Digital Transformation: FinTechs are still a role model for banks

After the temporary decline of the first FinTech hype wave, Digital Transformation is the most trending and relevant buzzword among banks right now. FinTechs have been a great accelerant for Digital Transformation so far.

From a banking perspective, they popped up out of thin air, a few years ago – and became relevant influencers on a business model that haven’t had changed for years. In times of a general global Digital Transformation, that effects not just corporates but in fact the global economic society, FinTechs smoothed the path into banking executives’ mindsets.

FinTechs did and still do show, how banking products can be realized with late-breaking technology and customer experience. Done by utilizing experiences of digital customer journeys from other digital business environments as a stencil how to develop customer-centric services in a non-customer-driven banking environment.

Why banks are interested in FinTechs

At first, banks only were interested in FinTechs because they focused on specific links of the traditional bank-to-customer value chain – and often improved them tremendously or created entire new services. But, besides the disruptive potential on the product side, banks lately have become interested in the entire corporate organization model.

FinTech learning journeys and start-up safaris transformed FinTech offices literally into zoos, due to frequent visits of hordes of recently digital-minded banking executives. Which is remarkable, because it shows that banks start to realize that they have to get out of their comfort zone. During those learning journeys, banking executives get a glimpse into how such small organizations can be able to attack their business models. Without the overhead, budget power and traditional working ethic of a bank. But, with comparatively lightning speed in product development, creativity and a completely different culture approach.

Why FinTechs are a perfect real-life showcase for Digital Transformation

If we are looking on FinTechs from a technological perspective than it is obvious that they often can outperform traditional banking services: They just use modern technological resources and have the advantage of not having to integrate their services into an archaic IT legacy, like nearly all banks need to do.

But, some of the grown-up FinTechs, that reached the size of a medium-sized corporate with i.e. 50+ employees, can be a different role model for a holistic Digital Transformation that banks have to undergo – now. In best case, FinTechs are able to build up an organizational model from the scratch, which fits to the most of ideals of a Digital Transformation:

  • Digital business model excellence: the ability to improve banking value chain links with top-notch technology and customer experience. And to completely invent new services that extend and/or enrich traditional banking value chains
  • Culture & mindset: the most underestimated trigger of Digital Transformation! Team play within FinTechs often fits to the new working ethic of the averagely younger employees from the generations X, Y & Z. FinTechs offer high degrees of freedom in everyday work and responsibilities, combined with a working environment that tries to support instead of oppress and control employee potentials. Engaging employees to participate in the business drives a steady innovation potential for good.
  • Leadership teams with digital DNS: FinTech leaders have to know how to handle those new melanges of employee needs, too. Very successful leadership teams in start-ups often show an ability that banking executives often lack: they identify deficits in their own leadership skillset and emphatically try hard to improve themselves or they hire people who do have those skills at command. They often realize that employees are a very valuable human capital for a small company, compared to a bank with 1.000+ employees in which individual employee needs often are nothing to speak of.
    And they transfer a lot of historical “leadership privileges” to their employees to be able to invest their time into more valuable activities. Less governance, less demeanour, more trust, more headspace for forward-thinking.
  • Technological excellence: as mentioned before, FinTechs use the modern technologies to their advantage. They do not have to deal with an old IT legacy in their back-ends, they generally try to build up new IT stacks combining elements of big data analytics or RPA and so on. And in front-ends, they are an example for a smooth customer journey, conversion rate and a user friendly design.
  • Agility & workflow: top-notch collaboration tools and processes enable them to structure their workflows highly agile. If done right, these agile workflows sustain even when the number of employees grows constantly.

5 learnings for banks in order to successfully perform a Digital Transformation

To transfer the lessons learned above into the banks own Digital Transformation, five recommendations for action can be derived:

  1. Start immediately: If you didn’t start a Digital Transformation initiative: Do it. Now!If you already started:
  2. What’s your digital status? An obvious starting point: measure what’s your current status quo regarding digitalization. You need i.e. a kind of digital performance benchmark to clarify, in which fields you are already on a sufficient digital path and where you have gaps to close (that might cost you money!).
  3. What’s your digital vision? This includes the review of your digital agenda to adjust your vision and build a tangible target image towards a successful and holistic Digital Transformation of technology, governance and culture.
  4. Just do it! Make sure your digital agenda is realized on every corporate hierarchy level. Eliminate barriers, align forces. Be brave in make-or-buy decision making processes. You have to realize: Digital Transformation is not a cost centre, it is an investment into the future of your bank – or into its survival.
  5. Manage with competence: Finally, managing and monitoring a transformation process is the key to success. If you don`t have internal expertise in Digital Transformation, it should be supervised by a) external competency or b) hired competency – especially at the beginning.

Focus on transforming your bank while not giving up the DNS of the original corporate values. But, be radical, leave no stone unturned. Get inspired by exceptional examples in your business. Go visit other commendable banks, cooperate with FinTechs and get in touch with experienced game changers like Crealogix. Collaborate, learn and do better.

If you need support on your path to a successful Digital Transformation just get in touch with me.

Mariusz C. Bodek

Keynote Speaker, Author, Senior Manager KPMG, Hamburg

Mariusz C. Bodek is Senior Manager for “Digital Transformation” of banks at KPMG. He is founder and former head of the comdirect start-up garage, publisher, author and speaker. He is committed to a fair dialogue between banks and FinTechs.

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