Have you ever wondered how Apple AirTags will impact banking? Perhaps you should.
Every time consumer tech gets simpler, more automated and more helpful, consumers start to expect more from all their providers across all industries. That includes financial services.
Perhaps consumers will expect credit cards that they’ll never misplace, one that will have the equivalent of an AirTag built in? Or phone apps that summon lost receipts. While I cannot predict future customer expectations, there is one thing I can tell you for sure: Customer expectations will constantly evolve, and those who serve them need to respond quickly.
After all, a seamless and elegant customer experience is where companies win the battle for customer mindshare. Institutions like Goldman Sachs have gotten the message. Goldman purposefully optimized its Marcus banking service to prioritize an excellent digital experience. That online platform provides innovative, easily accessible banking solutions, for which Goldman has received industry-wide recognition.
Leaders in banking and financial services must similarly strive to deliver such high levels of service consistently to satisfy today’s customers. The customer with a multifaceted portfolio expects a consistently high degree of service across every service (checking, savings, loans, mortgage) and every channel (text, email, web, mobile, ATM, brick-and-mortar). Just perfecting part of the experience isn’t sufficient; rather, that approach would shine a spotlight on shortcomings elsewhere.
It is also vital to bear in mind that today’s standards and expectations are already aging. By the time a project started today with today’s assumptions sees the light of day, the bar will only have moved even higher. Banks must anticipate and prepare for continuous innovation.
And customer experience is just one aspect of innovation. There are similar significant trends regarding new payment options, biometric security, IoT-enabled insurance services and more.
So how do you innovate fast enough? Goldman Sachs achieved its success with Marcus by starting from scratch. But, most banks cannot afford that approach. They need to work with existing systems and processes and gradually expand from there. The problem herewith is that an otherwise well-optimized but overly rigid technology stack makes change exceedingly difficult, if not impossible.
The answer for financial services institutions lies in building a “platform of platforms,” abstracting away complexity to create a universal platform that delivers innovative services. When fully implemented, such a foundation is composed of technology and infrastructure, knowledge and processes, as well as adaptable, persistent and pervasive skills.
Hitachi Vantara has worked with large and medium-size banks worldwide to rearchitect their digital core to foster rapid innovation, and we understand the best practices. Let’s look at the top five technology innovations that underpin a banking innovation platform:
1. APIs for Access
APIs are the fundamental building block of flexibility. They provide the means to access data and critical application functionality, which are the foundation for providing customers with smooth, efficient, modern performative experiences.
Simply having “open APIs” is insufficient. A purposeful API tier that can access systems of record and aggregate data and functionality for the app is needed to support higher-order experiences.
How does this translate to something with which a customer can interact? Consider the customer who accesses their account from their mobile phone, as 50%-80% of Generation Zers already do today. In a given interaction, they might encounter facial recognition, use a cryptocurrency to pay for a transaction, with funds swept across an ETF portfolio designed and maintained automatically by artificial intelligence and machine learning (AI and ML) based systems.
Microservices enabled by APIs supporting every individual action within that encounter. The API approach makes it possible for institutions to break free of the trap of monolithic applications that are difficult to evolve. Decoupled microservices can instead be applied and adapted in endless permutations to deliver the best customer experience today and tomorrow.
2. Robotic Process Automation
For the customer to take advantage of the many services enabled by the API layer, the intention of the customer must be clearly understood so the right services can be invoked. For example, if the customer wants to open an account from their phone, their request will require the actions of numerous APIs. Process automation codifies that operation so that the correct calls are made without requiring the involvement of any staff so that the customer’s experience flows unimpeded.
Creating such a system starts with understanding the many steps involved in a given process. That includes all the minutiae of opening application windows and moving information previously handled manually by an agent or a ponderous batch process. Those steps are compiled and codified so they can be performed by robotic process automation (RPA); in effect, this is a layer that can execute manually repetitive tasks without intervention. This approach can provide immediate returns to the institution by reducing costly, error-prone manual steps.
3. Artificial Intelligence
AI makes it possible to mine data from processes in action. It creates opportunities to monetize that data by presenting the customer with additional service offers, retaining customers, or recognizing macro-level patterns across groups of customers that suggest regional options.
AI is invaluable to making processes such as onboarding and fraud detection more streamlined and detecting anomalies within data. As such, it is a valuable tool for performing due diligence, detecting and avoiding fraud, and many other activities that can benefit from pattern detection capabilities.
Enabling automated customer operations at scale requires AI and ML to detect data gaps, enable iteration and enhance data quality. AI and ML make effective decision-making possible by performing these functions seamlessly, triggering actions and redirecting workflow in real time, without disruptions. It would be inefficient and likely impossible for people to manage these functions at scale and at a pace that can deliver a satisfactory customer experience.
4. Data and Application Integration
The building blocks described above need to be fully integrated with the requisite upstream and downstream applications. For example, it’s no good for AI and ML to identify a potential opportunity if there is no way to integrate those results and information. Reporting and the ability to take action are the foundation systems on which the institution runs.
These systems will also create vast quantities of data and other content. This information must be moved into a new hybrid system composed of data warehousing and digital asset management capabilities to record, store and recall information on demand. For example, for regulatory and compliance purposes, you need data, as well as descriptors of how that data was captured and how it has been managed. That complete picture is the product of integration.
For business and technology to work in tandem, both the business catalog and the technology attributes must be aligned to be accessible and deliver value through many different mechanisms and contexts.
5. Modern and Automated Infrastructure, Edge to Cloud
Applications run on infrastructure composed of compute, networking and storage. That infrastructure needs to be highly available, responsive, secure and compliant while being distributed across multiple clouds, data centers and even branch office systems. At the same time, it must support workloads that may change rapidly in the future.
An effective infrastructure modernization approach adopts cloud-computing principles, even for on-premises data center and edge workloads, including container management and orchestration, hyper-automation, and dynamic storage tiering.
Your Innovation Platform for What’s To Come
The net result of these new layers is an environment within which applications can be assembled, disassembled and reassembled as needed. That dynamic approach is the essence of an effective user interface and, by extension, an excellent customer experience. By supporting flexibility “under the covers,” it becomes possible to meet customers’ escalating expectations at all times and in all scenarios, consistently and efficiently.
Delivering a superior customer experience is just the tip of the iceberg. An onslaught of change is underway, bringing cashless societies, pin- and password-free banking (biometrics trend), decentralized finance, cashless societies, dark data and more. Building an effective innovation platform today will be the key to adapting quickly to meet tomorrow’s requirements and opportunities.
Suranjan Som is Vice President, Head of Financial Services Consulting, and Client Engagement Partner, EMEA, at Hitachi Vantara.