Instrumented Interconnecteds Intelligent

by Alex Bray
Managing Consultant
IBM Global Business Services

I think we can all agree that internet banking has proved itself to be a BIG thing! And yet, banks seem to be way off the pace in terms of quality of service and functionality provided to corporate and business customers online. In fact, I would say that internet banking for business is in a ten year time warp. It feels similar to where retail banks were back in 2000 – when they were still trying to understand what customers would do online and figure out if they could make money from that new-fangled ‘inter-web’.

It’s strange, really. These are the business accounts that are worth hundreds of millions – you would think banks would be lavishing money on them. However, business and corporate banking has remained a largely person to person relationship business. Internet banking has been a hygiene factor rather than a differentiator. This is especially as, by and large, it is small business people or junior finance clerks who most regularly use online services.
But I think this is all about to change – and for a few good reasons (and this list is not exhaustive):

Banks are waking up to the fact they can save money:

  • The cost of a person to person service is growing. As relationship managers have to care for larger and larger portfolios of customers, banks will have to beef up their online offerings to compensate
  • Collaborative working tools will give banks the ability to work more efficiently with clients – which will save banks money and save customers time. For example, web-chat built in to internet banking will allow banks to share information with customers in real time – answering questions in one touch.

It is becoming apparent that internet banking can differentiate service and  deepen relationships:

  • Banks will be able to provide new functionality as a value add – particularly for top end users. By adding quality reporting functionality to online services and making it accessible via mobile / tablet devices, banks can deepen relationships with CFOs
  • By offering broader ranges of functionality and more user friendly processes, banks will be able to help their business clients to save time and cut costs – particularly important in the current environment

Customer expectations have grown:

  • Online customer experience leaders like Apple and Amazon – as well as retail internet banks – have raised the bar. Customers are already becoming frustrated that they cannot do the things they expect to be standard.

I recently co-authored a white paper on the future of internet banking for businesses – spanning both the corporate and SME markets.  As part of that process, I spent time reviewing all the major business internet banks and talking to users – both small business owners and corporate users. This conclusively confirmed that users want a better service.

Users want banks to get the basics right – which many do not do today. Users want their internet bank to provide a decent user interface – with simple to follow processes, a convenient log in process and proper multi-signature functionality. SME customers want access to a greater range of functionality. Corporate customers want more configurability – and to be able to fulfil their foreign exchange and money market transactions for themselves. However to truly differentiate themselves, I think banks need to look to the future – to the services that customers don’t even know that they need yet – or that banks are too scared to offer (online corporate lending anyone?). As all the banks bring their online services up to the standard of retail banks, that is where I think the true differentiation will lie.

So internet banking for business is in a ten year time warp – but it is starting to fast forward. There are clear areas for immediate improvement (banks need to get the basics right) – but differentiation will be achieved through innovation. Banks need to move now, before they get left behind by their competitors and their customers.

Alex is a retail banking and internet / mobile / social media professional with over 10 years experience.

Alex joined Lloyds TSB in 2000. During his time at Lloyds, Alex worked in both product teams and distribution. In his first permanent role, he managed a customer service call centre team of 100 people. He went on to work in Lean Sigma for Personal Lending and strategy for General Insurance. He also held roles in Telephony and Branch Network Operations.

Over the last few years, Alex specialised in internet and mobile banking. He started as a change programme manager and then moved into product management. In his last role at Lloyds, Alex was the product owner for Loans and Mortgages across the Lloyds TSB, Halifax and Bank of Scotland internet banks – the largest internet bank in Europe.

Since joining IBM, Alex has held implementation roles with UK online banking clients. He has also consulted on Retail, Corporate and Business internet & mobile banking and social media with European and Asian financial services clients.

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Posted by: Vera Obonyo
December 21, 2011
5:25 am

Hi Adrian,

Yes it is fair to say our greater focus in the white paper was on Corporates. However the underlying benchmarking work we did look separately at SMEs and Corporates. I would strongly agree with your comment about need to segment customer by needs, then alter services offered accordingly. I would only tweak the approach to more of a model of self-segmentation. In fact we see the optimal solution might be one where everybody works of roughly same or similar basic banking services, with added upgrade modules being available in areas such as payment authorisations, international payment, cash management, foreign exchange, alerts / notificatios and social media etc.

In an ideal world the baseline would be more similar with each customer being able to upgrade its functionality according to needs and each upgrade and level of new services could be priced or bundled in various ways as well. Our surveys have shown that businesses are willing to pay for added services and that in fact if they do not get the channel services they require, they are willing to move or shift business to providers that meet those needs.

Posted by: Jeff Watson
December 21, 2011
3:28 am

Hi Jeff,
Thanks again for your responses. After reading your report (there are only two mentions of SMEs in the whole report), I would suggest that your findings are more applicable to the corporate market and many of the concerns that you mention that face SMEs, particularly the smaller ones are already being handled in ways that work for those businesses, sometimes through retail functionality.

However, I would agree with the overall thrust of your whitepaper that few banks are using the Internet and mobile channels to truly differentiate themselves at a time when business, commercial and corporate customers are becoming increasingly demanding. The thing I would encourage the banks to do would be to segment their customer bases by needs. Too many service providers talk about SMEs and corporates as if they are all the same. This in itself commoditizes their own offering thus making themselves their own worst enemy ;)


Posted by: Adrian Swinscoe
December 20, 2011
10:02 am

One of the problems we highlighted in our study is that in fact most SME offerings grew of the bank’s retail banking offering. Thus the lack of international payment, multi-authorisation, or cash management. Going forward, one way for banks to differentiate themselves is to give some of their smaller customer services more akin to corporate clients, especially in some of these mentioned areas.

