The “virtuous digital banking cycle”: Why and how to go digital if you’re a bank.

April 29, 2019

Industry news can be grim reading. The strong are eating the weak with news of a dozen merger talks happening in the GCC alone. Large technology players are aggressively formalizing attack vectors or have launched payment plays that are taking share of wallet. They are helped by the fact that GCC populations are young and open to having financial services relationships with actors who are not legacy banks. Meanwhile looking at banks that have tried to innovate and go digital also makes for sober reading. The region is full of digital projects that have flattered to deceive, costing a lot of money without delivering intended benefits. Meanwhile the pressure from the board to bank management to have a digital roadmap and start executing on it is increasing. The consequences of disruption in banking services have already arrived. The question is how can banks unlock the power of digital banking to realize the opportunities that come from this disruption.

The Aion Digital “virtuous digital banking cycle” helps here. Inspired by Jeff Bezos’ flywheel that he used to explain what was powering Amazon, the cycle is a seamless business model which explains how digital banking can augment legacy banking to power the ultimate goal of digital transformation: Customer centricity that results in growth.


Digital banking combines with experience design and AI to result in better products and services which provide a better customer experience. This results in accelerated customer acquisition and cross sell validating the investment in digital banking which then continues the core cycle. There is a secondary cycle that leads from Digital banking. This uses Open API banking to create FinTech partnerships that result in demonstrated results. You not only get better products and services, but you get to provide financial services at a lower cost allowing you offer lower fees further powering the customer experience.

A word about the core cycle

The core cycle revolves around growth because that is the ultimate objective and greatest creator of value, but it is powered by an obsession with the customer. We have always defined digital banking as the use of disruptive technologies in banking to become customer centric to achieve value. This is important because disruptive technologies are a weapon and like any weapon they need to be aimed. Experience design and design thinking help us aim these weapons and give us the insights to make the brand shine. They help us appeal to younger customers. They help us identify use cases against which we can run data wrangling, data engineering and data science sprints to identify best way to serve customers using application of disruptive technologies. Of all disruptive technologies AI has the greatest power to transform across Front Office, Middle Office and Back Office. Augmented reality, Blockchain and IoT will also grow in importance but these will also be made more powerful with AI. AI is increasingly the base layer for disruptive technologies in financial services and should be treated as such.

Open banking powers the secondary cycle

Banks and indeed FinTechs need to get rid of the mentality that they are adversaries. The most powerful opportunity to create value in financial services today is FinTechs and banks working together. Banks are often hampered to innovate because their culture is product centric and management will not support innovation. Decades of orienting a bank around increasing compliance and regulation has also created time sinks for large numbers of employee hours. Where FinTechs can help banks is by becoming channels of innovation, both by sharing insights on how customer segments can be targeted and by helping create products and services that delight customers. Banks also have massive advantages. They have trusted brands. They have unparalleled geographic reach. They have incredibly valuable historic data and they know how to navigate the minefields of regulation and compliance. Banks and FinTechs together can create amazing experiences for customers and lots of value for each other.

At the heart of this alliance of value is Open API Banking. Open API Banking makes it much easier for FinTechs to leverage core banking transactional capabilities allowing them to work with banks to create incredible user experiences via products and services. These are done cheaply and quickly. This means Open API Banking allows banks to do three things: 1. Offer better products & Services – 2. Respond to market dynamics quicker yet cost effectively and always be a leader in offering new products and services – 3. Build stickier customer relationships with customers that are more engaged. Customer experience is thus dramatically enhanced. Customers get seamless financial services experiences while the cost to achieve those experiences is with lower fees.

Being Digital means being relentless

What this cycle means for banks will be personalized on their size, their positioning and their strategic priorities but one thing this cycle should enforce is the notion that digital banking is as relentless, as disruption in financial services is pervasive. It is not a project. It is a constant state of mind actioned by an unrelenting focus on the customer and measured by the success metric of growth. You don’t need to have a “can’t fail”, multi layered comprehensive plan before you get started. You will learn valuable lessons about the limits of culture and the power of collaboration as you go on this journey. But you must start.

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