How Retail Banks Thread The Innovation Needle

As banks thread the digital payments needle, the consumer push toward digital is demanding that products and services be made faster, delivered more intelligently and wrapped around a better customer experience. 

That’s at the forefront of the retail banking agenda today — whether you’re talking to the longstanding legacy players in the space or the newcomers and innovators trying to disrupt the retail banking status quo. Regardless of who’s got innovation in their sights, there are three topics that are always front and center: technology, engagement and data. 

To better understand how the digital retail banking ecosystem has shifted overtime — and to foresee what’s next, MPD CEO Karen Webster spoke with Samir Shah, CEO of Aurionpro — a global technology solutions company that helps businesses accelerate digital innovation, secure enterprises and optimize operations — to get his take on the challenges that banks face on their digital journey.

KW: We’re here to talk about innovation on the retail banking front. That’s a topic of conversation as the world — especially in the world of financial services — moves to a digital environment. What are you hearing from your clients about the challenges they face on their journey to digital? 

SS: Everyone in retail banking understands that digital disruption is already happening and it’s here to stay, but there is a lot of confusion around what is the digital strategy that involves the growth in the next 3, 4 or 5 years — especially as it relates to the emerging competition from the non-banking players as well.

But we see multiple things from those who are already on the journey to digital. One of the first things we see our banking clients are faced with is how to deliver a smooth and engaging experience for the retail digital bank. Oftentimes you have a solution on mobile or an online solution, but if the omnichannel experience is not converging, the traditional barriers that are currently separating this channel is making it increasingly difficult for the consumers to stick to the channel. As a result, what happens is they either get distracted and they log off, and the consequences of that is a lost sale. So that’s a big hurdle that everyone is looking to bridge. 

Another challenge on the journey is providing a complete digital banking process. Many digital banking processes still require a bank to engage, and it’s still creating and posting a document. Even asking customers to visit a branch to complete transactions. Those are real challenges, they provide the hurdles ultimately leading to the attrition that you don’t want. 

I think the confidentiality and the data protection in an increasingly digital world and the explosion of data that goes on with it is also a challenge. We’re talking about financial data, which protecting and keeping secure is the highest priority, and impacts trust. I think cybersecurity is a new phenomenon that needs to be on the forefront on enabling digital innovation.

And as always, there are regulatory challenges – making sure that customers understand what they are signing up for, and the terms and conditions of any digital financial product being based online. Those in our views are some of the challenges being faced by our customers globally. 

KW: What I hear you saying is that omnichannel is just as relevant on the retail banking side, and thinking in terms of lost sales is just as important, as it is in any other digital environment. How are you helping the retail banker adjust to this new way of thinking?

SS: I think the reality has sunk in. The new way of doing business is being enforced by the digital consumer. The digital consumer is the king. You and I decide what types of business we want to consume. It all begins with the digital discovery from the channels such as mobile or social or crowd. From the identification and discovery of a product or service to convention, adoption and engagement, it is all digital — which means it is all very fickle. One quandary here or there, the customer leaves. That’s a lost sales opportunity, that’s a lost engagement opportunity. The friction is here and it’s real.

The way we are helping some of our customers come to terms with this is to fundamentally understand the customer engagement in its truest form — in the same way Apple changes everything. The random set of efforts leading to a broken experience between the channels. So you have account opening that requires mostly manual process. But then you want to offer other sets of services like online — it does not work in the long run. The more you bring it all together in front of the products and solutions we’ve tried to help our banks to our platform really take them onto their journey more holistically. 

KW: Let me ask you about another point that you raised, which is the regulatory challenges that banks face. That’s certainly something to be considered, but is that a big driver of strategy in a digital environment? Is that an inhibitor? How are you helping clients address the very specific regulatory data protection requirements that exist within the retail bank and financial services sector?

SS: We do not see a lot of customers at a lot of our banks holding off on innovation initiatives because of regulatory challenges — and that’s a great thing. However, and it’s maybe a little too late for a lot of them, but it is not a bottleneck as not being viewed as a bottleneck, but it is something as we all know right at the top of a banker’s mind as to what is coming next. Look at what is happening in the P2P lending space or the NCA space and all of these are real profit opportunities lost for the retail bank by not addressing those opportunities cleared by the digital economy.

