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Shaping the future of finance

Digital is a mindset, not a project

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FedNow is a new faster payments service for America. It’s been developing for years, and will go live in 2023 and yet, in conversation with an American friend, only 1 in 10 banks are ready for this. Why?

Well, the issue lies in change. Fast change or slow change? In fact, a friend recently resigned from being a bank teller because there was so much change (ed: there’s a joke in there).

The challenge for many banks, particularly when talking with smaller US banks and credit unions, is that the structure for enabling real-time payments involves systems change. In order to make systems, or systemic, changes creates risk and cost which, if avoidable, will be avoided. It is the reason why most banks have never upgraded or changed their back office systems. It creates risk and cost.

We know this but, at the same time, what does this mean if we cannot respond to change? We see the Fintech world take off, and thousands of start-up innovators around the world, and we sit back and do nothing? Of course not. We try to change. Obviously, the start-up has the advantage of zero legacy, so they can change things fast, but banks can change and some are. In fact, some are changing dramatically.

Just look at JPMorgan Chase. Jamie Dimon has doubled-down on tech investments, so much so that this year they’re spending $12 billion on technology. Half is on keeping the lights on and half on innovation. That’s $6 billion on new things. That’s significant, when you think that most start-ups struggle to raise millions.

And JPMC is not alone. Most big banks are spending billions on innovation, and most medium-sized banks are too.

The problem is that innovation is not about budget, but about ideas and execution. So many large banks that I meet treat innovation as a project or program or feature. They create a function, a Chief Digital Officer, and give that person and function a budget. They delegate the future. The issue is that you cannot do this. Digitalisation is not a project or function with a budget. It is a fundamental change of culture and thinking.

In fact, it’s funny how often I have this conversation, as “transformation” is nothing to do with technology. It is all about mindset and thinking and culture. This is why you cannot delegate it to be a project or program. It is a reinvention of the bank to be truly digital from the ground-up.

The challenge is not easy however, as most banks are born physical. Being born physical, digital was added on top, and then cemented in place over the years because of core systems that are hard to adapt. Most firms overcame this issue by using middleware and apps to make it look like the back office core system worked, but that sticking plaster is no longer good enough. The bank needs to be built as born digital, with data at the core in the cloud, and APIs (Application Program Interfaces) connected the cloud core to the smart apps in the front office.

But, coming back to the main tenet of this perspective, the bank needs to be able to adapt fast and real-time and have a culture of digital at the core. The whole organisation needs to understand that digital is all about structure and operations that are supported by software and servers, rather than the traditional way of running the business with buildings and humans, with software and servers on-top.

This is why, when I saw the news about FedNow and only 1 in 10 American banks being ready, I knew that we still have a long way to go. Digital change needs to be overnight, not over days, months and years. If you don’t get this, then you will be left behind and, more importantly, you will realise you leadership is deficient because they don’t understand digital is a mindset and not a project.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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