Elliott Limb, chief customer officer at Mambu provides insights into how the cloud is enabling players to adapt fast at low cost and with minimum risk while rolling out products that customers actually want, as the new era in banking is unfolding.
For all the talk of today’s banking landscape being the most competitive ever, you’d think the customer would be spoilt for choice. Sure, there are more banks and prices are low, but the reality is that it is still pretty hard to tell one from another when it comes to real value-added services.
Every retail bank, for example, offers some form of online and mobile banking; and most private banks have adopted automation and robo advice of some kind to help bring costs down and make its service more relevant to customers.
The upshot of this homogeneity is that rather than working to provide a unique service, banks seek to stand out from the pack through marketing – offering free travel insurance for premium customers; zero-fee balance transfers; no interest on overdrafts; low-cost or flexible loans. These offers aren’t about providing a better banking service. They are small treats in an industry that has raced to the bottom on price.
But this old-school approach is now being challenged. Technology across other industries has already forced change, putting choice for the customer front and centre. The big platform companies like Amazon or Google were among the first to use Big Data and algorithms to analyze behaviour and thus predict what the customer wants – often before the customer knows it themselves.
As other industries apply predictive technologies, it has had two effects: customers have come to expect a highly personalized and relevant service that enhances their lives; and the big platform companies are beginning to encroach on some banking activities such as loans and payments. The capital reserves held by Apple today would put it among the top ten banks outside China.
Taken together, these changes are dragging banking into a new era of differentiation and choice, where customers will expect to get what they want when they want it at a price they’re willing to pay.
What every successful player will have in common is agility – the ability to quickly adapt and change not just products and services but business strategy to reflect movements within its own market space. And to be clear: this agility isn’t just about the technology that is used – it’s a business model.
The agile model doesn’t wed the bank to a set of tools; it marries the bank to choice, thereby maximizing the chances of it becoming and remaining the best. This agility can only come from cloud operations.
Enter the cloud
Cloud allows banks to innovate fast. Digital technology in the cloud lets them quickly reconfigure products and services to take into account new regulations or temporary circumstances – the fall-out of Covid-19 and the need to waive overdraft fees or provide payment holidays, for example. Where legacy systems demand banks carefully plan and time changes, which can take many months, banks working with the cloud can carry them out on the hoof, often within hours. This makes them more competitive, incurs lower costs and lowers risk.
Working with the cloud also allows banks to align costs to revenues because billing is on a pay-as-you-use basis. Use can be scaled up or down according to demand, so expensive technology doesn’t lie idle on-premise ever. Locked-in costs are minimised. This means that you could launch a great new customer-centric bank today and scale up to become a $1bn unicorn fast.
Finally, cloud technology helps cut risk. By providing flexibility, banks can adapt their products and services as the market evolves. They aren’t locked into medium and long-term strategies. They can be nimble.
Furthermore, cloud providers invest heavily in their technology, updating and upgrading it constantly and ensuring its resilience and security in a way that individual banks simply couldn’t afford. So banks working with cloud providers will have access to the best, most secure, resilient, up-to-date technology.
Make no mistake. Competition going forward will be tough and customers will expect the best or they will go elsewhere. Margins are already low, thanks to the above-mentioned fight to the bottom on price.
However, banks using cloud technology will be ready to compete on a level unseen as yet and offer customers services that they want and need, at price points they can afford. They are able to differentiate on agility and adapt quickly as their market dictates and they are able to manage risk. As a result, customers will have real choices for the first time – choices that will add value to their banking experience and even their lives.