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A digital compass for banks
A digital compass for banks
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A digital compass for banks

27/03/2017

Constance Chalchat

Constance Chalchat

Head of Change Management

BNP Paribas, Corporate and Institutional Banking

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How will the digital transformation impact banks - and how can they benefit from it?

Constance Chalchat expands on how banks can capitalise on the revolution currently underway in fintech services.

Why are we at a digital turning point?

Digital technologies will have an even greater impact on the banking sector than post-crisis regulatory reforms, profoundly transforming banks’ business models and the way financial services are delivered.

Manifold factors are driving this change. For one, client expectations are evolving quickly, especially as advances in digital capabilities take root elsewhere in our personal and professional lives.

For example, across financial markets people increasingly use tweets or similar chat mechanisms to exchange vital information. Banks need to be present on those channels and adapt the volume and speed at which we propagate information.

Technology is evolving quickly, too, including exponential growth in data availability, storage capacity and processing power. We are seeing ever-faster execution speeds as clients invest in technology to automate trading.

Of course change is not new. But the banking sector has tended to shift from one stable or slowly evolving state to another. Now, though, we are moving into a new environment where flux will become the norm, forcing participants to become much more agile.

What challenges does this new environment pose for banks?

The availability of different services through different channels provides clients with alternative means of meeting their financial needs. In the new competitive landscape, banks must develop new, smarter capabilities and better-quality services to retain clients. That means altering how we think about client problems and requirements. What is the fundamental issue they are trying to address? It is not to obtain a loan, but to fund their business or buy a house. Most banks are organised around product verticals, whereas clients want integrated solutions composed of different products.

The way banks take decisions must adapt, too. Traditional management practices work with regular budget cycles, where investment decisions are based on projected tangible benefits. Digital transformation is challenging those practices. Allied to this is an urgent need to decrease the distance between IT and the business, to ensure product development is targeted at clients’ shifting demands. Banks will have to be more flexible and collaborative, with much shorter development cycles that take two weeks instead of two years, requiring a complete change in mind-set.

Are areas of opportunity emerging?

One strength of banks is that we have a detailed knowledge of client businesses and vast amounts of historical data on customer activities. By leveraging new data mining and visualisation tools, we can gain deep insights into these relationships and develop more comprehensive solutions that better support our clients. For example, BNP Paribas is a major provider of supply chain financing and trade finance services. Our close relationships mean we are well positioned to help corporate clients with integrated supply chain management solutions.

Trust is also a key asset. Digital transformation brings new risks and challenges in data leakage, identity theft and integrity of financial flows and transactions. Banks have an opportunity to reinforce their position as trusted service partners. The need to remain safe in a digital world is increasingly important to clients, hence cybersecurity is one of the top priorities for BNP Paribas as a group.

Ultimately, digital transformation is not just about technology. The winning equation will be humans + machines. For banks to flourish in this rapidly changing world, the emphasis must be on leveraging technology to help banks serve clients better. It is this equation that drastically improves performance – and it is what clients will continue to want.

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