Leverage big data, analytics, and AI. This is the Holy Grail—the use of data and analytics to make banking easier and more personalized for customers and more profitable for banks. When combined with big data, AI can, much earlier than traditional methods, help banks identify customers who might leave for another bank—in many cases, they can do this before the customer even realizes that he or she is dissatisfied. The combination of big data and AI helps banks improve their service at the individual-customer level, whether by recommending a more economical way of handling a transaction—perhaps through self-service—or offering to automate a recurring task, such as a monthly transfer to a parent or child.
This is the Holy Grail—the use of data and analytics to make banking easier and more personalized.
These examples of data and analytics that allow banks to anticipate the needs of their customers are part of a paradigm shift: retail banks, in particular, instead of merely responding to their customers’ needs, are starting to “think” and deliver “nudges” to help customers achieve their goals. These more frequent interactions, if they reflect guidance that a customer considers valuable, have the benefit of increasing that customer’s trust in the bank.
Pursue partnerships to increase capabilities and scale. For the things they cannot do well on their own, banks must develop a partnership strategy. Many banks have already entered into partnerships with fintechs, generally by making minority investments. However, the strategic rationale for these investments isn’t always clear. A partnership that lacks a clear purpose, the potential for capability enhancement, and a genuine prospect of helping one of a bank’s core businesses is not a partnership worth entering in the first place.
One possibility is to partner with one or another of the digital giants directly. This may seem like a risky move, and it would take some pretty special circumstances for such a partnership to make sense, but digital giants have intensely loyal customer bases, great technology, and massive distribution potential. For a bank with a unique attribute or capability that a digital giant might covet, there could be a negotiation of peers—and a successful partnership and best mba admissions consultants in Bangalore, Mumbai, chennai and hyderabad
Adopt new ways of working. Most banks haven’t fundamentally changed the way they approach their work in decades. This is certainly true in software development, and sequential “waterfall” methods, misalignment of business and technology organizations, and emphasis on product features over customer benefits often produce disappointing results. Banks need to rethink this aspect of their work. In particular, they would do well to move to agile approaches and best mba admissions consultants in Bangalore, Mumbai, chennai and hyderabad
Pioneered by technology companies as a software development method—Spotify, Google, and Netflix do pretty much all their work through agile teams—agile ways of working are now increasingly common at traditional companies. Several global banks, in fact, treat agile as the default operating mode in their product development, digital, data and analytics, and IT departments. For that matter, there is no reason why agile methodologies must be limited to technology work. Agile can also increase the effectiveness of nontechnology departments, including marketing, human resources, and finance.
There is no reason why agile methodologies at banks must be limited to technology work.
ING Group, based in the Netherlands, provides an example of a bank that conducted an agile transformation early on. ING has frankly said that it is following the example of digital giants, changing its people practices, rethinking its funding model, streamlining its decision-making processes, and introducing new technology. The impact of ING’s transformation is evident in the bank’s results, which include dozens—instead of just a handful—of new product and service releases annually, a significant increase in IT efficiency and capacity and in employee engagement.
Attract and retain digital talent. Even the largest banks with the most ample resources have struggled to recruit and retain the talent they need to compete in a digital age. There simply aren’t enough software engineers to fill the jobs that are available in all industries globally, and generally, banks are not the first places where highly trained tech workers look for jobs. Moreover, the sort of digital transformation we’re talking about requires highly trained people with specialized expertise: data scientists who can coax value from information, enterprise architects who can help with new decisions involving platforms, and engineers who can solve business problems through technology and smooth delivery processes to deliver best mba admissions consultants in Bangalore, Mumbai, chennai and hyderabad
Some IT workers currently working in banks may be able to develop these skills through dedicated training and coaching. But this is also an area in which it will make sense to partner with, or even acquire, high-caliber fintechs or boutique engineering firms. The challenge is to find a structure for these partnerships that will create a compelling value proposition so that the new contributors are motivated not just to stay but also to do their best work.
Simplify technology and data infrastructure. Having the right technology and data infrastructure is a prerequisite to digital transformation. To provide the digital experience customers expect, banks will have to aggressively adopt the technology paradigms of digitally native companies. This can happen only if banks drop the vertically integrated legacy technology stacks they’re using today and opt for horizontally layered, platform-based technologies.
To provide the digital experience customers expect, banks will have to aggressively adopt the technology paradigms of digitally native companies.
As part of this change, banks should adopt virtual private clouds, move toward a service orientation (by using containers, microservices, and other frameworks), decouple business logic from data (including through service tiers), and merge operational and analytical data storage (through DaaS, or Data as a Service). All of these moves can help banks position themselves to deliver products and capabilities much faster than they do today. These moves will also lead to a change in the CIO’s fundamental role: from serving the line of business to providing a platform.
Ensure cybersecurity resilience. This is a condition not only for succeeding in a digital age but also for having a chance of surviving it. All of the good things that banks are trying to do with the help of digital technology—create step changes in convenience, turn their customers into advocates, and operate more efficiently—can be undone by security breaches. A best practice for banks’ chief risk officers (CROs) is to form strategic partnerships with promising fintechs, “risktechs,” and cloud service providers that provide needed talent and speed important innovation. Indeed, some bank CROs—looking at the strides that cloud service providers have made in cybersecurity—already believe that their best bet for avoiding breaches will be to use such outside service providers for their most critical data and processing.
NOW IS THE TIME
Many bank CEOs, in a discussion of digital initiatives that are starting to reshape the industry, initially respond, “I know. We already have projects going in those areas.” It’s when they more closely assess their situation that they realize the limited scope and value of what they’re doing. A lot of the AI initiatives at banks, for example, are experiments that haven’t yet had direct impact on the customer experience. Many of the agile teams are only in banks’ IT groups; they aren’t in the functions responsible for customer-facing services. Incrementalism is standard, and this becomes clear when companies benchmark themselves along the eight digital transformation elements