Thought Paper:Four Strategies to Build the Smarter Bank


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Robert Kiyosaki, American investor and author (of Rich Dad Poor Dad fame), hits the nail on the head when he says, “You have to be smart. The easy days are over.”

As consumers go about trying to manage their money, there is an opportunity for banks to show them that they’re not alone – by being the ideal financial partner that listens, understands needs, shows respect, acts with integrity, serves with a purpose and exceeds expectations through its products, services and financial guidance.

In other words, by becoming a smarter bank.

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Thought Paper:Four Strategies to Build the Smarter Bank

  1. 1. Four Strategies to Build theSmarter BankThought Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
  2. 2. Four strategies to build the smarter bank Robert Kiyosaki, American investor and author that such complacency does not become an (of Rich Dad Poor Dad fame), hits the nail on the impediment to their growth, leadership and head when he says, “You have to be smart. The relationship with customers in the future. As easy days are over.” consumers go about trying to manage their money, there is an opportunity for banks to Four years since the toughest financial crisis in show them that they’re not alone – by being over hundred years broke, the world still hasn’t the ideal financial partner that listens, come to a state of equilibrium. For consumers, understands needs, shows respect, acts with who have been hit hard, it has never been more integrity, serves with a purpose and exceeds critical to make the right financial choices – while expectations through its products, services and building budgets, protecting assets, repairing financial guidance. credit history, or simply making ends meet. For banks, this is a time of recurrent cyclical change, In other words, by becoming a smarter bank. in which crisis is followed by recovery, only to be But first, what is a smarter bank? followed by crisis, to leave a lasting impact on the global economy by redistributing influence • A smarter bank is differentiated on the outside, and power. which makes it agile in the marketplace. So it is no surprise that survival is the current • A smarter bank is simplified on the inside, flavor of financial services. Consumers have traded which means it has a simpler operating model. their fondness for debt for a smart spending • A smarter bank uses ease of execution to mindset, with the hope of reclaiming financial deliver excellence and efficiency. terra firma; and similarly, banks are doing what they can to keep their heads above water. Under All the characteristics of a smarter bank, detailed severe pressure, it is easy for banks to content in the next section, can be classified under the themselves with surviving; they must be careful above three attributes. Differentiation on the outside leading to agility in the marketplace The smarter bank eyes both organic and inorganic cautious about the cost of the service that they growth; hence it not only enriches its own are getting from banks, affordability, convenience products and services through innovation, but and accessibility. Differentiation cannot be on also complements them with external offerings the product and services but on how they are sourced through partnerships, white labeling priced, the way they are distributed and relevance deals or co-opetitive arrangements. to the customer. For example, customer must have convenience and flexibility to choose the Its product innovation extends to smart bundling, right service accordingly to their ability to pay. which means the creation of a bundle of In other words, customers determine the price products and services in real time, in the context of the service that they avail from the bank and of the immediate situation, location or need. use it to their convenience – a phenomena similar With the crisis over-looming the economy and to combining Do-it-yourself & Pay-as-you-use. consumerism, customers are more and more02 Thought Paper
  3. 3. The smarter bank runs a one stop shop; it’s the but become a part of organization’s DNA.hub in a networked multi channel environment Simplification aims at achieving processwhere all products and services are provided to efficiency, as a means to create differentiatedcustomers, from end to end, under a single roof, experience through every interaction betweenthrough the branch or any other channel. the customer and the bank. For example, the communication to customer in the form ofBusiness is rapid at the smarter bank, which is offers, contracts and pricing can have a simplisticquick to identify and tap new markets, zero in approach of how it is delivered. This cannoton the target segments, and understand their be at the cost of burying the complexity withunique and specific needs. technology but simplifying the processes and practices through technology.Simplification on the inside leading to asimpler operating model The operating model constituting design to delivery of products & services need to alignThe smarter bank simplifies continuously to with the organization goals. Simplification wouldsail the seas of complexity. For example, it be one of the imperatives driving these goals.standardizes products, processes and systems on At the same time, quick scalability – a hallmarkan ongoing basis. of the smarter bank has to be supported byThere is a vast area banks can include in their simpler operations and optimized cost to runapproach to simplify. This approach cannot those just through one initiative or a programEase of execution leading to excellence andefficiency in deliveryThe smarter bank takes the path of online real Customer engagementtime, and high automation, to achieve ease The smarter bank faces many challenges onof execution. the customer retention front: more competition,It is a facilitator of All Time Banking, wherein including from non-traditional players; waningevery functionality, however granular, is available loyalty, especially among younger customersto and used by banks, bank employees, bank’s who are distanced from