Financial Services Blog Posts

The financial services industry is undergoing a significant transformation in how applications are designed and delivered. A key driving force behind this shift is the growing imperative to be global both in terms of providing customer-facing services and in taking advantage of a distributed global workforce. Applications that were previously targeted to local deployments on well-provisioned workstations or kiosks, need to be re-designed to serve an increasingly distributed global client base running “thinner clients” such as consumer PCs, laptops, notebooks, and mobile phones.

Not that many years ago, legacy financial services applications were designed to manage both the presentation layer (the UI) and the business logic using the computing resources and horsepower of the local workstation. The result was rich desktop functionality, but severely constrained portability or reach.

In order to provide rich-client applications beyond the walls of the home office (i.e. an early form of going global), financial service institutions had to rely on remote terminal technologies like Citrix (before they were talking desktop virtualization) or Microsoft Terminal Services.

While remote client technologies (or their descendants) survive in some form, the cost, licensing fees, and technical knowledge required for operation, limit their value or applicability. The business demand to be global is however, more compelling and wider reaching than ever, This is forcing legacy fat-client and remote terminal technologies to give way to Rich Internet Applications (RIAs).

RIAs take advantage of AJAX, Flex, Silverlight, Java (w/ JavaFX), etc. to provide rich client feel and functionality within the confines of a web browser. At the enterprise level these applications provide the scale, feature, functionality and responsiveness of traditional desktop software, but with the global reach of the web applications. They can be designed to handle very large data sets, scale to service thousands of users, meet fraction-of-a-second performance demands and encapsulate complex business logic.

RIAs make it possible for financial services institutions to achieve the requirement to be global, but not sacrifice the performance, richness, security, or functionality of workstation-bound legacy applications. RIAs are however, only one (albeit critical) part of the wave in the transformation of financial services applications. In addition, computationally intensive business logic is being separated from the RIA presentation layer and deployed into the cloud (e.g. SaaS), reusable application components are enabling rapid adjustment and adaption to changing business demands, and financial services organizations are beginning to take advantage of integration and collaboration services.

I was reviewing the latest FinTech 100 and noticed that 4 of the top 10 firms are recent or current clients of Catalyst Resources. To be sure, the economic downturn has impacted the financial services sector and almost everyone is aggressively seeking ways to cut costs. However we find that many of these firms are also responding by investing in new applications that improve ROI, manage risk, reduce business process inefficiencies and attract new customers.

Financial services firms continue to invest in new applications

Different financial services firms (across banking, capital markets and insurance) call Catalyst in at different points in the design of these new applications - anywhere from the early idea stage, to a project with well-defined requirements. But one thing that is consistent. Because these tend to be mission critical applications, designing the application functionality and the user experience, is always an interesting challenge.

Typically these are global systems with extremely high performance requirements (e.g. trading platforms, or financial communications systems), as well as uncompromising fault tolerance and security (e.g. payroll systems or credit card processing). Progressively there is an increasing awareness that the functionality and components need to be modular so that they can be applied across disparate applications and, more importantly, to so that they can be reconfigured very quickly, and still adhere to regulatory compliance standards.

Changes in how software is delivered consumed - SaaS and mobile

There has been a fundamental shift in the requirements for how services are delivered and consumed in the financial services industry. Web-based applications, SaaS and on-demand cloud infrastructure are increasingly important for point financial processes such as governance, or tax management, as well as core systems such as HR, payroll and process management. In a Feb 2009 report, Saugatuck predicted that usage of SaaS-based core financial systems will reach 40% or greater by the end of 2010.

Firms are also asking that their applications become more user-centric, accommodating the diverse ways that their services are experienced by an increasingly distributed and mobile workforce. In the past, mobile meant laptops. But with users now accustomed to web-based business applications, firms are asking to adapt their mission-critical applications for handheld devices such as the iPhone and Blackberry. For these applications in particular it is essential to thoroughly encapsulate critical business processes and streamline the functionality so the apps are more refined, prioritized and elicit greater productivity within the small visual real-estate of the device.

A renewed focus on monitoring

As part of the focus on optimized application design, financial services firms want to be able to monitor how and when applications are being used. This information can then be applied to correct drop out points, improve effectiveness and efficiency for their users, and quickly determine how to modify an application on a regular cycle to adjust to changing needs.

Changing priorities

The priorities of senior financial service firm executives are changing as they adapt to today’s unprecedented economic conditions. Firms are jettisoning less efficient business processes and technologies, but they are also spending on well-designed applications that allows them to reduce costs elsewhere (via automation and self-support), generate new revenues, or attract additional customers. For us its an exciting time and certainly keeping us busy.

In Part I of this post I talked about how RIAs and web services offer an opportunity for financial institutions to integrate online banking, electronic billing and payment, and value-added services such as graphical tools and cash flow forecasting, into an end-to-end solution. Reusable interface components in the RIAs can be built once and shared across channels to increase upsell of add-on services, reduce training / support costs, simplify regulatory compliance, and save as much as 85% in application front-end development cycles.

