Accelerating the technological transformation of banking

June 2016

“We need to revolutionize our business because the world has changed so much.  It’s only through the concept of us becoming an applied technology company that we’ll achieve it. ”

—John Cryan, CEO, Deutsche Bank 

Since the financial crisis, regulation and related market changes have put pressure on banks’ profitability. At the same time, a new threat has emerged: technology-enabled companies that are changing the ways in which customers obtain financial services. Bank boards are working hard to distinguish between hype about disruption and the practical challenges their institutions faceto “sort out the substance from the noise” as they consider the appropriate scale and pace of technology transformation their institutions will require to compete in an expanding marketplace.  

While much of the commentary about technology in banking focuses on the external threat posed by these new, technology-enabled competitors, or on the way banks are changing their customer interface and creating mobile and other digital offerings, a further and broader transformation is also under way. Many banks are only beginning to address their underlying systems infrastructures, updating legacy systems pieced together over years of mergers and acquisitions. Advances in technology are changing the way banks collect, access, and analyze data, manage risk and compliance, improve the speed of core processes, and build resiliency.  As one director emphasized, “This is not just about developing the new whizzy apps.”  Rather, it is about transforming businesses for future success. Boards have a major role to play in encouraging effective innovation and wise long-term investment.

Over the course of the last several months and culminating with a meeting on May 5, 2016 in New York, Bank Governance Leadership Network (BGLN) participants discussed the challenges and opportunities in transforming bank operations via technology. A full list of discussion participants is included in the appendix.

Perspectives from those discussions are synthesized in the following sections of this ViewPoints:

  • Technology is increasingly driving business model changes

  • Boards need a broad, strategic view of technology needs, opportunities, and investment

  • Banks are working to attract technology expertise and build a culture of innovation

  • Regulation is adapting … slowly