Why The Bank You Know Today Will Disappear

Laurence Leyden

Woman writes a checkIt may take 10 or even 20 years, but the bank you know today is going away. For good. It will either reinvent itself from the inside out or simply disappear as a casualty of market forces. Digitisation continues to disrupt almost every area of financial services. New market entrants are targeting customers as banks that aren’t actually banks go after your market share while others are still figuring out how to swallow the digital pill.

Empowered customers controlling the buying process are demanding new levels of personalised omni-channel experiences. But the goalposts keep moving. As the generations get younger, the gap between service levels and customer expectations keeps getting bigger, with some struggling to remain relevant on the information superhighway.

Regulatory burdens are increasing the cost of capital, while macro-economic dynamics, such as low interest rates and restrictions limiting the ability to extract service fees and commissions from customers, hit profitability.

Legacy systems sitting in the quagmire of spaghetti landscapes built for pushing your bank’s products were never designed to cater to 21st-century consumer lifestyle needs. With the value chain challenged by customers, and simultaneously hijacked by disruptors, attempts at innovating often equate to well-meaning yet insular siloes.

If it’s properly understood, sensibly embraced, and well executed, then digitisation can transform traditional financial institutions not just to overcome, but to thrive. The change required is significant. But it can – and must – be done. Any action taken must be in the context of a well thought out strategic roadmap. Or you’ll sink straight back into another silo. Think strategically. Make sure you understand the holistic elements of the new world order and the business model that supports it.

Speaking broadly, banks need to work on three key levels if they are to compete effectively – customer experience, collaboration (leveraging ecosystems, business networks and products from outside the group where they are a best fit for customer needs), and agility, particularly with regards to response times of platforms, and decision-making capabilities.

The recent SAP Financial Services Forum in London tackled this and other related issues head on. If you missed it, you can still get access to the critical insights and advice from banks, insurance companies, fintech providers, challenger banks, and industry thought leaders by downloading the eBook: The digital evolution – As technology transforms financial services who will triumph.

In my experience, financial institutions are well aware that they have a problem, but they either underestimate the impact or simply don’t know where to start. Survival in this brave new world isn’t just about a change of technology platform or operating procedures. It’s a complete change of mindset — and a whole new world of possibilities ahead.

For more insight on why the banking industry is so slow to embrace digitization, see 3 Greatest Challenges Of Core Banking Transformation.

Laurence Leyden is VP & global head of pre-sales FSI at SAP.  

Laurence Leyden

About Laurence Leyden

Laurence is general manager of Financial Services, EMEA, at SAP and is primarily involved in helping banks in their transformation agenda. Prior to SAP he worked for numerous banks in Europe and Asia including Barclays, Lloyds Banking Group and HSBC. He regularly presents on industry trends and SAP’s banking strategy.