How Technology Can Create “The Good Bank”
Our trust in banks has faltered since 2008. Despite the great potential for financial institutions to bolster society’s goals, today it often seems that banks fail to be transparent, provide adequate risk management, or add customer value. As the economy improves, how can banks regain trust and truly work to make people’s lives run better?
Technological innovations can drive the development of a “Good Bank,” says Don Trotta, Head of Banking Industry Development at SAP. At a recent debate held by the Economist Intelligence Unit, Trotta argued that innovation can improve transparency in capital and risk management through real-time data capabilities, reduce the complexity and costs in banks through standardization of best practice business processes, and enable the spread of financial inclusion by bringing banking to the unbanked.
First, banks can improve risk management by using better data analysis and visualization software. In-memory database computing like SAP HANA can process information at speeds up to 36,000 times faster than traditional database technology. This means that banks can now integrate many data sets to create what Trotta called a “single source of truth.” When the data is analyzed together in real time, the banks can provide transparent and predictive information about prices, market data, and risk-based capital.
Second, the banking industry should adopt a standardized software system, like SAP’s Core Banking platform, to save money and be more efficient. Banks spend between 6 and 9 percent of their annual revenues on IT, higher than most other industries. This unsustainable model often includes complex proprietary systems that come with high costs. A standard software system would not only save money and time, but would also allow for more innovation and better incorporation of new regulatory compliance requirements.
Finally, technology can enable The Good Bank to spread financial inclusion around the world. Using mobile software solutions, institutions like the Standard Bank of South Africa are bringing banking to the unbanked.
This empowers individuals and helps them grow the economies of developing nations. Furthermore, banks can also use technology to bring personal finance management to the mass market—a luxury typically only afforded to the wealthiest individuals. Now, mobile technology and social media allow legacy banks and new startups (like Mint.com) to help more consumers manage their money. As financial literacy progresses around the world, the trust and transparency between consumers and banks can only improve.