The 5 techs
Famous fintech though contributor & author of fintech snark tank Ron Shevlin recently published article on 5 hottest banking tech for 2020 on his Forb column. His company surveyed 300 banking senior executives on what technology they will be spending their budget on, and the top 5 are:
- Digital account opening
- Video collaboration / marketing
- P2P payments
So, what’s surprising from the list is that I don’t see any of the hot technologies such as AI, blockchain, or even data analytics, or embedded banking. And the most surprising of it all is probably video. How is video a hot banking technology?
First, the survey is based on 300 mid sized banks in the US. Now, I read that the big 4 (Chase, Citi, Bank of America, Wells Fargo) counts for 25% ~50% of all IT budgets in the banking sector. I believe the role of the innovators will probably start with the larger banks with larger budget. Even the big 4, they are spending most of the budget on legacy systems. Hence even though banks are testing with the sexy new techs, I doubt you will see them on the list, especially for the mid-sized banks.
Second, it’s about replacing legacy system. With the shift to cloud and faster connection speed, simpler and cheaper solution in video conferencing became possible, such as Zoom. Banks are looking to switch to such solution and make it more widely available
The banks plans to apply video technology in two categories: B2B and B2C. In the B2B space, banks are enabling video technology for team collaboration, training, town hall,…, etc. In the B2C space, banks are exploring use cases to apply video to provide better customer experience from customer service, client meetings, or just providing option for customers to use video instead of having to visit the branch.
The belief is that video will help achieve the following: Accelerated decision making; improved productivity; boosted product innovation & improved customer experience.
What does it mean
What’s interesting for me is that despite the hype, this is a realistic view of where banks are in their digital transformation journey. From the list above, it’s apparent that banks still got ways to go. This trend is corroborated in Jim Marous’s latest digital banking report. Jim found that most of the banks are just beginning (46%) or in the mid (37%) process of digital transformation (DT).
Jim then digged deeper on those firms that has started or in the process of DT, and found that most of them are still working on basic functions:
- one third has digitally transformed new account opening & mobile banking
- one quarter has made progress on digital on-boarding and digital lending.
What’s happening I assume there are probably a lot of banks just waiting on the sidelines to get a more clear view of the impact of the new technologies. Also, as Jim has noticed in his report, banks are making small incremental changes when they needed to make bigger and fundamental changes. For a fintech enthusiasts like me, I would love to see that, but unfortunately won’t anytime soon. Most of the banks are public companies, and need to report their financial performance by quarters. The benefits of digital transformation will take much longer to realize. In addition, it doesn’t seem the banks felt the urgency for such dramatic changes. I think for such change, banks need to feel their existence is being disrupted, and we are truly not there yet. Digital banks hardly made a dent to banks top and bottom lines. Perhaps the proliferation of financial services offering by all kinds of company will? We shall see.