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RSS feedsChief executives of banks and insurance companies know that their business depends on technology but are acutely aware of its high cost.
They know it is dangerous to fall too far behind the competition but are cynical about the benefits promised by technology vendors.
Their chief preoccupation is 'getting closer to customers'. Fiercely competitive markets make it essential to retain customers and to sell them more products and services. So they have been investing heavily in systems for customer relationship management.
However, they also have to ensure operational excellence and have systems that work as expected, are fully secure, and meet customers' needs faster and more fully every year.
But there are other challenges. Many bank customers now use technology to do their banking on a self-service basis and no longer need to talk to bank representatives. This makes it difficult for the banks to sell them new products.
Consumers' payment habits are also changing. While banks are wrestling with converting to chip-and-Pin systems, other payment systems continue to proliferate. Travellers in London will soon be able to load electronic cash into Oyster cards to pay for travel.
Banks risk losing their role in money transmission for shopping and travel.
To contain costs, banks and other financial service organisations are looking at business process outsourcing for everything from contact centres to claims processing, mortgage processing, loan servicing, document imaging and many aspects of customer data management.
External demands from regulators present continuing challenges for IT departments. Their resources are already stretched by major initiatives such as the proposed new capital adequacy rules (Basel II), new international accounting standards and the Europay, Mastercard and Visa (EMV) specification for smartcard payment systems.
Smaller organisations may be wise to consider outsourcing to achieve compliance. Large ones may wish to offer compliant processes to smaller players as a revenue-producing service.
Keeping customers happy
Attempts to cut costs by moving more routine transactions to self-service have had only limited success. A third of most banks' customers are registered for web banking, but less than 10 per cent of the population sees this as their preferred method of banking.
Telephone call centres are facing a backlash and usage of phone banking has levelled off. Gartner research confirms that calling customers at home produces a strong negative reaction.
The way forward is to manage customer experience across all available channels, rather than measure success in each channel individually.
IT systems need to provide service to customers through independent financial advisers, mass merchants and any other channels of distribution the bank or insurer finds effective. Partner relationship management is becoming essential.
Bank branches must evolve
Banks realise that the most positive part of the customer experience is being able to talk to someone you know and trust. So they have stopped closing branches and are opening up space for advice and selling. They are reviewing staff skills, opening hours and branch technologies.
New branch infrastructures with secure wireless networking, versatile thin clients, tablet PCs and mobile devices could make discussion less formal and more productive. But banks must balance the benefits of each technology against customer resistance.
They also need to re-educate customers, many of whom believe that they cannot get help from branch staff and see no reason to come in.
The changes to sourcing and distribution now in progress will oblige banks and insurers to work with a wide range of partners. Customer-centric strategies will mean that business processes will need to operate across multiple organisations, often in real time.
Banks already have business process management systems that permit real-time credit checking and payment transactions. By 2005, many banks' systems will need to conduct loan origination and approval via external partners.
And they may need to co-ordinate this with quotations for related insurance products from different sources. Requirements to manage inter-enterprise processes will increase pressures to make web-services technology work effectively in good time.
The key challenge for an IT department, once it has evaluated complex new technologies, is to highlight their potential contribution to the company's strategic objectives.
To gain management backing, IT staff must present clearly the benefits for the company's customers and the impact on its operational effectiveness.
Graham Taylor is a vice president at Gartner G2
See also:
Keeping on the right side of the public and the law are major challenges for financial services companies. 20 Feb 2004All IT Management
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