Just over 20 years ago, a supercomputer named Deep Blue made history by beating the world’s best chess player, Garry Kasparov, in a six-game match. It was able to do this using hardware with a little over 11 Gflops of processing speed.
In contrast, the iPhone X you might be holding right now is capable of about 346 Gflops. That’s enough raw computing power to take on Kasparov plus 30 more grandmasters... at the same time.
Such comparisons remind us even by modern technology-industry standards, mobile technology continues to advance at a breakneck pace. The result of this trend—a relentless cycle of innovation, rising consumer expectations, and business disruptions—has created major challenges as well as lucrative opportunities for the banking industry.
Today, more banks are discovering that a successful mobile strategy offers a clear path to a profitable future. They are also discovering, however, that the wrong IT infrastructure decisions —especially those involving legacy infrastructure—risk turning this journey into a costly dead end.
Understanding the Mobile Banking Opportunity
There are many reasons why banks increasingly view long-term success through a mobile banking lens. Consider a few examples of the opportunities that an institution can unlock with a successful mobile strategy:
Room to grow:
According to the Citi 2018 Mobile Banking Survey
, 81 percent of U.S. consumers now use mobile banking at least nine days a month, and 46 percent increased their mobile usage in the past year. Mobile banking apps
are now the third most widely used type of app—trailing only social media and weather apps.
A global opportunity:
According to World Economic Forum
, 500 million adults worldwide became bank accountholders for the first time—but two billion more remain without banking services. As with access to healthcare and education, easy access to affordable mobile connectivity – with 1.6 billion new mobile subscribers coming online by 2020—will put banking and payment services in front of many people for the first time.
A mobile-banking revenue boost:
According to a 2016 Fiserv study
, mobile banking customers tend to hold more bank products than branch-only customers—a trend that suggests bigger cross-selling opportunities. As a result, mobile banking customers bring an average of 72 percent more revenue than branch-only customers.
Millennials are “mobile-first” banking customers: 62 percent of Millennials increased their mobile banking usage last year, and 68 percent of those who use mobile banking see their smartphones replacing their physical wallets.
Second-Rate Mobile Banking Technology Is Risky Business—and Getting Riskier
As mobile technology advances, however, so do the risks associated with a second-rate mobile banking presence. This is especially true for banks that previously settled on a “good enough” mobile strategy—an approach that, in many cases, was designed to work within or work around the limitations of a bank’s legacy systems.
Two risks stand out for banks that continue to accept a “good enough” approach. First, as competitors invest in cutting-edge mobile technology, they expose the glaring usability, reliability, and capability gaps associated with legacy IT infrastructure.
Second, it’s clear that technology innovation drives rising consumer expectations. When a bank’s mobile offerings fall short, the consequences can be profound, far-reaching, and extremely difficult to rectify:
Unhappy consumers are ready and willing to abandon their banks:
In 2016, about one in nine North American consumers switched banks
Millennials are even faster to switch:
During the same period, about one in five adults age 34 or younger switched banks. Another 32 percent of those surveyed said they would switch in the future if another institution offered easier-to-use digital banking services
Bad banking apps are a big deal:
Seeking a better mobile app experience
is now the third most common reason for switching banks—ahead of security concerns and customer-service failures.
Digital lag leaves mobile apps lacking: A recent survey of UK bank customers found just one in four said they were able to do everything they wanted using a bank’s mobile app, and 34 percent found their bank’s app easy to use.
There are many reasons why a bank might continue to rely on a lower-caliber mobile presence built using aging legacy infrastructure. It’s very difficult, however, to imagine why any of those reasons would justify this level of possibly grievous damage to a bank’s customer relationships, brand image, and industry reputation.
It’s Not Too Late to Invest in Mobile Banking Success
I know that I have painted a foreboding picture—especially for banks that want to embrace a modern technology infrastructure but haven’t yet been able to follow through.
That’s why it’s important to make another point: It’s not too late to get ahead of these challenges and to make the investments that enable a truly first-rate mobile banking strategy.
First, bear in mind that traditional banks still hold some very important cards: Consumers still consider them more deserving of trust than most businesses, their physical branches (though declining in numbers) are important for certain types of advisory and high-value services, and they have the compliance and legal expertise required to navigate the treacherous regulatory waters of the banking mainstream.
Second, it’s crucial to recognize that moving away from legacy infrastructure—the sooner the better—may be the single most important move a bank can make to trigger a quick and decisive pivot toward mobile banking success.
4 Keys to Winning with Bank IT Infrastructure
Let’s focus now on specifics: four action items that a bank IT leader can use to drive a fast and effective infrastructure modernization program:
1. Embrace the cloud to support global growth. Mobile technology performance is a key to creating a good user experience; nobody likes to wait, especially when they want to access their money. Cloud-ready infrastructure is a much better foundation for building robust and reliable mobile offerings—for example, eliminating the latency problems that happen when on-premises systems try to service a global customer base.
2. Get and stay ahead with help from integrated, co-engineered systems. Hardware and software designed to work together and offered in simple pre-configured and pre-optimized packages, offer better performance and faster deployment than DIY non-optimized alternatives. This can be a bank’s most powerful technology weapon for fighting back against the complexity, management, and reliability issues that accompany rapid growth and pressures to scale.
3. Liberate your IT staff to do the things that matter. Co-engineered systems and cloud infrastructure both contribute to many of the same goals: attacking complexity, enabling growth, designing scalable and resilient systems. This means less time spent on tedious maintenance tasks—and more time focusing on business goals that drive success.
4. Build infrastructure that’s ready to handle today’s data and analytics challenges. An entire category of fintech upstarts is focused on reaching new markets through the use of unconventional credit analytics and scoring systems. These firms incorporate everything from educational achievements to call center records and website analytics into models that identify preferences and assess risk for customers who don’t yet have—and might never get—conventional credit scores. In many cases, the only way to serve these customers will be over mobile banking apps and systems.
Many banks could pursue similar opportunities, given the massive quantities of customer data at their disposal. But first, they’ll have to put systems into place that are capable of pulling this data from dozens of siloed sources; combine it with the masses of data flowing into the organization; and apply the right management, analytical, and storage solutions to unlock the insights within.
Oracle Sets Up Banks for Mobile-Tech Success
Oracle’s engineered systems
are especially adept at giving banks everything they need for a truly modern, mobile-ready IT infrastructure. First, that’s because they are built to be fully integrated systems. Engineered systems like Oracle Exadata
enable banks with one dedicated, high availability environment to run Oracle Database, and another like Oracle Exalytics
or Oracle Exalogic
to run advanced analytics and other critical business applications.
Second, along with a single, integrated technology stack, Oracle gives banks a single, integrated technology partner to support a modern mobile banking strategy. This is a powerful advantage combined with Oracle’s ability to deliver openness where it matters: In compliance with open architectures, open industry standards, and open APIs; and to achieving interoperability and integration.
These are the qualities that truly give an IT team freedom and flexibility to support innovative mobile banking functions that are money in the bank.
About the Author
Srinivasan Ayyamoni is a Certified Accountant with 20 years of experience in business transformation, technology integration, and establishing finance shared services for large global enterprises. As a transformation Consulting lead with Cognizant's Oracle Solution Practice, he manages large digital transformation engagements focused on helping clients establish a high-performance finance function and partnering with them to achieve superior enterprise value.