Canada's Condominium Magazine
Two new studies find that Canadian companies, including the banks, are falling behind the rapid pace of technological change sweeping the world. A Deloitte study warns that Canada’s corporations are woefully unprepared for the future—that means tomorrow, in this age of non-stop technological disruption—while a survey of Canada’s bank customers reveals that the financial institutions have been slow to act as customers’ preferences have changed.
The good news for the banks is that we overwhelmingly trust the grand old institutions to securely manage our personal data. An impressive 91 per cent of Canadians would trust the bank before any other type of company, including consumer technology companies (1 per cent) or mobile phone providers (2 per cent).
Banks should invest in in-branch digital opportunities so that inside of the branch is just as digital as the outside—digital channels like online, mobile. Immersive and relevant customer experiences are key. The branch must be a relationship advice hub, not a transaction processor.
Retail banking, however, is changing rapidly. People no longer go to the bank branch very often, if ever. The survey of Canadian and American bank customers, done by technology consultants Accenture, found that nearly half of Canadians (46 per cent) now prefer banking online. Almost twice as many said it didn’t matter whether their local bank branch stayed open or closed: they would continue to bank with the “mother” institution.
“This is a big change in the evolution of retail banking,” said Jodie Wallis, of Accenture,. “For the first time in our research, Canadian consumers ranked online banking services as the number one reason for staying with their bank, ahead of branch locations and low fees. It is no longer a question of proximity to the local branch that is driving consumer choice, but of which banks are offering the strongest online capabilities and mobile applications.”
At the moment the banks appear to have one big advantage: the trust of their customers to manage their data. However, several other findings reveal cracks in the armour. Three-quarters of Canadians view banking as “transactional or commoditized,” rather than based on value from “advice-based products and services.” The relationship with the bank is defined by routine transactions like paying bills and clearing cheques.
But that is changing. The best indication from the Accenture survey that things are about to change profoundly comes from the Millennial population. Those aged 18–34 are more likely to change banks than other demographic segments, and they expect more from their banks. They want, for example, tools and services that will help them with their budget, and they would like to chat online with their bank. This matters because the Millennials will soon be the largest demographic, as the baby boomers fade out.
“Not only are they more likely to switch banks, but they are also dissatisfied with the experience they’re getting at their existing banks. This poses a significant risk for banks in the coming years,” according to Accenture banking expert Robert Mulhall. Banks will have to adapt to changing expectations. Some branches will no doubt be closed, but those that remain will have to be re-imagined, each one becoming “an interactive, omni-channel hub” where customers access the latest self-service tools and receive advice. “Immersive and relevant” customer experiences are key.
Disruptive innovation has the potential to impact each and every business, no matter its size, sector or location. No business is immune. The development and application of advanced technology is accelerating at such an exponential rate that people have difficultly coming to grips with the pace of change.
Few Canadian companies highly prepared for disruptive technologies
According to the wider-ranging Deloitte study, meanwhile, Canadian businesses in general are in big trouble, and the worst of it may be that most of them don’t even know it. The “bitter truth” is that only 13 per cent of firms in this country can be called “highly prepared” for the disruption that technology will cause. To be considered highly prepared a firm must have a high level of awareness of changing technology, must have an organizational culture that encourages innovation, must be able to react quickly to external threats or opportunities, and must have the resources to enable change.
The Deloitte report identifies five advanced technologies that will bring about the massive disruption that is already underway: advanced robotics, artificial intelligence, networks, advanced manufacturing, and collaborative connected platforms.
Each of these areas could, and no doubt will, impact, for example, the banking industry. Artificial intelligence (AI) systems are already capable, the Deloitte report reminds us, of displacing human workers in areas like accounting, a key banking profession.
But networks, specifically the Internet of Things, stand out as having the greatest disruptive potential for banking, tying in neatly with the Accenture findings. “As more and more everyday items connect, consumers and businesses alike will come to expect more advanced, personalized interactions, and companies will be able to provide products and services that adapt immediately to their customers’ needs and preferences,” the report states.
Data is key, and data is one of the banks’ greatest strengths, for now. The “flood” of data is growing exponentially. Companies that recognize the value of this will use data to achieve an “intimate understanding” of their customers and provide a level of customization that was not possible before. At the same time, companies—banks—will be under growing pressure to use customer data “responsibly.” The data security sector will grow in importance.
The Accenture survey of consumer banking uncovered a trend that is particularly “bad news” for the banks. Customers buy “low-margin products” from their primary bank, and shop around for the high-margin products like brokerage services, car loans and mortgages. If the banks took a more proactive approach to providing “value-add” services, customers would be receptive.
Companies that are not innovative are putting themselves at risk. This is the conclusion of both reports. The Deloitte study cites Statistics Canada numbers showing that over one-third of Canada’s companies self-identify as non-innovative. The proportion is even higher in resource industries like mining and oil and gas extraction. They will be among the first to “feel disruption’s sting.”