If banks want to survive in the post-royal commission landscape, they need to be innovators
As tech giants start encroaching and expanding on the banks’ basic business model, they pose an increasingly relevant threat, especially in the post-royal commission landscape, says a consulting executive.
“The banks have good reason to be nervous about the increasing areas of vulnerability the tech giants are targeting in the financial services’ value chain. Not only do banks lag Apple, Google, Alibaba and Amazon in delivering a seamless digital customer experience, but consumers are more likely to trust these brands with their money than they are their primary bank,” said The Strategy Group’s managing director Jeffrey Tobias.
While the tech giants don’t want the “regulatory headaches” that the banks have to bear, they are easily surpassing the banks when it comes to creating smarter technology.
Amazon, for example, has launched Amazon Cash: a fee-free digital account that aims to attract new customer segments— the unbanked customer and young customers with little money in their accounts.
It allows customers to deposit cash into their Amazon account from 10,000 retail locations. As Tobias points out, Amazon’s goal is not to increase revenue from fees, but to attract new customers and grow its core ecommerce platform.
“Amazon might simply be using Amazon Cash to attract these segments and grow them as future, profitable E-commerce customers. It’s a short-term investment in a long-term customer growth strategy,” Tobias said.
To date, Australian banks have responded to the tech giant insurgency by investing in technology and applying the agile project management model to their internal culture and way of working.
But these measures simply focus “on making a bank’s core business model more efficient, and its services more user-friendly”, instead of breaking new ground. In order to compete with Amazon’s multiple entry points into financial services, the banks’ measures need to be revolutionary and not merely evolutionary, he said.
Australian banks can respond more efficiently by focusing on business model innovation, building strategic partnerships, and leading in a time of disruption.
“Perhaps the Financial Services Royal Commission will provide an opportunity to think introspectively about what value they are trying to create for customers and question their current culture of customer-centricity. If there ever was a time for banking executives to make the big cultural leaps, it’s now,” he said.
For banks to survive, they need to stop focusing largely on technological advances and start thinking of how they can improve their business model, approach, and culture. “Many have started doing this,” he added. “Those that haven’t will probably not last the race.”