The Microsoft bank?

The giants of IT and communications technology are well placed for banking, writes Gavin Barrett

Warnings that British television is about to change irrevocably, with the launch in 1997 of digital broadcasting, masterminded by Rupert Murdoch, may be surprising but not incomprehensible. We are well used to pocket revolutions in the media. Whether the full significance is understood is another matter. The same could be said of the financial services and information industries. Both are changing globally on an unprecedented scale. Mergers and alliances redefine the known world almost every week. But are we putting as much effort as we should into thinking through the longer-term implications of radical and innovative change?

This rate of change is accelerating, both for competitive reasons and because of the impact of new technologies. Today we think nothing of seeing the word "direct" after almost every form of financial service. The "call centre" concept, capable of offering sophisticated customer-oriented response via distributed telephony networks, is scarcely a novelty. When ATMs (automated telling machines) start delivering travellers' cheques, social security payments and Euro currency, we may experience momentary surprise and then adapt to the new reality in days. What used to be a worthwhile source of competitive advantage now becomes the commonplace standard.

Taking the twin peaks of financial services and information technology, the question "who is leading and who is being led?" needs an urgent answer. There seems to be an emerging asymmetry between these sectors which could allow the notion of Microsoft as a global corporate and consumer bank as credible - it has the platform, so why not the content? - and yet an HSBC or Chase as a global information platform much less likely. No organisation wants to make ill-informed strategic choices, in terms of structure, markets to be served, brand proposition or distribution channels, but it is limited by what it knows or can find out about the future. Understanding the potential of emergent information or communication technologies, let alone risk- weighting them, is one of the greatest challenges facing the finance sector.

Partnership deals, such as that between BT and NatWest, allow dynamic exchange of views and experiences that form the bedrock of convergent development of long-term solutions. NatWest, like its fellow clearers, suffers from the chronic dilemma that the barriers to exit from branch- based retail banking are a great deal higher than the barriers to entry into electronic banking. Working with BT, as the expert partner in "communications", NatWest will be better able to plan an orderly migration to customer-driven, high-accessibility services. The cost of transforming NatWest will certainly be high, but as nothing compared with financial services organisations planning in relative ignorance of what is possible.

The history of the information industry is rich in rapid and imaginative solution development, arguably looking for well-heeled problems to solve. This technology "push" is no longer appropriate. The time for "pull" has come. Innovation is vital, but relevant innovation is better. This demands that innovators secure ownership of their intentions by potential customers much earlier in the development cycle. Such customer-led technology innovation is often vaunted, but seldom delivered.

Information industry leaders predictably aspire to global platforms, not necessarily limited by sectoral focus. Whether this top-down view is sustainable or must now be replaced with micro-focused application development is the critical question.

What is clear is that both sectors need to talk together much more, in pursuit of convergent opportunities, ensuring that the current wave of rather too perfect "one-stop shop" propositions from the likes of IBM and EDS, that bundle telecommunications and data systems, is put in context through well-informed bilateral exchange and alternative viewpoints.

It's an old axiom that we do not know what we do not know. When the rate of change was less hectic, the risk of missing significant catalysts was lower. Today, no strategic thinker in any sector can afford the luxury of being assumptive. The cost of failing to understand what now becomes possible through technology innovation may be catastrophic. Ignorance, never a defence in law, must not be an allowable defence in commerce. In the turbulent times which the financial services sector will be experiencing ahead, arguably more violent and traumatic than anything yet seen since the 1987 Financial Services Act, only close links with the change facilitators in IT and telecommunications will provide adequate insurance against catastrophic myopia.

It is surely better to talk than to guess! n

The author is marketing director of PA Consulting's Sundridge Park management centre.