Bank of the Future

When we start to think of the “Bank of the Future”, the following are some of the thoughts and questions that flash in front of us with specific reference to consumer banking / retail banking:

  1. What is the time line of the ‘future’ we are talking about?
  2. Before we look at the Bank of the future, should we not try and answer the question “is there a future for the bank”?
  3. This is such a topic that almost everyone will have some point of view or opinion and it’s pretty difficult to say whether one is even approximately right or absolutely wrong
  4. There is no crystal ball that’s available today to guess or predict the look and feel of the typical ‘bank of the future’
  5. Is ‘Bank of the Future’ restricted to or equal to ‘Branch of the Future?’
  6. Will the ‘bank of the Future’ be ‘branchless, people less, paperless and plastic less?’
  7. How will the ‘bank of the Future’ be different from the ‘bank of the present’ across multiple parameters of its People, Products, Services, Process, Technology and Customer Experience?

Let us look at each one of the above mentioned ten points in some level of detail.

  1. What is the time-line of the ‘future’ we are talking about?

For any conceptual view point, the definition of the time-line or the reference period is a very important component. It becomes doubly important when the reference is made relative to the past and/or present. So far as this paper is concerned, the ‘future’ is defined as a meaningful and reasonably foreseeable period and has been put as 2022-30.

  1. Before we look at the Bank of the future, should we not try and answer the question “is there a future for the bank”?
  • Analysts in the BFS world, industry practitioners, adjacent business verticals and banks’ customers have also been asking the question as to whether there is a future at all for the bank.
  • While the question has remained as direct and blunt as this, I strongly feel that the intent of this is more to dis-aggregate the multiple views and predictions in order to arrive at some sort of a three dimensional visual of this entity called ‘Bank of the Future’.
  • Notwithstanding the various theories / views that have been talked about on this, I am of the view that Banks will necessarily have to exist irrespective of the newer alternate players who will come into the fray to take some pieces of the banking cake. I expect that the rules of the banking game would change to the extent of even going beyond recognition and will primarily revolve around institution stability, consumerism, consumer protection, customer experience, regulatory, privacy and security

When the rules of the game change for the ‘bank of the future’…

..The ‘weak’ will perish

…The ‘mediocre’ will just comply

….The ‘good’ will adapt fast to usher a quick BaU

…..The ‘smart’ will constantly innovate to capitalise on the change

What will determine the relative success of one bank over another would lie on those ‘smart’ banks that would adapt faster to varying eco-system based partnership models that would go beyond the conventional banking of yesterday and today.

  1. This is such a topic that almost everyone will have some point of view or opinion and it’s quite difficult to say whether one is even approximately right or absolutely wrong

Absolutely true. One does not necessarily need to be an analyst, an industry practitioner or a consultant to express his / her view or opinion on this subject. Even a consumer of banking products and services considers himself / herself qualified to throw the towel on the subject and rightfully expect to be counted in this crowded opinion space.

However, I feel that a logically tailored view or opinion on the ‘bank of the future’ would only be feasible if one analyses the various parameters across the evolution of yesterday, today and tomorrow and associating them with global trends and outlook. This is precisely the reason for my belief that ‘future’ needs a clear definition (1 above) while bringing out a point of view and also not get extremely influenced by such things that would probably exist in the fringes of illusion and theoretical imaginations.

  1. There is no crystal ball gazing that’s available today to guess or predict the look and feel of the typical ‘bank of the future’

If one does not want to take refuge on this statement and is inclined to take a bold view, it is important to undertake a very logical journey of assimilating and applying the various incremental and disruptive innovations that are taking place. This way, one could potentially assist banks in their objectives across superior customer experience, ability to provide more for less, simplification, digitization, digital banking, business models etc. This aspect of assimilation of innovation needs to be strongly backed up with a sense of the destination themes. I strongly feel that innovation should be looked at through the lens of these destination themes and not just modelled on what more we can do over what we have today.

  1. Is ‘Bank of the Future’ restricted to or equal to ‘Branch of the Future?

Most articles and papers on the topic of ‘bank of the future’ tend to focus mostly on ‘Branch of the future’. ‘Bank of the future’ is definitely a much wider topic with larger implications and to me ‘Branch of the future’ is not only an integral subset of ‘bank of the future’ but also a very significant element in the ‘bank of the future’ in view of rapid technology developments that endeavour to replace or at least minimize the expensive physical touch points.

