Banking redefined


Disruption, transformation and the next-generation bank

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Banking at the brink

Disruptive forces that have swept across other industries are now squarely centered on banking. Born-in-the-cloud startups and retailers with lower marginal costs and greater agility are competing in payments and core banking. And a new generation of financial technology companies are aiming to decompose the financial services value chain – selecting high-volume activities like small business and consumer lending, threatening to reduce the incumbents to settlement agents of last resort. Traditional banks, often burdened with inflexible and costly legacy systems, struggle to redefine new operating and business models to meet what may become existential challenges ahead. With insights from 1,060 banking executives and 1,600 retail banking and wealth management customers, this executive report identifies key business imperatives and tangible actions that can position traditional banks at the center of a rapidly evolving financial services ecosystem, accelerate transformation and help bankers map a path to sustainable success and profitability.

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: many banks are struggling with sluggish profits; new classes of customers 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 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, creating 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 enduring 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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Additional content

Meet the authors

Nicholas Drury, Global Banking and Financial Markets Leader, IBM Institute for Business Value

Anthony Lipp

Connect with author:


, Global Strategy Leader, Banking and Financial Markets


Anthony Marshall, Senior Research Director, IBM Institute for Business Value

Likhit Wagle, Global Industry General Manager, Banking and Financial Markets


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