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Does the networked consumer imply incremental or fundamental change for banks?

A really interesting discussion with a group of banking
people this week about the impact of mobile and tablet computing on the banking
world.  I call this change the networked consumer, and it's a phrase that is meant to wrap up the whole discussion of the mobile internet and how it is affecting consumers attitudes to money, banking, relationships and life.

The take-away for me was that most of the people did not
believe that mobile was a fundamental change to the banking world, but just an
evolution in distribution.

That’s interesting as it is at opposites with my own opinion,
but then I’m biased as I think this is real change and it is fundamental.

So here’s the opposite opinions explained in a little more
depth and I’m interested to know your opinions too?

This is incremental

We have seen major technological changes throughout the past
decades from mainframe automation of the back office to desktop automation of
the front office.  Now, it is purely a
further evolution of change to see the internet and mobile developments giving
consumers the ability to self-serve and communicate 24 by 7.

For banks, this has demanded that we adapt, and we are doing
just that.  Our core systems are being
upgraded, we offer apps and mobile access, we are incorporating Facebook and Twitter
amongst our services and we are generating innovations in our other outlets –
branch, ATM and call centre – to ensure that this is all delivered

Therefore, we have not underestimated mobile internet
demands for change and, incrementally, we are upgrading to maintain
competitiveness in delivery.

This is fundamental

Banks historical structures are being fundamentally
challenged by technology.

It is not just mobile, internet, networks or computing
change that is creating this fundamental change, but the ability this change
gives to empower the customer.  That is
why so many industries have collapsed over the past twenty years – books,
music, films, entertainment retailing being the most obvious industries – and goes
further and deeper than this. For example, anyone, anywhere can now connect with
anyone else, anywhere else.  The whole
planet has become connected.  That is the
big change and banks are only responding to this change slowly and
incrementally because they have been protected from that change by their regulatory

If banks did not need licences, they would see far more
change.  Even with licences, new models
of finance are emerging to subvert or displace the need for banks such as Zopa,
Wonga and Bitcoin.  In other words, banks
will be dead meat if they truly believe this is just incremental change.

What do you think?

We will be debating this in depth at the opening session of
Innotribe at SIBOS on Monday 16th September in Dubai so please
provide views here, or there on the day, and we will see the truth. 

Innotribe opening plenary: The future of Money, the
evolution of business models

Monday 16 September
09:30 – 10:30
Innotribe – INN

Since Sibos Toronto in 2011, the "Future of Money"
has become a standard fixture of the Innotribe programme. With standing room
only at Sibos Osaka, this session is a perfect way to open our programme – the
first stop on our journey together.

Our industry is being challenged by aggressive new-comers
who experiment with creative strategies and dramatically different business
models. How can banks react? How can we make the ‘cake’ bigger for everybody?
Taking inspiration from other industries, there are several choices: unbundle
the current model and focus on excelling in one specific area, transform our
institutions into long-tail business model organizations, or partner with the
newcomers in the business.

In this session, we will identify how the current model is
being disrupted and how this impacts costs and revenues. We will co-create the
corporate banking business model of the future, using the Business Model Canvas
methodology of Alex Osterwalder (www.businessmodelgeneration.com).

To guide us, we have selected six dimensions of influence:
social and mobile, infrastructure (technology), transparency, transaction
costs, organizational models and big data.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Bill Cook

    I agree with your views Chris. This is fundfamental change which many large banks have attemoted to resist due to it taking them out of their comfort zone. They can’t resist. It is global, continually developing and banks and other FS organisations require a massive change in culture and attitude if they are not to lose out to those who can adapt and/or have created new business models!

  • Tim

    It amazes me that banks, or any industry, doesn’t recognise that this is a fundamental shift in power from corporate to consumer. Mobile is the last step in the digital revolution, taking digital into the real world. This will change the value proposition for every industry, the only question is how. More importantly it heralds a shift from the incremental, analytical to the experimental, evolutionary approach. From a world based on knowns to one based on the unknown. It is the businesses that can adapt to this ‘lean startup’ approach that will be tomorrow’s leaders.
    I suspect that today’s banks won’t be able to adapt, and they will become utility providers to tomorrow’s, consumer focused, financial service providers.

  • Mobile doesn’t have to be a fundamental change right this second, but the implications of the networked consumer do.
    My former colleagues view mobile app as “another channel”. Every 5 or so years, another channel comes along, and it gets a further subset of functionality to reduce the branch impact. The “snack, lunch, dinner” paradigm.
    My personal view is it’s this type of thinking that ruined Kodak, Blackberry and potentially Microsoft. The core business is profitable, topline is negative but not much more than the market, and bottom line is healthy.
    If your product is broken, customer sentiment through the floor, and account switching is about to get easier than ever. That’s a recipe for a slow decline followed by a sharp trip into being obsolete.
    Banks have been great gatekeepers of financial services, but I honestly think that trend is starting to be reversed. By innovative incumbents much more than disruptor’s, but also market factors like selling off assets to shore up balance sheets (Northern Rock / Virgin).
    I agree with Tim, I think we’ll see a “wholesale / retail” split in the way the Telco sector in the UK did in the early 2000s. Either banks will open up, or the regulator will break them up.
    “Agency Banks” are already a strong source of revenue in corporate banking….