Open for Business
How the principles of openness enable digital innovation and change in increasingly challenging times
Oliver Weber, President & CEO, CREALOGIX
At CREALOGIX’s recent Open Innovation Day, we had the opportunity to discuss with our customers and partners some of the major trends that are driving change in banking and wealth management in 2020 – and beyond.
So, what is “open innovation” really about? For us, it’s two fundamental and powerful things – listening and taking action openly.
As a fintech partner to hundreds of the world’s leading financial institutions, we believe it is essential to listen to our customers and understand their business challenges - and support them with innovative ideas and secure, scalable technology.
By listening we can improve awareness and select the best strategy in a world that’s changing on an almost daily basis. It’s increasingly about personalisation – a process that is never finished.
The same is true in terms of how you as a financial institution build relationships with your customers. Your success in the market relies on your customer base, and your relationship with every individual who banks or invests with you. What are your customers telling you? If you listen openly to them, and become more customer-centric, that can translate into your strategic vision for providing digital services.
Demand for personalised services
Boston Consulting Group estimates that, for every $1 billion in assets under management, a company can achieve as much as $3 million in additional revenue by personalising its customer interactions.
Of course, technology – and specifically, software – can help financial institutions to deliver higher quality, more personalised services at scale. But it’s important to remember that there is no substitute for human understanding – of course, you can leverage the best software, but great insights will ensure you provide services that meet customers’ expectations and needs.
Meeting the challengers
In advance of our Open Innovation Day, we commissioned a survey in which we asked about participants’ views on digital-only challenger banks. One thing that struck me from the results was the apparent lack of urgency among participants about the competitive threat posed by digital challengers, or neobanks.
The fact is, these comparative newcomers are eating away at incumbents’ margins - and they are grabbing a bigger share of the pot, particularly among younger generation customers.
In an earlier survey we commissioned, we found that, in the UK, one-quarter of under-40s is using digital-only challenger banks, and 14% of UK bank customers across all age groups have at least one mobile-only digital banking provider.
The question is: “Are neobanks really a threat in our market?” I certainly don’t think every challenger poses an immediate challenge to your business. However, challenger customer bases are growing, as is their share of the market. As an incumbent, you need to watch these developments very carefully – and be prepared to take some take radical actions to mitigate this threat.
Moving in the right direction
Some banks are already taking steps in the right direction. For example, Credit Suisse in Switzerland announced recently that it will launch a mobile-only bank, called CSX, in October this year. It’s designed to attract the younger customers they fear they might otherwise lose to neobanks. The CSX offering is close to that from Revolut in terms of price and user experience – i.e. one app for daily banking, financial planning, investing, financing, and more. But it comes from Credit Suisse – and that’s a big difference.
JPMC is another leading bank expected to launch its digital-only bank in 2021 in the UK, following the success of the Goldman Sachs neobank, Marcus, which was launched in 2016.
If these initiatives succeed – and they will if they create digital banks outside of the culture of the mothership – then they will be better placed than the neobanks because they can leverage their existing product offerings to upsell new products to new digital customers. And they know how to make a profit.
‘Big tech’ is moving fast
Unfortunately, there isn’t much time. In addition to neobanks, some bigger fish are starting to arrive. The so-called “GAFA” big tech brands – Google, Amazon, Facebook, and Apple – are interested in your customers. In fact, in many cases, your customers are already theirs, but not in banking – yet.
A survey of senior bankers conducted by Accenture revealed that two-thirds of your peers believe that “consumers will do most of their saving, investing, and borrowing through non-finance platform companies like Amazon and Google… within 5 years”.
And if Europe and America are pondering financial services through GAFA, what about China’s top technology brands – Baidu, Alibaba, TenCent, Huawei, etc? They are all highly active in financial services, doing some innovative things at a fast pace.
One thing is for sure. This race isn’t going to slow down. Customers are not going to stop expecting more. In fact, the more they experience from leading technology brands, the higher the bar will be set.
Be ready to take action
If you want to be ahead of the digital curve, it’s not a one-off objective. Leadership in digital means continuous innovation – and that involves being constantly open and constantly listening and learning. You need to leverage what you learn into an open innovation strategy. This isn’t just about gathering knowledge – it is about proactively taking action.
The impact of the global pandemic in 2020 means planning horizons have shrunk right down to the near term. A cautious “wait and see” attitude has become the norm, even for firms who used to take bold business initiatives.
But this is the worst time to stand still. I am convinced that if you become more open in listening to your customers, learning what will help them to live a smarter financial life, you’ll see huge business opportunities ahead. And you’ll know exactly where to focus your strengths.
Buy, don’t build
Many see the 2020s as the first fully digital decade for this industry during which no-one will win by going it alone. While it’s vital to be open to listening to your customers in order to chart a more confident course through uncertain waters you must also be open to working with partners who can help you accelerate that journey.
In practice, that means finding a way to “buy, not build” solutions and partner up instead of going it alone. You should look for the best ways to work with customers while you’re innovating, and partner with innovative teams who may be further ahead in terms of working on the solutions you need.
Openness to a new “fintech ecosystem” is central to our culture and technology platform at CREALOGIX. Our goal is to demonstrate the benefits of working and innovating in an open way and help establish our customers as true digital leaders who are open to innovative thinking – and to change.