Defenders of old faiths
In a world where tradition is highly valued, as in the haloed portals of many of the longer-standing financial institutions, a lack of passion around technology within senior management serves to perpetuate confidence in the status quo and a view that gathering storms will simply pass on by.
Banks need to move closer to their customers in a way that reflects the average
citizen’s comfortable interaction with mobile technology and the increasing assimilation of connected capabilities into everyday life. It’s an opportunity for new interactions designed in the way the customer wants them; easy, accessible, on the move. Yet it appears to be with less than clamorous enthusiasm that the sector greets the Open Banking Working Group’s recommendations on the Open Banking Standard.
Let’s freshen up
Meanwhile, innovators are embracing new business models built on leveraging internal and external third party APIs to create services and products. In her speech at FinTech Week earlier in 2016, Economic Secretary Harriett Baldwin welcomed the initiative and explained that it would enable banks to “design phone apps which help customers manage their money better.”
The Open Data Institute outlines the customer benefits of the new standard in the following way:
“If consumers could give an approved price comparison service explicit and limited permission to access their bank account data across an open API, they could simply and quickly find the best option to suit their needs”.
This is an initiative that will cause many to reassess their business models. Or, at least, it should. It represents an exciting opportunity for the banking industry to make some truly potent changes that would delight customers, benefit the banks themselves and freshen up the face of banking for many years to come – new traditions in the making. Now banks have the chance to introduce systems that gather really actionable data; behavioural insights that create a platform for predictive modelling. The old tradition would have been to ‘shoe-horn’ customers into categories that the banks wanted them to be in; most closely corresponding to the existing product portfolio. The new approach is to create services based on customer insights; responsiveness to what customers want rather than bullishness about what the bank happens to offer.
In a world where challenge, invention and bold new approaches are valued, as in and around the electrified centres of innovation coming into the market as FinTechs, the very course being chartered is straight into the eye of the storm; where the action is, and the high growth-potential customers are. These are the customers who are themselves embracing the same technology that FinTechs are embracing.
Back in traditional banking land, however, all is calm, tranquil and conceivably even lethargic. Accenture reports that only 3% of CEOs and 6% of board directors from leading banks have professional technology experience. Perhaps it’s not so much about lethargy, and more about simple, basic unfamiliarity?
Accenture’s group chief executive of Financial Services, Richard Lumb, says:
“ FinTech, cyber-security, IT resilience and technology implications of regulatory changes have all become critical board-level issues but many bank boards simply don’t have adequate expertise to assess these issues and make decisions about strategy, investment and how best to allocate technology resources.”
Chris Skinner (The Finanser) and Matthias Kröner (CEO, Fidor Bank) have made some great points in the Fireside Chat , the Future of Financial Services, they recorded at IFGS2016 recently. Kröner reminds us all that there was a time, not too long ago, when the sole purpose of tech in banking was to decrease costs, and possibly to gain efficiency increases here and there. FinTech has brought the realisation for the first time that tech can be used to reinforce the unique selling proposition. The big challenge for banks, suggests Skinner, is to change the core back office because it is crammed full of legacy. Accenture’s Lumb says:
“ Banks need to change boardroom culture through a combination of deep technology expertise and also much-improved understanding of the impact of technology among other board members”
Genius unchained
It is highly possible that the issue of slower innovation in established financial institutions is exacerbated by the way internal IT teams are structured and motivated within banks.
Much of their work is focused on keeping the lights on or endeavoring to effect major shifts and migrations to new technologies in a mass fashion; one that lacks the agility of the nimbler FinTech.
Imagine if…approaches to liven up thinking among the internal development team included tasking them with competitive KPIs to bring experiments and prototypes to the table quickly – could this be a way for technology specialists within the bank to flex their expertise and knowledge of the banking systems and apply new thinking to old models?
Thinking outside the bank
The bigger issue behind such initiatives as Open Banking Standards is about nurturing a culture of innovation and creating the environment for it to thrive in; one where cost concerns neither constrain nor define creative, aggressive, disruptive thinking. Within the UK, the banks are next door neighbours to one of the most innovative and passionate tech communities in the world: Silicon Roundabout. Imagine if banks took advantage of the proximity of talent, and the vast resource pool, with which they rub shoulders? The mind-set that richly pervades the atmosphere down at the end of Old Street must surely be accessible from Bishopsgate?
FinTechs are learning the language of traditional banking fast. Compliance and Regulatory documentation is no longer a secret language that only old banks can speak. They can no longer rely on the knowledge and experiences of the old ways to protect their future. Open Banking Standards is the catalyst for this change. Accept it. Embrace it. And show the world why the UK is right to lay claim to being the leader in financial services innovation.
The Technical Polyglot 