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Strategic anxiety in banking

Planning for future growth in a rapidly digitizing bank industry can be complicated, difficult and cause anxiety for leadership and boards. Deciding how to organize a strategy – where to start, where to focus, and deliver results – can also be vexing, for at least a portion of the industry.

Business planning takes on new urgency

It’s a time of opportunity and anxiety for many banking institutions. Planning for future growth in an industry that is rapidly digitizing is complicated work. Meeting this challenge through strategic planning has produced a real sense of anxiety among a host of bank management committees and boards. And, deciding how to organize and execute on a strategy is proving to be vexing for banks large and small.

To take an interactive journey exploring the state of the banking industry, a glimpse of the future, and the causes of (and steps to manage) strategic anxiety, click here.

In our opinion, there are three primary causes of strategic anxiety in banking:

  • Customer expectations. If banks don’t make customer experience a priority with innovative products and services, customers may explore other options.
  • Fintech pressure. By making a variety of capabilities available to customers digitally, fintechs are essentially unbundling the traditional banking relationship—banks must understand and address the business gaps being created by this dynamic.
  • Regulatory ambiguity. With regulatory changes squarely on the table under Trump, but the ultimate outcomes and impacts still unknown, banks must balance this uncertainty by proactively developing and implementing relevant processes.

To manage this environment we advise making a broad strategic shift:

  • Leverage customer behavioral data. Understanding the behavior of banking customers by amassing and analyzing data is critical for creating and efficiently delivering the products and services those customers want and expect.
  • Expand to a platform business model. Banks should take advantage of the network effects of a platform business model, which will enable them to expand their product base and reach—and engage with—more customers.
  • Engage in “coopetition” with fintechs. In this evolving space, we believe that banks and fintechs should admit they need each other and can work together to rationalize product lines, streamline communication and customize the overall experience

“You could define co-opetition as a shift from a model of exclusivity to one of inclusivity,’’ says David Pessah, a director at KPMG’s Innovation Lab, specializing in financial services. “And, that’s not only as it relates to products and services. It’s also about a bank’s ability to work with other participants in the banking ecosystem. It’s all about how interconnected the bank can become, and how it can personalize the banking experience.’’

Strategic anxiety in banking

As returns stay muted, regulatory expectations remain high.

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