Speaking recently with a leading European bank, the bank was explaining that its innovation and technology strategy is set on two strategic pillars. The first is centered on “building the future-proof bank” and the second is focused on “reinventing the customer experience”. The second pillar is not uncommon in banking. It would be surprising when speaking to any bank that this isn’t a strategic pillar of some sorts. By contrast, the first pillar is more interesting.
Not that this would not be of interest to other banks, but that for most, the proliferation of legacy systems at traditional banks tends to make future-proofing ambitious at best, with most banks struggling to support current demands, let alone future ones. The rate of technology change means that future-proofing and avoiding legacy creation is an issue even for the neobanks. It doesn’t take long for new systems to become outdated as business challenges and priorities evolve.
However, interestingly for this bank, future-proofing is less about technology systems themselves, although there is a focus on consolidation, rationalization, and digitalization of products, processes and platforms, but on the mentality of the bank. It is about achieving and sustaining a high level of employee engagement, as well as developing, attracting, and retaining key skills in areas such as sustainability, innovation, digitalization, and analytics.
Combined with this focus on skills and approach, the bank is also looking to evolve its partnership and vendor landscape, and is planning to source innovation and delivery of new services to clients through working and being part of a broader ecosystem, rather than maintain the “bank does everything” approach that tier-1 banks have traditionally taken. The central point is that time to market is more important than trying to control and manufacture/deliver everything internally.
For most banks, this cultural shift is one of the top challenges driving digital transformation. Technology platforms are important, but as the sector increasingly adapts to the realities of the new open banking paradigm, it will be the ability to change and create new business models, combining in-house and eternal services to meet client needs that will determine the winners.
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