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The legend
You have also heard about the Holy Grail of Banks, the mysterious thing that provides its owner with earthly and celestial fortune, vast data wealth, heavenly customer experience, and complete digital transformation, haven’t you?
Perhaps after a Beyond Banking conference, you told others about the legendary treasure, and even thought that you knew which strategic plan it was hidden in?
But you wouldn’t be able to pinpoint exactly what we’ve been looking for for a long time, would you?
Somehow this is how I feel about digitalization in banking. A lot of people have been enthusiastically talking about the subject for a long time, but I don’t think anyone really knows what we mean by this mysterious concept.
Beware, a provocative opinion article follows!
András Székely
Head of Banking Digitalization Services
András has more than 20 years of experience in banking with 10+ years spent in diverse management roles.
His primary area of expertise is retail banking and change management, with a particular focus on front-end and digital customer service processes, products, CRM and customer data management.
He is also familiar with related IT architectures and applications.
The earlier events
About why the history of digitalization in banking has been so ambiguous until now, I probably can’t tell many new things to those involved in this topic.
Perhaps the most important factor is that as of yet, no coercive force has really appeared regarding this issue from either the market or the client side. The financial awareness of the receiving side has not yet reached a level, where requirements that digitalization in banking could provide an answer to would be articulated at all.
In addition, neither the regulatory environment nor the existing technology foundations provided an adequate framework for the digitalization efforts of the banks.
It is also not a negligible fact, that the lack of major banking digitalization developments has not resulted in any apparent problems in the income, volume and earnings indicators of banks so far. In addition, the return on projects in this segment has been difficult to identify, which is also holding back the existing momentum even.
Of course, ‘Banking Digitalization ≠ IT Projects’, but it is also not equivalent to re-scanning the printed 14-page confirmation documents… In most cases, these activities do not appear to be banking digitalization developments fitting into a strategy, nor is it clear that the notion itself and the concept based on it have been defined by the concerned financial institutions.
What we’ve already been involved in
What has happened in recent years on this topic in the banks of the region? Let’s look at some actual examples where MINDSPIRE’s bank digitalization experts have contributed.
- We drew gigantic digital strategy presentations in PowerPoint at several financial institutions.
- We created great websites and workflow descriptions for existing paper-based processes.
- We can routinely wire the AS400 towers together with a wide variety of front-end systems.
- We have also participated in the development and implementation of Beyond banking solutions, for instance in relation with applications supporting the mobile payment of parking tickets, bus tickets, motorway vignettes, movie tickets, taxis and similar.
- We’ve significantly expanded the word cloud for trendy abbreviations and expressions, and had lots and lots of creative discussions about cryptocurrencies and blockchains (rather interesting topics by the way…).
- Meanwhile, everyone was extremely agile and enthusiastically transformed each and every thing they had access to.
And of course, the fear and trembling of the neo-banks just kept growing 🙂
Where to go further
There is still much to be done in the area of bank digitalization that has only been partially executed, although it would be essential to locate the Holy Grail.
The digital banking approach and culture is not yet fundamental within the regional financial institutions. One prerequisite for this would be complete and continuous top management commitment and support, that would allow (or force) to permeate the entire operation, mentality and development activities of the financial institution, rather than thinking about island-like digitalization projects.
In my view, the truly significant, fundamental organizational and operational transformation has started only in a few areas in the regional financial institutions. No-no, if we rename a previous department to tribe, it’s not a real transformation yet;)
In addition, the thought process about a real digital customer experience has scarcely begun, or only at the level of individual projects. The development of services that provide fast, mobile and experiential service has not yet been realized. It would also be essential to know and understand the expectations of Generation Z, which significantly differs from the needs of the previous generations.
The digital banking product development in most places only exists partially. In order for these attempts to happen not only randomly and separately, but also as part of a coherent strategy, the above activities must be carried out in advance by the financial institution concerned.
With that, so far the education of clients and organizations has not been complete or only with partial results.
We have surprisingly few ideas also for the prudent use of existing bank data assets, despite the fact that everyone deeply agrees that data is valuable. Yet banking data itself is not valuable either, only if we recognize the relations that allow its utilization and we also execute it.
Most financial institutions approach the question with great caution due to the banking secrecy: Can we use the available data to make a profit without compromising any regulation, the interests of our customers, or the trust placed in us? As an idea, the sale of anonymized purchase information and data from card systems may arise for example, but we are not aware of any actual implementation. It is also questionable whether the data can only be used by the bank, or maybe by external third parties also.
