FinTech companies such as PayPal and Transferwise have streamlined multiple traditional banking services, changing how consumers interact with and consume banking services.
They’ve pioneered a new landscape and banks find themselves needing to find their place, demonstrate their value and re-engage consumers within a brand new operating environment.
Unlike FinTechs though, banks operate in a very regulated landscape – legislation, governance and compliance requirements have yet to catch up with the technical revolution sweeping through financial services.
That combined with the shackles of legacy of systems makes it easy to focus on the challenges facing banks rather than the opportunities.
>See also: The rise of digital challenger banks – are they just for millennial ‘mobivores’?
Far from feeling sorry for themselves, banks have an appetite for change. Becoming a truly digital organisation does not happen overnight, but change is necessary.
There are three key elements that are vital for putting in place the right digital foundations at a bank.
1. Strategy – but not as you know it
To affect real change, banks have got to think beyond their present situation and really consider what their digital vision for the future looks like.
This will be unique to each organisation. However, regardless of whether you are a big high street name, challenger or niche provider, it’s important to be honest with yourself. To invest in everything is folly and unprofitable. What do you want to excel at?
Having a digital strategy might seem like an obvious starting point, but that is easier said than done. The overwhelming factor driving digitisation within banks is that someone will see a ‘cool’ application or an interesting new digital gadget and wants to replicate it.
Through internal lobbying, and getting buy-in from key influencers within the organisation, these piecemeal ideas start to gain traction because a way is found to make the proposition attractive to the business direction.
It’s then piloted, but as everyone knows a pilot never fails, so budget is then secured and hey presto, you’ve replicated that ‘edgy’ digital capability.
The problem here is pretty clear: if digital investment is dominated by those who shout the loudest then your digital offering will be fragmented at best, with each division setting its own agenda.
Equally, though, there is a need to recognise that you can’t stop different departments from experimenting. What needs to be created is a co-ordinated view of these investments.
This is not about command and control, but putting a flexible strategy in place that ensures all departments are working collaboratively and towards a common goal.
2. There is no digital tick box
Digital is continuously evolving. It won’t ever be ‘solved’ – new services, technology and thinking will continue to forge new frontiers. You need look no further than the ‘device mesh’ in order to realise this.
According to Gartner, the device mesh encompasses the sheer number of devices, individuals, information and services that consumers happily jump between and are surrounded by that are dynamically connected – from smart watches and mobiles to tablets and laptops. It will also become its own ecosystem for creative thinking that spurs new ideas and companies.
Banks need to embed themselves in the ‘mesh’ but also ensure their investments are creating an agile platform that means as digital advances, so do they.
Banks can’t afford to undertake a major transformation programme every ten years (or less). It’s costly and, ultimately, they won’t be creating new market opportunities, but following them. That’s not a recipe for long-term survival.
The fight for digital talent is on. Banks are in a good position to attract those with the skills they need, but the question is can they keep them?
They might want to emulate FinTech’s agility, speed of decision-making and innovation, but the reality is that their internal structures and processes are not geared towards facilitating experimental thinking.
This can be restrictive. As a result, many banks are looking at how they can work in conjunction with external companies. To this end, they’re utilising lab type formats, empowering digital teams to develop, experiment and evolve propositions before integrating them back into the wider corporate structure in a manner that is aligned with the wider digital strategy of the business.
>See also: Reimagining the bank: why financial services need digital transformation
Rather than piloting for the sake of it, these risk-free ‘playgrounds’ provide the opportunity to trial new technologies and only bring them back into the organisation once they’ve been able to establish if it is viable, thereby reducing risk and significantly increasing the chances of delivering a business benefit and outcome.
Technology is constantly pioneering new frontiers and these advancements impact and change consumer behaviour. Banks need to be planning not just for the now, but also for the future.
Much more than that, they need to understand what these technologies actually mean for them – and their customers – in order to ensure they’re investing in the right channels to help them reinvent and reimagine their business for the digital future.
Sourced from Stuart Hall, digital practice lead, iBe TSE