“In many ways, we see ourselves as a technology company with a banking license.” Michael Corbat, Citibank CEO
Consulting firms over last two decades have guided Banks to “Outsource Technology to Technology Providers”. This has helped the banks in focusing on their core competency, which is “Banking”. Based on this approach, technology teams within the bank moved from “Development Approach” to “Outsourcing & Program Management Approach”. In last two decades, they have attained skills in architecture, support, outsourcing and controlling multiple partners, while losing skills in pure technology and development.
With continuous improvement in technology, the banking knowledge has moved deep into codes & algorithms. This has resulted in slow and steady reduction in banking knowledge within each organisation. In most of the banks, the intricate accounting, interest calculation, charging algorithms is known to a very few, which was once known to each person in a branch (when this was done manually).
Digital wave & arrival of Fintechs has shown the banks that technology can drive the business models.
- Customers are now used to interacting with banks through digital channels from on-boarding to off-boarding and everything in between.
- Sales teams are now becoming more productive through sales tools available in their tablets.
- Operations staff continues to increase their productivity through tools like OCR, API, RPA etc.
- Fraud management units have started relying on triggers from Artificial Intelligence Platforms running on continuous stream of transactions.
Banking Industry as such is moving from
High Value, Low Volume, High Touch, Defect Prone, Slow Processing Industry
Low Value, High Volume, Low Touch, Defect Resistant, Fast Processing Industry
Business and technology are getting so close to each other that they cannot be segregated and for sure one part (technology) cannot be outsourced anymore. Some banks could sight this mega trend and had started investing in their digital strategy and technology units. These banks have moved digital initiatives into the centre of banking to create differentiated & profitable business model. They have hired best talents in the market around Artificial Intelligence, Development, Design, API, Digital Payments, Digital Lending etc.
In these organisations, technology teams are now additionally responsible (beyond running the bank, which based on my own experience is challenging in itself) for:
- Co-building Digital Strategy of the bank
- Driving Digital initiatives in partnership with business teams.
- Partnering with external entities like Fintechs / Financial Institutions for generating new streams of Business
- Selling technology driven services to customers (like API based integrations to corporates)
- Guiding the bank in acquiring / investing into Fintech / software companies
- Building digital culture in the organisation
The change in role needs rebuilding technology teams in alignment with the change in expectations. Digital initiatives need knowledgeable and agile in-house technology teams. There is a need to review the areas to be outsourced and need to be in-sourced.
In the current business environment, Outsourcing Technology for a bank is like outsourcing the bank.