their bank; and loss ofpartner ecosystem and customers round the customer intimacy to self-service banking.clock, independent of location. In the smarter The answer lies in finding new ways to improvebank everything, from technical features to engagement. For instance, a smarter banksystem functionality to business processes might look at improving its understanding ofto products, interactions and channels, is customers through a more refined segmentationAnytime, Everywhere. It achieves this by aligning approach that takes into account customerbusiness processes with the bank’s product aspiration, attitude and behavior in additioninnovation, channel diversification and customer to objective criteria of demography, ethnicity,experience strategies. geography and financial status.While there are many ways to build a smarter It might turn the rules of product promotion onbank, some factors will play a central role in its head to go from product oriented customersuccessful strategy. These factors, and their communication to customer tailored productimpact on shaping the attributes of the smarter communication, in which each message is craftedbank, are discussed below: Thought Paper 03
  4. 4. to suit the recipient. Or fortify the traditional and an accurate, enterprise-wide view of the channels of product distribution – branch, ATM, bank’s products and services; tools such as kiosk – with social media outreach. product configurators, simulators, modelers and goal seekers that suggest the right financial Then again, the smarter bank would be advice for each customer; and technologies quick to identify the benefits of using higher like Internet, mobile and Push to Talk that give customer information management technologies, them – as well as the bank’s subject-matter such as analytics and predictive modeling over experts and product managers – easy access to the traditional tools of CRM and offline market customers. Indeed these technologies are also research campaigns, in real time decision-making. vital building blocks of the smarter bank, as Customer and Employee Empowerment: From they help to simplify operations and improve its extensive studies of human behavior, Gallup execution by enabling real time automation, has established that customer satisfaction is All Time Banking, and the creation of a one meaningless without emotional connection, and stop shop. that businesses need to cultivate both in order That being said, the tools of technology are to secure beneficial financial outcomes, such as mere tools, and most banks have them. What higher spends per customer or lower attrition. differentiates a smarter bank from the rest is Therefore, the smarter bank must aim at creating that its employees know how to leverage these a relationship from which the customer not resources to elevate customer interaction to a only derives rational satisfaction (good products, level above the purely transactional, at which competitive prices, easy reach) but also finds they are able to understand the customers’ emotional fulfillment. Empowerment is the key broad needs and specific context, and accordingly to such relationships. The bank must empower make superior, intelligent suggestions and its frontline staff with: technologies that provide guidance, instead of merely giving them what them a unified view of the customer relationship they ask for. Convergence of bank and customer IT Today, the line between organizational and enabling customers to move seamlessly between personal systems has started to blur, as a banking channel and their social network in individuals tap into the same technologies and order to seek a bank advisor’s opinion, validate devices during and outside of work, and companies it with their friends, and complete a purchase, leverage what were once considered personal all during a single interaction) or product technologies to expand their business. innovation (by using consumer insights from social media to develop new offerings). The smarter bank must abide by this trend and take its business processes outside of its four walls, into the consumer IT domain of social Acceleration: media and personal mobility tools. This means, This is a strategy, which a smarter bank can for example, that the systems and processes deploy to cope with the constancy of economic supporting interaction between a bank and its crisis and recovery. While other banks conserve customers should also be available on social their energies and resources to wait out the networking sites. current upheaval, the smarter bank goes into When bank and customer IT converges in this overdrive to find a way to orientate its current manner, it will also enhance the bank’s other business model to a future direction. It uses smart attributes, such as differentiation (like this quiet period to revisit its priorities and Citibank’s loyalty program application on areas of focus and investment. For the smarter Facebook), ease of execution (for example, bank, the goal is not to survive the crisis by04 Thought Paper
  5. 5. slowing down, but rather, to charge ahead of players. With every bank adapting strategies toits rivals into a better future. win over their current state, what’s differentiating now can easily become something that canWhat next for banks? be imitated. Rather differentiation becoming a milestone, it has to be a journey that banks takeThe last financial crisis has left a huge impact on to succeed.banks, manifest as lower growth, smaller profit,bigger demands, more regulation, and so on. Although banks may still choose to wait andIt has also driven customers into the arms of watch, they cannot remain much longer in thenew age service providers, employing creative traditional mould because there’s a breed oftechnology, innovative business models, and smarter banks out there, just waiting to take theircustomer-centric measures to satisfy needs that place through better engagement, empowerment,might have been overlooked by the established and use of technology. Sai Kumar Jayanty Lead Product Manager, Finacle Thought Paper 05
  6. 6. 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© 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.