One of the critical change capabilities today’s senior executive needs is the ability to see and act on change opportunities before they become too big and toourgent. One such opportunity is happening right now for leaders in the banking sector. The big question is, are they seeing it coming and more importantly, are they doing something about it?
Antony Jenkins is the former Chief Executive Officer of Barclays Bank. A few weeks ago he predicted that banks, as we know them, would be obsolete within 5 years.
So, what does he mean? Is he saying that there will be no banks in 5 year's time? No, he’s not. What he is saying is that the traditional banks (like CBA, NAB, ANZ, WBC here in Australia) are about to have a Kodak moment. That is, like the fax machine, they are going to wake-up one morning to find that their services are so antiquated that customers simply don't want to deal with them anymore.
Right now, there are over 50 new banking institution start-ups and each is set to take on the old way of banking. This is a very different change-game and very few, if any, of the old banks appear to know how to play it.
So where are these start-ups going to attack the old banks?
Firstly, we have the 'online only' banks like Ally Bank, Discover Bank, Bank of Internet USA and UBank (NAB online). etc. These banks operate the same way as the old banks only they have done away with the bricks and mortar and thus they can operate on lower cost bases. This gives them a competitive advantage over the traditional bank.
The next wave of banking products which threatens both the old bank and the internet bank is being built on Blockchain (think BitCoin) technology. Blockchain will fundamentally change the trust structure so that we do not need big banks anymore.
An example of this is the way we move money around the world.
Today, you can go to your bank and send money to another party across the world. However, it will take 3 to 10 days before the counter party receives the money and it will cost you between 5 to 10 percent of the capital you move. Or you can go to Abra install their app on your phone and send money instantly to another phone around the world. It can literally be done in minutes and the cost to you is around 2%.
So if you are an executive in an old-style bank, what can you do?
Well, there are a number of options. You can quit and join, or start, a new bank like Antony Jenkins did. Or you can see and act on the change now by fundamentally re-thinking your business model. One of the biggest mistakes Kodak executives made was to believe their product would live for ever, and consequently ignore the now obvious signs of disruption.
75% of change success is determined by leadership. Regardless of the solution, banks need to start with an Executive Team that has the right mindset and capability to break ‘status quo’.
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