I find it interesting that so many commentators write about banks being head-in-the-sand ostriches, ignoring the need to close branches and being slow to innovate.
Banks are slow to change, but they are not slow to innovate.
Banks in many economies can see the decline in branch usage and are actively closing branches whilst investing in new digital structures.
The real challenge is not that banks have their head-in-the-sand but more that they see digital incorrectly.
All banks I talk to see digital as important but, as Lazaro Campos stated at our meeting in Stockholm recently, they fall into two camps: those who see digital as a channel and those who see digital as a foundation.
My mantra on this blog for years (almost a decade now) is that digital is foundation and not froth. It is core and the underpinning behind the bank’s new structure.
Humans, offices and branches sit upon that digital core.
I’ve believed this for a long time and now, more than ever.
As we see banks appearing with digital at their core – mBank, Fidor Bank, Atom Bank – we will see incumbent banks respond, and some already are.
Just look at Bank of America’s use of Cardlytics to offer proximity based targeted marketing offers or Deutsche Bank offering customers an app store for all their financial needs, with over 150 apps in place today, and you can see that incumbent banks are not placing their head-in-the-sand.
In fact, many are up for the digital challenge and their biggest issue is not the new, nimble competitor but their own, internal legacy structure.
Getting rid of old technology is far more a barrier to digital banking than competing with the new business models.
And that is where incumbent banks will succeed and fail.
Ensure the banks’ structures can evolve to digital at the core or, if they cannot, create a new digital bank.
That’s why BNP Paribas is investing heavily in Hello Bank and why BRE Bank bit the bullet and launched mBank.
If you cannot evolve, transform.
If you can evolve, do it fast.