The new game plan for banks in the digital age

• Consumers are showing interest in using banking services offered by tech companies
• Banks have a duty to constantly refine their applications to keep up with times

BORROWING the opening lines of Charles Dickens’ “A Tale of Two Cities” novel, banks are now in the best of times and the worst of times. Advancements in technology have given rise to changing consumer behaviours and enabled non-traditional players to offer banking services.

Asian consumers today are 1.6 to five times more likely to transact with their banks via online channels as compared to physical branches. These consumers are also showing interest in using banking services offered by tech companies. For instance, Alibaba’s Alipay and Tencent’s WeChat Pay are now widely used by consumers in China for payments.

The need for banks to deliver exceptional customer experiences is now more important than ever, as customers are becoming more open to switching financial services providers (even if the provider is not a bank) if they found one that offered them a better experience.

However, all hope is not lost. By making the right technological investments and adopting more flexible business models, banks have the opportunity to enhance operational efficiency and accelerate innovation in order to improve customer satisfaction and increase revenue.

APAC banks going digital

Banks in the Asia Pacific are recognizing the advantages of going digital. Case in point: IDC expects 80% of regional banks to operate on a hybrid cloud architecture this year. By doing so, they may be able to lower the total cost of ownership and increase agility.

Since cloud provides the ability to quickly provision resources, it allows banks to quickly develop and deploy new apps and services that address changing market and customer demands.

Taking it a step further, those banks could also deploy automation tools to both improve operational efficiency and free up staff for revenue-generating tasks such as cross-selling and building relationships with customers.  

Retaining competitiveness in the digital age with open banking

Although banks have already started digitally transforming to better compete in the digital age, they should bear in mind that digital transformation is a journey, not a destination.

As the business environment becomes increasingly volatile and uncertain, banks need to remain nimble and continuously innovate to quickly address the ever-changing consumer and market demands. Banks have a duty to constantly refine their applications to keep up with times. This is where open banking can help.

Open banking is a model in which banking data is shared between two or more unaffiliated parties through application programming interfaces (APIs). It provides opportunities for banks to gain a 360-degree view of customers that can be used to help enhance their services and create new revenue streams.

For instance, banks could use data from insurance companies to provide real-time comparisons of insurance plans and automatically suggest the best deal based on the customer’s financial capacity/needs.   

Recognising the benefits of open banking, some Asian banks are opening access to their APIs to co-create new and more customer-focused financial products and services. Such a move will enable banks to leverage each other’s strength and accelerate the speed of innovation.

To further benefit from open banking, banks should take a microservice-based approach to building apps, in which large apps are broken into smaller, independently scalable components (also known as microservices) according to their functionalities.

This enables app developers to make changes to specific microservices instead of a big piece of code, reducing the complexity and time it takes to release app updates. Moreover, microservices can help banks accelerate software development as they can be reused as the foundation of new apps.

With such a capability, banks will be able to constantly keep up with changing customer demands, which is crucial in ensuring good customer experience and retaining customer loyalty.

Macquarie’s Banking and Financial Services Group is one bank that has benefited from adopting microservices. By using microservices and containers, it now takes the Australian bank minutes instead of hours to release software updates and features. It is able to update existing applications quickly without any downtime on the customer end, as well as meet customer demands for new services.

Given the rapid pace of change, banks need to be agile to effectively deal with unknown disruptions that will come their way. Open banking is the key to achieving this.

Similar to sails that racing yachts deploy dynamically as conditions change, elements of open banking such as APIs and microservices can not only help solve the challenges they face today, but also help banks build the right foundation to address future customer and business needs.

Benjamin Henshall is the director of sales, financial services at APAC, Red Hat.