“To innovate is essential for any business, even for banks,” says Fabrizio Saccomanni, Chairman of UniCredit, during the Master Lecture held on May 23 at Villa Guastavillani. Transforming the business model: a choice that can not be postponed for banks, is the title of the meeting with the Community of BBS, during which Saccomanni explained the drivers that are pushing Italian banking institutions towards an increasingly necessary innovation of the processes and services offered.
According to the former Minister of Economy and Finance, the speed of change, customer pressure, digitalization and the entry of new players on the market are the four fundamental pillars on which the transformation underway is based. “The change must be understood as a real transformation that goes well beyond the usual restructuring that has periodically affected all the processes of the banks,” he added.
The great economic crisis has affected very closely the banks, which have surpassed, perhaps in better shape than other sectors, the period of recession thanks to the stringent controls to which they are continuously subjected. On the opposite side, 50% of the large companies that have dominated the markets since 2000 have disappeared, failed or have been acquired. The giants of today, which are the new players in the financial market, were founded on these ruins.
The increasingly important factor of differentiation will be in fact the Customer Experience, the terrain on which the technological giants are moving better and taking away large sections of the market from banks. “It’s the growing influence of digital natives to drive the change,” said Saccomanni. “A generation that will represent 40% of global consumers by 2020 and that brings with it high expectations of real-time interaction, great propensity for change and sensitivity to data processing.”
The necessity to provide an instant, transparent and satisfactory interaction, puts the banks in front of several criticalities, as it embraces many functions and skills for which the banking institutions are not adequately formed. “To compete we will have to equip ourselves with new professionals, graduates in statistics rather than data scientists and digital marketing managers,” explained Fabrizio Saccomanni, pointing out that one of the great challenges will be to attract these figures, since the skills that today banks need rotate almost entirely around the digital transformation.
For companies, and especially the banking sector, the process is about redefining the corporate culture, based on a more effective collaboration between the structures and a deeper sharing of information, together with decentralization of decisions. The digital transformation underway is therefore complementary with a profound reflection on the business model.
The organizations that have best interpreted this passage are without a doubt the technological giants, the so-called digital disruptors, which can focus on their important competitive advantages to erode the business of banks. On a worldwide scale, over 6% of consumers have already chosen non-bank operators to whom to entrust their financial situation, while recent market surveys reveal that 32% of bank customers in Germany and even 54% in Italy are willing to face this kind of change.
“However, banks also have distinctive assets and strengths to bet on. The one standing out is the confidence of customers on the security offered.” In a recent Accenture survey, it emerged that 86% of those interviewed trust banks in how their personal data are handled. “In addition, the habit of being regulated and compliant with specific laws is another point in favor, a quality that new media will have to develop ex novo,” concluded Saccomanni.
The furrow in which an intense competition is developing between new and old players is traced by new technologies and a regulation that is still struggling to keep up with the change. If it is to be considered that by the end of this year more than 2/3 of the global population will have access to alternative and real-time payment systems, the challenge that this involves for supervisory and regulatory authorities must be taken into account. Regardless of the technology used, financial service providers must be subject to the same stringent regulation and revision. Especially because of the high risk of non-liquidity and the impossibility of these channels to access assets of the Central Bank.
The current transformation is not just a ‘smart’ update of the services offered, but it is a real socio-technological process that applies digital technology to industry, able to influence and modify the underlying structures. In other words, the current process aims to reshape the value chain and create new ecosystems.