Banking on Digital Growth
Banking on Digital Growth

Episode · 1 year ago

67) #ExponentialInsights: Doing Digital: Why Traditional Banks Must Transform feat. Chris Skinner

ABOUT THIS EPISODE


Many out there understand that traditional banks need to digitally transform or die.

It’s one thing to say you are going to transform…

But it’s meaningless without first answering the question: Into what?

In this #ExponentialInsights episode, I sit down with Chris Skinner, Author of Doing Digital, and discuss what it really means to digitally transform traditional banking.

We cover:

  • Why digital transformation can’t be delegated to a department

  • Why digital transformation really isn’t about technology at all

  • Why the digitally-native fintechs will always have a leg up on traditional banks

You can find this interview, and many more, by subscribing to Banking on Digital Growth on Apple Podcasts, on Spotify, or here.
 

...traditional banks tend to push products through channels to get greater share of wallet and cross sell, whereas digital banks start with the customer journey in need and then build the user experience to be part of a relationship interaction digitally rather than trying to actually sell them anything you're listening to. Banking on Digital Growth with James Robert Lay, a podcast that empowers financial brand marketing, sales and leadership teams to maximize their digital growth potential by generating 10 times more loans and deposits. Today's episode is part of the exponential insight Siri's, where James Robert interviews the industry's top marketing sales, and Fintech leaders sharing practical wisdom toe exponentially elevate you and your team. Let's get into the show. Greetings in Hello, I Am James Robert Ley and welcome to the 67th episode of the Banking on Digital Growth podcast. Today's episode is part of the exponential insight, Siri's and I'm Excited to welcome Chris Skinner to the show. Chris is an author, speaker and troublemaker, according to his LinkedIn profile. I like that, and Chris has written 14 books, most recently doing digital lessons from leaders. He also writes a daily Blawg and consults about the future of banking. Hello, Chris. And welcome to the show. Hey, James. Thanks for inviting me. Great to be here. You know, I've been following your work for about a over a decade now and and and have to ask, you do a lot of writing. The writing has been very helpful for me personally, Very inspiring. But have you always been a writer? And what inspires you to write? Because you always have something good to share? And I'm grateful for that. If I'm honest, I've always worked in technology, and that would be companies dealing with banks and financial institutions. In fact, when I start starts getting with technology and insurance way back when on dumb Many, many, many, many years ago I did a presentation about the state of the insurance industry and the feedback forms came in and someone said, Tell me something that I don't know And I realized I was talking about the great depth knowledge I had about the industry. But I wasn't talking about something that was visionary or out there, and it changed my mind and thinking about things I still remember to this day, as you can tell on dso back then I decided on determined that you are the of how I will work would always be focused on where we going next. What's happening? A few in financial services. I've been doing that for three decades on initially mainly presenting about it. I wasn't writing about it, but I got made redundant In 2000 and two on Bond. I got hired by a couple of companies to start writing white papers, and that...

...started the writing process. I have been writing a little bit before, but then I became suddenly a a consummate writer on a regular basis on started blogging in 2008 because I'm a real sad Oh, I decided to block every single day. You know, hearing hearing that story. I connect with it a lot personally. In 2012, I had an advisor come in, David Baker. Hey wrote a great book called The Business of Expertise, and he had a great exercise called Drop and Give me 20 and pretty much just ramble off 20 insights that were unique, our own perspective, not someone else's perspective. And it was a very challenging exercise at the time, and he's like you need to start writing. You need to start writing a lot. And so started the writing process myself. Very cathartic. And then I had another adviser that I've worked with Blair Ends, who wrote a book called Win Without Pitching and one of things he picked up. And he goes, You do a lot of thinking through your writing, so I probably right way more than what people know. Onley. A small percentage of it makes it out, because for me it's It's, I think, through my writing. That's really where I find my thoughts. So it's good. It's good to hear that back story, because thinking about your writing, you wrote a a recent piece on your blogged. One of the most respected bankers in the world, Jamie Diamond, is the chairman and chief executive of J. P. Morgan Chase, which is also one of the most highly valued banks. You noted that Jamie is scared shitless of Fintech, and I had to chuckle it that I have to ask why is Jamie Diamond scared shitless of fintech and should other financial brand leaders feel the same way? First of all, we need to qualify that, he said, that I didn't say, he said on an analyst call around what keeps him awake, and you know that was his reaction on. But the reason why he reacted that way is quite a while now, Jamie Diamond said. Well of the bank leaders have Bean giving a rallying call to start waking up to the challenge of technology and specifically the fact that AH bank is very slow moving, inflexible, not agile on. They have to change and pivot, which is very hard to do if you're not using the technology capabilities of today effectively. Specifically, for example, I use this analogy quite often is that most traditional banks are becoming cloud based, but they're not cloud native. Most challenger banks were born on the Internet on most traditional banks were born in the Industrial Revolution, and so there's a really difficult exercise to go through there on DSO when I wrote the most recent book doing Digital, what I aimed to do in that book is to say, Look, you know, there's some banks trying really hard here to change and pivot at which JP Morgan Chase's one on. But you know,...

