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Digitalisation and The Future of Commercial Banking
Digitalisation and The Future of Commercial Banking
Contents
Introduction 3
Opportunity space
2. Blockchain technology
10
11
12
Bibliography 14
Authors:
Helena Forest
Product Management
Donya Rose
Strategy & Business Development
June 2015
Introduction
Digitalisationa impacts everything. Especially with
respect to finance its impact is transformative:
going far deeper than the cost-saving potential from
innovative IT, or even from sourcing new revenue
streams. Digitalisation is about taking control of your
customer-experience ecosystem by managing your
entire business from your customers perspective and
rethinking your legacy business model.
This paper summarises how the banking industry is being influenced by digitalisation:
the factors driving the change in business(1) and the evolution in customer expectations.
It then outlines ways to identify specific opportunities for the realisation of
digitalisations full potential.
Digitisation and digitalisation are sometimes used interchangeably. However, digitisation describes the process by
which other forms of representation are converted into a digital format, such as the conversion of an analogue audio signal
into its digital form. Digitalisation denotes transformation beyond that. An organisation seeking to become digital might
focus on automating processes to create efficiencies. By contrast, a company focusing on digitalisation might aim at more
effective outcomes by improving customer engagement. In this paper, we will use the latter term.
//3
4//
Opportunity space
Digitalisationb is a trend
one being driven by three major forces:
Customer experience: Customers are
accelerating the drive to digitalisation. They are
leaders not laggards, having readily adapted
to the digital environment as consumers
and retailers. Customers expect a seamless
multichannel experience and a consistent,
global service. They judge their experience on
three levels: how well companies meet their
needs; the ease of doing business, and; how
enjoyable it is. One of the main challenges
for banks is, therefore, adapting their existing
service models to changing customer
expectations and cost-awareness.
By digitalisation as a trend we mean the mass adoption of digital technology through connected services and devices by
consumers, enterprises and governments.
//5
6//
An obsession with the customer experience. They find ways to constantly improve the
experience and learn from every interaction. Indeed, they are obsessive about this.
They are unreasonably aspirational. They make someone accountable at the ExCo
level. They also create stretch visions. And they measure digital value, not digital
interactions.
They ring-fence and cultivate digital talent. Key personnel must be protected from
business as usual. They forgo existing HR models and, instead, set up a separate
business unit that nurtures digital initiatives. Within the unit, many remove organisational
hierarchies in order to increase collaboration, productivity and mind-shift.
They acquire new capabilities. They invest in scarce talent, en masse. They hire digital
skills not industry experience if required, moving into adjacent markets to do so.
They are quick and data-driven. They continually evolve their value proposition. They
embrace live testing, and they adopt methods such as agile development and live
beta supported by big-data analytics in order to increase innovation.
They follow the money. Successful digital enterprises create a zero-based technology
budget aligned with the value at stake. They also invest across the value chain
though not haphazardly across the organisation (perhaps under the halo of
experimentation). That said, they rapidly scale success.
They challenge everything. Questioning the status quo, they create plans covering
all functions, products, business units and locations. They examine all aspects of the
business: embracing both customer-facing and back-office systems and processes. They
look up and down the supply chain. They also think expansively about partnerships.
From the above, it is clear that a key differentiator is the intelligence they build on their customer
base: information about the customers that competitors lack. Critically, they constantly listen to
customers and ask the right questions often those never asked before.
//7
8//
20
10 20
Mobile
Cash dispenser
Branch 4 20
Call centre 3 9 18
37
18 12
49
21
8 14
40
29
37
33
76
29
10
37
Weekly
Monthly
Rarely/never
(E&Y, Fintech the digital (r)evolution in the financial sector,
2014, page 5)
//9
10//
2. Blockchain technology
Asked to name just one event reshaping finance
in recent years, fintech companies are likely to
cite the launch of Satoshi Nakamotos Bitcoin
in 2008. While Bitcoins long-term prospects have
been questioned since its 2004 value tumbled,
many believe that the technology underlying
it the Blockchain has a bright future. The
Blockchain is a ledger listing transactions credits
and debits in the form of an ever-expanding
computer file. Split up and distributed over
thousands of computers across the world, it uses
cryptography to ensure each block is digitally
signed in such a way that changing an entry
invalidates every other entry preceding it, all the
way back to Block 1. This ensures all entries in the
Blockchain are immutable. Indeed, to hack the
system requires commandeering over 50% of the
systems computers: possible, but unlikely.
It is genuinely new, and its applications are
infinite. Blockchains can be used to record
any transactional data requiring immutability
including smart contracts, royalty payments,
certificates authenticating art, electronic voting,
patents, even government budgets. Indeed,
//11
61
Simple savings
products
25
Current account
22
53
44
30
27
39
48
17
52
35
23
10 12
42
Consumer credit 10
Structured savings 5
products
34
25
48
Likely
Unlikely
Very unlikely
12//
14//
Bibliography
(1) Mazars, Digitalisation: a vehicle of the new
age of transformation, 2011
(2) EY, Digitisation of everything, 2011
(3) PWC, Managing for performance:
Transaction banking, 2012
(4) Strategy&, The digitisation megatrend:
http://www.strategyand.pwc.com/
global/home/what-we-think/digitization/
megatrend
(5) Capgemini, The Digital Advantage: How
digital leaders outperform their peers in
every industry, 2012
(6) http://www.zdnet.com/article/applegoogle-microsoft-where-does-the-moneycome-from/
(7) Strategy&, Builders of the digital
ecosystem: The 2013 Strategy& global ICT
50 study
(8) http://www.powerretail.com.au/shippinglogistics/supply-chain-digitalisation-foromnichannel-retail-part-two/
(9) Strategy&, Digital Health: A way for
pharma companies to be more relevant in
healthcare, 2013
(10) Strategy&, Becoming a digital telecom: Be
bold, move fast, 2014
(11) DB Research, Fintech the digital (r)
evolution in the financial sector, 2014
(12) http://www.theguardian.com/
business/2014/oct/26/banks-digitalrevolution-change-regulation-job-losses
(13) McKinsey, Big data: The next frontier for
innovation, competition, and productivity,
2011
(14) Strategy&, The data gold rush, Companies
need the right models and capabilities to
monetize data, 2013
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