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The past few years have seen experts repeatedly warn that banks will need to adapt to remain relevant in this fast-changing financial services arena. In order to keep up with fintechs, financial services (FS) organisations will need to ensure that technology and innovation is at the heart of their strategy. As the recent Digital Transformation Index report puts it, industry leaders in today’s digital era proactively drive change and seek to take control of their digital destiny, delivering on the attributes of a digital business as a result. To discuss this further in an open forum environment, we recently gathered senior leaders from across the top global financial institutions to examine some of these issues and carve out recommendations for driving digital in FS.
The reality is that many FS organisations have already taken big steps to ensure they aren’t behind the curve. Last year for example, Goldman Sachs revealed they now employ more programmers and engineers than Facebook, and they aren’t alone. However, an influx of tech talent alone isn’t enough to ensure that banks are moving in the right direction. Part of the problem is that many of their developers are still using their time doing application maintenance on legacy systems, not origin core for new applications. It’s expensive to maintain legacy apps, and the net result is that banks are just spending money on technology – rather than being innovators in terms of how they use it. The main issue is a cultural one, driving change in these cases is all about people and process. So how can you ensure that your organisation truly moves towards the digital agenda?
1.Ensure your developers are motivated
Developers are one of your most valuable assets and they need to be motivated and incentivised. The way that they are managed can have a huge impact on the organisations digital success. To drive innovation in the financial services, they need be encourage to work creatively and have the freedom to develop products and apps for the business in new environments, while remaining compliant with regulations. The trick is getting the balance right and encouraging innovation in the right direction. Too much standardisation, and you risk your developers jumping ship. Not enough, and you end up with applications which cannot be migrated.
However, working closely with and motivating developers isn’t always easy, especially given that they are often not based on-site.
2.Drive a culture of collaboration
Technology companies have a reputation for creating engaging and collaborative workspaces and strong corporate cultures. Take Google for example. Their company culture has been widely documented by the media. However, it’s not just technology companies that could benefit from improved levels of collaboration and employee engagement. Successful innovation depends on effective communication and knowledge-sharing between individuals and teams. Financial services organisation should therefore invest in collaboration tools, such as enterprise social networks, which open new communication channels. We’ve even seen banks looking at how employees use office space, and putting collaboration tools in places where people congregate. Others are looking at heatmaps of their organisation, and analysing which employees are supporting and collaborating with each other. This can help them to understand where content is being generated and where additional collaboration tools are needed.
One of the biggest inhibitors to progress is the organisational structure – banks are so traditionally set up that it can mean they now struggle to innovate. It’s the people and processes which are both hugely important and the biggest challenge. Changing the team structure could also be helpful. Removing hierarchy and implementing a horizontal structure, where developers work across departments, can also improve collaboration.
3.Get management on-board
Change management processes can often hold back progression. The provisioning time is really quick, but often it’s the business that’s holding people back. It takes a long time to get approvals from the board and the budget committee to get projects moving. This means that timelines become stretched, and projects end up running at between four to six months. It’s difficult to be innovative and ensure that your organisation is keeping up with the latest developments when the approvals processes are so long. By the time the project has been approved, it is already outdated. Things such as an automated approvals process where boxes can be ticked and certain changes can be automatically approved, would cut the time down from months to hours. However, this needs to come from the top down. There needs to be a culture of trust, where management understand and encourage change and advancement, within agreed parameters.
Looking at the big picture, without real structural change, banks won’t be able to take the next big leap in terms of how they differentiate themselves in the market place or be able to cut costs to drive greater originality. It’s not about legacy technology, good teams will make any technology work, whereas mediocre teams will always encounter issues. If banks want to continue to compete with the fintechs and tech firms, it’s crucial they create a culture which drives innovation, promotes creativity and ensure that the best technology talent will be retained.