Written by Danielle Neben, Editor at Nordic Finance Innovation
At today’s NFI meeting in Oslo, Chris Skinner held the European launch of his new book “Doing Digital” with an excellent group of speakers to comment on their own digital transformation journeys as well as highlighting some key lessons learned from his book.
What does Doing Digital really mean in the 21st century?
Banks’ business model was built on the distribution of paper, cheques, bills of lading, documentary credits, custodians to safeguard client assets, gold and through large branch networks. The focus of digitization has been on automation. But what about the customer?
Chris Skinner’s new book “Doing Digital” takes lessons from leaders from 5 key banks that are transforming their businesses from inside out: JP Morgan Chase, BBVA, ING, DBS and CMB. Before they started, these banks looked outside-in to learn from top tech companies born on the internet: Google, Facebook, Alibaba, Amazon and so on. How these corporations are built differently, run differently, managed differently. Three key elements are core to these bank digital transformations, which is an ongoing process:
Rethink around the customer
No one size fits all. And it is not about survival of the fittest. It is survival about how you adapt to change.
To become fit for the 21st century, refreshing Core Banking is an absolute must before embarking on this change. Most banking leaders have dodged the bullet of refreshing due to the risk of change. But now the risk is much higher than the opportunity. Forget waiting 3, 4 years. Changes should be made every day. Banks that are postponing these core banking changes will be acquired for customer data by banks that are doing well.
For all banks, agility is key. Technology is business and business is technology. These banks have moved to cloud and are now updating apps 2 to 3 times a day based on customer needs.
What is your purpose?
“A small tree with strong roots will outlive a big tree with weak ones”.
After the Financial Crisis, The Financial Conduct Authority in the UK said that banks had lost their moral compass. And 10 years later, very little has been changed. We see this with the recent money laundering issues face by many Nordic banks.
What is the purpose of banks?
“Banks that are doing digital well, live, work and bank around a purpose” as per Connie Dorrestijn, Founding Partner at BanikFi. Below are inspirational purpose statements of key banks that help to drive the change.
BBVA: Bring the age of opportunity to everyone DBS: A purpose driven bank around good citizenship ING: Empower people to stay a step ahead in life and business Alibaba/Alipay: We are all about making society and the planet a better place (Jack Ma)
At BBVA, the two top objectives set by the Chairman Carlos Torres are: 1) Sustainability and 2) Customers’ Financial Health. That is, doing the right thing. Offering pre-approved micro loans instead of driving customers into overdrafts – working with customers for their long-term financial health versus short term gain. These are services offered by Change Labs to their banking clients.
Many of the speakers today spoke about looking back at the history of their banks to understand their purpose. Gjensidige is a 200 year old insurance company in Norway. It was originally established by and for the customer. This is the core purpose that drives their innovation.
Understanding the customer through data
“To truly understand customer needs, this needs to be data driving with ongoing experimentation” as per Espen Espen Kjølberg, Head of IT at SpareBank1 Development.
Data is a major advantage that banks have over challengers. The data may not be clean. But it can be used in specific areas. The question is how to leverage AI and data, not only for risk and fraud management, but for marketing and customer intelligence.
Giving guidance, not direction
Henrik Kniberg at Spotify demonstrates this in the below diagram for balance between alignment and autonomy of teams:
Banks are used to giving orders, not direction. Leveraging open innovation to become more agile is key to move out of core innovation to revolutionizing innovation.
“Running the bank” focuses on delivery. “Changing the bank” is the hardest part.