Industry Spotlight E01: IBM Customer Experience Solutions For Banking & Financial Markets

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The past few quarters have been busy for us at Greyhound Research. At one end, our team of analysts and consultants have been working closely with some of the world’s biggest companies and helping them with their digital transformation strategy. At the other end, our team has been busy planning for and launching a series of new research content types to better cater to the needs of our audience. As part of this change, we recently launched Product Spotlight, a dialogue series wherein we host the real brains who are architecting products. Essentially, insights that go beyond the usual 30,000 feet conversations and focus on products/suites that IT teams are currently exploring or using. We are happy to report that our first product spotlight has been read more than 5,000 times from over 30 countries (at the time of publishing this post), and we’ve received some brilliant reviews about the format and the insights from the IT Decision Maker audience.

To build on the success of Product Spotlight, we are now happy to launch Industry Spotlight, a dialogue series focused on an industry wherein we host a relevant executive from a technology vendor and quiz them on their solutions, products, offerings, experience and more.

In this 1st exchange (E1) of Industry Spotlight, we host Gayathri Parthasarathy, Vice President & Senior Partner, Asia Pacific Banking Leader, IBM Services. In her current role, Gayathri leads the Banking consulting practice for IBM and works extensively with Banks across the region and globe in their technology transformation journey.

Greyhound Research:As someone who has witnessed the evolution of the banking and financial markets in the Asia Pacific from the front row, we are keen to understand how you see the intersection of technology and this industry at large. To be specific, most players in this industry have invested in some form of technology in the past decade, but not all have kept pace in these investments and are losing to other challenger banks or start-ups. When we at Greyhound Research consult with some of the players in this industry, we notice that while most claim to have the intent to invest in technology (and some are investing), not all can invest with the same rigour. The executives of these firms often quote increased regulatory compliance burden (hence increased cost of compliance), changing stakeholder expectations (specifically improving return on equity (ROE), Return on Assets (RoA), reduced NPAs, and profitability) and customer behaviour as critical challenges. In your experience, where do you think the industry stands today in terms of its broader changes and technology adoption to be future-ready?

IBM: The Asia Pacific Banking industry faced an “innovate or evaporate” situation over the last decade, and that saw rapid adoption of customer-facing technologies. We have witnessed a massive jump in digital technology implementation by banking consumers, especially in India, where I am currently based. Digital payments technology has taken off big time. 

Per a recent study by the IBM Institute for Business Value, the number of countries investing in instant payment systems nearly quadrupled to 54 in the five years before the pandemic outbreak.

It is true that Banks are faced with multiple challenges, including the need to improve RoE and rising costs, cost of compliance, NPAs etc. But still, the end customers forced the banks to go digital, and banks responded with gusto. Our banking clients responded likewise – for example, SMFG (Sumitomo Mitsui Financial Group) experienced an increase of 36% year-over-year (YoY) in their online banking transactions through the pandemic.

But the pace of change itself has caused several issues.

While Banks rushed to do quick fixes by transforming the front end, the legacy back-end was just bandaged to respond, leaving debris of disparate systems and partial digitalization. As opposed to end-to-end transformation, this partial transformation is now coming back to haunt some financial institutions. And what is more, areas such as Customer Service, fraud and financial crime that were relegated to the next rung of priorities are the very areas that are now adding to costs and complicating the operations.

As reported by the Reserve Bank of Australia (RBA) in 2020, the number of banking outages surged to about 2,300 total hours in Australia, and the number is up over the past three years, from less than 1,000 incidents in 2017.

It is time for banks to sit up and consider the landscape and recalibrate priorities to bring the back-end on par with the front-end; and spend on previously relegated areas such as Security, Fraud, and Compliance. Being customer-centric means delivering value to the customer throughout their lifecycle, not just focusing on attracting new customers. And an important part of that today is secure banking, service banking, and building trust across customers, regulators, and stakeholders. Of course, all of this has to be done at scale and lower costs. Fortunately, the new technology landscape dominated by Cloud & AI and the move to newer models such as SaaS is making all that possible and at speed.

Technology today is truly redefining banking. It is for the banks to leverage this as an opportunity to progress to next-generation banking. 

For example, Brazilian bank Bradesco gives personal attention to each of its 65 million customers with Watson. Bradesco is one of Brazil’s largest banks, with over 5,200 branches. They were looking for ways to provide information to their employees on products & services and increase the speed of customer service and personalization for each client. That’s when they turned to IBM and Watson. Watson was trained, tested and launched across 5,200 branches. Watson, trained on 62 products, answers 283,000 questions a month with a 95% accuracy rate, with just 5% requiring calls for further assistance. This helps employees have more enriching interactions with clients because they have time to dedicate to providing the best possible customer experience.

