Editor's Note: Last month, Jim Marous of The Financial Brand published an article "Top 10 Strategic Priorities for Banking in 2017. In this blog, we reflect and take a deeper look into the priorities that Marous discusses in his article. 2017 is going to be a crucial year for many financial institutions, and it appears that digital is going to play a substantial role.
Last month, Jim Marous at the Financial Brand published a column entitled Top 10 Strategic Priorities for Banking in 2017. Jim is a thought leader in our industry and anyone who has read his work knows he is thorough and complete in his assessments. This particular work is no different, and in addition, it contains - what are to me - some surprises.
I speak with bankers and read about the challenges they face almost every day. More times than not, the litany of things they find themselves struggling with is consistent across the industry: regulatory compliance, replacing aging legacy technology, retaining talent, improving core business processes and security.
Would you believe that of the top ten priorities documented in Jim's study, these were numbers five, six, seven, eight and nine, respectively? The only priority that finished behind them was number ten - partnering and investing in FinTech companies. However, it might be even more surprising to know what priorities were higher on the list.
Number three - reducing operating costs - is no real surprise, other than the fact that it was not number one. Number four - invest in innovation - also may not be too shocking though its finish ahead of reducing costs, regulatory compliance, and replacing legacy systems is encouraging.
The second highest priority item on the list was enhancing data analytics capabilities to identify customer needs. Besides the fact that it was recognized as the second highest priority, there are two things about it worth noting:
- Nowhere are the words "big data" used. This is shocking. Up until recently, it seemed as if all the spokespeople being quoted in the industry media must have had a portion of their bonuses based on saying "big data" a certain number of times. But this number two priority in the report references, what Jim calls "smart data" -- the information banks and credit unions retain and store about their customers and members. But don't let small data terminology be misleading because this structured data about individuals is broad and deep within financial institutions. IN other words, there is a LOT of it.
- The second interesting thing about this priority is the fact that the use of data analytics is linked with identifying customer needs. Not understanding the customer's needs better. Identifying the needs - period. Anyone who has dealt with financial institutions more than likely understands this at an experiential level. Banks and credit unions too often just do not know their customers as well as they should - i.e., well enough to anticipate their needs. This might be understandable if it were not for the fact that the digital age has taught all of us that it is possible to do much better, a la Amazon, Apple, Google et al. If awareness is the first step to addressing an issue, then hopefully seeing this priority high on the list is a good trail sign.
That leaves the priority that was at the top of the heap: redesign/enhance the digital experience. That says it all. In fact, it is key to many of the other priorities listed. It is why D3 Banking has identified this priority one need as the key driver increasing momentum in the online/mobile banking replacement cycle in financial institutions in the U.S. The fact is, you simply cannot put lipstick on the pig to achieve this priority. Don't get me wrong, the lipstick can be very, very attractive compared to the rest of the pig, but a pig, by any other name smells more or less the same (w/ apologies to Shakespeare).
If financial institutions want to save on operating costs, then they need a solution that provides the necessary features and functions built on the same code base. Otherwise, they will pay one provider for online, another for mobile, another for PFM and another for data analytics which is why the price of providing digital access is already so costly to financial institutions. This same type of "digital core" will be required if you want to anticipate customer needs since currently much of the valuable data needed to do this is held in a variety of "jails" throughout most IT infrastructures.
Most certainly, you will need to invest in innovation, at least in the form of emerging technology providers. The legacy providers - from the elephants with multiple products to some specialist digital/online/mobile vendors - simply do not have the technology in place that is required to get this right. Current tech is required and most of the players in the legacy group simply don't have the appetite for a full rewrite.
Graphic Credit: The Financial Brand: Top 10 Strategic Priorities for Banking in 2017