Can You Become a “Young” Bank

By: Guy Clapperton
June 2017

Guy Clapperton

senior journalist
in the UK

Guy Clapperton is a senior journalist in the UK. He has written about technology and business since 1989 and has been found in the pages of the New Statesman, Guardian, Times and many other publications, both specialist and mainstream. An occasional broadcaster on the BBC, he is currently editor of Professional Outsourcing Magazine and has written a number of books on the intersection between technology and business.

The traditional banking institutions have been established for centuries. There is now a new breed of ‘young’ companies which are trying to get involved by supplying a customer focused mentality, moving away from the product focused mentality of their predecessors.

 Perhaps “young” isn’t the right word. It offers up the idea that only kids want to operate in a customer-centric way, as if they were in charge and define the next generation of banking. It assumes everyone else is more than happy with the status quo. This is misleading; remember, fifty-somethings are just as capable of using their banking apps and changing their bank when they are dissatisfied. Being a ‘young’ bank, doesn’t equal young customers.

 However, banks can look staid and old-fashioned and there appears to be little need for a bank to appear young.  Take the idea of apps as a starting point. Whisper it quietly, don’t alarm anyone…but banks aren’t actually any good at apps. Or quite a lot of other things for that matter.

 Third parties emerge

The days of doing everything by yourself are gone. There is third party expertise to make a lot of things easier. Apps are one such area but other mission-critical elements of the banking industry are also best carried out by other providers throughout 2017 and beyond. Analytics, for example, are most useful if they are carried out in real time and the tools to make this happen are brought into the banking environment rather than developed in-house.

This is true of analytics, mobility and just about everything else that turns an organisation from an old-fashioned business into a modern, customer-centric digital enterprise. The reasons are, generally, twofold; firstly a lack of resources or secondly, a lack of inclination to develop these technologies in-house. In order for this to work, the entire banking organisation has to undergo a cultural change.

Cultural change 1:  banks can no longer be product led

There are two stages to the cultural change which needs to happen to the banking industry. The first has nothing to do with technology except in that it is a reaction to the possibilities the IT has opened up. This is the move away from being a product-led culture. Consider how a manager measures profitability; they analyse which products have sold best, which salespeople have sold them and through which channel the transactions happened.

This face of banking has quietly gone away. Customers now inform themselves and consume products and brands across a wide range of touchpoints; they may check the details of a mortgage or loan on a website or by picking up a leaflet in the branch, equally, they could apply online, pick up the phone, or opt to do it in-branch.  Customers are increasingly channel-independent meaning the old measurements are becoming rapidly uninformative. You can ask the customer where they first heard about a particular offering if you like; the correct answer is to already know it is likely they neither remember nor care.

The banks, frankly, can no longer afford to be product-led in the way they were. At the moment they are better off considering whether the customer, rather than a product, is profitable to them; as the industry evolves it is going to become a business imperative. This means changing the technology and allowing open API.

Cultural change 2: banks need to collaborate

Yet, in order for banks to become less product led, a separate cultural shift must happen first. Banks have had good reasons in the past to put their information and processes into silos. They need ultimate security, and the customer needs to be super-aware of this.

The easy part is to agree on the need for new technology and agility in principle, and also to open up the possibility of open APIs. This is a crucial part of the process as an API-based approach leaves the core of the banking technology untouched; protecting legacy systems rather than opening  them up to conflict, preserving existing investment.

This collaborative approach is going to be a major way to accommodate all of the developers who could conceivably bring their skills to bear, and turn an analogue bank into a digital entity, with the customer right at its heart. APIs are certainly the most common technology to open data up, subject to the right security protocols of course.

Technology change 1: Facilitating the above

Both cultural changes are only enabled by the right technology, which is where SunTec’s Xelerate can be a massive boon. This is a suite of products for financial services organisations that take the digital elements of service and offers them to developers so they can become powerful ingredients of new service apps, smoothing the professional lives of all who use them.

One example is from one of the top five global banks (we can’t name it) that used Xelerate to consolidate billing platforms across its 58m customers served by 6600 offices. The savings were immediate and the overhead of implementation far faster and lower cost than the traditional methods. Using only five SunTec personnel (the rest were the bank’s existing IT staff, this is not a thinly-disguised cutting measure) and three weeks of training, the organisation slashed implementation costs per country by 81 per cent. Another example is the US bank that consolidated its customer view and reported a 300 percent return in efficiencies. The benefits are real rather than theoretical.

Accounting for profit

It’s important to clarify that the whole banking culture changes when this sort of system is implemented. If the customer, instead of the product, is treated as a profit and loss centre in their own right, the partners will need a share of any profits as well. This isn’t how banks normally work so there will be a need for another partner to knit all of this together into something coherent.

The customer is increasingly where they always ought to have been, at the centre of the transaction rather than being subjected to a patrician bank as used to happen previously. This was essential in its day because of security and notions of service. The landscape has changed: the customer has to be able to set the agenda and feel in control of his or her banking through the devices he, she, or they, in the case of corporate banking, prefer.

It’s not about being “young” – it’s about being a 2017-and-beyond-shaped bank. And if your institution can’t or won’t do it, it may not be around for very long.