John desJardins, Chief Technology Officer, Hazelcast, tells us the past year has exposed lingering structural pain points in Australia’s banking sector that need to be addressed.
Australia’s retail banks have played a central role in enabling the economy to function and customers to continue transacting despite the challenges of the past year-and-a-half. The responsiveness and reliability of their systems, and the agility of their decision-making, have all been tested.
Uptime has never been more important, with regulatory overseers taking a specific interest, knowing the economic and practical consequences of downtime in a world where almost everyone is transacting online and digitally.
Payments are increasingly digital, performed without contact and processed in as close to real-time as possible. With many customers under financial strain, banks have had to enact hardship provisions on multiple occasions. Snap lockdowns mean the banks need to be responsive to a changing environment and to customers’ evolving needs.
That translates into a need to make better decisions at pace and at scale. The more that retail banks can do this in real-time, the better they’re able to triage and manage high volumes of support requests and offer smarter, more tailored solutions.
Technology has already played a crucial role in enabling retail banks to fulfill their obligations and launch new digital services, but there is more to do. A PwC Australia Survey found banking customers now have ‘elevated expectations around fast and seamless experiences.’
Their “frustration is quick to escalate when an expectation divide leads to bumps in the road – and bad experiences aren’t easily forgotten,” the firm said.
PwC Australia found that customers also have a direct interest in the bank’s systems: “Sixty-nine percent of surveyed respondents say that the most up-to-date technology is an important factor in choosing a bank or financial product. Forty-five percent say that this will only become more important – flagging a potential battleground for banks when it comes to the new possibilities brought by technology and the speed it will enable.”
But in the general panic of the past year-and-a-half, technology changes haven’t necessarily been optimal, nor met customers’ surging expectations. Accenture research found the ‘rapid pivot to existing and hastily launched digital services’ hadn’t hit the mark, and that trust in banks to look after customers’ long-term wellbeing had dropped as a result.
Identifying the pain points
From working with retail banks through this period, in Australia and elsewhere, we see five common ‘pain points’ being experienced.
The first is slow system responsiveness. Some banks’ systems suffer from latency issues when under high load. If a sudden spike in demand for a banking application or service causes it to slow down, customers may believe that is simply the status quo – that any time there is high demand, things will be slow, which is obviously not an impression banks want to make.
The second pain point is getting reliability while scaling. Scaling up a system with bigger hardware or scaling out a system with more hardware may not necessarily make that system more reliable. There are other ways to approach scaling and reliability challenges that do not involve costly, risky or inefficient changes to the backend.
The third common pain point is increasing costs. As customers move online, banks are getting more traffic. Processing that traffic may be expensive, particularly for repetitive requests hitting an expensive backend infrastructure like a mainframe environment.
The next pain point is real-time enablement. This doesn’t necessarily mean instantaneous processing of customer requests; rather, banks are looking at it more as a way to understand what customers want and to give them the right offer or assistance at the right time. For example, if a customer tries to withdraw money from an account with insufficient funds, they may be amenable to an offer of a short-term loan. If the bank has access to the right information and context, they can more effectively respond to customers’ needs.
The final pain point is slow time to market. Many banks still operate in siloed divisional structures, but would benefit from having access to shared or common services that can act as ‘building blocks’ when assembling new apps or services. This kind of structure would prevent each team building the same foundational elements separately.
Two paths forward
Retail banks are looking at two ways to alleviate these pain points and to meet customers’ rising expectations of digital banking services.
The first way they can do this is by introducing a digital integration hub – an ultrafast data layer that sits between banking applications and the bank’s backend. Oftentimes, this layer uses in-memory computing, meaning it can process tasks and requests much faster than a system that draws data on and off hard disks.
Banking applications and services ‘talk’ directly to the data layer, making them more responsive and reliable. If any part of the backend that sits behind the hub goes down, customer-facing services remain online and functional. Changes made by a customer are also reflected in the backend systems, allowing those systems to remain the master data source of truth.
To enable real-time services, such as personalized offers and next-best conversations, banks are adding stream processing capabilities, which track how a customer is interacting with a service and can be used to guess what they might really want – now or next time they come in contact with the bank.
