There is a "new reality" for financial services institutions that McKinsey attributes to the compelling value premise coming from digital players like Alibaba and Amazon. These emergent companies have begun to claim a strong stake for bank customers by targeting the most profitable parts of the banking value chain.
The result? Data-driven Disruption!
In this episode of our Twelve Days of Digital Transformation blog series, I predict the five ways that bankers will be responding to this disruption in 2018.
While the global banking industry shows many signs of renewed health, performance remains lackluster. The industry's return on equity (ROE) hovers around 8% and investors remain cautious about profits, reflected by bank shares trading at low multiples.
And now banks are facing a new competitive threat.
New digital entrants are also having an impact on bank performance, particularly by threatening the customer relationship and margin erosion across retail segments-- McKinsey
In this current scenario, banks have little choice but to take steps to remain relevant or face the risk of being downgraded to a mere utility.
After all, the original business model of banks is built for face-to-face interactions backed by paper documentation. Whereas the business model of digital banks is for device-to-device interactions backed up and driven mostly by data. The two extreme models remain poles apart, but the right digital technology to drive personalization, customer-centric service, and simplified interactions can turn data-driven disruption into opportunity for traditional banks.
At the recently concluded Sibos 2017, industry experts confirmed the spotlight on data as the fuel for digital transformation. When data is integrated and made actionable through the full spectrum of automation capabilities such as RPA, BOTS and Artificial Intelligence (AI) transitional Financial Services Institutions (FSI's) can refine operating models and business processes.
This is especially encouraging news for banks, which carry boatloads of data mostly transactional and some behavioral that can be fully leveraged in concert with emerging technologies to provide a better, faster, more personalized banking experience.
In today's digital technology age, we are all inherently driven by the "GAFA effect" (Google, Amazon, Facebook and Apple), where we have grown accustomed to getting what we want, when and where we want it by clicking one button on our mobile device. And this impact is carried over to the inherently service-oriented banking culture, where customers whether individuals in retail or corporate side demand instant action. This expectation has now become the norm and any sign of its failed delivery will drive businesses to another provider of choice, where they might receive the engaging experience they have come to expect from the GAFAs.
This insight is further validated by the latest Forrester insight: customer demands will drive digital banking transformation. Banking executives now understand that digital transformation means business transformation.
Banks that really get the secret formula down, and take the bold step to implement proven tools have already come a long wayÖ with the right digital technology, these banks can deliver holistic and engaging experience and manage to stay relevant across all customer segments.
So, what steps will savvy bankers take to stay relevant in 2018? Here are my predictions:
Taking a hard look at data-driven disruption this holiday season and then creating your "new reality" strategy will enable banks to deliver completely engaged experiences in the future.
As you get ready for 2018 and finalize your plans, I invite you to watch this webinar to help inform your priorities. Special guests include Jost Hoppermann, Vice President of Application Development & Delivery at Forrester and Michael Heffner, Vice President, Banking and Capital Markets at Appian. Hear their insights into:
The big question might well be where to start. Well, that will depend on your strategic business imperatives for 2018.
Industry Marketing Manager, Financial Services
Appian is a software company that automates business processes. The Appian AI Process Platform includes everything you need to design, automate, and optimize even the most complex processes, from start to finish. The world's most innovative organizations trust Appian to improve their workflows, unify data, and optimize operations—resulting in better growth and superior customer experiences.