Digitizing the Banking Sector Takes a Step-by-Step Approach

In recent years, financial institutions have grown increasingly comfortable digitizing and moving to a paperless model. In this episode of Mastering Innovation on Sirius XM Channel 111, Business Radio Powered by The Wharton School, guest Nathan Snell, Chief Innovation Officer at nCino, discussed his company’s approach to resolving major inefficiencies with cloud-based banking software.

One of the largest inefficiencies within the U.S. banking sector is that banks can have anywhere from five to thirty different operating systems, which makes it difficult for them to keep up with the pace of digitization. nCino allows these financial institutions to aggregate their data and communications into one platform to become more efficient, transparent, and secure. This transition is not easy, particularly given the regulatory and risk-averse nature of the industry. Snell explained that the key is to introduce a phased approach, rather than packaging innovation as one big step or a sudden revolution. This approach allows the organizations themselves to learn how to evolve as well.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Transcript

Nathan Snell (Chief Innovation Officer, nCino)

Nicolaj Siggelkow: In financial services, but also in a lot of other industries, there seems to be two opposing forces in terms of how to think about our customers. One is this idea of, “Let’s give our customer, the end customer, more and more data to help him/her make better decisions.” That’s the empowered customer. I now have access to this information, I have decision tools, and now, I can make decisions.

On the other hand, you have the, “Oh, let’s just try to make the life of our customer easier by doing things automatically for the customer.” Let’s call it the pampered customer. Where’s the right balance here? On one hand, it’s empowering. On the other hand, it’s just, “Do it for me.” Where do you see this going?

Nathan Snell: A lot of it is going to depend on the industry and the problem that you’re solving, understanding the two personas that you brought up. I do think that even above that, as a people, we tend to have an emphasis on convenience. Uber has proven that very well. Netflix has proven that well: while, yes, we want information, and there’s research that is often done, at the end of the day, once we have that information, we still want that process to be convenient and as fast as possible.

“You’re already putting in your time, and you want the net satisfaction of having been right and knowledgeable, but also getting what you want quickly.” – Nathan Snell

In some cases, I wouldn’t necessarily say that those two categories are mutually exclusive. There’s a benefit as there’s a group of buyers, if you will, or people that are going to do that research, but once they have that research, they still want the convenience. You don’t want to get that information and have to go through a slog to try to ultimately get what you want. You’re already putting in your time, and you want the net satisfaction of both having been right and knowledgeable, but also getting what you want quickly.

Siggelkow: Interesting. As you are talking to banks, trying to convince them to reorganize to a certain extent and at least restructure their data systems, what have you seen as the biggest obstacles for banks being able to implement these kinds of systems?

Snell: Some of the biggest obstacles that we see with financial institutions when it comes to taking on a system like ours or going down this innovation path, honestly, tend to be time and making sure that path and that journey are organized. As a whole, at least in my experience, most institutions, especially in the last couple of years, tend to be more progressive than one might think, especially as we think about banks traditionally. That’s why you package it in a way that demonstrates that you know where a bank wants to go, and you give them a nice staircase of innovations they understand. They may think they’re on step number three when they’re really on step zero. It’s saying, “Hey, let’s bring in reality in understanding where we are.” Don’t try to reorganize your entire operating model on day one. Let’s start with a particular sliver, then get that rolling very well and get that proven, so that way the organization itself can learn how to change in a different way that it may not be quite as accustomed to.

“You package it in a way that demonstrates that you know where a bank wants to go, and you give them a nice staircase of innovations.” – Nathan Snell

Siggelkow: Interesting. It’s similar to how you would probably try to onboard end customers into these systems. You’re trying to onboard your internal customers within the banks to these systems. Slice per slice.

Snell: Absolutely. To your question, right, a lot of it is personality-driven. You see innovation and the challenge that it has in any industry. While there are natural barriers in terms of purchasing things from a pure innovation standpoint, you need to be making sure the risk and everything else is well understood, and then that path is clearly defined.

Siggelkow: Is there something particular to the banking space that makes it easier or more difficult?

Snell: Banking, compared to some other industries, tends to be more difficult, just given the regulatory environment. Traditionally, those banks that succeed best are often those that are most risk-averse. Historically, folks tend to associate innovation with risk – and not necessarily wrongly so. That’s why I say we spend a lot of time decoupling to say innovation isn’t necessarily always risk.

“Folks tend to associate innovation with risk – and not necessarily wrongly so. That’s why we spend a lot of time decoupling to say innovation isn’t necessarily always risk.” – Nathan Snell

What is risky is to go from 0 to 100. That gets you to innovation, but that jump can certainly be risky. There’s a lot of risk in not taking the appropriate steps. But, given that banks tend to be in the business of reducing risk, that’s how they stay in business. That makes it somewhat more challenging than, say, the retail space.

About Our Guest

Nathan Snell brings a deep breadth of technology expertise and experience to the team as a founding member of nCino. As director of product development, he leads the development team and is responsible for the entire nCino Bank Operating System product and cloud-based banking platform. Prior to nCino, Snell served as system architect and product manager at Live Oak Bank, the nation’s third largest originator of small business loans, and as vice president of technology for National Speed. Snell could delve into the Future of Banking and what banks will need to do to keep pace.

Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.

Somina Lee is a Production Assistant for the Mack Institute’s radio show, Mastering Innovation. She is a junior in the Huntsman Program, concentrating in Finance and Marketing & Operations Management at the Wharton School and majoring in International Studies in the College of Arts & Sciences.