Banks don’t have a choice about becoming future-ready. They have to transform their businesses to compete with new, nimbler entrants and Big Tech competitors (Amazon, Facebook, Alibaba, etc).  They need to be more innovative. Over the next five years they must automate and modernize business processes while integrating data, analytics and intelligence into everything they do.  If that wasn’t enough, banks have two major challenges: hiring and retaining people with the relevant skills (42%) and integrating new technology into existing systems (41%). 

Accenture estimated that between 2015-18 banks spent a cool $1 trillion to transform their IT, but it hasn’t delivered revenue growth. In fact, Accenture reckons that only 12% of banks are genuinely committed to digital transformation i.e. backed up by investment and with a clear commitment to change.

Learn from the pioneers
This feels about right. The number of genuinely digital banks is pretty small.  Most of them started their journey at least ten years ago. They focussed on changing their culture to become far more entrepreneurial.  DBS is a good example. DBS CEO, Piyesh Gupta, asked: ‘How do you create a 22,000 person start-up?’  They focussed on improving customer journeys. They used hackathons to get older staff comfortable with technology. They partnered with local start-ups. They divided their customers into ‘traditional’ and ‘digital’. And they made money.

So how do banks move into the 12% category and match pioneers like DBS?

Choose your route
MIT CISR have identified four routes to becoming a future-ready bank. 

• Focus on great CX (18%). NPS/CSAT goes up leading to an ‘addiction trail’. You want more! But cost to serve increases and employee experience (EX) gets more complex.  
• Industrialize process (20%). This reduces cost and makes EX simple – which is good for employees. But you reach a ‘digitization desert’ where there is no CX ‘sizzle’, which needs managing carefully.
• Do both (41%). Work on CX (say) for 6-9 months, then swap to industrialization.  This creates ‘organization whiplash’ and needs sophisticated governance.  BBVA adopted this approach, but they have experienced digital experts on the board: the current chair started their transformation journey in 1999 (seriously) and the CEO ran the digital division beforehand.
• Create a new brand/organization (14%). This avoids the legacy issue, but it can be hard to reintegrate this business back into the existing bank. You could make the new brand into the main bank and transfer existing customers to it over time. mBank, Poland, set up a mobile-only bank and has now rebranded the whole bank as mBank due to its success.

Focus on three themes
Building on this, we have identified three transformation themes.  Whichever route you take, you need to deliver on them:

• Operational efficiency: Redesign and automate key business processes (such as KYC and AML) to manage risk and service better; adopt cloud to scale quickly and improve time-to-market; identify areas for human-machine augmentation.
• Join up CX and EX: Invest in employee experience (EX) through reskilling and better workplace tools (we call this WX). Significantly, EX was bottom of the list of transformation drivers for banks in our research; personalize and extend core offers; create ‘next best action’ analysis through AI/machine learning.
• Develop an innovation mindset: Create an entrepreneurial culture; use cross-functional teams to break down hierarchy and find solutions faster; go for short sprints and an agile mentality.

Are you a future-ready bank?
For a Spanish bank, we helped develop its digital transformation programme. Part of this was a mobile-first approach that led to improved CX and became the leading source for new account activations. We reduced customer issues by 50%, accelerated time-to-market by 15% and delivered an 86% increase in take-up since the launch of the new mobile application. 

For Canada Mortgage and Housing Corporation, Avanade moved their infrastructure into the cloud (Microsoft Azure), set up Office 365 and Skype and built out their CRM and ERP systems with Dynamics 365. They were the first in Canada to organize data on Azure to detect fraud. Their CIO commented: ‘We can now focus on what matters. One employee said, we’ve come from the Ice Age to the USS Enterprise.’

Each transformation journey is different. There is no silver bullet. But learn from the pioneers, choose your route, focus on the three transformation themes – and become part of the 12%.  

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