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How prepared are you for the 4th Industrial Revolution? - Banking

By Ambrish Parmar : Time to read: 5 minutes to gain a different prespective

“You cannot wait until a house burns down to buy fire insurance on it. We cannot wait until there are massive dislocations in our society to prepare for the Fourth Industrial Revolution.” Robert J. Shiller, 2013 Nobel laureate in economics, Professor of Economics, Yale University.

We are in the midst of the 4th Industrial revolution and the resultant disruption to the current world order will create a clear line of demarcation between those economies that have planned and adapted to the reality of changing demographics, labour markets and the digitisation of the business / public sector value chain. The Banking and Financial Services sector is reaching a pivotal juncture’ - whilst there are ‘green shoots of recovery’ the threats to the traditional status-quo have never been greater.

However, it is not all doom and gloom – there are significant opportunities for those with vision and conviction. Banking Reform/Open Banking is an example of a flourishing opportunity generated through market disruption, and one where digitisation will act as a differentiator.

Technology banking and unsustainable business models:

Technology centric ecosystem drivers (e.g. Google, Apple, Alibaba, etc…) are capitalising upon banking reform and entering into the provision of Financial Services. Shadow Banking (P2P, B2B and crowd-funding), neo banking and FinTechs have experienced unprecedented growth, and this trend will continue at a pace and scale. Regulation, balance sheet pressures, the erosion of trust, and the inability to shift to agile / low cost ‘customer centric’ business models due to legacy constraints appear to represent noteworthy hurdles for many traditional operators. The failure to acknowledge and respond to direct/ indirect threats and capitalise upon afforded opportunities may represent the death knell for many operators; I recently referenced such a threat within a recent LinkedIn article: Banking 2025 Red Telephone Box.

New entrants are not immune to the continued disruption – the failure to acquire profitable customers, or in insufficient volumes combined with lack of brand loyalty could lead to a series of acquisitions/consolidations. The combination of the above should be sufficient reason for organisations to, at a minimum, revisit existing business models - if not in-act significant overhauls. Emerging (however, not new) Technologies such as AI will have a profound effect upon the value chain and harnessed in the correct manner can reduce the cost of serve and support innovation/ customer centricity.

Strategy and response:

Fully acknowledging that the majority of Executives are aware of the threats and opportunities the 4th Industrial Revolution affords. The challenge is:

  • How to respond and whether the response can be delivered, and value derived?

Business and operating model transformations that are required to reduce threats and capitalise upon the opportunities will require substantial leadership commitment and planning. It is vital that Executives ‘stress test’ their strategies against a number of viewpoints (not exhaustive):

  • Market positioning, Competition, Goals, People and Culture,Customer, Horizon scanning supported by insights, Disruptive technologies (e.g. AI, IOT, etc..), Delivery models, Partnerships, etc..

Those operators that develop robust and actionable strategies will be best placed to thrive.

  • The question is how responsive are incumbent strategies and how well prepared are operators for the onset of the 4th industrial revolution?

“A satisfied customer is the best business strategy of all” Michael LeBoeuf         

Associated Banking Strategy Posts

About Ambrish: Ambrish is an accomplished, well-rounded financial services director with a 20-year career spent shaping and delivering business outcomes. He is an executive-board-level advisor at the intersection of business, technology, digital transformation and FinTech (https://www.linkedin.com/in/fsdirector/).

All views expressed are my own.

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