Earnix Blog > Can Banks Disrupt the Digital Powerful Disruptors?

Can Banks Disrupt the Digital Powerful Disruptors?

Stephane Meslet

April 11, 2019

The year was 2008, and the global financial crisis was well underway. From that point on until today, banks have gone through tremendous turmoil. Competition has been heightened, mergers & acquisitions have significantly increased, interest rates have slumped and are still very low, and most retail banking customers have vanished from local branches. This leaves banks with huge operating costs such as maintaining their legacy branches, while at the same time having the need to reorganize and restructure their distribution channels. As a result of all of this, it is common to see traditional banks falling below their projected market growth and lagging on almost all measures such as market share, the average number of products per customer, and other client base measures.

Additionally, digital disruptors such as Facebook, Amazon, Apple, and Google are now offering payment services, loans and credit, cash, and savings products to their customers. Let me provide a couple of examples of this phenomenon:
  • Amazon is quietly becoming a bank, offering services to over 70 million customers. Amazon Pay, an online payment processing service, has evolved to include a digital wallet for customers and a payments network for online and brick-and-mortar merchants. Amazon Go, a chain of automated convenience markets, hope to open 3,000 cashier-less stores by 2021.
  • Apple has recently announced launching its own credit card known as Apple Card. The card will have no annual, late, or international fees. It will also have an easy-to-use app interface. Finally, Apple is offering both a digital and physical version of the card.
  • Additionally, Facebook has introduced its new cryptocurrency, Libra, which will let you buy products and services or send money with no fees associated. They promise through their subsidiary Calibra to protect privacy by never mingling Libra payments with Facebook data.
One has to admire how companies like Facebook, Apple, Amazon, Netflix, and Google (known as the FAANGs) can reach out to the world in a very agile and flexible way through almost any digital channel. Their business models are structured to work well in the “personalization economy” of today, where consumer experience, transparency, ease of interaction, and scale are all paramount. They have the data to perfectly understand their customers' behavior, allowing them to predict customer needs and reach out to them with the right product, at the right price, and at the right point in time. Can financial institutions keep up and compete with this level of personalization?

Traditional Banks can compete and win against digital disruptors in the digital world. They can utilize loan books, branch networks, and customer data as assets alongside new advanced analytic capabilities, better innovative processes and technologies like machine learning, and improved systemization and agility to beat the digital disruptors of today.

Earnix believes that for Financial Institutions, personalization is key to both better consumer experiences and improved business results. With the complexities of financial products, an end-to-end personalization suite built using world-class analytics with the best real-time pricing, product bundling, event detection, and rating engine capabilities is needed for Financial Institutions. The Earnix 3D Personalization Suite provides the capabilities needed to support banking digital transformation strategies.

The Earnix 3D Personalization Rating Engine is composed of three main products:
  • Earnix Price-it is the base and core of the Suite, performing pricing personalization and enterprise-wide systemization of the pricing process. It enables the bank to offer the right rates, terms, and fees for a particular client or customer segment in adherence to local regulation. Being able to simulate and predict trade-offs between sales volume and profitability, predicting customer propensity to buy with demand modelling, and other tools and techniques to systemize the pricing process, provide exceptional decision support capabilities. Combined with integrated Machine Learning capabilities and the ability to leverage third-party data, the system can dramatically improve both consumer experiences and business results.
  • Earnix Personalize-it is the product-bundling banking personalization layer. Instead of offering all customers the same offer, Earnix Personalize-it generates a personalized offer, bundle or package for each customer. This enables the bank to offer, from its product catalog of often hundreds of possible products and services, a limited amount of the right options for each client.
  • Earnix Time-it is the event detection layer which uses advanced analytics to identify relevant life events, allowing the bank, to detect customer need or behavior, and to proactively approach the customer with a relevant, and personalized offer at the right point in time.
Being able to offer the right offer or package, at the right price, delivered at the right time increases customer experience and loyalty and at the same time improves business metrics across the business, including lines of business such as deposits, loans, credit cards, mortgages, business banking, and Forex, among others. The suite also improves system agility related to governance and control over the end-to-end pricing and product personalization process. Earnix customers have reported significant increases in market share, volumes, and earnings.

Should the banks of today fear the FAANGs? Clearly, the answer is yes. Their business model agility and digital innovation capabilities, not to mention the fact they have banking licenses should be of concern to all banks. But can banks disrupt the digital disruptors? Yes, if they are able to “offer the right product, to the right client, at the right price, at the right time”. To do this, they must invest in an enterprise-wide customer centric state-of-the-art personalization suite like that of Earnix, to efficiently use and leverage their data to support their product, marketing and digitization strategies.

 

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Stephane Meslet