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    The Digital Banking Revolution
    The Digital Banking Revolution
    The Digital Banking Revolution
    Ebook197 pages2 hours

    The Digital Banking Revolution

    By "Luigi" "Wewege"

    3.5/5

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    About this ebook

    Over the past decade financial service innovations have contributed to a completely new way in which customers can bank, threatening the status quo of traditional retail banks, and redefining a banking model which has been in place for generations. These new technological advancements have facilitated the rapid emergence of digital banking firms and FinTech companies, leading to established banks being forced to swiftly increase their pace of digital adoption to stay relevant and stop mass client attrition to these agile financial start-ups. These threats come at an inopportune time for banks due to mature markets currently experiencing stagnant growth. This coupled with decreasing profit margins due to the competitive pricing of new entrants, and financial customer loyalty becoming ever increasingly more tenuous.

    LanguageEnglish
    Publisher"Luigi" "Wewege"
    Release dateJan 16, 2017
    ISBN9781370884209
    The Digital Banking Revolution
    Author

    "Luigi" "Wewege"

    LUIGI WEWEGE Luigi Wewege is the Senior Vice President of Caye International Bank headquartered in Belize, Central America, Principal of Palmetto Global Ventures a financial consultancy firm focused on digital banking and FinTech solutions, and serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Outside of his main roles Luigi additionally serves as a Mentor at FinTech Go a startup accelerator for financial technology companies, as a Team Member of the FinTech Portfolio the world's 1st member-owned FinTech innovation ecosystem, and as a speaker for the Silicon Valley Innovation Center. Luigi is also the published author of: The Digital Banking Revolution which is available in audio, kindle and paperback formats throughout all major international online bookstores. Email: notify@cayebank.bz Website: www.cayebank.bz LinkedIn: www.linkedin.com/company/caye-international-bank

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      Book preview

      The Digital Banking Revolution - "Luigi" "Wewege"

      Title

      www.digitalbankingrevolution.com

      Luigi Wewege

      The Digital Banking Revolution

      How financial technology companies are rapidly transforming the traditional retail banking industry through disruptive innovation.

      www.digitalbankingrevolution.com

      First published in 2016

      © Luigi Wewege

      eBook ISBN: 978-1-48359-251-0

      All rights reserved. No part of this publication may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the author.

      The author has endeavored to ensure that all the information is correct at the time of writing. The author does not assume and hereby disclaims any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or other cause.

      For any comments, suggestions or feedback, please contact the author at:

      info@digitalbankingrevolution.com

      Dedication

      This book is dedicated to my amazing parents, Desmond and Loretta, without whom none of my success would have been possible!

      Praise for The Digital Banking Revolution

      The Digital Banking Revolution captures the effects of disruption brought to the banking industry by emergent financial technology businesses. The author provides a fascinating examination of several companies who have recently developed new financial innovations and how they are demonstrably significant to the consumer.

      Victor von Gierszewski

      Managing Director

      TNS Global

      The Digital Banking Revolution is an informative read focused on the transformational changes facing traditional retail banks worldwide. It covers insightful well-researched analysis on: big data, customer engagement, disruptive technologies, mobile payments, and the changing financial behaviors of consumers, in particular millennials.

      Michael A. C. Hart

      Chairman and CEO

      TPS Capital

      The Digital Banking Revolution provides a unique take on the consumerization of retail banking services. It elucidates on how banks are facing increasing pressure from digital competitors, and how by recognizing these threats they can now go on the offensive by developing innovative technologies of their own.

      Reginald D. Jele

      Chief of Staff to the Minister of Finance

      Republic of South Africa

      The Digital Banking Revolution should be considered a survival guide for bank leaders, providing those in the industry with a strategic blueprint on how to adapt, evolve and succeed in this digital age.

      G. Paul Warner

      Former Private Bank Director

      National Australia Bank

      The Digital Banking Revolution is an insightful look at how financial technology has brought welcome changes to the banking industry. This is essential reading not only for the next generation of retail bank customers, but also for those who want to fully understand how financial services will be conducted going forward.

      Thomas J. O’Rourke

      Assistant Director, Banking

      The Bermuda Monetary Authority

      The Digital Banking Revolution is an absolute must read for those who wish to gain a deeper understanding of how innovative technologies are shaping the future of financial services.

      Boris Simic

      Senior Manager - Business & Financial Strategy

      Klarna Inc.

      Contents

      Introduction

      Overview

      The past provides lessons

      Brief history of banking

      Banking in the modern era

      Select major international events in banking history

      An imperfect system – Financial crises

      The financial crisis of 2007–09

      Financial innovation and complexity

      Regulatory overhaul

      A new potential role

      Rapid transformation

      The customer shift

      FinTech - overview

      FinTech - outlook

      The financial disruptors

      PayPal

      Square

      Amazon

      Facebook

      Google

      Skrill

      TransferWise

      Alibaba

      Bitcoin

      The digital financial revolution

      Specific changes which redefined a banking model

      Loss of customer trust

      Better service experience

      The millennials have arrived

      Mass adoption of smartphones

      Regulation for the financial consumer

      More efficient financial services

      Economics 101 - supply and demand

      An industry transformed

      A new era of banking

      The rise of digital banking firms

      Banking on the go

      Contactless cards

      Check imaging technology

      Could social media shape the industry?

