As a consulting executive, I help clients in the banking industry on everything from their vision for digital transformation, to the nitty-gritty of implementation and execution. While it’s good to have this level of focus with individual clients, I also appreciate the chance to step back and see what else is going on in this dynamic sector.
This year’s CBA LIVE (March 12-14) was a great opportunity to hear thoughts from established banks and FinTech startups—as well as partners, competitors and even experts outside of banking—to affirm (or at times adjust) my thinking about the direction the industry is heading. After the event, I compared notes with some of my colleagues. Based on our observations, here are the biggest takeaways we see from CBA LIVE:
Industry focus shifts from regulation to innovation
During the opening general session, results of a CBA LIVE audience poll showed that perceptions of the top issue facing the industry have shifted. From 2012-2016, attendees listed the regulatory environment as their number one concern. Since then, however, banks have become more focused on innovation. After coming in second in 2017, “innovating and creating new products and solutions” broke through as the top issue this year.
This focus on innovation is echoed in our 2017 CGI Client Global Insights, where retail banking executives listed their top two business priorities as improving the end-to-end customer experience, and accelerating customer-facing digital transformation programs. The pace of innovation by FinTech startups and an increase in consumer demand for new digital offerings is disrupting just about every aspect of consumer banking, from payments to collections.
Banks must narrow and broaden focus simultaneously
While this idea may sound paradoxical, it’s a theme that popped up in several sessions at CBA LIVE. In order to survive digital disruption (or thrive in it by becoming the disruptor), banks must prioritize where they focus their agile efforts at an operational level, while looking strategically to examples of innovation in seemingly unrelated industries. In his keynote, “The View Beyond the Horizon,” digital thought leader Scott Klososky talked about disruption in the form of shifting customer behavior (e.g., choosing a bank based on its social mission) and the growing digital skills gap. Later, the “Challenging the Status Quo” session (with panelists from Capital One, JPMorgan Chase, SunTrust and TIAA Bank) expanded on the disruption theme and emphasized the need to prioritize where people spend their time around agile efforts.
Leaders view artificial intelligence as a catalyst for growth
Artificial intelligence (AI) was another theme that came up often, and it reinforced my observations from working with clients on digital transformation that AI will change the way banks (leaders and laggards alike) do business. As the session, “Rise of the Machines: AI-Enhanced Customer Experience” pointed out, there are many internal, regulatory, security and societal issues that banks must overcome when it comes to AI. However, banks that approach it as a lever for top-line growth, and think about human-centered design, will have a leg up on banks that view AI primarily as a way to reduce cost. In the examples given during the session, AI will provide rich new insights to employees so they can better serve customers, or use natural language processing in a way that customers can better serve themselves. In other words, done right, AI helps make banks more human, which brings me to my next observation.
Robotics is “taking the bot out of the human”
Although leading banks are using AI to open new channels of growth through human-centered design, they’re also using automation to free up time for humans to do the things we’re naturally good at. This idea of taking the bot out of the human is a point that Sunil Deshpande (PNC Bank) made in his session, “Danger Will Robinson! Robotics in Banking.” With robotic process automation (RPA), banks can transfer rote or repetitive tasks (such as data entry, invoicing, credit reviews and regulatory reporting) from employees to machines that usually can do such work quicker and more efficiently. This allows humans to focus on creative problem-solving or high-touch customer engagement.
With great rewards come great risk—the threats of digital transformation
Much of CBA LIVE focused on the positive possibilities of digital transformation, but another recurring theme was around the threats posed to banks. As General Michael Hayden pointed out in his keynote, “Things that go Bump in Cyberspace,” the proverbial cavalry isn’t coming and banks have to look towards partnerships in the private sector and within their own skill-set to address cybersecurity concerns. Ricardo Serrano (BBVA Compass) had a similar message in, “Fraud, Cyber-Crime and the Battle Plan for Banking,” that banks need a battle plan to “know thy enemy, know thyself and know what it takes to win.”
Open banking – an opportunity for digital transformation
While digital transformation presents risks, these are outweighed by opportunities such as open banking. As executives from PNC Bank, RBC and MUFG Americas noted in their session on this topic, open banking creates a new family of business models that are inextricably linked by partnerships. To succeed, banks must be nimble in their front and back ends. On the front-end, new open banking offerings are leading to increased competition at the customer interface. On the back-end, this increased pressure to keep pace with customer expectations can overload banks’ existing (traditionally not cloud-based) IT infrastructure.
Success in areas such as open banking brings together all of the takeaways discussed above: looking beyond banking for examples of innovation; having the agility to bring these innovations to market faster; leveraging AI and robotics to empower employees and better serve customers; and working in partnership with other innovators to combat cyber threats.
What’s next for consumer banking
This year, CBA LIVE provided great insight into the opportunities and challenges retail banks face with digital transformation. For more insight on consumer preferences for financial services, along with their satisfaction and acceptance of emerging non-bank alternatives from FinTech innovators, I invite you to download our Global Financial Consumer Survey ebook.