It’s interesting to see the changing dynamic within the banking and insurance industries. Technology innovation is pushing traditional institutions into a corner, and they must respond by embracing the disruption.
“Embracing disruption” is a term seen at least four times daily on LinkedIn news feeds. But do organizations understand what this means?
Disruption is a simple term. At first glance, disruption seems like a negative; the Oxford Dictionary defines it as “disturbance or problems which interrupt an event, activity, or process.” This is the essence of shaking things up. And that is certainly what we are seeing in the banking industry.
In fact, the disruption emerging in the traditional banking sector by new entrants and fintechs is pushing banks to seriously reshape their traditional business models – business models that were designed based on a “relationship for life” model.
Twenty years ago, traditional banks had it easy. With minimal competition, many customers had only one banking partner from which to choose, and generally it was whoever was on the closest corner.
No one could have predicted that Google or PayPal would be the ones stealing traditional banking customers.
In his recent blog, SAP banking solutions architect Ansgar Erlenkoetter explains how these disruptive forces open up extraordinary opportunities for banks and other financial service providers. By taking a fresh look at business models and processes, leading companies are already discovering that embracing digital change can create new revenue streams and grant access to additional customer segments.
We are seeing some amazing concepts in the banking industry that showcase how innovation is creating new “bank for life” relationships. It’s not just about the onboarding, it’s how you keep your customer happy – understanding them and being able to deliver upon expectations.
At the recent SAP Australia-New Zealand Art of the Possible event series, we saw Glenn Neuber, SAP innovation director, present a live concept of how banks can monitor customer behavior in real-time, allowing the bank to predict, flag, and act before a customer decides to churn and leave. This use of analytical technology demonstrates how banks can be one step ahead in analyzing and understanding customer behavior, enabling the bank to take immediate action when a valuable customer is showing signs of considering leaving. This may be a dream come true for banks that are struggling to retain and keep their customer base happy.
Organizations need to embrace innovation, taking some tips from their fintech counterparts. Being overly cautious and risk-averse is not an option. I am finding insights into how we can reimagine the future of financial services by looking at how customers are engaging with both traditional players and the new entrants at the same time.
Now is the time for banks to look ahead and future-proof their business models to ensure the concept of customer churn is seen as an opportunity rather than a threat.
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