Financial services prepare for digital disruption
After Standard Bank replaced its core banking system in 2014 with a digital banking platform, the many disruptions caused by the transition, forced the bank to prepare for future digital disruption that has the potential to make existing systems obsolete.
Standard Bank’s Chief Information Officer, Pieter Kruger said that this new digital core banking environment serves as a launch pad for the bank’s new digital offerings, placing the bank a step ahead of digital disruption.
Companies across all industries are finding themselves at a crossroads at which they have to decide to adapt their approach on business as it relates to mobile technology or risk perishing due to digital disruption.
Digital disruption occurs when new digital technologies and business models affect the value proposition of existing goods and services.
The expeditious increase in the use of mobile technology for both personal and professional uses has increased digital disruptions in many industries.
Kruger explained that businesses that cannot reinvent themselves and formulate an enterprise-wide digital strategy in order to survive the new digital era find themselves at risk of losing their value proposition and customer base.
An enterprise-wide digital strategy incorporates all areas of a business, thereby building customer experience and it can also define new jobs and roles that do not exist yet.
“Some companies have realized that they have to reinvent themselves and are working hard to find their proposition in the new digital world. A digital strategy is important and must be formulated and executed in order to survive in this new era where everything is connected,” Kruger explained.
Over the past five years, digital disruptors have all but destroyed some businesses, the 2015 Harvey Nash/KPMG CIO Survey found. This is owing to the fact that digital technologies have significantly changed the way that companies create and deliver value to their customers.
“For example, if you start a business today and you don’t have an e-commerce strategy with a website and a smartphone App, the business will most probably not exist within the next five years. In my opinion, we have to rethink this in Namibia because our focus is still very much on physical presence serving walk-in customers, and we are missing out on the opportunity to sell locally-manufactured goods and services internationally,” Kruger explained.
Banks and other financial institutions are not exempt from digital disruptions. For example, cross-border money transfers that were in the past dominated by banks are now being disrupted by distributed ledgers (crypto currencies) at a fraction of the cost of the traditional model. The banking industry will then need to reinvent itself to stay relevant in the digital world.
However, Kruger explained that banks operate in highly governed and regulated environment and have built and defined their target operating models around that. As such, new disruptive entrants to the market work around these obstacles and use the connected world to formulate new business strategies.
“Technology plays a very important role in the new digital world. CIOs will have to equip themselves with extensive knowledge of the digital world to provide the right expertise and insights to assist in the formulation and execution of a digital strategy in any organisation,” he concluded.