Agile in Banking: Reshaping Financial Landscapes

According to 33% of respondents in a global survey by Statista, Agile methodology is being used by their business to enhance data modelling and visualisation. Even today's majority of banks are constrained by a physical branch distribution strategy, making them equally susceptible to competition from internet firms as the retail sector was.  

It's crucial to understand that digital transformation doesn't just offer users online banking. High-tech invaders have already attacked numerous retailers and other companies. They had also put forth their bold (but delayed) attempts to digitise by establishing an online presence.  

Although the real change comes from within, the success of technology companies today (and the best hope for banks' future) depends on redirecting Agile development in banking — not to strengthen the organisation, but to adapt to the consumer. The entire business process must be transformed to make change an essential component of this process. The agile technique answers. This blog will discuss the value of Agile in banking. 

Table of Contents 

1) Is Agile only for IT?  

2) Why is the Agile Operating Model Relevant for Banking?  

3) How does Agile in Banking Work in the Real World?  

4) Does Agile follow a Customer-Centric Model? 

5) How can Agile Pay Off?  

6) Conclusion

Is Agile only for IT?  

To remain competitive, financial institutions must adopt the same data flows and project management practices as software development companies.  

The adoption of Agile in banking organisations is the primary driver of digital transformation in the industry. This holds for the well-known software product development process and the entire organisation to accomplish business objectives more quickly and effectively.  

Agile development is the iterative method of producing and testing products rather than waiting until the finished project is delivered, which has long been the standard in the Silicon Valley tech industry. Issues may be dealt with more quickly if they arise or modifications are required at any point. And with less impact than disassembling and rebuilding a finished product completely. Agile principles allow businesses to adopt a transparent, data-driven methodology and conduct continuous testing and learning, unlike "waterfall" development, which involves delivering a completed product before testing. By offering a minimum viable product (MVP) that satisfies user needs and is adaptable right away, this method also aids in speeding up time to market.  

According to a McKinsey & Company analysis, "Agility is the most crucial means of execution for digital transformation." Agile methodologies, according to McKinsey, can boost decision accuracy and product development speed by five times.  

Initiatives like hackathons, ideations, or immersive learning experiences based on the principles of failing quickly, emphasising cross-functional collaboration, help firms remain ahead of the innovation curve.  

Agile approaches aren't just limited to IT-related projects in the banking industry. Agile business methods may help banks across the board, especially in customer service, wealth management, and marketing. 
 

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Why is the Agile Operating Model Relevant for Banking?  

The Agile business model in banking is relevant because of the industry's rapid rate of change. Banks must immediately alter their operating procedures and priorities. The banking sector is likewise rapidly digitising and faces increased competition from pure digital businesses.  

Furthermore, banks have become highly functionally divided and complex, especially in light of regulatory changes and the variety of channels. Agile is a methodology for streamlining processes and increasing responsibility at the front-line level.  

Moreover, "Agile" reduces the risk associated with your strategy's digital component. After experiencing significant and costly failures, banks have been attempting to "value assure" the outcomes of massive IT programmes for years. The perspective has changed now as they encounter different challenges in agile implementation and overcome it bu streamlining their work process. It is impossible to plan everything before you start and describe the content of a five-year project right from the start because the market and customer behaviour are changing quickly. An Agile strategy enables banks to address customer journey pain points in a micro way and build on these changes gradually.  

And to support such a radical idea and change, you must be adaptable, and your organisation must be capable of fast reconfiguring itself. Additionally, Agile enables you to rewire your DNA, be nimble and put your customers' needs first.  

Since talent is a crucial component, banks know they need excellent digital and IT talent. Still, they are not considered ideal employers for this upcoming talent pool. Banks must become less bureaucratic and chained to rules and regulations. These characteristics of an Agile organisation should be pleasant places to work where brilliant individuals are empowered, can progress professionally, and are mentored for more excellent performance. 

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How does Agile in Banking Work in the Real World?  

Agile is still a relatively new concept in the banking industry. Banks' access to their data is complex, compared to many of their new tech competitors, because of the prevalence of internally designed systems, mergers and acquisitions, and outdated core platforms. The chance to experiment with Agile software development methods is beginning to present itself as time passes and legacy systems are replaced by new media created in more contemporary languages.  

One instance is BBVA Compass, which has claimed to use Agile practices. BVA now uses agile to produce 60% of its software. The bank has already decreased the time required for development from two years (using a waterfall model) to no more than six months. 

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Does Agile follow a Customer-Centric Model? 

Agile methodology's emphasis on meeting customer demands rather than just creating goods and back-end technologies is one of its core principles. The first aim is to enhance the customer experience throughout all connections.  

Flexible banking service is focused on the client experience. Before considering what is best for the financial institution, the organisation should consider what is best for the consumer.  

JPMorgan Chase & Co., a global financial services company serving over half of American households, adopted Agile methodology in banking to undergo a digital transformation. With the primary goal of enabling the delivery of highly tailored, real-time experiences that customers increasingly anticipate, they strongly emphasised satisfying the customer's needs. The business highlighted the key areas where clients depend on Chase's digital services in their day-to-day activities. Better choice, security, business simplicity, and personalisation are the four pillars of the consumer experience.  

Because of the depth, accuracy, and intimacy of their client data, banks possess a considerable competitive edge. Agile enables the quick and flexible development of applications that exploit such data by utilising advanced analytics. At crucial times in the customer journey and significant life events, this strategy helps engage customers with more innovative products. Banks may show that they understand their clients by continuously developing and improving such customer-centred goods. Recognise their needs and suggest the best offers at the right time. 

How can Agile Really Pay Off?

Banks with Agile processes roll out new services and products considerably more quickly. They also find and implement cost savings more quickly. Consequently, customer ratings rise. The effect could be remarkable- 

1) A financial services company with headquarters in the United States reduced the time needed to test new features by 70% and to introduce them by 55%. Product development costs decreased by 40%

2) A major U.S. mortgage banking services provider decreased the time it required to launch new product features from an average of 3-6 months to 6-8 weeks, a reduction of up to 75%. The percentage of users who used the additional features increased from 50% to 87% as well. Expectedly, the organisation received higher ratings in the JD Power consumer study

3) After implementing Agile methods, a large international bank created a digital channel for customers who desired a mobile-first experience, cutting the cost of customer research by 94%. Furthermore, it shortened the average time it took for customers to register a new brokerage account by 75% and the time it took to execute payments by 60% 

Conclusion

Agile in the banking industry is simply one path toward digital transformation. The Knowledge Academy's Agile Training Courses can help you earn an Agile certification that can open doors to opportunities in the field of project management and help you land your dream job. To understand why and how traditional financial institutions of all sizes are making this transition, check them out now!

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