Financial institutions opting for digital native strategies will reach a point of inflexion, says Chris Skinner, a digital transformation expert
The evolution of digital finance is a given for the banking industry but there is a hallmark distinguishing those who will succeed from those who will fail in the process, says Chris Skinner, specialist in financial digital transformation.
For the expert, there is a dichotomy between those banks that acquire technology but maintain traditional business mentalities and those who truly embark on a profound change in strategy and core.
“The mindset of most traditional institutions is to evolve their existing business to the network world. Whereas, actually, what they should be doing is reinventing their business to embrace the network world,” Skinner says in Banking (Remix), the new Veritran podcast.
According to the specialist, some recent transformation practices, such as data migration from legacy systems to the banking cloud, won’t be meaningful for the industry if they remain merely transfers of the traditional business to a new operating space. “What [they] should have done, and this is what [they] should be doing now, is rethinking the business model of the bank to being native to the cloud, born on the cloud, crated on the cloud and always on the cloud.”
Though the pandemic has accelerated finance’s online transition, today many institutions are still trying to remain available remotely to their clients. However, fine-tuning processes or operations is no longer enough.
Now, lenders will have to opt for native digitilization, something that will set some players apart from others: “The banks that ‘get’ digital are becoming digital native, and the banks don’t get it are becoming digital immigrants,” Skinner said.
The digital migrant is the financial institution that wasn’t born in the Internet age, unlike the digital native. With that in mind, Skinner says that long-term value will be determined by having a digital native business model, regardless of how old the institution may be.
“Are you built to be born on the net? … Because you really can’t deal with customers who live on the network if you are trying to evolve to the network, ” he said.
Leaders at the front of change
The vision for the transformation has to include the adoption of digital trends not just as a complement to the business but instead as the very core of the company. And this new structural approach also requires strategic management to be effective.
Although banks have an executive leadership team with professionals specializing in compliance and risk, regulations and accounting among others, these areas must also be balanced out with the new digital roles required for the transformation.
“The balance has to be between the two because you can’t be a digital bank if you only have people who are bankers leading the bank. So you have to have people who are really good digital people to balance, both the boardroom, but particularly the executive leadership team,” said Skinner.
According to the specialist, all this rethinking isn’t designed to punish the traditional financial industry but rather it’s a movement that will make the banking transformation swifter.
“I don’t believe [banks are] going to disappear. I believe there’ll be around for centuries to come. They won’t be disintermediated, disrupted, destroyed by technology. They will evolve and adapt.”
Nevertheless, Skinner doesn’t underestimate the importance of “correct” digitalization of finance to continue offering value in the market.
“It’s not a big shock to look at the most valuable companies in the world today are truly digital companies. And the ones that have lost the most value in the last year are those that are truly physical,” he said.
These and other reflections were made by Chris Skinner on Banking (Remix), Veritran’s new podcast, which invites leaders in digital finance to share strategies and perspectives on the future of the industry.
We invite you to listen to the entire conversation via the Spotify, Apple Podcasts or SoundCloud platforms.