Banks are reluctant to experiment because the only thing that costs them more than a failed experiment is a truly successful one.
As commentators, industry insiders and customers we all join in with the chorus reprimanding banks for not “innovating” but if we take a step back and consider what we want from our employers and service providers, we don’t want them to lead, we just want them to catch up. It is innovative to walk from the path into the jungle, leaping over fallen trees, pushing through undergrowth and fighting off threats, driven by your conviction that it will lead to a new watering hole. To follow in those footsteps, down a path proven safe, to a destination already known is not innovative, no matter how large your feet. The innovation has already been done, the path is clear. Following it only requires courage.
The technical, product, marketing and regulatory obstacles have already been cleared by smaller, lighter, more agile innovators. The challenge now is getting the large, heavy and cumbersome incumbents to address the same challenges.
Banks aren’t experimenting because the cost of a failed experiment is terminally politically and personally costly. Banks have had risk aversion shocked into them through the results of the industry’s own malice and, following that, beaten into them by regulatory requirements. The resulting culture of flighty, pessimistic conformism is all-encompassing and it takes courage and considerable amounts of personal political capital to do an experiment with an external technology company to see whether a banks is able to, if we are honest, do what has already been done before. The requirement for true experimentation is an acceptance of failure that does not exist, so when doing a ‘proof of concept’, like a 13 year old cheating on a science practical, they don’t define what success looks like until they have seen the results.
But a successful experiment — an unqualified, obvious success — is terrifying. It’s terrifying because it shows what much of the industry knows; change is needed, rather than innovation, and that others have already shown us the path. Change that is eye-wateringly costly and begets ever-more costly change as the dependancies radiate out from it, infecting every area of the organisation and industry from banking operations to holistic technical architectures; from the number, skills and techniques of the technology employees to the very nature of customer service; the structure of entire organisations to the depreciated concept of a ‘batch’ operation, and the shifted foundational juxtapositions between balance sheet, data and regulatory restrictions.
Innovation is pseudo-experimentation and experimentation itself is procrastination when the future has already been forged. Change is what is needed now, from the core outwards.
The industry has fundamentally shifted from one driven by the balance sheet to one driven by data; assets require stasis to be valuable, whereas data requires velocity. Relationships, paperwork, humans, aggregation, reporting and batch systems require stasis. APIs, code, computation, processing and rulesets require velocity. They’re batch in a world of API and change is needed.
Technology today is built with the customer, next to the customer, for the customer; no longer on the other side of the world using an abstracted voice as a proxy for the end user. They’re waterfall in the world of agile and change is needed.
If Google had high-street stores you’d only go into them when their technology didn’t work. They’re branch in the world of the app and change is needed.
They’re IBM in the world of AWS, and change is needed.
(These are, as always, my personal views and do not necessarily represent those of any company I’m affiliated with)