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The “DON’TS” before your bank goes Digital

The “DON’TS” before your bank goes Digital

While we have gone through the necessities of Digital Banking, along with the foundations of making it successful, it is also necessary to avoid some obvious errors that most first-timers end up making.

Think like a Customer, not a Business!

But how?

  • Start with customer journeys. How do you plan to offer an easier and compelling experience to your customers as compared to your competitors?
  • Focus on your mobile device. The first touchpoint for customers nowadays is mobile devices, and they have become a critical tool to sell, service and retain customers. One should always keep in mind that the customer will be on a small screen, with touchscreen input, and a number of distractions.
  • Personalize the customer experience. This is where Data Analytics comes into the picture. Use all the available information about your customers and make offers that not only resonate with them but also demonstrate how well you understand them.
  • Identify key customer pain points. Identify where their activities stall, incur errors, drop off, or are abandoned. Then drive your focus towards making incremental changes on those pain points and measure the improvements over time. The true measure of a successful digital bank relies on how much time customers spend to satisfy their actual needs.

 

Separate Out the Distribution from the Manufacturing


Unlike monolithic bank IT structures of the past, a digital bank cannot function efficiently with a single integrated system that requires a manufacturing change every time a new distribution feature has to be added.

In the digital banking space, the manufacturing has to be designed for the long haul, while the front-end has to be agile enough to adapt to the changing needs of the clients. Naturally, the front-end has to be flexible enough to have different features for different clients.

This presents a challenge, as the flow of data between Manufacturing and Distribution is critical to the entire process. In modern digital banks, the key is the separation of the systems through documented APIs and loosely coupled micro-services. In simple terms, it means that changes in one system do not affect the other.

For manufacturing, a key constraint is capacity. Adopting a cloud-native, cloud-agnostic back-office will help providers meet changing demands at a lower cost. Agility is the key to distribution. The digital front office should unify all customer journeys on architecture optimized for rapid iteration and improvement. And by creating a core-independent distribution, a user interface change would no longer require coding and integration changes in the core.

 

Do not become Responsible for Everything!

 

For a complex and scalable digital bank, there will be a number of features and services that may be required in order to provide the best experience to the users, and trying to build all of these features internally can overwhelm your ability to deliver. Services like identity verification, risk scoring, fraud detection, and payment services need to be integrated into the complete digital banking solution. But why not try to take advantage of the existing, already proven services that have been pre-integrated or are available off the shelf?

For example: Say your bank starts experiencing a rapid escalation of fraudulent transactions linked to a new product offer, and it needs a new fraud screening approach – ASAP. Instead of having to wait for months of design, development, test, and release cycles to integrate with your chosen FinTech solution, your bank can access this as a pre-integrated capability – ready to be called via API from the digital banking platform. This new process flow would only take days, not months.

The takeaway here is to use APIs and services that have already been created and proven. Then use your internal team to understand and adopt the external services the digital banking platform already offers.

 

Don’t Choose the Wrong Implementation Partner

 

This is perhaps the biggest mistake that a bank can make while going digital, to go ahead with an implementation partner that does not align with the strategies of your bank.

A digital banking platform is just like an iceberg, shining visibly above the surface, but the bulk of it is hidden underwater. And if you just pay attention to the obviously visible part of the iceberg, your ship can run into the big piece underneath, inviting a disaster.

To avoid trouble, a lot more attention needs to be placed on the platform that customers never see, but that supports the weight of their user experience. This underlying infrastructure is where rapidly changing product catalogs, integration to new FinTech services, and the ability to start, save and resume an onboarding transaction are managed. These less visible elements make up the difficult parts of building a new banking platform, hidden from view but critical to the operation.

This is exactly why while implementing a digital bank, we should be mindful of the fact that if we only focus on the look and feel, and don’t plan on building a scalable and flexible platform underneath, it will eventually turn out to be a Titanic mistake.

This is where Maveric Systems stands out from the rest. Since our inception, we have only focused on Banking, and in the last 21 years, we have built a competency that is as good as any other IT organization, especially when it comes to Digital Banking implementations and support.

