It’s that time of the year when market watchers’ 2022 predictions start to become reality or fade away as fast as the festive vibe in the first week of January. Then the analysts turn their attention to find the dominant trends for 2023.
Close collaboration with partners – in particular fintechs – is instrumental for banks
Will it be tokenisation? The metaverse? A new revolutionary payment mechanism? Or something else more abstract?
The opportunities are endless… but one concept dominates the retail banking world and continues to be discussed year in year out: how can banks be future-ready? This ever-evolving issue remains a healthy challenge for global and local banks alike.
So what’s the secret to success?
On the simplest level, we believe a future-ready bank is one that stays digitally relevant to its customers and resilient through changing times. But that’s a multifaceted challenge, so let’s unpack what that really means in practical terms.
The last decade has seen consumer banking evolve at a rapid pace – with technology firms and fintechs embracing regulation and innovation to adapt to ever-changing customer expectations at breakneck speed.
During this period, incumbents across the banking industry have invested heavily in digital transformation to close the gap with challengers. It is reassuring to see that digital teams are no longer treated as a standalone department in a bank; they are working seamlessly inside organisations – very much part of the vital machinery.
Globally, banks’ ambitions to be future-ready seem boundless, as the sector’s investment in digital is expected to increase in coming years. The global retail banking industry is set to increase its spending to £263bn in 2023, up from an estimated £250bn in 2022.
Amid this backdrop, I am eager to see the next evolution for both incumbents and challengers unfold – how to manage human-centric experiences to achieve the perfect combination of face-to-face services alongside digital interactions. We believe finding the solution to this unresolved problem is the key to building a “future-ready bank”.
So, what is the formula for creating a future-ready bank? Apart from creating tailored and holistic relationships and experiences, building a bank’s resilience is a cornerstone. The more resilient banks are, the higher the likelihood that they will be able to stay relevant through volatile times.
I recognise four particular areas which banks need to focus on to be resilient and thrive: connected ecosystems; a future-fit workforce; investment in technology; and reputation and integrity. Let’s take each one in turn…
- Invest in technology
Investing in the right technology is clearly paramount in building resilience, especially for a retail bank.
Technology and operational risk will continue to be an ever-evolving challenge as the bank of the future faces the tough balancing act of pivoting away from siloed systems to fully modular cloud-based solutions, while simultaneously ensuring operational resilience around the clock.
This challenge is apparent in the large scale of rogue cyber activity taking place – 63% of financial institutions experienced an increase in destructive cyberattacks in 2022, an increase of 17% from last year in the UK alone. Bolstering cybersecurity defenses to protect against business email compromise fraud and social engineering scams, for example, must be a priority for banks and requires continued investment.
- Nurture a future-fit workforce
Financial turbulence and the recent pandemic have taught us all about the need to be flexible and adaptable. Resilient employees today – and the workforce of the future – all require future-proof skillsets; some of which do not exist today.
For example, the skill needs of the financial services workforce have changed an average of 25.7% since 2015, according to the Financial Services Skills Commission. It’s striking that this data highlights a 75% overlap of the top skills today compared to merely a few years ago. In the fintech space, the fastest growing skills were in operations, artificial intelligence (AI), customer experience, cybersecurity and in fundraising, according to the Robert Walters Global Fintech Talent Report.
Investing in soft skills is equally important in building a “resilience toolkit” in a future-fit workforce that empathetically blends the human touch with digital service needs. This will not only be a differentiator, but also foster operational resilience in rapidly changing times.
- Connected ecosystems
Gone are the days when banks should feel threatened by collaboration. Having open platforms and the ability to connect customers across industries is paramount in a global and digital world where customers want the best of all services everywhere, all the time.
The days of a monolith providing its own bespoke products and services are behind us. For example, in the UK – according to the Open Banking Impact Report – more than six million people, about 10% of the adult population, regularly use services delivered through open banking.
Rather than constraining consumers exclusively to a single bank’s products and services, our sector must explore new partners to offer customers the best solutions built through smart collaboration.
- Reputation and integrity will always matter
Vitally, reputational and financial strength will be a fundamental pillar of resilience over the next decade. An impeccable balance sheet and an even more impeccable reputation will be essential to winning customer trust in the face of economic and geopolitical uncertainty.
Ultimately, retail banks can heavily invest in technology and do all the right things to avoid extinction. But the journey to build a future-ready bank cannot be confined to banks only. Close collaboration with partners – in particular fintechs – is instrumental for banks to stay resilient and retain client bases for the next decade to come.
Source via: https://www.fintechfutures.com/2023/01/building-a-future-ready-bank/