Natalie Turner, Host of disruptive LIVE and Jochen Werne, CDO/CVO of Prosegur Cash Services, Germany in a lively discussion about the different aspects of change in companies and society. The interview touches aspects of fear and consciousness by giving examples reaching from Shakespeare to the Age of Enlightenment and our modern times of exponential technologies and artificial intelligence.
Check out this Meetup: Influencer Marketing for FinTech and Banks. Looking greatly forward to inspiring discussions”
This meetup is for all fans of the previous one about storytelling the other day and a special wish by one of my guests: Influencer Marketing.
I have invited some very cool speakers to tell us about their idea / business / approach in marketing – which I see more or less connected to influencer marketing:
– Gerald Feind: How bloggers think and work (B2C)
– Jochen Werne: Becoming an influencer yourself (B2B)
– Ralf Mardeis: Platform meets Influencers (B2C)
– Thomas Braun: Platform meets video production (B2B/B2C)
There is no lack of buzzwording when it comes to trends in the financial sector: Disruption, FinTech, block chain, crypto. Currently, another term is climbing the zenith of a media hype – platform banking. And not without good reason. “Platform Banking” was voted “Financial Word of the Year” in 2018. Behind this lies the call for banking institutions to open up to third-party providers. Banks and savings banks should not only offer their own services on open platforms, but should also integrate third-party offers and services. Consistently thought through to the end, banks will thus become more intermediaries for all possible services and less providers of their own financial services. The legally necessary prerequisites for such an approach in the strictly regulated financial market have already been set in motion by the adoption of the Payment Services Directive PSD2. Will platform banking become a new hope for the industry, or another risk component in the attempt to lose fewer customers to new technology competitors?
The hype surrounding the topic is understandable: Eight of the ten world’s most valuable companies – Amazon, Google, Microsoft, Apple and Co. – have a platform in their business model. And even more striking: Only one of these companies was already among the top 10 worldwide in 2008. This growth potential, which is the result of the platform expansion, is of course intended by many industries to benefit themselves. The world of finance is also changing rapidly. In recent years, a variety of innovative developments have taken place in the areas of payment transactions and payments. The arrival of third party providers and fintechs has changed the market sustainably and comprehensively. According to a recent whitepaper by Deloitte Consulting, banks will also have to consider a platform strategy in the future: In the future, the customer base will also be able to access products and services from third-party providers in addition to the existing offering. The long-term goal behind this is well known – to retain existing customers, acquire new ones and increase margins.
Platform as recipe for success?
In general, a platform can be seen as a place where supply and demand meet. Economists call such a market – not a new discovery. Due to the digitization of all areas of business and life, geographical boundaries of the marketplaces belong to the past. The result: an almost unlimited number of supply and demand meet on a digital platform – and competition is known to stimulate business. In these business models, the so-called “network effect” ensures that with each new provider on a platform, the incentive for demanders and customers also increases. And in general the more demanders there are on the platform, the more lucrative it becomes for the suppliers. Both sides save enormous search and time efforts and transaction costs are reduced. In short, reflects this the recipe for success behind industry giants such as Amazon, AirBnB, Uber and Co. Nevertheless, there are existing fundamental reservations. The desire of many bank managers to grab a straw in order to grasp a component of hope in a difficult market environment seems understandable. However, blind action is fatal in this situation. Banks must not forget what the emergence of competition in the form of FinTechs has already revealed: frightening weaknesses with regard to their own modern hardware and software solutions, organisation and innovative corporate culture. The fact is that the challenge facing change management is proving to be enormous. And this already now, without having given space to the idea of creating a single platform. The current wave of closing down banking or partnership-based Robo Advisor solutions shows how quickly these carriers of hope can become problems. The commission model behind this, which is always transparent and low priced, is hardly profitable for the banking infrastructure and marginalises the added value that an institution is able to provide for its customers.
The complexity of the changes on all levels, starting with the completely changed, technological possibilities and their effects on the transformation of long-established business models, over the resulting new economic situation of the enterprises are enormous. The difference to the past decades lies in the temporal component. If companies today do not react directly to market changes, they open the way for competitors to their own customers. And this faster than ever before. In such disruptive times, all those involved want an “efficient” change process. However, active, well-considered and vital change management is often criminally neglected. For this one opens door and gate to blind actionism.
