Nicolás López: Manage for Glory or Manage for Cash?



As banks rush to develop digital capabilities, they often overlook their general strategy. The most successful strategies, digital or not, are founded on current strengths. Nicolás López, a partner in the Financial Services practice, discusses four ways banks can differentiate and use digital to enhance their strongest capabilities.

Read the Bain Brief: Retail Banks—Manage for Glory or Cash?

Read the transcript below.

NICOLÁS LÓPEZ: We see most of the banks today rushing to become digital, to transform their organization, their channels, their value proposition, in order to become digital. But we don't see most of the banks thinking on their general strategy before thinking of digital. So what we have discovered is that the truth is that successful strategies are very much related with your current strengths.

So it's not to follow what others are doing or the fashion about digital or fintechs, but to understand what do you do well and to build upon that. We came up with four different buckets. The first one is very much related with the relationship with the customer, what we call the relationship master.

If you have been able to become number one or number two in terms of generating a unique customer experience in the market, that's really difficult and challenging in this environment. Just stick to that. And don't worry that much in terms of digitalizing everything, but do protect the differential assets.

And of course, you have to become digital, let's say at threshold, but don't forget about what you build during years. Because this is going to be business for the future. Because the customers continue to value the way you treat them. That's part of the secret sauce of the fintechs. 

Number two is what we call back-end utility for those banks that are really good and have everything ready with operations, with processes, with the factory, with a very good cost-to-income ratio, with really quick time to market. Just protect that, because you could be perfectly serving other banks, other fintechs. They have the front line. And you are the factory. And this could be a really profitable business. And all the fintechs will need it, because they don't know how to do this higher banking. For example, underwriting.

Number three is to protect your unique business. So if you are a retail bank, if you are a generalist, but you are really good in private banking or SME banking, for example, or corporate banking, just build up on that and partner with others for the rest of the value proposition. But just protect what you're good at, because I'm sure that you have the things needed to succeed there, and then use the others to generate a compelling value proposition.

And the fourth one would be, of course, you can transform your business, you can become a digital bank, you can compete with the fintechs face-to-face, but you need the willingness of the organization; you need, I would say, almost all of the above: very good customer experience, very good cost-to-income, bargain platform, and you need tools in order to do that.

But that is not the only way. It's not the only way to transform yourself into a digital bank; there are other alternatives as we explain it. And of course, it's something that banks don't [want to hear]. But you could manage a bank to be sold. If you realize you are not a master of customer experience, you are not a master on cost, you don't have time, money, effort to transform the company into a digital company, I'm sure that someone will pay decent money for your bank, for your brand, for your customer base, for a lot of things. Thinking of your shareholders, that would be another alternative. 

In summary, your strategy should be based on your current strengths, on those things you do in a different manner where you are unique. And then to link digital in order to reinforce that differentiation, but not to put digital on top of everything.

Read the Bain Brief: Retail Banks—Manage for Glory or Cash?