Finacle - How Banks Can Drive Future Growth?
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Finacle - How Banks Can Drive Future Growth?

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Finacle thought paper discusses how factors such as customer centricity, risk management and global application can help banks drive future growth and increase business.

Finacle thought paper discusses how factors such as customer centricity, risk management and global application can help banks drive future growth and increase business.

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Finacle - How Banks Can Drive Future Growth? Finacle - How Banks Can Drive Future Growth? Document Transcript

  • How banks can drive future growthThought Paperwww.infosys.com/finacleUniversal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
  • How banks can drive future growth Ever since the financial crisis broke out in 2008, crisis of credibility in fact, cost cutting proved banks have been going through difficult times, clearly inadequate as a solution Banks are now with profitability taking a severe hit. They trying to rejuvenate themselves and usher in initially displayed a knee jerk reaction in the business growth in various ways – customer and form of pink slips, pay cuts and IT budget technology focus, new channel introduction and slashes. However, since the problem was risk mitigation to name a few. actually one of customer trust erosion, a Customer-centricity Customers are the raison d’être of any business sorted out, they will take customer understanding and banking is no different. So rightly, banks to another level altogether. are moving from a narrow product focus to However, all the good work done will come wider customer centricity. Where formerly, to naught if the bank staff is not customer banks gave due importance to customers, today, oriented. A customer-centric mindset must be the entire banking process revolves around ingrained within employees through proper them. Banks have wised up to the fact that training. Also, in recognition of the importance mere customer satisfaction is not enough; of personalized service and relationship building, customers must delight in their services, indeed banks must dedicate relationship managers to in the entire banking experience. serve niche customer segments, if they haven’t Although routine transactions form the bulk done so already. of the retail banking business, interactions Customer segmentation, better customer classified as “moments of truth” – for instance, understanding through innovative tools, the manner in which banks deal with a anticipation of client needs and customized complaint of credit card theft – can make or product offerings, will go a long way in earning break customer loyalty. Then, there are the the much sought-after customer loyalty. ‘wow’ interactions, like the introduction of a new channel, which positively delight the Meanwhile, creation of sophisticated pricing customer, resulting in stickiness. Growth-oriented models based on customer value and profile will banks have to focus on these and strive to take care of the profitability angle. For example, enhance customer experience. banks can follow a differentiated pricing model, wherein they first gauge the importance that This customer-centric banking model needs customers attach to a particular product and the to be supported by sophisticated technology price they are willing to pay, and charge accordingly. and tools like analytics which provide valuable insights and enable better customer Multiple channels understanding. Banks can even go a step further and work on applications that track online Thanks to technological innovations, banking behavior and facilitate understanding of real customers have the choice of many channels. time customer needs. While this might involve But having multiple channels is not the same some complications like privacy issues, once thing as having multi-channel banking. What is02 Thought Paper
  • required is a seamless, integrated, multi-channel Consistent experience across channels will leadoffering that considerably reduces the chances to customer satisfaction. Moreover, a qualityof the transaction being abandoned midway multi-channel offering does wonders for thedue to process glitches. Banks should provide brand and is key to enriching customerproactive assistance to overcome potential experience, whether through ATMs withhiccups. For instance, when customers stay on advanced self-service capabilities or mobileone page of their website for a long time, banking or even social media. It also opens thean online chat window can pop up, providing doors to future cross-sell and up-sell opportunities.customers the opportunity to sort out That said, the success and popularity ofproblems, if any. virtual banking channels has not sounded theWith an array of channels, banks can also death knell for the branch, as predictedachieve cost efficiency as they can shift routine by many doomsayers. The oldest bankingtransactions like balance inquiries and account channel continues to attract customers. Withupdate requests to lower-cost channels (after administrative and most back end operationsensuring their capability to handle them), centralized, the branch is now a more productivegiving branch staff room to attend to more sales center focused on providing significantvaluable or complex activities. value addition.Risk managementEach stage of the banking