Achieving a customer-centric service within the financial sphere can be no easy feat; traditional banks are finding themselves competing with emerging digital banks, amongst many other pain points they are faced with in today’s modern world. 

Recently, Gigaspaces had the opportunity to moderate a virtual panel for CDAO Financial Services. The panel, composed of expert team leaders in the banking field, weighed in on the topic of Customer 360 and discussed first-hand why customer-centric business transformations are crucial in today’s age. Michael Collins, a Data Science Manager at Regions Bank and Myra Chan, Head of Sales & Marketing and Data Analytics at Capital Group gave their opinions on where banks should focus their efforts when it comes to satisfying the end-user. 

The panel focussed on the ever-evolving back-end dynamics that traditional financial institutions are faced with in trying to keep up with today’s digital pace. The biggest question is: what can be done to essentially instill trust and ease of user-friendly features for the customer? The answer: aim for a more customer-centric and personalized experience is a great place to start. 

Let’s take a look at the main takeaway points to consider.

Problematic Legacy Systems

Traditional banks mostly use legacy infrastructure with mainframe operations that have been in use for decades. This mainframe is used in facilitating core banking operations such as loan processing, deposit and transaction processing, mortgage approvals, and so much more. So, why is this system becoming problematic? Simply put, it’s old, it’s not agile, and it’s not fast. There is also a void in people with matching skills who can optimize the legacy platform. The bottom line is- legacy systems restrict banks to become more customer-centric. 

That being said, mainframe and other legacy databases remain as core and valuable enterprise technologies for financial services. For banks, and other organizations such as insurance and transportation, these legacy systems of record have proven resilience and dependability which is associated with core mission-critical processes.

So, How Can Banks Shift Towards a Customer-Centric Strategy?

Using Data is Key

Processing and analyzing data in real-time is really the key to digital transformation. Michael Collins from Regent Bank adds. “I think it is crucial to understand that developing customer-centric needs and understanding customer-centric personas in terms of how different customers behave differently and how we should communicate to different customers using that data. And, I think that it really kind of puts power back in the hands of your associates and the customers to really get to that crucial part of how do you kind of continue to evolve and create this relationship with the customer over time”. In essence, using data to learn your customer on a personal basis is what banks really need in order to become truly customer-centric, and of course maintain a competitive edge. 

For example, should the client apply for a mortgage, at what rate should the mortgage be given? How long would the customer need to wait for approval, and also, since the mortgage is a trigger for other potential services, what other products can the bank offer the customer? All of these customized experiences would be ultimately powered by data. 

Safeguarding Customers

Dealing with fraudulent matters is also another aspect that can give a satisfactory customer 360 experience. How quick is fraud detected and how quick is it acted upon? Fraudsters have evolved and are using a range of ways to commit credit card fraud, the popular being something called synthetic identity, whereby they use details of stolen personal information to make new accounts, thus bypassing the validation process within a bank’s mainframe. Another issue that banking institutions are faced with right now is the stark rise in fraud owing to the economical crisis that has stemmed from the Covid-19 pandemic. Below is a diagram showing the sharp increase in credit card fraud that has taken place throughout 2020.  

Figure 1: Fraud is seen to be on the rise owing to the Covid-19 crisis that has impacted people on a global level. Source: Association of Certified Fraud Examiners.

The main problem is that identifying fraudulent maneuvers could turn into days if it depended solely on legacy systems. This is where AI or machine learning sets an immediate trigger when it sees an out-of-the-ordinary transaction or movement within a customer’s account. There is no front, back, or middle office when it comes to real-time processing of rich data.

Giving Way to 3rd Party Infrastructures

The customer from 20 years ago is not the same customer as today; tech-savvy customers are looking for swift, digitized options. Owing to the fintech “revolution”, younger clients seek newer services easily accessible from their mobile in just a few taps or swipes. Fintech or 3rd party firms are already offering a plethora of services that, according to a study by PWC, are starting to become a new norm. 

Figure 2: Some of the types of activities customers are conducting with Fintech firms. Source: PWC Global Fintech Survey 2017

This is where 3rd party digital infrastructures play a predominant role. More and more customers are migrating to a digitized format of transactions, giving way to instant transactions at a touch of a mobile app. Gone are the days of standing in long queues and physically visiting a bank for such easy and standard banking practices. Integrating with these digital platforms is a key to a bank’s success, allowing the customer to link their current account to these 3rd party providers. It’s really like having your own personal banker with a simple tap of a button. 

Figure 3: According to a study in Great Britain, 41% of Britons said they prefer digital banks because of the convenience it serves. Source: Statista

Data Augmentation

Traditional banks are now faced with taking a cohesive approach by welcoming 3rd party providers. Myra Chan stated at the recent panel, “I think third-party is so important because our customer only interacts with us for a specific product at a specific time. But in order for us to service our customers better, we do hope to gain more knowledge about who they are. This is essentially where data augmentation comes in. Understanding the customer is crucial and pairing this data quickly and efficiently with a bank’s 1st party format can pave the way for the ultimate 360 view of the customer and their customized needs”.

Integrated Experience and Ecosystems

Understanding what customers want and rising trends is also something to take into consideration. Customers want a holistic, “one-stop” kind of system, where everything is really integrated. Customers have now been turning towards big enterprises who offer value-added services such as financial integrations into their ecosystem. For example, Ikea has expanded its consumer banking services by buying a 49% stake in Ikano Bank. This means that banks are joining forces with other major retailers, giving the customers a cohesive service where their day-to-day banking needs are met; offering convenience at a whole new level.

How Can Banks Make This Work?

The points listed above represent a picture of supplying and meeting the customer’s needs, the question now is, how can banks infiltrate this customer-centric sphere and satisfy the customer’s needs without compromising or risking their complex back-end systems? Completely discarding the strained legacy system and migrating to something better is a great idea but it’s easier said than done. If a traditional bank were to change their old structural system to something faster and modern, it would complicate the whole system and possibly even crash. Legacy systems are complex and should one thing go wrong, it will cause significant damage to the whole process. Banks don’t wish to take this leap, because it’s really like jumping into the unknown, and this leap could have detrimental effects. Also, migrating such systems is expensive and tedious. 

The Hybrid Approach

The best way to approach modernization is to create a cohesive structure so that existing legacy systems can be served and not scrapped. There have been various examples of banks modernizing mainframe applications on their legacy systems and getting results within months, as opposed to the typical yearly wait. In one example, a French bank succeeded in enabling their mainframe to execute real-time payments in under two months.

Banks can form a solid and trustful anchor between what they have and the technologically advanced systems of today’s modern age; providing quicker transactions, enhanced customer service, and insightful data-driven analytics. This can be done by versatile and agile API or service layers to an existing mainframe; making the transition easier and smoother for all parties involved.