The business model of a financial platform is complex, the regulatory framework is strict and the willingness of customers to switch is only slightly visible. For this reason, this business model has so far been too uninteresting for Internet groups. And now, of all things, the banks, often perceived as conservative and unmodern, are to be transformed into digital platforms that can compete with Amazon & Co?
Enormous change management challenge
Banks need a forward-looking and sustainable strategy. That is beyond question. At the latest since the massive “democratization” of the Internet at the end of the 1990s, our lives have been shaped by leaps in technology. In short, the world feels like it is turning faster than ever before. What does this mean for the banks of the 21st century? Anyone who does not understand this exponential dynamic of technical possibilities or does not take them sufficiently into account in his business model can quickly lose touch – with the customers of today and tomorrow. Open banking is both an opportunity and a technological challenge for the banking industry. The European Payment Service Directive 2 – or PSD2 for short – has inevitably made opening up to third parties the focus of the digital strategy.
At the technical level, this is primarily associated with the use of programming interfaces, so-called APIs, which enable both internal and external cost-effective and fast access to data, as well as functions of software applications. What provides the end customer with a cross-product customer experience, means for banks to strategically cooperate with external partners. For FinTechs, cooperation is also advantageous. It creates fast access to customers and their data, as well as to the necessary financial and structural prerequisites.
Anticipating these developments requires a good eye for tomorrow’s customers. After all, customer data is a success driver for future business models. A few years ago, FinTechs began to “poach” their digital offerings among the customer base of traditional institutes. All of this culminated in Robo-Advisors, standardized, computer-controlled asset managers with low fees. It was therefore time for the banks to set sail anew. The plan was to enter into symbioses with FinTechs or “buy” their products directly into their own portfolios. For many large banks, it has become good form to enter into cooperation with small, independent and innovative financial service providers. This is also clearly demonstrated by the current situation of FinTechs. Mergers and co-operation are nothing else than a proof for the fact that the search for sustainable business models is not easy with a fixed idea to solve, not even with the platform strategy. Nevertheless, neither the previous business models nor the product possibilities seem to be mature.
Don’t forget the human factor
The personal relationship, the touchpoint between customer and consultant in the real world, has been increasingly reduced by the acceptance of digital banking. Nevertheless, even if a digital experience is a good thing for a modern bank, consumers continue to appreciate human contact points – especially in economically or politically turbulent times.
This is precisely the added value that banks can really deliver in this environment today. And this without having to rely on the healing promises of platform banking. Be a guide in the digital jungle and protect customers from ill-considered gut decisions. In addition, it is important to include the customer’s background, apart from monetary issues, in the decision-making process. This usually requires a counterpart. Not a digital one, but a human one. A person of heart and soul who generates trust and can provide a place for personal encounter. Today, it is the customer alone who determines where this is located and what it should look like. The same goes for when this meeting takes place. The modern customer expects the best possible service regardless of space and time, not only in view of the phenomenon of digital gadgets.
It’s a great pleasure having the chance to meet international experts and supporting the Summit as Speaker on AI in Finance and with an evening fireside chat about leadership, transformation and the sea.
Read interviews and articles from experts in the KI-Businessguide published by the Handelsblatt for the Summit and free to download on this website
Chapter 5: Transformation of an analogue private bank into an innovation driver Reflection on change, technological progress and human behaviour in disruptive times The article analyses and discusses the changes, challenges, decision paths and implementation practices of Bankhaus August Lenz in the years 2014 to 2016. In addition, the author would like to provide executives and managers entrusted with the transformation of their institution with practical arguments that may help them to cope better with daily challenges in change management practice. As a traditional private bank with a European parent, the task was not only to complete the transition away from a fully analog bank, but also to adapt the Group’s strategy for the German market with the budget adapted to the size of the institution. The most important internal customer was also integrated into the change: the Family Banker®, which is at the heart of the philosophy and is responsible for customer contact. This human contact and personal contact is the guarantee for the indispensable relationship of trust between customer and bank. The author examines issues such as coopetition, agile project management approaches and cooperation with FinTechs. In addition, topics such as value proposition, behavioral finance, the need to concentrate on core issues, the importance of personal consulting in the digital age and exchange in an international working environment as well as communication are treated as essential success factors. The paper does not claim to be perceived as a scientific work, but focuses on the practical implementation of the core problem of a market participant in a disruptive market – the question of how to restructure and realign companies in order to continue to play a role as a market player in the future.
