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Industry 4.0 And The Lessons For Banking

Last week we were privileged to take a deep dive into Industry 4.0 a.k.a The Internet of Things.


For those not familiar with the concept, Industry 4.0 is the digitisation of industrial value chains and

networks and regarded as the next 'industrial' revolution.


Common standards drive inter-connectability between all participants and produced parts, with

each resource becoming an information carrier able to communicate with other resources. This

creates compatibility, high visibility across the value chain and real time decision-making.


The impact is profound. Customers can seek highly personalised offers in small batches. Producers

become flexible to reconfigure to changing demands. The ecosystem of suppliers, logistics and

finance have to integrate seamlessly into the end-to-end process.


If you extrapolate further the whole basis of competition changes. Rather than protecting IP and tying clients in to long service contracts, Industry 4.0 will facilitate ‘plug & use’. Everything becomes open, client satisfaction is based on service excellence and market participants can share costs and opportunities.



Digital Transformation Required

Creating industrial Lego is not easy. Processes need to re-engineered and digitised across the whole value chain to create compatability and eliminate paper, phone communication and manual tasks.


Technology has to change too. Systems must become heterogeneous, providing new interfaces for communication and applications through which new products and partners can be added easily.


Significant shifts in mindset and of course investment, with payback measured in years, are also required to make this a reality.



Relevance to Banking?

As we listened we pondered that many parallels exist with Banking. For example, many Banks continue to lock-in clients by bundling ancillary services with lending.


Miss-selling and Market manipulation occur with amazing regularity (IR and FX fudged, Commodity and Credit markets anyone?), suggesting a lack of corporate governance and clients simply not understanding the offering.


Legacy infrastructure acts as a barrier to change, most notably in payments and the digital core banking systems required to operate a next generation bank.


In fairness most banks understand the benefits of digital transformation, after all client satisfaction stagnates and innovative challengers pose a threat

to already strained financials. Some understand but lack the skills or resources to change. The laggards remain sceptical despite FinTech allowing you to bank without a bank using Industry 4.0 principles – providers connected by API’s, seamless delivery, intelligence analytics and suggestions.



Live Digital  

It is essential to be digitally enabled, that is to see it it as a long-term (transformation program required) source of competitive advantage rather than a fad. All aspects of the business should in scope, be it a subsidiary, employee or process. Here is 10 ways how:


1. Adopt a client centric approach, making it is easier to analyse data, relationships and profitability.

2. Manage on a subsidiary and full Enterprise basis, removing silos improves decision making, standardisation improves efficiency and compatability.

3. Modular solutions, pay only for what you require.

4. Host in the Cloud or on your ecosystem.

5. Agility – customise to your need, scale quickly, adapt easily.

6. Open architecture to interface easily and securely with others.

7. Automate processes and messaging to provide efficiency and operational risk gains.

8. Process multiple data, transactions and applications in real-time 24/7/365.

9. Make it easy for clients, staff and stakeholders to engage, understand and transact.

10. Innovative mindset supported by a commitment to finance and skill the required change.


industry 4.0 implications for banking