Fifty years ago, the Boston Consulting Group laid out one of its most enduring concepts: the experience curve. The group’s founder, Bruce Henderson, proposed the idea that “costs decline by some characteristic amount each time accumulated experience is doubled.” Henderson was evaluating the manufacturing industry, but as the “as a service” model grows in popularity, I think there is an interesting corollary with our own industry about the value of experience.
Changing consumer behavior and new competitive challengers are driving financial institutions to focus on the consumer experience. Yet internal pressures force them to split that focus: the self-service network needs attention. Compliance cannot be ignored. The latest IT projects require constant care and feeding. And all the while, many FIs are limping along on a challenging combination of outdated software, hardware and core systems.
Consider these stats: In the latest “ATM Total Cost of Ownership Guide” from ATM Marketplace, respondents said the most expensive components of their self-service channel were hardware and CIT costs. Meanwhile, banks are routinely spending 80% of their IT budget on legacy technology maintenance, according to Financial News London. Translation: hardware, servicing, and software are all critical challenges for today’s banks.
If your company actually was an IT company, or a compliance company, or an ATM company, you might be better equipped with the breadth and depth of experience and expertise to drive down those internal costs. Instead, your organization’s strength is connecting consumers with the right financial products and services—you’re a B2C organization with B2B challenges.
The right partner can step into that gap and fill it, with end-to-end support that encompasses your hardware, services and software in a holistic, strategic way. I see two major ways they can help transform business processes and drive economies of scale through experience and infrastructure:
- Scale and Infrastructure to Tackle the Daily Grind
In the XaaS environment, ATM as a Service is a solution I firmly believe should appeal to nearly every FI. No matter the size of your organization, there are undoubtedly costs that could be driven down and efficiencies that could be squeezed out of both the cash cycle and your self-service network.
With a single vendor managing the entire process, you benefit from their speed and scale, and their ability to deliver end-to-end support across hardware, software, middleware, apps, monitoring services, transaction processing and the switch, interactions with various schemes such as Visa and MasterCard, supply chain, certification, compliance—the entire network operations can be optimized.
In the ATM as a Service model, partners like Diebold Nixdorf are competing against IAD solutions in terms of total cost of ownership (TCO). But there is one very key difference to consider: in an IAD relationship, you’re giving up all your intellectual property rights and consumer insights. In a collaborative, white-label-style partnership with a provider like Diebold Nixdorf, your organization retains control over critical elements like branding, consumer journeys and customized marketing.
- Expertise for the One-Off Projects
A financial institution may roll out a handful of new innovations or offerings every year. A financial services provider like Diebold Nixdorf helps FIs around the globe manage complex projects every single day. Our collaborations with a wide range of FIs translate into experience and efficiencies that can help your projects get off the ground—and out to market—much faster than if the project is managed in-house.
Take one example that’s becoming more and more common: the desire to offer transactions that can be staged on a consumer’s mobile phone. Our capabilities extend across physical and digital channels, which means we can advise and support the entire journey with our industry-leading solutions:
- Implementation and management of the software app on the consumer’s device.
- Installation and management of the back-office dynamic transaction middleware and associated software.
- Maintaining and updating the necessary applications.
- The branch and self-service hardware and software.
This approach transcends the silos within an organization—where one team is in charge of the branch, another is tasked with consumer experience, and a third is running the data center—and recognizes the components from across the company that must be tied together to deliver a fully functional solution.
Solving the Root of the Problem
Every bank we work with wants to “be more agile” and to “move faster.” But saying you want to move faster doesn’t make it a reality. You’ve got to lay the groundwork and set your organization up to be able to move faster. One of the best ways to lay that foundation is to partner with someone who knows your industry from top to bottom, and has the tools and resources to support your organization flexibly, seamlessly and at scale.
This article originally appeared in RBR Banking Automation Bulletin.