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We are in a race but there is a danger that some of us have lost sight of why we are racing. Taking stock of your direction of travel is even more important in this busy era

By Sanjiv Anand Chairman, IBS Intelligence and Cedar

This is somewhat of a contrarian article, but one that I hope will help you reflect as you go into the new year, and plan for another round of active digital transformation. Let me tell you a story. I recently met the CEO of a leading global bank, one that has been a path-breaker in terms of a digital transformation and has built a strong reputation for being innovative. They run hundreds of cool tech projects a year worth hundreds of millions of dollars of investment. A significant part of our conversation was focused on accelerating time to market for a number of digital innovations they were planning, including an attempt to successfully update their mobile app two to three times a month! That got me thinking and is the basis of this article. While I am all for, and IBS Intelligence is all for, a rapid digital transformation of the banking industry for obvious reasons, are there a few other things that we need to keep in mind?

Firstly, I am a strong believer that everything in life needs to be paced, even if the speed is scorching. The reality is that human beings (yes, even the so-called millennials) can only absorb so much change at one time, no matter how much better the new feature additions are. In fact, each change needs to be supported by an active campaign to ensure it gets the right lift and sustained user interaction. I am simply not sure that is happening. What has happened is that the banks have got actively engaged in every cool tech subject, interacting with many many small and large vendors, all topics and technologies seem interesting, and all of a sudden, a bank has a list of 150 tech initiatives – all running at the same time. Guess how many are likely to work out?

Then there is the issue of what is the role of a bank from the standpoint of tech investing. Last I heard, the primary role of the bank was to provide security to people’s deposits and provide a fair return on their deposits with safe investing and a strong level of customer service. Those seeking higher returns can play the securities markets. What has happened is that a lot of banks in the race against time have turned into fintech firms themselves. Every bank has a fintech lab. I don’t disagree that they need to make strategic investments themselves in this space, but to also play the role of the supplier is something else. So, they now carry the risk and investment of product development, implementation, and providing the cost of having their customers use the technology. I’m not sure this is how it was meant to be.

Then there is the issue of ROI on the tech investments. In this euphoria who is running the numbers and actually figuring out if the investments are providing the expected returns? The metrics for determining a return is pretty straightforward – increase in revenue or a reduction of cost on a sustained basis. In all my conversations with CEOs and CTO’s, this topic has not come up regularly. However, until three years ago when they talked about buying a new core banking system, ROI was very important.

So, what does this all mean? All I am saying is that as you plan your budgets and fintech strategy for 2018 it would be a good idea to do a stock-take of all new fintech investments that you have made in the last two to three years, make an honest assessment of what has worked, and what has not worked (shut it down). This assessment must be also an honest assessment of whether your customers have valued the new features or services provided. And carefully create a 2018 fintech initiative list. Wouldn’t it be great to use some common sense, before AI takes over?

Sanjiv Anand, Chairman, IBS Intelligence and Cedar, is an author, management consultant and an alumnus of NYU Stern and Harvard Business School. Sanjiv can be reached at SanjivA@ ibsintelligence.com

This article first appeared in the IBS Journal December 2017

by Bill Boyle
IBS Intelligence Senior Editor
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