I'm surprised that they allow me to step into their officers and joined in the book in terms of being interviewed and giving me the lessons they were learning and trying to pivot the other banks involved with BBS in Singapore, China Merchants Bank in China Obviously BBVA and I N g. I picked those five main because they're all respected in trying to do digital well on specifically through digital transformation. Well, but I think that the crux of the matter is fintech firms are born on the Internet cloud native, fully platform, based with a P s and the ability thio interact. Using open financial services on by the traditional banks are way, way, way, way, way off that ability. I used a photo in that log, in fact, which many people have been picking up on the racing truck that has all of these bags and bikes and chairs on the truck falling out of the sides and people seeing on the top on. My reason for using that picture was to say what most traditional banks are involved in is that they have all their workers and management riding on their speeding truck. They've gotta unload and reload the truck. Andi, that's really difficult to do. Yeah, and And I think you know, you mentioned before you do a lot of thinking about the future. And when we think about the future, particularly through the lens of financial services, it could be hard toe let go of the past. This idea of being built on the cloud natively its operational. It's mindset, and you share in in in your book doing digital that banks must create a burning platform to ignite change, for transformation to spark change of transformation. Can you expand on this thinking about creating a burning platform? Is this really about first principles thinking starting over instead of duct taping something that's really falling apart or just trying to hold things together for the old World? Well, there's, um, over 30 lessons in the book that I saw outline from the interviews I made over six months with these five big banks. But you start with obviously working out what to do and how to do it in getting a vision around how to digitally transform, and then you have to disturb people and make the organization uncomfortable. This is what Jamie's doing with this. I'm scared shitless about Fintech he's been doing it for a number of years. In fact, I think it's the first time was about 2014. Silicon Valley is coming to eat my lunch on. There's been regular mantra, you know, from Jamie around effecting change, disturbing people. That's quite funny, because when you look in track what he's been saying about Bitcoin, for example, it's turned around from Bitcoin is just a Ponzi scheme for criminals, to it's worth $146,000 by the end of this year. And we should invest in it so interesting...

...how things change on I think the critical thing is that it's great to have a burning platform and say, We're all going to die unless we change, which actually is another thing I heard from two of the banks. You know, if we don't transform, we die. But you have to then say What are we transforming to? And I use the quote often of Charles Darwin, which is is not the fittest, the fastest, the most intelligent or the strongest to survive. It's the ones who are most adapt thing, but the thing is on my challenge to most banks is are you adapted to change in the right way. If you're delegating digital transformation to a CFO or CEO CEO CEO, giving them a budget, a project implement in a line of business that's fragmented, you're really not going to survive because you have to digitally transform as a company with the leadership team. We're passionate about making the whole company change on. Do you really have to adapt? Not necessarily in a way that's rigid in a way that says, Well, we have to have a vision of the way forward. So this is where we we need to try and get. It's not a fixed destination. It's a continuum of change to make this organization fifth the 21st century, based on the Internet and born on the Internet. And that does the huge cannons took for any bank leadership team because most banks are led by bankers don't understand technological requirements. Yeah, and and it's that lack of clarity that keeps people trapped into what I call the Cave of complacency, uh, the cave of complacency. It creates a false sense or, ah, pseudo security, and you can look around the cave floor and see all the other brands that thought it was gonna be safe in the cave. But not really much. So when you talk about this idea of getting a clear vision about where they need to go next and I like, you know, making people uncomfortable because the desire to change has to be greater than the desire to change, to say the same and the idea of even a burning platform, I I even think of the old military strategy of Burn the ships like That's it. We're burning ships, we're either gonna survive or we're going to die, and we have to keep moving forward. But what's holding bank leadership teams back the most, Or maybe a better question is about specifically vision is what's blinding them to begin with in the first place. Well, I think and again, going back to Jamie Diamonds comments. You know, he points that square PayPal, but also on group in Amazon on says, You know, these guys have been be taking all of our business. Andi, that's the disturbance. But then you have to then say so how are we going to change and what we have to change into? Yeah, it's a metamorphosis. Its's not a reengineering. It's a complete reinvention. Renewal. Andi. I think...

