by Joe Mendel –
The financial services market is highly competitive and is encapsulated into a financial ecosystem that has its unique set of rules and operating circumstances. The competitiveness of banks vying for market share is fierce and will continue to be for the foreseeable future.
Competition for valued customers is lively. Technology solutions exist to maximize the value of data leveraged to create a competitive advantage and grow the base, creating a more profitable financial services organization.
Banks are evolving away from the old “banking as a product” paradigm, through the recent “banking as a service” model, to ultimately a “bank of the future” model. They can access and leverage vast amounts of data to analyze and react to the behaviors of customers and prospects within certain targeted personas and market segments. Blurred lines of embedded payments and finance are incorporated into everyday life interactions within banking as a lifestyle.
Four Basic Questions for the Bank of the Future
RCG Global Services Financial Services Group sees eight themes for data excellence that will drive growth opportunities. The eight themes are a result of identifying and capturing four basic questions that many of our customers are asking RCG to assist them with evolving and resolving. Every single one revolves around the data value chain.
Question 1 for the Bank of the Future: Data
How do I simplify and reorganize my bank's data architecture and create a data highway that minimizes cost–to-serve, speeds up go-to-market, and provides a competitive advantage without scrapping the investment in my current platform?
Question 2 for the Bank of the Future: Analytics
How do I utilize advanced intelligent analytics to give my client base the trust they demand to know that I understand their needs and can create value, uniquely market to them, and incorporate banking into their lifestyle?
Question 3 for the Bank of the Future: Automation
How do I leverage hyper-automation technologies to enhance the reimagined operating and engagement models (mandated by COVID-19 and the following “Great Resignation”) into human-technology hybrid interaction models that are efficient, cost-effective, and value-creating?
Question 4 for the Bank of the Future: Security
How do I get to the real-time payments solutions and embedded finance options demanded by my customer base yet minimize associated cyberfraud and losses?
Data Excellence Themes in Response to the Four Questions
1. Velocity in speed-to-market is the No. 1 new key differentiator facilitating the unique customer experience and driving competitive advantages.
Capturing, analyzing, and utilizing data—and getting it into the hands of internal stakeholder teams that can drive campaigns to win the hearts, minds, and wallets of your customer before the competition—is the future key to success. If your organization can’t understand the needs of existing customers and prospects while the competition does—and the competition has the velocity to get to customers first—you will lose.
The velocity of competitive data utilization is the single-most important factor for future success. Big data, data warehouses and data lakes, and real-time access platforms are table stakes. Actively using advanced intelligent behavioral analytics is key. Look to the success in other industries for behavioral insight and monetization of data points concepts (e.g., airlines, telco companies, retail, entertainment, hospitality, and so on.)
2. Digital and mobile applications will continue to be foundational experiential offerings.
The number of digital banking customers will grow to more than 3.6 billion in 20241—that’s 54 percent growth. Payment by mobile devices will increasingly be used and is forecast to reach $12.06 trillion by 20272. By 2024, 51.7 percent of e-commerce transactions3 will occur via a digital device. All of these transformations will be facilitated by the ability to ingest, harness, and access behavioral data points to create unique user experiences.
3. Increased use of APIs and other open platforms will shape the future of banking.
The application programming interface (API) management market will grow to $5.1 billion by 20234. Financial services organizations are reorienting their business models toward the customer and the new digital environment by establishing the bank as a platform for data and digital analytics and processes. This involves aggressively linking up with fintechs, platform providers, and other banks to share costs through industry utilities.
Open banking facilitates speed-to-market and the ability to test, fail, and adjust quickly. It enables fintech partnerships that bring ready-made solutions without an excessive investment of time and money. In addition, it reduces installation time and effort, and it reduces costs through an exposed API layer.
4. Data security has risen to a top priority.
Implied trust is essential. Enhanced customer service—through the use of advanced intelligent data and analytics—will drive transparency, trust, and personal identity as the most valued banking relationship attributes required by near-term consumers of financial services.
Fraud is in the news. Cyberattacks are reported daily in the media, and this is increasing anxiety among Americans who expect the number of fraud attempts involving their identity or accounts to intensify over the next 12 months. Fifty-eight million Americans have already experienced new account fraud in their name. Cybercriminals targeted new credit cards, checking, savings, and online shopping. Consumers will have to be at a heightened level of diligence as phishing attacks rise during future holiday shopping seasons.
5. A turn toward AI and automation can increase back-office efficiency and agility.
Front- and back-office cost savings driven by intelligent automation will reach $443 billion in 20235. By 2025, AI alone will boost the BFS market by $1.2 trillion6.
Efficient organizations are relentlessly identifying faster and systematic-based processes, investing heavily in technology such as automation and AI, and pushing the technology boundaries to differentiate themselves and create competitive advantages.
Zero back-office processes are highly automated using tools like robotic process automation (RPA), AI, and corresponding system enhancements. This reduces manual inputs and errors, creates efficiencies, and optimizes operations. As a result, employees can be shifted to work on higher value and higher return assignments.
With the right automation, organizations can quickly analyze and respond to new market trends, new product demands, and innovative solutions with focused enhancements or technology updates in weeks, not years.
6. The introduction of automation to traditional human capabilities is already happening.
Reduced cost-to-serve balanced with superior customer experience are driving forces that are igniting interest in hyper-automative technologies and emerging platforms such as cloud native and edge computing. Banks are looking to a human-technology hybrid model, leveraging technologies that replace human interaction plus make it more efficient for humans to interact when required.
The recent advancing developments of ChatGPT for use in self-service environments and automated BOTs will revolutionize existing interactions by speeding up responses to service questions and information requests in a manner indistinguishable from human engagement. It will reduce cost-to-serve, improve response times and accuracy, reduce manual errors and improve customer experiences.
