2017 Banking Transformation

2017 Banking Transformation (5 minute read)

Happy New Year! I hope everybody has had a great festive period. Mine was amazing, I spent time absorbing the beauty of nature in winter and sharing special moments with loved ones with complete digital detox. To warm up my neurones as I awake from my digital hibernation I have put together a brief Mystic Meg prediction of 2017 within banking.

The demands from customers, fintechs and regulation (PSD2, Brexit, deregulation in the USA) will put pressures on traditional banks to transform to fend off threats and exploit new opportunities. It is important that banks’ strategy is clear and more importantly understood, from management right the way to people on front of house. Banks will need to transform both within infrastructure technology and customer experience to stay relevant and maintain market share.

Infrastructure Technology

1. Microservices infrastructure
2. API ecosystem
3. Process optimisation and DevOps delivery

Banks will rearchitect their technology infrastructure to an event driven microservices infrastructure. This is going to be a challenge for banks with high entropy and customisation in their current technology ecosystems. Supported by well defined APIs the modular nature of microservices will provide flexibility and adaptability. Banks will also optimise their processes to drive operational efficiencies and make use of the new infrastructure. Within process optimisation, processes will need to be mapped, bottle necks and systems will need to be identified and constraints put in place to ensure continuous flow. Refer to the theory of constraints (TOC) for further reading. Banks will adopt DevOps delivery of automation and continuous delivery / integration to reduce lead time of change. This will need to happen to compete with the fintechs in terms of cost per change and ensure they can deliver value to the customer quicker are more importantly in a predictable way.

To enable DevOps we will see more banks moving their core banking to the cloud, as metro bank have done in 2016.

Customer Experience

1. Artificial intelligence
2. Chatbots, Natural language processing and Machine learning
3. Augmented reality

Emerging technology will have a massive impact on the customer experience. Customers will expect conversation like interactions with their banks, where established chat bots such as Facebook will be used to interact with banks, from support to day to day banking. Conversational interface which incapsulates natural language processing and machine learning will become the 5th dimension within the digital experience, enabling customers to authenticate and jump straight to the function they want to perform without navigation. Physical branches will continue their digital transformation and pilots of augmented reality will take place. Where banking apps intersect with physical branch, Pokemon meets banking so to speak. Customer journeys will need to reimagined, augmented or ripped up to make way for emerging technology. Banking apps will still be relevant and focus will be on omni channel experience, however certain functionalities such as payments will be available within other 3rd party apps. Blockchain development will continue but I do not think 2017 will be the year where blockchain will scale. Blockchain use cases will move from pilots to main stream, and start to become industrialised, especially in the sharing economy.

Conclusion

Plenty of excitement and change for 2017, banks such as Monzo and Starling offering new banking products and innovation leaps in emerging markets in India and Africa, where the above trends will have a larger impact. Banks will start to look at new business opportunities and building relationships with fintechs, which will become very important in 2018 with PSD2.

Wishing everyone a fantastic 2017.

Thanks for reading!