Building a Foundation for Innovation in Core Banking

Avato May 2, 2019
Digital Transformation Banking

Supporting the move to customer-centric banking

The Importance Of Customer Experience

As systems evolve and the ways in which customers transact continue to change, one thing that many global banks are aligning on is the importance of placing the customer’s experience front and center. As companies like Zappos and Apple have proven, an improved customer experience can be a real differentiator in a sea of competitors. Financial institutions are no exception.

McKinsey’s analysis of the annual reports and investor presentations from 50 of the largest global banks shows that three out of four of these banks now pledge themselves to some kind of customer-experience transformation. (The research is based on the S&P Global Market Intelligence list of banks by total assets.)

One financial institution that undertook a customer-experience transformation concluded that the profitability of a satisfied customer recommending the bank to their network is five to eight times greater than a customer who had a negative perception of the bank. Ultimately, a seamless customer experience builds customer loyalty, boosting revenue, reducing costs, and can even make employees happier.

Fragmented IT Landscape = Fragmented Customer Experience

However, the IT landscape of the typical financial institution is still highly fragmented. Beyond the typical core banking system used to store the customer account balances, most banks and credit unions have multitudes of applications that handle the myriad details of their business. This can include loan origination, insurance calculations, collections, online banking, telephone banking, ATM, POS, federal tax reporting, anti-money-laundering, fraud detection, account-holder statements, alerts, notices, investments, and currency rates — to name just a few!

For a financial institution to be viable at scale, all of these applications listed above need to be able to share data automatically and reliably. Expensive vendor modifications of these applications are normally required to allow them to work for a particular institution’s collection of products, services, processes, policies, procedures, regulations, and IT/network architecture.

Many of these applications – including the core banking systems themselves – are account-centric, meaning that data about a customer could be spread across multiple account records — each of which a financial institution would need to examine independently to truly understand a single customer’s journey. On the consumer side this translates into re-entering information every time a new product or service offering is added, making it inconvenient for a customer to change (or expand) a relationship with their financial institution.

Beyond the implications for required anti-money-laundering regulation and legislation, financial institutions could lose significant opportunities by not knowing their customer well enough. For example, if a financial institution’s customer is about to experience a significant life event (a marriage, a major purchase, a new baby), there’s an opportunity to tailor that customer’s offerings for the upcoming life event — reducing the chance of the customer turning to a competitor for those financial services as well as potentially reducing the customer’s risk profile.

For financial institutions to truly develop quality customer relationships, customers need to feel cared for — and it’s much harder to care for someone without knowing them first. When a customer interacts with a financial institute’s staff and systems, their experience must come first. The financial institution remembers what information the customer has shared in the past, and the customer sees the financial institution as a trusted friend, resulting in meaningful, easy interactions — and loyal customers .

Digital Transformation through Integration

Often, when organizations want to improve their customer experience, they’ll attempt a wholesale replacement of multiple existing systems with a single modern equivalent. This approach, however, is fraught with risk and cost.

Rarely, if ever, can a single monolithic application meet all of an organization’s needs without significant customization. And an application can’t be properly customized without first conducting extensive business analyses of everything the existing systems (some of which have been in use for decades) have done for multiple business units and working groups. Data migration, business process re-engineering, vendor customization, in-house or external software development, retraining of staff; all of this adds significant cost and risk. And in the end, when many of these projects fail, they fail spectacularly.

A more effective, lower-risk approach is for a financial institution to leverage the assets they already have — by extending their ability to share data and interact with each other. This is where a hybrid integration platform can play a pivotal role, because it enables the adaptation of application interfaces and information silos into usable forms that can easily interact with new and existing on-premises and public- or private-cloud counterparts. This approach allows an evolutionary migration that’s easily aligned with ongoing (and increasingly effective!) business operations.

As a by-product, this kind of approach produces access to comprehensive standardized data that is ubiquitously available for use as building blocks in new user processes and automation flows, allowing the business to agilely respond to an ever-changing landscape of opportunities, products and services, while constantly simplifying the experience for the customers and staff alike.

Streamlined Data = Streamlined Customer Experience

Customers agree that a simple, streamlined experience is a positive one. A hybrid integration platform allows for custom user interfaces (both for staff and for customers) that streamline screens, simplify processes, and pre-populates data to be utilized by the appropriate systems. Key customer data can remain at rest in the systems where it originates or is intended to reside, while this kind of user interface can then act as a window into a single “record of truth” for each type of data, while the data-to-customer relations are maintained in the middle tier’s meta-data repositories.

The hybrid integration platform streamlines all of a financial institution’s customer information from different systems into one place, allowing data to be fetched from every system as needed. Conversely, when customer information gets updated in one of the financial institution’s systems, the hybrid integration platform ensures that every system connected to it receives the same updated customer information.

As an example, when banking transactions like A/P can be conducted directly within a customer’s ERP of choice, without the customer having to log into a separate banking portal, that customer can pay vendor bills without having to export a custom file or rekey anything. When a platform bundles up vendor data and places it into the bank’s back office in real time, the financial institution has a good chance that this particular customer will give the bank even more of their business — the bank is now making it easy for this particular customer to automate their businesses’ payments through their accounting software versus having to log in to yet another portal.

When a financial institution can automate processes and the timely sharing of business intelligence through orchestration – like a symphony conductor – all of the applications that serve the financial institution (and its staff and customers), are “playing in time” to the same piece of sheet music. And as a symphony orchestra is conducted for maximum auditory pleasure, so a hybrid integration platform conducts data for a highly satisfying customer experience.

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