Taking retail banking from legacy to digital first

online banking on laptop
Date Published

03/03/2021

Reading time

4 mins read

Author

Ismail Amla

We’re all familiar with the global impact of the Covid-19 pandemic. It has touched every aspect of our lives and brought a lot of change with it.

This is especially relevant in the world of banking: the way that we exchange money for goods and services is changing faster than ever before.

Are banks up to the challenge? This is a question technology entrepreneur Vivek Wadhwa and I ask in our recently published book, “From Incremental to Exponential - how large companies can see the future and rethink innovation”. This is a pivotal moment for financial services, and big financial institutions need to innovate to survive.

In our recent Incremental to Exponential podcast, Vivek and I spoke to Ashok Vaswani, CEO of Consumer Banking and Payments at Barclays. Ashok has the unique experience of being both entrenched in global financial services and a champion for start-up-style innovation. So he was the perfect person to speak to about the challenges big banks face as they negotiate new digital territory.

The need for digital transformation has accelerated

There’s a high level of activity and transformation within financial services going on at the moment.

For example ,the payment sector saw investments worth more than £77bn during 2019 and more deals during the first three months of 2020 than during the whole of the previous year.

In the podcast, Vivek mentioned that not only has the pandemic accelerated the need for digital transformation, but it is also a dress rehearsal for what is to come. Across the globe, customers are demanding digitally integrated, efficient experiences similar to those they already have with retailers such as Amazon. In China, for example, banks are becoming irrelevant in the face of new mobile payment technologies. India’s unified payments interface will see the country leap-frogging an entire phase in the evolution of digital banking to make instant, real-time payments.

The change is daunting but, as Ashok said in our discussion, if big banks can adapt to these digital developments, they’ll be able to transform like never before.

Data will drive recovery and innovation

Many have said, as a result of the Covid-19 pandemic, a debt crisis is waiting to happen. However, unlike previous financial crises, banks have the data to stimulate recovery and help customers to manage their money better. In the future, our knowledge of our customers will drive innovation by pre-empting the services they may need next.

Big banks, big changes

This level of agility and digital innovation is usually associated with start-ups and fintechs. How can banks – with decades and sometimes centuries of legacy systems under their belt – keep up with the rapid changes expected of them in the digital age?

Ashok said: “Barclays is 329 years old. If there is one thing we know how to do, it’s how to change. We are an old organisation that has learned how to survive.”

As a group, Barclays has digitised its operations for a while now and fostered a culture of innovation within the business. Ashok noted that big banks benefit from regulators that control the financial services landscape. Regulation can serve to slow down disruptors’ entry, giving established banks time to adapt.

Yet it’s not a time to relax. Ashok noted that banks need to be wary of ‘big tech’ such as Apple and Google even more than fintech, and consider how to partner with these innovators as they enter the financial services sector.

There are benefits to being big

Vivek and I discuss the innate benefits of large organisations in our book. In the cases we examine, we notice that being big gives you the scale, network and expertise to succeed – an advantage that’s really tough for start-ups to replicate.

Large organisations have some key characteristics:

  1. They operate faster. In the case of Microsoft, the new CEO Satya Nadella drove the strategic imperative of mobile productivity from day one.
  2. They make decisions faster. We saw this in Logitech’s unexpected but strategically relevant acquisition of Jaybird, or Walmart’s decision to take a stake in Tiktok.
  3. They underpin their decisions with data. Netflix has illustrated the power of this in its targeted advertising. McDonald’s benefitted from the practice of social listening by learning that its customers wanted breakfast options served throughout the day.

Innovation starts with culture

While big banks may have the money, data and expertise to thrive, they will only survive if their leaders are passionate about innovation. Ashok told us: “You have to create a culture and mindset shift in organisations.” This includes investing in R&D and innovation opportunities. “You need to experiment, make mistakes and listen to what your customers are saying,” he added.

Looking ahead, the rate of change set to continue. In fact, said Vivek, it’s only going to speed up. We can expect more change in the next decade than we’ve had in the last 100 years. When technologies converge, they wipe out industries and create new ones. Personally, I believe this poses exciting opportunities for banking and we can look forward to an innovative, cashless payment landscape, data-driven decision making and alternative lending models. This allows us to refashion the financial services sector into one that’s inclusive, responsive and in touch with its customers.

 

Written by

Ismail Amla

Ismail Amla

Chief Growth Officer, Capita

Ismail is leading business development, sales and marketing to support our transformation and organic growth plans. In 2018 he was named as one of the top 100 most influential Black, Asian minority ethnic (BAME) leaders in the UK tech sector by Inclusive Boards.

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