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Bring the humanity back to banking

Innovation Jam keynote speaker David Brear

April 2016

As the keynote speaker for Temenos' Innovation Jam London 2016, David Brear says it's time for banks to get personal or die.

David Brear has been immersed in the technology of banking for as long as he's been working – he's in his mid 30s – and he is consistently voted one of the most influential people in fintech by both banks and his peers. His CV takes in banks, insurance, research and analysis, and consultancy. So when he says that not much seems to have changed in the 26 years since online banking took off, despite £15bn of tech investment, he is really worth listening to.

The lack of change was the opening statement of his witty presentation as keynote speaker at Temenos' London stage of its Innovation Jam, where Brear's topic was the future of banking.

There couldn't have been a more appropriate audience: banks, fintechs, tech and banking reporters, entrepreneurs and insurance companies. Brear made it clear that banks have a choice – change their conservative culture and invest better in technology or become irrelevant as customers, competitors and disrupters move the market on. The key is to tailor their services; it's time that banking got personal.

According to Brear, there's little love for the bankers, with only media organisations trusted less. This lack of trust gives an opening for disrupters and challenger banks to eat into their market. In addition, their operating costs are incomparably high compared with challenger banks. For a traditional bank, a current account costs between £140 and £170 a year to run; a challenger spends between 44p and £4 per account per year.

But banks' management teams feel stuck between a rock and a hard place – the huge investment they have already made in legacy IT systems on one side and a fast changing market landscape on the other.

He calls banks' management "salty" because they are old school, old fashioned and out of touch with technology. Only 3% of CEOs at leading banks and 6% of board directors have professional technology experience, and 40% of banks have no experienced IT professionals on their boards. This inevitably means banks are going have problems understanding the new digital banking landscape.

Proof is in the long list of analogue products that banks still push – everything from current accounts to mortgages, insurance, savings and loans. "It's like Apple trying to flog vinyl on iTunes. It doesn't work," he said. Where banks use technology, it's been to cut costs, not improve and personalise services. The result is a generic experience for everyone, lacking in any humanity.

The irony is that there are plenty of people who can identify and draw up a blueprint for banks to compete in and serve the digital market. But those immersed in the old culture and thinking still hold the purse strings; and even when the penny drops the weight of the legacy systems remains an overwhelming brake on change.

It is hard for banks to use new technology when those in charge refuse or don't know how to best implement it. Remember Kodak? It was one of the first to spend heavily on digital photography, but it failed to take the fruits of its R&D to market.

Brear's lesson is stark. Digital banking will not go away. While customers are unpredictable, digital banking is a certainty – we just can't always predict how they will use it. Indeed, mobile is already the product (think a Mondo bank account is downloaded to a mobile phone) and APIs will power everything. AI will start to make the decisions about things we can't afford to get wrong – for example in health and medicine. And we will automate things we simply don't want to do – the Mac Job.

It's been a while since Boston Dynamics posted on YouTube their videos of Atlas, their robotic human that can walk on uneven, snow-covered ground though a wood, lift and stack heavy boxes, and pick itself up after a fall (the voice over version is also worth a look so we know the technology is there, and improving fast.

Soon, sensors will be in everything – we've already got chopsticks that can tell whether oil has been reused making it unhealthy. And the Internet of Things is here, creating a vast amount of data, data that becomes intelligence. This makes it possible to turn a ubiquitous experience into a personal one. What's still missing, though, is trust. Customers need to trust that their banks are offering a good, reliable, affordable service. And for Brear, while this trust is currently lacking, it will be restored thanks to blockchain, which will bring transparency and traceability to transactions. "It's a major reset button," he said.

Banks need to rethink their products to really exploit the technology, cut risk and deliver personal service. As Charles Darwin said: "It's not the strongest of the species that survive, not the most intelligent, but the most responsive to change."

For Brear it's simple: banks have the cash, they have the customers and they still have time to act. Now they need to change; they need to step up their game and respond to the disrupter threat. They need to bring the humanity back to banking.

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