There is no digital offering if you do not have a grasp of your customer’s identity. Your customer has already been digital, so the elements of enterprise security has to be brought into the retail banking — or the commercial banking, for that matter. That’s where a lot of focus is going on within our experience, within our plan, too.

KW: You mentioned that incorporating the digital identity into the environment of the retail bank is one characteristic of an innovative bank. Are there others? And are there are specific retail banks that you believe are really innovative in the space and could be considered a model for others to at least look at and potentially replicate?

SS: There are actually specific challenges that differentiate some of the retail banking challenges from the other segments of the financial industry. For example, correct target customer identification itself is a challenge, which essentially means that as many as 75 percent of potential customers are lost in the process. And that additional 25 percent give up at some point during the journey because it proves too difficult, with approximately 15 percent failing the process all together. Now these are the real challenges that the retail banking space faces — challenges such as the whole digital versus legacy banking system. The number of challenges for digital banks continues to increase. They are unbound by the data legacy systems and are eager to get their share of market. 

In the face of these challenges, specific to the retail banks — trying to be innovative and take on the opportunities created by the digital ecosystem requires them to think of a completely unified omnichannel digital customer engagement. Before they can do that, they have to have a very secure infrastructure in order to address the need of every individual with high personalization and a high degree of security that ensures the trust of the individual and of the bank. 

KW: As you work in this space with so many retail banks all over the world, what is your thinking with respect to how this whole situation evolves? How does the digital experience in banking evolve? Look in your crystal ball and help us imagine the future.

SS: Digital technologies increase banks’ connectivity. Not just with customers, but also with employees and suppliers. This includes online interactivity and online payment solutions making them more mobile friendly. There is an approach to boost banks’ brands through social media. There are banks who are fundamentally approaching the whole tradition innovation through provisions themselves in these social causes completely differently than any bank has traditionally done.

This whole connectivity I think is No. 1. No. 2 is — digital technology is using big data, advanced analytics and predictive analytics, which can really help expand and refine the decision-making process. Such analytics are being developed by most analytic banks in many areas, including sales and product design, and pricing and underwriting to truly offer optimizing customer experience. And in process, gain the customer loyalty, which is so critical I cannot stress it enough in the current word.

Finally, I think digital also creates value by increased straight through processing, including boosting productivity and facilitating regulatory compliance, while let’s say emerging or other technologies further come out of the straight through processing.

In looking at the future, the elements of whether it is the advanced analytics or the predictive analytics or interface connectivity — all of that will still not change the need for speed. For example, for most banks, the technology menu is relatively complete. The online check, mobile check, omnichannel kind of, but if you look to the horizon, we think all these technologies are going to advance based on time still. Which means facilitating speedier branch meetings. Or allowing for real-time payments systems. Or applying for faster security alerts. Creating more responsive pricing and product recommendations.

The need for speed is definitely going to be driving some of that crystal ball question that you posed. Getting more mobile is definitely there. I definitely feel strongly that this whole ultimate retail banking picture — new banking — is going to drive a lot of innovation looking out to the horizon. In 2009, P2P lending was probably $26 million. Last year it was $7 billion. The future is looking astronomically high in terms of the opportunity and competition coming from this side.

Samir Shah | CEO and Director | Aurionpro

Samir Shah is one of the pioneering members of Aurionpro’s management team, he has been a key driver of progressing Aurionpro’s vision of becoming one of the world’s most respected and innovative technology companies. Prior to his appointment as CEO, Samir had played a number of key roles in the organization, including establishing Aurionpro’s North America operations, driving and integrating a number of strategic acquisitions, launching operational streamlining initiatives that have improved profitability, and reorganizing the company globally in order to improve sales effectiveness.

Today, Samir leads the company from its North America headquarters in the Bay Area, California, and spearheads Aurionpro’s aggressive expansion plans, promotes a customer-first philosophy, and fosters a united and collaborative corporate culture. A respected expert across the banking and electronic payments industries, he holds an engineering degree in computer science and an MBA in finance. Samir has previously served on the boards of PaySimple and PriorityCommerce.

He is the member of the Corporate Social Responsibility Committee.