Working together for the future

Ten years of “Bank & Future” research collaboration between the Fraunhofer IAO and S&N AG

Bank und Zukunft

The month marks 10 years of successful cooperation between S&N AG and the Fraunhofer Institute for Industrial Engineering (IAO) in Stuttgart as part of the "Bank & future" innovation forum. This is a good opportunity to reminisce about the work completed and look into the future of the banking industry. We interviewed Claus-Peter Praeg, project manager at the Fraunhofer IAO, and Uwe Bröker, Management Board of S&N.

Editorial staff: Mr. Praeg, what does the "Bank & Future" innovation forum stand for?

CPP: The innovation forum is a joint research initiative of several banks and bank-related service and deals with questions about the future of banks and banking.

Editorial staff: Looking back at 10 years of the innovation forum, what were the key areas of activity, and what has been accomplished so far?

CPP: We have developed many innovative concepts and solutions for banking. We began by developing future scenarios of bank branches, which still serve as the basis for designing offices. Apart from the market perspective, we focussed on bank organisation and business processes. The "Quick Check" provided simple and efficient tool to assess the quality business process management. This was successfully used within a large banking group. In 2008, we introduced individual measures and review applications for the management of distributed value networks – long before this topic attracted attention in banking. For four years, we have looked at the future of banks from the perspective of the customer and looked into how banks could be made more customer-centric.

At the Institute, the second generation of showcases was set up in the form of a laboratory experience. Here, innovative solutions were made tangible for interested parties and decision-makers. We also had the opportunity to look closely at the bank of tomorrow and come to grips with future issues.

In summary, in recent years, a completely new type of bank has been described. Practice-relevant concepts are available and can be used to design the "Bank of the Future".

UB: From the activities and results mentioned above, we developed innovative IT concepts which fed directly into solutions and consulting projects. In particular, in the implementation of value-added networks, we can benefit from the preparatory work of the innovation forum. As part of our business service, we combine different business partners, such as banks, offices, data centres, and hardware manufacturers to provide services in the areas of cash management, balance sheet data analysis, and output management. In addition the "Banking & Future" showcase provides us with a good opportunity to enter into a far-reaching innovation dialogue with financial institutions and other partners.

However, we also realised that some approaches often went a step too far. Some financial institutes were not prepared to be the "first mover", and some solutions remained as prototypes.

Editorial staff: You have developed many concrete solutions. How did the work of the innovation forum contribute to preparing banks and their service providers for the future?

UB: For us, the results of the innovation forum were and are an important source for strategic orientation when it comes to development products and services to meet future needs. In addition to our annual trend survey, we specifically use the numerous theses, scenarios, and case studies to derive road maps for our portfolio.

CPP: This also confirms our endeavour to develop concrete solutions that the "Bank & Future" partners can easily use in their daily work environment.

Editorial staff: That all sounds quite good. However, you mentioned that some topics could only be practically implemented with a time lag and followed up on and that others could not be implemented at all. From your perspective, what are the reasons for this?

CPP: Innovations always require the right time and environment for successful development. In the past, banks were not always forced to think about fundamental changes. Therefore, the culture of innovation is not as pronounced as it is in other industries. Accordingly, internal conditions do not always favour the quick and efficient implementation of innovation. In addition employees and managers are not always willing or able to embrace innovation. Especially in light of the dwindling customer confidence in banks resulting from the financial crisis, many financial institutions have focussed on the traditional core business.

Bank und ZukunftUB: We must not forget that the past years were – are still are – hard for the banking sector. In many areas, there has been a large-scale decline in income without the generation of new revenue. The financial crisis and its consequences led to an expansion of regulations that must be implemented by banks. Other large projects such as flat tax and the SEPA changeover required a lot of resources. There are thus many reasons why not all developments could be promptly implemented in practice.

Editorial staff: Mr. Präg, in recent years, consumer behaviour has changed considerably. What implications does this have on the financial services industry?

CPP: The banking industry needs to quickly respond to changing consumer behaviour, which is also influenced by another form of communication. The customer is now used to obtaining information from various sources in a timely manner. The customer expects customised, competitively priced products and consultations outside of fixed "opening times" and predetermined locations. Banking is an "activity" that is increasingly being performed independently of institutes. It is no longer a question of physical or on-line banking but rather a question of how the bank approaches the customer and gains his/her loyalty.

Editorial staff: In the area of technology, there has been a high rate of change. How as this affected banks? And what does this mean for the future of banking from the perspective of the innovation forum?

UB: Employees and managers are required to further develop their technological skills so that they can realise the new possibilities. Banks are in danger of being left out of the development of Industry 4.0 and the intensive networking of stakeholders associated with this. They risk continuing to lose ground. Furthermore, technology makes it possible to bring banking even closer to customers and more intensively advise them. New technologies form the basis for entirely new business models. Digitalisation and the spread of mobile solutions have yielded new fields of business for financial institutes. These only partially resemble traditional banking.

CPP: From the perspective of the innovation forum, banks will soon cease to exist as we know them today. Customer behaviour, new market drivers in the financial sector, and ongoing technological progress will continue to drive social changes. Banking will no longer be an institutional matter but rather part of the activity of a value-added provider.  

Editorial staff: Mr. Bröker how can help an IT service provider such as S&N AG help financial institutes to shape their future?

UB: With innovative technology projects, we can transfer experience from other sectors to the financial industry, which will benefit. Regardless of existing structures, we provide the opportunity to act as an "extended workbench" in order to implement innovations.

By decoupling banking from technology from technology through the flexible provision of IT and business services, financial institutes can focus on new business ideas.

Editorial staff: After looking back, we can now look forward. What will the innovation forum deal with in the near future?

CPP: We have directed our focus to the opportunities and possibilities of digitalising banks. We will deal with success factors in the context of the digital transformation and develop prototypical solutions for banks undergoing digitalization in order to show the decision-makers what great potential lies in the banking of the future.

Editorial staff: Thank you for the comprehensive overview. We are already looking forward to the results of the next research phase.

Banks in the digital economy

Project description for 2015/2016

The objective of this research phase is to actively support banks in the following areas:

  • Learning from the leaders
    We hope to learn from other industries using examples and case studies in order to be able to use the existing, wide-ranging experience in the context of digitisation.
  • Digital fitness I
    Researching factors that enable or hinder the necessary change in banks in order to make the future digital transformation more efficient and effective.
  • Digital fitness II
    Assessment of the organisational and technical maturity of the bank in relation to "digitisation".
  • Changes in customer behaviour
    Continuation of studies on banking customers of the future. Better understanding minimum requirements and identify approaches for enthusiasm.
  • New business and operating models
    Developing, describing and conceiving new business and operating models for banks in the context of "digitisation".