Banks are living a 'Great Transition' era, according to the latest McKinsey Research (Global Banking Annual Review 2023: The Great Banking Transition).
New tech, changing regulations & fresh competitors are reshaping banking. AI, the game-changer, is at the center stage.
From automating repetitive tasks, improving customer service with chatbots, to enabling personalized banking experiences, AI is redefining the norms. Emerging competitors, particularly FinTech startups, are also driving banks to adapt and innovate faster. But the plot twist? This change isn’t just about survival. It's an opportunity wrapped in a challenge. Banks that successfully ride this wave have the chance to massively boost their performance and heighten customer satisfaction.
Embrace Emerging Technology
- Implement AI chatbots, virtual assistants, and natural language processing to provide intuitive customer service and advice at scale.
- Adopt cloud computing, APIs, and microservices to enable flexible, agile IT systems that can quickly adapt to market changes.
- Leverage data mining, predictive analytics, and machine learning to generate customer and operational insights that optimize offerings.
- Automate repetitive processes with RPA and smart workflows to reduce costs and boost efficiency.
- Stay on the cutting edge of emerging tech like blockchain, augmented reality, and quantum computing by actively prototyping and testing new tools.
Rethink the Balance Sheet
- Strategically syndicate assets like loans and mortgages to generate fee income without taking on long-term risk exposure.
- Offer banking-as-a-service solutions to fintech partners to monetize capabilities beyond own customer base.
- Leverage asset securitization, special purpose vehicles, and off-balance sheet accounting to reduce capital needs.
- Unbundle banking services from capital-intensive balance sheet activities to focus on facilitating transactions.
- Fund operations with stable, low-cost demand deposit accounts rather than wholesale funding.
- Identify target transaction domains like payments, investing services, treasury management and aggressively build scale through M&A, partnerships, and digital platforms.
- Eliminate products and markets that cannot achieve leading scale in order to focus resources on areas of advantage.
- Leverage network effects and platforms to rapidly acquire new customers and partners.
- Implement robust APIs and developer tools to enable easy integration.
- Cross-sell transaction services across customer bases to maximize reach.
- Build intuitive, seamless digital interfaces across web and mobile to allow self-service delivery.
- Enable in-person advisors with data-driven insights, decision support, and productivity tools.
- Offer white-label banking services via APIs to be embedded in third-party apps and sites.
- Distribute products through fintech platforms and marketplaces via revenue sharing partnerships.
- Fully integrate human and digital channels for omnichannel delivery.
- Implement robust governance frameworks for emerging technologies like AI.
- Maintain strong capital reserves and access to liquidity to weather economic downturns.
- Proactively assess exposures, conduct stress testing, and set risk limits.
- Prevent fraud through technology like biometrics, behavioral analytics, and transaction monitoring.
- Make cybersecurity a top priority across the organization from access controls to encryption.
- Comply with rapidly evolving regulatory requirements for data privacy, conduct, and disclosures.
Also, banks need to add talent with specialized skills in areas like data science, engineering and UX design to successfully execute these strategies. A mix of institutional know-how and emerging capabilities will drive change. With the right talent and bold leadership, banks can thrive in the future.
