New research from Cisco details how retail banks can capitalize on the $405.3 billion dollar opportunity available with digital banking.
“The roadmap to digital value in the retail banking industry” describes the opportunity available through digital finance, how banks are currently doing, and what is preventing them from taking a larger slice of a $400 billion pie.
There’s plenty of pie left untouched in the plate. In 2015, financial services only captured only 29 percent of it.
Banks recognize the opportunity and are beginning to access it, but it’s a measured process, Jason Bettinger said. Mr. Bettinger is the director of financial services for Cisco’s Business Transformation Group.
“(Many) retail banks are working to digitize, because there’s huge rewards,” Mr. Bettinger said. “But they are moving not nearly as quickly as they would like.”
Cybersecurity concerns are the biggest reason banks are moving gingerly ahead, Mr. Bettinger said, as 71 percent of respondents said cybersecurity was the biggest hindrance to innovation.
For banks cybersecurity is a minefield. Poor legacy infrastructure makes add-on solutions at best patchwork options. High profile breaches also make them hesitant.
Perhaps taking a more positive stance will help, Mr. Bettinger suggested. By considering digital banking as a growth engine and competitive differentiator, they may be more proactive. One in three see digital adoption as a growth engine while 44 percent view it as a competitive differentiator.
Adoption is indeed slow but it is happening, Mr. Bettinger said. At 29 percent they are capitalizing better than some other sectors because they are reacting to competition from fintech startups and established companies like Apple and Google.
“The evidence points to now being the time to change,” Mr. Bettinger said. “We also believe that bank and other financial services institutions can grab a much bigger share of this value stake that’s out there.”
Banks have plenty of options, Mr. Bettinger explained. Branches and physical distribution channels continue to evolve with more self service kiosks, personal tellers, and the expansion of wireless capability. The increased use of tablet computers allow staff to engage with customers in new ways. Those customers can receive relevant messaging based on what the banks know those customers are interested in.
Technology is also changing the ways staff interact both with clients and each other. Staff in multiple locations can meet. Specialized personnel can video conference with clients across the country or the globe. This is an especially attractive option to serve clients in remote parts of regions where it can be inefficient to deploy staff full-time.
“You cannot have all of the right expertise available at a physical branch,” Mr. Bettinger said.
Many basic transactions can be executed solely by the customer without any staff help, but converting those to mobile-friendly processes favored by those customers can take time and effort. Compare that to fintechs who can build systems from scratch instead of struggling with converting and amalgamating systems often created in an earlier era.
Transformation and digitization of the banking industry will come in three waves, Mr. Bettinger suggested. The first is an enablement phase where banks start by focusing on their top effective areas. Then comes the differentiation phase where they separate themselves from their competitors based on perceived unique strengths. They finish with defining new business opportunities.