Backbase, the trailblazer in engagement banking, is at the forefront of accelerating digital transformation for banks. Heidi Custers (right), while reflecting on the success of the recent Backbase Tour Johannesburg, where 150 banking and fintech professionals explored the latest innovations in engagement banking, shares her insights into the future of banking technology, especially in Africa.
African Banker was recently with you at Backbase Tour Johannesburg. Can you give us a flavour of the experience?
Feedback from our customers is that it was the most successful out of all the global Backbase Tours, with customers even more highly engaged than in all the other successful tours. They had a great deal of lively debate with each other, both on and off stage, which was exactly the point: making the customer the hero.
We focused heavily on the region, as well as creating an intimate and honest space for thought leadership, rather than simply standing up and giving a software presentation. This enabled customers to discuss all kinds of issues, ranging from how they execute the digital transformation to core banking transformation and how practically to concentrate on customers. (A full report on this event appears in African Banker, Q3 2023 issue.)
At Engage EMEA, you are looking to inspire banks to make the ‘Big Shift’ and transition to an engagement banking model? How does it differ and improve on the traditional model?
The core tenet of engagement banking is taking previous best practice in customer experience, which is positioning the customer at the centre, and actually putting that into practice from a technology standpoint. Engagement banking does exactly what customer experience has been promising for years: it designs the technology around customers’ jobs.
A good example is a business banking journey – helping customers monitor their business finances. The technology takes everyday banking basics, such as the ability to view transactions and to receive statements, and combines that with value-added or beyond-banking services, such as cash flow forecasting, or accounting package integrations. These all get combined into a single journey. That’s the big shift with engagement banking.
Another significant trend coming out of engagement banking is taking an ecosystem approach around the engagement of a customer and combining best-of-breed cloud-based platforms that are mostly built on micro-services: combining different platforms to create that customer journey, rather than having one huge end-to-end platform that often can’t meet the customer’s needs. This allows a bank to hollow out the core and remove the processes that are not customer-centric, replacing them with more customer-centric ecosystem partners.
Was much of this enabled due to the acceleration of tech development during Covid?
During Covid, banks were forced to accelerate their customer journeys because often digital channels were the only ones available to customers, whether they wanted to use them or not.
Expectations were already starting to rise to a point where if they did not find ways to shift to an engagement banking model, customer attrition rates were starting to go through the roof. And we’re starting to see that now.
While customers didn’t tend to move banks during the pandemic, now that it’s over they’re starting to feel very much like they’re not as satisfied as they were, and the big shift is starting to happen.
What are the key hurdles causing banks in Africa to struggle with their own digital transformation?
The first is that banks typically treat digital transformation as a project that is somehow separate from business-as-usual. They assume business can carry on while digital transformation magically happens on the side.
But now, as we’ve moved into a mature space and they must integrate that into business-as-usual, resistance is emerging. A big shift is required to admit that this isn’t a project that happens on the side.
The second challenge surrounds connecting your success matrix. Company boards are still using metrics that are typical of board-level shareholder value metrics, such as revenue upliftment, capital efficiency and share price.
But the digital transformation matrix doesn’t seem to have any connection to those, and if an executive presents the success of a digital programme, too often they’re tied to things like app store rating or number of customers on the platform. It’s hard for board members to connect that to what they actually see as business value.
How receptive are African banks to the engagement banking model?
The executives of banks responsible for digital transformation are very receptive. They’re the ones trying to get internal buy-in into the big shift and it’s becoming easier for them to get the shift to happen towards engagement banking because technology is starting to align to their strategy.
The difficulty comes in execution, because reconciling those legacy processes and systems is a totally new way of doing business. It needs to happen in an iterative way and involve every single portfolio within a bank, whether it’s business technology, or back office, like HR or finance.
The banks are receptive if you speak to the people responsible for digital and often if you speak to the CEOs, but not when you start speaking to executives responsible for parts of the bank that typically haven’t moved into engagement banking and have been allowed to still operate on legacy.
Can you give any examples of Backbase partners in Africa benefitting from this shift?
There are two good examples of banks that have made that shift. Both were quite bold and decided not to wait until they were able to modernise their entire tech stack before they started driving the engagement banking agenda, and [they] decided to attack the customer-facing layer first.
The first is I&M Bank in Kenya. In a recent study I&M Bank came out top in terms of net sentiment indicator in the Kenyan market, both on survey data as well as social media data. The bank’s focus on engagement banking and on digital and their channels was a big contributor to its exceptionally high ratings by its own customers, and by the Kenyan market.
The second example is Mauritius Commercial Bank, the largest bank in the country. Typically, such a dominant player in the market will shift a lot more slowly because, with such a large market share, there is no real impetus to shift. However, they were bold and took a big leap into engagement banking. They launched their retail and business engagement banking app called Juice. The term Juice reflects their payments ecosystem, which is all based on customer behaviour and digital payments.
Now that term has actually become a verb in Mauritius. For example if you pay someone in Mauritius, often a local will say, “Well, Juice me.” That is a most phenomenal example of a bank taking its leap into engagement banking.
We’ve also recently announced a new partnership with GIM-UEMOA, the international organisation in charge of the interbank electronic payment system for the West African Economic and Monetary Union (UEMOA) zone, and a new customer acquisition with the Libyan Islamic Bank in a project to be led by our partner in Tunisia, Onetech Business Solutions.
ENGAGE EMEA is well known for being a window to the future of banking technology. How do you see banking changing in the next few years, particularly in an African context?
Many banks began their transformations at the customer-facing channel layer in a process that accelerated during Covid. Now it’s time to deepen that customer- centricity to the full enterprise architecture, one journey at a time. It needs to involve the entire bank.
I see the next few years focusing exclusively on that. The worldwide depression in banking has meant that banks must go back to basics and look at the way that they transform rather than finding new innovative, really funky, shiny things that might seem like they’re innovating.