As I have mentioned in the blog as well, we follow a customer-centric approach to our work, and we do not want to service our clients, but to become their partners in their success journey. We realize that transitions like the one into digital banking are particularly significant and irreversible ones, and we commit to promising the best solutions and the most competitive results.

This is also one of the reasons why we have partnered with Temenos, being the world’s #1 banking software. Be it Core Banking, Digital Banking, Payments, or Wealth Suite, Temenos always stays ahead of its competitors in terms of its innovations and its solutions, and we work closely with them on the implementation of all of these solutions.

The largest banks in the world choose Temenos because of the depth of their advanced technology:

  • Design-led, customer experience-focused front-end ‘distribution’ capabilities adding enticing new features and differentiation
  • The flexibility of a cloud-native, cloud-agnostic digital banking architecture, with associated cost and scale benefits
  • An API-based microservices architecture, enabling easy integration with other services, and continuous enhancements
  • Packaged model banks on a commercial platform to reduce cost, risk, and time to market.

We wish you luck on your Digital Banking journey, as it is the only space where banks would survive and compete in the future.

 

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Approach and Technologies for a Successful Digital Bank

Approach and Technologies for a Successful Digital Bank

Keep a human-centered approach

All your questions while designing an onboarding experience must be customer-centric:

  • Why is my customer applying for this banking product?
  • What could be their needs?
  • What could be their goals?
  • How are we simplifying it for them?

The answer to these questions will have a direct impact on the content that goes on the application pages.

It is also important to consider the questions that your customers might be asking:

  • How long is this going to take?
  • What information/ documents will I need?
  • Am I stuck? What do I do now?
  • Is my sensitive information protected?

These questions help plan an onboarding experience and make them easier and effective. For example, your customers might get overwhelmed with the online experience, or could be intimidated by the length of the application process. In such a scenario, informing them about where they are in the process (“Step 1 of 4”) can help ease their anxiety. Similarly, listing the required documents, providing clear information about how the customer’s progress can be saved, or adding a note about who will have access to their documents will help increase the customers trust in the digital route of banking. Hence, to think like a customer is of paramount importance in order to onboard them.

Customer Intimacy

In a post-pandemic world, where the digital experience is going to be the primary differentiator between competitors among financial institutions, banks will need to look at offering digital experiences that connect with the consumer on an emotional level, rather than a traditional transactional app. Thus, a deeper customer intimacy and engagement has to become the new normal of digital banking.

Digital Banking should make use of emotions which have a positive impact on the minds of users, and help them emotionally connect with a brand.

An example of this could be the Google Doodle – a witty and interactive alteration of Google’s logo that changes daily and often induces positive emotions among users, or triggers interesting discussions among them.

By offering a digital banking experience that not just meets the customer’s everyday needs, but also connects with their values and aspirations, banks can elicit a more intimate engagement with the customer.

A great example of this would be Flowe, an environment-friendly challenger bank launched in Italy in 2020. Flowe attempts to help customers build a more sustainable future through a range of initiatives, including a debit card made of recycled wood. Flowe’s digital banking app similarly helps the customers to be eco-friendlier by offering personalized advice based on the CO2 impact of their transactional behaviour. By connecting with the customer’s values and aspirations in this way, banks not just develop a more meaningful and emotional relationship with their customers, but also increase their recall among customers for new products.

Another way to maintain a close relationship with customers is by always providing them with an option to connect with a banking personnel. This would ensure that a customer never feels lost in his/ her customer journey. Enabling access to real-life interactions via audio/video chat or offering easy access to human interactions in digital banking journeys whenever the customer needs it can significantly improve the overall customer experience while also building stronger emotional bonds with customers.

In the future, we might also see the widespread use of emotional AI technology to gauge the user’s emotional state. Emotional AI technology measures reactions in real time by analysing the user’s interaction with a digital device, for example, by tracking mouse cursor movement patterns. This can help banks measure the emotions triggered by digital banking. We might even one day see emotionally intelligent banking applications automatically, and in real time, adapting the user experience and digital marketing based on the individual user’s emotional state and reactions measured using emotional AI technology.

