At the Heart of Innovative Banking

While voters were queuing at polling stations to decide of the UK’s future, world leaders shared their hopes regarding the evolution of banking at the Wired Money conference. IFinance was present.

On 23rd June, not only did the Brits voice their desires for their country’s future but world leading experts reunited at the British Museum for the Wired Money conference to share their wisdom, insights and aspiration for the future of finance. The first discussion revolved around the theme of banking and its evolution.

JP Rangaswami, from Deutsche Bank, opened the floor with his insightful projections about the future of banking.  Comparing himself to his daughter and grandson, he highlighted that each generation has a different relationship to banking and technology reminding us it’s those relationships that are at the heart of the industry. He noted that etymologically “bank” came from the bench where people would talk and build trust; “credit” comes from the Latin “credere”, to believe.  Financial providers must therefore remember that their roots are based in trust, relationship, convenience and simplicity. Furthermore, trust is underpinned by data. In fact, data is essential to deliver the services and products that respond to the clients’ needs. Hence understanding data is a challenge that financial providers must face. Rangaswami concluded with this consideration: “To understand where banks are going, we must understand where trust is going.”

Anthony Thompson, founder of Metro Bank and CEO of Atom Bank, centred his intervention around three main topics: purpose, trust and innovation. He claimed the purpose of business shouldn’t be to make money but instead to provide better services, products and/or experiences. He went on to explain that there are two types of trust: cognitive trust, or whether one trusts the bank’s ability to produce products and services, and associative trust, which refers to one’s belief that the bank is more motivated by the customers’ interests than its own. Most people have cognitive trust but not associative trust in their bank and therefore banks must improve this through customer-centric strategies. Lastly, Thompson stated that the main challenge for disruptive innovators is to make people understand how their innovation is disruptive. He exemplified this issue with the case of Ford’s model T, which initially did not provide a huge advantage compared to a horse however in time completely changed our transportation means. Thompson also stressed the value of data, stating that “data is money, profit is a by-product”.

Following this, Anne Boden, CEO of Starling, shared her experiences and advices concerning innovative banking. Echoing Rangaswami’s considerations, she stressed that customers’ attitudes towards banking are changing as, for example, customers progressively stop relying on a single bank for all their financial activities.  Therefore, she advised companies to seek regular feedback through one to one interviews, in complement to behaviour pattern analysis conducted via APIs. She argued that the future holds a growing ecosystem where big and small financial providers would exist in a symbiotic manner.  According to her, start-ups can complement bigger banks by providing very focused, high quality products and services. For instance, in 3 months’ time Starling will launch its platform to centralize and facilitate customer access to their financial information.

Matthias Kröner, from Fidor Bank, concluded this session by claiming that innovation in the banking industry depends on the culture of the managers and decision makers. For him, real disruption must be mass market relevant and customer driven. Integration and collaboration are key to making the banking sector better as they promote openness and efficiency. For instance, crowd-support in peer-to-peer activities can help reduce the need for customer service employees and therefore lead to a reduction in costs. A new banking world could be built around crowd-wisdom and peer-to-peer systems. Lastly, Kröner explained that digitalisation is the way forward for banking. Fidor Bank and O2 have recently joined to create a phone-based banking system; this may be a sign that a new era of smartphone banking might be just around the corner.

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