As the Internet has matured and evolved, so too have many business models alongside it. For example, many industries have found that they’ve had to adapt in recent years to accommodate the power shift that social media has afforded consumers.
Technologies such as cloud computing have enabled innovation in many sectors, thanks to its accessibility when it comes to price. Add to that big data and the insights it allows when it comes to customers and business intelligence, then throw mobile tech into the mix, and what you have is an exciting and competitive landscape in which new players are constantly emerging.
The banking industry is no different and recently, new entrants into the sector have threatened to disrupt the safe, comfortable niche enjoyed by the main traditional banks through digital.
Taking a Digital Advantage
This is made possible by disrupters taking advantage of everything that digital offers, such as social media, big data, and mobility. While the use of the latter in banking is something that we’re all aware of, not many people draw a parallel between banks and social media. However, it is thought that banks, or financial services in general, can benefit substantially from social.
With this in mind, if traditional banks are to survive the threat from digital disrupters, then they must adapt to suit the highly technological, connected era that we live in. It’s also necessary for banks to:
- Utilize big data effectively in order to gain additional insight
- Become further ‘involved’ in the lives of customers through social media
- Develop multichannel delivery models
- Leverage existing, valuable assets such as data sets
- Offer 360-degree integrated financial services
Of course, in order to do this, banks do have to change the whole culture surrounding how they work and interact with customers. This in itself is not a particularly easy feat, as many banks could be described as being somewhat “set in their ways”.
Forward-thinking and Innovation
However, forward thinking and innovation are key if traditional banks are to stand up to the threat posed by newer concerns.
A 2014 report from Temenos, titled Succeeding Through the Digital Revolution, has theorized that banks do have the ability to withstand the storm, especially because they have valuable existing assets such as vast customer bases and rich transactional datasets.
“While much of the fatalistic talk about banks’ futures is overdone in our view, the threat from new disruptive, digitally-enabled business models is real and banks need to act quickly if they are to succeed in the digital age,” the report stated.
It does seem that the time is ripe for change in the banking industry, not least because of the economic turmoil felt in many countries over the past few years. The market is all but begging for a new approach to financial services and this is driven by enabling technology.
Emergence of New Players
To some extent, this has already been illustrated with the emergence of these new players alongside other factors such as supermarkets offering such services. For example, in the UK, supermarket giant Tesco now offers a range of financial products to its customers. There are also of course, online-only banks that have also emerged and proven a business model that taking a new approach in the banking industry can indeed work.
Any business in the digital age that doesn’t become agile and innovative is at threat of being ousted by those that are more forward-thinking and while traditional banks have a highly established model, this is no guarantee of survival in the future.
With this in mind, it’s fairly safe to say that yes, traditional banks can survive the entry of digital disrupters, but in order to do so they will have to adapt – and fairly quickly. However, it’s worth pointing out too that new entrants into the sector will have to invest a high level of capital and understand the high operating costs that banks tend to have if they are to successfully enter and remain in the banking industry.
What’s key though is investment in IT, an understanding of the consumer and business landscapes when it comes to financial services, how to utilize data, and how to successfully connect with customers through multichannel platforms.