How "Back in the Day" Mentality Hurts Digital Transformation at Banks

Speaker A: Welcome to Reinventing Banking, a podcast focused on the intersection of financial institutions and technology leaders. Brought to you by FinXtech. I'm Kia Lau Haslet, the banking and fintech editor. We're here to talk about what's really happening in the financial industry and the challenges to digital transformation. Financial institutions are increasingly looking to technology providers and partners to help them become more efficient, reach new customers, and grow revenue. But there's a hidden component that may determine their success or struggles in those talent. Talent can hinder or unlock a financial institution's ability to use its technology well, says Elia Blankenship, the director of management consulting and technology at RSM US. Talent rears its head in different ways when it comes to technology. Some noticeable negative impacts can look like a new tool's lack of adoption or an institution's inability to innovate because the product manager and technology business lines don't share knowledge. Elia joined me for this episode of Reinventing Banking to discuss these issues, as well as how financial institutions can leverage change agents to drive adoption. Think about how their organizational charts impact technology collaborations and what roles they'll need as they grow and apply data analytics and artificial intelligence throughout the institution. Hi, Elia. Thanks so much for joining me today.

Speaker B: Hi Kia. Thank you so much for inviting.

Speaker A: Well, it was such a pleasure to meet you at the Bank Director Bank C Suite Summit a couple weeks ago in Nashville. And I thought we had some really fantastic conversations about talent and technology. And I don't always think those two issues or ideas always get connected or the two aspects of the bank. I wanted to talk to you more about this and just have a really broad conversation.

Speaker B: Oh, that'd be great. I think it's very much an emerging topic and a topic that's so important when we think about talent, technology, and how do we move the business operation forward.

Speaker A: Totally. So my first question for you is, how have you seen talent and technology connecting at banks? And how does talent unlock technology?

Speaker B: I'll start with the negatives. When we think about talent and technology, we think about legacy systems. So you're going to find there's going to be a tenure typically around community banks where individuals have either one grown up within the banking organization, they understand the tools that they use and so they're very comfortable with that. Right. And at, uh, many times when a new, uh, individual comes into the community bank space or you have an emerging leader that wants to move forward with certain strategic objectives, those will touch our technology stack and there's resistance there. And part of the resistance of change is twofold. One is I am used to my old legacy system. This is how I do my process. This is how I know what I need to do in terms of my tools. Yet you're going to have me change to a new system of software. And I don't know if it's going to do exactly how I used to do. Right, but what I used to do is not necessarily the right thing that I should be doing either. So there's a lot of conflict with that. And what is missing on the talent side many times is those team members that are change agents that are going to pull our legacy team members forward and also those change agents that will help us adopt the new products, solutions, services.

Speaker A: How does a bank find a change agent? That's not a job that you know a job posting, right?

Speaker C: It isn't.

Speaker B: It isn't. So it's embedded in two areas. It's embedded in our digital area. So we look at those team members from like your chief digital uh, officer, your chief innovation officer or innovation team carry us forward. In my opinion, those team members are very valuable, but they serve the organization better if they are within an innovation or like a digital uh, team area that pulls us forward. And of course you always need someone that's governance too, that could bring that strategy and that forward looking from the outside.

Speaker A: So Elliot, uh, you mentioned there were some negatives when talent holds back technology. How have you seen talent work with a flywheel for technology?

Speaker C: Uh, that's a great point. So when you work in such a fast pace and you have the right team members that are looking forward to this change and they know that it's going to um, be a specific solution or a tool that you're going to unleash like an AI technology tool or automation. The beauty of that is that you're able to move organizations forward. If you think of the three lovers of a bank, you're able to invest quickly into a solution that's going to be able to two, take some of that cost of your operations and your model then three, I always look at it this way, in terms of growth, then you're able to also utilize that opportunity to focus on more growth activities. Otherwise you're not able to do that. So when we see that working very healthy in an organization, they are moving in leaps and bounds and they're starting with like our back office operations, then reporting, then, then they move into the other areas that are critical but not as high volume. And that organization operates more from a performance perspective. And it's Very efficient of the way that they perform.

