage their customer information to offer service-first models built on trust and loyalty. Our technology is helping banks embrace customer-data to add real value to the communities they serve, while ensuring transparency for both customers and potential regulatory requirements.

The current pandemic has motivated banks to rapidly adopt SaaS and cloud solutions to accelerate their digital transformation efforts. SunTec has partnered with AWS, IBM Financial Services Cloud and Microsoft Azure to help banks adopt our cloud-native and cloud-agnostic products to help design and launch products, offers, reward programs rapidly to meet the evolving needs of their customers.

Clearly, pressure ismounting. Banks must recast their strategies, roadmaps and budgets so they can respond to today’s challenges, prepare for future business disruptions and ensure they retain existing customers while appealing to new targets.Now is the time for them to modernize their legacy technology systems, enable end-to-end agility and focus on flexibility, scale, and speed to accelerate their digital transformation and excel in a competitive and turbulent landscape. And SunTec is helping our global banking clients achieve these goals.

What upcoming news do you have at SunTec that you can share with our readers? What’s next for SunTec?

Nanda Kumar: In spite of the pandemic, we have seendemand for our SaaS and cloud products among banks across geographies. One of the world’s largest investment banking enterprises based in the US has adopted our cloud applications to enable customer-centric pricing, power-up deal management and revenue growth.

We are in the process of launching SaaS applications around preferential interest rates, risk-based pricing, offers and benefits management that will not only help banks meet the fast-changing economic conditions, but will also help them design and launch products and offers that meet the new needs of customers.

We are also in the process of integrating with leading cloud applications that are primarily used by front-line sales and relationship managers so that they can instantly get a clear picture of their respective customers’ product portfolio, negotiated pricing arrangements, projected revenues, performance against the commitments assured by a customer, eligible offers as well as enquiries on invoices, fees, new products, offers – and a lot more simply to enrich their ability to enable better real-time customer experience.

This article was originally published in Financial IT,  Read More – https://financialit.net/content/prioritising-customer-centric-approach-banking

“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’’.

Future of Fintech Q&A With Nanda Kumar: CEO of SunTec

What can banks do to remain competitive and grow while navigating this current turbulent landscape?

Banks need to embrace and accelerate their digital transformation initiatives and focus on customer centricity to survive and thrive during these unprecedented times.  Many banks recognized this was necessary even before the pandemic, but the pandemic and corresponding market volatility have created a new sense of urgency, and an understanding that we cannot simply revert to our previous “normal.” And while several banks have tried to accommodate customers in the short-term with incentives like deferred interest, waived or overdraft fees or credit card and mortgage assistance, these measures will not be what drives growth, profitability or most importantly, customer loyalty.

Increasing market pressure and changing customer sentiment are forcing banks to reimagine how they can extend their value proposition beyond core offerings. They realize they must deliver more hyper-personalized services, enhanced transparency and holistic capabilities to add measurable value across each step of the customer journey and offer a new level of customer engagement and fresh kinds of digital banking services. That can only happen if banks rethink 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 to humanize the banking experience.

To become truly customer-centric, deliver exceptional service and continue to grow, banks must embrace both offline and online models. Physical bank branches will continue to play a pivotal role for many consumers and will remain an important vehicle for banks to not just attract new customers and retain existing ones but to engage more deeply with them. Bank branches will become experience centres like Apple stores, offering a place for customers to explore products and services and solve more complicated banking problems. Customers want to have access to this type of physical experience centre – and then have the ability to perform their banking functions and transactions digitally, whether it be mobile, app or web-based. Delivering this new level of personalized customer offerings will require banks to embrace a new way of thinking that enables them to reevaluate their holistic systems, processes, data and people.

How can banks make sure that their digital transformation strategy will drive customer loyalty and trust?

Customer loyalty is currently fragile, which means customer retention and trust are critical to any digital transformation initiative. This gives banks a unique opportunity to provide value-based engagement and hyper-personalized services to empower their customers, help meet their short and long-term needs, and build and retain their loyalty and trust.

Banks can kick-start their transformation journey by simplifying complex operations and infrastructure, embracing intelligent technology and partners to create the right service bundles for their customers, and understanding how to leverage customer data to offer service-first models. They can start with a fairly low-risk method that allows them to leverage their existing infrastructure rather than overhauling their entire system and adopt a digital core. That will allow them to hollow out customer engagement functions from the core system and managing it as a horizontal cross-enterprise layer. They can then quickly deploy new technologies and add functionality that delivers the customized products and integrated services that customers really need.

