The first presentation of Sibos 2017 was “What does the future hold for banks – Evolution or Extinction?” Interesting topic to start with, eh? The panel consisted of bankers, a central banker and a techie. It was a lively presentation covering a range of themes – following are my notes:
4 Key Drivers of Change:
- Demand –
- The need for transparency, lowers costs, speed, products from non-banking providers, trust and closeness with technology companies
- Advances in tech have opened up new ways to offer innovative products, cost of tech has significantly decreased giving rise to new entrants
- Evolution of regulation, the opening up of banking services to new entrants and technology companies
- Millenials, the unbanked, mobile device usage are all factors driving critical technology trends within specific groups
Is There a Fifth Driver of Change..?
One of the panelists (think it was the Frantz Teissedre from Société Générale) put the spotlight on Security, adding that it is a fifth driver for change which is resulting in huge investments. Frantz went on to talk about how this time change is different because all of the above are happening at the same time giving the example of instant payments
Ecosystems and Dark Data
Tom Eck from IBM spoke about ecosystems and the need for banks to be less monolithic. Tom went on to talk about co-opetition – cooperative competition – and the need for regional and product based ecosystems. Lastly Tom talked about how tech providers such as Apple, Google and Facebook have conditioned individuals to use and remain sticky with their devices.
Tom went on to describe how digital apps need to give consumers the personal touch, similar to how the bank branch manager may have known your name and where and when your next holiday was going to be. Tom suggested that with data you can better engage and connect with individuals. Right now banks have so much dark data that they need to shine a light on it. That light may be in the form of new technology such as APIs and machine learning which may reveal interesting and value added insights.
Tom suggested that rather than thinking about a bank , think of a banking ecosystem. The trick for banks is to think about the role they wish to play in that ecosystem and figure out which arena is right for them. Start with granular offering was Tom’s advice, and build on it – a bit like how Twitter did not invent the hastag. Yet Twitter created a platform that embraced the hashtag, and used it to re-order topics. The point here is that everyone is talking about ecosystems.
Financial Inclusion Requires Digital Inclusion:
Petra Hielkema from De Nederlansche Bank offered up a couple of noteworthy points:
- First was the usual blurb from a central banker regarding the need to stay safe and robust in an increasingly fragile world
- Next Petra talked about Accessibility – if you want to be financially included, you need to be digitally included
- Lastly, Petra gave the analogy of different types of bicycles are built for various purpose but in order to function they need roads. Similarly in financial services there are many products – Banks have the roads or the rails on which things run
3 Responses for Banks to Consider:
Are you a:
- Where you are aggressively seeking to be at the top of the food chain, eating up any competition – the predator
- Retreating into key areas and living off the specific products – the prey
- At risk of extinction
Banks are Innovators too…
Alexander Bazarov from Sberbank suggested a fourth category – a Dolphin, eating up the smaller fish, yet agile enough to dodge the sharks. The “secret” as he called it was that banks are innovators too. In the past Sibos events, Fintech companies and Banks were fighting. Nowadays they’re partnering. giving the example that banks have been using APIs for 10 years – but this time round, Fintech companies offer banks to accelerate the innovation.
Another panelist explained that the banks that lead are the sharks and everyone else is a cockroach.
4 Key Areas to Consider:
- Mobile Operators
- Social Platforms
Within each of the above sectors the key players know something that the others don’t know, but now these sectors are merging.
What’s the Difference between a Bank and a FinTech…?
Sounds like the start of a joke…!
- Fintech companoies have the ability to take chances, make mistakes and move quickly
- But financial services is a complex industry which is highly regulated. This aint gaming
- So while checks are necessary, banks lose agility as a result – e.g. vendor assessments.
- Alexander spoke about how despite the fintech challenges things are actually pretty good
- Things are not bad enough to spark dramatic changes – so, why change? And therein lies the challenge.
- Confusing regulations – sometimes asking a bank to increase customer protections on the one hand, and on the other making banks share data securely with third party providers
- Lastly, many banks have legacy systems and it aint straightforward to rip them out and start over
4 Key Challenges:
- Ability to adapt operating model
- Different regulatory jurisdictions
- Ability to attract talent
The moderator, Thomas Olsen from Bain & Company summarised as follows:
- Likely that banking will survive, but the question is in what mutation?
- Some banks will adapt new and different ways of doing things
- Banks will become diverse and involve new roles
- Cloud, DLT are in the works, and the banks that are ahead will be best able to define future
- Some banks will adapt and co-exist in the ecosystem, but need to define how…