Digital Maturity Model for Banks' Digital Transformation

As I noted in my last post, Banks should define their roadmap for Digital Transformation, But it is mandatory to have in hand the definitive Digital Maturity Model, something like the well-known CMMI for the Software Industry. This model should provide levels of maturity for Banks. I´ve been amazed to see a lot of banks struggling with their own models. Consultants imposing their models, models built on the GO.

Since the Banking industry, just try searching the web for this term and easily there will be more than 250K results, none of them is a clear standard, none of them comes from a common source. So, as we are in such a state of multiple efforts to have a good model, the only way out is to evaluate the success possibilities around and take one. Any other suggestions? Yes, right, the best path eventually be not the best one. We fail in the dilemma of choosing the best based on the nearest truth. This means, that after benchmarking the market that affects the bank, something will come up and that will be the ideal model. Sad but true, as Metallica´s song says??. Not at all, the truth is that the banking industry is big, the threats vary from place to place, and it is not practical to compare one bank in New York to another one in Sri Lanka. Different realities? yes. In the end, there are different approaches, full of good intentions. This means that the bank across the street will implement a different model than its neighbor.  boooo, scary!

It is scary just if you think that Bank 1 considers that the level of digitalization for, let´s say its front office is roughly 80% and the Bank 2 assumes that for them the same level is 70%, but wait, The Bank A has 40 applications and Bank 2 has 110 applications. Sorry for Bank 2, now is paying for having a lot more in applications than its rival.

Now, the point here shows how important is to adopt the right Maturity Model and be prepared to understand where is located the bank in question. Something like the problem of two-speed runners, the first one like Bolt, tall, slender, etc, the second one will be a small man from X country who runs 100 m just 0.2 seconds behind Bolt. It is clear that regardless of the runner´s height and other physical factors, the winner is the one who scores less time for the same distance.

A common approach to measure the maturity index is to consider

1. Front Office
2. Middle Office
3. Back Office

and determine the percentage of Medium, Basic and Advanced degree of digitalization in everyone.  As far as now, the Front Office in all banks has more chances to improve its digital face, nevertheless, all 3 have an impact on Customer Experience and are affected by Service Design. Again, the Maturity Model comes to show that it is important to measure Digital Maturity as a whole. What an intersting point,  isn´t it?

Keep in mind to have KPIs and adopt a standardized model.

Most solutions fall in Customer Service digitalization, but the real Digital Transformation is a whole.   Hence, the maturity model should encompass internal and external actors affected by systems and operations.

Back in 2011, the vision of the branch of the future defined a revolutionary approach in customer service at the branch level, it depicted integrated channels for service, Mobile as the biggest container, then inside these web applications that covered call center and the call center keeping inside the traditional Branch and the philosophy behind the concept is to have a continuous process of performance improvement. The missing concept behind this proposal was the model itself, there are thousands of banks, each one living a particular reality, that is why we need a common framework, no less no more.

Crafting the path for a real Digital Transformation for Banks

Days ago talking with friends and after a short survey, I could confirm something that I just was wondering, in the Digital Transformation (DX) adventure it's easy to find financial institutions that believe in DX and have its roadmap, others that have been watching and have some steps addressed to change things but are misunderstanding transformation with filling themselves with a bunch of systems and applications, others that are aware of this change but do not know where to start, others who have not done anything. To cut short, the scale is full of representatives at any level.

One thing that attracted my attention is the majority is talking about FinTechs, FinTechs up, FinTechs down, in the sky, at the gym, FinTechs (FTs) everywhere and do not see that the main threat are themselves.  First, Banks should learn to survive and live with those alternate "money and financial disruptors", never ever better than today to say: If you cannot defeat them, be part of them".

Let's be clear,  there's a bunch of FT flourishing everywhere,  giant technology companies like Apple or Google with humongous numbers of data form credit card holders and users, PayPal running wild on money transfers,  in Asia the social networks allow for money transfers, Facebook and WhatsApp can take the hell upside down if they provide with money transfers and personal loans. Let's face it, FinTechs are the face of simplicity, that's why they are the best alternative in disruptive solutions.

