Are the incumbent banks ready for the future?

23 December, 2019Juno Baker
Close-up of QR codes

Banking is changing. The traditional incumbent banks are under pressure to adapt as they battle for market share with the new challenger banks. What does this mean for the future of banking? And how will the incumbent banks survive?

This is the third in our series on the future of banking.

The traditional banks face pressure from three main sources. That’s according to Justin Fitzpatrick, the Co-founder and Chief Executive Officer (CEO) of Duedil – a company intelligence platform.

Addressing delegates at the World Conference of Banking Institutes (WCBI) in September, he cited the three pressure sources as:

  • regulators
  • the underlying business model
  • and customer expectations.

What might these pressures change?

“We’re increasingly importing our expectations – as consumers of mobile apps and consumer services – into the financial services world,” said Justin.

And the industry is responding to that demand.

“We’re already seeing a number of fintechs and incumbents who are adapting – putting technology and data front and centre in the way they deliver their model to their customers.”

He reminded delegates of how long it used to take to open a bank account. Traditionally this was a “four-week process”, largely manual with “15 pages of application forms involved, back and forth”.

Now that process, along with so many others, is automated.

“The way organisations make use of data and technology,” said Justin, “is going to continue to be a major trend. That has a knock-on impact on the role that people play.”

Changing roles

Manually inputting data and processing forms takes staff traditionally one working day a week.

“That’s time they’re not spending speaking with customers, forming better relationships, looking for upsell in the existing client base,” said Justin. 

“Automation frees up that time, which means staff are going to “have to really transition quite rapidly into the role of trusted adviser,” says Justin.

Changing business models

Another area of change is that customer loyalty is more flexible than ever before. Customers increasingly shop around, relying on different providers for different products and services.

“The challenger banks have really made this a feature of their model, where it’s much more of a network of alliances rather than one organisation that delivers your entire financial life,” said Justin. “I think we’ll continually to see a move towards specialisation within particular business lines.”

He pointed out that in ten years’ time, customers will have more choices. “The customer is going to be able to access products and services digitally or face to face.”

To stay competitive, “those alliances of partners will need to be brought in to deliver something that’s best in class”.

Justin calls this customer view “the grumpy cat model”. 

“They’re going to expect that you’re going to be there as a financial services provider, when they need you, in the way that they need you – whether that’s digital or in person.”

This means the banks will need to become more adaptable.

More trust in staff

One of the biggest challenges when it comes to adapting, is changing culture.

“It’s the people side of things! Whether you can provide enough incentive – and a clear enough vision – to get people moving in the right direction with a sense of urgency. Because there is urgency around this.”

Justin believes working culture in the sector needs to move to a more open, eco-system style – “where technology and data are underpinning and empowering people within the organisation to form trusted relationships with the end customer”.

He pointed out that the incumbent banks enjoy a high level of trust among their customers which is something challenger banks haven’t built up yet. 

“There is still the opportunity for the incumbents to change and embrace this new way of doing business.”

Related content

Listen to the podcast: WCBI 2019 – What will banks be doing in 2029

Find out more about our Centre for Digital Banking