Leadership Drives Banking Innovation
Finalists in the 2015 BAI-Infosys Finacle Global Banking Innovation Awards are leading the way with more tailored products and services for customers.
BY Bill Hippensteel
Steve Jobs once said that innovation distinguishes between a leader and a follower, a phenomenon that we can see in the finalists for the BAI-Infosys Finacle Global Banking Innovation Awards. This year, 39 finalists representing 21 organizations will vie for top honors in nine award categories, with the results to be announced on October 13 at BAI Retail Delivery 2015 in Las Vegas.
Having been involved with the BAI-Infosys Finacle awards program for several years, I find it interesting that financial services innovation is truly a global phenomenon, taking place in virtually all regions of the world. The leadership of this innovation, however, can differ depending on where you are located. In Europe and Asia, for example, innovation leadership typically comes from traditional banks while in the U.S. it’s more likely to be spurred by venture capital-funded startups and fintech companies.
Different regulatory environments and dependence on legacy systems no doubt explain much of this difference. The point is, however, that innovation leaders across the globe are overcoming whatever barriers they encounter in developing new products and services to improve the financial lives of their customers, as we can see in our finalists described below:
In the “Product and Service Innovation” category, the finalists are: Hong Kong-based The Bank of East Asia (BEA) Ltd; Canadian Imperial Bank of Commerce (CIBC) of Toronto, Canada; the Desjardins Group of Quebec, Canada; Fidor Bank AG of Munich, Germany; and Bank SMART by FM Bank PBP SA of Warsaw, Poland.
For CIBC, the Tim Hortons Double Double Visa card represents a first-of-its kind, two-button payment technology that combines a no annual fee CIBC Visa credit card with cash rewards from the popular Canadian doughnut chain. Cardholders press the CIBC Visa button when they use it to pay to convert 1% of their purchase spending to cash rewards that they can redeem at Tim Hortons by pressing the other button on the chip-and-PIN contactless card. One early challenge CIBC faced was that strong demand for the card outpaced fulfillment expectations, resulting in initial delays in getting cards out to customers, says Gayle Murdoch, senior director for new business development for CIBC’s Payments, Retail & Business Banking business. CIBC managed customer expectations through social media, email, and frontline branch teams, Murdoch adds.
Fellow Canadian financial institution Desjardins Group found its own way to customize the payment experience with its Cloud Solution for Payments and Treasury, which lets corporate clients process domestic and cross-border payments from any Enterprise Resource Planning (ERP) system to their banks worldwide regardless of the file format. While most banks impose their preferred payment file format on their customers, Desjardins’ solution can accept any file format and transform it into the format required by the receiving bank through the least costly channel. The solution, available on mobile, includes features such as cash and liquidity management, real time payment processing, automatic account reconciliation, payment investigation, sanctions screening, audit and control as well as risk management tools. “Using multiple banking portals is very difficult to handle and extremely time consuming for large companies,” says Paulo Salomao, marketing spokesman for Desjardins.
Meanwhile Germany’s Fidor Bank introduced a free bank account built around an application programming interface (API), the Fidor Smart Current Account, to supplement classic account services with Internet payments and innovative banking products. The integrated API platform allows customers and partners to directly connect their computer systems with those of Fidor Bank so the bank and third-party providers can continuously add new products and services. Features include credit transfers via Twitter, social lending, social trading in virtual currencies and a wide range of cutting-edge products that go well beyond traditional banking services. By February 2015, Fidor Bank had more than 75,000 banking customers.
FM Bank PBP SA is creating a seamless transnational experience with its Bank SMART mobile-first digital bank, aimed at mobile Europeans who choose to study, work and live in other EU countries. Customers of the branchless Bank SMART can manage their finances in different countries within one mobile application, making it the first bank to provide borderless banking in Poland and the Eurozone. The bank offers two-currency personal accounts, European money transfers, bill payments, VPAY (Visa in Europe) debit cards and free worldwide money withdrawals. “In Poland, a large portion of migrants leave behind family members who are involved in their financial lives, paying utility bills, mortgage, consumer loans and making investments,” says Anna Znamirowska-Stączek, mobile banking department director for Bank SMART. “Yet, for a long time banks have not met these needs.”