...what blinds them and holds them back is the challenge of doing that is humongous. It's really not easy. There's a couple of great books that I've used through my years. And talking about this one is How do you make the Elephant dance by Lou Gerstner talking about turning around IBM in the 19 nineties? But more recently, Satya Nadella is book about Microsoft. And when you look at Microsoft and turn around, there you go. That's amazing that you could take a company that's, you know, stubborn, saturated, sinking and suddenly make it nimble and quick and turn around. How did they do that on? It's really about recognizing the cultural needs in the digital transformation is nothing to do with technology. It's about people. It's about making people understand that they have a voice and they have, ah, ability to enable change. And they're not just being told what to do. But they could tell us what. Yeah, and I agree with your perspective on that. I say, You know what? Technology is just the tool that brings people together, and this is still a people business. Whether that be internally, externally. And you even wrote, you know, specifically thinking about AI. You shared that ai. You cannot replace humans with machines. So how does this idea of a I play into the bigger conversation? Because that's where you know a I machine learning. Is it hype? Is it help? What's the path forward of adding that? Because, really, it's adding additional confusion and complexity to it already no challenging situation that were coming out of co vid. Where do we gain the clarity with that? It's a really lengthy question to answer in terms of or rather lengthy answer to your question, but I'll try and keep it neat. So when you look at a eyes best practice uses, most of it is automating the mundane. It's looking at fraud risk analytic metrics. It's looking at chatbots and automating mundane questions of customers online or on mobile APS. It's dealing with the things that are stupid, you know. My favorite example is headline from three years ago, which is that again, J. P. Morgan Chase are saving over $300,000 of lawyers time by using AI and what they're actually doing is saying instead of a lawyer manually manually checking the wordings in contracts. You can automate that using a machine? Absolutely. That's what we should be doing. We should be automating the things that you are stupid for people to do on. Then you say so. If we've automated all the things that are stupid people to do, what are people doing? Onda. The end of the day is that it augments what they could do. It should be enabling them to do better things rather than replacing them on. I've met so many banks spare bank in...

Russia, or, you know JP Morgan, who I've mentioned on the number of others who are saying, You know, the core of what we're trying to do is to say to people, This is going to make you work better. I mean, you be asked, is a good example that you bs private banking, wealth management, high net worth. Individuals have automated nearly all the mundane tasks, like when a customer sends a message saying, Can you change my port portfolio? Risk metrics to medium aggressive on Asia oriented? Why should a wealth manager is a highly paid relationship manager? Spend the whole of a day dealing with the admin of that when the machine could do it on. Then you leave the relationship ship manager to go back to the can't fly and say So this is what we've done, and this is what you can do. And this is what I would recommend if your next based on the machines recommendations on. By the way, let's look for that dinner next week when we're back. Post Pandemic. Andi Talk about where you go next. Technology has transformed our world, and digital has changed the way consumers shop for and buy financial services forever. Now consumers make purchase decisions long before they walk into a branch if they walk into a branch at all. But your financial brand still wants to grow loans and deposits. We get it. Digital growth can feel confusing, frustrating and overwhelming for any financial brand marketing and sales leader. But it doesn't have thio because James Robert wrote the book that guides you every step of the way along your digital growth journey. Visit www dot digital growth dot com to get a preview of his best selling book, Banking on Digital Growth, or Order a copy right now for you and your team from Amazon. Inside, you'll find a strategic marketing manifesto that was written to transform financial brands, and it is packed full of practical and proven insights you can start using today to confidently generate 10 times more loans and deposits. Now back to the show, hearing what you're you're speaking through automate the mundane and the things that are stupid for people to do. It reminds me of one of the great lessons that I've learned from the reading of S. C. Sharp, founder of the Four Seasons Hotel, where he had shared systemized the predictable so that we can humanize the exceptional. And, you know, I was just having a conversation with Sue Woodard, who's the chief customer officer for Total Expert in Episode 60 66. And we were talking about the need to create space and time for these relationship managers to ask good questions. And ai machine learning is such a tremendous way to do that. And you you write a lot about this because this is about, I think, the humanization of digital because so much conversation has been about the technology. But once again,...

