Why the digitalization of banking is no joke

“Old bankers never die; they just lose interest.”

The groan-inducing joke is familiar, comfortable, and safe—much like the industry itself.

Or at least like the industry has been in the past. Now, a new breed of bankers, armed with apps, AI, and datasets, has bypassed the dusty branch networks. Their new stock in trade is digital networks, personalized services, and direct instant access to customers.

This is banking on your phone. It’s available how and when you want it, not just during “banker’s hours.”

Or at least like the industry has been in the past. Now, a new breed of bankers, armed with apps, AI, and datasets, has bypassed the dusty branch networks. Their new stock in trade is digital networks, personalized services, and direct instant access to customers.

This is banking on your phone. It’s available how and when you want it, not just during “banker’s hours.”

In this edition of Transform, we explore how established legacy financial institutions are fighting back and competing with challenger banks, mobile wallet players, and digital disruptors. Do we all need to be technologists now? Will innovation add another layer of personalized services to our financial lives?

Futurist, podcaster, and best-selling author Brett King subtitled his popular book Bank 4.0 “Banking Everywhere, Never in a Bank.”

He tells me the industry is being stripped back to the basics, demanding top-down culture shifts.

“We suddenly have the technology, with AI, to provide a bank account that can actually help you manage your money—a smart bank account, if you like,” he says. “This is the most positive development in banking in a couple of hundred years.”

Yes, the digitalization of banking is about things that will be of interest mainly to bankers – automating loan processing, for example.

Get smart

But whizzy tech plays a role as well. Take smart glasses, for instance.

“With smart glasses, you won’t have a mobile banking app. You’ll have chunks of functionality or moments of experience where the glasses will look at the context of the situation, interpret your need, and use the financial services layer to provide you with a solution,” he says.

Dame Jayne-Anne Gadhia is the founder of the Snoop money management app and former CEO of Virgin Money, a financial services brand that is part of the Virgin Group.

Like Brett King, she is enthusiastic about the potential benefits of AI for banking. But she says it’s important not to neglect more traditional skills.

“You can't just use a banking app,” she says. “You need to be able to understand the inputs and outputs. That easy access and easier response means we all need to be more numerate.”

Dame Jayne-Anne denies that banks have been slow to embrace full digitalization. Instead, she says, they’ve been rightly cautious, recognizing the need for cast-iron cybersecurity.

“It's not as simple as waving a magic wand. It’s complex, expensive, and risky. It’s a big project that people will have to plan for over many years.”

David Brear, CEO of the financial services consultancy 11: FS, sees the modernization of banking as a Darwinian battle. “It's not the strongest of the species that survive, but the ones most adaptable to change,” he tells me.

“What we'll start to see is the march towards self-driving money [where your bank moves your money around to make sure you always get the best products and the best rates]. Financial services needs to move to a place where it's fundamentally there to make people better off.”

Among other interviews in this edition of Transform:

▪ The former CIO of China Merchants Bank and now Huawei’s Financial Services Chief Digital Transformation Officer, K.T. Chen, tells me how Huawei’s experience and technical support is “priceless” in helping banks anticipate and meet their customers’ changing needs.

▪ Paul Siy, CTO and head of infrastructure and operations at BDO Unibank, explains why COVID forced the bank to radically beef up its digital capabilities.

▪ Justin Chen, director of IT and operations at Indonesia’s Bank Neo Commerce, compares digitalization to changing a car’s engine and wheels mid-race without stopping.

All agree that the banking industry is experiencing a generational upheaval.

And in some ways, that’s a good thing. In the developing world, for example, the digital transformation of financial services means the development of new apps, such as bKash in Bangladesh and “fetswallet” in Nigeria. These apps allow unbanked populations to deposit and transfer money, receive social benefits and welfare payments, and even pay their bills electronically—something previously unthinkable in cash-based economies.

And, like the welter of weak online jokes—“If money doesn’t grow on trees, then why do banks have branches?”—the transformation of banking is no laughing matter. Financial services remain a consistently vital and lucrative business.

The tired old gags will have to be updated to match the digital age. But the provider who can do the same with the public’s changing digital demands will be laughing all the way to the bank…

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