Updated: May 25
Originally posted on LinkedIn | 14 March 2021
Faced with relentless VC-funded competition from FinTechs - which are systematically unbundling profitable parts of the banking system - incumbent banks have been pouring money into digital transformation. $1 trillion over three years, according to Accenture research reported on Bloomberg.
Some have done a decent job - producing competitive digital products and services to retain their customers. Barclays made the running early, with innovative products like P2P payment service Pingit. Emirates NBD, DSBS in Singapore and Bank of America have all risen to the challenge. Yet many struggle to reap the rewards of this investment, and evolve from traditional bank to digital businesses. So why is this proving a challenge?
To tackle this question, we hosted a Round Table session last week: ‘Building an Agile Mindset’, with guests working with traditional banks and FinTech disruptors:
Sai Man of BNY Mellon, formerly Bank of New York, the merchant bank founded back in 1784
Lisa Gorski of HSBC, the international network with 7,500 offices in over 80 countries, founded in Hong Kong in 1865
Randy Heyrowsky of Klarna, Europe’s largest FinTech by valuation, founded in Stockholm in 2005
In advance, we sifted through questions submitted by over 40 banks, asset managers and insurance companies in 25 countries, and selected the most popular ones for our panel.
To download a recording from the Round Table, please email email@example.com
Here are key lessons from three questions tackled in session:
Q: What are the most important steps to take to help people reach a new mindset?
This may sound like the title of a meditation course, you may be thinking. Its importance really matters when you realise that whilst technology, data and automation are all vital ingredients of digital transformation, none of this matters if your people are using outdated techniques and processes to tackle new business challenges presented by digital.
Sai and Lisa’s answers got straight to the heart of the problem for so many banks: all too often there’s a lack of understanding about what ‘Agile’ means, and resistance to change from senior management.
>> Tip from the Panel: Explain what you Mean by ‘Agile’, and Make it Relevant
You’ve got to explain clearly why an ‘Agile’ mindset is important: what it means to your teams and their projects. After all, ‘Agile’ is a software delivery approach - based on the principle of design, build, test, review and iterate. So how will that be relevant to investment banking, boosting uptake of credit cards or mitigating the risk of loan defaults?
Think about recrafting the language to avoid misunderstanding, and avoid impediments which inevitably follow. Plenty of bankers have carved our successful careers based on traditional banking practices, so why should they start with adopting an ‘Agile’ mindset?
An Agile mindset is about creating and responding to change in uncertain and turbulent environments. It's about thinking through how you can understand what's going on in the environment, identify what uncertainty you're facing and figure out how to adapt as you go along.
>> Tip from the Panel: Get you Senior Managers to Drive the Agile Mindset Shift and Disrupt Yourself before being Disrupted
Driving an Agile agenda must be driven by senior management. At BNY Mellon, the C-suite mindset shifted from fear and anxiety over digital transformation - rooted in not truly understanding its business value - to disrupting all aspects of the business before it was too late.
Its Innovation Council has the remit to deploy internal and external players to challenge the BAU mindset and challenge all departments - including Technology and Operations - where many other banks task internal teams with figuring out the transformation agenda and driving change from being challenged by external experts.
Q: Why do FinTechs have an advantage over traditional banks in agile working to drive digital transformation?
Randy, a former Googler, revealed some of the ways that FinTechs behave, and the mindset which drives this behaviour.
He described Klarna as a tech company with a banking license, and explained the cultural and organisational features which underpin its innovative product development roadmap and rapid growth.
>> Tip from the Panel: Create the Conditions to Accelerate Rapid Digitisation
Create a sense of urgency, acceptance of moving fast and breaking things
Assemble a coalition of self-driven, self-motivated people
Produce clear communication of the business vision to rally the troops
Sai added that in consumer banking, incumbent banks feel that sense of urgency to change from the demands of customers, whose digital behaviour provides a realtime data flow which serves reveals their fast changing needs.
Banks must now question their place in the banking ecosystem, and be open minded about collaboration with FinTechs. The competition is no longer binary: just think about the digital payments industry - with CAGR tracking at 29% - driven by likely suspects AliPay, Stripe and Adyen, plus a raft of new entrants including taxi and retail players offering secure, trusted payments alongside their core business offering. These present collaboration opportunities.
Q: How do you orientate the whole business around agile? Does this create a sub-culture?
Lisa challenged us to question the true appetite for change. Speaking candidly, she explained that if banks restrict their ambitions to individual projects or teams, they limit the potential of the digital transformation success for the bank. Instead, they should aim for true cross-functional change. Sounding a pragmatic note, Lisa went on to explain that Agile should not be used as a blunt tool, as ‘one size fits all’ approach simply does not work.
>> Tip from the Panel: Apply Agile Thinking to Match the Team and Business Needs
Instead, take a nuanced approach: develop and share relevant success stories to match the business context, digital profile and proficiency of teams across different markets: the agile coaching needed to empower a team of young developers and marketers in Hong Kong will differ from upskilling and aligning a leadership team in London.
Technology, data and automation are vital ingredients of digital transformation, but cannot be leveraged unless your teams adopt a new mindset to tackle new business challenges presented by digital.
An agile mindset will help you identify what uncertainty you're facing and figure out how to adapt as you go along. Test, learn and iterate, without fear of reprimand if you make mistakes.
Don’t restrict your ambitions to individual projects or teams - instead, aim for true cross-functional change, enabled by true cross-functional collaboration.
To download a recording from the Round Table, click here
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Round Table #3 | Unlocking the Value of Data through Automation
Round Table #4 | Creating a Culture of Innovation