The emergence of open banking could have been a breakthrough in the prudent use of bank data assets, but so far this has yet to happen in practice. Anyway, I think the main reason for this is that the regulator has not standardized the services offered via the e-channel, and their technologies.
So far, different refund, points collection, referral and ‘next best offer’ solutions have been implemented in several banks, but in many cases sophisticated data analysis and logic is not connected to these.
What is enabling the further development of digitalization in banking?
Based on the above, we can build on several things to achieve our bank digitalization goals.
Fortunately, the fundations have already been laid in virtually every financial institution: netbank, mobile application and online workflow support. However, in connection with this, the main question still remains, what to do with the existing business and IT architecture?
In addition, the basics of paperless banking, and also the online banking products exist, and their use is now being tested in practice.
With regard to the regulatory environment, in general it can be stated that both domestic and regional banks can plan developments under more open conditions.
Furthermore, one or two real digital financial institution products already exist in Hungary, and examples can also be found abroad. These can also be a perfect development pattern and foundation for banks.
These already implemented banking digitalization developments include the online account opening, the online credit application, the RPA-based processing of incoming invoices, the renewal of ebank and mobile banking, the introduction of push notification, the 2FA and the soft token.
In the end, I think the most important thing is that there are a lot of colleagues, experts and indeed quite a few financial institution managers who really believe in the digitalization in banking, and what we really believe, that exists!
Where do we look further for the Holy Grail of banks?
Unfortunately, I do not have a magic orb, and 10-15 years ago even I thought differently about this topic. However, I am especially proud that at a time I managed to achieve that the management of a certain bank did not consider the development of a WAP bank to be a central strategic goal. I know, under the age of 40 it is not necessarily clear what the merits are in this…
Real change is right if it is natural, unforced, and the basic premise for this is to understand our customers and ourselves. All right, it was really such a cliche that it hurt me also – but put your hand up, if you truly, sincerely believe that clients want to love their bank, that they just need money, or that an online mortgage with interest subsidy is the secret desire of their heart…
I believe that they are much more looking for a financial solution to their current need, life situation or problem, and bank digitalization is actually the ability to adapt, so that the bank can provide an appropriate, simple, fast, efficient service – at the place and time chosen by the client.
Fintech and startup-type thinking and methods can really have a chance here, as they show more openness to change than usual, and the flexibility needed to implement it.
Nevertheless, I don’t believe that the full spectrum of banking services can be replaced or exchanged with any solution appended with a prefix or suffix such as neo or tech. Nonetheless, the activity of a bank is trading in risks and confidence, and the knowledge and experience accumulated in the sector is essential for this. There is certainly room for many simple, innovative tools and services, but you need to find their place and role in the structure.
In addition, it is obviously important for the user to be aware that he or she has a need at all, or what these needs might be, and not incidentally the bank should be there not only in the given place, but also in the head of the client (ecosystem?).
The vague concept of “bank digitization” itself can hinder internal thinking and decision-making. After all, instead of simply trying to identify viable and profitable new solutions based on technological capabilities and expectations, we are limiting product and service development with foggy and uncertain barriers. It doesn’t encourage creative thinking if occasionally we smack the hands of a person with an idea for not including the mandatory neo-, smart-, e-, AI / ML prefixes, and anyway it doesn’t fit into the widely unknown digitization strategy.
It is much more beneficial to put aside the practice used now in our minds and take stock of all the options available to the bank and look at what we can make money with.
Such an exciting idea seems to be KBC’s ‘we.trade’ solution for commercial transactions, which is based on blockchain technology.
While financial institutions mainly draw workflows and produce presentations about this topic, fintech challenger banks collect the tangible and most readily available treasures, such as foreign exchange or international online transfers.
In response, some banks have chosen the strategy of creating greenfield startups, offering one or two products, such as Simple. Although, it can be said that this solution was not originally considered to be a digitalization development, nor was it intended to eliminate human contact from the bank’s perspective. Perhaps it is more of a beyond banking service, but it is also true that most banks register beyond banking solutions under banking digitalisation label.
However, all that glitters is not gold, it is worth keeping in mind that the vast majority of fintech startups are loss-making, with the exception of TransferWise for example.
In order for banks to continue the digital transformation they have begun, they will need a lot of change and modification oriented mindset and ability, a lot of money, a quite serious IT background, and once again highlighting, a well-prepared, conscious and open to change employees, who are fully supported by the top management.
Without these, we will continue to talk about digitalization in banking, not implementing it – and continue to search for the Holy Grail in the strategic documents…
Do you have a question or comment about this article? Send it to info@mindspire-consulting.com email address and our expert will contact you!
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