Traditional banks today are being bombarded by a combination of innovative technology, rising customer demands, emerging competitors and new regulations.
The question is whether banks are ready and willing to invest in enhancing their service offerings, utilising the new technology options available and at the same time, continuing to maintain a secure system for their customers?
Banks are being forced to radically transform their business models, alter products and services in order to maintain momentum with the ever-changing technology and innovation on offer. Whilst many studies have suggested that customer behaviour is the primary driver for change, a report by the Economist Intelligence Unit states that the key driver for transformation is the emergence of new technologies, in particular, artificial intelligence, machine learning, blockchain and other systems related to data and analytics. The report suggests that this influence of new technologies is only going to get bigger over the next few years.
In a survey commissioned to major financial institutions, clearly, the most vulnerable factor to competition was payments, followed closely by savings and deposit services. Short term competitor threats were highlighted as large technology businesses, payment providers and peer-to-peer lenders. Financial institutions also stated that they believe strategic priorities to continue to change over the coming years. Banks expect expansion in key areas of digital marketing, digital channel migration and cutting costs.
The rise of open banking
From the customer side, people are looking for simpler ways to handle money and make their daily lives easier. Many banks are concerned about the challenges faced with open banking services, especially in regards to collecting and sharing data with third parties and the associated risks of this.
Banks need to determine what path they wish to take in the future, whether this is providing a multi-service offering of financial and non-financial products or looking to specialise in a specific area of the banking community. What is quite clear, is that the traditional banking system is not a feasible pathway for a sustainable future.
Max Chuard, the chief executive officer at Tenemos believes that five years from now, intelligent banking will involve a bank that utilises the cloud, AI and other innovative technologies. Banks will be able to offer a wider range of new services to their customers. Historically, conventional banks have tended to avoid the risk of changing systems but the need to continue innovating is clearly a path that needs to be taken.
In terms of investment in digital strategies, a large focus continues to remain on cybercrime. Cloud technology, however, is becoming an increasing area of interest, followed closely by the importance of data and advanced analytics.