Could an Apple a day keep the market at bay? Identifying the source of competitive advantage

By Nanda Kumar | 30 September 2014

With banks facing pressure on both the bottom line (from increasing compliance costs) and the top (from rising customer expectations and mounting competition), anything that even threatens to provide a competitive advantage is understandably seized upon with relish in the sector.

For example, the news that IBM and Apple are to partner to sell devices pre-packaged with powerful new business applications, caused great excitement in some quarters. Particularly, the mention of applications for financial services has received a warm reception in the industry.

The combination of analytics and data gathering know-how, and user-focused design expertise, has the potential to introduce some genuinely helpful technology into the business of banking. The combination could allow a much more effective use of data analytics for the purposes of customer experience orchestration. This partnership between the technology heavyweights carries the hope of easier decision making for account managers at banks across the world for when customers request more information about upgrades and new products. However, some of the excitement is perhaps a little premature.

While the Apple/IBM partnership is likely to deliver some very special technology into the hands of front-line staff, it is a reasonable supposition that the full benefits will only be felt by newer, smaller and more agile banks and non-bank institutions. That’s not to say, of course, that the larger, older institutions could not benefit from technology of this type. In fact, economies of scale dictate that, all other things being equal, larger institutions would feel greater benefit.

However, all other things are most definitely not equal. Front-end systems that empower staff are only as good as the data that they run on. And the truth is that most legacy (or ‘established’ or ‘incumbent’ or even ‘market leading’) banks have IT systems that are simply too primitive to be able to feed the latest business intelligence software with the data it needs to be effective. The data is too siloed and too inaccessible to be used in that manner.

This is, of course, the same reason that banks are often unable to offer customers what they want, and unable to differentiate themselves in the marketplace. This is especially true in the current global financial system, where the advanced markets are highly consolidated, but the sheer complexity of core banking IT means that any large bank that has been in existence for a decade or more will struggle to get the right information to the right people at the right time.

The IBM/Apple collaboration is an exciting one, which will hopefully result in business solutions that will help banks become more useful, more relevant and, hence, more competitive in years to come. Today, customers have more channels to interact with their bank than ever before. The argument for in-branch, face to face bank-client relationship is decreasing in strength as social and real-time video calls replaces the personal touch. Therefore banks need to rethink how they deliver a seamless, multi-channel experience to customers whilst keeping them onside with the latest and best deals.

Apple and IBM together hope to provide better access to relevant data to what current customers are demanding currently. This means social and mobile usage data is as important as how often a customer swaps her current account. Banks could do no worse than examining the best consumer-

facing businesses in sectors such as retail, entertainment and hospitality which already use data from social to continually update and improve their customer experience.

Doing so will have the added (and even more important) benefit of allowing banks to cater more exactly to the changing interests of customers, create and deliver offers via a glitch-less experience which set them apart from other financial institutions.

By Nanda Kumar, CEO, SunTec

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