The Interface

The digital transformation of financial services with Jim Marous and Sonia Wedrychowicz

Jim Marous, internationally recognised financial industry strategist, and the publisher of the Digital Banking Report and Sonia Wedrychowicz, an experienced technology transformation professional of over 25 years discuss how digital transformation is more than merely technology while exploring the leadership and cultural issues surrounding digital transformation in banking.

How do you feel the conversation around technology has changed? Are businesses now driven more by technology and IT than ever before?

Sonia:

First, we need to understand that, in the last couple of years, the way people consume, communicate and commute has changed dramatically, and is increasingly being delivered using digital channels. In today’s world, the vast majority of our daily lives are supported by technology. So, by definition, all companies, including banking, are becoming technology companies. That realisation, however, is not universal yet, and in many organisations, I can still see the business and technology running separately. The transformation efforts focus on modernisation of the platforms on the technology side, and the digitisation of the customer experience on the business side, while the two functions, in my opinion, should work as one team with the common goal, driven by customer obsession.

Jim:

Financial organisations do know what they need to do. They do understand the technologies that have to be embraced, but the challenge is they’re not very far down the digital transformation process. This is a concern, given that the industry is moving so fast in the digital space. A lot of organisations have seen digital transformation as the purchase of technology and the implementation across different initiatives. This is opposed to an overarching perspective of digital transformation that really starts from the inside out, and looks at processes and programs, culture and leadership and then builds technology against that. We’re seeing a big challenge with regards to leadership and culture, and without that, the implementation of technology will probably never see its full optimal implementation.

How common is it that across different businesses in different industries, in different capacities, digital transformation means something different to each and every person and organisation? And how do you go about unifying it in a way that makes sense to everyone?

Jim:

When you’re talking about digital transformation, and you’re combining that with the financial services industry, it’s more difficult. You look at organisations that are going to need to embrace change, take modified risks, and actually disrupt themselves, and that’s not in the comfort zone of financial institutions. It’s the opposite of the legacy culture that’s been in play before.

Sonia:

There is a lot of misunderstanding regarding the difference between digitisation, digitalisation and transformation, and it comes to the old rule that people have the tendency to always see these things as the same, although they are actually different. There is a very common misconception of digital transformation, which is disruptive, and challenging the status quo, with change management, or restructuring, which is basically more of the same, but more lean and efficient.

A good example of this is centres around the difference between the process of digitisation versus digitalisation itself. Digitisation is all about making the current process, or product, digital without truly reimagining it. The same process can, however, be digitalised, rather than digitised. The digital transformation is being trivialised by being understood as bringing new technologies into place without truly reimagining the customer journeys, the customer experience, and actually making it much simpler and more transparent for the customers.

What are some of the biggest challenges and barriers to embracing digital transformation and embracing these new technologies?

Sonia:

The emergence of efficient fintech companies offering different banking services, not only cheaper, but mostly through an amazing, simple and friendly customer experience. The existence of banks is under a serious threat. Interestingly enough, the threat level varies in different parts of the world and so banks need to accelerate on the path of reimagining themselves, in order to keep pace with the emerging competitors who are, these days, coming from industries that were never associated with banking before.

Jim:

I think the biggest challenge we’re going to see, and the reason why banks right now are starting to rethink their complacency, is not because of the revenue, but because of the threat, while we’ve been thinking about what’s going to happen in the future, and what’s going to happen in the fintech banks and the challenger banks. To the large tech companies that is the biggest challenge.

The threat is real. The consumer’s going to start demanding more and more of their financial institutions. A consumer can now change a financial provider, invisibly. They don’t have to come into the branch anymore. They can do it with a click of a button on a phone and they can change their financial relationship. What we have to do is realise that there’s a major threat out there to financial institutions that sit back and hope that it’s going to be business as usual.

How important is it, during a transformation and during change, that you are keeping the customer at the very heart of everything you do?

