You can talk about reinventing branch banking, or about the future of cash versus other currencies. You can talk about the role of banks in e-payments or m-payments or any other kind of payments. You can talk about service innovation or advanced analytics or social networks or viral marketing, or incorporating the voice of the employee and the consumer. But in each case what you’re really talking about—the trend behind most coming challenges and opportunities for banks — is digital disruption.
Digitally-driven transformations have disrupted book publishing, newspapers, and television. They will, and perhaps in a tangible sense have already begun to, disrupt the financial industry—sooner than most people think. Indeed, many organizations do not appear to be ready for the scope and speed of the coming disruptions.
When it comes to the technologies themselves, companies have taken large and commendable steps. For example, retailers and consumer-goods companies create Facebook pages; media companies replace print revenues with digital revenues—and financial institutions learn from every step. But often these adjustments to the new digital realities capture only a fraction of the shifting value. It’s hard to make any huge company do more than inch toward digital, especially since nobody knows when, or from which source(s), the next disruption will come.
But such inertia is particularly devastating now, because today’s digital disruption involves not only evolving technologies, but a revolution in the way that people use technology. In short, today’s innovations are digitizing not only content, but interactions. Now, every time you make a transaction or even speak with someone—in person, on the phone, or on the Web—that exchange is augmented by technology tools. Those tools can both generate information and leverage that information to enhance the exchange. And thus your relationship is transformed. Transforming relationships can often be a good thing, but it can also lead to operational risk, because of the proliferation of information, tools, and channels involved in the new relationships.
Many commenters note the exponential adoption rates for mobile connectivity, but they don’t always talk about the implications. A sudden population shift to seamless anytime, anywhere connections with anybody means that although many of us think we’ve experienced rapid and profound technology-driven disruptions, we ain’t seen nothin’ yet. Rapid and profound: again, the coming digital disruption will change not just processes but relationships. Thus the pressure to transform enterprises will come from not just technologists or number-crunchers but consumers themselves.
Sure, headquarters may exert pressure to reinvent the branch in the face of declining performance numbers - but consumers will exert greater pressure because they will be exasperated at doing their banking the same stodgy way their grandparents did. Sure, the board of directors may encourage involvement in new payment technologies — but that involvement will blossom or falter based on how the organization can respond to pressure from partners or consumers to add meaningful value to the new relationships involved in these new digital formats. Most coming bank challenges — how to innovate new services, manage complexity and risk, relate to consumers, and so on — will depend on a deep understanding the new relationships produced by digital disruption.
At A.T. Kearney, we’ve been watching these signs of digital disruption and working with companies seeking to exploit them. But we’ve been surprised at how many organizations don’t really have that deep understanding. Some bandy about phrases such as omni-channel consumer engagement or new digital products and services, but few have put together a big-picture view of how these trends might combine to reconfigure their traditional value chains. And so over the next several months, I’ll be sharing some details of how we at A.T. Kearney see the mega-trends of digital disruption affecting traditional practices, showing how they fit into that big picture.
But the first step is a general acknowledgement: Big changes are coming, driven by consumers empowered by new technologies. Are these changes an existential threat or a transformative opportunity? The answer may depend on how effectively an organization comes to grips with digital disruption.