Why would a bank ever embrace disruption?
Posted on: August5, 2019 by Eddy Claessens
Back in November 2017, I chaired a panel discussion on how FinTechs can get out of the lab and into the business. It involved digital leaders and innovators from big financial institutions and FinTechs talking about how best to integrate the work of one with the other.
Interestingly, the discussion highlighted how the ‘lab’ was currently the most appropriate environment for FinTechs focused on “disruption”. It’s a word we hear a lot these days – particularly in Banking and Insurance and even more so in the field I am interested in here at Atos, Payments.
If you look up “disruption” in most dictionaries, the primary definition almost always sounds negative. Even the secondary definitions speak of ‘interrupting the normal course of [an established way of doing things]’. This suggests a new level of uncertainty; and uncertainty can lead to inertia. For banks and insurers that have been traditionally organized to create stability, the thought of uncertainty and interruption to normal operations is almost anathema.
So why would banks want to bring disruption into their businesses?
Reading the Atos whitepaper, “The Digital Business Continuum: Enabling organizations to thrive amidst disruption”, encouraged me to explore this question further.
Focusing on big businesses, it not only sets out why they have to transform but also how they have to transform. It demonstrates that transformation must be constant (hence the ‘continuum’) rather than “one-shot” for organizations to stay competitive. One section, in particular, explains the difficulty facing banks, insurers and payment providers as:
‘…traditional businesses innovate by seeking to do more of what they already do, while disruptors ask themselves “How can we give people what they really want?”’
So it got me thinking – can banks ride new waves of disruption in a different way?
The Digital Business Continuum suggests that rather than becoming insular and protecting what they already have, large enterprises should use the “searchlight” and the “radar” to ‘face outwards to identify threats and opportunities’.
‘We use the metaphor of the searchlight to highlight that a business must actively seek out external threats and opportunities. However, used in isolation, the danger is that a company will only discover what it already knows to look for and confirm its existing biases. Hence we combine it with the metaphor of the radar, to reinforce the notion that organizations must be constantly scanning for changes in their business context.’
As we discussed during our panel session, the larger enterprises don’t always have to be the ones to come up with ideas. They can create a new role for themselves by focusing on what is around them. Using the searchlight and the radar approach, they could re-position their businesses as the heart of a new ecosystem. By doing so they could create a new operating model that embraces disruption by using the full potential of that ecosystem.
Still, this means answering some fundamental questions:
- What does it mean to be a “bank”?
- What do customers really need?
- Do we do it or let our partners do it?
- What do we provide that will support this?
Whether the bank takes a role as the central risk manager or transaction aggregator for the ecosystem, it is all about putting the customer at the center. Here again, we go back to the need to start by innovating at a business model level – defining the model based on the service(s) the bank will provide.
It will, of course, require more than panel discussions to enable the huge (and ongoing) transformation espoused by the Digital Business Continuum. But it does have the merit of bringing together all stakeholders in the ecosystem into a conversation about disruption – a conversation that is surely needed if all those stakeholders want to be successful.
Those that join the conversation and accept the need for continual transformation will be much better placed to ride the next wave of disruption.