by Rebecca Merrett

How our banks are innovating

Jun 16, 20149 mins
Risk Management

Despite its reputation of conservativism, the banking sector is one of the leading industries pushing for new innovations to better engage and service customers. Real-time mobile app payments, near-field communications, mobile wallets and even virtual currencies are all examples of how the industry is digitally ‘disrupting’.

In a highly competitive and regulated environment, technology is at the core of many banks’ strategy to stay in business and to remain successful. But the technology cannot stand alone; it’s how technology is used to service and engage customers that is key.

“We can’t wait any longer for people to come knock on the door; we have to engage [customers] and keep them engaged,” says Defence Bank’s CIO, Ian Brown. “It’s therefore essential to know your customer, and know when that customer wants you to act on their behalf, so you can.”

Here, we look at two key areas where technology is being used to help drive customer engagement in banking and financial institutions.

The mobile customer

CIO of St George Bank, Dhiren Kulkarni, is looking to use context-aware technology for the bank’s mobile app for self-services such as reporting lost or stolen cards, and notifying the bank when planning on travelling overseas.

The app will be able to detect if a customer is located at an international airport, and can send a reminder to notify the bank of the customer’s travel plans so that it doesn’t suspect fraud and freeze the account.

When an individual arrives to an overseas destination, the app can point out the nearest ATMs St George has partnerships with so the customer can avoid having to pay a fee, Kulkarni says. The app will also automatically convert foreign currency into Australian dollars when customers arrive to their overseas destinations.

Not one to miss out on the emerging wearables scene, Kulkarni also recently rolled out the St George’s banking app to the Sony Smartwatch 2. Customers can check account balances without having to continuously log on with MoneyMeter, look up nearest ATMs and branches, and receive SMS or email alerts when money has been deposited or withdrawn from their accounts by configuring the wearable device to their smartphones.

“At this point in time, we have not made monetary transactions available on the smartwatch because of the security issues, which we take very seriously,” Kulkarni says.

Kulkarni is inspired to be a “trends-setter” in the online and mobile banking space, claiming St George was the first banking institution in Australia and the second in the world to offer Internet banking in 1995, and was the first in the country to launch a mobile banking app in 2009. “We saw the smartwatch or wearable devices as an opportunity to be leading in this space.”

Kulkarni plans to roll out these services to Samsung and Pebble smartwatches later this year. “The hard work has already been done, which is essentially connecting it to our back-end system. In order to do the rollout, we need the SDK [software development kit] and API [application programming language] from the vendors, and we just received that from Samsung.”

Suncorp’s CIO, Matt Pacino, is another IT leader focusing heavily on mobility and cites explosive growth across all of the bank’s channels in the mobility space. Today, 57 per cent of customers engaged in online banking are via mobile.

“Our mobility channel for banking is the number one interaction we have with our customers. So it’s absolutely critical we are able to get their feedback and actually adjust to service their needs very quickly,” he says.

Pacino overhauled Suncorp’s banking app in November 2013 after workshopping features and functionality with customers. New capabilities include the ability to check account balances by swiping the screen with Quick Balance, a feature similar to St George’s MoneyMeter. Customers can also do every day banking transactions via the app such as transfer funds or pay bills.

Making the app simple and easy to use was the main driver, says Pacino. This ties in with his broader strategy to simplify and consolidate existing core IT systems to create a more consistent experience for customers across all of Suncorp’s engagement channels. The simplification program is earmarked to deliver $225 million in benefits in 2015.

“We will have one claims engine, one pricing engine, one policy engine and one digital platform where we are able to deliver differentiated services to each one of our brands and customer segments appropriately,” Pacino says.

Bank of Queensland also launched a mobile app in November that provides any home buyer free access to RP Data property reports. Once entering an address, a full report is emailed to the buyer and includes the property’s estimated value, recent sales in the area, suburb profile and description.

“Mobile is our most popular channel, and the growth has doubled year-on-year,” its CIO, Julie Bale, says, adding the property app is a way of better engaging and developing a relationship with customers and potential customers looking to mortgage a home.

Intelligent customer insight

Alongside customer-facing technology innovations, banks are increasingly looking to better understand customers through data. Defence Bank’s CIO, Ian Brown, is doing a proof-of-concept on predictive analytics software to help retain customers, as well as better tailor services such as personal loans.

“What we are looking at doing is a complete transactional analysis, going back over the last three or four years, and looking at patterns, behaviour and so on within our membership,” he says.

“You can see that when they get to a certain pattern of spending at a certain point, they may be ready to change vehicles. I, for one, was quite surprised when I looked at the average life of a new car loan; I thought it would be longer than what it is.”

Brown is trialling Pitney Bowes software, and entered into joint projects with software and hosted services provider, Data Action, and other mutual banks to develop further capabilities. “We figured by all of us working together we can gain economies of scale.”

Brown is using the bank’s internal tools to analyse customer behaviour, but says capability is limited.

“We’ve haven’t had genuine or what I term big data systems,” he says. “There are a lot of institutions that have been doing data modelling with adhoc style reports and a business analyst delving into their data. But we need to be a lot more efficient than that, we actually need genuine data warehousing tools.

“For example, there may be somebody using a machine in a branch and this can go hand-in-hand with big data. They may be transferring money into their account and a little pop up may come up on a branch worker’s iPad saying this person had just purchased travel from so and so and transferred money to them, so we should go over and talk to them about travel insurance.”

The challenge for Brown is integrating the customer systems and digital channels with the analytics software. “There are things like social media too. How do we drag data from that, how do we make it meaningful, how do we store that and how do we manipulate it so that we can actually use it for some of our predictive modelling and what does it tell us about customer behaviour?” he asks.

“How is everything going to talk to other systems? The last thing you want is to replicate what you had in the past by doing things like simple data extracts and downloading files. You really do need stuff to be integrated and populate data fields for you on the fly as it’s being used and keep everything right up to scratch.

“I want something that is going to grab that data in real time, do the analysis and be predictive for me.”

Data analytics and intelligence is also a strong focus for Pacino at Suncorp. He is experimenting with machine learning tools to try and gain deeper insights into customers’ purchasing decisions and help better inform them about different products.

“We are looking at how we can understand or use data to make people have more informed decisions,” he explains. “As people purchase particular products and services from us, we are looking at ways to give people confidence of similar people that would be buying similar types of products. So it gives people that sense of confident that they are buying the right types of products and services for a particular area.”

Real-time backbone

The Reserve Bank of Australia (RBA) is working with industry to develop a New Payments Platform (NPP) that will clear and settle payments in real time at the bank infrastructure level.

By the end of 2016, any transaction will occur within a few seconds using the new platform, and will support overlay services such as mobile payments created by commercial banks. “If you look around the shopping mall and on the streets, the generation of today and even the generation that will come beyond that expect things to happen in real time,” says RBA CIO, Sarv Girn.

“We believe the platform we are creating will be able to sustain anything that might come forward in the future,” adds Paul Lahiff, chairman of the NPP Steering Committee at the Australian Payments Clearing Association.

Moving away from a bilateral-type infrastructure, the platform will allow banks to connect to a central hub rather than having separate connections to each individual participant.

“Australia’s existing electronic payments infrastructure is largely bilateral in structure. This is remarkably cost-efficient but can be complex for new players to join, and challenging when it comes to adding new functionality,” Lahiff says. “The layered hub architecture of the new payment platform aims to deliver the best of both worlds – ease of access, scalability for participants, flexibility to add new products and process efficiency.”

Seventeen financial institutions have joined the NPP program, which include the major players in Australia.