The new decade demands a more focused outlook to building economic moats.

Up until a time, ‘product and pricing innovation’ were the popular means of differentiation and competitive advantage among the banking institutions. Once that became mainstream, the then-innovative banks turned to technology for improved efficiency and optimized operations.

Today, the banking ecosytem is both competitive and challenging across all economies. The product, pricing and efficiency have become table-stakes, and no longer lend significant competitive edge.  

The newer aspiration for the banks is to champion the trifecta of Customer Experience (CX), Omnichannel engagement and a Platform business model.  

• The CX principles put the customer at the center of transactions, conversations, products and services. The endeavor involves reimagining the customer journeys to make banking experiences contextual, ubiquitous and invisible.
• The omni-channel engagement takes a holistic approach to channel modernization with an objective to create coherent experiences across all the channels. This requires an application to orchestrate omnichannel administration.
• The final state of platform business model will involve the bank to curate a platform wherein their own, and 3rd party products and services can be listed, explored and consumed by customers. It’s no mean feat, considering the efforts needed to carefully scale both the demand and supply side of the platform equation.

These may seem like a daunting task, but succeeding in these endeavors \entails great benefits.

Several reports and studies have been able to quantify the ROI of investements in CX, Multi-channel integrations and platform business models.

In a study from Kantar, it was found that financial institutions that lead in CX have a higher recommendation rate (1.9X), a higher share of deposits, and a greater likelihood that customers will increase their portfolio of new products (2.1X) and services from their bank. On the contrary, it was found that financial institutions that let their CX decline, risk losing up to 12.5% of their share of deposits. A McKinsey & Company analysis found direct benefits of multi-channel integration for the banks. It found out that customers, who use multiple (three or more) channels, contribute more than twice as much revenue as those customers who use one channel. Success in the digital economy is a function of 'being able to scale'. Embracing the platform business model and open API revolution has created opportunities for the banks to augment their revenue with new fee-based income. Progressive banks are already exposing their APIs to external developer ecosystems, third parties and other banks to collaborate and co-innovate. Ecosystems are now invaluable assets of a business over which great value gets continually created and exchanged.

An interesting observation is that, technology has a vital role to play in building each one of these economic moats. Banks, now more than ever, acknowledge the role of technology in amplifiying their business transformation initiatives. 

The next few years will be exciting as incumbents strive hard to match and perhaps even outdo the CX strides ushered by FinTech and neo-banks.