When I first heard about digitalization, it was only another buzzword of a new hype. It is a dumb naming of the phenomenon, because we were in the digital age from the 90's. Every computer, mobile device is a digital equipment, why we call digitalization an evolutionary step ? I think the correct word for the current evolution would be real-time. As the mankind is moving much more towards the mobile devices, people tend to live their lives like a digital zombies.
Everyone who uses the public transportation in any part of the world often faces the same situation. With this dependency to the mobile devices, the population starts suffering from a disease which called: FoMO
Thanks to this disease, everyone wants everything immediately. For me this means everything has to run real time. As I work in the finance industry, we can translate this into real-time products:
Instant payment
Realtime CRM offers
Financial industry's evolution is just as slow as, a dinosaur. They still use old core / payment systems, which follows the design of the 60'-70'. To enable these old systems, to be ready for the new era, they need to create satellite systems, which increase the complexity of the systems further. These complexity behaviors, slows down the development pace, and increase of the costs of the systems.
On one hand, cost increase means no problem currently, because most of the banks still have profitability. On the other hand, Fintech companies build their systems from the ground in the most effective way without the knowledge of the past. They usually build their systems from scratches, as the demand requires. When banks try to cooperate with the Fintechs, it does rise the question: how will they integrate with their solutions?
One way is integration, another way is moving out functionality from their systems towards Fintech solution. This can be a really dangerous game. With the second approach, they start to split their business into different companies, which in mostly not in their hand only. As their value splits into different companies, it will be really hard to manage one bank's interest over multiple companies. This is particularly true if they not owning a 100% share from the Fintechs.
In my perspective, it is much more important to make the bank's internal processes efficient. This means lowering the number of the systems meaning new development impact, and simplifying the operation of the internal systems. In the near future there will be a heavy competition, which will be driven by two factors: pricing, and service quality. If a bank is able to fulfill an internal system redesign, then they will succeed in both fields.
If the bank's internal reaction speed increase and they open their mind to the new solutions, the bank can become a Fintech company accordingly. These banks just need to learn from tech companies. They have capital, so they more easily capable to create new solutions.
I have seen a lot of examples in the banking industry where this approach had been put into practice. Most of them created an Innovation Department, which was independent from the overall IT/Business ecosystem, so they could freely create new solutions. The less conservative atmosphere could help to motivate young, open minded talents to join the bank.
This positive aspect I can confirm as every day I make a job interview with candidates.