The most important view point around Branch Banking has of course been and for some with great degree of passion and conviction is that all other channels available today and those that will emerge tomorrow will jointly & severally render the swan song for Branches and even write the dreaded obituary for Branch Banking“.

Based on all what is heard from the wise men in this business and my own research, I am certainly of the opinion that Branches are here to stay for a variety of reasons that are driven by multiple market forces. Branches, albeit in different forms of size, shape and business-mix will be there and brave-out extended competition through its ability to provide consistent user experience while building or re-building intrinsically important strengths like Trust, Confidence and Brand value. I am also of the opinion that exponential growth in digital channels uptake can only go to strengthen the “Power of the Branch”. I am seeing Banks that were fairly myopic in shutting down branches to meet some short term objectives have re-looked at their distribution strategy and in a way given re-birth to branches although manifesting through genetically modified to dwarf or Bonsai versions. At least for the period of reference for this paper (2020-22), I maintain that it will be period of co-existence of physical and digital albeit the distribution is bound to move more and more in favour of digital.

With reference to branches, let us look at the practical challenges of today that are only expected to multiply for the period under reference for this paper. The dynamic banking landscape has catapulted newer challenges to branches. Why are Banks saddled with this dilemma of “To have” or “not to have” branches?

Essentially, branch banking has been haunted with multiple challenges and some of them hit the very purpose of its existence. We are now seeing bank branches needing to “justify its very existence” and perhaps the only way to do that is to innovatively transform.

Appended below are some of the most common challenges and how these are being addressed by various players today in preparation for being in readiness for the period 2020-22.

  • Firstly, the one that is hard hitting everyone is the aspect of “cost”. Various research outputs talk about branches taking 40 to 60 percent of total costs. Hence innovations are taking place in this aspect and we have been seeing things like “Branch flexing”, “Branch refresh’, – all essentially trying to live with “less real estate” and / or newer types and higher utilization of existing real estate.
  • Rationalization of branches is an ongoing phenomenon. While some branches are being shut down for multiple reasons some are being opened as well in order to provide optimal presence and customer convenience.
  • Superiority, ease of use, convenience and adoption levels of newer channels that were hitherto called “alternate channels” have started taken the front stage driving Branch to now be relegated as “alternate channel”. It’s in this aspect that Branch has the onus of proving its superiority through its ability to “engage, transact & conduct” with the added flavour of providing “Trust, Confidence, Brand value and above all Human connect for face to face advisory services etc”
  • As per some research reports, although transaction volumes have been in the decline at branches, newer offerings and regulatory compliance overheads have increased the interactional and operational complexities.
  • From a people perspective, impending staff cost has forced banks to optimize the staff mix. Leading banks have come up with innovative people structures to ready a knowledgeable, highly motivated work force that not only aid in optimizing the cost but also help the top line grow. Hub and spoke kind of mechanisms are growing in popularity with banks. Empowering Tellers to become Bank’s ambassadors through cross sell and up-sell is receiving tremendous attention. Value-add of branches is seen coming from tellers not being mere Robots or ATMs dispensing cash or reading out balances – but capitalize on ‘human connect’ to be “wise and timely” in exercising cross sell / up-sell leads provided by technology.
  • The continued regulatory regime focusing on transparency, service levels, customer protectionism etc have imposed newer constraints for branches. Towards this branches are resorting to multiple innovative ways aided by technology and other channels in order to minimize / eliminate customer dissatisfaction triggers. eg. Advance notice / preparation, concierge services etc
  • Customers are human and humans are subject to “mood swings”. Branch Tellers / advisors need to capitalize on their ability to read “customers’ mood and body language” – the unique capability of this powerful channel which no other channel can match.

Branches will endeavour to take more and more of innovative steps to comprehensively take on the present and the future.

Let us now look at the role of a branch and what are the enablers for the branch to function efficiently.

