Reframing banking

April 2019

In recent years, innovation and disruption have become among the most discussed terms in banking. Some technologies, like distributed ledger technology and new applications of artificial intelligence threaten to replace or at least reshape the roles of traditional intermediaries, advisers, traders, and bankers. The competitive landscape is changing, with fintech and technology platform companies providing efficient and customer-centric services and expanding access to banking products. As these new competitors achieve greater scale, banks risk being disintermediated from their customers and the valuable data that comes with them.

Yet the same technologies driving emerging competitor business models are also enabling new approaches for incumbents. Banks are at various stages of updating legacy systems and building new digital capabilities. Still, most predict banks will have to move faster to keep up with the pace and scale of change—and the more dramatic changes that could be approaching—to remain competitive over the longer term.

Bank leaders may also need to think differently about the business models that will provide a valued service to customers in the future. A participant asserted, “We are at or near an inflection point for consumer financial services, where financial services is being reframed. Apple didn’t create a better phone, they created a platform for all kinds of things at your fingertips—they reframed it, just as Amazon and Netflix didn’t just try to create a better model of the old, they reframed the shopping experience and video content.”

On February 12th, 2019, directors from US banks joined a series of presentations and roundtable discussions with EY financial services leaders, SMAs, and other subject matter experts on how technology is transforming financial services and the challenges for board oversight. The meeting took place at EY’s wavespace in Chelsea, New York. Tapestry supported the meeting and developed this ViewPoints. Drawing on the presentations and discussions from the meeting and related discussions with participants, ViewPoints synthesizes the key themes that emerged:

  • The environment is changing rapidly

  • Banks are in the early stages of exploring new models

  • Boards and management teams face difficult choices