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06. 05. 2018

New business models for survival – W.UP Digital Banking Weekly

New business models for survival, farewell to high deposit rates, enough with the digital lipstick – W.UP Digital Banking Weekly

It’s time for banks to go back to the drawing board if they want to weather digital disruption and changing profit pools. But what are their options?

Mix and match

Banks just can’t catch a break these days. Turbulence in banking markets continues as new competitors from established tech giants to smaller fintechs are getting their hands on traditional banking activities. Not to mention that new regulations like Open Banking, PSD2 and GDPR have been stirring up a lot of change the industry. The problem is that most banks’ current business models are not disruption-proof at all, according to Bain & Co. But fear not: as profit pools change, four alternative business models for survival are expected to take centre stage.

Wind of change

“Citigroup Inc does not plan to use high deposit rates to attract customers to its new digital bank accounts when it begins marketing this fall,” Reuters has reported. The reasoning? The bank believes that offering high rates draw ‘hot money’ depositors rather than loyal customers. Citi may only have about 700 branches in the States but has recently unveiled plans to offer accounts nationally on a brand new mobile banking app.

Size doesn’t matter

Sitting on a massive amount of banking data doesn’t automatically mean you have valuable customer insights, Publicis.Sapient strategic advisor Louise Beaumont warns. But how to move from volume to value? Well, among other things, banks should delve more deeply into how the human mind works.

The big question is whether financial institutions will finally be able to hear what data is telling them about their clients’ needs. If organizations continue relying solely on data as a science, they’ll sure struggle to understand where and why consumer expectations are increasing.

Put down the digital lipstick

As digital technology erodes profit and revenue growth, why aren’t companies responding with bold strategies? That’s the question McKinsey asks in their latest article, and with good reason. Only one in six companies seems to think outside the box, even if nine out of ten say they’re engaged with digitization.

But more and more incumbent banks are starting to understand the gravity of the situation. As DBS’s CEO Piyush Gupta puts it: “In 2013, the DBS board therefore took the view that if we didn’t lead the charge, frankly, we might die. We really had to digitize completely, not just by putting on digital lipstick.”

 

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