Before diving into the discussion what “digital” could mean to the banking business let us first spend some minutes, WHY we should deal with it. My theory: “Digital” helps to create relevant banking.
Now, what means “relevant” in the context of banking to me? Let me try to explain my view: Talking about retail and SME customers, relevant banking is banking that helps the customers regardless of time and place in the appropriate form. Relevant banking is not limited to life-cycle management in 10-year-waves but in 10-minute-increments. Relevant banking helps with small problems to “small solutions”. Relevant banking helps to have more money.
We now can discuss whether we can achieve this goal in a branch. The answer – to me – is easy: no, no way. To achieve the goal of becoming a relevant partner to the customers, we e. g. need to interact digitally 24 hours a day, 7 days a week on a realtime database. None of the modern services like peer-to-peer-lending, crowd finance, communities, product-ratings, personal finance management and any other upcoming service can be seriously executed in a branch.
Let us even go one step further. It’s not just the digital communication- and interaction-channel. It is the infrastructure behind the customer front-end that enables relevant banking in the digital age. Means: Setting up a modern day digital financial services experience with the objective of becoming a relevant partner to the customer cannot be reduced to a nice looking app on top of a 3 decades old corebanking-system. A sustainable digital concept must be more than only “lipstick on the pig”. (By the way: that phrase to me is “the phrase of the year 2015”).
Creating “relevant, digital modern day banking” needs an appropriate infrastructure (because of its digital nature) that must meet the following criteria (shortlist):
- It must be an open and accessible to all market stakeholders. This is why APIs are a basic precondition to any future development. Those APIs should be easy to understand, man- and machine-readable.
- The modern day banking infrastructure offers modules that support the bank (or non-bank) creating a suitable offer according to its strategy.
- To the customer this is an account that looks more like a marketplace: increasing choice, variety and options for both the bank (or non-bank) and the customer instead of reducing those for both parties.
- As you can read out of that, speed is the super-crucial topic to any digital development. The modern day banking infrastructure can deal with the customers realtime demand in the same time it understands the “traditional behaviour” of a legacy corebanking system.
- Of course, a modern digital infrastructure is agnostic on both sides: to the corebanking-side as well as the to the customer/user experience layer. Via APIs it can be connected to any kind of “front end”, presentation layer or end device. Within an increasingly growing IoT (Internet of things), this it is a crucial criteria
- The digital modern day banking infrastructure allows realtime identity management. Via its profile-module it can aggregate a banking profile, a community profile and third party community profiles. This data is stored safely and audited by banking regulators.
- A customer acquiring a third-party-offer within that open account-marketplace must be ensured a safe transfer of identity. Same thing for the b-t-b partner who is offering services within that account. That partner might have the need to ensure KYC status etc. which then will be provided and shared by the infrastructure – as said in realtime. Means: Such a digital infrastructure is creating trust and security to all its partners and users.
- Real-time communication and interaction takes customers for example held in the integrated community-module. This offers peer-to-peer communication as well as bank-to-user/customer interaction.
- Speaking about data: The digital modern day banking infrastructure is the central “data lake” handling date as fast as possible. Just a minor example: A client has the need for microfinance at midnight. Pressing the button (in the app or desktop, doesn’t matter) the customer receives a few seconds later a positive feedback based on a real-time scoring. Same time, the money is already sent because a digital modern day banking infrastructe offers realtime closed loop payments. In the same account for more or less zero cost.
- Data and analytics is relevant also to customers. It must be used to the maximum benefit of the customers, simply because it is the customers date. By that I mean that a customer should have the chance to receive whatever kind of analytics irrespective to assetclasses, spending behavior or type of transactions. Out of that data the account should become a “coach” supporting the customer in achieving his/her goals and objectives.
- Digital means that even small-sized/micro financial services can be provided in a profitable way. Digital banking must have the ambition to work with the industries best KPIs – not only because it must be super scalable.
- And, not to forget: The digital platform of the future must be compliant with the respectively local regulation. Best would be if its creators have a deep understanding of regulation.
Summarizing: Banking can become more flexible, instant, customer centric, customer-supporting and by that finally relevant to its user. The digital development can boost banking into the next level by becoming a relevant partner to a mass market – not only to a elite of customers services via wealth management or private banking.