When operating an organization in the 21st century, digital transformation has caused us to learn how to deal with disruption. This is true regardless of the type of business or the field.
Case in point: less than 25 years ago, Amazon burst onto the scene, creating a new and convenient way for people to buy books from home. After a few short years, it became increasingly difficult to find a small or local bookstore in your area. A few years later, Amazon blossomed from “the online bookstore” to “the online EVERYTHING store.”
A similar scenario is playing out in other industries. Companies like Uber and Lyft are heavily disrupting cabs and traditional transportation, and Airbnb is turning the hospitality industry on its head. Make no mistake about it: banks are not safe from this phenomenon, either.
Therefore, it’s important to learn from these industry disruptors to help identify a better path forward for financial institutions as a whole. Why are they so successful? What is it that they’re doing that wasn’t available before? What are they offering that is so important to consumers? The answers to these questions can inform and influence further actions moving forward.
Brave New World, Brave New Banking
The most important thing that industry disruptors can teach us about banking technology is that IT should become a means for more than a brick-and-mortar storefront.
In many ways, the first mobile apps were a pure example of this. People were willing to go into a bank branch, but if they could view their account balance without picking up the phone or getting in their car, they were more than willing to do that, as well. Next came mobile check cashing. Rather than driving down to the bank, someone could take a picture of the check and see the money deposited into their account in a matter of days.
What the industry disruptors learned early is that consumers want more than simple routine banking services. Technology is a means to that end. They want their financial institutions to help benchmark their performance against competitors. They want personalized help when deciding what type of loan is best for whatever needs they have. They want assistance with things like wealth management and even merchant processing.
They want all of these things at the same time, and the only way to economically get there is to embrace what modern technology can make possible.
Many financial services organizations are also using assets like social media to help inform credit scoring. Think of the sheer volume of personal data that people share on Facebook or Twitter — information that goes beyond what you would ever provide on a credit application. Now, think about how much more efficient that would make the process of determining who to give a loan or a credit card to.
Even something as simple as using IT to simplify the loan application process can have a major impact on a bank’s bottom line. Using automation to accomplish goals like reducing loan underwriting costs can save a tremendous amount of time and money, too.
Maybe the most critical lesson that financial institutions can learn to understand is that they need to be proactive about preparing for disruption. Truly, it is no longer a matter of “if” but “when.”
As the Amazon example helps to illustrate, you never know when the next big competitor might emerge or if it’s the one that will drastically change the way things are done for the foreseeable future.
Since no single person can truly predict what the future holds with 100% certainty, it’s necessary to start laying the groundwork for an eventual digital transformation now. That way, when the time does come, the business can be as prepared as possible to hit the ground running.
In the end, it’s important to understand that the word “disruption” only comes with a negative connotation if allowed to. At times, it means a sudden shift in the way things are normally done, which can be a struggle for those who resist change. But disruption is also nothing if not an opportunity, a rare chance to optimize processes and procedures to create a better, stronger, and more forward-thinking business for the future.
As the FinTech examples above go a long way towards proving, it’s also an opportunity that shouldn’t be overlooked.
If you’d like to find out more information about what industry disruptors can teach us about banking technology and how that relates to you, or if you’d just like to discuss your own specific needs with someone, feel free to contact the team at DMI today.