Disclaimer: these are not my ideas, it is a summary of 2 banking reports I’ve read (out of several) and a list of the core concepts I liked the most.
All of us working in this space know how quickly things can change - this is why I’ve decided to place the year for these thoughts.
From invisible banking to having ‘concierges’ to help on complex lending, the Financial Services (FS) landscape has 5 core areas that people at McKinsey think are ripe for disruption.
Everyday banking
The ultimate goal invisibility
day-to-day financial services, such as checking and savings accounts, credit cards, personal loans, payment processing, and lines of credit on the traditional-banking side, for individuals and for small and medium-size enterprises (SMEs). This arena will also include e-commerce ecosystems, loyalty programs, discounts, advertising, and peer-to-peer marketplaces.
The common thread of all these services is that customers want them to be hassle free, reliable, highly automated, and inexpensive in their day-to-day life.
Commerce marketplace specialist (CMS). Specializing as a commerce marketplace offers everyday banking for individuals and many non-banking services via a marketplace platform . It can be a single access point for anything from consumer goods and electronics to home-cleaning services and movie tickets, all connected to bank accounts, or niche solutions embedded into selected specialized journeys. ie. Mercado Libre
Business gateway provider. Serving as a gateway provider offers everyday banking for SMEs via an integrated online portal, aggregating services that facilitate payments, cash flow financing, accounting, taxes, and so on. ie. SumUP.
Investment advisory
The ultimate goal superb personalization—blending the human touch with digital efficiency.
An area from young people just starting to build wealth to older people who need sophisticated investments and protection to institutions, this includes:
Financial planning
Brokerages
Trusts
Retirement plans
Insurance
Complex financing
The ultimate goal journey integration—making these processes convenient, efficient, fast, and low cost yet also as personalized as possible.
Examples include mortgages, home equity loans, car loans, and start-up loans. Such services are complex because many kinds of players are part of each ecosystem.
Real-estate-journey orchestrator: The orchestrator can compete to become the end-to-end “concierge,” integrating mortgages or rents and all other services into a subscription model.
Equipment and vehicle marketplace specialist: Specializing in the equipment and vehicle marketplace means providing complex financing of cars, trucks, and industrial equipment for individuals and businesses.
Mass wholesale intermediation
The ultimate goal: extreme efficiency.
It includes corporate finance, cash management, portfolio management, M&A advisory, equity and debt financing, and other traditional investment banking offerings.
Automated trading and funding marketplace. Serving as an automated marketplace means offering mass wholesale products and services for corporate customers.
Integrated enterprise services platform. Serving as an integrated platform means offering corporate customers deep integration with enterprise systems such as SAP. The platform can personalize and coordinate services such as accounting, commodity trading, and enterprise resource planning.
Banking as a service (BaaS)
The ultimate goal utility—giving clients robust, secure, and efficient services and liquidity.
BaaS is the only arena that’s not customer facing. BaaS providers create highly efficient tech and infrastructure platforms, which they can license to customer-facing organizations.
BaaS balance sheet provider: Providing BaaS balance sheets gives both banks and nonbanks access to distinct pools of capital and offers asset liability management and regulatory-required licensing for nonbanks.
It’s possible that, over the next decade, customer data will become the new oil—highly regulated, jealously guarded by institutions that capture it, and a key source of business value. A more likely scenario is that customer data will become the new water—a public utility accessible to all and therefore much lower in value.
Making things even more uncertain is the fact that banking is a “multi-local” rather than a truly global business. Banking experience and regulation differ greatly by region.
The successful bank of the future will be defined as a network of platforms.
Now, to put on top of McKinsey’s predictions, let’s see what 1.000’s senior FS leaders told Publicis Sapient about Financial Services and some core ideas I got from our (I’m a PS employee) Banks Embark on the Next Frontier of Digital Transformation report.
The segment of one Understanding customers’ unique circumstances and treating them as a “segment of one” creates the opportunity for banks to deliver highly personalized experiences. As hard as it is to do, banks need to prioritize customer satisfaction above short-term ROI.
Difficulties extracting and combining siloed data in a timely fashion
Lack of trust in the provenance of customer data
Inconsistent, missing or poorly documented data taxonomies, classifications and standards across the bank
Integrating channels to provide a seamless omnichannel experience: Transformation leaders are those that take a holistic approach to improving customer experience, from delivering personalization and omnichannel servicing, to building seamless customer journeys and new distribution channels.
The main 3 vehicles according to the executives interviewed were:
Modern cloud-based core banking systems
Intelligent Technologies
Data / Analytics to obtain a richer understanding of our customer and their relationship to us
Digitizing core banking systems: Banks need to replace large and complex traditional core systems with modern architectures.
Transforming from a product- centric to a customer-centric operating model: Leading banks are shifting away from more traditional vertical product- focused teams.
To get there, banks should focus on some of the following to boost acceleration.
A more customer centric approach to innovation
Greater investment in cloud infrastructure and cloud based technologies including cloud based core banking systems
Greater technology and CX expertise at board level
A more agile approach to product development / service innovation.
To make meaningful progress towards transformational leadership, banks need to reorient their teams so that they can be truly customer-centric, and they must focus on creating more engaging customer experiences by putting digital and data at the core of everything they do.
There you go, 9 compelling ideas to imagine what this year and the immediate future could bring for banks.
For more insights, feel free to download both reports at McKinsey and Publicis Sapient.