As part of its strategy to attract young and wealthy customers, The Bank of East Asia (BEA) revamped its premium wealth management service, SupremeGold, by integrating the bank’s in-house-developed digital devices with professional services, competitive products and offers, expert staff, and an entirely new look and feel. These solutions are housed in new SupremeGold Centers which are located in key shopping hubs.
The improved SupremeGold has a suite of innovative financial planning devices that includes the i-Window, an interactive digital device with split-screen functionality that enables customers and advisors to review key documents simultaneously, and streamlines the investment and insurance transaction process. “Before its revamp, the brand image of SupremeGold was dated, and not altogether appealing to the younger generation,” says Vincent Hui, general manager and head of personal banking for Bank of East Asia. “Customers did not have an excellent experience in using our services, as the operations before revamp were mostly manual, involved tedious procedures, and required long transaction times.”
Aiming for Omni and Digital in Channels
BEA was also a finalist in the “Channel Innovation” category with its highly flexible and mobile digital branch, which operates as a paperless, straight-through model. The BEA digital branch features video banking with remote staff, and financial planning and credit card application stations. It takes up half the floor space of a traditional branch, and takes only 13 days to renovate and install. With a smaller back office and reduced manpower, BEA has opened more of these digital branches in high-footfall luxury shopping mall locations. “Since shop rental in Hong Kong is the most expensive in the world, we designed the Digital Branch model to capture every opportunity to set up branches in prime locations and create a competitive advantage,” says Hui.
Another finalist for Channel Innovation, Bank Millennium SA of Warsaw, Poland has created its own “omnichannel banking platform,” based on social, mobile, analytics and cloud (SMAC) platforms. Through the omnichannel project, Bank Millennium now offers end-to-end cash loan disbursement across digital banking, mobile, and ATM channels. Since the launch, the bank’s digital channel sales have doubled, with cash loan conversions increasing 50% and cash loan sales 30%.
Turkey’s Odeabank is taking a crack at the omnichannel experience with its “Unique” mobile banking application, which resembles a phone keypad where users can choose any banking transaction by typing in numeric sequences. Project “Unique” included building a digital design guideline, re-designing Internet, ATM and Self-Service channels, modifying the IVR, and developing a new mobile application. In the first 5 months, more than 55,000 people downloaded Unique, and more than 500,000 transactions have been conducted. “We believe our mobile application has a strong social impact on financial inclusion for everyone, even for unbanked people,” says Tayfun Kucuk, chief technology officer for the three-year-old Odeabank.
Also from Turkey, Istanbul-based Finansbank’s Basemap, a mobile tablet interface is giving small to medium size enterprises (SMEs) and commercial banking customers a tailored experience that is also untethered from the physical branch. Basemap increases branch effectiveness by allowing bank relationship managers to locate existing and prospective customers while traveling via GPS, weigh their value and risk to Finansbank and gain insight about their product propensities. Relationship managers can run core banking and office applications on the tablets.
Since Basemap’s launch, marketing efficiency has jumped six-fold and cross-selling by 24%. “The uniqueness of Basemap lies in the fact that it is the first selling force and CRM tool to show all current and potential customer locations with customized banking solutions,” says Okan Cetinkaya, spokesman for Finansbank.
BNP Paribas, of Paris, France, greeted its retail customers with its own version of the digital bank, Hello Bank! Launched in France, Belgium, Italy and Germany with plans to expand to other European countries, Hello Bank! gives customers the option of interacting with the bank’s team of experts through email, chat, Facebook, Twitter, Google+ or by phone. Developed in less than seven months, the bank acquired 800,000 customers in within the first 18 months. “The technical challenges were huge but we’ve already had great experiences,” says Antonio Queiroz, director at BNP Paribas. “The issues we were facing are always the same, ‘how to transform financial products, designed to be sold in branches, into digital financial products?’”
Pay Your Way
Fidor Bank scored another finalist nod in the “Innovation in Payments” category –along with other finalists CaixaBank of Barcelona, Spain and Poland’s IdeaBank SA– for its virtual currency offering. Through a partnership with Bitcoin.de, Fidor Smart current account holders can now trade Bitcoins. The bank removes the risk of fraud and foreign market uncertainties by keeping customers’ money in their own account, which is legally protected up to 100,000 euros. With the implementation of the Rippleprotocol, Fidor customers can also send money for a flat fee of 0.49 euros per transaction, regardless of destination.
