Can Today’s Banks Become the ‘Bank of the Future’?

As the consumer is becoming more digital, the banking industry is being transformed. Consumers are becoming accustomed to instant communication, one click service and real-time contextuality. This comes at a time of increased competition. A study looks at how global bankers are responding to these increased expectations.

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

Now more than ever, banking needs to step out of its collective comfort zone, digitizing and diversifying in response to the changing consumer. While branches aren’t vanishing as quickly as some predicted, banking can no longer follow branch-centric models. Instead, the ‘Bank of the Future’ represents an omni-channel, client-centric, self-directed digital model that many banking executives admit may be beyond their scope.

A report from Oracle titled, “Banking is Changing … With or Without the Banks,” surveyed more than 100 executives at major retail banking institutions globally, which revealed a desire amongst banks to invest in digital strategies … but also stark differences in progress.

According to the report, digitization of the entire banking organization is viewed as the primary enabler of banks’ business objectives. Regardless of whether the focus is increasing revenues or profitability, decreasing costs or meeting regulatory guidelines, digitization is seen as a central investment priority.

Overall, 94% of banking executives interviewed say that having a digitized omni-channel customer engagement strategy is important to their future success, with 37% admitting that future success of their business is ‘entirely dependent’ on digital customer engagements. Despite the recognition that digital technology initiatives are urgently needed, 88% told Oracle they see significant challenges in moving toward digitization.

The Fintech Challenge

Every publication talks about the transformation of banking and that today’s retail banking competitive landscape is far removed from what existed a decade ago. Much of this change has been highlighted by the rising influence of new digital competitors that are impacting all levels of banking.

“No longer do retail banks simply vie for customers against other retail banks. Instead, we are witnessing an influx of new, tech-savvy, digital competitors – FinTechs – all eager for a piece of this lucrative financial pie,” the report said.

The foundation of these changes is caused by changing consumer demographics and expectations. “The world’s largest demographic, born after 1980, are now millennials. These customers have grown up in the era of Facebook and Amazon; an era of instant communication, one-click purchases and 24 hour delivery. If a supplier can’t provide a service, they don’t wait – they find someone else who can,” says the report.

More than half believe that both private label banks, alternative payment providers and even credit card providers will be major competitive threats – a greater percentage than are worried about other traditional high street players.

The Digital Delivery Gap

The banking industry is not standing still as these changes in expectation and competitors occur. Most organizations recognize that digital customer engagement is the way to respond to the changes in the industry. Key services that are among the most important to adopt, as noted by the respondents in the report, include mobile payments and real time data synchronization, spend analytics and even digital advisory services.

For the rest of the article on the digital/omnichannel delivery gap, go here ...