Jim Marous, internationally recognised financial industry strategist, and the publisher of the Digital Banking Report and Sonia Wedrychowicz, an experienced technology transformation professional of over 25 years discuss how digital transformation is more than merely technology while exploring the leadership and cultural issues surrounding digital transformation in banking.
How
do you feel the conversation around technology has changed? Are businesses now
driven more by technology and IT than ever before?
Sonia:
First, we need to understand that,
in the last couple of years, the way people consume, communicate and commute
has changed dramatically, and is increasingly being delivered using digital
channels. In today’s world, the vast majority of our daily lives are supported
by technology. So, by definition, all companies, including banking, are
becoming technology companies. That realisation, however, is not universal yet,
and in many organisations, I can still see the business and technology running
separately. The transformation efforts focus on modernisation of the platforms
on the technology side, and the digitisation of the customer experience on the
business side, while the two functions, in my opinion, should work as one team
with the common goal, driven by customer obsession.
Jim:
Financial organisations do know what
they need to do. They do understand the technologies that have to be embraced,
but the challenge is they’re not very far down the digital transformation
process. This is a concern, given that the industry is moving so fast in the
digital space. A lot of organisations have seen digital transformation as the
purchase of technology and the implementation across different initiatives.
This is opposed to an overarching perspective of digital transformation that
really starts from the inside out, and looks at processes and programs, culture
and leadership and then builds technology against that. We’re seeing a big
challenge with regards to leadership and culture, and without that, the
implementation of technology will probably never see its full optimal
implementation.
How
common is it that across different businesses in different industries, in
different capacities, digital transformation means something different to each
and every person and organisation? And how do you go about unifying it in a way
that makes sense to everyone?
Jim:
When you’re talking about digital
transformation, and you’re combining that with the financial services industry,
it’s more difficult. You look at organisations that are going to need to
embrace change, take modified risks, and actually disrupt themselves, and
that’s not in the comfort zone of financial institutions. It’s the opposite of
the legacy culture that’s been in play before.
Sonia:
There is a lot of misunderstanding
regarding the difference between digitisation, digitalisation and
transformation, and it comes to the old rule that people have the tendency to
always see these things as the same, although they are actually different.
There is a very common misconception of digital transformation, which is
disruptive, and challenging the status quo, with change management, or
restructuring, which is basically more of the same, but more lean and
efficient.
A good example of this is centres
around the difference between the process of digitisation versus digitalisation
itself. Digitisation is all about making the current process, or product,
digital without truly reimagining it. The same process can, however, be
digitalised, rather than digitised. The digital transformation is being
trivialised by being understood as bringing new technologies into place without
truly reimagining the customer journeys, the customer experience, and actually
making it much simpler and more transparent for the customers.
What
are some of the biggest challenges and barriers to embracing digital
transformation and embracing these new technologies?
Sonia:
The emergence of efficient fintech
companies offering different banking services, not only cheaper, but mostly
through an amazing, simple and friendly customer experience. The existence of
banks is under a serious threat. Interestingly enough, the threat level varies
in different parts of the world and so banks need to accelerate on the path of
reimagining themselves, in order to keep pace with the emerging competitors who
are, these days, coming from industries that were never associated with banking
before.
Jim:
I think the biggest challenge we’re
going to see, and the reason why banks right now are starting to rethink their
complacency, is not because of the revenue, but because of the threat, while
we’ve been thinking about what’s going to happen in the future, and what’s
going to happen in the fintech banks and the challenger banks. To the large
tech companies that is the biggest challenge.
The threat is real. The consumer’s
going to start demanding more and more of their financial institutions. A
consumer can now change a financial provider, invisibly. They don’t have to
come into the branch anymore. They can do it with a click of a button on a
phone and they can change their financial relationship. What we have to do is
realise that there’s a major threat out there to financial institutions that
sit back and hope that it’s going to be business as usual.
How
important is it, during a transformation and during change, that you are
keeping the customer at the very heart of everything you do?
Sonia:
Never focus on your competition.