Speaking of AI, we now focus our attention on the most important aspect of being successful, deploying the latest technologies.

Top 6 Technologies for building your future digital bank

In order to survive in the digital space, the offerings from the banks have to be the best and the latest, as unlike the legacy times, there are plenty of options for the customers, and any delay results in customers switching their loyalties. Hence, it is extremely important for banks to stay on top of the latest technologies disrupting the financial industry.

Let us look at some of the top technologies to build your future digital bank

Robotic Process Automation(RPA): RPA is improving the user experience by allowing bots to handle repetitive tasks without the need for human intervention. This reduces errors and enables bank staff members to focus on more intricate queries and provide better customer service.

Data Analytics: In the present times, success is achieved by driving intelligent conversations with customers based on a data-driven understanding of them. Using insights fetched from historical customer data, banks can offer potential products and smartly upsell and cross-sell to existing customers.

Application Programming Interface (API): An API is a software intermediary that allows two applications to talk to each other, so that the services of a third software can be provided to you by the software in use for you. Through API platforms, banks nowadays are working with FinTechs to build banking stacks that give them the liberty to be a platform on which customers and third-party service providers can connect to deliver more meaningful and personalized experiences to the end-users.

Cloud Computing: Another technological advancement that has been revolutionizing the banking industry is cloud computing. By leveraging cloud-based services, banks can cut down on their data storage costs by saving on capital and operating expenditure, ensure that the business is easily scalable, while also promising that the customer data is protected. Cloud computing also forms the basis of safe online payments, digital money transfers, wallets payments, etc.

Artificial Intelligence & Machine Learning (AI & ML): Nowadays, the FinTechs are increasingly using AI and ML in a number of applications across multiple channels to make use of all the available client data to predict how customers’ needs are evolving, what services would benefit them, what fraudulent activity has the highest possibility to attack their system etc. Banks can leverage the power of AI and ML in banking, along with data science, in order to improve the current customer service as well as enhance the customer’s portfolio offerings.

Explainable AI (XAI): As we already know, AI uses machine learning for optimization. However, it is possible for AI to learn things incorrectly, leading to biases, errors, and negative results. These systems are highly complex, which means that most businesses will not even realize that this is occurring, because the underlying logic about how the results are derived is not explained anywhere.

Let’s assume that for a job role, so far 10 females have been hired, while no males could get selected yet. An AI/ML system could make the inference that females are more suited to this role as compared to males and could get biased against males while shortlisting CVs. This biasness will only increase with time, and since no one would even be aware that the system has learnt incorrectly, this problem will persist. So how do we tackle the negative side of AI?

Enter XAI: an in-depth analysis of AI systems by experts to detect any biases or self-taught errors so that the companies can trust, understand, and explain their AI results. It is vital to ensure that the AI is ethical, fair, and in compliance with relevant laws.

Other than the above points, for small and mid-sized banks, the Open Banking revolution ushered in with the enforcement of PSD2 regulations, was expected to pave the way for FinTech and bank collaborations in Europe. Open Banking is not merely just a compliance requirement. Once small and mid-sized banks start leveraging Open Banking, they can enter the same playing field as large banks and disruptive FinTechs, offering their customers products and services beyond their portfolio. As was aptly put by the CEO of leading FinTech firm Finastra, Simon Paris, “Open banking is the concept of banks assembling a service for customers even if some of the products don’t come from their bank. There’s no doubt that power returns to the customer and those who embrace it will benefit first.”

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Why consider the SaaS platform for banking channels?

Why consider the SaaS platform for banking channels?

Is it an exaggeration to say most future companies will be fintech companies? Not really. Companies of all makes and maturity – including retailers, big techs, logistics, insurance providers, telcos – either are prepping to or launching embedded financial services that cater to business and consumer segments. These firms can plan and realize a significant portion of their revenue from financial services because of the massive adoption of cloud computing and its subset, SaaS platforms.

