The Chief Executive Officer of The Nigerian Stock Exchange (NSE), Mr. Oscar N. Onyema, OON and a former Minister of Education, Dr Oby Ezekwesili have reiterated the importance of financial literacy in lifting Nigeria and indeed Africa out of poverty. Their positions were articulated at the awards ceremony of the 2017 NSE Essay Competition for Senior Secondary Schools Students in Nigeria, held on Wednesday, November 29, 2017, at the Civic Center in Lagos.
Banks would do well to use technology as a catalyst to empower and motivate people to lead the way to their digital future. Artificial intelligence, digital ecosystems, on-demand labor platforms, design thinking and other key technologies can help banks respond to people based on their wants and needs, even as the bank evolves to a digital-first business model.
In doing so, banks will become true and trusted partners—helping customers and employees achieve their goals. The more goals a bank helps people achieve, the more confident people will be in the partnership, yielding an ever-stronger relationship with each interaction. When bank customers and employees succeed, so does the bank.
Artificial intelligence (AI) in banking is not new. Banks are already using AI in heavilymanual processes for accuracy, efficiency, speed and cost benefits. What is new, however, is the move of AI beyond process to interaction. By automating the interaction between all of the different tools and people in an IT environment, for example, a New York-based investment bank achieved a 93 percent reduction in average resolution and fix time (from 47 minutes to 4 minutes).15 Thirty percent of bankers are currently using intelligent virtual assistants on large scale projects or broadly across the organization. The next stage of AI in banking will be toward simpler, smarter interfaces: machine learning to reengineer back-office processes, and AI tools that allow better interaction with customers.
Banks can use advanced machine-learning— systems that gain knowledge from data as “experience” and adapt to apply what is learned in upcoming situations—to streamline back-end processes and support networks. For example, text-mining algorithms pointed at data from internal text, voice, social media and other data sources can help identify unusual and potentially risky or illicit trading patterns. Machines can learn from that data analysis to help banks better detect fraud. A prominent global bank intent on seizing first-mover advantage in its digital strategy successfully tested the IPsoft Amelia AI platform’s ability to support its network of mortgage brokers by providing guidance on policy details.
Tapping AI-enabled tools (like centralized platforms/assistants or messaging bots) to enhance front-end services is a gamechanger. For example, Capital One® Bank developed a “skill” for the Amazon Echo’s® Alexa, allowing people to check their accounts and pay credit card bills via the Echo device.17 Customers of HSBC® can connect with the bank’s virtual assistant, Olivia, to get answers about their credit cards or current accounts.18 “Collette” is one of Accenture’s premier virtual mortgage advisers that uses cognitive science, AI and user-centered design to provide tailored advice on complex mortgage applications— articulating its own thoughts, understanding the intentions and emotions of the customer, making recommendations, and, if necessary, referring the customer to a human assistant.
Most banks get it: 79 percent agree that AI will revolutionize the way they gain information from and interact with customers; 29 percent believe it is extremely important to offer their products/services through centralized platforms/assistants or messaging bots; 76 percent believe that in the next three years, the majority of organizations in the banking industry will deploy AI interfaces as their primary point for interacting with customers; and 71 percent believe that AI is capable of becoming the face of their organization or brand. Basically, AI is creating a new era of computing, rapidly moving from mobile-first to AI-first in the customer experience and moving staff to more judgment-based and higher value added roles.
For both front- and back-office applications, banks are focusing on several AI-related technologies to progress forward. They expect to invest in the following capabilities extensively over the next three years:
• Embedded AI solutions (40%).
• Computer Vision (40%).
• Machine Learning (38%).
• Natural Language Processing (37%).
• Robotic Process Automation (34%).
Bankers do expect high returns on such investments. Their top three reasons for embedding AI into user interfaces: data analysis and insight (60 percent), productivity (59 percent) and cost benefits/ savings (54 percent). Interestingly, 67 percent of US bankers place cost benefits/savings at the top of their reasons to invest in AI. Bankers also expect AI to accelerate technology adoption throughout their organization (80 percent) and ease use of and simplicity in the user interface to ensure a more humanlike experience (78 percent). Seventy-six percent believe organizations will increasingly compete on the ability to make technology fade, or appear invisible to the customer. Reaping such benefits will require banks to tackle privacy issues in embedding AI into user interfaces (38 percent), integration/ capability issues between AI and current IT (36 percent), and data quality (36 percent).
