In my last blog I discussed a new wave of digital disruption where existing business models are being challenged by agile new disruptors that have been built for the digital age, putting the customer in charge, with social, mobile, data analytics and cloud technologies at their core.
In this blog I will be discussing the key trends of Digitisation and Digitalisation.
Many organisations are anxious to get ahead of the curve on digital which is changing the very nature of business and making markets more dynamic, putting the customer first and placing data at the heart of the organisation.
In reality there is no instruction book or bible on best practice. Digital commerce implementations are dependent on a complex ecosystem of technologies, data, tools and vendors.
To date, many banks are focusing their digital initiatives on “Digitisation” :
Digitisation: “Moving what you did offline (analogue) to online (digital)”
Historically, this has occurred across 3 distinct phases and has mirrored banks internal core systems by applying a digital veneer to existing activities in order to reduce channel costs and improve operational efficiency :
3 phases of Digitisation
- 1980 – 2002 Payments, ATM cards and tele banking
- 2000 – 2010 Access banking remotely 24 /7 improving convenience and cost efficiencies
- 2010 – 2015 Full digitisation of sales and after sales
Although worthwhile, digitisation of separate end to end value chains is no longer sufficient by itself to justify future digital investment.
These early digitisation pioneers, have given way to a new wave of “Digitalisation” :
Digitalisation: “Process of exploiting digital assets to maximise business success”
Alternatively Gartner defines Digitalisation as “the use of digital technologies to change a business model and provide new revenue and value producing opportunities”.
New competitors are aware that they can offer customers a more convenient and less expensive proposition by exploiting new service models and industrialising digital assets such as data, cloud and mobile.
Technology is now being used at the forefront of the user experience increasing customer centricity as well as driving innovation in new Omni channel products and services.
This approach relies on offering new technical capabilities (APIs, apps, functionality and connectivity) that support a broader customer use case — one that extends beyond simple financial services transactions such as mortgages and savings.
Digitalisation has already disrupted digital wealth platforms with the advent of new platforms such as Nutmeg and Simple to enable people to manage their money and investments online. The rise of new robo advisors will further accelerate change in this sector.
In addition, consumers are now choosing to invest their savings into small businesses through crowd funding or peer-to-peer lending platform such as Funding Circle and Zopa.
3. Walled Gardens / Digital ecoSystems
Powered by extensive use of big data techniques, data analytics and massive data pools, new digital disruptors are creating new digital eco systems or walled gardens to further accelerate the customer proposition and potentially disintermediate existing players.
These new digital walled gardens, such as Alibaba, Alipay and MyBank, promote both increased customer lock in as well as locking out traditional financial providers. As an example Alibaba via its Alipay alliance now controls 82% of China’s online payments.
MyBank, an Alibaba backed online bank, uses big data techniques and a data trove of 40 trillion retail customer records to generate a unique competitive insight using predicative analytics of customer behaviours, business sentiment and commercial risk exposure.
4. In Conclusion
Applying a digital veneer to existing operations to make the service more attractive to the customer, is no longer worthwhile in the new digital eco system.
Banks now need to fully exploit their digital assets and update their structure, services and products to remain competitive and relevant in the new Digitalisation ecoSystem.
In my next post I will discuss the key pillars for digital success.
Email : ian@IanAlderton.com
Tel : +44 (0) 7702 777770