The opportunities for banks, insurance providers, investment firms, and other financial institutions become even more interesting when you add SaaS into the mix.

Software-as-a-Service (SaaS)

“Banking 2.0” is of course, broader than just using RIA technology to create compelling and addictive user experiences. Banks are in a unique position to offer their corporate, small and medium business (SMB) customer a range of integrated business services.  Customers may not naturally think of their bank as an innovative and cost saving software provider, but Internet banking already has good market penetration and banks have the potential to be a SaaS provider of choice for other business services. Banks are already trusted for security and reliability and can use SaaS to deepen their relationships with SMB and enterprise departmental groups. Boston AMI-Partners find that the services desired most by SMB include banking/finance, instant messaging and payroll processing applications, and human resources management.

SaaS and managed services aren’t a new concept in banking. Aite Group, estimates that 60 percent of community banks deploy a majority of their internal IT applications through SaaS including expense reporting, travel booking, payroll, PR services, and recruiting. For external facing applications such as consumer lending and loan processing, many savings and loans rely on the infrastructure and services from larger banks.

The movement now is for financial institutions to use RIAs and SaaS to offer their corporate and SMB clients a diverse portfolio of services. Very large financial services organizations may choose to develop the projects completely in-house. Most financial institutions will build their SaaS applications by linking together services from larger banks (e.g. Fidelity) with other SaaS infrastructure providers (e.g. Saleforce or OpSource) . In either case, the keys to success will include developing a consistent and user validated UI across all services.  On the development side this shortens development time for new services. On the customer side, if a customer knows how to use one application, then it will be easy for them to try and then subscribe to additional services without training or frustration.

Address the Full Customer Life Cycle

The real determinant of success however, will be how well financial institutions develop their RIAs and SaaS to deliver the full customer life cycle that accompanies the new services.  It is not enough to deliver a well-designed forecasting tool, for example. That is just one component of what the customer experiences.  Equally important, the SaaS must provide the demo, sign up process, provisioning of services within the SMB,  support, monitoring or internal use, and billing - the entire customer life cycle - all with the same level of user validation testing, customer engagement, and RIA performance and design consistency as the core application.  I’ve described this life cycle approach in a previous post,  and it is no less critical to apply to SaaS services provided by financial services firms.  It is more important to start with just one new service, but address ease-of use, UI consistency and all aspects of the life cycle, then it is to come up with a complex new portfolio of financial products but not address the full life cycle or UI consistency.

Monitoring in Saas to Cross Sell and Upsell Services

SaaS offers a unique opportunity to monitor when and how the software is being used, or when and where the customer stops using the software. This information can then be applied to correct drop out points in the life cycle, improve effectiveness and efficiency for your customers, and quickly determine how to modify your application on a regular cycle to meet user needs.

Monitoring also enables financial institutions to plan and execute targeted marketing campaigns aimed at improving online and mobile banking, bill payment adoption and usage and select value-add financial management services.

Back in April I was interviewed by the American Bankers Association (ABA) Banking Journal for a feature they were writing on how banks and financial services firms were beginning to adopt RIAs and modernize their web presence into a full-service channel. I explained how our clients have used RIA features to drive business and help enhance self-service capabilities.  In the last month, I’ve seen several other news stories on similar topics.

RIAs

ReadWriteWeb noted the significance of RIAs to banking in their post about a survey of 1000 Facebook users (admittedly a young and tech savvy audience, but definitely the future of banking).  Almost half of respondents said they would use secure gadgets for personal banking if their bank offered it. A little over one quarter said they would consider switching to another bank that offered Web 2.0 gadgets for online banking.  With Gears or Adobe Air this could be extended to the offline world.

CNNMoney referenced Mint.com, an AJAX-based web application built for consumers to manage home finance - a service gap that banks have left open. Mint is particularly notable in how it delivers an RIA/Web 2.0 style experience that gets adults immersed in managing their finances the way teenagers immerse themselves in playing a video game. Mint is also highly viral - customers become advocates and evangelists for the services. This level of RIA user experience will be a requirement for any financial institution that develops their online presence.

Using RIAs and web services, financial institutions can integrate online banking, electronic billing and payment, and value-added services such as graphical tools,  and cash flow forecasting into an end-to-end solution. Moreover, the same web services that push electronic banking and bill payment functionality to the online channel,  can also push services to mobile devices, ATMs, teller stations and call centers. Reusable interface components can be built once and shared across these different channels. Componentized, re-usable UI will increase the probability of customers trying new services, reduce training / support, simplify regulartory compliance, and save significantly (as much as 85%) on application front-end development cycles.

Part II of this post will look at how banks and financial services firms can add SaaS into the mix with RIAs, to offer corporate customers, departments within organizations, and SMBs a diverse portfolio of services, that will effectively engage existing customers and lure new customers from other services.