Stepping To The Beat Of Disruption

Chet Kamat, Managing Director & CEO, Oracle Financial Services Software Kamat has over 35 years of financial services, consulting and business transformation experience. His expertise in banking transformation has driven strong top line impact for both the products & services businesses at Oracle Financial Services Software.

Digital disruption shows no signs of slowing down. It has already compelled banks to reimagine customer experiences, build new expertise, and redefine the way they do business. However, this is merely a scratch on the surface. As technology continues to disrupt the banking landscape, banks need to reevaluate their own capabilities. Can they reinvent themselves yet again? Find new sources of generating revenue? How do they recognize and capture opportunities that come with the next wave of digital disruption?

Disruption that began as new competition from the digitally nimble fintechshas spurred an acceleration of innovations supported by artificial intelligence, machine learning and blockchain technologies. This accelerated transformation is stimulating industrialized information sharing among firms large & small, established incumbents and digital startups and not just within financial services, but across industries and value chains. Firms are increasingly collaborating in connected ecosystems by sharing data and services to provide more value to their customers. Regulatory directives are also fueling the emergence of ecosystems within the financial services space which include the Payment Services Directive (PSD2) in Europe, Open Banking and SWIFT standards.

Far from being a threat, banks must consider these ecosystems as significant opportunities to power innovation and go to market with greater scale and efficiencies. Banks need to start thinking like ‘digital natives’ displaying the will to experiment with new technologies and learn new ways of operating. Real break throughs can occur once banks learn the nuances of consumer behavior and orchestrate their role within the future ecosystem of partners, suppliers and customers. Oracle has a long history of partnering with hundreds of banks of all sizes across multiple geographies. We recommend four broad areas that banks must focus on to stay relevant and profit from the next wave of digital disruption.

Partnerships: The New Disruption
During the initial phase of disruption, banks primarily faced competition in specific segments. But in this next phase, we're beginning to see digital firms access previously sequestered customer data and integrate their offerings with other firms. What does this mean? Simply, they will deliver more comprehensive financial services and drive deeper customer relationships. If traditional banks remain complacent, they could very well lose exclusive ownership of financial relationships with customers. That will mean significant challenges in driving revenue growth, profits and return on equity(ROE).
Yet despite their nimble, innovative stance, digital firms also face challenges. Fintechs and 'neo banks' grapple with rising costs to find customers, scarce funding and growing regulatory oversight. They must also look for new ways to scale and increase revenue and improve profitability.

Mean while, social media platforms and e-Commerce firms want to enhance their customer experiences and provide greater value with relevant financial services but remain wary of the associated risk management and compliance overheads. As a result, many are open to leveraging the inherent strengths of traditional banks that with deep extensive customer data and strong expertise in compliance and managing risk can help them forge ahead.

Banks will need to define new strategies, reenergize their work force and keep an eye on peers. Above all the transformation is a continuum and banks would do well to keep their 'transformation engines' well oiled and running

For banks on the other hand,a digital firm partnership means utilizing the latest technology and services of these firms as they gain new capabilities to enhance offerings. Banks will also access new customer touch points in the extended value chain. What's more they'll cost effectively scale new services as they cross and upsell existing ones. That makes for a strong business case to initiate strong partnerships between banks and digital firms to create or orchestrate customer centric ecosystems.

Data & Insights
Digital & data go hand in hand. Banks are uniquely rich in data full of context both structured and unstructured and this is distinct from consumer data alone. Banks need to start thinking about how to monetize the data securely and drastically improve insights and critical business decision making. Successful enterprises will leverage advanced technologies like artificial intelligence and machine learning to uncover unseen and untapped patterns of human operational and system activities which deliver significant benefits and help establish significant competitive advantages. Generating analyzing and communicating data seamlessly underpin the gains promised by the next wave of digital disruption.

Agility & Flexibility
Digital savvy enterprises have agility and flexibility interwoven into their transformation strategies. Such enterprises typically implement technology and solution architectures that are flexible and agile. Banks today have the opportunity to leverage plug and play platforms and APIs to deliver effective, efficient and consistent experiences at speed and scale to both customers and employees. Apart from technology solutions, enterprises will need to adopt agility & flexibility into their organizational culture, where business & technology planning and execution are agile and iterative with much faster decision making and time to market. Most successful transformations occur when the responsibility of driving the transformation agendas is a strong and collective focus from the entire leadership of the bank.

Connected Technology
Technology reigns supreme in the world of connected ecosystems connected banks must invest in modern, interoperable and scalable systems. This enables quick development of new services and extension to new channels and ecosystems. But to get there, banks need to revamp legacy architecture to enable easy upgrades to both front end and back-end systems. Additionally, banks must customize their systems & strategies around agility and the delivery of digital capabilities. This will help future proof business, deliver faster and better innovations, and drive customer value. The systems must also comply with global standards and protocols, while enabling the bank to offer and consume data and APIs securely transparently and efficiently. Disruption in its next phase is ultimately about reengineering every aspect of the bank around technology with a focus of delivering unprecedented value to the customer.

The next phase of disruption will continue to compel banks to rethink how they respond and engage with the environment. It will require new ways of creating value. Banks will need to define new strategies, reenergize their work force and keep an eye on peers. Above all, it reinforces the fact, that transformation is a continuum and banks would do well to keep their ‘transformation engines’ well oiled and running.