In the NextWave banks can capture the upside of disruption and innovation and become more confident in their strategic choices.
Digital is raising the bar on customer expectations with mobile apps, robot advice and live video chat-bots providing more choices. Banks need to evolve to meet the opportunities that digitization offers. Many are adopting vertically integrated models to improve the customer experience, reduce costs and manage risks. But navigating the future is not as simple as it looks.
Banking is changing rapidly and FinTechs, InsurTechs and other players have disrupted the market over recent years. To play a relevant role in the new ecosystem and compete with value chains in other industries, banks need to redefine their business models and set a course to achieve their new objectives.
It’s critical to make the right decisions today to ensure success tomorrow. That’s why banks must adopt new operating models that are agile, flexible and adaptable to change. Not only will they unlock digital opportunities, but they will also drive future innovation.
There’s a fine line between innovation and embedded innovation and how that translates for the business. To stay relevant in the market, banks need to define the scope of what they can do, where they can excel and how they can work with others to be better. Doing it themselves is less important than partnering with others and assembling the components from third parties to deliver a truly integrated offering.
As the industry transforms, it’s time to consider a three-step strategy to reshape the digital future for banking.
Reflect on strategically investing in the future
Traditionally, banks grew by increasing market share and offering as many services as possible to attract the consumer. With this scenario, banks faced the risk of becoming average in everything – and beaten by competitors that were stronger in every proposition or service.
Today, banks are rethinking their current position in the market to determine where they can add value and better meet customer expectations. Is the end game to defend or disrupt, transform or innovate, buy or build, diversify or focus? What are their strengths – and are there weaknesses that could be a liability? Recognizing that building a digital bank is a major investment, how much will it cost to transform – and where is the money best spent?
Define the bank’s role
As digital changes the customer experience, banks need to expand their infrastructure and services to better compete in the market. It’s time to define the unique selling points that distinguish them – and resist pressure from others inside and outside the industry that will likely expand into the same space. Looking at the options and adopting an agile focused approach that plays to the bank’s strengths – one that can be adapted over and over again in response to change will be key.
Act on a plan to shape your digital transformation journey
A future banking model begins with a strategy and a strong digital culture for today and tomorrow. The journey will require upgrading outdated legacy systems, re-allocating resources, developing performance management tools and fundamentally reviewing all aspects of the business.
EY has identified five ways that banks can reshape their future: as an experience, marketplace, service provider, facilitator and producer. This article is part of a series that highlight the features and benefits of each. Under this new direction, none of the five ways are vertically integrated. Banks could adopt one approach or a combination that will help them truly differentiate their bank from others.