Historically, financial services have always been the early adopters and pioneers of advanced technology.
I am talking about financial services in an all-inclusive sense — which encompasses a broad range of institutions that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, and more.
Managing applications and infrastructure in financial services is very different from other industries.
Like any other modern industry, online applications are pivotal to the success of financial service companies but the highly regulated nature of the business and concerns around security make providing and managing online applications even more challenging. For many banks, credit card companies, insurance companies and online payment processing companies, their websites, web apps, or mobile apps are the primary revenue generators.
Even a second of delay in processing a transaction or a minute of application downtime can cost millions in revenue, lost customers, and diluted brand equity.
Let’s explore how proactive application performance monitoring can help financial services increase revenue and avoid operational nightmares.
The real cost of poor performance
When it comes to the importance of the speed of online applications, we often take the example of an e-commerce site, where it’s easy to understand the cart abandonment and failed conversion.
Unavailable or slow applications have similar impact on financial services. When your banking app fails to complete certain action or your credit card fails to process a payment request, what do you do? Customers are highly invested with your financial service provider, so it’s unlikely that they’ll switch banks after one failed transaction. But they will pick up the phone or go on social media to share a bad experience.
Financial services companies understand the costs associated with an overflow of customer service calls. For example, it can cost banks anywhere from $5 to $15 per minute to maintain a call center. And, depending on the scope of an outage and the number of users that are impacted, social media backlash can have significant long-term and short-term costs to your business.
The takeaway here is that when it comes to financial services, the cost of poor application performance may not seem as straight forward as that in e-commerce or any other industry, but it is indeed equally severe when it comes to revenue impact.
Customer retention is the key.
This is true across all industries, but especially crucial for financial services.
It’s well documented that increasing customer retention rates — even by a marginal of just 5% — can have the potential to increase profits from anywhere from 25% to 95%. What’s more, 82% of companies agree that retention is cheaper to execute than acquisition, according to an eConsultancy report. Losing a customer due to poor application performance or stability is easily preventable and should never happen. Due to the ‘sticky’ nature of products in financial services, the cost (and effort) of switching is too high. Acquiring a new customer can cost businesses 6-10 times more than retaining an existing customer.
Mobile first and performance first
As the number of financial transactions on mobile devices continues to rise, the importance of mobile performance will only increase. In many developing countries, mobile is the primary channel of accessing the internet. When users access your banking or insurance app from different geographic locations, via different devices running on different wireless providers and different softwares, it becomes absolutely crucial to test and prepare your application to withstand all these diverse use cases.
Users are demanding and highly impatient when it comes to mobile transactions. What can lead to instant satisfaction can also lead to instant frustration — hence, a performance-first strategy needs to be the precursor of your mobile first strategy.
APIs and digital transformation
Fintech is already disrupting the financial services industry.
In simple terms, Fintech refers to new solutions that show an incremental or disruptive innovation, development of applications, processes, products or business models in the financial services industry. APIs are at the core of FinTech and digital transformation. And with great APIs comes great responsibilities.
APIs fuel financial applications with data and services, and accelerate innovation. But a slow of poorly performing API can break the app and impact your end users. As FinTech evolves and emerging companies base their applications and core business on a handful of essential public APIs, proactively monitoring for availability, performance and functional correctness becomes more important than ever.
Increased dependency on financial technology provider
With increased pressure of keeping up with the technology, banks are increasingly adopting 3rd party financial technology providers. Some of the largest banks maybe still running on home grown core systems that are 30 to 40 years old, but many modern regional and smaller banks are using financial technology providers such as Fiserv, FirstData, Fidelity National Information Services (FIS) to go digital. In this interview, Byron C. Vielehr, group president of Fiserv’s Depository Institution Services group, mentions how digitization of other industries and consumer demands are forcing traditional banks to change their core systems to these modern 3rd party payment processing, credit rating technology and security solutions. When such integral part of the business depends on an external service provider, it is absolutely essential to ensure that the vendor is adhering to the agreed upon service.
For example, if an underlying payment processor is slowing down a money transfer transaction on a banking app, consumers will blame the bank and not the underlying payment processor, most commonly a faceless company. All the aftereffects of slow or unavailable application will impact the bank, and not so much to the payment processor. Financial institutes should have an ability to formulate and negotiate service level agreements, and hold the vendors accountable in case of service degradation or failures.
How can proactive application monitoring help?
Proactively monitoring your websites, web and mobile applications, and underlying APIs help you avoid operational nightmares and enable you to find and fix application issues before they impact your end users. With a premium synthetic monitoring tool like AlertSite you can monitor not only the availability of your applications, but also the performance and correctness of complex user transactions such as filling forms and processing payments.
We don’t need to explain the significance of ROI to the financial industry experts. At a macro level, profitability is the function of stable and high performing applications and customer loyalty and retention. With minimum initial investment of time and money, you can bulletproof your applications for all diverse use cases. A sound application performance strategy and right tools can not only help avoid application performance issues but also increase revenue and customer satisfaction.