I recently did a workshop with a major bank and asked them to send questions beforehand. This is a great way for me to develop a Q&A stream as they asked me lots of questions. The first big question was: What do banks need to do to be successful in the future?
Well, if I knew the answer, I’d be running a bank. Having said that, I have some ideas.
First, you need economists who can predict what’s next. The world is far more fragile today than the last decade or so – just look at President Putin’s latest comments about a possible Third World War – and banks need to be strong and stable. They always have been, and this is something I keep coming back to: banks have been predicted to die for most of my working life and yet they have not died. In fact, they’re doing better than ever. Banks just need to stick to the line of reliability and resilience and they will still be around in a hundred years, as long as they can track the future trends financially, which is why they need good economists.
Second, a bank needs to have balance between digital people and banking people in the executive team. You cannot be a digital bank if you only have bankers in the driving seat and, as we have seen with the rise of fintech, traditional banks can be replaced by digital banks. The rise of Revolut, Monzo, Chime, NuBank, WeBank and more have proven this. You cannot be complacent and, if your bank does not have a digital leader, then you are likely to be a digital loser.
Third, focus on the customer. I’m sure banks say they do this but, in my experience, most banks seem to focus on the regulator. Rules and regulations take precedence over customer and user experience. Just look at the whole debanking affair of recent times where, due to new regulations, banks are increasingly irritating customers rather than servicing them. This si not a positive situation and banks would do well to remember that ti is customers who make their profits, not regulators.
Fourth, in the balance of all the things above – economy, technology, customer – think about the balance of things. Most banks talk about ROI, ROE, CIR and such like, but what about the future. If you want to be successful in the future, think about ROF – Return on Future. This means specifically, right now, the balance between the traditional structures of branch-based banking and the move to digital mobile and online banking. We know what that means, but what’s next? We know there’s 6G, Quantum Computing, Generative Finance and more. How close is the bank to the leading edge or bleeding edge of those balances and trends?
Finally, have someone on the throne who can understand the balance of trends. Too often, banks promote bankers onto the throne. Bankers understand risk, regulations, compliance, accounts … but do they understand accountability? Accountability to all stakeholders, not just shareholders. Accountability to customers, suppliers, government, regulators, shareholders and, oh yes, the planet. Is the person in the driving seat balanced? Do they understand all of the needs of their stakeholders? Are they investing in each with the right balance?
To be honest, this list is nothing new. Bank leaders trying to ensure future success have always been required to balance all stakeholder interests. The trouble is that in the past they leaned heavily towards regulatory and shareholder interests more than any others. Today, with technology transparency, they have far more pressing needs. Obviously, the digital transformation revolution but, more than this, the needs of customers and the planet. How balanced is your bank on all of these fronts?
The last piece of advice is that the list is not exhaustive, but you have to have a balance of interests. A balance of political, economic, social and technological interests. Some would add legal and environmental interests to the mix. Yep, it's called PEST or PESTLE. Simples!
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...