Banks' legacy open to FinTech opps
Deloitte's Chris Wilson: Traditional banks will soon be free from legacy shackles
The end of this year could see Australian banks finally unleash products and services based on predictive analytics systems that have so far been stymied by banks’ creaky, legacy underpinnings.
For the last decade and more, banks have been busy replacing or modifying the core systems that date back to sixties, seventies and eighties to make them better able to support the modern world and its mobile banking apps and other digital goodies.
While mobile banking apps abound and are often the weapons in marketing wars between the finance institutions, we are yet to see local banks offer much in the way of deeply customised service based on the use of predictive analytics.
In the Deloitte Australia Mortgage Report 2016, Deloitte canvassed innovation issues and how they would affect the world of mortgage lending in the near future.
Customer expectations of their digital banking experience have risen much higher in recent years following constant exposure to modern digital platforms like Facebook, Google and Amazon.
“All that does is heighten the requirement of a mortgage provider to be able to do similar things,” says Deloitte consulting partner Chris Wilson.
“The (mortgage providers’) excuses of ‘it’s difficult because we have got complex core systems and it’s hard to do the integration,’ although valid, are now confronting a consumer attitude of that’s not our problem,” says Mr Wilson.
Consumers expect the same experience with financial providers that they have with any other digital channel.
But a banking revolution based on hooking up the latest analytics tools to the big data flows coming off core systems may be just around the corner.
“This is going to become a key opportunity and a challenge for the mortgage market to take on over the next 12 to 18 months,” says Mr Wilson.
By the end of 2016, Mr Wilson predicts banks will start to roll out services based on their use of big data analytics tools that more finely target customers’ financial profiles.
“Before the end of this calendar year, multiple organisations will be putting things into the market,” says Mr Wilson.
Bankers and their digital engineers sit atop serious data streams with enormous potential, as Lisa Claes, executive director customer delivery at ING Direct describes in the report:
“Behaviourally, as an example, I see 1.5 million savers in our database; some are transacting, some starting to accumulate balances. Some even display a banner on their savings that specifies home loan deposit.
When you consider their age, their savings patterns, as well as their digital footprint across our product range, rather than wait for them to come to the direct mortgages site or start a conversation with a broker, we can pre-emptively tap them on the shoulder,” Ms Claes says in the report.
Ms Claes points to digital services already available from banks in Romania that drastically speed up loan approvals.
“Our bank, together with a few others, lobbied the equivalent of the Australian Tax Office to build a pipeline to the Romanian tax office, so with the customer’s consent, a borrower seeking secured or unsecured credit can permit that bank access to their income records to verify serviceability and capabilities.”
The pipeline between banks and the Romanian tax office gives instant access to a loan applicant’s income history and makes approvals or disapprovals available in minutes.
The report concedes local finance institutions will need to beware the ‘creepy line’ where customers get spooked that the bank knows too much about them. The ‘creepy line’ plus local privacy regulations will hamper banks exploiting data held by public institutions such as the ATO.