By Frederic Dussart, Senior Vice President, Dell EMC Global Services
The Financial Services (FS) sector faces disruption from several angles. Smaller and well-publicised ‘challenger’ players like Monzo and Atom Bank are targeting those who live their lives on their smartphones. While large non-FS organisations, such as Apple, Android and Google are creeping over into the payments industry. And according to ourDigital Transformation Indexthe market understands these very real threats. 50% of FS organisations think that their company may become obsolete in 3 to 5 years time, while 80% expect non-traditional start-ups to pose a threat in future.
If you think about, as consumers we need banking but we no longer need bankers to do it. Some, including myself, believe that it’s just a matter of time before we’ll be turning to the Google’s of this world for everything, including our financial services. The ‘Ubernet’ if you will, something which The Economist warned us about back in 2014. So with this in mind, what should traditional FS organisations be doing now to ensure they’re able to adapt?
Mine all of your data and make use of it
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If you look at new successful disruptors in any sector who’ve gone on to become the market leader, their success all hinges on using data to understand the customer and connect them to what they desire. Neither Uber, Airbnb nor Just Eat own any physical assets in their industries, they’ve just tapped into consumer’s desires to manage their lives through apps and ensured they have the right data and partnerships to deliver their “goods”. Financial services should be following their lead by making the most of the data they have at their fingertips. What they can really compete on is their customer knowledge, as they have years of historical data on them. By mining this data for insights businesses can decide where to streamline, digitise or expand the customer experience. Research already suggests that customers want to see faster services with 24/7 availability.
Monetise your strengths
Businesses should consider where their strengths lie and how they can be turned into additional revenue streams. For instance, historical customer data could be made available to other sectors. If someone has recently purchased a mortgage then they might be in the market for home insurance, life insurance, furniture and white goods. Years of experience and a deep knowledge of the industry could and should be packaging up for consumers to offer added insights and value. Barclay’s has been dipping its toe into this with its Code Playground, Digital Eagle and video tutorial campaigns. And more can be made of FinTech investments if a longer-term view is taken. Banks should partner with more mature startups to target new customer segments, or to use this technology to offer more comprehensive, capable, customized services to their customers.
Make sure you know where to begin & that your culture can keep up
Many of those I speak to know that they need to transform but are unsure where to start and how to build a strategic roadmap to get them there. They’re also still feeling cautious but to these people I say, measured and responsible risk-taking is essential to retain a competitive edge. No business should avoid self-disruption. They might be making 40% margins on a legacy product, but if new technology enables them to deliver the service at a significantly lower cost they mustn’t avoid it simply because it also requires narrowing their margins. This is precisely the thinking that allows companies like Uber to steal a march on the establishment it sought to challenge. Business leaders must also take responsibility for empowering the wider workforce in order to drive transformation and embrace an organisational culture that encourages employees to innovate and take risks for the good of the consumer. You might never be an Uber but you can certainly learn to behave more like them.
Form productive partnerships
This is where expert partners come to the fore. Particularly as 79% of FS organisations are still not investing in digital skills. Building a taskforce of experts can help fill any internal knowledge gaps within an organisation, as well help map out a strategy and then provide the tools to actually make it happen. A trusted advisor should help bridge the gap between the old, the new and the future, and produce measureable business value. Dell EMC has been working closely with The Bank of Ireland to help it compete effectively in the digital economy by developing a new online mortgage service and system in just 12 months. The service generated £250m in new mortgage applications in the first 3 months alone.
While we can’t predict exactly what the financial services world will look like in ten years’ time, we can be sure that whoever is able to adapt and evolve the fastest will be the ones who thrive. Just like a game of musical chairs, traditional FS organisations are trying to find their seat in a changing ecosystem. And with the right transformational strategy, culture and partners there’s no reason why older players can’t find a unique way to deliver stable growth and profitability.