Kin + Carta
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4 Takeaways to Bring Back to the Boardroom from Finovate Fall 2019

Last week I attended and spoke at Finovate Fall 2019 in NYC. After spending four straight days inside the world’s financial capital with the industry’s elite, I left feeling both a sense of affirmation, as well as, hope for finservs undergoing their digital transformation journey.

As I met with peers, engaged in discussions and delivered two talks on stage, a few themes really stood out to me as I reflect on the week and the clients I regularly work with.

Here are four key realities that I strongly believe all finserv executives should be addressing in today’s boardroom:

1. The world is moving from batch to real-time faster than finservs can hire for.

I was invited to give a breakfast briefing to a room full of senior executives on the first morning of Finovate. Here I spoke about how, as the world moves from batch to real-time, I’m seeing more and more finservs really struggle with both hiring and retaining talent, all the while drowning in a sea of legacy applications built decades ago. Most firms are exploring different strategies for how to migrate away all of these old, hard-to-maintain systems, including moving to the cloud and using extreme programming (XP) to get the work of modernizing done as quickly as possible. However, what you don’t hear about XP is the toll it can take on your culture and your individual employees’ work-life balance.

Being paired with another developer literally sitting at the same desk as you, all day, every day, means that by the time you get home, you’ve already used up all of your capacity for socializing, and are quite drained. I showed a slide in my presentation with quotes from developers who work at some of the finservs that were sitting in the room, pulled from Glassdoor.com, and a recurring theme is how drained digital teams feel working on legacy systems, especially in XP environments. You could hear an audible groan of agreement from the folks in the room when I showed them this undeniable truth about their businesses.

So what can finservs do about this? Check out my talk below.

And be sure to listen to Kin + Carta Solstice’s latest podcast, introducing FleXP: our balanced and blended approach for helping companies rewrite mission-critical software.

2. Digital transformation is no longer enough.

The term “digital transformation” is the new “frictionless.” Just like anything involving the experience of a user must now mention that it is “frictionless,” “digital transformation” has become overused to the point that is now a catchall for being better than business-as-usual and having any digital component at all.

Almost every single exhibitor at Finovate talked about how they will digitally transform your firm, whether they just offered a digital display of information to greet people in a bank lobby, a bolt-it-on chatbot, or if they have an end-to-end banking platform. Because so much transformation is desperately needed in the financial services realm, I think it’s a good thing that most firms are on the same page about it. However, most finservs are having a hard time justifying to their Boards why they need to “digitally transform.” And now that every bank and finserv is in the process of digitally transforming, the conversation needs to shift and elevate to growth-driven digital transformation; wherein fintechs should now be specifically describing how they can help incumbent finservs grow their business during their transformation journey.

3. Customer experience is now more about business models and values, than it is about experiences.

Customer experience (CX) has been the ongoing trend for years at Finovate. Most demos and exhibitors orient their pitch around customer experience, however, the large finservs firms that are most successful are able to pitch their CX to their Board as a defense against disruption by rethinking their business around digital, and not bolting digital onto their existing business models.

Too many exhibitors talked about customer experience as something that can be added onto a business, or an improvement of an existing experience, when in reality it may mean taking some things away (legacy business models and processes).

4. What has worked for Amazon won’t necessarily work for banks.

I spoke on a panel at Finovate as well, and I noticed Amazon getting frequent mentions. Many speakers were mentioning how, like Amazon, neo-banks and challenger banks (think Monzo, N26, Revolut) have great customer experiences, and as those startup fintechs start to penetrate US markets, incumbent finservs will feel the sting, just as incumbent retailers did. However, I think it is more complex than that. Let’s compare these neo/challenge banks to what happened with the first wave of robo-advisors.

In 2015, Betterment, a robo-advisor, doubled in size to $4 billion AUM, Personal Capital grew 70%, to $1.2 billion, Wealthfront grew 84% to $2.6 billion*. Now, this is a huge amount of growth and incumbents should be scared, right? Not really. It’s just a drop in the bucket compared to Vanguard and Schwab, enormous incumbents, who launched their own robo-advisor products in 2015.

[Source: Backend Benchmarking]

These incumbents leveraged their enormous client bases and by the end of 2016, Vanguard had amassed $50 billion in new AUM and Schwab had already reached $12.3 billion (as sourced by Backend Benchmarking).

Now, I’m not saying that the disruption of large finservs is impossible, but I believe that the impact of startup robo-advisors and neo/challenger banks is overblown. The REAL disruption happens when the incumbents compete against each other using the level of digital experience that challengers have come to market with. Other than OakNorth, I am unable to find any neo-bank or challenger bank that is profitable. If their strategy, like Amazon, is to grow accounts, then try to become profitable later, there will be trouble ahead. Amazon benefits from network effects in a way that finservs typically do not. As more people shop on Amazon, more merchants are motivated to sell there, bringing in yet more customers who want to buy from those new merchants, in a virtuous cycle. However, for banks, a customer typically does not care how many other customers you have, since they don’t have a relationship with the bank’s other customers in the way that an Amazon customer would benefit from more merchants being on their platform.

Overall, the big takeaway from conferences like these is to find a way to look through the buzzwords, and the bold statements, and find the truths that resonate with you and your business. Financial innovation requires challenging the status quo, and as digital transformation becomes the status quo we need to continue to push forward our thinking to what comes next for our businesses.

Feel free to connect me on LinkedIn to discuss any of these topics further.

Or reach out directly to our team at Kin + Carta to learn more about how we help grow financial services firms: hello@kinandcarta.com

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Jared R. Johnson

Jared R. Johnson

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I help companies reimagine their customer experience through outcome-based innovation and qualitative & quantitative research. I ❤ guacamole.