Banking’s New Operating Models
Disruptive operating models are having a major impact on the financial sector, leading to disintermediation and loss of earnings, which is forcing banks to reorganize their value chain. Alongside competition and changes in customer needs and behavior, technology is one of the top challenges for the industry. Over 70% of global financial institutions surveyed say their strategic priority in 2017 is to improve customer experience, according to the Digital Banking Report on trends and predictions.
The banking industry has recognized the importance of implementing a differentiated strategy, as the they come under pressure to keep pace with technological advances and new entrants using disruptive operating models to attract a more demanding clientele that has no tolerance for delays or errors. Technology is no longer just being used to fix a specific business-related problem and has become an integrated part of business strategy, which is why 87% of the banking and IT executives surveyed for the report are already implementing intelligent technology in their strategy. That said, banks need to adopt a flexible, customer-centric approach with a highly connected operating model to improve customer engagement.
Machine learning, for example, is being tested by the US Financial Industry Regulatory Authority throughout 2017. With machine learning, banks expect to be able to extract the most valuable data, reduce risk and automate processes. Some people fear this will lead to the loss of many jobs, others believe it is an opportunity for banks to gain competitiveness and therefore be less tempted to relocate to other countries, since employees gain more skills when their work increases in added value. Furthermore, by making use of big data, new solutions are available to tackle to fraud and anti-money laundering (AML), customer segmentation, compliance supervision and agility.
The most valuable asset a bank has is the huge amount of data it collects from customers. The volume, variety, velocity and veracity of data is increasing, and with fintech bringing more agility, innovation and flexibility to the market, banks need a smarter approach, one that includes the implementation of digital banking platforms designed to handle large amounts of transactions in back-office processes for basic financial products and services.
Investing in fintech platforms and innovating as customer needs evolve is a key step banks must take to achieve their strategic goals.