As the banking experience evolves from product-based to customer-based, banks must identify new ways to design and deliver the hyper-personalization services that customers expect. This is especially true for younger audiences like millennials, who grew up on today’s technology and expect a seamless digital experience. By making smart use of customer data to uncover the context behind banking transactions, banks can understand their customers’ ultimate goals and add value to every interaction, presenting offers and opportunities in real-time that are catered to different audiences and ultimately deliver a superior customer experience.

What do you think the future holds for traditional banks and fintechs, in terms of what they can offer to customers? Do you anticipate increased collaborations within the ecosystem (i.e. between banks and fintechs)?

Fintechs have successfully encroached on traditional banks because they have prioritized the user experience and customer journey. This has enabled them to rapidly grow their customer base and grab increased market share from banks and other traditional financial services providers. Banks can learn from how fintechs have focused on service-first models that engender customer loyalty and trust, and how fintechs view and use data to deliver a transparent, customized client experience vs. a traditional product.

The rise of fintechs and other challengers is forcing banks to recast their strategies and roadmaps, which is a positive change. Banks now realize they need to better leverage their existing assets to re-focus on customer-centricity, deliver value-add products and services and own the customer value chain. This means delivering a model that includes both physical branch banking and digital banking services.  Banks are well-positioned to do this; they already possess a great deal of intelligence on their customers, tested ways to interact with them, and the ability to compile and analyze customer insights. If they can intelligently invest in the right technology, partners and resources to customize their offerings, banks have the power to enable truly empathetic and humanized banking and offer a new level of customer experience.

With the rise of Open Banking and an API driven ecosystem, there are also significant opportunities for banks to increasingly collaborate with fintechs, independent developers and non-financial lifestyle institutions.  This will allow them to offer holistic physical and digital services that directly impact the customer lifecycle and ultimately make Banking as a Service (BaaS) a reality sooner rather than later.

What trends do you think we’ll see in a COVID-19 shaped banking world in the next 12-18 months?

The only thing the banking industry can be certain of in this COVID-19 environment is more uncertainty. The time is now for banks to future proof to ensure they can quickly adapt to changing market conditions, new customer requirements and continued disruption. And while the current difficulties facing banks and the broader industry are very real, they can also serve as a catalyst to accelerate long-overdue initiatives.

In the next year we will see more banks look to modernize their legacy technology systems, focus on flexibility and scale, and accelerate their digital transformation initiatives. They’ll begin to embrace customer data to ensure their offerings add real value to the customer journey, deliver hyper-personalized services, and allow them to quickly respond to consumers’ evolving needs.  Increased competition from fintechs and the Big Tech companies such as Google, Amazon, Facebook and Apple will force banks to shift from product-based offerings to experience-based and service-first models. This will enable them to focus on customer-centricity and truly own the customer value chain. And the value of connecting with third parties becomes more clear, the move towards Banking as a Service (BaaS) will accelerate and become a priority, allowing banks to rapidly innovate and expand their product and service offerings through a collaborative partner ecosystem.

The banks that emerge stronger post-pandemic will be those that deploy technology innovation to deliver on customers’ expectations, control costs and differentiate themselves from competitors.  If they can focus on these critical areas during these challenging times, they can transform themselves to become an agile, customer-first organization that builds, retains – and mostly importantly deserves – customer trust and loyalty.

This article was originally published in The Fintech Times,  Read More – https://thefintechtimes.com/qa-with-nanda-kumar-ceo-of-suntec/

“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’’.

Banks Are Here To Stay, But They Must Rewrite Their Futures

If there’s any upside to a crisis, it’s that we are forced to reimagine. Just a year ago, we predicted that it would take at least another decade for banks around the world to embrace digital transformation. A mere six months later, we were blindsided by one of the worst global pandemics in modern times. Like most businesses, banks were forced to think differently and reimagine an uncertain future—and they were forced to do so almost overnight.

Branch banking has historically played a pivotal role in both acquiring new customers and fostering strong relationships with existing customers. But COVID-19, with the social-distancing measures required to keep populations safe, has caused a sharp decline in branch traffic, a pattern that may linger for several months—or even years. The question that now confronts the industry is: Are banks up to the task? Unfortunately, it isn’t a choice anymore. Bank branches are already becoming high-end service centers offering customers appointments. Banks must further change their approaches if they hope to survive, thrive and successfully operate in a post-COVID-19 world, and digital will lie at the heart of this transformation.

