The Adaptive Bank

Evolving to thrive in the experience economy. Survival starts with becoming an Adaptive Bank—one that’s intelligent, agile, and integral to customers’ businesses and lives.

1 The Adaptive Bank

2 Today’s changing world

3 Intelligent

4 Agile

5 Integral

6 Our theory of evolution

1. The Adaptive Bank

Time is running out for traditional banking. Survival means becoming an Adaptive Bank—but what does that mean, and how do you achieve it?

With each passing month, traditional banks risk crossing a point of no return where their decline appears certain.

The industry faces global headwinds in the form of continuing rate cuts and margin compression, geopolitical and economic uncertainty, trade wars, and rapidly-changing regulations. Combine this with increased competition from new and existing players—technology giants aka big tech, fintech, and platform providers with thriving ecosystems—and it’s no wonder banks are experiencing a steady drop in the number of deposits,1 reduced revenue from traditional offerings,2 and the continuous reduction of their once vast branch networks.3,4

The effects will be different for every bank. But new entrants with innovative business models that leverage data and emerging technologies to meet shifting consumer needs are forcing the market to its tipping point. Even banks that anticipated this pivotal change are struggling to transform and adapt to the new business environment quickly enough.

Given the systemic nature of these changes, it’s clear that this is no short-lived trend. As the experience economy takes root, banks are looking for ways to stay relevant on their own turf.

What’s the key to survival? Evolution. And it starts with becoming an adaptive bank—one that’s intelligent, agile, and integral to your customers’ businesses and lives.

The Adaptive Bank understands that its ability to evolve with the experience economy will provide true differentiation. And it’s The Adaptive Bank that will set the standard for financial services in the 21st century.

1 “BAI Banking Outlook: Top Trends in Financial Services for 2019”
2 “Global I-Banks’ H1 Revenues Fall to Lowest Level Since 2006,” S&P Global Market Intelligence. September 5, 2019
3 “Deutsche Bank branch closures create a vicious circle,” Finextra, October 2, 2019
4 “Where Have All the Branches Gone: Citi Explains,” Tearsheet, April 21, 2016

2. Today’s changing world

New technologies have dramatically reduced barriers to entry, and opened doors to a new breed of competitors. Customers have come to expect great digital experiences in every aspect of their lives—and banking is woven into them all.

Experience economy

A new customer segment has emerged. These customers, who will be dominant in the 21st century, were born digital and approach their relationships with financial service providers in very different ways. Their loyalty is predicated largely on their satisfaction with digital experiences. They want and expect personalized services from their banks. And they are constantly surveying the wider market for the types of services and experiences they want when their bank doesn’t provide them.

The firms that address this shift by joining data with intelligence at scale are writing the rules for banking in the experience economy—they recognize how they can benefit from process automation, advanced analytics, and an ability to augment the human capacity to take advantage of it all.

“Companies that lead in customer experience outperform laggards by nearly 80 percent.5Forbes, 2019

Cyber security

While competing for insights to grow is essential, banks are also competing for insights to protect the bank from harm. New digitally-native criminals are more sophisticated than ever, and banks find themselves under ceaseless cyber attacks—while defending themselves from illicit activities surrounding drugs, human trafficking, and terrorism. Banks that lack modern intelligence are getting hit with higher churn, massive fines, lower valuations, damage to their reputations, and a loss of public trust.

Challenger banks

Today, two out of three new deposit accounts opened online are with direct, non-traditional, cloud-based banks.7 These challengers are more effective at managing customer profiles and anticipating preferences and spending patterns than incumbent banks. And they’re able to acquire and serve customers without building expensive branch networks. By establishing trust through seamless, cross-channel experiences, these new entrants have discovered the recipe—and the technologies—for eroding the incumbents’ customer bases and profit margins.

Fintech disruption

In less than 10 years, the financial technology (fintech) phenomenon has split into two main variants—one of challengers that are positioned as an existential threat to incumbent banks, and another as a pool of innovation and collaboration. This has driven the expansion of a relatively smaller set of independent software vendors (ISV) that has serviced the banks for decades, into a US$200 billion fintech supply chain where banks are the keystone species that aggressively help to develop and exploit innovative startups in order to compete against the challengers.

Big tech ambition

Fintech startups are no longer the biggest threat to the industry—but they were the avant-garde. The Big Four, also known as GAFA (Google, Apple, Facebook and Amazon), are the latest challengers. They have dramtically ramped up efforts to offer financial services with strategies to test the market and the status quo. They are also partnering with banks—sometimes big name brands, and other times small and often dormant banks—where they can leverage their native cloud platforms and behavioral customer data. This enables them to offer lower-cost payments, lending, deposit taking, and investment services to their expansive customer sets.

