Put NOT a customer at the centre. A new approach to the customer-centric strategy. 

Why you shouldn’t ask your customers what they want?!

 

 

It has been assumed that most companies, when crafting product portfolios, seek to understand customers’ needs first and then fine-tune product’ parameters so they’re best suited to answer these needs.
At INCAT, we believe that to be successful in today’s finance world, you need to take this approach two steps further…

Going two steps further…

1) Step one is focusing on customers’ stories rather than just their needs.
2) Step two is to jump into the story at the very moment it starts unfolding.

But what exactly do we mean by customers’ stories and how focusing on them can help you achieve business success?

Let’s start with an example.

Imagine a well-off individual who’s in the market for an expensive piece of electronics – say, a pricey TV.  He or she may have a sufficient amount on a current account or credit card, but deducting the full price straight away would mean that the account would be swept clean for the rest of the month.

This, of course, calls for some sort of short-term financing: a loan, buy-now-pay-later or a similar product. If you have a solid grasp of customers’ needs and preferences, you’ll be able to tell which product would be best suited to their needs, and which of its optimal parameters and benefits to highlight.

Let’s take another case: a foreign vacation. All the excitement of holiday making – traveling, sightseeing, visiting tourist attractions, dining out, partying – inevitably tend to be followed (or sometimes preceded, e.g. booking a hotel) by a rather mundane string of transactions. These often include currency exchange, which can lead to a sobering realization of how costly it can be to just use your ordinary Visa or Mastercard.

Again, when you know your customers’ preferences, you should be able to present a product your customer perceives as optimal: quick currency exchange, a multi-currency payment card or a currency account.

There are two challenges, though.

First, although such a needs-based approach – or a customer-centric approach – tends to be more and more effective as your understanding of customers’ needs grows, it still has its limits. It doesn’t facilitate innovation, as it tends to keep you within the realm of products that customers already know.

This is a major drawback in a world that is being reshaped, and sometimes even revolutionized, by new products emerging on virtually a daily basis. Just think about how all the online currency exchange services have been made basically redundant with the emergence of Revolut.

Therefore, we believe that the customer-centric approach needs to be reimagined as a customer story-centric approach.

 

Introducing BOS’ customer story-centric approach

It’s tempting to think that customers need specific financial products in certain situations. It seems to be a very convincing point of view, since even customers themselves tend to adopt a product-oriented perspective. Buying a house? I need a mortgage. Buying a car? I need leasing and insurance – or maybe a deposit and insurance, if I choose to save up and finance the purchase myself. Going abroad on a regular basis? I need a multi-currency card. Getting a new TV? I need an installment loan.

But the truth is, customers don’t really need these financial products – they just use them to realize their true needs.

These stories can be simple or quite elaborate. Buying a TV is the former: it’s just making the purchase and paying for it in a way that doesn’t distress the monthly budget. Going abroad for a vacation? While a vacation might be an amazing adventure and make a great story that takes hours to tell, its financial aspect boils down to spending money and exchanging currency in the process, preferably quickly, hassle-free, and inexpensively.

Did you notice how we’re not talking about specific products here? This is deliberate. A product-free perspective lets you see more clearly what the core of the story is.

On the other hand, buying a car or house is usually a complex endeavor, with its stages interdependent on each other and more than one potential path from start to finish. In such cases, it can be virtually impossible to avoid bringing up specific products, because they are sometimes rigidly tied to a given process. Nevertheless, you should still be trying to sketch out the core story.

Once you’ve got it done, you can begin picking specific products – your own and third parties’ – to match it. The less they affect the underlying customer story and the more seamlessly they fit into it, the better.

Remember, your customers don’t really want to use your products. They only need them to have a great time on holidays, get a huge screen for their home cinema or drive a new, safe, eco-friendly car. The less time is needed to spend with your products, the less effort these products require and cost, and the more transparent they are – the better.

And the more likely it gets they’ll… grow to love using your products.

Your customers don’t really want to use your products. They only need them to have a great time on holidays, get a huge screen for their home cinema or drive a new, safe, eco-friendly car.

 

Real-time marketing turns into real-time banking

Of course, you might say that this is an approach that the financial sector is already starting to embrace. Even some of the biggest banks are aiming to make their products as “light” as possible, i.e. effortless to use and readily available via mobile apps with just a few taps.

