Lonesome George - 3 Key Survival Lessons In Modern Banking
By Gaurav H on Dec 11, 2013
Chelonoidis nigra abingdonii.
That’s the Latin name for the Pinta Island Tortoise – more popularly known as Lonesome George.
Considered the rarest animal on Earth, Lonesome George passed away last year.
Not only was George the last of his kind but he was also, in many ways, a living dinosaur. Out of his time, he acted as a reminder that environment and circumstance can change substantially for any ecosystem—whether it’s over a hundred years, or a hundred hours.
As we have seen in the last five years, the world’s financial markets act as an ecosystem as well. And, what we can learn from Lonesome George, in both the capital and retail environments, is that legacy systems, outdated infrastructures and failure to adapt can have extreme consequences.
We need not look too far to see recent examples in other industries.
During the financial crisis, one set of corporations in particular was called out for failure to change – the automotive industry. Using outdated manufacturing practices and unable to appease target consumers, American car companies failed to deliver what the rising Korean and Japanese companies had wholly embraced – streamlined operations and affordable, quality products that Americans were looking for.
Let’s also remember the camera companies that were booming in the early nineties but had failed to invest in growing interest in the digital markets. Or even now, look at the challenges bubbling up for cable TV…examples of corporate Lonesome Georges are everywhere.
And, when it comes to retail banking we can see similar challenges coming to the surface – like the continual erosion of the branch. In an October 2012 McKinsey & Company report titled "The Triple Transformation - Achieving A Sustainable Business Model", customers were showing a greater preference for branchless transactions, making digital interactions more habit than not. In addition, the report estimates that these interactions will not only increase, but jump 300% by 2015.
What’s more is that branch closings have increased pressures on banks to grow by using existing, outdated legacy technologies. A recent Deloitte report , "When Legacy Is Not Enough" points out that in fact as branch preferences are changing, maintenance of core systems remains 70-80% of all IT spending.
So, what does this all add up to? How are banks going to avoid extinction-level events?
Here are three maxims we can learn from other industries to move with change, instead of against it:
- Reduce operational cost: In the same report mentioned above, McKinsey & Co. notes that banks need to follow the leader – the automotive industry – in avoiding obsolescence. Meaning, banks need to simplify businesses and streamline operating models.
- Manage resources: Once operational costs are stabilized, IT teams can keep their eye on the ball—when it comes to customer acquisition and retention—and avoid time spent on maintenance.
- Grow: By harnessing IT and operations resources, banks can utilize new tools to deliver better services to customers, translating into a larger, stickier customer base.
Whether you’re slow-wandering an offshore Ecuadorian island or managing a global business, the risk of stagnation is clear – you must grow with the passage of time, adapt to changing markets and transform your business to meet the needs of the ecosystem at large.
Aubrey Hawes is the Senior Director, Product Marketing for Oracle Banking Platform. He can be reached at aubrey.hawes AT oracle.com