I attended a conference this week, and one of the topics was how banks can keep up with the challenges and continue serving digital natives with modern and relevant digital banking services.

One of the experts' conclusions was that incumbent banks are not expected to have all the latest developments in their app, so they don’t need to keep up with neobanks. He had my attention, not because, in my opinion, he was right, but because it made me want to join that panel.

I personally think it is offensive to incumbent banks. Customers may not expect the level of excellence from incumbent banks, but I believe they should. The only reason customers don’t expect it is that they have not seen it so far. They don’t expect it because they are unaware incumbents are capable.

We need to change that narrative!

The same experts continued by saying that incumbent banks are inherently different from challenger banks because they serve the primary bank relationship, while challenger banks are often only selected for specific journeys, like travel, great loyalty programs or investment solutions, crypto, or cheaper FX rates.

Coincidentally, an hour before that panel, I was on a call with an executive from a highly successful challenger bank, and guess what? They are going after incumbents with the mission to become their customers' primary bank. They compare themselves with the incumbents, not as a different species, but as equals. Equals with limitations here and there, but not afraid to admit where they need to grow, expand, and improve. Because their customers are, just like the customers of incumbents, comparing and setting expectations.

In Belgium, for example, it was enough to say that Revolut doesn’t have a local IBAN. Guess what? That may change quickly, and that change is a world of difference.

So again, let’s change the narrative here because challenger banks are also banks, and ambitious challenger banks will find your customers.

So here is my advice: stop comparing neobanks as they’re a different kind of bank than the incumbents because they are not.

These banks are getting closer to closing every possible gap that would prevent people from selecting them as their main bank.

Their KPI may be the number of journeys they can’t compete with incumbents yet, but these banks need to make a profit today so that sales KPIs will be equally important, just like an incumbent bank’s.

The difference may be the weight of each KPI compared to the others. Where a smart challenger will figure out the right KPIs for long-term customer acquisition, loyalty and happiness, and the incumbent may still too often lead the business with mainly sales KPI to drive short-term ambitions.

And that, my friends, brought me to another discussion I recently had. I spoke to someone about the book I am writing and the need for some banks to redefine their ethos. He argued that most banks are detached from reality and, indeed, need to redefine their ethos. To make his point, he suggested to look at their KPIs, saying that a bank may preach that, for example, sustainability is a top priority, but what does that mean if this is only one out of 10 KPIs to define the bonus of the executive committee?

Have you read the interview on Ethos with Joris Krijger, AI and Ethics Officer at De Volksbank? One of the things he said was: “We need to rethink how we conceptualise our measurement for success as a financial institution. Banking in the '70s and '80s was structured around neoliberal principles, and so what it meant to be successful as a bank was to provide the best possible return for your shareholders. Over time, we have seen that this measurement for success is changing towards providing value for stakeholders. But that transition is something I think organisations are still grappling with”.

He continued by saying society is evaluating banks today on ESG, fraud detection, providing a fair share to deposit holders, dividends for shareholders, and digital capabilities. With GenAI, we’ll soon face new trade-offs. Will the development balance bank profit or customer well-being? Will we respect full privacy or close the gates for fraud and AML? These are just a few new ethical dilemmas that come with different expectations than 20 years ago.

The measurement of success defines the direction of the organisation, especially if there is a high variable bonus involved.

If banks cannot do what they preach, then what are those words worth? Why should banks even doubt why people are no longer listening?

Challengers may have other KPIs than incumbents because their mission is crystal clear: to offer the best digital experience, which is very often the one, and the KPIs will push the organisation to make it happen.

They still play the same game, though. The fact that people have different expectations from an incumbent than those of a challenger should be a warning rather than an assurance.

We need to reconsider our measurements of success, and that may be the biggest challenge for banks going forward. By defining the measurements of success and comparing the weight of each measurement against each other, banks will demonstrate their priorities not just in words but also in action.

Those measurements of success will define the bank’s direction, and all the results will follow.

(Be sure to secure your seat today for The Banking Scene Art Night 24, for more thought-provoking discussions with banking industry leaders as we explore "The Waterworks of Money".)