As open banking (opens in new tab) continues to have a substantial impact on consumer financial services, the balance of power has tilted further away from established institutions and more towards financial technology innovators – from small fintech startups to the internet giants (opens in new tab).
Open banking essentially clears the way for any vendor with a vision to redesign the consumer finance management and payment experience. It means traditional financial institutions can no longer rest on their laurels if they want to stay relevant to current and prospective customers. Gartner suggests (opens in new tab) that, within a little over a decade, 80 per cent of established players will go out of business or suffer other ill effects as more attractive alternatives enter the market.
Customers are hungry for change, too. Big tech companies such as Amazon or Google bring new expectations, with high-quality customer experiences and a frictionless mobile journey. This has elevated consumer expectations and makes it more difficult for traditional banks to compete with these new startups entering their space.
Frustrating service processes and the accelerating closure of physical bank branches are stoking consumers’ appetite for something fresh and more convenient. And digital-native consumers care little about where they source this from, whether a big-tech giant, quirky startup or new challenger bank.
So why haven’t traditional banks upped their game? ‘Digital transformation’ is hardly new to their agenda, yet no matter how much they may have invested in digital skill sets or attempted to refresh their customer service activities, established players have largely failed to deliver anything significantly different and exciting.
Part of the problem is cultural. But at a very practical level, the big institutions are not set up to be agile. Over several decades, traditional banks have deployed a myriad of systems and tools to manage their information, resulting in information silos and content chaos. Even today, over three-quarters (76 per cent) of organisations simply can’t find the information they need to deliver digital service innovation, according to recent research by Nuxeo. Nearly the same proportion (75 per cent) want to extract the required data from “locked” legacy systems; and 79 per cent can’t connect different data sources to support more dynamic services and integrated ways of working.
Until they can find a way past these challenges, established banks and financial services firms will continue to be at a strategic disadvantage.
Four steps in the path to IT modernisation and digital transformation
As 2019 unfolds, there are four practical steps banks should take to safeguard their future:
1. Accept but move on from legacy constraints
Rather than think in terms of costly rip-and-replace programmes, or complex systems integration projects, banks can move forward while still exploiting legacy investments.
One practical solution is migrating to an open and modern a content services platform that operates in harmony with existing information systems. It means banks can keep current content stores as they are, for as long as they need to - but with the ability to tap into the value they contain in multiple different ways, to support business and service innovation.
Goals might include faster credit approvals, a more consistent experience across different customer touchpoints, or creating enticing new products and services to keep the emerging competition at bay.
Designed from the outset to be run on a cloud-based infrastructure, this approach is inherently flexible, scalable and futureproof - able to support high volumes of activity, maintain performance during peak demand, and adapt to new requirements over time.
2. Achieve a clear line of sight across content silos
ECM grew out of document management, yet most businesses today are not managed according to prescriptive, document-centric processes. The flexibility needed to be more customer-centric relies on being able to efficiently and easily unlock information contained within those documents, and combine it with other data to build a more complete picture, allowing fast decisions and next actions to happen – aided by intelligent automation, where possible. This in turn could help reduce application approval times, for example.
Leveraging an open cloud-based content services platform that can intelligently connect with existing systems and content repositories can help provide the visibility banks need. Even if respective information is stored in diverse systems, being able to see it all via one central hub will make it easier to manage everything from security, data protection compliance (personal data per GDPR, for example) and customer permissions management, to new service innovation. The more complete the insight that business/product development teams have, the easier they will find it to spot and act on new product opportunities and/or actions to maintain compliance. For example, the ability to action wire transfers by phone, or confirm someone’s credit-worthiness so they can progress a car or house purchase without delay.
3. Innovate incrementally and at a faster pace
Once banks are free to do more with information they already have, they can start to press ahead with specific actionable service improvements for customers. That could be something as simple as giving customers real-time insight into their overall financial status, across multiple financial products and reflecting up-to-the-minute payment activity.
4. Delivering benefits today, while preparing for the future
After being limited for so long by locked-down data and finite system capacity, it’s important that banks build scalability into their strategies for information management. Given that no one really knows how the financial services market will continue to evolve, banks’ best strategy will be to be ready for anything. That means planning for unlimited possibilities and capacity, especially given that future competitors are likely to include the likes of Google and Amazon – huge consumer champions with infinitely-scalable cloud infrastructures for storing, analysing and exploiting data in real time.
Dave Jones, VP of Product Marketing, Nuxeo (opens in new tab)
Image source: Shutterstock/MaximP