Sonia:

Never focus on your competition. Always focus on your customer. For years we’ve been completely ignoring the customers and looking at what the competition was doing in order to keep pace. By focusing on your competition, you’re always going to be one step behind them. Technology-enabled tools are allowing us to be much closer with the customers without seeing them and even talking to them, but just focusing on how they behave, what they do, how they react to the different propositions we are giving to them, and whether it results in increased business generation.

Jim:

I think part of the difficulty with transformation is transparency. We get updates on our mobile apps from many organisations, updating you that changes are being made. It doesn’t happen that frequently in the financial services space because the communication isn’t there. There are a lot of organisations that believe: if you build it, they will come. The reality is, that’s not the case. We need to provide more information upfront and do a lot more research to find out what the consumer wants. What they’re looking for is simplicity and a lack of friction, and really what they’re hoping for is that the financial institution is going to know them, look out for them, and reward them.

Jim, you mention that non-financial institutions are now dominating the payment space, how is that impacting the decision-making and the approach to technology?

Jim:

Financial institutions are looking at the fintech companies because those companies looked at the digital companies and asked, “How can we take customer insight, AI, and digital technologies to make better experiences?” In every case twe’ve seen, what the competitors and non-traditional competitors have done is built solutions. They take data, insight, and technology to provide a seamless experience built on a digital platform, and that’s a very important component, because being built on a digital platform means that they’re not building on legacy infrastructure. The tech companies have streamlined the application process for loans or for a credit card because it builds on a tech platform.

 The case studies that we see going forward are coming from the fintechs, and I think traditional financial institutions are going to build more and more partnerships, because bankers can’t get out of their own way, and they really can’t build something that they’ve never done before.

Sonia:

When I look at the big fintech companies and companies like Amazon, I think they’re being watched closely by the banks for their customer obsession, delivered by technology. When it comes to small fintech companies; it’s very interesting. They are providing solutions on untested but interesting technologies like blockchain or AI. Once those technologies became more established, expertise will rise. So, they are not using the fintech start-up companies to integrate those solutions any more, but they want to have this expertise in-house.

Talk to me about the importance of bringing people along on these journeys, and in these transformations, and not necessarily equipping, re-equipping them with these new skills and new capabilities in order to drive the business forward.

Jim:

This is probably the biggest challenge that the banking industry is going to face. We do not have a large knowledge space of digital mind-sets in the marketplace and that includes everything from digital applications of AI, to just how the technology and coding works. There’s a major weakness. But just as big is how do we reach for the people internally, because when you talk about automation, robotics and AI, there’s going to be, if not an elimination of jobs, a transformation of jobs into new sets. So, we’re going to have to take it upon ourselves as an industry to retrain people across the organisation, so they’re prepared for the future. The challenge is, not many organisations right now are doing it.

Sonia:

I also think that a big challenge of the traditional organisations today is to attract young people. The attraction of the old conservative companies is fading away in favour of the Apples and Googles of this world. People are joining the new technology companies not for free food and gym on the premises, but for the ability to constantly learn new things. The financial institutions need to develop the leaders of the future. They need to reimagine, not only their equipment policies, but more importantly, change their hierarchical structures within the organisation to ones that are powered by people who are more willing to listen, with employee empowerment that is bringing the customer experiences of change much closer to where the customers are.

If you could give one piece of advice on how to be successful in these disruptive times as a professional in the financial space what would it be?

Sonia:

Keep reinventing yourself and have the courage to unlearn what you learnt in the past. Constantly learn new things. Brains change, so surround yourself with young people, as they will become your bridge between the past and the future.

Jim:

We have an industry filled with legacy bankers that have been in this industry for a very long time and have done very well in most cases. What we need to do is to look and say, “How can we, as people in organisations, build a culture that will make it so that organisations can truly be part of the future?” The future will happen very quickly, as will the impact of not making changes. We have to do better.

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