Speaker A: Yeah, that's really interesting. And um, I've been thinking a lot about adoption and how people get really comfortable with the technology that they have and don't want to maybe adopt new technology because they don't trust it or it's a new process. And I've been trying to remind myself that oftentimes the systems that we trained under, we were kind of using what was available and we haven't kept up with what's available. So when you have a new technology and you don't want to adopt it because it's uncomfortable and it's not the exact same, well, you wouldn't want it to be the exact same because there's actually new, maybe better processes available. And I think about paper based processes exist because maybe email didn't exist or because the computers weren't widespread. And then, you know, you'd want to keep adjusting based on the technology that can help run this process. And you don't want to just replicate, uh, the process that you currently have.

Speaker C: KIA that's exactly correct. That is what technically happens in banks that haven't modernized. They are still producing the same product in a very manual way. So it's an impediment to process. Like, oh, if I, back in the day, you'll hear this. Back in the day I used to do it this way, it would take me less time. Now I have to use blah. But they just haven't adopted the solution. Well, to perform what it needed to do to replace that activity that's no longer of a value add.

Speaker A: So I've heard the phrase, quote, it doesn't own technology a lot.

Speaker B: Yes, yes.

Speaker A: How do you explain what that means and how talent connects to that?

Speaker C: Yes. So there's two schools of thoughts on that. So in the prior years, I mean, let's just call it over 15 years ago, there was truly a shift. The shift first was technology led the innovation and solutions to some of our uh, I'll say operating model impediments that we had. So we relied heavily on it. Tell us what we need for this, show us that, um, this is my problem. Right. And then they would provide a solution. Then there was a shift approximately, I'll call it 15 years ago, where you then saw many of the business unit technicians, I'll call them M, they understood, they started learning. We started getting better phones as an example. We started getting better tools even at home. So we were curious. And that then bled into the banking institution where we started touching the systems. We started Looking at configurations, understanding the wording of technology. So now we, the business side is who needs to lead what we're going to purchase and we need technology to support and enable it.

Speaker A: Do you think that banks understand who needs to be involved in these conversations and the role that the business units or the leaders need to be playing in them?

Speaker C: I would love to say yes, but the true answer is we have a split. So now remember that fundamental change that we just happened from an organization and community perspective, well then we forget to bring back our team members that know the technology. So now we have business units in some organizations and large asset sizes. I'll say that I walked into where business owners are buying. They're buying solutions without letting technology, our technology, our infrastructure, our cyber team members know. So that way they can run their due diligence and make sure that it's going to fit the model. And including data, right. They're like, well, we bought this, but now our data and reporting, it's not going to be fulfilled because I didn't bring in our data specialists. So now we have technology, our cyber team members and our data people that are being left out. So it's really a split. And you should, you should, in my opinion, I always recommend this. Bring everyone when you launch a new product or service because you're going to need your compliance team members, you're going to need your folks from project management side, your technology accounting, and then segment your meetings to that audience as you go forward in your purchase. And then the important one that we always forget too is hr, because that's how you tie talent to the adoption of the new solution. And that's how you also tie the change management and you also tie the learning and the training.

Speaker A: Um, I think about sometimes the question of does tech run your bank or does tech grow your bank? And if you banks had to like think of what percentage is which. The person who told me about this said his bank had been maybe like 80, 20 and he was trying to get it to 60, 40. And in order for tech to grow the bank, he had to bring in business people into the conversation with tech. And they had to, I mean, I think he was talking about even putting some of them in pairs, that they would need to work together a couple hours a week to discuss maybe pain points or problems or what was possible or to think about, um, searching for technology solutions and what would work well within the bank's tech stack. But the issue is it doesn't make a loan and the loan officers don't work in it, um, but they kind of need to work symbiotically. Right? And closer.

Speaker B: Yes, agreed.

