Most incumbent banks digital transformation efforts (whether they are piecemeal or end-to-end) are optimized for a world that no longer exists: the vertically integrated value chain, where change is slow, competition is limited, and incumbents are protected by regulation and channels. In this world, doing what banks have always done, only better - faster, cheaper, etc. - drives business results. In the digitally disaggregated value chain, banking opens up, and industry lines blur. Everything that banking is begins to change.
Banks' advantages are well known: they have all the customers, those customers trust them (at least to keep their money safe), they have lots of money, and they're spending that money on digitization. But digitization cannot be bought. You can buy a digital channel; you can't buy a digital culture. You can source external innovation - through fintech partners - but you can't distribute that to customers through the existing structures and processes of the bank. Bank legacy is ever present.
Incumbent banks face difficult questions around their liabilities, growth prospects, and role in coming years. The core of banking isn't going away. Who else could sustain that level of regulation? Who would want to? The question is whether banks will become little more than dumb pipes, acting as utilities with all the more interesting, valuable customer interaction, happening in over-the-top (OTT) apps.
It's not necessary to be a bank to disrupt banking. Indeed, it may well be the best approach - highly specialized, free from legacy, and able to bypass bank regulation. However, a bank license does confer a level of trust, the ability to hold deposits, lend money, and earn net interest margin (NIM), and the revenue pool associated with those activities exceeded $5 trillion in 2018. That business is not going away anytime soon. This report assesses the potential for full service digital banking providers to protect and grow that revenue.
Scope of this report
- The vast majority of bank customers are unwilling to use a digital-only bank as their main current/checking account. However, those customers that described themselves as very willing are typically banks' better customers.
- New digital banks structure fees so they win when customers win. Incumbent banks often earn most when customers benefit least creating enormous structural disincentives to customer centricity.
- New digital banks simplify products. Consumers don't trust products they don't understand. Complex products are not only harder to sell, requiring more training and more tinkering with the incentive plan, they drive more branch visits, which means a bank's greatest expense - the branch - spends much of its time dealing a problem the bank itself created through bad design.
- New digital banks interpret regulation from the customer perspective. Risk-averse compliance departments often have interpretations of regulation that are more restrictive than the actual regulation. This type of legacy thinking, unchallenged, constrains what banks can deliver to their customers as much as legacy technology.
New digital banks bring customers to life. Customer personas, journey maps and design thinking bring customers' core needs to life. This combination of techniques allows firms to go beyond the what and how to reveal the underlying why. Understanding core needs is critical to digital reinvention as it forces banks to think about the true value they might provide.
- New digital banks have a single view of the customer. This is the multi-year tech transformation that takes time, of course, but appointing customer outcome owners to synthesize processes across products and channels, where otherwise there is not enough tech alignment, can help. So too can rotating executives across siloed functions and business units.
Key Topics Covered:
- Technology trends
- Macroeconomic trends
- Regulatory trends
- Consumer trends
- Competitive analysis
- Mergers and acquisitions
NINE DIGITAL BANKING THEMES
- Bank centric to customer centric: putting the customer at the heart of digital strategy
- Deposit-driven to data-driven: enabling safe and secure data sharing
- Backward-looking advice to forward-looking coaching: making money management easy
- Product-focused to life-journey focused: building overall digital engagement
- From closed to open distribution: leveraging non-proprietary channels
- Human to humanized digital: delivering human-like help and support
- B2C to B2B: optimizing digital products and services for API as a channel
- Disabling security to enabling security: making it easy to become a customer
- From efficiency to agility: evolving to support changing customer needs
- Incumbent banks and credit unions
- Incumbent-built or owned digital banks
- New independent digital banks
- Subsidiaries of non-bank and tech companies
- Technology vendors
- Buddy Bank
- Bank Mobile
- Tinkoff Bank
For more information about this report visit https://www.researchandmarkets.com/r/miuuyj
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