Like companies in other industries, banks are increasingly integrating their core business functions with digital ecosystem platforms as they seek to manage broadbased customer relationships in a fragmented value chain. In fact, banking executives are more likely than average (36 percent of bankers, versus 31 percent of all respondents) to believe that it is very critical to adopt a platform-based business model and engage in ecosystems with digital partners. The Digital Relationship Manager, for example, will make money from financial products delivered through their own personalized customer-centric ecosystems (such as for home buying or retirement planning) as well as from financial transactions like payments that are embedded in other non-bank transactions.
Seventy-six percent of bankers agree that competitive advantage will not be determined by their organization alone, but by the strength of their chosen partners and ecosystems. Platforms, like Uber, WeChat and Amazon’s Alexa®, are where much of the transaction banking of the future will take place. However, being a platform player does not necessitate being the platform owner. Consumers expect banks to be there, regardless of who owns the platform.
Bankers understand and are responding. Twenty-three percent indicate their organization is leading one or more digital ecosystem(s). For example, BBVA in Spain is opening up its core platform and services upon which others may build their companies and services which, in turn, will help the bank build new businesses. It is already giving authorized third parties access to account data and aggregated card profiles to benefit customers, for example by enabling intelligent consumer lifestyle choices like timing of restaurant visits and recommendations.13 Its US bank, BBVA Compass, opened its payments API to digital payments startup Dwolla to allow real-time money transfer between bank accounts in the United States—a process that typically take a few days.14 This mirrors our survey findings. Bankers cited the top three benefits of participating in digital ecosystems: improved customer satisfaction (53 percent), increased speed and agility in developing solutions (52 percent), and access to a new customer base (47 percent).
Effectively leading or participating in a digital ecosystem means new challenges. Along with cybersecurity (36 percent) and uncertainty as to how industries will be disrupted (21 percent), banks will need a strategy for protecting their brand positioning and deepening their influence in the customer’s life. Seventy-six percent of bankers agree that ecosystem participation involved giving up control in favor of an overall better outcome (such as speed, agility, access, lower costs) while 69 percent agree that ecosystems are creating an environment for unlikely partners. Slightly more than 70 percent agree that their organization’s API strategy is instrumental to their brand and 73 percent believe that in five years’ time ecosystems will have shared responsibility for a brand.
Of course, being an Open Platform Player is not the only way for banks to play in the digital economy. As banks are experiencing signs—from open banking regulation and fintech explosion to low market valuations and digital native competitors—that the traditional banking model is coming to the end of its growth curve, most are looking to jump to the next curve to survive. Some banks may seek to create platforms that offer predominantly third-party products; others will choose to become Digital Relationship Managers that manage most of the value chain while enabling transactions on other platforms. Some may only serve a narrow set of needs as a Digital Category Killer, or as a Utility Provider that provides product solutions or regulated entity services to other players. In any case, banks must evolve to digitally-fit business models.
The future of work is already unfolding in banking. Leaders are creating a workforce with built-in flexibility and scalability for more agile ways of working.
In fact, bankers said that 16 percent of their workforce are already independent freelance workers and 29 percent expect their organization’s use of these workers to increase more than 51 percent over the next year. It’s a smart move. Agile workers represent a broad pool of sought-after skills, knowledge and experience that banks can access asneeded to compete as an agile, efficient on-demand organization.
It is also one aspect in banks shifting the workforce from an industrial “run the bank” mindset focused on executing tasks to a modern “change the bank” mindset focused on success in the ever more digital future.
The latter creates the innovative, collaborative, failfast-iterate-fast culture that makes modern bank models work. It is entrepreneurial, and becomes more automated, scalable and advisory (inside and out) overtime, which affects budgets and people.
For example, Société Générale’s “Digital for All’ program is designed to help conceive the bank of the future through customer relations, internal working methods and digital technology. It is gradually and securely rolling out latestgeneration office and collaborative tools to its teams, updating its infrastructure and network, and enabling communication without the barriers of location or traditional hierarchy, which can stifle workforce agility and frustrate tech-savvy workers.
