Recognizing that technology innovation is changing the banking industry at breakneck speed, more than half of bank executives expect to be working with new digital partners within their industry in the next two years, according to a global survey of more than 300 banking executives by Accenture.
In addition to current technology challenges, more than four-fifths (85%) anticipate that the pace of technology change will increase rapidly or at an unprecedented rate over the next three years.
Building digital ecosystems where banks can connect customers to other service and product providers – in other words, creating a ‘platform economy’ business – is one of several emerging trends reshaping the banking landscape. According to the 2016 Accenture Technology Vision for Banking report, collaborating with digital partners will enable banks to offer services tailored to customer preferences.
“For banks, building platforms means understanding the privileged place you have earned in the customer ecosystem arising from trust, connectivity or proprietary data and appreciating the value of that position in the market,” said Alan McIntyre, senior managing director, head of Accenture Banking. “The massive volume of data and existing partnerships that banks already have in place today are assets that banks need to leverage to their advantage in creating new business models. Digital optimization of the traditional bank business model could add 5% to ROEs, but if customers start migrating to new platform-based services outside of the banking sector, increased profitability from a shrinking business will be scant comfort to shareholders.”
More than four-fifths (83%) of bank executives surveyed believe platforms will be the ‘glue” that brings organizations together in the digital economy, and nearly half (46 percent) say that adopting a platform business model and engaging with digital partners are very critical to their success. Of the banks that expect to be working with new digital partners, two out of five (42%) expect those partnerships to be outside of the banking industry within the next two years.
The changing nature of the banking industry will also demand a different type of workforce, one focused on outcomes rather than processes. Eighty percent of respondents agree that the workforce of the future will be structured more by projects than by job functions.
“Implementing the right technologies to achieve digital transformation is only one part of the equation; banks also need to harness technology to enable their people to do the right tasks in a nimble and adaptable environment,” continued McIntyre. “A flexible workforce with evolving skill sets will help banks keep up with the rapid pace of change while staying close to customers. However an agile and project-based workforce will also create many new management challenges for those used to a hierarchical model.”
Nearly three-quarters (74%) of bank executives believe a more fluid or ‘liquid workforce’ will improve innovation by introducing more diverse thinking and individuals to the process. This liquid workforce will include a mix of traditional employees, on-demand workers, crowd sourcing, application development companies and other external sources, enabling banks to scale talent up and down as needed for greater cost variability and efficiency. Three quarters of bankers expect a large proportion of their workforce to shift from individuals with deep expertise in a particular area towards more flexible, multi-skilled generalists within three years.
The report also states that automation and artificial intelligence will become banks’ essential new co-worker. More than four-fifths (86%) of respondents agree that the widespread use of AI provides a competitive advantage beyond cost cutting. Their top targets for more automation include: knowledge workers (91%), customer interaction (88%) and information technology tasks (90%).
With greater openness and accessibility comes more vulnerability. As banks increase the number of touchpoints with customers, they also multiply the number of potential access points for hackers. While 84% of respondents agree that trust is the cornerstone of the digital economy, more than three-fourths (76%) strongly agree that they are exposed to more risks today than they are equipped to handle as a digital business. And while customers trust banks to hold their money and access their personal data, they are skeptical whether banks are offering them the best advice and services for their needs.
“Banks have much work to do to reassure customers that their best interest is top of mind and their data is being handled ethically and securely,” concluded McIntyre. “The first step to securing ‘digital trust’ is to be transparent and clearly communicate what data is being collected and for what purpose, and then use that data for the primary purpose of offering customers benefits tied to the data being shared.”
More than four-fifths (85%) agree that a lack of data security and ethical controls could exclude them from participating in other companies’ digital platforms and broader ecosystems.