Does Your Bank Have What It Takes to Go Digital?


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I’m often askedwhat’s the best way to make for a bank to go digital. There’s never an easy answer to that question as every bank is different. Some will only make it by launching a whole new bank rather than trying to reinvent their current bank. Some will try and re-engineer their bank and fail. And a few may actually succeed, although true digital transformation is a long and tough road. Most existing banks were built for the management of paper notes and documents in a branch environment. All of the technology that has been laid over that structure has cemented a physical distribution focus into the bank’s core back office systems. Those core systems are often written in archaic code, and it’s all very complex and difficult to change. The most fundamental point here is that it is also proprietary to the bank.

What is happening now is that fintech startups are using open source architecture that relies on the internet for distribution. They have no history and therefore no constraints. They are using all the latest development environments and are incredibly agile. How can a traditional bank compete with that?

The answer is they can’t. However, what a bank can do is use the fintech ecosystem to re-engineer its operations to become faster and more efficient. That’s going to take time and it’s critically important to understand that this bank re-engineering is more than just a tech project. It’s re-thinking the bank’s business model into an open sourced marketplace ecosystem where the bank is just a platform for many players to play. The visionary banks get this and are building such capabilities as I write this post. However, those visionary banks are few and far between and, common to all of them, have a technologist in the driving seat.

When you think about that statement, it’s pretty obvious that this has to be the case. You cannot convert a traditional bank built around physical structures to a digital bank built around digital structures if you are a banker. This is because the bank is trying to transform itself from a financial institution using technology to a technology provider offering finance. It is radically different thinking, and is a cultural outlook, rather than a tech project.

How many banks are led by technologists? I can count them on one hand. The majority of banks have zero technology representation in the C-Suite. A 2015 study of the world’s largest banks found that 40 percent had no technology professionals in the C-Suite, and 33 percent had just one. Seventy-three percent of banks lack technology leadership and yet they are the very same organizations where the current leaders are shouting for change. JPMorgan Chase & Co. CEO Jamie Dimon’s comment at an investors day event in 2014 that “When I go to Silicon Valley they all want to eat our lunch” is right on the money, but what will most bankers do about it? This is where many hem and haw. They make it known within the bank that it intends to go digital—and then assign the task like it’s just another tech project.

Instead, the few banks that are really making the change are building a C-Suite where the majority of those executives have professional technology experience, and along with the CEO live, breathe and talk technology from the Boardroom to the Boardwalk. They don’t just talk the talk, they walk the walk.

This is something I see very rarely in incumbent financial institutions, so when someone asks me what’s the best way to make a bank digital, my answer is always the same: Get a digital leadership team to work the project from the Boardroom to the Boardwalk. Does your bank do that?