SKILLS AND RESOURCES
Banks have the customer base, people, skills and the resources to pursue innovation.
In the 'traditional' lifecycle of disruption, truly innovative people (or companies) start small. New players and start-ups, are on the margin of markets. Some of the hottest areas of disruption in banking are in payments and personal lending.
Kabbage, which uses data generated through regular business activity such as shipping, payments and social media, is able to assess small-business loan applications and provide funding within seven minutes.
Founded in 2009, it's now the largest online provider of working capital to small businesses in the US and UK. Its challenge will be balancing the need to scale with the need to grow profitably.
The Lending Club, established in 2006 and now the world's largest peer-to-peer lender, says it can offer lower interest rates and better returns than traditional banks. Interestingly, banks form a significant part of the group's lending base as they can outsource unsecured lending while holding onto their customers.
However, we don't know yet whether investors will be protected in a downturn. This highlights the fact that, while start-ups add value by disrupting, they still remain untested to some degree.
Banks on the other hand have a proven track record of supporting customers through the economic lifecycle. But we can learn from disruption.
The mortgage sector in Australia was a major market which underwent seismic disruption in the 90s due to new technologies, platforms and business models. Today, mortgage brokers play a key role in financial services.
SOLVING REAL PROBLEMS
The lesson is that banks need to find out what customers want and improve their experience. It's not about reducing a process from four clicks to two. That's not disruption, that's hygiene.
We need to be solving real problems, delivering to a gap in the system to provide a better customer experience and using our information to be much smarter.
Today we provide a customer with a mortgage so they can purchase a house. Tomorrow, how do we engage customers from when they're first thinking about buying a home right through to the day they move in? People need more than just the money they don't have. Currently banks do almost nothing to help.
It's about creating eco-systems that currently don't exist. Digital and analytics allows us to do that, to play a more important role in our customers' lives and help them with what really matters.
That is what Uber and AirBnB and Amazon have done so well. But it's also what Google, through its use of digital and analytics, has done.
In arguing banks like ANZ can be disruptors, I am not claiming incumbents in any industry can avoid disruption. New technology, faster communication speeds, richer data and smarter analytics are all tools that allow someone, somewhere to come up with a better way to service customers or fill a gap that existed in the market.
Smart companies and talented entrepreneurs will do that. But there's no reason why banks can't be among them.
To me it’s about a mindset and thinking about what business we’re really in.
Matt Boss is managing director of products and marketing at ANZ.