Aaron Marsh
Hello and welcome to “The Buzz,” a Bank Automation News podcast. I’m Associate Editor Aaron Marsh, and I recently had a chance to speak with Rajashekara Maiya, vice president of global business consulting at digital banking solutions provider Infosys Finacle, which surveyed more than 1,165 executives at banks of all types regarding their use of retail digital banking technology, including how their organizations are investing, where they expect the biggest changes will take place in the coming years, and where they’re falling short of expectations. Mr. Maiya took the time to walk through some of the findings from this study that included input from 170 large multinational or national banks, 89 regional banks, 547 community banks and 95 credit unions from across the globe. Rajashekara Maiya
So, as you rightly mentioned, we’ve been doing this research jointly with the Efma for a number of years now — this is the 13th edition that we are publishing, and what started with 150 participants way back in 2008. Today, this research specifically stands at covering around more than 1,100 banking business executives, and these executives represent all across the globe plus various segments of banks, whether it is large banks or midsize banks, regional banks, community banks and credit unions. So it is a well thought out and covered report, so that all aspects and all opinions are being taken care of. Aaron Marsh
With all these banks, is this globally? Rajashekara Maiya
Yes, it’s global, it covers six continents. So we have tried to make sure that it represents each and every continent and the region so that we are not leaving out any specific region or our country from the report.Aaron Marsh
Okay. Well, one of the one of the strongest results that I that jumped right out at me, is this question where you’re polling these executives on the area of banking, where they expect the most innovation over the next five years, and pretty much overwhelmingly — like 53% — pointed to product delivery, and specifically channels of product delivery. What can you tell us about this?Rajashekara Maiya
Absolutely, Aaron. I think all of us have undergone never seen before probably never again kind of a pandemic situation. And because of which most of the time the customers are expecting the financial services being delivered to their devices. And either it is because they are not able to visit the physical branches or the ATMs either due to lockdown conditions or in terms of physical distance expectations. So more and more banks were expected to go digital at scale overnight. And this is where the pandemic has given not only an opportunity, but at the same time exponentiated the need for going digital. So, we have seen 53% of the bankers out of this 1100 Plus bankers who responded. So they are now looking at using delivery channels, whether it is in terms of online banking, mobile banking, are using a social media based banking to be used as the the first and the foremost and the primary channel of communication with the customers when it comes in terms of delivery of financial transactions. And that’s what we found out in this report.Aaron Marsh
Yeah. Okay, so I wanted to move to this section because I find this fascinating here. There’s a section that breaks out all these the survey respondents asks them to gauge the success of different components of business innovation. And so just looking at this, you know, how do they feel they’ve been, you know, very successful, somewhat successful, not successful and so on. Um, it seems like the lack the area of least success, so they’ve got least confidence in measuring success of innovation initiatives. So it sounds like they’re putting all this effort and money and time into innovation, but maybe they’re not so good at it actually measuring the results they’re getting.

Rajashekara Maiya
Absolutely. And this is one of the reasons in terms of while you start putting your money into this innovation, it is not that it is going to be yielding results immediately unlike any other project. So these you know, investments are spread across anywhere between a period of two to three years before you see actual results, because it has to percolate down the organization has to change and to adapt these kind of innovations and from then on what is goes into the customer, some from customers, then you start receiving the feedback, the advocacy, the loyalty, so, it is going to take time. So, within a year, you will not be able to see the results, but it is the investment that you are trying to make to yield results at a future point in time. Hence, you see, more and more banks are now increasing their investments on innovations. And this year when we ask this question, which are the areas these financial institutions are planning to increase or decrease the level of investments we have heard around 78%, the banker said that their organization is trying to increase the level of investments in the customer experience. Because that is when you will have the advocacy and loyalty coming into picture. And that advocacy loyalty will have a an effect after six to 12 months when new customers come in, based on somebody suggesting or word of mouth.