Always focus on your customer. For years we’ve been completely ignoring the
customers and looking at what the competition was doing in order to keep pace.
By focusing on your competition, you’re always going to be one step behind
them. Technology-enabled tools are allowing us to be much closer with the
customers without seeing them and even talking to them, but just focusing on
how they behave, what they do, how they react to the different propositions we
are giving to them, and whether it results in increased business generation.
Jim:
I think part of the difficulty with
transformation is transparency. We get updates on our mobile apps from many
organisations, updating you that changes are being made. It doesn’t happen that
frequently in the financial services space because the communication isn’t
there. There are a lot of organisations that believe: if you build it, they
will come. The reality is, that’s not the case. We need to provide more
information upfront and do a lot more research to find out what the consumer
wants. What they’re looking for is simplicity and a lack of friction, and really
what they’re hoping for is that the financial institution is going to know
them, look out for them, and reward them.
Jim,
you mention that non-financial institutions are now dominating the payment
space, how is that impacting the decision-making and the approach to
technology?
Jim:
Financial institutions are looking
at the fintech companies because those companies looked at the digital
companies and asked, “How can we take customer insight, AI, and digital
technologies to make better experiences?” In every case twe’ve seen, what
the competitors and non-traditional competitors have done is built solutions.
They take data, insight, and technology to provide a seamless experience built
on a digital platform, and that’s a very important component, because being built
on a digital platform means that they’re not building on legacy infrastructure.
The tech companies have streamlined the application process for loans or for a
credit card because it builds on a tech platform.
The case studies that we see going forward are
coming from the fintechs, and I think traditional financial institutions are
going to build more and more partnerships, because bankers can’t get out of
their own way, and they really can’t build something that they’ve never done
before.
Sonia:
When I look at the big fintech
companies and companies like Amazon, I think they’re being watched closely by
the banks for their customer obsession, delivered by technology. When it comes
to small fintech companies; it’s very interesting. They are providing solutions
on untested but interesting technologies like blockchain or AI. Once those
technologies became more established, expertise will rise. So, they are not
using the fintech start-up companies to integrate those solutions any more, but
they want to have this expertise in-house.
Talk
to me about the importance of bringing people along on these journeys, and in
these transformations, and not necessarily equipping, re-equipping them with
these new skills and new capabilities in order to drive the business forward.
Jim:
This is probably the biggest
challenge that the banking industry is going to face. We do not have a large
knowledge space of digital mind-sets in the marketplace and that includes
everything from digital applications of AI, to just how the technology and
coding works. There’s a major weakness. But just as big is how do we reach for
the people internally, because when you talk about automation, robotics and AI,
there’s going to be, if not an elimination of jobs, a transformation of jobs
into new sets. So, we’re going to have to take it upon ourselves as an industry
to retrain people across the organisation, so they’re prepared for the future.
The challenge is, not many organisations right now are doing it.
Sonia:
I also think that a big challenge of
the traditional organisations today is to attract young people. The attraction
of the old conservative companies is fading away in favour of the Apples and
Googles of this world. People are joining the new technology companies not for
free food and gym on the premises, but for the ability to constantly learn new
things. The financial institutions need to develop the leaders of the future.
They need to reimagine, not only their equipment policies, but more
importantly, change their hierarchical structures within the organisation to
ones that are powered by people who are more willing to listen, with employee
empowerment that is bringing the customer experiences of change much closer to
where the customers are.
If
you could give one piece of advice on how to be successful in these disruptive
times as a professional in the financial space what would it be?
Sonia:
Keep reinventing yourself and have
the courage to unlearn what you learnt in the past. Constantly learn new
things. Brains change, so surround yourself with young people, as they will
become your bridge between the past and the future.
Jim:
We have an industry filled with
legacy bankers that have been in this industry for a very long time and have
done very well in most cases. What we need to do is to look and say, “How
can we, as people in organisations, build a culture that will make it so that
organisations can truly be part of the future?” The future will happen
very quickly, as will the impact of not making changes. We have to do better.
