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RBSi and Kin + Carta

The Great Realisation of Banking: Recovering and Thriving Post Covid-19

The expectation that banks could offer a 100% digital and remote service at the flick of a switch as COVID-19 swept the globe brought to light one great realisation across the sector: banks are not as good as they thought at predicting the future.

In this session, we will cover what this Great Realisation means for banks. How will this shape banks' recovery and strategy? What will it mean for banks to be shock-ready? And how can banks bake in agility to their capabilities, products, and services for the future?

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Hi, everyone, welcome to this session at FWD20, the age of resilience. This is the first time that we've taken our summit both global and digital so we are so glad that you can join us for the day, or just for this 30 minute session. My name is Morgan Kainth and I'm one of the Senior Strategists at Kin and Carta Create Europe and I'll be your host for the next 30 minutes.

So a quick one, just to give a bit of background. So regardless of industry at Kin and Carta, we believe that the next generation of successful businesses will have adaptability, resilience and recovery at their core. And today, we're speaking With over 90 executives in 45 virtual sessions, digging into what we can do to accelerate this exciting new normal for business. It's important to note that it’s not just COVID that's made us think we're on the cusp of a new era, though this particular session does focus on COVID as a hard stop for what was and where we can go next. So for the next 30 minutes, you'll be part of "The Great Realization of Banking:"Recovering and Thriving Post-COVID. We'll be digging into what the challenges of COVID have done to shift assumptions in banks, what a recovery strategy looks like and how banks can be better prepared for shocks in the future. There will be a chance for a brief Q and A at the end, unless I ramble and please do join the conversation on LinkedInand Twitter, using the hashtag #fwd20.

Morgan: So now housekeeping is done, let's kick off. I'm delighted to be joined today by Jamie Broadbent, who is Head of Digital and Innovation at RBS International, where he owns all customer facing digital channels and has responsibility for driving the overall innovation agenda of the ban. He is an award winning banking leader and is well placed to drive innovation across the six jurisdiction where RBSI has a physical presence and comprehensive market leading set of propositions for corporate and institutional customers, alongside their retail, business and wealth offerings We've been working with Jamie and his team at RBSI since the beginning of this year on an exciting new channel for one of their flagship platforms. When he made an exceptionally astute point about what COVID has meant to the banks, we basically plagiarised he's turn of phrase turned it into a talk title and then begged him to come and speak about it to us in a bit more detail. Very luckily he said yes, so welcome, Jamie, thank you so much for coming over today.

Jamie: That's all right and thank you so much for that welcome. You made us sound pretty good.

The great realisation of banking


Morgan: (laughs) Great, well I'm glad. So I think probably the best place for us to kick off and to start this conversation is for us to maybe unpack the title a little bit. So can you talk us through "The Great Realisation of Banking", what is it in your mind? What do you think that banks have come to or been forced to realise as we enter this new decade?

Jamie: Yeah, so I guess for a bit of context, banks spend an awful lot of time and energy in trying to predict and plan for the future. Whether that's developing strategic plans or financial forecasts and projections, you name it at least 50% of my time is spent putting together plans or debating those plans. And that's all fine, plans are essential to any business. But to steal a quote from the eloquent philosopher Mike Tyson, "Everybody has a plan until they get punched in the face." And, you know that quote, I think has taken on new meaning for all of us in 2020. Every single organisation came into 2020 with a pocket full of plans, all the things that we would do, that we would prioritise, I even had plans about where I was going to vacation, you name it. And then wham! You know we all got that punch in the face, that was this global pandemic that, irrespective of how effective we thought we were at planning, nobody envisioned the impact that this has had on organisations and society as a whole. So the great realisation in banking and across every industry, is that things are going to happen which are simply unexpected and totally beyond your control. So the things that we really need to focus on, is not so much about obsessing over our plans, but developing that organisational capability, agility, resilience, so that when the unexpected happens, you're able to adjust and adapt and navigate, whatever that new landscape looks like.

How are RBSI innovating and seeing beyond the horizon?


