What, no banks in the future, are you insane?
This is the first of three discussion forums around this important subject. The consequences of the demise of a global financial services system that supports the needs of everyone on the planet will be far reaching to say the least. But is it likely to disappear altogether? This is a very big question and if it did, what would take its place?
Social inclusion at every level
Although the 20th century is now a distant memory, it undoubtedly spawned a more socially aware generation, intent on rewriting the rules by calling time on long established traditions and ‘old world’ approaches to macro economic and environmental issues. Many people, including Time magazine’s 2019 person of the year, Greta Thunberg, are very vocal on the consequences of global warming, our continuing dependency on fossil fuels, the lack of tolerance and diversity, a shift towards a predominately plant based food supply chain and the need to create a more inclusive, much fairer distribution of global wealth.
Without question these are noble, long overdue aspirations, which, if managed appropriately, will not only be for the good of the planet but also provide much needed new business development opportunities across the globe. But what does this mean to the traditional financial firms and will they have a role to play as a trusted, 21st century services provider in the new world order?
The rise of the all powerful consumer
The impact of our technologically driven world and its influence on 21st century expectations is unprecedented. However, we must never forget that whilst delivering many benefits, technology also has a dark side, in terms of rising cybercrime, vicious online bullying via social media channels and the damaging effects of fake news, etc. Despite this, because of technological advancements, today’s consumer wields a never before seen power which has transformed virtually every aspect of modern society.
Nowadays the ‘customer experience’ is king. Hailing a taxi via a mobile device, 24×7 food deliveries, online medical consultations or ‘Googling’ for information, available at the touch of a button, are all things that were beyond the wildest dreams of our ancestors. In terms of banking services, consumers are voicing their needs: “I want it now, in the way I want it and at the cheapest possible price (or even for free), delivered on a device of my choice, not yours” – this is becoming the new norm.
Everything digital. Everything cloud…
Global communications, rapidly evolving technologies, Artificial Intelligence, the abundance of data, the Internet of Things, the rise of crypto currencies, increasing regulation, massive budgetary and expenditure pressures and an empowered and highly mobile customer, have all combined to change the game forever. With new and often unexpected competitors emerging every day, many financial firms are now fighting for their very survival. We all know that technology is the enabler; everything digital, everything cloud and with open banking, everything on demand with chatbots and 24×7 online support as standard. Of course this goes without saying, but to achieve all this requires a 360 degree change in approach and attitude.
For any firm, not just banks, undertaking a wholesale change programme is a ‘Herculean’ task, especially when faced by a myriad of legacy technologies, outdated attitudes plus onerous, labour-intensive working practices. But, and it remains a BIG but, do the leaders of today have the vision and the appropriate skills at their disposal to see it through?
The backbone of business growth and development
Across the world, small and medium-sized enterprises (SMEs) are seen as the engines of growth. In the UK alone they employ some 60% of the private sector workforce and account for up to 50% of UK GDP. Despite this significant contribution, shockingly many of these firms struggle to access business development finance from their traditional providers. It is no wonder that the new, highly automated lending platforms such as Ezbob and the new payments providers, such as Starling and ClearBank, have become such attractive alternatives and are merrily disrupting the established order.
Servicing the customer of tomorrow
Today, the survival of the ‘bank of tomorrow’ is a fiercely debated topic. Whilst opinions vary greatly and without the benefit of a crystal ball, no one can accurately predict what form this will take, or if indeed ‘the bank of today’ as we know it will even survive? One thing is for sure, change needs to happen and it needs to happen very quickly. Unless they get cracking now, the current financial services providers have very little chance of creating an appropriate, ethical and compliant entity, capable of supporting the diverse needs and new world demands of the corresponding ‘customer of the future’.
Over spending on IT, with very little to show for it?
According to a recent Bank of England ‘future of finance’ report published in November 2019, amongst other things, they found that most financial institutions are spending up to twice as much as they need to on IT. If this is true, what the hell are they doing, and why are so many still unable to provide the products, services and much needed funding the SMEs and other businesses so desperately need? None of the following is rocket science, simply a snapshot of the Bank of England’s ‘must do’ recommendations:
- Update IT operating models to get ready for the ‘new normal’’
- Slash costs by simplifying legacy systems, taking SaaS beyond the cloud, and adopting robotics / AI
- Build the technology capabilities to become more intelligent about your customers’ needs
The new competitors must be rubbing their hands with glee at these findings. In this modern world, there is simply no excuse for maintaining systems or services that are no longer fit for purpose.
Albert Einstein was right
Where would we be today if, for example, the early explorers had not set sail in search of new horizons, or medical practitioners had not taken enormous risks in order to improve the health and well being of their patients? Albert Einstein, hit the nail on the head when he said: “the definition of insanity is doing the same thing over and over and expecting different results”. Yes, mistakes were made by the early pioneers and inevitably more will be made on the journey to transforming the business of banking, but doing nothing is not an option.
A legacy of insanity?
However, environmental issues notwithstanding, money still makes the world go round, and whatever form it takes, there will always be a need for a global financial services system that supports future growth and development. It is up to us now and we owe it to the upcoming leaders and workers of tomorrow; and oh yes, not forgetting Greta and her growing band of followers, to ensure the right system is in place. How this can be achieved is the subject of another discussion. But who today in their right mind would want their legacy to be one of insanity?
Watch out for the next “bank of tomorrow” series which will explore what can, and is being done to ensure that banks and banking are part of the long term solution.