An era of unprecedented digital disruption will force banks to behave like startup companies in order to survive.
According to Westpac’s Brian Hartzer banks must learn from startups and act as “disruptors” if they are to successfully fill gaps in the market. In a speech to the Centre of Economic Development of Australia, Hartzer stressed that to do this banks need to become more customer-centric:
“Disruption happens when businesses don’t pay enough close attention to the needs of their customers. We know that new business models are developing – and they won’t fit neatly inside our current operating model.”
Digital disruption is affecting every industry. From hospitality – where Airbnb is proving stiff competition for top hotel chains – to transportation – where Uber’s popularity with consumers is causing concern amongst taxi drivers. Traditionally Financial Services has lagged behind other industries in this respect. But this doesn’t mean that banks are immune to a major shake-up. Hartzer uses the examples of PayPal to illustrate his argument that banks need to adopt a startup mentality. He argues that PayPal’s success can be explained by the fact that the business directly responded to a customer need for better online payments, at a time when banks were slow off the mark to adapt their credit card processes.
Granted there are barriers that prevent financial services firms from behaving like startups, including the heavy burden of regulation and the need to remain compliant. In addition to this, teams within financial services organisations don’t tend to be set up in an agile way and the firms themselves often have a mind-set that has been conditioned towards caution, resulting in long lead-times before products come to market.
But not everyone in the industry is allowing these potentially daunting barriers to dissuade them. Brian Hartzer stressed that Westpac is trying to “think and act like a 200 year old startup company.” With plans to introduce iBeacons in-branch, a Google Glass app and an augmented reality banking app in the pipeline, they certainly seem to be delivering against this goal. Spanish bank BBVA is also trying to learn from smaller, more agile companies, regularly organising a contest to find tech startups with the potential to transform the financial services industry. Agility may be a tall order for financial services firms, but those brands that begin to think more like startups are likely to reap the rewards.