Wednesday 16 July 2014

The downloadable bank

I recently spent the day at WIRED Money, where the ideas design business and technology media entity brought together the people and businesses disrupting the world of finance. The event offered a range of sessions covering themes and technologies changing the face of money.

With Brett King from Moven saying that the traditional banking model involving branches, ATMs and application forms is redundant in a digital age and when you consider that the most powerful smartphone of 2014 has more computing power than RBS or HSBC had in 1985 then we are very much in a new world.

Another of the speakers Matthias Kroner from Fidor, an internet community bank, challenged the attendees by saying "to revolutionise banking in a truly global way, financial services need to be open – to their customers, to change and to innovation". He called out a powerful learning that process won over price citing same-day lenders with their ease and convenience as evidence.

The rise of the digital bank
The session amplified the takeaways from a recent Mckinsey paper.  A digital transformation will put upward of 30 percent of the revenues of a typical European bank in play.  Add this to the view that banks can take out 20 to 25 percent of their cost base by leveraging this digital shift to transform how they process and service. You then have an incredibly strong position.

Competing on Digital: the rise of digital banking services
In engaging with start-ups and entrepreneurs one can easily get lost in the analysis they call out as justification for change.  The BBA’s report provides an excellent state of the nation to back up most of the claims.
Finding that digital usage by the British public continues to rise. 14.7 Billion banking apps have been downloaded so far this year and GBP 6.4 Billion is being transferred via the Internet every week (up from GBP5.8 Billion last year).  6.6 million clients use Lloyds banking apps every week in 2014 so far. That compares to 4.7 million for the whole of 2013. 750,000 people have signed up to the new Paym service remitting a total transaction volume of GBP520 million.
Some serious numbers on the move to digital and with the use of branches continuing to fall and in the case of RBS/Nat West, branch usage has fallen from 25% of transactions in 2010 to only 10% today.

The world is changing
Digitization is changing the traditional financial services business model, in some cases radically. The good news is that there are substantial prizes to be had to those willing to embrace it. The bad news is that change is coming whether or not they are ready. 

Friday 3 January 2014

The increasing value of going digital


More than accounting
Last July Mckinsey published a useful little paper on the changing relationship of intangible and tangible assets of digital capital and how what was once a small minority of business activity are becoming the rule in the digital economy.
The view being, we can see the rising importance of this shift in the recent copyright battles between Internet and consumer-electronics companies and in the major spending on patent portfolios.  Measuring the full impact of digital capital requires a new set of management and financial lenses that incorporates your intangible assets such as your designs, business models and brands.

This is echoed by the work that BCG have done and called out in my Digital Diamond Hunting post, digital capital has become a major contributing factor in global economic growth. In some economies such as the UK, Sweden and Japan spending on intangibles represents two-thirds of digital capital’s total value.
According to BCG the digital economy is being driven, too, by small – medium-sized businesses’ fast adoption of online commerce. These companies are the backbone of the UK and they've taken to the internet economy, creating a virtuous circle: more choice for consumers, more cash in the marketplace and more promotion of the internet as the way to reach and engage.

Not all rosy
UK startups, have blazed a trail, but for the larger FTSE 100 enterprises things aren’t as rosy. With a market cap of over £1tn and employing an estimated 6.5m people and only four chief technology officers sitting on their boards, an indication of the low priority attached to digital strategy.
With FTSE 100 companies far behind the public, small businesses, startups and even governments in the digital race, there is growing demand for them to be held to account. With various stakeholders considering some form of Digital Performance ranking indicator to showcase this as a key business metric, where companies with at least ten percent of revenues online will be championed. 

Want a playbook and fresh approach?
For the laggards a useful methodology to consider is Max Kreijn’s Open Activation work on how to evolve from enterprise to startup?"  He’s done some fresh work and introduces 7 of the many findings from the research that consolidates the method of Open Activation. Collectively they provide an initial guide to how a large enterprise can begin thinking, acting, and succeeding like a digital startup.
Check it out, as the importance of digital intangibles continues to grow, we are increasingly going to see the need for these types of fresh approaches where the Digital Davids transform the Enterprise Goliaths.