...technology is a tool that brings people together and and I go ahead, I think the AI machine learning is actually there to augment human interaction not meant to replace it. And I think that this is one of things that we get fundamentally wrong. A lot of digitalization, particularly in financial services, is being const production on getting rid of staff instead of being augmenting service on giving better customer relationships and customer advice. And when you turn it around to the customer focus, which is actually where we should always start, we shouldn't folks start with the cost focus we should start with. What is the customer need and how are they behaving on? How can we be more predictive and servicing them and better at servicing them? Then we could know augment our people with much better tools to deal with customers rather than trying to get rid of our people. It's a great point. We should start to be customer focus as opposed. Thio, I guess traditionally would be cost focus. What can we redo Thio due to reduce cost? Is that a fair statement way? Use the line regularly again, going back to traditional banks vs banks, which is traditional banks tend to push products through channels to get greater share of wallet and cross sell, whereas digital banks start with the customer journey in need on, then build the user experience to be part of a relationship interaction digitally rather than trying to actually sell them anything. Yeah, so put the transformation of people over the commoditized transaction of dollars and cents, if you will. And that's one of the things I really appreciate about your writing is you're always looking to inject humanity and into banking. And that's something that you touched on in an article you wrote. The world is good, bad and mad, and the same is echoed in an article about the money jars in the pots, you know. So what are the opportunities here as we continue to journey through this world that we're all navigating right now? Not necessarily a playbook. But what are the opportunities for banks to bring their focus to solving people's riel problems that they're facing right now? I mean, it's again open question, which could lead to a very lengthy answer about not trying to be sure. I think it's two angles to this level 31 is too many of the cos both Fintech, Challenger, neo bank and Traditional bank are just creating the traditional Protestant services in a better way. I've always said it's, you know, creating faster horses rather than thinking about there's new vehicles out there that we could create from start from fresh and again from Steve Jobs to Henry forward, you know, as the customer what they want. They don't know, present them with something that they need and they go, OK, I'll buy that. So what we should be doing is...

...challenging all the traditional products and services of financial institutions on saying, Can we reinvent these on? I don't think enough of that well, including all of the new near banks and challenge the bank. I think they're just automating with cloud on platforms, and happy is what was done before. When we look at what what then comes the most interesting companies right now are companies are breaking down traditional finance into real time finance. On there's an insurance company called trough, which is West coast. That's one of the first that was on my radar doing this and then and group in China do this and others which is, I really wanna have a product that I can use for the next 60 seconds, not for the next 12 months. And the only reason why we have 12 months annuity products is because in the traditional industrial model it was too expensive to do something more often than on a yearly basis. This is particularly insurance, but it is also in loans and credit. Whereas what we should be doing is saying, because digital tools allow us to do it this way, we could actually give people the ability to move within seconds and minutes instead of years and months. The best radio illustrate. That is, when the payday loans company to come into Poland on day. One of the banks here en banc who are being quite close to for the last decade took the view of saying they're going to steal or the credit from from from our business. How do we respond to that? And they had a big workshop brainstorming on the credit manager. Head of Risk had a huge argument with the digital bank lead project manager because the digital blankly project measures, saying We have to give loans in seconds. Do you compete with pay their loans on the credit risk management, saying there's no way you could do that. And then he ended up working out. You know what? We've got these customers. If we just our credit risk metric profiles of our existing customers on a real time basis, second by second. And whenever the customer says I need alone, you can see exactly at that split second of time what they're good for and over what? How long a period. And that's what they did. And in fact, they ended up creating a product that literally, if you open the app and said, I need €3000 over the next 12 months, you get the money in your account within 60 seconds, you can literally to see it moving it within 60 seconds. And that's what really time credit and real time insurance thought that is working in second. It's not in months or years, and it took. It took, you know, there's there's a quote from the movie Moneyball with Brad Pitt. I think there's so many great applications and learnings from from that movie because they're having to compete with the New York Giants. There the Oakland A's having to compete with the New York Giants. And Brad Pitt challenges the table, and he says, We're not looking at the We have to...

