The Future Shape of Banking
According to PwC "banking is an industry facing irresistible forces for change...
They are facing rapid and irreversible changes across technology, customer behaviour and regulation. The net effect is that the industry's current shape and operating models are no longer sustainable into the future.
The combined power of these three drivers of industry change - technology, customers and regulation - is increased by the fact that they are often closely interwoven.
For example, technological change creates new categories of customer utility, which in turn fuel further technological investment. Similarly, regulatory changes prompt both service and structural innovations, which together change the nature of the activities or entities that need regulating. And all the while, shifting attitudes and expectations are redeï¬ning the reality and perceptions of the industry's role and purpose in society."
They suggest that there are many examples of these dynamics in other industries:
- Once upon a time, having a telephone that could take pictures would not have ranked high on the hierarchy of customer needs. But the emergence and convenience of this technology altered the whole ecosystem for mobile phones and - by extension - cameras and photograph processing.
- The automotive sector is another example, with regulation, customer preferences and technological innovation all combining to push the sector into electric and hybrid technology. In the face of such industry-wide shifts, experience shows that those companies that fail to adapt tend to lose out to those that use ongoing technological innovation to re-deï¬ne and reï¬ne the customer experience.
And they stress that "it is no longer enough to know about your customers' behaviour and utility at one point in time, or to rest on the laurels of a one-off innovation. Being able to set customer expectations and preferences, and being able to apply technology to build these into the evolving suite of products and services, are the attributes that enable institutions to succeed in volatile environments."
Although this e-book is intended for the NZ banking sector, I think any bank anywhere in the world could benefit from understanding PwC's 3 hypotheses:
1. A future in which core banking services are delivered outside of the regulate dbanking industry is now totally feasible
2. Banks still have advantates but, to be part of the future, they need to invest heavily, redisocover and reassert their core role in society and secure the ongoing suport of policymakers
3. Regulators and regulation also need a radical re-orientation
Their conclusion is that - the future is different and that CEO's need to take action in 4 key areas:
1. Adapting to regulatory change and executing compliance, at least at the pace and to the standards expected by their supervisors
2. Work through their under performing assets and misaligned cost structures at least at the pace and to the standard expected by their shareholders
3. Change the culture and behaviours of their organisations and demonstrate security, integrity, dependability and quality of sedrvice offerings to regain the trust of ALL their stakeholders
4. Invest in customer service and operational innovation at least at the pace and to the standards set by their competitors.
So there we are. At last someone is telling it like it is to the banking sector.
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