After centuries of dominating the financial services sector, banks are facing an existential threat thanks to disruption from technology companies.
Financial technology companies and upstart banks are offering low-cost high-interest accounts that can be opened online instantly, and insurance services where claims are processed automatically in seconds.
Unless banks make fundamental changes and use new technologies to offer better services to clients, a myriad of financial technology start-ups are waiting to overthrow big banking.
This is the word from Colin Iles, who was speaking at the Sybrin Systems 2020 User Forum in Cape Town. Iles is an independent consultant who has held senior positions at several banks, including Standard Bank and Absa.
“The average half-life of a company on the S&P 500 has gone from 60 or 70 years, 60 or 70 years ago, down to about 12 or 13 years,” Iles said.
“Companies are going bust at a rate we’ve never seen before.”
Iles noted that if this trend continues, 40%–50% of names on the S&P 500 won’t exist in the next decade.
“There are a lot of financial institutions in the S&P 500.”
Stuck in their ways
While there are obvious examples like Kodak and Blockbuster video being disrupted by digital technologies and services, Iles focused on the more recent collapse of travel agency Thomas Cook.
“Thomas Cook didn’t fail because of problems with its cash flow, or debt-equity ratios, or profit margins. Analysts will say that until they are blue in the face,” Iles said.
The real reason Thomas Cook failed is because it was too busy competing with TUI to notice that the world had moved on.
“They failed because they missed Booking.com, Airbnb, and Uber. They missed a collection of start-ups that made it incredibly easy for anyone in the world to go anywhere they want and get the ideal travel package [without the help of an agent].”
Thomas Cook found itself in a position where it could no longer compete because it has physical shops on high streets and in shopping centres which people no longer want to go to. It had a service with huge amounts of friction that no longer added any value.
Traditional banks and Thomas Cook have a lot in common, Iles warned, such as branches and offering a service to people for a world that has moved on.
By not giving microfinancing, not supporting the “gig economy”, and not supporting free and frictionless services for the SMME market, banks will meet the same fate as every other business that has been disrupted by technology.
Adapt or die
Iles said that for organisations like traditional banks to stay relevant in an exponentially changing world, they will have to make some changes. He suggested two key areas to focus on: becoming purposeful and giving employees autonomy.
Studies have found that brands that serve a higher purpose are more profitable, and Iles mentioned Microsoft as an example of an organisation that recently went through such a transformation.
Microsoft states its purpose as: “Our mission is to empower every person and organization on the planet to achieve more.”
When people in an organisation are given autonomy to pursue such a client-first, almost altruistic purpose, Iles said that they are able to deliver the best, most creative solutions to customer problems.
“If you do think that the world is exponential rather than linear, and that your organisation’s operating system has to be changed to adapt to the rapid changes, Sybrin Systems is the company that can help you on your transformation journeys,” Iles said.
Where does Sybrin fit in?
Sybrin offers products and systems to help any business digitally transform and automate their operations.
Through Sybrin Nitro, its rapid application development platform, it empowers software developers and non-IT staff to create business applications that increase productivity and enhance service delivery.
Built on its own platform, Sybrin has also developed a suite of services and applications aimed at the digital banking and payments industry called Sybrin Apex.
They also offer machine learning and artificial intelligence tools, within Sybrin AI, which can do intelligent document processing, digital onboarding, and various forms of document capture.
With its development platform and nearly three decades of industry expertise, Sybrin is ready to help any business evolve through digital transformation.
This article was published in partnership with Sybrin.