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Who leads who?

April 26, 2018 - Vishnudatta Harihara Keshavamurthy Product Manager, Infosys Finacle

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Banks have globally witnessed and withstood an onslaught of changes in the last decade offsetting the absolute monopoly they enjoyed for the last one century.
These changes have emerged and originated not only in the financial/banking industry but also from entities that didn’t even exist a decade ago.
There are sweeping changes from the regulators as well who have joined the party, albeit not so much to the liking of traditional banks.
If we look at these changes in isolation and purely from the perspective of banking there are very few which are hard core domain related changes.
Changes started in the form of user experience offered by the new internet based tech giants (GAFA), progressed further by technology led startups- FinTechs, fueled by Government and regulatory directives.
As a result, we saw banks across the globe either in a denial mode, reactive mode or some even panicking, but very few being responsive and proactive to these changes.
This resulted in mergers and acquisitions, neo and challenger banks, digital only banks and finally some banks becoming invisible too!
Let’s look at three major change factors, their impact and the future state of these changes:

Influence/change by GAFA and FinTechs:

If we analyse the banks of 80’s,90’s and early 2000s’s what appears very common is – complacency of banks. Banks for obvious reasons took their business for granted which probably cannot be termed as negative from the position they were in.
As stated earlier, consumers of banking services are also consumers of other industries which offered them products and services in unique personalized ways and consumers were spoilt for choice and offers. But the same could not be said about their banking experience and that’s what led to the FinTech challenge.
As we know, at one point there were strong indications that FinTechs will close down traditional banks.
But now we see that banks somehow seem to have thwarted that threat by the sheer position they have in the market and the trust factor from consumers. But this didn’t happen overnight and not without paying a price. Most importantly this shook the entire banking industry and had some great learning too.
An offshoot of this challenge is that banks are now working more like tech start-ups with heavy investments made in futuristic technologies and platforms.

Change induced by regulators/governments:

Some of the leading regulators have always been keen observers at the global level and in fact at times have even taken proactive steps to embrace these changes in their sphere of influence, while still playing the role of regulators.
We have seen this phenomenon in India, Europe, Middle East, Australia and UK as age old regulations are revisited, new directives are framed and new business platforms are set up.
We can look at what NPCI (UPI) is doing in India, PSD2 in Europe, Blockchain banking in Australia, Open banking in UK etc.
Banks have lapped up these changes/challenges too or appear to have geared up to embrace them and here again, banks whether they like it or not learnt their lesson and for now, seem to be taking these challenges as opportunities to revive their branding and business.

Changes brought in by Technological innovations:

Interwoven with the above two influencing factors is the pace of technological innovations seen in the last one decade. The way data is presented, captured, processed, secured, analysed and used has changed from being manual to humanoid. Embracing this change has definitely not been easy for banks and in this process, banks have undergone overall transformation and have evolved into more lean, agile, digital and innovative organizations in the process.
Everyone in the process went through these waves of change thinking that they are the ones who are riding these waves and banks forever will be at the receiving end.
This leads us to think – who emerged as the winner, who lead whom?
In my view, majority of banks have taken a very balanced, matured approach and at times adopted the wait and watch approach too.
It’s an old saying that every now and then life comes a full circle. And who leads in a circle? Well, when everyone comes together and forms a circle/ecosystem of innovation is when we see a revolution that cannot be accomplished in individual capacity. To understand this is of utmost importance as we usher into the era of open banking.

Vishnudatta Harihara Keshavamurthy

Product Manager, Infosys Finacle

A passionate product management professional, an intrapreneur at heart. Key interests: Studying M&A, agriculture and F1 racing.

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