Adding value to data a key challenge in a multi-channel world

Retail banking in the Middle East and Africa has evolved greatly in the last few years as banks introduce new products and leverage innovation to meet customer expectations. However, recent regulatory changes have restricted fees and interest rates. Banks also contend with the market reality of intensifying margin compression. All told, they feel the need to diversify and accelerate growth from new business lines and customer segments by evaluating current market operations and expansion into untapped markets. Amid these pressures, external issues are pushing banks to improve operational efficiency, processes and technology. Liquidity must be managed, customers must be better understood and product quality and service excellence must be prioritised to truly realise required growth.

In the Middle East and Africa banks are investing in technology to digitise processes and speed up decision-making. The Middle East is transitioning from a market share focus to a customer relationship focus phase, with emphasis on technology to customise products and reach the customer. Branches continue to be a physical symbol of the bank’s strength, especially since money is an emotional commodity for most people. While the number of customers visiting branches might be falling every year, customers need the familiarity and security of a front facing relationship. In the past few years, branch penetration was forecasted to fall due to advances in technology. However, branches are not disappearing but are becoming more developed and specialised.

Instead of looking at branches, mobile banking and ATMs as separate segments, banks are realising that these channels are interconnected. For example, ATMs are no longer just cash withdrawal machines, they can be multifunctional, helping customers pay bills or remit money. The industry has also seen technological boosts in channel applications, risk monitoring and payments as well as the emergence of a unified user experience across all touch points. In mobile banking, banks are expanding to introduce functions such as savings programmes, transfers, loan applications and point-of-sale. Banks agree that the best strategy is to provide the customer with a number of channels as most do not want to be restricted to just the digital or physical channel.

Rise of non-financial institutions
There is currently more innovation on customer-facing technology than on technology infrastructure development. The shift from core-banking to channel innovation is testament that banks want tactical applications, not just technical development. However, it is also important for banks to invest in back-end operations and use them to create efficiency and effectiveness. With front office applications constantly evolving at the expense of back-end operations, a gap has been created between knowledge and application that requires upgrading to align front and back-end competencies.

As banks try to differentiate themselves based on technology this opens the door to how they can distinguish themselves from non-financial institutions. Non-financial institutions, unlike banks, spend a lot of money on design and engineering, and very little on marketing and sales. Banks that are leading innovation tend to focus on maintaining market share, when in reality, application design is the critical differentiator. Non-financial institutions’ interface designs engage customers on a much higher interaction level.

A comprehensive customer profile
A large portion of the Middle East and African population comprises the youth segment, making social media a very important communication tool. In this scenario, the retail banking ideal is the customer relationship which the bank can understand, reach and retain through data and analytics generated by social media to provide the best possible service. The verdict is still out on the value of social media—some bankers look at it as a customer experience and outreach tool. Others believe that more value can be added by finding ways to monetise the data. Banks and other institutions in the US have monetised social media by selling products via related channels, but its success has yet to be determined. However, despite not having a tangible ROI, social media interaction can create financial value from data capture.

Customers use social media to look at what other customers are saying about the bank, and how the bank is responding, especially when choosing a new bank. Therefore, banks need to take social media communication seriously and respond appropriately to project a favourable image. Currently there is twice the number of negative sentiments on social networks than positive ones. One of the ways banks can handle concerns is to address them on the same channel instead of redirecting them to other venues.

Social media, coupled with data and analytics, gives a more complete picture of the customer by profiling and transaction data. One of the biggest challenges in using data and analytics efficiently involves making sense of the volume of unstructured data generated. Unstructured data currently makes up 90% of all data captured by banks and many banks in the region still cannot add value to the data. Accumulating big data and warehousing takes a tremendous amount of effort and investment for the banks but implementing a data and analytics strategy can give banks a comprehensive customer profile.

As banks in the Middle East and Africa move to more customer-centric business models the use of innovative technology becomes inevitable as banks look to connect with customers across multiple channels. Non-financial institutions are giving banks a run for their money in the retail banking services industry, but remain constrained by regulations. This provides a window of opportunity for banks to take back market share. As banks re-invent themselves to deepen customer relationships through technology and design, access of data becomes essential to move into the next phase of customer-centric banking.