Banks are dead, but banking is not

That was a famous quote that was supposed to signal the end of banks as we know it. But as with such prophecies, there is some truth and mostly rhetorics in it.

Almost half a decade ago, we met the leadership teams at one of the leading banks here in the region called SEB. They just got back from petting the zoo in Silicon Valley and meeting all the preachers who kept saying the following 3 sentences:

1. Everything is governed by the law of exponential technology
2. What got you here as the big powerful entity won’t get you there
3. If you don’t work on disrupting yourself and the moon shots, you are dead in this new world.

Sentiments captured from the trip to the Valley and beyond.

But Banks & Digital have been going hand in hand since the 90s

Needless to say, the trip changed the perspectives of the leaders, realised the speed needed in this new world. They did work with the big consulting companies to help them adjust their strategy to make sense for digital new things coming in.

It is worthy to point out that banks are not new to digital.

In the 1990s, banks were sidestepped by the growth of electronic stock exchanges where trading moved online disrupting the trading floor — a large part of how they operated.

Then in the early 2000s came internet banking which was supposed to put all branch offices out of place with great agility and swiftness.

Then came the mobile revolution which was supposed to change everything. And it did play out more or less that way. People stopped going to the branch offices, mobile traffic and banking apps soared in popularity.

And then it exploded with fin-tech companies. Then CB Insights came up with this chart that was just plain genius and evil. How companies are attacking every aspect of the bank’s business model and the bank is getting killed by a 1000 stabs.

And then came the regulations with data sharing and opening up fee structured with regulations like MIFID and PSD2.

I believe the key moment was the leadership group realising that they don’t have all the answers to the questions but it is key to begin somewhere and not keep deliberating it.

And if you are the CEO going through all this — what do you do? You can either go into full-on denial, appear to be digital by doing digital innovation theatre or become bolder for real and create structures to move into the future faster.

The No Regret Move

After months of deliberating, SEB did the No Regret Move — what would be a move that we would not regret starting or doing to help the bank go into the future?

After much talking, the answer was hidden in plain sight. For all the amazing things digital and technology can do, if you don’t have the people with the right mindset and the skillsets required to make this work, they are just great plans with no firepower.

Most corporates when they realise the gap in their organisations sometimes adopt a policy of fire and replace. In my experience, I have never seen this work as a sustainable long term strategy to drive continuous innovation.

The no regret move for SEB was to invest in their own employees with a 3 pronged objective in mind:

1. Enable better product prioritisation through testing
2. Enable solutions that create a better customer experience
3. Create a culture of intrapreneurs

The setup is quite simple, inspired by models from out there

1. Anyone can show up to an innovation day 2–4x / year, with an idea or just curious to be part of the team
2. We do a team matchmaking session during the day
3. We work with toolkits to prototype and test
4. We invite a jury of senior management to pick up to 10 teams
5. These teams get 1 day a week for 6 weeks, during which they go deeper in their validation journey
6. The jury comes back again to pick teams that get access to 4 more weeks to develop a plan to integrate or spinoff

And almost 4 years later, the following has happened:

• 2000+ employees have gone through the innovation day
• Over 60 teams in the program
• 23% implementation rates from the program
• 50+ people who have gotten jobs within digital teams after the program
• Pivoted the focus of their CVC fund to focus only on Fintechs. Interestingly 1 of the projects that were in the program realised a fintech company solved it better than their own solution. Hence they partnered with them, ran a test and got their CVC to invest in them.
• A structure to rapidly take concepts to market and integrate it back into the line organisation
• New refresh on their strategy adding all their learnings from digital into their building blocks
• All in on agile and experimenting as new ways of working
• A whole new revised talent pipeline who leave fintechs to work with the bank
• Senior experts who have been in the bank for almost 2 decades getting upgraded and realising how much more they can contribute instead of feeling fearful for their jobs vanishing

7+ years in, what happened to FinTech?

It is getting more and more clear that it is a two-way street in this new world. You need banks to build more value. If Fintechs have great user experience, speed and money to try, the banks have a brand, intelligence (although data is being opened up more and more), entrenched customer relationships, a multi-layered business model. While a VC funded fintech can give away their service for free in the name of growth, there does come a point where they need to earn money, and they turn to banks to make that happen with the advantages they have built up.

While there is still a lot of work to be done, SEB is a bank on the move. We are so proud to have been a small part of their journey.