In this blog we welcome guest blogger Laurence Leyden, General Manager for Financial Services in EMEA at SAP.
“The last thing I want to do is hurt you, but it’s still on the list.” If the banking industry had its own memes for the state of the market, this would be one of them. There’s so much change coming. Some of it will be painful. Some of it will create new winners and losers. All of it will result in a seismic shift in business models.
Cash is disappearing, revenue models are shifting, mobile is everywhere (including your wallet), brand advocacy has replaced marketing strategy, multi-channel friction is alienating impatient, cynical customers, de-banked consumers are on the rise, crowdfunding has reached 8 billion, and Google now has a banking license.
We shouldn’t be surprised. Just about every other industry has been transformed through tech innovation and machine intelligence – from medical science to self-driving cars to the music industry – yet most banks continue to operate with 1960s style production lines. It’s opened a gap that’s getting wider as new competitors step in, and render banks irrelevant, targeting one service at a time. We’re already seeing the first casualties – branches (viewed by some as a nuisance in the digital age), disruptive, cheaper payment services, and innovative third party funding options.
Of course, technology does have a huge role to play, and banks have an opportunity to redefine and reinvent themselves, but first you must realise that we are witnessing the end of an era in banking as we know it. No one is really sure of the timescale. The death of banks has been predicted for some time, but typically things take three times longer to disappear than most people think. That means in the next ten to fifteen years, your bank will be vastly different. Do you know what ‘different’ looks like for you and how you’re going to get there?
Start with the obvious. No bank can expect to survive the next few years without ridding itself of manual processes and back office inefficiencies. And speaking of inefficiencies, why would you continue to run old style production methods by writing code, when you should be assembling it? And why wouldn’t you have 100 per cent real time online systems that engage with customers, rather than putting a human teller behind a pane of glass telling customers what they can and can’t do?
One of the best examples of true innovation I’ve seen is from the insurance industry. Discovery of South Africa recently announced a collaboration with Apple to create its Vitality Active Rewards program, giving consumers a new Apple Watch for joining. If all weekly fitness targets are met over 24 months, then the watch is free. Members also enjoy other rewards when they hit their fitness targets, ranging from a free drink, free domestic flights, to a waiver of monthly fees for gym memberships.
Should the member miss some or all of the targets in any month, then depending on the number of targets missed they pay a monthly penalty of the cost of the watch. It’s a clever move. Discovery can also see which members are most active – and presumably lower health risk – as well as gather all sorts of insights into consumer behaviours.
My point is that there are opportunities everywhere in data. The sands may be shifting underneath your feet and new market entrants may be using agility against you, but you can fight back. Find areas of value by engraining yourself in the customer value chain of requirements and provide consumers with a simple, cohesive digital experience.
Traditional methods simply won’t cut it. The level of disruption, behavioral shifts and changes are unparalleled. The digital age has forced financial institutions to rethink how the entire customer experience works. It’s time to reimagine and rebuild your bank into a modern, tech savvy useful alternative to the stale, status quo experiences that exist today. Just about every other industry has been through this transformation. You may not like it, and may not want it, but if history proves anything, you don’t have much of a choice.
Laurence Leyden, General Manager for Financial Services in EMEA at SAP. Laurence is responsible for all elements of Banking, Insurance and Capital Markets. A veteran of 15 years at SAP he previously headed the global transformation team, ran the global pre-sales organisation, and lead the EMEA Value Engineering and Core Banking teams.
Laurence specialises in understanding real customer needs and how SAP and partners help drive transformation across organisations. Increasingly this involves reviewing business models and aligning to the benefits that true digitisation enables. He is heavily engaged in looking at the changes facing banks and promoting the role of innovation and looking at how SAP views ‘the bank of the future’. He is regularly quoted in the financial press and speaks on behalf of SAP at various industry summits and events as well as with the analyst community.