Australia’s financial services organisations are in need of a good SMAC. Not physical abuse or a substance-induced high, but a sound strategy that encompasses social, mobile, analytics and cloud - SMAC.

If there was any doubt that these four forces are critical to today’s business, consider the following predictions:
SOCIAL:
The fastest growing demographic for Facebook and Google+ is the 45-54 age bracket, according to Fast Company. For Twitter it’s the 55-64 bracket. So much for the assumption that only GenY or your teenagers use social media! The growth segment for social networks just happens to also be the one with the most disposable income and is thus the most profitable for banks.MOBILE:
Cisco Systems predicts that by the end of 2014, the number of mobile-connected devices will exceed the number of people on earth, and that over two-thirds of the world's mobile data traffic will be video by 2018. Last year's mobile data traffic of 18 exabytes (an exabyte has 18 zeros after it) was nearly 18 times the size of the entire global internet in 2000. Bottom line, mobile is THE channel for interacting with your customers.ANALYTICS:
IBM has estimated that every day the world creates 2.5 exabytes of data. We know that 90 percent of the data in the world today has been created in the last two years alone. Now try to imagine that future in terms of the amount of data that we need to make sense of.CLOUD:
Three in four US companies are already using a cloud computing service, according to the 2013 Future of Cloud Computing Survey. Cloud is becoming so pervasive as a viable business model that the latest buzz terms associated with it are “everything-as-a-service” and “anything-as-a-service”. Pretty much anything can be provided on a utility-based model.
In Australia, most organisations should by now have a well articulated group-wide IT strategy with the better among them able to articulate their position in terms of sustainable IT capabilities required to meet their business objectives. This strategy would likely outline their plans for leveraging social networks, using mobile, what insight they might be able to get out of better analytics and how best to take advantage of the cloud.
While this is a good start, in my experience as a CTO and Head of Strategy in some of Australia’s largest financial services companies, looking at these trends in isolation isn’t enough.
What organisations need to do is spend more time and effort thinking about the convergence of these four elements. Specifically, they need an integrated “SMAC Strategy”.
The concept (and acronym) of SMAC is not so new. It has been rearing its head for more than a year or so now within the more advanced organisations and certainly within some key technology services vendors such as HCL, IBM, TCS and Cognizant.
All of these firms espouse it in some form, some better than others. Gartner has been using the phrase the “Nexus of Forces” to describe the importance of social, mobile, cloud and information. These slightly different terms point to the same concept. This has been a key theme of theirs since 2012 and is now embedded into a lot of their predictive research.
While focusing on a SMAC strategy is relevant for organisations of all sizes, banks and insurance companies with large numbers of retail customers need to prepare for it most. Having worked in banking and insurance over the last 26 years in Australia and parts of Asia, I have seen the need first hand.
Personally, I don’t feel the larger financial services organisations around the globe have quite nailed the importance of this yet, certainly not all the elements of SMAC. Many have been successfully experimenting and making progress in one or a more of the four areas, although I suspect none are doing anywhere as well as they could, at least from the end customer’s perspective.
Specifically, in Australia, we tend to do better at social and mobile, less well on leveraging the cloud and not very well at all when it comes to getting real value out of analytics.
The key point here is that while the bigger financial services companies take time to make progress in these areas, there is an increasing risk that new entrants will appear who might be more advanced in their thinking. Here are some examples:
- PayPal is shaping to provide a direct threat to banks on multiple fronts. The company has no physical presence and provides all of its services via the cloud. It's whole business model of peer-to-peer payments is a form of social networking. PayPal also leverages the mobile channel substantially. Merchants are able to buy a dongle to enable them to accept credit card payments in a very simple and easy fashion - even my local bakery allows customers to place orders and pay using their PayPal account - all cashless and seamless.
- Google recently invested in a social network based peer-to-peer lending platform that allows individual borrowers to obtain unsecured loans from individual investors, via their mobile phones. Google Wallet also has the potential to disrupt traditional payment mechanisms.
