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The Digital Bank – How to make Business Models fit for the Future

“Banking is necessary, banks are not”. This clear statement was made by Bill Gates as early as in 1994. What sounded provocative back then has become a reality today. Many traditional banks have reacted and are now en route to the digital world. But many (too many) are not yet heading in this direction. ITONICS advises numerous banks on how to make their business models fit for the future and not merely keep up with digitization, but even become a first mover. In this article, we are sharing some of our experiences and insights about this topic.

Stringent requirements, legacy systems, and complex structures are sometimes making life difficult even for innovative masterminds in the banking sector. The consequence: digitization advances only at a sluggish pace and established solutions are zealously protected against modernization or replacement instead of continuously addressing and identifying what customers might need. Unfortunately, the times when a solid business model worked for decades are over – not only in the banking sector but also for rental car businesses, travel agencies, wholesale, and retail operators, basically everywhere. Digitization reduces customer loyalty while increasing cost pressure and transparency. Time and again, we witnessed that companies have lost sight of their customers’ needs over the years and are then taken by surprise if their customers turn elsewhere.

Compared to the start-ups, however, established banks also have advantages such as an excellent market access, reliable and established products, established brands and hence customer confidence as well as the budget to bring innovations to market. If these core competencies are combined with a sustainable innovation management, such banks are on the right track. One important question is: “Who are the most innovative and relevant market participants in my business field today and in the future?” In most cases, they tend to look no further than their own peer group. Things get a little more difficult when you are looking for the hottest and most relevant fintechs around the world. Market monitoring and contacts to potential cooperation partners and, in particular, to all partners along the value chain are therefore essential to be able to play in the top league on a permanent basis.

What about the human factor? It still plays a major role, especially in corporate banking, but this sector, too, is subject to change. ITONICS CEO Dr. Michael Durst on this: “All standard processes will have to be radically automated so as to be able to still generate relevant margins. Proactively guiding the customer throughout the entire lifecycle will be the challenge and also the solution, in order to secure both sales and margins in the B2B business.” Retail banking customers will continue to have a strong need for advice as long as the standard offers don’t match their needs. Standard products, by contrast, can be quickly compared on the Internet, thereby reducing the need for advisory services.  

Which trends should clearly not be underestimated by banks? Open APIs, artificial intelligence, chatbots, cryptocurrencies, machine learning, and big data are incredibly present. Large data volumes enable banks to better understand their target groups and customer needs, thus allowing them to offer individualized and personalized financial services. Also, robo-advisors, i.e. automated asset investment, is rapidly gaining in importance. But, just like in many other sectors, activities should focus on ensuring a digital and seamless customer experience and customer journey. Here, especially trends such as targeting and personalization are essential to create sustainable and effective customer experiences.

Eventually, this is about ramping up speed to gradually transform the organically grown structures and make them fit for the future. ITONICS has the experience, the methodology, and the tools needed to this effect – feel free to contact us without any obligation. Read also how the DZ Bank practices fintech-monitoring powered by ITONICS.