This Thursday’s Thought Leader Actiance (#TLTActiance) guest blog is by Elizabeth Lumley, special projects editor at financial services newswire Finextra, based in London. Follow her on Twitter @LizLum
According to research from the Boston Consulting Group, revenues from global transaction banking are expected to grow from $189 billion in 2011 to $509 billion in 2021 – an increase of 170%.
This renewed focus on the transaction bank has brought up several key trends. To highlight these I’m going to look at two trends from Finextra’s Global Banking Transaction Survey.
Most banks are combining cash management, payments, trade finance (and sometimes securities services) into one business unit.
Almost 90% of the banks surveyed in 2012 have created a transaction banking group, combining these business, or plan to in the near future. That number has grown exponentially. In 2010, 57% of those surveyed had merged, or were planning to merge, their trade finance and cash management business. That rose to 77% in 2011.
Now, there are a few issues I have with these statistics. And it’s from a technical, rather than a business strategy standpoint.
The client-facing sides of the bank are now concerned with this idea of ‘customer-centricity’. Banks need a ‘customer view’ of their services, not a product-view of their services. Why?
So that banks can enable a stronger strategic focus on customer service, channel and product innovation. So that banks can ‘cross-sell’ their services. It is not a giant leap to suggest to a cash management client, that ‘oh by the way…we also offer supply chain.’
However, saying that a bank is now ‘customer-focused’ rather than product-focused, is very different from re-engineering decade’s old, legacy-heavy, enterprise-wide infrastructure that has been aligned along product lines.
Piecing together your old ‘product’ systems with some dodgy middleware, sticky tape and chewing gum, or moving your cash management guys to the same floor of the building as your trade finance gals – does not mean you are now operating in a serene, holistic, IT paradise (complete with angels and cotton candy.)
In 2013, most banks ‘want’ to combine their business under the neatly packaged ‘transaction banking’ umbrella – because of all the reasons cited including ‘better press’. (I mean who will admit, to the media, that their business is struggling to cope with changes in customer behaviour; with ageing systems that were probably built when people thought having a phone in your car was the height of innovation?)
But many banks are still struggling with real issues concerning complexity their IT environments. In fact 57 per cent of respondents, to the survey, said IT and system complexity is a hindrance. Any business within the bank, can offer cool, smart, innovative products – but if the infrastructure supporting them is, for lack of a better word…creaky, then the whole house of cards will fall apart.
Mobile channel development is a growing trend, with 45 per cent of banks ranking this a priority in the coming year, while 63 per cent said expanding self-service channels such as mobile would be part of their strategy over the next three years.
Conservative IT people – and let’s face it most bank IT people aren’t your young guns in hipster jeans and retro glasses (not that I’m saying that’s a bad thing) – tend to deal with innovation in terms of ‘products’. The digital revolution that has been going on around us, in the consumer world, is often seen in banking as a mobile revolution.
The questions that are being asked in innovation and development teams right now are:
- How do you get payments on the phone?
- How do you engineer a ‘Wallet’ on the phone?
- How do you allow a corporate treasurer to authorise a payment on the phone?
This is the ‘mobile as a channel’ view of the world – which has led many banks to make the mistake of trying to shove the online banking experience into the mobile. (Or to shove the card onto the phone via NFC)
You should not think of mobile as a channel, but think of it as the channel. Whether you’re a retail customer or a corporate customer – you’re not looking for banking services ‘on a mobile’ you are looking for ‘mobile banking services.’ There’s a difference.
The cell phone, tablet or smart phone is merely the device of today.
According to last year’s Capgemini World Payments Report only two percent of mobile phone users have ever made a payment using their phone. Customers are not crying out for more apps – where they are moving towards is being able to access banking and payments services wherever they are.
It is people who are mobile. If your innovation strategy is bogged down with the device – it will move in the wrong direction.
That revolution in consumer banking is having an immediate impact on what corporate customers are demanding from their banks and how banks plan on focusing their investment in innovation.
Elizabeth Lumley is a global specialist commentator on services, regulations, risk, data and technology in investment, retail, and global transactional banking. She is an internationally recognised reporter, tweeter, blogger and broadcast journalist. Elizabeth Lumley is currently special projects editor at financial services newswire Finextra, based in London, where she is responsible for all the multi-media output.