Banking blind spot #1: customers vote with their feet
It’s an interesting time to be a technology provider in financial services.
For many years there has been talk that banks need to change the way they run their back office in order to cut costs. A combination of cost pressures, new entrants and a slew of regulations has moved the industry from talking about the problem to acting on it. Consumers are also savvier than ever. The internet has put the power in their hands. They’re used to bartering and finding the best deals in all walks of life ranging from holidays to technology. This is now embedded in their psyche and they now expect only the best in terms of product, service and price. If one bank isn’t up to par, it is now easier than ever to switch to another who has better reviews. Consumers are now empowered and are not afraid to vote with their feet if banks are not meeting their expectations.
When it comes to banking, consumers don’t care how a current account transaction is processed, so long as it is. Consumers care about how they interact with the bank, whether this is via a technological interface or simply face to face. They care about how they are treated as a customer. As such, banks need to think long and hard about where they focus their investments. Money spent building the back office is invisible to customers, but the back office must be tended to. So, what’s the answer? If you consider that bank back-offices are essentially providing a commodity service to their organisation, then the possibility of sharing the substantial costs associated with running the back office amongst a number of banks becomes a reality. Once that is done, the savings made can be diverted towards the customer facing parts of the bank, delivering enhanced experiences and product improvements that customers can actually see and appreciate.
Banks should bear in mind the notion ‘united we stand’. Keeping financial technology up to date is a costly business. Banks should move away from the old thinking that technology needs to be owned and treat the processing of transactions like a utility. This is banking on demand: it provides flawless execution of the bank back office, keeping everything up to date and compliant at all times. All banks using this utility, automatically shift their cost base from a fixed to a variable one. This will free up spend to focus on banks’ most important investment: attracting and keeping customers.