The notion of technology disruption has been, and continues to be, a huge topic of discussion in the financial industry and beyond. As technology evolves and becomes more sophisticated, many experts believe that the industry needs to evolve with it to better serve customers who crave innovative ways to fulfill their banking needs.
In his welcome address that kicked off day two of CSI Customer Conference 2016 in San Antonio, Texas, CSI CEO Steve Powless talked about the importance of financial institutions focusing on the future of technology. That’s because, from his perspective, the technology that’s driving consumer behavior today will not be the same a few years, or even a few months, down the road.
“Any new technology will require more integration, faster deployment, new staffing models and perhaps an even more entrepreneurial mindset,” said Powless. “Because at the end of the day, it will continue to be the interplay between consumer expectations and technology capabilities that brings ongoing disruption to the banking industry.”
To corroborate Powless’ thoughts on disruption, and to share his perspective on the effects of disruption on financial services, Craig Weber, chief executive officer of Celent, took the stage to discuss Celent’s research on the topic.
What Is Disruption?
Weber cited Clayton Christensen’s definition of disruptive innovation as a process by which a product or service takes root initially in simple applications at the bottom of a market, then relentlessly moves up market to displace established competitors. Weber said that while innovation crept into the lexicon about 15 years ago, the idea of disruption is entering the lexicon and consciousness now but has not yet gained a foothold in the financial industry.
“We don’t think it has really penetrated banking completely, or insurance, securities, wealth management or any part of financial services,” said Weber. “And that represents immense opportunity for this industry.”
According to a Celent survey, consumers rank the banking industry fairly high on the scale in terms of the ability to deliver a great service experience through smart use of technology. Weber said these results are not that surprising, because consumers generally think of the relationship with their bank in such narrow terms as deposits, lending and payments – functions that many banks are covering today through banking apps and online presence. However, for financial institutions to expand their services beyond these expected interactions, Weber noted the need for banks to look at truly upending their approach to technology in order to stay relevant in today’s technology marketplace.
Weber said one of the main issues blocking an organization’s ability to disrupt is that the idea of disruption itself hasn’t been widely adopted as a technology strategy in the financial industry.
When Celent analysts meet with a financial services organization about disruption, they ask if the organization is doing the right things to have a reasonable expectation that it will be able to be disruptive in any way. Then, they map out a selection of the organization’s IT projects based on corporate strategy and three different project goals: improvement (5-10 percent improvement on performance metrics), innovation (20-40 percent improvement on performance metrics) and disruption (fundamentally changing the business’ economics).
Citing a Celent customer case study, Weber said that while many organizations want to put an emphasis on innovation and disruption, it’s not quite happening yet.
“Most firms in financial services have this issue,” he said. “While they say they want to pursue disruption, they have a clustering of IT projects fundamentally aimed at improvement; most are not even aimed at innovation.”
Between Two CEOs: A Conversation on Disruption
At the end of their presentations, Powless and Weber joined each other on stage to further elaborate and continue the conversation on disruption.
Leading up to the conference, Powless said he heard from a multitude of customers asking about the best ways for financial institutions to innovate and be a part of disruption in order to maintain profitability and market share.
Weber replied that the answer, in part, is about financial institutions getting out of their comfort zones, because the key to pursuing disruption is managing discomfort.
“For every institution, the core of what you do is not going to change,” Weber said. “But if you don’t introduce some outside-in thinking to how you do those things, you are likely to end up with results that are very close to the center and status quo of what you do. The idea of creating customer experience is not specific to banks or wealth managers. This is something other businesses have done and done effectively.”
Following up on his point, Weber asked Powless about what he sees banks doing to prepare for disruption. Powless said the first step is recognizing that disruption, and its forces, are real.
“I see more and more bankers acknowledging this,” said Powless. “As I look at community banks from a personal perspective, I think they are going to be successful because of technology, not despite it.”
Preparing for Disruption
Powless provided some guidance for financial institutions to manage disruption in order to better target and enhance their offerings to customers. Here are three tools he suggested for disrupting the status quo to create a seamless customer experience:
- Customer Relationship Management (CRM) – Banking CRM software enables financial institutions to track, view and analyze interactions across the entire customer lifecycle.
- Business Intelligence – Business Intelligence applications help leverage bank customer data to make informed decisions and create new revenue opportunities.
- Integrated Digital Platforms – Modern digital banking solutions, which include mobile and Internet banking, are fully integrated into the core, enabling banks to connect with and serve customers in all new ways.
Regardless of the approach, the financial industry must consider additional ways in which to bring outside thinking in and pursue more disruptive IT projects. The tech industry around us will continue to innovate, so banks must take steps to keep pace—or be left behind. A key piece of advice to remember: there is no longer a banking experience, there is only a customer experience.