“As we near the end of summer, many bank executives are taking some well-deserved vacation. But I’d wager that most of them will have a harder time relaxing than usual.
That’s because disruption in banking remains high and could intensify. Consider what’s happened in just this calendar year.
The effects of the first rising rate environment in the past 17 years have come to bear with a vengeance. While rising rates have historically been a boon for most banks, in the age of smartphone-fueled bank runs they have also caused chaos. We’ve seen bank failures, credit rating downgrades and plunging commercial real estate valuations, not to mention growing government pressure to drive ESG investment and possible new capital requirements for banks. Meanwhile, despite easing recently, 83% of banking executives surveyed in Accenture’s recent Pulse of Change survey remain concerned about inflation.
To top it all off, the fundamentals of customer behavior have evolved. With 90%+ of banking touchpoints now digital, those remaining in-person conversations take on outsize importance.
It’s a daunting time and many banks are hitting the breaks on “big bang” transformation projects as a result. Some are in what you might call turtle mode, pulling their heads into their shells to wait things out. Recent cross-industry research, in fact, found that most banks are unusually cautious right now.
The analysis of 1,516 global businesses found that less than 10% of banks today are committed to reinventing their business and operating models.
This caution is understandable – maybe even commendable, given banking’s regulatory environment and the sector’s crucial economic role.
But the findings also suggest that clinging to the status quo might mean getting left behind.
The few banks that are reinventing their business and operating models are, on average, more profitable (+1.2 percentage points in pre-tax return on equity) and more efficient (30 basis points in operating expenses over assets) than the industry average. They also manage their costs better, and their change programs deliver 30% more financial value in their first six months and progress significantly faster.”
Analysis: I found this Forbes article incredibly relevant to the Huntington research project, as it confirms the dire need for design intervention in the banking industry. In highlighting the fact that the customer behavior is rapidly evolving, I am curious to pull apart the different factors that are pushing forth change in these customers. What outside of smartphone-fueled bank runs is creating chaos? What other social factors may be playing a bigger role in the banking industry than we originally thought? As I ask myself these customer-centered questions, I must note how the article poses more concern for the banks themselves. What innovation needs to occur to help banks become more profitable and appealing to future customers to keep bankers from losing their job? Overall, this is a perfect article to fuel my quest to understand banking problematics.
Citation:
Abbott, M. (2023, August 23). Why Innovation in Banking Can’t Take a Holiday. Forbes.
https://www.forbes.com/sites/michaelabbott/2023/08/23/why-innovation-in-banking-cant-
take-a-holiday/?sh=7d45830f3831
