Ambition for disruption: how the Millennials are changing the banking sector

Scenario

Three connected forces drive the need for change in the Banking sector: technology, competition and behaviours.

In the last years, technology has deeply influenced customers’ behaviour and enabled new business model.
Regarding the behaviour, Millennials are defining a huge discontinuity on communications, service model and consuming pattern. Most of the companies, including Banks, need to review the way they made business in the last decades.
On the competition side, Fintech companies are attacking the financial “value chain”, having Millennials as their specific target.

Challenges and Opportunities

Banks are facing some serious risks related to external factors as well as to internal weakness of their traditional business models. The bad news for the banking sector related to the Millennials are:

• Poor reputation among Millennials
• Growing internal / external competition
• Slight internal awareness about ongoing changes
• Scarcely sustainable traditional business model
• Little effect, to date, in digital / remote selling and acquisition.

At the same time, there are also some good news for Banks:

• Millennials enable new service models: light, efficient and scalable
• Millennials are largely banks clients: they don’t need to get them but only to retain
• Banks are still perceived as solid/safe
• Banks / Fintech will collaborate (Fintech need clients and support to manage complexity and compliance)
• To leave their own bank, customer needs a strong motivation.

Banks need to define their road to innovation, choosing a strategic option among:

• Internal / organic evolution
• Contamination / co-optation with Fintech
• Acquisition of existing Fintech players
• Banking startup.

Solution

There are some issues that must be addressed from Banks in order to travel the road to innovation.

Build internal awareness at executive level and breed commitment to change

Reply invests on market benchmarking (i.e. “Osservatorio Reply sulla Multicanalità nelle Banche Retail” born in 2009 and today bought from main Italian Banks; “European Millennials and their relationship with payment systems”) and manages business events (i.e. Hackathon, Reply Xchange, …). Through these initiatives Reply can support its clients in building internal knowledge about innovation trends, competitors evolution, change management issues, etc.

Focus on relevant innovation issues

The Reply DNA is composed of innovation, which is declined in clients core processes with a pragmatic approach and business sense check. Reply expertise has been built:

• Managing several experiences / projects on the digital and innovation side with main European companies
• Installing internal competence centres for Financial Services and Bankingtech Innovation that comprise practitioners with vast technical and business expertise
• Funding start-ups through its incubator Breed Reply.

Align with Millennials value and needs

Reply’s consistency with Millennials expectations, needs and values is granted by the nature of Reply: a young and fast multinational company.

Have the ambition to be disruptive

Reply thinks it is important (for teams and clients) to have the ambition to be disruptive in order to deliver real and punchy innovation. Reply contributes:

• Bringing to clients a mix of relevant skills based on Reply network model (business consulting, process, technological, UX design, …)
• Managing some specific projects according to Design Thinking principles.

Reply can successfully support its clients on each of these steps.