American psychologist Nathaniel Branden once said “The first step toward change is awareness.” If his hypothesis is accurate, recent research suggests a large percentage of banking professionals have a long way to go if they are to safeguard their institutions in the face of digital disruption.
Published in October, IBM’s “Banking Redefined” report highlights the striking gap in performance perception between the 1,060 executives questioned for the study and the customers they exist to serve.
Headline statistics include the fact that 62% of bankers think they are delivering excellent service to their users—a belief only shared by 35% of customers. That disparity was even more pronounced in the area of wealth management, where only 16% of customers considered their experience to be excellent, compared to 57% of bankers.
The trend continued across multiple lines of questioning; from customer loyalty, to the personalized nature of services, banks, and the people who use them clearly have different definitions of greatness. As the report puts it, “bankers surveyed seem overly confident that they are meeting customers’ expectations.”
Another interesting finding to come out of the survey was bankers’ belief that 96% of customers see them as being more trustworthy than non-bank competitors. In reality, only 70% of customers felt that way, and IBM’s prescription for banks throughout the remainder of the report hints at the likely reality that as more and more people manage their finances through digital platforms, confidence in non-bank services is liable to rise steeply.
While recent years have seen a growing tendency to view collaboration between banks and FinTech innovators a sensible way forward for financial services, IBM’s report is notable for its unequivocal insistence that such a coming-together is the only path for progress. It states, for example, “Traditional bankers face a stark and, for many, existential decision. They can work to defend and protect themselves from an emerging onslaught from FinTechs and others—or they can embrace them. The most successful banks of tomorrow will orchestrate broad portfolios of partners to deliver compelling banking experiences and services to their customers.”
By incorporating FinTech innovations, claims the report, banks have the “opportunity to position themselves at the epicenter of evolving ecosystems, overseeing and orchestrating a broad range of best-in-class services for the benefit of their customers.”
While IBM’s vision of the future is plain, the paper also paints an interesting picture of the current landscape. The report separates existing banks into three categories, namely “Doers”, “Talkers”, and “Blockers”. The definitions are self-explanatory, and IBM categorizes 60% of banking organizations in the latter two groups. The remaining 40%, “Doers”, are marked by investment in digital technology, a firm grasp of how data can enhance their business, and robust cross-channel customer experience delivery—not to mention the fact they “outperform peers in both revenue growth and operating efficiency.”
Perhaps the most intriguing stat in IBM’s publication, though, is that 45% of global banking execs believe that partnerships and alliances improve their banks’ competitiveness. The number is not insignificant, but still suggests that more than half of today’s incumbent financial institutions feel otherwise.
How banks choose to interpret such numbers is up to them, but they may be wise to reflect on them in light of one parting quote from IBM’s report: “Banking executives and employees alike will need to recognize that transformation will be a permanent condition. There is no end state. The bar will always be rising, goal posts shifting, innovation deepening and partnerships evolving. Change will be the only constant, and those that cannot adapt quickly enough will face marginalization and decline.”