Once products have been changed or updated, banks then face the challenge of migrating customers to the new version. That is not straightforward because the front and back books must be treated differently. While new customers can be automatically assigned to the new version, existing customers must receive ample notice of changes to avoid any potential regulatory issues, particularly if those changes are to the customer’s detriment (e.g. fees are increasing).
The size of that back book means customer account migrations typically need to be staggered, usually starting with customers who are in better financial health, for instance only customers with a balance over a certain amount or those without any loan arrears.
One respondent said: “In certain hardship scenarios, we can’t just force customers across. Banks have a lot of legacy products because we can’t force the customer to change.”
To ease the process, banks can identify cohorts of customers that can be moved at different times. That could be broken down by where the customer is located, what products they have, what their salary is, when they first opened their account, and so on.
Even when there is a notice period, banks can’t always force customers on to a new product - some customers may need to opt-in. Banks may wish to frame this as a choice rather than an opt-in, but banks also need to think about what happens if a customer doesn’t respond or simply chooses not to opt-in. In that situation, banks could advise customers that they have 90 days to respond, after which they will get transferred to the new product by default. At the extreme, banks could simply close the accounts of those who elect not to opt-in.
All of these challenges can be solved by adopting a core banking system that transforms account migration into a light, nimble process instead of something that traditionally can take months and might even need external consultants to provide support. Built-in segmentation also enables banks to migrate certain cohorts of customers on specific dates, while built-in communication and compliance tools ensure that customers are notified appropriately and there are no regulatory repercussions further down the line.
All of that makes it easier for banks to split a product into two or merge accounts into a single product and retire old products to reduce legacy clutter in product portfolios. In other words, banks can become much more agile when managing financial products and customer accounts.
More effective communications mean customers won’t miss any product change notifications. That gives them the ability to update to newer products faster should they wish to, while also enabling banks to provide customers with more optionality around account migrations.
This article is an extract from our whitepaper "Supercharging your product lifecycle". To read on, please download the full whitepaper via the button below.