Tag: banking

Everest Group Study Analyzes Consumer-Facing Digital Investments of Leading Retail Banks across U.S. and Europe | Press Release

Customer-centric innovation is ‘do or die’ proposition for retail banks; Everest Group reveals what’s working and who’s winning from a digital strategy perspective.

Banks are aggressively investing in digital technology to boost customer loyalty and gain a competitive advantage. In which technology strategies are they investing, and what is paying off? Everest Group answers these questions in recently published research that identifies the digital banking leaders in the United States and Europe.

“Digital innovation and customer experience is the only way forward for retail banks—it is a matter of do or die,” said Jimit Arora, partner at Everest Group.  “They need to innovate consistently and add functionalities across the customer touchpoints to offer best-in-class user experience as well as defend their business against neobanks.

“At the same time, retail banks are facing increased pressure to invest across ‘run-the-business’ initiatives—updating outdated, legacy systems; implementing stronger cybersecurity; observing stringent compliance and reporting requirements; and operating an extensive branch network, just to name a few! This is why retail banks are aggressively investing in digital technology. They must leverage technology quickly and wisely, or they will be left behind.”

Using its proprietary Ability | Performance | Experience (APEX) Matrix™, Everest Group has analyzed the digital banking functionalities of 26 large retail banks in the United States and 18 large retail banks in Europe.

According to Everest Group, the current technology priorities for retail banks include:

  1. Introducing multiple value-added services across digital banking channels
  2. Offering advanced security and authentication functionalities
  3. Providing secure, convenient and fast payment solutions to customers
  4. Leveraging social media for efficient customer service and marketing
  5. Redesigning and creating smaller branches equipped with self-service technologies

“We use the APEX Matrix to assess the extent to which investments by retail banks in these digital functionalities are yielding business results,” said Sarah Burnett, vice president at Everest Group. “This assessment is particularly vital to the retail banking industry today, as competitors in a mature industry seek to differentiate themselves among the consumer base by leveraging digital technology. The APEX Matrix reveals what the leading banks are doing from a digital perspective, and what’s paying off. These reports also assist senior stakeholders to understand the difference in adoption of digital technologies across different geographies.”

The following institutions have been identified by Everest Group as Digital Banking Leaders in their respective geographies:

United States:

  • Bank of America
  • Capital One
  • Chase
  • Citi
  • PNC
  • Regions Bank
  • USAA
  • S. Bank
  • Wells Fargo

Europe:

  • Barclays
  • BBVA
  • HSBC Holdings
  • Lloyds
  • RBS
  • Santander

The complete results of this research are published in two reports available at everestgrp.com:

About Everest Group’s APEX Matrix™

The APEX Matrix is a first of its kind ‘open-source’ evaluation of the digital effectiveness of the largest retail banking operations. The research methodology for the APEX Matrix—designed to spotlight consumer engagement and experience—relies solely on publicly available information and takes into account only those aspects of digital functionality that a customer could evaluate.

The X-axis of the APEX Matrix measures digital functionality across mobility, social, online and branch/ATMs from the vantage point of a consumer. The Y-axis measures the business impact by assessing adoption levels, customer experience scores, brand perception and financial impact. Across the two axes, Everest Group evaluates more than 70 parameters to identify the leaders, innovators, optimizers and aspirants for digital banking capabilities.

Banks Turn to Technology, Outsourcing in Fight for Relevance in New-Age Market | Press Release

Robotic process automation, analytics and consumer-facing technology solutions drive 10 percent growth in banking BPO market.

“If banks do not get their act right, they might soon lose their relevance,” claims Everest Group in new research addressing the business process outsourcing (BPO) market in the banking industry. The fight to remain relevant in an evolving market of new-age consumer preferences and unprecedented external pressures is driving demand in the banking industry for technology solutions and third-party assistance, as reflected in an approximately 10 percent compound annual growth rate in the banking BPO market.

Describing the future outlook for banks, Everest Group points to evolving consumer preferences, macroeconomic and regulatory pressures, and increased competition from non-traditional players. Traditional, brick-and-mortar bank branches are losing significance as consumer interest in traditional banking channels declines. Banks are also under serious pressure to reduce costs, increase profitability and respond to greater regulatory and compliance requirements. Furthermore, competition from non-traditional sources is on the rise. Financial technology companies (FinTechs) are a serious threat as they provide a better consumer experience and benefits such as ease of use and improved functionality. Also, the market for digital wallets (e.g., Apple Pay), person-to-person (P2P) transfers (e.g., Facebook Messenger and SnapCash) and new-age banking solutions (such as applications for wearables, voice-activated assistances and personalized interfaces) is growing rapidly.

“Consumer preferences are evolving fast, and banks need to align themselves with consumers’ desires,” said Anupam Jain, practice director at Everest Group. “The consumer wants their financial partner to be integrated with their daily life and to be easy to access. They want real-time advice based on their own transactions and behavior. This is why we are seeing growth in banking BPO: service providers can support banks by offering domain expertise and analytics; by leveraging technology to offer modern services; and by using tools like robotic process automation (RPA) to improve efficiency and cut costs.”

