How Legacy Banks Can Reinvent Themselves…

BUSINESS CONTEXT:

Nowadays, Banks are operating in an Economy of Disruption where customers are getting amazing Experience. The Business Environment is disruptive where competition is coming from outside the industry as well. Technology is changing at an exponential pace. All of this is making an eco-system very challenging for any legacy Bank as depicted in the diagram below.

Typical legacy IT landscape was good enough when users were using IT systems to get data/ information.

But now, the users are not just information consumers! They are generating the content themselves!!! They are reviewing the product and rate the product with their remarks. They do chat and expect two-way participation in the process of sales & service. They are EXCHANGING VALUE which is far beyond mere INFORMATION EXCHANGE.

Ability to operate at hyper-scale is not enough. Ability to hyper-personalize is the key. Ability to quickly adapt to changing market needs and respond to competitive threats is critical. Net-net, there is a huge focus on how to deal with disruptive eco-system. 

Modern IT Landscape leverage the power of modern architecture and emerging technologies of Cloud, Mobile, AI, Blockchain, IOT, Web, Digital, AR/VR, NoSQL DB etc.

What are the key show stoppers from Legacy IT Landscape:

Most of the Legacy IT Landscape depicts most of the characteristics mentioned in the table below. The impact is nothing less than that of a show-stopper:

Root Cause of key show stoppers:

Following are the few root causes:

1.    Most of the Legacy Banks companies have an inventory of products that were designed and optimized for agent / branch-oriented engagement environment. 

The problem arises when Legacy Banks undertake digital transformation initiatives. Because they put the same agent / branch-oriented products onto digital channels (web online, mobile app, IOT Wearables etc). The business processes are not realigned for the digital omnichannel experience.

1.    The other key reason that does not allows Legacy Banks is the legacy IT Applications’ Landscape where there are overlapping applications for one business capability!!! The diagram below depicts the cause.

Addressing key show stoppers from Legacy:

I recommend the following Business Shifts:

1.   A shift in Business Model of Customer Engagement: Banks need to forget the product-centric approach to use-case-centric approach. This requires banks to think in terms of ‘Persona-manifesting Life-Style’ rather than ‘customer’. Car Owner driving the car herself is a different ‘Persona’ than a Car Owner employing a driver. ‘Persona’ helps you to hyper-personalize your offering based on a deep understanding of larger context beyond profile and transaction history.

2.    The fundamental shift that Legacy Banks need to undertake is to re-design their agent/branch oriented products for digital omnichannel experience meant to be delivered through mobile, web online, IOT Wearables as well.

·      Digital technologies must not be viewed as an additional channel to the agent/branch.

I recommend Banks to adopt Elon Musk popularized ‘FIRST PRINCIPLE’ to re-engineer their ways of engaging with their customers and product design.

3.    Institutionalization of experimentation and start-up culture where mistakes are allowed.

4.    Work with Regulatory bodies to remove the friction during user KYC / identity validations and onboarding.

5.    Financial inclusion needs to be thought of from multiple banking services: from deposits to payments to lending to investment to insurance to other services.

6.    Embed Voice, AI, and Blockchain in everything you do. Voice will become the primary interface of triggering a search on the web to make touch screen based interfaces secondary. Using AI, you can capitalize on the VoiceFIRST trend. Using Cloud-native technologies like IBM ICP and Red Hat OpenShift, banks can develop applications’ infrastructure that is self-healing.

7.    Form Tie-ups with Startups: Startup lack customer base whereas Banks have a huge customer base. Banks should leverage the end user impacting innovations being done by modern FinTech, Insurtech, and other startups. Banks can use FinTechs to drive Financial Inclusion of underserved masses. E.g., InMotion.in, a startup in India has created a platform to solve the financial, healthcare and educational problems of daily wage earners in the country. InMotion.in enables daily wage workers to save small amounts every day in their bank accounts, and offers loans, insurance, pension plans etc. financial products at a far lower cost than market.

Even aids hourly workers by managing their paychecks. The Oakland-based company gives hourly workers an alternative to payday loan operations with ultra-low fee hitherto unthinkable till recently. 

8.    Adopt Crowd-sourcing for continuous innovation at a low cost. It is expected that skilling oneself in emerging technologies will need time and willingness of individual than money. The Bottom of the Pyramid will start contributing in building innovative apps as hobby which can be leveraged by Banks.

9.    Adopt Hormone Oriented Architecture for tapping human creativity and motivation for continuous innovation.

I recommend following IT / Technology / Architecture Shifts:

1.    Use ‘Domain Driven Design’ to ensure that Technology is serving the business.

2.    Use ‘Single Responsibility Principle’ which ensures “a module should have only one reason to change”.

?The benefit is one business functionality is not duplicated in multiple applications.

?IT Complexity does not increase even with the addition of functional features.

3.    Adopt “Cloud-native Infra Technologies” to make infrastructure and applications provisioning fast (and automated), and low cost. Now there are technologies like IBM ICP and Red Hat OpenShift using which banks can leverage cloud capabilities of elasticity, flexibility, and resilience in their on-premise environment.

4.    Adopt “Microservices Architecture Style” and "Event Driven Architecture” to incrementally transform legacy IT Landscape.

5.    Define customer journeys using proven Design Thinking Framework.

6.    Use 12-Factor App methodology to develop scalable, Resilient web-scale applications.

7.    Choose Technology Platforms which support Open Standards instead of proprietary mechanism to avoid lock-in with a specific technology provider. Choose technology products from established players like IBM, SAP, Oracle or Open Source from likes of Red Hat, Apache, Facebook, Google, IBM, Strongloop.  

8.    Adopt PLATFORMification Architecture style: PLATFORMification is like Lego building blocks using which you can make any shape. PLATFORMification, you can start offering the best of breed experience in various stages of customer’s life-cycle. And in each stage of customer-life-cycle, the architecture pulls in best of breed partner’s capabilities to deliver wow-experience.

9.    Adopt disruptive-Digital Architecture for Modern Technology Adoption  

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