How mobile consumers are changing the face of retail banking

Clare Grant, General Manager, Mobile, Red Hat

The UK Chancellor has announced that FinTech Week will take place in April 2017, to showcase innovation in the sector and attract investment to the UK’s financial technology sector and business support to start-ups.

In May 2016, the BBC reported the closure of more than 600 bank branches across Britain during the prior year. a trend that can be attributed to the increasing popularity of online and mobile banking.

And an Ofcom report from 2016 shed some light on this behaviour, noting that “in March 2016, nearly a third (30%) of mobile internet users used their devices to access their bank accounts and 20% used their device to pay or transfer money electronically.”

The British Banking Association has also reported that while visits to branches have declined, mobile banking apps were used four billion times a year, and logins to mobile banking increased to 11 million a day in 2015.

Industry analysts expect that a steady shift to mobile could force banks to reconsider the technology suppliers that they select to support future services. A Gartner press release on digital banking demands predicted that “by the end of 2019, 25 per cent of retail banks will use start-up providers to replace legacy online and mobile banking systems.”

It identifies seven types of providers of digital banking platforms in a market that is very fragmented. “Vendors include: incumbent bank niche vendors, mobile or online banking solution vendors, horizontal digital platform and customer experience vendors, horizontal portal vendors, system integrators, emerging digital banking vendors, [and] start-up digital banking vendors.”

As more people start to view their smartphone as the first point of contact with their bank, CIOs in the banking sector should prepare for fundamental changes in the technology they use. Closed and proprietary banking systems can hamper banks from bringing fresh digital services to market to compete with newer entrants to the banking sector, which are digital first and digital only.

Meeting customer demands

The Gartner press release outlines a similar concern, stating “Incumbent vendors often do not support open architectures that decouple the presentation of services from the services and transactions themselves and, crucially, enable the bank to bring new and existing processes together to offer innovative digital services.”

“This is why many banks developing digital banking strategies to meet customer demands have sought out new providers to replace their existing online and mobile banking solutions with digital banking platforms,” wrote Stessa Cohen, Gartner Research Director.

Authors of a December 2016 report “The Enterprise in Motion: Phenomena Transforming Business Process Management and Mobility,” which was commissioned by Red Hat, agree with this need to decouple legacy back-end systems from the way services are presented to banking customers, in order for banks to compete with traditional rivals and new entrants to their market. The analysts observe that the way in which banks deliver services impacts customers’ perception, commenting, “‘how an enterprise does things to deliver customer value often determines its competitive advantage and market success.”

To support this requirement, the 451 Research analysts point to the evolution of mobile application platforms (MAPs) that enable banks to deliver agile front-end app development that enhances the user experience for their customers, without impacting monolithic banking systems in the back end.

“MAP offerings came to market with tools to support greater agility of front-end application development. They are particularly good at user interface (UI) and user experience (UX) designs. Moreover, MAPs make thorough use of device features (e.g., location of mobile users and images taken with the mobile device’s camera) that add context to the data orchestrated in and out of mobile applications.”

“More importantly, MAPs provide reusable back-end services and APIs (application program interfaces) that ease the secure integration of applications with systems of record (e.g., enterprise resource planning [ERP], supply chain management [SCM], customer relationship management [CRM], etc.) and other cloud-based back-end application services. This infrastructure became known as mobile backend-as-a-service (MBaaS), which has now been subsumed within MAP architecture,” wrote 451 Research analysts, Chris Marsh and Carl Lehmann.

By focusing on their customers and prioritising the key business processes, retail banks can create apps that deliver great user experiences. There are apps that can already call up customer data from core banking systems, as well as using email, messaging and social media services to engage more effectively with consumers.

Looking globally 

An example of the use of mobile device features is Standard Bank’s SnapScan mobile payment app, which is used by more than 22,000 merchants in Africa.

In the US, Mitek Systems’ Mobile Deposit® app is used by more than 70 million consumers and is estimated to have saved financial institutions $2.5 billion in cheque processing costs.

In the UK, a leading retail banks has opened a dedicated technology centre in its Edinburgh office and is working with start-ups and technology providers to support collaborative development of customer apps. IT experts at the technology centre are working with financial technology companies and open source technology partners to explore new technologies and develop ideas into customer pilots. They are also working to identify emerging financial sector trends and technologies from around the globe.

Adopting digital platforms that de-couple back-end systems from front end user interface systems is one way retail banks can maintain more robust security safeguards while innovating and enhancing the user experience.  This can be an effective way for banks to maintain customer loyalty while gaining adoption for new services in the face of competition from an increasingly diverse ecosystem.

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