...think different. We're not looking at the problem the right way and hearing the story. And, you know, you talked about Henry Ford. You talked about Steve Jobs. I even think about like Elon Musk, right, with the everything that he's done with Tesla and then with Space six. And it really comes back to this idea of of principles. First thinking you've seen inside a lot of different organizations over the years. When it comes toe technology adopting technology transformation, how can financial brand leaders overcome? And I think it's This is overcome the past to deal with change in the present, to then eliminate some of the fears that they have about the future again. It's in the doing digital book, a couple of key things, but I just remember distinctly. That's one interview I have with the CFO, one of the Big Five banks, and he said to me the previous chairman, she was actually knew that we had to do digital, but they didn't know what to do or how to do it because they just they weren't equipped with not just the tools but with the actual ability to create that leadership. And so a new chairmanship they came in on, the first thing they did is work out what to do. They had a CEO resource of new, who had friends in Silicon Valley. They'd started doing study tours of who they thought was doing digital the best. Obviously, there's usual suspects, Amazon and Facebook. But then there's also Spotify and Netflix and others that, and they did the same in China with Group and 10 Cent and Bingen on. They ended up learning the lessons of those people about how they structure and how they managed to the people on how they do technology on the key thing is, it's not rocket science or magic. It's just creating organizations that embrace the 21st century digital age and implemented well on When you think about, for example, of Netflix. You know, originally they were a blockbuster competitors on Where's Blockbuster now? So they learn the lessons of the digital leaders that they respect in other industries and then try to internalize that in the how to do it within their own company. I like that. That lesson right there they took study tours. They learned from others. They looked outside the industry because I think so. Often we get stuck looking inside, and we and we talked about this idea of R and D, and that's not research and development that's rip off in duplicate what are others doing? And then it's a It's the false fallacy. It's the blind leading the blind, uh, sure authority. What's up? But I was chairing a panel in Africa on Duh Peasant was on the panel, which is the famous story convoy, the phone payments network in Kenya. And I said, How the banks compete with you. Andi, the CEO said they don't They copy what we do on. We just focus on what...

...the customer needs. Yeah, there it is. You put people at the center of all of your thinking and all of your doing and and even you reference Netflix. I think the interesting thing about the Netflix story is they were a blockbuster competitors. They were making it faster, simple or more simple and easier for for for people. But then Netflix, they had the courage and this is what they had the courage to disrupt and transform their own business model. And they upset some people when they went from the delivery subscription to the streaming platform. But they were so far ahead of their time to where even then, they took it a step further to where it went from streaming to now. They're really a content production house, Andi, creating and owning some of their own content. So I again I usually quite often, uh, in terms of their transformation. I'm not saying Netflix is the best, because I actually quite quite frustrated with the Netflix user experience interface. But there was a very interesting Anderson Horowitz, late 16, said podcast, where they interviewed the head of cloud for Netflix. Which arm or crafting his name what this is. A few years ago on, he was talking about micro services architecture, which is the secret source of how Netflix transformed streaming Andi. He made a quote in the middle of it, which said, Well, I talked to financial institutions about micro services architect. Basically, this is Cuba net. If people owning their little bit of code and having a diversity Thio changed their peace day by day without affecting the rest of the company, which gives you fleet of force and eligibility. But, he said, anything is that when you talk for National Institute, they kind of give a straight back it around that whole process because they wanted to sign off protests that goes through the organization hierarchy. The head of right on back, Down again before it allowed out into the wild, which takes 3 to 6 12 months. By the time is out there, you've actually killed the enthusiasm of the developers. It's too late and it z well, and then you bring back to the point of agile, you know, 80%. Seth Godin speaks a lot. You just ship it, get into the marketplace, learn from it, iterate on it, optimize it, and it's a very just different operational model coming back full conversation. Now, being banking is if you do that, you're gonna create instability and potential hacking and exposures. But DBS, you know, they said to me, and this is interesting that they created this agile organization doing all the things that the likes of Netflix do. In fact, that was one of their key so off organizational structures they were trying to emulate on they got the stage that they're actually creating at updates faster than Apple's store can keep up with. Wow, wow! Yeah, And it's keeping people their problems, their challenges at the center of all of the thinking, and doing so that you know, they're not getting frustrated with a negative, even digital experience because it could take months, weeks, years to...

