Finacle thought paper discusses how factors such as customer centricity, risk management and global application can help banks drive future growth and increase business.

1. How banks can drive future growth
Thought Paper
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2. How banks can drive future growth
Ever since the financial crisis broke out in 2008, crisis of credibility in fact, cost cutting proved
banks have been going through difficult times, clearly inadequate as a solution Banks are now
with profitability taking a severe hit. They trying to rejuvenate themselves and usher in
initially displayed a knee jerk reaction in the business growth in various ways – customer and
form of pink slips, pay cuts and IT budget technology focus, new channel introduction and
slashes. However, since the problem was risk mitigation to name a few.
actually one of customer trust erosion, a
Customer-centricity
Customers are the raison d’être of any business sorted out, they will take customer understanding
and banking is no different. So rightly, banks to another level altogether.
are moving from a narrow product focus to
However, all the good work done will come
wider customer centricity. Where formerly,
to naught if the bank staff is not customer
banks gave due importance to customers, today,
oriented. A customer-centric mindset must be
the entire banking process revolves around
ingrained within employees through proper
them. Banks have wised up to the fact that
training. Also, in recognition of the importance
mere customer satisfaction is not enough;
of personalized service and relationship building,
customers must delight in their services, indeed
banks must dedicate relationship managers to
in the entire banking experience.
serve niche customer segments, if they haven’t
Although routine transactions form the bulk done so already.
of the retail banking business, interactions
Customer segmentation, better customer
classified as “moments of truth” – for instance,
understanding through innovative tools,
the manner in which banks deal with a
anticipation of client needs and customized
complaint of credit card theft – can make or
product offerings, will go a long way in earning
break customer loyalty. Then, there are the
the much sought-after customer loyalty.
‘wow’ interactions, like the introduction of a
new channel, which positively delight the Meanwhile, creation of sophisticated pricing
customer, resulting in stickiness. Growth-oriented models based on customer value and profile will
banks have to focus on these and strive to take care of the profitability angle. For example,
enhance customer experience. banks can follow a differentiated pricing model,
wherein they first gauge the importance that
This customer-centric banking model needs
customers attach to a particular product and the
to be supported by sophisticated technology
price they are willing to pay, and charge accordingly.
and tools like analytics which provide
valuable insights and enable better customer
Multiple channels
understanding. Banks can even go a step further
and work on applications that track online Thanks to technological innovations, banking
behavior and facilitate understanding of real customers have the choice of many channels.
time customer needs. While this might involve But having multiple channels is not the same
some complications like privacy issues, once thing as having multi-channel banking. What is
02 Thought Paper

3. required is a seamless, integrated, multi-channel Consistent experience across channels will lead
offering that considerably reduces the chances to customer satisfaction. Moreover, a quality
of the transaction being abandoned midway multi-channel offering does wonders for the
due to process glitches. Banks should provide brand and is key to enriching customer
proactive assistance to overcome potential experience, whether through ATMs with
hiccups. For instance, when customers stay on advanced self-service capabilities or mobile
one page of their website for a long time, banking or even social media. It also opens the
an online chat window can pop up, providing doors to future cross-sell and up-sell opportunities.
customers the opportunity to sort out
That said, the success and popularity of
problems, if any.
virtual banking channels has not sounded the
With an array of channels, banks can also death knell for the branch, as predicted
achieve cost efficiency as they can shift routine by many doomsayers. The oldest banking
transactions like balance inquiries and account channel continues to attract customers. With
update requests to lower-cost channels (after administrative and most back end operations
ensuring their capability to handle them), centralized, the branch is now a more productive
giving branch staff room to attend to more sales center focused on providing significant
valuable or complex activities. value addition.
Risk management
Each stage of the banking process, from Banks can undertake the following steps to
customer prospecting and conversion to alleviate credit risk:
transaction and communication, is fraught with
• Set exposure limits for various kinds of
risk. Banks today, cannot afford to just react to
borrowing and link them to capital funds.
unexpected, adverse situations. They have to
work out a comprehensive risk management • Have a credit review and renewal policy in
policy, which enables them to anticipate place. For instance, fix benchmarks for fresh
problems and build risk-facing capabilities in exposure and link customer privileges to
advance so as to minimize damage. This does their risk ratings.
not entail risk avoidance, but rather, risk
• Set up an elaborate risk rating model wherein
awareness and consequently, plans for
the ratings are reviewed periodically.
measurement and mitigation.
An effective risk management framework calls • Price risk scientifically by linking loan rates to
for an efficient Management Information System expected risk.
and appropriate data warehousing solutions, One of the reasons why banks are unable to
which interface with the transaction and risk manage risk as efficiently as they should is
systems. Risk mitigation involves analyzing past because they lack a cohesive approach for
data and setting them up as reference points. handling enterprise risk. Different entities within
Here again, analytic engines and tools play a the bank manage their risks individually, with
significant role. no visibility or insight into how these risks
Banks face risks of various kinds – credit, market, interplay with those faced by other departments,
legal, liquidity, compliance and control, and even functions or lines of business. It is imperative
reputation risk, of which, credit risk is usually for banks to replace the current silo based
accorded greater importance than the rest. approach with a holistic model.
Thought Paper 03

