Frank Schwab

I help navigate digital transformation

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

Sohar International Bank's Digital Transformation Journey

A Case Study on Sohar International Bank's Digital Transformation Journey - Building an Ecosystem, Delivering Excellence

Customer expectations are changing. Driven by a demand for integrated, self-service options, banking customers are actively seeking solutions beyond traditional models. This shift has facilitated the rise of digital ecosystem banking, a collaborative approach where banks partner with other companies to provide a broader range of services.


Sohar International Bank exemplifies how to navigate this digital shift. Sohar’s strategic transformation journey, initiated in 2018, prioritized customer experience through a five-year plan. This resulted in significant investments in people, technology and processes. 





The outcome? A customer-centric mobile banking platform offering a comprehensive suite of financial and non-financial services, alongside a sophisticated transaction banking platform for businesses. A strong digital core, outperforming industry average returns, paved the way for long-term success. This foundation positioned the bank to seize a strategic M&A opportunity, acquiring HSBC Oman. Since the ownership changes in 2017 and development of new strategy in 2018, Sohar International's digital transformation journey has yielded significant results.


Built a World Class Ecosystem: The ecosystem has delivered seamless experience for Sohar International’s customers.




Market Expansion: Sohar International’s market share grew by 10% to 18%, with 2% organic growth and 8% inorganic growth through strategic acquisition of HSBC Oman.


Financial Growth: Total assets surged 135% to USD 10 billion, deposits soared 211% to USD 9 billion and profitability increased by 178% to USD 117 million.




Industry Recognition: Sohar International earned numerous prestigious awards like "Most Innovative Digital Bank for Ecosystem Services" and "Industry Leader in Digital Banking," highlighting the bank’s commitment to cutting-edge solutions.






Notably, Sohar International's commitment to digitalization aligns perfectly with Oman Vision 2040, the nation's economic development plan.





Sohar International Bank's acquisition of HSBC Oman presents a growth opportunity but also operational challenges, necessitating an efficiency program focused on leveraging digitalization and automation to streamline processes and optimize staff allocation. The program should prioritize integrating HSBC Oman's operations, consolidating systems, and upskilling employees for a digital environment, ultimately unlocking the acquisition's full potential. Additionally, the bank could explore strategic partnerships and acquisitions to expand its digital ecosystem, offering a wider range of financial products and services, and accelerating innovation through integrating new technologies and talent.




✍️ Contact me to learn more about the in-depth case study and receive the comprehensive 20+ page report, featuring detailed analysis and multiple informative graphs.


 📧  mailto:frank@frankschwab.de





http://www.FrankSchwab.de




Published in CaseStudy,  DigitalJourney on 25.07.2024 22:29 Uhr. 2 commentsComment here

How 200 people achieve EUR 100 million in annual profits - Digital Banking Journey of Advanzia Bank 

Explore one of Europe’s most innovative banks. This month, we take a look into the digital banking journey of Advanzia, a Luxembourg-based niche bank that redefines consumer finance. Discover how they achieved remarkable growth, profitability, and efficiency by harnessing technology and focusing on customer needs.




Advanzia Bank, a Luxembourg-based direct bank founded in 2005, has emerged as a digital banking trailblazer in the European market. It has achieved remarkable growth, expanding its credit card customer base from 1.2 million in 2017 to 2.6 million in Q1 2024. The bank's strategic focus on credit cards and payment solutions, coupled with its exclusive online and phone channel operations, has allowed it to maintain a lean team of 200 employees while achieving annual profits of EUR 100 million.



Financial Performance and Resilience


Advanzia's financial performance is noteworthy, boasting a Return on Equity (RoE) of 38%, surpassing the average of 15% for consumer finance specialists in Germany. The bank's Cost-Income Ratio (CIR) of less than 40% is also significantly lower than the German banking average of 75%. Despite economic challenges in 2023, including rising funding costs and an increase in non-performing loans, Advanzia's long-term performance remains strong.




Digital Transformation and Innovation


Advanzia's commitment to digitalization is evident in its investments in software and technology. Key milestones include implementing AI-powered fraud detection, launching new mobile apps, and completing a full digital migration to the cloud. These investments have streamlined processes, enhanced customer service, and improved operational efficiency.




Customer-Centricity and Strategic Partnerships


Advanzia's success is attributed to its customer-centric approach, agility, data-driven decision-making, and strategic partnerships. The bank's free Mastercard Gold credit card, with no annual fee, has been a major draw for cost-conscious consumers. Advanzia's total turnover on all cards reached EUR 6.3 billion in 2023, with an average loan balance of EUR 1,700 per active customer.



Future Growth Strategies


Advanzia's future growth strategy may involve a combination of organic growth through creative digital marketing and inorganic growth through specialized mergers and acquisitions. The bank's focus on community building, data-driven personalization, gamification, and innovative marketing could attract new customers and foster loyalty. Additionally, Advanzia could explore acquiring smaller financial institutions specializing in niche markets to expand its portfolio and market share.



