There’s the story about the little boy learning how to bat baseballs for fielding practice. He tosses the ball up, swing and misses. Toss, swing, miss. Again and again. Just when the coach is about to take the bat away, the boy grins and exclaims, “Coach, ain’t I a great pitcher?”
Some people look at big banks’ creaky legacy systems and think, “Uncompetitive, not ready for the digital future.” Others see the opposite. They see an industry on the brink of a burst in creativity and targeted investment, poised to expand their leadership in payments, mobile commerce, and cybersecurity.
Certainly banks have had a rough patch. The credit crisis not only dashed profits but spurred regulators to unprecedented activity that made compliance worries compete with innovation for management attention. The fallout damaged customer confidence, and the industry is still scrambling to recoup it. In the meantime, the best laid plans for legacy modernization and other innovations had to be postponed.
But banks remain influential entities for the best of reasons. According to statistics from The Clearing House (the influential banking association and payment company owned by the world’s largest commercial banks), the wealth generated by U.S. banks contributes 6.6% to U.S. gross domestic product. Banks paid $63 billion in income taxes and $50 billion to shareholders in 2013. The median amount they spend per employee on cybersecurity is $2,500 (vs. the $400 spent by retail and consumer businesses). They process 123 billion transactions annually, the value of which is $80 trillion, and lent $582 billion to small businesses.
Banks provide the funding for our infrastructure – houses, businesses, highways. They support their local communities. Banks in the U.S. employ about 6 million people at wages and benefits typically above the norm. They export more than $70 billion of financial products and services. Banks play an essential role in state and local economies. In global markets they facilitate access to scarce capital, supporting economic growth and job creation. They hold an incredible opportunity in customer knowledge, especially as they amp up social listening and data analytics.
And now, after the rough patch, signs of spring are unmistakable for the industry. Vendors that wish to partner with these remobilizing powerhouses need to recognize the signs and prepare to contribute. Among the signs:
So yes, the industry may have been “a great pitcher” for a while when they would have preferred being firmly in the batter’s box. They have catching up to do in the IT area. But another way of looking at it, especially since banks finally had a pretty good year, is to see pent-up demand about to burst through. When it does, they will be looking for best-practice solutions, trusted partners, and real-world proof points from other industries. More important, they are tightly focused on their core businesses, which means they welcome external sources of innovation and creativity. They hold great opportunity for innovative vendors skilled in partnering.