Blending new and old

In today’s hyper-connected world, where consumers and businesses alike are looking for the next best technology, financial institutions are finding themselves increasingly caught between the old world and the new. They are supporting existing methods for payments, banking and commerce, while at the same time aiming to take advantage of all the opportunities presented by digital channels, such as mobile, tablets and wearable devices.

To lead and redefine the delivery of financial services, financial institutions must create a technology roadmap that not only maximises return on investment and decreases total cost of operations, but also creates a new and personal experience for the end-customer. In addition, those who lead the charge must ensure high adoption rates of the new technology-enabled channels in which they invest.

“The evolution of mobile banking from ‘viable’ a few years ago to ‘demanded by customers’ in the near future is now almost certain, and it is here that financial institutions are increasingly looking to differentiate themselves and their products,” says David Abbott, payments lead for Europe, the Middle East and Africa at technology provider Fiserv.

“The ability to move seamlessly between devices, applications and channels will attract clients who find it increasingly simple to change their banking supplier. Payment habits will change. Costs and processing time will reduce. All this will take place without compromising on security or damaging customer confidence.

“With differing technologies on offer and many options to pursue, the challenge for banks is to leverage their own experience and the creativity of their technology partners to produce solutions that deliver outstanding customer experiences.”

The ability of new payment providers to set expectations and influence the behaviour of consumers is challenging financial institutions to think differently

One example of the balancing dilemma faced by banks in the UK, and other countries such as Australia, India and Brazil, is managing the cost of processing paper cheques, while investing in automating and accelerating electronic funds transfers (EFT).

Automating and accelerating EFT is done through the development of low-cost national real-time payment and clearing systems. All these countries are engaged in a process designed to remove the need to deposit paper cheques at bank branches while keeping the payment instrument alive for those who need to use them.

Proposals for the abolition of the venerable cheque in the UK met strong resistance from public and private-sector organisations, as well as some sections of society, particularly older customers.

Cheques continue to be so useful to some that the UK government is investigating the introduction of a remote deposit capture solution for electronic imaging that enhances the current paper-based process. The solution enables cheques to be processed quickly and easily using smartphone cameras, as part of a mobile banking app.

“Once remote cheque deposit is available, which it looks likely to be in 2015, we should see the implementation of a process that combines one of the newest technologies available with one of the oldest payment instruments around,” says Mr Abbott. “The ‘wow’ factor and viral marketing are not traditionally where banks have scored highly, but killer apps, such as mobile cheque capture, make a huge difference when it comes to influencing customer behaviour.”

This technology is creating a hybrid model as banks realise they can reduce costs and improve the overall customer experience by blending new technology with traditional payment instruments. “We see this co-existence of new and old as a vital transitional step towards totally eradicating the high cost of paper processing for the UK’s banks,” he says. “This is just one example of the benefits that an always on, always connected mobile world can offer its stakeholders.

“We have been very active implementing mobile deposit capture solutions in the United States, and have seen countries like Brazil, India and now the UK, start to embrace it.

“Implementing remote capture in the UK will extend the life of cheque processing on one level. On another, it offers a real insight into the future of banking as customers embrace mobile devices to execute a range of financial transactions, including bill payments, cheque capture and instant funds transfers.”

Time is short for adoption. The line of non-banks looking to support the growing digital payments ecosystem continues to multiply. If banks get the calculation wrong, they risk greater disintermediation by these competitors. Competition has always been fierce in payments and it remains so as new entrants exert disruptive influences on the old order.

“PayPal has leveraged eBay, Amazon has optimised its marketplace, while iTunes and Starbucks have all created highly focused payments communities,” adds Mr Abbott. “The ability of new payment providers to set expectations and influence the behaviour of consumers is challenging financial institutions to think differently.”

The banking industry and regulators have responded to the challenge with initiatives, such as Faster Payments and Paym. “These real-time products demonstrate that the establishment is still able to drive low-cost, high-speed payments innovation that works in the interests of the wider community,” says Mr Abbott.

“Institutions need to act now to put in place the architecture and infrastructure they will need to ensure they take advantage of our always on, always connected world. New payment products and banking services require time to develop and implement. That may require workshops, closed user groups, private trials and then public trials before roll-out. No time has ever been wasted in thoughtful preparation or experimentation, so the time to start is now.”

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