In order to remain competitive in this globalised, connected 24/7 and strongly regulated era, banks need to deploy digital assets and capabilities to create new and compelling service propositions for their customers.
So much is certain. The problem is how. What is the best way of doing so in the face of a market fracturing as a result of the rise of new competition from Google, Amazon, PayPal and others.
The best route is a radical one. It’s to move away from a traditional focus on major life events such as marriage, buying a home, having children, preparing for retirement etc, and look instead for multiple, micro-opportunities in the incidental moments in everyday life, seeking to add value in small but useful and profitable increments.
This can be done only by using customer data in a forward-thinking way. That’s a challenge, but if you are able to realise it, the rewards are huge; banks will have the opportunity to retain and expand their current dominant position in the fiscal value chain by providing pro-active services, even beyond current scope, in ways that will keep the customer loyal and the competitor threat at bay.
In effect, banks must find ways to make working with them so simple it becomes almost invisible. Put another way, banks need to shift from ‘Straight Through Processing’ to ‘Touch Through Processing’. In practical terms, that means offering them products they can grasp in an instant, and apply microseconds later, and which they can change easily and without penalty as their personal situation evolves.
So you need to make changes to what they are presented with, which you can only convincingly do by making changes at the infrastructure level, integrating platforms to facilitate access to products and services, as well as to peer-to-peer services to create value.
A new bank manager
Pro-active should be the watchword of the next phase of e-banking. That’s just to keep up – as customers will want and expect banks to help them manage and optimise their incomes. Forget savings getting left dormant in a low-interest rate account; if you don’t suggest a better option, then some third party will certainly build an app that does – grabbing them in the process, once their trust has been siphoned from you to them.
In the same way, customers will get alerted by their peers to any charges they judge are egregious or to any unhelpful product combinations. You need to have the proactive and automated service process in place to cope – Think a Google Now for personal finance, offered in real-time and which incorporates context and location, transparently, into its calculations.
To be clear: banking needs to be seamlessly integrated into what the customer does during the day, with the bank’s response shifting fluidly from payments to lending to PFM in an instant – with those shifts prompted by customer need, not any internal banking process.
That gets you to a profitable place but also overnight transforms you from being a mere provider of financial products into a trusted cyber advisor,
a value aggregator, an access facilitator – perhaps something like a bank manager of old, a financial advisor at the centre of your customer’s fiscal universe.
In order to cement digital at the heart of everything your bank does – learn from what others have found are great adaptation methods:
- See how fundamental tech is to any business strategy All your offerings need to be digital first – and all aspects
of your strategy should be informed by digital
- Learn from other industries to create innovation
- Acknowledge co-opetition is just how business gets done now Many new, non-traditional financial services firms and models are emerging - PayPal in the payment business, Amazon in small-business lending etc. Work with these newcomers to share value, as Santander did with Funding Circle
- It’s evolution, not revolution Many banks are trying two-speed IT, running a shadow digital-only IT team within the traditional IT department – a great way to evolve to a new way of working.
Finally, banks need to accept they need to adapt and continuously evolve to meet the challenges of the always-connected world that is here to stay.
Or in other words – change is the new normal. Can you cope?