Relationship banking software helps banks tighten ties with loyal customers
Aims to introduce new products that enable business innovation
NOT many privately held software companies can claim that they have a unique solution and that competitors can only match 40% of their product suite. This is even more impressive when one of the competitors is Oracle Corp.
For Al-Karim Somji (pic), the chief executive officer of Zafin Labs, a Canadian-based software company, claims of his product’s superiority is possible thanks to it being a specialist in one particular area: Relationship banking solutions, especially with its pricing and billing solutions.
In fact, he says that it was Zafin Labs which created a new market segment called Relationship Pricing. Simply put, this is the ability of a bank to price a product or service to a customer based on the existing relationship that customer has with the bank.
In a way, it is about rewarding or even creating loyalty.
As Al-Karim explains it, consumers have multiple relationships, accounts and credit cards. “But how do you get them to increase their spend with your bank?”
The answer, he believes, is to take care of one’s clients. It may seem basic enough, but doing it well requires a lot of data crunching. “You need to let customers know that, you, the bank will give them tangible loyalty for the relationship they have given to the bank,” he says.
Transparency is key in this form of relationship banking. Apparently, the more transparent the bank is, the stickier the customer. “They understand that banks are there to make money, but be transparent about the fees you are charging and the benefits you are giving them,” says Al-Karim.
This is what Zafin Labs’ software, with its ‘powered for innovation’ tagline, does, he claims.
“Our solution is built from the ground up for the financial market. It is our core focus and the reason why we have had successful implementations in 40 countries with 22 banking customers, six of whom are Tier 1 global banks,” he says.
Surprisingly, the inspiration for the relationship banking product came from the telco sector where Al-Karim was working in. With the European telcos spending big on 3G (third generation mobile technology) licences around the year 2000, he knew that a lot of money would also be spent on the getting the 3G infrastructure running and in parallel with the older 2G systems.
This was when he also discovered that Japan’s NTT DoCoMo had the best monetisation model, where it took a 10% cut of all paid content that went through its pipes. Aiming to replicate this model in Europe, he realised the telcos did not have the systems to handle the type of transactions he foresaw.
That’s when he started looking at the banking market, but in turn found that the major components of customer service were missing among them too. Even more amazing was the fact that the banks’ core systems were not able to support product innovation and where it was possible to make a change to the core, it cost a bomb.
This is the case until today, he claims.
Having seen the NTT model, he felt this was what telcos needed to do but their systems were not equipped to handle this. Banks on the other hand, had the best systems to handle this.
So he started looking at the banking market and found that the market was missing major components of customer service.
For instance, the concept of relationship pricing did not exist and neither did consolidated billing based on relationships. Meanwhile, with the telco market going through a bust in 2002, the decision to go after the banking market was inevitable.
It has proven to be a successful move. However, as a private company, Zafin Labs need not disclose its revenue and neither is Al-Karim keen to share any figures.
But the Tanzanian-born entrepreneur, who sold ice-cream and washed dishes while waiting to start his schooling in Canada upon emigrating there, has a more ambitious target.
The goal is to try and reduce implementation of his software from six months to three by the end of this year.
“At the same time we want to introduce new products that enable business innovation. That’s where the value of our software lies, from the business side,” he adds.
Built purely on the Java platform, the software is highly scalable with one global bank running 450 million transactions a day on it from over 35 million accounts, he claims.
But there are no patents to protect it, with Al-Karim feeling that the process of sharing information on a patent application is time consuming and exposes what you are doing.
He feels Zafin Labs, with its core research and development (R&D) being done out of Ottawa, in Ontario province, and with another unit in India, is still one to two years ahead of customer requirements, which means customers are only using between 40% and 50% of his product’s features.
That’s why he has domain consultants, ex-bankers themselves, to help educate banks on how to leverage Zafin Lab’s products for their business.
“We tell them to ‘open up your imagination’ to the possibilities that exist in better serving your customers,” says Al-Karim.
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