Over the past five years, UK banks have come under huge pressure to change and evolve, in response to tightening regulation and the digital revolution.
The next five years look set to be more testing still, as banks compete against a growing pool of competitors for a share of an ever more demanding consumer market. To triumph, banks will not only need to maintain their share of traditional banking services, but also improve their digital offerings. This relies heavily on an ability to attract the very best talent.
For all the talk of public mistrust of UK banks in the wake of the financial crisis and the various scandals that have engulfed the sector over the past five years, very few consumers have been moved to take action and change their banking services provider. Whether through lethargy or not, loyalty, for now, is enduring.
Many individuals and businesses still lean on traditional banks for primary and investment banking services. Even younger customers, who will more readily use emerging products such as Apple Pay, are likely to persist with their traditional bank for their primary banking needs.
However, the proliferation of omni-channel retailing is resulting in a wave of competitors striving to provide consumers and businesses with a range of channels with which to manage and use their money. This is evident across the spectrum of services, extending to services about which people tend to be more conservative, such as mortgages and savings. These are being shaken up in small digital wealth platforms that enable people to manage their money entirely online. Some consumers are actually choosing to invest their savings into small businesses through crowdfunding or peer-to-peer lending.
Mobile banking apps are now widely used to take out loans and for foreign exchange rather than just for account balance checking.
The range of services traditional banks offer is therefore being challenged by emerging technologies and new, well-backed competition. As the preference of younger generations continues to evolve they will be less reliant on the large high street banks - which will need to work increasingly hard to keep their custom.
The rise of the CDO
Banks cannot afford to be complacent. In order to keep up in the digitalisation race, they are being forced to upgrade their structure, services and products to remain competitive and meet regulatory pressure. These operational changes require specialist talent and significant upskilling to lead them.
As a consequence, the role of chief digital officer has become vital within many banks. The CDO has a place on boards in order to make important decisions about where investments should be made, and digital officers are being brought in from a variety of sectors to:
• develop cloud-based infrastructures which are less expensive and less prone to cyber-attacks than traditional systems;
• develop more secure payment infrastructures to protect against breaches of customer data (this has been an area of increased regulatory focus);