Gartner’s latest research revealed that digital business transformation is now the top priority for CIOs in the financial services sector.
The big banks now accept that they need to change their business models and adopt the latest technologies if they are to prosper.
This is significant when you consider that CIOs put becoming a digital business as a higher priority than increasing market share.
Gartner said that banks now recognise that they have to disrupt themselves or will be disrupted by companies using technology to make the customer experience easier while reducing retaining low business cost for themselves.
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When you consider the digital disruption going on in other sectors it would appear that banks are late to make this a top priority.
Banks have been luckier than traditional suppliers in other sectors. Look at the travel industry for example. Who goes to a high street broker to book a holiday these days. Websites and apps such as Experian and Lastminute.com swept up that business in no time.
Then you have cab drivers. Uber arrives and their world is turned upside down. Meanwhile the holiday rental market has been hit by platforms like AirBNB, where people can list their properties or even rooms for rent for short periods.
Imagine if the traditional players in these sectors had the luxury of seeing the future competition being formed. They could have been better prepared to retain their market share. They could have invested more in IT or acquired a potential disrupter.
That is what the banks have had the luxury to do because of regulation. New players in the finance sector face a period of gaining approval before they can operate, and for good reason. The process has been made easier but still takes a lot of time.
This has given the traditional banks the opportunity to use their huge tech expertise and capital money to prepare for the changes. As a result new challenger banks have so far not really made much of a dent in the market share of the big banks.
The complexity of the business combined with the regulation meant that disruption was always going to move slowly in comparison to other sectors.
In comparison it seems it is only now, after they are established, that disrupters in other sectors are being hit by regulation. For example the rejection of Uber’s licence application in London is forcing the company to change its approach and there are new rules being applied in cities to control platforms like AirBNB which are disrupting life for locals.
In the agile development tradition these disrupters will have to change their business models as they go. In comparison there is a huge from loading of regulation for the disrupters in banking.
So CIOs have had time to prepare their digital response to market disruption and today they will see the biggest threat coming from traditional competitors disrupting themselves.