I was recently interacting with a CxO of a Fortune 100 banking firm and something he said caught my attention – “The future CEO of our organization may very well be an engineer and not necessarily someone from the banking industry.”
I kept thinking about this point for a few days and my curiosity led to some focused reading on digital disruption.I realized, if Google can be run by an engineer, perhaps so can any other organization in the world. However, there was still a difference – Google is a digital native company unlike a majority of companies today. This led to more research and here are some interesting statements I found made by leaders in the banking industry.
“Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking. We are going to work hard to make our services as seamless and competitive as theirs,” said Jamie Dimon, CEO of Chase
Francisco González, Chairman and CEO of BBVA went further, claiming, “Up to half of world’s banks will disappear through the gaps opened by Digital Disruption of the banking industry.”
In April 2017, PWC stated, “A large majority of global banks, insurers, and investment managers intend to increase their partnerships with Fintech companies over the next 3 to 5 years and expect an average return on investment of 20% on their innovation projects.”
It started dawning on me that the banking industry (especially the ones providing services to consumers) is going through a paradigm shift, forcing them to transform into technology companies providing banking services.
According to Bain, technology is at the heart of global financial transformation, and with the right capabilities, traditional banking firms can compete against nimble, technologically sophisticated startups that are reimagining ways to serve customers’ financial needs.
The bandwagon effect…
Let us quickly look at the strategic moves taken by global giants in the banking industry.
JPMC recently announced its own mobile wallet, competing with Google Wallet and Apple Pay.
Aviva launched its “digital garage” for digital product development around upcoming technologies like IoT, wearables, telematics.
Wells Fargo launched an innovation lab for next-generation virtual reality, social media, biometrics, and GPS-based systems.
Citi assembled the Citi FinTech team, comprising about 40 employees handpicked from various parts of Citi and also professionals hired from technology leaders like Amazon and PayPal.
JPMC hired ex-Yahoo employee, Tim Parsey, and Abhijeet Bose, who used to work for Google, to lead their digital initiatives. ANZ hired Maile Carnegie from Google as a group executive for Digital Banking.
Either these banking firms are hiring leadership teams from technology giants or are collaborating with service providers who can provide expertise on development/support around products/platforms with an engineering mindset.
I found a similar movement (hiring from digital natives among banking firms trying to become technology company) happening in several other verticals besides banking services: retail, CPG, media & entertainment, publishing, insurance, travel, transportation, and logistics.
Nestle hired an expert from Amazon to lead its e-commerce wing. Coca Cola announced a new position altogether, hiring its first ever Chief Digital Marketing Officer. Mattel found their new CEO in Google’s payroll while Walmart resorted to acquiring Jet.com.
And there are endless examples of digital disruption in each vertical.
The engineering perspective…
Here’s another interesting quote I came across: “Companies that succeed will be the ones with a great platform and not with a healthy pipeline.” This, once again, reaffirmed the importance of choosing the right way when building platforms. However, it is important to note that developing a software platform is very different from developing a software application.
Let’s consider a few additional parameters which are critical for traditional banking organizations embarking on this journey:
- Digital experience – ensuring:
- high performance
- customized personal experiences
- zero defects
- excellent CSAT
- Innovation – having the Agility to:
- respond to business and compliance demands
- monetize the ecosystem
- scale globally with minimal incremental work
- build connected systems and embrace convergence with API enablement
- create global payment solutions with complete coverage for risk & compliance
- Intelligent digital operations – enabling:
- platform intelligence
- self-diagnosis and healing
- reporting and dashboards
- complex event processing while monitoring Business KPIs, logs, and platforms with the best of DevOps
- holistic control across the platform
- Consistent performance – leveraging engineering service providers’ ability to:
- overcome space constraints
- harness embedded software to work with small chip sizes
- Heightened security – strengthening relevant firewalls for:
- fraud and risk management
- identity management
- access management
- Integration – employing Engineering Service Providers to effectively converge:
- hardware systems
- device networks
- disparate infrastructure
- Device interactions – having the ability to execute:
- meaningful and intelligent devices connectivity
- hardware and related communication as part of the engineering services ‘DNA’
- Non-functional requirements and testing, forming the very core of engineering services
- Customer reach and adoption rates
- End-to-end expertise spanning not only the platform but the entire ecosystem
- Resilient frameworks to handle ‘rugged conditions’
Clearly, only a business-driven engineering product/platform mindset can appreciate the different kinds of platforms. It might be function-centric, application-centric, ecosystem-centric or even based on hosted software infrastructures. This is where the role of Engineering and R&D (ERS) Services comes into play.
While each of the above points deserves an individual article, here are the points I’d like to focus on:
- Developing a software product/platform is very different from developing an application
- More and more organizations are now applying software engineering best practices to stay competitive and offer the best experience possible for their customers.
- What makes ‘digital’ critical is that an organization’s brand image potentially hinges on it.
I’d love to hear your thoughts on platform-based transformation for banking services. Please reach out to me on Twitter @ajkumaraj