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PwC: Digital evolution essential for banks

Pressure to personalise the customer experience and threat from digital disruptors is accelerating the need for traditional banking models to transform

Janet Brice
|Jan 5|magazine9 min read

Pressure to personalise the customer experience and threat from digital disruptors is accelerating the need for traditional banking models to transform, reveals a report from PwC.

This, along with COVID-19, has accelerated the move to transform banking models into organisations that can deliver services virtually and digitally, highlights the report, Banking on change: Has managing our money changed forever?

For banks to achieve a digital transformation they will have to embrace emerging technologies: mobile technologies, the cloud, automation, the Internet of Things (IoT) and Artificial Intelligence (AI) and rise to the challenge from digital disruptors in the banking world.

“Such innovations will enable them to provide personalised services with a human touch, informed by better data insights,” comment PwC.

According to the report, customers today expect banks to serve them just as quickly, efficiently and conveniently as the world’s top technology businesses and eCommerce sites and predict the banking organisations that do this best are the ones most likely to succeed.

“COVID-19 has not only forced businesses to look to more digital, flexible ways of working for themselves - it has fast-tracked the prevailing customer trends they need to respond to, such as the move to digital-first services, said Steve Davies PwC UK.

“Even those customers who, until earlier this year, would have chosen to bank in person, in branch, have increasingly moved online during the pandemic out of necessity. In turn, that has shown customers what is possible. But it has also demonstrated the effectiveness, relevance and usability of the digital services currently on offer,” he said.

The report points out the environment banks operate in today has changed compared to six years ago. In 2014, 85% of the UK’s banking market was served by just five big banks and entry for new competitors was ‘prohibitively difficult’.

“Today, many of those previous barriers to entry have fallen, enabled by the cloud and other digital technologies, as well as by changes in the regulatory landscape aimed at encouraging innovation and delivering more choice for banking customers,” comment PwC.

Digital disruptors

The desire for a different kind of retail banking is reflected by the latest customer ratings from the consumer association Which? It shows two of the top three highest-ranked organisations were challenger banks – known as digital disruptors.

“One of those was Starling Bank, which launched as a digitally native mobile retail bank. Founder and CEO Anne Boden says her mission was simple: to ‘change banking forever’,” reveals the report.

It is reported that Starling Bank’s success was due to the fact it came up with a suite of 52 new products and services designed to meet the needs of sole traders, micro businesses and smaller SMEs, their products included instant invoicing, VAT management and flexible deposit accounts. In February 2019, it was awarded a £100m CIF grant.

“A brand-new digital disruptor had essentially come out of nowhere to win,” comment PwC.

Path to transformation

So why do so many traditional banks fail when they try to launch offerings to compete with digital-native competitors?

“They didn’t recognise that transformation involves more than simply bolting modern technology onto existing services and products. To meet customer expectations, retain market position and compete against digital challengers, banks must adopt new models with financial technology (FinTech) at their heart,” says PwC.

Digital transformation also requires banks to modernise their back-end operations through the right mix of technology and workforce reskilling. “Banks need wholesale change - not just in technology. They need to rethink how they work, lead and operate across every part of the business. 

“While technology is critical to transformation, it’s not the whole story. Successful transformation also requires banks to change their cultures, mindsets and skills,” concludes PwC.

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