IOA Enables Innovation & Disruption In Retail Banking

Digital transformation is impacting every industry in unique and challenging ways. Financial services is no different, with retail banking poised to be affected significantly.

Facing disruption from non-traditional players, changing customer demands, and new regulations to deal with the changing environment, retail banking is making digital a core business imperative[1]

As reported in a previous article that looked at the electronic trading sector, one in three financial services CIOs have identified digital as a top business priority, and beyond that, only around 26% of financial services organisations will actively work to remain "traditional businesses". This means that most financial services organisations are looking to become digital-ready on some level.

Retail banking is a large segment of the financial services vertical, accounting for roughly half of all banking revenues worldwide. Industry revenues are projected to reach $2.75 trillion by 2022, a growth rate of 5.5%, with retail banking retaining this lion's share of revenue[1]. However, the path to this number will prove to be a difficult climb unless banks capitalise on the opportunities afforded by digital transformation. Facing challenges from non-banks and fintechs, changing customer preferences, and technological innovations, banks will need to move fast and think quickly to capitalize on this growth.

Retail banking faces stiff competition on all fronts

Customers are increasingly indicating that their banking preferences are driven by personalisation, continuous delivery, and self-serve opportunities. From the likes of Apple and Samsung taking a role in payments processing, to the emergence of nimble, digital-only banks, and even the advent of crowdsourced lending, traditional banks have found that areas where they once dominated are being chipped away at. In fact, Accenture predicts that these new competitors can erode up to 33% of traditional banks revenues in the coming years[2].

To further complicate matters, consumers expect these services to be available anytime, anywhere, and at lightning-fast speeds. This expectation of services being available on-demand in real-time has been tackled by various players in the market in different ways -- through digital relationship managers, real-time customer care, and various self-service technologies such as mobile banking. Retail banks will need to provide all of these services to their customers if they wish to retain them.

Traditional banking models constrain innovation

Retail banking incumbents have struggled to address these challenges for four particular reasons:

  1. products and offerings are disjointed across the bank, leading to inefficient management and frustration from the customer in trying to interact with multiple products;
  2. centralised IT architecture hampers the performance of digital customer experience;
  3. being slow to market. As a result of an inefficient, soiled environment, innovative product development is always a step or two behind the disruptors; and
  4. a lack of customer insight stemming from poor, siloed data collection and analysis activities means that the incumbents are slow to identify and respond to market trends and opportunities.

In addition to the above, traditional IT architecture simply cannot keep pace with the requirements of the digital-first customer. Customer demands for personalised offerings far outstrip the architectural capabilities of traditional IT, as they require intense data analysis, often at the edge, to minimise latency. In addition, continuous delivery of services requires distributed architecture to ensure that no matter where the customer is, or what device they are using, they can access personalised banking services.

Fortunately, there exists a solution that is proving to be incredibly effective at bringing retail banking up to speed with their digital readiness – Interconnection Oriented Architecture™ (IOA).

IOA™ disrupts the disruption

Interconnection Oriented Architecture™ (IOA), pioneered by Equinix, a leading global data centre and interconnectivity provider, helps plug many of the gaps between traditional IT architecture and the dynamic IT requirements of the 21st century. By enabling data storage and analysis close to consumers at the edge; unparalleled scalability for increased analytics and insights; and connectivity with a wide variety of service providers to create relevant customer offerings, IOA™ enables a more rapid way of working.

Retail banking, specifically, benefits from IOA™ as it allows decision-makers on all levels to gain greater insights into customer requirements for personalised, value-added products and services.

Interconnecting ecosystem partners, employees, and customers together allows for banks to deliver their services anywhere, at any time, and over any device. For retail banks, moving to a distributed, interconnected platform will be essential if they are to increase innovation, the standardisation of operations, and their ability to scale as needed.

Equinix's distributed environment -- which includes 10,000 interconnection customers worldwide -- encompasses 16 data centres in Australia, enabling local banks to offer services in close proximity to their customers, business partners and employees at all times.

The banking and insurance industries are among the fastest adopters of secure, private interconnection. According to the Global Interconnection Index, a market study published by Equinix, interconnection bandwidth in this sector is projected to grow at 65% annually and is being used to build differentiated customer experiences, offer cost-effective service delivery round-the-clock, and scale through interconnected insights.


Finding retail banking success with IOA™

Organisations that adopt the Equinix platform for their IOA™ environment have come to make it the basis for their digital transformation efforts. The speed with which banks can leverage the transformed platform will allow them to expand their product portfolio, find new markets, and scale to rapidly capture emerging business opportunities. In short, banks would move from being the incumbent to become a disruptive force with a loyal and highly engaged customer base.

DBS Bank, a multinational banking and financial services corporation headquartered in Singapore, and named the World's Best Digital Bank by Euromoney, is at the forefront of leveraging digital technology to shape the future of banking. The bank partnered with Equinix to transform one of its traditional data centres into a cloud-optimised centre, enabling the bank to run a more efficient technology architecture and infrastructure, resulting in massive cost savings and creation of customer value for the bank.

David Gledhill, DBS' Group Chief Information Officer and Head of Technology and Operations said, "By being a leader in adopting cloud technologies, DBS can deliver more customer value through our ability to experiment and scale quickly. Our teams are able to iterate and deliver products to our customers at a much faster rate while adhering to the highest standards of security and resiliency. With the new cloud data centre, we are able to significantly increase our energy efficiency as well as drastically reduce our carbon footprint."

For more information on how retail bankers can provide more personalised, value-added experiences to meet customer's rapidly changing banking requirements anywhere in the world, read Equinix's Retail Banking Digital Edge Playbook.


[2] Accenture, Banking Survival Point of View