Morgan: That's great, thank you. And I guess RBSI has a very specific perspective on that, right, you are an organisation that's working across jurisdictions. Some of those jurisdictions have quite varying approaches to COVID response. So how's the distribution of your workforce and the different customer circumstances that you're dealing with, offering up any specific insights to help you all see beyond the horizon or see innovative new ways of doing things?

Jamie: Yeah, sure, so RBS International again, for context, we have people based across Jersey, Guernsey, The Isle of Man, Gibraltar, Luxembourg, London, Edinburgh, Belfast, Manchester, You know I'm running out of fingers. From all of those jurisdictions we serve a customer base which is truly global. Absolutely all of them have been impacted in one shape or form by COVID and absolutely nobody has been immune to the effects of this. So the challenge that we've had is how to fundamentally change the way that we operate as an organisation, at the same time as continuing to serve global customers, who almost overnight have had to fundamentally change the way that they operate as an organisation and managing their money. So as you might expect, that led to unprecedented volumes of queries, requests for additional support during a period of heightened anxiety for customers, they're uncertain. And the only way that we've been able to manage that is effectively flipping a switch and going into crisis management, this rapid response mindset because there's no playbook for this. You have to figure it out as you go. And that led to a dispensing with traditional hierarchies and organisational boundaries and politics and all that kind of stuff. So instead we began working in
a very different way, bringing the right people around the problem, fully empowering them to make the decisions at the right level which has enabled us to deliver change at an unprecedented rate. So what would have normally taken years for a bank to deploy, has been done in a matter of weeks, and sometimes even days. The ultimate learning that we're now trying to take from this is, how do you take the way that we responded in a crisis and just simply maintain that to be part of the way that you always work going forward?

A strategy accelerator not a strategy changer 


Morgan: So it's interesting that you're kind of looking at how you can sustain or maintain those ways of working beyond that crisis point. And you know, strategist to strategist, we love a framework, we love these tests and experiments to unpack, what's going well, what's worth working on a bit more, what's looking a bit further in the future and then what we should just get rid of and where do you start to build that recovery strategy, coming out of crisis mode what's emergent there? How are you guys going about it? When it's shared with actually just keeping your head above water, continuing to serve those global customers that you were just telling us about?

Jamie: So there certainly isn't a playbook and there isn't really a framework either that you can just find on Google and stick into a PowerPoint bag. But we don't necessarily see this as a strategy changer for us. What it's been has been a strategy accelerator. So it's exacerbated what our known weaknesses are within our business model and banks generally and intensified that need for change. If we look back to the last global crisis for some lessons that you can learn, you go back to 2008 and it's important to stress that this is not the same thing, right. That was a global credit crunch, seizing up of liquidity. This is a global health pandemic. But effectively, they are both gonna be incredible catalysts for change and innovation. So 2008 set in motion a raft of changes across the banking industry. Be it regulation, the desire to make incumbents smaller and less systemically important, drive increased competition. And that paved the way for a revolution of the new and emerging challenger banks that we have today. So that's been really positive. I think what this crisis will do is really cut to the core of why we even have banks and what the purpose of a bank really is. We're very clear that going forward, banks have to have a clear role in society. We exist to help people, families, businesses to thrive and that's in both good times and bad times. So the banks that will make it through this period, it's because they will recognise that out of this opportunity comes a chance to really refocus and reframe around the things that really matter most to customers.

Unilateral Opportunities 


Morgan With such a diverse customer base, like you have, are there any unilateral opportunities that you're seeing there?

Jamie: Sort of positions that the bank can take, or products that the bank can offer that can support unilaterally or is it going to be very much on a segmented customer by customer basis?

Morgan: So what does that new experience of an individual accessing an RBSI service as an individual who is resident in one of your jurisdictions or versus a domestic corporate versus an institutional client? What are those experiences and what are the similarities and differences there?

