Top 10 Banking TrendsNew Report Predicts Business, Technology Change for Next Decade
Verizon Business outlines its vision of banking's future in a new report, Top Trends in Financial Services.
And in an exclusive interview, Raj Dhinsa, managing principal of Verizon's financial services practice, outlines:
- Key trends from this report;
- How these trends impact information security and risk management;
- What banking institutions can do today to pave the way for tomorrow's technologies and services.
"So, before when they were much more risk adverse, organizations are now committing to these mediums and these new channels."
Dhinsa focuses on solutions development, business development and strategy for Verizon and its financial services customers. He brings more than 20 years of experience from leading firms such as Wells Fargo Bank, Charles Schwab and Ernst & Young Management Consulting. Raj has contributed to numerous publications including the Wall Street Journal and American Banker regarding business and channel strategies.
TOM FIELD: To get us started, why don't you tell us a little bit about the financial services practice and your role there please?
RAJ DHINSA: Verizon has committed to making sure that all their customers have the most relevant product and services, and part of that process is bringing people from different vertical industries such as retail, healthcare, transportation and in my case financial services. I have over 20 years of experience in banking and brokerage, as well as software and other technologies, and I bring that experience to make sure that we have the most robust capabilities for our financial service customers.
Top 10 Banking TrendsFIELD: Raj, we talked upfront about what are the top 10 trends in financial services, and this is the title of a new report from Verizon. What can you offer us for some highlights from this report?
DHINSA: I think among the highlights that somebody could take away from this is that we're at a perfect storm in terms of regulatory change and technology change. So, obviously with a financial meltdown in the last few years, and the onslaught of changes in terms of regulation, we're going to continue to see that for a few years. It's requiring a lot more transparency and potential changes to products and services. At the same time, we're in this age of digital technology both for consumers and employees. So the way that customers now consume that information, particularly around financial services, is going to be much different going forward. So there is a lot of change coming, and this report highlights what those top 10 opportunities and changes might look like.
FIELD: Can you give us just a couple to whet our appetite, please?
DHINSA: So, first of all, the banking experience and financial experience overall is a multi-channel experience. What we're going to see is a much more interactive experience. So when customers go into a branch or a kiosk, they are going to an integration of a lot more technology. It could be analytics where they are actually identified ahead of time based on their profiles and a much richer set of products and services could be offered. That is just one example how technology is going to be making changes.
You will also see a much more bridging of privacy and personalization. So going forward, especially as demographics change, more and more people are going to be using social media and other virtual channels, and institutions need to be able to account for those changes and make sure they are addressing all customer ways that they communicate. So, you know I was just reading the other day that social media managers are one of the most sought after positions now within financial institutions. So, before when they were much more risk adverse, organizations are now committing to these mediums and these new channels.
Finally, I would say that because of this change of technology and the speed by which it is being introduced, you'll see more and more companies using cloud-based services as well as outsourced business models to make sure that they don't necessarily have to invest all the capital up front in terms of that technology infrastructure and use it more as a service, platform as a service, software as a service, etc. So those are some of the highlights that we see.
Speed of ChangeFIELD: Raj, as you said, you've got a couple of decades of experience in banking and financial services. Did any of these trends really surprise you?
DHINSA: I think the biggest surprise is the speed by which it is happening. Financial institutions traditionally have been somewhat methodical about change and introducing technology. However, what we are seeing now is everybody is on board. I mean, customers expect it, and companies are now responding to that. So no more is it like, 'Let's wait and see if it happens.' It's more like, 'Let's jump on board and get their first and make sure we have a differentiated product and service offering based on some of these new technology capabilities.' The social media is a good example. Things like remote banking through virtual technology, chat, telepresence. Those sorts of things will become more of the norm. So I think that is the biggest surprise is that the speed of adoption, anytime, any place type of activities.
Security ConsiderationsFIELD: So you've used some interesting buzz words here, technology, privacy, social media, speed of adoption, all these things just scream out to me security. What are the security considerations that banking executives have got to bear in mind as they jump on board with these trends?
DHINSA: Certainly, at a fundamental level all of their communications, the network needs to be very secure. So obviously, here at Verizon we're all about that. So we take a lot of pride in making sure that the health of a network, the security of a network is top notch. I think beyond that, what you're going to see is some sort of need or mechanism of a universal identity. So because customers now are using different forms such as smart phones and tablets and other portable wireless devices, it's becoming more and more difficult to make sure for organizations that they are dealing with the actual customer they think they are dealing with. So, I think security firms will be looking at 'How do we make sure that we are talking to who we think we are?' So look for more and more kind of universal security mechanisms to make sure that authentication takes place in a very secure manner.
FIELD: Raj, when you look at these trends and you've got them outlined pretty well for the next decade, is there an "x" factor or "x' factors that could step in and influence the speed of these trends one way or another?
DHINSA: Well potentially one of the obstacles or one of the enablers will be a set of standards. So if you think of mobility for example, particularly around payments. One of the challenges with organizations in terms of rolling out these products and solutions is, you know, what is the standard going to be? So, if we invest a lot of money developing a payment system; is that going to be the standard or the universal way that customers and back office systems integrate? And so I think that has a chance of either really slowing things down as companies wait and see, not necessarily wanting to be the early adopter and invest a lot of money, and then come back and have to rip out of some sort of technology. So the broader level of standardization that takes place in the industry around various technologies, I think the more accelerated rate we will see in terms of adoption at the consumer level. So I would think that is one aspect, one "x" factor that we have to pay attention to.
Regulatory ComplianceFIELD: What about regulatory compliance? Because it occurs to me particularly if you are talking about mobile banking, maybe even social media. that we're likely to see guidance come down from the regulators. Do you look at that as an "x" factor as well?
DHINSA: There is certainly the potential of that. I would say the caveat is companies really can't wait for the regulation around some of these new media to really come out necessarily, and by that I mean holding them back in the meantime. So I think what companies are looking to do is if dip their toe in there, try things that are not too risky in terms of what they are doing out in the marketplace, and let it somewhat evolve. So I think that the evolution of a lot of this is what's going to happen in the next couple of years. It's not going to be that there is mass adoption and companies are taking a lot of risk to get out there first, but it's more of a steady approach where, as the regulation falls into place, they learn how to use these new tools such as social media. They'll build policies and procedures around that, and they'll refine those over time. Hopefully, at some time in the near future regulatory meets the new technology which meets a strong authentication and security, and then I think the consumer is going to feel much more secure as well as companies, and then we'll start to see some of the mass adoption that the companies hope for.
Tips for 2011FIELD: Raj, a final question for you. Again, this is ambitious. You've outlined trends for the next decade, but for banking and security leaders who are looking now to 2011, what advice would you give to them so that they can lay the ground work so to speak for these trends as they unfold?
DHINSA: Absolutely. I think it is important that they forge ahead. If they want to be able to differentiate around service and having a wide array of offerings and channels for their customers, they can't wait to see what happens because companies aren't waiting. It's important that they not necessarily break the bank, but at least allocate investment dollars to some of these new technologies and trial and learn, and I think that is really the operative here is to make sure that they are trying new things or innovating and learning from that. Then as things evolve, as technologies evolve, and the marketplace evolves, they can take some of those best practices and introduce them into their existing platform and products and services and hope that they can have more of a comprehensive strategy as time goes on.