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Digital business, digital banking

Boldly go where few banks have gone before

Bank tech trends can make your head spin. So each week longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So each week longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

Ever wonder how crew members on the starship Enterprise got paid?

Doesn’t matter what TV or movie version of Trek you consider. They’re on five-year or continuing missions to seek out new worlds, etc. Routinely they save the universe. Thank goodness they do that.

But how do they get their paychecks?

So much from that show and its sequels and prequel, science fiction at first, now is reality. Mobile communicators—in fact, “flip” phones, reminiscent of Captain Kirk’s original series communicator, are considered way past their sell-by date now. Ph[t]asers. Three-D replicators. Wearables.

Now, with the Windows 10 hololens, technology is just one small step short of the Star Trek: The Next Generation virtual-reality holodeck.

But what about paychecks?

Beam me some bread, Scotty

Wait a minute—we have that. Direct deposit. Near field communication. Biometric authentication. When a crew member gets a synthohol drink at the Enterprise’s Ten Forward bar/lounge, nothing so base as cash ever crosses the counter. One thing the crew members never have to do is beam down to the nearest planet, find an ATM, and withdraw cash.

The point being, if it can be imagined, and if it proves of value, it will be invented and then embraced. In business, and in banking, that’s called innovation. Entities that believe in innovation and act on it quickly, at this point and time, are most likely to succeed. You can’t argue with Kirk or Picard.

For examples, read “‘Digitization Of Everything’ Demands Design” from Accenture that lists various ways digitization drives businesses to offer personal, intuitive customer experiences. In part the Accenture report summary says: “The digitization of everything is changing how businesses design services and products for customers … The digital winners will be those companies that make interactions with consumers more personal, ensure their offerings connect more smoothly with the outside, and build anticipatory, unobtrusive services.” DanLINK: To Digital story given you this morning

Cisco’s future history

That is a sentiment that really has taken hold in the banking industry. Cisco, in a 2012 white paper, looked at the future of retail banking five years from that date.

Here we are in 2015. What did Cisco predict the industry would embrace? The list sounds familiar: Omnichannel. Mobile banking. Mobile payments. Social media banking. Video banking. Banking in the cloud.

Cisco was even talking, three years ago, about “banking in the era of the internet of things.”

What were/are the pillars of a new value proposition that they predicted three years ago? These, too, sound familiar: 1. Contextual banking, in which the bank comes to the customer when, where, and how the customer wants, and, 2. Banks as life enablers—helping people find houses and providing key business services beyond mortgages or small-business loans.

Déjà vu three years on

Okay, that was what Cisco was talking about in 2012. What are the business/banking gurus talking about now, in 2015?

On the macro level, it’s not that much different. Here’s what Gartner says in a recent post: “Digital business success will require organizations to take bold actions, including inventing new business models and changing the way they function.”

Gartner, through Julie Short, research director, gets even more emphatic in its tone: “It’s imperative to break away from linear business processes and deploy a spectrum of standardized and variable processes to reap the benefits of digital business. The need for this shift is intensified by the introduction of many types of internet-connected things into the business environment.”

Accenture, in an analysis separate from the design project, weighs in on the need to respond rapidly and radically to changing customers’ needs and expectations.

“There is a $1.6 trillion market in the United States just waiting to be tapped, so one would expect a rush of companies seeking growth from it. Instead, many established companies are reacting too slowly to the needs of today’s nonstop customers, and consequently, they are seeing both a customer exodus and a decrease in their revenue potential,” says Robert Wollan, senior managing director, Accenture Strategy.

“While many companies have been chasing the opportunity digital brings,” Wollan continues, “they have not addressed the root causes of the problems that are exposed when they don’t execute well. Companies have been focused only on doing the same things better when these issues really require them to do things differently.”

It’s those millennials again

Of course, the millennials are causing most of the trouble—or opportunity, depending on how you look at it.

A couple of studies show they influence both the front and the back of the house.

A BBVA Compass study observes that, as customers, “Millennials fully expect innovation in banking to come from outside of the industry. And while many millennials are tethered to their smartphones, simply offering online and mobile banking won’t be enough to build a long-lasting relationship … Instead, banks should create a strategy for this segment … Banks should advise young people on how to manage their finances, seek millennials’ feedback, hire young employees, and partner with financial disruptors.”

As potential employees, according to a Deloitte Touche Tohmatsu Limited analysis, “The message is clear: When looking at their career goals, today’s millennials are just as interested in how a business develops its people and how it contributes to society as they are in its products and profits.”

Bluepoint Solutions, in a recent white paper, puts it very plainly. Millennials, in looking at their banking experiences, value convenience over brand, immediacy over trust, user experience over relationship, and self-service over face-to-face.

“The goal of … financial institutions should be to shift service offerings, business models, and culture to stay positioned as critical players in the value chain of payments and the larger banking ecosystem,” Bluepoint says.

Where does your attack begin?

So what to do? It seems logical to go back to that prescient 2012 Cisco report:

Invest in a future-proof, omnichannel-ready infrastructure that accommodates new interaction channels and is integrated into existing core banking apps.

Strengthen the company’s innovation DNA. Set up an innovation acquisitions and incubation structure with an innovation mindset that involves other innovative participants and startups from various industries.[Innovation.]

Actively pursue employee and operational productivity initiatives to free up the funds needed for the customer-facing transformation journey.

Restructure the organization around customers and channels rather than existing product-centric models.

Kirk would say “Engage.” Picard would say “Make it so.” Whatever. Time for that “continuing mission” to continue into the next episode.

Sources for this article include:

U.S. “Switching Economy” Up 29 Percent since 2010 as Companies Struggle to Keep Up with the Nonstop Customer, Finds Accenture

Banks need strategy to reach tech-savvy, educated millennials, BBVA Compass economist says

Disruption in Financial Services: Threats and Opportunities

Future of Retail Banking 5-Year Vision

Business needs to reset its purpose to attract Millennials, according to Deloitte's annual survey

Gartner Says Digital Business Requires Organizations to Rethink How They Respond to Change

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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