Hybrid Banking: Customers And Tech Take Center-Stage

  • Nanda Kumar, Founder & CEO at SunTec

  • 09.03.2021 03:45 pm
  • Banking

In the recent past, when a consumer completed a banking transaction it could take up to five days to show in their bank account—and that was perfectly acceptable. Flash forward to today when the internet has made deeper inroads into our lives and the demand for digital banking services has significantly increased. Customers now expect up-to-the-minute information about their finances. Thanks to the digital services these customers enjoy in their daily lives from the likes of Apple, Amazon, Netflix and Spotify, they also expect the same type of seamless and frictionless banking experience. 

There is no doubt that the COVID-19 pandemic has upended societies across the world and the new era of omnichannel banking has put immense pressure on banks to deliver an integrated and personalized customer experience. That means they must re-assess their existing systems and capabilities to deliver true integrated banking with a human touch. 

Maximizing the core 

Core banking systems handle a high volume of transactions and are expected to function without interruption, as outages can mean regulatory issues, customer dissatisfaction and significant revenue loss. Banks around the world, both large and small, are now spending millions of dollars to maintain their core banking systems. The core is meant to be a system of record but has evolved over the years into something much more critical. While it’s true these systems now deliver additional capabilities, they often also act as a bottleneck for banks due to their lack of agility and flexibility. 

Banks can maximize core systems and deliver a new level of customer-centricity if they strategically analyze what directly impacts their customer and lift those applications out of the legacy core. In other words, ‘hollow out the core’ so these applications sit in a digital layer above the core. This digital layer is intelligent, prescriptive and forms the bridge between current customer-facing capabilities and the legacy core. If banks introduce this type of middle layer, they will be able to simplify complex operations and infrastructure, embrace intelligent technology and forge partnerships that create the right service bundles for their customers. It will also allow them to understand how to leverage customer data to offer service-first models. By doing this, banks can cease looking at the legacy core system as a hindrance and identify ways to maximize the core to their advantage. 

Understand that the world of large ERPs and end-to-end systems are over

Technology innovations have disrupted the banking solution landscape with platforms, products and interoperable point solutions that are well placed to address specific customer needs. That will only continue as banks are forecast to spend 11.4% more on enterprise software in 2021. More banks will turn to digital operations platforms (DOP) that combine back-office business tools into a single product and are viewed as a replacement for legacy enterprise resource planning (ERP) software. New DOP offerings will become AI-based and ecosystem-oriented, tailored to industry and even micro-vertical use cases and requirements. 

If banks want their legacy system upgrades to be successful, there must be agreement at all levels—starting at the top. Without holistic buy-in and commitment for such a significant transition, banks risk pouring investments down the drain and further damaging the customer experience. There is no doubt that the foundation of any change must be focused on data, analytics and technology, but the human element cannot be ignored. As more banks adopt digital, they will need to augment legacy skillsets with fresh skills to adapt to this fast-changing environment. 

Orchestrating ecosystems and the rise of personalization

Customer loyalty is fragile, and customer retention and trust are key to any bank’s overall success. This gives banks a unique opportunity to create ecosystems that provide value-based engagement and hyper-personalized services, empower their customers, and help meet their short and long-term needs to build and retain their loyalty and trust. 

Banks cannot afford to neglect their customers’ changing preferences anymore. As they adjust to the post-pandemic world, banks must remember the value of face-to-face service. In-branch banking will continue to play a pivotal role for many people and will remain an important vehicle for banks to attract new customers, retain existing ones and engage more deeply with them. We see bank-branches becoming experience centers like Apple Stores, offering a place for customers to explore products and services, and to solve more complicated banking problems. 

Customers want to have access to these types of physical experience centers while also being able to perform their banking functions and transactions digitally via their mobile phones, tablets or laptops. With both the physical and digital realm, customers want to know that they will have an enhanced level of security, comfort and confidence, especially when it comes to financial issues that can be complicated, highly sensitive or both.

Banks and financial institutions have already started to separate their external presentation layer from their back-office data layer to create enhanced digital consumer experiences. One good example of such a trend is the collaboration between Google and several financial institutions. Slated to roll out this year, Google Pay is all set to launch its “Plex” bank accounts in partnership with 11 banks and credit unions in the United States. This service gives Google users an attractive chance to open checking accounts with traditional, trusted financial institutions.

The concept of a bank is no longer about mere payments and transactions but represents so much more – think mortgages, education and healthcare. Banks of the future need to go beyond providing just financial products. They must embrace, build and orchestrate ecosystems and support integration with fintechs and other “non-banks.” By building an integrated (hybrid) banking model, banks have a significant opportunity to go beyond pure-play banking and into needs-based banking, making the one-size-fits-all template redundant. 

Essentially, if banks want to move the needle as they set out on their digital journey, they must treat the customer as their guide. That means they must go beyond traditional customer service models and adopt an empathetic mindset that will truly drive their customer-focused activity. 


Nanda Kumar is the founder & CEO of banking technology firm SunTec. With over three decades of experience as a technologist and business evangelist, Kumar has helped shape the wave of customer-centric software platforms and solutions for pricing, billing, and product management, particularly in transaction intensive verticals.

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