European banks are racing to catch up with the mobile services available in the US but remain twitchy about over-extending budgets.
Despite a stagnating economy and the resource-draining process of adhering to thousands of pages of regulations, UK banks are investing time and money on mobile and internet technologies to improve customer services.
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Banks in the UK have a long way to go to match the mobile banking experiences of consumers in Asia and the US, but next year will see them begin their journeys.
However, financial services companies need a strong business case to spend money on IT.
Technology budgets are drawn into the firing line when economic conditions take a turn for the worse, as they did in 2008. Banks have cut thousands of IT staff since then and assets are being sweated. Citigroup’s swingeing cuts – where thousands of IT workers were shown the door – is but one recent example.
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Then there are regulations to adhere to, which takes up time and capital. There are reams of regulations produced on a frequent basis and meeting them usually requires significant IT changes. For example, banks are currently wrestling with a rule created by the Banking Commission that will guarantee consumers can change bank accounts in seven days. Banks will need to link their systems to a centralised database to make this possible
But although banks are focusing on compliance and improving operational efficiency, they must meet customer demands and invest in services – such as the online and mobile channels – as consumers increasingly demand these banking platforms.
This year will see banks in the UK step up their interest in upgrading technology, believes Daniel Mayo, financial services analyst at Ovum: “It has taken a long time for European banks to realise that mobile banking is important, compared to Asia and North America, where there is real innovation,” he says.
At the moment there is a realisation that big data is about your internal and external data and we are just starting to see the user cases emerging
Daniel Mayo, Ovum
A recent study of 300 banks in 66 countries, carried out by IT supplier Infosys and banking association Efma, supports this view. It found 70% of respondents plan to increase their spending on innovation, with the mobile and online channels seen as the most important delivery channels to invest in. The research revealed that 93% of banks will offer mobile payment services and 89% plan to offer bespoke tablet banking applications to customers in the next three years.
So far UK banks that offer mobile banking functionality have tended to replicate online banking services, which themselves are quickly growing out of date. “Mobile banking in Europe is currently just a repetition of what you can do online but next year we will see a lot more from the European banks,” says Mayo.
In contrast, consumers in the far east and US have richer mobile banking experiences, with personalised product offerings in retail or insurance, for example. They also offer services such as instant security warnings when unusual activity is detected in an account. A good example of what banks can offer are value-added services, such as personalised location-based offers. The Efma and Infosys research predicts that, in three years, more than 76% of banks will focus on this area, up from just 8% today. Some 87% of the banks interviewed are focused on integration with social media; and 86% on interactive services such as web chat and video conferencing.
Imagine your car speeding down the Autobahn at 100mph and your bank sends you an offer for car insurance on your mobile. Today it would appear a coincidence but in the future mobile banking services might do this.
Mayo at Ovum says the aim is to make mobile banking as easy as using Facebook, with a single sign-on for all services.
An example of a UK finance firm spending money on IT while most are tightening their belts is Nationwide. The building society realised it had to improve its IT if it was to survive after years of underinvestment. While the company is doing a total refresh – with SAP at the back and Microsoft in the front office – it is also innovating around its channel offering, with mobile and online banking developments.
Nationwide launched a new online bank in October, replacing a 14-year-old in-house system with one developed with IBM. The new platform integrates with over 30 line-of-business applications and has taken almost three years to develop. Last month it released a mobile banking platform built on the internet bank.
Nationwide COO Tony Prestedge highlighted the importance of innovations around mobile and internet technologies when he told Computer Weekly that customer satisfaction was a critical measure of the building society’s success. He says Nationwide will innovate around its mobile and internet offerings to try and retain its identity.
“The customer experience is vital,” says Prestedge, adding that the experience of the technology is an essential part of that. Nationwide measures customer experience and the results influence strategy. “Since upgrading our technology we have seen an uptick in customer satisfaction,” he says.
This is just one example of what banks are doing to make delivery channels more efficient and user-friendly and meeting customer demands. But there remains much to do.
Rik Turner, another analyst in Ovum’s financial services unit, says UK banks were slow to invest in mobile banking platforms because they just saw it as a cost with no benefit in driving business. He says some of the newer banks, such as Tesco Bank and Metro Bank, have missed a trick by not differentiating through mobile and online banking offerings. Turner thinks this could have put them ahead of the big banks, which were struggling and proving unpopular with consumers.
“The new players that have broken into the market have not been aggressive enough,” says Turner. “There could have been a lot done two years ago to develop iPhone and iPad apps, for example.”
The big banks are tentatively improving mobile services. While they are not yet as fulsome as those in Asia, they are being opened up to more people. For instance HSBC recently made its online banking app for businesses available on Google’s Android mobile operating system (OS).
The Business Banking app was already available on Apple and BlackBerry devices. And Barclays Bank launched a mobile banking app, Pingit, that enables mobile phone users to make free payments to other UK mobile users directly by just using their phone number. Big future for mobile banking
But the business and customer benefits can go much further. With mobile banking comes greater interaction with customers and the opportunity to acquire a better understanding of them.
The increasing use of mobile and online banking services is opening banks’ eyes to the opportunity that big data could present. The use of online and mobile channels is providing banks with additional data. Mobile platforms will give them petabytes of intelligence about customers which could be used to provide added value services to consumers.
Mayo says big data has moved from something that people ask about to something that people are doing. “At the moment there is a realisation that big data is about your internal and external data and we are just starting to see the user cases emerging.”
At a presentation by Royal Bank of Scotland (RBS) at the Ovum Banking Forum, RBS IT architect Benjamin Stopford described how banks need to open up more data and have it all in one place to benefit, saying closed and siloed data makes the organisation opaque and unresponsive. Stopford says banks have more choice in which technology suppliers they work with for big data projects rather than just the big database suppliers. But he adds: “The technology is not quite there yet but it is close.”
The UK banking industry suffered a downturn that had it on its knees. But now the banks are trying to regain the consumer confidence they enjoyed before the crash. Customers today want to bank while they sit on a train via their mobile device and they are interested in being made appropriate offers. Luckily for banks in the UK, new players in the market were cautious and failed to get a head start in mobile banking, unlike banks in Asia and the US. But the big banks have the opportunity to invest now. The business case is more proven, new opportunities such as big data are better understood and now 4G is here.
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