Building tomorrow’s bank amid today’s turmoil
There’s good news and challenging news for executives working to build tomorrow’s bank amid today’s macroeconomic and technological turmoil.
The good news? People are more loyal to their bank than other companies they interact with, according to PwC’s 2022 Customer Loyalty survey. It indicates that a bank that’s still designing its cloud strategy is at low risk of losing customers. But don’t get too comfortable.
Survey respondents also picked banking as the top industry where they’d like a more personalized, individual relationship — something cloud technology can accomplish more easily than legacy computer systems.
The findings suggest that those banks with sophisticated cloud systems delivering innovative, personalized products are in a stronger position. They may even start trying to poach a slower-moving bank’s customers. Fintechs, meanwhile, continue to make inroads.
Shopping around? Consumers are less likely to switch banks compared to other businesses
Source: PwC Customer Loyalty survey, 2022.
Note: Results reflect respondents who chose “much more likely/somewhat more likely” when asked “How likely are you to try a new brand for each of the following business types?”; Responses totaled 14,076.
Note: Results reflect respondents who chose “much more likely/somewhat more likely” when asked “How likely are you to try a new brand for each of the following business types?”; Responses totaled 14,076.
Play both offense and defense
What to do in response to the threats? Play both offense and defense. Go on the offensive by using a strategic cloud spending approach to add new accounts while defensively guarding existing clients.
Strategic cloud spending, while complicated in detail, can be straightforward to put into practice: Pick an area to prove part of your growth plan, use a digital business model to monetize it and apply the lessons learned to inform your work on the next cloud project. The result is the building — step-by-step — of a cloud-powered bank.
A national bank with a small-business banking franchise is using accounts receivable as a way to migrate clients to their digital product, protecting its market share. Offensively, the bank is steadily expanding its suite of real-time payment options. Using cloud technology, such as Microsoft Azure, to collect and analyze data can help a bank identify the behaviors and trends that existing customers value and potential customers can benefit from.
Banks may be able to use recent investments in modern technology and fintech business model opportunities to either acquire whole firms or to lure IT talent. Bringing in new perspectives can strengthen the growth side of the bank, and fresh eyes could also find ways to bring efficiency to the defensive attributes that have made the institution a success.
Disruptors: Some need defense, others need to play offense
Financial industry disruptors continue to build emerging bank ecosystems; however, their business strategy likely also needs to incorporate defense and offense in these turbulent times.
Fast-growth disruptors who initially focused on adding customers are likely finding they need better defenses, namely in risk management, fraud protection and tougher cybersecurity as regulators more closely examine their operations. Increasing customer trust and protection is the kind of operational maturity the government wants, and it’s a necessary building block before going after new clients.
Disruptors that took a more traditional financial services route to start with are now likely on a slower growth path, and should concentrate on playing offense now, going after new customers. The risk they face is failing to attract enough customers to profitably scale the business.
Make it personal. Consumers chose banking as the top industry where they wish to have an individualized experience
Source: PwC Customer Loyalty survey, 2022.
Note: Respondents were asked “Many businesses try to provide products, services, offers, messages and other items that are tailored for an individual customer. For which type of business is it most important for you to have a personalized experience?” Responses totaled 4,035.
Note: Respondents were asked “Many businesses try to provide products, services, offers, messages and other items that are tailored for an individual customer. For which type of business is it most important for you to have a personalized experience?” Responses totaled 4,035.
A balanced approach
To play offense and defense simultaneously requires the correct technology to help bankers and industry innovators win in their respective market segments.
The financial services industry cloud is already creating computer networks that are more accurate than humans in assessing risks, processing applications and responding to customer questions.
To thrive amid such rapid change, financial firms need the best of both the offensive and defensive worldviews. This is because the ways of doing business today could disappear in a handful of years.
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