Aaron Marsh
Another area that stands out to me is, you know, there’s some lack of confidence at these banks that they’re doing this well get this having a well-defined innovation strategy. And there’s actually a good number that find that they are somewhat unsuccessful or very unsuccessful at that. Are they going into these innovation projects, maybe without, like a key foundation?

Rajashekara Maiya
Ah, not exactly. So it varies from bank to bank. And it also depends on the size of the bank. If you know located in the segment three and four, which is largely the credit unions and community banks, you may not have a separate division of innovation group or a chief innovation officer being identified and recruited. It is all happening from the ground up, even at the branch level, there’ll be some smaller innovation that is going to yield results immediately for the bank to achieve it. But as you look at the upper segment, in terms of the larger banks, where they have gone ahead and created subgroups of innovations are in terms of departmental wise innovation groups are there is a specific CXO designation called the chief innovation officer. That is where you see some of these challenges coming into picture not able to now spread that entire innovation across because the organization dynamics and as a culture has to adjust to it. That is where you see these challenges coming up.

Aaron Marsh
And then again here, because we seldom get the chance to really break into this what’s going on at banks, there’s a question that asks how successful these banks or these organizations are in addressing the following innovation and digital transformation challenges. And one of the so I want to look at the pain points, we have an opportunity to do that. Because the area where it seems like there’s the largest potential issue comes into a lack of skills and expertise. So are these organizations having trouble getting the talent that they need to get these innovation projects through?

Rajashekara Maiya
I think it’s a global phenomenon, not just limited to the banks, and especially the pandemic has accentuated and we are seeing a lot of talent war going on across industries. So, one of the important things that banks when we asked them in this report question around what is the level of importance in the context of customer in the next three to five years perspective. So, almost 90% of the bankers said that delivering mobile channel user experience is extremely important for them, while they have identified that as an extremely important and 90% of responded to that question, but for now, look at the reality on ground is only 14% of the bankers said they have done something around his mobile banking experience being delivered. So there is a huge gap between the expectation and the reality. And that is to do with in terms of the right talent being recruited. So you know, look at it is a combination of business domain experience, process, experience, and technology platform coming into picture and all of them coming together to help build these kind of experiences. So we today we do have a challenge on the ground. And specifically, the pandemic has redefined the work, workplace and the workforce. So all three are undergoing dynamic changes as we speak. And that is where you see that the entire challenges around having the right talent to do what the banks are looking at the next two, three to five years horizon is going to be a challenge and as well as an opportunity for them.

Aaron Marsh
Thank you for that. But there also seems to be a problem too and just sort of looking at these pain points. Now this relates to the time and cost required from concept to reality. We’re talking about digital banking or mobile banking innovations, there seems to be a lack of confidence around ideation and coming up with the concept of the project and actually executing. Do you see that there?

Rajashekara Maiya
This is typical in the larger banks and banks which have a legacy environment. So the existing legacy technology infrastructure is holding them back. It’s very easy to have a conceptualizing a way, the new digital onboarding, digital experiences, and the customer onboarding, and mobile can be visualized. But when it comes to implementation execution on the existing infrastructure of legacy, that is where the challenges are, because banks are finding it difficult to see the API is not being exposed, the micro services are not available, the market infrastructure is not ready, they’re not able to link to the ecosystem in terms of fintechs and startups. So all of these starts popping up one after the other. And that is where the challenge is for them to now realize what the concept that have visualized.

Aaron Marsh
And it makes me wonder, too, because we’re talking about the big banks, maybe having some of these legacy systems, you know, you may have an instance where the larger banks had the resources to invest earlier on when it was more of these legacy systems being put in place. I wonder if some of those big banks may be at a disadvantage right now we’re talking about open banking and digital banking, then maybe some of the smaller banks, regional and community banks and credit unions, maybe they didn’t have those systems in place. Now moving to mobile banking and open banking solutions, where they didn’t have so many legacy systems to have to overcome.

