Engagement banking – or, “In what way does your customer prefer to do business with you, from time to time?” – is increasing around the banking landscape. To some extent it might take quite large steps (or even giant leaps..) into the “future”, as for example the high-tech branch bug in South Africa.

As for Africa as a continent, one could actually say that they have, in many ways, taken a lead role in the development of this new ”era” of NFC (Near Field Communication) solutions and have accelerated the concept of Mobile Payments . Why so? Well, extremely simplified one could say that due to the lack of infrastructure within the banking area (i.e. basically poor presence of bank branches and virtually no ATM’s), and simultaneously – the telecom business doing a great job – more people have a mobile phone than a traditional bank account..  – hence the rapid growth of new business opportunities; (to begin with) pay via your mobile phone bill, which later has turned into many new mobile payment solutions.

Referring back to South Africa “Engagement Banking” could easily be seen in a more pragmatic way, such as multi-channel dialogue with the banking customer. Multi-channel banking is the buzzword in today’s banking world; the banks are competing to increase their reach by adding new customer touch points including laptops, PCs, mobile phones, tablets, kiosks, smart ATMs and even television. But, are customers expecting more?

Of course they are..

The digital generation is always ready for innovation and experimentation, and expects banks to make their banking experience easier. Seamless cross channel transactions are one of the needs of this tech savvy, busy, young population.

So, what does cross channel transaction mean? …Allowing your customer to schedule a fund transfer to another account, through internet banking, and later modify the schedule through a mobile. A transaction with a life cycle across multiple channels – that is what is meant by a cross channel transaction.

What other cross channel scenarios can be deployed to entice your customers? A few are listed below:

• Schedule a utility bill payment for a later date through internet banking and reschedule or cancel it using a mobile
• Provide location based offers on mobile (say an offer on motorbikes, with auto approved loan facility), allow the customer to show interest through mobile, and later upload relevant documents to sign up for the product through the internet
• Sign up for a new product through the internet and call the call center later to update certain information
• Create a monthly budget to track finances through the internet, tag transactions and monitor spend patterns against the budget using a mobile
• Approve payments, or enable the salary uploads initiated through the internet by one user to be approved over a mobile or tablet by another user

But aren’t we forgetting something down the road towards Digital Paradise City?

All above mentioned possible cross channel scenarios are (more or less) targeted to the part of the (probably widely spread) target group that are willing to easily adopt (and demand..) new ways of interaction; the tech savvy busy young population. So what about all the other customers notwithstanding age, are they to be forgotten and left out in the cold, while the banks are focusing on the, today, minor part of their target group..?

Of course not! Lesson nr 1 – k know your customer (in what way he or she wants to maintain and develop the preferable dialogue) and be smart enough to adapt to these different challenges, having a variety of channels in place and the means to implement them.

So, is a cross channel experience solely for customers?

No, of course it isn’t. Bank employees can enjoy a similar experience too. Take a sales representative who meets with the customer at his office, and introduces a new savings product. The customer shows interest, which is captured by the sales representative using his mobile or tablet CRM app. Later, the sales representative synchronizes the information captured on his mobile/tablet to a CRM solution, thereby creating a product request for the customer.

Cross channel experience is expected to become hygiene in a multi-channel banking solution. It will evolve in due course and we can (hopefully?) watch out for more complex scenarios turning cross channel in the days to come.

So, back to the initial question “Engagement banking and multi-channel banking” – flavour of the month or here to stay? – Well, I would say – here to stay!

If you’ve dismissed the Cloud as “just another marketing term” to hype the on-demand solutions that businesses have been using for more than a decade, then I would say you’re actually missing the point..

There are of course many different definitions of what the Cloud actually is; some of the definitions that are commonly used define cloud technology as “on-demand, self-service, scalable, and measurable.” But however you define it, there’s buzz about the Cloud for good reasons. The rapid movement of technology to the Cloud – along with its promised benefits of elasticity and cost-effectiveness – is significantly changing the IT landscape for all kind of businesses today – from SME’s to mid-size and large corporates. And of course – the financial landscape is no exception..

So what would you use the Cloud for..?

Well, one common need is data storage. I read somewhere there are approximately 2.5 zetta bytes (2.5 billion terabytes) of data existing in today’s digital universe..(!) – add to this the increasing regulations that drive more banks and financial institutions to look for better backup and recovery solutions – making data storage one of the fastest growing areas of cloud computing.

