The lean, agile and collaborative bank
Banks and financial institutions need to partner with Fintechs, incorporate agile working methods and use lean start-up principles to develop products. It all sounds good on paper, but how is it working out in practice?
I attended the Fintech Talent event in October to hear about real-world examples and the strategies that large institutions are adopting to ensure they create the digital products and services that customers increasingly demand.
The overall impression expressed by delegates was that the majority of bank executives see the value in collaborating with Fintechs to co-create innovation, but that traditional thinking, culture and systems continue to slow their best efforts down.
In many cases, financial institutions have made highly focused and intentional interventions to unblock the impasse, setting up specialist innovation teams tasked with finding and onboarding Fintechs or proving the value of agile developments internally.
Others are running events such as hackathons where third parties and academics are invited into the organization to solve problems with innovative ideas that may not have come to the surface otherwise.
A second theme discussed by institutions at the event was customer-centricity. Banks now recognise that decisions about where to prioritise development efforts must be led by the problems faced by customers, not just by the opinions of the institution itself.
This is where Fintechs can play important role, because they think differently from the bank and are adept at not just spotting opportunities but acting quickly to fill the gaps with genuinely useful apps and services. Banks recognise that they need to learn from Fintechs and start-ups, rather than simply relying on their own industry views.
A further challenge for banks is to transfer from a waterfall development environment to agile, recognising the benefits of agile but also understanding that transformation cannot happen overnight. The general approach is to move incrementally, reversing the current split between 75% waterfall to 25% agile over the next few years.
Some banks approach this by establishing separate categories of development, one relating to core systems and longer-term maintenance and update work and one including apps and service closer to the customer that need to be rolled our quickly and in a continuous delivery model, possibly in partnership with Fintechs.
But it is important for banks not to abandon one of their most important assets, which is trust in their ability to look after their customers’ funds. Core systems have to be protected even while customer-facing processes are transformed, and the ability to integrate and analyse data brings those two worlds together
All financial institutions are wrestling with the skills shortage, finding that developers with agile and DevOps experience are in particular demand. In response, banks are adopting creative solutions, such as training a percentage of staff across the business to learn coding or seeking people outside the IT department with an interest in technology to build up new skillsets.
These efforts also serve to build a more agile development environment, where people from development teams can collaborate with those in the business to deliver customer-focused solutions using tools like storyboards and customer journey mapping. There’s recognition that delivery times for new systems have to shrink from 18 months to a maximum of 12 weeks if opportunities are not to be missed.
Applying agile to departments beyond IT can help break down cultural resistance too. If an innovation team can find a way to improve processes within legal or compliance, by using technology such as artificial intelligence (AI) or machine learning, for example, a case can be proven for the adoption of technology in other areas of the business.
Indeed, banks acknowledge that there is no longer any choice but to invest in new technology to deliver business growth, following years of reduced IT budgets driven by the need to cut costs. This can include the acquisition of fintechs with innovative ways of working and ideas for new apps and services.
Finally, banks acknowledge that while they need the fresh thinking and creativity that Fintechs provide, they don’t always make it easy to bring them on board. We can expect to see financial institutions taking definite steps to reduce friction in their onboarding processes in the years ahead, along with improvements to their own front and back office systems.
This blog previously appeared on Finextra.