Digital disruption in the banking industry
Should banks be doing more to address advances in technology?
Considering the amount of resources banks are spending on IT and digital assets, it may seem surprising that there is not more evidence of technology innovation in the banking industry. Various reasons may seem likely such as legal and compliance hurdles or antiquated backend systems that make delivery particularly difficult.
It could also be a question of priorities. According to a webinar by the tech research company Gartner, a survey among bank CIOs has shown that in the past three years their main focus was on scaling existing products to help grow revenue rather than on driving innovation. But if investing in internally-driven technology or products upgrades is not the way forward, then what should banks be doing to address digital disruption?
There are clear signs for a need for customer-centric digital innovation in today’s business world. The technology-driven changes of consumer behavior are significant and are revolutionizing the face of whole industries (one example discussed in a former blogpost is the music business). Besides technological advances banks are subject to the transforming forces of markets, consumers, and governments. For an industry that is only just recovering from a crisis, this is a lot to deal with.
The explosive increase of apps is also causing significant challenges for the banking industry. Mint, a free money organizing app acquired by the American software company Intuit in 2012, has over 14 million users and has received rave reviews as well as various awards for its reliability and ease of use. But now Intuit is digging even deeper into personal finance. Last month it announced the acquisition of Check, a mobile bill-paying app that has already been downloaded by 10 million users. "It's not hard to imagine that most of our financial lives might soon be overseen, directly or indirectly, by Intuit", commented the Washington Post on the deal.
In an interview with the American Banker, an analyst warns that “the digital revolution is a bigger threat than when a traditional bank competed with one down the street”. However, banks are not ignoring these trends and have responded with incremental improvements within the context of an overall digital strategy. In its current edition, “Schweizer Bank” cites UBS’s mobile banking application which contains new features that help users monitor and manage their money similar to the mobile app Mint.
The advances in mobile devices, social media, big data analytics and cloud computing should be combined to drive innovation by banks, as well as new financial services providers. Banks should not be lagging behind on delivering digital experiences that are on par with other industries. Therefore, the benchmark for banking should perhaps not be within banking.