According to Harvard Business Review, more than 85 percent of retail banking transactions in the US are digital.6 In business models like the Open Platform Player and Utility Provider, the human interaction totally disappears. While human contact is diminishing in terms of volume, the quality and importance of any human touch points will increase. This is especially true for Digital Relationship Managers and Digital Category Killers where human connection can play a vital role in building the brand and shaping the culture of the business.
Take robo adviser servicing start-up Betterment, a Digital Category Killer. It uses smart design to provide a friendly and intuitive way to guide customers to the right investment decisions. While machines do the math and complicated logic, Betterment’s design features—including questions to prompt the right actions and tax impact previews—offer the best potential options based on their customers’ behavior. Investors can then make choices to help achieve their long-term goals in a simple and engaging way.7 Betterment recently announced new service offerings that include access to human certified financial planners and licensed financial experts.8 The technology itself is impressive, but more importantly, it is built around a thorough understanding of human interactions, both with machines and with other humans.
Bankers are beginning to recognize the importance of adapting for unique human behavior to shape the quality of the customer journey and the effectiveness of technology solutions. Eighty-one percent of bankers agree that organizations that can truly tap into what motivates human behavior and design the customer experience accordingly will be the next industry leaders; 34 percent are planning to extensively use human behavior analysis and insight to guide customer experience design. The majority (80 percent) also agree that organizations will need to understand not just where people are today, but where they want to be, and then shape the technology to act as their guide.
That part is easier said than done. Despite an increase in the amount of customer data and insights available, 67 percent of bankers agree that their organization struggles to fully understand their customers’ needs and goals. Nearly 80 percent of bankers report a moderate to significant gap between what customers want versus what they need; 27 percent say they are pioneering actions to improve the “match” of what their customers say they need and what, by action, their customers actually need and receive. A good example is bank rewards programs. While the 2016 Accenture Loyalty and Rewards Benchmarking Study reveals that 91 percent of financial services executives believe members are satisfied with their loyalty programs; in another recent study of financial services customers, only 31 percent said their loyalty programs are “great.”
Perfecting that match makes designing technology capabilities to fit unique human behavior that much more advantageous— particularly in the face of modern, digital banking models, such as ecosystem platforms and channels not owned by banks. Platforms, for example, bring in customers who come from outside the sphere of the bank’s knowledge. Within such models, banks typically have only the financial transaction to impress consumers with whom they may never connect again. And, the amount of time that banks have to sway consumers grows shorter and shorter. Thus, design-centered thinking will need to be surgically precise. Interactions are hardwired into the technology. As design thinking changes, the bank’s technology must be agile. Imagine a customer walking up to an ATM with a blank screen simply waiting for the customer to dictate the interaction. It means that the bank must adapt its model, infrastructure, and workforce to ensure that every customer interaction is a low-friction, enjoyable experience that fits with the way customers want to interact, not how the bank wants them to interact.
What lies ahead for banks is, in many ways, a blank page. Major aspects of the future are waiting to be mapped out. For example, while Europe’s Payment Services Directive (PSD2) mandates that financial institutions give customers and third-party integrators programmatic access (typically API-based) to their data, it does not specify where the data should reside. Nor does it clarify how the security and authentication models will work.
As part of their rotation to winning-digital business models, banks must take the lead role in setting guideposts. They can build on the fact that customers still have a lot of confidence in the banking sector to protect their data and execute transactions in a safe and secure manner. In North America, for example, 86 percent of consumers trust their bank over all other institutions to securely manage their personal data.2 Just as the technology industry took the lead in shaping its own standards, banks cannot wait for regulators and governments to set the terms of competition. Sixty-six percent of bankers globally (82 percent in US) say government regulations have not kept up with the pace of technology advancement; 61 percent say that the industry’s regulatory environment is outdated and a barrier to growth. For example, legacy regulations in Japan limit a bank’s ownership in non-finance companies to 5–15 percent.3 Regulators in Japan consider fintechs to be technology firms, not financial firms—so while megabank Mitsubishi UFJ might want to take a portfolio approach to investing in fintech startups, regulations make that impossible. In response, Mitsubishi UFJ is building an in-house financial technology R&D division to deliver the innovation they need.
