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Banker: We’ve Done Digital! Skinner: Oh Dear

At the end of most of my speeches, I get someone raising questions around security and regulations. What was interesting is that I got the regulatory one this week, but my host told me afterwards that one of the bankers in the audience had come up and said he was surprised that I hadn’t talked about security. Before I could say it, my host made the comment he doesn’t get it, does he? I was a bit surprised but then we had spent quite a bit of time together talking digital transformation, and they were pointing at the fact that there is an enormous difference between doing digital and being digital.

I guess my host had got my message, and it goes something like this.

I see stats, surveys and research that give me various figures of bankers’ complacency about digital. For example, a CGI survey found that 80% of senior bankers surveyed believe they’ve done digital; Gartner have a stat that 76% of C-level bankers surveyed see digital requiring zero change to their business model.

These figures are right in the bankers’ heads because they think digital is a channel, delivered today via mobile apps. Yes, they have done mobile, but mobile apps is not what digital is about. Digital is about a reimagining of finance using technology. In fact, digital requires a complete rethinking of the business model.

This is because the banking business model is built for physical distribution, whereas now we are moving to digital distribution. Banking has its heart in its back office products, and thinks about pushing products to customers through channels. Digital has its heart in real-time availability, and thinks about using customer data to create intimacy through devices. Banking has added technology to its core products, and calls these channels; digital is adding financial products to its technology, and focuses upon access.

I know that digital demands a rethinking of the business model of the bank, as the banks’ business model doesn’t work in the digital age. In fact, when banks talk about channels – a digital channel – I know they don’t get it. Channels is the old business model that layers itself on top of transactions. Access is the new business model that starts with the customers’ digital footprint. The two models are opposites as one requires a transformation whilst the other is just banking-as-usual faster and cheaper.

In fact, the CGI and Gartner stats both shout that bankers believe digital is just banker-as-usual, faster and cheaper. It’s what they’ve always done with technology – deploy tech to create greater efficiency and reduce costs. The fundamental change today is that the technology is open sourced and in a marketplace of platforms that connect people who have money with people who need money. It is focused upon software and services, not buildings and humans; it demands partnering and collaboration, not internalisation with proprietary systems; it is open and transparent, not closed and opaque; and it is globally connected not locally located.

For any bank leader who thinks their organisation will survive with zero change to their business model, I feel sorry for them. They are leading their firms into obsolescence. But then 94% of the C-suite board members of banks are bankers, so it is unsurprising that they do not understand how digital is a total transformation of the business, not just banking-as-usual. This brings me back to where I started.

Cynical bankers who understand banking and don’t get the message, will always raise security and regulation as the focus for the future. Sure, security and regulations are important, but if you understand that digital is revolution in thinking about money, and the business model that goes with it, then the last thing you would start with is a focus upon security and regulation. The first thing you would focus upon is how does the business model need to look for the future, and how are we going to get there.

Ahem …



About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Philip

    As usual, a great article Chris. I’m curious, are you aware of any bank (old school or startup) that is genuinely using digital to reimagine finance, and consequently, a complete rethinking of the business model?
    To me, the startups that I’m aware of seem to be developing the same/similar products and services of established financial houses, just without the legacy tech infrastructure and traditional distribution/access channels! Perhaps, this is their (startup) strategy to acquire customers, and will evolve their proposition over time – but at the moment, I can’t see anyone truly offering something different to the consumer. Your thoughts?

    • Nastase Bogdan

      ING DiBa-Germany

  • Allan Brown

    I’m a recent subscriber to this blog, and have found your comments very insightful. Your observations here about the mindset of the mainstream banking industry towards “digital” certainly highlight one of the industry’s biggest challenges. However, in defense of these execs, I think one of the problems is the vague nature of the term “digital” as it is used today. It has become shorthand for the application of lots of technologies to achieve lots of goals. For example, deployment of blockchain-based tools and engagement through social media require different skills and solve different challenges, but both get tucked under the digital “umbrella”. To your point, organizations that leverage one (or more) of the tools and concepts that fall under that umbrella may be think they can check-off the “digital” box.

    As you (and others) help the industry parse the concept of “digital”, execs will get better at translating it into actionable strategies.

  • Andrew Singleton

    Not only very good, but very useful. I think one of your sentences: ‘digital is about a reimagining of finance using technology.’ Could be paraphrased for creative agencies: Digital is about the reimagining of ideas using technology.