Digitisation in retail banking
The Swiss retail banks are moving forward with digitisation. Sascha Gysel, Head of e-foresight Switzerland, shows where financial institutions are doing well and where they still show weakness.
Hansjörg Honegger, 28 October 2016
The new study “Fintech Services in Retail Banking” gives the impression that disillusionment has become widespread in the Swiss banks compared to the last study in 2014. Is that correct?
Sascha Gysel: Thanks to their greater experience, banks can now better prioritise projects; interpreting that as disillusionment is wrong.
One newspaper even said that the hype was over.
Hype is another word for a bubble. Seen in that way, it is true. In their digitisation efforts, the banks are focusing today on relevant topics and can be less intimidated by buzzwords.
Give an example.
The area of digital investment continues to be highly relevant; people are actually investing. In the area of crowdfunding, which was still considered highly relevant two years ago, a correction took place. The growth was below expectations, and accordingly all banks give it somewhat less priority.
The study thus shows: Banks develop as digital solutions where it makes economic sense?
Yes. Many banks have realised that they cannot implement everything they want to. The banks focus on what the customers use most and ask for: Digital investing, online mortgages and payment – in some cases you’ve already done a lot by just providing that.
Digitisation of the existing business is not an innovation.
I wouldn’t say it in that way. Let’s take examples such as Robo-Advisor in asset management or Crowd Lending for financing SME projects. Both are digitisation of the existing business, but the way they are done varies significantly.
Personal contact with the bank manager is central for many Swiss customers. Are customers willing to accept innovations such as a Robo-Advisor?
The Swiss are loyal bank customers. They do not change their bank because the competition is a few francs cheaper or offers a slightly simpler solution. However, that does not mean that banks should ignore digitisation. Banking customers now expect offers which they are accustomed to from other areas – from Uber, Apple or Amazon, for example. The digital transformation is coming to Switzerland as well, albeit sometimes a bit later than in other countries. We expect hybrid models, however. Particularly in regard to Robo-Advisors. There must also be a differentiation in regard to whom the Robo-Advisor is offered by: by my existing bank or an unknown FinTech startup.
«The digital transformation is coming, albeit a bit later than in other countries»
Those who ignore the trend will pay for it in the future?
Banks today need to think intensively about what implications digital services have for their existing business model. And what is very important: Where they have to respond quickly when a competitor launches a digital offer.
Waiting to see what the competition is doing and only then taking action is not the silver bullet.
Up to this point, the Swiss banks had no pressure to innovate. This is in contrast to England, for example, where regulators see themselves as drivers of innovation and also remove obstacles to changing banks, such as maybe allowing you to keep your old IBAN in future. The approach of FINMA in Switzerland is different in accordance with the current mission. That’s why this situation is new for the Swiss banks.
The study reveals that certain strategies – that is, long-term plans – have been completely overturned in a span of just two years. For example, two years ago 88 per cent of the surveyed institutions claimed they had a cross-channel strategy. Today it is only 28 per cent. How can that be?
As already stressed at the beginning of the conversation, this is associated with the higher level of knowledge of the banks. At the time many believed they had a reliable strategy, but on closer inspection it turned out to be a mistake. People are more aware of the complexity of the subject today than two years ago, which is reflected in the low numbers.
What does the innovative capacity of a bank depend on? On its budget, on its size?
It surely helps if the necessary wherewithal exists. On the other hand, smaller banks have shorter decision-making processes and are therefore more agile than big banks. Equally important is that the IT is organisationally and technically ready for change.
One aspect is defined and open application interfaces that make it possible to quickly integrate FinTech services from third parties and thus economically provide smaller target groups.
«It is necessary to have people who drive projects forward with passion and expertise»
Is it really necessary that banks always develop everything themselves? There are also many FinTech startups with interesting solutions in Switzerland.
A lot has happened in recent months. Previously many startups thought they could snatch customers away from the banks. And the banks felt threatened. Now both sides have realised that they can benefit from each other and are seeking cooperation.
What will it take for digitisation to be spurred on in a bank?
A very important element is the commitment of top management and active, bank-wide promotion. Compliance or security concerns often make new projects difficult. It is sometimes necessary for someone to put their foot down at least in the early stages of a project. In middle and lower management, it is necessary to have people who drive projects forward with passion and expertise.
How are Swiss banks positioned compared to other countries? Where is digitisation going better?
In regard to digitisation, Swiss banks are in the lower midfield in international comparisons. In the UK there are significantly more FinTech innovations. The Nordic countries are much further along in regard to payment. In Austria there is a great e-banking marketplace approach. In Germany there are already genuine online banks.
Oh, come on, Switzerland is a top banking location, and now even the Austrians are better?
I singled out a few strong areas; all of these locations also have significant weaknesses in terms of digitisation. What is striking in Switzerland but perhaps not as spectacular: The Swiss banks have made tremendous progress on a broad front in the last two years. This is ultimately more important than an individual lighthouse project.
Since 1 October, Sascha Gysel has been Head of Banking Trends and Innovation at Swisscom. In this capacity, he also manages the e-foresight think tank. E-foresight accompanies the banks on the Management Board and Board Of Directors level in questions relating to digital banking. Gysel went from UBS to Swisscom, where he was responsible for the trend radar and for setting up the FinTech program as part of the Kickstart Accelerator. Previously he completed masters study programs at the Universities of St. Gallen (HSG) and Stanford, founded his own startup in Beijing and worked at Accenture.