Traditional banks can boost their revenues by nearly four percent if they rethink their business models and embrace innovative strategies. Inspiration for innovation is close at hand. All they need do is look at what digital-only banks, FinTechs and financial service new entrants are doing, claims a new Accenture report, ‘The future of Banking’. The findings of the report are completely in line with TrustBuilder’s Digital Maturity Model.

Traditional banks need to copy tactics from FinTechs

Subtitled ‘It’s time for a change of perspective’, the report analyzes the business models of both traditional banks and digital-only players around the globe. The authors see two common business models:

  • Traditional, linear business models where financial service players only sell their own products or distribute products from other providers. The report calls them vertically integrated.
  • Adaptive business models where ‘packagers’ assemble new propositions, add value to existing products or embed their propositions into third-party services. The report cites the example of ‘buy now, pay later’ services that are embedded into ecommerce merchants’ point-of-sale.

As low interest rates and fee compression from increased competition are eroding revenue and margins, traditional banks need to reimagine how they create and deliver compelling products that focus on customers’ intentions, says the report.

Being digital is no longer a differentiator

“To capture growth, traditional banks need to go beyond becoming the best digital versions of themselves and become adept at operating multiple business models simultaneously,” the authors of the report argue. Collaboration and partnership with third parties is key in making this work. Financial service companies that unbundle their traditional products and partner with third parties to create and distribute new personalized customer offerings can achieve breakout growth and higher market valuations. Owning the value chain end-to-end and selling only your own products are no longer enough to achieve success in an era where customer experience reigns. New business models that leverage digital platforms will drive customer engagement and generate new revenue.

Digital maturity model

This report is a strong confirmation of TrustBuilder’s strategy of helping financial service companies progress on the digital maturity curve. As a commissioned study conducted by Forrester Consulting on behalf of TrustBuilder in March 2021 showed, banks and insurance companies are all digitizing their products and services, but are doing that at a different pace. This study showed that digital ecosystems are the holy grail of the financial service industry. In our Digital Maturity Model, what Accenture calls ‘packagers’ are described as either Ecosystem Extenders or Monetizing Masters. By bundling third-party services (be it financial services or other services that deliver a one-stop-shop experience to consumers) with their own solutions, banks can increase customer loyalty and add revenue streams.

At each stage of the Digital Maturity Model, other security challenges apply. Connecting to third-party services and opening new channels creates potential security threats. To uncover what steps financial service companies need to undertake to make their digital transformation journey a secure one, TrustBuilder developed a Digital Maturity Assessment. Taking this assessment tells you where you are on the digital maturity curve, takes stock of your current cybersecurity challenges and serves as a starting-point for a digital action plan. Request our Digital Maturity Assessment here.

As co-founder of global trade management leader Porthus, customer experience platform NGDATA, and strategic consulting services company innacco, Frank embodies the entrepreneurial mindset. His 20+ years of ICT experience is complemented by his position as ‘Entrepreneur in Residence’ at iMinds and coach at Netwerk Ondernemen.

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