Banking on Digital: The confluence of IT and marketing
By Dinesh Lal Kumar July 25, 2013
- Consumer expectations of their banks are changing thanks to the Internet
- IT functions need to be in tandem with the marketing and product divisions
“THE bank of the future will be a technology company with a banking licence.” - Unknown source at a recent financial services technology event.
Indeed, to product or channel executives at a bank, this quote sounds like an apt one to underpin a perception of intelligence around the water cooler.
However, it grossly underestimates the benefits trust, local presence, infrastructure and ownership of a multi‐channel footprint lends a bank compared with over-the‐top (OTT) players which only serve digitally.
While today’s customers choose less by their feet and the neighbourhood locality of a bank’s branch, and more with their fingers and how simple a bank makes it to seamlessly perform banking transactions through the PC, laptop, tablet or smartphone, consumers still want the comfort of knowing that they can go to a branch if needs be.
Look deeper though, and the more pertinent message of this quote is that it hints at the sort of business scenarios and the immediacy of agile IT solutions these executives now need to cater for.
Consumer expectations of their banks are changing as the Internet enables a near-zero barrier to product comparison and activation of services suited for their individual needs.
Product teams need to be adept at developing and deploying product variations in reaction to competitor offerings which can immediately affect response and conversion rates via digital channels.
Marketing executives, on the other hand, can no longer be financial product or channel experts alone, but need to be adept ‘business users’ of analytics and performance-tracking tools so they can best optimise the take-up and sales conversion rates of their products.
In short, some aspects of the bank’s core IT functions need to be adapted to move in tandem with the motivations of the marketing and product divisions, and vice versa.
For example, Rocket Internet, one of the most ‘aggressively’ growing technology venture vehicles with over 40 ventures globally, focuses predominantly on the online commerce, price comparison and payments businesses.
The mantra of all its businesses is to be, rightfully or wrongly, the No 1 ‘in category’ in market before any other player.
Love ‘em or hate ‘em – given Rocket Internet’s predisposition to realise paper-value equity gains versus consistently high functioning teams which deliver high-yield sustainable business models – the agility and rapid execution with which it goes to market bent on acquiring that No 1 spot, makes it a force to be reckoned with.
I digress. We're talking about banks … and the lesson for banks here is that these types of venture companies typically operate with both their marketing and IT roles reporting into the same functional role – one person who has to weigh the pros and cons within his own departmental function.
In a large bank however, these functions practically exist in different time-zones, with one zone tasked to capture the customer and market share, and the other to ensure the uptime and stability of the systems supporting the business – never in between the two shall meet, and even if they do, there is disdain of one for the other.
No doubt, the scale and nature of venture businesses are vastly different from the banking industry, but there is something here which banks (and telcos for that matter) can learn – the confluence of IT and marketing functions as witnessed within agile OTT web ventures will play an ever more critical role for an aspiring digital bank.
And this goes beyond just the remit of IT to ensure uptime availability and data security, and marketing-product functions being tasked with being experts and acquirers of their customer base.
Sure, this sounds like high level hyperbole rehashed from one too many management consultant white papers or conference dialogues.
So let's go down a notch to illustrate – take the merits of multivariate A/B testing, an approach to see which subtle tweak favourably influences users to perform a particular action on a site.
[Or, in Wikipedia terms: Multivariate testing is a process by which more than one component of a website may be tested in a live environment. It can be thought of in simple terms as numerous A/B tests performed on one page at the same time. A/B tests are usually performed to determine the better of two content variations; multivariate testing can theoretically test the effectiveness of limitless combinations.]
Web companies like Amazon, Facebook and Google all rely, by design, on this sort of continual optimisations to reduce drop-offs and increase conversions.
Banks too should adopt similar development approaches, whether to increase the number of payment transactions at their online banking site, transfers done through a mobile banking app or even the completion of registration of interest forms for a new home loan.
While the weekly scheduled tweaks may be random and instinctive, the analysis of the take-up rates are nothing but scientific and data led.
For banks and telcos, the ‘change request’ and security and stability impact assessments means any minute change requires much more forethought, with hoops to jump through for internal business cases and approvals for system integrator and creative web agency job orders.
In some cases, the colour and 50-pixel displacement position of a ‘buy now’ button can already influence conversion and there is no way to pre-empt what would work better other than regular ‘unscientific’ trial and error suggestions. The cold data from these experiments though should dictate what stays.
A key challenge the bank would face is that these capabilities require a new business partnership between the business functions (namely the marketing and product divisions) and the IT function of the organisation, with the latter currently playing a supporting role to the business rather than being a prominent driver sharing accountability for lead generation and sales conversion.
Typically, these two groups have been able to operate somewhat independently – but the digital ecosystem requires an immediacy whereby both of these functions start to collaborate in a new way that is going to deliver the business benefits required, experimenting along the way by quickly adjusting and optimising the front-end digital experience based solely on cold analytical data.
Zooming back out to the bigger picture, regardless of the strategy and digital roadmap banks adopt, the resources they spend and talent they nurture or bring into the organisation, what will determine how successful they are in becoming the future bank of choice very much depends on how well both the functions of marketing and IT are allowed and fostered to organically confluence and unify around common goals.
This could mean joint business KPIs (key performance indicators) and bonus performance rewards being commonly tracked and awarded, while the necessary controls are kept in place to ensure larger infrastructure IT projects continue to be securely and ‘scale-ably’ deployed.
How should the functions of a CIO, CTO, CMO (chief information, technology or marketing officer) and product head be married in the ‘bank of the future’? I postulate that the leading bank of the future will be the one that figures this out correctly first.
Dinesh Lal Kumar is a former telco executive. An entrepreneur at heart, he is currently in transit to new ventures. In the early days of the dotcom buzz in KL, he was part of a promising startup that eventually flamed.
Banking on Digital Part 2: Where conversion matters