These figures illustrate how mobile technologies and the internet have become an integral part of everyday life. Retail banks have been late to the party in addressing the new ways in which their customers operate but Joe Pagano, worldwide managing director for banking and capital markets at Microsoft, says they now need to move into the future.
In part it is simply upgrading their platforms to be better equipped to offer balances updates, payments, account management and services by text, email as well as branches and phone centres. Some banks are also installing Microsoft Surface in branches to better connect with customers. Microsoft Surface is a table sized multi-touch computer platform that responds to touch, natural gestures and includes object recognition.
Microsoft is installing table-sized touch screens in bank branches that can identify the customer, answer their questions and direct them to suitable products. Other banks, such as Deutsche Bank, have introduced coffee lounges and wi-fi to draw in customers.
But it is not simply a case of adding gimmicks to appeal to a more technology-craving world. Technology can improve efficiencies and also better identify sales opportunities.
He points to a venture with ING Turkey which recently deployed a customer relationship solution with Microsoft and partner Veripark that supports 327 branches. In three weeks, 65% of their 900 salespeople were able to identify new sales opportunities. "Banks need to modernize and be in touch with the customers on a real time basis so they can predict what they want, where they want it and when they will want it." The National Bank of Kuwait cut 40% of its infrastructure costs by putting their key banking applications in a Microsoft private cloud he points out.
"We think this is a once in 35 year opportunity for the banking system. We are in a perfect storm as customer loyalty to their bank is low and customer service has become a key differentiator," says Pagano. "We are now seeing major investments in innovation and operational efficiency. The discussions are not just about the front office but the middle and the back. Banks realized they need to modernize at all levels."
It might be imagined that the larger banks have the biggest advantage as they have bigger budgets for innovation but Viveca Ware, a senior vice-president of regulatory policy at the Independent Community Bankers of America, says community banks are also on board. "They don’t have the money for research and development to throw an idea against a whiteboard and see if it sticks. New technology or a new model has to be stable for them to embrace it."
But she points out that as they are smaller, they can roll out new ideas much faster than larger banks. One innovative area the community banks have made headway in, however, is prepaid cards, where funds are loaded onto a card and the cards can be used like a credit or debit card. "The initial thought was that this would gain traction among lower-income earners, but it has actually become more diversified and has created new opportunities in attracting broader customers," says Ware. One example is that in the situation of a divorce, support money can be loaded onto a prepaid card.
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