Technology acceleration

With the exponential increase in available data and the widespread adoption of new technologies to query, process, analyze, visualize, and extract business insight from that data, a new world of opportunity is emerging. The impact across the bank’s operations is vast and unrelenting. Whether it’s the war for talent, the ability to build and join new ecosystems, speeding time to market for new products, or reducing the cost of running the bank—these new approaches to managing and leveraging all this data are proven to be critical to the bank’s success.

The debate about the bank’s baseline technology platform has come to rest too—it’s no longer a matter of if, but when, a given computing need will be completely or substantively remade in the cloud. The evidence for this is that after over a decade of tech vendors driving the discussion, banks now find themselves feverishly demonstrating to their stakeholders—and especially regulators—the risks and benefits of moving to the cloud. It’s become clear to them that to compete, they need to move to a lower cost, more flexible, and more extensible technology platform.

“Half the employees working at native cloud competitors are focused on technology, while only 20 percent of employees of incumbent banks can say the same.10

Why act now?

For years, you’ve been hearing about many of these forces of change. You’ve also been told that the change will only continue to accelerate. And while that’s still true, the difference now is that the rate of change in the market is faster than banks’ ability to evolve. Time is not on their side.

As younger, tech-savvy consumers come to populate the market, the results of disintermediation are becoming apparent. Some banks are selling off business units to remain viable. Others are being acquired. A number of leading banks are restructuring around their core competencies. And with each passing month, banks risk crossing a point of no return where their gradual—and then rapid—decline appears assured.

But it’s not just increased competition that’s causing the decline. Traditional banks struggle to discern clear signals from their existing customers, and can’t see the opportunities for efficiency and growth inherent in their data. Yet both of these are the inputs they need to generate new value.

We see the effects of this changing landscape taking an especially large toll on smaller, community, and regional banks. But even multinational banks are feeling the pressure.

How will your bank survive the extinction-level event? It’s got to adapt.

Learn more about the products that can help. Download the white paper.

5 “50 Stats That Prove The Value Of Customer Experience,” Forbes, 2019
6 “Discover the Patterns in Personality,” Accenture, March 4, 2019
7 “BAI Banking Outlook: Top Trends for 2019.”
8 “BAI Banking Outlook: Top Trends for 2019.
9 “Sensing a Threat They Can’t Ignore, Wall Street Banks Instead Partner with Tech Giants like Apple,” Kate Rooney, Hugh Son, CNBC, April 26, 2019.
10 “A bank that runs accounts for just 50 cents a year,” The Finanser, 2019

3. Intelligent

Optimize your data investment and turn data into insights by embedding intelligence into your systems. Integrate the latest technology advances to connect information across your bank, and uncover the insights that drive better customer experiences.

Transform data from stored treasure to shared wealth

Turbo-charge your business by embedding AI technologies into enterprise processes. Augmenting employees in every department with improved data and AI-equipped technologies allows you to drive intelligent customer interactions. This gives you an advantage in understanding market opportunities and risk, running intelligent finance, better understanding your workforce, and thwarting financial crime and cyber threats.

Machine learning (ML) enables autonomous systems. Robotic process automation allows what machines learn to be refactored into intelligent processes that can handle exceptions without human intervention, at faster speeds and lower cost. Taken together, these systems provide greater intelligence and richer experiences for end users, and increased efficiency for banks.

How Oracle can help

Oracle offers various development tools and pre-packaged AI solutions to help accelerate adoption of AI and machine learning. Only Oracle embeds data and intelligence across all areas of your business and IT stack—from your infrastructure to through your platforms and SaaS applications. With AI/ML embedded throughout processes and the software that runs them, you’re able to engineer your business to press your information advantage, securely, and win in the moments that matter.

All Oracle applications share the same data model, which means that data flows freely across business processes, enabling “shared intelligence” across your business.

Caixa Bank gets bank-wide boost with machine learning

CaixaBank wanted to build a better picture of its customers and improve messaging to reach them more effectively. They employed Oracle’s analytics solution to input, manage, and analyze massive amounts of diverse data from both internal and external sources. By integrating data from all point of sale systems and customers’ online and mobile profiles, CaixaBank was able to better understand their preferences and moods, and offer them tailored solutions.

“Oracle enables us to quickly find patterns and correlations in our customers’ online interactions with us. We’ve improved our ability to know and serve our customers, ultimately focusing on creating value for them rather than solving IT issues.” Luis Esteban Grifoll, Chief Data Officer, CaixaBank

This led to a tangible 39% improvement in click-through rate and 50% increase in real sales within a month from leveraging the new data model. The new platform enables CaixaBank to develop predictive models to improve customer value and identify cross-sell and up-sell opportunities. It also helps the bank to reinforce risk management services, deploy stronger fraud analysis, reduce time to market, and support new regulatory requirements.

