By Andy Haigh, Head of Banking and Capital Markets, EMEA, and Jeremy A. Donaldson, EMEA Managing Director, Banking and Capital Markets, DXC Technology
The recent bank bailouts and buyouts have created an atmosphere of concern and uncertainty in the banking industry. Additionally, traditional banks face significant challenges amid changing consumer behaviours, an economic landscape still recovering from COVID-19’s impacts and competition from born-in-the-cloud challenger banks. In this increasingly demanding environment, bankers have opportunities to fight back by investing further in their digitalisation programmes.
AI (artificial intelligence), data analytics and automation technologies offer opportunities to transform customer experiences and automate repeated processes. With these tools, banks can supercharge their operations by delivering relevant data and insights to the right people at the right time and speed, optimising and accelerating decision-making. At the heart of this transformation is data. Properly sourcing, managing, interpreting and protecting data will be the key ingredient for banks to grow, manage risk and make strategic investments for years to come.
With so many opportunities within the sector, here are five data-related trends that are shaping the future of banking.
- Banks must create digital operating models that fit the modern customer experience.
For banks to remain relevant to a new generation of tech-savvy consumers, they must focus on digital customer journeys and how people are accessing and experiencing their products and services. Banks are moving as quickly as they can to power this customer experience, but as they do, they must continue adopting technologies with the latest security protocols. The agility that new technology brings also enables banks to launch new products and services quickly, extend customer contacts, make business processes more efficient and improve connectivity with ecosystem partners. For example, Open Banking protocols allow data to be exchanged (with the customer’s permission) among ecosystem players to drive greater value, benefits and innovative offerings for the customer.
Many traditional banks are making headway, including JPMorgan Chase, which recently announced plans to open a digital bank in Germany by 2025; Lloyds Banking Group, which outlined a three-year digitisation strategy; and Santander Group, which is utilising big data to drive customer experience and digital transformation.
Deriving insights about the customer’s experience will continuously enhance what this experience looks and feels like, creating a virtuous circle and, ultimately, increasing customer loyalty. To make all this happen, banks must also re-assess their operating models: Easier and better data integration, more efficient processes, faster response times and plug-and-play (PnP) platforms make for a more resilient business and enable faster monetisation of the available data.
- Protecting data from cyberattacks will remain a top priority for corporate banks and their customers.
At the boardroom level, the C-suite will continue to prioritise cybersecurity, knowing that any breach would have disastrous impacts on their reputation and, by extension, their bottom line. The penalties associated with failing to secure the data entrusted to them as they evolve their business models are too great for banks to take this matter lightly. Therefore, banks will continue to invest heavily to protect against cyberattacks, data breaches and financial crimes.
As banks transform their businesses, they increasingly partner with financial-technology companies (fintechs) to optimise payments, underwriting and app development. Some banks even offer banking-as-a-service (BaaS) to fintechs, giving them opportunities to take advantage of the bank’s charters and deposit insurance while providing more nimble services to consumers. However, it is essential that banks have the right cybersecurity controls in place to protect themselves and their customers’ data when partnering with less-regulated companies. Equally, fintechs looking to partner with banks need to prepare for the complex regulatory, cybersecurity and risk-management obligations of banks if they are to establish successful relationships.
- Sophisticated,secure identity management will help banks manage their cost bases and personalise consumers’ day-to-day transactions.
Banking communities in Europe, the Americas and Asia are moving quickly to roll out new digital platforms. Digital Identity (DI) management is key to making them secure and efficient. Indeed, there is great interest in the work DXC Technology has done in Norway to implement and run the BankID identity scheme for the country. Relying on trusted and verifiable sources, BankID has dramatically increased the speed and reliability of validating identities and processing transactions across all areas of banking in Norway—from payments to account openings and asset transfers. This work has provided deep data-driven insights into what is possible in digital banking when infrastructures, ecosystems and business processes align, and it is helping lay the groundwork for tomorrow’s model.
Elsewhere in the market, secure identity management is facilitating moves such as Western Union’s (WU’s) integration of Mambu (software-as-a-service cloud banking platform) into its new digital-bank platform, giving WU full control to deploy new banking products and services that are easy to configure and integrate with external applications. In a single native mobile app, customers can now open accounts in minutes—in what is viewed as a move to transform the transactional relationships WU has with its customers into closer customer-centric connections.
- Data will be at the heart of proving the effectiveness of sustainability investments.
All businesses—small- and medium-sized enterprises (SMEs) in particular—are transforming to ensure their operations are sustainable. The scale of the task can seem overwhelming. Banks help remove some of the angst by providing critical financial vehicles to help SMEs on their sustainability journeys, as well as fund public-private partnerships (PPPs) that further the sustainability agenda.
As well as being the right thing to do and a key part of the corporate social responsibility (CSR) banks hold, such investment will be increasingly welcomed by customers who are more discerning of sustainable business practices. Many banks are creating ecosystems that bring together a range of relevant organisations, including specialist ESG (environmental, social and governance)-related public and private finance suppliers. These platforms can provide and exchange the data required to monitor progress and create innovation.
Demonstrating the impacts of banks’ contributions to such causes will depend on their abilities to monitor, track, report and (therefore) adjust their initiatives for maximum effect. This can only be achieved with data: Banks will invest in the proper tools, processes and reporting environments to manage the impacts of their ESG-related investments effectively.
- Banks must reinvigorate their hiring practices to ensure they reach the talent who can take them into the future.
Multiple scenarios impact staffing needs. These include:
- Increasing reliance on digital technologies,
- Transitioning to platform-driven businesses powered by data,
- Shifting focus from shareholder relations to stakeholder relations,
- Renewing emphasis on purpose-led strategies.
With such a wide range of issues impacting a bank’s day-to-day operations, proper staffing is as vital as it is nuanced and requires upskilling existing staff as well as hiring new employees to plug skills gaps and service growth areas.
Of equal importance are the expectations of the people being recruited. Younger employees work and communicate very differently than those who are accustomed to historic “analog” banking operations. To attract and retain the best talent, banks must invest in practices and technologies that speak to this audience and mirror the digital offerings offered to customers. Data gleaned through recruitment processes and staff surveys will ensure banks stay on track.
The banking industry is under renewed scrutiny. Not only are banks’ investment choices and business dealings under heightened oversight by regulatory agencies, but customers are more selective about where they choose to secure their personal finances. Banks must seize all opportunities to digitise their operations securely, thereby improving their offerings and enticing the next generation of bank depositors.
Whether creating seamless digital customer experiences and securing their identities, investing effectively in ESG initiatives or ensuring staffing needs are met, banks’ successes and/or failures in the coming years rest on their efficient use of data.