They’re also getting better and better at targeting their customers and presenting them with products they likely need. If banks notice their customers are making frequent card transactions abroad, they offer them a multi-currency card or a currency account. Once the total amount on the monthly credit card statement reaches a certain level, they suggest paying it back in installments.

And this brings us to the second challenge we mentioned earlier.

By its very nature, customer profiling takes time. Also, it’s usually processed in separate systems, such as CRMs or dedicated analytical software. As a result, banks are usually weeks or at least days behind their customers.

This, however, is not the case with BOS. With BOS, you can jump into the customer’s story at the exact moment it is starting to unfold.

This is possible thanks to BOS’ event-driven architecture, which means that:

  • every action taken by the customer is an event
  • events are processed in real-time
  • every event may trigger a system action, such as generating a transaction or sending a message to the customer (or other recipient).

With BOS, you can jump into the customer’s story at the exact moment it is starting to unfold.

In other words, every card transaction, every bank transfer (initiated or received by the customer), and every loan application submitted is an event – and so on. Also, every system-originated activity, such as charging a fee or generating a monthly statement, is an event.

And that’s not all, as events reach beyond financials: every time a mobile app is open also constitutes an event. So does logging in to your online banking system.

-> Your customer has just paid over $2000 in a consumer electronic store with your card? Ask them straight away if they want to split it into installments, or automatically “re-route” the amount to your buy-now-pay-later product.

-> It’s your customer’s third day abroad and their currency account is running low? Send a display notification suggesting currency exchange – or even process one automatically if the customer has chosen such an option earlier.

A specialized BOS module – the Event Orchestrator – lets your system administrators set up triggers and relations between events and create scenarios – such as the ones mentioned above or more – complex ones. Their number and level of sophistication depends solely on you. You can rely on the event definition supplied with the system, or create your own. Event Orchestrator is intuitive to use and ergonomically designed, so setting up scenarios is fast and requires only basic training.

The only limitation is the innovative spirit of your company, as well as its ability to spot emerging opportunities and its understanding of customer needs.

Or should we say: stories.

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Have thought about this subject? Contact the author: zdzislaw.grochowicz@incat.com.pl

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ABOUT THE AUTHOR: 


Zdzisław Grochowicz is the Head of Business Development at INCAT. Zdzisław has been involved in the banking and financial sector for almost 30 years. Previously, he worked for Comparex Ltd. For many years he was also associated with the Sygnity Group – where he played numerous roles.
Zdzisław Grochowicz graduated in Electrical Engineering at the Szczecin University of Technology.

Email: zdzislaw.grochowicz@incat.com.pl

 

 

 


Flexibility is King

A recent survey conducted by Accenture leaves little doubt: the future of finance lies in the cloud. Even seemingly sedate institutions such as banks are determined to migrate most of their core functions away from their mainframes. 82% will operate more than half of their workload in the public cloud in the next ten years (in fact, almost a third already does). This represents a massive shift in IT strategies over the course of just a few years. The main reason? The agility and speed of cloud-based core systems. 
In INCAT we believe that agility and speed are only some – although important – properties that cloud-based core banking systems should boast. When we were designing BOS – our flagship core banking engine, we decided to offer to the market much more than just agility and speed. We decided that ‘full flexibility’ would be something that will make our system stands out. And flexibility itself became a part of the DNA of our product.
After many years of developing our system, we have identified 4 key areas that have to be covered if the core banking system is to be considered fully flexible:
  • technology: IT solutions that allow for scalability in both quantitative and qualitative aspects,
  • functionality: ability to easily shape and modify the customer stories to perfectly fit customer’s needs and the company’s marketing strategy,
  • implementation: an agile approach to launch and system development,
  • business: pricing adapted to the scale of operations.

