The need for digital transformation to compete with growing sources of competition for traditional financial institutions keeps growing. As nimble new rivals like neobanks and tech giants expand into financial services, agility has become critical to the survival of retail banks and credit unions.
The concept of agility is straightforward. It’s an iterative approach to software development and project management characterized by highly collaborative, self-organizing and cross-functional teams.
Many banks and credit unions have been moving quickly to empower their tech teams to adapt agile techniques. However, challenges have held many back. These include the industry’s cultural mindset that has traditionally included a preference for predictability, a concern for cost control, an abundance of legacy technology, and the burden of massive regulation.
Patience is a Key Tool:
Real digital transformation takes time and money to accomplish and many leaders may not be willing to make those investments for the sake of “going agile.”
Consequently, we see some organizations “go agile” in name only and never reach their full potential. While IT teams are typically more willing and able to adopt agile practices, they do require steadfast support from the broader executive leadership.
How Agility Fuels and Sustains Digital Transformation in Retail Banking
Despite these challenges, over the past five years we’ve seen agile practices becoming more commonplace within retail banking IT departments. This is largely due to the growing awareness that traditional methods of product development can no longer maintain cost efficiencies while trying to keep up with increasing project complexities, shortened product life cycles, and more frequent regulatory requirements.
In addition, agile practices encourage innovation and more up-to-date, cost efficient options such as moving to cloud and serverless technologies. As more legacy platforms transition to modern systems, opportunities to try out agile practices become more common, adding further to the growing acceptance of agile.
The adoption of agile development can also help retail banks and credit unions attract tech talent. Fresh talent is in high demand, and most of the qualified candidates expect and prefer to work in agile environments where they can satisfy their needs to be innovative problem solvers and work on more self-directed and collaborative teams.
As more tech leaders experience such benefits, the idea of going agile will make its way further into the bank organization. This will erode the lines between departments and support wider involvement in new digital initiatives. In the process, employees throughout the organization will begin to more readily accept new ways of working and help new products and services get to market faster with fewer defects. Over time, traditional roles and functions will be reconsidered in order to accelerate growth of more customer-centric solutions.
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Why Well-Intentioned Attempts to Go Agile Fail
Some organizations favor going agile, but don’t get there. For example, a common concern voiced by tech leaders is the hierarchal mindset that typifies most retail banking organizations. In order for agile to flourish, leadership needs to stop thinking of the concept as a “tech thing” that only the IT department needs to adopt. Rather, leadership needs to commit to making the entire organization more agile.
Another reason efforts fail: Agility represents a flatter, more self-directed organizational model, often causing management to feel like they will have less control and more problems. Many leaders and their teams — even within the tech department —struggle to work in this more flexible and collaborative way where team autonomy and accountability preside.
Maintenance of legacy systems such as deposit platforms that still use mainframes as their core components also pose agile adoption problems for banks. These systems monopolize IT resources with system maintenance just to keep things going. In a more agile environment, the focus becomes system delivery rather than maintenance. Upkeep and modernization is approached more incrementally, freeing resources to learn new technologies and build innovative new products.
Lack of fresh tech talent is yet another barrier. Many financial institutions are historically known to be slower to adopt new technologies, so next-generation talent often looks elsewhere. This has prevented many retail banking organizations from readily adopting modern enterprise architectures.
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Four Ways to Produce Greater Retail Banking Agility
In order to overcome these challenges, here are four best practices that can help make the difference between a transition plan that works or one that falters:
1. Changing the cultural mindset: Because traditional institutions are typically more conventional, one way to convince stakeholders outside of IT to warm up to agile is to explain that, properly done, a culturally agile organization becomes a support structure for employee empowerment and success.
How to Sell Agility to Staff:
One of the best agile tactics is in-house product demos. No matter where they work in the company, nothing gets people more excited about embracing agility than getting to try new products and services earlier in the development process. They like to see how innovation impacts their daily workflow and benefits customers.
2. Coaching and training internal tech teams: Classrooms are fine for general training, but it often yields the mentality that “we have sent everyone to an ‘agile school,’ so we are now agile and will reap all the benefits.”
Transformation takes time. The best way to cultivate agile teams and individuals is to engage a certified, on-the-ground agile coach who can observe people unfamiliar or hesitant about agile practices and provide feedback in real-time. This approach is often overlooked because it takes more time, resources and patience to let teams practice agile approaches in a safe environment.
Coaches can also help identify people who just aren’t working out in the agile model and need to be considered for alternative opportunities.
3. Attracting and recruiting quality tech talent: The most talented prospects want more than a paycheck and benefits. They want to work with inspiring leaders and do exciting, innovative work in a supportive environment.
Banking leaders need to recognize this mindset and become more authentic when it comes to agility and transformation. Just saying you are “agile” won’t necessarily convince a candidate to accept a job offer.
Smart Candidates Sniff Out Wannabes:
People talk, and unless an organization is offering a real opportunity to be part of a transformative team and can demonstrate its desire and commitment, talent is unlikely to come.
Coach your recruiting team to excite candidates by explaining how your job offer is an opportunity to be part of an industry in transformation, as well as an opportunity to leverage their experience and grow their skills as they help move the institution forward.
4. Addressing legacy systems: There are few technologies that cannot be managed with agile principles — including the maintenance and operation of legacy platforms. While going agile might feel ominous to teams conditioned to working the same way on the same system for 20 years, the solution is to first overcome the legacy nature of the teams and organizational culture that created it. When it comes time to modernizing the technology, do it gradually. Even small successes will grow a team’s appetite for agile.