The challenge for banks is not what they have but who they are. Challenger banks are natives in the digital world, but banks are migrants
Could banks be going about digitization like a 40-something year old does a smartphone?
He believes the smartphone makes him digitized but it only makes him digital. Digital is an appearance; digitized is a lifestyle. He has, say, a Galaxy Note 9 but his ‘phone-less digitized son marvels at how dad still asks for a pen every time he wants to jot down something. “Why doesn’t he just use the stylus (‘pen’) on the ‘phone?” The son has seen these analogue tendencies throughout every phone upgrade from Note 2. This is the first of two articles on the challenge of banks selling themselves in a digitized world.
The challenge for banks
Banks create an app that allows customers to access their accounts via mobile. That makes them digital but not digitized. That’s why this can happen. The app hangs (technology isn’t perfect), and the customer calls, saying, “I ‘pulled’ money from my account but it’s not on my ‘phone. But, it has ‘left’ my account.” And the staff member responsible, from somewhere in back-office, retorts, “Tell him to wait for forty-eight hours.”
And why? Because he thinks he still can; and, that’s what the (analogue) standard operating manual says. Before digital, resolving a similar error involved four people across three departments. With digital, human intervention can be removed and so forty-eight hours should be forty-eight seconds, yes? No. Faster. That’s why the Central Bank Governor Prof. Njoroge instructed banks to reduce the transaction time for Pesalink to less than ten seconds (from the forty they were so proud of) if he was to approve it.
Pesalink and banks
Can you imagine M-PESA taking forty seconds to complete a transaction? Speaking of which, Safaricom (a challenger bank, as such players in the financial sector are referred to) would empathise with you if you sent money to the wrong number and go out of its way to try and resolve the issue. How do you suppose a bank would react?
The challenge for banks is not what they have but who they are. Automating existing services is just upgrading from a ‘dumb’ ‘phone to a smart one. It doesn’t change who you are. This explains why a decade later banks have nothing to show in response to M-PESA. You must be a banker if you think Pesalink is it. It also explains Prof. Njoroge’s continual challenge to banks admonishing thus: “Innovation is not just another app.” (Or, bank-wide automated system).
The smartphone does not suddenly make you digitized; unlike your son who is a native to it you are a migrant. That’s why you consult him to fix seemingly complex problems, as he silently wonders what a dinosaur this adult must be. However, he can’t help if you don not give him the permission or space to do so; that is, create an enabling environment. That means letting go and acting as midwife. This speaks to leadership re-thinking the bank’s potential and how to compete in a digitized world. And that’s our topic next week.
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