Banks are typically conservative and hierarchical. They are subject to a great deal of regulation in the area of security and privacy, which can create inflexibility. Yet, they must be flexible to keep up in the current era of disruptive FinTechs and open banking. We spoke to four experts about how achieving agility is in the best interest of banks.
Everyone we spoke to agrees that banks depend on IT. "They have become large IT factories,” says Timo Span, a Deloitte partner who works a lot with banks. "IT has more power than in the past, so the business must understand IT and vice versa. With that mutual understanding, the business can see opportunities in IT and IT can contribute to the business."
Span states that banks should be agile, but not by exchanging waterfall dogma for something equally dogmatic. "Be flexible with it; it's not called agile for nothing," he says. He also sees banks struggle with agility. "But in real business, occasionally something fails," he adds. "So, have the courage to quit quickly, instead of drawing up a budget. In addition, discover what did work and where you can use it."
Breaking Out of the Hierarchy
Making big strides in this respect is necessary. According to Rui Pereira, co-founder of low-code platform vendor OutSystems. "Looking at what you have and determining how you can improve it is not good enough," he says. “While valid, the process is too cautious with little room for innovation.”
At banks, IT and the business are still separate entities, he notes. They work together, but the hierarchical model is ever present. Pereira recommends a different model, one that goes further than agile, where people work together in what he calls “network teams.” He compares this model to the agile and scrum methods but with distinctive elements. With the agile method alone, different people from IT and the business are still in their own silos and think from that structure. A network team works together for six months on a specific problem with a specific goal in mind. So the members are beyond any silos. But this is difficult for a bank, Pereira adds. “Banks are very conservative by nature. They have to be, because of security and privacy. The biggest hurdle to overcome is leadership with a command and control mindset. It takes courageous leadership to set up these kinds of teams.
“And, of course, a bank has to be careful. I understand that very well. The model also has its challenges. But the benefits are too big to ignore."
A Different Culture for Agile
Marco Witteveen is one of those courageous leaders. As COO, he has set the change at Garantibank in motion. According to him, a completely different culture is needed for the agile way of working, and that culture change does not happen overnight. "Agile means you assign responsibility to the teams to carry out work themselves and set priorities. In the past, we were a very hierarchical bank, but now people make their own decisions, although, of course, they do so in the frameworks that are set for this."
At Garantibank they started small, says Witteveen. "We started with a real problem that just couldn't be solved. In our case, this was the order management that still was based on paper tickets. This was a long-standing open audit issue, so something had to be done about that. We started with a proof of concept, and then we made a minimal viable product, with a few people together, just agile enough. I appointed a product owner and a scrum manager. We bought some agile tools and the OutSystems low-code platform, and with that, we fully digitalized the process. Afterwards, there were no more mistakes found in any audits. People got excited and at some point, there was no turning back."
In this respect, Witteveen has left little to chance. “You have to show results”, he emphasizes. "I've hired the right people for this. To start with, I involved an agile expert who helped me form the teams."
The model that Pereira and Witteveen advocate is similar to what happens at FinTechs. John Robinson of Bluezest explains how it works at his small British FinTech. "Everyone knows what is going on and everyone participates in the tests. It's agile by itself and it's also a very creative environment. When we start to grow, we will have to formalize it, which is a pity, in a way. But we will always be agile. That works very well, as long as you have a clearly articulated vision and a good design, for you must know where you want to be."
Continuing to Improve
At Garantibank, the focus is continuous improvement and continuous change, says Marco Witteveen. They have indeed left the silos behind them and are opting for a holistic approach. "First, we looked at the processes. Then, we defined a number of end-to-end processes and subdivided them into sub-processes. For example, customer relationship management is an end-to-end process, and its sub-processes are reviewing, onboarding, and offboarding. Other end-to-end processes are product onboarding, product fulfillment, and more generic ones such as payment.
Each process has a process owner who leads a team. Each team has representatives from different departments. They have monthly meetings, where they look at which workflow is followed for the process, what risks there are, and what the controls look like to minimize those risks. They take a “photograph” of the end-to-end process and record it in an administrative system. The photograph consists of descriptions of the processes and policies they continue to edit and improve.
"That's what we call continuous improvement. But, of course, that only describes how we would like to work. That still has to be translated and implemented. That is the continuous change, for which the agile method is used. The process owner also becomes the product owner of the scrum team and then the process is implemented very strictly.”
The Biggest Challenge Vanishes with Courage
Our conversations show that change is possible for banks. Although agile tools are helpful, agility must start from the top as a very clear vision from courageous leadership. Only leaders change company culture and ways of working. With leaders committed to breaking through the hierarchical structures and silos by including people in the vision and showing how things can be done differently, individuals can start deciding for themselves and setting their own priorities.