It may seem strange to focus on growth as economies around the world are teetering on the edge of recession of showing only anaemic growth. Yet, with some bold moves and well-focused investments, banks could radically transform not only their performance, but their future growth trajectories in 2023.
The past few years have seen enormous disruption, but many banks have seen these challenges as catalysts for far reaching digital transformations. Mobile banking in particular has exploded as customers of all kinds needed banking services but were unable to visit branches during COVID lockdowns. Putting key applications and tools literally in the palm of their hands has changed banking forever. But faced with their own eroding margins, high costs and low market confidence in an environment of continued political and economic instability, what should banks do next?
INCOMPLETE DIGITAL TRANSFORMATION
In truth, although rapid and far reaching, the digital transformation of banking over the past 2 to 3 years has been shallow and incomplete. It could be argued that much of the real innovation has been driven by upstart fintechs that have responded smartly to specific demand signals from (mainly) consumer banking customers. They have delivered slick touchpoints and helped remove friction from day-to-day banking processes. The advantage they had was to be unencumbered by the broad and complex array of IT systems requires to deliver the wider range of banking services offered by high street banks.
For their part, the incumbents learned from the challengers and copied, developed or acquired many of the digital channels used to deliver a more frictionless service to customers. They also invested in the back office to automate processes reducing cost whilst improving quality of service. But this efficiency and acceleration of existing processes, essentially an internally focused optimisation project, is not true digital transformation. Cost reduction, including cost to serve individual customers, was the key driver, and from a data perspective it was about modernising systems of record and systems of engagement so that they can better talk to each other.
DOING BETTER THINGS
But this incomplete digital transformation misses out a critical piece of the puzzle. Data science platforms and data warehouses remain isolated when, in reality, they are the keys not only to doing things better, but to doing better things. In an article at the end of last year, McKinsey outlined what it saw as the $20 trillion opportunity for banks. At the heart of it was the transformation from a one-stop shop for linear-process centric financial products to fluid ecosystems focused on fulfilling ever evolving customer needs in ever changing ways. The article goes on to say, “Banks that successfully manage the coming transition will use tech and data to embed themselves deeper into customers’ lives with real-time services that were unimaginable just a few short years ago.”
To unearth ‘better things’ banks and fully embed data in their decision making, banks need to integrate ‘systems of intelligence’ into their digital transformation. Some make the mistake of assuming that their Salesforce or ERP system is the data platform that can support analytics and AI as a system of intelligence. But in reality, a true System of Intelligence must not only link, but enable smart feedback to and from both systems of record (ERP) and systems of engagement (Salesforce etc) thus enriching both.
Systems of Intelligence represent the natural home for at-scale, real-time data analytics. Instead of endlessly moving data to a variety of analytics point-solutions, it is faster, more cost effective and more impactful to bring analytics to data on a single enterprise-wide platform. Teradata Vantage operates on data from across the bank, from multiple digital touch points and from third-party sources, to make in the moment analysis and predictions. Implemented across hybrid multi-cloud and on-premises architectures Teradata Vantage delivers the resilience, reliability, speed and scale that banks need to fully embrace digital transformation.
CONFIDENCE IN UNCERTAIN TIMES
Faced with a new set of uncertainties, not to mention extreme competitive pressure from within and outside the sector, banks must place their investments wisely. Whilst there are still costs to be driven out, and automation has more to give, the focus must shift to unlocking new revenue and growth. Data science, AI, and predictive analytics running on live data enhance understanding of customer requirements, in the moment. Armed with this intelligence banks will be able to step away from merely smoothing the established route to specific products and instead truly engage with identifying and satisfying an individual customer’s immediate requirement.
The return on investment from automating systems of record and systems of engagement can only ever really be measured in terms of cost savings. Conversely, investments in ‘systems of intelligence’ – such as enterprise-wide, real-time data analytics – will be measured by the significant new top line growth they will deliver. Working with trusted partners and proven technology can unlock this next wave of growth. If you’d like to speak to us about the work Teradata has done to deliver digital transformation and growth, please get in touch.
