"The winds of change are blowing, and they are blowing fiercely."

As much as it is true, I didn’t come up with the quote. It was the result of a prompt, a word I didn’t know 1,5 years ago, with me asking “Make me an opening keynote on The Paradigm Shift in Banking—Transforming The Rules of Engagement”. I didn’t use it again until March 26, in the intro for The Banking Scene Conference 2024 Amsterdam.

It didn’t feel like me. It was a speech that was hard to remember, so it felt less spontaneous. But it was a great lesson because the winds of change are blowing fiercely. New technologies arise, and they come with risks and endless opportunities, if we know how to use them.

After the phase of fear and reluctance, we start to learn how to use, and sometimes abuse, them. We learn, we iterate, and we improve. That is why talking about transforming the rules of engagement is so important. It is important because the winds of change are blowing, and they are blowing fiercely.

And, to use another ChatGPT cliché, as we embark on the journey of transformation, let us remember that the greatest risk is not embracing change but standing still. We have a choice: to lead the change or to be led by it.

Hence, when it comes to new technologies, we must not blindly adopt them but be open to utilising them for the benefits they can offer our organisations. This openness necessitates us to be adaptable in our technology adoption, and strong and resilient in our organisational and IT infrastructure.

That is essentially what Tim Rutten, the Chief Strategy Officer at Backbase, spoke about on stage in Amsterdam. As we saw in the telco industry, where phones shifted from the good old feature phones to smartphones, we are starting to witness a similar evolution in banking today.

“The Next Generation is Now” was the title of his session, highlighting the importance of customer centricity in everything a bank develops. In the past, digital transformation was mainly focused on introducing new features, while we talked about the importance of putting customers at the centre. However, nowadays, just talking about customer centricity is not enough. It is time to actually build it.

In the past, banks used to prioritise channels, but that approach is no longer sufficient.

Today, engagement banking puts customer-centric journey orchestration at the centre.

Achieving this, requires a completely different approach to building the banks of tomorrow.

“To create differentiating value propositions, I think right now any traditional bank is being challenged to truly deliver a differentiating value proposition that is segment based, that is dynamic, that is dynamically priced potentially. And that has a very different look and feel”, explained Tim.

So how should banks tackle that challenge? From what I understood, you can compare it with eating an elephant: to deal with the challenge piece by piece. Tim’s advice was to decompose the complexity and start creating modular and composable capabilities. Tim called this “Progressive Modernisation”, recognising that banks cannot afford to simply start over again from scratch.

By decomposing complexity, banks can overcome the silos that are built over the years, reduce the cost to maintain them, and more importantly: prepare banks for more waves of innovation. In Tim’s words: “Progressive modernisation indicates that we're going to do this step by step incrementally. But we're going to do it on the platform already; we're going to do it using the right technology with the right architecture. And step by step, we're going to unlock the different lines of business or a different journey. We would like to modernise without going for a shortcut and without going for a short-term decision”.

More holistic banking platforms will integrate with existing systems and facilitate new, innovative services. The end goal is a unified architecture, not to build one size fits all, but quite the opposite.

“Doing that, you can start reallocating budgets to value creation. So effectively delivering more value to the business to reinvest into streamlining your customer journeys, unlocking yet another product line or reinvigorating your business value proposition to grow your market share, and lower your cost overall”, he pointed out.

It will effectively enable banks to shift maintenance workers towards innovation and value creation, and prepare them for an open future built on partnerships to deliver more comprehensive, tailored services to customers.

Tim believes that banks can accelerate their transformation efforts by leveraging existing platforms, like Backbase, allowing them to differentiate and truly transform the rules of engagement. Decomposing complexity can put the business in the driver's seat, and empower employees at all levels of the organisation so that silos can be overcome.

Tim Rutten's insights underscored the critical need for traditional banks to embrace digital transformation through customer-centricity, strategic modernisation, and collaboration, utilising platforms that can integrate seamlessly with their existing technology landscape to drive innovation and growth.

In today's fast-paced world, it's not enough for banks to simply keep up with the latest technologies. The winds of change are blowing so fiercely that banks must anticipate the future, a future that is cloudy, one where we cannot evaluate whether to expect sun or storm. So let’s not wait to prepare for the right weather until we can see behind the clouds, but let’s make the change today and be resilient tomorrow.

To close the circle of this post: by anticipating that cloudy future, with every new technology, banks can keep the phase of resistance, fear and reluctance to a minimum and start building value with that technology as fast as possible.

Hear further insights from Tim at The Banking Scene Conference in Brussels on May 21 and join the conversations to help shape the future of banking.