...create enough goodwill. You know, deposits in a person's trust bank that sits between their ears. And it could take, you know, minutes to deplete that. And, you know, lead to that frustration. If there's one thing one thing that you could recommend for a financial brand leadership team to think about, to commit to, you know, moving forward in in this world, what would that one thing be? Well, apart from reading Christians block and buying his book, I would say that is really committing that there's, you know, the age old joke around the chicken participates in breakfast. The biggest committed Andi. It's kind of yeah, it's really saying that you want to believe in making this happen and changing the company and the toughest thing on. I've had this for decades because I've been dealing with transformation for decades, ever since business process reengineering appeared on the scene back in the early 19 nineties, on every time around workshops or discussions around transformation. Everybody just wanted to do incremental improvement because that's actually much easier. Andi, Specifically, every time around the workshop, I get some senior or middle managers say, How can I persuade my CEO and Sea Level team to understand this because I need them to commit to make the change? Andi typically, and this is the really issue they had. Is that the CEO on DMA Any of the team probably had a window in front of them of staying in that job for another two or three years before retirement. Why the hell would they take that risk, change the company and do something radical? So my recommendation would be you have to do a radical reinvention for the digital age. And if you don't make that happen, most banks, they're not going to die. But they're going to get acquired by people who do this well on DSO. If you want to survive as an independent bank that maybe it's Enquirer rather than the acquired on is the disruptor rather than the disrupted. You have to have a leadership team that really wants to make this happen. Is committed, not participating? Yeah, the idea of incremental change versus exponential change to X Thinking versus 10 X thinking two x. You can work a little bit harder, invest a little bit mawr into whatever it is. But really, if you're going on that exponential 10 X thinking around its whole reinvention of of looking at the problem through a completely different lens, coming back to putting people, customers at the center of all of that thinking and all of that doing what you just said, you know, two X thinking is comfort. Zone 10 X Thinking is uncomfortable. There's not many people who want to be uncomfortable that they're happy to just do the job. But if we think back, if we think back to all the growth that we've ever made personally, it's always been in that that uncomfortable zone. That's where growth happens. And so we...

...gotta lean into that. Chris, this has been great has been a great conversation. Thank you for your insights to your point. Thank you for your writing. Definitely pick up. Pick up Christmas book. Read his blawg. If someone wants to continue the conversation with you, what is the best way for them to reach out? Say hello, Connect with you. I'm very active on all social media, but specifically on On on Twitter and Chris. Underscore Skinner. Connect with Chris Read. Chris Learned from Chris. Thanks for Joining Me, Chris, on another episode of Banking on Digital Growth. Thank you, James, as always. And until next time be well, do good and wash your hands. Thank you for listening to another episode of Banking on Digital Growth with James Robert Ley. Like what you hear? Tell a friend about the podcast and leave us a review on Apple podcasts, Google Podcast or Spotify and subscribe while you're there to get even. Mawr Practical and proven insights, visit www dot digital growth dot com to grab a preview of James Roberts bestselling book Banking on Digital Growth or order a copy right now for you and your team from Amazon. Inside, you'll find a strategic marketing and sales blueprint framed around 12 key areas of focus that empower you to confidently generate 10 times more loans and deposits until next time, be well and do good.

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