Over the pandemic there was an oft-repeated phrase used at (online) conferences or highlighted in blog posts that was generally held up as a nugget of truth.
It was that the ongoing Covid-19 pandemic and subsequent lockdowns were “accelerating digital transformation already in progress”. When I first heard it, I too repeated that observation during a panel preparation call, where several of the speakers nodded with acknowledgement and agreement. That reaction should have been my first clue. I have a long-standing personal revulsion at meaningless phrases, repeated ad nauseum, without context or confirmation, and handed out like wisdom from the gods by “thought leaders”.
However, I may be a tad unkind. The pandemic did indeed accelerate digital transformation during that period. With so many of us working from home, we had to expand or even learn how to better use collaboration tools. Now more than ever, WiFi is a utility that feels more like a basic human right. With the growth of online ordering and delivery from everything from pizzas to pianos, the use of cash is declining faster than ever before. However, with Covid-19 behind us, much of that “acceleration”, that many assumed would continue, seems to have stalled. Many in the banking world are now looking at “innovation” in a different way.
Digital transformation and embracing emerging technologies are still priorities at banks. However, the pre-pandemic innovation labs and hype-filled start-up showcases are mostly gone, and many in the sector are still spooked by the fall of Silicon Valley Bank and other banks aimed at the innovation sector in the US which collapsed due to an inability to respond to changing economic factors.
This was the question I asked Alex Jimenez, strategist, fintech influencer, writer, speaker and currently principal consultant at Backbase on The Banker exchange podcast this week. If Covid supposedly accelerated digital transformation in financial services, what happened?
Jimenez admits that he, too, was guilty of saying the pandemic was going to accelerate innovation, “because it looked that way”.
However, he thinks what happened is that banks went back to what they were doing before, then came economic conditions that were unfavourable.
“Here in the US, for the past year and a half, two years, we’ve been playing the game of: what’s going on with the economy, are we in a recession or not?” he says. “The unemployment numbers say we are not in a recession, but inflation says, maybe we are.”
With “bankers, being bankers”, says Jimenez, they’re managing risk, being more conservative and hunkering down. That hunkering down means “cost-cutting”, figuring out “how we can do more with less” and how to be “more efficient with digital transformation”, he adds.
However, this cost-cutting might not be all bad news for innovation in financial services. The urge to go to the “shiny thing” (new-fangled emerging tech tool) to “make it all better” (solve all my legacy problems), as my colleague John Everington likes to describe it, can be a costly exercise.
Jimenez agrees: “Let’s go back 10 years when banks were throwing money at blockchain without a reason for it, right? I remember being in meetings where bankers would say: we need to figure out how we can use blockchain, and they would come up with ideas that make no sense, right? How do we do it? How do we use blockchain for our CRM that makes no sense? Those sorts of projects just have disappeared and should have never started.”
Let’s hope today many banks are looking at innovation and exploring the use of new technology, like generative AI, in a more considered and cautious manner.
Liz is deputy editor of The Banker. You can connect with Liz on LinkedIn, or follow her on Bluesky.
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