Most banks today are locked into a physical branch distribution model that makes them as prone to disruption from technology companies as the retail industry was. Even century-old behemoths like Sears, Levitz, and Woolworth's succumbed quickly to cutting-edge online competitors. The same fate awaits financial institutions that fail to transform their business models in short order digitally.
It’s important to realize that digital transformation isn’t just about providing customers with online banking. There are countless large retailers and other businesses that already fell prey to high tech intruders. They had also made their own valiant (but late) efforts to digitize with an online presence.
Real change comes from within. The success of technology firms today (and the best hope for banks tomorrow) depends on refocusing development — not to solidify the organization, but to adapt to the customer. This process requires transforming the entire business process to make change an integral part of the process. The solution is an agile methodology.
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Agile: It’s Not Just for It Anymore
To stay competitive, financial institutions must adopt the same project management principles, and data flows that software development companies use.
“A key agent for digital transformation in banking is for these organizations to embrace agile methodology,” says Jennifer Borchardt, Director of Omnichannel Experience & Strategy at U.S. Bank. “This applies not only in software product development, where the process is well-known but also throughout the entire organization to deliver business objectives faster and better.”
Long the norm in the Silicon Valley tech industry, agile development refers to the iterative process of building and testing products rather than waiting until the completed project is delivered. With sharp, if problems occur or changes are needed anywhere along the line, they can be addressed sooner. And with less impact than having to scrap and rebuild a finished product from start to finish. Unlike “waterfall” development (delivering a final product before testing), agile principles enable companies to follow a transparent, data-driven approach and continuously test and learn. This practice also helps in speeding time to market by providing a minimum viable product (MVP) that meets users’ needs and can be adapted quickly.
“Agility is the most important means of implementation for digital transformation,” says a report by McKinsey & Company. McKinsey says that agile methodologies can increase product development speed and decision efficiency by five times.
“[Agile] culture must be nurtured across the enterprise and not be relegated to a single “innovation team,” advises Dennis Gala in CIO Magazine. “Initiatives such as hackathons, ideathons, or immersive learning experiences based on the principles of failing fast with a focus on cross-functional collaboration help firms remain ahead of the innovation curve.”
Agile methodologies in banking can apply to more than just IT related projects. Banks can benefit from using agile practices on a business-wide basis, including customer service, wealth management, and marketing.
Agile Banking in the Real World
Agile is still relatively new to the world of banking. Due to the commonality of in-house developed systems, mergers and acquisitions and aging core platform, banks’ access to their data comes with complexities not faced by many of their new tech competitors. "As time moves on and legacy systems are replaced by new platforms built-in more current languages, the opportunity to try agile methods of software development start opening up,” says James O'Neill, senior analyst at Celent.
One example is BBVA Compass, which has committed itself to agile processes. BVA currently develops 60 percent of its software using agile. The bank has already cut development time from two years (under a waterfall model) to six months or less.
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A Customer-driven Model
One fundamental tenet of agile methodology is that it focuses on satisfying customers’ needs rather than merely building products and back-end technologies. Improving customer experience through every touchpoint is the number one priority.
“An agile banking provider is obsessed with the customer experience,” says Jeffry Pilcher in The Financial Brand. “The organization makes decisions first based on what’s best for the customer, then on what’s best for the financial institution.”
Serving nearly half of America’s households, with assets of more than $2.5 trillion and operations worldwide, JPMorgan Chase & Co. used agile methodologies in their mission to digitally transform. They emphasized serving customers, with the core objective: “To enable the delivery of highly personalized, real-time experiences that customers increasingly expect.” The company highlighted critical areas in which customers rely on Chase’s digital offerings throughout their daily lives. Their four pillars of customer experience are to provide better choice, security, ease of doing business, and personalization.
Banks hold a substantial competitive advantage when it comes to the depth, timeliness, and personal level of the customer data they possess. Harnessing powerful analytics, agile enables the swift and flexible development of applications that use such data. This practice helps in engaging with and serve customers with more innovative products — at crucial moments in customer journeys and life events. Continuously creating and refining such customer-focused products will help banks demonstrate that they know their customers. Understand their needs, and can suggest the most relevant offers at the optimum time.
Making the Jump to Agile
“In banking, the iterative approach that is the hallmark of agile enables faster development of and improvement to digital banking platforms in response to customer demand,” note industry advisors Marc Harrison and Isaac Sacolick.
Agile development is just one avenue of digital transformation. To understand a complete picture of why and how traditional financial institutions of all sizes are making this shift, download Simpllearn’s white paper, Banking on Digital Transformation: Financial Services Modernization from the Inside Out.
If you wish to build a career in Agile and Scrum, you can master your Agile skills by taking our Agile Scrum Master (ASM®) Certification Training. Achieving an Agile certification will open the door of opportunities in the field of Project Management, and you can walk through it to land your dream job.