Digital Disruption: Bust or Blockbuster?
Transforming member relationships can be both good—and risky.
Going to the movies is a time-honored form of entertainment, a recreational activity that brings certain expectations and behaviors.
If we miss the movie the first weekend it plays, we have several weeks to catch it when we can at the theater. If we should still miss it, eventually we can get it from iTunes or Netflix.
However, “Movies Need a New Business Model,” says businessweek.com.
“Movies aren’t a growth business anymore and won’t be again until studios charge viewers based on how and where they view motion pictures.”
This shift will occur over the next 10 years, according to Jeffrey Katzenberg, CEO of DreamWorks Animation. He anticipates “consumers will be able to buy or rent movies 17 days after their release in cinemas.”
“It will reinvent the enterprise of movies” as filmmakers will charge consumers “by the inch” or, according to viewing screen size, in shorter time after a film’s release—by SmartPhone or large-screen TV, for example.
This time-honored entertainment is changing.
Similarly, technology disrupts methods of providing time-honored financial products and services. What are current consequences of technological change? What changes will evolve? What drives these changes, and how are some providers responding?
Imagine how it might affect you.
Risk for disruption
“How Prepared Is Your Bank for Digital Disruption?” asks Bank Systems & Technology.
“Digital transformation is going to change banks’ relationships with their customers and will require an over-arching strategy for dealing with those changes,” notes the article.
Complicating this disruption is not just new technologies, but also how consumers use technology. This means not only is content affected by such innovation, interactions are, too.
“Transforming relationships can often be a good thing, but it can also lead to operational risk because of the proliferation of information, tools, and channels involved.”
Consumers will drive the disruption, according to this article, and financial services providers must be aware of this phenomenon. That way, an institution will be more likely to view disruption as an opportunity.
Indeed, “The Time is Ripe for Disruption in Banking,” says nextbank.org, and millennials are the group to initiate it.
“This should seriously worry banks,” says a summarization of survey results conducted by the creative agency Scratch.
Some interesting takeaways:
One disruptive consequence providers already detect is a reduction in the number of branches, according to Bank Systems & Technology. During the first quarter of 2014, more branches were closed than opened among U.S. banks, continuing trends of 2013.
These closures are attributed in part to consumer preference for digital channels, in addition to mergers.
The greatest number of branch closures occurred in Illinois, Arkansas, and Pennsylvania.
Disruption seems inevitable but it need not be a source of angst. Opportunity may present itself with change, as evidenced by some financial service providers.
The new financial services environment brings convenience to some consumers but challenges for others, including low-income groups who may fall prey to big-data tools payday lenders use to identify target markets, according to U.S. PIRG.
At the opposite end of the spectrum, underserved groups can become a target market for providers offering low-cost services—namely smaller, community-focused financial institutions.
“In recent years, technological and legal developments, as well as changes in business strategies of larger banks and nonbank financial service providers, have purportedly made it more difficult for community [financial institutions]… to survive,” says a new Federal Reserve Board report.
Some providers aim to boost their competitive edge by acquiring their competitors, including Spanish bank BBVA, The New York Times reports.
BBVA “has bought U.S.-based mobile banking technology start-up Simple for $117 million. It may be a small deal, but it comes with potentially big implications for the industry.”
Simple provides an app that helps users create spending plans and savings goals. At the time of purchase, Simple had 100,000 customers, “a fivefold increase in just 15 months.”
“By keeping tech enemies like Simple close, BBVA should be in a good position to fight back.”
Another competitive option for providers may be to restructure branches, according to The Financial Brand. America’s top 25 banks spend more than $50 billion annually to keep up oversized and poorly located branch networks.
According to research by Accenture, financial institutions need to restructure their branches by:
Further, “organizations need to start their transformation today if they want to be relevant in the year 2020… The winning formula may well be to combine the advantages of a traditional bank with the benefits of a digital bank.”
The digital bank makes the consumer the focal point by allowing them to engage with the provider anytime and anywhere they choose.
Just as consumers like to enjoy their favorite movies, they want to have positive experiences with financial service providers through engaged interactions.
Technological disruption provides not only challenges, but opportunity for those providers who are attentive to the sneak peeks of technological previews which will be “playing in theaters soon.”
Will your members have positive reviews?