Time for a Step-Change in Omnichannel Efforts 

In a recent survey[i] conducted by Simon-Kucher & Partners in June 2020, 42 percent of respondents reported that they will reduce their branch visits after lockdowns end in the United States. When it comes to choosing with which institutions to bank, the survey found that the physical bank branch will continue to play a pivotal role for many consumers. And in what could have a significant impact on branch density, retail-bank customers also indicated that they would be more willing to travel greater distances to visit a branch.

Banks traditionally do an excellent job of promoting their products and services at a physical branch due to the tangible value of face-to-face interactions, and the branch model affords clear benefits for both banks and customers. For the bank, it can quickly confirm the identities of new customers and execute and notarize legal agreements. For the customer, branch banking allows them to withdraw significant amounts of cash on short notice, quickly and safely deposit cash into accounts or engage directly with trusted advisors. All of this provides an enhanced level of security, comfort and confidence for customers, especially when it comes to financial issues that can be complicated, highly sensitive or both.

The greatest challenge for banks lies in transferring this same level of trust, flexibility and security to a digital setting, especially during such turbulent times as these and when COVID-19 has forced many banks to move to digital onboarding. Banks can begin to accomplish this by establishing protected digital identities for their customers that allow them to engage with their banks across channels. Customers want the ability to engage securely with their banks via their laptops, to shift to speaking with an executive at a call center (if necessary) and to have the option to complete transactions using their mobile phones if they so desire. And the key to all of this? Omnichannel.

An omnichannel experience offers a customer the ability to interact with a bank in the physical or digital realm using any device. To offer this type of experience, banks need to structure their digital strategies in a holistic manner, orchestrating customer experience by adding a thicker layer of customer engagement. Existing bank strategies may offer a level of omnichannel, but they need a further upgrade based on changing conditions and lifestyles—especially now.

Some banks have already responded to these requirements. Citibank, for instance, has made it simple for customers to raise credit-card disputes online via either a form or through its banking app, whereas many other banks would opt to take the customer through a more time-intensive and often frustrating telephone menu. Several banks have introduced individual chatbots that can address personal queries and offer a one-on-one “conversation” with a customer, which in turn gives customers a sense that their banks are working to take care of them directly and respond to their individual questions and issues. Implementing this type of technology-enabled automation and/or AI (artificial intelligence) response behind the scenes to improve customer experience is a significant upgrade for many banks and represents a step-change in how they can begin to deliver hyper-personalized services to their customers.

Digital Banking is No Longer an Option—It’s an Imperative

2020 has had a clear impact on consumers’ digital-banking behaviors, and banks are wise to take note. The Simon-Kucher & Partners June 2020 survey[ii] showed a clear affinity for online banking during lockdowns in the US, a trend expected to continue as restrictions ease. A majority of respondents indicated that they would now not even consider opening an account at a bank that did not have best-in-class digital capabilities, and all agreed that both traditional and digital-only banks still have work to do to improve their digital offerings. Another recent survey[iii] conducted by management consultancy firm McKinsey (April and May 2020) examined changes in consumer banking patterns during the COVID-19 crisis and found that reliance on cash payments decreased substantially in most countries, while remote payments increased—another trend unlikely to reverse itself post-pandemic.

Looking to the future, it’s clear that banking customers increasingly enjoy the ease and convenience of a digital model that empowers them to manage their finances in one place—from setting up automatic payments to making deposits and more—without having to queue in a bank. To truly capitalize on this, accelerate their digital transformation and deliver a new level of personalized customer offerings, banks will need to embrace a new way of thinking that enables them to reimagine their holistic systems, processes, data and people. And this type of change needs to be strategized thoroughly before being operationalized.

Customer-Centricity is Key 

If banks continue to operate solely in their current form, they risk becoming nothing more than a utility service. But if they can create an ecosystem by partnering with businesses that offer connecting services, they can build lasting relationships with their customers and deliver new levels of measurable value. Banks are in a unique position to orchestrate this for the ultimate benefit of their customers.

For instance, if a customer reaches out to his or her bank for a mortgage, what stops that bank from helping that customer to own that house—instead of just selling its mortgage business? Or what stops a bank from partnering with restaurants and entertainment hubs to enhance its customer’s experience?

Banks need to enable a set of partner-capabilities that will permit them to deliver products and services based on customers’ evolving needs and immediate requirements. Several banks have recently shared notices on their websites to warn their customers about the prolonged wait times for services during the pandemic. Providing this type of proactive client notice is good, but what if a client needs to reach the bank urgently? What are the digital options for that customer? Banks must be savvy and intelligent enough to move from being reactive to prescriptive and, eventually, cognitive. Banks must take that digital plunge to improve the customer experience across multiple channels and implement a customer-centric approach that ultimately enables them to improve time to market, drive personalization and enable growth.

