Banks: All at Sea

Whatever outrages over executive pay, you have to think that no amount of money would make it worth being CEO of a major retail bank.

Whatever outrages over executive pay, you have to think that no amount of money would make it worth being CEO of a major retail bank.

Think Basel 3 and the new capital adequacy requirements, impossibly old and cancer-ridden IT, the burden of 1950's operational model in real estate and staffing, madder and madder EU regulations, government scrutiny, the never-ending mis-selling agonies. Add in negative media, morale, trust and brand issues and so on and you have a toxic cappuccino for any senior executive sitting down to embrace the new day. Oh, and there is a business to run too.

Not surprisingly such survival imperatives make the banks look the wrong way. Like picnickers with the tide out, they sit on their sandbar, constantly checking that the incoming breakers don't get too close. Meantime they haven't noticed the rivulets behind their sandy vantage point. Soon and catastrophically these trickles combine into a river they cannot cross. Long before the main tide over-runs their sandbar, they will have no escape.

These rivulets behind the banks' sandbar are the digital players in their ones and two's who will within 18 months make the banks re-define their strategy. Zopa and Funding Circle in the P2P lending space, Transferwise and Caxton in money transfer, and in their very heartland, digital banking services like our very own Ffrees. Meantime, silent and patient, Google, Amazon and Facebook lick their lips, like cats motionless in the long grass as the mouse scurries home.

Perhaps over-lunched and nicely refreshed, our banking picnickers dismiss the digital players as insignificant. These services currently do not have "scale" and banking is, after all, a "scale business". They will "deal with digital" by offering an app. They can acquire a digital leader soon. For now they keep an eye on the incoming surf. But scale is no longer relevant. That was last year's lifebelt.

The digital trickles are now converging into streams. The streams will become rivers. It's no longer just the millennials (born 1980-2000) but their seniors too. They don't want what they are told to have, they want shared ownership and collaboration (not a facet of banking DNA). This requires a technology platform built in the past few months not 50 years ago. This demands a new customer service model. It needs leadership which commands customer engagement not margin orientation. And it requires organisations that re-configure constantly.

Bank CEO's are not daft. They just have far more terrifying priorities. They know that 60% of their customers aren't profitable and get a pretty poor service. They know this is feckless but they can't do much about it. They sort of know that this "social thing" is important because their kids tell them so. But as the evening sun loses its warmth, they can feel the spray and taste the salt of the incoming rollers. They still haven't had time to look behind them.

Where does this leave the picnickers? Diall 999. Now.


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