THE FOUNDATION: FLEXIBLE FUNCTIONALITY

Choosing the core IT system is vital to the success of a fintech startup or a challenger bank. Not only must this crucial system allow for crafting products aligned with current marketing strategy and consumer preferences, but it also has to enable adaptation as they change in the future. Also, the ever-evolving technological landscape and regulatory environment require constant, sometimes swift adjustments and product modifications.
Many fintech brands start with a very limited product portfolio, oftentimes limited to a single product with a breakthrough in its service. While such a focus on perfecting a product is beneficial at the early stages, it may become a barrier to growth when customer numbers increase. Take Revolut – a company that started off as a money transfer and currency exchange is now a full-fledged neobank with 18 million customers, boasting dozens of products, including personal and corporate current accounts, deposits, loans and Mastercard and Visa payment cards.
While hardly any new player to the market will have a precise, predetermined path of product growth, most will need a possibility to evolve inscribed into its core system. This should be possible via both proprietary modules, supporting all the core banking products (accounts, payments, deposits, loans etc.) and fully documented APIs, allowing for integration with third party solutions.
BOS does it all. Thanks to its Customer Stories concept, fintechs that run it as a core system can offer their customers banking products ranging from payments, savings through loans based on a foundation of the general ledger. Whether they need the full variety or just the selected product, BOS will suit their needs.

TECHNOLOGY MUST BE UP TO THE TASK

All of these require adequate technological solutions – APIs being only one of them. Deploying the core banking system in the cloud is probably the most vital when it comes to scalability. Unlike mainframe systems, cloud-based ones easily and effortlessly adapt to fluctuating workload, be it a sudden growth or a significant decrease. Hardware ceases to set limits for operations: cloud-based core banking systems can serve 10 million customers as easily as it just served 10 thousand. Even though it’s hardware, it still can – and should – be flexible.
Another key feature technology-wise that fintechs and challenger banks should be on the lookout for when choosing a back-end system is a microservices architecture. Not only does it further increase scalability, but it also allows for smooth and simple functionality development. Microservices-based systems also tend to be more resilient and potential issues are easily isolated and fixed.
Also, there are things that should go without saying – but surprisingly often don’t. In today’s world, when customers access their financial services 24/7, fintechs should be able to provide them with virtually 100% availability. Gone should be the weekend upgrade breaks or downtimes of any other nature.

Hardware ceases to set limits for operations: cloud-based core banking systems can serve 10 million customers as easily as it just served 10 thousand. Even though it’s hardware, it still can – and should – be flexible.

 

KEY TO IMPLEMENTATION: AGILITY

The phrase “time is money” is probably even more true than it has ever been: months or even weeks can mean the difference between success and business failure. Thus the dominant MVP-oriented approach among startups, also including those in the financial sector. Product definitions are outlined in general terms and detailed only as the project is already ongoing. Agility is no longer avant-garde or nice-to-have: it’s a prerequisite for survival.  Thus, when choosing core banking solution providers, challenger banks and fintechs should be looking for companies that can fit into this regime. The ability to launch a product within weeks of project start can spell a market win.
This of course requires full support and partnership from IT solutions providers.  In INCAT we understand it perfectly and we make our implementation team fully available to our customers. And last – but definitely not least – is the business aspect.

BUSINESS MODEL ALIGNED TO STARTUP’S NEEDS ALIGNMENT

Deploying a core banking system can present significant business risk, as it often means high initial investment and significant monthly overheads. These in turn have to be counter-balanced by adequately high sales and margins, which may be challenging for a newcomer. According to Statista.com data, there were over 26 thousand fintech startups globally, as of November 2021. It’s a 26% percent rise when compared to 2020, and a whopping – 116% –  leap from 2019.
The twofold rise over the last two years represents both the sector’s attractiveness and lower costs of entry, but the sheer number of players shows how competitive the market has become. If a fintech is not able to start off light, its chances of success – or even survival – grow slim. The possibility to build a business over a core banking system with flexible price plans, with relatively low initial investment and price tiers based on scale of operations (e.g. the number of customers, accounts or transactions) can make the business case solid and as safe as it can be in today’s environment.

ABOUT THE AUTHOR: 

 

Zdzisław Grochowicz is the Head of Business Development in Incat. Zdzisław has been involved in the banking and financial sector for almost 30 years. Previously, he worked for Comparex Ltd. For many years he was also associated with the Sygnity Group – where he played numerous roles.  
Zdzisław Grochowicz graduated in Electrical Engineering at the Szczecin University of Technology.

Contact an author: zdzislaw.grochowicz@incat.com.pl