If there's any doubt about the potential for transformative technologies such as mobile and analytics to generate revenues and competitive advantage in banking, consider this: SAP intends to double its revenues in financial services by 2015, and expects to do so by offering the industry a complete portfolio of solutions and services in mobility, cloud, real-time technologies, analytics and core banking.
"This puts us in a position to have transformational conversations with banks," according to Falk Reiker, SAP's Global Industry Business Unit (IBU) Head for Banking, who spoke with BS&T at the company's 2013 Financial Services Forum in New York. SAP's banking business totaled about $1 billion in 2012, Reiker reports, and it expects to grow that to $2 billion by 2015. Similarly, he said, the rest of the company's financial services business, including insurance, is targeted to grow from $1.5 billion to $3 billion by 2015. "We have a commitment to invest in growth," Reiker says.
These aggressive goals are in anticipation of the fact that "Banks are more open to transformation -- they see they have to develop a digital strategy. How to transform into the digital future ... is what is keeping them awake at night," Reiker reports. "Banks need more transactions, more cross-selling, and ideas must come faster," he adds. This requires a "common user experience across multiple channels. There's a lot of work still to do [around this] at many banks, [as well as the] potential for improving productivity, efficiency."
These capabilities are critical not only because they are linked directly to growth, but also because the growing number of potential non-traditional competitors (such as PayPal and Google) are very good at digital customer engagement. "How do banks compete with these companies in the future?" Reiker asks. "They have to put the customer at the center. Digital and mobile apps are all about the customer. In mobility, usability is everything." If customers don't like a company's app, Reiker points out, they'll delete the app and download a different one. It's no different in banking than in consumer products, he notes.
The disintermediation threat isn't just about losing revenues, Reiker adds. "As banks get disintermediated, they are losing information about the customer" -- for example, when they lose payment flows (and the related customer data) to an alternative payments company such as PayPal.
To address this challenge, banks must "do something with the data [they] have ... turn the data into value," rather than just organizing and managing it, Reiker says. "They must prepare for a segment of one, individualized offers, and not just on the high-end side. This will be reality in retail banking space."
The key, Reiker adds, is to do this with "new data, real-time data, not old data."
This can be accomplished, he suggests, with in-memory computing, a capability enabled by tools such as SAP's Hana, which can allow banks to "ask the questions you don't know."
Reiker's comments not surprising were in sync with observations made by SAP's CEO Bill McDermott during the Financial Service Forum's keynote presentation. "Digital consumers who engage with you on mobile spend two-thirds more time than those [who interact] on their laptops," he said. This means that financial services companies must be very nimble, he added: "Speed matters. We have to innovate every day. Slow kills companies fast."
McDermott continued, "This is an inflection point. It's going to take courage to disrupt the status quo and go for innovation."
[To learn about The Role of the Cloud in the Transformation of IT, check out the session at Interop on October 4.]