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Thought Leadership Paper

Written for Temenos

The Digital Bank: Agile, Responsive and Customer-Centric

By Dharmesh Mistry

Chief Digital Officer


The most successful banks in today’s marketplace take a specific approach to their business, consistently striving to provide experience-driven banking. They focus not only on conducting financial transactions, but also on providing products and services that improve a customer’s life and support their goals. They move from being simply transaction providers to trusted advisors.  


But the ever-changing customer ecosystem makes delivering that service a daunting challenge. Customers want to consume services where, when and how they want them—usually on their mobile device of choice—and they expect  online banking offerings to be completely personalized, to be available through non-traditional sources, and to include suggestions for new products that might be of interest.

“A world-class digital banking experience will be driven by more intuitive, empathic and intelligent delivery of products and services.”



The current stringent regulatory environment for banks adds another challenge. Issues such as customer data ownership, technology platforms’ liability for customer protection, alternative sources for risk capital, and cyber risk management make compliance not only essential for avoiding penalties, but also for controlling costs and outpacing the competition.

Today’s financial institutions walk a precarious tightrope: They must be adaptable to satisfy rapidly evolving customer demands while maintaining the discipline to adhere to stringent regulatory standards. How can they create business processes that successfully execute both tasks?  

Agility Is the Key

To maintain the flexibility to provide excellent customer service and achieve regulatory compliance, a bank must be agile, able to respond promptly to all aspects of the demanding business environment.


Jack Welch, the former CEO of General Electric, advocated for business agility 20 years ago when he said, “If the rate of change on the outside exceeds the rate of change on the inside, then the end is near.”

“Long-term sustainable growth in the banking industry seems only possible with a radical departure from a sales- and product-obsessed mindset to one of genuine customer-centricity, and further rationalization of strategies to target the right markets, customer segments and solutions.”



The only way banks can achieve agility is by embedding flexibility into their operating models so they can quickly adjust to serve their chosen market. Agility is required to ensure that fears of being “too big to respond” are not simply replaced with being “too concentrated to survive.” Banks need an operating model that supports efficiency in pricing and flexibility of resource utilization.


The Limitations of Digitization 


Digitized banks—those that added computer systems to their existing banking operations—are not only ineffective at achieving agility, their technology landscape can present an obstacle to reaching that goal.


Many of those banks struggle to achieve digitization because they built systems that are highly customized and layered one piece of legacy software on top of another—their home-grown systems are not agile and scalable, which caused their technology issues to compound over time.


According to Celent, banks currently spend between 70% to 80% of their IT budget on maintaining their current systems solely to keep them operational and compliant, which leaves 20% to 30% percent of their time devoted to innovation. This robs them of the agility they need to adapt to the fast-moving, quick-changing, competitive landscape.


Those banks must understand that it takes more than just developing a mobile app and connecting it to existing back-office applications to achieve the agility they need to satisfy customer demands and compete in the marketplace. They must transform into a truly digital business.


Digital Banking Benefits


Higher Revenue, Lower Costs

A modern digital bank, as demonstrated by new start-ups globally, can expect to achieve—on average—25% less from a cost-income perspective than traditional banks. To make this quantum leap to lower cost and higher revenue requires a re-imagining of the customer experience and bank operational processes.

Risk Mitigation

A digital bank can mitigate risk effectively. An Accenture report based on a risk management survey states, “Risk managers agree that considerable value is at stake for banks in achieving this digital state in the near term. This value would be derived mainly from efficiencies, reduced losses and even indirectly through an enhanced customer experience and increased revenues. Twenty-eight percent of survey respondents expect automation to reduce costs by at least 30%.”


Deeper Customer Connections

Because a digital bank effectively obtains and analyzes customer data, it establishes deeper customer connections. Firms can draw insights from customers' information and use it to practice experience-driven banking, helping customers make better commercial and financial decisions. This capitalizes on banks' competitive advantages and lets them move from being transaction providers to trusted virtual advisors.


Improved Customer Service

The need for banks to support their demanding customers is critical, and the main way to achieve this is through greater customer-centricity. The effective digital bank maintains its focus on customers because it has aspirational goals that aren’t totally banking-related—it focuses on providing products and services that enhance customers’ day-to-day lives.


Creating the Digital Bank

There are no shortcuts to becoming a digital bank. It involves more than just creating a good mobile app—it means developing new products, new processes and rethinking the way people interact with their bank. A digital bank must operate an integrated, data-driven technology platform that is agile because it is real-time and open, enabling them to offer the right services and content over the right channels at the right time, with the ability to fulfill all orders and inquiries instantly.

The future banking landscape for digital banking will be fundamentally different—there will be four banking models: 


  • Scaling Up and Becoming a Manufacturer—For some banks, digital banking will drive a separation between manufacturing and distribution of their products. Many will scale up and become large-scale manufacturers of products, and they will sell those products through other providers, including other banks.

  • Being a Provider—The banks that choose to focus solely on providing products and services will obtain access to large-scale vendors and develop other partnerships to achieve customer intimacy.

  • Traditional Bank Reform—Traditional banks will manufacture a few products and augment those products by obtaining additional products and services from third-party vendors. This type of change creates banks that are “thin and vertically integrated.”

  • Utilizing Agile Platforms—A number of technology providers  specialize in platforms that bring banks and customers together. Through these agile, scalable platforms, a provider can reduce the time and complexity involved in opening bank accounts or helping a bank establish its services.

“In recent years, large financial services firms have increasingly focused on digital change: embracing mobile channels, redesigning customer experiences, partnering with innovators, using cloud computing and exploring new datasets and analytic tools.”

Ted Moynihan, Managing Partner and Head of Financial Services, Oliver Wyman


Speeding the Transformation


One way to accelerate a bank’s transformation into a truly digital bank is through open APIs (application programming interfaces). APIs are an important way that a digital bank can achieve increased value—they connect the products and services of one company with those of another.


By opening its data, functionality and services to third-party developers via APIs, a bank can expand its capacity for innovation and interact with an entire ecosystem of partners. Banks that embrace open APIs will profit from a potential revenue uplift of 20%, whereas those failing to do so risk losing 30% to disruptive industry players by 2020.


Open APIs push banking to other industries, platforms and businesses, resulting in a growth of the banking ecosystem. In this new banking paradigm, customers will be able to interact with their financial services everywhere, rather than solely through one bank’s owned channels.


For more information on how Temenos can help you achieve the many benefits of digital banking, contact Dharmesh Mistry, Chief Digital Officer at

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