The Digital Storm Heading to the Financial Services Industry
In this guest post, Saad Abukhadra shares his perspective on the digital revolution facing businesses from a millennial point of view.
In light of HSBC’s decision to revamp the direction of its IT operations, let’s take a look at the digitization trend taking storm in the financial services industry. The demands on companies to innovate are increasing at a rapid rate and banks are struggling to keep up.
But what’s most baffling about this struggle, is that the solution is right in front of all of these banks! Yet for some reason, most feel unprepared or even unwilling to modernize their technologies and embrace the new way of banking. Simply bettering archaic technologies will not meet the demands of the present day.
In today’s highly connected, digital environment, every business must not only digitize existing processes but reinvent itself as a true digital business to meet mounting customer expectations. While I share the importance of adopting digital, I must also emphasize the importance of adopting quickly.
Consider the examples set by Charter Savings Bank, Lloyds Banking Group and HSBC, who are all making breakthroughs with digital innovation. Looking specifically at Lloyds Banking Group, they decided to cut more than 9,000 jobs in order to invest 1.6 billion pounds into modernizing their network. The decision was based on an interesting set of facts. First, 1 billion pounds worth of mobile and internet transactions are made every day. Second, the money made from visiting branches has fallen to about 10 percent a year.
Let’s put this into perspective. Society nowadays is geared to mobile use. The emergence of a younger millennial generation of customers has created the dilemma of how to ensure customers are engaged in a way that best fits their evolving needs. In order to improve business results, banks must tailor the customer experience to millennials like me in order to improve engagement and loyalty.
Consumers expect a seamless experience across online and offline banking channels. In this day and age, consumers would much rather open a web application than visit a physical branch and deal with all of the hassles that are involved with the trip. It is this shift that will leave the banks that don’t adapt in the shadows of digital innovators in the financial services industry.
But those who do innovate their practices and build a digital business will see many benefits, including cost savings, a simplified IT environment, new connections to third party services, and revenue increases. And while Charter Savings Bank, Lloyds Banking Group and HSBC have an edge for now, other banks have an opportunity to catch up. Banks must aggressively be looking for ways in which software and digital technologies can help them overcome market challenges and embrace change.
John Chambers, outgoing CEO of Cisco, predicts that 40% of companies will be dead in 10 years if they fail to go digital. “Disrupt or be disrupted.” Missing this market transition will result in many firms being upended by startups. This has been proven by examples from other industries such as taxis (Uber) and hotels (Airbnb). The fintech revolution is upon us, and banks must respond to this threat by transforming their business models.
To be able to compete in this day and age, companies must be willing to adapt and remain up to date. The mobile phone has become a newspaper, camera, music player, map and more recently has transformed into a wallet with credit and debit cards being supplanted. Software is a must and it’s a matter of when and not if financial service companies need to adapt.