The burst of technological innovations has created a variety of opportunities for the financial institutions to win new customers alongside managing the challenges of regulation and complex business processes. Although many banks fit into the new digital realities there are a number of technological issues that financial institutions still need to address. Especially it concerns the traditional banks that have built the long standing clientele but often lack the technological potential and agility to reach out for new digital generation of customers. Cognizant has been helping the experts in many industries including financial services to cope with IT and business challenges of all levels. The myriad of services provided by Cognizant include, but are not limited to, consulting, digital, data, analytics, process design and quality assurance as well as IT and business process management across industries such as financial services, health care and life sciences, manufacturing and supply chain. Tony Virdi, VP and Head of Banking & Financial Services in the UK & Ireland at Cognizant, discusses the need for traditional banks and fintechs to collaborate and analyzes the impact of innovation labs on the market.
“There are a number of challenges that traditional banks face nowadays,” starts Virdi. “Banks are struggling to retain relevancy and also be profitable. The other thing is traditional banks are facing a huge amount of regulation. The regulatory pressure puts a lot of additional costs on banks. They have to cope with this regulatory burden, whilst at the same time remain profitable and generateshareholder value whilst beingas efficient and compliant as possible. At the same time Fintech firms stir up the market together with new ‘challenger’ banks. Our experience at Cognizant shows that successful collaboration between traditional banks and Fintech firms can bring really fruitful results to the bank’s customer base.”
“Asan IT and business services provider with very strong heritage in financial services we have helped many financial institutions to buildresilient systems andprocesses. The financial services and insurance sectors make up around 40% of our business. And we have deep relationships with all of the main institutions. Sometimes, we might start small, testing applications for example, but we often grow this relationship to look after their applications, provide consulting work and then move on to extend the relationship to include digital and operations’ related services.”
Financial IT: Are there any areas where traditional banks are still positioned better than challenger tech banks?
“The big advantage that traditional banks have is that they already have a large customer base,” continues Virdi. “Whereas the new challenger banks mostly have to grow their customer base from scratch. Given the current economic climate it’s all about trust and loyalty and making sure that you look after your customers. That’s why traditional banks should put efforts into not only maintaining their customer base by making sure they give them a service, which may not be the best service in terms of technology but an effective and efficient service from a customer experience perspective. In terms of profitability the traditional banks can make money on cards, mortgages and loans and typically provide a wide set of services, challenger banks often target their services towards current accounts, niche and wealth management services. Additionally, what we have noticed is that traditional banks perform well when they focus on a certain targeted customer segment. That could be people over 50s or SMEs for instance. I think as long as you create focused and personalised value for the customer you can build a customer base within any specific target market.”
Financial IT: What’s your attitude towards the innovation labs set up by banks such as Citi, Deutsche Bank and Barclays - do they work and will they help to fight off the competition?
“I think those labs surely work well but you have to look at any innovation within a certain time period. It doesn’t work right away, it’s not like a light switch. Most innovation projects have incubation levels of three to six months at least – and this is something they all want to shorten. Basically, if you talk about traditional banks in general terms, they have old ‘legacy’ architecture which means they sometimes struggle to keep up with the technologically advanced and digital world. But through controlledinnovation labs and supporting processes, they can build discrete products and services that can help them remain relevant to their customers and embrace new technology ideas such as blockchain or artificial intelligence.”