RiskCALM4® The Future of Banking – E-commerce (Part 1) The Issue
It is widely agreed that financial institutions, through the issuance of credit, are a major impetus of economic expansion. There are many reasons driving the need for credit; all of them are involved with some form of commerce. Whether commercial or retail, banking is about commerce, and in today’s world, it’s about e-commerce. So much is happening online with more and more commercial transactions: B2B, B2C, as well as C2C business.
The emergence of e-commerce is the primary force behind each financial institution’s digital transformation and why transformation is a top priority in most banking surveys.
The Economist Intelligence Unit (EIU) and Temenos concluded a survey in 2018 of financial institutions, to determine the top banking priorities through 2020. Out of the several hundred institutions globally, the priorities were:
52% – product agility
45% – migrating customers from physical channels to digital
45% – cutting cost and improving margins
These priorities are not separate priorities, in that they are all related; cutting cost and increasing margins requires business processing automation and migrating customers to the digital channel, requiring those business processes be available online and agile. In other words, as visionaries, financial institutions should view these priorities through the prism of their business processes. That viewpoint will allow them to see and conclude that the top priorities are integrated issues all impacted by the other. As such, an integrated solution, well thought out, would afford the institution the ability to resolve all the top priorities today with an evolutionary continuum for the future.
The technical solution to product agility, without a depth of understanding and a well thought out application plan, will lack the substance to be successful and will be incapable of translating your institution into the digital transformation required. Your customers’ digital journey will not be met with the ease and convenience that develops trust and loyalty.
Today, the Internet has spawned customers that are more demanding and less inclined toward loyalty. Loyalty in business has mostly been a by-product of personal interaction, but on the Internet, loyalty is developed through the convenience and ease of service. The anonymity of the customer allows for an impersonal approach in selecting a financial institution to whom the customer’s loyalty is given. With the growth of e-commerce and the cloaking effect of the Internet, the invisible customer is now addicted to the empowerment of the selection. Typically, loyalty is bestowed upon the financial institution delivering service that makes the customer’s journey easy and convenient. The ‘Prime’ example is Amazon, a company whose primary offering is service, utilizing the Internet to make it easy to shop, easy to buy, and easy to receive. Competing with that level of convenience and ease is most difficult for a financial institution with its regulatory compliance requirements.
There are then two issues the financial institutions must resolve in this era of e-commerce. How to be involved with an e-commerce transaction before the time of financing and how to dynamically resolve compliance requirements online during the process to create ease and convenience for a customer’s journey.
RiskCALM4® answers the top three priorities of banking while solving two vital issues for financial institutions in the era of e-commerce, involvement in the financial transaction, and compliance!
Conclusion
A financial institution’s success will, by default, be determined by when it arises to act, how it views these priorities, and how it moves forward with the solution. “Veni, vidi, vici,” I came, I saw, I conquered, the great quote attributed to Julius Caesar as a reason for his swift victory, and this is the time to respond in kind. Technology is moving quickly, as is the competition, it is time for financial institutions to likewise be decisive.
This white paper series continues with Part 2: The Customer Journey.
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