Essentially, a typical branch does the following activities:

  • Transactions
  • Sales
  • Service and
  • Advisory

To do these we have the enablers in the form of Bank staff, customers, infrastructure and real estate

  • The Power of multi-channel is enabling self-service and transaction automation significantly. Extension of the other channels into the branches is contributing towards overall efficiency enrichment of the Branch.
  • We are seeing more and more of encouragements for Branch visitors to use self-service channels. Things like intuitive assistance greatly enrich customer experience and in a subtle way prepare the “gadget-hesitant” customers to use these channels outside the branch as well.
  • Research shows pre-staging transactions in the branch will go a long way towards enhancing Branch experience by not only bringing down the service time through “branch readiness”, but also to streamline branch footfall through queue and traffic management alerts and even diverting to alternate service points.
  • Cohesive concierge services are something that is fast maturing in certain markets where the customers themselves visit a branch. This is however a challenge in markets where the actual customers use third party or ‘bearers’ to get their transactions done.
  • Security and authentication is an aspect where there is scope for innovation to contribute in a Branch environment. Essentially, the scope lies around discrimination in selective lowering of security and authentication in a visible and ‘pre-qualified Branch environment’ vs a completely ‘invisible digital environment’.
  • When it comes down to Sales, servicing and advisory, the components that gather momentum for innovation are around:
    • Multi-distribution frameworks that permit deployment of varying levels of expertise and the power to bring them into the Branch with focused relevance and through the right media
    • CRM and SCRM based analytical abilities that can empower the Teller and the advisors with information that can be used and conveyed through streamlined conversation – something that other channels would struggle to do.
    • Innovative collaboration models with partners ( mutual funds, insurance, real estate, investment houses etc) is another aspect that comes out pretty handy for a branch by physical and logical housing of them in the branch or branch itself being housed at these partner locations.
  • When it comes to Real Estate and infra-structure, differentiated layouts, apt-2-serve logistics and virtual Branch through augmented reality approach etc are some of the areas where multiple innovations are taking place.
  • Perhaps the most important component comes in the Customer and people side as its only through this channel the bank is able to build the most critical aspect of “Human connect”. One of the important things that we see is the readiness of the bank to address customer obsession through multiple innovative ways. The future Branch is not one of being human ATMs spitting out cash or reading out balances. It’s going to be a place where the Bank enables meeting customers’ procurement needs that obviously go beyond normal financial transactions.
  1. Will the ‘bank of the Future’ be ‘branchless, peopleless, paperless and plasticless?

As mentioned in 5 above, I maintain that it will be period of co-existence of physical and digital. While all these terminologies of ‘branchless, peopleless, paperless and plasticless’ are oft quoted, there is definitely a need to draw some reality across these aspects with the time-line that I have specified in this paper for the ’bank of the future’. While, most progressive banks have been constantly addressing these aspects with varying degrees of success rates, I feel that the most pragmatic way to describe the possible scenario in ‘bank of the future’ environment is

  • Less branches
  • Less people
  • Less paper and
  • Less plastic
  1. How will the ‘bank of the Future’ be different from the ‘bank of the present’ across multiple parameters of its People, Products, Services, Process, Technology and Customer Experience? 

I am of the opinion that the singularly largest difference between the bank of today and the ‘bank of the future’ will lie in the enrichment of the products and services that will be provided to its customers directly and indirectly.

Without going into the multiple line items that would possibly be part of the enhanced scope of products & services, I feel that it would suffice to state that the following will be the characteristics of the /bank of the future’:

  • Banks will direct its energy towards being custodian of customers rather than mere agents of origination & destination of funds
    • Today, we see banks being reduced to mere warehouses of money for its customers and nothing more. ‘The bank of the future’ will look to be much more than this for its customers by playing a much larger role in the overall customer wellbeing and not restricted to only financial wellbeing. This is neither going to be easy for banks to elevate themselves to this status nor its going to be an overnight phenomenon. The ‘bank of the future’ will have to necessarily address a series of sub-optimal operations of today and gradually build various point solutions that would aggregate to increasing customer stickiness and loyalty. ‘Bank of the future’ will capture back their inherent strength i.e. Customer ownership that is fast eroding today – thanks to smart and possibly smaller nimble players in the industry who are not necessarily Banks. They will focus on immersive customer engagement technologies rather than the mundane transaction enablement technologies. This is where I can see the power of multiple digital forces coming to banks’ rescue. Almost all the initiatives (best described as line items) that Banks and Consultants are talking today as part of Digital Revolution, re-imagination or similar terminologies fall under this broad category of regaining customer ownership. Becoming a trusted advisor is easier for a Bank as the factor of trust is in the very DNA of banks. Banks always stand for trust when compared to the fringe players outside. This inherent advantage will have to be capitalised by the ‘bank of the future’.
  • Banking will go beyond money
    • By this statement, what I really mean is that the ‘bank of the future’ will possibly elevate itself from being a mere bank to an enriched financial services provider to an entity that will facilitate life style and life stage management for its customers. The banking component of the overall life style / life stage event would be made extremely incidental and not as a separate stream or activity. I see the ‘bank of the future’ becoming a customer centric aggregator of financial and non-financial services.
  • Banks will see partnerships that go beyond the realms of conventional financial services providers and will see more and more of ‘shared services’
    • I see Banks entering into partnerships that not only go beyond the realm of financial services but also enlarge to cover those that align with the life style / life stage of its customers. I also see that the level of shared services would rise to a significantly high levels that various infrastructure components including branch/store would be shared. Multiple models of workplace banking and banks going to customers will evolve and become key elements of differentiation.
  • Banking will move from branch level banking to bank level banking to banking level banking.
    • I see the ‘bank of the future’ as a well graduated entity from being a provider branch level banking to bank level banking to banking level banking. Towards the period under review, I can see a significant multi-banking practice / experience of customers and the industry itself would have matured in terms of inter-operability and collaboration that the customer would see no difference between a branch level banking and banking level banking.