So, data storage is obviously great to put in the Cloud – but what else? Of course (almost) anything packaged as a service (SaaS) would also be a great thing to offer. One area specifically concerning banks and financial institutions are the new regulations regarding Common Reporting (CoRep) and Financial Reporting (FinRep). They, I believe, might be great candidates for a cloud solution.

Banks within the EU have long suffered from a problem (or a challenge) – they report similar information to the regulators, but they do so in slightly varying ways, making comparisons difficult. Now, it’s the responsibility of the European Banking Authority (EBA) to get them all to “speak the same language” (and we all know how easy it is to get us Europeans to speak the same language..) . 

One of the tools to secure a “common language” is an “interpreter” called the Fourth Capital Requirements Directive (CRD IV). What the CRD IV does, is to call on the EBA to draw up a set of implementing technical standards (ITSs) and create templates that all EU banks will use when reporting to their national regulators.

So far, everything seems quite alright. But – and here it might be room for an “aspirin moment..” –  while everyone agrees reporting needs to be harmonised across the European Union, the EBA’s proposals for CoRep and FinRep are causing lots of headaches for banks and regulators..

Why so? Well, the banks are saying with (almost) an united voice; instructions published with the EBA’s draft templates are not necessarily clear or complete, and the proposals requires significant volumes of data from the banks and financial institutions, some of which is not currently easily available..

All in all, industry experts estimate the number of individual items of information to be reported will increase close to nine times under the new “regime”..! Now – there’s an area that could be a good candidate for the Cloud..!

What if, there was a SaaS solution that could help banks and other financial institutions collecting the huge amount of data needed and then sort them into the correct report almost in an instant, send it back to the compliance officer, who then would have the accurate figures just a click away..?

If so, that’s a possibility where we could go from make the Cloud drip, to make the Cloud drizzle, and better yet – to make the “Cloud rain”!   So Let it Rain!

Social media approaches the financial services arena with an advantage in the sense that the networks already know an incredible amount about their customers, and that information is constantly being updated. For instance, your bank probably doesn’t know that you just got engaged or are considering buying an apartment, but Facebook does, because you have updated your profile and status to reflect these changes. Talk about possibilities of relevant communication. It can even be tailored to you in real time!

From the customer’s perspective there are a lot of obvious benefits of getting multiple services from one provider, time saving being just one. However, I wonder if a consumer would be willing to trust social media networks with their money? After all, these are websites set up primarily for virtual ‘social’ interaction between, not only friends, but also millions of strangers. Nonetheless, if Facebook and the coming changes in their credits system, would allow me to buy products and services over and above the current offering through a pre-paid account; that may be interesting to me since it would make my online life easier.

In the end it all comes down to trust and reputation. I trust my personal data to a company proven to be the best at using this data to do exactly what was promised, to connect me with my friends. I would need a lot more persuasion – and a bigger incentive – to give them more information. Personally, I am not ready to trust Facebook, or any other social media site, with my banking information – yet. Perhaps I have missed something obvious with these benefits that would ensure me, or maybe I’m just from the wrong generation…? Nonetheless, I DO believe we’re only in the beginning of a very interesting journey on the path of interaction between different kind of social media and on-line financial solutions.

So where does this ‘Social-media-interconnected-Financial-Services’ road lead us? To a far more interconnected place? Or will it take us all around the loop again, where a bank is a bank is a bank and the social media sites are just – social? Let me know what your think!

The Landscape

OK, we understand there are some potential upsides for both Banks and corporations. But how far have we come?

Let’s have a look on where we stand right now, is there a market or not for this?

 The total estimated market value for the entire Financial Value Chain (Order-2-Cash, Purchase-2-Pay) in Europe is € 200 Billion annually and less than 10% of this is put into practice!

OK, so there is a market..! But what is actually done, by who and for whom?