Measure Customer Value, and Build Resilient, Agile Capabilities 

Technology can connect services and provide unmatched insight into customer behavior and sentiment. All businesses have one thing in common: the financial dimension. And here’s where banks can play a major role if they can rethink how to measure customer value and build a resilient, agile capability to adapt to market changes. That will require them to alter the way they interact with customers by bringing all customer-engagement capabilities into one enterprise layer, just like other customer-centric brands, such as Amazon or Apple. Services need to be flexible, respond swiftly and offer configurability to each customer that creates transparency and allows customers to drive their relationships with their banks. The focus must always be on the customer, and the bank must manage the value offered to the customer across its ecosystem.

It’s clear that physical bank branches will continue to play a role in attracting new customers and retaining existing ones in a COVID-19-shaped environment. Convenience cannot be ignored for some banking customers; branch proximity will always be a deciding factor for some consumers. Branches will need to become experience centers, like Apple stores. But to really build a long-term strategy and roadmap and ensure branch banking can coexist with online banks and new fintech (financial-technology) offerings, traditional banks will need a systematic process to create resilience, choice and convenience tailored to each bank’s wide-ranging demographic. That may mean understanding that branches may instead become the place to solve more complicated problems or offering premium services to select clientele, such as wealth management and small-business banking.

Although the current economic downturn is not a direct result of a financial crisis, the banking industry must be careful not to exacerbate the impact of the pandemic by ignoring the needs of its most affected customers. If banks are unable to make themselves available to their customers when they’re needed the most, how will the reputation of the banking industry fare by the end of this pandemic?

There’s a dire need for banks to build a resilient, agile distribution and servicing model to not only enhance but sustain the customer experience during and long after the pandemic has ended. They need to simplify historically complex operations and infrastructure and embrace intelligent technology and strategic partnerships to create a new level of services and products for their customers. Critically, banks must also ensure that evolving banking behaviors, required social-distancing measures and the current global health crisis do not inhibit how they build and maintain customer trust. This must be a fundamental goal if banks hope to validate their existence and also future-proof themselves as we as an industry prepare for a new normal.

Banks now have the unique opportunity to show their customers the values they hold, demonstrate just how much customer loyalty means to them and allow customer-centricity to guide them. Times like these force us to think differently, and if banks can reimagine their offerings with a sense of urgency, empathy and optimism, this can only translate into significant value for both themselves and their customers.

References:

[i] https://www.simon-kucher.com/en-us/node/5636

[ii] https://www.simon-kucher.com/en/about/media-center/simon-kucher-partners-survey-reveals-pivotal-roles-bank-branch-and-digital-capabilities-after-covid-19-lockdowns-us

[iii] https://www.mckinsey.com/industries/financial-services/our-insights/a-global-view-of-financial-life-during-covid-19?cid=other-eml-alt-mip-mck&hlkid=1920574895504d9fa680f29ce395a117&hctky=12141416&hdpid=2f51913d-d4a8-46ff-b03e-cf669b45c927

This article was originally published in 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’’.

The Digital Future is Today: Why The Future of Banks Will Hinge on Customer Centricity and Smart Design

As the financial services industry continues to tackle short- and long-term challenges brought on by the COVID-19 pandemic market disruption, banks are facing a completely digital reality powered by accelerated digitalization.

Banks, which have for years relied on legacy technology and traditional processes, will be hard pressed to survive and remain competitive as new modes of operation amongst technology-driven, agile competitors push the pack forward. Banks will eventually face two options: embrace the methodologies of innovative market competitors, or risk losing long-term customer loyalty and thereby, revenue.

To build a secure future for themselves, banks must begin designing customer-centric solutions and making smart use of the assets and partners available to them. They must champion flexibility and scale to maximize the value they deliver, as they enter a new era of competition.

Banks were already under pressure to accelerate their digitalization efforts and revitalize the customer experience pre-pandemic, and COVID has forced their hand. According to a recent survey by management consultancy firm McKinsey,  the pandemic has not only accelerated client demand for digitally banking services, but clearly shown that bank customers are placing a higher reliance on their advisors during these uncertain times – bringing the importance of customer experience into sharp focus. It’s clear that banks cannot continue to make limited progress. It’s about a complete step change and an understanding that digital is now the norm, not a ‘nice-to-have’.

