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You can’t “wake up and begin to innovate”

Going digital is a huge shift for FIs. Partnerships will be key to success

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  • Written by  Rahul Singh, HCL Technologies
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  • Comments:   DISQUS_COMMENTS
UNconventional Wisdom is a periodic guest blog where the conventional wisdom is held up for fresh inspection. If you have some "UNconventional Wisdom" to share, email scocheo@sbpub.com. UNconventional Wisdom is a periodic guest blog where the conventional wisdom is held up for fresh inspection. If you have some "UNconventional Wisdom" to share, email scocheo@sbpub.com.

Traditional IT services in banking and financial institutions are flatlining. These include services such as infrastructure and application management.

At the same time, digital services are growing at over 20%, according to Everest Group research. The reason is simple: the number of customer touch points is growing, services are going 24/7, and customers are demanding more information in order to make decisions about their financial assets—and they want things like simpler but secure transaction capabilities. This is making collaboration with partners essential to innovation.

Tech companies use partners

Using partners, organizations like Alipay, the huge China-based mobile payment service, are adding dramatic new capabilities. Last September, Jack Ma, founder and chairman of parent Alibaba Group, introduced a fascinating new feature integrated with Alipay. As reported in TechCrunch, users at KFC in Hangzhou, China, could simply flash a smile to make payments for their orders. A camera at the point of sale scans the customer’s face, verifies identity and automatically completes the payment. The payment process does not require a smartphone or a card. At the back of Alipay’s wickedly named Smile to Pay system is the facial recognition technology of partner Face++ that is unleashing new capabilities using facial recognition technology.

This and other innovations in the financial services space depend on digitizing the business. It isn’t any surprise to hear Richard Fairbank, the CEO of Capital One, say, “We’re going to need to think more like technology companies and maybe a little less like banks.”

Michael Corbat, CEO of Citigroup puts it elegantly: “My company, on an average day, moves $3 trillion in business and institutional financial flows… Nearly all of that is moved electronically. In many ways, we see ourselves as a technology company with a banking license.” Traditionally, data and information have been the lifeblood of banks. Now, banks need to place digital IT at the heart of their operations to extract more from their data (plus that extra juice from external data) to deliver delight to customers.

Shift from cost to expertise

A big shift in expectations is underway. Traditionally, banks have pursued service models that drive value through cost reduction, capacity enhancement and process improvement. Today, value is being driven through effort elimination, outcomes, and customer-facing innovation. Until recently, banks have looked at ways to scale labor by offshoring processes to low-cost locations and using junior employees. Now they want skills and expertise, intellectual property, and automation along with local/best-shore locations.

This shift is driving interest in new technologies such as Automation/Robotic Process Automation (RPA), Natural Language Processing (NLP), Blockchain (for trust networks), and Cognitive/Artificial Intelligence (AI) that can support the new goals of banks.

Banks now need top-class talent ranging from engineers to software developers and innovators to execute their digital strategies and deliver applications that evolve along with digital trends.

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Don’t “innovate,” teach innovation

Bankers hear from all corners the need to innovate. The problem is that innovation can’t be sparked at will and talent cannot be trained overnight.

Banking executives can’t expect a team to wake up one morning and begin to innovate. It isn’t going to happen. There will be false starts, missing tools, general apprehension about failure, and even perhaps a reluctance to give up the low-risk security of traditional approaches.

How, then, do you bring in innovation? Our belief is that banks need to set up a team whose express focus is not innovation per se, but whose responsibility is teaching others to innovate. This ensures that a variety of teams within a bank quickly find the mentoring, the tools, processes and partnerships to confidently take ownership of innovation.

Learn by working with partner

Banks, too busy to take their eyes off their operational agenda, are bound to ask, “How do we go about creating these ‘in house innovation mentors’?”

One quick solution is to partner with technology companies who bring a startup mentality and the ability to formulate and execute on big ideas. Working in such an environment gives bank employees the experience and encouragement to examine their methodologies. Then, using their new-found creative confidence they begin to replace existing processes with more market-focused approaches. They learn how and when to deploy AI and how to use data to surface new opportunities. They understand how partnerships can accelerate new product development, make payments simple, and bring joy to the customer by using digital solutions to go beyond the traditional boundaries of banking.

There is a good example of this in the recently announced Marriott-Alibaba partnership. Among many things, the hospitality chain will use Alipay to make it easier for Chinese travelers to make payments. The partnership potentially places a new product into the hands of Alipay—it can offer pre-paid, post-paid, and installment-based payments to customers who use Marriott properties and services. Alipay is now able to provide an amazing experience to its users by going beyond managing money for transactions.

Clearly, banks are in urgent need of a digital fix. Without this, they cannot use advanced technologies to solve customer problems and meet customer needs.

About the author

Rahul Singh is president of Financial Services at HCL Technologies. The company, headquartered in India, is an IT services company that specializes in digital transformation. Previously Singh founded Citigroup Global Services, the India-based BPO unit of Citi, acquired by Tata Consultancy Services in 2008.

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