Jamie: So I think across all customer segments, we are a full service bank, so we have everything from customers that use retail branches through to high net worth customers, small businesses, large businesses, other financial institutions, we've got the whole spectrum. And all of them have moved in the same direction around digital first, right? Because it was digital only was the only offering that we could provide. I would say that pre this crisis, about 50% of those customers that had never used our digital channels before are now fully embracing them, and they're never going back. So we've seen an acceleration there that's permanent. What it's done though is shine a spotlight on some digital inequality and those in our societies who for whatever reason, perhaps they're vulnerable, perhaps they just never been shown a better way we risk leaving them behind if we don't get the balance right between digital first experience and a bank which is able to cultivate and harness humanity. So I think that's the secret sauce that we have to get right, is how do we build this fantastic, digital, frictionless bank. But at the same time one which is filled with human empathy, and can connect with customers on a personal level and bring them along the journey, irrespective of how they might need to be helped.

Does digital first mean digital only?


Morgan: Now that's really interesting, and I think it's something that we see quite a lot in terms of the technology that we develop as an organisation. We bake in that accessibility element, so that there's no kind of imperative barrier between any one individual and how they might be able to use and access a piece of technology. What you speak to very eloquently there is the kind of behavioural shift that needs to go along with that and almost this pandemic acting as a hard stop to being able to walk into your bank branch and put in a check. All of these things that would've been fundamental to the way that people and businesses access banks for such a long time. They've now just become fundamentally impossible. What would be really interesting is to unpack, this idea that following COVID and as we move towards recovery, we start to switch off some of those old services, does digital first mean digital only? What's the consideration that you have there?

Jamie: Yes, it's funny that you mentioned about, people perhaps are used to or like the experience of going into a bank branch. I'm always reminded of this statistics, I forget where it comes from, but 71% of millennials would rather visit the dentist than they would interact with their bank. So that really hit home the message about how nobody wants to “do” banking. Banking is not a fun or enjoyable activity. I can't wait to get up and do my banking, is a line that nobody said ever. We don't take that personally. We recognise that banking is a friction or a chore in people's life that ideally wouldn't be there. That said, absolutely all of us want to have a really healthy relationship with money. Now, money takes on a different level of importance for different people. But it's kind of like oxygen in the sense that, when you have enough of it, you don't give it a second thought. When you don't have sufficient supply, it's all you can think about so I guess the go forward role of the bank whether it's kind of digital only, whether it's a blended model, is about how do you help those individuals, those businesses, achieve a better relationship with money so that they can get on living the lives that they want to live, they can build their business, they can focus on the things that really matter most and that constant worry of money management almost falls away into the background, because the bank has built services, that have got your back. So you can trust those and get on with living the life you want to. That's quite a fundamental, almost business model shift for a bank, right. A bank that kind of has moved away from making money by holding money and moving money, to a bank that is delivering and providing a service to its customers.

Holding money vs providing a customer service


Morgan: Would you say that that's a shift that you are looking at embracing and how would that play out in the context of RBSI?

Jamie: Yeah, very much so. So if I'd give you very much the banking 101 the traditional business model of a bank is making money off of what we call net interest margin. So we take deposits in from people that have got surplus funds, and we pay them a small amount of interest for that. We lend those funds to those people, those businesses that have a requirement, and we charge more interest for that and the thing that the bank lives off of is effectively the difference. Ever since 2008, we have been in a depressed, low interest rate environment where that margin continues to be squeezed and squeezed and is effectively a race to zero. In fact, technology has made it such that, those people with surplus funds and those people with borrowing need, don't even need to go through the bank now, they can find each other through peer to peer platforms etc. So that business model for banks is a ticking time bomb, and doesn't have a lot of life left in it. The other place where banks typically make a lot of money is in what we call money transmission. So the privilege of you moving money from A to B, there's interchange fees, there's payment charges, etc and the bank always creams off a little bit of those. Again with the development of new technologies, that becomes a race to zero. So the bank is left saying, well what is our sustainable business model of the future? And really, it's how do we provide services that are so good and valuable in a customer's life that the customer is willing to pay us money for it? And how do we use the customer's data and what we know about them to save money for that customer, make money for that customer, save them time, save them effort, create value in their life that wouldn't otherwise be there. Now that's probably a slightly different business model for banks, but it will be the only one that's sustainable for us in the future. It is happening, the industry is moving in that direction. It's not happening fast enough and this is where we've got to use COVID as an opportunity to really put rocket boosters on that.