CaixaBank is also offering a more tailored way for its customers to make payments, pairing with Visa to offer a contactless payment bracelet. Using the EMV-enabled bracelet, CaixaBank customers can pay and make ATM withdrawals at more than 500,000 locations across Spain. Since its launch, electronic payments by bracelet-wearing customers have increased 10%; more than 50,000 CaixaBank customers are already using it on a daily basis. “Contactless wristbands have made payments faster, more flexible and more convenient,” says Josep Gallach, the bank’s director of corporate communications. Ensuring customers know these payments are as secure as card-based payments has been vital, Gallach adds. And designing the band itself, to be comfortable, attractive, anti-allergenic, sturdy and water-resistant, was also a tall order.
Idea Bank is aiming its payments innovation at small to medium size businesses (SMEs), offering its Money Collection service to physically collect deposits from business owners in person. According to the bank, eight out of 10 Polish SME owners visit the bank in person. With Money Collection, a trained bank employee can be booked via mobile app to deliver funds or collect deposits and convey them to the bank branch in their in-car secure depository. “The Mobile Collection service was developed to lift the weight of money transportation off customers’ shoulders,” says Małgorzata Szturmowicz, director of operations for Idea Bank. “It proves that having cash-loving conservative clients is no excuse for the lack of innovative payments thinking.”
Getting to Know You
Four financial institutions became finalists for their “Innovation in Internal Process Improvement,” including the Boeing Employees Credit Union (BECU) of Tukwila, Wash., Turkey’s DenizBank, and repeat finalists CaixaBank and The Bank of East Asia. BEA created i-Kit as a one-stop paperless financial platform for iPad users, where they can learn about banking products, make choices, and electronically apply and open an account within 15 minutes or apply for a credit card within 5 minutes. The i-Kit uses optical character recognition (OCR) to read the customers’ ID card, address and income proof, and pre-fill application forms, and digital signatures to sign forms. Hui of BEA says in the last year the paperless platform has received a satisfied rating from 95% of customers.
CaixaBank is also using the mobile channel to streamline communications. The Spanish bank’s FinApps Community connects talent and ideas from CaixaBank customers with professionals in the mobile sector so that the bank can improve services and track customer needs. The FinApps Community has reached more than 1,300 registrations, 58 ideas published and 40 project proposals from clients. David Urbano, director of mobile channel and digital networks for CaixaBank, says that to promote the community, the bank has launched FinApps Challenge, a two-month competition to generate more ideas, where members help choose the winners.
Rather than turning customer suggestions into action, BECU is converting ATM transaction data into action with its process improvement innovation. Since the credit union’s ATMs average more than 7,200 transactions per machine per month, BECU has been monitoring real-time transactions and customer analytics to get a better view of how members interact with ATMs in order to improve their availability and understand the transaction mix at various machines.
“The development and implementation of the ATM Analytics product was crucial in our journey to migrate from reactive to proactive channel management,” says Shirley Taylor, head of ATM management and development at BECU. “Having the ability to shrink our member transaction data gathering and analysis time from weeks down to minutes allows us to make decisions based on timely and comprehensive cardholder analytics.”
Similarly, DenizBank developed its own Powerful Teller-Dashboard platform to use customer relationship management (CRM), predictive analytics and data mining to make the customer the central focus, and better understand what customers and tellers need. The dashboard consolidates screens and streamlines processes to simplify teller-customer interactions. The deployment of the dashboard reduced operational efforts by 63%, increased annual sales 216%, decreased transaction time 58% and increased employee and customer satisfaction.
CaixaBank is also a finalist in the category of “Innovation in Societal and Community Impact” –along with DenizBank, Georgia’s JSC TBC Bank, and Nusenda Credit Union of Albuquerque, N.M. – for its EnFamilia multiEstrella Community. Built as an online vertical social network, customers can create a “family” space to be accessed by invitation only from the space’s creator, and can be used by CaixaBank non-customers too. Within the “community,” members can message each other, and share images and wish lists. “It is a key step to get new leads who can eventually become customers,” Urbano says. “Customers register and then invite their loved ones, even when they’re not ‘la Caixa’ customers.” Urbano says it took “meticulous work” at first to overcome the initial fear that non-customers would be rejected, and to boost registration.
