The digital revolution is fundamentally impacting every industry across the board, and banking is no exception — in fact, far from it. As focus shifts from paper money to digital distribution, the implications for the banking industry are significant. And for an industry that impacts each and every one of our lives in such an important way, it’s worth understanding how this shift is changing banking as we know it — and the future of banking overall.
Who better to weigh in than Chris Skinner, independent commentator on the financial markets and fintech industry, and acclaimed author of the best-selling book, Digital Bank and its new sequel, ValueWeb. Check out a few highlights from Chris’ recent discussion with us below during a recent LeadingEdge webcast, and watch the replay to learn more.
“In each revolution, we create a brand new way of trading, transacting and storing value — but we don't get rid of the old ones. So, 5,000 years ago, we invented money; we still have money. Three hundred years ago we invented banks; we’ll still have banks. But in this revolution, the digital revolution, seven billion people on this planet can get access to real-time trade. And that means that there's a new way of thinking about how we’ll create this Internet of value, and what it's going to look like longer term.”
“We can't have an Internet of Things without some form of the underlying Internet of value exchange. We're going to have around 50-billion devices transacting 24/7 for the seven billion people who live on this planet. If those devices are on the Internet, how are they going to order goods on our behalf if they have to go through a bank branch? It just won't work.”
“Now we're seeing what I call ‘the complete open sourcing of financial services’ through apps, APIs and analytics. So the front office relationship is in an app. The middle office processing is through an API, and the back office is all about analytics. And all of that is being done by a lot of specialist companies that have narrow focus, which are these FinTech startups.”
“We don't have ‘customers’ anymore; we have people engaged in the community who want to use different services. So the bank has to pivot from developing everything internally to being a curator of apps, APIs, and analytics from marketplaces that give the best overall customer experience. Because I, as a customer, don't want to go to 200 different startup companies and try and put that together myself — I'd much rather have a trusted brand do that for me.”
“The banking industry was built in the industrial revolution, and focused upon the physical distribution of paper in a localized network of buildings and humans. Now we're in a digital revolution where everything is becoming the distribution of data on a globalized network focused on software and servers, and banks have this physicality that's locking them into old ways of doing things. They're trying to break out of it, but it's difficult because it's a fundamental change of the bank structure.”
“Everything's becoming an easy project that anybody can throw into the marketplace and plug and play. And I think for the banks, that's the real fundamental challenge: How do we move from this monolith, lethargic organization that's been used to dealing with projects on a ten-year time frame, to being a microservices organization dealing with projects in a weekend? It's a difficult cultural change.”
“Compliance, risk and regulation is often used as an excuse not to do something — even though there's no logical reason why you can't. When you look at most of the economies that are trying to be the FinTech centers of the world, the regulators in all these regions are effectively saying ‘we want to innovate with technologies.’ Because otherwise, the customers are not getting the servicing or the competition that we, as a regulator, want to see on the marketplace.”
“The banks that really get digital have customer-centricity at their heart … I think that's the problem. A lot of banks are product pushers, when they should be customer engagers.”
“What we need to see is far more diversity in the leadership team, incorporating the capabilities of the younger generation, while also recognizing that the mentoring of the older generation is very important, too.”
“Most banks have chief executives who couldn't tell me the difference between machine learning and artificial intelligence — because they don't have any technology experience. But banks are fintechs, and if a bank is a fintech, then half the bank's leadership team (or thereabouts) should have technology experience.”
“This, to me, is the battleground when I'm talking about the digital revolution, the digital human, the digital bank: If you do not get cognitive, predictive, proactive, custom analytics that give the customer far more informed view about their financial affairs, you will not be the partner for that customer in their financial future.”
“How do [banks of the future] make money? The answer is, by being the most intimate provider of service to the customer based on that digital footprint, and by being able to really leverage our understanding of the customer's financial lifestyle far better than any other player.”