Speaker C: I think that's such a critical point. You need to bring in those business team members and especially in your growth areas. The areas that are the growth areas that we make our bread and butter is the lending side. And then the areas that keep our doors open and fund these loans are our branches and our digital channels. You need to bring those team members so that you understand the pain points on what it takes to onboard a client as an example or provide a loan. Like how do we make this better, faster and improved process so that we can move on and help the next client and really focus on that customer experience. So it's really key to bring those business members from a growth perspective. Now see how I said growth perspective. And the reason why I say that is because I did not include our operations folks because we're at the other side of the house. We're at the other side of the house that we need to guard the gate. Right. When you say, well, yeah, you want to go faster, better and you want to buy that. But also did you add this compliance checkpoint? Did you add this quality checkpoint? So bringing the business side from a growth perspective is key before we start putting guardrails.

Speaker A: Sure. So what do bankers mean when they talk, when they say that they want to have the right people or right skills when it relates to technology?

Speaker C: Such a critical question, uh, because if you look at the org chart of a true technology bank, community bank, let's call it a mid sized bank. Right. In a smaller organization you're going to need different talents. You're going to rely many times on your outsourced partners, your MSP partners to manage the infrastructure. You're going to rely on your core partners to do the configurations typically or the customizations of your core. Then you're going to need to rely on someone inside your doors to help you do some light configuration of other applications. So in that model you don't need a very heavy developer, data analyst or those engineers that could do like AI or think about, you know, automation now scale us up as we're scaling up, uh, from a community bank perspective, that org chart needs to account for those team members that you're missing. So you're going to need those team members that are heavy engineers and then not heavy code like in the back, you know, the days, but those team members that understand Python, those team members that understand these new language. Right.

Speaker A: Something I've been thinking about is um, the talent that banks will need to execute on more complex projects like um, data analytics or thinking about future uh, AI uses. Um, according to Bank Director's 2024 Technology Survey, only 51% of respondents said that they had a Chief Technology Officer. 59% said they had a chief Information Security officer or an equivalent position. And this was the position, the largest uh amount that banks said they have of the technology title. So everything was less than 50%. Um, do community banks need a CTO? And if there's like, if the answer is like, it depends what kind of community bank should consider adding this role,

Speaker C: it's a great question. So here's in my opinion and from my observation, working in the space, this is the experience led response. So the experience led response is this. Typically when you are outsourcing most of your infrastructure and application you don't truly need a cto. So it's not truly gathering the like the essence of a true in house bank. When you're looking at an in house bank where you have all your infrastructure, all your applications, you're pushing the buttons, right? At the end of the day you need ctos. It's a different level of experience and know how they understand the deep components related to technology. A uh, cio, once you have, once you leapfrog into not owning that hardware and software inside your doors, you can leapfrog to a CIO position. And in those positions you're a bit more agile, right? You have more software dependencies. It's really about software strategy solutions, what connects to what but not at that deeper level yet. As we get into the bigger asset size organizations truly is where asset size counts. You start getting into the um conversation that certain vendors are not going to be able to provide you solutions that you desire to meet your strategic objectives and your goals. So you want to do some homegrown systems. That's when you start seeing back our CTOs coming into play because we need that deeper experience to be able to purchase, connect, drive a strategy for um, organization that's really building and that's what it really is. It's the building are you building or are you not building and the deeper experience or not that you're going to need.

Speaker A: I've been writing about um, data initiatives and talking and thinking a lot about AI recently and I have been wondering about what kind of talent banks could expect to use to really um, make these initiatives broad based. Um, and maybe not simply like a vendor use case application. Um, if you know, if I think about AI being applied towards fraud and that's great but I Wonder with some of these, um, if you need to take more control of your data and be a better steward of your data or user of your data, um, so you can use it in more AI applications, what kind of talent will you need in addition to all of the um processes and procedures that would support these initiatives?

Speaker C: Kia, that's a great question because the data side of the house, it's still not a matured, I'll say from a data management perspective and a governance perspective and that's even going up to our $15 billion asset size organizations. So we need some data analysts, we need some data engineers to truly unlock that. We need some resources around even the tools to use and the AI and or automation tools. Those are the key ones that we're going to need in order to unleash

Speaker A: that future for sure. So we um, mentioned, you mentioned organizational alignment. And I think that's probably the least um, exciting topic that I've ever talked about on a tech podcast. But can we talk a little bit about you know um, some of the, some, some ways that organizational alignment can either hold back or accelerate a bank's technology adoption? Um, you know at C Suite we heard about having making sure that the chief operating officer maybe has um, a mindset towards um, uh, customer experience across the digital delivery channels or a bank that had split their um, operations team one into more traditional operations and one into a user experience operations focus in order to better align or incentivize these groups towards what they wanted to achieve strategically. So how does organ how can banks use organizational alignment or make sure that the organizational alignment supports their strategic um, initiatives?

