The End of Digital Banking Transformation
Digital banking transformation is dead. No single framework, timeline or set of initiatives, features, apps, project plans or technologies will point your bank to transformation nirvana.
Photo by Simon Berger on Unsplash
There is no Digital Banking Transformation Destination
A few months ago, I had a conversation with Esteban Kolsky that forced me to confront my definitions of “digital banking transformation” in ways I hadn’t before.
During our conversation, he asked me, more than once, to define digital banking transformation. It’s not the first time I’ve answered that question, thought about that question and the answer.
But as Esteban pushed on this question, the less sure I became about my answer to this question. Is there is a single answer to this question. Afterwards, I continued to think about whether “digital banking transformation” was even a strategy or destination - more than I ever had before.
What if our understanding of what transformation is and isn’t has been limiting our vision?
What if our understanding of digital banking transformation obscures our ability to see what is possible, to see achievable change?
The End of Digital Banking Transformation
At the same time, everything banking and payments is digital still applies today – even for branches & drive-throughs (but maybe not the way you have thought). I’ve been writing about this since the 1st issue of this newsletter
And, every customer is a digital customer - even if they never use your app or website. But that does not mean every service or product is or must be delivered via digital channels.
Today and beyond the phrase implies that there is a single framework, timeline or set of initiatives or project plans that point your financial institution or banking vendor - directly on a track to achieve “digital banking transformation.”
There is a single framework, timeline or set of initiatives or project plans that point your financial institution or banking vendor - directly on a track to achieve “digital banking transformation.”
Photo by Kévin et Laurianne Langlais on Unsplash
The more I thought about what “digital banking transformation” the more pliable that phrase became:
Is a new feature that increases customer profitability transformational?
Is it a feature that uses AI to proactively discover fraudulent attempts to open new accounts?
Is a new mobile app that eliminates app down time transformational in 2024?
Is a system that enables financial institutions to automatically take customer payment instructions and suggests the most efficient & cost effective payment method that meets the requirements in the instructions to the customer?
Is it a platform that understand the blurring boundaries between delivery, payments and banking transactions – in every step of transaction supply chains
Is it the replacement of the FI’s entire payments infrastructure with modern payment technology?
Is a challenger bank?
Is it a core banking replacement?
Is it one of these things?
Is it all of these things?
Is it none of these things?
The longer I consider Esteban’s question, the more I came to the conclusion that the answer to all of these questions is “yes.” What would be transformation in one bank in a particular country does not even make the to-do list of a bank in another and is simply process improvement in yet another bank. This list makes clear that change, improvement and innovation is global – but it’s also contextual and never-ending.***
As I’ve written about small innovations, a way for a bank to get started in change & innovation is to identify small problems and fixing those – and leave open the opportunities for those “fixes” to create new change & to build into larger innovations. A foundation of small innovations can drive radical change that links smaller initiatives to the broader strategy & initiatives.
Financial institutions want a transformation destination roadmap. I get that. A roadmap is tangible. You can attach it to emails, insert it into a PowerPoint and publish it in the strategic plans. But there is no destination for transformation. There are multiple destinations - or none at all. Further, there are no data set, analytics, technology (AI, LLM, robot, API) that you can acquire that will assure that you have reached the “transformation” goal line.
Why? Because if transformation was a destination, it will certainly have changed by the time your team, your financial institution, reaches it.
The pursuit of “digital banking transformation” not a technology or even a strategy.
How your FI adapts to and accommodates change, incorporates new technologies, ideas & perspectives, strategies and all of the business, regulatory, political and environmental changes in your specific context will depend on your FI’s lifestyle choices. Your strategy and technology will flow from these lifestyle choices. I plan to write about these choices in an upcoming newsletter.
Takeaways
For financial institutions
It’s time for some questions & discussions. Who and level of people within your FI who are willing to engage in discussion of these questions will tell you a lot about your bank’s “lifestyle.”
What is the goal of “digital banking transformation” at your financial institution?
How many different definitions of “digital banking transformation” are used within your bank? Do the teams, groups and lines-of-business doing “transformation” or innovation share the same definition? Do senior executives share the same definition with those teams, groups and LOBs?
How does your FI measure “transformation”? Who measures it?
Do you maintain data about the variety of “transformation” and change initiatives, projects and strategies that your bank has achieved and failed to achieve?
For digital banking vendors
Digital banking vendors too must ask themselves similar questions and answer them:
Do your solutions contain the assumption that there is a single goal of “digital banking transformation?
How does your solution enable an FI define their own goals?
How do you know when your customers reach “transformation” or change?
Who measures & how do they measure?
Do you have your own data about the variety of “transformation” and change initiatives, projects and strategies that your bank customers have achieved and failed to achieve?
Note: *** Leda Glyptis and Ronit Ghose in their books Bankers Like Us and Future Money underscore my understanding that innovation and disruption is global but also has a specific context with plenty of sharp insights and examples.
Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades.
My aim is not to confirm what you know (and you are plenty smart!) but to challenge you & give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.
How can I help you?
Want more insights and analysis on small innovations, ghosting customers, hidden tribes and leveraging your bank’s legacy? Need help positioning your digital banking solution or fintech to meet the demands of today’s banking environment? I have my own firm PivotAssets.
To collaborate with me: I can analyze your GTM strategy or sales or VC presentation, help you prepare for your first vendor briefing or your first funding pitch meeting. I also write piece of thought leadership relevant to your business, solutions or technology. I also organize and moderate webinars series, podcast or panel.
Contact me at stessa@pivotassets.co or via LinkedIn.
I’m also available for inquiry and strategy sessions via Third Eye Advisory.
Me, Elsewhere
Fintech Book Club - Our next discussion of Ronit Ghose’s Future Money is July 12 at 10:00 EDT. Join us on LinkedIn Live!
I’m an expert advisor at Third Eye Advisory.
Theodora Lau, Barb Maclean, Efi Pylarinou and collaborated on this unorthodox, diverse perspectives about financial services & the year to come.
I spoke with Theodora Lau and Barb Maclean on their podcast One Vision about smart banking & hidden tribes.
I moderated a great panel of folks for a conversation on innovation. We cut through the hype and share practical advice for making your digital transformation efforts pay off. We definitely talked about the importance of small innovations.