✍️ Contact me to learn more about the in-depth case study and receive the comprehensive 18+ page report, featuring detailed analysis and multiple informative graphs.


 📧  mailto:frank@frankschwab.de



http://FrankSchwab.de


Published in CaseStudy,  DigitalTransformation, DigitalJourney on 29.06.2024 20:37 Uhr. 1 commentComment here

From Oversight to Architects of Digital Resilience - DORA Reshapes the Board's Role

The financial sector faces escalating cyber threats in its digital evolution, prompting the introduction of DORA, the Digital Operational Resilience Act, aimed at fortifying defenses. DORA requires supervisory boards to pivot from mere compliance to becoming architects of digital resilience, orchestrating robust risk management strategies. It emphasizes the importance of understanding and addressing third-party dependencies while fostering a culture where resilience is ingrained, enabling boards to navigate digital disruption with strength and agility.


The accelerating pace of digital transformation in the financial sector has fundamentally altered the landscape of risks faced by banks. Operational disruptions caused by cyberattacks, technology failures, or third-party dependencies have the potential to trigger systemic crises across the interconnected financial system. In response to these evolving threats, the European Union's Digital Operational Resilience Act (DORA) represents a watershed moment, establishing a harmonized framework to enhance the sector's ability to withstand and recover from digital disruptions. For supervisory board members of banks, DORA signifies a call to action, demanding a renewed focus on digital operational resilience and a comprehensive oversight approach.


DORA goes beyond existing cybersecurity regulations by mandating in-depth ICT (Information and Communication Technology) risk management across the entire financial ecosystem. Supervisory boards hold the primary responsibility for ensuring their institutions are adequately prepared for the challenges posed by DORA. This entails a profound understanding of the regulation's core principles, a strategic recalibration of risk management approaches, and a commitment to fostering a culture of resilience across all organizational levels.





One of the most critical functions of supervisory boards in the wake of DORA is the implementation of a robust ICT risk management framework. Board members must not only approve ICT-related policies and procedures but also actively monitor their effectiveness. This requires a shift in mindset, recognizing that ICT risk is not a purely technical issue but a fundamental business risk. Boards need to ensure a holistic view of the institution's digital footprint, mapping critical business functions and identifying potential vulnerabilities stemming from internal systems, external dependencies, and the ever-evolving threat landscape.




Effective ICT incident management is another cornerstone of DORA compliance. Supervisory boards must play a crucial role in defining incident reporting thresholds, escalation procedures, and communication protocols with both internal and external stakeholders. DORA emphasizes the need for swift and decisive action in the face of disruptions, as well as thorough analysis of root causes to prevent future recurrences. Board oversight in this area helps drive continuous improvement in the institution's ability to manage operational crises.




Furthermore, DORA spotlights the interconnected nature of risk within the digital financial ecosystem. The reliance of banks on a complex web of third-party ICT service providers introduces a unique dimension to risk management. Supervisory boards must ensure that meticulous due diligence processes are in place for the onboarding of new third-party providers and that contractual agreements explicitly address issues of ICT risk and operational resilience. The oversight role must extend beyond initial contracting, demanding the institution maintains continuous monitoring of its third-party relationships.




The implementation of DORA goes beyond technical compliance; it necessitates a culture where digital operational resilience is a top priority. Supervisory boards are best positioned to lead this cultural transformation. Through communication, incentives, and accountability mechanisms, board members can promote resilience-focused behavior across the organization. This translates into investing in robust technologies, proactively identifying and mitigating risks, and emphasizing the importance of effective incident reporting and response.





Effectively navigating the requirements of DORA requires board members to expand their knowledge and expertise. This may mean including individuals with deeper technical backgrounds in cybersecurity or digital risk management or seeking external advisors to support the board's decision-making. Additionally, remaining abreast of evolving regulatory expectations, industry best practices, and the changing threat landscape is essential for informed and proactive oversight.




In conclusion, the Digital Operational Resilience Act (DORA) marks a significant milestone in the evolution of the European financial regulatory landscape. For supervisory boards of banks, it demands a shift in focus and strategy. By embracing the core principles of DORA, fostering a culture of resilience, and driving the development of robust ICT risk management frameworks, supervisory boards can safeguard their institutions and contribute to the overall stability of the financial system.





Published in DORA, regulation, technology, DigitalBanking, BoardMember  on 15.04.2024 19:07 Uhr. 0 commentsComment here

Beyond Gut Feeling - 25 KPIs as the Board's Roadmap for Digital Transformation in Banking

Discover how board members wield 25 Key Performance Indicators (KPIs) as their compass, guiding the institution towards digital excellence. Dive deep into the themes of Customer Experience & Adoption, Innovation, Financial Performance, Operational Efficiency, Cybersecurity, and Regulatory Compliance, unlocking insights crucial for navigating the complexities of modern banking. As the landscape evolves, so too must the metrics; witness the evolution from adoption to revenue generation, ensuring adaptive oversight at every turn.


