By Ian Bradbury, CTO for Financial Services at Fujitsu UK & Ireland
Technology continues to transform and disrupt Retail Banking. From the rise and rise of mobile banking, to the launch and rapid growth of a host of challenger banks, to the innovative services promised by Open Banking – all of this has been made possible by digital technology and it is causing an industry revolution like none in living memory.
However, this is nothing compared to the change coming. We are at a point of digital maturity, which is enabling further innovation. Technologies like (Robotic Process Automation (RPA), Cloud Native Applications, Artificial Intelligence (AI) and the Internet of Things (IoT) and moving from niche deployments to mainstream adoption and they are driving the further automation and personalisation of financial services. Combined together they will enable innovation so powerful it will change the face of the industry entirely.
New services leading to new business models
Traditional Banks and Challengers alike are beginning to harness the power of this digital technology to transform the services they offer. Implementing the technology alone will not provide competitive advantage in a fast changing market – banks need to adapt the way they operate and even think about what they do for their Customers. Born-in-the-Cloud Challengers already work this way – for incumbents it is a seismic shift to their culture and ways of working. Challengers have already shown the potential of thinking and acting differently – with rapid growth of an increasingly loyal Customer base, multiple industry awards and rising investor confidence.
As Banks mature in their journey to become true Digital Disruptors they can start to review and diversifying their traditional money-centric business model. Securing and lending money will be supplemented by obtaining, securing and creating benefit from other forms of personal and business owned ‘value’ – for example identity and data and perhaps even reputation. Banks can become a powerful digital platform business connecting trading partners through trust provided by the Bank.
Obviously, there are already many digital platform businesses focusing on bringing together trading partners. These businesses lack the unique value a Bank can bring – the extra assurance and integrity required to operate in a highly regulated industry.
Four ingredients for success
I believe there are four elements in today’s financial services landscape that help create a successful organisation that will rapidly gain market share and form long-lasting relationships with the customers:
Accelerate the adoption of New Digital Technologies
To become a Digital Challenger you need Digital Technologies. Existing monolithic systems – which have served Banks well for many years – are now significantly holding Banks back in terms of cost, agility and Digital services. Adoption of Cloud Native applications, utility services from the Public Cloud and automation of the vast majority of Bank operations needs to be the new norm, and Banks need to get there quickly.
Change the Mindset & the Skills
For incumbent Banks, the biggest challenge is one of mind-set change, leading to new skills and ways of working. Digital companies think and act differently – experimentation and even failure are encouraged, software is always the first solution to any task, collaboration and empathy are core values, agility rises to top of the performance benchmarks and everything is 100% data driven. Most incumbents are a long way from this, and the journey to it is not easy. Incumbent Banks need to align this journey with accelerating their adoption of Digital Technologies.
Maintain and Build on the Key Value – Trust
Many studies have shown that despite a number of high-profile credibility challenging events, the Banking industry maintains a high level of trust from the public and from businesses. This is due in part from being within a regulated environment – designed to protect Customers and trading partners. Interestingly these studies have also shown that Banks come out significantly higher than most other organisations for protection of non-money value, e.g. a Customer’s Data.
If Banks are to fulfil their full potential of becoming a successful Digital Platform business then they need to maintain their key differentiator – trust delivered from a regulated environment. As other industries continue to suffer from ethical ‘Digital’ growing pains – misuse of data, AI driven bias, and fake-news – Banks have a unique opportunity to become a ‘safe haven’ for business, but only if they maintain and even improve on their trusted status. Banks need to focus on their own Social Purpose to reinforce this unique differentiation.
Seek out new Business Models
With new digital technologies and a new mind-set Banks can begin to explore new business models. The most successful Digital Disruptors are always looking for new ways to reinvent the value they offer and the markets they operate within – without being constrained by any notional boundaries of what they do and don’t do. With a large Customer base, significant amounts of data and a unique position with respect to trust, Banks can disrupt other industries – and perhaps even create new ones. Banks need to become ambitious to do this!
To quote Bill Gates, “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. Whilst it’s hard to accurately crystal-ball the future of today’s banks, they are now presented with more opportunities than ever, and are facing an exciting future.