With all the paradigm shifts occurring in the world of ICT – specifically social networks, mobility, big data and cloud computing – there can be little doubt that traditional institutions such as banking will be radically re-invented over the next decade.
Last week I head more more about the possibilities at an SAP banking innovation breakfast event in Toronto. The speakers were Chris Skinner (http://thefinanser.co.uk/ and author of Digital Bank) and Maggie Fox (who is senior vice-president of digital Marketing at SAP). They spoke about the impact of digitization first on banking in general and then on bank marketing in particular.
This event was hosted by SAP Canada with its partners b2tec, outsideIQ, Zenmonics, and ifb Group, all of whom provide products and services to assist banks to move to the digital future.
Three key themes were identified in the SAP introductory remarks:
- Customer centricity – engaging with the customer through multiple channels;
- Modernization of systems – re-inventing core systems to fit the modern world; and
- Data-driven insights – gaining value by understanding the customer.
I am not really sure these are very new themes, but they certainly are very important in the information age when time is money and money is data.
Chris Skinner talked about the various ways that the digital revolution is starting to change how banks operate. He identified a series of things we have always believed about banking and showed how these assumptions are not holding up any longer.
Some of the ideas I took away from the presentation were:
- Regulations – we have many banking regulations but these are increasingly causing problems with modernization of the financial industry;
- Bank branches – there will be always be a need for some branches but their size and role will be very different, with far fewer transactions being done in the branch; this will have significant impact on the 15,000 branches in Canada.
- Connectivity – this is nothing new but we are quickly moving to replace telephone and PC-based banking with a mobile, wireless banking (photographing a cheque to deposit it comes to mind); the next big developments will include wearable devices and even embedded chips; literally everything will be interconnected.
- Augmented services – various technologies will augment the customer experience – geo-location, Google Glass, and a variety of others. One example that shows how banking could change is Hailo where the exchange of payments is no longer done at the point of service but is an automated back-end function. The concept of an “Internet of Humans” was introduced. The idea is that a Digital Bank will be part of the community, not just a centre of money and commerce, which means that social media must be a priority for banks.
- Since money is just data, the old saying that “money makes the world go round” is rapidly being replaced by “data makes the world go round.” Currency has had various forms in the past, with a chip in your arm potentially being the next form of value.
- Banks are now becoming the “data vault” for storing data, not physical money, and hence security and privacy have to be primary bank services. The requirement for highly secure financial services has never been more visible than today.
- Another important capability for the digital bank of the future will be to find value in all the masses of related data that is available. This sounds very much like the promise of “big data.”
Chris Skinner’s presentation concluded with two fundamental messages: First, that digital banking is a journey, not a destination; and second, the digital relationship between the banks and their customers needs to be humanized.
Maggie Fox shifted gears somewhat to look at how the marketing role in a bank is changing and becoming more strategic. The message was that significant marketing value can be derived by gathering information from and about the customer.
She cited a Gartner Group survey predicting that the CMO will spend more on IT that the CIO by 2017. In fact, a new role – Chief Digital Officer – is emerging to oversee all things digital.
One of the biggest problems at present is that the data is available, but we don’t know how to read it very well.
One of the new concepts is “deep personalization” which represents the voice of the individual instead of groups or averages. Some of the technologies that will be employed include sentiment analysis and predicting behaviour by tracking data about actions.
Banks will need to become proficient at deriving meaning from the masses of unstructured data that is being collected or can be accessed from others. Today, much of the effort is spent on capturing the data. In the future this will have to change – the majority of the work will be doing the data analysis. A new role – the marketing technologist – will emerge in the marketing department to provide analytic services.
Data-driven marketing leads to a strategic focus on customer outcomes, collaborative orientation for the organization, changes to processes to include intelligent context, a technical roadmap to lead the business and data mastery.
So, what does the future hold? The suggestions were that:
- Marketing has to work very closely with the IT division;
- A robust measurement infrastructure will need to be in place;
- Custom algorithms for discovering value will be a competitive weapon; and
- Action-based connections will need to be understood.
All in all, it was a thought-provoking event, and certainly shows that big changes are on the horizon.