Banking Greatly Underestimates Speed and Scope of Digital Disruption
29 January 2018
Posted by: Heather Smith
Nothing has impacted today's consumer more than the power of the smartphone and digital technologies. The full impact of digital technologies has yet to be fully realized. Those banks and credit unions that continue to have a passion for yesterday's banking models will soon see negative impacts on growth and revenue.
The smartphone and digital technology is the foundation of today’s increasingly demanding connected consumer. Nothing has changed consumer behavior so much, so fast, as the 24/7/365 connectivity of the smartphone. It allows consumers to shop, search, share, and interact with almost any company and person in the developed world. It also can help consumers make decisions and connect with an increasing number of home devices.
We are approaching a new technological revolution, which will bring together digital technologies and the power of advanced analytics to improve convenience, simplify everyday life, and help us make better decisions. We are entering an era where digital devices will proactively provide us personalized recommendations based on past behaviors and expressed goals. Beyond just e-commerce, the smartphone has replaced the computer as the go-to device for an exponentially increasing array of needs.
The most dramatic result of this digital revolution is the shift in power to the consumer. Consumers can research, analyze, seek recommendations, purchase, interact and grow or eliminate relationships without any in-person engagement. Each of these steps in the buying process can be done with a touch of a finger or a quick voice command.
The Speed and Scope of Digitization
According to McKinsey, many organizations underestimate the increasing momentum of digitization. This includes the speed of technological changes, resultant behavioral changes and the scale of disruption. “Many companies are still locked into strategy-development processes that churn along on annual cycles,” states McKinsey. “Only 8% of companies surveyed said their current business model would remain economically viable if their industry keeps digitizing at its current course and speed.”
Most importantly, McKinsey found that most organizations also underestimate the work that is needed to transform an organization for tomorrow’s reality. Much more than developing a better mobile app, organizations need to transform all components of an organization for a digital universe. If this is not done successfully, an organization risks being either irrelevant to the consumer or non-competitive in the marketplace … or both.
Complacency in the banking industry can be partially blamed on the fact that digitization of banking has only just begun to transform the industry. No industry has been transformed entirely, with banking just beginning to realize core changes.
Yet most executives are fully aware that by reducing friction, digitization enables competition to put negative pressures on revenue and profit growth. Current levels of digitization have already reduced, on average, up to six points of annual revenue and 4.5 points of growth in earnings before interest and taxes (EBIT), according to McKinsay. The full impact is much greater as digital penetration deepens.
Article Source: https://thefinancialbrand.com/70142/digital-mobile-banking-technology-strategies-trends-ai/?smedia-twt-jm