The opportunity no bank can ignore

Banks need to become technology companies. This is the single most critical strategic driving force in the industry as we all approach another of those dates that sound like defining moments: 2020. Just a few months away and yet everything will have changed for banks by then. Most of it already has.

While some banks have been through digital transformation, and some are currently in the midst of it, many have yet to fully embark on the journey, but regardless of where a bank may be, the industry is changing forever. “Different business models could impact up to 80% of existing bank revenues by 2020”, observes Accenture. Consider the following four trends:

• The demise of paper
  People pay by phone or online. Everyone knows PayPal. New entrants (FinTechs) like Venmo are now also picking up the gauntlet. “Overall, the UK made 15.4 billion cash payments in 2016 – an 11% drop from the 17.2 billion seen in 2015, with the total number of cash payments being equivalent to less than half of all recorded transactions for the second year in a row”, reports ITProPortal. 
• The end of physical
  Convenience is all-important to customers. As mobility develops further, ease-of-use will be critical. Money no longer has to be physical. If datacentres can evaporate into the cloud, why can’t money? It is, after all, simply an accepted form of exchange, so if all parties agree to accept that the exchange can be represented in a different form, a virtual form, then so it will be.
• An intuitive world
  All banks will be so agile in future that agility will no longer be discussed as a thing. It will just be the way banks work. An agile environment is one where more really can be done with less as organisations embrace the FinTech focus on cloud enablement. 
• Data defines everything
  Changes to core technologies today assimilate challenges such as GDPR readiness into longer term strategies. GDPR has been and will continue to be a driver for change. Banks are now reassessing and redesigning their data management practices and strategies.
  
  Data will continue to proliferate as the technologies to harness it become more and more sophisticated and efficient. Regulations will evolve, but the lessons from GDPR will have stood many in good stead. All organisations will need to be in control of data they hold, able to use it comfortably and confidently to more fully understand what their customers want.

Today's customers are digital-savvy. Increasingly, they expect banks (and all other providers of financial services) to respond to this irresistible and inevitable trend. Being able to do so dictates that the core of the successful bank of the future is built around technology, fundamentally accelerating capabilities by streamlining every traditional core service  –money management and movement, lending, investments and savings.

By driving the essential change to digital, banks have an enormous opportunity to engage with customers more meaningfully than ever before, embracing true customer centricity to enhance services, and using data to understand customer needs to predict behaviours.  The theory is self-evident. Putting it into practice is a struggle.

Turning legacy into history
The legacy issue dominates change conversations. Most banks have vast legacy systems firmly cemented into their buildings, their IT infrastructures, their practices, their procedures, and how they serve their customers.   These systems were built and designed in a different world, for different customers, in a time far different to today. They're not designed for agility, yet as banks focus on simplicity of process and improved customer experience, the legacy estate holds them back.

A report from Forrester (summarised here) states: “Although banks have largely focused their digital transformation efforts on driving down costs, such as through easy-to-use digital self-service capabilities and more efficient back-office operations, these innovations are still being built on top of outdated legacy technology and risk-averse cultures.”

With the advent of cloud technologies and the unceasing transition to banking apps rather than human and branch engagement, technology is moving out of the datacentre. Everything is becoming more virtual, digital, and data-driven.

The leaders of tomorrow
Banks are in a phase of challenging everything because the market, the consumer and technologies we have at our fingertips, are forcing it. Market pressures such as FinTech-thinking are encouraging banks to address core systems to respond to new market pressures.  These pressures include the need to manage data more effectively, the requirement for stringent compliance, the threat of cyber-attacks, and the overall backdrop of the need to reduce operating cost whilst delivering ever higher customer experiences

“In order for banks to weather the performance challenges that lie ahead,” suggests EY, “…they must prepare for a future led by innovation and technology. The pace of innovation continues to accelerate, and banks must have a strategy in place to ensure their implementation of new technology is effective.”

At a convergence point in the future, when customers expect more from less – easy, convenient interactions at the click of a button – cloud technologies will be delivering speed, efficiency, and the ability to make smarter decisions through the smarter use of data, and ultimately, absolute customer satisfaction. 2020 is just around the corner. It's a compelling date but of only artificial importance. The new market landscape is being formed right now, every day. No bank can ignore the opportunity to be part of it.