Frank Schwab

I help navigate digital transformation

Annual Planning in Banking IT




It's the same every year. During the annual budget planning, every bank I know faces an overwhelming number of IT project requests. I've often heard senior managers proudly proclaim, "As part of this year's budget planning, we've reduced IT project requests by 50%." This is frequently touted as a success, which always surprises me. Additionally, false hopes are often raised about what IT can deliver during the planning phase, when in reality, fulfilling all requests is neither feasible nor desirable.


The annual struggle of IT project planning in the banking sector highlights a fundamental challenge: the disconnect between ambition and reality. This ritual is flawed for several reasons. Firstly, it assumes that all IT projects are created equal. In reality, some projects yield significant benefits for the bank and its customers, while others may offer only marginal improvements or even prove detrimental. Secondly, it overlooks the crucial role of IT in driving innovation and competitive advantage. Banks that fail to invest strategically in IT risk falling behind their rivals, losing market share, and ultimately jeopardizing their long-term viability.


The key to overcoming this challenge lies in proper prioritization. This involves not just reducing the number of IT projects, but selecting the right ones. Desirable projects are those that create tangible and measurable benefits for the bank and its customers, such as faster payment processing, more reliable and accessible account services, or enhanced security features. By focusing on such projects, banks can ensure that their IT investments deliver maximum value and contribute to their overall strategic goals.


Moreover, proper prioritization requires a clear understanding of the bank's overall business objectives and the role of IT in achieving them. This means aligning IT projects with the bank's strategic priorities, ensuring that they support the bank's core business functions, and delivering a clear return on investment. It also involves involving key stakeholders in the prioritization process, including business leaders, IT experts, and customer representatives, to ensure that all perspectives are considered and that the chosen projects have broad support.




Published in SundayThoughts, banking, technology on 01.09.2024 9:30 Uhr. 0 commentsComment here

Why PEST is Still Relevant


PEST remains relevant as a strategic analysis tool for digital banks, provided it evolves to capture the nuances of the digital age. By focusing on how external factors specifically impact digital operations, PEST can help digital banks navigate the complexities of a rapidly transforming industry.



1️⃣ Political Factors


📌 Regulation & Compliance: AML, KYC, GDRP, DORA, …

📌 Licensing Requirements: which licenses are required?

📌 Government Initiatives: are there beneficial programs or restrictions?

📌 Cross-border Regulations: are there compliance requirements?



2️⃣ Economic Factors


📌 Interest Rate Environment: influence on profitability?

📌 Economic Downturns: appropriate risk management in place?

📌 Cost of Capital: funding secured? 

📌 Consumer Spending and Saving Trends: impact on demand for digital financial products.



3️⃣ Social Factors


📌 Consumer Preferences: the growing demand for digital financial services.

📌 Trust & Security Concerns: how to deal with concerns about data privacy, fraud, and cyber security?

📌 Financial Inclusion: potential to reach underbanked or unbanked populations through mobile-first solutions.

📌 Demographic Trends: younger, tech-savvy consumers are more likely to adopt digital banking.



4️⃣ Technological Factors


📌 Innovation and Digital Transformation: rapid pace of technological innovation (AI, blockchain, cloud, …) is both an opportunity and a challenge.

📌 Cybersecurity Risks: a strong focus on cybersecurity and continuous investment in protecting customer data is essential.

📌 Fintech Integration: collaborations, partnerships, and APIs can expand service offerings.

📌 User Experience (UX) & Interface Design: intuitive, user-friendly, and accessible across various devices to retain and grow their customer base.









Published in strategy, banking, DigitalTransformation, all on 29.08.2024 9:30 Uhr. 0 commentsComment here

Design Matters





In the banking sector, design is a strategic imperative that shapes customer experience, brand perception, and overall business success.


As some of you may know, I was also involved in Deutsche Bank’s project "Quartier Zukunft" (formerly Q110 - Deutsche Bank of the Future) in Berlin between 2005 and 2010. As someone trained in IT, banking, and marketing, the project changed my perspective on the role of design in banking. Since then, I have believed that design is not merely an aesthetic consideration in banking but a strategic linchpin. It orchestrates a seamless customer journey, from intuitive digital interfaces to welcoming physical spaces. It simplifies complex financial processes, fostering trust and empowering users. Moreover, design is the differentiating factor in a saturated market, attracting new customers and retaining existing ones. A well-designed banking experience communicates a brand's values, instills confidence, and ultimately drives customer loyalty and business growth. 