How can we accelerate things going forward?


Morgan: That makes a lot of sense and leads quite nicely on to the last question that I've got for you and then we'll hopefully leave sort of six, seven minutes for questions at the end. What do you think is really special about this COVID moment, without this is kind of bizarre cocktail that we have here which is a global pandemic which has caused a lot of sharp definite policy decisions, unilateral lifestyle changes, economic shocks, does it really take this much to shift a bank's assumptions? How can we stop it from taking such a drastic thing to accelerate things that have been going on in the background in the future, that listening, sensing adaptable culture that you spoke at the beginning, how can we make sure that that's maintained in banks? And how can we make sure that those listening organisations can provide services sustainably to their customers long term?

Jamie: Yeah, as you mentioned COVID has been one of those timely wake up calls that nobody would wish for, right, because the human consequences of this, people have lost businesses and livelihoods and loved ones. It has been a horrendous experience for so many people globally. But that said, I'm a firm believer that out of every crisis comes opportunity, and this really is one of those once in a lifetime moments for people to have this wake up call, this great realisation, and whether that's at an organisational level or us as individuals, right. We get so focused on living our lives in a particular way that this has been that smack in the face that allows you to step back and say, am I really focused on the right things and the things that matter most? And that's the thing that the bank has got to cling on to, this is an opportunity now for us to, put rocket boosters on some of those trends that were already well in motion before COVID but ultimately recommit to a renewed sense of purpose, a renewed sense of meaning and why we even exist. That's got to be the thing that we take forward out of this. The digital acceleration, all of that stuff, is super important. The thing that I really want us to hang on to is that we're human centric. We provide services that are meaningful and have a real impact in the lives of people. The banks that succeed will be because they prioritise that, and they never lose sight of that.

Morgan: That's awesome, thank you.


Morgan: And just almost right on cue, we have a question. So the first question. How does RBSI plan to ensure that that human and empathy element isn't lost in digital first? So how can you maintain the authenticity while promoting a digital first culture?

Jamie: Yeah, that's a fantastic question. And if there is a model answer for that, then you know, someone send it to me, because that's effectively (laughs) what we're trying to work out every day. I guess that the way that we work out what works and what doesn't is through experimentation and ongoing dialogue with our customers. Banks have talked for a long time in terms of being partners with their customers. But going forward that takes on new meaning and it is working out what that right balance is together. Yes, it would make commercial sense for a bank to just be we're digital everything and if you don't like it go bank somewhere else. But that, if we come back to that, is a bit about why we exist, as we don't just exist to make profit. We exist because we serve a societal purpose and that starts at the leadership level, the bank has to make sure that your board, your executives, are brought into this idea of, we've got a meaning in life and it's not just generate profit, that's a happy consequence of getting the right balance, the right services that customers will really value. So it's a test and learn. It's figuring out as we go, but we're starting to see, I think really positive signs. But great question.

Morgan: Awesome. So the next question is from Dan. So whether it's sort of in branch or in an ATM, how much are you using contactless experiences? Also how much do you think about contactless, following COVID where touching is going be a bit of an issue for a while. What does contactless mean to you? And how are you thinking about it?

Jamie: Yeah, so I don't know where Dan is based, what part of the world, whether you're UK or somewhere else, but certainly in the markets that we operate, cash usage has fallen through the floor. Nobody wants to touch it. I haven't touched paper money. Well really before COVID because I'm head of digital and trying to set an example but literally it has been months and businesses have adapted to that. I was out with my kids the other day and we went to an ice cream van, they didn't take cash. It was all about just contactless. So again, that was a trend. But we've probably seen five years worth of cash decline in the space of three months. That's beneficial for a lot of people, right. Cash is expensive to secure and to move and to manage and all those kind of things. It's also a favorite term of money launderers and so moving kind of all of that to digital, serves a lot of benefits for a lot of people. That said, there are some people who we risk leaving behind and that's where the banks have really got to step into this role of a trusted partner that will hold the hand of individuals and bring them on a journey, because otherwise we risk leaving them behind.

