Oracle - How financial institutions can remain competitive

Today’s banks are faced with tighter budgets than ever, and they are being asked to do more with less. At the same time, they must create a positive customer experience, provide exemplary customer service, achieve competitive differentiation, and meet ever-increasing regulatory demands.

But none of these challenges is more daunting than those related to attracting and retaining profitable customers, and remaining financially stable. And it's become more difficult than ever for banks to turn a profit, and more essential than ever that they do.

Unfortunately, banks have seen considerably erosion across the entire income spectrum, with increasing competition from non-bank entities, as consumers now have plenty of non-traditional banking alternatives to choose from.  

Banks cannot afford to lose any more of their payments franchise. In fact, it's essential for banks to grow their customer base.  

Generation Y (Gen-Y) - consumers aged 18 to 30 - comprise a considerable segment of the unbanked/underbanked population. In fact, a hefty two-thirds of consumers in this young adult group do not have checking accounts. Gen-Y consumers have shown a great propensity to turn to non-bank resources for their financial needs, like web-based services, money service businesses, grocery stores and big box retailers like Wal-Mart, which offer a variety of financial services.

Gen-Y consumers have been particularly elusive for traditional financial services firms that have tried to court them. Yet banks must find a way to win them over if they are to convert them from unbanked/underbanked individuals to customers.

Gen-Y's preferences for products and services are influenced by the knowledge and experience of their peers, not the marketing messages sent out by companies. In other words, Gen-Y prefers a pull approach, instead of a push approach. In a recent report, Catalysts for Change: The Implications of Gen-Y Consumers for Banks, Deloitte says that Gen-Y-ers are positioned to become the wealthiest generation ever. Their cumulative earnings are projected to increase by 85 percent within the next 10 years, surpassing those of their Baby Boomer parents by as much as $500 billion.

Technology Is Key

Non-banks, relatively new entrants into the financial services arena, aren't held back by inflexible legacy core banking systems. Instead, they have agile systems that enable them to respond quickly to market demands and offer customers financial products and services they need and are seeking. Many non-banks are effectively leveraging technology to reach unbanked and underbanked consumers. Non-traditional players like Zopa and PayPal have effectively leveraged social networking to increase their presence in the financial services industry, and to enrich their brands.

While social networking has emerged as an important tool for reaching Gen-Y and other demographic groups, wireless is equally, if not more, important. There are more than 229 million wireless subscribers in the United States, in addition to approximately 20 million prepaid wireless customers. Wireless providers and wireless applications pose a threat and offer an opportunity for banks. On one hand, features like virtual wallets on cell phones enable consumers to further disinter mediate banks.

Banks need agile technology that will enable them to bring products to market quickly. Most banks' decades-old legacy core systems were coded by people who are now nearing retirement age. When these individuals leave the company, they take their knowledge with them. These systems are inflexible, and each time a bank wants to launch a new product, they must hard-code the system, which could take 18 months or more.

Change is Necessary

Fortunately, financial institutions now recognize the need to change their systems and processes.

Banks that have already transformed their core banking systems are reaping the rewards of a more agile infrastructure. They are able to respond quickly to dynamic market conditions and better compete in the marketplace. These banks are also better able to meet ever-changing regulatory requirements.

Financial institutions must adopt core banking technology that will enable strategic transformation while not disrupting current operations. New core systems can interoperate with existing IT investments and eliminate information silos for true customer-centricity and a 360 degree customer view that will lead to deep analytical customer insight and resulting cross- and up-sell success and exemplary customer service. Banks will find that agile new core systems will enable the enterprise to get products to market fast, without time-consuming and laborious code changes.

Oracle FLEXCUBE Universal Banking combines standards-based technology and industry best practices to create a comprehensive platform for service-oriented growth. Oracle FLEXCUBE is a flexible, powerful, long-term solution that will help transform banks into next-generation financial institutions. It can successfully replace legacy systems and improve banking operations with minimal disruption and no loss of existing functionality.

Oracle FLEXCUBE helps banks become more competitive, increase margins and successfully meet rising customer expectations. And Oracle FLEXCUBE gives banks a cost advantage through straight-through processing and exception handling. The solution supports regulatory requirements in key markets through a highly secure data management system, which can easily integrate with third-part solutions.

Gen-Y presents a vital opportunity for banks to prevent further erosion of their core services and their revenue, which threatens banks' viability today.  While reaching the millions of unbanked and underbanked Gen-Y consumers is challenging, banks must pursue this dynamic and technologically-adept group of consumers if they are to survive the current competitive market environment and flourish in the future.

Powered by modern, flexible core systems that enable them to optimize business processes, move from account centricity to customer centricity and quickly launch new products and services, financial institutions will be able to remain competitive in the current market and into the future.  

To learn more, read the full article here