Electronic invoicing on the EU agenda

The Digital Agenda is Europe’s strategy for a flourishing digital economy by 2020. The European Commission is focusing its efforts on removing barriers to the broad-scale adoption of electronic invoicing in Europe and the four key priorities on this topic are:

• Ensuring a consistent legal environment for E-invoicing
• Achieving mass market adoption by getting SMEs onboard
• Stimulating an environment that creates maximum reach between trading partners exchanging invoices
• Promoting a common E-invoicing standard

Beyond E-invoicing

After establishing E-invoicing, the next automation steps soon follows:

• Replace traditional procedures along the procurement supply chain with electronic and automated processes
• Replace traditional procedures along the financial supply chain with electronic and automated processes

RTE – Real –Time Economy

• Full FVC

RTA – Real-Time Audit

• Enables Tax authorities to audit invoice before goods are shipped by suppliers

 My humble conclusion on this; since the “market share” for e-invoice is still below 10% – no one is “too late” for this… Here in Sweden we – Tieto – provide white label e-invoice solutions for Banks allowing them and their corporate customers to send & receive in any channel (e or print) and with any-format-in, -any-format-out. I believe that the process starts with Order-to-Invoice-to-Payment, with a “straight-through-process” allowing for add-on services like supply chain finance; factoring and reversed factoring. Combining all these services (as Tieto does today) is absolutely something for the Banks to take part of as this is close to their core business – Payment, Loans and Funding. At least in Sweden, Banks play a huge role of converting the large SME segment into the “world of e” within the FVC – Financial Value Chain!

Having a meeting with one of the largest Banks in Sweden, discussing further development of their eInvoicing service; they clearly stated that the main reason for the Bank to develop and manage their own e-invoicing service, is that it’s so close to their core businesses; Payment, Loans & Funding, that’s it’s so essential for them to have “their own” service rather than acting as “consultants”. Hence, this service leads them straight to their own “core business products” (as mentioned above) with a smoother straight-through-process and a better margin.

I believe it’s essential for the Banks (like all other e-invoice VAN’s end vendors) to extend their roaming agreements leading towards a larger and smoother “market landscape” for all – not at least the end user/customers!

With a greater roaming network – we are all building the infrastructure and secure the possibility to increase the total market share of e-invoicing!

Ps. did you know that European Banking Association declares that 2 500 trees need to be cut down to deliver 1 000 000 paper invoices?

First we need to figure out if and why e-invoicing may be a potential “cash-cow” (for Banks?), “Money-saver” (for Corporates?) and “new-basic-electronic-demand” (for Consumers?).

Based on experience, a corporation can save about one to two percent of its sales per year by switching from traditional invoice processing to e-invoicing. One can exemplify it by separating some of the incoming and outgoing invoices, as issuer of invoices you can make a saving of about 3 SEK per invoice, as a rule of thumb. This will obviously depend on several factors, above all, volumes. This may not sound much but consider that a lot of companies send out, say from a few hundred thousand to several million invoices each year, it’s a pretty nice saving!

Regarding the receiving end, one can generally say that a corporate makes a saving of about 150 up to 500 SEK per invoice received, notwithstanding the actual amount of the invoice. Again, it of course depends on some factors, such as volumes, ERP systems etc. The point is that it reduces costs from the first invoice, whether sending or receiving.

Money in the shape of invoices, pending payments, finance charge etc. are hidden in processes where they are not optimally managed. No matter how good you are at sales, production and delivery processes, the financial process remains as the most sluggish of a company’s overall business processes. Multiply that by the number of customers, suppliers and business partners you have – and what you have is a BIG problem. This issue decrease cash flow and reduces the visibility and control. Again, e-invoice improves efficiency in processes, procedures and lead times.

Tieto serves as provider to roughly 80 percent of e-invoicing market in Sweden. In 2011, the usage of eInvoice has increased about 40 percent! This pace will probably pick up further or at least continue in coming years. Two customers whom Tieto work closely together with, are Swedbank and Nordea, which offers a so-called White Label solution, meaning that variations of Tieto’s e-invoicing solution is run by the banks as a cloud service where each bank then provides this service along with their other banking services, and resell it to their corporate customers. For banks, it is a strategic decision to offer e-invoice services to its customers, though this is a natural channel to the bank’s other core business services, including various financing and factoring services.

Finally, as a new generation of consumers placing even greater demands on electronic and mobile solutions for information and financial services,  the increasing needs for cost reductions for companies, especially banks, will lead to a sharp increase in use of electronic financial services. Here we find the eInvoice service already far in the development curve combined with a great availability for both corporate and consumers.