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Next Generation of Banking: Smarter

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Once run by a few large banks, it has been taken over by smaller, more nimble and technology-driven disruptors who are putting the power back into the hands of consumers.

Banks need a more customer-centric way to do business and to differentiate themselves in new ways.

This report series will explore the most crucial changes happening in the finance industry, and how legacy banks need to act today to be around tomorrow.

This is part 3/3, and explores successful case examples of greater organizational transformation with focus on two crucial components to enable business to simply the challenges of tomorrow by working smarter today.

- The two key approaches to organizational transformation within legacies, with focus on traditional banks
- Several case studies of best practice transformation examples
- Implications & actionable starting points for traditional banks to approach transformation in an effective way (minimize risk, maximize cooperation)

Published in: Economy & Finance
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Next Generation of Banking: Smarter

  1. 1. NEXT GENERATION OF BANKING. HOW TO TRANSFORM FROM LEGACY TO LEADER IN THE WORLD OF FINANCE THE LATEST INSTALLMENT OF OUR: Near Future Of Series
  2. 2. ABOUT. At LHBS, we believe in continuously observing and learning from what’s happening in the market. We’ve created our Near Future Of (NFO) series which consists of inspiration and insights reports designed to highlight what is happening today and how it can share tomorrow for brands, businesses and entire industries. This issue explores the two critical transformations traditional banks must face. We take key learnings from successful legacy transformation cases and turn them into actionable first steps to pursue transformation. Banks can simplify the challenges of tomorrow by working smarter today. We hope you enjoy this deck and find guidance for your transformation process. DISCOVER DEFINE DEVELOP DELIVER LHBS // NFO: NEXT GENERATION OF BANKING INTRODUCTION. 2
  3. 3. CONTEXT & CHAPTER 01 & 02 RECAP CHAPTER 03: BANKS NEED TO BE SMARTER - CORPORATE CULTURE TRANSFORMATION ‣ Why it’s critical for successful transformation ‣ Case studies of successful cultural transformations ‣ Key learnings - BUSINESS MODEL TRANSFORMATION ‣ Open banking as an opportunity for traditional banks ‣ Case studies of successful business model transformations ‣ Key learnings - IMPLICATIONS FOR TRADITIONAL BANKS EXPLORE YOUR OPPORTUNITIES 07 20 42 74 87 CONTENTS. 3 LHBS // NFO: NEXT GENERATION OF BANKING
  4. 4. LHBS is a marketing & innovation firm with offices in Berlin and Copenhagen. We help clients to understand today's emerging customer expectations and to shape their business offerings for tomorrow. www.lhbs.com Kathleen McCaffrey Analyst at LHBS lhbs.com | kmc@lhbs.com Once run by a few large banks, it is now being over-run by smaller, more nimble and technology-driven disruptors who are putting the power back into the hands of consumers. Banks need a more customer-centric way to do business and to differentiate themselves in new ways. This report will explore the most crucial changes happening in the finance industry, and how legacy banks need to act today to be around tomorrow: • Banks need to be bolder by standing for a value or experience that differentiates them from the crowd. • Banks need to be faster by identifying changing trends and expectations, and applying insights to quickly innovate around new opportunities. • Banks need to be smarter by seeing new competitors as opportunities and their internal culture as crucial for greater transformation. They need to challenge their most fundamental assumptions as traditional banks. THE FINANCE INDUSTRY IS EVOLVING. INTRODUCTION.LHBS // NFO: NEXT GENERATION OF BANKING INTRODUCTION. 4
  5. 5. CHAPTERS INTRODUCTION.LHBS // NFO: NEXT GENERATION OF BANKING 5
  6. 6. BANKS NEED TO BE BOLDER. BANKS NEED TO BE FASTER. BANKS NEED TO BE SMARTER. CHAPTER 1 CHAPTER 2 CHAPTER 3 LHBS // NFO: NEXT GENERATION OF BANKING Download chapter I here Download chapter II here 6
  7. 7. In chapter 01, we explored the five key expectations defining today’s generation of consumers. Here we will dive deeper into one of the fastest growing and most challenging expectation of real- time services, and how exactly traditional finance brands can react, respond and adapt to this. BOLDER. Traditional banks can differentiate for today’s consumers with superior customer experience. CHAPTER 01 RECAP. !7 LHBS // NFO: NEXT GENERATION OF BANKING
  8. 8. FASTER. Monitor changes to quickly respond and accelerate & sustain innovation to stay relevant. In chapter 02, we discussed the exponential pace of change in today’s markets. We explored actionable insights into how traditional banks can observe evolving trends and expectations, respond with innovations their audience need and want and how they can quicken their ways of working for sustainable and accelerated innovation through seeing competitors in a new light. CHAPTER 01 RECAP. !8 LHBS // NFO: NEXT GENERATION OF BANKING
  9. 9. Here we will dive into the topic of organizational transformation. What opportunities await traditional banks today who embrace digital transformation? We distinguish between corporate culture transformation and business model transformation, and discuss why both are equally crucial for a successful outcome. We round up our series with actionable implications banks can take away and apply within their own organizations. CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING SMARTER. Simplify the challenges of tomorrow by working smarter today - transform to keep up with digital. 9
  10. 10. 10 Elina Mattila
 Executive Director, Mobey Forum “For perhaps the first time, the idea that the future will be better is under serious and sustained threat.” CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING LOOKING TO THE FUTURE.