Meeting the expectations of digital natives, combating competition from anyone in the ecosystem, and the hunger to innovate business models will all mean that – banks of 2025 will operate vastly differently. In the least, they will be scalable, flexible, and cost-effective. A WSJ study speaks about how banks will spend $12B + on public cloud infrastructure and data services by 2021, up from $4B. These exponential growth numbers suggest that SaaS platforms for banking channels are the way forward.

Given the privacy and security concerns, banks’ relationships (friends, enemies, or frenemies) with cloud computing companies (Amazon, Microsoft, Google) will keep shifting. But the undeniable attraction banks have for SaaS is built on a few solid considerations. For one, SaaS offers the agility to support volatile business cycles and demand patterns. Secondly, it realigns IT cost structure from CAPEX to OPEX models, reduces cost, and enhances cost predictability. The third advantage of SaaS deployments is the flexible functionalities via API catalogs and web-based interfaces. Finally, comes tomorrow’s edge – prepare banks to exploit the power of AI, ML technologies, and Predictive analytics.

 In addition to the above reason, SaaS’s promise for banking channels has jumped notches in the last few years. Here’s why. 

 Remote working: Cloud-based SaaS tools revolutionize the ability for scattered teams to collaborate, something that becomes important when banks announce extended work-from-home routines.

 Leveraging data management: Banks leverage speed and computing power by taking advantage of SaaS applications’ ‘greenfield’ approach. Be it Goldman Sachs (making its entry into the consumer-lending market with ‘Marcus’) or JP Morgan (Finn), or even ING (Yolt), banks are utilizing the wealth of available customer data to innovate in ringfenced ways.

 Innovation sandboxes: With next-generation SaaS solutions such as Temenos Banking Cloud, banks today focus on fast innovations with fintech collaborations. The outcome? The ability to self-provision always-on banking services that scale instantly and reduce operational costs to 10% of legacy systems.

While banking segments of all stripes – universal banks, retail banks, corporate banks, challengers, private banks, credit unions, or fund administrators – benefit SaaS platforms, the overriding concern – Security – is not new. IBM reports that an average data breach in the financial sector works out to $5.9M.

 How do banks counter security concerns for SaaS deployments?

In many ways, Banks can mitigate security breaches from regulating access permissions through a unified framework for user authentication to enforcing perimeter network control via pre-defined firewalls, intrusion detection, and prevention systems.

Moreover, virtual machine management includes standardizing VM images, third-party applications, and security patches that boost security protection across IT infrastructure. Then comes the data encryption practices, wherein SaaS deployment partners give banks the options to manage their encryption keys.

Finally, the governance and incident management layer scrutinizes SaaS applications for specific breaches and intrusion incidents. These are captured, reported, and monitored till closure.

 Core banking systems often do not run in real-time. That reality should change. 

Especially when Temenos, with its features of ‘Build a Bank in a day,’ offers sandboxes for banking customers to experience the ease of consuming, composing, configuring, and extending capabilities, services, and enterprise solutions any way they see fit.

 In the final analysis,

 As Banks look to upgrade their IT infrastructure fast, SaaS platforms become crucial. Ensuring their clients don’t ever worry about upgrades or on-prem hardware updates, SaaS providers unburden banks with hassle-free services.

The tipping point is near. More banks are electing SaaS deployments since they acknowledge their commercial viability relies on upgrading their core. This acceptance is a step in the right direction as the next five years promise a sea change across the entire consumer finance ecosystem. After all, technology costs are constantly crashing and replacing core, or building new banking platforms gets more attainable.

Banks most alive to the challenge – ‘every company will be a fintech company’ – will gain the most in this landscape.

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How ‘Temenos Screen’ Help Banks in Customer Profiling

How ‘Temenos Screen’ Help Banks in Customer Profiling

The modern banking and credit industry relies heavily on customer data analysis. Customer profiling is critical when banks want to perfect their CX strategy. As centralized banking solutions proliferate, customer data analysis, and its extension customer profiling, will help bankers get their product promotion right, optimally utilize self-service channels, and reduce branch visits for everyday transactions.