- Apple boasts over 570 million iTunes accounts with a built-in payments capability that is simple and intuitive. Cupertino’s Passbook application allows users to store various things like boarding passes, coupons, tickets and store cards. They don’t store credit and debit card information but the capability is there. Apple is also making its iCloud platform a key component of all products.
- Woolworths recently noted that it had managed to "overlay" its insurance company's car crash data base and its Everyday Rewards statistics to reveal which consumers were best to target for insurance. A good example of the use of analytics.
- In the US, Citibank has improved the quality of its consumer loan portfolio by leasing access to a supercomputer running predictive analytics programs. By analysing information on market conditions as well as the applicant's life events, interactions on social media and past decisions, the company is able to get a far better prediction of potential loan defaults and fraud. Citibank could easily bring this capability to Australia.
All of the above are good examples of organisations leveraging elements of SMAC.
It gets ever more powerful when all are combined. IMDB, now owned by Amazon, is the world’s largest movie database. When looking up a movie on IMDB, viewers are presented with an amazing array of movie specific information but also related information that the customer didn’t ask for, based on sophisticated analytics.
Customers are able to immediately share this information with their major social networks or collaborate with other likeminded people directly on the site. Once a movie has been reviewed, US viewers can then buy the show, which is immediately served up via the cloud to any device for instant enjoyment.
So how might an Australian bank combine all the elements of SMAC and hold off the new market entrants? Read on...
For banks to take advantage of SMAC, they will need a bit of imagination:
XYZ Bank is a new entrant in the Australian market. It runs the bank using a core banking platform hosted in the cloud via a software-as-a-service vendor that manages all upgrades, enhancements and compliance obligations remotely. The remainder of the bank’s internal systems and applications are run on a mix of private and public clouds, with XYZ owning none of its own infrastructure.
XYZ focuses on a multi-channel approach, giving the customer a consistent experience across all the channels. That said, all user interfaces are designed for mobile first, while traditional banking services are available on channels such as Facebook and LinkedIn. The bank’s staff engage and encourage dialogue with customers via social networks.
XYZ automatically provides better pricing or fee reductions for customers that have multiple accounts with the bank, without the customer or sales people having to intervene.
XYZ generates a great deal of data on the behaviours of its customers. The bank subscribes to a hosted predictive analytics service from a vendor that combines the structured data XYZ has on its customers with unstructured data the vendor derives from external sources. The vendor delivers insights in near real time, and XYZ uses this information to provide value-added offers to customers.
Customers might be offered a specialised insurance package as they log onto mobile banking, for example, with the premium based on information XYZ has been able to glean. Purchases made with an XYZ retail partner using an XYZ credit card could attract bonus reward points, with sales generated using location-based services.
Insights generated from the predictive analytics vendor also enables XYZ to provide tailored financial information, budgeting and advice to its customers. The basic services are free, but as the advice gets more advanced, XYZ is able to charge for this service.
My advice for Australian financial services organisations who don’t already have a SMAC strategy? Get your IT and business strategy teams together now and start the process of developing one.
Use scenario-based planning. Start with what you want to achieve from a business perspective, identify and prioritise the capabilities you need to develop, identify how you are going to develop the capabilities and then create the projects to do so.
Once you are ready, test the market and don’t forget to refine and adapt as you go along. As with any good strategy you need to engage with key stakeholders throughout the process to bring everyone along on the journey.
Your SMAC strategy should show how you can provide products and services to your customers via mobile and social channels while at the same time delivering these much faster and at a lower price point through the smart use of cloud providers. It should also show how the use of analytics on both structured and unstructured data will enable you to fine tune your offerings and adapt to customer preferences.
Remember, the important thing here is to look at how each of these elements interact and work with each other. The premise of SMAC is that using the elements in combination leads to a multiplier effect that results in better outcomes for the customer and better outcomes for the organisation.
Jeff Jacobs is a Sydney-based technology executive and IT consultant with over 25 years experience in senior IT positions with AMP, Zurich, CBA and most recently as the CTO of Westpac.