The time has come, however, for banks to provide high quality service to customers in order to remain competitive and retain their customer base.

Being a completely customer driven segment, banks need to be in constant touch with their customers, and the use of information technology and Web 2.0 tools can act as a strong platforms for customer communications.

In fact, Internet has already significantly changed many aspects of banking.

For example, online banking has grown substantially over the past decade, with online bill payment particularly strong in the Middle East. But most banks have yet to seize the true potential of today’s abundant new technologies and tools.

And as consumer preferences and expectations continue to adapt, the imperative for banks to respond with new offerings will only increase.

To retain their competitive edge, banks need to devise new products and services that are simpler and more transparent and use the power of information technology and other digital platforms to improve their marketing.

The importance of high quality customer service is evident in a recent IBM study that found that 50 percent of customers would only give their bank two chances to fail in meeting their requests for services or new products before considering a change in financial provider.

Banks need to consider several crucial factors in addressing challenges laid down by customers.

Consumers’ faith (including my own) in the banking system was severely tested due to the financial crisis and has continued to be so as a result of ongoing service failings.

As a result, Middle East banks are looking to rebuild trust amongst their consumers.

Ovum Consulting conducted an end-user research ‘banking technology spending strategies’, among a global cross-section of 171 banks.

They discovered that ‘increase in customer satisfaction’ gained the most importance followed by “raising efficiency,” “achieving compliance,” “cutting costs” and “increasing revenues.”

With the rise of empowered consumers — armed with easy access to comparative information, pricing alternatives and market reviews on financial products and services typically share their positive and negative experiences through social networking sites and online communities.

Consumers demand more personalized services and banking where it is most convenient.

Hence, customer satisfaction has returned to the heart of banks’ strategic and tactical decision-making process.

As a result, banks’ online channels must extend beyond websites to include a wide range of device support, as well as wikis, blogs, user communities and other forms of social media and branches must provide a seamless and high quality experience for the customer. However, if the core system is incapable of supporting the processes of all consumer touch-points in real time, the consumer experience is gravely affected.

Technology is increasingly a value differentiator among Middle East banks.

An IDC Financial Insights study noted the overall banking systems in Middle East are timeworn and ripe for replacement, with the knock on effect on of service failings.

Combined with growing volume of consumers and an expanding product set, forward-thinking banks in the Middle East are investing in new core systems as well as specialist core systems for Islamic banking.

For banks to succeed, a significant consideration must be given to implementing innovative practices — which are supported by equally innovative technologies, after all, this is what today’s banking community is demanding. Today, a solid core banking system plays an intrinsic role in helping banks achieve their business goals and improve overall productivity.

Another significant business driver influencing banks to invest in core systems is “compliance with the new regulatory environment.”

Hence banks’ survival requires the transformation of existing operational strategies and processes.

This requires significant changes to existing core banking systems, many of which are in need of remedy; banks can no longer pay lip service to process adherence. Robust processes, which reflect the business of effectively servicing customer demands, are vital.

Furthermore, “increasing cross-selling opportunities” and “faster time-to-market of new products” inherently refine the operational performance to increase revenue in a 'commoditized' environment.

Also, a prominent technology factor driving banks’ IT investment is “compliance and risk management.”

This is because banks are keen to adhere to both existing and new regulations to avoid penalties.

As institutions gradually pull clear from the turbulent waters of the economic crisis, IT investment has begun to rise and core systems transformation is high on the agenda; banks are now able to rise to the demands laid down by the socially empowered customer.

Ovum’s latest market forecasts on core systems growth, demonstrate that spending is set to rise by 7.4 percent through to 2014.

Banks are authorizing investment in their core systems, indicating that existing technologies require improvements for a bank to remain competitive and fight for their position in the new banking community.

An ideal core system should offer something fundamentally different from previous systems and banks are starting to see the benefits associated with having an agile banking platform for the future.