Banks drive the economic wheels of society by facilitating the movement of money safely between different parties. It is hardly a surprise that the financial industry was one of the first to adopt the commercial use of computing.In the 60s and 70s, allbanks had to reinvent themselves technologically as bank ledgers moved onto big mainframes, which provided unprecedented quality and efficiency. Today, banks have evolved with plastic cards, the internet and mobile applications, etc. but many are still relying on analogue business models and old-fashioned mainframes in their underlying technology stack. Banks used to be at the forefront of technology, but now,start-ups and big tech companies are looking at theindustry and are desiring to do things better and more efficiently.
I talk to strategy executivesin different banks and they are aware of this threat. The industry knows what it needs to do and they are investing significant amounts to get there. The financial services industry is now one of the biggest employers of Software Engineers and uses more than 6 per cent of their revenue on average on IT; only surpassed by software and internet services companies. However, many banks are failing to achieve their ambitions, despite the good intentions and huge investments.
I work for Danske Bank as Chief Digital Officer,and in the last couple of years, I have primarily focused on transforming Danske Bank in Northern Ireland from an analogue business to a digital business and the results have been remarkable. We have doubled our digital logons and increased digital transactions and sales volumes by 35 per cent and 75 per cent respectively, two years in a row. Recently we got awarded “Most Responsible Digital Innovation” amongst all companies in Northern Ireland. I am delighted to share my thoughts and experiencesas I think my learnings are relevant for IT executives in all industries.
"Today, banks have evolved with plastic cards, the internet and mobile applications, etc. but many are still relying on analogue business models and old-fashioned mainframes"
Are most of your initiatives reactions to changes in our environment: competitor movement or new regulation? Analogue businesses are defensive and digital businesses are on the offensive. You need to create business opportunities and try things or you will never surpass the competition.At Danske Bank, wehave taken different approaches to increase our ability to innovate. Initially, we ran a set of innovation teams outside the line organisation and at another physical location to give them a better chance of trying new things. We also hired fifty percent new staff from other industries in order to get more views and ideas. The result:launching a new payment app, “MobilePay” that achieved massive adoption within our customer base and made it to rank#1 in the Apple App Store; surpassing even Facebook. But it is essential to look at the entire organisation to fix the basics and really get ahead.
Your executive team needs to prioritise customer needs and drive digitalisation projects accordingly.Analogue businesses focus on their internal priorities while digital businesses focus on their customers. Customers make or break your business, so everything you do should revolve around your customers. For example: chatbots have been hyped during the last couple of years, but I think one should be careful to offercustomers the sub-human experience that they provide. From my personal experience, I have felt unfulfilled and rather annoyedwhen I have encountered chatbots. So why would anybody want them? Most companies deploy chatbots to reduce their cost, but in reality, they don’t save a lot of money and even worse, the customers don’t want them. It’s essential to start with knowing what your customers want and need and accordingly adjust your organisation’s priorities. Thenuse the technology that is most appropriate to provide them with the best value add and solve their real life problems.
One third of CIOs rate cultural and behavioural challenges as the most significant challenge to meet digital prioritiesahead of issues such as lack of talent or problems with legacy infrastructure. At Danske Bank, we realised that we needed to look at both our internal organisation and culture to achieve our ambitions and have everybody work together. Analogue businesses are often organised in silos while digital businesses are cross-functional. Our target KPIs were all replaced with one overarching KPI across the company“Customer Satisfaction”. The teams were organised according to customer journeys and we secured strong ownership for the customer experience and agile cross-functional teams that could develop digital solutions at pace.
In banking,one of the biggest inhibitorsto deliver is having a very risk-averse culture. Analogue businesses are highly risk averse, while digital businesses try things out and fail faster if the product or solution isn’t viable. I am continuously working on taking our culture from a “risk-averse” to a more “risk management” culture, and we are starting to see the results. Our teams are more empowered to make decisions and they are developing MVPs at pace while trying them out with our customers.
So to conclude, if your digital and innovation capabilities are an integral part of your organisation, and your colleagues are doing great things for their customers, using technology whenever appropriate, then you are probably on the right trajectory.