Five Questions with an OG, Vikram Atal: The Future of Banking
MissionOG is fortunate to be supported by a deep network of experienced operators and entrepreneurs. This entry is part of a blog series where we share perspectives from “OG’s” – original innovators from specific market segments and/or business disciplines.
Vikram (Vik) Atal is a Board member of Goldman Sachs U.S. Bank Holding Company and the PRA Group, a Senior Advisor at McKinsey & Company and a member of the MissionOG Advisor network.
These roles follow a highly successful 27-year career at Citigroup with a primary focus on the consumer. Vik served as CEO of Citigroup’s North American Card Franchise where he led its turnaround and subsequent growth. Under his leadership, the group drove significantly higher customer engagement by leveraging data, analytics and information centricity and had strategic oversight of the high-risk global consumer portfolio through the 2008 financial crisis.
WHAT WILL BANKS LOOK LIKE IN A DECADE?
Similar to the sea changes impacting diverse industries across the globe, the banking sector and, in particular, its consumer facing elements, are witnessing the beginnings of a massive disruption. Regulatory changes in the latter period of the 20th century, including the lifting of restrictions in the U.S. on interstate banking, had led to the industry consolidating into vertically integrated global megabanks.
While these megabanks continue to hold the vast majority of consumer deposits, neo-banks and non-bank entities have leveraged technology and consumer demand to establish a firm foothold across the sector. With the scope of disruption and pace of change expected to sharply accelerate, further disintermediation and fragmentation of the consumer banking sector is now a given.
WHAT STEPS DO BANKS NEED TO GET RIGHT TO CONNECT THEIR EXISTING NETWORKS THROUGH DIGITAL CHANNELS?
A transformation of this size and scale requires enormous focus on the “hard” stuff: Infrastructure, processes and execution. While these are certainly critical building blocks, they are inward-looking initiatives that are necessary, but far from sufficient.
The ability to compete and the ultimate determinant of success will be driven by the tone at the top and a cultural change that places a premium, across each and every function at the bank, on leveraging digital access and expanded information sets to provide solutions for customers that meet their needs for relevance and real-time responsiveness.
HOW SHOULD LEGACY BANKING INSTITUTIONS BEST STAVE OFF THE ENCROACHMENT FROM NEO-BANKS?
Legacy banks retain significant advantages over neo and non-banks: large customer bases, a proven ability to operate at scale, regulatory and compliance capabilities and brands that are known for reliability. To shore up these assets and capabilities, they need to work on three concurrent fronts:
- Modernizing their infrastructure to operate at dramatically lower cost and at higher speed
- Accelerating their migration to becoming digitally and information-centric
- Selectively identifying opportunities for partnerships with the new entrants to create a win-win-win for all parties
WHAT NEW PRODUCTS AND SERVICES DO YOU SEE BANKS OFFERING TO BUILD STRONGER RELATIONSHIPS WITH THEIR CLIENTS?
The innovations that created a “wow” in consumer banking (Universal ATM’s, credit card reward programs, and low cost mutual funds) are each now decades old. The next generation of products and services to transform the customer relationship will need to combine friction-free interactions, a switch from large actuarial segments to individualized and tailored solutions, and economic relationships that transfer value back to, rather than from, customers.
An example might be proactive, seamless mortgage refinancings offered to qualified credit card customers that generate both interest savings for them and, through the lower acquisition costs, allow banks to supplement these saves with reward points linked to the customer’s choice of card.
WHAT HAVE BANKS LEARNED FROM THE COVID CRISIS?
Banks have likely surprised themselves, their regulators, and even their customers with their ability to navigate through the crisis. Their processes have stood up to the demands of business continuity and they have shown resilience in the face of daunting externalities. Perhaps most importantly, they were forced to adjust at a rapid cycle pace to new realities with remote and digital interactions moving from “test” and “additive’ initiatives to becoming a central pillar of their business. The sense of heightened confidence across the industry coupled with explicit learnings will almost certainly stand them in good stead for the challenges ahead.