I find more and more people are starting to understand that digital is a transformation project, not just an adjunct to business as usual. But there needs to be more of them. We can liken most people’s thinking about digital in banking for example, to the thinking within the media when the first digital magazines were being produced. The idea was that we added a page flicker to the top right and left of each page online, so that the user could flick through the magazine as though it were in print. We digitized printed media into online printed media. That’s not digital content or digitalization, but just a faster horse and therein is the rub. Much of what I see banks doing is producing faster horses.
This struck home when one of the big consulting groups were telling me about their worldwide global survey of big banking execs and how 77% thought they had done digital. You think you’ve done digital, I screamed? But, as 11FS guys would say, digital is just 1% done so how come you think you’ve done it.
Their response made it clear that the banking survey had found most banking execs believed they had done digital because they had a mobile app. That’s digital, they would say. Oh, and we have a Chief Digital Officer or, rather, several of them, and we made a big point of talking about our digital investments and journey in our annual report and investor briefings. So yes, we’ve done digital.
Oh dear. The bank had changed nothing. There was no rethinking of product and service. No new ideas about how to structure the bank. No fundamental redesign of core systems structures. Effectively nothing had changed except that they had stuck an app on the front end of the banking process.
This is a fatal error, and will prove the downfall of some big banks in the next decade. The reason why I am confidently predicting the demise of a big bank – and by big, I mean systemically important – is that they will be acquired or broken up due to their inability to keep up. If a bank is just sticking apps on the front end, how are they meant to keep up with their competitors deep learning projects? If a bank has not changed anything under the hood, how can they leverage internet technologies for the 21st century? If the management team have zero digital experience, how can they lead the bank through a digital transformation journey?
Between the hordes of start-ups that want to challenge banks, along with their compatriots who want to reinvent financial services for the internet age, a bank firmly rooted in last century technologies is clearly not going to survive for the long-term.
What I truly believe by digital is that a bank reinvents itself to place a digital structure at its core. That digital structure is based upon front office apps for sure, but it is deployed in a marketplace of middle office APIs and back office analytics that are open sourced and collaborative. The banks that just do the front office app have fundamentally changed nothing. They aren’t ready to collaborate and co-create, but sit rigidly in their old command and control structures like King Canute on the beach trying to stop the waves. Eventually, unless they move, they will drown.