DenizBank also created a digital platform, called Kumsal, a cloud-based platform to help its small business and entrepreneur customers grow and manage their business online. The platform delivers online management tools to these small business customers for tracking contacts, cashflow, reporting, inventory management, creating templates and online storefronts, email marketing, and social media, and offers discounts and special pricing from third parties.
Meanwhile, JSC TBC Bank is reaching out to Georgia’s vast underbanked regions with its Universal Sales Agents (USA) Program, where agents function as mobile bank branches by visiting clients where they are, completing and submitting loan applications through an Android application, communicating with centralized back offices remotely and approving loans and other products without the clients having to physically visit a branch. Loan generation and approval takes 30 minutes, and disbursements are issued on debit cards through ATMs. Mariam Rusishvili, head of new initiatives and strategic projects department at TBC Bank, says they faced obstacles including, “internet coverage, integration of the internal banking system, loan processing on the spot, scoring and black list management as well as penetration in very remote regions of Georgia, where the majority of the population is not technology savvy.”
On the other side of the globe, Nusenda Credit Union is also widening access to financial products with its Co-op Capital program, which allows co-ops, unions or other associations to sponsor a loan on behalf of borrowers with low-income, poor credit, or insufficient collateral. There is no credit report, and the member organization’s savings account acts as collateral. Based on testing, Nusenda estimates at least 50 new loans from this program within the year. “We’ve streamlined access to capital by maximizing membership-based organizations’ already-thorough vetting process,” says Robin Brule, senior vice president of community relations for Nusenda. “Nusenda doesn’t have to comb through financial statements or conduct a credit check. It saves time, builds relationships, and the repayment rate is 99%.” Since this type of microloan product has not widely been tried in the U.S. before, there is little research about what to expect, says Brule, adding that they have addressed concerns of default or insufficient collateral up front.
Like credit unions and banks, non-financial institutions have been innovating as well. This year’s non-bank finalists included Amsterdam’s AcceptEmail; Lending Club of San Francisco; Chicago’s Moneythink; New York’s PayItSimple USA Inc.; London’s Travelex Currency Services Inc.; and Moven, New York. PayItSimple’s cloud-based service allows customers to make interest-free installment payments with existing credit cards. Travelex’s Taxidia helps global cash processors make fewer errors in sending payments. Moneythink introduced a new mobile social application, dubbed the “Instagram of Money,” where young people can share photos, comments, and hashtags, while learning to make good financial decisions.
AcceptEmail introduced a one-click method for consumers to securely initiate a bill payment from an email address or mobile phone, making electronic payment faster and less expensive. “Banks are all looking for more and better ways to serve the Millennial Generation, and the combinations of AcceptEmail and PayWithMyBank is the perfect way to meet millennials’ demands for convenience, mobility and instant confirmations,” says Peter Kwakernaak, CEO of AcceptEmail. “It gives the banks a way to reassert themselves in the payments arena against other payment providers.”
Through its online marketplace, Lending Club is making credit more affordable and investing better with its new technology to match borrowers and investors, and offers borrowers access to more affordable credit. Robin Shin, public relations manager for Lending Club, says her firm “enables investors to capture the spread traditionally available only to banks and credit card companies, and to receive steady cash flow and predictable, solid returns.”
Moven developed a free mobile financial “wellness” application where users can compare their spending behavior from month-to-month, receive a categorized expense summary, and even forecast future expenses. Alex Sion, CEO of Moven, says his company is essentially trying to “reinvent” the nature of the typical banking engagement, to help customers build better money habits. By pairing the old-fashioned simplicity of the “cash envelope” method with the ubiquity of mobile, Sion says consumers can use the application to become more “mindful” of money. Moven has 100,000 users in the U.S. and New Zealand and plans to expand to Canada soon.
Mr. Hippensteel is chief content officer for BAI.
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