Going digital is more than slapping lipstick on a pig

The bank account: It’s the hub of our financial lives, yet it hasn’t changed much since its inception. But as we all move toward digitalization—some faster than others—does “going digital” mean simply digitalizing existing products, or is there more to it?

At Trustly, we find the topic of transforming the bank account fascinating. After all, we believe the bank account will continue to be central to every individual’s financial life. To learn more, we dropped in on a session at Money20/20 titled “Old school to new school: Transforming the bank account.”

The spirited panel, moderated by JP Nicols, President & Chief Operating Officer at Innosect, featured executives from Danske Bank, Citi, Sberbank, challenger Fidor Bank. They all agreed that going digital is vital for banks, but several clashed on how to do that, and even what “digital” means.

What does “digital” mean?

“Let’s take a step back and discuss first: What is digital? What is disruption?” said Matthias Kroner, CEO of challenger bank Fidor. People often throw around those buzzwords without truly knowing what they mean, he said. There might be new processes, but nothing truly disruptive. Banks think about digital solutions, yet they still send out applications via a mobile app that customers need to print out and deliver to a branch.

“If you have a legacy core banking system and you call it digital because you create an app on top of that, well to me that’s lipstick on the pig,” Kroner said, eliciting laughter from the audience.

Kroner went on to define what he believes “digital” means: “It means high-speed banking. It means real-time banking. What is the fastest loan you can supply? Can you ship a loan in a second? If you can’t do this, you aren’t digital. If you can’t do this in a profitable way, you aren’t digital. If you can do this in a micro way, you are digital. If you can do this on a Sunday, you are digital.”

Going digital is a cultural task

Greg Baxter, MD & Global Head of Digital at Citi, jumped in to add that while digital drives exponential change, human behavior doesn’t also change exponentially; it changes linearly. “You must look at their behaviors; not what people say but what they actually do. You need to move in a way that allows them to move with you,” he argued.

But the majority of digital banking is actually happening where the customer does not even feel or see it, Kroner countered. “I think it’s more of an internal task to become digital. And by the way, I think it’s not only a technical task; I regard it to be a cultural task because you can’t sit on a perfect digital infrastructure if you have a corporate banking culture. Forget about it.”

Digitalization knows no age

Nicols redirected the conversation: “So is it just about digital natives?”

On the contrary, said Tonny Thierry Andersen, Executive Board Member and Head of Personal Banking at Danske Bank. Anyone shopping on Amazon expects the same seamless experience with their bank, he said, mentioning a 102-year-old customer who uses P2P payment on mobile. “In my view, digitalization has no age.”

Slava Ostrovskiy, Digital & Mobile Business Executive at Sberbank, noted that there are many segments of people not willing to adopt technology and that it’s the banks’ job to educate them.

Committing to digital

Baxter told a story about a pig and a chicken sitting at the breakfast table looking at the spread. “I was involved in this,” said the chicken. “Yes, but I was committed,” said the pig. “So it comes back to, are you involved or are you committed?” Baxter said, tying it back to the topic. “Digitalizing the company is different from becoming a digital company—and when I say ‘digital’ I mean relevant in a new world—in a world of different business propositions and demands and a different operating model to serve them.”

What we can learn from McDonald’s

But how do you bring digitalization to humanity? It’s all about personalization, the panel agreed.

Kroner, who has a background in hospitality, alleged that the financial services industry is the only industry that thinks to serve the customer without first asking them. “Even McDonald’s is asking what you want,” he shot. For a long time, banks have prided themselves on top-notch customer service at branches, but as things move digital, the panel agreed that banks must reconsider what a customer-centric strategy looks like across channels.

“I think as a bank, we won’t win on every one of the distribution channels; we have to partner with other companies that are far better in the journeys that they own. But we do want to still win in terms of having financial well-being, so this concept of an account, while it needs to radically change, I think the symbolism of a core of a client relationship still matters greatly to us,” said Baxter.

Banks have always prioritized security, but to be able to cater to constantly connected consumers amidst a demanding, rapidly changing tech and regulatory landscape, we at Trustly believe collaboration and partnerships with FinTech companies are the way forward.

For more news from Money20/20 Europe, check out our recap of “Get into co-opetition: How partnering with your competitors can be a win-win.”