Simplifying the business of banking
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2014 may be the year that banks pick up the pace in their walk-crawl-run to new operational models. The reason for urgency is threefold: to find ways to improve profitability and return on equity, to meet customer expectations of personalization and better service, and to digitize to stay alive. Expect to see reconfigured business models, and renewed focus on innovation and customer experience. Emerging technologies will play a vital role.
Mobility changes the game:
Forget statistics proclaiming smartphone shipments, mobile subscriptions and the rising popularity of mobile banking. These are given. Mobile/online shopping shows it has the power to play upon the psyche of a changing society. On China’s Singles Day – the antithesis to St. Valentine’s – e-commerce giant Alibaba raked in the largest ever sales on a single day at US$5.75 billion. In 2014, mobility will continue to disrupt the status quo in banking.
Research says banks can improve profits by up to 20% by reducing complexity. Customers, regulators and bankers are demanding simplification in banking. In 2014, let’s hope that banks are able to separate good complexity from bad – the type that adds no value – and simplify their operations to become more cost competitive, customer centric and agilely innovative.
Banking couture takes off:
Google Glass is set to arrive in 2014. What next? Wearable Windows? New tech, such as wearable, will disrupt consumer banking and engagement. Some day not too far away, banking may be as simple as ordering (Google) Glass to tell you your bank balance.
The regulatory machinery rolls on:
Although banks have always been tightly regulated, they are facing unprecedented levels of supervision today. Jamie Dimon of JPMorgan Chase thinks that his bank could spend between US$400 – 600 million annually just to comply with the Dodd–Frank Act. Amidst all the upheaval, banks in many countries are also facing the prospect of having to deal with a super regulator or an existing regulator with superpowers, like the European Central Bank. This will most certainly inflate the cost, effort and complexity of compliance.
Banks get serious on social:
Gartner says that nearly one in three customers would have purchased social integrated products or services by the end of 2016. Most progressive banks realize the opportunity, and are continuously expanding their offerings on social channels – such as personal financial management (PFM) tools and spend comparisons, P2P payments and innovative savings products. Here’s some good news for such banks – research by Gallup shows that those who explore information about banking products in social media make the best prospects.
The forecast says cloud:
At least six out of 10 banks globally will process most of their transactions on the cloud in another three years. Having built their private clouds, banks will increase their presence in the public one next year, largely owing to improvement in public cloud security and reliability. The expectation is that half of all enterprises will operate in a hybrid cloud environment by 2017.
Banking through app stores:
API platforms will usher in an era of the custom-built apps. Credit Agricole (CA) has created such a platform for third-party developers to create specific apps requested by the bank’s customers through the CA App Store. Examples include an app to analyze expenses and another that incorporates gamification. Expect more and more banks and solution vendors to join the party.
Banks get a better grip on big data:
Next year, banks will focus less on the hype-tech of big data and more on the business outcomes it can deliver. Focus will be on developing new uses cases to improve customer experience, managing risk, and optimizing operations. However, complexity of data won’t make it an easy journey.
Banks progress from keeping lights on to switching (legacy) lights off:
In this new era of reduced profitability, banks can no longer carry the burden of expensive and inefficient legacy in their IT environment. The world’s leading IT research company estimates that almost 84% of annual IT budgets are spent on simply supporting existing business operations and enabling organic growth. In the coming year, many banks around the world will replace legacy and embrace progressive modernization to drive profitability and stay competitive.