Financial firms must look beyond the efficiencies gained from digital workloads. Most are still mired in legacy systems and regulations and struggle to grow their businesses under unfavorable conditions. How can digital technologies help reignite business growth? In the digital world, cloud-based services create new value and bring pervasive revenue sources. Unencumbered “born in the cloud” digital services ensnare consumers virally and sustain double-digit growth rates. What will be the strategic synergies?
1. Known challenges: How can banks, credit unions, and securities firms fend off tangible threats from a plethora of digital players that keep challenging their established businesses? For how long can they survive through sheer consolidation, footprint expansion, and economies of scale?
→ Actions: Savvy firms should tap the dynamic ecosystem of digital providers to combine both physical and digital channels. Find growth through vast pools of consumer data and artificial intelligence insights.
2. The new known: When financial firms renovate legacy systems to gain some flexibility, business processes remain basically the same. The business of digital payments and its linked consumer perks, however, enjoys a healthy growth momentum as it transcends the limitations of the physical footprint.
→ Action: Financial firms should reckon that in the long term the growth rates attached to their traditional business model will be limited. To accelerate, they must get to the digital highway.
3. The unknown new: Pristine digital services can replace or supplement older technology solutions. For example, mixed reality in the Metaverse will blend a hybrid of in-person and remote presence. Riding on regulations for greater transparency and access to digital services, new entrants will proliferate.
→ Action: To tap a fast runway of emerging cloud-based services and accelerate revenue growth, financial firms should chart strategic milestones along an agile, multi-year journey.
4. Unknown disruptions: Expect the unexpected. Social media may erupt massively with unwieldy, emotional reactions that carry unintended or vile purposes. Ubiquitous digital streaming may amplify the impact. Also, breakthroughs in quantum computing and networking will shake up cybersecurity.
→ Action: Firms should evaluate such unforeseen and disruptive “tail events” in their strategic risk assessment both from the vantage point of the potential exposure and new avenues of opportunity.
5. What consumers want: Would consumers cherish fleeting digital services more than physical goods? The much greater velocity, volumes, and profit margins of digital services will lead to a value reversal. In our book Digital Life (co-authored with Mark Sievewright) we highlighted the landscape of innovative digital value-added services and business models for financial firms and the need for speed.
→ Actions: To reignite growth, financial firms must develop digital product strategies for their clients, customers, and members that build up from credit strengths. Leverage the much broader (even global) reach of consumer-oriented digital services to extend beyond the established local and regional bases.
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