The financial services industry has suffered consecutive blows in recent years. The global banking crisis, new regulations, empowered customers calling the shots, not to mention a new breed of digital disruptors out to steal market share, have wreaked havoc on business as usual. Profits have been slashed, reputations have been damaged, and management has been blindsided.
The only way forward is change – a change of business model, a change of mindset, and a change of ecosystem. It’s a major upheaval, and not to be taken lightly. Banks in particular have operated largely the same way for the past 300 years. Management is facing a once in a generation reassessment of 21st century banking.
Changes in customer behaviour, including 24×7 omnichannel service expectations, lack of loyalty by current customers willing to exchange privacy for easier access to information, generational expectations of future customers – “screenagers” and tech savvy Millennials – and technology advances in cloud, mobile, real-time data, and predictive analytics make yesterday’s business model redundant.
Banking isn’t actually about banking anymore. It’s about enabling people’s lifestyles. That means you have to completely re-think how you engage with customers. The lessons are everywhere in parallel industries. Nokia, for example, thought it was about the phone, not the customer experience. Digitisation has both emboldened and empowered customers. Ignoring this fact is pointless. You need to cater to what consumers want. That means your back-end systems need to be integrated, consistent, contextualised and easy to deploy across any channel.
There’s also a whole new ecosystem required to support this new business model. Banks are facing disaggregation as they no longer own the end-to-end value chain, as well as disintermediation as new market entrants attack specific parts of the business (think Apple Pay). Smart banks are forging relationships with different and unexpected partners, such as mobile and retail organisations, even providing products from outside of the group where they are the best fit for a customer’s needs. As I’ve said in one of my previous blogs, there’s a new mantra for modern banking: “Must play well with others.”
Old-fashioned banking is gone, and with it so have old style processes, business models and attitudes. Nobody wants to be the last dinosaur. It’s time for the industry to dust itself off, and step up. Embracing change is easier – and far more profitable – than risking irrelevance in the widening digital divide.
I’ve briefly summarised only some of the key drivers of digital transformation, but you can find much more insight – including views from thought leaders in banks, insurance companies, fintech providers, challenger banks and aggregators – by downloading the eBook from the recent SAP Financial Services Forum: “The digital evolution – As technology transforms financial services who will triumph”.
It’s essential reading if you’re going to successfully fight back.