  11. 11. 11 Monitor and respond to innovations from other industries to create new norms and translate them to financial services. Question the norm and create products and services for this generation. Banks can learn from comparable industries to create new norms of service. CONTEXT..LHBS // NFO: NEXT GENERATION OF BANKING It’s about noticing the broader trends.
  12. 12. There is also a clear missed 
 opportunity to better serve Millennials: BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !12 say they never came 
 across a financial product aimed specifically at them. 59%OF MILLENNIALS
  13. 13. Millennials will be the first generation in history to earn less than their parents. Source: Resolution Foundation There has been a global decrease in home ownership and credit card use among the Millennial generation. Source: Urban Institute & Transunion Money is being spent more frivolously as younger consumers hold up to five times as much debt as older generations. They attribute this to feeling uneducated on financial matters (71%). Source: Acorn Money Matters report More frivolous spendingDecrease in ownershipEarning less LHBS // NFO: NEXT GENERATION OF BANKING Our changing financial world has led to some key differences being identified between the Millennial and their preceding generation: KEY DIFFERENCES OF THE FINANCIAL HABITS OF MILLENNIALS VS PREVIOUS GENERATIONS. !13 BANKS NEED TO BE SMARTER.
  14. 14. In response to these changing habits, banks need to revaluate the value they deliver to this demographic. They need to challenge even their most fundamental assumptions as traditional banks. LHBS // NFO: NEXT GENERATION OF BANKING !14 BANKS NEED TO BE SMARTER.
  15. 15. While this sounds like banks need to
 reinvent the wheel, it’s more about how you package, market and deliver it to the customer. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING An example of this is that younger consumers are most comfortable with the crowd-funding model. However they are wary of anything labelled as an “investment.” !15
  16. 16. Gather data continuously and apply insights gained to seize this market opportunity. Learn and apply best practice from other sectors. Support and sustain this innovation with: BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING A customer-centric corporate culture A flexible business model !16
  17. 17. “For example, if a Facebook page is expected to take a maximum of three seconds to download, the same will be expected of banks,” therefor “banks need to become ‘learning companies’, i.e. companies that encourage lifelong learning among their employees. The subject matter that we’re working with is changing, which is why staff ought to be following continuous learning through company programs.” BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Nathalie Doré
 - Previous CEO of L’Atelier North America !17
  18. 18. Banks should not only be continuously learning, but actively analyzing and applying these learnings to better their understanding of customers, and in turn their service and products. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING This process of learning & applying learning needs to become second nature, to become the internal culture. !18
  19. 19. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING We will explore these two areas of transformation, drawing from best practice and insights from leaders within the finance industry: Both of these areas are of equal importance and should be transformed in tandem. This ensures that resources are used effectively and outcomes are aligned. THE TRANSFORMATION OF
 CORPORATE CULTURE & BUSINESS MODELS. !19 A customer-centric corporate culture A flexible business model
  20. 20. CORPORATE CULTURE TRANSFORMATION BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING BUSINESS MODEL TRANSFORMATION 20
  21. 21. When it comes to
 facing disruptive change
 within organizations: BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !21 80% NEARLY of organizations that focused on culture sustained strong or breakthrough performance in their pursuit of organizational transformation
  22. 22. TONY SCHWARTZ. “Most organizations pay far more attention to strategy and execution than they do to what their people are feeling and thinking when they’re asked to embrace a transformation. Resistance, especially when it is passive, invisible, and unconscious, can derail even the best strategy.” AUTHOR, CEO OF THE ENERGY PROJECT. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !22
  23. 23. Risk aversion is a key inhibitor of change within a legacy organization. Modern organizations should be comfortable with taking risks as this is necessary for innovation. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Business leaders must foster an organization-wide culture that embraces failure as a prerequisite for success. !23
  24. 24. Employees have increasingly acknowledged the need for transformation. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING A global study revealed the vast majority of employees want to work for organizations that are committed to digital progress and change. Source: MIT Sloan Management Review and Deloitte, 2015 !24
  25. 25. c) addresses concerns associated with change b) outlines the benefits of change a) ensures a common understanding of end goals BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING This involves a process that: HOW CAN YOU EFFECTIVELY MANAGE CHANGE AND TAKE EMPLOYEES ALONG THE JOURNEY? !25
  26. 26. Let’s explore two cases of organizational transformations that primarily addressed culture, and how they managed this internal change… BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !26
