bankingciooutlook

The Goldman Sachs Effect on the Future of Banking is All about Millennial Digital Experience

By Alan Royal, Head of Technology Innovation & Business Transformation, Strategy CIO

Alan Royal, Head of Technology Innovation & Business Transformation, Strategy CIO

The Goldman Sach’s One Dollar Virtual Bank

Recently, posted on TechCrunch, was the announcement that Goldman Sachs launched “GS Bank, a virtual bank with a $1 minimum deposit.” As this announcement was not largely picked up by the mainstream media, it was largely shared via social media. It has yet to be recognized as to its future impact, and associated competitive threat which will emerge, in the banking industry.

The target market for this virtualized banking experience is clearly the emerging Millennial & GenX’ers. Why? These two emergent demographic markets, if not already, will be inheriting the “wealth” from their parents, the baby boomers. Additionally, these individuals also represent the future wealth generators, as baby boomers are generationally transitioning into retirement.

"Having established the value generation hypothesis for GS virtual bank, the obvious emergent matter at hand, is the “so what” for your bank"

When one lands on the GS virtual banking virtual experience, it draws in early adopter customers, as a savings bank, and not a transaction bank. In carefully examining the landing page, it is traditional, as well as innovative, forming the basis to be interactively relevant to the “wealth givers” (baby boomers) and the future “wealth receivers” (millennials/ genX’ers).

The Underlying Value Narrative

The underlying narrative of this web experience is subtle, demonstrable, and of material value. Parents are drawn into funding their account with material cash at hand, given the attractive deposit rates. When desired, parents easily, based upon an event or planned basis, enable wealth transfer to their offspring. The offspring experience real time money transfer, which they can then interact against their own demographic acknowledged web experience. GS Bank becomes a “virtual” wealth transfer platform. Additionally, the branding of “Goldman Sachs” transfers, in a meaningful way, to their future digital generation consumers.

The demographic “neutrality” of this virtual experience should be carefully observed. This virtual day one digital experience stands in the “neutral” zone, where neither parents nor offspring “love it;” but rather are willing to “accept it.” If the web virtual experience was too offspring focused, parents would not engage. In contrast, if the virtual experience was too parent focused, the offspring would not engage. This is precisely why, when either parents or offspring interact against this virtual experience it is not particularly “exciting,” but reflects “relevance” to both parties.

Over the tincture of time, the wealth givers will expire, while at the same time the wealth receivers will emerge. This, current state GS virtual experience will evolve in cadence with this wealth transition toward a fully “Millennial,” GenXer, digital experience.

A New Technology Platform

Another underlying benefit associated with Goldman establishing this new virtual bank, is the freedom to enable a “fresh,” unencumbered technology infrastructure. Large, well established organizations like Goldman Sachs have “legacy monolithic” technology platforms. This is not a fault, but a reality for most banks. As technology has evolved over the preceding decades, so has the underlying technology platforms, which enable consistent business relevance, enabled through fast adoption of enabling system technologies. The emergent problem at hand, when seeking to enable a virtualized differentiated omni-channel behavioral and predictive Millennial/GenXer experience is consistent access to the data necessary to create and maintain the required supporting analytical database, with the required breadth and depth of customer specific data, to enable behavior and predictive analytics.

This new Goldman virtually digital bank is most assuredly set up, to optimize customer demographic and interaction data. Unencumbered from the traditional “legacy monolith,” results in an optimal data capture, learning machine, purpose built to enable constant evolution of digitized banking as an industry leader rather than follower.

GS Bank Success

Success for this virtual bank is measured by the number of emerging Millennial/GenXers, who find this emerging virtual banking platform to be their preferred virtual banker and also representative of the demographic sub-segment, most likely to be the wealth generators in the coming decades. In addition, another measurement of success reflects the amount of wealth transfer between parents and offspring.

Having established the value generation hypothesis for GS virtual bank, the obvious emergent matter at hand is the “so what” for your bank. As every banking institution has their own “uniqueness” in the marketplace they serve, addressing this matter at hand at a “granular” level would add little value. Thus the steps toward enabling bank specific, omni-channel customer digital behavioral and predictive experience, a framework for bank specific strategic enablement, which when acted upon within the context of each bank specific context, leads to optimal outcomes.

Organizational Reconfiguration for Success

In virtually all organizations, the potential synergistic value associated with an integrated IT and business configuration has not been realized. As we are now seeing technology transformation occur at a far faster pace than we have seen in the past, optimization of the technology delivery process is a critical objective for the coming year.

IT leaders and the businesses they support, need to be integrated into the overall technology enablement process, with equal accountability for solution delivery. The long-held view that IT development activities represent a “black box” to the business needs to be abandoned. When I participate as a thought leader at Fortune 1000 senior executive events, this virtual wall between IT and the business often comes up as a matter of great concern to C-Level executives.

CEO and board engagement is essential. No longer can technology enablement be a secondary priority for this top leadership group. A change in visibility and involvement is necessary as the future of an organization’s competitive differentiation will be tied to technology enablement.

CIO Mindset Change

Going forward, CIOs must change their mindset to be strategically focused. This will result in, some level of internal IT organizational delivery reconfiguration in order to enable an optimal strategic delivery model, while in addition, embracing the integration of the business into the overall solution delivery process, as discussed above.

Data Analytics as a Top Priority

For any consumer-driven organization, consumer data retention has to be a top priority. The key driver behind any behavior and associated predictive analytics is data. Organizations need to establish their unique data enablement strategy, which leads to an organizational analytical database. The hiring of a data scientist is essential to participate in what data is mined from existing systems, which then forms a basis from which supplementary data requirements can be established.

Even if data analytics is not currently relevant today, enabling the retention of the maximum amount of consumer related data is critical. This non-specific data retention strategy will be required due to the fact that behavioral and predictive analytics represent an art vs. a science. The key data elements that enable behavioral and predictive analytics only become emergent when the data scientist performs their data modeling against a baseline data set. Thus data retention, prior to a potential future need, remains essential as the value generated from behavioral and predictive analytics is directly tied to the breadth and depth of available data.