Digital tanks are firmly on the lawn of the financial sector and the recent launch of Apple Pay should erase any lingering doubt over their urgent need for a dramatic response. The general public could be forgiven for thinking most banks and financial services providers are tinkering while the likes of Apple, Facebook, Google or even Alibaba move aggressively into this space.
We have discussed this with financial services companies around the world, recently publishing the findings in a paper which concludes that the time for incremental change has passed and a different approach to talent and transformational leadership is needed to address this market disruption. When you think that, in 2013 alone, Starbucks took in $4bn (£2.57bn) in customer deposits through its loyalty card, it’s not hard to see why and it is not about protecting against future threats, it’s already happened.
Most of today’s incumbent financial services players are reacting to this revolution. The challenges – and opportunities – are immense, yet few senior leaders realise how profoundly their business needs to truly change in an increasingly connected world. Every bank has a ‘digital strategy’ that they feel unique but until they fundamentally change the customer engagement and experience, that differentiation will not protect them against powerful disruptive players.
On the plus side, today’s financial industry is still largely trusted to be the gatekeeper of valuable insights on what we consume and how we transact. Potentially, this presents an extraordinary opportunity to re-define the nature of banking and financial relationships with consumers. But, to achieve this, banks will need an entire different digital skillset and organisational structure.
A power shift
Given this context, I was recently asked what the future banks will look like. I certainly have no crystal ball but if I may suggest a different question: how will consumers fulfil their financial needs in the future?
It is not about providing better products but realising that customers have choices and are becoming more sophisticated in their demands and expectation of how their needs are fulfilled. The digital revolution is not about technology or enhancing existing propositions but about moving from a product-centric mentality to a consumer-demanding service approach at scale. This requires banks to rethink their entire business model with a fundamentally different corporate engagement and a change in skill set and focus.
Digital talent is key
Without the right people in place to transform the business, banks will not be successful in making the shift. Talent across the whole customer engagement value chain – from product design to branches to Boardrooms – will determine which firms succeed. A fierce battle for a scarce digital talent pool is already well underway with financial services firms competing not only with each other but also with disrupting start-ups seeking to overturn the established order and companies from other, less regulated, industries undergoing similar shifts. Fortunately, re-defining the future of financial services is the kind of challenge which appeals to many digital executives. How you attract, develop and retain talent is going to be the ultimate measure of success.
We’re often asked for advice on what constitutes ‘digital talent’ and how to identify and develop digital leaders as well as – importantly – what existing leaders can do to help digital transformation succeed.
As much as experience is coveted, the reality is that no one has done this level of transformation at scale before. While competencies provide an important inventory of a candidate’s current capabilities, I suggest looking less at experience and competencies and much more at an individual’s potential to succeed in the face of this fluid and complex digital power shift.
There are wonderful disruptive visionaries out there but I would strongly advocate not losing sight of those who have true execution capabilities and the DNA to call to action. Lean execution is paramount with the ability to cut across silos. Often, this means that organisations must be brave and look at talent outside of the sector to bring best practices and a different way of thinking and making decisions.
Sweeping organisational change
But finding the right individuals is only part of the story. It is crucial to have unwavering support from the very top of the business, both at executive committee and board level, to drive this change. This sounds obvious but few are truly willing to do what it takes as it often translate into organisational change and results in reshaping roles and accountabilities. This is a long-term journey that will face resistance and most certainly require cannibalisation of certain existing businesses, allow experiments to fail and suspend traditional measures of success, such as ROI.
This amounts to asking the existing leadership of banks and financial services companies to embrace a fundamental shift in how they run their businesses. Executing on this imperative may be one of the biggest challenges of all.
Axelle Sznajer, head of European fintech, Egon Zehnder