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Banks must move from the mindset of being digitally available to digitally native if they want to keep fighting fit in the future. 

During the summer and autumn of 2020, I ran an online survey of banks and fintech firms to garner their view of physical versus digital access to banking. Obviously, digital access to accounts has come to the fore during the pandemic, but it is interesting is that this has not been a priority before. Some 28% of the bankers who responded to the survey said that 2020 had massively changed their view of physical versus digital, and 43% have permanently changed their strategy as a result.

Put another way: almost half of the banks globally who responded to the survey said that they had to pivot to digital in 2020. 

That’s all well and good, but then there’s a bigger question: what is their digital strategy?

It’s easy to talk up digital and say that you are doing it, but what does this mean in practice? Digital is not a project; it is a cultural transformation of the bank that involves everyone and everything — not just a chief digital officer who has been given a budget. While this has been obvious to me for a long time, it becomes categorically clearer as we move forward.

Cloud adoption

In a specific example, I question how banks are moving to cloud computing. My first discussions of cloud computing in banking date back to the late 2000s. At that time, people were concerned about security and risk. And while they probably were correct to have been concerned, cloud technology has matured over the past decade. Today, in many ways thanks to the pandemic, banks are now committing to the cloud.

The core of 21st century banking is data and a consistent experience across devices and access

But they are committing to cloud-based services for non-strategic tasks to give employees access from home. The bigger question is how to commit to cloud-native services for strategic tasks to give customers digital access.

This debate about cloud-based versus cloud-native will rumble on, but it is a very fine distinction. Cloud-native is projecting a business model built for the internet; cloud-based is developing a business model to evolve onto the internet. The two strategies are very different, as is digital-first versus digitally available.

This leads to a whole host of questions that I would ask any management team about their digital transformation strategy; but here are three questions I would lead with:

  • Were your business products and services fit for purpose in the pandemic?
  • Is your business model designed for being born on the internet, or are you trying to develop to the network?
  • Have you refreshed, restarted and redesigned for a lockdown world, or are you just trying to muddle through?

Secret to success

I could go on, but I’m sure you get the idea. The idea is that the bank of the 21st century should begin with digital, the internet, networking and cloud. That should be its core design — one where the bank is born on the internet, and all of its products, services, structures and models are designed that way.

At least nine out of 10 banks were designed another way, back when physical access was key. It was a design focused on access to banking through buildings and humans; today, the design is focused on access to banking through software and servers.

I call it ‘omniaccess’. The core of 21st century banking is data and a consistent experience across devices and access. Omniaccess starts with a rationalised and consolidated core of customer data that can be analysed and accessed with both artificial and human intelligence. Unfortunately, most banks are still talking omnichannel, which means layering cloud and digital on old legacy structures and dodging the requirement to rationalise and consolidate.

This friction between omniaccess and omnichannel will become a key debating ground for banks in the 2020s, as institutions that understand omniaccess win market share, while banks that layer digital on top of old structures lose out.

This is the battleground, and designing digital and data around customers are the weapons. Are you fit and ready, or are you just muddling through?

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


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