“Technology tail wagging the strategy dog” in retail banking says Celent
Celent: focus on the strategy, not the technology
Bitcoin, gamification and Personal Financial Management are “generating more heat than light” in debates about the future of retail banking and banks should not be distracted from other major challenges such as digital channels and legacy transformation.
In a new report, Top Trends in Retail Banking 2014, Celent classifies these three topics as “the dogs that haven’t barked”, saying that “the amount of press and discussion far outweigh the actual impact that they’ve had”.
Bitcoin is “certainly something that banks should watch for entertainment value” the report says, advising a “very prudent wait-and-see attitude”. The recent collapse of the Mt. Gox Bitcoin exchange has added to the uncertainty over the future of Bitcoin.
Both gamification and PFM are likely to have a long term impact, but both involve changing customer behaviour, and this will mean their mainstream adoption will be slower than proponents believe.
For gamification “the gap between theory and execution remains large” and its impact this year “will be marginal at best”.
PFM continues to be “enormously interesting” and several banks are dabbling in this area, but no-one has had “unequivocal success.”
The larger issues that the industry should be concentrating on in Celent’s view also fall into three headings – digital and omnichannel, innovation and emerging technology, and legacy and ecosystem transformation.
“Technology has become the tail wagging the strategy dog,” the authors say, so in each of these areas the report considers the strategic issues rather than the technology trends. It identifies 10 top trends that banks need to take account of – “not emerging trends, and not sexy trends”. Some have been around for years, but have taken on new urgency, others are at the point where technology has advanced and made them possible.
“The banking industry is undergoing profound transformation, driven by technology advances, changing customer behaviour, and a rapidly shifting business model,” says Dan Latimore, senior vice president of Celent’s Banking Group. “We are at the point where several long-term trends have been supercharged by technology that’s advanced enough to make activities that seemed like science fiction five years ago a reality today.”
Four of the 10 trends the report focusses on concern legacy and ecosystem transformation – data security and regulation are universals, while modernisation of core systems has become big issue in the US.
The fourth is partnering and componentising: “Playing effectively in an ecosystem with a wider range of partners able to provide services better, faster, or cheaper requires that banks provide a culture and an IT infrastructure that can integrate with third parties efficiently and effectively,” says Celent. “Key elements of this strategy include outsourcing, asset release, and strategic sourcing.”
