Banking Fintech

Harumph … I didn’t join this bank to get technical

Harumph ... I didn't join this bank to get technical. Image: Freepik
Written by Chris Skinner

Is nobody at your bank responsible for keeping an eye on the technical side of banking? They should be, says Chris Skinner.

In the 1970s, Walter Wriston, then CEO and chairman of Citibank, said that “information about money is becoming more important than money itself”. His successor John Reed said that “banking is just bits and bytes” in the 1980s. How right they were, and this just underscores how important digitalization is to banking. We have known it was coming for a long time, we just didn’t know how big it was.

I remember a prediction that bank boards would have CIOs sitting at the table, and that a CIO would one day run the bank
I remember a prediction in the 1990s, that bank boards would have CIOs sitting at the table and that a CIO would one day run the bank. That hasn’t quite happened (I cannot name a single bank run by a CIO), but the role of technology is certainly in the driving seat and at the boardroom table today. Yet, here’s the thing: how many CxOs really understand all of this?

I remember making a presentation a couple of years ago to a major UK financial institution’s board executive offsite. During the presentation, I touched on the growing impact of apps and APIs.

“API,” said one board member. “What the hell is one of those?”

I explained that it was related to open source architectures and integrating systems.

“Jesus,” said the pumped CxO. “I never expected to be attending a technical meeting. I run the business, not the systems!”

At this point, it was either him or me leaving the meeting, and so I made my way home. This is a strong illustration of the problem we have today: banks are being eaten by technology, but the parasites are not even understood by the bank executive team. I recently blogged about this, with my favorite story being the battle between Klarna and Stripe, and most bank CxOs having never heard of them, even though these are two mighty unicorns in a battle for payments supremacy.

How long can a bank CxO get away with being dumb about technology?
So, the real question is: how long can a bank CxO get away with being dumb about technology? I don’t know the answer to that one. If you’re the CIO, you should know about tech, but even some CIOs are poor when it comes to vision. I’ve met many who have no vision at all. They are there more to keep the lights on than make the bank light up. Nevertheless, if your job in the bank isn’t tech-related, you may think you need no knowledge of tech.

Take the chief risk officer, CRO. The CRO needs to know Basel III, regulatory requirements, the compliance and audit processes, and more. Tech? Hmmm … what about cybersecurity? What about real-time risk reporting? What about instantaneous credit risk ratings using clever software algorithms? What about exposure to markets through high frequency trading? Nah, the CRO needs to have a systems knowledge as much as the CIO.

CFO? Hmmm. The chief finance guy is normally the head of spend avoidance, yet banks spend huge amounts on technology. Most banks invest 10% or more of their annualized budgets into systems spend, and, of that investment, the majority is washed down the drain by giving it to the CIO to keep the lights on. It’s maintenance spending, not spending for the future. As illustrated by my regular notes on banks such as CBA (which saved 35% on annual IT costs by investing in the cloud or BBVA , which is saving over €300m a year in costs through digital transformation), if the CFO isn’t challenging the CIO about reducing costs through adopting new technologies, they’re failing in their duties.

In fact, I cannot think of a single role in the leadership team of a bank that shouldn’t be at least keeping up with the latest technology trends. After all, if the leadership isn’t understanding the technology threats and opportunities, then they’re surely failing in their leadership role.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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