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CULTURE WARS: SHAPING A DIGITAL BANK
How can banks, fintechs and other financial institutions make sure they adopt the right culture to fuel rapid growth and success as banking services digitise? The interface between culture and technology has never been more important, writes James Tall
Around 10 years ago, staff at Amazon received a memo from the big boss, Jeff Bezos. In a five-point mandate, he instructed all Amazon teams to henceforth expose their data and communicate only via service interfaces, now known as application programming interfaces (APIs). This required planning and designing interfaces from the ground up, so that they could be exposed to outside developers.
The memo sparked a huge transformation in terms of technology, governance and culture within the company – without it, maybe Amazon Web Services and the Amazon marketplace wouldn’t exist in the way they do today. And, in writing it, Bezos showed he’d not only understood that data needed to be ingested and used in a dramatically different way, but that the culture of an organisation has to change, too. In other words, there has to be an open culture for an open technology platform to exist.
The interface between culture and technology is crucial to unlocking innovation and growth. And it becomes especially important when companies enter the much-sought-after rapid growth stage.
What was central to Bezos’ vision is also critical to open banking – how many times have you heard Amazon invoked by neobanks and others as the totem for a customer-centric business model? But when it comes to implementing measures to achieve Amazon-shaped goals, commitment can be more sketchy – especially when other, often technology, issues are front of mind. So, it’s worth considering: does culture prompt the adoption of certain technologies, or does the appearance of new technology produce changes in culture? Financial organisations are often guilty of drooling over the shiny new tech without actually considering what behaviours could influence its success or failure if it’s adopted. In fact, there’s a strong and increasingly popular argument that the right culture is more important than the technology.
Tandem’s CEO Ricky Knox told an audience at Paris Fintech Forum earlier this year: “The shifts in technology that have occurred in the past five years or so have enabled banks to bring a better product to market that appeals to customers and attracts a large number of people into the business. If it wasn’t for the Cloud, agile methodologies, AI (artificial intelligence) and so on, we couldn’t do what we do today. However, I don’t think that our competitive advantage in anything beyond
the shortest term is technology. Culture is actually much, much bigger.”
His fellow panellist, Rabobank’s chief digital transformation officer, Bart Leurs, agreed. “We’re faster than ever before, thanks to technology,” he said. “But culture is way more important. We embarked on an agile transformation over the past year at Rabobank. Today we have 4,000 people across the business working agile and the cultural impact of this is way higher than the technology supporting it.”
It’s well-known that incumbent banks and other financial institutions have battled outdated legacy technology systems, manual processes and high operating costs for years. This has tended to result in a distinct corporate culture that’s pretty inflexible and resistant to change. It’s therefore somewhat surprising that in a new white paper to be published by Banking Circle, only seven per cent of financial leaders surveyed said that they consider internal cultural change to be the most challenging aspect of banking in the current macro environment.
In the words of Joseph Healy, founder of Judo Bank and former National Australia Bank executive: “When I look inside these large organisations, I believe the cultural concrete has set…
large banks are slow moving, they’re stimulating progress in areas needed complex, they’re bureaucratic, they chop to keep up with the rapidly changing and change people every three, four, market. This is why banks and financial five years. There’s not a lot of evidence, institutions are increasingly choosing to anywhere in the world, of where big partner with fintechs (albeit often in a banks have adopted innovative safe sandbox environment) in the hope technology developed by others and that they’ll blow a fresh breeze through made it as successful as it otherwise the organisation. According to a recent could’ve been.” Fintech Disruptors report, 84 per cent of
A little harsh maybe, but those who Nordic bankers believe fintechs will help work in change management would argue them to achieve their goals, whether that a cultural shift definitely needs to enhancing customer experience, finding precede heavy investment in technology; new business models or discovering new that a digital bank culture needs to be revenue streams. Such partnerships created and reinforced by everyone from naturally shape the attitudes of a bank. the newest starter through to the board Collaboration, not competition, is and CEO, top-down and bottom-up. now seen as the primary driver of Singapore’s DBS Bank is a great example disruption. Fintechs imply change by of a bank that adopted that approach their very nature and among its 25,000 employees – so much so that it’s now seen as a model “ When I look inside these partnering with them is proving to have for embedding digitisation across large organisations, a beneficial impact banking services. I believe the cultural on bank culture as
It can be a difficult challenge concrete has set much as the tech. when a bank’s legacy system and processes have been in place for decades, acting as a comfort Joseph Healy, Judo Bank “ There’s a big difference blanket. The good news, though, is between the cultures that introducing a digital culture at Revolut, Monzo and doesn’t require the elimination of the incumbent banks. what’s already in place. It’s not that one’s bad
In more entrenched cultures, and one’s good, or external inspiration better than the other is often key to Dexter Cousins, Tier One Recruitment
Agile tech requires an agile mindset:
Banking as a platform demands culture change
And, as strange as it may sound, COVID-19 has actually provided a fantastic opportunity for firms looking to get a better understanding of the intersection between the two.
