Although traditional IT services in banking and financial institutions are flat lining, there’s a continued growth in digital services. Indeed by 2021, half of the world’s adult population is set to bank digitally. With the number of customer touch points growing, services are going 24/7, collaboration with partners has become essential to innovation and customers are demanding more information in order to take decisions about their financial assets.
However, all of these changes will only be possible is banks are able to fully digitize themselves. It isn’t any surprise to hear Richard Fairbank, the CEO of Capital One, say, “We’re going to need to think more like technology companies and maybe a little less like banks.”
Michael Corbat, CEO, Citigroup puts it slightly differently: “My company, on an average day, moves $3 trillion in business and institutional financial flows… Nearly all of that is moved electronically. In many ways, we see ourselves as a technology company with a banking license.” Traditionally, it has been data and information that have been the lifeblood of banks. Now, they need to place IT at the heart of their operations to extract more from their data and deliver delight to customers.
Shift in expectations
There is a big shift in expectations that is underway. Traditionally, banks have pursued service models that drive value through cost reduction, capacity enhancement and process improvement. Today, value is being driven through effort elimination, outcomes and innovation. Until recently, banks have looked at ways to scale labor by moving processes to low cost locations and utilizing graduate talent. Now they want skills and expertise, IP and automation along with best-shore locations.
This shift is driving interest in new technologies such as automation and Artificial Intelligence that can support the new goals of banks.
Banks now need top class talent ranging from engineers to software developers and innovators to execute their digital strategies and deliver applications that evolve along with digital trends.
How to spark innovation
The problem is that innovation can’t be sparked at will and talent cannot be trained overnight. Let’s take this one by one, starting with the problem of innovation. Don’t expect a team to wake up one morning and begin to innovate. It isn’t going to happen. There will be false starts, missing tools, general apprehension about failure and even perhaps a reluctance to give up the safety of traditional approaches. How, then, do you bring in innovation? Banks need to set up a team that doesn’t innovate but has the responsibility of teaching others to innovate. This ensures that a variety of teams within a bank quickly find the mentoring, tools, processes and partnerships to confidently take ownership of innovation.
One quick way to tackle the problem is to partner technology companies who have a startup mentality and the ability to come up with big ideas. Working in an environment such as this gives people within banks the experience and encouragement to examine their methodologies. Then, using their new-found creative confidence they begin to replace existing processes with more market-focused approaches. They learn how and when to deploy Artificial Intelligence and how to use data to uncover new opportunities. They understand how partnerships can accelerate new product development, make payments simple and bring joy to the customer by using digital to go beyond the traditional boundaries of banking.
Give customers what they want
As technology has improved, customer expectations have been raised. It is those companies that are implementing the most innovative solutions and making their customers lives simpler that will prosper. The recently announced Marriott-Alibaba partnership is a good example of this. Among many things, the hospitality chain will use Alipay, the world’s largest mobile payment service, to make it easier for Chinese travelers to make payments. The partnership potentially places a new product into the hands of Alipay—they can offer pre-paid, post-paid and installment-based payments to customers who use Marriott properties and services. Alipay is now able to provide an amazing experience to its users by going beyond managing money for transactions.
Clearly, traditional banks are in urgent need of a digital fix. Without this, they cannot use advanced technologies to solve customer problems and meet customer needs.
The article was originally published on https://www.globalbankingandfinance.com/digital-not-small-change-for-banks/