  27. 27. 27 This case outlines the top-line learnings from the SVP of Business Applications himself, Stefan Okhuijzen and how he observed the internal change within SES. SESTransforming SES’s infrastructure to an API model to meet new network demands and speed up responsiveness to change. CASE STUDY 01:
  28. 28. 28 Stefan Okhuijzen
 SVP of Business Applications “What I realized quickly is that not everyone in our company was well-versed when it comes to terminology like APIs and API-led connectivity. So for me the crux for success was to ensure that we tie this [change towards an API business model] to business outcomes.” CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING CONSIDER YOUR AUDIENCE
 FOR COMMON UNDERSTANDING.
  29. 29. “What people in our business understand is the concept of Agility and delivering their request on time and always increasing the pace of the delivery. So, you really have to think about how you pitch ... how you sell this to your wider business. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING I’m a big believer that in today’s world, it’s no longer the bigger companies that eat the smaller companies, but it’s the fast ones that eat the slow. I used this whole dimension of being more agile, being able to realize things quicker and increasingly being able to pick up pace by creating this reusable library of assets, [and] I think that that was really the selling point.” !29
  30. 30. “When it comes to how to communicate it’s all about analyzing who your audience is. What I witness in our company today is that we suffer from information overload, and that means that you just have to repeat your key messages over and over again before people pick up on it and really get it. Tie it to business outcomes - that is the best way to get people on board.” BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !30
  31. 31. Identify your audience & use simple language THREE KEY LEARNINGS FROM SES’S TRANSFORMATION. Tie each aspect of change to a tangible business outcome BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Define the meaning of transformation for your organization, and select the key message you will repeat Always maintaining an open channel of communication throughout the organization Choose the business outcome by what is most important to each department / level Ensure common understanding instead of throwing around buzzwords everyone has their own interpretation of !31
  32. 32. 32 As part of their change management strategy, ING used a rigorous approach to minimize ambiguity and execute the change effectively. We will explore the initiatives put in place. INGING’s transformation to an Agile bank. This involved the merger of two legacy organizations to encourage a collaborative and customer-centric culture between them. CASE STUDY 02:
  33. 33. THREE OF ING’S INITIATIVES TO ENSURE THE EXECUTIONAL CERTAINTY OF THE CHANGE: c) financial and metric based projections b) a behavioural action plan with specific changes a) the definition of objectives for managing the merger BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !33
  34. 34. A crucial component of this transformation were the clearly set milestones for change. These milestones included: a) specific delivery dates, b) clearly outlined any impacts on business units and teams. This helped define the pace and ensured the changes were implemented in a timely manner.  Progress against these milestones were marked based on a “traffic light” system that categorized the progress made. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Change should be based on specific milestones that are tracked and accountable !34
  35. 35. Employees at ING showed a willingness to change but revealed initial concerns. An initial poll was conducted to measure the “ready, willing, and able” -ness of the employees. The results were overwhelmingly positive however employees were concerned with the impact the changes would have on larger running IT projects. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING These concerns were addressed by senior leadership through the clear communication of the reasons for the merger. This involved the creation of a story that outlined: a) the reasons for change, b) what the bank would look like in the future including the customer value proposition. This alleviated employee concerns as they understood the merger was a product of a well-thought out strategy and that the changes would be implemented over time. Identify &
 alleviate concerns. !35
  36. 36. Managers received training toolkits in the initial months to help individuals buy-in to the change. This included the use of engaging internal marketing campaigns and customized “change-behaviour” plans. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !36
  37. 37. Demonstrate executional certainty of the proposed change THREE KEY LEARNINGS FROM ING’S TRANSFORMATION. Translate new initiatives and proposed behaviors into engaging internal campaigns BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Involve employees and address any concerns from the outset Leave no room for doubt of ever needing to get on board with the change, and emphasize the greater struggle to be had if change is rejected Instead of simply communicating required changes, engage and motivate people to actively change, with the same forward-thinking mindset Keep everyone in the loop, or at least always have the opportunity for more involvement from all employees !37
