My advice on 3 approaches to digitization within your bank

Kids - including my own four - never cease to amaze me. When they manage to get their hands on digital devices, kids behave as if it’s an extension of their own bodies and brains.

We adults may still fumble around, and we’re certainly known to panic every once in a while if the device doesn’t do as we command.

This phenomenon - that digital comes more naturally to some than others, and those some tend to be young - also applies to banks. Just when banks, particularly established ones, thought they were digital enough, it has become clear that the journey to digitization has only begun. The imperative to embrace even more digital is stronger than ever.

As the head of business development for BDO Financial Services in Switzerland, I have a keen interest in understanding where digital is taking the industry – and in helping my team lead in that direction. That’s one reason that I signed up for a course last year to earn a certificate in digital banking. 

I expected to meet at least a few other auditors or consultants at the class, but in fact I was surrounded by people working in the trenches of digitization at banks across Switzerland. They had been sent there by employers who felt acutely that they must get set up properly for the future. Indeed, other industries have moved faster toward digitization than banking, which was dragged slower by everything from legacy systems and M&A waves, to matters of compliance.

My classmates and I spent lots of time thinking about what works and what doesn’t, and I observed three approaches to digitization:

#1 – Reject digital in some areas, but reject it in the right way

That’s right, you heard me correctly. I said reject digital in some areas. But I also said you should reject it in the right way. I have seen how some smaller banks in Switzerland are not opening up to digitization and fintech, and it appears they won’t have to. And their bet might just pan out. Many people still like “old school” banking with a personal touch, and these banks may do just fine tapping a client base of high net worth individuals or family offices.

There are quite a few traditional banks that are not focusing on digitization but are still growing their client base. They have a business model of personal advice and trust.

My suggestion to companies taking this route is to really play it up in your marketing. If you’re going to buck the trend, buck it hard and make that your USP. Tell your customers what more you can do for them than anything automated, and do it with full branding and a full marketing plan. Make it clear what justifies your higher fees.

That said, some sort of middle way may be the best… Consider which parts of your process should be automated for the simple fact that computers can do many jobs better than humans.

#2 – Embrace digital change at the highest levels

Here again I have to think of kids' attitudes to challenges. They’re masters at change. Or at least they’re better at it than most adults. Instead of latching on to the way things “could have been” or “should have been,” they can get very enthusiastic when things change.

That’s why my second point of advice is to say banks must embrace change because digitization in banking is happening, whether we like it or not. Digitization is changing banking operations and the banking landscape, and it will continue at a fast pace.

In my opinion, embracing this change starts with cultivating your own curiosity. For the last 100 years, banks’ boards have been populated with people whose job was to make sure nothing changed. The time has come for those seats to be filled with Chief Digital Officers - e.g. with change masters.

I strongly believe that we need diverse board members who have the right knowledge about tech and compliance. They need to be change champions who are evangelists for digital innovation and are pushing it from the top down.

#3 – Experiment, explore, get involved

My third point of advice is to move forward with a full commitment, whichever road to digitization your bank chooses. You will need a vision, incentives, resources and the right skills. You’re best off with professionals who do not see their jobs as a linear process but as places to experiment. They will constantly look for ways to do their jobs better or even eliminate their own jobs with digital capabilities. These are the people who should be given a budget to play with. They should be encouraged to explore, to hear startup pitches, to go out and find the best fintech companies to partner with. Right now, it is only the big banks in Switzerland that have incubators.

Speaking of vision, we recently came up with our own vision for digitization in financial services. As auditors and advisors for banks, BDO also needs the right vision and skills to lead the way on digitization. Articulating our vision was one of the first things we did in our new FinTech Digitization Task Force for Financial Services at BDO in Switzerland that was set up in early 2017.

We are a multi-disciplinary group of both seasoned and young professionals, and our main goal is to improve and expand our service offerings. But, I have to admit, we also have a lot of fun in our brainstorming sessions. We like to talk through the new business cases we hear about and consider the turns fintech might take next. Already, Swiss banks have gone to market with their experiments, such as crowd-sourced investment decisions or robo mortgages.

If the ideas I presented here are of interest, or you have questions about how BDO can help, please send me an email or give me a call. I love to discuss all things digital.