When we think of the transformation of banking, it tends to relate to the consumer side of the business, particularly online banking and apps. While this area has developed, and will continue to do so, more fundamental systems are also in need of transformation.
Ciarán Harris, co-founder and director of user-experience (UX) consultancy Each&Other, said a renewed focus on the design and user experience of banking upgrades was being driven by three key factors.
Quite often, the biggest reason is regulation, and, in tandem, you get system obsolescence. Systems come to end-of-life and need to be upgraded and replaced.
Alongside these two, new competition is also present in the market: “The third, which is more visible but perhaps less of a factor, is competition, such as from the neo-banks.”
Neo-banks have been on the scene for some time, with Revolut in particular making waves in Ireland. More are coming: this week it was announced that Dutch digital bank bunq had entered the Irish market with a banking service that uses Irish international bank account numbers (IBANs).
The banks have been in a bit of denial that they are an issue. Not many people are using neo-banks for day-to-day banking, but loads of people have accounts and once that momentum is built-up they will be hard to stop.
For the moment, however, traditional banks are looking at their core systems to see where improvements can be made.
Each&Other has performed research with banks based in Britain and found that the scope for improvements runs the gamut from large overhauls right down to small changes that make a real difference.
“These are banks going through some kind of transformation, usually operational transformation. We worked with one bank whose call numbers were huge. People just couldn’t find the information online. We looked at it and found there were immense challenges to find even quite basic information online. Some simple editing and content restructuring [which is now being done] would save literally hundreds of thousands,” Harris said.
Another innovation was with a bank in Ireland, allowing customers to see their balance without logging in. This move was driven by Each&Other’s real-world customer behaviour research.
“The phone was the trusted device and seeing the balance doesn’t allow you to do anything else. The driver for that was we did some observational research and we found there was a spike in logins but not in online transactions at 6pm. We found it was people standing in the supermarket queue checking their balances.”
Of course, banks are also faced with significant regulatory challenges, and it would be fair to say that today, banking and financial services exist in an ever-changing environment.
“Quite a lot of the regulations came in after the financial crash, aiming to bring more accountability and responsibility into the world’s finance,” Harris said.
Getting systems ready to deal with coming regulatory evolution does not occur overnight, however. “Out there in the market, we’re seeing some people still implementing KYC [know your customer] and AML [anti money laundering].”
The issue typically is that inflexible IT systems need to be dealt with, and there was no single solution for doing this. “There are different ways of tackling legacy hardware and systems,” Harris said.
One of Each&Other’s clients, based in the Middle East, found it was easier to develop a new system rather than work with the existing one. In other cases, the answer may be to find a way to integrate data from a legacy system to a new, more agile one.
“Some of the systems, even if they’re not that old, may not be flexible enough,” he said.
Though typically robust, mainframe platforms, for example, are not suited to interactivity, something that causes obvious problems.
“One insurance company we were working with in the EU has a COBOL back-end and they want to make it more responsive. They’re doing that by pulling the info into a data lake. From an actuarial point of view, there has to be one master record, one single source of truth, but they want to enable customer self-care, so there has to be an interaction there between the systems,” Harris said.
The fact that these transformations are needed has grown increasingly obvious as customer expectations grow, but Harris said there was good news: financial institutions paying attention to design and to user-experience were successfully changing.
“That does make a difference. Not just the digital user experience but the whole end-to-end experience: they design their banking experience.”
Doing so will become a key driver of customer satisfaction, Harris said. “If you talk to most bank customers, they are unhappy; the relationship is a challenge, one with not a lot of flexibility. Transforming it into one of delight is a real possibility.”