It’s important “not to get starry eyed” about technology by itself, a panellist at this year’s Citi Digital Money Symposium advised during the ‘Reinventing Finance’ fireside chat. Instead, it should be seen as a toolkit to solve business problems.
A major issue that was raised throughout the symposium was the industry’s reliance on legacy technology. Antony Jenkins, CEO and founder of 10x Banking, emphasised the difficulty that banks are facing in providing the customer experience that clients are demanding when using technology “from the 1970s or even earlier.” Particularly when going up against fintechs and new banks, this leaves incumbents behind.
Using legacy technology also comes at a high cost. Jenkins reported that many firms are spending large proportions of their budgets on operations and technology staff, due to a reliance on multiple systems and the need for manual processes. The solution to this issue is automation, he said.
A second panellist agreed that incumbents are not embracing the new technologies that are available to them. When technology is so important in increasing financial companies’ competitiveness, this is a significant problem.
Considering why banks are avoiding transformation, the panellists cited a number of barriers that are holding them back. Cost, again, is a concern. Old technology is expensive to upgrade, and getting it to match current standards could take up the majority of a firm’s budget. On top of that, on speaker added, many big technology transformation projects have gone wrong in the past, or at the very least have run over schedule.
As a result, Jenkins explained 10x Banking’s development of “time-bound components” and a “de-risked” approach to technology transformation. He stressed the fact that a company’s transformation is driven by the use of technology, rather than just by moving existing technology to a new core. Taking this process in small, incremental stages allows momentum to grow, he affirmed.
Looking at the path ahead, Jenkins drew comparisons to the fintech industry’s history. Innovation takes a long time, but fintechs “reinvented the future,” he claimed, and expects a similar path to be followed by today’s nascent technologies. A second panellist added that incumbents have been content focusing on customer experience alone in recent years, and are beginning to realise that “solving the interface is only going to get you so far.” Business model transformation is necessary to make progress, he asserted.
On the topic of emerging technology, Jenkins was quick to warn against getting caught up in the excitement of new technology. It’s essential to identify the business problem before finding the technology to solve it, he said, a sentiment echoed throughout the symposium. One speaker predicted that a minority of firms will use new technology to their advantage, with a small proportion able to successfully scale to their goals.
Jenkins went on to call attention to technology being used in other industries that could be applied to financial services use cases. This is cheaper and easier than developing new technologies, he explained, with the second panellist agreeing that making the most of existing technology, both within and outside the industry, will be beneficial.
Advising clients currently on their transformation journeys, Jenkins maintained the importance of improved data management and the delivery of a positive user experience that matches the offerings of neobanks. There is a steadily increasing gap between those who are embracing new technology and those who are not, he said, with future market leaders in the former category. Affirming the importance of technological transformation, Jenkins concluded that “it’s obvious we’re not going back to the old world.”
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