Banks as digital conductors

By Bjorn Cumps, Professor of Financial Services, Innovation & FinTech (Vlerick Business School) and Director of the Vlerick Centre for Financial Services

The bank of the future is not around the corner just yet. The battle to be the rising digital star of the Belgian banking world has stepped up a gear with the announcements about new, quicker investments in digitalisation. After the visible face of the bank (‘front-end applications’), attention has now shifted behind the scenes, to the ‘back end’. And, let’s be honest, banks are no different from many of us: the back end is not our most attractive angle. But these new investments are essential because banks still use relatively old legacy technology. And the model of a renewed front end with a flashy website, new chatbots or a designer mobile app coupled with a hopelessly outdated back end of processes and technology is not sustainable. It amounts to not much more than “putting lipstick on a bulldog”.

So while many banks have mainly worked on their digital affinity in recent years, it is now that the really thorough work must begin. It is time to renew the core and motor of the bank and transform it into a gigantic digital connector, because the banks of the future will have to be open and platform-driven if they are to exist at all. The bank must be a large digital connector to which third parties can connect to deliver better services for clients, together with the bank.

Banks will work much more with FinTech businesses to develop quicker and more innovative services. So FinTech businesses must be able to connect quickly and efficiently with banks' processes and ICT systems. And there are also possibilities in other sectors: banks can cooperate much more closely with notaries, lawyers, estate agents, utility companies, media companies, supermarkets and many others. Clients are not looking to buy a mortgage as such, but a mortgage is often a key element in their need for a home.

Banks will increasingly take on the role of conductor, which means that they orchestrate the different parties involved in meeting clients' needs. Thus the bank will be an orchestra leader that harmoniously combines the services of the estate agent, notary, architect and contractor: whoever is needed to meet clients' needs. Clients are already familiar with this in other sectors. When we book a holiday, we can often get a hotel, flight and hire car on the same website. The service is completely digital, integrated and orchestrated. Can the bank of the future help us in our personal business management by optimising our energy use? Perhaps we will buy our new cars from the bank of the future, which can then group together the orders per manufacturer, use its market power to get better prices, and immediately arrange a car loan for us? But before all of this, banks must renew internally so they can support these kinds of partnerships.

The bank as a digital conductor: a great digital connector. And, in particular, banks that help clients more by serving them better. In other words, the bank as a platform that connects, in every sense of the word.

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