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Mapping the New Banking Ecosystem

By: Michael Scheibach

Although our journey has taken us well into the 21st century, I am not alone when it comes to feeling like Lewis and Clark as they trekked across the continent at the turn of the 19th century. As with America’s most notable explorers, bankers today are unsure of their footing, confused about which path to take, and cautious, if not frightened, about what lies ahead when it comes to mobile technology. Trepidation still exists about the ultimate impact of mobile devices; and many banks truly believe their future is threatened by new players and new technologies disrupting the traditional banking ecosystem.

Rather than being cautious or frightened, however, banks need to be aggressive and seize the opportunity presented by mobile technology. This is the view of Sanat Rao, vice president and global head of business development, client engagement and strategic alliances for Infosys. Infosys is a global company offering enterprise solutions for a wide range of industries. Among its solutions for the financial industry is Finacle, which provides core banking, e-banking, mobile banking, treasury, wealth management and CRM requirements.

Rao believes banks should take the role of “enablers of various next-generation mobile technologies.” The entire mobile financial services landscape, which includes mobile banking, mobile payments, mobile micro lending, mobile insurance, mobile wealth management and mobile treasury, will become affordable, accessible and convenient for banks and their customers.

“The presence of an installed base with banks,” said Rao, “provides them with a unique opportunity to provide anywhere, anytime services to this base, build loyalty via convenience and up-sell/cross-sell offerings through a cost-effective channel. The real benefit of mobile banking will be realized when a bank can acquire customers using this low-cost channel and enable existing customers to conveniently execute day-to-day transactions for different goods and services. Mobile banking will drive opportunities to create an ecosystem where cash and check usage will continue to decrease while enablement for mobile transactions through NFC and modern Point of Sale terminals will increase gradually. At the same time, banks have to ensure greater adoption through rich user interfaces and viral marketing, minimal validation for low-value transactions and maximum security for high-value transactions.”

Perhaps the most significant change ahead is the definition of mobile banking. Just as the word “television” has changed over time, so, too, will the phrase “mobile banking.” The more applicable term, according to Rao, is “online banking” — transactions originated by customers through any device connected to the Internet.

If the ultimate ecosystem is, in fact, device independent, then banks have a definitive advantage over non-traditional entities vying for a share of the financial services industry. Banks occupy a pivotal role in this ecosystem as they are uniquely positioned to track, identify and leverage changing customer demands and demographics and offer services catering to this landscape. “Depending on the device, location, time, history, profile, etc.,” said Rao, “the user experience for each transaction will be optimized and driven through multiple business rules. As mobile technology evolves, the user adoption rate will push mobile banking and transactions to become a key revenue-generating channel for banks.”

With industry consolidation through mergers and acquisitions, however, banks often find it difficult to integrate and scale multiple legacy systems as effectively as modern core banking systems, which provide the ability to integrate seamlessly, transition smoothly and ensure smooth data migration. Moreover, the changing regulatory landscape requires banks to rapidly adapt their operations and technology and to invest in risk management and analytical solutions.

For those banks comfortable in the new mobile ecosystem, the decision now is whether to build upon its existing legacy system or to implement a stand-alone mobile banking solution. A stand-alone system, such as Finacle, for example, should integrate easily with the bank’s core processing system. It also needs to integrate with network providers and payment systems. And, Rao emphasizes, it needs to be compatible with a variety of mobile platforms, security (including two-factor authentication), limit management and channel-specific registration processes.

Finacle’s Mobile Banking 2.0 leverages a single platform to provide multi-channel access to banking services, integrating easily with disparate host systems, core banking solutions, payment networks and third-party applications. It supports most device form-factors and platforms, while enabling banks to open up a secure channel that improves customer convenience. The company’s mobile banking solution delivers a portfolio of banking, commerce and payment services, along with personal financial management tools that provide informed decision-making capabilities on the move. For banks in search of an easier transition to mobile banking, Finacle offers Mobile Bank-in-a-Box, an integrated mobile-channel banking solution pre-configured, pre-packaged, pre-integrated and pre-certified with an optimum set of selected services.

Unquestionably, mobility is changing the whole customer-bank relationship. Javelin Strategy & Research seemingly confirmed this in a recent report that found an astounding 60 percent increase in mobile banking usage this year. Yet while consumers see mobile primarily as a self-service channel, banks need to map a new ecosystem that includes a cost-effective — and revenue-generating — distribution channel extending across both consumer and business segments seeking convenience and security of use.

Meriwether Lewis sums it up best. Upon first seeing the prairie north of the Platte River, he wrote in his journal: “I had been led to believe, that it was barren, steril [sic] and sandy; but on the contrary I found it fertile in the extreme.” Mobile banking — or redefined online banking — is, indeed, fertile ground for the banking industry.

Michael Scheibach is executive editor of BankNews.

Copyright (c) November 2011 by BankNews Media.