Unchanging Banks against the Turbulence of Innovation

The world is changing rapidly. With the development of Digital Technology and the Web, the internet world connects and access much information across borders. In particular, in a world of transformation, where daily life and business scenes are easily dismantled and integrated as data is digitally remastering with the development of information technology, consumers produce products, and resources & technologies are shared to create new values.

Furthermore, the world we will experience is no longer bound by reality but is being completely renewed (innovation) as we head towards the virtual metaverse. In a world where virtual reality is becoming a reality with artificial intelligence, avatars, digital twins, etc., we may have to go on a long, irreversible journey to find a new identity while experiencing unique experiences.

Even if we don’t want to change, the world changes, and so do we. In a changing world, if we do nothing, we will disappear rather than survive, so we still have a share in preparing and executing. If an organization plays a big role in any country, society, or economy that does nothing, the harm will be even more serious.

Consider banks. What would our daily life be like without a bank? Perhaps not only the inconvenience that is hard to imagine but also the way you live will be innovatively different. Though the private sector operates them, we provide institutional protection to them to maintain the public nature. Then we need to keep an eye on whether the bank is changing.

First of all, looking at newspaper articles on banking-related innovations over the past year, it is said that the bank’s CEO delivered the New Year’s Address, achieving the best performance since its foundation. Some banks are also focusing on diversifying their profits through M&As in securities and insurance. In addition, bank-affiliated savings banks are showing higher deposit growth than other savings banks, driven by the halo of their parent company. They are also increasing their size to inflate. Unfortunately, these articles only reveal the financial behaviors we have been accustomed to seeing.

Of course, banks have been leading their businesses using advanced technologies so far. They are making their efforts for financial innovation, such as establishing an organization responsible for digital financial transformation, the introduction of new digital technologies, open banking, and My Data, but the results are still quiet. Could it be that only intelligence familiar with regulation was operating?

Now, banks must prepare for a new world of innovation by nurturing innovation-sensitive intelligence. Banks need to stand higher, chasing innovations from fintech, big tech, and even non-financials. Furthermore, we need to prepare for decentralized finance, climate change, and ESG management.

We must do right now to respond to these challenges to enhance the customer experience. In other words, it is to quickly identify customer needs through various communication channels and provide customized services to individual financial consumers. And the tool that helps make this possible is artificial intelligence. So even if we do not mention ‘the artificial intelligence bank of the future’ quoted in McKinsey, artificial intelligence in financial innovation is very important.

If artificial intelligence is a function of data and algorithms, it is necessary to apply more refined and abundant data and algorithms suitable for use. In this respect, the ‘My Data business model’ and ‘Abolish network separation regulations’ can be the starting point of financial innovation.

The MyData Business Model connects 360 degrees of individual-centered life with data without relying on specific institutions or platforms, creating new customer experiences and sales strategies that we can not imagine with customer information for banking transactions only. In addition, the network separation regulations applied to most organizations in Korea segregate data and analysis tools, making it difficult to develop and verify algorithms.

We are now living with a choice between three worlds:

• A world of rapid change
• A world of great transformation
• A world of real innovation

In such a world, it remains to be seen which one will prevail: an intelligence familiar with the regulation or an intelligence sensitive to innovation.