Blending new and old

In today’s hyper-con­nect­ed world, where con­sumers and busi­ness­es alike are look­ing for the next best tech­nol­o­gy, finan­cial insti­tu­tions are find­ing them­selves increas­ing­ly caught between the old world and the new. They are sup­port­ing exist­ing meth­ods for pay­ments, bank­ing and com­merce, while at the same time aim­ing to take advan­tage of all the oppor­tu­ni­ties pre­sent­ed by dig­i­tal chan­nels, such as mobile, tablets and wear­able devices.

To lead and rede­fine the deliv­ery of finan­cial ser­vices, finan­cial insti­tu­tions must cre­ate a tech­nol­o­gy roadmap that not only max­imis­es return on invest­ment and decreas­es total cost of oper­a­tions, but also cre­ates a new and per­son­al expe­ri­ence for the end-cus­tomer. In addi­tion, those who lead the charge must ensure high adop­tion rates of the new tech­nol­o­gy-enabled chan­nels in which they invest.

“The evo­lu­tion of mobile bank­ing from ‘viable’ a few years ago to ‘demand­ed by cus­tomers’ in the near future is now almost cer­tain, and it is here that finan­cial insti­tu­tions are increas­ing­ly look­ing to dif­fer­en­ti­ate them­selves and their prod­ucts,” says David Abbott, pay­ments lead for Europe, the Mid­dle East and Africa at tech­nol­o­gy provider Fis­erv.

“The abil­i­ty to move seam­less­ly between devices, appli­ca­tions and chan­nels will attract clients who find it increas­ing­ly sim­ple to change their bank­ing sup­pli­er. Pay­ment habits will change. Costs and pro­cess­ing time will reduce. All this will take place with­out com­pro­mis­ing on secu­ri­ty or dam­ag­ing cus­tomer con­fi­dence.

“With dif­fer­ing tech­nolo­gies on offer and many options to pur­sue, the chal­lenge for banks is to lever­age their own expe­ri­ence and the cre­ativ­i­ty of their tech­nol­o­gy part­ners to pro­duce solu­tions that deliv­er out­stand­ing cus­tomer expe­ri­ences.”

The abil­i­ty of new pay­ment providers to set expec­ta­tions and influ­ence the behav­iour of con­sumers is chal­leng­ing finan­cial insti­tu­tions to think dif­fer­ent­ly

One exam­ple of the bal­anc­ing dilem­ma faced by banks in the UK, and oth­er coun­tries such as Aus­tralia, India and Brazil, is man­ag­ing the cost of pro­cess­ing paper cheques, while invest­ing in automat­ing and accel­er­at­ing elec­tron­ic funds trans­fers (EFT).

Automat­ing and accel­er­at­ing EFT is done through the devel­op­ment of low-cost nation­al real-time pay­ment and clear­ing sys­tems. All these coun­tries are engaged in a process designed to remove the need to deposit paper cheques at bank branch­es while keep­ing the pay­ment instru­ment alive for those who need to use them.

Pro­pos­als for the abo­li­tion of the ven­er­a­ble cheque in the UK met strong resis­tance from pub­lic and pri­vate-sec­tor organ­i­sa­tions, as well as some sec­tions of soci­ety, par­tic­u­lar­ly old­er cus­tomers.

Cheques con­tin­ue to be so use­ful to some that the UK gov­ern­ment is inves­ti­gat­ing the intro­duc­tion of a remote deposit cap­ture solu­tion for elec­tron­ic imag­ing that enhances the cur­rent paper-based process. The solu­tion enables cheques to be processed quick­ly and eas­i­ly using smart­phone cam­eras, as part of a mobile bank­ing app.

“Once remote cheque deposit is avail­able, which it looks like­ly to be in 2015, we should see the imple­men­ta­tion of a process that com­bines one of the newest tech­nolo­gies avail­able with one of the old­est pay­ment instru­ments around,” says Mr Abbott. “The ‘wow’ fac­tor and viral mar­ket­ing are not tra­di­tion­al­ly where banks have scored high­ly, but killer apps, such as mobile cheque cap­ture, make a huge dif­fer­ence when it comes to influ­enc­ing cus­tomer behav­iour.”

This tech­nol­o­gy is cre­at­ing a hybrid mod­el as banks realise they can reduce costs and improve the over­all cus­tomer expe­ri­ence by blend­ing new tech­nol­o­gy with tra­di­tion­al pay­ment instru­ments. “We see this co-exis­tence of new and old as a vital tran­si­tion­al step towards total­ly erad­i­cat­ing the high cost of paper pro­cess­ing for the UK’s banks,” he says. “This is just one exam­ple of the ben­e­fits that an always on, always con­nect­ed mobile world can offer its stake­hold­ers.

“We have been very active imple­ment­ing mobile deposit cap­ture solu­tions in the Unit­ed States, and have seen coun­tries like Brazil, India and now the UK, start to embrace it.

“Imple­ment­ing remote cap­ture in the UK will extend the life of cheque pro­cess­ing on one lev­el. On anoth­er, it offers a real insight into the future of bank­ing as cus­tomers embrace mobile devices to exe­cute a range of finan­cial trans­ac­tions, includ­ing bill pay­ments, cheque cap­ture and instant funds trans­fers.”

Time is short for adop­tion. The line of non-banks look­ing to sup­port the grow­ing dig­i­tal pay­ments ecosys­tem con­tin­ues to mul­ti­ply. If banks get the cal­cu­la­tion wrong, they risk greater dis­in­ter­me­di­a­tion by these com­peti­tors. Com­pe­ti­tion has always been fierce in pay­ments and it remains so as new entrants exert dis­rup­tive influ­ences on the old order.

“Pay­Pal has lever­aged eBay, Ama­zon has opti­mised its mar­ket­place, while iTunes and Star­bucks have all cre­at­ed high­ly focused pay­ments com­mu­ni­ties,” adds Mr Abbott. “The abil­i­ty of new pay­ment providers to set expec­ta­tions and influ­ence the behav­iour of con­sumers is chal­leng­ing finan­cial insti­tu­tions to think dif­fer­ent­ly.”

The bank­ing indus­try and reg­u­la­tors have respond­ed to the chal­lenge with ini­tia­tives, such as Faster Pay­ments and Paym. “These real-time prod­ucts demon­strate that the estab­lish­ment is still able to dri­ve low-cost, high-speed pay­ments inno­va­tion that works in the inter­ests of the wider com­mu­ni­ty,” says Mr Abbott.

“Insti­tu­tions need to act now to put in place the archi­tec­ture and infra­struc­ture they will need to ensure they take advan­tage of our always on, always con­nect­ed world. New pay­ment prod­ucts and bank­ing ser­vices require time to devel­op and imple­ment. That may require work­shops, closed user groups, pri­vate tri­als and then pub­lic tri­als before roll-out. No time has ever been wast­ed in thought­ful prepa­ra­tion or exper­i­men­ta­tion, so the time to start is now.”

To find out more about how Fis­erv can posi­tion your busi­ness for future suc­cess, vis­it www.fiserv.com