Customer and Competitor Pressures Mount

Especially during these disrupted times, the looming threat of customer recession and competitive challengers are catapulting banks’ technology projects – many of which are long overdue – into overdrive. As the Bank Governance Leadership Network (BGLN) recently highlighted,  COVID-19 has accelerated the industry pivot to digital, and new challenger banks and FinTech providers are expected to challenge the notion of  customer trust. While banks have understood the need for digital transformation for years, they now recognize the urgency to adapt so they can better manage rapidly changing customer priorities and market conditions.

With the entrance of technology goliaths like Google and Amazon, and user-centric banking and fintech platforms, like Venmo and PayPal, which leverage customer data to create not only reactive, but predictive customer journeys. Customers have come to expect bespoke and seamless user experiences, and as their expectations heighten, banks that don’t offer solutions that follow the entire customer journey will soon be left behind, ultimately forfeiting loyalty and retention in a generation of customers that values hyper-personalized experiences.

Digital is no longer an option for businesses – it’s an imperative. And none more so than banks. Most banking customers today would not even consider opening an account at a bank that did not have best-in-class digital capabilities.  It is critical that banks develop comprehensive plans that will enable them to accelerate their digital transformation initiatives and deliver a new level of personalized customer offerings. To do that, they will need to reimagine their holistic systems, processes, data and people.

Transforming the Core: Risk Reduction via Redesign

Though the ever-evolving demands of customer expectations and competitor innovation seem insurmountable, banks are actually well-positioned to compete. The key to reducing business risks lies within developing a clear digital strategy and redesigning core processes, leveraging their pre-existing data assets and partnerships.

By adopting a digital core and ‘hollowing out’ customer engagement functions from the core system, and managing it as a horizontal cross-enterprise layer, banks will be able to take a low-risk, modular approach, while offering enhanced product innovation capability, sophisticated customer data management, partner ecosystem and revenue management.

The digital core, which captures and meticulously logs the data from every customer interaction, relevant personal information, purchasing patterns, and more, is integral to improving customer centricity. By tapping into customers’ data, banks can leverage their information to meet their unique needs, create and bundle products, services and offers for any customer segment, and adopt relationship-based pricing strategies and new business models.

Furthermore, by utilising partnerships that maximize economies of scale, banks can quickly adopt new technologies, add more functionality, enhance the customer experience, provide customized internal and external products and integrated services. Most importantly, they can do this whilst maintaining ownership of the customer relationship and value prop.

Cloud: Here Today, and Here to Stay

The recent pandemic disruption highlighted the need for stable, reliable technology solutions that can weather market volatility. Especially as internal and customer functions faced increased risk and disruption, banks saw first-hand the need to embrace cloud capabilities to maintain a competitive edge.

Cloud computing offers banks the ability to innovate at faster and lower costs, increase the amount of services and offerings to customers, while monitoring and preventing revenue leakage. By reducing time to market and thereby creating new revenue streams, banks have the opportunity to accelerate their customers’ digital transformation journeys at an accessible price point.

Banks have begun to recognize the value that cloud infrastructure can offer their customers, and savvy organisations will take full advantage of cloud deployment’s benefits for their digital transformation projects across pricing, billing, product, loyalty, deal, offer, partner monetization, and tax management processes.

The opportunity for banks is to leverage the cloud’s flexibility, agility, scalability, high performance, security and strong reputation in handling large volumes of transactional data and functionality to translate it into value for their customers, instilling confidence in their ability to keep up with nimble industry players.

Keeping the Customer at the Center of Design

In order to design solutions that keep customers content, banks musts assess the value that their products are offering to customers. With customer value, comes customer trust – and with trust, comes loyalty and ultimately business longevity. When designing solutions, banks must take similar strides to their fintech competitors – the most successful of which offer not siloed, but rather experience-based products and services.

Undoubtedly, the bank of the future will orbit around the growth of Solutions as a Service – providing hyper-personalized products and services for any customer segment, adopting relationship-based pricing strategies, and optimising billing processes. For banks to survive in this hyper-competitive market landscape, reinforcing value to customers will be paramount. Banks need to understand what customers truly want, and what they are trying to achieve with every interaction. Essentially, banks will have to shift their mindset to think like a customer, anticipate their needs, and restructure their traditional process to design holistic solutions catered to those needs.

Now more than ever, it is imperative for banks to focus on agility, scale, and speed to succeed in their digital transformation journeys. Driven by market competition and increasing customer demands, banks must build the bank of tomorrow, today – embracing the flexibility and cost efficiencies of partner models, existing data assets, and cloud computing to build experienced-based designs, deliver true value and ensure customer loyalty.

This article was originally published in Finance Derivative, 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’’.