Accenture: The chat bank concept - Edwin Van der Ouderaa

The strategic plans of all modern retail banks are underpinned by a commitment to enhancing their digital offering to customers. However, some financial institutions are faring better than others. Future Banking talks to Edwin Van der Ouderaa, managing director FS digital EALA/APAC, Accenture, about the steps individual banks can take to stay ahead of the curve.

In February, millions of Americans sitting in front of their televisions and waiting for the Super Bowl to resume were introduced to a new advertiser. For 30 seconds, a spokesperson from Quicken Loans showcased the 'Rocket Mortgage', a website and app that had launched the previous November, wherein the customer can share their financial information and qualify for a mortgage application in just a few minutes. The product is so named because the average time it takes for the whole application to be processed - around eight minutes - is the same as that taken by a space shuttle to reach orbit.

Critics quickly pounced on Quicken Loans for encouraging the same sort of blithe attitude towards credit that had fuelled the very housing bubble that caused the 'great recession', despite the fact that all the Rocket Mortgage actually does is allow the user to qualify for an application and reserve an interest rate. Yet, for Edwin Van der Ouderaa, managing director FS digital EALA/APAC, Accenture, what Quicken Loans is doing lies at the cutting edge of where retail banking is headed within the next few years. In short, financial institutions are beginning to revolutionise the way they provide their customers with digital services, making them fast, easy to use and imbuing them with the ability to be integrated seamlessly into the customer's daily lives.

"Up until a year ago, there were a number of regions where digital wasn't really happening that much," says Van der Ouderaa, "but that's all changed now."

Now, banks across the world are in a race to provide digital services that fit with increasingly high customer expectations on ease of access, practicality and security. As one of the largest consultant, system integrator and outsourcing providers, Accenture is at the fore of this global transition. Accenture Interactive, which is part of Accenture Digital, was recently named the largest and fastest-growing digital agency in the world by Ad Age. While Accenture works for companies across five industries - communications and high-tech, public services, products, resources and financial services (FS) - the latter represents closer to 25% of its volume of digital work rather than 20%. This reflects the proportionally higher amount of investments in digital made by banks and insurers. Also, the growth rate of these investments keeps rising.

"We help banks with the specifics of their digital business strategy, including the financials and the practicalities involved with implementing the project," explains Van der Ouderaa. Accenture's long-held expertise in such projects is backed up by formidable resources. "We can count on close to 400,000 employees to help with all the work that comes with implementation. Because we have implemented so many of the leading digital banks across the world, we know what works and what does not."

Legacy systems

Fully digitising a banking institution's operations and services can be a highly disruptive process that can take years to complete. Accenture, however, is able to reduce this time period to a mere three market quarters by attacking the problem from two different directions.

"When we create transformation roadmaps for our clients, they are based on a concept we call 'decoupling'," says Van der Ouderaa. This essentially means that banks can deploy in one to three quarters advanced digital front-end solutions, without hardly touching the back-ends, by using a number of specific techniques."

Up until a few years ago, any change in the front would have required extensive and painful re-engineering in the back-office legacy systems, often akin to open heart surgery on the core banking systems. However, with the recent introduction of robotic process automation, intelligent bots, new API technology and real-time data lakes, engineers can effectively bypass that core altogether, introducing advanced front-end systems that can take care of themselves.

"For many of these new digital services like real-time mortgage agreements, online payments and digital wealth advice, only a small part of the back office needs to be replaced by robots to have them operate 24/7 rather than nine to five on working days. Later, banks can automate the rest of the back offices, step by step, taking all the remaining back-end paper out in the process," says Van der Ouderaa.

Set phases

When it comes to the second phase of reforming the bank's back-end systems, Accenture will use several new techniques to reduce complexity. One of them is the use of a real-time Hadoop data lake with a live copy of all the data contained within the existing legacy systems. This data lake becomes the new centre of the architecture. "In less than a second, everything that's in your legacy systems is up to date in that big-data lake," says Van der Ouderaa. That, in turn, makes it a great deal easier for software engineers to trim away at the remaining legacy systems over time, in ways that minimise the level of disruption felt among core services. In effect, the legacy systems become merely systems of record with much of their functionality stripped down and deactivated.

"It's no longer where everything happens, but it becomes a place where the bank keeps the records of the commitments it has made to its clients," says Van der Ouderaa. "This is what we do all across the world, allowing the bank not only to become fully digital, but also drastically reduce its costs. For example, if we're working with a classic retail bank in Europe with a low interest margin and a cost/income ratio of 65%, we will bring it down to 40% or lower. And all the while, the bank is still active in the marketplace."

In parallel with the real-time data-lake approach, Accenture will often put in place new, simple standard software systems for the back end since most of the complexity is moved out of the back to the front-end personalisation systems. "For example, for a leading bank, we built in three quarters a full front-end suite for real-time car loans," recalls Van der Ouderaa. "The customer can obtain the car loan with just a few taps on their smartphone and use a digital signature."

Most importantly, the solution incorporated a direct link between the customer and a credit adviser, who could provide key recommendations on the affordability of a loan based on the former's financial circumstances. The solution is paperless and real time for the customer, who can buy the car and its loan at home; for example, after discussing which car to buy with the family over dinner. But the transaction can also be done with a few taps by the bank relationship manager or by the car dealer.

Going social

It is this emphasis on quick, personal contact between an adviser - or, increasingly, with an artificial representative - that Van der Ouderaa believes will transform banking as we know it within the next three years. Cutting paper just won't be enough.

"We predicted last year that chat banking, a form factor for the user interface based on chat like in WeChat or WhatsApp, would become mainstream this year and so it has," he says. "We have implemented, for several banks in a matter of a few months, artificial-intelligence bots that can chat with millions of customers at the same time."

Ultimately, Van der Ouderaa envisions a smart messaging system that can not only process payments instantaneously, but make suggestions for how the money should be transferred according to the information it has to hand. "I can, for example, just type 'Send €100 to John' and the bot would ask 'Do you mean your friend John Miller in London and shall I use his normal current account?'; 'Yes'; 'Do you also want me to change the euros into pounds?'; 'Yes, good idea, thanks'," he explains. "These interfaces work surprisingly well because they are closer to how we naturally interact with humans. They also have the advantage of shielding the customer from the technicalities of banking."

Safety guaranteed

Van der Ouderaa firmly believes that security concerns will not be an impediment to the implementation of such systems. In fact, receptiveness to the concept has come from unexpected places. "The regulators are all for it," he says. "It's not them who are the problem. In fact, they tend to approve because they're of the mindset that financial institutions should innovate in customer service. Also, the chat-advise interaction is easily traceable and auditable, and can be more easily compliant. Biometrics and real-time fraud-pattern detection do the rest."

Accenture's cybersecurity practice will install all the necessary safeguards and then harden the infrastructure of the bank against hacking attacks. Paradoxically, in a growing number of cases, more security can be obtained by moving these solutions on to the cloud, as most of the large cloud providers are (near) military grade, something that is difficult for a bank to do due to the lack of scarce skills and critical mass.

Van der Ouderaa believes that the 'chat and talk bank' form factors will become mainstream within three years. "Sooner than we think, digital financial assistants and mortgages that are available in minutes will become the new normal," he says.

Accenture sees an increasing uptake of digital across the world. There is a marked convergence between the regions that were a year or two behind and the others, often leapfrogging straight to the newest concepts and technology.

Edwin Van der Ouderaa, managing director FS digital EALA/APAC, Accenture.