Banking at the Crossroads

History tells us there are certain watershed moments. Banking is going through such a phase. After decades of building systems around products, the industry must now build technology around customers, and, in particular customer relationships. Also, the conversation with customers is changing from complex instruments to simpler products like value based checking.

Banking is going back to basics.

This is no easy task. It requires not just new technology, but a completely new way of thinking. It requires genius to be simple. Banking is becoming a simpler, leaner, more agile industry. The time to make adjustments is now.

Timing isn’t great. Margins are under pressure. Budgets are tight. New technology is expensive. Something has to give. Improving customer experience for organic growth is one challenge. Banks have to reduce costs as well and at the same time.

Where to start? We can’t manage what we can’t measure which means getting control of data. The market is rushing to embrace ‘big data’ solutions. Banks are awash with information. But it is often buried in individual silos making it hard to access when most needed. Plus the organization of that data reflects past questions not future ones.

The nature of data is changing – less structured; more volatile; more dynamic and more immediate. Not just numbers or words, but click-streams, noises, images, even presence offer clues to market trends and consumer preferences. Social networks lead the charge where banks have been slow to follow. Distributed Map/Reduce systems (like the open source Hadoop) provide new scalable ways to efficiently query this data, extracting intelligence and sourcing insight outside of the usual boundaries. Banks must perfect the science of search and analytics to manage customers, products, risks and operations. Only then will they have the tools to understand and service customers more creatively.

Once the data challenge is met, customer interfaces and channels should be revisited. Outbound marketing no longer works as before. Consumers tire of endless campaigns. We live in a world of expanded choices. Highly targeted and inbound marketing are the new priorities for banks attracting customers to their channels, whether social, digital or physical. Natural user interfaces can revolutionize the banking face to the markets, whether wholesale or retail, across tablets, smartphones, digital and physical media.

More insight at lower cost.

Let’s focus on costs. The trend towards simplicity reduces the need for complex processing and hybrid operating systems. Simpler piping within the bank facilitates front and back office integration, paving the way for paperless, effortless banking.

Technology deployment is another issue. The public cloud is anathema to many banks, but the economics of building and maintaining internal data centers is becoming prohibitive. Volatile markets no longer wait for new data centers to be built to support new products. Banks that don’t have some form of cloud strategy are placing themselves at a serious disadvantage. The cloud makes scale less important. Today it’s agility that counts.

Banking technology priorities fall into four main parts. Leverage big data. Build new technology around customer relationships. Simplify processes and systems and burst to the cloud – no easy task. Banking may be going back to basics, but the opportunities for genius and creativity have never been greater.