7. Cloud platforms and cloud-native solutions are a competitive requirement.
A recent publication by McKinsey7 says migration to the cloud is gathering momentum. Fifty-four percent of recently polled financial services executives said they expect to shift at least half of their workloads to the public cloud over the next five years. The same analysis found that Fortune 500 financial institutions alone could generate as much as $60-$80 billion in run-rate EBITDA in 2030 by making the most of the cost optimization levers and business use cases unlocked by the cloud.
To achieve these changes, they propose several strategic changes in mindset:
- Moving from “we need to experiment” to “the cloud is in our future”
- Moving from “make IT run better” to “make our business more valuable”
- Moving from “migrate apps but keep the same processes in place” to “automate as much as possible and install a hybrid ops foundation”
The interest is in moving from legacy mainframe system platforms, through service-oriented platforms, to cloud-native platforms. In addition, this change involves leveraging near or real-time microservices-based architecture with APIs, providing access to and from other internal and external services in real time.
Serverless computing is an evolution of cloud computing that removes the user’s job of installing, provisioning, maintaining, scaling up/down, and upgrading servers. It enables a simpler, more cost-effective way to build and operate cloud-native applications, in which the cloud provider allocates machine resources on demand, taking care of the servers on behalf of their customers. For businesses, this eliminates manual infrastructure management tasks so teams can focus on writing code that serves their customers’ ongoing needs.
The cost-effective and event-driven nature of serverless computing makes it a beneficial structure for the banking and finance industry. Because serverless applications maximize on-demand-only costs, when services are not required, the chargeback is zero. Financial services’ highly variable workloads (for example, recurring yet temporary risk and repricing calculations) can benefit from serverless computing.
Some key advantages of a serverless environment are:
- Lower costs
- Simplified back-end code
- Simpler pricing models
- Stability
- Global auto scalability
- Improved DevOps
- Focus on the business
- Elimination of DBA tasks
- Improved latency
- Agility
8.The increased connectivity and bandwidth of 5G (and more) presents opportunities for new growth and innovation.
By 2030, the Internet of Things (IoT) could enable $5.5-$12.6 trillion in global value8.
The current data transport mechanisms of 5G (and soon 6G)—combined with Wi-Fi 6, Web 3.0, and GPS Block III—will create the “big pipes” necessary to instantly have access to a multitude of new and interactable data through the thousands of sensors creating data points via the IoT. This will contribute to new advances in the monetization of behavioral data for predictive and prescriptive sales campaigns for financial services organizations through advances in the ability to stream and analyze data in real time.
Become the Bank of the Future with RCG Global Services
Almost everything boils down to harnessing the power of available data. Capturing, storing, normalizing, and transporting in real time—you must get meaningful data into the hands of users who will create stakeholder value and contribute to answering the four questions mentioned at the beginning of this article.
We at RCG Global Services are available to help you drive your digital revolution through our solutions, practices, and advisory services. Since 1974, we’ve helped financial service organizations around the world understand the complexity of remaining viable and competitive in today’s on-demand, ever-evolving consumer economy. Our clients rely on us to help them harness the “speed of now” that drives evolution to the hyper-business age.
We know companies struggle to exist in an ecosystem of three simultaneously co-existing strategic states, where the adoption of an evolutionary mitosis process constantly transforms and evolves operational and engagement models. Our engagement model has evolved also to provide the expertise necessary to identify evolutionary solutions and get you from mode to mode efficiently with minimal disruption. We’re here to help you offload and de-risk your most critical strategic and competitive initiatives.
We ask questions to solve business problems. We engineer the velocity necessary to create competitive advantage through impactful outcomes. We make your strategy a reality by compressing the time between putting the strategy on paper, execution, and impact. This maximizes return on investment while creating competitive advantage.
We prepare you today to meet the “speed of now” necessary for tomorrow.
Works Cited
1. Juniper Research (2020, Mar 3) "DIGITAL BANKING USERS TO EXCEED 3.6 BILLION GLOBALLY BY 2024, AS DIGITAL-ONLY BANKS CATALYSE MARKET" Retrieved from https://www.juniperresearch.com/press/digital-banking-users-to-exceed-3-6-billion
2. Allied Market Research (2020 Oct) "Mobile Payment Market" Retrieved from https://www.alliedmarketresearch.com/mobile-payments-market
3. FIS Global "The Global Payments Report" Retrieved from https://www.fisglobal.com/en/global-payments-report?
4. Cision PR Newswire (2019, Mar 12) "API Management Market Worth $5.1 Billion by 2023 - Exclusive Report by MarketsandMarketsTM" Retrieved from https://www.prnewswire.com/news-releases/api-management-market-worth-5-1-billion-by-2023---exclusive-report-by-marketsandmarkets-300810744.html
5. Yahoo Finance (2022, Sept 1) "Industrial Automation Market to Reach $443.5 Bn, Globally, by 2031 at 8.7% CAGR: Allied Market Research" Retrieved from https://finance.yahoo.com/news/industrial-automation-market-reach-443-233000128.html
6. The Financial Brand "AI and The Banking Industry’s $1 Trillion Opportunity" Retrieved from https://thefinancialbrand.com/news/data-analytics-banking/artificial-intelligence-banking/artificial-intelligence-trends-banking-industry-72653/
7. McKinsey Digital (2022, Aug 3) "Three big moves that can decide a financial institution’s future in the cloud" Retrieved from https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/three-big-moves-that-can-decide-a-financial-institutions-future-in-the-cloud?cid=app
8. McKinsey Alumni Center "The accelerating value of the Internet of Things" Retrieved from https://www.mckinsey.com/alumni/news-and-events/global-news/firm-news/the-accelerating-value-of-the-internet-of-things