Although relatively belated compared to other disrupted industries such as travel, retail and media, the pace of change and its impact on business models, customer behaviour and operations is forcing banks to rethink their traditional banking model.
Banking is being disrupted by digital technology, new regulations and increased competition. Daniel Meere, Managing Director of Axis Corporate, reflects on three ways traditional banks can fight back.
Whichever the option taken by traditional banks, it is clear that the disruptive force of technology from new players has moved from potential to real threat. As BigTech firms begin to take a more active interest in banking, the barriers that prevented FinTech firms from scaling up and expanding their offerings (lack of reach, lack of a widely recognised brand, lack of funding) begin to disappear.
Traditional banks can, therefore, no longer afford to be special, in the sense that they still see their businesses as too complex, too unique, and too specialised to be performed and provided by non-bank partners. The overhead of owning and operating a full bank service within the bank´s own walls is prohibitive. The costs of compliance with regulation and patching up the creaking technology infrastructure have proven this.
Overcoming this ´cultural debt´ and the fear of change is the main challenge for traditional banks. We see three key actions to transform banks from within, and make them relevant and competitive in the newly disrupted banking market:
Identifying the key value-adding services that customers expect from them, and retaining these. Ensuring that these differentiators are delivered to world-class standards
Sourcing the ´commodity´ services from leading technology partners to enable low-cost, scalable operations that can adapt to market and regulatory demands
Providing, partnering to provide, or procuring the ´utility´ services delivered at an industry level to optimise cost/revenue and value as part of a banking ecosystem.
People continue to need banking services, though not necessarily all from banks. The services themselves are changing rapidly, enriching the financial user’s journey and transforming the banking industry. The challenge for banks if they are to continue to be relevant, is to change with them.
Daniel Meere is the UK, Managing Director. He leads business development and delivery, with solutions for clients across the Financial Services sector to meet regulatory, profitability and client objectives. Setting the strategy for the UK business, and contributing to global strategic growth themes. Daniel is based in London.
Related article by Daniel Meere: Navigating a Path for Growth in Uncertain Times