  38. 38. Technological change alone without organizational change cannot drive a bank to improved productivity, speed and innovation. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING “Organizations’ success or failure is essentially due to the things its employees do or fail to do.” - Stephen P. Robbins (1996) !38
  39. 39. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Let’s explore the second
 transformation traditional banks need to face to find out… But what can technology
 help organizations to achieve? !39
  40. 40. CORPORATE CULTURE TRANSFORMATION BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING BUSINESS MODEL TRANSFORMATION 40
  41. 41. As we move closer to an age of hyper-connectivity and customer-centricity, traditional banks must become more open. They need to listen, engage with and respond to their customers’ needs and expectations, instead of finding new ways to make them want the products and services they’ve always offered. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !41
  42. 42. DAN MCKINNEY. “This requires a modern banking architecture, one that is innovative, agile, and permits banks to evolve their entire business model – not just a customer experience.” FINXACT CO- FOUNDER. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !4242
  43. 43. By embracing digital, banks could speed up, automate and increase flexibility and personalizability of their processes. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !43
  44. 44. 44 HBR
 The Transformative Business Model “Although new technologies are often major factors, they have never transformed an industry on their own. What does achieve such a transformation is a business model that can link a new technology to an emerging market need.” CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING TRUE TRANSFORMATION TAKES MORE THAN TECH.
  45. 45. Open banking is an evolution of banking architecture that is not only a source of major innovation in the banking industry, but that’s success has been predicted with the rise of the platform economy. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING It is the finance industry’s answer to converting from resource-heavy and producer-driven linear business
 models to demand-driven and multi-sided platform models. !45
  46. 46. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Open Banking is a new way of creating, sharing and accessing financial data. It is a shift from the traditional, “centralized” model of banking to a “network” model. This network is made up of multiple application programming interfaces (APIs) that contain customer financial data, which can be accessed by third parties, such as fintech firms, at the discretion of users. This gives customers a more modular approach to banking and allows customers to access multiple accounts from different financial institutions through one platform. DEFINITION: OPEN BANKING !46
  47. 47. 47 Provides the benefit of choice - especially for how they make payments Access to customized and relevant options Access to all accounts in one place Enables quicker, more accurate and personalized credit decisions BENEFITS OF OPEN BANKING
 FOR CUSTOMERS. LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE SMARTER. + + + +
  48. 48. It is still a new concept with the lack of a unified standard across all financial institutions Data security and privacy concerns - - 48 DRAWBACKS OF OPEN BANKING
 FOR CUSTOMERS. LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE SMARTER.
  49. 49. Traditional banks can leverage open banking to provide these benefits and do it in a way that alleviates the concerns of customers. LHBS // NFO: NEXT GENERATION OF BANKING To do this, they need to ensure they: !49 BANKS NEED TO BE SMARTER. Transform their value proposition to provide full banking capabilities to customers rather than offering a vast array of disparate and individual services Leverage their pre-existing, large customer base, established financial security and economic muscle in partnership with smaller, fast-moving and innovative fintechs Future-proof their technologies through agile and fast approaches to implementation
  50. 50. 50 More innovative and responsive to customer requirements Increase digital revenues from new channels Extend & enhance native service offerings Better retention of existing and the attraction of new customers BENEFITS OF OPEN BANKING FOR
 TRADITIONAL BANKS. LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE SMARTER. + + + +
  51. 51. While embracing open banking can bring business benefits, doing nothing can negatively impact traditional banks in much more powerful ways. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !51 Banks that embrace Open Banking APIs can expect to witness a 20% increase in revenue; meanwhile, those that reject the initiative may lose 30% of their revenue to “disruptive industry players” by 2020
  52. 52. LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE SMARTER. of respondents stated that it is important for them to have a bank that is innovative; yet only 12% of respondents in the survey considered their own banks innovative 69%
  53. 53. Over-saturation of the market will make it hard for traditional banks to differentiate themselves. This will challenge banks to find new ways to innovate and compete with new entrants Competition from Fintech competitors who are also able to expand and extend the range of services they offer - - 53 DRAWBACKS OF OPEN BANKING FOR
 TRADITIONAL BANKS. LHBS // NFO: NEXT GENERATION OF BANKING BANKS NEED TO BE SMARTER. Fintechs are likely to find a way to overtake banks in their offerings,. Through embracing open banking banks can capitalize on this opportunity.