Jain points to four case studies cited in the research:

  • A leading bank in Europe replaced its in-house core banking solution with a modern core banking platform and outsourced back-office services with the aim of improving efficiency and cutting the costs of regulatory compliance.
  • A leading UK investment bank leveraged RPA to achieve 80 to 85 percent time saving in its management reporting and indexing processes
  • A leading bank was able to reduce the time needed to identify problem loans from greater than 100 hours to less than 5 minutes using an analytics solution
  • With the support of a service provider, a leading bank was able to streamline its anti money laundering (AML) process and thereby realize a 30 percent cost advantage.

Other key findings:

  • The US$3.8 billion banking BPO market is poised to grow at a steady pace of 7 to10 percent compound annual growth rate, driven by increasing adoption of technology and automation.
  • Traditional banking faces pressures from FinTechs, telecoms, retailers, etc., driving demand for innovation
  • The macroeconomic environment, regulatory concerns, changing consumer preferences, and growth in adoption of automation, analytics and risk management services are some of the key factors influencing the market
  • BPO demand drivers vary by banks’ size, with smaller banks seeking operational support and larger banks using service providers to drive regulatory initiatives.
  • Robotic Process Automation offers an opportunity for service providers to help banks in the short term by fixing broken systems and in the long term by aiding the transition to new-age systems
  • Among the service providers covered by Everest Group, Genpact, TCS and Xerox continue to dominate the banking BPO market
  • Service providers are looking for new opportunities such as delivering more complex processes to counter the fading labor arbitrage and efficiency drivers.
  • The US and UK led the establishment and growth of the BPO market. North America accounts for the highest share of global BPO revenue, followed by Continental Europe and Asia Pacific, which are driving the next growth wave.

These results and other findings are explored in a recently published Everest Group report: Banking BPO Annual Report 2016: Riding on the Digital Wave and Advancing in Automation. The report provides comprehensive coverage of the global banking BPO market including detailed analysis of market size and growth, buyer adoption trends, solution characteristics and the service provider landscape.

 

Don’t Turn Cross-selling In Banking into A Villain | Sherpas in Blue Shirts

A critical factor behind the Wells Fargo fiasco was the incentivizing of employees based on their ability to achieve their sales targets by cross-selling products. While this is the easiest and lowest cost model for defining and measuring sales team performance, it can lead to fraud if left unchecked. In Wells Fargo’s case, over 5,300 employees were fired for fraud that occurred across multiple years and led to the exit of CEO John Stumpf.

The scandal raises serious questions. Did Wells Fargo not have the data and analytics tools needed to identify fraud that had been going on for so long? Did the bank’s processes not have a channel to capture customer feedback on transactions to raise a flag for the fraudulent activity? Can we create employee performance measures other than sales targets?

To answer these questions, I believe banks need to go back to services marketing basics 101:

  1. Measure customer acquisition costs
  2. Develop mechanism for measuring customer satisfaction (in almost real time, on an ongoing basis for consumers in the age of connected ecosystem)

If Wells Fargo had measured the cost of acquisition per customer and had the ability to drill down at the sales representative level, it would have realized that the 5,300 fired employees had unbelievably low cost of customer acquisition for the sales they made over the years – meaning they were doing amazing, or fraudulent, work. Whichever the case, the bank would need to explore further.

These days, measuring customer satisfaction after every transaction is the norm in many industries. After every call I make using Skype, the application asks me to rate my experience. The same is true for every Uber ride I take, and each time I book a flight online.

Can’t banks do this? I believe they can. It makes sense for multiple reasons:

  1. In the age of agile development and DevOps, driving continuous integration and continuous deployment the customer feedback loop needs to be real time for the customer experience and service design teams to actually drive continuous improvement of their systems
  2. This helps banks develop a rich data set that can be used to drive process and product design and improvements, and also identify fraud
  3. The data can help improve the customer experience, and demonstrates to consumers that their feedback is valuable. Customers can be enticed to leave feedback through offers of loyalty points, which in turn can help improve customer retention
  4. This approach drives customer centricity, and ensures designing processes that are aligned to the needs of customers
  5. Banks can use this data to predict the need for different segments of customers, and help drive personalization of user experience

While there are many more reasons why measuring customer satisfaction is valuable for banks and customers alike, let’s dive a little deeper into the idea of using it to measure sales team performance.

Banks can use the customer satisfaction measuring mechanism to capture feedback that enables measurement of the effectiveness and value added by the sales team member across the customer lifetime journey, from being on-boarded to systems to purchasing products to retiring products.

By embracing a customer-centric design philosophy for all its internal processes (not just for its products and services), including performance appraisals of all employees, with every KPI being linked to customer satisfaction, banks will be able to create a consumer-centric enterprise.

True that Wells Fargo’s case has made the idea of cross-selling a villain. But we must realize that its debacle was also caused by other more pressing issues such as top management failure to respond to the matter in time, lack of data and analytics solutions to identify fraudulent transactions, and the organization culture that promoted unethical behavior.

FinTech players in the market are looking to disrupt traditional financial services players by leveraging technology and designing for customers. However, they face challenges in terms of gaining customer trust and loyalty while building scale. Traditional banks boast of having scale and years of customer trust. But, we are witnessing erosion of that trust. While financial services enterprises are investing heavily to embrace the wave of digital disruption from FinTechs, they need to ensure while they pursue this strategy they continue to protect their competitive advantage of years of customer trust.

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