Rajashekara Maiya
Absolutely, you’re right. And that is the challenge that most of the larger banks are finding. But the some of the larger banks have also found out an alternate way, in terms of trying to create a bank within a bank. That means in terms of a digital twin of their environment, that means it will not have any dependency on the existing legacy infrastructure. From day one, it is going to be on new modern platforms and new ways of doing businesses a different the statement of direction, and more importantly, the standard operating procedure, all of them going to be aligned to the digital way of doing business. And you see many of those examples coming up with bigger banks. And that is one of the ways that they are trying to address this challenge of legacy.

The second way of addressing it is the smaller the banks are trying to move module by module, component by component, to the latest technologies, so that they don’t have to know really depend on the entire legacy platform for whatever innovation that they want to do. Wherever possible, they are trying to move component by component by having a progressive modernization approach. And that is also giving them some benefits so that they don’t have to rip and replace everything overnight. And that gives them some breathing room for them to now look at doing it component by component.

Aaron Marsh
Okay, thank you. And I want to flip the switch just very quickly, because in dealing with these components of digital transformation challenges, there’s actually a standout here too, in terms of successful addressing, is getting the CEO and leadership buy in, it seems to me that there’s a pretty key majority here. These banks these organizations have been able to get buy-in from their leadership on digital transformation.

Rajashekara Maiya
I think in even in our own experience, our customer base, if you know look back, Finacle has more than 500 installations across more than 100 countries. We have seen successes in banks where there is a stronger sponsorship and support from the leadership teams. So whenever there is a support and sponsorship, you see the projects going very successfully, and they will also be encouraging people taking risks and innovating on the ground. So that is one of the important key find out some practical experience. And we have heard as well from the survey respondents here that wherever they have got this senior management sponsorship and support, they are seeing successes.

Aaron Marsh
All right, very good. And I just want to say, this is a very in-depth survey and the results provided from it. So I definitely encourage anybody listening, seek it out if you’re interested. And download the full report because we’re barely scratching the surface on this thing, to be honest. I’ll throw it back to you — what final detail can we add to this that stands out to you in this in this report in this survey?

Rajashekara Maiya
Well, as you mentioned, this is a comprehensive report. This is the 13th edition right now. But there are many other interesting insights that this report provides. For example, when we asked the questions about what is the business model change that is going to be looking at in 2030, many of the banks said that there is a business model innovation that is going to take place where some of the banks are interested in being a platform player, they want to move from a pipeline business to platform business. Some of them want to be distributing these banking products. So there are many such inserts coming into picture.

Similarly, when we asked this question to a bank, they responded, in terms of whom do they think is going to be leaders going forward in next two to three, three to five years horizon. And specifically, the observation was that almost 36% of the bankers believe that the big tech players like Apple and Google are in terms of the leading consumer technology companies like the Amazon will lead the way in terms of the payments, business, the cards business, and as well as in terms of some of the digital delivery of banking services. And today, we have already seen that happening in India, if no look at India processes, almost more than 3 billion transactions every month, which is real-time payments, out of these 3 billion transactions, almost 70% of these transactions are carried out by non-banks like Google Pay, WhatsApp, and Walmart and as well as Amazon pay. That is the interesting fact is where the traditional banks are losing out on this business and the big tech that trying to now come into the picture and take into some of these businesses add on. So that is the sum of these insights are available in this report. I really appreciate people going through this report so that they get to know about what’s happening around the globe.

Aaron Marsh
So just to kind of draw that point out, many of these banks are expecting, and maybe we can also expect this, that you’re looking at these technology giants — Apple, Google, Amazon — to be key players, possibly in digital banking and payments, particularly going forward. It’s going to be some of these giants involved. Well, we have been speaking with Rajashekara Maiya of Infosys Finacle, and thanks once again for taking the time with us today.

Rajashekara Maiya
Thank you, Aaron.