Introducing Smart Banking: the future of banking

Accenture, Avanade and Microsoft have pioneered an initiative that demonstrates how banks can implement modern technology for a more innovative experience for their customers. Amber Stokes reports

Amber Stokes
Amber Stokes
By Amber Stokes on 22 May 2014
Introducing Smart Banking: the future of banking

This article was first published in the Summer 2014 issue of Finance on Windows

According to the 2014 Celent report IT Spending in Banking: A Global Perspective, total IT spend across the banking industry in North America, Europe and Asia-Pacific will grow to US$188 billion this year – up 4.4% compared to last year. Celent suggests that this upward trend is indicative of the emphasis that is being placed on the importance of implementing new technology. Indeed, many organisations predict that if they don’t invest, they risk losing customers and falling the behind competition. But for some banks, though, the thought of implementing modern technologies feels like a minefield.

“Our customers often ask us how they can be innovative and improve services for the new, empowered consumer,” explains Marcelo Marquez, director of business development for worldwide financial services at Microsoft. “Accenture, Avanade and Microsoft have therefore developed an initiative that illustrates which technology is the right fit for them and how it can transform their business. We call it Smart Banking.”

Changes in the banking landscape
“In Europe, many banks are still under cost and margin pressure following the financial crisis. At the same time, the European Union is taking critical next steps to introduce a banking reform proposal aimed at reducing risk through further regulations and stress tests of capital structures at Europe’s biggest banks,” says Claudia Hauser, EMEA financial services lead at Microsoft. “Many banks struggle with exaggerated cost-income ratios caused by high-cost legacy infrastructures and decreasing revenues and/or customer retention due to lower trust and loyalty of banking customers. 

Hauser says financial institutions need to be agile and proactively embrace innovation through technology, in order to lower the cost of current systems and achieve competitive edge in today’s challenging landscape. “New innovative technologies will help to drive richer customer experiences and services across all channels in order to win customer trust,” she says.

Morten Steiner, who is responsible for financial services within EALA at Avanade, elaborates: “Banks are experiencing increased customer churn as they simply don’t need a strong relationship with their bank any more, and there are a number of reasons for this.” These include:

  1. The market is becoming more transparent through online price comparison services, making banking products more commodity-based. Customers are therefore ‘shopping around’ to get the best price, rather than valuing longer trust-based relationships
  2. The digital revolution means customers expect to be able to receive products and services when they need them and on any channel. If their bank doesn’t meet their expectations, they will take their business elsewhere – a trend supported by the report Accenture Global Consumer Pulse Survey 2013, which found that 20% of customers changed some or all of their retail banking products in 2012
  3. The industry has also seen an influx of new players entering the market. The new entrants, including retailers and telecommunications organisations, are threatening many well-established banks because they’re able to implement modern technology without the legacy costs old players are weighed down by and can subsequently provide products at a lower unit price. 

Juergen Pinkl, Accenture’s managing director of technology financial services for EALA, explains that it is not so much that the technology is new, but that it has instead matured. “I was talking to clients about the possibility of using video conferencing ten years ago. Back then, it was a rather cumbersome technology,” explains Pinkl. “But use of Lync and Skype, for example, is widespread today among consumers and within the banks themselves.”

Due to the consumerisation of IT, Pinkl says there is a danger banks will become marginalised, as fewer customers see the value of the bricks-and-mortar branches. “Banks therefore need to reinvent themselves. Instead of remaining on the periphery, handling strictly financing and fund transfers, they should instead strive to become an ‘everyday bank’: positioned to fulfil all their customers’ daily financial and non-financial life needs and being central to lifestyle purchases, in the same way that social media organisations and retailers have become central to retail purchases,” he says.

Smart Banking – built for real customers
Accenture, Avanade and Microsoft’s global initiative aims to illustrate to banks how they can use modern technology in order to overcome these challenges and ultimately take a step closer to becoming an everyday bank – winning back customer loyalty and positioning themselves successfully in the market.

While it is important for banks to become innovative and implement modern technology, Ramon Miranda, Avanade’s chief technology innovation officer for Europe, Middle East, Africa, Latin America, explains that they shouldn’t simply implement technology for the sake of it. “Consumers are setting the trends today and banks have to remain flexible in order to keep up,” he says. “So Smart Banking acts as a guide for banks, illustrating how they too can innovate just like the customers we have already worked with, and which technology is a best fit for them.”

