Attracting and retaining customers in the digital world is no longer just about service levels and product offering, but also world class experience and innovation across every touchpoint.

Branch banking is dead. Long live branch banking. Industry reports state that at least one billion internet banking users are expected to be active by 2020. And that means every bank (big or small, multi-national or regional) must have a tick in the box when it comes to the gamut of channel options. So what differentiates the good, the bad and the ugly? It’s all about the innovation and the freshness of the offering. We explore four central success factors which are increasingly being adopted by banks across the world

1. Engage the customer

The success of any innovation is in its adoption. And the key to driving adoption is in customer engagement. No matter how expensive or sophisticated the birthday gift, the child’s attachment to it is always a function of its appeal to be engaged. As simple as it sounds, embracing this logic is essential. Take the example of video banking; be it the adoption of Nuance’s Nina virtual assistant by Garanti Bank in Turkey, or the Virtual Relationship Manager concept promoted by Kotak Bank in India, or the In-branch virtual contact centre by JP Morgan, the theme is consistent: engage the customer. Umpqua Bank in the US has taken things to the next level. LCD screens and projectors project live Twitter feeds, bus schedules, weather information, creating an interactive digital ‘catalyst’ wall.

2. Demonstrate convenience

An app is not the end game. Innovation that does not demonstrate convenience will have no takers. With mobile, digital and social media becoming a way of life for the next generation, embedding convenience in interaction levels across any of these channels is critical for driving adoption. A simple and yet highly effective demonstration of convenience is QMS integration with mobile banking. The convenience of planning a visit to the branch and options to book appointments based on queue waiting times has been implemented by most leading banks..

The Money Collection service promoted by Idea Bank in Poland allows SMEs to use an app to invite a trained employee of the bank to deliver or collect money in a car-secure depository. Remote deposit capture is another good example. Introduced by JP Morgan, the concept has been widely adopted by leading banks across the globe.

3. Make experience personalised

Not just about personalised landing pages or tailor-made emails. Less than 40% of retail banking customers reportedly have a positive experience to report about their financial institution. Yet it is also true that 75% prefer their primary bank as their personal finance manager. And that’s an opportunity to leverage digital channels – both mobile and internet to drive a personalised experience. Be it in monitoring spend, setting budgets, reviewing saving goals, managing investments or notifications and reminders, a customer wow is only assured when the experience is highly relevant.

While SWIFT is a critical platform for every bank, the actual financial transactions are initiated in their Core Banking and other back-office systems and driven through STP. Banks also prefer to have an alternative mode of manual posting where there is a need for additional validations. In essence, there is a context, linked with merits and challenges with either approach:

  • STP allows for the whole transaction going through without any manual intervention, and therefore minimizes events of fraud. However, a glitch in Core Banking Systems or an error in the posting of the transaction could lead to erroneous transactions getting initiated/ posted. Also, since the core banking platform and other back-office systems are used by a large base of employees, enforcing the controls in the authorization process and controls would need to be done across all systems.
  • The alternative is where banks post the entries in SWIFT without an STP, where a select set of authorized and trained people get to post the transactions. These also include nonfinancial transactions that create a contingent liability. This approach comes with the operational risk of giving access to a few individuals on a critical platform, and hence fraught with a higher risk of fraud.

In the real world, it is generally a combination of both situations that exist. While most financial transaction types generally tend to be posted using an STP, there are a set of non-financial transactions that get to be posted directly (manually). Also, all exception situations involving free format and enquiry messages usually tend to be managed outside the STP flow, with a manual intervention.

How can banks minimize such operational risks ?

The real solution to drive higher controls is not only about integration of systems, but also about having a strong process workflow, prudent organizational controls and a well monitored compliance framework. Here are 8 key principles that are fundamental to minimize operational risks around SWIFT:

  • Workflow: An automated workflow for each type of transaction, with pre-enabled STP and approval levels and compliance norms across core and back-office systems.
  • Access Control: Manual interface with the SWIFT network being remediated with redefined access controls enabled through all such connected systems.
  • Approval levels: Approval level definition with 2 to 3 levels of control being maker-checker-verifier, based on the underlying transaction value.
  • Job Rotations: Enforcing employee job-transfers and periodic rotations. Critical to avoid collusion, and fraudulent transaction risk.
  • Authority Matrix: Authority matrix aligned with responsibilities. Both SWIFT and Core Banking Systems should be configured accordingly.
  • Fraud Analytics & Reporting: Use of analytical tools to monitor fraud, Know your Customer (KYC) and AntiMoney Laundering (AML) compliance. Exception reporting resulting in immediate, high intensity investigation and action.
  • Limit Management: Definition and measurement of direct capital exposure, contingent liabilities and collateral management driven by credit policies.
  • Audit Reviews: Periodic, institutionalized audit reviews to confirm compliance to policy norms and adherence to all above. This is fundamental and most critical.

How can Cedar help ?

Cedar Management Consulting International, LLC ( is a leading global consulting and research ( firm with a significant financial services practice.

With deep experience in business, operations and technology transformations, Cedar has deep understanding of operational risk and process controls to be put in place, and has advised global banks in the design and deployment of a risk management framework built around the key principles defined above. Typical assistance areas that Cedar offers include:

  • Diagnostic Review: Assessment of current risk exposure & key vulnerabilities related to the process flow, technology deployment including STP and controls.
  • Process Design & deployment: Design and implementation of automated workflow framework that identifies points of vulnerability and build a higher degree of controls.
  • Risk Management framework: Design and implementation of a risk management framework that helps in driving compliance, aligned to industry best practices.

To read more such insights from our leaders, subscribe to Cedar FinTech Monthly View

Talk to our Consulting leaders about how we can add value
Contact us to make strategy & innovation work for you

Relevant CedarViews