  54. 54. Yolt, the multiple account management app from ING has become the first to connect customers through Open Banking. Yolt allows users to view and manage all their bank accounts on one simple interface and has the goal of empowering customers. They recently became the first third party provider to complete a successful connection with a CMA9 bank - Lloyds Banking Group - under the new Open Banking system. YOLT CONNECT UNDER OPEN BANKING. EXPLORE SIGN 54 BEST PRACTICE. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING
  55. 55. Monzo lets its customers individually connect their bank accounts to a wide range of apps and devices, such as Spotify, Twitter or Amazon Echo using If This Then That. IFTTT lets people build their own connections. They could let Spotify play a certain song every time they get paid, or post something on Twitter every time you make a purchase in a certain shop. MONZO AND IFTTT CONNECT YOUR MONEY TO OTHER APPS. EXPLORE SIGN 55 BEST PRACTICE. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING
  56. 56. By opening its “Deutsche Bank Application Programming Interface” companies from small start-ups to big brands have access to customer data of Deutsche Bank as long as the customer explicitly allows this.  An example is the app “Finanzguru”. Deutsche Bank customers can connect their account to the app and receive personalized finance and saving tips on the basis of their existing contracts and subscriptions. DEUTSCHE BANK OPENS INTERFACE FOR APP-PROVIDERS. EXPLORE SIGN BEST PRACTICE. 56 BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING
  57. 57. Let’s explore two cases of business model transformations that took an open banking approach with an API structure, and how they prepared for and executed this change… BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !57
  58. 58. 58 DBS transformed their entire business model as part of a greater organizational transformation. Having a more modular and accessible infrastructure of products and services offers the bank more opportunities for collaborations and for replicating features within other services for a better, smoother customer experience. DBSDBS launched what they claimed to be the largest banking API platform in the world. Collaborations that contribute to the platform’s offerings include fintechs, startups, governments and partners. CASE STUDY 01:
  59. 59. LHBS // NFO: NEXT GENERATION OF BANKING To achieve their goal of being “digital to the core,” DBS first fixed the basics, then secured the building blocks needed to support the business model transformation. These included: BANKS NEED TO BE SMARTER. !59 Building resiliency Revamping data centers Begin insourcing & building engineering ‘bench strength’ Building a security operations center Building a monitoring center Building up resources.
  60. 60. DAVID GLEDHILL. “DBS embarked on a journey to transform our tech infrastructure nine years ago. With that early start, we are now ahead of many others in being digital to the core. This has given us an edge – enabling us to operate with fintech-like agility and nimbleness, and also platform-like inclusiveness. This will be transformative in ways not imagined previously, both for the customer and the bank.” CIO OF DBS BANK. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !60
  61. 61. For DBS, building an open banking platform was just one part of their digital transformation journey. They aimed to “make banking ‘invisible’” with customers only seeing their everyday life and goals being fulfilled with their solutions. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !61
  62. 62. Focusing on the customer and their everyday life needs and goals can bring about innovation possibilities that may have never before been considered. McDonald’s make use of PayLah! In DBS’s platform payment category. PayLah! is Singapore’s most popular mobile wallet, and McDonald’s can now offer this convenient, cashless payment service for its McDelivery customer base. McDonald’s payment via Paylah! Homage is an on-demand service for in-home caregiving services for seniors. It enables their relatives to redeem credit card reward points for arranging care assessments by Homage nurses to determine home care needs. PropertyGuru helps millions each month to find homes in Singapore. Now customers can get instant home loan affordability assessments as a result of their partnership with DBS’s platform. PropertyGuru’s instant home loan assessments Homage on-demand home care BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Just a few examples of DBS’s solutions offered via their platform include: !62
  63. 63. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Fixing the basics and building supportive backend systems are crucial first steps THREE KEY LEARNINGS FROM DBS’S TRANSFORMATION. An API platform is not a passing tech trend, but an ever-growing pool of innovation potential Making banking invisible delivers the most customer value Customer insights tell us that before companies begin exploring value-adding services and new technologies, they first need to get the basics right. This is to have basic functions meeting expectations and customer satisfaction to be at a good level. Existing problems will only be amplified and only increase pessimism about the transformation to those skeptical about change. APIs can be replicated and re-used for any product or service. A huge modular network of capabilities can be built over time. Banks could then answer emerging needs faster. Also, new entrants to the market are likely to be lacking the large customer base of traditional banks. Traditional banks who make their capabilities and data available can ensure they - and their customers - capitalize on the next impactful innovation of disruptors. When banking actions just work, require little to no effort and are intuitive, it is “invisible” to the user. The opposite of this would be a hassle, an interruption in what they are trying to get done. “Invisibility” is not the same as “taking no notice,” it actually puts the customer first. On the other hand, highly “visible’ banking would be a reason to switch banks for many consumers today. !63