When it comes to overseeing a bank's digital transformation, board members play a critical role in setting strategic direction and ensuring that the organization achieves its objectives effectively. Key Performance Indicators (KPIs) are essential tools for board members to monitor progress, assess the impact of digital initiatives, and make informed decisions. 


Beyond mere tracking, KPIs serve as litmus tests for evaluating the success or need for course correction in transformation efforts. They provide evidence of ROI for significant digital investments, aligning with boards' fiduciary duty to shareholders. Moreover, KPIs aid in risk management by tracking potential threats like cybersecurity, enabling proactive measures to address vulnerabilities. By benchmarking against industry standards, boards gain insight into the competitive landscape, shaping strategies for maintaining competitiveness.


Enclosed 25 KPIs are indispensable for board members during a bank's digital transformation:


I) Customer Experience & Adoption KPIs provide insights into how well the bank is meeting customer expectations and adapting to changing preferences. Board members need to understand the level of digital channel usage, Net Promoter Score (NPS) for digital channels, Digital Adoption Rate, Customer Effort Score (CES), and Self-Service Completion Rate to gauge the success of digital initiatives in enhancing customer experience and driving adoption. By tracking these metrics, board members can ensure that the bank remains customer-centric and competitive in the digital age.




II) Innovation KPIs help board members evaluate the bank's ability to innovate and adapt to a rapidly changing digital landscape. Metrics such as Time-to-Market for New Digital Products, Number of New Digital Partnerships, and Rate of Experimentation reflect the bank's agility, creativity, and willingness to embrace innovation. By tracking these KPIs, board members can assess the bank's competitive positioning, identify emerging opportunities, and ensure that the organization remains at the forefront of industry innovation.





III) Financial Performance KPIs offer board members valuable insights into the financial implications of digital transformation. Metrics such as Return on Investment (ROI) of Digital Initiatives, Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and Revenue Generated from Digital Channels enable board members to assess the profitability and sustainability of digital initiatives. Understanding these KPIs allows board members to make informed decisions regarding resource allocation, investment prioritization, and revenue generation strategies.




IV) Operational Efficiency KPIs are vital for board members to assess the operational impact of digital transformation. Metrics such as Cost-to-Income Ratio, Process Automation Rate, Time-to-Resolution for support tickets, and Operational Cost per Transaction help board members evaluate the efficiency gains achieved through digitalization efforts. By monitoring these KPIs, board members can identify areas for optimization, cost reduction, and process improvement, ultimately driving operational excellence across the organization.




V) Cybersecurity KPIs offer critical insights into the bank's resilience against digital threats and its ability to protect sensitive data and systems from malicious actors. Metrics such as Number of Cybersecurity Incidents, Mean Time to Detection (MTD), Mean Time to Resolution (MTTR), Percentage of Successful Phishing Simulations, and Compliance with Cybersecurity Frameworks provide board members with a comprehensive view of the bank's cybersecurity posture. It's important to balance security with customer experience. Overly stringent security measures might frustrate users. By monitoring these KPIs, board members can assess the effectiveness of the bank's security measures, identify potential vulnerabilities, and prioritize investments in cybersecurity infrastructure and employee training. 




VI) Finally, regulatory compliance is another area of paramount importance for board members during a bank's digital transformation. Regulatory KPIs help board members assess the bank's adherence to legal and regulatory requirements, mitigate compliance-related risks, and maintain the organization's reputation and trustworthiness. Metrics such as Number of Regulatory Fines, Percentage of Audits Passed, Number of Regulatory Change Orders Required for New Digital Products, and Customer Data Privacy Breach Rate offer valuable insights into the bank's compliance efforts.




⚡️Important to note: the best KPIs evolve with the transformation's phases. Early on, focus may be on adoption, and later, the emphasis could shift to revenue generation. Boards need adaptable oversight.




In summary, these 25 KPIs are essential for board members during a bank's digital transformation because they provide valuable insights into customer experience, innovation, financial performance, operational efficiency, cybersecurity, and regulatory compliance. By monitoring these KPIs closely, board members can effectively oversee the digital transformation process, drive strategic decision-making, and ensure the long-term success of the organization in an increasingly digital-centric world.






https://FrankSchwabSpeaks.com





Published in Digital, Transformation, Banking, KPIs, leadership, innovation, BoardMember, DigitalBanking,  DigitalTransformation  on 09.04.2024 10:24 Uhr. 0 commentsComment here

More entries

© Frank Schwab 2024