Morgan: So another question from Antonio, who asked a really, really great question. Which is about how we've talked a lot in this session about what banks should be accelerating and focusing on moving into the future. But are there also critical things that banks need to stop doing? And what are those things if they're any, especially off the back of COVID?

Jamie: So there absolutely are. Banks have notoriously made products and services over complicated, far more complicated than they ever needed to be. To the point where, we've had tons of litigation related to mis-selling, because people weren't clear about what they were getting and when and what value it delivered for them. So banks have absolutely got to leave complexity behind and become easy to deal with. That's first and foremost. The other thing that I think banks are starting to realise is that they probably try to be too many things to too many people. So I mentioned earlier that we are a full service bank, and we serve customers across the whole spectrum. The problem with that, when you've got limited resources, is that you stretch those resources across so many different areas that you become average in just about everything. In fact, the direction of the market is that new market entrants have laser-like focus on the niche or the customer segment that they can serve and they can serve brilliantly, and they'll go after just that little bit. So banks don't really fear this idea of one big competitor will come in and take away their lunch. But it's this death by 1000 cuts because you're going to get outmaneuvered in just about every market that you play in by someone who's just focusing on that area of value. So I think going forward, there will be more safety for banks, not in trying to be everything to everybody, but recognising what are our core strengths? What are the areas where we can really excel in delivering value for customers? And let's go after that.

Morgan: That's quite an interesting concept, I think. Because you know, generally the expansionist mindset is one of and then we'll take over this market and this market and this market, but again, speaking to your service based model, it's really about no, in how many ways can we own the customer experience of this part of this and I think that's fascinating. We've got time for a couple more questions. I do have one that was sent anonymously, which is always very exciting. So, what digital investment are you guys making at the moment? And what are you kind of happy about and what do you think is strategically playing into that thing that you just mentioned around sort of specialisation and owning customer experience in a certain segment?

Jamie: So one of the investments that we're making right now you know very well. Because we're working with Kin and Carta Create to build it. But we are building a mobile app for our corporate and institutional clients. This is recognising that the way in which they do their banking is starting to change. These are clients that key thousands of payments on any given day into a desktop. But then those payments need to be authorised by somebody else within the business and all that stuff. So then they're anchored to offices in order to authorise those payments so what we've looked at is, every single one of these people has a mobile phone in their pocket. They live their lives in a mobile way, maybe they're out meeting other clients, maybe they're, heaven forbid, on the golf course. Let's actually utilise the tool that they have with them and make that the way in which they can start and interact with the bank. So it's a first step along that journey, but it's really exciting because you now move into an entirely new channel and unlock a whole bunch of different value opportunities that you might be able to deliver for that customer. So mobile is definitely a big one. I think at the same time, we keep a watching brief on other technologies, things like voice AI, for example, is really accelerating at a rate even quicker than mobile phones did. So even though it probably seems novelty right now, give it a couple of years, and that will be hard baked into just about everywhere we go such as smart cars and it's already in our homes. So we need to be thinking about what are the journeys that we build now on these emerging technologies?

Morgan: Awesome, great. We have one more quick question. Have you seen any trends around sort of bundling and unbundling of banking services and sort of developing propositions with partners to provide that value-add service to customers.

Jamie: Yeah, definitely. And we probably don't necessarily talk about it in terms of bundling and unbundling, but it's about what connections the bank will enable for a customer. So we shy away from, you know, package deals, if you have to buy one of these if you want to get one of those, 'cause customers don't have time for that. I think the future model for banks will be that you can interact with us on your terms. So if you like our platform, but you want to have accounts elsewhere, you can manage those accounts through our platform, because we're done being siloed, we are building connections with other banks. And the value that we'll bring to customers is the connections that we enable, across all aspects of their life.

Morgan: Thank you. So, first of all, I just really wanted to say thank you everyone for joining us, and especially, obviously to Jamie It's been a really engaging and insightful session. And thank you for understanding my rambling questions and coming up with some really great, insightful and valuable answers. So if you do have any burning questions or just want to have a chat about anything covered in this talk, contact us using the details below.

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