I’ve been grappling with what sets apart the banks that I think are truly digital from the rest, and realised the other day that it is because they have digital to the core of the bank. They don’t just think the bank has to adopt digital or do digital, they have to be digital. It is a different way of thinking and illustrated well by the few that I count as truly digital. These banks are on a continuous journey of developing digital services, replacing core systems, creating strong data analytics structures and converting the organisation to one that codes rather than transacts.
IT is fascinating to talk with these banks as they talk like bankers, but more like Silicon Valley geeks. In fact, one was telling me a story about how they visited Silicon Valley before they embarked on their digital journey. They visited Facebook, Amazon, Google, Netflix and were impressed with the speed and structure of these firms. In particular, they were surprised to find guys who used to work for a bank coding in Netflix. When they asked Netflix how this could be, the answer was quite amusing. Apparently, the Netflix exec said “we hire the guys you fire and set them free”.
And I guess this is what a digital bank does, if it takes digital to the core. The bank creates small teams and sets them free. They are no longer part of a waterfall structure where everyone has to sign everything off. They are instead moved into teams of less than ten people, who can code and develop at will.
It is interesting to see this in action, as developers and coders and designers are almost like a small team crafting an art. An artist cannot be constrained by structure. An artist would not allow their client to inspect their every brush stroke before it can be applied to the canvas. An artist would not test their music with the head of the music label before they started to try to play it.
And yet this is exactly how a traditional bank behaves with its development people. They want them to test, show and explain all and get it signed off before they will allow it into the bank. There’s a great episode of the Andreessen Horowitz A16z podcast where Adrian Cockcroft, the former head of cloud for Netflix, talks about microservices and agile. His key takeaway is that it is soul-destroying for people who code to work in a waterfall organisation, where everything has to be signed off from top-down.
A digital bank does not behave this way. It sets their people free. It is really hard to do this in a company that traditionally has a strong command-and-control structure. Let the people go. Let them do their own thing.
No wonder there are so few truly digital banks out there amongst the large traditional bank community.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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...