You may be asking yourself, "What do sports have to do with banking?" Well, it turns out there's a lesson that banking can take from the major sports leagues.
Let us explain.
Up until the 2000's, baseball was known as "America's Game" and was undoubtedly the most popular in sport in the USA. However, according to a 2021 Washington Post Poll, just 11% of adults listed baseball as their favorite sport to watch -- behind football (34%) and tied with basketball (11%).
Many people point to the fact that baseball had not evolved, relying on "what got us here" instead of forward thinking to change the game to appeal more to the new generation. Only recently they have taken steps to evolve the game, integrating a pitching clock, new extra inning rules, and other directives to speed up the game.
It remains to be seen whether baseball and the MLB waited too long to institute progressive changes... Could banks be making the same mistake?
The Danger of Legacy Thinking
As noted by The Financial Brand, effective forward progress can be thwarted because banks and credit unions are unable to jettison legacy thinking and outdated processes -- similar to Major League Baseball.
It's often easy, in other words, to slip into a state of satisfaction with "what brought us here." However, as The Financial Brand emphasizes, business as usual is not a good recipe for success.
While legacy technology often gets all the attention, legacy thinking is often preventing organizations from realizing the full benefits of modern technology and hinders the ability to adapt to changing market conditions. This stifles innovation and impacts an organization’s ability to make informed decisions quickly and at scale.
To respond, banks and credit unions must support a shift in culture, mindsets and processes, including investments in training to ensure that employees will support business transformation without holding on to legacy thinking and processes.
Citing an article in the MIT Sloan Management Review, The Financial Brand reminds us that the ability to innovate and transform an organization requires four organizational capabilities:
- Nimbleness: The ability to quickly pivot and move from the current state to the desired future state.
- Scalability: The ability to increase capacity to serve a greater universe efficiently and effectively.
- Stability: The ability to maintain operational excellence during times of massive disruption.
- Optionality: The ability to leverage external collaboration to expand capabilities.
Partnering with Third Party Fintechs
An approach adopted by more and more financial institutions is, of course, use of third-party partners:
As we research financial institutions globally, we find that organizations are successfully engaging third-party solution providers that can implement exceptional digital solutions at speed and scale. Unfortunately, in the majority of cases, banks and credit unions can’t let go of some of the most inefficient legacy processes that derail the benefits of the solution.
Large financial institutions possess the necessary internal resources to develop technologies on their own. This is not the case for all banks, of course, and financial institutions need to evaluate their specific internal resources and partner with fintechs that can help achieve modernization.
This includes addressing payments like checks. Check processing has moved from using algorithm-leveraging OCR to artificial intelligence and machine learning technologies, increasing processing speed as well as accuracy. In addition, this technology enables financial institutions to extract information from all fields and transfer it to other business intelligence systems.
The way banks approach the shift towards digital will determine whether or not they can swing for the seats!