Speaker C: Great question. And it's one that whenever we brush up our strategy plans, whether it's a three year sprint or more than that or five year, right. We forget about the org. And the org is so critical because at times the way that an organization is set up in a traditional financial institution, it, it may impede it and it does impede it. So my recommendation is if you're going to brush up and drastically change your strategic priorities, then our objectives are going to change of course. And that's going to then be driven by our organization which is you're going to have to do a whole re look of um, what is there, what is not there. And I'll even show a very simple example. If you think about the universal like teller approach or the universal branch approach approach. Right. Well that has been flourishing. But yet we have organizations that still have an org chart that shows the older model. Teller 1 Teller 2 Then your operations staff that's overseeing that piece of it, but within the brand then you have your assistant manager, branch manager, then separated by this, your consumer side of the house where they're going to have some lending. You don't need to do any of that. Your technologies and services are allow, they allow you to, to be able to have universal roles where they can facilitate anything for a client except the complex commercial lending. Right. We want to give that to those team members that have that experience or the complex wealth management. But that's just an operating example. A bigger example is if we're going to focus on the customer experience or the digital experience, then we need to have focus areas that are related to, to that. And you got to then reduce the true operational quality review. Because if you look at operations in its true essence of yesterday and much of the organizations, it's truly about quality and control. Did you do this? Because that might be a, ah, control that we can't afford not to have.

Speaker B: Right.

Speaker C: So it's very quality control. But if you imagine for a moment, if you change that scenario where you actually have automation and solutions that are doing that control the qc, then now we have the operations side that truly is focused on the experience. What do you need, what do you need to help that customer internally or

Speaker A: externally, who needs to be involved in these organizational alignment conversations?

Speaker C: We first need from tone from the top to get support. So we always need our governance. Right. So even, even go beyond that. We need our board to be behind this change that is going to be done at the management level from the C suite. So our CEOs need to socialize that with our board. And then from the tone from the top our CEOs need to bring in the C suite and that's where you drive the change.

Speaker A: You know it occurred to me in the two examples, those were really great examples where obviously like a bank acquired the software for a very specific reason, they wanted it to do something. But I was thinking about how the bank didn't necessarily want the software to change the bank or how the bank did something. And so then you would have, so then they've got this software that can do everything and allow for the universal teller model, but the bank doesn't want to be changed by it. The bank doesn't want to adjust um, its own approach to how it runs its business even though um, the software would facilitate this. And the bank ostensibly acquired the software for its ability to facilitate this. And it's almost like why did you buy the software to enable this change that you Actually don't seem to want. And also you should want this change,

Speaker C: you know, also we'll bring up an example of your ATM machines then. They were there to serve a purpose, right? To help facilitate transactions during off hours or during hours to eliminate some of that branch traffic. Yet they're not used as they should be and now they're not, not evolving to itm. So now we need a little more high touch. But we still haven't using an old transaction model and those work in certain locations. But you're absolutely right. We see that many times. Like we'll walk into an organization like we're having challenges. We just don't think we did this migration or conversion correctly. And then we start walking and talking to the colleagues that are there and we always walk in and say, listen, we're not auditors, we're consultants. There's no right or wrong. We just, just want to understand how you do things. And as we're walking through the theme that emerges is we just want to do things the way we used to do it. And this is the rules that I've had. So this is what I'm going to do. So you're not using what you bought as intended. And so that's much of the modernization that we do is like we go, okay, now you need to use a system this way, change this, don't do that, lean on this for those that have a great technology stack, right. And that fits into their strategic plans.

