Your customers are changing. Your competitors are changing. And your technology … well, that’s getting more complex by the day. But how is your bank navigating all of that change?
That’s the urgent question for the banking industry, and the idea of change is no longer a matter of “if?” but “when?” The whitewater is further churned by rapidly changing customer expectations and nimble new nontraditional competitors—all while traditional banks have been hamstrung by the knock-on regulations of the financial crisis and legacy technology challenges.
But disruption breeds opportunity and we believe many of the challenges of the past are old news as innovative patterns have emerged that can change the game. Traditional banks that successfully identify the right innovations for their banks will be positioned to match those disrupters with their traditional strengths, protecting high-value business segments and building a long-term competitive edge. Success will require a more adaptable strategy, guided by an ongoing assessment of digital disruption in core business areas and an openness to nontraditional partnerships, as outlined in a new report from KPMG.
What to know: Millennials (ages 16-35) have displaced Baby Boomers (52-70) as the largest demographic. More important, Millennials have emerged as the benchmark for consumer preferences, with both Gen-X (36-51) and Boomers adopting Millennial customer expectations through the echo effect.
What to do: Update customer insights with tools like the Net Promoter Score (NPS), rapid customer surveys to expose changing expectations and ‘test and learn’ proof of concepts.
What to know: The speed, volume and variety of new competitors in financial services have skyrocketed in the last 3 years. Nimble financial technology companies were the first wave, but prepare for bigger nontraditional players (Amazon, Walmart, PayPal, et al) in the next wave. At the same time, many fintechs are seeking bank partnerships and these are great opportunities to accelerate fintech-like capabilities that can be applied to bank’s customer base to drive enhanced experiences.
What to do: Foster a culture of innovation and a capability that constantly tracks and evaluates new digital disrupters—and remain open to get-there-faster partnerships.
Tech and data
What to know: Technology platforms like social media and mobile have unlocked rich new data sources with tantalizing customer insights. But the data is mostly unstructured, meaning it doesn’t fit standard analytics models. Much of this data also sits outside your four walls, meaning your data warehouse and lake builds aren’t always effective sources of data to glean insights from and to solve business challenges.
What to do: Identify useful new data sources (mostly external and unstructured) and ensure technology and business intelligence teams seamlessly integrate that data to sharpen actionable next steps. Be open to partnerships that can accelerate pattern recognition.
What to know: Ever-smarter algorithms are advancing process automation and workforce efficiency at a time when labor costs are taking a larger bite from banks’ operating expenses.
What to do: Stay on top of the increasing capabilities of artificial intelligence (AI) to drive more automation in areas like call centers, compliance and security and be open to non-traditional partnerships.
What to know: The speed and complexity of technology is driving a long-overdue push to improve the speed and ease of payments— historically slow and outdated in most countries.
What to do: Plan for success. Build the business case for the investment return on the technologies required to tap into faster payments and explore opportunities for incremental revenue generating use cases across your business functions.
Ultimately, digital disruption in banking will mean winners and losers. The winners will have a crisp yet flexible strategic vision, an appetite for advanced analytics and new technologies, and a stomach for volatile returns on innovation.