Who would want to be the CEO of a major UK bank? Listening to Ross McEwan of RBS speak at a recent dinner, you could only imagine that he is looking forward to handing over the reins to the next masochist who puts his hand up. If it’s
not capital adequacy, then its more rules and regulations. If it’s not operational footprint (“we employ a small village of 92000 people”) then it’s rogue behaviour and culture. If not legacy IT issues, then it’s fighting off the digital nerd infestation.
And so on.
It drives even great men like Mr McEwan to madness “we are the true challenger bank” he said in a newspaper article last week, pointing to the improvement in their policies about bonuses and teaser rates. He said the same thing at the dinner I was at recently
and when I asked why “moral improvement” meant RBS was now a real challenger, he had no answer.
The reality is that the major banks have a massive problem and it is nothing to do with the fintech fiesta. We are just the torch that shines the light on their broken model. They are just not structured to deliver a customer-first proposition.
Their legacy operational and IT footprint is too bulky, old and busted to allow it. Instead they try to deliver the best they can for customers, but limited by what their environment allows. It is a Dr Bankenstein’s Monster, banged together from old parts
and new stuff to a perfection blueprint from which they can only ever create an ugly, dysfunctional creature that is an awful parody of reality.
Because of the difficulty in replicating the minute parts of the human body, Victor makes the Creature large, about eight feet tall. As a result, the beautiful creation of his dreams is instead hideous, with yellow eyes and skin that barely conceals the
muscle tissue and blood vessels underneath.
These Monsters are now being glued together in the labs at the Big Banks, working from blueprints copied from fintech, banking and God Knows What Else. It is a process that has actually been going on for years (hence the COBOL mainframes
with Mobile apps sitting on top and (the ultimate Bankenstein creation at HSBC) facial recognition and biometric software for “added security”. We wait nervously for the next Chapter called “Inserting the Open APIs”. Just as in the novel, we don’t quite
know how it will end, but we do know it won’t be pretty!
The answer is of course that the Banks are stuck. They need to change and I think they are doing their best to do so. But their change strategy in most cases (take a bow BBVA, Santander and few others who really get the need to re-think) is analogue.
Bankensteins are not the future; the future is new build, new business models, new companies, neo-banks. The sooner the Banks draw a line in the sand with their broken business models, broken “worldclass” IT and broken operations, the better
for customers. They need to throw away their Gothic parodies and work hand in hand with neo-banks whose structure allows customers to be first, and a model for the future to be both beautiful and human.
Alex Letts is The Unbanker and Founder of Ffrees.