Digital transformation and innovation in Morocco: when banks become service platforms
The digital revolution is accelerating change, and as such, banks are more and more being encouraged to become multi-service providers, financial and otherwise. This change requires a radical rethinking of IT systems, says Ali Essakhi, Senior Manager of Sopra Banking Platform in Africa and the Middle East.
The traditional banking model has been built around the branch, which is often seen as the sole point of contact with customers. Furthermore, organizations have been used to simply providing their customers with products and services and nothing more.
However, since the year 2000, this model has been debunked. The emergence of the Internet and digital solutions has introduced new channels, rendering the former status quo redundant. Over the past decade, a new technological transformation has forced banks to adapt: It’s no longer enough to simply offer customers a catalog of different products and services; rather, banks need to integrate these offers into a wider consumer ecosystem. This means going beyond just treating customers as customers, and instead as consumers. That is to say, providing them with a complete, holistic service, as well as the basic product offerings. In order to successfully to do this, banks need to partner with stakeholders from outside the world of banking, i.e. e-commerce, Fintech, telcos, etc. And if they’re able to do so, they can achieve their ultimate mission, which is to become the customer’s sole point of contact.
This transformation for banks is a must, given the recent and on-going change in customer behavior. The digital revolution has rendered customers less loyal. With increasingly effective comparison tools available, customers are willing to shop around and take out services with several organizations. They are no longer just seeking the lowest price available; instead, they are seeking a better quality of service. Studies show that in Europe consumers now bank with several organizations, and this phenomena is spreading to other countries, including Morocco.
Information systems must go back to the drawing board
Of course, this new status quo means banks will be creating new positions and business models, which could result in a number of different outcomes in the long run. At Sopra Banking, we have identified three main scenarios we believe are likely to unfold.
Firstly, we believe that the third-party services distribution model will be reinforced. This is a model that first emerged with insurance products. In Morocco, developments in this domain are currently focused mainly on payment services.
Secondly, that the service aggregator model, driven by PSD2 in Europe, will become a predominant factor. This approach sees banks or FinTechs become a single point of contact for customers offering multiple services, banking or otherwise.
Finally, we believe that the marketplace model could play a part in the future operations of financial institutions. This involves offering services via an ecosystem (banking or non-banking), where partners share customers.
Regardless of the approach they decide to take, organizations must change their information systems. New models are based on openness to an ecosystem. Our vision of a modern bank’s IT systems has been based on three complimentary principles, outlined below.
Firstly, core banking applications, where modernization means enhancing security, optimizing operational efficiency and authorizing access to certain functional areas, depending on requirements and without disturbing everyday banking.
The second principle aims to transform the products and services distribution layer, adopting a multichannel and, above all, customer-centric approach. This means revising sales systems and marketing management, or using an Open Banking approach.
Finally, the third principle is focused on open innovation. This means being capable of assembling services – either in house or externally – to adapt to customer journeys and progressively build a scalable ecosystem to support customers.
Opening up information systems: Going beyond the basics
For banks, setting up an open architecture means addressing at least two challenges. Firstly, there’s data -- a domain the sector has long neglected. Organizations must learn to capture a maximum amount of data to better understand their customers – and this means aggregating external data – but also effectively leveraging this information within business processes. Broadly speaking, even if banks have a significant amount of data available, they don’t use it to a great enough extent.
The second challenge – where most companies are focusing their efforts today – lies in opening up information systems to best use all channels, but also for banks to establish themselves in new business models. Banks have started working -- using APIs in their core banking applications -- on the basic processes, such as balance checks and transactions. This work is being expanded to customer management: loans, savings, account management, etc.
Innovation: The pace is picking up
We are witnessing an acceleration in digital on a global scale. This transformation, which is now at full speed, can take on different guises: reworked customer experiences, solution catalog enhancements and financial services that make everyday life easier. In any case, it requires an undeniably agile, customer-focused IT infrastructure.
This transformation takes place over several stages, as mentioned above. Some organizations try to bypass certain stages by playing with channels to offer innovative services. But this is often just a façade that hides disconnected processes. This leads to lower quality services, greater risks and lower capacity to scale up. Digitalization also implies real change management within a bank.
Certainly, some banks have made good progress in innovation. Most Moroccan organizations, for instance, are working on the second area of transformation, aimed at bringing value to all customer interactions. However, these banks need support when it comes to creating innovative services suitable for new usages and drawing on an expanding ecosystem. This will ultimately prove to be an invaluable tool in the race for banking innovation.