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Time for Banks To Fight Back

The financial services industry has suffered consecutive blows in recent years. The global banking crisis, new regulations, empowered customers calling the shots, not to mention a new breed of digital disruptors out to steal market share, have wreaked havoc on business as usual.  Profits have been slashed, reputations have been damaged, and management has been blindsided.

The only way forward is change – a change of business model, a change of mind-set, and a change of ecosystem.  It’s a major upheaval, and not to be taken lightly. Banks in particular have operated largely the same way for the past 300 years. Management is facing a once in a generation reassessment of 21st century banking.

Changes in customer behaviour, including 24x7 omni-channel service expectations, lack of loyalty by current customers willing to exchange privacy for easier access to information, generational expectations of future customers - “screenagers” and tech savvy Millennials – and technology advances in cloud, mobile, real time data, and predictive analytics make yesterday’s business model redundant.

Banking isn’t actually about banking anymore. It’s about enabling people’s lifestyles. That means you have to completely re-think how you engage with customers. The lessons are everywhere in parallel industries. Nokia, for example, thought it was about the phone, not the customer experience. Digitisation has both emboldened and empowered customers. Ignoring this fact is pointless. You need to cater to what consumers want. That means your back-end systems need to be integrated, consistent, contextualised and easy to deploy across any channel.

There’s also a whole new ecosystem required to support this new business model. Banks are facing disaggregation as they no longer own the end-to-end value chain, as well as disintermediation as new market entrants attack specific parts of the business (think Apple Pay). Smart banks are forging relationships with different and unexpected partners, such as mobile and retail organisations, even providing products from outside of the group where they are the best fit for a customer’s needs.  As I’ve said in one of my previous blogs, there’s a new mantra for modern banking: "Must play well with others." 

Old-fashioned banking is gone, and with it so have old style processes, business models and attitudes. Nobody wants to be the last dinosaur.  It’s time for the industry to dust itself off, and step up. Embracing change is easier – and far more profitable – than risking irrelevance in the widening digital divide.

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Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 September, 2015, 15:48Be the first to give this comment the thumbs up 0 likes

Banking industry reputation has certainly taken a bruising in recent years. I don't know about management being blindsided. But facts don't support the contention that profits have been slashed:

Financial services is the most profitable sector in FORTUNE GLOBAL 500 in 2013: http://ow.ly/d/3qCc

Finserv is still very profitable. 6 out of 10 most profitable Fortune Global 500 corporations are banks. https://twitter.com/GTM360/status/642284454409584641

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 September, 2015, 16:04Be the first to give this comment the thumbs up 0 likes

Lost Internet connection while posting my previous comment. Reposting it in full: 

I agree that the reputation of the banking industry has taken a beating but despite that - or maybe because of that!!! – it is very profitable.  

  • Financial services was the most profitable sector in FORTUNE GLOBAL 500 in 2013: http://ow.ly/d/3qCc
  • Finserv continues to be a very profitable sector. 6 out of 10 most profitable FORTUNE GLOBAL 500 corporations in 2015 are banks. https://twitter.com/GTM360/status/642284454409584641

Many wannabe bank disruptor neobanks will die overnight if their VC funding dries up – or even if banks cut off their access to banking rails.