Technology has become an essential component of banks and one that needs rigorous oversight. So why, asks Chris Skinner, are there so few tech experts on bank boards? 

Back in the 1980s, Walter Wriston, the then chief executive and chairman of Citibank, said: “Information about money is becoming more important than money itself.” His successor, John Reed, said: “Banking is just becoming bits and bytes.” A quarter-century later, this vision of the future of finance has come true.

By way of example, I just saw that in April 2018, the cryptocurrency Litecoin processed a single transaction between two users valued at nearly $100m. The transaction took just over two minutes to process for a cost of $0.40. On a similar note, the move to open banking means that most banks are now managing a marketplace of apps, APIs and analytics, with disappearing branches and humans.

The relentless move to automation moves at a clip. Traders and investment bankers are disappearing and being replaced by algorithms; tellers and call-centre workers are being replaced by mobile apps and chatbots. Is it any wonder that the long-term forecast is that banks will be run as automated structures without people? For example, US research company Opimas has forecast that 230,000 capital markets jobs will disappear by 2025 thanks to artificial intelligence; Citibank predicts one in three banking jobs will go over the next seven years; and John Cryan, outgoing CEO of Deutsche Bank, announced in October 2017 that half the jobs in the company will be removed by technology because most of the humans are “just abacuses”.

The rise and rise of tech

The march of technology is unstoppable. Bearing this in mind, it surprises me how nonchalant many bank leadership teams are about technology. Back in the 1990s, I remember hearing key presentations from the leaders of several tech firms, one of which was Ken Olisa, chief marketing officer at Wang Computers (now Sir Kenneth). He talked about the network effect of technology and how it would mesh into a world of networked systems requiring every business to have a technologist at the helm.

Another speaker was the head of financial markets at electronics company NCR who, in the mid-1990s, predicted that every bank board would have people with technology experience leading the charge forward. Twenty years later, it is starting to happen, slowly but surely, but it is amazing that based upon all of these predictions from a quarter of a century ago, banks’ executive teams are only just getting the message.

For example, when Barclays announced the formation of a new board for the ring-fenced retail bank in 2017, a key requirement was that “candidates should have experience of organisational transformation, particularly with a focus on customer, digital and technology”. Yet when the new board was announced, it included a retailer, an accountant, two investors and a banker but not a single tech person. 

This surprised me, as I would have expected that if the bank were truly appointing someone with ‘real experience of digital and technology’, there would be a former CIO of a bank or CEO of a technology firm included.

Does oversight need knowledge?

Maybe I’m being a bit extreme here, however. Does the board really need to know digitalisation, technology and transformation? According to many respected regulatory and oversight organisations, the answer is no. The board is there to oversee the leadership team of the bank – the people who do the day-to-day management – and ensure the team is fit to maintain the bank’s stability, that it is not taking excessive risk, that it has a strong balance sheet, and that it is responding to the strategic requirements for change. In other words, there is a major difference between the board and the management executive of a bank. The board are there to oversee the bank’s management leadership team, and the management are there to deliver the day-to-day needs of running the bank.

I agree with this to some extent. The leadership team of the bank, the C-suite, must be fit for digital transformation and the board must provide the oversight to ensure that the management team is balanced between the right level of skills to cover digital transformation.

However, my contention would be that if the team at boardroom level have little digital transformation experience, how could they vet the management team of the bank and, specifically, ensure their digital leaders are the right people? More particularly, if the massive changes in technology and digitalisation predicted a quarter-century ago by leading bankers and technologists hold true, surely both the management and the board need to have digital intimacy?

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.


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