How digital will changing banking forever

Rosalind Madge our consultant managing the role
Posting date: 7/17/2013 3:05 PM

Banks are changing dramatically amid an avalanche of regulatory change and widespread debt reduction. They will be safer and, sadly for users of bank services, costlier as a result. Yet all of this may soon seem somewhat irrelevant, because technology could transform the way banking works far more profoundly.

Banking is very ‘digitizable’. Cash is the only part of the industry that is inherently physical and that is a tiny part of what a bank does. The rest is really about transferring and modifying property rights and information of various sorts, all of which can be digitized.

Banks are next in line

Of course banks have invested huge sums in technology – automating processes and enabling customers to bank online – but we haven’t yet seen the fundamental transformation of business models that have taken place in other sectors, such as music.

It will happen, and when it does it will have a huge impact.

Some of the consequences are clear from other industries. Intermediaries disappear or get marginalized unless they discover new ways of adding value.

Look at what has happened to recorded music companies or bookshops. Banks are the primary intermediaries of the financial world, so their margins will fall unless they reinvent what they offer their customers and how they work.

Winners take it all

In the digital analytics world, things work differently. Scale and network effects drive competitive advantage. Winners tend to take all, as Google and eBay demonstrate. Discrete products get turned into bundled services. Customers of Spotify, a music service, do not buy recordings of individual songs – they buy a subscription to a cloud-based archive.

Perhaps surprisingly, the transparency of the Internet doesn’t always lead to the disaggregation of bundles and the disappearance of cross-subsidies. Things get pulled apart and put together in different ways. Monetisation, costs and customer value can be even more often disconnected than in the physical world.

New business models will emerge, as we have already seen: Lending Club’s peer-to-peer model is changing personal lending. Some will thrive, many will fail.

Banking will get cheaper

Above all, customers will benefit enormously. Greater transparency will mean better prices for customers. Digital analytics delivery will mean never having to go to a branch. More information and more flexible service configurations will put the customer in control.

Why is it happening so slowly compared to other industries? Part of the answer lies in the banks themselves. Contrary to what many believe, banks are extremely risk-averse. They don’t like failing, and it’s almost impossible to innovate unless you are prepared to fail. In a context where trust is so important, and where there’s increasingly little tolerance for any kind of failure, that’s extremely difficult.

But regulation is an even more powerful impediment – and not only because ‘financial innovation‘ is a four-letter word in banking supervision circles. Technology-driven innovation that leads to big winners and big losers, that replaces established products with flexible service bundles, that overturns established business models and blurs the boundaries of banking, and that sometimes fails to deliver quite what was intended, doesn’t fit well with today’s regulatory zeitgeist.

Real innovation needs to happen

To be fair to the regulators, it’s not like banks are straining at the leash. Mostly they’re investing in technology to meet ever-increasing regulatory demands, or to reduce costs. There’s relatively little investment in real innovation that offers major changes in customer experience; and the prevailing ‘zero tolerance’ environment is toxic to new ideas.

Moreover cyber-security and privacy issues are becoming ever more acute. The more finance becomes digital analytics, the more important it is to prevent intrusion, disruption and digital analytics theft.

Yet, despite such challenges, and whether they like it or not, banks and their regulators are going to have to embrace technology-driven innovation. Otherwise it will simply happen by stealth, driven by players outside the industry. We have already seen examples such as M-Pesa, the mobile payments solution pioneered in Kenya, the ubiquitous Paypal, or most recently, Bitcoin – the online currency.

We should be making banks better

Given the scale of customer benefits, and the scope to seize competitive advantage, there are huge prizes for those who can innovate successfully. Too much of the debate about banking is about not repeating the mistakes of the past. We risk missing the opportunity to make banks much better in the future.

We’re stepping up the pace of innovation at the bank I run: generating more ideas, implementing them more swiftly, being quicker to discard the ones that don’t work. By making everything digital analytics, exploiting the power of Big Data and the ubiquity of mobile communications, we see huge opportunities to enhance the value to our customers, to increase efficiency and to manage our risks more effectively.

The upsides are huge, and the downsides are stark. That’s why accelerating technology-driven innovation is a top priority.


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Weekly News Digest: 10th - 14th May 2021

