The financial services market has its own set of unique challenges when it comes to technology, including a huge installed base of legacy systems.
It also has to appeal to a broad range of clientele – from the technology-resistant who still want to deal with a live agent, to the tech-savvy who expect to be able to run their entire life over their mobile phone.
For the banking industry, it’s a balance of holding onto the past, while trying to build out for the future – including new touch points and customer-facing technologies.
One of the top trends in the financial services industry over the next couple of years will be lifecycle information management, said Rob Burbach, analyst of financial insights with IDC Canada’s Canadian Financial Advisory Services.
The banks are collecting a whole lot more information, both structured and non-structured – and the rapid growth of unstructured data, in particular, is causing issues for banks.
The idea is to manage that information over its lifecycle and discard it when it’s no longer needed. It’s about keeping information current and updated, he said, and deciding what’s important and what’s not.
The banks are still dealing with technology refresh, figuring out what to do with their core and legacy systems. “It’s still a question, whether it’s total rip and replace, or can they fix it using approaches like SOA or other middleware products,” said Burbach.
What’s driving that is new channels or touch points for customers, where banks are looking to incorporate those touch points into their legacy systems.
There’s a new generation of customers that have an entirely different expectation for touch points, who are looking to do mobile banking or make mobile payments.
“They don’t want to do it via phone – they spend their lives texting and IMing,” he said. “Even Second Life or MySpace or Facebook, we’ve seen some Canadian banks experimenting in that space as well.”
But there’s still a lot of legacy infrastructure in place, especially in the major banks, and that infrastructure tends to be inflexible.
One strategy is to rip and replace that with new technology that’s more flexible; another is to look at putting a middleware wrapper around it.
In their back offices, there’s been a lot of emphasis on customer relationship management and trying to get cross-silo types of analyses going, said Gail Cowling, vice-president with Ipsos-Reid. But there are restrictions from a legislative perspective on how much of that they can do, except in the case of credit unions where all accounts are attached to one number.
“Their focus on their client is different and it reflects in customer satisfaction scores,” she said. “They come in higher and have for decades, and for years I’ve been saying that’s probably because of the holistic focus on the individual rather than separate types of relationships.”
In any for-profit organization, the motive is to make money for shareholders by building the most lucrative relationships and maximizing revenue per customer. And banks are looking at how they can best leverage and get more business out of their best customers, and bind them to the bank more closely so that business doesn’t go away.
The drivers behind CRM are heavily profit-driven, said Cowling, but hopefully in the process the banks create better customer relationships.
That’s not unique to financial services by any stretch of the imagination, she added. Other businesses have been doing this as well or better for years, and the banks and financial institutions have been coming on board with the technology for a while.
But, being large organizations, it takes the banks time to get things done, and they’re not as far along as some of the other organizations that have strong, well-developed loyalty programs. “But they’re certainly attempting to move in that direction,” she said.
They can’t abandon their legacy systems, though, so we’re seeing more integration than migration. But they do need to evolve to migration, she said, because there’s a limit as to how much their old systems can talk to some of the newer systems.
Then there’s the area of data security, which continues to be an issue for banks, said Burbach. This year there haven’t been as many security breaches making headlines in the news, and regulators are quiet, but it doesn’t mean the problems have gone away.
As new technologies, such as mobile banking, become more widespread, banks are facing the issue of maintaining and building security for these new customer touch points.
The banks are inherently conservative, said Burbach, and would rather not move quickly, but technology has also forced them into an increasingly competitive environment.
“All of a sudden you can create virtual banks and all of a sudden you don’t have to carry all the weight of that legacy stuff,” he said.
“It does drop the competitive threshold for entering the market, so they have to be wary of new or existing competitors that are quite nimble.”