The digital transformation offers opportunities for Belgian Banks.

by Wim de Waele (original publication in NL, on 8/10/16, De TIJD)

Belgium could be a pioneer in offering new services for digital platforms for banks, but we need to act quickly and united.

Exactly one year ago I left the digital research institute iMinds. When I told my social environment that I was going to start a company in financial technology with Jurgen Ingels, who just sold his company Clear2Pay, a lot of them were surprised. They couldn’t believe that we were getting into Tech4Fin, like we call it: digital technology for the financial sector. “The boring grey sector of banks and insurances, who were not very credible anymore due to the 2008 crisis”, I heard often.

Exactly this digital transformation of the sector was called as the most important motive for the fundamental restructuring, announced earlier this week at ING. As a reader of De Tijd, I don’t need to explain you how much the impact of technology will affect our traditional sectors, now that artificial intelligence, big data and the internet of things are maturing. It’s already been accounted for in several columns of Peter Hinssen and others.

Economist Geert Noels and moral philosopher Etienne Vermeersch agreed surprisingly on this impact in an interview at VRT. Not only the banking sector, but also the whole society is facing a digital revolution, which could be compared to the industrial evolution. It invokes several questions on how we can still create value in Belgium, but also on the manner how we will divide this value across the population. It’s a subject that affects everyone.

One thing is certain: it does nobody any good if the financial sector marginalises. Let us thus restrict to the question which strategy we need to follow with this sector, so we can still hold a retribution debate. If we act quickly and united, then there are still opportunities to seize.

Banking platforms

The new digital economy is based on the value of data. The Internet user realizes more and more that when he clicks the ‘general agreement’-box, a company has a carte blanche to use his personal data to attract paying advertisers or to be able to show a personalized offer.

And banks have a lot of data. They perfectly know our consuming behavior. In the future they can easily position themselves as guarders of our privacy and offer us better digital services, depending on how important you believe your privacy is.

That ‘beyond-banking’-strategy, where a financial institution also becomes a digital platform like an e-commerce platform or a social network, offers the possibility of superior provision of services for the client. The bank does not longer only help you with your mortgage, but also becomes your provider of all services in the purchase process of your house or offers a full package of services, regarding your ‘connected car’ instead of a uniform car insurance. This strategy is also possible for services towards clients as well as for services for small and bigger companies.

In consultancy surroundings this is called ‘platform banking’. There are two important conditions for this to apply: the regulator needs to collaborate and must acknowledge that privacy is important, but not absolute. It’s the individual that needs to decide how much of his privacy it wants to share.

Collaboration

The financial sector can’t do this alone. The competences that are needed to build data-driven platform architectures are not at all easy. You don’t only need realtime IT-systems, which already is a challenge for banks, who carry a decade of digitization and are experiencing the law of the handicap of the head start. You also need to build these services very quickly. There are definitively aggressive competitors in sight like the big technology companies. This velocity can only be reached if you create an ecosystem of partners, on which you work closely together to market new innovative solutions.

The applications from the Apple store are also not developed in that big building in Silicon Valley, but are created by an ecosystem of smaller app developers. Big institutions like banks have processes and rules which slow them down, also not helped by the regulatory system of the government they are pushed into.

The valid concern about the financial stability of our banks are at odds with the risk capital culture in the technology sector. That’s why big companies and the government need to go above and beyond to embrace these starting technology entrepreneurs and to help them grow, through partnerships and grow investments. This way they need to create a win-win situation in which banks are able to strengthen their offer in collaboration with the earlier mentioned entrepreneurs.

Exportable

Not only banks and small start-ups will have to collaborate with this new reality. A lot of administrative aspects of the banking system are also not really differentiated, on the contrary. It’s easier and cheaper for the consumer if these services are developed and offered collectively.

Just like our country was a pioneer in the standardization of payments over the different banks, it could be a pioneer again in a number of new digital services. Belgium is small enough to be able to make decisions quickly. Besides, with organizations as SWIFT and Euroclear, Belgium has world leaders in market infrastructure. Cyber security and privacy will be the big themes for these infrastructures. If we join forces and if we use the already accumulated knowledge, we can build new services on this, which will be globally exportable.

We need to accelerate and act powerful on these three pillars: data-driven digital bank platforms, collaboration between small and big, and the construction of joint infrastructure. Only then we have a chance to become a pioneer again in this sector as a leading region to create value and to retain our well-being. The only condition to fulfill this is that we all pull the same chord and so build up the critical mass. This belief was the base for the Eggsplore initiative, which gets more and more attention. Now it’s important to transform these beliefs in real-life actions.