Or should APAC banks just adopt an existing cloud-based platform and tweak it to specific specifications to enhance customer engagement?
Today, the banking industry in India goes beyond delivering a comprehensive portfolio of banking services; consumers expect banking experiences to be on a par with those in familiar lifestyle e-commerce and social media platforms.
The COVID-19 pandemic necessitated the nation’s quick adoption of digital financial services and emphasized the significance of a customer-centric digital banking environment. Now, RBI — the country’s national bank, is aggressively promoting programs for boosting digital transformation and customer experience. Banks that are registered with RBI are permitted to create new digital centers without RBI’s express permission. Furthermore, RBI promotes digital lending by offering a Default Loss Guarantee.
Such accelerated digital transformations in banking typically involve plug-and-play digital banking solutions that are used to create seamless banking experiences. Such platforms work across all channels and business lines, power the entire customer lifecycle, and re-architect a bank around its customers.
According to Riddhi Dutta, Regional Vice President (Asia), Backbase, a fully engaging customer experience is made possible by an engagement banking platform (EBP), regardless of the touchpoint. By making workers a crucial component of the equation, such a system can help a bank’s customers re-establish contact, while establishing a cohesive ecosystem that prioritizes the production of distinctive value rather than the upkeep of compartmentalized or tiered services.
In-house builds or SaaS EBPs?
Previously it was always a service provider that would be engaged to build EBPs for the banks. However, according to Riddhi, a study he commissioned to IDC had shown that “80% of in-house designed digital engagement systems with expenditures above US$10m performed poorly and did not produce the intended returns-on-equity for their digital projects.”
In the Asia Pacific region that was included in IDC’s study, there were several instances of in-house builds going wrong, even when prominent experts were involved. What could have caused the outcomes in the study?
According to IDC’s Senior Director of Research (APAC), Ashish Kakar: “Building in-house has been a de-facto strategy by banks, but it is no longer feasible to deliver to the pace and scale that is required to be competitive. The complexities that come with the extensive amount of data layers, channels, features, upstream and downstream integration that needs to support legacy and modern systems to manage and orchestrate with sophistication is where in-house implementation breaks apart.”
Kakar noted that many banks in the study were still in the early stages of digital transformation despite having started in the 2000s — and so were “unable to fully realize its advantages and provide engaging digital client engagements.”
Also, the majority of banking products and solutions were seen as generic and constrained, with a sizeable portion of India banks continuing to use IT in a conventional manner, viewing it as a cost center rather than a differentiator in transformation. This had led to the following challenges:
- Customers struggled to use various services with different interfaces, did not have a consolidated picture of their portfolios, and went through protracted onboarding procedures.
- While segmentation, personalized experiences and relevant advertising based on each consumer’s lifestyles, life moments, and ambitions continued to elude the customer base, the desire for instantaneous approvals and simplified digital procedures remained unmet.
- Due to the lack of intelligent help in contact center, and the need for consumers to repeatedly provide the same information to multiple service agents due to the lack of a 360-degree unified customer view, backend operations also suffered. This is a result of banks putting a lot of emphasis on locking-in resources to get banking systems in shape rather than giving top priority to developing distinctive upstream client journeys and experiences.
Said Riddhi: “To accelerate their go-to-market visions and prioritize innovating differentiated digital customer engagement and experiences, a true (EBP) platform comes with all the hygiene requirements from market fit, to security and regulatory compliance, to being versatile and customizable to support each bank’s unique customer needs. The platform is a compassable fabric providing modularity and re-usable data and journeys for banks to help banks future proof at scale.”
Choosing a pragmatic EBP solution
For banks in India and the APAC region to accelerate their go-to-market efforts, data suggests that an “Adopt and Build” approach could help them avoid reinventing the wheel (by building an EBP from scratch) while differentiating where it matters.
A full in-house build could take up to 20 months to go “live, while adopting a collaborative platform and building upon it may shorten the time to within 11 months.
In addition, an “Adopt and Build” solution as studied by IDC, had proven to be 2.3 times more cost-effective than the traditional in-house build option.
Finally, banks considering such an approach can evaluate proposals across six key metrics: market fit and differentiation; legacy risk; build risk; time to market; modernized talent & IT skillset; and regulatory compliance. The results of such due diligence will help each bank to decide the most pragmatic approach based on its awareness of the pitfalls of an in-house build approach versus other EBP options.