Can the power of data help banks make a comeback?
Bankers are unlikely to feature in any superhero movies anytime soon but the story of Marvel Comics might just inspire them. Marvel and its comic book business went bankrupt in 1996 yet its next owner, Isaac Perlmutter, could see a post-bankruptcy digital future. That future was Marvel’s ink-based superheroes like Spider-Man, the Avengers and Iron Man transitioning to the Hollywood big screen. Fast forward to today, and the Black Widow premiere in July will be just the latest in a string of multi-billion dollar movie hits powered by Marvel’s original comic characters. Banking has no superheroes but arguably it has one potential superpower – Data.
Banking was the original data business as far back as the 1970s. In fact, banks in the 1990s were leading the way in data. However, a combination of poor strategic decisions and near-death credit experiences in 2000 and 2008 saddled the banking sector with balance sheet challenges and legacy IT systems. Banks are now playing technology catch-up with digital transformation projects looking to leverage their enormous primary data resources. However, the route to maximising the digital potential of all this data faces three big hurdles – or as we like to call them, the 3 Cs:
- A very low interest rate environment makes it very difficult to grow bank revenues. Unfortunately, providers of capital to the sector continue to demand lower cost/income ratios. So, in a low-growth commercial environment this means cost cutting is the go-to management weapon.
- Customer expectations, on the other hand, have moved on. Digital banks are giving customers a taste of a far superior experience. The new competition do not have to deal with legacy systems and database frameworks. Instead, customers can now experience super-slick services on digital applications using the very same data that is sitting inside the traditional banks.
- The final frustration for bank management is that they can see customer demands and expectations rising but their investment budgets have to target far more basic and less-sexy demands. The blunt truth is that the majority of banks’ transformation budgets is now spent on ever-increasing regulatory and compliance requirements.
However, just as Marvel movie scripts stack the odds against their superheroes, banking now faces an additional foe in the shape of the 4th C! Covid-19 has driven remarkable global healthcare collaboration and an amazingly fast vaccine solution but healthcare is not the only sector moving at warp speed. The pandemic has massively amplified and accelerated digital transformation across large parts of the global economy. The urgent commercial reality is that Digital Customer Collaboration is an essential tool for most businesses, including banking. And whilst most Banks may have launched their flashy new Mobile Apps, these are typically focussed on day to day banking needs and not on more complex customer journeys or other digital channels.
Urgency and speed have become the focus due to Covid and we believe this has shifted banking transformation strategies in the following ways:
- Big projects which are slow and expensive have been largely abandoned.
- Digital transition projects have been refocused on smaller targets. We have documented these “quick wins” in previous articles as “digital gaps” where up to 50% of budget is being wasted.
- Projects are prioritising solutions which deliver immediate benefits to bank and customer.
- Digital is the primary channel to reduce “friction” in customer journeys and optimise engagement and results. Indeed, we have written previously about the real benefits of smarter digital engagement with financially vulnerable customers.
So, given this urgency, this is not the time for internal pilot projects with never-ending trials and too many errors. Our own experience of overcoming the challenges of the 4 Cs has informed some fundamental lessons in addressing this urgency. We like to think of the following as our ABCs of successful customer collaboration:
Budget constraints are a banking fact of life. But time is money, even survival these days. We often refer to our Which50 solutions as “agile, quick and easy” so you know time is on our minds. CustomerMinds technology can be ‘wrapped’ around a bank’s existing systems and data frameworks and major surgery is not required to get real two-way collaboration with customers up and running. Instead, the focus can be on how best the bank’s own data can be used to effectively engage with the customer. There may not be any superheroes, billion dollar budgets or even superpowers but if the customer is happy that’s a hell of a comeback in anybody’s book.