The banking flywheel effect: how to harmonize business and customer value

Introduction

Over the last two blogs in this series, we’ve explored the unique characteristics of your banking flywheel, including the side that drives customer value and the side that drives business value, plus the best ways to give them momentum. But the fact of the matter is that these flywheels don’t exist in isolation — they never have and they never should. Instead, you’ll need to unite both sides of the equation if you’re ever to drive continuous value for your bank and its customers.

But maybe you’re wondering why, and you’re not alone in that. Many banking leaders have taken the “if it isn’t broke, don’t fix it” mentality, and it’s not hard to understand why. Optimizing in isolation still yields results, and execs often stop there — and leave money on the table in the process.

Let’s take a look at how the synergy of tech and business flywheels can help your bank future-proof itself for the years to come and create a cycle of sustainable, self-financing innovation.

Driving both customer and business value

Years ago, Backbase was in the same place you find yourself today. As we brainstormed our tech and business flywheels, we found ways to give them momentum, and for a while, that was enough. But we didn’t stop there. We started thinking about how to unite the two, using their commonalities to run both in tandem, side by side. Of course, this isn’t exactly rocket science. We always knew we’d have to bring the two together, and we’re sure your bank is on the same page. But maybe you’re not aware of the real value of doing so. Consider the chart below.

Our usual entry point for digital transformation has always been technical debt reduction, and it serves us well here too. As you plan and coordinate your bank’s journey, start by using a unified platform model to simplify your existing tech infrastructure — then watch as the cost savings roll in and your agility skyrockets. If you were thinking only on the tech side of things, this is where you’d reinvest in further tech-debt reduction, but what if you reallocated this budget towards value creation on the customer-facing side, including streamlining your journeys and ideating differentiating value propositions?

In doing so, you’d dovetail the two areas together, accelerating both in ways that would never be possible in isolation. As you continue using your funds to improve the customer experience, you’d gain new opportunities for cross- and up-sell, as well as growing market share. Then, you can turn around and reinvest in the tech side of your flywheel, and so on, and so on.

The key here is to act like a technology company. They’re constantly driven to improve; things are never “good enough” — and your bank needs to think the same way. Constant improvements in the tech area will give you the power to optimize your business-related considerations, and the cycle will continue. You don’t have to revolutionize the banking experience right off the bat. You just have to make small, incremental improvements as you go and watch them add up in the eventual cascade of value. And that’s how you future-proof your bank for the platform era.

Digital transformation vs. modernization in banking

Over the last few blogs, we hope you’ve gained a healthy understanding of what both the tech and business sides of your banking flywheel bring to the table. More likely than not, you’re eager to take the first step, but before we can get started, I think it’s key to clear up one point of confusion: the difference between digital transformation and modernization.

These two terms are often used interchangeably in the banking industry, and that’s a huge mistake. In the next blog, we’ll dissect the commonalities the two share and then demonstrate how they’re actually quite different. After that, we can really kick things off with a frank analysis of your bank’s three best options for overhauling your tech: the big bang approach, the greenfield method, and progressive modernization.

For more information, check out our Banking Reinvented podcast, where Backbase Founder/CEO Jouk Pleiter dissects similar topics alongside Tim Rutten, EVP/Chief of Staff, and other digital leaders. Stay tuned as they chat about everything from progressive modernization to decomposing your bank’s complexity.