Digital Davids vs Financial Goliaths
We live in an interesting time of disruptions. Like many industries, the financial services sector is facing its Kodak moment. The incumbents have the experience, the challengers are creating the experience. Here are a few of the many moments that I feel will define the next decade for the incumbents.
(The views expressed here are of the Author’s and does not reflect the views of the Company).
1. Billion Users Challenge: Nearly half our planet is digitally connecting on a monthly basis. Therefore, to build a winning Digital experience, incumbents will need to ‘un-think’ their bank’s or insurance plays. Only WeChat, Alibaba, Google, Facebook and Tencent have the experience of dealing with a Billion users a month. All the banks in the world put together, don’t connect a Digital Billion monthly. Digital scale for incumbents is something new and challenging.
2. Incumbents should start with a ‘100 Million Digital Users’ mindset, that will enable creating a better stack. This is different from building core banking for 100 Million accounts.
3. A Digital Bank cannot be built with a Channel mindset, simply because ‘Digital’ is not a channel.
4. Valuation for banks will shift from Price/Book ratios. Revenue per digitally-engaged customers will soon be a metric.
5. Building ‘Digital’ is a culture. A mindset. One cannot build a Digital Bank using talent or mindset from the channel era.
6. Future banking licenses are going to be on Tap. Many Retailers/ eTailers/ Internet Giants have more customers, net worth and technology than all banks put together. Banking is not a protected industry anymore. Incumbents need to think of digital engagement as key differentiator.
7. Digital is borderless. None of the incumbent banks have a successful global model. Internet giants boasts proven global models. Building strong local Digital models is imperative for incumbents.
8. Digital is a collaboration. It is OPEN. Incumbents need to build open API stacks or else, they will lose value every year.
9. Digital customers are connected by device, APIs, social, data, voice and cloud. Incumbent banks connect to customers via account, card, ATM, branch and call centre — all are starting to fail.
10. Digital giants will acquire financial licenses — This is a few dollars in a monster revenue stream. Incumbents will have to acquire digital players — Nearly unaffordable.
Will Goliath unwittingly overestimate his strength, by relying on his size and experience, and confront every battle with the same strategy? Or will Goliath allow himself to be outwitted by David’s unprecedented approach? Remember, according to legend, David wins.