ICICI unifies for risk-adjusted performance

Similary, ICICI, a premier private bank in India, faced stronger regulatory demands. Regulators in India requested specific data points from the bank, while its customers were also requesting improvements in the information they were getting. To manage risk in the face of seismic domestic risk events, the bank needed a system to provide high quality real-time information, and visibility into transaction patterns and the relationship between growth risk and capital invested.

“As part of this exercise we have driven a lot of change in the way we source data as close to the source system, and keep aggregation and computation at the end of the system.” A R Ganesh, General Manager of Treasury and Corporate Services, ICICI

The bank required a system that unified its risk management and finance systems, presented risk-adjusted performance data, and allowed it to build its own analysis from various data elements. By adopting Oracle’s Financial Services Analytical Applications, ICICI was able to transform the way it sourced and managed data to meet emerging reporting requirements, while defining clearer data governance rules.

Optimize your data investment—turn data into insights by embedding intelligence into your systems.

Learn more about the products that can help. Download the white paper.

4. Agile

Modernize your back office and gain the flexibility to simplify, standardize, and execute your evolution to the cloud.

Drive simplification, standardization, and continuous innovation

Simplify, standardize, and automate manual tasks—everything from end-of-day processing and business close, to managing large, mission critical database environments—to become more efficient, responsive, and competitive.

Adopting cloud throughout your business enables you to drive operational efficiency and effectiveness while reducing risk, increasing speed, and refocusing your teams on innovating for the future.

Your new competition are born in the cloud, and rely on standard, simplified processes to run their businesses. To compete, you need the latest technology advances and functionalities that come with every new release, without having to manage complex, multi-year migrations or new implementations.

Your ability to get out of the data center business and back to banking has become inextricably tied to moving to the cloud.

How Oracle can help

Oracle is the only company that provides a comprehensive set of choices from on-premise, cloud at customer, and public cloud, so that you can choose what’s right for you. Our stack—comprising IaaS, PaaS, SaaS, and DaaS—is the most complete in the industry. And it’s all engineered on the Oracle Generation 2 Cloud—the most comprehensive, secure cloud in the world. It’s the only autonomous cloud on the market, allowing you to put less time in at the data center, and more time in at the bank.

Oracle offers the latest high-end components, support for third-party and open technologies, unique support for hybrid and multicloud strategies, and an unwavering commitment to protecting sensitive business data—available in data centers around the world.

RBS future-proofs finance in the cloud

One of the challenges that RBS faced was not being able to model strategies and scenarios that would serve customers at the speed that they were demanding. This was due to the large number of spreadsheets it had to manage with its legacy systems.

To address this need for speed, the bank decided to move a number of finance functions to the Oracle ERP and EPM cloud. These included planning and budgeting, strategic modeling, financial forecasting, predictive analytics, profitability and cost management, and the financial close.

“The cloud has really helped... Our users are able to evolve their models on a regular basis, in a safe and controlled way." Stuart Wray, Head of Implementation for Future Finance, RBS

The bank was able to achieve cost-effectiveness, better insight and control, and simplify its processes. It was also able to take a step towards zero-touch forecasting.

“Zero-touch forecasting is our aspiration… what we mean by that, is that the forecasts will run themselves. We're not quite there yet, but the cloud has put a great base in place for us to start to build towards that.” Stuart Wray, Head of Implementation for Future Finance, RBS

Nedbank creates a truly centralized core

Nedbank, a pan-African bank, was running on systems that were heavily customized for each individual country. That approach was becoming increasingly expensive and unstable. The bank was looking for a technology partner to support its business ambitions and continue to grow its footprint in Africa.

“We needed a core banking platform that would allow us to be flexible, meet customer requirements, do bundled pricing, launch enhanced customer experience to our clients, and stay abreast of technology. FLEXCUBE lends itself to that.” Trevor Howcroft, CIO, Nedbank

Implementing Oracle’s FLEXCUBE enabled Nedbank to go beyond its core requirements and extend the investment to Ecobank—one of its strategic investments present in a geographically diverse region of over 35 countries, with three languages and 25 regulators. The bank was able to create a centralized platform and drive common service standards across its affliates—as well as reduce the number of maintenance staff required from 330 to fewer than 50, freeing up resources for other innovation purposes.

Modernize your back office with the flexibility to simplify, standardize, and execute your evolution to the cloud.

Find out more about what Oracle offers to help you become The Adaptive Bank.
Download the white paper.

5. Integral

Transform your customer experience and exceed expectations at every touchpoint, by delivering a seamless, integrated experience that drives loyalty and revenue across your bank.

Become an essential enabler in the experience economy

Understand your customers’ and prospects’ activities and behaviors on every channel across their journeys. Developing a single, comprehensive view of current and prospective customers—using first-, second-, and third-party data—enables you to see the value your customers want, at what time, and in which channel. It also shows you where the best opportunities lie for new business models and revenue generation.

