By Elliott Limb, Chief Customer Officer, Mambu
The future of banking is a moving target. These are the challenges and trends we see as making the biggest impact in the next year and beyond:
Top three challenges
1. Building for a future you cannot predict:
In this area of continuous innovation, how can we deliver the best customer experience and build for the future we don’t know. Today, to support their business models, companies need to build systems that they cannot even think of. Yet such systems may eventually become the BAU operation in the next 3 to 5 years.
2. Software-as-a-service is still in its early stages:
The answer to controlling a cost model that is managing risk and supporting growth, is a move to a cloud-based offering. However, there is a lot of uncertainty involved and businesses are waiting for evidence and proof points to trust that a fully SaaS model is going to provide the solution. While the cost base is obvious and a continuous delivery model is what they are looking for, many fear that there is a trade-off to risk. Besides, this is driven by the regulator positioning, and therefore differs per country.
3. Too many choices
Even when a business chooses SaaS and the regulator supports it, businesses find that the choice of vendors, architecture, approach and technology stack is too vast. Finding the right fit is becoming increasingly difficult.
Big impact future trends
1. Speedboats becoming battleships
Speed boats are the digital banking offshoots of traditional financial institutions. A lot of the composable banking and collaboration is happening in the start-up and neo-bank space, but the larger banks are launching or have launched “speed boat” digital banks to prove the model. Over the next few years, these solutions will become the central process of the bank, removing the legacy and on-premise monolithic technology stacks and related business architectures with an agile, fit for purpose and composable solution that is adaptable to future business needs.
2. Growth of the customer-centric approach:
We really are seeing the customer put at the centre of business models and decision making. The entire concept of a return to relationship banking (possibly with a commoditised product delivery around it) is something that many banks are starting to embrace with their digital offerings. Artificial intelligence will play a more important role in this and it will be very interesting to watch customers get what they need, when they need it and how they want it.
3. Collaboration throughout ecosystem
This is the power shift in the market. Players are realising that purely technology collaborations or “bank-led” collaborations are not enough. There has to be alignment from strategy through to value realisation in the entire ecosystem for collaborative models to work. This plays a role in developing the support to the customer experience and the ability to deliver better products faster at a lower cost will be key.
4. Flexibility of infrastructures
Financial services today bears little resemblance to business of old. Composable business architectures is the key. This is how the market will deliver a framework for collaboration in order to support customer-centricity. We also call it ‘composable banking’ which refers to the quick and flexible assembly of independent systems. Having an architecture where everyone is “the best” at what they do, but with an easy integration that allows banks to build solutions and products for an unknown future is going to be a big differentiator.
What’s next for retail banking?
Banks have realised they cannot predict the future, there are too many unknowns in terms of increased speed of innovation, customer expectations, a shift to the cloud, new market dynamics with challengers and new market entrants, shifting regulatory landscape and new technology focus (AI, IoT, etc.). These drivers put us in a position where banking is no longer about delivering basic services, having the most suitable (or coolest) channel or lowest costs. Right now, it is about delivering the diverse, individual customer experiences across a wide range of demographics and geographies, with very different and often complex demands, that the market has not seen before.
We predict an acceleration over the next 12 to 24 months. The first movers in the top tiers have already launched their speedboats and are seeing the benefits in terms of innovation, time to market and enhanced customer experience.
Greater focus on customer intelligence
Historically, this is an area at which banks have been poor, however with the decade long wait to understand what to do with big data, the rise of the Chief Data Officer and the AI models that facilitate predictive modelling of debt defaults (i.e. less risk on the loan books), spending patterns (targeted sales and savings) and many other use cases are offering a fascinating insight – data itself was never the key, analytics was.
That realisation and shift in focus will drive the move to personalised banking and will become one of the main drivers of banking transformations that the industry has ever seen. Having a business and technical architecture that supports this unavoidable acceleration of innovation and gives flexibility in delivering future, currently unknown, customer experiences will be the platform for growth that banks will need.