Johannesburg, 06 May 2014
Fierce competition together with ongoing technological developments has seen a tremendous shift in the banking sector over the past two decades. While banks are becoming more customer-focused and market driven, customers are becoming selective in their preferences.
Richard Sharod, Africa and Middle East Regional Director at Stratus Technologies, a leading provider of always-on solutions, believes that minimising customer switching is one of the biggest challenges facing the banking sector today.
"Locally, the big four banks have some form of loyalty or rewards programme in place, most of which are bundled into the payment mechanism. However, they are a step behind countries such as the United Kingdom which has gone so far as to introduce a 'seven-day switch' policy among 33 of its bank and building society brands.
"In the UK, consumers are able to move all aspects of their banking freely from one banking institution to another within seven days, effectively taking all the hassle out of moving your bank account. This has had a profound impact on the measures banks now have to implement to entice their customer's to remain loyal, and I'm certain that this type of 'switch for free' service is not far off for South Africa," he comments.
However, due to its heavy reliance on technology, Sharod says more and more service within the sector is measured according to availability. "While cost and rewards programmes do play a part when it comes to customer's weighing-up the pros and cons among various banks, customers ultimately want to be guaranteed that they can perform their banking transactions where and when they want. This is where system downtime can be an important determining factor when choosing a banking provider," he comments.
Sharod refers to the deluge of downtime debacles that have plagued the Royal Bank of Scotland (RBS) over the past two years. "This is a prime example of the kind of disaster that can be avoided through not adequately reinvesting in IT infrastructure. Following an initial three-day outage in 2012 where RBS banks could not process payments to millions of accounts leaving infuriated customers short of cash and unable to settle bills, RBS execs were again left red faced last year when a hardware fault in one of the mainframes prevented millions of customers from accessing their accounts. To make matters worse, the outage occurred on Cyber Monday, one of the busiest online shopping days of the year," he adds.
The consequences of the RBS outages came at both tremendous financial and reputational cost as Sharod explains millions of its customers took to social media to voice their outrage. Furthermore the UK's leading banks were scrutinised by industry regulators who as a consequence raised concerns around infrastructure and in particular, back-office resilience.
However when it comes to downtime, Sharod says ATMs form an important part of the reputational and financial risk mix. "Not only is the financial cost of ATM downtime enormous but the annoyance customers experience when not being able to transact at their banking provider of choice is again often voiced on social media platforms, and it comes with a hefty Saswitch penalty. Should account switching come into play, the consequence of ATM downtime could cost banks customers," he says.
As a provider of availability solutions for the four South African banks, Sharod says solutions that promote customer loyalty and ensure the providers are delivering on what they have promised their customers are generally always earmarked for investment. "In an always-on world certain sectors are more at risk when it comes to downtime and banking is one of these. It is this investment in technology that will ultimately determine success or failure in the sector going forward," he concludes.
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