Companies have spent Q2 learning about their business model, people and processes. They have a better idea of whether the organisation is comfortable with uncertainty and change. They can explore what worked when locked down and what human interactions people still want.
Automation definitely helps, but there’s still plenty of room for the human touch within the value chain. For example, Nick Day, CEO of Small World Financial Services, told attendees at a recent webinar organised by money transfer industry body IAMTN that, as well as the predictable big surge in digital traffic, his team was hitting the phones harder than ever to engage with agents and customers to support those without access to digital technology, and therefore government updates.
WINNING THE TALENT Digital transformation is a journey, not a destination. It’s not a box to be ticked, a service just to be brought in or a switch to be flicked. While many organisations have
responded to the recent wave of pandemic-induced change by adopting a more open-minded attitude to the workplace and its relationship with technology – be it distance working or Cloud-enabled processes – it’s not mission accomplished as tech will continue to evolve, as will customers, laws and society itself. Organisations need to evolve with them. It’s a journey that demands an open, flexible attitude from staff. And the experience of working through an existential crisis over the past few months has rather proved whether they have the attitude to adapt and grow in a constantly changing digital environment – or not.
“What’s interesting about COVID is that, thanks to changing attitudes about home working, it’s really opened up the talent pool,” observes Alex Chirica, a consultant at UK specialist fintech recruiter Broadgate Search. “You see some companies – banks and fintechs – try to rush [recruitment]. They hire a lot of people very quickly but then, after two years, they get rid of them all and start from scratch. They realise they’ve made bad hires. Since COVID, if a client of mine wants someone, but they live in Switzerland, there’s no longer any reason why they can’t have that candidate.”
Judo Bank kicks on How Australia’s SME provider is preserving its startup zeal
Judo Bank co-founder Joseph Healy is under no illusion that organisational culture is critical to the success – or failure – of a technology-first business.
Given his long experience of working at senior level inside big financial institutions, he’s acutely aware of the atrophy of imagination that legacy creates. It’s why he spent as much time thinking about building an agile and open ‘attitude’ as he did an agile and open tech stack to support Australia’s new SME bank. Only by having both, he believes, can a new-generation bank ensure resilience. The one position companies appear to be getting less keen on is a chief digital officer (CDO). Although that sounds counter-intuitive as the pace of transformation quickens, according to PwC it’s an indication that organisations are beginning to recognise that everyone needs to take responsibility for change.
In a report last year, PwC noted that ‘new technologies need to be introduced, for sure, but legacy systems also need to be revamped, internal processes changed, and employees persuaded to adapt to new ways of working — all of which cuts across a company’s organisational silos. It is often at this moment of realisation that the CDO role is elevated to the board level, with capabilities that enable transformation across those silos. Looking ahead, we think that as transformation becomes part of the core business, the next step will be for the CDO to disappear. Digital transformation will become the responsibility of every member of the executive team’.
