The shape of banks to come
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The shape of banks to come

Evolution is speeding up in financial services: to respond banks need new faces and different skills in the boardroom


Boards exist to set strategy for the organisation and hold the executive team to account for its delivery – for financial services businesses, it's time to frame a vision for the future.

As the age of Open Banking approaches, boards face two overriding questions:

  • Do they have the range of skills they need at board level to frame strategy that depends more than ever on technology and customer insight?
  • Are they attracting the right kinds of talent further down the organisation to deliver the next generation of digital banking services?
New strategic issues

"More than simple technology expertise, bank boards now need the imagination to see a world of hyper-personalised, predictive and pre-emptive services," says Louise Beaumont, Co-chair, techUK Open Bank Working Group.

"These are not products: they are services that wrap around the individual in a market of one. Making the transition to that world needs the imagination to conceive of something that doesn't exist, the creativity to work out how to achieve it, and the will to make it happen. It's not about having a technology-based strategy – it's about thinking strategically."

Bank boards of today

The boards of major banks today are dominated by people with experience in finance, accounting, law and regulation. Given the enormous changes in regulation since the financial crisis, it is not surprising banks have sought out board members with skills relevant to banking's strategic agenda for the post-crisis years: regulation, risk management and compliance.

But the post-crisis environment is shaped by another set of strategic issues that grow steadily more pressing:

  • digitalisation
  • mobile
  • automation
  • the emergence of big data analytics
The challenger bank view

Megan Caywood, Chief platform officer, Starling bank, says: "After the financial crisis, the banks became very focused on the new rules and regulation and the fines that were being imposed. As a result, innovation dropped to the bottom of the priority list.

"But the timing of the crisis coincided with when some of the most innovative new products came to market: 2007 is when the iPhone came out, and subsequently Uber, WhatsApp, Airbnb and so on. As a result, a gap emerged between what the banks offer and what consumers expect, particularly in terms of user experience – how intuitive and smart applications can be. That's what they're missing out on."

Tech companies vs banks

The contrast between banks and leading technology businesses is clear: tech companies' boards have large contingents of people from technology, customer insight and digital media backgrounds. As a result, they demonstrate a sharper focus at the top level on the strategic issues of the coming decade: the digital transformation of all businesses, including financial services.

Be more customer centric

The technologies underpinning Open Banking put customers at the centre of the picture. This challenges providers to develop a deeper understanding of their needs and behaviours, and to harness data and computing innovations to create the next generation of banking services.

To achieve this, banks must attract the right kinds of technology talent, but just as importantly they need people who can bring the necessary level of insight and empathy with their customers: behavioural psychologists and ethnographers, for example.

"Banks need to understand what customers want," says Bill Roberts, Assistant director, Remedies, Business and Financial Analysis, at the Competition and Markets Authority. "It's either a threat or an opportunity depending on your appetite for risk. The more customer centric you are, the more likely you are to succeed."

67%

of people in the UK say they don't trust banks

61%

of British customers are interested in banking services provided by alternative suppliers such as Tesco, John Lewis, Amazon and Apple

Source: Harvard Business Review 2016

£5m

UK banks have funded a £5m prize for Nesta's Open Up Challenge – intended to inspire the creation of apps and tools for small businesses

More than simple technology expertise, bank boards now need the imagination to see a world of hyper-personalised, predictive and pre-emptive services
Louise Beaumont

Co-chair, techUK Open Bank Working Group

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