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October 21, 2015
Not your father’s bank: a wake up call for the banking industry
By: Geoff Merrick
Accenture A Wake Up Call for the Banking Industry

Our favorite retailers might very well be our next banks. Traditional banks need to take notice and make changes today in order to keep up.

There’s an incredible amount of change taking place in the banking world right now, and a good portion of it isn’t confined to what we traditionally think of when we hear about banks or even financial services firms more broadly.

BANKS HAVE NEW COMPANY

You’ve probably heard Jamie Dimon’s “Silicon Valley is coming for us” warning by now, but what exactly does it mean for banks? To put it very simply, it means that banks have a whole host of new competitors unlike those against which they’ve ever competed before.

Today, there are a lot of technology companies in the banking space (e.g. Lending Club, Wealthfront, GoBank) that are innovating faster, doing things cheaper and generally more willing to experiment than older institutions, who can’t seem to shake their shackles and test the waters with cloud technology, mobile apps and other cutting-edge technology.

And it’s not just technology companies for which banks should keep an eye out. In its report The Future of Finance, Goldman Sachs estimates that there is $11 billion of annual profit at risk to leave the banking system in favor of “shadow banks” in the next five years. Of course this begs the question, what is a shadow bank? Walmart, Starbucks, car dealers… and no, I haven’t copied and pasted my list of errands here by accident.

I know what you’re thinking: How can these companies be banks? Well, you probably already have accounts with shadow banks like these without even realizing it. If you have a store credit card or even a gift card, you’re engaging in shadow banking because that company is lending you money or holding it for you and collecting interest on those transactions. Similarly, many retailers such as car dealers today are making more money by handling the financing of customer purchases than they are on the actual sales of the physical products themselves.

These examples barely scratch the surface of the growing shadow banking market and, as a result, today it’s much easier to say who is not a financial services company than it is to say who is one.

HOW CAN TRADITIONAL BANKS KEEP UP?

In light of this disruption, what’s a traditional bank to do? There’s no doubt you’ve noticed the changes — look no further than the number of “non-banks” who attended last week’s BAI Retail Delivery conference or the emphasis that leading cloud providers like Salesforce have placed on banking solutions. Salesforce has positioned the capabilities of its Financial Services Cloud front and center since its announcement, and it’s starting to make heads turn. It hasn’t always been the first name that comes to mind for banking technology… but it’s starting to be.

The key to keeping up and staying relevant is providing a more modern customer experience, which you can achieve by paying more attention to mobile and online channels, offering more personalized relationship management and making origination and other activities more efficient by moving them to the cloud. In other words, as we outline in our “Everyday Bank” model, you need to harness the power of cloud technology to create a true ecosystem-centric experience along the entire banking journey. Okay, that’s great to say, but how can banks actually do that?

First, you need to think beyond the four core systems. Doing so isn’t easy at first given how entrenched they are in the banking industry, but the truth is, those solutions are well behind the times, showing no signs of innovation and offering no mobile capabilities.

Second, you need to embrace speed and innovation. It’s common for banks to have armies of compliance people who dictate what can and can’t be done, and while compliance is absolutely non-negotiable, it is possible to innovate at the same time. Just look at all of these technology companies and shadow banks who are trying new things and moving quickly. Competing with them requires moving at their pace.

ENTER CLOUD FOR BANKING

For many banks, the key to competing in this changing market is to tap into the power of cloud CRM solutions.

For example, Salesforce has devoted a lot to its banking solutions (as illustrated by the fact that banking was a huge topic for Salesforce at Dreamforce ‘15) in order to help traditional institutions satisfy these goals. Although the first thing that often comes to mind when people hear Salesforce is CRM, the platform has expanded well beyond the boundaries of what traditional CRM covers, and leading banks are already starting to tap into these capabilities.

I’ve seen several banks do very creative things with cloud technology like this to improve loan origination and mobile capabilities, connect better with customers and obtain a true 360-degree view of customer relationships. And they’ve done this all with speed, too. Recently, I had the opportunity to work with one regional bank that’s now putting out new releases every two months — yes, you read that right, it is possible!

As our Everyday Bank model makes clear, getting started with efforts like these is simply a matter of reframing how we think about cloud technology, and CRM in particular, in the banking world. So the next time you hear about cloud CRM, don’t just think of it as a tool for marketing or for service teams to create cases around complaints. Instead, think about providing mobility, increasing visibility, aggregating back office data, eliminating silos to create a 360-degree view, personalizing customer interactions and the list goes on.

Staying relevant in today’s changing banking market requires providing a better customer experience. Fortunately, cloud CRM solutions that offer innovation and efficiency without sacrificing compliance can help.

LEARN MORE

To learn more about how you can tap into the power of cloud technology for your bank and the benefits that doing so can provide, check out Accenture’s latest thinking on the Everyday Bank.

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