Banks, GAFA and big challenges
The announcement that my old employer has signed a partnership agreement with Google has got me thinking again about the challenge that the big, global banks face in transforming their technology landscape.
Whenever a new technology gets introduced, the temptation for a bank is to ask, “how can we use this to transform the customer experience?” Mobile and online channels, client self-service, and innovative new products get a lot of management attention whenever digital transformation is discussed; which is understandable considering how poorly the banks have compared traditionally against tech businesses such as Amazon and Facebook in those areas.
Yet, in many of the world’s largest banks, sat behind the client-facing products is a layer of technology that is often old, very costly, and difficult to change. Finance, core banking, and credit applications aren’t often at the top of the list for transformation. On one level, that’s understandable. After all, no client is going to pay the bank a single dollar or euro more because at the end of day their accounting process just got quicker. These applications are difficult to change because they are so tightly integrated with FX, payment, securities, treasury etc, that any change program becomes a huge undertaking. However there is a huge cost to running and maintaining this older technology, and there is also a limit to how far a bank can take radical, digital transformation if the core processes of holding customers accounts, assigning credit lines and accounting for the business sits within this older technology.
In Corporate banking, there is also another important aspect to the question of customer experience. At the top end of the corporate banking market, the large, multi-national customers all use multiple banks. They have to since they operate across multiple locations, have wide credit requirements and want to diversify their banking partners for risk reasons. Across all sectors of corporate banking, customers are becoming more willing to take specific services like FX payments from fintech partners rather than their banks. What these customers want are solutions that work across all of their banks and fintech partners; if one of their banks introduces a new, digital experience around customer self-service for example, for the customer it simply means there is a new process to follow just for that bank. A bank would have to be very confident in the quality of its core offering to also offer a multi-bank digital experience.
Yet as we talk to clients, partners and prospects, there is more demand for multi-bank or bank agnostic solutions. Will any bank have the courage to create a digital offering for clients that could also be used by others, including their competitors? If not, there are plenty of innovative fintechs around offering exactly the type of multi-bank services customers want.
Written by Rob Lunn