COMMENT
Shockwaves Leading fintech commentator and publisher of the Digital Banking Report, Jim Marous, spent the better part of 2019 on his Disrupt Yourself tour, giving banks an uncompromising message: embrace change, take risks or events will overtake you. Then COVID-19 happened… COVID hit completely unexpectedly. And those organisations that were the furthest along the digital curve were the most prepared for the unexpected. When bank branches were forced to close and everyone asked ‘now what?’ the ones that were faking digital, those that replicated paper systems with automated
ones and weren’t ‘thinking digitally’, found they had the biggest hurdles to jump to move to the next level. When we conducted research for the Digital Banking Report, 70 per cent of organisations said they had digital account opening. Three questions later, we asked ‘how many of you require the consumer to come into the branch to finish the process?’. Seventy per cent said they did. That’s what I mean by faking it. If they really want to see how it’s done, they should look to China – to organisations like WeBank and Alipay that are built from a digital structure out. WeBank’s digital mainframe allows it to test different innovations on live computers. Because it has so many backups in the digital world, it can take one of them and say ‘let’s replicate what reality will be’. It’s conducting 20 to 30 updates a month, when most financial institutions in the States, and probably in the UK, too, have a, quote/ unquote ‘major update’ every six months to a year. So, first, you need to catch up: restructure your organisation from a digital perspective, because there are going to be other surprises beyond COVID-19. And the consumer’s going to present you with some of the biggest. They will demand more and more of you and that’s not going to be driven by what some other financial institution, somewhere else, did. It’s going to be driven by what a retailer, a restaurant, a hospitality company, an airline, has done, perhaps with a one-click identification procedure or a compelling engagement proposition. Organisations internally – their people – have to disrupt themselves. That is why I believe the organisations at risk right now are your mid-sized, mid-level financial services providers.
Funding has become pretty tough for fintechs. If they’re running a big shop but don’t have venture capital funding, they’re running out of cash. They’ll be looking for partners because that’s natural for them. But if you’re a mid-sized, traditional financial institution with legacy people who have been moved up the ranks because of their time with the company, that’s the worst thing imaginable for them. Right now – with the whole world looking at equity, diversity and gender – bringing more women and people of colour into financial services, which as an industry is the furthest behind, is a good call. But if you bring in new blood, people with new thinking and great ideas who have been educated in digital technology, the last thing you want to do is put them through a legacy onboarding programme, learning how we do it. No. You should be asking them to teach you how to do things. A good example of doing things differently is Marcus, the new digital bank by Goldman Sachs. It basically set up the entire organisation around the consumer experience. It’s not adding services until it can do it right. So, it doesn’t have a chequeing account yet but it does have savings and lending accounts, it has the Apple Card, and it’s soon going to have a loan package around the Amazon Merchant. But it’s going to make sure that every step that’s not absolutely required isn’t in the customer application process. Unfortunately, financial institutions in their legacy mental state often look at the worst-case scenario, for what could go wrong and build for that, as opposed to doing what Rocket Mortgage, in the US, does, for example. If Rocket can have an application for a mortgage done in five minutes, please don’t make me take 10 minutes of my life to open a bank account.
There are going to be other surprises beyond COVID-19. And the consumer’s going to present you with some of the biggest
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