process, from Banks can undertake the following steps tocustomer prospecting and conversion to alleviate credit risk:transaction and communication, is fraught with • Set exposure limits for various kinds ofrisk. Banks today, cannot afford to just react to borrowing and link them to capital funds.unexpected, adverse situations. They have towork out a comprehensive risk management • Have a credit review and renewal policy inpolicy, which enables them to anticipate place. For instance, fix benchmarks for freshproblems and build risk-facing capabilities in exposure and link customer privileges toadvance so as to minimize damage. This does their risk ratings.not entail risk avoidance, but rather, risk • Set up an elaborate risk rating model whereinawareness and consequently, plans for the ratings are reviewed periodically.measurement and mitigation.An effective risk management framework calls • Price risk scientifically by linking loan rates tofor an efficient Management Information System expected risk.and appropriate data warehousing solutions, One of the reasons why banks are unable towhich interface with the transaction and risk manage risk as efficiently as they should issystems. Risk mitigation involves analyzing past because they lack a cohesive approach fordata and setting them up as reference points. handling enterprise risk. Different entities withinHere again, analytic engines and tools play a the bank manage their risks individually, withsignificant role. no visibility or insight into how these risksBanks face risks of various kinds – credit, market, interplay with those faced by other departments,legal, liquidity, compliance and control, and even functions or lines of business. It is imperativereputation risk, of which, credit risk is usually for banks to replace the current silo basedaccorded greater importance than the rest. approach with a holistic model. Thought Paper 03
  • Core banking platform • Scalability across entities and geographies. A robust core banking platform is imperative for • True multiplicity – multiple products, integration effective functioning of banks. Legacy systems of multiple channels, capacity to operate have to give way to new age core banking across languages, currencies and countries. solutions with the following key features: • Sophisticated channels such as Internet and • A unique and integrated customer database mobile banking and multipurpose ATMs with 360 degree visibility, which enables integrated into multi-channel architecture. banks to understand customer needs. • Lower Total Cost of Ownership, through • 24/7 banking access across channels, all outsourcing of infrastructure or application providing the same set of functionalities. management. • Real time processing and updates that enhance customer experience and also enable bank staff to view current data across channels. Global application IT can play a crucial role in enabling banks capital management discipline are the hallmarks to take their customer-centric approach to of new age banks, and the key to reducing the foreign markets, and grow the business from a cost of funding. Banks need to know exactly domestic operation to a multinational one. how their products or lines of business For instance, they can leverage technology to consume capital in order to better manage build a global operating model, which relies assets (their risks) and capital. on global policies, regional hubs for back office operations and the services of strategic A final word outsourcing partners. There have been instances in the past, when This will call for the creation of an appropriate banks tottering under recessionary conditions IT model, that can be standardized and scaled bounced back into the black not just by paring across locations, global hardware infrastructure, costs, but more importantly, by directing their regional development centers and regional retail savings towards strategic investments. This banking platforms etc. time around, banks need to innovate, engage with and win over customers and manage Capital management risks better, to regain the path of profitability and growth. Integrated management of capital planning and consumption, efficient capital allocation and04 Thought Paper
  • References1. w w w. b a i n . c o m / p u b l i c a t i o n s / a r t i c l e s / 5. w w w. t e m e n o s . c o m / D o c u m e n t s / Fi l e s / customer-loyalty-in-retail-banking-americas- About%20Us/Temenos%20Newsletter/ 2011.aspx Temenos%20Newsletter%20Nov06.pdf2. w w w . p w c . c o m / u s / e n / c f o d i r e c t / 6. The Customer-Centric Bank: Debunking the redirects/042711-centric-pdf.html?wt.ac= Myth that Cross-Sell = Customer-Centric CFOdirectPDF_Getting-to-Know-You 7. www.mckinsey.com/App_Media/Reports/3. w w w . p w c . c o m / u s / e n / c f o d i r e c t / Financial_Services/Retail_Banking2010_ redirects/042711-centric-pdf.html?wt.ac= Multichannel.pdf CFOdirectPDF_Getting-to-Know-You 8. www.icai.org/resource_file/11490p841-4. www.rtdonline.com/BMA/BSM/18.html 851.pdf Ashit Gandotra Senior Associate Consultant, Infosys Thought Paper 05
  • About FinacleFinacle from Infosys partners with banks to transform process, productand customer experience, arming them with ‘accelerated innovation’that is key to building tomorrow’s bank.For more information, contact Finacleweb@infosys.com www.infosys.com/finacle© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosysacknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.