There are innumerable opportunities for solving traditional problems and adapting to the new trends in the financial services industry, with the help of technology and innovation, avers Jaya Vaidhyanathan, Executive Vice President and Head of Technology and Strategic Transformation in Scope International P Ltd, Chennai (http://bit.ly/F4TJayaV).
As examples of innovations in the consumer segment, Jaya mentions the following: Demonstrable financial inclusion at a reasonable payback, low-cost branches giving the cost advantage and higher penetration for rural and urban customers, reaching out to a wider customer base and analysing customers’ sentiments and responses towards the existing and new products by using various social media channels, mobile apps providing not just basic banking solutions but next-generation services as regards promotions and rewards, Gen-Y related offerings such as mobile wallet and instant incentives, customer co-creation with a focus on the lowering average age of the customer base, use of robotics to enhance customer interaction experience and promotions, and integrated platforms for seamless switching of customer transactions across various modes.
In the SME (small and medium enterprises) segment, innovations are taking place by partnering with SMEs for providing virtual banking services which are low-cost and highly scalable, adds Jaya, during a recent interaction with Business Line. “These include managing working capital, supporting business expansion, enhancing yield on surplus cash, and the provision of easy access and convenience as well as an extensive network.”
Our conversation continues over the email…
Excerpts from the interview.
Can you describe a few examples of how IT helps businesses in finding new solutions to traditional problems?
If we look back at the banking technology solutions till date, they have mostly been in two main areas, viz. efficiency and convenience. First, efficiency-deploying systems have helped us manage some of the most complex operations more efficiently. The second area, ‘convenience,’ is about solutions that helped us reach the customer when he/she required the service through ATMs, Internet banking and so on.
While banks continue to sharpen their edge in these two areas, banking technology now is playing an increasing role in expanding the customer base, and ensuring better governance through business intelligence.
A good example of how technology innovation is helping in expanding customer base is rapid branch deployment at a low cost which is a traditional problem. Technology now has solutions that would enable us to deploy a complete branch solution in under $10,000 using virtual ATMs that connect to back-office branch locations with complete branch services, including global SME connects through the use of virtual conferencing on ATM, cheque fraud scans, document scans and other services in under 400 sq ft space.
Financial inclusion with biometric ATMs, smartcards and other offline services, and customer attraction and retention through the optimal use of customer channels are other examples.
An area where increased investment is happening is business intelligence, which is being used to help manage the growth objective along with a better appreciation of the underlying risk. The aim is better governance and greater compliance to requirements like Basel III. This focus area will continue to see more solutions as regulators play a greater role in the emerging world, or as some call it the “new normal.”
Aren’t there challenges when financial services bank heavily on technology?
Continuing my thought on risk, as technology helps businesses manage risk better, we need to answer similar questions about the risk that the typical large and complex IT operation of a bank is exposed to and how we manage this risk well.
In my view, stability and scalability are key drivers. The basic technology platform needs to be scalable and stable to handle the onslaught of new open channels and interfaces that keep added on to the fundamental infrastructure. Unless the focus is on stability of the primary platform, the other bells and whistles are not useful.
We also need to be focused on all the aspects of information security and disaster recovery, in an environment where a twin disaster like what has happened in Japan can test our preparedness.
On a different note, if we look at the importance of technology in delivering differentiating services, then a very big challenge is to keep innovating for driving new solutions. This to me is a far bigger challenge. And, today, IT is finding a seat in the board to address these issues.
Where does the human element fit in IT innovations?
The emergence of social media has made the human element very critical. Let us take the introduction of a new variation of the credit card as an example. The blog volume and the volume on social networks go up.
A synthesis and analysis of the feedback along multiple dimensions, and quantitative scoring of the blogs can be done using an IT tool. The same tool can be used for doing a correlation analysis with other credit cards to analyse potential variations on human aspects of communication regarding our new products.
As financial services firms realise the need to enhance the customer experience and simplifying it, their innovation strategies are also centred on these themes. In a majority of recent innovations that we have seen – be it the social media, SME focus, or virtual banking – the focus revolves around the human interaction and interfacing dimensions.
One area where the human element of innovation comes to the fore is the branch banking experience. Comparing the branch banking experience now with that of a few years ago, it becomes evident that technology has brought about a sea change both for the bank internally and for the external stakeholder, most of which is through innovation in the human interactions sphere.
How does one measure performance or effectiveness of innovation?
Wideness of adoption by customer, and the effectiveness of deployment are clear winners. Business value, measured by top-line revenue impact or lower cost of customer acquisition, is an all-time favourite.
Taxonomic classification of measures of innovation takes a three-dimensional approach, and is structured thus:
1) Results-based measures – These focus on business outcomes, such as sales or profits, stock price or market valuation. Results-based measures are lagging indicators of innovation capability; they show the results of a company’s past efforts.
2) Process measures – These capture the activities that contribute to these business outcomes, such as the number of projects in the pipeline, time-to-market, or percentage of sales from new products. Process measures provide what organisations call leading indicators of innovation performance; that is, measures which could tell you how the organisation will be doing in the future, rather than being a reflection of the past.
3) Project measures – These look at the returns and investments from specific innovation projects.
Measures such as ‘time-to-cash’ or ROI are calculated on a project-by-project basis. Project measures are especially prevalent in long and intensive innovation cycles, where innovative efforts are undertaken in large and discrete projects.