Technology investment is crucial for banks
Unusual circumstances are changing the equation for banks and technology. Our research report, Boosting the Boardroom’s Technology Expertise, finds banks increasing their technology investment. Why? in part, banks are looking to enhance their resilience and efficiency. But increasingly, they need technology to address changing customer demands and drive growth.
Banking customers prefer the seamless, high-quality, hassle-free service the right digital tools can enable. The COVID-19 pandemic has only heightened customers’ interest in interacting digitally. For example, before the pandemic only 15 percent of customers used video calling, while 46 percent are now ready to do this when banks reopen—and 35 percent prefer this to face-to-face.
Banking executives get the picture. Nearly four in five see a need to dramatically reengineer their technology-people interactions to achieve a more human-centric approach. Banks are leveraging technology such as cloud to boost service levels and accelerate offer development.
But as they increase their technology investments, banks face a key question: Does their board have the digital fluency and expertise to assess and support these new solutions?
Missing: Tech-savvy bank board directors
Banking personnel and executives see value in rapidly increasing their digital technology investment. What’s missing, though, is technology expertise at the board level.
Some banks do have high-profile technology experts on their boards, but these are the exception rather than the rule. Our research finds only 10 percent of banking board directors currently hold or have previously held a technology role, or a senior role at a technology company. Among those with tech expertise, roughly a third are women.
These numbers are low, but we’ve seen improvement since we first conducted this research in 2015:
This progress is good, but slow. We believe banks should aim for technology expertise in at least 25 percent of its board directors. But at the current pace, most won’t reach that goal until the end of this decade.
Why does the board’s technology expertise and digital fluency matter?
- Without it, banks could make mistakes in developing their digital strategy, evaluating potential vendors or rolling out new systems.
- Lacking coordination from a tech-skilled board, different business units might choose different—and incompatible—technologies.
- Further lessons learned might not be shared from one business unit to the next.
Technology risk is on the rise, so banks cannot afford to be guided by boards that lack adequate technology expertise.
Building bank boards’ tech proficiency
Banks can take steps toward upskilling to build a tech-savvy board, better positioning themselves to respond to new consumer demands in the post-COVID era. Here are actions they can pursue:
Banks with tech-savvy, digitally fluent boards are better positioned to avoid the risks inherent in new digital technologies. But even more importantly, they are equipped to maximize what technology can offer, to deliver valuable customer experiences and profits for the bank. Read our report if you’d like to learn more about building technology competence and raising the tech savvy of your bank’s board.