  64. 64. 64 Orange transformed from a fixed line and mobile network provider to a bank, TV platform and voice & data provider through embracing technological innovation. A large part of this transition was a shift towards an API business model. ORANGEOrange has transformed itself into a digital service provider and enabler through technological innovation. CASE STUDY 02:
  65. 65. Orange observed apps used by competitors and created prototypes to “try them out” within their own projects. This was in line with their aim to become a more software driven enterprise. Orange created a series of API prototypes through mimicking approaches taken by internet giants over a decade ago. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !65
  66. 66. The ‘fail fast’ approach was tough to adopt until the CEO realized its benefits. Such an approach would enable Orange to realize the potential of advanced software methodologies and apps, and this inspired the CEO to push for APIs to become common practice within Orange. A shift that also initiated some big changes within the company culture. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING “When the head of the company explains why it is important to move in a certain direction, that simplifies everything.” - Patrice Slupowski, SVP Digital Innovation at Orange !66
  67. 67. The company became insistent that any product released should come with it’s own APIs. This creates opportunities for Orange to easily form partnerships with big or small companies. An API approach required no implementation costs due to its inherent simplicity and self-serviceability for developers. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Their greatest challenge was effectively manage the use of APIS whilst maintaining implementation speed and achieving scalability.   Orange teamed up with apigee, the provider of API management and predictive analysis software, to solve this issue. This partnership resulted in the creation of two sites, “Orange Partner” and “Orange Developer,” which enabled developers to find, test and use their APIs in ‘self-service mode’. Initiating use of APIs & management. !67
  68. 68. The Techno Center was established based on agile principles to carry out larger software development projects. The products and services were developed in partnership with third-parties such as startups or larger groups. Legacy systems still ran in parallel however they did not inhibit the adoption of the new APIs. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !68
  69. 69. PATRICE SLUPOWSKI. “Any company creating a platform, capability or an app has to provide an API if they want to be part of an ecosystem. If not, they will be on their own - and either they’re perfect and they will score, or … APIs will always be the missing part for them.” SVP FOR DIGITAL INNOVATION, ORANGE. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !69
  70. 70. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING Knowledge of what to test is crucial for a fail fast and learn fast approach THREE KEY LEARNINGS FROM ORANGE’S TRANSFORMATION. Create a dedicated “center” for software development Accessible APIs dramatically lower the cost of strategic collaborations This increases the speed of building & learning as analysis can be done even while still testing. The test itself has focus, which makes it simpler as it is only gathering necessary data and more accurate in delivering what it has been designed to. This can be seen as reductionist but enables faster progress and more time to test further factors in following phase. A separate center dedicated to software development alleviates worry of new approaches affecting the core business. It moves the new, more experimental and modular business model to it’s own environment. This reduces the risk of affecting other projects and being slowed down or disrupted by running up against the more traditional business model which may still exist for most. By offering APIs with a self-service mode for developers, banks can save on costs of forming partnerships in the traditional way and from using up resources to identify the use cases. They can observe the adoption rates of various functions created by developers and pursue the most popular ones further, saving resources for the most promising collaborations. !70
  71. 71. 71 Patrice Slupowski
 Vice president for Digital Innovation, Orange “API is a complex thing which can be explained in a very simple way to do great things.” CONTEXT.LHBS // NFO: NEXT GENERATION OF BANKING
  72. 72. When facing an internal culture transformation, traditional banks - and any legacy organization - should consider… BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !72
  73. 73. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING QUESTIONS TO ASK: Who will be affected by this change? What are their specific challenges and fears? What language would address their concerns and that they would best respond to? BEFORE COMMUNICATING !73
