I was recently talking with David Frankil, President of the NJ Credit Union League. We were chatting about a keynote which I’ll be doing for him in March at the CU Reality Check. I was talking about innovation and my drive to get financial executives to “think about how they think.” Since financial institutions are doing pretty well financially at the moment, most are not thinking about how their services will need to adapt in the coming years to be relevant to millennial customers that will be replacing their baby boomers. They are stuck with an outdated model of what a bank does and can’t seem to envision a different way that they would deliver services. David mentioned that what I was describing sounded like the Wesleyan Quadrilateral. (You can look it up, I had to.)

This got me thinking. Is there a similar progression related to the forces of change as it relates to banking services? I think there is. The pattern follows this way: Tradition – Experience – Reason – ExoMorphosis. Let’s examine these individually:

  • Tradition truly drives much of what is done in banking, particularly as it relates to the inner workings of the institution. “We do things this way; we have always done them this way. It’s how it’s done. Period.” Many FIs are being run generationally, with the current CEO being the 3rd or 4th generation. In many cases, the way that the FI is currently run is a product of the training that the CEO received from the previous CEO, with little regard for the changes in technology and customer preference.
  • Experience clearly adds to the management style of a senior management. Once there are events that occur that introduce new elements into the banking environment that ultimately change internal processes or services offered. Sometimes a surreptitious event creates an opportunity, the equivalent of the invention of Velcro or Rogaine. Inventors have to be aware that what they are trying to achieve may yield a different result but one that could be a bigger opportunity than the original objective. This happens in banking but there must be awareness to recognize such an experiential event that might result in innovative changes.
  • Reason – If you sit and think, really think about a problem, it is likely that you will create one or more solutions. Certainly reason has been employed by bankers to create new product opportunities. A good example of this might be home equity lending. People who needed additional funds had equity in their homes. The equity could be used to secure a line of credit, allowing the homeowner to use those funds as they saw fit. This opportunity for thinking of innovative solutions using reason does seem to be limited to incremental innovations on existing services, but it exists.
  • Which brings us to ExoMorphism (Ok, it’s a made up word, but stick with me …). I created it using Exo meaning external and Morph meaning change ― change that occurs due to external factors. I truly believe that the transformational change that will occur in the coming 8 years will be driven not from within the institution but from external factors. Factors such as the explosion of product offered by financial technology companies (aka FinTechs). From potential changes by the Office of the Comptroller of the Currency allowing those FinTechs access to the U.S. Payments system. By the changing desires of millions of millennials and the generation coming behind them (I was recently introduced to a term for Gen Z, MineCrafters. So named for world-building game they love, I really like the term). We are the precipice of the greatest amount of change in financial services than at any other time in history.

Bankers must break out of tradition and become more open to innovation. Rather than eschewing new ideas, they must seek them out. They must hire younger employees and then when those employees openly question the status quo, they must listen. Not everything a new pair of eyes sees is an opportunity for a breakthrough but some are. If you stifle questioning, if you squelch creativity and genuine inquisitiveness, then very quickly those employees fall into the dull routine of how things work today with no interest in innovation. Or they get bored and leave. Either way, your organization loses an amazing opportunity to learn, to grow.

Check out this excellent article written by a former bank teller who found that none of the institutions she worked for had any interest in developing her or recognized her contributions on the front line of the customer experience – Tellers Should Be the Focus of a Bank’s Succession Plans. (OK, full disclosure, the article mentions me and my advocacy for engagement in the branch, but nonetheless, it is an honest evaluation from someone at the ground level and you should check it out …). ExoMorphosis is going to occur. It’s like a tank. You can either jump on board, use it to make a dramatic difference in your survivability in the coming years or you can get run over. Your choice…

David is an international speaker, executive coach, serial entrepreneur, and shipwreck survivor. He is the bestselling author of Grounded (Little River, 2016) . If you’re interested in David’s expertise in the areas of decision-making in a crisis, leadership, and metacognition, please get in touch here.

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