      The world of FinTech wearables

      Notable financial innovators

      Paym

      Midata

      Are bank branches disappearing?

      Unlocking data for customers

      From incremental change to total reinvention

      Financial innovations from around the world

      Global FinTech

      Australia

      Turkey

      Iceland

      New Zealand

      Norway and Sweden

      Asia region

      Africa

      The Republic of Ireland

      Poland

      United States

      A digital blueprint for banks

      Digital banking value?

      Maximize use of existing technology

      Apply minor technology interventions

      Identified areas for sweeping transformation

      Cross-Selling in the Digital Era

      Human resources in the digital era

      Optimizing structure and incentives

      Emphasis on business outcomes

      Devise a new strategic vision for staff

      The future of banking

      List of figures

      List of sources

      About the author

      Thank you

      Foreword

      For many years, retail banks have been secure, highly profitable businesses. However, recent industry disruption has come knocking at the door of these financial giants. The turning point was the global financial crisis experienced between the years 2007 and 2009 which not only led to large losses, and even the collapse of a significant number of established banks, but has shaken the trust of financial customers worldwide to their core. These factors, combined with the fact that banking has been relatively undisturbed for centuries, meant it was time for change, and that change has been the rapid rise of financial technology companies.

      Emergent innovative financial technologies are profoundly changing the way in which we spend, move and manage our money, unlike ever before. The digital transformation and its pace of change have been truly astounding, dramatically shifting customer behaviors and expectations of their financial service provider. Retail banks must now become positioned to fulfill their customers’ every financial need, especially as the millennial generation is poised to soon command the largest purchasing power of any age group, and banks will need to become cognizant of this generation for a multitude of reasons. Research undertaken by the Cassandra Report into how millennials conduct their financial services has shown a defined trend in that they typically do not have the same legacy relationship with their banks as older generations have had. The research indicated that millennials judge banks based on their digital capabilities, and will not hesitate to switch their bank account to another provider if they consider a better banking service available. The overall progress of financial service innovations has been driven by adoption across all age groups, but the demand from the millennial generation to push the boundaries of innovation, and think about financial services differently has been a major catalyst for disruptive change.

      I consider The Digital Banking Revolution a well-written and an informative read, capturing the current dramatic shift of how financial innovative technologies are shaping the future of banking services. The book also provides those who work at senior management level within the banking and finance industry, with an invaluable resource outlining how to adapt, evolve and succeed in this digital age. Additionally, I would recommend this book as a must read for those who wish to gain a deeper understanding of how financial services will be conducted going forward.

      Thomas J. O’Rourke

      Former Large Bank Examiner-In-Charge & Team Lead for Northeast Region The Office of the Comptroller of the Currency – United States Department of the Treasury

      December 2016

      Introduction

      Banks have always fought to gain absolute power and market share, knowing their competition and serving a marketplace that had relatively few alternative choices. However, the battlefield is changing as financial technology advances and new players emerge. Today, financial customers have become as restless, demanding more from their financial service providers than ever before. Many retail banks around the world have now reached a pivotal moment in their history, and they need to transform through financial technological advancements to stay relevant, or risk the possibility that agile financial start-ups could confine them to a limited utility role. This challenge comes at an inopportune for retail banks just as industry profitability stagnates, and customer loyalty becoming even more tenuous.

      To illustrate how rapidly new technology can transform an industry consider that it took just 18 months for Google to erase 85 percent of the market capitalization of the biggest GPS companies in the world after the launch of its Google maps app. Alibaba on the other hand which is considered China’s equivalent to Amazon, became the world’s fourth-largest money market fund only nine months after entering the market.

      These examples show how today’s technology-enabled disruptors can dramatically change markets in a short period. For many, the first real disruptor to enter the banking sector in the current era was PayPal. Initially, traditional banks treated PayPal as an annoyance, limited to eBay and with little potentially to disrupt the highly lucrative and bank dominated payments industry. How wrong they were and at the end of 2015 it was reported that PayPal had 173 million customers, $9.2 billion in revenue and $1.2 billion in profit and was more valuable than their parent eBay. PayPal has paved the way for the payments space to be transformed, with popular retailers having also shown remarkable success moving into payments, and for example: the Starbucks loyalty card handles nearly one-third of the company’s United States-based transactions. Previously a tight regulatory environment has always acted as a barrier to entry for those who wanted to access the banking industry, but today these barriers are constantly becoming more relaxed. To illustrate, PayPal has been a licensed bank in Europe since 2007 and Facebook, which has more than 250 million users in Europe, may soon be authorized by the Central Bank of Ireland to handle payments across the entire European Union. Other new entrants who have grown rapidly without becoming regulated banks are: Google with their Wallet, TransferWise, and SimplePay. Many of these nonbank financial institutions have all relied on similar white-label services such as those offered by The Bancorp, Inc. who are able to provide regulated banking services to their clients’ customers.

      In a digital world, winning and retaining customers hinges on creating value for them that enhances the convenience and quality of their everyday lives beyond mere financial transactions. With more interaction comes more opportunity for selling. This point of view is

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