Digital Banking 31
Welcome to planet Earth
One of the best things of flying – in an airplane! – is having the possibility of a ‘loneliness moment’, unplugged from the rest of the world and the constant beeping light of the mobile phone. I believe we all have read this reflection at some moment. The best thing is not to read but enjoy it.
I
have spent a couple days in London, in the HP Discover. HP is going through a
deep transformation. Plenty of interesting things. We have been back to back,
jumping from one interview to a meeting and then to a presentation and then to
a demo and then …reset and start again. And during the small breaks we have had
the chance of discussing on several topics related to the financial services
industry. The so-common digital transformation had to be one of the hot topics.
And we have laughed with it, …besides learning from other points of view. And
we have laughed because there is no common and generally accepted understanding
of what digital transformation is and what the implications are. But everyone
talks about it.
In
the flight out I was reviewing a survey on digital transformation a friend had
sent me. I have asked him to make use of some of his questions. Out of
the 20 questions, let me focus on three, that I reckon are the baseline for any
discussion on the topic. And here you have my thoughts – dear reader, this may
be the moment to click away.
Who should be leading the Digital Transformation in a company?
- This question cannot be answered without agreeing what DT is. I am afraid we still talk about DT when we are meaning digitalization. Digitalization goes about applying “new” technologies to what we already do to sell more, serve better, be more efficient …all of the previous ...and in this sense, the people that should lead the digitalization are the same people who are currently leveraging on technology to do things better. Those are the people that know what does work and what does not. Those are the people who know what is currently working and will need to be working tomorrow too.
- TD goes beyond, it implies a new business model or a deep change in the current one. Yes, it is based on tech, but tech is just an enabler. And it is to be sponsored, advocated and led by the C-suite. If a bank decides to axe its retail banking branch network and rely on mobile and web banking for supporting sales and services, if a bank decides to leverage on its knowledge of its customers behaviors and persona to become a marketing and sales agency for third parties, if a bank decides to go to the market with white labeled products [kind of a B2B2C model, where the first B stands for Bank and the second for Business], if a bank decides to offer third party ecosystem products and services and not its own …decision must come from the CEO and the rest of the C-Suite. It does not only affect technology but the whole bank.
What are the main obstacles for DT?
- The main obstacle is finding the reason to change. Are we in a burning platform? Why does the C-suite want to change a business model that is working and a company that is making money? It may be in financial services or in any other industry, change happens when one is in a burning oil platform in the North Sea. And depending how close death is, the deepness of change (and jumping into the freezing water does not guarantee survival). And banking is a business that still works. It makes less money than it used to, but this is not due to having a bad or out-of-fashion business model – being trust worthy to receive deposits and lending carefully to make a margin …is an activity that goes hand by hand with humankind -, the point is that interest rates are so low that it is extremely difficult to make a margin. The oil platform is not burning, it is pumping at lower pace. That is the reason why digital banking has been so far focused on digitalization and not on digital transformation.
What will be the impact of fintech on the banking industry? Where are the main menaces?
- Fintech are not the main
menace for the banks. The main menace for a bank is …another bank – as it has the
financial know how, a customer base and the complete banking products and
services catalogue – that benchmarks fintechs in whatever services they
provide, in their operating model, in their user experience, …in their
digitalization. In the UK, only-digital new banks are expected to change the landscape. I am
agnostic; this is a titanic task that requires the incumbents to stay still.
And the incumbents are moving forward in digital, they are no longer what they
used to be two years ago. And they have the stamina to resist and then the
strength to copy whatever is successful in the new players. Welcome to
competition, the final customer wins.
- Competition … think beyond
the obvious … ‘digital’ means ‘global’. The
famous crisis is not a road bump, but a direction change. We have awakened to a
world that was already there, even it resembles new. Internet and logistics have
blown the frontiers up. It is not only that one can buy shoes made in China, furniture
from Nigeria, French wine bottles, a bike helmet from Japan, … through internet
and have them delivered at home in few days, but also that it is technically
feasible to open an account through internet anywhere in the world … and be
served in our mobiles and laptops from any bank in the world.
- ‘Digital’ means for banks an
exponential increase in the number of competitors. The challenger is no longer
the branch at the other side of the street, but the website in the near tag of the browser – dozens, hundreds of financial entities (and yes, fintechs) offering similar
(or the same) products and services. The initiatives to suppress or minimize
cash (governments are quite keen on achieving cashless societies), the spread in
the adoption of single or 'universal' currencies, the freedom of capital movements, the issue
of common financial regulations, …fuel this process of digital banking
globalization. It is as natural as breathing for a millennial to open an account
in internet regardless where the bank is located … and it may be financially
convenient and profitable for an X-Generation (watch out, those are wealthier than
the millennials) to open not only the account but the loan, the card, the
insurance, the investment …This is retail banking. Do you think SME, commercial
and corporate are not global? Do you think they do not use internet?
- The banking license as a
requisite to operate in a country is an endangered species in the new ecosystem. In this new ecosystem, global digital banks will be the dominant species. American corporations have
understood the best that digital allows them to become global and no longer just
American. Google, Apple, Amazon, …provide services in only “one” country – the World
-, pay taxes wherever is more convenient, and offer same product, service and
experience all over the world – they are unbeatable in terms of efficiency per
customer.
- Digital is global. Money is
digital. Money is global. Welcome to planet Earth.
And in order to finish, a curation of a couple ideas that called my attention. Surely they explain things much better than I do. Hope you like them.
- “Banks’ own systems have to be rock-solid — but banks’ customers’ computers are a different story. In an era where more customers connect to banks digitally every day, a secure connection between the two systems is essential, but this can be difficult since customer devices are outside the banks’ control. Problems experienced while attempting to connect to banks’ systems may be blamed on the banks, even if the customer’s own infected machine is the cause.”
Have
a nice week
