As part of an IT service provider in financial services especially to banks, we are
constantly reminded of and surrounded by what’s happening in the midst of our
customers. The changes are hard to miss. We ignore
these trends at our own peril!
I see the following 3 key changes happening in banking that
have huge impact to IT service providers.
#1. Banks are placing more importance on open banking standards and providing APIs
(Application Programming Interfaces) either due to regulatory pressure or from a desire to stay relevant
#2. Banks are using data and AI in almost all services where
possible to provide differentiation.
#3. Banks invest a lot in understanding and enhancing their end-customers' engagement with them. They want to make their customers' journey – as much STP (Straight Thru Processing)
as possible whilstnot comrpromising on customer experience.
Where do the new customers, especially the millennials, shop
for financial products? Where do they perform the analysis and comparison? The
answer is in their own mobiles or hand-held devices. In other words, a strong integrated data
management that helps in analysing real-time structured or unstructured data to
understand customer better and create a personalized experience is required. IT
service providers who understand this and build solutions that can adapt will
survive. Such an IT system should allow customers to engage in the channels of
their choice at any time. The switching from one channel to another should
provide a seamless experience.
Second, long winded vendor selection process (perhaps
robbing of certain revenue for “Sourcing advisors”) with a view to reducing
cost of the landscape is gone. This is because banks have started focusing more
on enhancing experience than cost reduction. This, of course, doesn’t mean the
latter is not important. It is just that it has taken a back seat to the former
and has huge implications in terms of the type of skills a service provider
needs to engage with the banks to develop suitable solutions. And the banks are
not prepared to wait for 3 months or more in order to select a partner! Failing
fast is the new norm.
The banks are willing to pick up customers at any point in
their journey but want to provide a wholesome experience that lasts long and
enhances the relationship. A customer may have come to avail a particular
banking service, say housing loan, after using online comparison or aggregator
tools. But it is in the bank’s interest to hold on to the customers by
understanding their preferences and evolving a bouquet of services that are way
better than what they are currently having. IT systems can no longer be built to do
only one thing. Instead, they should be nimble, lean, have the ability to learn
and grow very quickly and provide a means of differentiation to the
organization.
Impact to IT service providers
All the above changes affect the Indian IT service providers
(ISP) in many ways and in different dimensions.
- Capability: The skills, required for building
or changing IT systems, are continuously changing. As a result, people who can
adapt quickly are the need of the hour. How fast can a service provider deliver
such skills? This has huge impact on reskilling, cross-skilling, recruitment
etc. As service providers grow hugely, such changes take long time implement.
They have to start exhibiting in pockets and spread them across the rest of the
units. They can’t afford to wait for global roll-outs!
- Skill mix: Major impact in the percentage of
thinkers vs builders. As the IT systems of the bank move to providing more and
more business value, the fundamental nature of the skills change. ISPs used to
break down every piece of IT work and execute 80% or more of them at offshore. This ratio is becoming more skewed. Some of the new
type of IT work demands more than 40% work be done close to the customer and falls into the "Thinking" category. As
the release cycle reduces, very quick execution is required. This would place
huge emphasis on collaboration tools to enhance the quality of work and provide a seamless experience to the banks.
- Location is the third aspect. As the banks
expand into new markets and offer new services, there would be demands from
ISPs to service them locally. For example, there is a growing market in Baltic region.
Many banks are targeting customers in the region who are considered very
tech-savvy. Such demands have to be met locally very close to customer.
Traditional models of building capability in a monolithic way and transporting
the people to the desired locations may not work. The lead time may not be
advantageous to the ISPs. Many ISPs make use of centres in off-beat fancy
locations. How many of them are known for certain capability other than being a
low-cost location? The customers are paying increasing attention to the
capability and people being developed in various delivery centres.
All the above will call for various measures, in a
co-ordinated way, to be implemented by the ISPs. Guess what, implementing these will not only be simple but add to their growing costs. But the banks may not be willing to give you a long lead time nor absorb
a temporary surge in their IT costs! Only those ISPs who are not afraid to
experiment and who invest in understanding their customers' journey are more likely to succeed.
