The banks need to change. And not only in the fringes. They need to fundamentally shift their mindset, business model and operating model. This requires a resolute willingness to take risk and experiment; it requires a new culture where one is allowed to fail, and it requires cannibalisation.
Armed with deposit accounts, lending relationships, a reputation for security, and a robust infrastructure for clearing and settlement, we believe banks are well positioned to continue delivering financial services and to stay relevant for their customers.
When we meet banks we’re always stressing the importance of adjusting their business model to meet the needs of their existing and new clients. Mobile payments is not a “nice to have”, it’s the centrepiece of their existence and it’s not for banks to decide otherwise.
Customers want clever mobile payments services and if the banks don’t realise this they will lose their business to third-party providers, such as Facebook, when PSD2 is introduced in a year.
The reality is that banks need help with this transition. We’re glad to see a change where banks are more inclined to seek advice and cooperation with experts, such as Auka, to reach their potential and to stay relevant.
Yesterday a brilliant piece by Anette Mellbye, Head (VP) in Schibsted Change Office was published in Dagens Nærlingsliv about DNB’s (Norway’s largest bank) transformation from a bank to business with the mindset of a tech company.
It highlights the need for an all-changing shake up of established truths to survive the demands of the modern consumer. I couldn’t agree more.
We’ve taken the liberty to translate the original article since it’s in Norwegian and unfortunately behind a payment wall.
DNB is indeed a technology company
DNB chief executive Rune Bjerke will benefit from breaking out of old patterns and he will benefit from signalling that from now on it is anything but “business as usual”.
Do people really want banking services? Goldman Sachs recently conducted a survey which showed that only one in three young people think they need banks in five years. They would rather use alternative banking and new fintech services. This is something Rune Bjerke knows.
He also knows that Alipay, the world’s largest bank, is not a bank. Alipay is a technology company owned and operated by the Chinese e-commerce behemoth Alibaba. And although Uber today is the world’s largest payment network, Alipay is significantly more profitable. In peak periods, Alipay processes 97,000 transactions per second, approximately 90 000 more than Visa.
We’ve only just seen the beginning of this. The head of JPMorgan recently said: “Hundreds of startups equipped with top talent and lots of money are working hard to come up with alternatives to the traditional bank.” Globally there are more than 14,000 fintech companies.
Nasdaq, which was established long before the commercial Internet was a reality, defines itself as a global fintech company. Now, Rune Bjerke is talking about DNB as a technology company. Why is this happening now?
Most of us like to think of evolution as a linear function and that it has always been like this. Alas, in 2017, development is no longer linear. It’s exponential. The development rate increases by approximately the same percentage every year – and we have reached the inflexion point.
The reason why we’re seeing this exponential technology development is that we have reached a point where many transforming factors or technologies are in place. Factors like mobile phones, which allows everyone to online and soon will be powered by 5G thus allowing a completely different transmission speed; sensors, that in ten years has become 100 times cheaper; software that facilitates artificial intelligence, machine learning and big data, as well as robotics and 3D printing.
Not only are these factors in place. When they play together, they release waves and waves of new exponential and transforming factors. Thus, the development goes faster and faster. It’s been said that we’re facing 12 simultaneous “Gutenberg moments”(Silvja Seres).
The many transformative technologies that are currently available makes it obvious for both entrepreneurs, and increasingly for more established companies, that the tasks that until now have been solved in one way will be solved in a fundamentally different way moving forward.
The consumers see it the same way and so does DNB. DNB understands that they must be rigged to fight for the modern consumer – which, because of technology has a whole new set of expectations. The modern consumer doesn’t want a bank service provider. They want their transactions to happen on their mobile and “instant” and “on-demand” financial advisory. Because when technology is working properly it becomes invisible and frictionless.
This is not how DNB operates today and therefore Rune Bjerke has signalled a change of pace. In the same way as improvement of the candle light was in now way connected to the invention of the light bulb is will continuous improvement of the current banking services rescue DNB.
DNB must go back and ask themselves one fundamental question: What problem are we really solving? And this problem must be solved with new technology.
Going forward there are companies that quickly adapt to new technologies that will gain a foothold in the market. For those who do not, there´s a risk of feeling like the Nokia CEO. At the press conference where it was announced that Microsoft buys Nokia, he said tearfully, “We did not do anything wrong, but somehow, we lost.”
One thing is certain. It is not the behaviour that has brought DNB the success it has today, which will ensure DNB success in the future.