For generations, banking was nearly impenetrable to outside agencies. Value was generated by providing customers with core banking services. As critical intermediaries, bankers were able to sustain healthy margins.
But a triple set of challenges have emerged, requiring bankers to rethink how they do business: declining revenues combine with difficulties making additional cost reductions; new classes of customer are easily dissatisfied and disillusioned, possessing ever-growing expectations of engagement and experience; and a new breed of competitor is emerging for banking customers.
Traditional banking functions are being contested and are becoming commoditized. As a consequence, value is shifting from functional capabilities to relationships. While emerging competitors may be able to replicate banking functions better and at lower cost, they will find it much more difficult to build and manage the breadth and depth of customer relationships traditional banks have carefully built over decades.
Because of these relationships, traditional bankers far from being disintermediated, have the ability to shift their focus from service fulfillment to service-facilitation and orchestration. Banks can position themselves as the principal gatekeeper to their customers, facilitating an ever-evolving ecosystem of services and experiences.
To achieve this, traditional banks will need to rapidly transform. They will need to connect with an ever-expanding portfolio of business partners. And they will need to engage customers in new, powerful and sustainable ways. The rewards will be significant for those banks that can rise to these new challenges. For those that fail to do so, the future may be less bright.
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About the authors
Director, Global Industry Marketing and Communications for IBM
Connect with Jim Brill
Global Banking & Financial Markets Leader for the IBM Institute for Business Value
Global Strategy Leader for Banking & Financial Markets at IBM
Connect with Anthony Lipp
Research Director and Strategy Leader, IBM Institute for Business Value
Connect with Anthony Marshall
Partner and Global Industry Leader for Banking and Financial Markets, IBM’s Global Business Services
Connect with Likhit Wagle
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