(Guest blogger, Jerry Silva, is research vice president at IDC Financial Insights.)
The banking industry has seen more potential for change through technological innovation in the last three to five years than it has in the last three to five decades.
Spurred by regulatory demands, increased customer expectations, and competitive pressures, normally deliberate financial institutions are embracing technologies like cloud, artificial intelligence (AI), mobility, and even quantum computing in order to maintain their relationships with consumers and retain their position as trusted and convenient financial partners.
Tomorrow’s bank experience will look deceptively easier and more in line with the customer’s lifestyle—faster, more convenient and responsive, and customers may be a bit surprised when their bank is there at exactly the right moment when they’re needed. But behind the wall, the changes will be fundamental, essential, and truly transformative. As science fiction author Arthur C. Clarke once observed, “Any sufficiently advanced technology is indistinguishable from magic.” To the customer’s eyes, their bank’s improved responsiveness and convenience will belie the enormous work taking place today to make that future possible.
I believe that one of the key characteristics of transformation is represented by a philosophy I used to hear quite a bit in the 1990s: to stick to core competencies. Banks that seek to leverage technology more efficiently, but don’t strive to be technology firms themselves, will be best positioned to deliver the future of financial services.
I say this for a number of reasons. After speaking with technology executives at banks both large and small, it’s apparent that there is a real challenge in attracting and retaining the staffing required to develop data lakes, AI-enabled analytics, cloud environments, and next generation security solutions, just to name a few—but very critical—areas of transformation. Banks focused on becoming technology-first organizations run the risk of losing sight that they are, first and foremost, financial institutions.
The other reason I believe in the power of core competencies today is that many banks are overly focused on IT transformation instead of business innovation. For example, while open banking is growing in Europe because of regulatory guidance, it lags in the Americas, where the potential of innovative products and services based on customer journeys is lacking in attention.
Finally, I say this because I’m cheating: I already had the answers to the test, as it were. In IDC’s 2019 CloudPath survey of adoption of cloud technology by banks globally, the institutions told us that’s exactly what they’re thinking when three of their top five expectations of cloud are business-related. Figure 1 shows the top five expectations banks have in adopting public cloud.
While in the evaluation process, which of the following benefits did you expect to achieve from your organization’s public cloud purchasing, usage, and strategy?