600 participants, 80 FIs and over 250 investors gathered at this year’s RBCFI19 conference. Yet despite the diversity of banks, specialty lenders, insurers, asset management companies, and investors in attendance, one shared challenge emerged: how do we navigate a changing financial landscape?
Uncharted territory lies ahead. To succeed, we all need to rethink, restructure, refocus and embrace change and disruption.
Here are the key talking points and takeaways from the conference.
1. Watch out for the FANGs
Concerns remain that the highest-performing technology companies will outmaneuver incumbent banks by servicing more aspects of their customers’ financial lives.
“Taking control of our customers’ digital moments of truth has been mission critical for RBC,” says Dave McKay, CEO of RBC. “We’ve invested heavily in that journey; we knew we’d be disrupted if we waited.”
The key is to create longer value chains for customers. “We are moving from an asset-heavy world to an asset-light world,” explains McKay. “We need to move higher up the funnel of decision-making and life moments, and not be beholden to someone else’s platform when banking and financing decisions are made.”
2. Disrupt to thrive
In order to survive in a changing world, it’s important to be willing to change. As BB&T Chairman and CEO Kelly King puts it, “we must disrupt to thrive.”
The choice is simple. Disrupt or be disrupted. According to King, it was the need to stay competitive in today’s disrupted digital landscape that helped to set the stage for the “merger of equals” between BB&T and SunTrust. Building the nation’s sixth-largest bank will, he says, “unlock further opportunities to invest in technological innovation.
Other delegates shared their strategies to mitigate disruption, volatility and uncertainty. For Suresh Ramamurthi, Chairman of CBW Bank, “the key is to build more speed into everything you do. From compliance to risk, it gives you less problems to handle.”
3. Beware the new normal
A robust and sustained period of solid economic momentum has given companies and investors increased confidence in the year ahead, with a watchful eye on when the cycle will turn, though most players are not sure about the timing and extent of a downturn.
“We’ve been on upward trajectory for so long, it’s easy to think this is the new normal,” says FDIC Chairman Jelena McWilliams. “The risk signals are harder to spot in a strong economy.”
Chairman McWilliams also discussed re-evaluating the regulatory rulebook to help bring innovation back into the banking sector. “The regulatory system needs to support that. New ideas are not always encouraged in Washington, but things are changing. Regulatory frameworks need to change too. We want the industry’s best-regulated institutions to lead innovation.”
4. Cyber security is the biggest threat
“Cyber security is our industry’s number one threat,” says RBC’s Chief Financial Officer Rod Bolger. The financial sector has long been at the forefront of cybersecurity. Even so, cyber-attacks on financial institutions and financial market infrastructures are becoming more frequent and sophisticated, prompting ever-larger security investments.
Across the industry, managements are playing an increasingly active part in managing cybersecurity.
5. Consolidation will continue
Drivers that were favorable for bank M&A in 2018 continue into the year ahead. Banking M&A at the regional level may be a catalyst for broader M&A.
Opportunities exist in other verticals of financial services including asset management, insurance and specialty lenders. “The Asset Management industry is still very fragmented,” says David Brown, CEO of Victory Capital. “That makes it ripe for consolidation.”
6. Partners, not disruptors
Just a few years ago, many Financial Institutions looked upon FinTechs as unwelcome market disruptors and threats to their customer and revenue base. Today, we see the majority pivoting to more engaged and proactive collaboration as they pursue options to secure the technologies they need to differentiate and grow.
Whether through buying, building, investing or partnering, it’s clear companies are looking to evolve their relationships with FinTechs in the year ahead.
7. Get ready to compete in a data-driven world
Historically, banks had a singular focus on products and sales. Customer experience took a backseat. That’s changing dramatically today. “Over the next few years we’ll see banks become life-style providers,” says Sankar Krishnan, EVP, Banking and Capital Markets. “Companies like Amazon have excelled at one-click experiences – imagine that power in banking.”
Data will be critical to improving those customer experiences. Through data-driven insights and analytics, banks can devise customized services, drive up-sales and make customers feel valued. However, adopting and operationalizing this mindset in traditional banking institutions is no easy task.
