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Building a digital bank from the ground up

Identifying the problem statement your bank is solving

Riddhi Dutta

Riddhi Dutta,
Regional Head for ASEAN & India at Backbase

In our brand new Top Banking Transformation Case Studies ebook, we detailed how we’ve helped banks on their digital transformation journey. Since I interact with banks across the region and of various sizes, I will be sharing my perspective on the actionable insights banks can take from these success stories.

The first chapter highlights the ground-up development of new digital banks and the strategic areas that leaders should focus on.

Identifying the problem statement your bank is solving

Rather than thinking about what products sell best, banks should strive to understand the problems that users are facing, and develop solutions targeted at resolving those pain points.

As a new digital bank, what is the problem that you’re trying to solve? If we look at Revolut, they started off with travel currencies and travel cards. Another success story is the Coconut app in the SME space, who were simply trying to solve an accounting problem. In both cases, they became successful by trying to solve that one problem statement.

In the case of ila Bank — the first cloud-based, digital, mobile-only bank in the Middle East, and the greenfield spin-off of Bank ABC — the idea came about when Bank ABC, a traditional wholesale bank, was looking to expand into retail operations in a disruptive manner. What was missing in the market is a banking service that catered to the Gen Z and millennials, where the median age at Bahrain is 32.5 years old. Just a year after launching, ila bank surpassed their KPIs — including cost-per-acquisition and number of deposits — was 4.5x higher than they even expected.

Choose the right partners that share the same vision and commitment

“Should you build everything on your own or is there a shame to partner up and build a technology stack?” – This question from a Fintech News Network webinar audience member has been stuck in my mind.

While technology is a key enabler, it is difficult for banks to keep up with innovation. That’s why it’s important to keep a close eye on partners that are committed to investing in the latest technologies and are able to equip your team with agility and scalability. This will ensure your bank is always future-proof and on top of the tech stack game.

In UNObank’s example, they’ve pieced together a powerhouse technology stack of ecosystem partners like Backbase , Amazon Web Services (AWS) and Mambu. We have seen banks thinking about build, and others thinking about buy. A hybrid model like UNObank – where you can do things in a composable manner as Lego building blocks – is an option.

Focus on what your team is good at and build your ecosystem with the right partners. By bringing together the competitive edge of your partners, you will only have to focus on delivering the end solution. This will hugely move the needle for your customers.

Shoot for the stars while staying grounded

What is your Minimum Lovable Product? No matter how ambitious your plans are, avoid trying to do everything on day one. With UNObank, we spent more than two weeks with their leadership team to design their Minimum Viable Product. Though the team was bombarded with questions, they better understood what their launch product should look like based on market trends and user feedback. Instead of rushing any regional plans, DigibankASIA selected the Philippines to pilot the launch of UNObank.

Getting started – The 4 questions to ask yourself when embarking on a digital transformation journey

With every bank, we get into a consultative discussion by asking them 4 key questions.

One, as a bank, how do you distinguish yourself from others? What is the problem statement are you trying to solve?

Two, are you focusing enough on your customer? Are you taking an outside-in approach instead of an inside-out approach?

Three, from a business perspective, how are you looking to scale up? Have you considered the aspects of reusability, repeatability, plug and play and flexibility?

Lastly, how are you looking to sustain this journey? Are you future-proofing your technology stack for the next 5 to 10 years?

We’ve seen successes when banks take these questions into consideration. When you take an outside-in approach where you focus on what your customers want, your products will automatically start getting sales. For myself and my team, we always ensure that the right fundamentals are in place and these 4 questions are the fundamentals that we start with.