 “We have spent a lot of time connecting with customers that are already using our solutions, in order to develop innovative scenarios that illustrate the value of Microsoft technology across all customer touchpoints,” explains Marquez. “The scenarios are then demonstrated to banks, reflecting a day in the life of the new consumer and bank advisor. They are focused around three main areas – the advisory centre at the branch, the operational side of the bank and at the customer’s home – and through these demonstrations, banks are able to follow the customer’s or advisor’s journey, witnessing how Microsoft technology can be used to make their experience better.”

 Key themes demonstrated through Smart Banking include banker mobility, next-generation self-service, remote advisory, social computing and the use of digital signage. “For example, we demonstrate how digital signage and advanced appointment scheduling can improve services to customers on the go, at home or in the branch through the use of modern advisory services that are based on interactive Windows 8 applications running on tablets or touch-enabled walls or tables like the Samsung SUR40 with Microsoft PixelSense, or Xbox Kinect,” explains Hauser. “Because Kinect is a sensor, it can, for example, measure heart rates or the current mood of a customer, and depending on that, provide an express service, put them in touch with a remote advisor over Lync or Skype, or connect the customer directly with their relationship manager or financial expert.”

Accenture, Avanade and Microsoft can also help banks deliver next-generation selfservice by enabling virtual greeters and remote advisory services, for example. “Gamification is key to improving customer experiences and deepening customer loyalty. With Kinect, we can provide unparalleled experiences within the branch, outside the branch – like in a shopping centre or sports event – as well as convenient banking from the customer’s living room,” says Hauser.

Miranda explains that a number of banks are starting to experiment with technology in order to improve first impressions with the customers by developing flagship branches. “UniCredit has created a flagship branch in Milan at the base of the UniCredit Tower in Piazza Gae Aulenti as part of its threeyear plan to transform 1,000 branches and revolutionise the customer experience,” he explains. “UniCredit has implemented modern technology based on a user-friendly service model that enhances the customer experience. For example, the windows in the new branch become interactive screens at night, using Microsoft Kinect technology, enabling more personalised and dynamic communications with customer than traditional printed posters.”

Continuous innovation
Accenture, Avanade and Microsoft have successfully organised several Smart Banking innovation days globally, including in London, Paris, Frankfurt, Japan and New York, where they have presented the initiative to customers. The innovation days have also given the companies the opportunity to get to know the customers and their individual business needs, so that they can then follow up with a tailored workshop demonstrating how certain solutions within the Smart Banking initiative can help them.

“80% of the time, banks share the same problems, and so one reason the Innovation Days sessions have been so successful is because banks can see what other organisations are doing and how they can gain inspiration from their projects to drive innovation themselves,” Miranda explains. “But Smart Banking is really useful because it is a great point of departure to see the art of possible with Microsoft technology and banks can use to find the right solution for them that allows them to get closer to their customers.”

Accenture, Avanade and Microsoft will continue to develop and update scenarios as and when customers implement new solutions, which means that banks can follow the Smart Banking initiative for a continuous reflection of innovation in the industry. “Consumers are used to the benefits of their connected, mobile lifestyles and forward-thinking retailers have set the standards high. Consumers are used to being able to order a product online one day and see it arrive the next day,” says Pinkl. “They expect this level of service everywhere they go, so banks have to catch up.” 

Steiner adds: “Banks are adverse to risk, which might be one reason for some organisations to view the implementation of new technology with caution. That’s why with Smart Banking, we have set out to illustrate not only the ‘art of possible’ – showing how they’re able to develop new capabilities by implementing modern technology – but also how it can be implemented in a secure, low-risk manner.”

“With Smart Banking, we provide banks the methodologies, technologies and solutions to become a digital bank and remain at the heart of their customers’ everyday lives,” says Hauser. “We believe that with our innovative technologies, we can enable banks to lower and streamline bottom-line technology costs, while also enabling seamless customer experiences to improve customer loyalty and acquisition.”

“With technology in the banking industry evolving at breath-taking speed, we see interactions with customers becoming more engaging and dynamic, the workplace becoming more mobile and collaborative and processes becoming more flexible. For customers, this means many more contact points with their bank. For banks, this means having a much deeper understanding of their customer base, and having the ability to offer a customised experience tailored to the individual,” says Karen Cone, Microsoft’s general manager for worldwide financial services. “This in turn is driven by a socially connected and collaborative workforce, a connected view of customer and market opportunities, and the ability to engage customers through seamless, contextual experiences across channels. The Smart Banking initiative enables banks to optimise customer engagement models to drive customer retention with high-quality service experiences, attract new customers with a redesigned sales experience, connect and share with colleagues in real time – and ultimately become more engaged with customers.”

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