About the Author:

R Krishnan (Krish) has over 40 years of experience in Banking, IT/BPS, Consulting and Competency enrichment. He has held several senior management positions in Tata Consultancy Services (TCS) and ANZ Grindlays Bank (now Standard Chartered Bank). Krish was with the erstwhile ANZ Grindlays Bank until Dec 2000 and the last position held by him was Director–Operations, Transaction Services in Corporate Banking. Between early 2001 and until Dec 2014, Krish was with Tata Consultancy Services and the last role performed by him was that of Global Head & Vice President Banking Industry Practice.

In his professional career spanning over 40 years, Krish has interacted actively with Board / CxO level and senior / middle management of various global institutions and contributed towards building a distinct brand and providing Thought Leadership & accelerated solutions embedded with futuristic outlook / vision.

Krish is now an Independent Consultant providing ACT (Advisory, Consulting & Training) services to IT companies, BPS organizations and academic / professional institutions. Krish has designed and conducted several training programmes in Banking Financial Services space across the globe for multiple organizations.

As an industry veteran, Krish is one of the most sought-after practitioners in the Banking Financial Services space.

  • Krish has served as a Senior Advisor of Manipal Banking Academy for Banking & Insurance – the pioneer in training, competency enrichment and transforming talent for the BFSI industry and has been India’s leading talent development and employee productivity solutions provider to leading Banks, Financial Services and Insurance Industry.
  • Krish was also engaged by NIIT – a leading global institution that offers competency enrichment to corporations, institutions and individuals in over 40 countries. Krish’s role as a consultant to this organization, involved pre-sales support, creation / designing of contents / portfolio for corporate training programmes, development of content for programmes as per clients’ requirements, delivery of corporate training, tracking & sharing global trends /outlook of financial services industry, etc. Has designed and conducted a number of training programmes in Banking Financial Services space for multiple clients.
  • Krish currently plays a significant role as competency enricher and training at ANZ Operations & Technology – India, (a subsidiary of ANZ Banking group – Australia)
  • Krish is a member of the Board of Studies (BoS) of the reputed Thiagarajar School of Management in Madurai. The BoS has eminent members from both Academia and industry and is the school’s apex academic advisory and policy framing body.
  • Krish is also a visiting faculty in the following reputed Management Schools:
    • Thiagarajar School of Management, Madurai
    • MYRA School of Business, Mysuru
    • TAPMI, Manipal
    • NMIMS Global Access School for Continuing Education
  • Krish is currently the Founder Director of his consulting outfit, consultRkrisH.
  • Krish is an active member pf Linkedin and has contributed a number of articles / posts that have received kudos from readers.
  • Krish is also an active mentor and coach to many budding youngsters coming out of various B Schools.
  • Krish is also a Quiz Master and conducts Quizzes in the Banking & Financial Services space. His offering FinnovateQ is a Quiz programme designed as part of Learning with Fun initiative.
  • Krish has had an impeccable academic record starting from his school days to his post-graduation and professional career. Krish is a post-graduate in Management and a Certified Associate of Indian Institute of bankers (CAIIB)

Disclaimer:

The views and opinions expressed in this ‘Point of View’ article are those of the author and do not necessarily reflect the views and opinions of any organization and / or client the author has served or currently serving. Analysis performed / used within this article are only examples. They should not be utilized in real-world analytic products as they are based only on limited and dated open-source information.