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The age of 'sense and respond' banking

Sajid Akbar
IMAGINE a scenario — your customer purchases an airline ticket online using his/her credit card. In a couple of hours your bank's call centre executive gets in touch with the customer to sell a travel insurance product. The chances of the customer positively responding to this call are very high, simply because the bank has grasped upon the right time to sell the right product to the right customer. This real-time reaction to an event seems the most logical step for the bank, but unfortunately is one of the most difficult tasks to execute. In fact, today while there is plenty of cross-selling batch based marketing taking place, banks can seldom guarantee that the customer receives a promotion offer when he/ she is most interested in.
There are a couple of reasons for this. Firstly, while data is available, getting immediate and meaningful information out of that data remains a challenge and more often than not selling opportunities remain untapped. Currently, CRM (customer relationship management) systems are capturing various customer interactions and storing them in a central repository; following which, data mining tools are analysing this historic data to execute marketing campaigns. What is lacking is adding the contextual intelligence to enable real time reactions to the business event.
Take for example, a customer conducts a single big transaction that nearly depletes his/her credit card balance. Real time banking rules should ideally prompt the Call centre agent to immediately and proactively inform the customer of the high value transaction and offer a personal loan to offset the credit card outstanding against a fixed tenure flexi-EMI (equal monthly instalment) plan. Such an offer, if made at the right time, will ensure the bank keeps the customer locked in and using his/her credit card over a longer duration.
In a conventional banking setup, while the offer will be made, it may be made when a campaign is run much later in a batch. By then, most banks will have missed the window of opportunity with the customer. Hardly surprising then that with realtime event processing, banks can assume anywhere between 20-40 percent upside over traditional batch based marketing.
The second obstacle facing banks is an ever widening gap between business requirements and IT’s ability to deliver. While IT has historically been a core enabler in the industry, processes have been developed and deployed on a project-by-project basis, creating narrow focused and siloed systems that lack the flexibility to react to rapidly evolving business changes.
Take the case when a customer applies for a loan at his/her bank branch. From the time the application is submitted to the time of loan disbursement may take up to a month. The underlying cause of this delay is that established financial organisations still have numerous, disparate, proprietary back office systems that limit the capabilities of even the most advanced front-end systems.
There are a number of manual not to mention duplicate tasks along the way that should ideally be automated. However, this is easier said than done. The remodeling and implementation of new processes to meet the demands of dynamic change are severely constrained primarily because of the expensive proposition of overhauling existing processes.
Banks thus need to find a way to drive greater efficiency and value from existing systems and processes, while simultaneously managing risks associated with dynamic change and achieving greater visibility and flexibility across complex operations.
For some years now, banks have grasped on to an approach called business process management (BPM). As a concept, it is focused on aligning all aspects of an organisation with the wants and needs of clients, thereby promoting business efficiency. The driver of BPM is integration which needs to not only extend across the enterprise, but also embrace third parties who often supply key components of today's complex, multi-instrument commercial banking landscape.
However, while traditional BPM systems were designed to manage macrolevel processes across multiple applications, current new and modified processes simply cannot be executed quickly enough to meet the business need. The need for such immediacy can acutely be felt when you look at what's taking place in the banking industry today. Driven by the emergence of new payment channels, banks are increasingly concerned with exercising regulatory control and preventing fraud. Especially with the growing popularity of the mobile phone
as a payment mechanism, banks require the ability to look at all payment transactions as they flow across payments processes, identify a rogue transaction based on business rules and trigger an alert process to intervene any likely fraudulent activity. It is the age of grasping upon the opportunity cost of split-second "sense-and-respond".
Reflecting this is Gartner that has coined a new term - intelligent BPM systems (iBPMS) where organisations will increasingly make intelligent, agile responses to events in real time, much like the human brain. That banks already accord high importance to event-driven processes was reflected in a survey the research firm conducted in 2010. The worldwide survey on BPM spending showed that banking was the only vertical that had event-driven processes within the top five most popular capabilities of a BPM suite, reflecting the need for banks to react to changes in the external environment.
This brings us to what banks need to do in the present day scenario? Enter the need for a unified BPM suite which can support all types of processes. Since integration is a key to BPM, it should also be unified with the rest of the bank's middleware and applications. Furthermore, the tools need to work for all participants across IT and business and should possess rich common
collaboration capabilities to simplify cross functional communication. Last and most importantly, the BPM suite should not add more software to the inventory. Rather it should provide a thin management layer above the bank's existing server, thereby minimising the need for new investment in infrastructure and enabling the bank to get more from its existing investment in applications and processes.
Of course, the benefits of such a unified solution do not end here. It facilitates shorter timescales to delivering and running processes, closes the communication gap between business and IT, delivers a single consistent view of the process that both business and developers can understand and effectively orchestrates integration between services and applications within the enterprise.
But perhaps the biggest benefit of all is that banks respond to events in real time, applying current information to historic overviews and facilitating proactive response rather than reactive. The new levels of efficiency help keep costs low yet reduce lag time to a minimum, with the overall result that the bank is better informed, instantly responsive and able to make faster, more reliable decisions that bring direct benefits to the bottom line.
The writer is the country manager of Oracle Fusion Middleware, South Asian Growth Economies-West.