Powerful trends have been reshaping the banking industry and rearranging the competitive landscape. Consumers, for example, are increasingly in control of business relationships, engaging businesses on their own terms and at the time and place of their choosing. They create value for other consumers by writing product reviews on Amazon and posting “likes” on Facebook. In this environment, banks are under growing pressure to define clear digital agendas and allocate capital to the right investments. They need to determine which business platforms to prioritize and transform and which new digital initiatives to launch.
With consumers gaining power, major consumer-to-business (C2B) players such as Google, Apple, Facebook and Amazon have been encroaching on banks’ traditional territory. Google and Apple have launched payment systems and Facebook Messenger allows users to send money to each other. Amazon Lending offers its “power merchants” business loans and takes the loan payments out of the sales proceeds of those merchants.
These and other trends make banks more vulnerable, even banks that have begun to transform themselves into the “Everyday Bank” of the future – one that interacts daily with customers. We estimate that, by 2020, different business models could impact up to 80 percent of existing banking revenues, including revenue streams from current accounts, consumer finance, cash management, and small- and medium-enterprise (SME) payments.
With these competitive pressures, banks will need to move fast and make the right decisions in three crucial areas:
- Which roles to play;
- Which “phygital” (combined physical and digital) businesses to prioritize and which new businesses to launch; and
- How to develop and deploy relevant digital enablers, and how to digitize processes end-to-end, including branch activities.
In this series, we will explore banks’ strategic options, the actions needed to implement their decisions, and internal and external factors affecting successful execution of a chosen strategy. In these disruptive times, banks will need to go beyond the concept of the Everyday Bank.