Sponsored: Welcome to the 21st century bank
AB+F spoke with DXC Technology Associate Partner, Digital Transformation, Catherine de Ruyter de Wildt and Emerging Technologies Lead, Andrew Slapp about what it takes to become the bank of the future.
Welcome to the 21st century bank, was the title of DXC Technology’s presentation at last month’s Australian Retail Banking Summit.
The topic raises a critical question: What is required from a bank if it is to embrace the 21st century? In a joint presentation, Slapp and de Ruyter de Wildt pinpointed four key themes to driving innovation in banking. But first, they acknowledged that the sector confronts a challenging landscape underpinned by regulation, evolving consumer expectations and technological disruption.
“The 21st century bank has to create a platform for self-serve, industrialised processes, scalable automation and social reach. At the same time banks have a heightened focus on risk due to the increased pace of change,” de Ruyter de Wildt (pictured left), said.
Banks know they need to innovate and accelerate to engage customers and many have already embarked on several strategies. This includes recognising that partnerships with fintechs are a given.
The majority of banks have set up their own purpose-build innovation labs already applying “agile” and “fail fast” in their landscape. But it takes more to be an innovative bank and we are now seeing banks driving organisational focus, to evolve business models that meet the rapidly transforming digital agenda. According to de Ruyter de Wildt, there are a number of challenges that have stalled this progress.
“While there is a buzz around innovation, financial institutions are finding it difficult to realize their plans. There are a number of issues that remain difficult to manage, ideas from innovation labs are not getting to market fast enough and competing demands on the IT department are hampering innovation plans.” de Ruyter de Wildt said. According to the team at DXC there are four key themes to address in the transformation to a 21st century bank.
1. Corporate culture
Slapp (pictured right), highlighted some interesting research that revealed a resistance to change in many companies. According to the study, one in two company employee’s favoured the status quo over innovation. “A resistance to change really creates an inertia in the organisation and it is important that this is overcome if companies want to dial up changes in their business,” he said.
Banks need to recognise that existing organisation structures and processes may need to be revamped if they are to drive innovation. Slapp highlighted the example of a leading bank which has already started to merge its retail and wealth divisions.
“Eliminating duplication through breaking down the silos in wealth and retail may allow banks to innovate by creating a high net worth experience for the mass affluent. The approach would enable multi-disciplinary teams to be brought together, driven through agile thinking,” Slapp said. Executive attention and commitment to understanding the current culture and driving cultural change was highlighted as a key factor in enabling rapid innovation and embracing change.
2. Tools and enablers
According to de Ruyter de Wildt, banks need to be mindful that not all tools and enablers can work for the business. It is imperative for banks to clarify the objective and desired outcome to drive decisions about which tools to implement. She cited an example which highlighted that Robotic Process automation (RPA) can be a powerful enabler for innovation and improving speed of service for customers, however it is not a silver bullet and should be looked at in conjunction with a suite of other process improvement solutions. “The key learning here, is not to get hyped about any piece of technology but rather focus on the business problem first”. de Ruyter de Wildt said.
3. Working with fintechs
Fintechs have certainly shifted the paradigm on innovation. Indeed there are a number of examples of banks se¬curing partnerships in this sector. Slapp believes that banks need to adopt the right approach in ensuring such joint ven¬tures really do deliver on innovation. Banks can’t encumber fintechs with the internal challenges and constraints they face, otherwise they will limit the success of the partnership. “We believe that the banks of the future will succeed by be¬ing the orchestrators of a unique customer experience and ecosystem, bring together internal capabilities and fintechs to deliver on customer needs. We need to embrace open in¬novation going forward,” Slapp said.
4. Return on investment
There is a predominant focus on achieving fast return-on-investment as financial services continue to drive a reduction in costs. de Ruyter de Wildt notes that a drive for ROI stifles innovation. “Ideas that promise short-term gains are favoured over more strategic initiatives, even if those ideas have the potential for greater benefits in the long term. Fundamentally, innovation is about creating a better experience for customers, whereas ROI turns the focus inwards,” de Ruyter de Wildt said.
A new way of thinking
Existing bank models bring challenges around rapid innovation and improving the customer experience. Indeed banks need to rethink their approach and deliver a revolutionary digital customer journey that spans the end to end value chain rather than just within the banks walls.
Slapp believes a solution can be found in adopting a standardised approach through platforms that give banks building blocks to achieve innovation. These platforms can effectively plug in the 3rd party suppliers, innovators and white label products, thereby providing a quick and easy basis for collaboration.
“The best organisations that are truly innovating are those that have established a standardised platform fabric across the bank supporting this collaboration. This then allows the bank to spend more time focused on crafting and delivering value exchange for consumers, to advance their business faster and deliver on scalability,” Slapp said.