This is Harnham’s weekly news digest, the place to come for a quick breakdown of the week’s top news stories from the world of Data & Analytics.       Personnel Today: Mental Health Awareness Week: Concerns up 24% from last year It was Mental Health Awareness week this week, and this year, the focus was on the theme of nature. Personnel Today revealed some worrying statistics on the back of research from Close Brothers into the state of the population’s wellbeing in 2021.  Reports of mental ill-health has increased by nearly a quarter since this time last year as a direct consequence of the stresses and strains of COVID-19. From yo-yoing in and out of lockdowns to extended periods of isolation, job uncertainty and illness, this year has been like no other and it’s most certainly taken its toll.  63 per cent of 16–34-year-olds report mental health worries, up a seventh from last year.For those who are 55+, this worry has risen by a third. In this piece, it is made clear that the underlying issue lies not only with COVID-19, but the lack of support given by employers. The research revealed that 70 per cent of employers don’t have a wellbeing budget in place, and only 8 per cent of firms invest more than £126 per employee each year in health and wellbeing.  To read the full research, visit Personnel Today here.  Towards Data Science: 5 unique skills every Data Scientist should know We know that career tip articles for Data Scientists can all feel pretty ‘samey’. But this article in Towards Data Science mixes up the usual advice, looking at how those in, or aiming to be in, the industry need to brush-up on their softer skills if they are to be successful.  Tips include: Cutting down the jargon in order to communicate effectively with stakeholders. Don’t be hasty to overpromise, or you’re at risk of seriously under-delivering. Become friendly with your team’s software engineer, they’ll only be able to help you be more efficient and effective in your role.  Of course, there has to be some mention of coding in there – it wouldn’t be a data-based article without it. Make sure you’re mastering your SQL Optimisation. Don’t leave your Git out in the cold, become familiar with the practice to ensure you can update your model code quickly.  To read the full article, click here.  Analytics India Mag: What SMBs can learn from Big Tech’s AI playbook? AI has come on leaps and bounds in a short space of time, and its popularity has boomed. For the monster-sized companies, where budget is of no question and innovation can happen overnight if need be - embracing AI has been a total no-brainer. Workflows become more efficient, technology becomes smarter, and the scope of growth seems infinite.  However, despite all the benefits of AI that are so regularly shouted about, it’s been clear since the birth of the technology that there’s a huge divide in those who can and those who cannot afford to implement this innovation.  Up until now.  In this piece from Analytics India Mag, author Ritka Sagar, highlights how SMEs are finally finding ways to become ‘inventive’ with how they implement and use AI systems without breaking the bank.  To read how SMEs are managing this, click here. Silicon Republic: For smart cities to work, they need to be neutral and objective The concept of a smart city seems like something out of a futuristic, sci-fi film but, in fact, they are closer to becoming a reality than we may think.  The idea being that urban areas use sensors and other electronic methods to collect data. From citizens to traffic, water supply networks to crime detection, all of these assets of life, and more, are monitored, data collected, and insights given to make ‘life’ more efficient.  On the surface, it’s all very cool, but there are, of course, worries that come with it. In this Silicon Republic article, Computer Scientist, Larissa Suzuki, discusses the importance of ‘neutral and objective’ smart cities if they are to work.  She says; “Data and services in smart cities must be neutral and objective when reporting information about the city environment. They should encompass the entire population and respect data licences, regulation and privacy laws,” she said. “In a similar fashion, the digital services and the backbone technology – including algorithms – should be free from any ideology or influence in their conception, operation, integration and dissemination.” To read more on the future of smart cities, visit Silicon Republic here. We've loved seeing all the news from Data & Analytics in the past week, it’s a market full of exciting and dynamic opportunities. To learn more about our work in this space, get in touch with us at info@harnham.com.     

Using Data Visualisation To Bring Data & Analytics To Life

The majority of the human population are visual learners. Our brains are wired in such a way where we can register 36,000 visual messages per hour, and visuals are processed 60,000 times faster than text. In short, one of the best ways to truly assimilate and understand new-found knowledge is through clear and digestible imagery.  Because of this valuable insight, we are now witnessing the fast-growing trend of Data Visualisation. Over the next six years, the value of Data Visualisation tools is expected to reach $19.2 billion, over double what it was in 2019.  Data & Analytics is one key area where data visualisation is used continuously. The raw data collected on a daily basis by Data Analysts can be incredibly time-consuming to sift through, not forgetting near-impossible to form palatable findings from. However, through the use of data visualisation tools such as graphs, heat maps, charts and infographics, confusing, text-based data can be transformed and brought to life. So, how can Data Visualisation help your business? Greater understanding of your data As Lydia, our Senior Recruitment Consultant, stated in her most recent article – data insights have the capability of not only improving decision-making, but also allow you to spot key trends, errors and predict future challenges. Nevertheless, all of these brilliant capabilities of data insights can only occur when teams can garner an in-depth understanding of the data being presented to them.  Without a background in statistics, which very few members of any team would possess, the raw data simply wouldn’t mean anything, and key insights could be missed. Utilising data visualisations not only makes data more tangible, but it also allows every team member to understand the data, make decisions and implement changes more efficiently. Standing out from the competition The effectiveness of Data Visualisation is no secret, and time and time again it’s been proved that this way of presenting data is far more likely to produce results than simply reviewing text.  Research within Analytics Insight reported that businesses using data discovery tools are 28 per cent more likely to find timely information compared to their dashboard-using counterparts, and 48 per cent of business intelligence users at companies with visualisation tools are able to find the information they need without the help of a specialist team.  Nevertheless, despite the incredible benefits, only 26 per cent of businesses globally are using data visualisation tools.  While the reasons for this slow uptake are varied, it’s clear that those companies who are willing to invest in Data Visualisation are far more likely to stand a head above their competitors. It can improve customer experience 98 per cent of companies will use data to help drive a better customer experience, but it doesn’t always mean that this data is collected, managed or presented well.  Data is, and should be, used as a way to back up what brands are saying, especially if they’re shouting from the rooftops about how fantastic they are.  When a business or brand uses accurate Data Visualisation to tell this story – for example, the percentage of consumers who report high levels of customer satisfaction, or the amount of money donated to CSR projects – audiences will respond much better than if the claim appears to be empty words without any evidence.  Data Visualisation is undoubtedly one of the most effective ways to communicate data, both internally and externally. The comprehensible formats available enables information to be processed with ease, and for learnings and understandings to be absorbed and implemented with much more efficiency than text-based raw data. It’s clear that this trend is only going to grow in popularity as businesses begin to put more investment behind it in order to reap the benefits and watch the positive impact on their bottom lines prosper.  For examples of how Harnham uses Data Visualisation, head over to our recent research reports.  If you're looking to take the next step in your career or build out your Data & Analytics team, we can help. Take a look at our latest opportunities or get in touch with one of our expert consultants to find out more. 

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