12 August 2019
Chris Skinner: ‘Traditional banks need more tech-savvy c-level executives’
In the first episode of the two-part interview we interviewed fintech expert Chris Skinner about his vision on the fragmented European payments market. Skinner - famous for his books on financial technology, his commentary on the BBC, Sky News and Bloomberg and his role as the Chairman of the Board of the Nordic Finance Innovation (NFI) - says that a unified Europe must first be created before an integrated payments network can be established.
In part two of the interview on the future of payments we asked the financial expert about his view on the viability of banks. Skinner explains what regulatory change is needed for banks to remain relevant in the future.
"It is difficult to break the shackles of old business models", says Skinner about the legacy and organizational problems that banks face today. Banks are overtaken by flexible fintechs and bigtechs with enormous innovative power. "The traditional banking model is broken, as the banking model is completely turned on its head." Skinner refers to the fact that banks were built for the physical distribution of money as paper, using local branches with employers. "Today, banks need to be built for the digital distribution of money as data, across the world and real-time."
According to Skinner, banks are now fully aware of the fact that they have to change. But simply earmarking funds for technological innovations is not the solution, as this does not always lead to big new developments. Skinner: "Banks are changing, the question is: are we making the right changes today? Putting huge amounts of money into technology without a clear vision or strategy is a mission that is doomed to fail."
In order to survive as a bank, the mentality of the staff would have to change radically, only then would a traditional bank become future-proof. Skinner: "The change must start at the top of the bank: the executive management must fully understand what digitization means. Management needs to realize that they need to bring a change in mentality and culture within the bank. They should not see digitization as a simple project in which they need to invest. Digitization entails much more than that. The problem is that banks are not tech-savvy enough: more than 90 percent of executives on c-level have never had any tech experience in their professional life. How can they create the right digital vision?"
Tech-savvy managers have proven to be able to lead a company to the top, with Steve Jobs and Elon Musk as one of the examples, but also in the finance world Skinner sees that some traditional banks are on the right track. He mentions the Dutch ING and BBVA from Spain. "At BBVA, half of the leadership team has a digital technology background. This leads to a clear digital vision. The digital change at BBVA was initiated by former Chairman Francisco Gonzalez who took the leading role in the digital and technological transformation of the Spanish bank. He had experience in technology and banking at the moment of his appointment."
That is why, according to Skinner, tech-experienced people should take their place on the executive management team. "A traditional bank should not only reserve a budget for a digital project, because this does not guarantee structural changes, but assign technical people to fulfil c-level positions. A bank has to prevent that technical people are only being used as project leaders, as they have to play a much more important role than simply bearing the title ‘project leader digital transformation’. This calls for radical change, which is not easy, because people don't like change. But it is the way forward for traditional banks."