Speaker A: So, um, the other thing, I think it's just so interesting, this idea that the software would allow for change that the bank resists adopting or the bank doesn't think about adopting. Right. Is there a role in the bank after software is implemented for the bank to be like, okay, well, um, how can we elevate the work of the people who maybe were doing quality control that's being performed automatically now? How can we elevate them, um, in their job and give them more meaningful work within this role? Because we have allowed for some automation and we're actually going to use the software for its purpose.

Speaker C: That's a good question. So those team members, because of their skill, if like they were, they were mostly devoted on quality controller review, they have a skill set and that skill set lends itself to being more practice oriented. Uh, so you could do some of, they could fit into a good role inside of our risk department areas. They could fit into a really good role around business analysts as an example. So we don't want to just, you know, disinherit them because they no longer don't do a specific function. I look at it as they have a talent to be able to, to identify anomalies. So where can we use them? Right? Where can they be leveraged so that they are still contributing to the organization? Because their historical knowledge is completely, you can't buy that ever. You can't come off a shelf.

Speaker A: That's interesting too because you think about um, you know, this is, fits into a broader conversation banks have around talent, uh, and recruitment and finding, um, you know, all these like kind of specialty positions that I think come uh, from like the compliance or the risk or the audit side of the house. House that again those responsibilities are growing because the tech that we use is growing and it's presenting maybe different types of risk than risks in the past. And I think that to kind of understand this pipeline or to think about not necessarily titles but about attributes and qualities of uh, these employees that can be deployed throughout the bank flexibly. But you kind of have to have like a good understanding of everyone's skills and what all the different departments need, right?

Speaker C: That's right. And you know what's an interesting thing here? It's an inside information. They know our clients. So as a banker, even if you're in the front or the back office, there's a habit and that habit, you know, you know your clients, you know, sometimes if the software doesn't work or does work for a specific thing and why. Right. That's what we need. That's what we need from a control perspective, that's what we need from a modernization perspective, that's what we need from a trading perspective. So you can see right there all three of those attributes where they all fit.

Speaker A: So how can banks increase their product team's knowledge of technology and leverage them as stakeholders, um, for uh, you know, thinking about tech that will grow the bank.

Speaker C: I'm going to name some sources because I think this is an area that I will share very much. It goes by gut feeling and who I like. Right. It's my neighboring bank and friend, uh, they use this. But I really highly recommend leverage bank director leverage. Industry journals like Gartner as well. Look at Infotech, right? Don't just do a Google search, don't just do an AI search. I mean while it valuable, it'll give you some thoughts to think about, but you also want to discern those and make sure you validate them. Uh, there's bankers online, it's another great forum. There's SPC Global, great forum as well that you can go in there and have conversations. But if you want to get more localized and get into again bank director peer exchange conversations, work with your core providers. Right, all of them. And they'll have exchange user groups or peer groups that they can go and give you more what's working inside your application space too.

Speaker A: What other changes can financial uh, institutions make within their organization if they want to um, maybe increase technology adoption of solutions they already have or think about focusing on better uh, customer experiences. And I say that knowing that those are two different goals.

Speaker C: There are, uh, so the first is business analysts. We need to lean and have more business analysts deployed. They're going to be worth their weight in gold, especially if they speak the business side of the house and the technology side of the house and don't have them put or placed in our technology IT or IT org chart. Move them over, put them there. Because then, um, I'll say their priorities are more on the technology side driving that. But if you put place them in an innovation side of the house, if you place them on that digital side, right. They're going to speak both languages to fulfill adoption and move you forward and they're going to help you decide and determine through with your system application persons. Because I'm sure you're going to have a system app person that owns the software too that'll say, you know what, this system no longer serves us. But you got to get those business analysts in different roles. And my recommendation is you need to have one in your accounting area, you need to have one in your lending area because lending speaks different than accounting. You need to have your operations business analyst. Right. Driving that change on the org chart and you need to start moving forward and having those innovation and true digital digital departments or divisions developed.

Speaker A: Well, Elia, thank you so much for this conversation about how talent supports and um, unlocks technology. I think we're, this is going to be a really important issue for the years to come and so I'm glad that we were able to chat today about it.

Speaker C: Oh, thank you. I appreciate again the invitation. I do believe 100% with you. This is a very important topic that we need to put more support behind to make those changes.