How banks can effectively leverage new tech to get ahead of the competition
In the fiercely competitive world of banking, technology has rapidly become the cornerstone of differentiation and success. Bain & Company's recent analysis of the banking sector underscores this reality with compelling clarity. This blog delves into the insights from their research and examines a case study of Kleinwort Hambros Bank's (KH Bank) innovative use of blockchain technology to enhance customer experience, internal control and governance.
Overview of Bain & Company’s latest research on the role of tech in banking success
Banks are no strangers to the winds of digital change. They have been employing technology to carve out competitive advantages in various ways: modernising platforms, enhancing digital customer experiences, deploying advanced data analytics, and integrating new forms of AI. Recent research by management consulting leader Bain & Company underlined this trend, linking technology with cost reductions, increased investment capacity, and, ultimately, a better customer experience and improved financial outcomes.
For the study, Bain & Company dissected the operations and strategic choices of 42 of the world's largest banks, scrutinising a multitude of variables from board composition to technological infrastructure across three key dimensions: shareholder return (TSR), cost-to-income ratio (CIR), and Net Promoter Score (NPS). The findings of the analysis revealed that tech-savvy banks boasted 5% higher TSR, 10% lower CIR, and 12 points higher NPS on average, proving a strong correlation between technology focus and high performance.
The analysis further recognised the following three key factors that seem to have particularly contributed to the winners’ success:
Tech-focused boards: High-performing banks have boards that see technology as a strategic linchpin rather than a support function.
Larger in-house engineering team: Building a strong in-house tech function with a higher number of engineering talent than other IT staff allows leaders to have greater flexibility where it’s most needed.
Technology company mindset: Top banks embrace a technology-centred operating model.
Among the research “winners” were BBVA, DBS, Capital One, and JPMorgan Chase who emerged as regional leaders, with tangible results from their tech-forward strategies. They have managed to lower their cost-to-income ratio, increase their total shareholder return, and improve their Net Promoter Scores, all indicators of their commitment to technology as a strategic lever for growth.
Paths to technological dominance in banking
Bain & Company's research outlines several strategic trajectories banks can adopt to harness technology effectively:
Simplification to reduce costs: Banks like Santander, for example, have chosen to streamline their products and processes, investing in technology to enhance productivity and lower costs.
Leveraging emerging tech and data: JPMorgan Chase is an exemplary case, investing $14 billion in tech in 2022 alone, with a significant chunk dedicated to data and AI capabilities.
Becoming a technology powerhouse: Capital One’s cloud-first strategy embodies this route, showcasing a bank transforming into a tech company.
Starting afresh: Some banks opt to launch new, tech-driven offshoots to innovate faster than their legacy systems allow.
These strategies emphasise that technology should not be merely a tool but a fundamental component of modern banking.
Kleinwort Hambros Bank transforms signatory management with blockchain technology
Kleinwort Hambros Bank provides an illustrative example of technological transformation through blockchain. By integrating Cygnetise's blockchain-powered application, KH Bank addressed a number of critical challenges in managing authorised signatory lists, such as version control issues, auditability and operational inefficiency.
The blockchain solution
Amanda Collins, Head of Corporate Governance and Accountability at Kleinwort Hambros, spearheaded the initiative to find a streamlined solution for managing authorised signatory lists. And she discovered the answer in Cygnetise’s blockchain-powered application.
Impactful outcomes
By implementing Cygnetise, Kleinwort Hambros Bank achieved some major efficiency gains like:
95% reduction in processing time: The time taken to maintain and update signatory lists saw a dramatic decrease.
Automated record-keeping: The system maintains a clear audit trail with automated timestamps for each action enhancing security and control whilst lowering the risk of fraud and contract disputes.
Enhanced shareability and visibility: Lists are now easily shared internally and externally, facilitating key business processes like transaction management and improving the bank’s overall customer experience.
Searchable and easy-to-navigate database: An easily navigable golden-source database of signatories and permissions enhances operational efficiency with minimal training required.
Embracing the future
The takeaways from Bain & Company’s research, combined with Kleinwort Hambros Bank’s success story, create an indisputable argument for the banking sector's continued investment in technology. The right technological choices can lead to significant performance gains, provided they are implemented with a clear strategic intent and an understanding of the organisation’s unique needs.
For banks looking to navigate the digital transformation landscape, the message is clear: Embrace technology not just as a tool, but as a fundamental aspect of the business model. As banks like Kleinwort Hambros demonstrate, with thoughtful implementation, technology can drastically improve not just customer experience, but also governance and internal control, creating a more agile, efficient, and future-ready institution.