Beyond operational effectiveness

The priorities for retail banks in the 1990s were back-office technology implementations, operational efficiencies and managing per transaction costs by leveraging economies of scale.

The focus has now shifted towards deploying technology to attract and retain customers, and towards using all channels for cross-selling more products and services to existing customers. Today banks must deal with customers who are more aware of the choices available to them, and are therefore more demanding. They expect:

To control where, when, and how they bank (i.e., via branch, ATM, internet, mobile etc.)

• Consistent data across all channels
• A single window view of their relationship with the bank (across their savings, loans, cards, fixed deposits and investments) that includes bank statements and spans all delivery channels
• Multi-channel payments – bill payment, mobile top-ups etc.— to be available on all channels
• Security and data privacy

Increasing loyalty and improving feedback

In today’s competitive environment banks need to deepen their relationship with customers and increase their loyalty. At the same time they want precise control and feedback on marketing strategies and credit decisions. For example they need to know:

• How effective their channel deployment is in enhancing customer experience and selling products
• How they can drive their less profitable customers to lower cost channels
• Product and customer profitability and credit decisions at individual customer levels and customer segment levels

The biggest challenge for banks is that they use multiple product processing systems that have evolved over the years and don’t co-exist in harmony. Hence these back-end legacy host processors need to be replaced or re-architected, and integrated with every channel independent of one other. Alternatively, they need to implement an enterprise-wide middle layer, and integrate multiple channels and multiple hosts incrementally. Banks also need to use a business intelligence solution for analytics and business decision support.

Application Integration

FLEXCUBE@ framework is a multi-channel integration middleware from i-flex ®solutions that allows data from diverse back-end systems to be integrated and presented in a consistent manner to customers irrespective of the channel that the customers use to interact with the bank.

Banks can also use Reveleus ®, a business analytics solution—also from i-flex solutions— built on the concept of unified metadata. It comes with a number of solution packs that make it possible to evaluate the effectiveness of a bank’s channel-deployment and the profitability of its customers.

Analytical approach to retail lending

Using the two applications, banks can employ an analytical approach to retail lending. Reveleus can help:

• Provide the marketing department inputs on product positioning and customer characteristics
• Gauge the quality of the bank’s appraisal mechanism by providing inputs on customer-behavior
• Enable the bank to monitor the credit quality of its lending portfolio

It can analyze the risk exposure across various dimensions, including:

• Segment-wise, product-wise and location-wise sourcing of business by the bank
• Distribution of key credit parameters like tenure, income etc.

It can conduct portfolio concentration analysis, including the analysis of:

• Credit risk exposure concentration along multiple dimensions and across customer profiles
• Distinct trends in the sectors in which the bank is operating
• High concentration, if any, in a particular segment, asset finance model etc.
• Relationship, if any, between sourcing and delinquency

It can help banks analyze cheque presentation and ascertain if:

• There are any specific branches where cheque-bounces happen
• The average size of the bounced cheque is higher than the average ticket size of loans booked
• There are any trends in cheque bounces across profiles and demographics

It can help banks conduct delinquency analysis to explain:

• The delinquency rate across products and regions
• The effect of backward and forward flows into each bucket
• Lagged delinquency and to examine, further, if it is in anyway related to the product, geography or a particular segment of customers

It also supports NPA and recoveries management by determining:

• Gross credit losses
• Subsequent recoveries
• Net credit losses
• The strategy to maximize recoveries through early identification of potential loss- accounts

FLEXCUBE@ and Reveleus achieve effective multi-channel integrations and provide business intelligence that result in enhanced customer loyalty and profitability for banks. Hence, these are choices that deserve serious consideration by banks as they make strategic decisions on channel integrations and business intelligence.