Financial industry publisher Jim Marous calls for rethinking banking culture to embrace technology and serve customers in a way big tech alternatives are already doing.
Marous has long flagged the need for innovation among financial institutions and believes most of them are playing technological catch-up.
Financial services expert Jim Marous has long advocated for greater application of technology initiatives in the banking sector, frequently telling audiences to “disrupt yourself.” But while Marous, the owner and publisher of the Digital Banking Report, acknowledges that a digital transformation is “on the front burner of all banks,” he argues that most companies are focusing mainly on efficiency improvements.
S&P Global Market Intelligence recently spoke with Marous ahead of his keynote address at Febraban’s Ciab conference in São Paulo, Brazil, an event focused on banking technology.
What follows is an edited transcript of that discussion.
 Jim Marous, co-publisher of The Financial Brand; owner and publisher of the Digital Banking Report. |
How would you sum up innovation in the banking industry and its response to new core-tech competitors?
Jim Marous: The banking industry in all parts of the world is trying to respond to an increasingly turbulent business environment, where legacy leadership and existing cultures are being challenged. It not only includes new technologies, but also new strategies, processes, skill sets and a complete disruption of legacy organizational structures — moving from a product focus to a consumer focus. Great technology will not overcome a culture that is not in alignment with the transformation taking place. In many instances, the legacy culture becomes a barrier to the required change.
How would you define banking culture and its approach to innovation?
The banking industry is an excellent example of willful blindness where banks continue to stick with existing business models, products or services despite knowing that changes are needed. Many organizations claim to be making significant progress in the areas of “becoming a digital bank,” “improving the customer experience” and “supporting innovation.” Each of these strategies are laudable, but when examined more closely, essentially mean conducting business as usual, just slightly more efficiently.
What should be the approach from top-level executives?
The new leadership model will require that directors and all top management constantly reinvent their skills and roles. Without a new leadership model, banks may not survive as we know them today. [But] decades-old fundamentals are still required. Leaders should not let the technological change occurring around them distract. Understanding the basics of communication, prioritization, investment and project management is even more important during times of change. They are the foundation for a culture that embraces the potential of digital transformation as opposed to simply providing lip service.
Here in Brazil, the five largest banks hold roughly 80% of all banking assets. Does that kind of market share change that approach?
“Being big” does not preclude an organization from needing a strong innovation mentality. In fact, most consumers hold larger financial institutions to a higher standard. The increasing demands of the consumer, fueled by digital experiences from large technology leaders, relegates many traditional providers — even the largest ones — to playing a game of catch-up. It is even harder for smaller organizations, which often lack the resources to deliver the digital functionality of larger peers. While great progress has been made, there is still much more ahead.
What are banks currently doing in terms of embracing technology?
Virtually all financial institutions are looking at technology innovations to make their organization more digital. We’re not talking about small changes here. In most cases, what’s required is large-scale and typically takes years to accomplish. This cannot occur without the rethinking of the back-office processes banks have had in place for decades. Unfortunately, much of the innovation has been around iterative technologies compared to the more disruptive technologies of augmented and virtual reality, robotics, the internet of things, and conversational interfaces. At a time when most organizations are still playing catch-up, a new wave of digital technology has the potential to change the way organizations deliver banking services even further.
How can banks make better use of the data they collect?
They need to leverage data from all sources and channels to create a contextual data repository. Everything from online banking apps and mobile, to ATMs and branch engagement. That can drive highly personalized engagement in real time. It is what fintechs do, and if done well, banks [would] not only have the ability to know a consumer’s financial profile, but what they may be browsing on the website, online shopping, or discussing with others. With real-time consumer context, financial institutions potentially will offer personalized offers and enhanced experiences before the consumers even realize the need themselves. The banking industry must follow the lead of high-tech leaders and major retailers.
What are the most important technologies banks should focus on?
They include using data and AI for personalization at scale, open banking both within financial services and the addition of non-financial services, the emergence of voice-first banking, the addition of more digital-only banks, the challenge of tech giants, and the continued importance of cybersecurity. The winners in the future will be defined by those organizations that can leverage digital technologies to deliver a customer experience that goes beyond the ordinary.
Where should banks make their bets?
Financial institutions need to develop a rigorous approach to emerging technology and innovation — one that includes a formal framework of listening to those on the leading edge, learning the true impact of these technologies, sharing results from pilot projects, and quickly scaling by implementing them throughout the enterprise. This requires getting out of our collective comfort zones and finding a way to serve the consumer in the way they are being served by big tech alternatives.