Technology Implications of Bank Modernization

By M. Isi Eromosele

Many banks still have their products, channels and lines of business in silos or they are only partially integrated. Non-integrated systems prevent banks from having a critical enterprise-wide view and cripple organization-wide efforts to improve customer experience; nor do they allow banks to adequately monitor operational activities.

Banks need to introduce applications that are service-oriented and standards based. Service-oriented applications are easier to integrate with other applications. Standards define how applications and the underlying technology work and operate with each other.

Proprietary technology, by contrast, locks the purchaser into a particular vendor and product. It also increases the cost of introducing new systems, integrating them into existing applications and maintaining them.

There are five areas of banking operations where it is essential for banks to review their technology assets to ensure they are up to date and fit for purpose. These are:

• Attracting and engaging customers
• Managing risk
• Transforming business operations
• Optimizing operational efficiency
• Simplifying IT infrastructure

Attracting And Engaging Customers

So what role does software have in facilitating the modernization of operations that will help banks attract and engage customers?

There are five software categories:

• Core banking, for managing customer accounts and their financial transactions.
• Direct banking, for providing internet and mobile banking.
• Data management, for collecting, managing, storing and retrieving data, including scanned paper documents.
• Business intelligence and analytics, for analyzing data, often in real-time, to deliver intuitive, role-based intelligence throughout the organization for fast decision-making. With the power of analytics, banks can understand and manage their risk-adjusted performance objectives and lower the costs of regulatory compliance; they can also analyze profitability across all levels of the organizations.
• Customer relationship management (CRM), for managing relationships across all channels and customer touch-points. CRM software is designed to increase customer satisfaction and retention, increase sales and expand relationships by providing a high quality of service. It can be installed on bank systems, or accessed “on demand” from cloud computers.

I shall elaborate on two of these: Core Banking and CRM.

Core Banking

At the heart of customer relationships is core banking software, which manages customer accounts and financial transactions. Core retail banking software holds basic customer data such as name, address, age; maintains links between accounts and customers, ideally providing a single view of the customer.

Additionally, it provides routine maintenance activities, such as opening and closing accounts, processing deposits and withdrawals, calculating interest, processing direct debits, and making and receiving payments; and runs the bank’s general ledger showing, among other things, the cost of staff and premises, income and customers’ balances.

The legacy systems that most banks use are typically account-centric, with customers’ individual accounts grouped by product type, instead of customer-centric, grouped by customer. Account-centric systems provide a fragmented, incomplete and often inaccurate portrait of customer accounts.

These systems prevent banks from getting a complete, 360-degree view of the customer, which is essential for up-sell and cross-sell success. These decades-old legacy core systems are inflexible and each time a bank wants to launch a new product, they must hard-code the system, which can take 12 months or more.

Such closed systems render product development and management activities cumbersome and slow. These outdated systems prevent financial institutions from offering targeted and differentiated products on a timely basis.

In a day and age when it is essential for companies to quickly launch targeted products in order to remain competitive, outdated systems hold banks back. Banks that cannot swiftly bring the right product and service to market will be left behind in today’s highly competitive business environment. Banks need agile technology that will enable them to bring products to market quickly.

By contrast, customer-centric systems enable banks to strategically target products and services to each individual based on what he has, what he needs and what he lacks.

Core banking software can be tailored to suit any banking segment: direct, wholesale, treasury, commercial and private banking. It also offers a much wider range of features and benefits than earlier versions.

Customer Relationship Management

When Customer Relationship Management (CRM) applications were first introduced in the 1990s, many failed to live up to expectations. Software developers and banks have since collaborated closely to iron out the problems to make today’s offerings much more relevant, reliable and useful.

If a bank’s customer management software does not offer the features and benefits listed below, it is time to renew it:

• Manage relationships across all channels and, ideally, all business units: for example, branches, contact centers and online, and across retail banking, wealth management, SME and other units.
• Increase sales of products and services to existing customers through cross-selling and up-selling.
• Assist in customer acquisition
• Maximize customer profitability.
• Retain customers.
• Be easily integrated with other applications and databases.
• Follow standard industry processes.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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