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Greyhound Research:As you rightly mentioned in the previous question, digital technologies are redefining the possibilities in the banking and financial markets and investments in centralized infrastructure, Cloud, analytics, automation, and AI to redefine the next decade. However, amid all this, an area being spoken about and debated rather intensely is the need to optimize the cost of service. While banks and other financial markets institutions are using data in nearly all critical processes like customer acquisition and the related lifetime value metrics, they have also been investing time and money to ensure presence across the new customer touchpoints. Hence, we’ve seen banks launch new mobile apps, use APIs with partners, use bots for select processes and even invest in automation to help move customers and human agents to self-service. Given all this change, what do you think the future contact centre will look like for those in the banking and financial markets? Would it be fair to assume that conversational AI that allows a better handshake between human and chatbot agents is the way to go?

IBM:Customer service has long been an ignored area mostly because it was easier to throw people at the problem rather than go for seemingly costly technology. That situation has changed dramatically with the advent of newer technology that is reliable and implementable at speed.

Contact Centre transformation is now possible with conversational AI and insight-based assistance at the point of service. 

Interestingly, the Banks are feeling the heat and the need for this transformation, here and now. This is because the increasing complexity in operations and changing regulations have changed, making the average contact centre job fairly complicated and banking domain-centric. Add to this a war for experienced talent with banking knowledge, and you have a situation we are in now, where there is an urgent need for imminent transformation.

IBM has for long believed that data-driven, insights-based servicing is a key differentiator for enterprises. Our ethos of being essential to our clients led us to continue investing in Data and AI, building capabilities for enterprises to be cognitive and customer-centric. Our new offerings that combine conversational AI, explainable AI, data platforms, and automation will help enterprises build a new-age contact centre that is customer-centric, service-focused, and can help banks improve serving by leaps and bounds. Our AI technology offerings enhance employee effectiveness and employee experience, making the contact centre agent a service superpower. 

Greyhound Research:And this conversation about the transformation of the contact centre is incomplete if we don’t speak about the pandemic’s impact. From our ongoing discussions with banking and financial markets institutions over the past year, we at Greyhound Research have noted that the pandemic has changed the broader approach to contact centres. The pandemic has expedited the investments in the overall aggregation and digitization of the existing disparate assets across multiple customer touchpoints. Are you witnessing similar sentiments during your client conversations? Specifically, since not all institutions are fighting similar battles in the maturity of their processes, teams, customers, and competition, are there key trends that stand out by the country/market segment?

IBM:The pandemic and the lockdown last March left many of us scrambling to react to an unprecedented situation. Such a situation did not leave a choice for doubts, so digital adoption became mainstream. Contact centre transformation, which was long overdue, had to be done then and there. Fortunately, technology providers like us rose to the occasion with secure solutions that enabled ‘anywhere anytime’ servicing. Let me share a few examples.

1/ The UK government issued financial assistant to citizens, which created a surge in demand on the contact channels of the Bank.

Conversely, the availability of agents to answer these questions was significantly impacted by sickness and self-isolation – knocking out 1,000 staff within the first week. What IBM did was to help the Bank go into self-isolation mode, with contact centre and Branch staff working from home to help customers with their queries. IBM deployed its solutions in just three days and that allowed the staff to handle about 2,000 customer queries per day all remotely.

2/ In another example, IBM and Bankia partnered to complete an end-to-end Contact Centre Transformation powered by AI. 

Rather than outsourcing their Contact Centre to reduce their cost base, Bankia partnered with IBM to rebuild their contact strategy from the ground up, ensuring that they have a natural, intelligent and fully AI-augmented engagement with all customers in any channel they choose. This has proven a far more sustainable operating model by stemming the demand at source and ensuring every engagement with customers is a positive experience. In this engagement, the scope of transformation was extensive and included (was not limited to) Omnichannel contact capability, optimized contact routing, AI-enabled and automated customer transactions, a single entry point for contact centre agents, a brand new CRM based on Salesforce, first contact resolution (FCR) for all interactions, and a full suite of reporting and analytics capabilities.

3/ Hang Seng Bank and IBM worked together to take banking rights to the consumer’s fingertips by introducing HARO on WhatsApp.

