Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
State of Financial Services Industry Report 2020 (Oliver Wyman): When Vision and Value Collide
Olivery Wyman | Chris Allchin and Ted Moynihan | February 2020
Financial institutions face a big challenge: creating the business of the future from the legacy they have today. There is considerable investment and activity underway to make this transformation. Firms have set up incubators, accelerators, and innovation teams, often consuming considerable management attention.
They have hired chief digital officers and teams, and rolled out new ways of working. Some breakthroughs are occurring. Yet positive impact on the bottom line has been rare, and no firms we speak to are happy with the rate of change.
See: MOF: Consumer-directed finance: the future of financial services
Until recently, this has been a concern but not a crisis. Pressure is now building. Investors, analysts, and management teams in the past year have begun asking questions about the lack of progress from the considerable investments being made.
The outside threat is growing, not receding, with the big technology companies positioning themselves in financial services. The industry also faces difficult macroeconomic conditions that will put investment budgets under strain.
In short, financial institutions are struggling to make and deliver on the investments they need to be successful in 10 years’ time, while delivering value for shareholders in the short-term. This is now revealing a major tension in the industry between two opposing mindsets:
The vision mindset is focused on building the firm of the future
It foresees structural changes to the industry driven by new technology, changing value chains and ecosystems, new rules of competition, and disruptors setting those rules. A full transformation effort is seen as necessary, with a three- to seven-year investment horizon and a growth narrative that emphasizes customer value.
The value mindset is focused on delivering financial returns
It sees an industry that has adapted to successive waves of technology and focuses on cost and capital responses to slow growth. Investment should be made only where concrete returns are expected, with an impact in the next one to three years.
See: Inflection point:Seven transformative shifts in US retail banking
The industry needs a mix of both mindsets. But in many cases, one or the other has come to dominate. When the value mindset dominates within firms, the result is myriad small changes with known but low-impact outcomes. Short-termism leads to increasingly outdated legacy technology, which holds back future productivity improvement, and new growth opportunities rarely amount to anything substantial.
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Download State of Financial Services Industry 2020 (32 page PDF) -> Here
Top 5 Killers of Banks' Technology Projects | | Feb 7, 2020
Why are tech projects dying a slow death? We’ve identified five drivers of their demise and how they can be brought under control.
Killer #1: A Battle of Opposing Priorities
For any program to deliver, a compromise is needed between how much the leaders want to focus on the vision for the future versus revenue improvement in the short term. Without a balance of the two, projects fail, because either their scope is too narrow to create impact or leaders are so ambitious that they keep spending but never finish.
The Treasury Committee in the U.K. set boundaries in this area. It stated that if management teams are so focussed on the short term that customers become exposed to risks from old tech systems, then regulators must intervene.
Killer #2: An Absence of Experts at the Very Top
A clear differentiator between organizations that successfully deliver on technology projects and those that fail is a technical leader on the board or executive committee. A quick glance through the annual reports of the top 10 retail banks in the U.K. shows a clear absence of deep IT, technology or digital experience in most leadership teams. This must change.
There are many benefits to having a senior leader with business acumen and technical know-how. For example, they can ensure new technology capabilities built in disparate parts of the business use standardized and compatible technologies.
Furthermore, a CIO who has influence only within the technology team is a wasted asset. Working at an executive committee level allows a chief information officer to collaborate with HR to ensure the technologies deployed across the business align with the level of technical skills within the existing workforce or establish a training plan.
Killer #3: No Plan for Crossing the Finishing Line
There have been cases where businesses are itching to launch a neat new data stack and a fancy app for customers, but missed one vital detail: how to move their millions of customers from the old system onto the new one.
With the excitement around developing a new product, it is easy to forget about what’s needed at the very end, like data migration or scalability. It’s a similar story for apps. More than half of app development time is needed just to get it working behind the scenes.
Leaders need to ensure their tech teams focus on what makes a real difference to the project’s main objectives, such as security and reliability, and know what it takes to move from development to testing to launch.
Always sacrifice scope before quality.
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