4. Core banking platform • Scalability across entities and geographies.
A robust core banking platform is imperative for • True multiplicity – multiple products, integration
effective functioning of banks. Legacy systems of multiple channels, capacity to operate
have to give way to new age core banking across languages, currencies and countries.
solutions with the following key features: • Sophisticated channels such as Internet and
• A unique and integrated customer database mobile banking and multipurpose ATMs
with 360 degree visibility, which enables integrated into multi-channel architecture.
banks to understand customer needs. • Lower Total Cost of Ownership, through
• 24/7 banking access across channels, all outsourcing of infrastructure or application
providing the same set of functionalities. management.
• Real time processing and updates that
enhance customer experience and also enable
bank staff to view current data across channels.
Global application
IT can play a crucial role in enabling banks capital management discipline are the hallmarks
to take their customer-centric approach to of new age banks, and the key to reducing the
foreign markets, and grow the business from a cost of funding. Banks need to know exactly
domestic operation to a multinational one. how their products or lines of business
For instance, they can leverage technology to consume capital in order to better manage
build a global operating model, which relies assets (their risks) and capital.
on global policies, regional hubs for back
office operations and the services of strategic A final word
outsourcing partners. There have been instances in the past, when
This will call for the creation of an appropriate banks tottering under recessionary conditions
IT model, that can be standardized and scaled bounced back into the black not just by paring
across locations, global hardware infrastructure, costs, but more importantly, by directing their
regional development centers and regional retail savings towards strategic investments. This
banking platforms etc. time around, banks need to innovate, engage
with and win over customers and manage
Capital management risks better, to regain the path of profitability
and growth.
Integrated management of capital planning and
consumption, efficient capital allocation and
04 Thought Paper

5. References
1. w w w. b a i n . c o m / p u b l i c a t i o n s / a r t i c l e s / 5. w w w. t e m e n o s . c o m / D o c u m e n t s / Fi l e s /
customer-loyalty-in-retail-banking-americas- About%20Us/Temenos%20Newsletter/
2011.aspx Temenos%20Newsletter%20Nov06.pdf
2. w w w . p w c . c o m / u s / e n / c f o d i r e c t / 6. The Customer-Centric Bank: Debunking the
redirects/042711-centric-pdf.html?wt.ac= Myth that Cross-Sell = Customer-Centric
CFOdirectPDF_Getting-to-Know-You
7. www.mckinsey.com/App_Media/Reports/
3. w w w . p w c . c o m / u s / e n / c f o d i r e c t / Financial_Services/Retail_Banking2010_
redirects/042711-centric-pdf.html?wt.ac= Multichannel.pdf
CFOdirectPDF_Getting-to-Know-You
8. www.icai.org/resource_file/11490p841-
4. www.rtdonline.com/BMA/BSM/18.html 851.pdf
Ashit Gandotra
Senior Associate Consultant, Infosys
Thought Paper 05

6. About Finacle
Finacle from Infosys partners with banks to transform process, product
and customer experience, arming them with ‘accelerated innovation’
that is key to building tomorrow’s bank.
For more information, contact Finacleweb@infosys.com www.infosys.com/finacle
© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys
acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.