Few of us would take a job abroad without learning about the history, culture and language of the host country. This urge comes from a natural inclination to communicate, to make contact, create an understanding and show respect. It’s the same with business and technology, which are often like different cultures within an organisation, each speaking its own language. The question is, how fluent and knowledgeable does a business leader need to be in technology to ensure success?
Until recently, business leaders were most likely to rise up through the ranks of finance, sales or marketing, their skillsets centred on revenues and costs. Today, technology has to be part of the mix. We are living in a tech-enabled era. So many key business decisions, such as which products and services to launch and when, are affected by the technology currently available, what’s new and what’s coming down the line, its cost, the benefits, its flexibility and how long it takes to get up and running. Depending on their sector, those making the decisions need at least a basic knowledge of all this. For those in banking and fintech, that level must be higher.
The turning point came with the launch of Apple’s first iPhone in 2007. It kicked off the smartphone revolution, putting advanced technology into the hands of consumers and fuelling an explosion of innovation.
Before the smartphone, we accessed technology via desktops and laptops at work and home. We had to sit down for it. Today, the power in our pockets is far greater than those desktop computers and as a result technology has become ubiquitous. It is tightly enmeshed in both our private and work lives.
This has had a major effect on banks’ strategy and business models. The “IT department” is no longer a support function: it is core to the business. The level of knowledge and understanding of the fintech landscape at board level has a direct impact on the decisions board members make, which in turn affect operations, revenues and profit. The options are many and the outcomes critical.
A bank looking at how to reduce lending risk, for example, has a plethora of technologies to choose from, each using different combinations of data points. Traditionally, a customer looking for a loan would fill in a form noting income and spending before receiving a decision. Today, that information can be supplemented by technology drawing on many more data points – credit scores, which are fed by their own data points, psycho-analytics and surveys, even peer-group analysis. And it’s the same story for every other element of banking, creating a complex matrix of choices that result in different customer experiences, cost models and value decisions. These decisions are so integral to the success of the business that leaders cannot delegate them.
Some of the burden of this knowledge-sharing must fall on tech teams. They can’t work in isolation. They need to be able to explain the business benefits to the leaders, the trade-offs of saving money versus the speed and agility of the different options for each business line. Having leaders schooled in at least the basics – or better, having a chief technology officer on the board – makes the conversations easier and more meaningful. It helps the decision-makers grasp that while an approach that is quicker but limits flexibility is fine for one area where the pace of change is slow, it is inappropriate for another where change is swift.
But the benefits of understanding tech aren’t limited to better business decisions. As the role of technology has changed within a bank, affecting every department from compliance to treasury to payments, having leaders with a good grasp of it informs the culture. Leaders who can talk tech will engender a more sympathetic atmosphere and create closer bonds between departments as they better understand each other’s challenges and successes. It’s a demonstration of respect that will lead to better outcomes.
So while today’s bank leaders don’t need to be programmers, they do require a thorough understanding of the advantages and drawbacks of tech and how different trade-offs play out over the short, medium and long term. Those that do will make better decisions and are more likely to inspire a culture where everyone understands each other that little bit more.
Eugene Danilkis
Co-founder and CEO, Mambu
