The decade since the financial crisis of 2008 has been a challenging time for the financial services sector. Not only has the industry had to face the increased compliance and governance requirements that emerged as a result of new and tighter regulation intended to prevent a similar crisis in the future, but it has also had to face increased threats to its market share.
Initially this came from more agile fintech startups, digitally-native and able to offer new and improved services to customers or more efficient ways of delivering existing services. But now there is also the persistent threat that one or more of the big tech giants will enter the financial services market.
If Amazon or Google were to suddenly start providing banking services, the impact it would have the sector would be huge. What can banks do to respond to the emerging threat of big tech firms entering the financial services market?
The need for change
There is certainly an appetite for more flexible banking offerings in order to keep pace with consumer expectations, and open banking continues to have a substantial impact on consumer financial services. This essentially clears the way for any vendor with a vision to redesign and improve the customer experience.
It means traditional financial institutions can no longer rest on their laurels if they want to stay relevant to current and prospective customers. Gartner suggests that, within a little over a decade, 80% of established players will go out of business or suffer other ill effects as more attractive alternatives enter the market.
Customers are clearly hungry for change. Frustrating service handling and the closure of physical bank branches demonstrates the evolving appetite of consumers for something fresh and more convenient. And digital-savvy consumers care little about where they source this from – big tech giants, fintech start-ups, or challenger banks.
Struggles with digital transformation
Given this real and growing threat, why haven’t traditional banks upped their game? Digital transformation is hardly a new concept, yet no matter how much they may have invested in digital skill sets or attempted to refresh their customer service activities, established players have largely failed to deliver anything significantly different and exciting.
While senior management is aware of the need for change, embarking on a digital transformation programme is another matter. Juggling legacy systems, siloed departments, and internal resistance make the endeavor of digital transformation a major and complex undertaking.
Most big banks are not set up to be agile. Even today, more than three-quarters (76%) of organisations simply can’t find the information they need to deliver digital service innovation, according to recent research by Nuxeo. Nearly the same proportion (75%) want to extract the required data from “locked” legacy systems; and 79% can’t connect different data sources to support more dynamic services and integrated ways of working.
Until they can find a way past these challenges, established banks and financial services firms will continue to be at a strategic disadvantage. But there are some practical steps they should take to safeguard their future.
Deploy a content services platform to work with legacy systems
It is unrealistic to think highly-disruptive and costly ‘rip-and-replace’ programmes and complex systems integration projects are the answer. The good news is that banks can still move forward with their digital transformation initiatives while still leveraging their legacy investments.
Open and modern content services platforms that operate in harmony with existing information systems are a practical approach for improving how financial services firms manage and extract value from the content and data that resides within these systems and repositories. It means banks can keep current content stores as they are, for as long as they need to – but with the ability to tap into the value they contain in multiple different ways, to support business and service innovation.
Goals might include faster new customer onboarding processes, quicker credit approvals, a more consistent experience across different customer touchpoints, as well as the ability to create new revenue streams by launching new products and services.
Designed from the outset to run on a cloud-based infrastructure, this approach is inherently flexible, scalable. and futureproof. Content services platforms are able to support high volumes of activity, maintain performance during peak demand, and adapt to new requirements over time.
Intelligently connect information silos
The flexibility needed to be more customer-centric relies on being able to efficiently and easily unlock information contained within files, documents, and objects, and combine this with other data to build a more complete picture and to support critical business decisions.
Leveraging a content services platform that can intelligently connect with existing systems and content repositories can help provide the visibility banks need. The more complete the insight that business/product development teams have, the easier they will find it to spot and act on new product opportunities and/or actions to maintain compliance. For example, the ability to action wire transfers by phone, or confirm someone’s credit-worthiness so they can progress a car or house purchase without delay.
Add value now, but future-proof against the big tech threat
After being limited for so long by locked-down data and finite system capacity, it’s important that banks build extensibility into their strategies for information management. Given that no one really knows how the financial services market will continue to evolve, banks’ best strategy will be to be ready for anything.
This means a more flexible and agile approach, involving planning for unlimited possibilities and capacity, especially given that future competitors are likely to include the likes of Google and Amazon. Both companies are enormous consumer champions with infinitely-scalable cloud infrastructures for storing, analysing and exploiting data in real time, so if they do enter the financial services market, banks will need to be smart and ready to adapt and improve services in quick time.
If your bank wants to be one of the 20% that Gartner has predicted will have survived by 2030, then this more flexible approach must begin now. The Nuxeo ebook ‘5 Digital Strategies to Overcome the BigTech Threat in Financial Services’ provides details of strategies that embrace new digital technologies to transform the way organisations do business, deepen customer experiences, and drive loyalty.
Dave Jones is vice president of product marketing at content services platforms supplier Nuxeo.