But, DX it is not just fighting against FTs, it is about simplification, it is about do more with less effort. Unfortunately, less effort means less headcount in many situations. Here, it is important to plan with people in mind. Your workforce knowledge can lead to a bright future with better business services and lines. Who can tell what is wrong or right? Your people, who else, so why do you will fire them?

The roadmap definition is not enough, there's a lot to take in account:

- Customer
- Processes
- Key Services
- Technology
- Security
- Key indicators
- Follow up dashboards
- Strategy

Nevertheless, the main pillars to define a real  DT roadmap are:

Customer on board	Strategy	Technology	Operations	Culture. Organization. People
Aquisition	Brand Management	Applications	Agile Change Management	Culture
Customer Experience	Ecosystem Management	Connectivity	Automatic Resource Management	Leadership and Governance
Behavior Knowledge	Investment and Financing	Data and Analytics	Integrated Services Management	Organizational Talent Design Management
Trust and Perception	Market and customers	Distribution Gonvernance	Understanding and Real Time Analysis	Workforce enablement
	Portfolio, Concept and Innovation	Networking	Adaptive and Intelligent process management
	Stakeholders Management	Security	Standards' Automation and Governance
	Strategic Management	Architecture

There are advices, yes of course, a lot. But every company is quite different. So, it is mandatory to have master advisors at hand. Take care when dealing with technologies like Blockchain or Kubernets implementations (to name a couple) , technical resources are scarce and you need good ones.

To finish this post, take a look at BBVA, they have an innovation pool, good to check for Apps ideas for your bank. Take a look, reinvent your services, get better ones.

What about banking cores in Cloud?

The first time that something like Cloud bases solutions for Core Banking came to my mind, looks like "costs saving model" or "economy of a scale model", technically speaking the chance to have more control over code in just one location or distribution point than the common model of individual installations if you know what I mean. The versions of hell could come to an end. The model was so convincing that some other colleagues were thinking the same. "Yes, that´s the solution we were always looking for!"

And the dream did not end at that point, looked easy to grow. I came up with the design of a sort of Applications Market, a place where, the software house,  customers, partners, and developers with the right license could publish applications in such a way that the original product could be enhanced or enrich. The company´s president liked the idea, said it looked revolutionary. But then we faced restrictions from local regulations. As a matter of fact, there are few countries that allow financial institutions to have their Core systems installed in the Cloud. You can hear about Temenos with some installations in Cooperatives in Mexico and its efforts to have its product, T24, over Windows Azure. Other initiatives come from Finacle, Denarius (actually DenariusOnline), Misys, and others, but a company that is striking hard in the market is the german: Mambu.

Mambu has a presence in more than 30 countries, mainly in startups from developing countries. There is still a long path to discover, starting with the right strategy since we have sensitive data, unranked providers, service availability. What if somebody like a fierce group of hackers decides to attack the digital fortress and at least cause service blockage?  The currently accepted solution uses private clouds, with few services running in this model. Institutions need to be cautious, adopt strategies that start with services that do not compromise their data, something like loan services and things like that.

Mambu's experiences in Africa are worth checking since the service is addressed mainly to the unbanked. What about unbaked in the rest of the world. Roughly around 60% of the population is underbanked or unbanked, What a Chance! If any financial institution offers cloud-based services for around 60% of the population and that service generates just $1 in profits per customer, it´s is something to take into account. Servicing people that live far from populated and serviced centers can benefit from this kind of service.

Security is one key point that keeps financial institutions considering cloud more than the advisable, but there are other key points to consider, surpassing the old debated cost savings and opening doors to other subjects like agility, ubiquity, response speed, image, brand, etc. Salesforce is offering the first service for banks, based in the cloud (http://www.salesforce.com/industries/financial-services/) Banks that opt for this service can nurture their leads from multiple channels, personnel from the bank will access all information from cloud repositories. Security is no more an issue with capital letters, with appropriate policies, and infrastructure data is fully protected from unauthorized access.

Looks now that regulatory agencies in the majority of countries are some steps behind since local regulations do not allow to hang data in the cloud for financial institutions. But, it is just a matter of imagination and disruption to put business-enabling services in Cloud Servers or hiring services as salesforce1. Technology does never sleep and banks should do the same.

#Cloud #CoreBank ##banking #SaaS