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Banks having mid-life crisis

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Banks are experiencing a midlife crisis. They desperately want to transform and become digitally enabled but they are being hamstrung by legacy systems, data silos and disjointed marketing, says CARLA PETERSEN, Senior Business Director at Acceleration, London.

Digitally maturing organisations who are leveraging technology to redefine their businesses understand that this journey starts with transforming their customers’ experience of their brand through the transformation of their operational models, which ultimately leads to the transformation of their business models.

They, therefore, treat their customer data as an asset and foster a culture that supports rapid iteration, rapid prototyping and risk-taking, enabled through well-integrated marketing technology. If something doesn’t work, they chalk it up to learning and try something else.

Yet, banks are inherently risk-averse. This is not unexpected given that the financial industry is one of the most heavily regulated, especially when it comes to the responsible use of their customer’s personal data. Most have the challenge of integrating expensive legacy systems that are still being used and navigating the slippery slope of digital analytics, mobile, social and cloud solutions that should enable the modern marketing capabilities of their organisations. A common theme, too, is the lack of executive-level buy-in and commitment to drive the type of cultural change that puts the customer at the centre of the business strategy. So where do some of the opportunities lie that will empower banks to be more future ready?

Data silos

A recent study conducted by Wunderman and research partners, Penn Schoen Berland, (in which 250 senior executives from global brands were interviewed) indicate that whilst 99% of all executives surveyed believe that data is critical to achieve success, 62% feel that they are unable to convert this data into insights or action and an even further 68% say they can’t use the data to create relevant messages. 

Banks have a wealth of information about their customers’ income, lifestyles and purchasing behaviour. The problem is that this data resides in silos within the organisation, making it impossible to understand what a customer needs when they need it – much less accurately predicting their needs over time so that the customer benefits from every interaction they have with the brand. The credit card division works off a different dataset to the home loan division, for instance. The result could be that the bank ends up offering a credit card to a customer who already has two or three, rather than offering him preferential rates on a home loan because the bank knows he’s looking to buy a house.

When data is integrated and centralised, all departments work towards a common KPI: to drive business growth by meeting the needs of a particular customer at a particular point in their lifecycle.

Yet, performance in banks is still measured by business-unit KPIs. This has resulted in disjointed organisational cultures and decentralised decision-making.

Stop-gap solution

There is some awareness of this problem though, as seen by the trend towards creating cross-functional teams when launching a new product or brand experience. In these set-ups, brand and product teams, marketing teams and the IT department come together to focus on what a good customer experience looks like and how technology and data can support it.

Once the cross-functional brainstorm is finished, however, the different teams go their separate ways to focus on their individual objectives that usually have nothing to do with the KPIs that result in digital transformation. Digital transformation requires strong leadership and vision to drive the change and reap the rewards.

Customer first

All marketing and digital transformation strategies need to put the customer experience first – and that requires a new approach to data management, a new approach to technology enablement and, most importantly, a new approach to organisational culture.

This cultural change can only be driven from the top and it is imperative that senior executives integrate digital transformation across all their products and services and create a team of digital experts who are experienced in modern marketing practices and understand the customer journey and how data and technology can enable that experience. Until this happens, the agility crisis facing banks will continue, putting their business models at risk.

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VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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