  74. 74. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING STEPS TO TAKE: Map stakeholders with their specific concerns. Draw up a stakeholder engagement plan for everyone involved - front shareholders to frontline employees, and put together any necessary toolkits. BEFORE COMMUNICATING !74
  75. 75. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING QUESTIONS TO ASK: What are the real business outcomes that could be seen as a result of these changes? How does your organization really feel about the prospect of an internal change? Are they against changing or is there an obstacle of fear of the unknown? WHAT TO COMMUNICATE? !75
  76. 76. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING STEPS TO TAKE: Communicate change to those in sales and business development roles by quantifying wherever possible. Instead of simply presenting changes, tie changes to business outcomes. Make it clear these changes will happen, it has been well thought through and that there is a burning platform for change. Emphasize that doing nothing will have consequences that outweigh the risk of change. WHAT TO COMMUNICATE? !76
  77. 77. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING QUESTIONS TO ASK: What communication platforms are easiest for your organization to use regularly? What types of incentives do people in your organization best respond to? Who in your organization do people follow or look to for leadership? HOW TO COMMUNICATE? !77
  78. 78. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING STEPS TO TAKE: Ensure the internal campaign gives all employees the opportunity to ask questions, find out more information and resolve any issues they have. Offer the chance for anything to be asked anonymously and through a convenient platform. It is a good idea to build an incentive system to reward those who adopt the change to set an example and already associate positive outcomes with the transformation on an individual level. HOW TO COMMUNICATE? !78
  79. 79. Becoming a truly digital organization takes more than simply offering digital products and services. Core operations also need to be powered by technology. Bringing these two together requires a tectonic change to happen in not only employees’ activities but their individual behaviors. A digital organization has a different set of values and a characteristic set of behaviors from a traditional way of working. Instilling this new culture to support the transformation is doable, but requires a methodology that is clear, and disciplined effort. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING !79
  80. 80. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING When facing a business model transformation, traditional banks - and any legacy organization - should consider… !80
  81. 81. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING PREPARATION & KNOWLEDGE OF YOUR EXISTING RESOURCES AND DATA IS THE CRUCIAL FIRST STEP Fix the basics Fix the basics of your business before branching out to new technologies and methodologies. Ensure that you and your team don’t fall into the trap of believing all systems you’re using now are the only - and most efficient ways - to get things done. !81
  82. 82. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING PREPARATION & KNOWLEDGE OF YOUR EXISTING RESOURCES AND DATA IS THE CRUCIAL FIRST STEP Know your existing data Know what data you have right now and what it tells you about your customers. Is there more value you cold extract from it that could enable you to offer more value to customers? !82
  83. 83. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING PREPARATION & KNOWLEDGE OF YOUR EXISTING RESOURCES AND DATA IS THE CRUCIAL FIRST STEP Be strict with keeping & eliminating systems Which of your existing platforms and processes could be flexible and adopted into the new changes, and which will you have to make tough decisions on? Be strict in what will stay and what will be eliminated to truly embrace the change and set a precedent to the organization. !83
  84. 84. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING PREPARATION & KNOWLEDGE OF YOUR EXISTING RESOURCES AND DATA IS THE CRUCIAL FIRST STEP Put in place the right resources Define and build up the right resources in order to cope effectively with new technologies and methodologies. Be realistic and set the organization up for success from day 01. !84
  85. 85. Your transformation journey starts here. Your Agile Workshop will enable your team to align on a common vision and explore what’s possible for the organization with Agile as an opportunity. AGILE WORKSHOP. BOOK YOUR FIRST SCHEDULE TODAY STEFAN ERSCHWENDNER Managing Partner +49 151 6462 0729 se@lhbs.com BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING READY TO ACT? !85
  86. 86. A marketing & innovation firm, we work primarily with legacy organizations to adapt their customer value proposition to meet emerging customer expectations. Together with our clients we discover business opportunities and deliver integrated customer offers for products, services, experiences and communication. DISCOVER DEFINE DEVELOP DELIVER Explore further on our website, and discover more industry insight reports. BANKS NEED TO BE SMARTER.LHBS // NFO: NEXT GENERATION OF BANKING ABOUT. !86
  87. 87. THANK YOU. You can explore more industry insights reports on our website. LHBS // NFO: NEXT GENERATION OF BANKING

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