The next generation of banking is upon us, with a new report urging banks to speed up when managing digital innovation. Digitally powered business models are changing the way money and data are moving. While banks are dealing with an increase in competitors, progressively slimmer revenues and increasing losses, businesses are demanding that banking leaders commit to ongoing digital transformation.
Digital disruption is not new in the banking world, however, a report by the Boston Consulting Group (BCG), Corporate Banking Performance Benchmarking, have indicated that banks are experiencing increased costs due to inflexible operating standards. Banks need to embrace digital innovation in order to remain profitable.
THE RISE OF FINANCIAL TECHNOLOGY
With the next generation of banking shaping the financial sector, corporate banks are being pressured to adapt their practices. Financial technology companies (Fintechs) have incorporated digital innovations into their business models, which have changed the face of the banking industry as we know it. Accenture recently released a report which indicated approximately US$5.3 billion was invested globally in fintech in the first quarter of 2016, up 67% from the previous year.
In the short term, fintech does not threaten traditional banks in the industry, however, this may be a different story in the long term as the future of banking is hard to predict. Given their adoption of new technology, however, it is likely they will play an important role as industry disrupters.
THE EVOLUTION OF BANKING
The central bank of Singapore is currently testing a single blockchain model for bank-to-bank payments, with the big Australian banks pushing to follow suit. The CBA has spent more than A$1 billion updating their main banking platform in recent years. Westpac has recently partnered with Prospa, a leading Australian fintech company, in order to expand SME lending. ANZ is relying heavily on cloud-based technology to partner with software providers and fintech companies in order to explore data, artificial intelligence and blockchain technology.
In a global sense, the banking industry is looking at different opportunities which have the capacity to change the relationships between banks, suppliers and customers forever, resulting in new business models for all parties involved. This is said to be accomplished primarily through an improvement in data exchange and improved automation. However, in order to make this transformation, banks need to be making these internal changes quickly in order to remain viable to customers.
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