A CDO, or in some cases a chief digital information officer (CDIO), is where growth and control meet: an individual who helps a company realise its ambitions by converting more traditional, analogue businesses to fit-for-purpose digital ones, using the
One over on the big banks:
Judo’s culture is significantly different, says Joseph Healy
potential of technologies and “ We today have 4,000 people 10 million users, and 700 data. There’s a lot for them to across the business to 2,000 employees. That’s a consider. They need to look working agile and huge amount of complexity at everyone they work with the cultural impact to deal with in a six-month and think about their skills of this is way higher timeframe. These kinds and professional background than the technology of challenges are very – legacy or fintech – and how supporting it symptomatic of high-growth, to best balance those. Bart Leurs, rapidly scaling businesses, It’s indeed important that when people move from Rabobank whether fintech, neobank or any other tech. bank to fintech, or vice versa, “There’s a big difference they move at the right time between the cultures at in their career and at the Revolut, Monzo and the right stage of a company’s incumbent banks,” he adds. growth. This can have a huge “It’s not that one’s bad and impact on the culture they one’s good, or better than are becoming part of. the other, it’s just that each
“The key is finding at what environment requires a certain point somebody from a big type of person. bank comes in and has a real impact,” says Chirica agrees that a hire needs to be Dexter Cousins, founder of Australia-based the right cultural fit to add value to a recruiter Tier One People. fast-growing firm: “Sometimes I say to [a
“The challenge is always assessing skills candidate] ‘look, it’s a mess, but this is why and the ability to deal with an environment they need you’. It’s really about finding who that’s constantly changing. the candidates are who will thrive in that
“I remember when we did the search for business, and make it even better.” Revolut’s Australia Country CEO, we took One thing’s for sure: it’s extremely that brief and I think it changed four times important to have someone at C-level because in the six months we were working that can help push digital transformation on it, the business went from four million to forward. In the survey for the Banking Circle
“I’ve been involved in several efforts to launch in-house venture capital businesses, to develop new things, but, at the end of the day, the complexity, the competition for capital and the relatively short career span of many bank executives, means that the patience, enthusiasm, resources and entrepreneurialism needed to make these things successful, represent serious barriers,” he says.
For that reason, he’s allergic to the idea of ever selling out to them.
“History says that, if you’re consumed by a large organisation, you’re given all sorts of promises and commitment about being left alone but they rarely last more than one year. The person you got on with and trusted inside the large bank either leaves or is promoted, and the new one doesn’t share the same enthusiasm or vision. You start getting hit with lots of costs that don’t belong to your business and, eventually, they end up damaging or killing the business they bought.
“So, given how passionate I am, and my colleagues are about Judo, and our strong belief that we can build a world-class SME bank that, over time, represents a huge legacy for the team that built that bank, I would personally consider it as close to a nightmare as you can ever imagine if we ended up being acquired by a large bank.”
Instead, he’s instilling a permanent startup culture, even as Judo Bank goes through a rapid period of growth. It’s piling on staff and opening new offices as it competes with the Big Four – Westpac, Australia and New Zealand Banking Group white paper, only six per cent of financial leaders identified executive management buy-in as essential to realising the success of infrastructure innovations and investments. That indicates that the interdisciplinary teams that play such a key role in technology selection don’t have much board-level representation.
This is a problem. In any programme of change, senior support and leadership is widely regarded as crucial. The disconnect highlighted in Banking Circle’s white paper suggests the cultural infrastructure that supports a bank isn’t regarded as a major change project or something that has a significant impact on business performance. That’s not just misguided but potentially damaging.
The white paper ultimately concludes that the culture wars can be won, but adds that to succeed in the digital age, companies must take internal culture, communications and talent as seriously as technological change. “It’s imperative to get the executive board fully on board,” it says. “Technology and infrastructure alone can’t create partnerships, serve customers or build an ecosystem. Insight, vision and leadership are also necessary for scaling up, scaling down,
moving sideways and working in new ways.”
(ANZ), Commonwealth Bank and his former employer National Australia Bank – to service the country’s SMEs.
“We see this company’s future being defined by our ability to look at data as a strategic asset,” says Healy. “We wanted to build a high-tech and high-touch company: a customer-facing, human dimension to how we engage with our business customers, enabled by bleeding-edge, Cloud-based technology, so that when people come to do business with us, it’s easy for them and for our people.”
Scaling as quickly as it has this year, Healy recognised, though, that it might be hard to replicate and sustain the passion and drive that staff had for that vision in the early days. “To engender that same feel, passion and motivation within our people is the single biggest issue we’ve got,” he says. “So we’ve insisted that, as people join the company, they have an equity stake in it so that they think like owners and not just as employees.”
