Universal banking gave way to heavily regulated Banking 2.0 post the financial crisis of 2008-09. To encourage competition for customer benefit, regulators pushed open banking – Banking 3.0. After the COVID-19 fallout, financial institutes will usher in Banking 4.0 –experience-driven, platform-based, optimum-channel banking that is resilient to financial and non-financial threats, built around long-term sustainable growth, and where human interaction evolves from servicing to advising.
To lead in this new normal, banks will have to recalibrate their capabilities to become:
- Lean and agile with robust digital foundation
- Resilient with a sustainable platform.
Banks are data-rich but not data-centric. Only ~25% of banks make the best use of data. In the new approach, data will be the prime factor distinguishing leaders from everyone else. Banks with mature data management capabilities will lay the foundation to transition from being a digital bank to becoming an intelligent enterprise, and finally, to orchestrating an intelligent ecosystem.
Banks, previously obsessed with front-end digitization, will shift their focus to end-to-end transformation to build the lean and agile enterprise of the future. Modern core, cloud infrastructure and API networks will design and develop the inventive bank, equally focused on delivering superior CX and achieving operational excellence.
Product and process-centric traditional approaches will make way for customer-centric transformation where hyper-personalized products will be offered at customize prices. Contextual products will be bundled with refined services to offer lifestyle banking experience.
In the ecosystem model, financial services will be embedded in customer journeys. While banks will become invisible, banking will become ubiquitous. The “experience-driven ecosystem models,” where participants leverage each other’s strengths, called an Open X approach to banking, will evolve financial product production and distribution. The Open X ecosystem will be resilient by design, with a strong focus on mitigating financial and non-financial risks.
Product stewardship (green products), reducing carbon footprint (green operations), and green financing (decarbonizing the balance sheet) will be important, at par with maximizing shareholder value. The new approach must create financial services that are more accessible and affordable with reinforced commitment towards financial inclusion. Reaching out to this population and serving the vulnerable communities (migrants, aged, or with terminal and cognitive health issues) and long-term sustainability will be integral to Banking 4.X.
In today’s context, incumbents will have to enhance their internal capabilities while leveraging the external opportunities available to create and retain new value. Banks must design and develop microservices environment enabled by cloud and APIs to achieve greater business agility and improved business continuity management capabilities. This should be augmented by building collaboration maturity to plug-and-play with FinTechs to further enhance the existing value chain capabilities and, innovate new products and services for customers, economically and quickly.
Watch the video Pioneering Intelligent Banking 2020 Launch by Capgemini at Singapore Fintech Festival 2020.