" class="no-js "lang="en-US"> EXCLUSIVE: "If you’re gonna do it, do it right!" - Ayaz Haji, Credit Suisse in 'The Fintech Magazine'
Wednesday, February 08, 2023
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EXCLUSIVE: “If you’re gonna do it, do it right!” – Ayaz Haji, Credit Suisse in ‘The Fintech Magazine’

Digital transformation is no longer a technical challenge for banks – it’s a cultural one. So let’s start by making them great places to work for engineers, says Ayaz Haji, Chief Data Officer & Head of Data Engineering at Credit Suisse

Technological innovators in the business arena now stand on the shoulders of software giants. Cloud computing has enabled the work of engineering organisations to be more focussed on the top layer of the tech stack, spinning up MVPs (minimum viable products) faster than ever, with intentional abstraction of the layers of hardware and operating systems below.

This means that while developers still don’t know everything about technology, in many instances they don’t need to. Developing technology is no longer a challenge in itself for the financial sector. Just witness the explosion of innovation across the fintech space. The real challenge continues to lie in the clichéd term that is ‘digital transformation’. For the purposes of this piece, we can define digital transformation as the digitisation of all processes within an organisation.

For neobanks, this is a default way of working and, hence, second nature. However, for incumbents, it is determined by the culture of a financial institution and its willingness to embrace change. Having worked on technology within major financial institutions for two decades, I’m acutely aware that banks aren’t stuck in the analogue age, and have successfully adopted digital tools in multiple areas, particularly in high-volume/liquid markets where the business case has neatly aligned.

The problem with technology is that it doesn’t wait for you to catch up. As banks continue to become Cloud-native at their own pace, tech companies are already grappling with the next iteration of the software which is being driven by Web 3.0. What I’m talking about here is how banks can seize the initiative as the next generation of banking approaches, emerging alongside the next generation of the internet.

To prepare for this coming wave of innovation, banks need to adopt a brand new approach to technology that learns from what they got wrong before: a digital transformation 3.0, if you like. People is a great place to start. At the beginning of my career, it wasn’t difficult for banks to attract top engineers. There wasn’t a UK tech industry to poach them, and even Silicon Valley was nowhere near the scale it has now.

Today, though, engineers have choices: they can work in a global tech firm, in a startup, or on their own projects. Financial institutions need to recognise that these alternatives are often more relatable to engineers than working in a bank.

Unlike startups, banks can’t offer stock options with the same potential upside. Unlike tech giants, they’re unlikely to be able to offer engineers the opportunity to work on groundbreaking technology.

But, in my view, banks can still coax great engineers away from tech giants and the nascent fintechs by implementing their own hybrid incentive structures. At the moment, most banks reward engineers with a bonus at the end of the year. Adopting a bonus structure similar to mature neobanks, where engineers work towards short-term, project-by-project bonuses, would give engineers at incumbent banks a more direct sense of momentum and purpose, both of which can often get lost in a large organisation.

Engineers are well compensated in a number of industries, and providing them with day-to-day happiness and fulfilment can help prise them away from the plethora of alternative options. Incentive structures are key when thinking about the types of technologists an organisation wishes to bring in. I separate engineers into two categories: operators and innovators. Operators like to work on clearly defined problems. They’re comfortable following instructions and appreciate black-and-white choices.

“Banks need to recognise engineers of all stripes, in their job titles and career paths, to help them feel valued for what they bring to the table”

Innovators, on the other hand, work in the grey area of problem-solving and tend to thrive when they’re given the freedom to create solutions of their own. Both operators and innovators are essential within large organisations, but banks are increasingly attracting operators, while innovators seek more stimulating opportunities elsewhere. The result of this imbalance can be a skew away from creativity and towards stagnation.

Digital transformation 3.0 will surely require creative solutions.

Jamie Dimon’s announcement that JPMorgan Chase would be investing $12billion in the bank’s technology could be read as a bold move to address this, or is it the inevitable result of years of technical debt? In today’s big banks, a significant proportion of engineers are presiding over layers upon layers of legacy software and a large amount of effort is spent on keeping the lights on, not developing new products. Over time, this extensive, knotted back end becomes crippling, and Dimon’s huge innovation war chest might well be a sign that the bank is looking for a more sustainable approach to digital transformation.

What will be interesting is whether the additional spend comes with an evolved incentive and organisational structure. That brings me to team structure. One problem I’ve seen, time and time again, is that projects aren’t resourced with the right skill sets to adequately complete them. Senior bankers currently tend to see tech workers in a binary way: you’re either a techie, or you’re not. Recognising that software projects require developers, UX (user experience) designers, product management and data scientists will help banks put together the right teams to drive change internally. Holistic teams do, of course, exist, but I’ve also seen teams that aren’t even aware of what a UX designer is. As a result, some projects still go into production without any UX at all, with the teams behind them – and customers – taking the hit.

Banks need to recognise engineers of all stripes, in their job titles and career paths, to help them feel valued for what they bring to the table. It also would not be crazy to align the incentive structures mentioned earlier to multi-disciplinary teams rather than to individuals. You could argue that major financial institutions should down tools and leave the innovation to the fintechs, where all of this is second nature. It’s true that, in my 20 years in finance, I’ve seen the ‘build-versus-buy‘ binary evolve into a seemingly more clear-cut ‘buy-versus-buy’ logic.

But procuring technology comes with its own headaches. The sheer choice on the market is overwhelming.

Big bank procurement managers end up rushing off in all sorts of directions, enticed by the claims of vendors, before encountering the inevitable integration issues that
come from bringing in external tech. Engineers are then bogged down with plumbing in new products, cutting corners, which inevitably plays into vendor hands as external products become tightly coupled.

Software-as-a-service theoretically helps with this, however a healthy marketplace of swappable, Cloud-based software products is yet to materialise due to proprietary API specs and data models. This is by no means an issue that only afflicts banks. Digital transformation will always see powerful technology misapplied precisely because it’s so new to the people who procure and use it. But banks can learn from their past missteps.

It’s possible to conduct procurement more soberly, with careful consultation between leaders and technologists, service level agreements with vendors should also, arguably, be evolved to be machine readable and more directly enforced; smart contracts in this space will help align incentive structures and create fertile ground for healthier partnerships across organisations.

The solutions I’m proposing here might seem straightforward and limited, but they are some of the necessary changes of approach that will only gain traction in banks that are able to fundamentally adapt their way of working. Such changes have to come from the top, which is why banks should seriously consider putting a technologist, such as their CTO, on the board. Examples of this can be seen at UBS and Credit Suisse, where Mike Dargan and Joanne Hannaford sit on the executive boards. Doing this sends a message of intent across the institution, promoting the voices of engineers and an engineering viewpoint to the top table.

It’s no surprise that banks are being careful about changing their cultures. To date, it’s been their secret sauce and, in many cases, the foundation for decades of success. But without seismic cultural evolution, financial institutions are at risk of being left on the platform as the innovation train steams by.

It’s clear that there are huge opportunities for banks to capitalise on the emergence of Web 3.0. They’ll just have to throw some innovative ingredients into their secret sauce to realise them


This article was published in The Fintech Magazine Issue 25, Page 84-85

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