Banking CRM systems need continual updates from moving homes to changing marital status or job changes. After all, these alterations influence multiple decisions – from promotion activities, newer risk assessment, revising interest rates, or resetting credit limits. Recent research says 97% of US companies make avoidable errors associated with the customer profile.

In 2022, customer profiling will be essential to CX.

The customer of 2022 is used to digital-first. The dependencies banks will have on customer profiling – whether speed (‘want-it-now’ culture), seamless omnichannel experiences, messaging, and mobile-first conversations, or even experiences that will move from automation to prediction- will only grow.

Along with delighting customers anytime, anywhere, a key imperative for banks today is the ‘screening’ services. From mitigating financial crime (fraud, terror financing, money laundering) to amping up due diligence by accurately matching profiles against sanctioned lists, banking CRMs play a critical role.

Size of financial crime.

A recent Global Banking Fraud survey interviewed executives across 43 retail banks, with eighteen having annual revenues over $10Bn and 31 employing more than 10,000 people across the globe. The outcomes were disturbing.

  • More than 50% of respondents recover less than a quarter of fraud losses.
  • 1 in 2 respondents globally experienced an increase in fraud value.
  • Over 60% of respondents experienced an increase in fraud volume.

There are other indicators. Between record-breaking fines from regulators ($40B in 2016) and the adoption of open banking (banks share data and systems with third-party service providers), banks must now contend with an additional layer of complexity and vulnerability. Not to mention cost as anti-financial crime efforts can cost banks up to 1.8% of their total assets.

Temenos Banking – core components of combating financial crime.

Temenos core banking solutions mitigate financial crime through four primary ways:

  1. Suspicious activity prevention: Real-time transaction monitoring that detects, and before funds are moved, stops suspicious transactions of abnormal frequency, suspect locations with ‘not-seen-before’ partners.
  2. Profile: Web-enabled, end-to-end customer profiling as part of anti-money laundering solution. The ‘Profile’ module creates alerts when current customer behavior supports money laundering and differs from previous or reference patterns.
  3. Know customer plus: A risk-based solution that classifies customers according to their risk profile at the account opening time and across the entire customer lifecycle. More advanced than KYC, the module uses a detailed risk matrix dashboard that incorporates risk status, range, and count, that ensures customer profile awareness.
  4. Screen: This versatile module offers business protection by screening customers and transactions against watchlists and sanctions. Screen integrates lists across origins – public, commercial, private, by applying geographic and business rules. Next, sophisticated algorithms and next-generation scanning methods deliver the lowest rate of ‘false-positive’ alerts without diluting detection rates.

Critical features of Temenos Screen that help in customer profiling

Lowest false positives

Compared to traditional sanction screening technologies, Screen is highly automated. Overall operational efficiency is enhanced along with the reduced cost of screening transactions. Through automation and accurate profiling, Screen has high straight-through processing. Not only does it discover internal misbehavior like stripping relevant information out of transactions, but it also detects politically exposed persons within customer databases, which may have slipped through manual ‘Know-Your-Customer’ checks.

Proven rules and algorithms

Temenos Screen works on a unique financial fingerprinting technique (DNA assigned to a customer). It brings clarity and control, accuracy, agility, efficiency, and reduced risk. With complete operational and technical management, Temenos Screen flags both usual and unusual behaviors through pre-built typologies and AI-enabled self-learning algorithms.

Enterprise-wide integrability

Temenos solutions routinely process more than 2Mn transactions per hour with 100% system availability with highly configurable business rules and vertical & horizontal scalability. For corporates invested in continual risk assessment, the modules offer holistic coverage – watchlist screening, KYC, anti-money laundering, and fraud.

Stakes will grow only higher.

United Nations estimates $1.6 trillion is laundered globally through banks each year. As compliance costs rise (increase by 50% by 2027), the fines to non-compliant banks will exceed $320 billion. While only 1% of money laundering flows are intercepted, 99 percent of illicit financial flows go undetected. The result? Trust in banks drops, and regulators bring additional focus on their operations.

