Mobile banking and other digital financial services are indeed a global growth phenomenon. Yet while nearly two-thirds of retail banking executives state that delivering financial services to customers across all channels is a priority, traditional retail banks have yet to effectively provide a positive customer experience through digital channels as well as they do personal channels. Why are traditional retail banks so far behind while new service providers are leading the way?
After all, retail banks know more about financial transactions and products, they are expert at understanding the financial needs of customers, and have decades more experience in developing financial products, processing transactions, and engaging with customers. Banks are the natural owners of the payments space, and payments are the gateway into almost all customer related financial relationships. However, new non-bank providers are developing payments capabilities and customer service interactions superior to those of banks. They are not smarter or more experienced, but somehow have taken a significant lead in digital banking services, and the gulf is widening.
And they must get there quickly.
Organizational culture - Wikipedia
What Derails Traditional Retail Banking? There are numerous structural and regulatory obstacles faced by retail banks in providing digital mobile banking services. Growing regulation, coupled with their massive scale, means there is limited room for failure in large financial institutions, making them relatively less innovative and considerably more risk averse.
New-age companies thrive on a culture of trial and error. The new age tech firms value speed while financial institutions face bureaucracy and hierarchy which has developed largely to deal with risks and regulations. As a result the FinTech companies are evolving at a rapid speed and winning customers from traditional banks. Another barrier is that many banks have to cope with a legacy and burden of IT infrastructure going back decades. That makes it tough for them to keep pace with the rapid advancements in the sector. FinTech and tech companies have access to the latest technologies, allowing them to develop and test new processes quickly to meet the growing demands of the customers.
As an example, FOREX trading, once dominated by big banks, has largely migrated to multiple FinTech firms who can process transactions faster, cheaper, and with a superior customer experience.
While these are the most obvious barriers to timely digital transformation by retail banking, like the proverbial iceberg, there are massive hidden barriers just below the surface that are poorly understood and rarely talked about. In our estimation, these are the real roadblocks to speedy adoption of digital financial services by traditional retail banking.
Many of these hidden barriers reside in the corporate culture of traditional banking. In order to understand and deal with these barriers, it is necessary to first understand corporate culture, what it is and how it impacts performance. A Brief Primer on Corporate Culture. Corporate culture is anything but soft stuff or academic theory. Corporate culture can be a significant business risk, or a valuable asset for growth and competitive advantage. The problem is, most senior banking executives have no clue what their corporate culture is and how it impacts performance.
Since then the study of corporate culture has flourished and culture is now recognized as a critical aspect of modern business success, especially during times of change. The role of corporate culture during times of change is particularly important for business leaders to understand. Most companies, and traditional banks in particular, were established and grew in a fairly stable, slow changing business environment. As a result, the major business systems, strategy — structure — culture, evolved in tight alignment.
Everyone knew what the goals were, who was responsible for what, and what behaviours were accepted and not.
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And banks prospered. However, over the past two decades, external changes such as increased competition, heightened customer expectations, increased regulation and global business requirements have forced many of the traditional banks to respond by adopting new strategies and business models and also by changing their organizational structures to accommodate additional functions and increased complexity. The problem is, trying to deliver on a new strategy and a new structure with an old culture presents considerable problems. In essence, the old culture of banking can become a significant anchor to change and business performance.
While most banking executives are adept at reformulating strategy and business reorganization, few understand how to reshape corporate culture. The Cultural Barriers to Digital Banking So, how has culture in traditional retail banks slowed down the adaptation to digital and mobile financial services? There are two key elements of the culture of traditional banking that have acted as significant roadblocks to progress towards digital banking services. Certain internal functions, such as Investment Banking and Trading Departments, are seen in many traditional banks as the most important functions by senior management, especially in terms of making profits for the bank.
Investment bankers tend to get huge bonuses and even junior investment bankers are paid starting salaries much higher than most retail bank employees. Many of bank CEOs and senior managers have come from the Investment banking side of the business. As a result over the past several decades, a culture of functional arrogance has been created inside most major banking institutions.
And while the investment bankers and traders are treated as special cases and much of management attention is focused on growing its scope, products and services, there has been little respect or attention given to retail banking, back office operations, and the internal technology functions.
These are often treated as second-class citizens, or worse. Starting salaries are lower, bonuses significantly lower if any at all , and capital investment and training has been minimal. So it is no wonder that the transition to digital banking and mobile banking in particular has been slow. Open and Honest Communication In strong and healthy cultures, communication tends to be more open, and honest.
Making corporate culture deliver long-term value
Few things are as important as good internal communication flows. Those who promote the flow of communication, rather than creating communication obstacles, will thrive within our culture. Identify impediments to communication flows and eliminate them.
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Those who share information on a "need to know" basis will not succeed within our organization. Conflict Resolution Our culture promotes a win-win method of conflict resolution. Whether dealing with customers or fellow employees, we have the responsibility to, A identify the conflict, B attempt to provide a positive solution to the conflict, and C make sure that all parties on both sides of the conflict are given something that will help them accept the solution, and help them feel better about themselves and those who they were in conflict with.
Outstanding Customer Service Success within our culture requires a strong customer service attitude. We must take the initiative to understand just what the company means by "outstanding customer service" and then demonstrate that we have the right customer service attitude and skills to make each of us customer service leaders within the organization. Outstanding customer service comes from true "relationship banking". A positive business relationship, built on trust, will generate opportunities to determine what our customers need in the way of banking products and services, and then it is our responsibility to deliver those needs.
Wells Fargo's Organizational Culture: Can You Bank on It?
It is not appropriate to sell products to people merely for the purpose of generating profitability for our company. Customer relationships built on trust, and taking care of customer needs, will be more meaningful and longer lasting. Pride Acceptance within our culture requires a high level of pride, and excitement about the company. It is our belief that our corporate culture makes us unique and special. It is the factor that differentiates us from all the others. Our employees are proud to wear our logo, and to communicate that they are part of the Citizens Bank team.
They think of themselves as winners, and a highly valued asset of a special organization. Teamwork Few things can do greater damage to an organization's culture than a weak team spirit. Effective teams can accomplish much more than can any individual working alone. Teams fail when people choose to focus on themselves in order to be successful. Some people don't accept the value of leadership, and the enormous power that comes from teamwork.
Citizens Bank is a high performance banking company because of the combined success of many teams that make up the organization. No single individual within our culture can successfully stand above the team. Explore Mobile Features. The MoneyPass network offers tens of thousands surcharge-free ATMs coast to coast located in most areas that you live, work and travel.
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