If I was to identify one dominant response from bankers at SIBOS this week it is confusion. Not confusion over the event, where to find sessions, or what they are doing here, but confusion over where the banking sector goes next.
The fact is, after time immemorial where banking has essentially remained the same, bankers are suddenly thrust into a world where trust in banks is questioned, where the value of the bank in the value-chain is questioned, where the way we (as bankers) interact with customers at large is rapidly changing (and therefore questioned), where regulators are facing innovation that is so rapid they don’t know where to start or what questions to ask, and where a plethora of new business models that look and smell a lot like banking, but aren’t are increasingly popping up – the big question is what is banking at the end of the day?
What banks aren’t
The concept that banks are a place to hold your money is difficult to reinforce when money is essentially digital. The concept that banks are physical locations where you go to bank, is difficult to align with behaviors where mobile and internet will dominate daily access to the bank brand. The concept that unbanked customers are out of reach of a bank because of lack of profitability, when M-PESA and others are showing you can do massive transaction volume – make us question our margins. The concept that banks are the sole purveyors of ‘trust’ in an environment where trust in banks is at a all time low and where social media can destroy your brand at warp-speed, is obviously a challenge. As digital begins to overshadow the physical elements and the traditional networks that have underpinned banking, where does banking fit in our daily lives?
This was really borne out when I chatted with a senior executive from Western Union after my session at Innotribe today. He asked me what I thought Western Union’s business would become and how to bridge the challenge of mobile payments. I commented it would make sense for Western Union to act as locations for converting cash to digital/mobile credit and visa versa. His comment:
“Yes, well that will work for a while…”
But what about regulators, AML and compliance requirements, payments networks, and other constants that provide the backbone to the banking sector today – surely these can’t be easily circumvented? Maybe those aren’t constants any longer. Maybe they are legacy issues.
The key emerging at SIBOS this year is really how do we restore trust and stay relevant given what banking will become?
I think therefore, I innovate
This is the intellectual adjustment that bankers are going through at SIBOS this week. There is the grudging acceptance that the bank industry is NOT going to return to normal. There is a “new normal” that is being thrust upon bankers, and this is confusing. Why? Because it is untested territory, there is no defined path that is clear in respect to how we move forward as an industry, but one thing is for sure… it’s going to be very different from where we are today.
At the moment we’ve got lots of bankers who are running around talking about clouds and crowds(ourcing), social media, mobile payments, trust, leadership, Apps, APIs, innovation and so forth, and an equally overshadowing plethora of vendors and solutions providers pitching their wares as the magic piece of the puzzle. But there’s no straight answer – we know where we have to get to, but not how to get there.
Where do we start?
Leading banks out of this confusion will not be easy. The problem really is that while many bankers now get the big shift, there are an equal number of proponents of the risk adverse strategy who say we should wait and see what happens before trying to move the big ship.
This is the big challenge. As an industry we are simply not used to the scale of disruption, changes and challenges to our conceptual models of banking and payments that we see today. This scale of disruption means that, in fact, there is not a clear dominant solution emerging, there are tens, hundreds, perhaps more. In this environment what is the best course of action? When we have less and less time to adapt, how do we enact the sort of structural, strategic and financial changes that are required to re-mobilize (excuse the pun).
It has to start with a desire to change, to adapt. That’s the toughest part for many of the SIBOS attendees this year. It is perhaps the first time that intellectually as a group we are seeing the sector understand that it is our instincts that we have to change.
Change, disruption, the importance of engaging the customer and redesigning banking in that spirit, along with an ongoing culture of experimentation and innovation are the only certainties that are emerging. This is not how you would normally characterize banking as a sector, so the learning curve is steep and the options confusing.
The good news is, I finally feel like we are at the start of the journey. As a group we have accepted the need to reinvent what banking is for the future. It is confusing, but it’s sort of exciting in the same way.