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Top 5 Core Banking Software Companies in 2022

Top 5 Core Banking Software Companies in 2022

As neo-banks win market share and serve customers at around one-third of the cost of traditional. Then, there are threats posed by big tech players eyeing lucrative niches in the value chain. Post-pandemic customer is more digital, and less loyal. Also, today’s banking regulations are equally about innovation (PSD2 for instance) as they are about reporting and compliance.

That being the landscape for core banking software, what are the incumbent banks to do?

The answer, more than ever, is to exploit disruptive technologies like cloud, mobile, big data, microservices, open API’s and AI.  But these technologies rely on a robust banking core.

Before we look at the top 10, let’s see the top 4 parameters that distinguish the great core banking software from the good.

  1. IT cost reduced: Removing technical debt, pushing for higher efficiencies by leveraging cloud-based services, not to mention higher developer productivity (via automation tools DevSecOps) – are all factors that add to reduce costs.
  2. Quicker time to market: Employing both hyper parametrized configuration and higher standardization levels, banks leverage automated testing – all of which helps them to speedily develop new products and services.
  3. Customer-centric proposition: Data differentiates. Modern-day core banking software support integrated data sets and operate on a single source of truth. This capability in turn helps create real-time personalized experiences and brings into play, advanced analytics. Ergo. Precise decision making and a happier customer.
  4. Mastering scale through ecosystem partnerships: Modular architecture and API communication enables rapid scaling. This becomes critical especially in a development environment where core and ancillary services are relatively cheaper.

Little wonder that a McKinsey report, highlights 65% of banks surveyed exploring next-gen core banking platforms.

How were the top 5 arrived at? Simply, by applying these five comparisons.

  • Faster access to support digitization
  • Flexibility in pricing
  • Facilitating faster time to market
  • Supporting agile and remote working
  • Allows new capabilities like open banking

Top 5 Core Banking Software in 2022

  1. Temenos Transact: 25 years of industry-defining banking software, Temenos supports retail, corporate, wealth, and treasury lines of business. 41 of the top 50 banks use Temenos Transact. It has been ranked #1 for 16 years by IBS intelligence. Cloud-native, Cloud-agnostic, API-first, and AI-enabled, Transact (it was called T24), allows banks to launch products in cycles that are 10X faster.
  2. Mambu: Riding on a composable approach (traditional providers lock functions like decisioning, reporting, analytics into dedicated applications), Mambu offers low-code, born-in-the-cloud functionalities that lets banks scale on their terms. With deployment across 65 countries, 200 + global customers, and a 4X higher NPS score than others, Mambu’s USP is to deliver great modern financial experiences.
  3. SDK Finance: With 15 years in FinTech, SDK’s use-cases target neo banks, E-wallets, currency exchanges, and online payments. The core banking software allows creation of digital banking solutions so financial institution can deliver reliable products and services. Secure authentication, next-gen integration offers ease in handling traffic; SDK finance’ includes best-in-class personalization.
  4. Oracle Flexcube: Packed with features that modernizes a bank’s core system for today’s digital and agile demands, Oracle Flexcube places significant value on enhanced customer engagement, increased insight generation, and rapid integration approaches via open architecture. The USP of Oracle’s product is the flexibility banks get in choosing transformation models, and the associated support across deployment models.
  5. Infosys Finacle: Finacle helps both traditional and emerging financial organizations in their digital transformations, focussed on frictionless customer experiences. Relying on Finacle, banks across 100 countries service 1B customers and $1.3 B accounts. Bringing a proposition of – ‘truly digital’ – Finacle’s core banking software offers flexible product factories, extensive parametrization, product building and reusable business components – all of which accelerates innovation-led growth.

In 2022, what is the consensus on core banking software – final words

Most incumbent banks are limited with legacy platforms. Approaching inflection points puts distance between the leaders and laggards, each passing day. The post-pandemic altered customer behavior and accelerated digitalization trends, makes it necessary to act without delay. Once an assessment of the current core banking platform is done, banks should choose solutions and software that greatly increase their odds of success.

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