I’m a firm believer that banks rarely invest to drive revenue and elevate customer service. But I recently hosted a roundtable discussion in London with Appian, a process automation platform company, where leaders from mainstream and challenger banks in the UK gathered to discuss the challenges facing financial institutions when adopting new technology. One of the most significant challenges identified was ensuring that the technology aligns with business objectives and strategies to deliver value and return on investment (ROI).
During the evening we discussed whether ROI is the right measure for technology adoption and concluded that technology is not purchased for investment purposes, but for business purposes. Therefore, value and ROI can only be achieved when technology and business objectives are aligned. The key challenge is how to ensure that alignment and what approach to take when deploying new tech.
One participant mentioned: “There's no doubt technology is delivering value in finance. The more relevant question might be whether it is doing enough to drive differentiation to both the top and bottom line? The answer there is definitely no.”
Another participant added: “Delivering the value in technology is about leadership; it's about the operating model; and it's about the culture. Where banks have failed is that they've just seen an IT department that supports the business where, in firms like Google and Amazon, they know that technology is the business...“
It was agreed that leadership and culture are the critical factors for getting value from technology, not the technology itself. The people around the table – most from mainstream banks (under Chatham House rule!) – highlighted the need for a cultural change in financial institutions to focus more on the long-term benefits of technology, rather than short-term gains. In this regard, regulation can play a significant role in driving technology change, as the process of implementing regulatory requirements can trigger improvements and ROI.
We addressed the challenges of aligning new technology with business objectives and strategies, and noted that there are major risks of just delivering vanity projects that don't align with business objectives and lead to wasteful spending. It was specifically noted that technology trends, such as AI, ML, low-code, blockchain, Open Banking, APIs, ecosystems, and platforms, can be an illusion if not aligned with the business strategies.
One of the key challenges for financial institutions is the legacy systems they have in place. It is obviously far easier to start from scratch, with a clean sheet of paper, as opposed to dealing with the challenges of integrating new technology with existing systems. However, leveraging existing assets and considering whether deployment is customer or cost-focused is essential when taking an approach to technology.
Overall, the discussion highlighted the need for financial institutions to take a more strategic approach to technology adoption. Technology is not a silver bullet that will solve all the challenges facing financial institutions. Instead, it should be viewed as a tool that can help achieve business objectives and deliver value. To do so, financial institutions need to focus on leadership, culture, and a comprehensive end-to-end business strategy that aligns technology with business objectives and strategies.
In conclusion, financial institutions face many challenges when it comes to adopting new technology. ROI is not always the appropriate measure for technology adoption, and other factors, such as leadership and culture, are critical for getting value from technology. Financial institutions need to take a more strategic approach to technology adoption and focus on aligning technology with business objectives and strategies. By doing so, they can future-proof their operations and deliver value to customers.
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