Digital and mobile technologies have disrupted traditional ways of doing business across a variety of industries, and the banking sector has arguably been of those most affected by the change. The increasing adoption of digital banking globally, along with a recent boom in mobile payments and e-wallets, is transforming the way in which we perceive traditional methods of banking. A recent survey by ArabNet found that 74 percent of 2500 respondents in the UAE have already adopted digital banking in the form of online, mobile or both – but what does this mean for branches in the region?
“The way banking is transforming today, with the digitisation of all processes, introduction of mobile apps, and with ‘anytime, anywhere banking’, visits to branches are diminishing,” says Arti Sogani, manager, business development and pre-sales, Finesse. She adds, “This also means that the human interaction gets compromised to a large extent.”
Having the opportunity to deal with a physical human being whilst discussing financial affairs is one of the main drivers that keeps branches in operation, and deterring people from completely switching to online banking. If banks are to encapsulate full-digitalisation, and adopt the concept of ‘virtual banks’ online, they need to ensure that personal customer service is not compromised through using this outlet.
Naveed Minhas, banking industry leader, Global Business Services, IBM MEA, believes that personalisation is key. “Cookie cutter banking services will not survive in the next decade,” he says. “To design a great mobile user experience, the bank should create personas that truly represent its customers. A persona is a vivid, narrative description of a named fictitious person representing a segment of the customers that the bank creates to guide its mobile user experience design.”
In order to enhance user experience to its full potential, banks should be looking to adopt the omni-channel method of operation, rather than the more outdated, simplified multi-channel method. “Real-time technology and Big Data analytics are essential for Middle East banks to boost profit margins, meet compliance, and have a 360-degree view of omni-channel customer services,” says Yasar Yilmaz, industry director, Financial Services, SAP MENA. Omni-channel provides consistent interaction between customers and their financial institutions across multiple touch points; every time customers use a computer, search for a product on their devices or call a customer service department, they are providing an information trail, which leads to more intimate, nuanced customer understanding for banks. While multichannel is focused on transactions, omnichannel focuses on interactions, meaning the user experience is tailored to someone’s specific preferences.
Building on this need to fulfil customer satisfaction, banks have to keep ease of transactions and security at the forefront when designing online and mobile strategies. It is also crucial that applications are cross-compatible and responsive across all devices.
“More banks are introducing analytics along with their apps, and some of them have introduced value-added functionalities such as a personal finance manager (PFM),” says Sogani. A PFM creates a virtual financial manager and advisory centre within an app, and is just one of many innovations that banks should be looking to implement in this era of digital transformation, she says.
“The key metrics that matter to financial services are customer satisfaction, profitability, business efficiency, and security,” says Yu Ting Huang, director, Finance Integrated Product Marketing, Citrix. “The type of technologies deployed should allow the finance IT to quickly respond to the business in order to perform on these key metrics.”
However, within this era of digital transformation, security is still of the upmost importance to customers. 33 percent of UAE respondents in ArabNet’s survey said that the main deterrence in opting for digital banking was the worry of security. This is of prime concern to banking CIO’s looking to implement online and mobile strategies.
“CIOs should take the lead in securing mobile apps, and transition from two-step authentication to multi-factor authentication with one-time passwords and hardware and software tokens,” says Yilmaz.
This concept of ‘multi-factor authentication’ queries the future existence of the PIN. Banks nowadays tend to rely on a combination of methods; knowledge – a PIN or password, possession – a card or token, and inherence – a form of biometric identification. “PIN usage will be drastically reduced in the coming years, but it will not go away completely,” believes Sogani. “Biometrics play a key role in authentication methods with finger print, voice, iris and face recognition. Most banks in the region are already using a combination of these to provide the most secure environment for their customers.”
The introduction of e-wallets and concepts such as ‘Apple Pay’ may also threaten the future of physical money, but the proof is in the pudding, ArabNet’s survey showing that 52 percent of UAE respondents still use cash as their primary payment method – demonstrating that cash is here to stay, for the time being at least. Some of this is down to human instinct, according to Sogani. “In this day and age, most people are earning and spending money without ever touching it. But when it comes to privacy and freedom, cash can’t be beaten,” she says. “As humans, we tend to protect our civil liberties by preserving some untraceable payment method.”
Ensuring compliance with regulatory standards is also of great concern to banks implementing digital strategies. The introduction of Basel III in the UAE has had a significant impact on the way in which banks operate. Basel III is a set of global banking regulations designed to improve risk management in the industry, alongside forcibly encouraging banks to hold an increased level of capital. Essentially, this means that after implementing Basel III, banks should be better protected during periods of economic stability, as they will have extra capital to fall back on.
“The more stringent capital requirements derived from Basel III regulations have put more pressure on operations efficiency in banks, making digital banking a key lever in the achievement of a substantial improvement of overall profitability,” says Minhas. A range of companies are reaping the rewards of the regulations, as the demand for solutions to assist with the risk assessment process of a business increases. “We are seeing strong demand for our data management and business intelligence solutions catered to Basel III, which allow for reports on market, credit, operational, and liquidity risk; capital definition; and risk-adjusted return on capital,” says Yilmaz.