In essence, design is the silent architect of the modern banking landscape.






Published in SundayThoughts on 16.08.2024 19:53 Uhr. 0 commentsComment here

Mitigating the Risks of Shadow IT: Empowering Users with the Right Tools and Training




It's not a common occurrence, but last week, I engaged in a heated discussion regarding the IT department's responsibility to provide the appropriate tools to all business users. Whether it's analytic tools or AI solutions, preventing shadow IT hinges on IT's ability to deliver these resources and training promptly.


In my experience within the banking sector, the proliferation of shadow IT and shadow AI has emerged as a significant challenge. These practices, where employees utilize unauthorized IT resources or AI solutions, often arise from a need to fill gaps in the official offerings of the financial institution. A 2021 Gartner report indicates that shadow IT can account for 30% to 40% of IT spending in large enterprises, underscoring the scale of the issue.


I recall several instances where ambitious teams deployed new functionalities from external vendors to improve, e.g., customer profiling or risk assessment. While the results were positive, the lack of integration with core systems led to inconsistencies in data handling and reporting. This mirrors findings from a McKinsey study, which noted that shadow AI efforts often misalign with a company's overall IT strategy, leading to fragmented implementations.


To address these issues, any IT department must proactively enable all users with appropriate tools and platforms. By providing robust, flexible, and secure IT solutions that meet diverse departmental needs, reliance on shadow IT and shadow AI must be reduced. This approach not only enhances productivity but also ensures adherence to data governance, security, and compliance standards.

Furthermore, investing in user training and support across the organization for these tools ensures that employees can fully utilize the provided resources without seeking unsanctioned alternatives.


In conclusion, by equipping users with the right tools and fostering collaboration between departments and IT, the risks associated with shadow IT and shadow AI must be mitigated. This not only enhances operational efficiency but also strengthens security and compliance posture, aligning with industry best practices and regulatory requirements.





http://www.FrankSchwab.de



Published in SundayThoughts on 16.08.2024 19:38 Uhr. 0 commentsComment here

Strategy Isn't One-Size-Fits-All: The C-Suite's Impact on Strategic Choices


For nearly a decade, I have served on various advisory and supervisory boards of banks and financial services companies. In these uncertain times, discussions about strategy have become increasingly crucial. Surprisingly, many argue that strategy can be formulated independently of the people who will execute it, implying that any competent C-Suite should be able to successfully implement a given strategy. While this may hold some theoretical merit, the reality is often quite different.


Consider the case of a large investment bank attempting a rapid expansion into retail banking. While the strategy might look promising on paper, its success hinges on whether the existing leadership team possesses the skills and experience necessary to navigate this new market. A C-Suite accustomed to high-risk, high-reward investment strategies might struggle to adapt to the more conservative, customer-centric approach required in retail banking. Conversely, a retail banking specialist thrust into the leadership of a high-frequency trading firm might find themselves out of their depth.


Conversely, a well-aligned C-Suite can elevate a seemingly mundane strategy to new heights. For example, a fintech startup with a strong leadership team in technology and customer experience could turn a simple digital banking app into a disruptive force in the industry, leveraging their expertise to create innovative features and seamless user experiences that traditional banks struggle to match.


In my view, a strategy can only be successfully executed if there is a strong alignment between the strategy itself and the skills of the C-Suite tasked with its implementation. This is a two-way street: the skill set of the C-Suite both enables and constrains the potential strategies a company can pursue. I believe it is perfectly acceptable, and even advisable, to tailor a strategy to the specific strengths of a company and its leadership team. Just as a skilled conductor brings out the best in an orchestra by selecting music that suits the ensemble's strengths, so too should a company's leadership leverage their unique talents to craft a strategy that plays to their advantages.

In the ever-evolving financial services landscape, recognizing and embracing this symbiotic relationship between strategy and the C-Suite is not just a matter of good practice; it's a matter of survival.




http://www.FrankSchwab.de





Published in SundayThoughts, strategy, BoardMember on 11.08.2024 10:39 Uhr. 0 commentsComment here

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