Regarding data access, clearly opt-in would be required for release of specific customer level data, say with the promise of access to the data of others on an anonymised basis. However it is not clear that that would be necessary for data released on a larger scale aggregate basis which could still be valuable in assessing industry trends, benchmarks vs peers, or to say review the cost of your own personnel as a % of revenue vs top 25% performers.

Posted by: Jeff
December 20, 2011
6:24 am

Hi Jeff,
Thanks for your extensive responses. There are a couple of things that occur to me from your responses. One is…..would banks need to ask for clients permission to use their ‘data’ in benchmarking services? Second, most of your answers seem to suggest that when you are talking about commercial and corporate banking and CFOs that you are referring to the larger end of the SME market. With increased competition and pressure on costs and margins do you think that the SMEs at the smaller end of the scale (those that are established, have a history and a small team for example) but don’t necessarily have an FD or CFO that they will lose the personal touch and the offer to them is more likely to replicate the business banking offer that is provided to banks’ ‘retail’ business clients?


Posted by: Adrian Swinscoe
December 19, 2011
12:33 pm

Hi Adrian,

Alex is away right now. My name is Jeff Watson. I am an Associate Partner for Digital and Mobile Channel Transformation at IBM. I was the co-collaborator on the white paper in question. Thank for your queries. My views are as follows:

– Is there not is a danger that online banking could commoditise their corporate or commercial offer?

JW Response- I see no greater danger of service commoditisation for corporates and commercials an in fact there are ample opportunties for increased differentiation. The reality is that these customers still want high levels of personal service. However the increasingly demand that it not only be delivered face to face or via phone when needed but also that it be available via chat or to have key services delivered through digital channels as well. Thus services such as smart alerts or via banking functions via mobile or to address international needs online are becoming expected services to compliment the broader relationship banking. I think that true service differentiation will come from delivery of “Right Channelled” services. That is to deal with the customer on the device they want and / or channel they want when they want it, but to know also when human intervention is either demanded by the customer or is necessary for the optimisation of new business development or profitability. Being able to deploy right channelling to get the right mix of service optimisation and profitability is key to avoid commoditisation.

-Why would a CFO use online banking for MI or analytics? Wouldn’t they do this on their own finance systems?

JW Response – Clearly larger organisations will trend towards using their own finance systems, however for small SMEs a basic gathering of transactional or portfolio data can be a value added tool that banks can offer. Furthermore, banks are well positioned to build Social Media opportunities that help their client businesses to aggregate and / or share key performance data. Who better knows the KPIs of a top quartile retail operator in a select geography for instance than the banks? One of the sustainable differentiators that banks have is knowledge about key performance data across multiple entities and industries. In as much as they can provide a value-added Social Media solution to promote data and knowledge sharing and even trading, they may be able to encourage affiliated businesses to share analytical data or other knowledge with other clients of the bank.

-Could banks preserve their personal touch by using digital technologies like video conferencing in a more innovative way to preserve this touch but also managing costs?

JW Response – Absolutely! I feel video conferencing can only grow and definitely adds to efficiencies and personalisation. It is not without challenges however. For instance, it still requires a 1:1 relationship so is not as efficient as chat which allows for multi-tasking or efficient / automated dealing with FAQs. Further, you still have the lengthier discussions versus the shorter discussions of chat. Production qualities must also be considered, so when compared to a call centre, the dress codes and personal presence must be considered along with background. On the positive side, however, a bank relationship manager can give a much higher degree of personalised video services using desktop and mobile video versus either just phoning or trying to visit clients. The key is to know when to use each channel and when to shift to another more value-added channel.

-You say ‘Banks are waking up to the fact they can save money’. How about them realising that they could also be waking up to the fact that they could and should focus on saving their customers money?

JW Response – One key message of Right Channelling is that there are many potentials for win-wins. Thus an alert which notifies a CFO that his excess cash has reach a critical point at a very busy time can help him to both rapidly deploy that cash for a higher return, while contributing to increased asset sales by the bank. A mobile function that allows self-help of key functions while a CFO is on the move can save him / her time and money, while delivering a much lower cost solution versus a phone call into a relationship manager for action. Banks must differentiate themselves by delivering their clients lower costs solutions, expanding opportunities for new business growth, and through improved services through digital and mobile channels. They key is to find the win-wins and wherever possible to drive digital and multi-channel strategies towards these sweet spots.


Jeff Watson

Posted by: Jeff Watson
December 15, 2011
5:49 am

Hi Alex,
You raise some interesting points and challenges. Some thoughts occur to me when reading this that I would like to share with you and get your thoughts on:

– Is there not is a danger that online banking could commoditise their corporate or commercial offer?
– Why would a CFO use online banking for MI or analytics? Wouldn’t they do this on their own finance systems?
– Could banks preserve their personal touch by using digital technologies like video conferencing in a more innovative way to preserve this touch but also managing costs?
– You say ‘Banks are waking up to the fact they can save money’. How about them realising that they could also be waking up to the fact that they could and should focus on saving their customers money?

Look forward to your thoughts on these.

Best regards,


Posted by: Adrian Swinscoe
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