The COVID crisis has catapulted banking into its digital future. Many of the forced changes in customer behaviour and ways of working may well stick. The ‘New Normal’ could look a lot like today. Digital projects that have sat on the fringes, or been stuck as proofs of concept, have been rapidly industrialised and thrust into the limelight. So, do you cement this digital progress or quietly slip back to the old way of doing things?
Prior to the pandemic, many banks saw partnering with more agile tech firms as the best route to digitalisation. Last year 81% of banks felt collaboration was the route to digital transformation
. Collaboration with Big Tech is not new, and many banks may be congratulating themselves for reaching thousands if not millions of new customers by providing the back-end systems to the sexy offers from Apple or Google. Indeed, they’d be right in claiming that they are providing the essential elements that make those services possible.
But if data is the asset, these decisions must be more beneficial to Big Tech than banks. Google’s project Cache leaves all the banking, compliance and risk to Citigroup
, but allows it to mine customers’ financial data to provide “useful insights and budgeting tools.”
The value of that data, and the insights that Google can derive from it is unlikely to accrue to Citigroup. If Amazon copies products from independent sellers
using its marketplace, then should banks trust it, or any of the other Big Tech players, not to apply lessons learnt from their data?
Even presuming that Big Tech has no acquisitive aspirations over financial data, partnering can box banks into a low-margin corner. Mobile network providers fought this battle early in the century as agile, customer-friendly, data services (now largely owned by Big Tech) capitalised on their networks. The ‘Over the Top’ (OTT) services gained all the attention, customer loyalty and margin, whilst network operators were stuck running ‘dumb-pipes’ to deliver them. Growth in OTT put pressure on the networks, requiring investments for which they saw little financial return.
This could be a model for the bank of the future. Stuck on the manufacturing side of the business, running the rails for Big Tech’s transactions and eking out a few margin points on huge volumes of business.
I believe that banks have a much brighter future. But they must act fast to leverage their significant advantages to see off the threat from Big Tech. Financial services are driven by trust and although trust in technology firms seems to have weathered the tech-lash, banks lead in key areas. Research from Boston Consulting Group and Capgemini shows that 80 percent of people trust banks to manage their data
. And even among millennials and Generation Z – the most prolific users of digital services and devices – banks are still more trusted to give advice than technology firms
. The present crisis has precipitated a flight to safety as businesses and consumers turn to established banks for security, support and assistance in times of trouble. Now is the time to capitalise.
A comprehensive connected view of all data is the foundation of The Bank of the Future. Understanding rapidly evolving customer behaviours, creating frictionless connected experiences, automating back-end processes and optimising risk and compliance requirements all demand a single orchestrated data platform.
But the decisions go beyond technology and touch on the role of the bank in digital society. McKinsey suggests that banks take time to pause and reflect on their purpose in the post-COVID world
. I’d second that view but argue that they shouldn’t take too long! It is clear, from the most recent Edelman Trust Barometer
, as well as numerous other indicators, that demonstrating how your business and services make the world a better place for everyone must be at the heart of your strategy. Only by effectively leveraging its data asset will a bank enable the analysis, understanding and engagement of all its stakeholders necessary to truly define its purpose. In a dog fight with Big Tech over customers and their data, banks need to be sure of what they are, and the benefit they bring to customers, shareholders and society.
There is no time to waste. Banks must start to build these foundations now to successfully defend against Big Tech, build trust and loyalty with customers and create purpose and growth for the Bank of the Future. To understand more about the role of data in creating the essential building blocks of the Bank of the Future, continue to follow this blog.