Artificial intelligence is finding its way into the highly regulated world of banking. And not only GAFA Silicon Valley high-tech companies see it as the technology of the future, but also FinTechs and established banks. How it came to this, what possibilities and limits there are at the moment and why humans will remain irreplaceable not only when it comes to money – the commentary
by Jochen Werne, innovation and transformation expert Munich private bank Bankhaus August Lenz
Original published in German in the IT-Finanzmagazin (31 July 2018). Translation by DeepL
After “FinTech”, “Blockchain” and “Crypto”, “AI” is the new buzzword in the banking world. Whether chatbots in the digital customer center or self-learning algorithms for highly complex investment strategies are being discussed – the omnipresence of the term suggests that the integration of artificial intelligence into one’s own business model seems to be virtually vital.
Artificial intelligence and big data are currently the strongest and most vibrant innovation trends in the financial sector …
… was also one of the guiding principles of Prof. Joachim Wuermeling, board member of the Deutsche Bundesbank, in his speech on “Artificial Intelligence” at the second annual FinTech and Digital Innovation Conference in February 2018 in Brussels.
The choice of the conference venue, which like rarely any other city combines both a belief in progress and a deeply rooted European tradition, can hardly be more symbolic of the forthcoming change. In fact, the topic is by no means new: the development towards an increased use of so-called non-human intelligence is based on approaches from the 1940s – with the invention of the first computers
Artificial intelligence: revolution as a reaction to mountains of data?
But what is now possible in times of exponential technologies is in fact nothing less than a revolution. The financial industry is sitting on a valuable mountain of data, the extent of which is currently difficult to estimate. The maturing AI systems would not only make the preparation and processing of this data easier, but also much more cost-effective, faster and more targeted. Data already collected could become the most valuable raw material and a resource due to the technological leaps in the field of AI, which, in combination with the enrichment of external, non-structured data, must be “usable” in a meaningful way.
The industry is asked to use private data in a sensitive way for the benefit of the customer, – a goal that should certainly apply to all AI-based approaches.
To find meaningful regulations for the handling and the effects of the use of AI on society, economy and thus on our life and the work of tomorrow is the task of politics. The fact that this topic is taken very seriously is evident not only in national initiatives such as the German Platform for Artificial Intelligence “Learning Systems”, but also in the European Artifical Intelligence shoulder-to-shoulder approach, which is being pushed forward by France and Germany.
“Digital hand holding” in the event of a financial crash is not enough
At present, it is still too early to say which operational areas of the financial world will sooner or later be supported – in part or even entirely – by the use of AI systems. However, the financial crises of the past have shown this time and again:
Trust is crucial when it comes to money. Trust in the markets, the banking system and the human contact as an intermediary in a complex issue”.
However, the banking industry knows very well from its own experience how easy it is to loose customer’s trust. An experience that Mark Zuckerberg and Facebook recently also had to make in connection with the Cambridge-Analytica scandal. As with every new technology and every new approach, the same applies to the topic of “intelligent” systems: a lot of trust, coupled with half-knowledge and a big dash of emotionality results in a popular trend cocktail, which, however, bears a certain risk of headaches on the following day.
Jochen Werne is the authorized signatory responsible for Marketing, Business Development, Product Management, Treasury and Payment Services at Bankhaus August Lenz & Co. After two years as navigator of the sailing training ship ‘Gorch Fock’, the international marketing and banking specialist completed his studies as client coverage analyst at Bankers Trust Alex. Brown International and in Global Investment Banking at Deutsche Bank AG, he has worked on numerous projects in other European and American countries. In 2001, he joined Accenture as a Customer Relationship Management Expert in the Financial Services Division before joining Bankhaus August Lenz & Co. AG in Munich, where he has since been responsible for various areas of the institute. As part of the Innovation Leadership Team of the Mediolanum Banking Group, a member of the expert council of Management Circle and the IBM Banking Innovation Council, Jochen Werne is a keynote speaker at numerous banking and innovation conferences.