Enterprise Agility: How Digital Banks Can Stand Out from the Crowd

Although digital banks have captivated financial institutions and end-customers alike, the  concept often means different things to different people. 

Neobanks have been springing up more frequently in recent years. Thanks to new virtual banking  licenses in Singapore and Hong Kong, digitally native companies both neobanks and non-banks  are offering financial services without the operational burden of legacy technology or branch  networks to highly engaged customers hungry for better experiences. 

In Hong Kong, the government regulator handed out the first batch of digital banking licenses in  2019, offering a chance for new entrants to vie for the retail banking business in the city. In all,  eight virtual banks are in the market today. 

Meanwhile, in Singapore, four digital bank licenses were given out in 2020, two for Digital Full Bank  and two for Digital Wholesale Bank. 

Established banks are catching up by tapping into an ecosystem of partners with a range ofdigital  capabilities allowing them to overcome disruptive challenges and better serve customersold and  new with new non-banking services. In December 2021, the SCBX Group inked a deal with Publicis Sapient to launch SCB TechX, a joint  venture to usher in the next generation of financial services across Southeast Asia. It offers  platform-as-a-service to help banks reimagine customer engagement while driving efficiencies in  the back office. Beyond that, the business will also provide non-banking services to commercial  institutions and consumers in the region.  

To stand out in this increasingly saturated market, all banks must embrace digital. There is no alternative. But how? 

Banks must be able to adapt continuously—in an agile fashion—to constant change and  disruption. Although digitalisation has been in progress over the last 8 years; it has significantly  accelerated over the past two years. The road is still fraught with challenges, and it is important  for banks to understand and avoid common mistakes while marching steadily towards digital  existence. 

Rushing in, losing out 
One common issue is that banks often rush to develop a digital product or adopt a single digital  technology and expect it to transform their business. Experience has shown that a project- or  product-based mindset does not help in the long term. 
For example, developing a mobile application that offers an attractive front end may not be  enough to cover up the lack of capabilities in a back-end system that is run on legacy hardware. When a customer taps on their phone screen to view transaction records from more than a couple  of months ago, the app slows to a crawl because legacy backend applications are unable to  scale and provide quick response times. 

In the rush to digitalisation, many banks can lose sight of the fact that revamping banking  infrastructure is often a multi-year exercise that comes with increased cost and risk. Some boards,  unfortunately, choose to focus on a digital product or service that can be created in months— and use it to spearhead their digital efforts. Any larger issues with the backend tend to snowball over time, creating a potentially negative experience for customers, resulting in further time, cost, and efforts to rectify in the future. 

Business units operating in silo with a myopic product vision is another issue. Creating individual  products to capitalise on an immediate gain, without a more holistic strategy in place, risks having  multiple products and services competing for the same market and customer share. Multiple apps  targeting various customer segments end up increasing costs and not generating enough  revenue and app utilisation. It also confuses the customer and ruins the experience! 

Enterprise agility in digital transformation 
Enterprise agility is the prowess all industries seek. For banks, achieving enterprise level agility is  particularly challenging. However, once implemented correctly, it not only allows banks quick to  market product releases, but also sets them up to adapt to disruptive change. 

Here, it is important to note that there are various layers to the notion of enterprise agility. An agile  mindset must guide a bank’s values, principles, practices, tools, and processes. If there is no end to-end business transformation effort, it becomes harder to change to newer and better tools and  processes down the line. A bank may have an advanced front-end application but still get  dragged down by back-end systems that were not designed to keep up with their agile ambitions. 

Understandably, it is not trivial to decommission old servers and applicationsthat have been doing  the job of delivering services with certainty for years. However, both direct and indirect costs will  add up if legacy technology infrastructure becomes more difficult to manage. This will eventually  make it more difficult to establish a more agile solution in the long term. 

Conversely, banks that have moved away from legacy technology will find the cost of creating  new apps to be lower over time. With easier scalability through the cloud, development teams  can create, test, and deploy apps much faster. What’s more, by using application programming  interfaces (APIs) to connect to and call services from a more responsive back end, this reduces  the need to create new apps from the ground up each time.  

Instead of creating apps in a “waterfall” fashion, this firm foundation will help create a  “repeatable” pipeline of apps or micro-services that can be replicated easily or adapted quickly  to meet new needs. 

Standing out from the crowd 
What will ultimately distinguish one digital bank from another is agility, and how quickly the  organisation is able to respond to changes and meet customer needs with the digital tools already  at its disposal. 

Rightly, many banks now see themselves as technology companies in the business of delivering  financial services, thanks in no small part to the constant innovation needed to compete. 

Constant iteration is a necessary part of this agile process, coupled with performance metrics that  help provide a measurable indication of how well these services and products are performing. This can come in the form of customer feedback given through an app, or through A/B testing to  see which path yields the best outcomes for a specific set of customer and business requirements. More importantly, a bank’s management as well as its development team must constantly review  pipeline builds and their backlogs, checking how far in the agility journey they have progressed. 

Change is not particularly easy in the banking, more so a highly regulated sector where service  delivery standards are stringent, and downtime comes with severe penalties to the bottom line. To this end, it is unsurprising that stability has long been regarded a critical factor of success. 

However, a change of mindset is needed now more than ever. Being quick to market is important,  but this can only be sustainable in the long term if there is agility from end to end. That will include overhauling legacy technology and taking the necessary risks. 

Committing to these changes is not easy but it is necessary to be truly agile. The winning digital  bank of the future will be one that is not just able to deliver high performance in uptime and  experience, but also one that is constantly updating itself and delivering fresh and consistently  performing offerings over time.