Banks In Trouble As They Struggle With The Pace Of Digitalisation

Banks In Trouble As They Struggle With The Pace Of Digitalisation
B&T Magazine
By B&T Magazine
SHARE
THIS



In this opinion piece, Andrew Birmingham, the editor of B&T’s sister business site Which-50.com, says bank’s sluggish approach to digitisation has them ripe to be disrupted…

Here it is in such simple terms that even the board of directors at a bank can understand. It’s the Loan Book, Stupid.

Lending constitutes one third of the revenues of a typical retail bank, but recent analysis by Bain & Company and SAP Value Management Center finds that “…most banks have digitalised only fragments of the process for marketing, selling and servicing loans.”

That’s basically an open invitation to disruptors.

The finding is contained in a new report called “Retail banks wake up to digital lending” written by Bain analysts Richard Fleming and Joe Fielding.

“New digital entrants, ranging from financial technology start-ups to incumbent retailers and telecommunication providers, have spotted the opportunity, and are attacking thin slices of the lending profit pool,” they say.

And they note that Fintechs have proven particularly adept at providing a better experience for often underserved parts of the market. While they don’t say so explicitly the implication is that banks are paying the price for taking customers for granted.

“The fintechs also are creating new models to make lending decisions, source capital and service loans. Often, they can offset at least some of the scale benefits of large banks with simpler digitalized processes. In some instances, they enjoy a regulatory arbitrage; Prosper and LendingClub source funding in a way that requires less capital to be held on their own balance sheets.”

The authors caution that banks need to accelerate investments in digital lending or face a material decline in profits and loss in market share.

The Bain report echoes earlier research and analysis by the likes of McKinsey & Company, and Macquarie Equities. Indeed 18 months ago Macquarie warned that Australian banks are set to lose up to a third of their revenues, as dotcom giants like Google, Paypal and Alibaba muscle their way into the payments markets and use their superior customer understanding to disintermediate the incumbents.

And looking at the Bain report’s assessment of key digital metrics in retail banks around the world, its hard to believe matters have much improved.

How banks fare on key digital metrics
How banks fare on key digital metrics

Among the findings of the study;

  • Most banks lack digital cross-selling expertise, with the average number of loans at just 1.1.
  • Banks spend only 18 per cent of their marketing budget on digital initiatives.
  • Some 14 per cent of simple loans and 36 per cent of complex loans require rework.
  • All of the above translates to mediocre combined annual growth in loans, at 3 per cent for 2011 through 2014, and flows through to cost efficiency metrics.

“Across all countries, most banks’ capabilities fall far short of their own aspirations,” say the report authors.

Please login with linkedin to comment

#PRWisdom einsights Media Partners

Latest News

Fifth Dimension Expands Executive Leadership Team
  • Media

Fifth Dimension Expands Executive Leadership Team

Fifth Dimension Consulting has announced the expansion of its executive leadership team in response to the organisation’s significant growth over the last 18 months. Lyndall Spooner has moved from the position of managing director to the role of chief executive officer (CEO).  As CEO, she will lead Fifth Dimensions’ innovation arm, as well as the […]

GoDaddy Australia Launches GoDaddy Studios To Support Creative Content By Small Business
  • Marketing
  • Technology

GoDaddy Australia Launches GoDaddy Studios To Support Creative Content By Small Business

GoDaddy Inc. has today announced the Australian launch of GoDaddy Studio, a new content creation tool designed for small and medium businesses to create beautiful visual content for their business for all platforms. Compatible on both iOS and Android mobile apps and desktop, GoDaddy Studio includes thousands of customisable templates and easy-to-use tools, providing small […]

Seismic Announces New Zealand Partnerships To Empower Businesses And Workers
  • Technology

Seismic Announces New Zealand Partnerships To Empower Businesses And Workers

Seismic has announced an expanded New Zealand (NZ) presence to support the transformation of sales and marketing teams, and enable the nation’s employers to focus on upskilling their workforces to overcome a digital skills shortage. The company has also signed NZ-based specialist consultancies, Fresh Perspective Sales (FPS) and Jumping Fox Interactive, as its first two […]

Booktopia’s Alex Huntley On Partnering With SaaS Platform Freshworks And Tackling The Pandemic
  • Marketing

Booktopia’s Alex Huntley On Partnering With SaaS Platform Freshworks And Tackling The Pandemic

Alex Huntley, Booktopia’s head of customer experience, recently appeared at software company Freshworks’ recent digital CX summit RE:SOLVE. During the summit, Huntley shared his thoughts on future-proofing customer service architecture.Huntley sat down with B&T to discuss Booktopia’s partnership with Freshworks and how it has helped their platform develop. B&T: Why did Booktopia first decide to partner […]

Nestlé Oceania Adds The Edison Agency To Strategic Design Roster
  • Marketing

Nestlé Oceania Adds The Edison Agency To Strategic Design Roster

The Edison Agency has made four new appointments in its Sydney office to service the continued growth across key account The Arnott’s Group and the recent appointment to Nestlé Oceania’s strategic packaging design roster. Over the past 12 months, the culmination of strategic and creative work across the Uncle Toby’s brand and continued growth of […]

SCA Launches Smart Speaker Experience Tom & Olly’s Guide To Lockdown
  • Media

SCA Launches Smart Speaker Experience Tom & Olly’s Guide To Lockdown

SCA has announced a new smart speaker experience for the Hit Network, with Tom and Olly’s Guide to Lockdown. A voice-activated way to get inspiration and information on fun activities that can be done at home, the guide is curated to appeal to a wide audience. Smart speaker users will find a range of ideas […]