A Traditional Bank Pursues Digital in a Nontraditional Way

BankCo* is a commercial bank leader in its home market, with a full suite of traditional banking products and a strong reputation as a safe, reliable institution. Its core retail business caters to an affluent and progressively aging customer base. After a decade of decline in younger segments, this bank turned to us for help in reinventing itself.

Rather than retool its core business, which can be costly, complex and time-consuming, BankCo decided to explore launching an entirely new digital bank to operate alongside its existing operations. Using our NextEngine approach, we designed a radically different entity for BankCo, complete with blueprints for a sophisticated technology infrastructure, a robust go-to-market plan, and a compelling value proposition for millennials. This cloud-based, mobile-only banking platform can complement BankCo’s existing business in mutually beneficial ways.

Our team began with a detailed market assessment that revealed how a new digital bank could complement BankCo’s existing business by attracting young, tech-savvy customers. We demonstrated that BankCo could draw these customers toward its core retail franchise over time as their needs grew more complex. Our research showed the value in developing a differentiated brand, one that would resonate with young people through its informal tone of voice and customer-centric engagement tools.

Next, our multi-disciplinary team outlined the new entity’s operating model, governance structure, and route-to-market. By partnering with a range of third-party providers we designed a mobile-only user experience powered by state-of-the-art payment systems and frictionless customer journeys.

BankCo’s new entity is what we call a “digital attacker” business. Such an entity can serve both offensive and defensive strategies in nearly any industry. On offense, it allows companies to enter a new market with lightweight solutions that undercut established players in terms of cost-to-serve; on defense, it allows them to bid for segments that reject traditional banks – for instance millennials, students and young professionals – who can provide future revenue streams. It also gives BankCo new capabilities for continuous innovation, including a “digital factory” product development team that embraces Agile principles.

In our experience, such a platform can be delivered in nine to twelve months. We estimated that it has a cost base that is 60-70% lower than BankCo’s traditional bank, which has to contend with the twin burdens of legacy technology and branch networks. It provides a new engine of innovation for BankCo, serving as a testbed for next-generation banking technologies. And it can be replicated in new markets, opening many new horizons for BankCo going forward.