A topic that is high on the agenda in our discussions around the future of banking. Are we actually seeing the ‘seismic shift’ that has been suggested?
Having attended the recent BBA Conference on Digital Banking I have been giving a lot of thought to the subject and reviewing what I see as the key points that came out during the day:-
- More names on the high street are getting involved in digital banking with the emergence of newer challenger banking brands which, along with other non-banking companies, are using technology advances to focus on niche areas of banking, for example Peer-to-Peer lending and payments specialists, such as PayPal.
- There is a perception that established banks have an historical culture that makes them slow to react and develop, further exacerbated by regulators being similarly slow to adapt, with limited specialist staff able to understand complex digital processes. There was a plea for banks to work with regulators to ensure that regulation does not hold digital back.
- And on ‘big data’, that buzzword used to describe the massive volume of data a business holds which can be managed and manipulated to gain insights into customer behaviour; it was suggested that banks probably know less about their clients than at any other time in history and yet they have access to greater data about their clients than anyone else.
- Are core banking systems suitable for the Digital Age? Established banks are suffering a complexity crisis with difficulties that include the accumulation of thousands of product variations over decades; the idea of Evolution, not Design. Complexity slows down innovation, another example of where the challengers are gaining ground. And importantly, complexity increases risk.
- Businesses emerging as challenger brands have a dramatically different culture around project risk management than traditional banking, with the Silicon Valley approach where taking risks around radical innovations is respected and encouraged.
I would summarise the day as…businesses have to adapt to a digital world to survive; the banking industry is adapting as technology innovation accelerates, but established banks need to improve systems and reaction to change or they risk losing niche areas of banking to challengers from a more adaptable and versatile ideology.
And the quote of the day…’Treat Digital as a philosophy not a channel’.