Furthermore, aiming to strengthen its proposition on millennials and the young segment, IBM is helping Hang Seng Bank to enhance their customer care with Cognitive Virtual Assistant. HARO, empowered by Watson Assistant Service, addresses customer enquiries on retail banking services in three languages. Cantonese phrases often used in Hong Kong are also supported through joint training efforts with the client. In addition, operational frameworks including Analytics Dashboard and Live Agent Portal are developed to enable VA maintenance across banking departments on an ongoing basis.  With the implementation of HARO, the Bank could provide omnichannel customer services 24/7 and drive for user segment growth of the younger generation. This innovation initiative has been widely recognized by the local market and is entitled to various awards.

4/ Royal Bank of Scotland (RBS) wanted to find new ways to engage customers and restore the personal touch.

With approximately 100,000 calls per month and rising, the contact centre offered an ideal place to make significant improvements. IBM built a Watson-powered digital assistant using the IBM Cognitive Care Platform and the IBM Cloud. The AI-driven digital assistant called Cora can address 200 different intents and offer more than 1,000 responses, engaging in a natural language dialogue with customers. Key outcomes included Cora handling more than 50% of customer inquiries, an impressive 85% resolution rate and an estimated USD 59 million in savings over a period of five years.

Greyhound Research:Not sure what you think, but we believe the pandemic has positively altered the executives’ perception of their willingness to participate in industry ecosystems. While many reasons are bringing about this change, the key reason is the need for these institutions to offer personalized and customer-centric offerings. Hence, they are willing and open to sharing data across the ecosystem and using non-linear methods to understand customer behaviour better. Of course, this change is being enabled by no-touch systems that allow for automated exchange of data and AI/ML models offering rich predictions and scenarios to the business teams. Have you also noticed such a change in your customer interactions? And if so, what do you think are the critical reasons for this change? Also, in your opinion, how do such institutions get started on this journey?

IBM:Ecosystem participation had started before the pandemic for us. The State Bank of India’s YONO is one of the biggest and the most successful examples of an ecosystem play. Another example is our work with the Bank of Baroda Krishi. The bank had to respond to government nudges of focusing on ‘Agri platforms’, but more importantly, they seized the opportunity to convert a transactional interaction with an agriculturalist customer on loans and repayments to one of a rich engagement where the farmer could do multiple things including participating in the mandi. Pandemic made these ecosystems even more important from a consumer perspective, thereby making adoption easier. What is more, the pandemic proved that anywhere login or partner ecosystem was not the source of security concerns anymore. 

We have seen a rush of interest in ecosystem play recently. For example, when institutions share data, it is possible to engage the customer in a meaningful way. AI/Machine Learning and other technology have made those interactions more effective and intelligent, and contactless. 

The good news is that these ecosystem models lend themselves to agile implementation and are more effective with a “start small and proliferate fast” credo. The IBM Garage method is perfect for uncovering hidden opportunities – start with MVPs, iterate and innovate at speed. Such a “fail fast” approach makes transformation cost-effective manageable too. Most importantly, the method allows our customers to transcend the PoC syndrome and move fast to mainstreaming innovations.

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Greyhound Research:With so much happening on literally all fronts, executives often find themselves caught in a conundrum. At one end, there is a need to invest in automation and new AI/ML models to help improve customer understanding and hence the ability to personalize offerings. At the other end, one often finds that the same banks (running PoCs for AI/ML and chatbots) are not sufficiently equipped for the most basic tasks. Only recently, one of India’s large banks that prides itself on an industry-leading chatbot was called upon by the country’s regulator to fix its core infrastructure issues to ensure its services are available without any outages. Of course, the regulator has also gone ahead and stopped the bank from selling any new digital products. In addition to the revenue loss, it’s also a significant watershed moment for the bank’s brand equity that has taken a hit since. This bank isn’t alone, and many banks in the region are similarly placed, if not the same. In your experience working with some of the largest banks and other financial institutions, what are some of the early investments they are making to ensure they don’t meet a similar fate?

IBM:That is a perfect wrap-up to where I started. Banks transformed the front end but ignored the crying need for modernization of the legacy landscape. Now is that watershed moment when you cannot ignore that anymore. 

Fortunately, the advent of Cloud technologies has provided banks with an option to move to secure, scalable infrastructure that enables them to go for pervasive digitalization from patchwork digital.

Many of our clients are at various stages of cloud migration. With our offerings centred on Hybrid Cloud and design once, deploy anywhere and manage all of them with IBM Red Hat, we are providing Banks with very real choices of going for fit-for-purpose solutions that are secure and scalable. Our Advise/Move/Build/Mange and Hybrid is the best approach that helps Banks follow the coexistence pattern of legacy and new while transforming their legacy incrementally, consistently and at pace.

Greyhound Research: Thanks again for your time. This has truly been a wonderful conversation.

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