With customers demanding innovation, banks need to partner with fintechs to deliver it
While banks may fear the ‘Amazonization’ of their industry, something that Huw van Steenis, a member of the World Economic Forum’s Disruptive Innovation in Financial Services group, says is very real, what can they do about it? As the saying goes: if you can’t beat ’em, join ‘em, which is why every financial services company needs to be a technology company!
Look across industry sectors from travel through to retail and transport and you realise that so many businesses are being disrupted by technology companies. Big names such as Tesla, Airbnb and Uber have quickly established themselves. While banks are also facing up to technology challengers, for the moment at least, it is a little different.
As Patrick Fisher from the Technology Practice Group recently wrote: “Companies that best use technology to create competitive advantage will win.” He goes on to talk about Goldman Sachs and how the firm’s Chairman and CEO Lloyd Blankfein once said that “Goldman Sachs is a technology firm.” This points to the fact that, at the time, the company employed more engineers than companies such as Facebook, Twitter, or LinkedIn.
This fact is interesting because, as far as banks are concerned, there hasn’t yet been an ‘Amazon moment’. A disruptive digital platform has not yet usurped the banking industry in the same way that Uber has challenged the dominance of established taxi firms. Although aspects of banking have been picked-off by fintech invention – Apple Pay is a prime example – banks themselves still have a huge opportunity to drive the future of the industry.
Many of the technologies that will truly challenge banking are still in their infancy, and as such, they can still be researched and embraced by traditional banking. Blockchain and AI, for example, are increasingly familiar terms. But their application within financial services is still limited, the domain of trials and pilots more than usable products and services.
But their time will come, and it would be foolish to think that talking about them is just future-gazing. Big data is already playing a role in shaping business thinking, if not entirely banking thinking. The NewVantage Partners 2018 survey makes for interesting reading on this subject, revealing an understanding among financial services firms of how big data can help with improved decision making.
Technology innovation though is not just confined to AI, big data and blockchain. Fundamental technology-driven banking services such as mobile payments, commercial card management, expense management and virtual cards can drive everyday interaction with banks. Their use can feed data back to banks, providing intelligence on usage and business spending habits. This can subsequently inform research and development, which can, in turn, create new digital products and services for customers.
As part of a broader ecosystem, this can also lead to personalized technology solutions for customers, as banks would be able to pick and choose technologies to fit specific requirements.
How can this be achieved? Through a partnership with fintechs, banks get the best of all these businesses. They can become a technology company, quickly and efficiently, using partners as development centres while retaining the relationship they have built with their customers. Not all banks can build their own technology, and certainly not within short timeframes. Not all banks have the capacity to continually research and develop new ideas, crunch big data and make sense of it all either.
This is where the banking industry can differ from other industries. It can partner and create its own future, rather than have one dictated by disruptive technology platforms. For banks today, their destiny is still in their own hands.
We’ve spoken on this topic before. Find out what the banking industry can learn from Amazon and its attitude to making business easier and more consumer-like.