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The Future of the Banking Industry

With Chris Skinner, a bestselling author and the Chairman of the Finanser, we discussed the future of the banking industry at Novathon#withPBZ, a 24-hour innovative marathon held in Zagreb, Croatia.


ASEE: How should banks in Central Europe and South-Eastern Europe approach digital transformation?

Chris Skinner: Well, most banks are going through a digital transformation, and some banks think that digital transformation just means rolling out a mobile app to their customers, but that is not it at all. It is really about transforming the heart and structure of the bank to optimize digital services for their customers, and banks in Central and South-Eastern Europe are actually grabbing that opportunity because they can see it is a very quick way in which they can become much better at the service they offer their customers, reducing costs at the same time. So, I think banks here are doing a particularly good job.

ASEE: Digital banking has a lot to do with technology, but also with internal organization. What are the critical aspects of such projects?

Chris Skinner: Digital transformation projects rethink the whole organizational structure of the bank and also its products and services, as well as how to use people within that structure. Because, when you have digital relationships based on digital platforms and outreach, it is a very different organizational structure and service that is coming from the bank.So, banks really need to have strong leadership that can re-architect the organization for the Internet era and make sure that they are really leveraging digital tools for service. 

ASEE: Are Open APIs, the Cloud system, new data models and partnering eco systems the way to improve banking?

Chris Skinner: What you need at the helm of a bank is a person who isn’t necessarily a technologist but who has a good, strong understanding of digital and technology change. It is equally important that they have a leadership team that at least has a number of people who really do understand technology in their blood, because they’ve had experience with some form of technological roles in their history. If you have that balance amongst your leadership team, then the digital transformation journey is far easier than trying to do it when you have no understanding of what the technological change is.

ASEE: ValueWeb is your new book. How do you see the role of FinTechs and big software vendors like Asseco in regard to banks?

Chris Skinner: In a digital structure, I often talk about a front office of apps amongst devices, linking into a middle office of APIs in a market place that leverage data from the back office using artificial intelligence and strong data analytics. Whereas, historically, banks’ front office has been their branches with human employees, their middle offices has been their proprietary internally developed software and systems, and their back office has been an infrastructure based on mainframe. So, what I’m describing is a very different structure of front-middle-back office using open source software and co-creating systems collaboratively with a lot of players. One of the key things that I think will differentiate the strong banks from the weak banks in the future is how good they are at partnering with other API providers.

For a FinTech start-up the challenge is that they have no history, no customers and often very little money, whereas banks have millions of customers, centuries of history and billions in capital. So, there is strong logic in favour of partnerships between FinTech start-ups and large banks. Large banks are slow to change and have a lot of legacy, while FinTech start-ups have great ideas and vision, and the ability to develop very quickly and actually be far more agile in what they can develop for a bank. So, what you end up with is a collaborative structure between banks that can see their problems being plugged by companies that can solve those problems for them, such as Asseco. So, I think there will be strong partnership models between start-ups and banks.

ASEE: In your opinion, what will be the type of bank that will be leading the market in the next 3-5 years?

Chris Skinner: In the next 3-5 years, there are going to be some substantial changes, specifically the open source collaborative model that I’m describing of apps, APIs, and analytics in the front-middle-back office, and as to what will really happen, I like the phrase describing data as air. So, for a future financial organization to breathe, they have to have data as their air. And by data, I mean having cleansed, enterprise-analysed data that really understands every customer wish, requirement and dream in real time. The banks that understand that the best will be the ones that can provide proactive, predictive and relevant services in a way that is personalized and special. The banks that can do that will be very successful.

ASEE: What approach should the traditional banks adopt in regard to Block chain and Cryptos?

Chris Skinner: Very good things have been written about Block chain for the past few years. There’s been a lot of talk and very little action. That’s because it is a complicated area that banks have been trying to understand through doing proofs of concept. So far, very few banks have gone from a proof of concept to a pilot, let alone to production. What will happen over the next 5-10 years is that we will see a transformation of the financial system through shared distributed ledgers, but the banks will first of all have to understand what these structures are for the future products and services that will run on those shared ledgers and databases, and how they’re going to share and with whom. That will take a long time to resolve, so I think block chain is transformative but it’s going to take a good few years until we get there.

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