The digital future has been the subject of a lot of discussion across all industries in the past several years, yet, most of the talk has not fully captured the true scope of the art of the possible, especially in financial services.

Current limitations

Digital transformation largely takes place within the traditional boundaries of a brand or an industry. For example, when a bank considers digital transformation, they generally limit their thinking to their current business and apply digital technologies to aspects like account opening, loan application, payments, or other traditional banking functions. In other words, they focus more on improving what they have always done rather than imagining what they could also do.

While this can be valuable for a bank and their customers, it falls short of their complete opportunity. Because digital transformation transforms actions, decisions, money, and intelligence into data, traditional assumptions about who does what evaporate.

Think about it this way. In our personal and business lives before the information age, we would go to a specific place to do a specific activity. For example, if we needed to do something with insurance, we would see an insurance agent. If we wanted to purchase something, we would go to a store that had that product. If we needed public services, we would go to the appropriate government offices to get it done. As the internet emerged, many of these services shifted to websites where these same services could be done remotely, but within that same business. In other words, the move to a digital experience has stayed (to a large degree) within the traditional boundaries where a government website continues to provide only government services, and insurance companies provide only insurance services.

Shifting to holistic customer experiences

Now we are on the edge of the next major shift, characterised by the blending of these functions across functional silos and consolidating them into holistic customer experiences. These customers can be both end consumers as well as business buyers. Increasingly they don’t look to specific industries to help them; they expect, rather, that digital services will be combined to help them achieve a desired outcome. That’s the shift, in a nutshell.

No single industry has a monopoly on data anymore. Therefore, no single industry enjoys unique ownership of the customer experience. We have learned from Uber and Lyft that making rides easier—including an element of trust and simplifying payment—quickly erodes the expectation that “yellow cars are how I get rides.” But this is “small change” compared to where we are headed.

What a focus on experiences can mean

To illustrate the scope of possibilities in the digital era, consider this simple example, reflecting on the potential for cloud-based artificial intelligence (AI) capabilities to change the game in terms of addressing business needs in real time.

Suppose you want to set up a bakery. Some questions that might need answering could include:

  • What services would you need?
  • Where might it be best to set up your business?

Understanding the demographics of the area might help, too. So, you go on:

  • What’s the average income?
  • What type of bread do people like to eat and when and with what types of meals?
  • How do they like to buy—in the store, or online?
  • Can you deliver?

As your business expands, you might need real estate advice. You may need capital. As an early stage business, you may seek legal advice, accounting support, business consulting. How should you incorporate and where?

As your network of bakery stores grows, you start to think about how technology might help. Perhaps it would be beneficial to install sensors in stores that manage traffic and help you understand what types of bread attract the most interest. You install a new security system. You start to build a database of customers, so now you can develop individual profiles. Analytics may help you predict future demand. Social media may get your message out and provide feedback on customer sentiment and expectations.

The questions you need to answer continue to emerge, across all the various vertices of your business:

  • What staff will you need and how will you source them?
  • What type of employment makes the most sense?
  • How best to compensate them?
  • What are the tax and benefit considerations?

At some point, after you’ve tackled these questions over time, you become so successful you start outsourcing the baking process, focusing instead on distribution, marketing, and branding. Pretty soon,™ lists its IPO on NASDAQ.

To achieve this, your bakery has consumed services across several industries: banking, real estate, professional services, agriculture, public sector, technology, etc. But dealing with firms across multiple industries and sectors is time-consuming. Digitization—which, to its fullest extent, harnesses the power of data with the scale, speed, and agility of cloud-based technologies like AI—reduces this friction, blurs the lines between different industries, and makes possible entirely new, thoroughly agile business models. In this way, technology transfers power from corporations and institutions to smaller scale business entities and individuals. In the process, the economy itself transforms (some parts more quickly than others).

The opportunity for financial services and other industries

Industries today are still defined in terms of SIC codes first established back in 1937. This classification is helpful for compiling data on employment and the economy. Where should our bakery owner expect to seek out this type of help? A better question might be: What functional—banking, retail, transportation, insurance, manufacturing, telecom, etc.—arena would have the right data to be able to answer these questions for the bakery owner? It starts to become clear that financial institutions in particular have a great opportunity to snatch up these value-enhancing services and position their own brands as the source for intelligence at scale.  

To broaden our perspective a bit more, the opportunity for businesses in all industries—from shipping to banking to manufacturing—is two things:

  • First, they must determine how they can participate and enhance customer experiences created and curated by others.
  • Second, they must find ways to develop intelligence—using AI—that they can monetise into these customer experiences.

For example, would Airbnb hosts benefit from a bank’s insights related to the expenses, pricing, and budgeting for their property? Would they benefit from temporary insurance coverage? Would they pay for these services? Very likely they would.

Orchestrating customer experiences

The more you define yourself by what you have always done rather than what you could do for your customers and fans, the more commoditised your business becomes—and the more vulnerable to disruption. Organisations in financial services are rightly concerned about commoditisation, but it is a threat to every company in every industry. While banking is one of our oldest industries (the first mortgage being granted in the eleventh century), commoditisation is knocking at every company’s door. The only way to succeed is to deliver new kinds of value, in new ways, by orchestrating altogether new types of customer experiences.


Enabling innovation is Microsoft’s core mission: we understand that transformation can be challenging, but we also believe that it holds incredible promise. Our approach is to leverage technology in novel ways—enabling business agility with the tools that will define the future of customer interaction.

As your trusted technology partner, we offer both industry know-how and enterprise-grade solutions. And we can help you wherever you are on your digital transformation roadmap.

Find out more about the Microsoft perspective on the future of engagement and loyalty in banking and capital markets.

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