Are banks the true digital dinosaurs?

Written by on September 7, 2016 in Opinion with 0 Comments

FossilWe used to think that telcos were the dinosaurs of the digital age. Compared to many digital service providers (DSPs) this may still be true. But it is changing, and fast, as telcos begin to unleash their true potential, begin to attract DSPs as partners and innovate in other areas.

Indeed, compared to some industries telcos are positively wind-swept and interesting. Tony Poulos recently pointed at the airline industry as one that was truly stuck in the past, because they could afford to be. Yet, when a major outage causes widespread chaos (“Call Bob in the old folks home, he might remember where the code is”) then the spotlight falls on the dinosaurs in the industry. Meanwhile customers face chaos.

While Mr Poulos might well point the finger at the airline industry, others might well point the finger at the banking industry. There are many stories that point to out of date systems, mash-ups in the back office, networks down and customers complaining. In fact, banks have basically screwed up so badly in the last few years that simply opening a bank account is a major, time-consuming, painful effort. Stories soon to emerge will describe managers unable to understand a digital business and yet having to act as judge and jury as to whether it is viable and therefore whether an account should be opened. Others will describe part of an ‘account opening process’ that involved a personal commitment to invest in the bank’s savings plan.

As for innovation, there is a desperate lack. As Sally Krawcheck said on a recent Business Insider podcast, “I would argue with you…the last real innovation that came out of a big bank was the ATM”. And the ATM was only partly innovation. As one source said years after we had got used to getting cash out of walls rather than people, “we basically forced it on our customers to cut costs and close branches”. Krawcheck’s argument is that Wall Street and the banking community is outsourcing innovation. Thus, the huge and seemingly unstoppable rise of the fintech community, with novel money-raising techniques, new underlying technologies and new payment methods.

The banks, then, are happy to let this happen because when a start up, or a new technology proves its value, they simply buy it.

This is fine, up to a point.

But if banks do not invest in new billing and payments technology the question becomes whether the underlying processes can keep up with the innovation at the coal face. Probably not, and probably the fall out will badly affect customers, as usual. We at DisruptiveViews know that, for instance, the online banking portal that we use is a collection of 30 year old systems. The SME market is clearly not important to our bank.

Old systems, out of date processes and a protective, defensive way of thinking will only make it worse.

Take security.

The findings of the recent ACI 2016 Fraud Report, ‘show that of those not using mobile banking at all today (36 percent), more than half of them (74 percent) cited security as the major reason, which could slow the overall adoption of mobile banking services during a time where mobile device usage is exploding’. Almost one in three UK consumers (29%) has been a victim of card fraud in the last five years and a full 17% have been victimised multiple times’.

No wonder there is a lack of trust in banks. The conclusion from NuData Security is that ‘it might be a trust issue, but they likely fear that banks really don’t have control of their mobile security’.

Given a combination of lack of trust from their customers, ridiculous sign up processes and ancient systems that collapse and remind us of Swiss cheese, the argument that banks do not need to innovate is flawed.

The problem is, while we might hate our bank, what is the alternative?

It is not a pretty picture.

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Alex Leslie

About the Author

About the Author: Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet. He is publisher of DisruptiveViews and previously BillingViews. .

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