Bankers understand industry challenges— security, fraud, privacy, digital ethics, emerging technologies like blockchain and so forth— much better than regulators. First movers can move faster than regulators (and even pull regulators along) to pioneer uncharted banking terrain and influence customer behavior. They can help shape the new standards, processes, practices and crossindustry partnerships that will underpin innovative models. Those who are finding a place at or near the center of their new ecosystem look to gain freedom to innovate (53 percent), opportunity to develop standards that competitors will be expected to follow (52 percent) and expanded opportunities for trusted partnerships (52 percent). Those who are not risk being regulated out or being poorly positioned in a competitive landscape they did not have a role in creating.
These banks are fully integrated, top to bottom, inside and out. They use data insights to facilitate, manage and differentiate seamless, personalized and relevant customer experiences.
Importantly, they optimize physical and digital channels, turning them all into productive assets to offer financial and nonfinancial solutions, not products. In this regard, Digital Relationship Managers will take what Accenture calls the Everyday Bank model10 to new heights.
They will do so by delivering highly fluid, personalized and experiential Living Services that extend from banking to areas as divergent as housing, travel, health care and beyond. In so doing, they position Everyday Banks as dynamic, digital financial managers delivering individual relevance, not mass appeal.
Ping An, with approximately 90 million customers, aims to become China’s leading personal financial service provider by occupying a position at the center of a vast digital ecosystem. With an integrated platform, Ping An brings together traditional insurance, banking and investment services and nontraditional financial services in the areas of health, shopping, transportation, housing and entertainment. Its nontraditional lifestyle businesses serve as a channel for selling core financial products. In 2014, more than 11 million customers migrated from nontraditional finance products to one of Ping An’s core finance businesses.
Traditional banks can no longer just strive to be better at what they do. Within a few years, their current business model, which calls for them to provide a full range of banking services and channels by default, will no longer be sustainable. To thrive in the digital age, today’s banks will need to engage with customers in new ways and connect with broader business ecosystems to offer more than traditional banking products.
Based on our analyses and client experiences, we believe four business models are poised to reshape the industry. These models are now possible to pursue because of the maturity of the technologies that will enable them. They differ not only in the services they provide, but also their market focus, the manner in which they make money, and how they evaluate their performance (see Figure 2). Importantly, none of these models is mutually exclusive. A bank may pursue one model, or select aspects of each to deliver a truly differentiated service. Whether they are applied in isolation or in combination, we anticipate these business models will deliver the majority of banking revenues in just a few years.
Because transitioning to these new models is a multiyear journey, it’s critical that banks begin their migrations today. Those that wait will be left behind.
In line with its commitment to empower women with the skills they need to thrive in the economy, Access Bank has concluded the first season of the much talked about Womenpreneur Workshop by training Female Entrepreneurs in the Eastern region of the country.
This edition which serves as the fifth and final edition of the first season was organised just before the 3rd Anniversary of the Bank’s W Initiative. The workshop, which held in Enugu’s capital city, serves as the final session for the first season of the series. Prior to the Enugu Workshop, the Bank had held the training in four other locations in the country namely; Lagos, Port Harcourt, Ibadan, Abuja and Kaduna and trained over 1,600 female entrepreneurs in the first season.
To successfully implement the workshop, Access Bank’s W Academy under the W Initiative, partnered with the Enterprise Development Centre (EDC), Pan Atlantic University; the Entrepreneurship arm of Lagos Business School to organise and drive the training.
The Womenpreneur workshop is designed to address the lack of access to entrepreneurial skills, finance, networking, and management skills; which are the key barriers to women’s economic inclusion.
Speaking on the purpose of the workshop, group head, Inclusive Banking of Access Bank Plc, Ope Wemi-Jones said, “Since 2006, the Bank has continued in its commitment to drive women’s economic empowerment in the nation. The Womenpreneur Business Workshop is intended to educate and enlighten Nigerian women on the fundamentals in business which will eventually help them attain their full potentials and continue to drive economic activities in Africa”.
“So far, business women in Lagos, Port Harcourt, Ibadan, Abuja and Kaduna have benefitted immensely from the workshop with over 1600 female entrepreneurs testifying to have increased their business network, improved their business model and are thriving through the economy with ease,” she added.
This first of its kind workshop is highly discounted and targeted at small and medium scaled women entrepreneurs.
Celebrating its 3rd Anniversary this year, Access Bank’s W Initiative has decided to commit to growing female SME’s in Nigeria by organising the second season of the highly beneficial workshop. This much expected season is positioned to reach more budding female entrepreneurs thus fostering the growth of SME’s in Nigeria.