(This is the final episode of a two-part series on the business and people impacts of digital transformation by Fintech commentator and best-selling authorChris Skinner. Check out part 1 here.)
To compete and win in the digital economy, banks need to be digital at their core and act as technology giants not just financial giants.
"Everybody's waking up to digital transformation and headlines about the technologies that have transformed banking from the back office to the front office to improve customer experience and provide low-cost services to customers who were unreachable before."
"China's Tencent bank, for example, launched WeBank in 2015 to expand banking services to blue collar workers," says Skinner. "The company achieved profitability in its first year of operation and now serves over 100 million customers at a cost of only about half a cent per customer per year for the technology stack behind their service offering. It's all about finding better, faster, low-cost ways to reach customers through the digital platform."
"...Most banks are talking digital," says Skinner, "but the question is whether they're walking digital. And the difference for me is illustrated well by a project I've been working on since I wrote Digital Human, which is all about the banks that are actually doing digital transformation well."
Skinner also revealed that he's working on a new book about banks that are doing digital transformation right. He interviewed a large number of banks around the world and picked out five as best of breed examples. He says that perhaps his biggest takeaway from that experience is that all of the banks that are doing digital well also have a leadership team where typically half or a quarter of the people come from a technology, telecommunications or digital background.
"With the most advanced (bank)," says Skinner, "half of the executive leadership team are people who are responsible for some form of digitalization including a head of engineering who sits in the C-Suite, a head of data who sits in the C-Suite, a head of customer experience who sits on the C-Suite and a CEO and chairman who are also by background a technologist and a CIO."
"...And I think that's the real aspect that I drone on about so much," says Skinner, "which is that you can't be a digital bank if you only have people who are bankers on the (leadership) team. You've got to have digital people and banking people."
On the new podcast, Skinner also argues that banks will have to figure out how to make money in a future where everything is free. He says that as tech giants like the Amazons and the Alibabas of the world start moving into financial services, banks will have to figure out how to respond to that and stay ahead of the surge. He makes the case that tech giants aren't moving into financial services because they want to get into banking. Nope, they're doing it to drive more traffic to their commercial platforms.
"This means giving loans away for free and enabling payments to take place for nothing in real time. (It also means) creating the opportunity to have savings and investments with higher returns than any other market player. And by doing that, they (the tech giants) are getting a lot more traffic flow. But they're not doing it to be a deposit taking full-service bank. They're doing it purely to enhance their core business."
Skinner says that there are about 30 clear things that are clear markers for banks that are succeeding with digital transformation. He says that it's all about making a cultural shift and not about investing in a digital project. From a cultural standpoint, the best digital banks are doing things from the top through to the bottom and from the back office to the front office of the organization to change the mindset of their people and not just change the structure of their systems.
"It goes to the heart of the company," says Skinner from the leadership team down through the organization with a passion for fundamental shift that I don't see in a lot of the financial institutions I talk to...They have banking people who don't get that this (digital transformation) is a fundamental shift. They think it's a protect... "
So, how do you change an organization fundamentally from top to bottom, from systems and structures and organizational charts? Skinner hinted that his upcoming book provides a digital transformation playbook that includes 30 key steps and four big phases that answers most of these questions.
In the meantime, you can listen to the full interview on our Digital Masters podcast:Digital Transformation and the Rise of the Digital Human.
[podcast id="19343501" text="Digital Transformation and the Rise of the Digital Human on Spreaker."]
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