Whether you’re serving individuals, SMEs or large corporations, the path to efficient and enduring customer-centricity lies in being able to address their needs quickly and seamlessly. This can be accomplished by building or joining a robust partner ecosystem, and deploying a customer experience platform that will allow you to compose new functionality for consumers—or for seamless connected commerce with corporate clients—to address customer needs more effectively.

How Oracle can help

Oracle’s front-office portfolio has everything you need to create a seamless customer experience designed to drive revenue and loyalty across your bank. This includes an integrated platform for marketing, sales, and service that allows you to be relentlessly focused on your customers. A suite of tools and solution components let you develop new, mobile-first applications and business models. And an unrivalled catalogue of Open Banking APIs are designed to encourage collaboration as you expand your partner ecosystem, generating entirely new experiences and revenue streams.

Only Oracle connects front- and back-office intelligence—in code—to delight your customers and grow your business.

Santander shrinks response times in the cloud

Santander Consumer Finance (SCF), a subsidiary of Banco Santander, wanted to simplify the flow of information, become more responsive to its customers’ needs, improve service quality, and increase market share. It was looking for a powerful, reliable, and flexible platform, tailored to the requirements of the finance group’s growth project.

SCF selected Oracle as a technology partner as “Oracle’s vision aligned with one shared by the Santander Group”. With personalized communication provided by Oracle Rightnow Engage, they were able to reduce the time for verifying information and responding to clients’ requests from one hour to seven minutes.

Oracle Service Cloud also enabled SCF to automate 100% of its workflow, and create bespoke process orchestration so that they could move all documentation and signature processes for loan applications online, without having to revisit all their processes.

“The success of the project would not have been possible without the strongest feature of Oracle Service Cloud—its flexibility. We started working in May 2015 and the launch was nine months later.” Leonardo Gaete, Head of IT and Cybersecurity Projects, Santander Consumer Finance, Chile

With a robust platform, customer experience was improved and the company’s business volume increased by 116% from year to year in 2016. On a month-to-month comparison, the volume of business in January between 2015 and 2016 increased by 35%.

Westpac transforms customer services

Westpac wanted to connect customers to a real-time centralized customer service hub that would sit in the middle of the banking group’s IT infrastructure. It wanted to rebuild operations from the middle out and refocus the bank on “service” instead of “product and channel”. The bank’s major IT transformation plan also included simplifying the organization and adopting a data-centric approach to create value.

Westpac embarked on categorizing its service needs and building five key foundational platforms within the organization. The first was the customer service hub, underpinned by Oracle Customer Master Data to pull data across every system into a central resource. The second and third would serve payments and the banks’ large employee base, through the Oracle Banking Platform. This was followed by API-enabled platforms around data and infrastructure to meet open banking obligations.

“The Oracle Banking Platform is a key part of our solution. It provides the architecture that we wanted to deliver that [consistent] experience to our customers. A key part of the program is how we position the bank much better for the increasing speed of change, both in regulation and innovation that we need in banking.” Tim Whiteley, General Manager, Application Development, Westpac

The bank sought to transform business logic around its customers, and present information to them in new and innovative ways. It also endeavoured to move beyond the superficial opening of banking systems, to tap core business logic and data to open new services.

Transform your customer experience—exceed expectations at every touchpoint by delivering a seamless experience.

Find out more about what Oracle offers to help you become The Adaptive Bank.
Download the white paper.

6. Our theory of evolution

Adaptive Banks will set new standards for financial services in the 21st century.

They know the key to growth lies in offering products and services that become indispensable to people’s lives. That means having a sharp focus on serving customers across an exploding number of channels, and developing the ability to anticipate their customers’ financial needs and serve them—sometimes invisibly—in the moments that make or break success.

This level of service is made possible by the innovative use of digital technologies and the specializations that have emerged along with it. The providers that can deliver are those that have become part of a broader ecosystem and developed the ability to continually reassess the needs of their customers and prospects as they progress through their journeys.

The truth is, not every bank will succeed in adapting to this radically new business environment.

Some won’t know where to begin, and will quickly be swallowed up by larger competitors, or shrink beyond recognition. Others will think they’re above it all—too important to their customers and clients, too deeply embedded in the fabric of the economy, too big to fail—only to recognize their flaws when it’s too late to do anything about them.

But some banks will emerge as winners. They’ll invest in their intelligence. They’ll shed their rigid, analog pasts to become digital, organic entities. They’ll listen and respond to their customers in ways that are human, humble, and helpful. They’ll do the work.

These are the banks that will thrive in an environment of ever-changing business models and revenue streams. The banks that will attract the top talent, collaborators, and partners. The banks that will give birth to new digital products and services, learn from their successes, compound them, and grow exponentially—and intelligently—for the future.

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