Tomorrow’s digital banking will always be a journey, never a destination
Ahmed Michla is a spokesman for Sopra Banking Software
To maintain growth in our globalised, always-connected and increasingly regulated world, banks need to use digital assets and capabilities to create new value propositions for their customers, we know. The problem is how? And what is the best way of doing so in the face of what some worry could be a complete fracturing of the market due to the rise of non-traditional competition from possible banks like a Google or an Amazon? writes Ahmed Michla
The best way is to move away from traditional banking’s century long focus on customer ‘milestone events’ (e.g. marriage, buying a home, having children, preparing for retirement) and instead start looking for opportunity in the myriad incidental moments that crop up in every customer’s 24 hours, seeking to add banking value in multiple micro-increments.
This can be done, we believe, only by using customer data in a truly forward-thinking, innovate way. The prize is banks having the opportunity to retain and expand their current dominant position in the fiscal value chain by providing pro-active offers and services, some entirely out of the banking business scope, in ways that will both retain the customer but also keep the opposition at bay.
In other words, banking must integrate seamlessly into the life experience. Transactions and interactions must become simplified to the point where they almost become invisible. We all need to move from today’s ‘Straight Through Processing’ standard to tomorrow’s ‘Touch Through Processing’. Customers are already looking for products they understand, that they can buy without worrying about the small print, and which they can change easily and without penalty as their personal situation evolves.
To meet that demand, we need to change both what the customer sees, but also the back office. In terms of back end infrastructure, integrated platforms to facilitate access to products and services beyond financial services, as well as to peer-to-peer advices and activities that engage and create value for the customers, need to become mainstream.
A critical aspect of the e-banking of tomorrow will be being pro-active. Customers will expect banks to help them manage and optimise their money, at all times. The days of money being left dormant on a low-interest rate account will soon be gone forever; and if you don’t offer services to help them transfer it to a better place, then some third party will surely build an app for that and they’ll use instead.
Customers will soon also expect to be informed of unnecessary fees or redundant product combinations. You need to get ready for that, building out the proactive services that can be fully automated (a Google Now for personal finance) that will also be offered in real-time and that take context and location into reckoning.
The real takeaway here is that banking needs to be digitally integrated with everything a customer does during their day – so that service effortlessly moves from payments to lending to PFM in a heartbeat; it is customer behaviour driven as opposed to today’s banking process-driven.
As soon as you put together electronically delivered pro-active service, seamless interaction, joined up products tailored for the individual based on sound platforms for extended services, you as the bank become not only a provider of financial products but also a trusted advisor, a value aggregator and access facilitator – maintaining your position at the heart of the customer’s money world.
How can banks evolve to meet these new challenges and expand their role beyond pure financial activities? The answer is that digital moves to the heart of everything you do. The good news is that best practices and guiding principles are starting to emerge from various digital successes around the world that you can start applying now:
- Recognise that technology is now a co-driver of the business strategy Digital needs to be default basis of all your new offers; all aspects of strategy should be informed by digital considerations and vice-versa.
- Learn from other industries to kick start your innovation. And never be afraid to rip it up and start again if it doesn’t work!
- it’s not feasible to defend all fronts simultaneously, so cooperation with some of the new breed of competition can make more sense than competing. Dozens of new, non-traditional financial services firms and models are emerging; PayPal, for example, is taking slices of the payment business, while Amazon is eating into small-business lending. But you can work with these firms sometimes, offering ways to share value and learning; look at Santander’s recent partnership with start-up Funding Circle
- The time to start is now, not next year To change the paradigm doesn’t mean stopping doing all you’re doing now Many banking organisations are experimenting with two-speed IT – i.e., running a shadow digital-only IT team within the traditional IT department. In some firms, this goes beyond just two styles of application development but also doubling up processes, as you skill up in this new way of working.
However you do it, be clear that digital is a journey, not a destination. Banks will have to continuously and relentlessly evolve to meet the challenges of the always-connected global banking world of tomorrow. And depending on their context, heritage and strategy, each bank may well need to assemble a different set of offers and services to engage and create new value and revenues.
But without a shadow of a doubt, change will be the order of the day if you are serious about being part of this future.
