The following is a guest post from Gys Hyman, Principal – Deloitte Digital, Deloitte Consulting and Thomas Jankovich-Besan Principal – Doblin, Deloitte Consulting LLP
Moving beyond the legacy models
Digitally enabled businesses have changed entire industries – music, news, travel. Now the banking industry is at a crossroads. For years, banks have sought to increase their offerings through geographic, product, and channel breadth. Now, the historical infrastructure originally built to push core banking services through physical branches is buckling. Each successive channel and offering has been layered onto an aging core infrastructure that is no longer able to integrate and respond to customer demands, nor compete with nonbank entrants. The cost is too high and the functionality is suboptimal.
Customers have become undeniably more sophisticated in their acquisition and use of financial services products. They both expect and demand smarter, more transparent, seamless and connected experiences. Technological advances and regulatory changes have lowered barriers to entry and allowed non-traditional players into banks’ backyards to meet these demands. Such entrants are nimble, unchallenged by legacy platforms and banking-specific regulation. New entrants have only accelerated the pace of change in technology and customer expectations, compounding the negative and costly effects of legacy banking infrastructures, onerous regulation and layered channel engagement.
Reimagining what a bank is
As consumers have increasingly demanded customized services and unique experiences, a patchwork quilt of banking products has evolved that is fragmented, opaque and cumbersome. While data mining and analytics now allow for tailoring of offerings, their value can only be realized by a banking platform equipped to support such powerful offerings and architecture that is agile enough to adjust as expectations change. With all the offerings in the world, a consumer will still likely choose a product with fewer features if its functionality better fits his/her individual needs and expectations. Simply having “more” is inadequate.
Amid all of these choices, there is value to be found in helping consumers to sift through the noise to understand the products and features best suited to their individual goals. Imagine a world where there is no such thing as a bank account, credit card or checkbook. A world where financial services are simple and engaging, anticipatory and continuously evolving, trustworthy and transparent. A world where financial services are celebrated, not vilified, and where they connect with their user at a very human level – meeting not just their expectations, but goals users haven’t yet verbalized as well.
To compete effectively, banks should break free from existing orthodoxies around why people bank and ask a fundamentally more basic and comprehensive set of questions: How does money and value flow into and out of consumers’ lives, and within and across their communities? Where does money go and what is it being used for? How have consumers grown accustomed to operating with technology across other areas of their lives that impacts how they want to operate now? What problems can we solve for our customers?
Addressing these questions requires insights that go beyond current systems. Key capabilities will likely include:
- Smart products that self-optimize around customer goals
- Predictive analytics that anticipate what lies ahead and helps consumers prepare for the future
- Levels of security and trust, where consumers are not charged for the mistakes they make
- Understanding user models that help consumers build better habits
- Total transparency, so consumers know what they pay for and what value they receive in return
Rising to the challenge
Supporting these capabilities requires re-platforming banks. Continuing to tack new services onto an aging core infrastructure is likely not a sustainable approach. Banks should embrace simplified products, processes and architecture. Simplified products mean a full range of low-cost customer-focused retail and corporate transactional offerings underpinned by a loyalty scheme and voucher model. Simplified processes means highly automated, rules-driven, self-service processes that have minimal human intervention, driving down operational costs and improving turnaround times. Simplified architecture means an anywhere, anytime, self-service digital experience, open APIs, and a component-based design using cloud solutions. New entrants not only embrace these principles; rather, they are designed with the explicit purpose of employing them. For banks to do the same, they must be re-platformed. Utopia is possible, however banks need to move beyond the legacy models.
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